Exhibit 10.15
Circuit City Stores,
Inc.
Employment Agreement for Reginald D.
Hedgebeth
This EMPLOYMENT AGREEMENT
(“Agreement”) is made, entered into, and is effective
as of the 11th day of July 2005 (the “Effective Date”),
by and between Circuit City Stores, Inc. (the
“Company”) and Reginald D. Hedgebeth (the
“Executive”).
WHEREAS, the Company desires to
employ the Executive as Senior Vice President and General Counsel
of Circuit City Stores, Inc.;
WHEREAS, the Company recognizes the
Executive’s intimate knowledge and experience in the business
of the Company, and desires to secure the employment of the
Executive in the role of Senior Vice President and General Counsel
of the Company; and
WHEREAS, the Executive will develop
and/or come in contact with the Company’s proprietary and
confidential information which is not readily available to the
public, and which is of great importance to the Company and is
treated by the Company as secret and confidential
information.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements of the parties set forth in
this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
Article 1. Term of
Employment
The Company hereby agrees to employ
the Executive and the Executive hereby accepts employment as Senior
Vice President and General Counsel of the Company, in accordance
with the terms and conditions set forth herein, for an initial
period of one (1) year, commencing as of the Effective Date of
this Agreement as indicated above (the “Initial Term”);
subject, however, to earlier termination as expressly provided
herein.
The Initial Term shall automatically
be renewed for additional periods of one (1) year each at the
end of the Initial Term, and then again after each successive year
thereafter (collectively, the “Renewal Periods,” which,
together with the Initial Term, constitute the “Term”
of this Agreement). However, either party may terminate this
Agreement at the end of the Initial Term, or at the end of any
Renewal Period, by giving the other party written notice of intent
not to renew, delivered at least forty-five (45) days prior to
the end of the Initial Term or any Renewal Period. For purposes of
this Agreement, an “Employment Year” shall mean any
twelve (12) month period during the Term of this Agreement
beginning on the Effective Date or on any anniversary
thereof.
Article 2. Position and
Responsibilities
During the Term of this Agreement,
the Executive agrees to serve as Senior Vice President and General
Counsel of the Company. In his capacity as Senior Vice President
and General Counsel of the Company, the Executive shall report
directly to the Executive Vice President and Chief Financial
Officer and shall have the duties and responsibilities of Senior
Vice President and General Counsel of the Company and such other
duties and responsibilities not inconsistent with the performance
of his duties as Senior Vice President and General Counsel of the
Company.
Article 3. Standard of Care
During the term of this Agreement,
the Executive agrees to devote substantially his full-time
attention and energies to the Company’s business. The
Executive covenants, warrants, and represents that he
shall:
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(a)
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Devote his full
and best efforts and talents full time to the performance of his
employment obligations and duties for the Company;
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(b)
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Exercise the
highest degree of loyalty and the highest standards of conduct in
the performance of his duties;
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(c)
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Comply with all
rules, regulations, and policies established or issued by the
Company; and
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(d)
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Refrain from
taking advantage, for himself or others, of any corporate
opportunities of the Company.
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Article 4. Other
Employment.
The Executive shall not, during the
term hereof, be interested directly or indirectly, in any manner,
as partner, officer, director, investor, stockholder, advisor,
employee, or in any other capacity, in any other business similar
to Company’s business for the Executive’s personal
advantage or benefit or that of others. Any other employment or
position which might reasonably be deemed contrary to the best
interests of the Company is prohibited. During the term of
employment hereunder, the Executive agrees to obtain the
Company’s written consent prior to entering into any other
occupation, even if dissimilar to that of the Company. Such consent
may be granted or withheld, in the Company’s absolute
discretion. Nothing herein contained shall be deemed to prevent or
limit the right of the Executive to invest in the capital stock or
other securities of any corporation whose stock or securities are
regularly traded on any public exchange, nor shall anything herein
contained be deemed to prevent the Executive from investing in real
estate for his own benefit (so long as such investment (a) is
not related to or in support of any entity engaged in a business
similar to that of the Company or (b) does not detract from
the Executive’s performance of his duties and obligations
hereunder).
Article 5. Compensation and
Benefits
As remuneration for all services to
be rendered by the Executive during his employment, and as
consideration for complying with the covenants herein, the Company
shall pay and provide to the Executive the following:
5.1. Base Salary.
During the Term of this Agreement,
the Company shall pay the Executive a Base Salary in an amount
which shall be established and approved by the Compensation
Committee of the Board of Directors; provided, however, that such
Base Salary shall be established at a rate of not less than
$325,000 per year. This Base Salary shall be subject to all
appropriate federal and state withholding taxes and payable in
accordance with the normal payroll practices of the Company. The
Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while the Term of this Agreement
is in force, to ascertain whether, in the judgment of the
Compensation Committee, such Base Salary should be changed. If
changed, the Base Salary as stated above shall, likewise, be
changed for all purposes of this Agreement.
5.2. Annual Bonus.
In addition to his Base Salary, the
Executive shall be entitled to participate in the Company’s
short-term incentive program, as such program may exist from time
to time during the Term of this Agreement.
Under the Company’s short-term
incentive plan, the Executive has the opportunity to earn an annual
bonus with respect to any fiscal year of the Company (“Annual
Bonus”). The Annual Bonus, if earned, with respect to any
fiscal year, will generally be in an amount that is not less than
sixty percent (60%) of the Executive’s Base Salary for
the fiscal year with respect to which the Annual Bonus is being
paid (the “Minimum Bonus Rate”) and is commensurate
with the position of Senior Vice President and General Counsel of
the Company.
The award and amount of any Annual
Bonus shall be determined under the Company’s short-term
incentive plan, at the sole discretion of the Company’s
Compensation Committee. If the Minimum Bonus Rate is changed, it
shall, likewise, be changed for all purposes of this
Agreement.
5.3. Long-Term
Incentives. During the
Term of this Agreement, the Executive shall be eligible to
participate in the Company’s long-term incentive plan, to the
extent that the Board of Directors of the Company or the
Compensation Committee, in their discretion, determines is
appropriate.
5.4. Retirement
Benefits. During the Term
of this Agreement, the Company shall provide to the Executive the
opportunity for participation in all Company retirement, insurance,
fringe benefit, and executive compensation plans and programs,
subject to the eligibility and participation requirements of such
plans.
5.5. Employee
Benefits. During the Term
of this Agreement, the Company shall provide the Executive all
benefits, as commensurate with the position of Senior Vice
President and General Counsel of the Company, subject to the
eligibility requirements and other provisions of such arrangements.
Such benefits may include group term life insurance, comprehensive
health and major medical insurance, dental and life insurance, and
short-term and long-term disability.
5.6. Perquisites.
During the Term of this Agreement,
the Company shall provide to the Executive, at the Company’s
cost, all perquisites, which are commensurate with the position of
Senior Vice President and General Counsel of the
Company.
5.7. Right to Change
Plans. By reason of
Articles 5.5 and 5.6 herein, the Company shall not be obligated to
institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan or perquisite.
Article 6.
Expenses
During the Term of this Agreement,
the Company shall pay or reimburse the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the Executive
incurs in performing his duties under this Agreement including, but
not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with
membership in various professional, business, and civic
associations and societies in which the Company finds that the
Executive’s participation
is in the best interests of the Company. The
payment of reimbursement of expenses shall be subject to such rules
concerning documentation of expenses and the type or magnitude of
such expenses as the Compensation Committee of the Board of
Directors may establish from time to time.
Article 7. Employment
Termination
7.1. Termination Due to
Retirement or Death. In
the event the Executive’s employment ends by reason of
Retirement (defined as voluntary “Normal Retirement”
under the then established definitions and rules of the
Company’s tax-qualified retirement plan) or the
Executive’s death during the term of this Agreement, the
Executive’s benefits shall be determined in accordance with
the Company’s retirement, survivor’s benefits,
insurance, and/or other applicable programs of the Company then in
effect. In addition, all stock grants, except performance-based
grants in the case of Retirement, will become immediately vested
and may be exercised by the Executive, the Executive’s
personal representatives, distributees, legatees, or estate at any
time before the expiration date of the grant.
The Effective Date of Termination
due to Retirement or death shall be (a) ninety (90) days
following the date the Executive provides the Company with written
notice that the Executive is ending employment by reason of
Retirement or (b) on the Executive’s date of death, as
the case may be. Upon the Effective Date of Termination, the
Company shall be obligated to pay the Executive or, if applicable,
the Executive’s estate; (a) any Base Salary or Annual
Bonus that was accrued but not yet paid as of the Effective Date of
Termination; and (b) all other rights and benefits that the
Executive is vested in, pursuant to other plans and programs of the
Company.
7.2. Termination Due to
Disability. The Company
shall have the right to terminate the Executive’s employment
for disability. For the purposes of this Agreement, disability
shall mean any physical or mental illness or injury that causes the
Executive to be unable to substantially perform the
Executive’s normal duties; provided however that the
Executive shall not be considered disabled until: (i) the
Executive has been so disabled for 180 days during any period of
twelve (12) consecutive months; (ii) the
Executive’s attending physician shall have furnished to the
Company certification that the return of the Executive to his
normal duties is impossible or improbable; or (iii) the
Executive is determined to be totally disabled by the disability
insurer then insuring the Executive, if any.
The Effective Date of Termination
due to Disability shall be specified, in a written notice, by the
Executive’s immediate manager, and such written notice shall
be delivered to the Executive, but shall be no less than thirty
(30) calendar days after the delivery of such written notice
to the Executive. Upon the Effective Date of Termination, the
Company shall be obligated to pay the Executive [or, if applicable,
the Executive’s estate]: (a) any salary that was accrued
but not yet paid as of the Effective Date of Termination;
(b) the unpaid Annual Bonus, if any, with respect to the
fiscal year preceding the Effective Date of Termination (such
Annual Bonus, if any, to be determined in the manner it would have
been determined and payable at the time it would have been payable
under Article 5.2 had there been no termination of the Employment
Period); and (c) all other rights and benefits that the
Executive is vested in, pursuant to other plans and programs of the
Company.
It is expressly understood that the
Disability of the Executive for a period of one hundred eighty
(180) calendar days or less in the aggregate during any period
of twelve (12) consecutive months, in the absence of any
reasonable expectation that his Disability will exist for more than
such a period of time, shall not constitute a failure by him to
perform his duties hereunder and shall not be deemed a breach or
default, and the Executive shall receive full compensation for any
such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement.
If the employment of the Executive
terminates because of Disability, all of the Executive’s
outstanding stock grants, excluding restricted stock grants issued
under a performance based plan, will become immediately vested,
effective as of the date of the Executive’s Disability. Then,
the Executive, the Executive’s personal representatives,
distributees, or legatees may exercise the Executive’s grants
at any time before the expiration date of the grant.
7.3. Voluntary Termination by the
Executive. The Executive
may terminate his employment and this Agreement at any time by
giving the Company at least forty-five (45) days written
notice. The Company reserves the right to require the Executive not
to work during the notice period but shall pay the Executive his
full Base Salary, at the rate then in effect as provided in Article
5.1 herein, through the notice period plus all other benefits to
which the Executive has a vested right on the last day of
employment (for purposes of this paragraph, the Executive shall not
be paid any Annual Bonus with respect to the fiscal year in which
voluntary termination under this Article 7.3 occurs). The Company
thereafter shall have no further obligations under this
Agreement.
7.4 Involuntary Termination by
the Company Without Cause. The Company may terminate the Executive’s
employment, at any time, for any reason other than death,
Disability, Retirement, or for “Cause”, by providing
the Executive with at least forty-five (45) days written
notice; provided, however, that for purposes of this Article 7.4
(a), no variation, alteration, modification, cancellation, change
or amendment made to this Agreement pursuant to Article 12.3 or
12.4 shall be deemed an involuntary termination without
Cause.
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(a)
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Upon the
Effective Date of Termination specified by the Company for
termination by the Company without cause, the Company shall pay to
the Executive, an amount equal to the product of one (1) times
both the Executive’s Base Salary and the Executive’s
target Annual Bonus established for the fiscal year in which the
Executive’s Effective Date of Termination occurs according
the Company’s regularly scheduled payroll practices, or as
otherwise determined by the Company. In addition, the Company shall
continue, at the same cost to the Executive as existed as of the
Effective Date of Termination, all health and welfare benefit plan
participation, as permitted by law, for one (1) full year
following the Executive’s termination of employment;
provided, however, that the applicable COBRA “period of
coverage” under any plan subject to Section 4980B of the
Internal Revenue Code of 1986, as amended (the “Code”),
or Sections 601 through 609 of the Employee Retirement Income
Security Act of 1974 (ERISA) shall begin as of the Effective Date
of Termination.
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(b)
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The Company
shall also provide the Executive with outplacement services not to
exceed a cost of fifty thousand dollars ($50,000).
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(c)
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Any unvested
stock options or any outstanding restricted stock, excluding
restricted stock grants issued under a performance based plan, that
would become vested (that is, transferable and non-forfeitable) if
the Executive remained an employee through the Initial Term or the
then current Renewal Period of this Agreement will become vested as
of the date of the Executive’s termination of employment. The
Executive must satisfy the tax withholding requirements.
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The Company thereafter shall have no
further obligations under this Agreement.
7.5. Termination For
Cause. Nothing in this
Agreement shall be construed to prevent the Company from
terminating the Executive’s employment under this Agreement,
without notice or liability for doing so, for
“Cause.”
For purposes of this Agreement,
“Cause” means:
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(a)
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The
Executive’s material breach of this Agreement, which breach
is not cured within ten (10) days of receipt by the Executive
of written notice from the Company specifying the
breach;
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(b)
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The
Executive’s gross negligence in the performance of his
material duties hereunder, intentional nonperformance or
intentional misperformance of such duties, misconduct or refusal to
abide by or comply with the directives of the Board, his superior
officers, or the Company’s policies and procedures, which
actions continue for a period of ten (10) days after receipt
by the Executive of written notice of the need to cure or
cease;
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(c)
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Conviction of a
felony or any crime involving moral turpitude;
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(d)
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The Executive
engaging in illegal conduct, dishonesty or fraud with respect to
the business or affairs of the Company that in the reasonable
judgment of the Company materially and adversely affects the
operations or reputation of the Company;
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(e)
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Failure of the
Executive to disclose to the Executive’s manager a conflict
of interest, of which the Executive knew or, with reasonable
diligence, would have known, in connection with any transaction
entered into on behalf of the Company; or
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(f)
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Failure of the
Executive to agree to a modification of this Agreement, pursuant to
paragraph 12.3 below, when the purpose of the modification is to
comply with applicable federal, state and/or local laws or
regulations, or when such modification is designed to further
define the restrictions of Article 8 or otherwise enhance the
enforcement of Article 8 without increasing the scope of the
Article 8 restrictions.
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In the event this Agreement is
terminated for Cause, the Company shall pay the Executive his Base
Salary through the Effective Date of Termination for cause and the
Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) he would otherwise have been
entitled to receive under this Agreement. The Company thereafter
shall have no further obligations under this Agreement.
7.6. Termination for Good
Reason. At any time
during the term of this Agreement, the Executive may terminate this
Agreement for Good Reason (as defined below) by giving the Company
forty-five (45) days written notice, which notice sets forth
in detail the facts and circumstances claimed to provide a basis
for such termination. However, the Company shall, at its option,
have thirty (30) days from receipt of such written notice to
cure any event or circumstance that could constitute Good
Reason.
If the Company chooses not to cure,
the Effective Date of Termination for Good Reason shall occur upon
the expiration of the forty-five (45) days prior notice period
that is specified by the Executive in the written notice, and the
Company shall pay and provide to the Executive the benefits set
forth in this Article 7.6.
For purposes of this Agreement, Good
Reason shall mean, without the Executive’s express written
consent, the occurrence of any one (1) or more of the
following:
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(a)
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Failing to
maintain the Executive’s participation in the Company’s
annual bonus and long-
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