EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”) is made and entered into by and between
99¢ Only Stores (the “Company”) and Rob Kautz (the
“Executive”) on November 11, 2005.
In consideration of the mutual agreements set
forth herein, the Company hereby agrees to employ Executive in the
capacity of Executive Vice President and Chief Financial Officer
commencing on November 11, 2005, and Executive hereby accepts such
employment, on the terms set forth in this Agreement. Executive's
employment will be on a part-time basis of two full days per week
for the first three weeks of employment, and his salary will be
pro-rated (at the rate of 40%) during this period, and will be
full-time thereafter.
Executive’s areas of responsibility will
be accounting and controls, compliance and internal audit, finance
and reporting, strategic planning, and such additional
responsibilities as may be assigned to Executive by the Chief
Executive Officer. Executive will report to the Chief Executive
Officer.
The terms of Executive’s employment shall
be as follows:
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1.
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Executive’s annual salary will be
$400,000. The Company will make these salary payments in periodic
installments in accordance with the Company’s normal salary
payment dates for executives. Executive’s salary will be
reviewed annually and may be increased at the discretion of the
Company with the approval of the Compensation Committee of the
Board of Directors.
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2.
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The Company
will grant to Executive nonqualified stock options for One Hundred
and Fifty Thousand (150,000) shares under the Company’s 1996
Stock Option Plan on the first day of Executive’s employment.
The exercise price will be the closing price of the Company’s
common stock on that date on the New York Stock Exchange, and the
term will be ten (10) years. These options will vest annually
(50,000 shares per annum) on the first, second and third
anniversaries of Executive’s employment commencement date.
These initial options shall also contain the other terms set forth
in Appendix A. Executive will also be eligible to receive
additional stock options or other long-term incentive grants at the
complete discretion of the Compensation Committee of the Board of
Directors at the same time when such grants are made to other
senior executive officers commencing in 2007.
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3.
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Executive will
be eligible for an annual bonus of up to fifty percent (50%) of his
base salary. The Company’s determination of Executive’s
eligibility for this bonus will be based on goals and objectives
which are established by the Company each year. These bonus
objectives will be based on reasonable, measurable objectives
consistent with Executive’s responsibility for objective
public reporting, provided that EPS targets will not be used. No
bonus will be paid to Executive for the calendar year ending
December 31, 2005. Executive shall be entitled to receive $100,000
of his 2006 bonus immediately upon achieving timely filing status
with the Securities and Exchange Commission for the Company’s
reports, provided that in no event shall such bonus be paid to
Executive prior to January 1, 2006.
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4.
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Executive will
be eligible to participate in the Company’s health, dental
and vision insurance plans in accordance with the terms of these
plans commencing on the first of the month following 30 days of
employment. Executive will also be eligible to participate in other
Company welfare and retirement benefit plans which are offered to
other senior executives in accordance with the terms of these
plans.
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5.
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The Company
will provide prompt reimbursement for all reasonable expenses
incurred by Executive in performing services hereunder, provided
that such expenses are incurred and accounted for in accordance
with procedures and guidelines established by the
Company.
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6.
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The term of
this Agreement shall be five years from its effective date. If both
parties wish to renew this Agreement, the parties shall commence
renewal negotiations six months prior to the end of the term of the
Agreement.
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7.
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The Company
agrees that if Executive’s employment is terminated by the
Company during the term of this Agreement for reasons other than
for cause (as defined below), then upon Executive’s signing a
full and general release of all known and unknown claims against
the Company, the Company will make a lump sum payment to Executive
equal to twelve (12) months of Executive’s base salary at the
rate in effect on his termination date, and Executive’s
unvested initial options shall become 100% fully vested and remain
exercisable for a period of one hundred and eighty (180) days
following his termination date. Executive shall be entitled to
receive the same payment and treatment of his unvested initial
options, subject to the same conditions, if Executive terminates
employment during the term of this Agreement due to the
Company’s failure to cure any material breach of this
Agreement within thirty (30) days of receipt of written
notification from the Executive to the Company of such
breach.
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If
Executive’s employment is terminated by the Company during
the term of this Agreement for cause (as defined below), or if
Executive’s employment terminates for any reason other than
as described above in this paragraph 7, Executive shall not be
entitled to receive any termination payments, and all of his
unvested options shall be forfeited.
Any termination
payments which are payable to Executive under this Agreement shall
be delayed until six months after Executive’s termination
date, only if necessary to comply with Section 409A of the Internal
Revenue Code.
As used herein,
“cause” shall mean Executive’s conviction or
entering a plea of guilty or nolo contendere to a felony or any
crime which constitutes a misdemeanor involving moral turpitude;
willful misconduct; gross negligence; alcohol or substance abuse
(which in the Company’s judgment renders Executive unfit to
properly perform his duties); or Executive’s failure to cure
any other material breach of this Agreement within thirty (30) days
of receipt of written notification from the Company to the
Executive of such other breach.
Executive acknowledges and agrees that, during
the period of his employment with the Company and at any time
thereafter, he will not use for his own purposes, or disclose to or
for the benefit of any third party, any trade secret or other
confidential information of the Company, and he will comply with
any and all confidentiality policies and obligations of the
Company. Executive agrees that all property of the Company obtained
or prepared by or for him in the course of his employment with the
Company, including all documents, data, recordings, or other
property, whether tangible or intangible, including all information
stored in electronic form, shall remain the exclusive property of
the Company, and Executive agrees to return all such property to
the Company upon the termination of his employment for any reason.
As used herein, the Company also refers to subsidiaries,
affiliates, predecessors and successors of the Company.
Executive acknowledges and agrees that while he
is employed with the Company, he will devote his full business
time, attention and energies to the performance of his duties for
the Company. In addition, Executive agrees that he will not engage
in any other activities that would conflict or interfere with the
performance of his duties hereunder. Without qualifying the
foregoing, it is acknowledged that Executive’s being a Board
member of private or non-profit organizations, with approval of the
CEO, does not automatically imply a conflict or interference,
including limited time
