99 Cents Only Stores 8-K 11-11-2005


    
      

    


    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:

     

    
      	 	
              1.

            	
              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.

            


    

     

    
      	 	
              2.

            	
              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.

            


    

     

    
      
        	 	
                3.

              	
                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.

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	 	
              4.

            	
              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. 

            


    

     

    
      	 	
              5.

            	
              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.

            


    

     

    
      	 	
              6.

            	
              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.

            


    

     

    
      	 	
              7.

            	
              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.


            


    

     

    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.


     

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    


    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 spent during business hours attending functions off-site.
      

     

    This
      Agreement will be governed by and construed in accordance with the laws of
      the
      State of California. Other terms and conditions of Executive’s employment, not
      otherwise determined by this Agreement, will be governed by the policies,
      procedures and benefits outlined in the current Employee Handbook and New Hire
      Packet materials, as they may be amended from time to time, which includes
      a
      mutual agreement to arbitrate claims. Executive acknowledges receipt of these
      documents and, more specifically, that the document entitled “Arbitration of
      Disputes,” set forth in the Company’s Employee Handbook, attached hereto as
      Appendix “B” is incorporated by reference herein and is binding as to any
      dispute under this Agreement as well as Executive’s employment or termination of
      employment with the Company.

     

    All
      notices, requests, demands or other communications that are required or may
      be
      given under this Agreement shall be in writing and shall be deemed to have
      been
      duly given when received if personally delivered; when transmitted, if
      transmitted by telecopy, electronic or digital transmission method with
      electronic confirmation of receipt; the day after it is sent, if sent for
      next-day delivery by recognized overnight delivery service (e.g. FedEx); and
      upon receipt, if sent by certified or registered mail, return receipt requested.
      In each case notice shall be sent to:

     

    If
      to the
      Company:

     

    Chief
      Executive Officer

    99¢
Only
      Stores

    4000
      Union Pacific Avenue

    City
      of
      Commerce, CA 90023

    fax
      (323)
      980-8160

     

    If
      to
      Executive:

    


    Rob
      Kautz

    c/o
      Stanley W. Levy

    Manatt
      Phelps & Phillips LLC

    11355
      W.
      Olympic Blvd.

    Los
      Angeles, CA 90064

    fax
      (310)
      312-4224

    

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

    This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of
      the subject matter contained herein. No provisions of this Agreement may be
      amended, modified or waived unless such amendment, modification or waiver is
      agreed to in writing signed by Executive and by an officer of the Company duly
      authorized at such time by the Compensation Committee of the Board of
      Directors.

     

    This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which together will constitute one and the same
      instrument.

     

    IN
      WITNESS THEREOF, the parties hereto have executed this Agreement on the date
      first written above.

     

    
      	 	
              99¢
                ONLY STORES

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Schiffer

            
	 	
              Title:

            	
              Chief
                Executive Officer

            
	 	 	 
	 	 	
              /s/
                Rob Kautz

            
	 	 	
              Rob
                Kautz

            


    

    

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

     

    APPENDIX
      A

     

    The
      initial options granted to Executive under the Agreement shall become 100%
      fully
      vested on any “Acceleration Date,” and Company shall afford mechanics for
      Executive to exercise such options simultaneous with any event which constitutes
      an “Acceleration Date.” An “Acceleration Date” occurs when any of the following
      events occurs:

     

    (i)    
any
      Person (as defined herein) becomes the beneficial owner directly or indirectly
      (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934
      (the
“Act”)) of more than 50% of the Company’s then outstanding voting securities
      (measured on the basis of voting power);

     

    (ii)    the
      consummation by the Company of a merger or consolidation with any other
      corporation or business entity, other than a merger or consolidation that would
      result in the voting securities of the Company outstanding immediately prior
      to
      the consummation of the merger or consolidation continuing to represent (either
      by remaining outstanding or by being converted into voting securities of the
      surviving entity) at least 50% of the combined voting power of the voting
      securities of the surviving entity of such merger or consolidation outstanding
      immediately after such merger or consolidation;

     

    (iii)   the
      Company ceases to be a public company required to file reports with the
      Securities and Exchange Commission; or

     

    (iv)   the
      complete liquidation or dissolution of the Company or the sale or disposition
      by
      the Company of all or substantially all of the Company’s assets.

     

    An
      Acceleration Date as described in (i) above shall not occur as a result of
      the
      ownership of voting securities by (A) the Company or any of its subsidiaries,
      (B) a trustee or other fiduciary holding securities under an employee benefit
      plan of the Company of any of its subsidiaries, or (C) a corporation owned,
      directly or indirectly, by the stockholders of the Company in substantially
      the
      same proportions as their ownership of voting securities of the Company.
      Securities held by an underwriter pursuant to an offering of such securities
      for
      a period not to exceed 40 days shall be deemed to be outstanding, but shall
      not
      be deemed to be beneficially owned by such underwriter for purposes of clause
      (i) above. 

     

    “Person”
      shall mean any individual, firm, corporation, partnership or other entity and
      shall include the Affiliates and Associates of such Person. “Affiliate and
“Associate” shall have the respective meanings ascribed to such terms in Rule
      12b-2 under the Act.

     

    The
      Company will use its best efforts to maintain in effect an S-8 registration
      statement for the initial option shares granted to Executive under the
      Agreement.

     

    The
      Company may only exercise its right under the Company’s 1996 Stock Option Plan
      to terminate the initial options granted to Executive under the Agreement based
      on the Executive engaging in “Detrimental Activity” (as defined in the 1996
      Stock Option Plan) if such “Detrimental Activity” constitutes “cause” for the
      Company to terminate the Executive’s employment as defined in the Agreement.



    
      
        Appendix
          A

      

      
        
        

        
          

        

      

      
        
        

      

    


    APPENDIX
      B

     

    ARBITRATION
      OF DISPUTES

     

    While
      the
      Company hopes that employment disputes will not occur, the Company believes
      that
      where such disputes do arise, it is in the mutual interest of everyone involved
      to handle them pursuant to binding arbitration, which generally resolves
      disputes quicker than court litigation and with a minimum of disturbance to
      all
      parties involved. By entering into this Agreement the Company and the
      undersigned Employee are waiving the right to a jury trial for all
      employment-related disputes.

     

    The
      Company and the undersigned Employee hereby agree that any dispute with any
      party (including the Company’s affiliates, successors, predecessors, parents,
      subsidiaries, divisions, dba’s, contractors, employees, officers, directors and
      agents) that may arise from or in connection with Employee’s employment with the
      Company or the termination of Employee’s employment with the Company must be
      submitted for resolution by mandatory, binding arbitration. The arbitration
      requirement applies to all federal, state and local statutory, constitutional,
      contractual and/or common law claims arising from or in connection with
      employment with the Company including, but not limited to, claims arising under
      Title VII of the Civil Rights Act of 1964; the Age Discrimination in Employment
      Act; the Equal Pay Act of 1963; the Fair Labor Standards Act; the Americans
      with
      Disabilities Act; for employees of the Company’s California facilities, the
      California Fair Employment and Housing Act and the California Labor Code,
      sections 200 et seq., 970, and 1050 et seq.; for employees of the Company’s
      Arizona facilities, the Arizona Civil Rights Act (Title 41) and the Arizona
      Labor Code (Title 23 et seq.); and for employees of the Company’s Nevada
      facilities, the Nevada Revised Statutes, Title 53 (the Labor and Industrial
      Relations Code, including the Nevada Civil Rights Act), as they may be amended
      from time to time. Both the Company and the Employee shall be precluded from
      bringing or raising in court or another forum any dispute that was or could
      have
      been submitted to binding arbitration. This arbitration requirement does not
      apply to claims for workers compensation benefits, claims arising under ERISA
      (29 U.S.C. §§ 1001, et seq.)
      or
      claims for provisional remedies.

     

    Binding
      arbitration under this Agreement shall be conducted, for employees of the
      Company’s California facilities, in Los Angeles County, for employees of the
      Company’s Nevada facilities, in Clark County, and for employees of the Company’s
      Arizona facilities, in Maricopa County (unless required by law to be conducted
      elsewhere, in which case it shall be conducted anywhere else permitted by law,
      at the Company’s discretion) in accordance with the California Arbitration Act,
      Code of Civil Procedure sections 1280, et seq.
      (for
      employees of the Company’s California facilities), the Nevada Uniform
      Arbitration Act, NRS sections 38.015-38.205 (for employees of the Company’s
      Nevada facilities), or the Arizona Arbitration Act Revised Statutes sections
      12-1501 to 12-1518 (for employees of the Company’s Arizona facilities), as they
      may be amended from time to time. The substantive law of the State of California
      shall apply for employees of the Company’s California facilities, the
      substantive law of the State of Nevada shall apply for employees of the
      Company’s Nevada facilities, and the substantive law of the State of Arizona
      shall apply for employees of the Company’s Arizona facilities. The arbitration
      shall be conducted before a neutral arbitrator selected by both parties from
      (1)
      the American Arbitration Association Labor and Employment Panel; (2) Judicial
      Arbitration and Mediation Services, Inc. (“JAMS”); or (3) Action Dispute
      Resolution Services (“ADR”) in accordance with the rules promulgated by those
      entities or under Section 1281.6 of the California Code of Civil Procedure
      (for
      employees of the Company’s California facilities), Section 38.055 of the Nevada
      Uniform Arbitration Act (for employees of the Company's Nevada facilities),
      or
      Section 12-1503 of the Arizona Arbitration Act (for employees of the Company’s
      Arizona facilities), as they may be amended from time to time, if the parties
      are unable to agree. Where required by law, the Company shall pay all additional
      costs peculiar to the arbitration to the extent such costs would not otherwise
      be incurred in a court proceeding (for instance, the Company will, if required,
      pay the arbitrator’s fees to the extent it exceeds Court filing fees). Each
      party shall pay its own costs and attorneys’ fees; however, the arbitrator may
      award costs and attorneys’ fees to the prevailing party to the extent permitted
      by law. The parties will be permitted to conduct discovery as provided by
      California Code of Civil Procedure Section 1283.05 (for employees of the
      Company’s California facilities), Sections 38.087 and 38.095 of the Nevada
      Uniform Arbitration Act (for employees of the Company’s Nevada facilities), or
      Section 12-1507 of the Arizona Arbitration Act (for employees of the Company’s
      Arizona facilities), as they may be amended from time to time. The arbitrator
      shall, within thirty days after the conclusion of the arbitration, issue a
      written opinion setting forth the factual and legal bases for his or her
      decision.


    
      
        Appendix
          B

      

      
        1

        
          

        

      

      
        
        

      

    


    I
      ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, AND I UNDERSTAND AND
      AGREE TO ITS TERMS. I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY, AND HAVE
      NOT
      RELIED UPON ANY PROMISES OR REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN.
      I
      UNDERSTAND I AM GIVING UP MY RIGHT TO A JURY TRIAL BY ENTERING INTO THIS
      AGREEMENT. I ALSO ACKNOWLEDGE THAT I HAVE HAD THE OPPORTUNITY TO CONSULT WITH
      AN
      ATTORNEY IF I SO CHOOSE REGARDING THIS AGREEMENT.

     

    
      	
              DATE:

            	
              11/11/05

            	 	
              /s/
                Rob Kautz

            
	 	 	 	
              Rob
                Kautz

            


    

     

    ACCEPTED
      AND AGREED BY COMPANY:

     

    
      	
              BY:

            	
              /s/
                Eric Schiffer

            
	 	
              Eric
                Schiffer

            
	 	
              Chief
                Executive Officer

            


    

    


     

    
      Appendix
        B

      2