1
EXHIBIT 10(b)
RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 22, 1994, is between Robert L. Norton
("Norton") and FABRI-CENTERS OF AMERICA, INC., an Ohio corporation ("FCA").
FCA is considering the possibility of an acquisition (the "Acquisition") of
the Cloth World division ("CW") of The Brown Group, a major retailer of
fabrics, notions, crafts, and sewing machines in the United States. Norton is
assisting in the evaluation of the Acquisition and, if the Acquisition is
consummated, FCA anticipates that he will assist in the integration of CW with
FCA. FCA desires to enter into this Agreement in order to ensure Norton's
assistance in these matters, as well as the continued performance by him of
other responsibilities, in the event the Acquisition is consummated.
In consideration of their mutual covenants in this Agreement, and subject to
the consummation of the Acquisition, Norton and FCA agree as follows:
1. EMPLOYMENT. FCA will employ Norton, and Norton will render services to FCA,
as Vice Chairman and Chief Financial Officer. These services will be
rendered at FCA's Hudson, Ohio, headquarters. In addition to his duties as
Chief Financial Officer, Norton will use his best efforts (i) to assist in
the integration of FCA and CW, including the selection of the new management
team and realignment of personnel and responsibilities associated with that
integration, (ii) to support the new combined management team once it is in
place, including the new Chief Operating Officer and the other executive
officers, and (iii) toward the end of the term of his employment, to work
with and assist his designated successor in the assumption of his
responsibilities, except that this clause (iii) shall not apply if the
parties have mutually agreed to extend the term of Norton's employment
beyond the Normal Termination Date (as defined in Section 3).
2. COMPENSATION; BENEFITS. During the term of his employment, FCA will provide
the following compensation and benefits to Norton:
a. BASE SALARY; EXPENSE REIMBURSEMENT. FCA will pay to Norton an annual base
salary of $312,000, payable in bi-weekly installments, subject to normal
withholding. In addition, FCA will reimburse Norton for reasonable and
ordinary business expenses incurred by him in the performance of his
services to FCA, provided Norton keeps and renders to FCA such records as
FCA may reasonably require.
Page 189 of 196
2
b. BONUS. Norton will be entitled to participate in FCA's Key Management
Incentive Plan or any incentive plan that replaces it (the "Incentive
Plan") on the same terms and conditions as FCA's other executive officers.
c. FRINGE BENEFITS. During the term of his employment, Norton will be
entitled to participate in any retirement plan, group term life insurance,
profit-sharing plan, group health and hospitalization coverage,
disability, club memberships, supplemental retirement plan, split-dollar
insurance, and other benefits that are currently provided to him and
continue to be provided to other executive officers of FCA during the term
of his employment. In addition, Norton will be entitled to the use of the
company car currently used by him, together with all car maintenance and
related expenses as have been paid by FCA in the past. To the extent any
of these benefits is contributory for other executive officers of FCA,
Norton will contribute to the cost of the benefits on the same terms as
other executive officers. Except as otherwise explicitly provided
elsewhere in this Agreement or required by applicable law, Norton will not
be entitled to continue to participate in any of the benefit plans and
arrangements referred to in this paragraph (c) for any period after the
effective termination of his employment. Without limiting the generality
of the immediately preceding sentence, the split dollar life insurance
arrangement currently maintained for Norton's benefit will end as of the
effective date of the termination of his employment for any reason other
than death.
d. STOCK OPTIONS AND RESTRICTED STOCK. Stock options previously granted to
Norton will become exercisable, and shares of restricted stock will vest,
in accordance with their terms, subject to the provisions of Section 4.
3. TERM OF EMPLOYMENT. Unless extended by the mutual agreement of the parties,
the term of Norton's employment will expire at the close of business on the
later of (i) the second anniversary date of the effective date of the
Acquisition and (ii) August 2, 1996 (the later of these dates is referred to
as the "Normal Termination Date"), subject to early termination as follows:
a. EARLY TERMINATION BY NORTON. Norton may, in his discretion, terminate his
employment effective as of August 1, 1995 by giving written notice of
termination to FCA on or before May 1, 1995. In any such event, Norton
will be entitled to the compensation and benefits set forth in Section
4(a) and Norton will also be entitled to spend a reasonable amount of time
during the period from May 1, 1995 through July 31, 1995 to search for
other employment.
2
Page 190 of 196
3
b. EARLY TERMINATION BY FCA WITHOUT CAUSE. FCA may, in its discretion,
terminate Norton's employment at any time without cause, effective at such
time as FCA may provide in the notice of termination, in which event
Norton will be entitled to the compensation and benefits set forth in
Section 4(a).
c. EARLY TERMINATION BY FCA FOR CAUSE. FCA may terminate Norton's employment
at any time for cause, in which event Norton will be entitled to the
compensation and benefits set forth in Section 4(b). For this purpose,
"cause" means (i) dishonesty, theft, or fraud by Norton in connection with
his employment, (ii) material breach by Norton of his obligations under
this Agreement (including, without limitation, any persistent failure by
Norton to perform his duties under this Agreement, including the duties
set forth in Section 1), or (iii) material breach of his obligations under
Section 5. Any termination of Norton's employment for Cause shall be
effective immediately upon FCA giving notice of termination of employment
to Norton. However, if any breach or failure on Norton's part referred to
in clause (ii) of this Section 3(c) is curable, FCA shall not give Norton
notice of termination for Cause based upon that breach or failure unless
the Board has first given Norton written notice of that breach or failure
setting forth in reasonable detail the nature of the breach or failure and
the actions necessary to correct the breach or failure and Norton has
failed to effect a cure within 30 days of the receipt of that notice.
4. COMPENSATION AND BENEFITS PAYABLE UPON EARLY TERMINATION.
a. EARLY TERMINATION BY NORTON; EARLY TERMINATION BY FCA WITHOUT CAUSE. In
the event Norton terminates his employment early in accordance with
Section 3(a), or in the event FCA terminates Norton's employment early
without cause, Norton will be entitled to receive the following
compensation and benefits: (i) FCA will continue to pay Norton's base
salary up to the Normal Termination Date, (ii) Norton will participate in
the Incentive Plan for any fiscal year completed prior to the effective
date of the termination of his employment (the "Early Termination Date"),
but not for any subsequent fiscal year, (iii) FCA will not provide Norton
with any fringe benefits referred to in Section 2(c) after the Early
Termination Date except that the group health and hospitalization coverage
and group term life insurance will continue until the earlier of the
Normal Termination Date or the date on which Norton first obtains other
employment that provides group health and hospitalization coverage or
3
Page 191 of 196
4
group life insurance and (B) title to the company car currently used by
Norton will be transferred to him, as soon as practicable after the Early
Termination Date, upon the assumption by him of responsibility for
insurance and other expenses related to the operation of the car, (iv)
stock options that would become exercisable after the Early Termination
Date and on or before the Normal Termination Date if Norton's employment
continued through the Normal Termination Date will be accelerated so that
they become exercisable on the Early Termination Date and may be exercised
at any time within three months after the Early Termination Date (and the
Compensation Committee of the Board of Directors of FCA will exercise its
discretion to permit such exercises during that three month period), but
stock options that are scheduled to become exercisable after the Normal
Termination Date will expire as of the Early Termination Date, (v) the
vesting of shares of restricted stock that would vest on or before the
Normal Termination Date if Norton's employment continued through the
Normal Termination Date will be accelerated so that those shares of
Restricted Stock will vest on the Early Termination Date, but shares of
restricted stock that are scheduled to vest after the Normal Termination
Date will be forfeited, and (vi) FCA will provide Norton with outplacement
services through a firm that is reasonably satisfactory to Norton.
b. EARLY TERMINATION BY FCA FOR CAUSE: EARLY TERMINATION BY NORTON OTHER
THAN PURSUANT TO SECTION 3(A). In the event FCA terminates Norton's
employment early for cause in accordance with Section 3(c), or Norton
terminates his employment early other than pursuant to Section 3(a),
Norton will be entitled to receive the following compensation and
benefits: (i) FCA will continue to pay Norton's base salary up to the
effective date of the termination of his employment, (ii) Norton will
participate in the Incentive Plan for any fiscal year completed prior to
the effective date of the termination of his employment, but not for any
subsequent fiscal year, (iii) FCA will provide Norton with the fringe
benefits referred to in Section 2(c) up to the effective date of the
termination of his employment, and (iv) any stock options that have not
been exercised on or before the effective date of the termination of his
employment will expire, and any shares of restricted stock that have not
vested on or before the effective date of the termination of his
employment will be forfeited.
c. EARLY TERMINATION DUE TO DISABILITY. In the event of the early
termination of Norton's employment due to disability that prevents him
from performing his duties under this Agreement, Norton will be entitled
to receive the same benefits that he would have been entitled to receive
4
Page 192 of 196
5
under Section 4(a) (offset, in the case of continuing compensation
payments, by the amount of any disability benefits payable to Norton under
any disability income insurance program sponsored by FCA), including
acceleration of the date on which stock options become exercisable and
restricted stock vests.
d. EARLY TERMINATION DUE TO DEATH. If Norton's employment is terminated
before the Normal Termination Date as a result of Norton's death, (i)
stock options that would otherwise become exercisable after his death and
on or before the Normal Termination Date if Norton's employment continued
through the Normal Termination Date will be accelerated so that they
become exercisable on the date of death and may be exercised at any time
within three months after the date of death (and the Compensation
Committee of the Board of Directors of FCA will exercise its discretion to
permit such exercises during that three month period), but stock options
that are scheduled to become exercisable after the Normal Termination Date
will expire as of the date of death, and (ii) the vesting of shares of
restricted stock that otherwise would vest on or before the Normal
Termination Date if Norton's employment continued through the Normal
Termination Date will be accelerated so that those shares of Restricted
Stock will vest on the date of death, but shares of restricted stock that
are scheduled to vest after the Normal Termination Date will be forfeited
as of the date of death, and (iii) none of the other benefits referred to
in Section 4(a) will be continued beyond the date of death.
5. COVENANT NOT TO COMPETE OR SOLICIT: CONFIDENTIAL INFORMATION.
a. COVENANT NOT TO COMPETE OR SOLICIT. During the term of Norton's
employment and for a period of three years thereafter (the "Noncompetition
Period"), Norton will not have any financial or other interest in or
become involved, directly or indirectly, as a proprietor, partner,
shareholder, officer, employee, consultant, or agent or in any other
capacity, with any person or organization listed on Exhibit A or with any
subsidiary, affiliate, franchise, partnership, joint venture, successor in
interest, or assign of any such person or organization. During the
Noncompetition Period, without the prior written consent of the Chief
Executive Officer of FCA, Norton will not recruit, solicit, or recommend
for employment any employee of FCA or any of its subsidiaries or otherwise
seek to induce any employee of FCA to terminate his or her employment with
FCA or any of its subsidiaries.
b. CONFIDENTIAL INFORMATION. Norton will not, at any time during or after
the term of his employment, disclose any confidential information gathered
or
5
Page 193 of 196
6
learned by him in the course of his employment by FCA. Confidential
information includes, but is not limited to, oral or written information
regarding business plans, management reports, vendor agreements, store
performance records, and other information of a similar nature regarding
FCA or its subsidiaries.
c. REMEDIES. Notwithstanding the provisions of Sections 3 and 4, in the
event of a material breach by Norton of his obligations under this Section
5, (i) FCA's obligation to provide compensation and benefits to Norton
will cease, any stock options that have not been exercised will expire,
and any shares of restricted stock that have not vested will be forfeited
and (ii) Norton will refund to FCA all compensation and the value of all
benefits provided to him after the effective date of the termination of
his employment pursuant to Section 4, including the value of all stock
options that were exercised after the effective date of the termination of
his employment and the value of all shares of restricted stock that vested
after the effective date of the termination of his employment. Norton
acknowledges that any breach of his obligations under this Section 5 would
result in irreparable harm to FCA that could not be adequately remedied by
an award of monetary damages; accordingly, Norton agrees that FCA will be
entitled to injunctive relief to enforce his obligations under this
Section 5, in addition to any other rights or remedies that FCA may have
at law or in equity, including reasonable attorneys' fees.
6. RELATIONSHIP TO CHANGE OF CONTROL AGREEMENT. Norton and FCA are parties to
an employment agreement dated November 30, 1988 (the "Change of Control
Agreement") intended to become operative only upon the occurrence of a
"Change of Control" (as defined in that agreement).
a. The Acquisition shall not be treated as a Change of Control for purposes
of this Agreement or the Change of Control Agreement and, if the
Acquisition would otherwise constitute a Change of Control for those
purposes, the Change of Control Agreement is hereby amended so that the
Acquisition will not constitute such a Change of Control.
b. If a Change of Control occurs during the term of Norton's employment under
this Agreement, Norton shall thereafter be entitled to assert rights under
either (i) this Agreement or (ii) the Change of Control Agreement but not
under both. If Norton asserts rights under either this Agreement or the
Change of Control Agreement, he shall thereupon forfeit his rights under
the other agreement.
6
Page 194 of 196
7
c. If Norton's employment is terminated for whatever reason before a Change
of Control occurs, the Change of Control Agreement shall be of no further
force or effect.
7. MISCELLANEOUS. If Norton's employment with FCA ends on the Normal
Termination Date, (a) the Compensation Committee of the Board of Directors
of FCA will exercise its discretion to permit the exercise, at any time
during the three month period after the Normal Termination Date, of any
stock options that were exercisable on the Normal Termination Date, and (b)
FCA will provide Norton with outplacement services through a firm that is
reasonably satisfactory to Norton. FCA will pay the reasonable fees of
Norton's counsel incurred in connection with the negotiation and execution
of this Agreement. If Norton's employment with FCA terminates before the
Normal Termination Date under circumstances entitling Norton to continuation
of health and hospitalization coverage under this Agreement, FCA will
provide Norton the right to continue health and hospitalization coverage, at
his expense, as generally required by the Consolidated Omnibus
Reconciliation Act of 1985, for a period of 18 months after the Normal
Termination Date. This Agreement will be interpreted and enforced in
accordance with Ohio law. This Agreement expresses the entire understanding
between the parties on its subject matter and, except as provided in Section
6, above, supersedes all prior understandings between them on that subject
matter. The obligations of the parties under this Agreement are subject to
the consummation of the Acquisition; in the event the Acquisition is not
consummated by November 30, 1994, this Agreement will be void.
IN WITNESS WHEREOF, FCA and Norton have signed this Agreement as of the date
first above written.
FABRI-CENTERS OF AMERICA, INC.
By: Alan Rosskamm
--------------------------------
Chief Executive Officer
Robert L. Norton
--------------------------------
Robert L. Norton
7
Page 195 of 196
8
EXHIBIT A
---------
House of Fabrics
Hancock Fabrics, Inc.
Piece Goods Shops Company
Northwest Fabrics & Crafts (Conagra, Inc.)
Fabricland/Fabricville (Canada)
BouClaire House of Fabrics, Inc. (Canada)
Michaels Stores, Inc.
Lee Wards Creative Crafts, Inc.
Ben Franklin Crafts, Inc.
Frank's Nursery and Crafts (General Host Corp.)
Rag Shops, Inc.
A. C. Moore
Mae's Fabrics (Florida)
AGREED TO:
FABRI-CENTERS OF AMERICA, INC.
By: Alan Rosskamm
-------------------------
Alan Rosskamm
Chief Executive Officer
Robert L. Norton
-------------------------
Robert L. Norton
Dated as of April 22, 1994
Page 196 of 196