EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 1996, by and between Xxxxxx
Xxxxxx, Ltd., a New York corporation (the "Company"), and XXXXXX X. XXXXX, an
individual residing at 00 Xxxxxx Xxxx, Xxxxxxxxx, XX 00000 (the "Executive").
W I T N E S E T H :
WHEREAS, the Company desires to secure the services of the
Executive upon the terms and conditions hereinafter set forth;
and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby employs
Executive and the Executive hereby accepts such employment, as the Chief
Operating Officer of the Company, subject to the terms and conditions set forth
in this Agreement. The Executive shall have the additional title of President of
the Company upon mutual agreement of the parties hereto which the Company
anticipates will be within 12 months following the date hereof.
SECTION 2. DUTIES; BOARD SEAT. The Executive shall
serve as the Chief Operating Officer of the Company (and, when
applicable, the Chief Operating Officer and President of the Company) and shall
be responsible for all tasks and activities which are customarily the
responsibility of a Chief Operating Officer, or Chief Operating Officer and
President, as the case may be, including without limitation, [describe duties].
If requested by the Company, the Executive shall serve on the Board of Directors
or any committee thereof without additional compensation. Within four (4) months
following the date hereof, the Company shall use its best efforts to have the
Executive elected to the Company's Board of Directors, including, if necessary,
the Company shall call a Special Meeting of the stockholders of the Company to
elect the Executive as a member of the Board of Directors. During the term of
this Agreement, the Executive shall devote all of her business time to the
performance of her duties hereunder unless otherwise authorized by the Chief
Executive Officer of the Company. Notwithstanding the foregoing, the Executive
may donate her time and efforts to charitable causes so long as such endeavors
do not effect her ability to perform her duties under this Agreement.
SECTION 3. TERM OF EMPLOYMENT; VACATION.
(a) The term of the Executive's employment shall be for
a period of thirty six (36) months commencing on the date hereof,
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subject to earlier termination by the parties pursuant to Sections 5 and 6
hereof (the "Term").
(b) The Executive shall be entitled to three (3) weeks vacation
during each year of the Term.
SECTION 4. COMPENSATION OF EXECUTIVE.
4.1 SALARY. The Company shall pay to Executive a base
salary of Two Hundred Thousand ($200,000) Dollars per annum (the "Base Salary"),
subject to increases in accordance with the terms of the last sentence of this
Section 4.1, less such deductions as shall be required to be withheld by
applicable law and regulations. All salaries payable to Executive shall be paid
at such regular weekly, biweekly or semi-monthly time or times as the Company
makes payment of its regular payroll in the regular course of business.
Commencing on the first anniversary of the date hereof, and on each anniversary
thereafter during the Term, the Base Salary shall be increased by 10% of the
then Base Salary.
4.2 SIGNING BONUS. Upon the execution of this Agreement, the
Executive shall receive options (the "Initial Options") to purchase 60,000
shares of the Company's Common Stock at an exercise price equal to the closing
bid price of the Company's Common Stock on June 28, 1996, as quoted on The
Nasdaq
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Stock Market, which Initial Options shall be subject to the terms and conditions
of an Option Agreement, substantially in the form of Exhibit A attached hereto.
The shares of Common Stock issuable upon exercise of the Initial Options shall
be registered by the Company with the Securities and Exchange Commission for
sale to the public and one third of the Initial Options shall vest on each
annual anniversary of the date hereof commencing on July 1, 1997.
4.3 PERFORMANCE BONUSES.
(a) During the term of this Agreement, the Executive shall be entitled to
receive a cash performance bonus based upon the Company's consolidated earnings
before the payment of interest or taxes or deduction for depreciation ("EBIT-D")
as reflected on the Company's quarterly reports on Form 10-QSB. By August 31,
1997, 1998 and 1999, the Executive shall be entitled to receive a Cash Bonus
equal to four percent (4%) of the amount by which the aggregate EBIT-D for the
four (4) calendar quarters ending on the most recent June 30th exceed EBIT-D for
the four (4) calendar quarters ending on the preceding June 30th (the "Cash
Bonus"). For example, if EBIT-D for the four (4) calendar quarters ending June
30, 1997 equals $5,000,000, and EBIT-D for the four calendar quarters ending
June 30, 1996 was $2,000,000, the Executive would
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be entitled to receive a Cash Bonus equal to $120,000 ($5,000,000 - $2,000,000 =
$3,000,000 x .04 = $120,000). Notwithstanding the foregoing, under no
circumstances will the Executive be entitled to receive a Cash Bonus in excess
of 150% of the Base Salary (i.e. if the Base Salary is $200,000 during the year
commencing on July 1, 1996 and ending June 30, 1997, the maximum Cash Bonus for
such year will be $300,000).
(b) On each August 30th during the Term the Executive shall be entitled to
receive options (the "Option Bonus") to purchase a number of shares of Common
Stock equal to the dollar amount of the Cash Bonus (i.e. if the Cash Bonus
equals $120,000, then the Executive shall receive an option to purchase 120,000
shares of Common Stock). The options comprising the Option Bonus shall vest
quarterly over a two year period commencing on the September 30th following the
date of grant and be exercisable at a price equal to the average closing bid
price of the Company's shares of Common Stock for the five trading days ending
on the August 29th prior to the date of grant. The Performance Options will be
substantially in the form of Exhibit B attached hereto.
(c) If at any time during the Term the Company's EBIT-D aggregated over
four (4) consecutive fiscal quarter equals or exceeds $20,000,000 (the "Earnings
Target"), the Executive shall
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be entitled to receive an additional bonus equal to two hundred thousand dollars
($200,000) (the "Additional Bonus"). In such an event, the Company shall pay to
the Executive the Additional Bonus within sixty (60) days following the end of
the fiscal quarter during which the Earnings Target was satisfied. In no event
shall the Executive be eligible to receive the Additional Bonus on more than one
occasion during the Term.
4.4 EXPENSES. During the Term, the Company shall promptly reimburse
the Executive for all reasonable and necessary travel expenses and other
disbursements incurred by the Executive on behalf of the Company, in performance
of the Executive's duties hereunder, assuming Executive has received prior
approval for such travel expenses and disbursements by the Company to the extent
possible consistent with corporate practices with respect to the reimbursement
of expenses incurred by the Company's senior executives. In the event that the
Company relocates its executive offices and requires the Executive to relocate
outside the New York Metropolitan area, the Company will reimburse the Executive
for all reasonable out-of-pocket expenses incurred by her as a result of such
relocation.
4.5 BENEFITS. The Executive shall be permitted during
the Term to participate in any hospitalization or disability
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insurance plans, health programs, pension plans, bonus plans or similar benefits
that may be available to other executives of the Company, subject to such
eligibility rules as are applied to senior managers generally.
5. DISABILITY OF THE EXECUTIVE. If the Executive is incapacitated or
disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of 90 consecutive days or 180 days
in any period of 360 consecutive days (a "Disability"), the Company may, at the
time or during the period of such Disability, at its option, terminate the
employment of the Executive under this Agreement immediately upon giving the
Executive written notice to that effect.
6. TERMINATION.
(a) The Company may terminate the employment of the Executive and all of
the Company's obligations under this Agreement at any time for Cause (as
hereinafter defined) by giving the Executive notice of such termination, with
reasonable specificity of the details thereof. "Cause" shall mean (i) the
Executive's wilful misconduct which could reasonably be expected to have a
material adverse effect on the business and affairs of
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the Company, (ii) the Executive's disregard of lawful instructions of the
Company's Board of Directors or Chief Executive Officer consistent with the
Executive's responsibilities under this Agreement relating to the business of
the Company or neglect of duties or failure to act, which, in each case, could
reasonably be expected to have a material adverse effect on the business and
affairs of the Company, (iii) the Executive engages in conduct which is publicly
abusive to the Company's Chief Executive Officer or members of the Board of
Directors, (iv) the commission by the Executive of an act constituting common
law fraud, or a felony, or criminal act against the Company or any affiliate
thereof or any of the assets of any of them, (v) the Executive's abuse of
alcohol or other drugs or controlled substances, or conviction of a crime
involving moral turpitude, (vi) the Executive's material breach of any of the
agreements contained herein or (vii) the Executive's death or resignation
hereunder; provided however, that if the Executive resigned as a result of a
material breach by the Company of this Agreement, such resignation shall not be
considered "Cause" hereunder. A termination pursuant to Section 6(a)(i), (ii),
(iv), (v) (other than as a result of a conviction of a crime involving moral
turpitude) or (vi) shall take effect
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30 days after the giving of the notice contemplated hereby unless the Executive
shall, during such 30-day period, remedy to the reasonable satisfaction of the
Board of Directors of the Company the misconduct, disregard, abuse or breach
specified in such notice; provided, however, that such termination shall take
effect immediately upon the giving of such notice if the Board of Directors of
the Company shall, in its reasonable discretion, have determined that such
misconduct, disregard, abuse or breach is not remediable (which determination
shall be stated in such notice). A termination pursuant to Section 6(a)(iii),
(v) (as a result of a conviction of a crime involving moral turpitude) or (vii)
shall take effect immediately upon the giving of the notice contemplated hereby.
(b) The Company or the Executive may terminate the employment of the
Executive and all of the Company's obligations under this Agreement (except as
hereinafter provided) at any time during the Employment Period without Cause by
giving the Executive or the Company, as appropriate, written notice of such
termination, to be effective 15 days following the giving of such written
notice. For convenience of reference, the date upon which any termination of the
employment of the Executive pursuant to Sections 5 or 6 shall be effective shall
be hereinafter
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referred to as the "Termination Date". In the event the Executive resigns as a
result of a material diminution of the Executive's responsibility or a material
breach of the Agreement by the Company, such resignation shall be treated as a
termination by the Company other than for Cause, as described in Section 7(c)
provided the Executive shall have given the Company thirty (30) days written
notice, and the Company shall not have cured the breach within such thirty (30)
day period.
7. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) Upon the termination of the Executive's employment
for Cause, neither the Executive nor the Executive's beneficiaries or estate
shall have any further rights to compensation under this Agreement or any claims
against the Company arising out of this Agreement, except the right to receive
(i) the unpaid portion of the Base Salary provided for in Section 4.1, earned
through the Termination Date (the "Unpaid Salary Amount"), and (ii)
reimbursement for any expenses for which the Executive shall not have
theretofore been reimbursed, as provided in Section 4.6 (the "Expense
Reimbursement Amount").
(b) Upon the termination of the Executive's employment for a
Disability, neither the Executive nor the Executive's beneficiaries or estate
shall have any further rights to
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compensation under this Agreement or any claims against the Company arising out
of this Agreement, except the right to receive (i) the Unpaid Salary Amount,
(ii) the Expense Reimbursement Amount and (iii) accrued and unpaid amounts owed
to the Executive under Section 4.3 hereof through the Termination Date,
including a pro-rata entitlement to such amounts equal to the award to which the
Executive would have been entitled at the end of the applicable fiscal period
pro-rated for the period of the Executive's employment during such fiscal period
(collectively, the "Additional Payments").
(c) Upon the termination of the Executive's employment for other
than Cause or a Disability, neither the Executive nor the Executive's
beneficiaries or estate shall have any further rights to compensation under this
Agreement or any claims against the Company arising out of this Agreement,
except the Executive shall have the right to receive (i) the Unpaid Salary
Amount, (ii) the Expense Reimbursement Amount, (iii) severance compensation
equal to the Base Salary (including medical benefits) for the lessor of (a) the
term of this Agreement (as if this Agreement was not terminated) and (b) twelve
(12) months, 50% of which is payable on the Termination Date and 50% of which is
payable in equal monthly installments during the period
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commencing thirty (30) days following the Termination Date and continuing for a
period of twelve months thereafter, and (iv) the Additional Payments.
SECTION 8. DISCLOSURE OF CONFIDENTIAL INFORMATION. Executive recognizes
that she has had and will continue to have access to secret and confidential
information regarding the Company, including but not limited to its customer
list, products, know-how, and business plans. Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by her in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after her employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of her employment, which is treated as confidential by the Company,
including but not limited to its customer list, not otherwise in the public
domain, other than in the ordinary of business during her employment hereunder.
The provisions of this Section 8 shall survive Executive's employment hereunder.
SECTION 9. COVENANT NOT TO COMPETE.
(a) Executive recognizes that the services to be performed
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by her hereunder are special, unique and extraordinary. The parties confirm that
it is reasonably necessary for the protection of Company that Executive agree,
and accordingly, Executive does hereby agree, that she shall not, directly or
indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 9(e) below):
(i) except as provided in Subsection (d) below, be
engaged in the sale, marketing or distribution of
footwear products or provide technical assistance,
advice or counseling regarding the footwear
industry in any state in the United States in
which the Company or any affiliate thereof
transacts business, either on her own behalf or as
an officer, director, stockholder, partner,
consultant, associate, employee, owner, agent,
creditor, independent contractor, or co-venturer
of any third party which directly or indirectly
competes with the Company; or
(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf of
herself or any third party, any employee or agent of Company
or any affiliate
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thereof.
(b) Executive hereby agrees that she will not, directly or indirectly, for
or on behalf of herself or any third party, at any time during the term of the
Agreement and during the Restricted Period solicit any customers of the Company
or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 9 shall not be construed to prevent Executive from
owning, directly or indirectly, in the aggregate, an amount not exceeding five
percent (5%) of the issued and outstanding voting securities of any class of any
company whose voting capital stock is traded on a national securities exchange
or on the over-the-counter market other than securities of the Company.
(e) The term "Restricted Period," as used in this Section 9, shall mean
the period of Executive's actual employment
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hereunder plus (i) in the event the Executive voluntarily terminates her
employment (other than a resignation as a result of a material breach of the
Agreement) by the Company, one year, (ii) in the event the Executive's
employment is terminated without Cause or for a Disability, twelve (12) months,
and (iii) in the event the Executive's employment is terminated with cause,
twenty four (24) months.
(f) The provisions of this Section 9 shall survive the end of the
Restricted Period as provided in Section 9(e) hereof.
(g) In the event that the Executive breaches the terms and provisions of
Section 9(a)(i) above, the Company may terminate all unvested options comprising
the Option Bonus as liquidated damages hereunder.
SECTION 10. MISCELLANEOUS.
10.1 Injunctive Relief. Executive acknowledges that the services to
be rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Executive agrees that any breach or threatened
breach by her of Sections 8 or 9 of this Agreement shall entitle Company, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction
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to seek to enjoin such breach or threatened breach. The parties understand and
intend that each restriction agreed to by Executive hereinabove shall be
construed as separable and divisible from every other restriction, that the
unenforceability of any restriction shall not limit the enforceability, in whole
or in part, of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances warrant.
In the event that any restriction in this Agreement is more restrictive than
permitted by law in the jurisdiction in which Company seeks enforcement thereof,
such restriction shall be limited to the extent permitted by law.
10.2 Assignments. Neither Executive nor the Company may assign or
delegate any of their rights or duties under this Agreement without the express
written consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the
full and complete understanding and agreement of the parties with respect to
Executive's employment by Company, supersedes all prior understandings and
agreements, whether oral or written, between Executive and Company, and shall
not be amended, modified or changed except by an instrument in writing executed
by the party to be charged. The invalidity or partial invalidity of one or more
provisions of this Agreement shall not
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invalidate any other provision of this Agreement. No waiver by either party of
any provision or condition to be performed shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of,
be binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage prepaid, or by
private overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party may hereafter
give notice of in accordance with the provisions hereof. Notices shall be deemed
given on the sooner of the date actually received or the third business day
after sending.
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10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws provisions and each of the parties
hereto irrevocably consents to the jurisdiction and venue of the federal and
state courts located in the State of New York, County of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one of the same instrument.
10.9 Separability. If any of the restrictions contained in this
Agreement shall be deemed to be unenforceable by reason of the extent, duration
or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form this Agreement shall
then be enforceable in the manner contemplated hereby.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
XXXXXX XXXXXX, LTD.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
/s/ Xxxxxx X. Xxxxx
-----------------------------------------
Xxxxxx X. Xxxxx
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