EXHIBIT 10.18
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 1, 2002 between XXXXXX XXXXXX, residing at 000
00xx Xxxxxx, Xxxxxxx, Xxx Xxxxxx 00000 ("Executive") and MOVIE STAR, INC., a New
York corporation having its principal office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("Company").
WHEREAS, the Company and Executive entered into an agreement dated as of
February 22, 2000 governing the terms and conditions of Executive's employment
by the Company for a term ending on June 30, 2001 (the "2000 Agreement"); and
WHEREAS, the Company and Executive modified the 2000 Agreement in certain
respects and extended the term of the 2000 Agreement by an agreement dated as of
April 2001 (the "2001 Agreement"). (The 2000 Agreement and the 2001 Agreement
are hereinafter collectively referred to as the "Prior Agreement"); and
WHEREAS, the Company and Executive have agreed to other and additional
terms governing the terms and conditions of Executive's employment by the
Company.
IT IS AGREED:
1. Employment, Duties and Acceptance.
1.1 The Prior Agreement is hereby superseded in its entirety and shall
be replaced by all of the terms, conditions and agreements set forth in this
Agreement. The Company hereby employs Executive as its President and Chief
Executive Officer ("CEO"). All of Executive's powers and authority in any
capacity shall at all times be subject to the direction and control of the
Company's Board of Directors. Executive shall report directly to the Board of
Directors of the Company.
1.2 The Board may assign to Executive such general management and
supervisory responsibilities and executive duties for the Company or any
subsidiary of the Company, including serving as a director, as are consistent
with Executive's status as President and CEO. The Company and Executive
acknowledge that Executive's primary functions and duties as President and CEO
shall be to manage and supervise the overall operations of the Company's
business.
1.3 Executive accepts such employment and agrees to devote
substantially all of his business time, energies and attention to the
performance of his duties hereunder. Nothing herein shall be construed as
preventing Executive from making and supervising personal investments, provided
they do not interfere with the performance of Executive's duties hereunder or
violate the provisions of paragraph 5.1(f) hereof.
2. Term and Termination
2.1 The term of this Agreement shall commence on July 1, 2002 and
continue until June 30, 2007 (the "Term").
2.2 If Executive dies during the term of this Agreement, this
Agreement shall thereupon terminate, except that the Company shall pay to the
legal representative of Executive's estate (i) the base salary due Executive
pursuant to paragraph 3.1 hereof through the date of Executive's death, (ii) if
death occurs between July 1 and December 31, one-half of the bonus payments
calculated in accordance with paragraph 3.3 for the year in which Executive
dies, and the entire amount of the bonus payments, if death occurs between
January 1 and June 30, (iii) all earned and previously approved but unpaid
bonuses, (iv) all valid expense reimbursements through the date of the
termination of this Agreement, and (v) all accrued but unused vacation pay. In
addition to the foregoing, if the cumulative pre-tax profit of the Company for
the fiscal periods commencing on July 1, 2002 and ending on the earlier of the
December 31 or June 30 immediately following Executive's death (the "Death
Measurement End Date") is equal to or greater than $6,000,000, then the Company
shall pay to the legal representative of Executive's estate an amount determined
under the provisions of paragraph 6 hereof (substituting the Death Measurement
End Date for June 30, 2007); provided that if the Company, at its sole option,
elects to increase the death benefit payable under Executive's Life Insurance
(as defined in paragraph 3.4) to provide additional coverage of not less than
$1,000,000 and such coverage is in effect at the time of Executive's death, the
Company shall not be required to pay the amount referred to in this sentence. If
the additional life insurance coverage is not in effect at the time of
Executive's death, the amount referred to in the immediately preceding sentence
shall be payable within 90 days after the Death Measurement End Date in a
lump-sum cash payment. With respect to any bonus payments pursuant to the
provisions of subdivision (ii) of this paragraph 2.2 and any payment under the
two immediately proceeding sentences, it is expressly agreed that the amount of
any insurance proceeds payable to the Company on the life of Executive shall be
excluded from the calculation of the Company's pretax income for the fiscal year
of the Company in which Executive's death occurs.
2.3 The Company, by notice to Executive, may terminate this Agreement
if Executive shall fail because of illness or incapacity to render, for one
hundred and eighty consecutive (180) calendar days in any consecutive twelve
calendar month period, services of the character contemplated by this Agreement.
Notwithstanding such termination, the Company shall pay to Executive (i) the
base salary due Executive pursuant to paragraph 3.1 hereof through the date of
such notice, less any amount Executive receives for such period from any
Company-sponsored or Company-paid source of insurance, disability compensation
or government program, (ii) if the disability commences between July 1 and
December 31, one-half of the bonus payments calculated in accordance with
paragraph 3.3 for the year in which the disability commenced, and the entire
amount of the bonus payments, if the disability commences between January 1 and
June 30, (iii) all earned and previously approved but unpaid bonuses, (iv) all
valid expense reimbursements through the date of the termination of this
Agreement, and (v) all accrued but unused vacation pay. Notwithstanding the fact
that the Executive has not attained the age of 64 at the time of a termination
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in accordance with this paragraph 2.3, the Executive shall also be entitled to
participate in the Company's Senior Executive Medical Plan as provided in
paragraph 3.4 hereof. In addition to the foregoing, if the cumulative pre-tax
profit of the Company for the fiscal periods commencing on July 1, 2002 and
ending on the earlier of the December 31 or June 30 immediately following the
termination of this Agreement under this paragraph 2.3 (the "Disability
Measurement End Date") is equal to or greater than $6,000,000, then the Company
shall pay to Executive an amount determined under the provisions of paragraph 6
hereof (substituting the Disability Measurement End Date for June 30, 2007).
Such amount shall be payable within 90 days after the Disability Measurement End
Date in a lump-sum cash payment.
2.4 The Company, by notice to Executive, may terminate this Agreement
for cause. As used herein, "Cause" shall mean: (a) the refusal, or failure
resulting from the lack of good faith efforts, by Executive to carry out
specific directions of the Board which are of a material nature and consistent
with his status as President and CEO, or the refusal, or failure resulting from
the lack of good faith efforts, by Executive to perform a material part of
Executive's duties hereunder; (b) the commission by Executive of a substantial
and material breach of any of the provisions of this Agreement; (c) fraud or
dishonest action by Executive in his relations with the Company or any of its
subsidiaries or affiliates, or with any customer or business contact of the
Company or any of its subsidiaries or affiliates ("dishonest" for these purposes
shall mean Executive's knowingly making a material misstatement or omission, or
knowingly committing a material improper act, for his personal benefit); or (d)
the conviction of Executive of any crime involving an act of moral turpitude.
Notwithstanding the foregoing, no "Cause" for termination shall be deemed to
exist with respect to Executive's acts described in clauses (a) or (b) above,
unless the Company shall have given written notice to Executive specifying the
"Cause" with reasonable particularity and, within thirty (30) calendar days
after such notice, Executive shall not have cured or eliminated the problem or
thing giving rise to such "Cause;" provided, however, that a repeated breach
after notice and cure of any provision of clauses (a) or (b) above involving the
same or substantially similar actions or conduct, shall be grounds for
termination for "Cause" without any additional notice from the Company.
2.5 If Executive's employment hereunder is terminated for any reason,
then Executive shall, at the Company's request, resign as a director of the
Company and all of its subsidiaries, effective upon the occurrence of such
termination.
2.6 The Executive, by notice to the Company, may terminate this
Agreement if a "Good Reason" exists. For purposes of this Agreement, "Good
Reason" shall mean the occurrence of any of the following circumstances without
the Executive's prior express written consent: (a) a substantial and material
adverse change in the nature of Executive's title, duties or responsibilities
with the Company that represents a demotion from his title, duties or
responsibilities as in effect immediately prior to such change; (b) Executive is
not nominated to serve as a director by the Company; (c) Executive is not
elected to serve as a director of the Company or is removed from service as a
director of the Company, other than in connection with a termination of his
employment; provided that "Good Reason" shall not be deemed to exist with
respect to (i) the failure of Executive to be elected to serve as a director of
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the Company if each of Xxxx X. Xxxxx, Xxxxx Xxxxx, Xxxx Xxxxx and Xxxx Xxxxx and
each of their successors in interest shall have voted in favor of the election
of Executive to serve as a director of the Company or (ii) Executive's removal
from service as a director of the Company by a vote of the Company's
shareholders, if each of Xxxx X. Xxxxx, Xxxxx Xxxxx, Xxxx Xxxxx and Xxxx Xxxxx
and each of their successors in interest shall have voted against the removal of
Executive as a director of the Company; (d) a substantial and material breach of
this Agreement by the Company; (e) a failure by the Company to make any payment
to Executive when due, unless the payment is not material and is being contested
by the Company, in good faith; or (f) a material and adverse change in the
compensation or benefits described in paragraph 3 or 6 of this Agreement with
which Executive disagrees. Notwithstanding the foregoing, Good Reason shall not
be deemed to exist with respect to the Company's acts described in clauses (a),
(b), (c), (d), (e) or (f) above, unless the Executive shall have given written
notice to the Company specifying the Good Reason with reasonable particularity
and, within thirty (30) calendar days after such notice, the Company shall not
have cured or eliminated the problem or thing giving rise to such Good Reason;
provided, however, that a repeated breach after notice and cure of any provision
of clauses (a), (b), (c), (d), (e) or (f) above involving the same or
substantially similar actions or conduct, shall be grounds for termination for
Good Reason without any additional notice from the Executive. In addition, Good
Reason shall not be deemed to exist with respect to any adverse change in the
Executive's duties or responsibilities with the Company that represents a
demotion from his duties or responsibilities as in effect immediately prior to
such change in the event Executive is unable because of illness or incapacity to
render, for sixty (60) consecutive calendar days in any consecutive twelve
calendar month period, services of the character contemplated by this Agreement
and the Company shall, in good faith, determine to engage the services of a
senior management employee with significant experience in the apparel industry
to assume the duties and responsibilities (but not the title) as chief executive
officer of the Company; provided however, if the Company fails to reinstate the
prior duties and responsibilities of the Executive promptly after a
determination by a physician of Executive's choice who is reasonably acceptable
to the Company that Executive is able to resume such duties and
responsibilities, Executive shall have "Good Reason" for purposes of this
Agreement.
2.7 (a) In the event that Executive terminates this Agreement for Good
Reason, pursuant to the provisions of paragraph 2.6, or the Company terminates
this Agreement without "Cause," as defined in paragraph 2.4, the Company shall
pay and/or provide to Executive (or in the case of his death following any such
termination for Good Reason or without "Cause", the legal representative of
Executive's estate or such other person or persons as Executive shall have
designated by written notice to the Company), all payments, compensation and
benefits required under paragraph 3 hereof through the Term; including, without
limitation, incentive compensation as determined in accordance with paragraph
3.3 (provided, however, the amount of incentive compensation payable in
accordance with paragraph 3.3 for any fiscal year shall be deemed to be the
amount of the incentive compensation which was payable to the Executive for the
fiscal year prior to the fiscal year in which this Agreement is terminated), and
Executive shall not be subject to the obligations of paragraph 5.1(f).
Notwithstanding the fact that the Executive has not attained the age of 64 at
the time of a termination for Good Reason or without "Cause", the Executive
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shall also be entitled to participate in the Company's Senior Executive Medical
Plan as provided in paragraph 3.4 hereof; provided, however, that if Executive
is covered under a similar program by reason of employment elsewhere, such other
coverage shall be primary and the coverage under the Company's Senior Executive
Medical shall be secondary. All cash amounts due under this paragraph 2.7(a)
shall be payable to Executive within 90 days of the termination of this
Agreement in a lump-sum cash payment.
(b) In addition to the foregoing, if the cumulative pre-tax profit of
the Company for the fiscal periods commencing on July 1, 2002 and ending on the
earlier of the December 31 or June 30 immediately following a termination of
this Agreement to which this paragraph 2.7 is applicable (the "Measurement End
Date") is equal to or greater than $6,000,000, then the Company shall pay to
Executive an amount determined under the provisions of paragraph 6 hereof
(substituting the Measurement End Date for June 30, 2007); provided, however,
the amounts payable to Executive pursuant to paragraph 2.7(a) hereof shall be
excluded from the calculation of the Company's cumulative pre-tax income for the
fiscal periods set forth above. Such amount payable pursuant to this paragraph
2.7(b) shall be paid within 90 days after the Measurement End Date in a lump-sum
cash payment.
(c) In addition, if an Acquisition (as defined in paragraph 6.6) or a
Xxxxx Family Stock Disposition (as defined in paragraph 6.7) occurs within 6
months of the termination of the Agreement by the Executive for "Good Reason" or
by the Company without "Cause", Executive shall be entitled to the payments
provided for in paragraphs 6.6 and 6.7.
(d) Payments to the Executive pursuant to this paragraph 2.7 shall not
be subject to mitigation, and shall not be reduced by compensation received by
Executive from other employers or entities.
3. Compensation and Benefits.
3.1 The Company shall pay to Executive a base annual salary during the
Term as follows:
(a) For the period July 1, 2002 through June 30, 2003, at the
annual rate of $475,000.00. The sum of $37,500 shall be payable on
each of July 1, 2002 and January 2, 2003 and the balance of $400,000
shall be paid in equal periodic installments in accordance with the
Company's normal payroll procedures;
(b) For the period July 1, 2003 through June 30, 2004, at the
annual rate of $500,000.00. The sum of $50,000 shall be payable on
each of July 1, 2003 and January 2, 2004 and the balance of $400,000
shall be paid in equal periodic installments in accordance with the
Company's normal payroll procedures;
(c) For the period July 1, 2004 through June 30, 2005, at the
annual rate of $525,000.00. The sum of $62,500 shall be payable on
each of July 1, 2004 and January 2, 2005 and the balance of $400,000
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shall be paid in equal periodic installments in accordance with the
Company's normal payroll procedures;
(d) For the period July 1, 2005 through June 30, 2006, at the
annual rate of $550,000.00. The sum of $75,000 shall be payable on
each of July 1, 2005 and January 2, 2006 and the balance of $400,000
shall be paid in equal periodic installments in accordance with the
Company's normal payroll procedures;
(e) For the period July 1, 2006 through June 30, 2007, at the
annual rate of $575,000.00. The sum of $87,500 shall be payable on
each of July 1, 2006 and January 2, 2007 and the balance of $400,000
shall be paid in equal periodic installments in accordance with the
Company's normal payroll procedures. and
3.2 Except as otherwise set forth in paragraph 3.1, Executive's
compensation shall be paid in equal, periodic installments in accordance with
the Company's normal payroll procedures.
3.3 The Company shall also pay to Executive such bonuses as may be
determined from time to time by the Board of Directors. In connection therewith,
the Executive shall be entitled to participate in the senior executive incentive
compensation pool as adopted by the Board of Directors on February 22, 2000, and
thereafter as in effect from time to time during the term hereof; provided that,
notwithstanding any action hereafter taken by the Board of Directors, throughout
the Term, Executive shall receive incentive compensation as more fully set forth
in Schedule A annexed hereto and made a part hereof and on terms no less
favorable than the terms of Schedule A and the Senior Executive Incentive
Compensation Plan as they exist on March 1, 2000 a copy of which is attached as
Schedule B. Any amounts due under this paragraph 3.3 shall be payable to the
Executive within 90 days of the end of the applicable fiscal year in a cash
lump-sum payment.
3.4 The Company shall, at its own cost and expense, maintain (i) a
policy of life insurance on the life of the Executive which will provide a death
benefit to the Executive's beneficiary in the amount of $1,500,000 and which
will be owned by Executive (the "Executive's Insurance Policy"); (ii) a policy
of disability insurance which will provide a benefit of $10,000 per month
payable to Executive until Executive attains the age of sixty-four and which
will be owned by Executive; and (iii) such group medical insurance covering
Executive and Executive's dependent family members and such other benefits as
are generally afforded to other senior executives of the Company, subject to
applicable waiting periods and other conditions. Provided that Executive is
still employed by the Company on the date he attains age 64 and Executive
thereafter retires from such employment, Executive shall be entitled to
participate in the Company's Retired Senior Executive Medical Plan in accordance
with all of the terms and conditions thereof and contained in the letter from
Xxxxx X. Xxxxx to Xxxxxx Xxxxx dated August 2, 1999 (a copy of each of which is
annexed hereto as Exhibit II), except that (i) no further approval of the
Compensation Committee of the Board of Directors shall be necessary for such
participation and (ii) the Retired Senior Executive Medical Plan shall at all
times provide benefits to Executive and Executive's dependent family members and
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at costs to Executive no less favorable than were provided to senior executives
and retired senior executives of the Company on March 1, 2000. Executive agrees
to fully cooperate with the Company in obtaining and maintaining the Executive's
Insurance Policy, any additional death benefits thereunder and any other
policies of insurance on the life of the Executive obtained or maintained by the
Company.
3.5 Executive shall be entitled to four weeks of vacation in each
calendar year and to a reasonable number of other days off for religious and
personal reasons.
3.6 The Company shall provide Executive with a suitable leased
automobile and shall pay for all other costs associated with the use of the
vehicle, including insurance costs, parking, repairs and maintenance; provided
that the Company shall not be required to expend more than $1,200 per month for
the cost of leasing such automobile; and provided further that at the end of the
term of any such lease, Executive shall have the right, at his sole cost and
expense, to purchase the vehicle in accordance with the terms of the lease
applicable to any such purchase. The costs associated with Executive's
automobile shall be considered taxable income to Executive, except to the extent
that it is documented to have been used by him for business purposes.
3.7 The Company will pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by Executive on
business trips and for all other ordinary and reasonable out-of-pocket expenses
actually incurred by him in the conduct of the business of the Company against
itemized vouchers submitted with respect to any such expenses and approved in
accordance with customary procedures.
3.8 Executive acknowledges that he will be obligated to render
services hereunder wherever such services are reasonably required by the
Company, which may necessitate substantial travel by Executive.
4. Executive Indemnity
4.1 In addition to any rights Executive may have under the Company's
charter or by-laws, the Company agrees to indemnify Executive and hold Executive
harmless, both during the Term and thereafter, against all costs, expenses
(including, without limitation, fines, excise taxes and reasonable attorneys'
fees) and liabilities (other than settlements to which the Company does not
consent, which consent shall not be unreasonably withheld) (collectively,
"Losses") reasonably incurred by Executive in connection with any claim, action,
proceeding or investigation brought against or involving Executive with respect
to, arising out of or in any way relating to Executive's employment with the
Company or Executive's service as a director of the Company; provided, however,
that the Company shall not be required to indemnify Executive for Losses
incurred as a result of Executive's intentional misconduct or gross negligence
(other than matters where Executive acted in good faith and in a manner he
reasonably believed to be in and not opposed to the Company's best interests).
Executive shall promptly notify the Company of any claim, action, proceeding or
investigation under this paragraph and the Company shall be entitled to
participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
7
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company's expense) if Company counsel would have a
"conflict of interest" in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive's consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith. The Company further agrees
to advance any and all expenses (including, without limitation, the fees and
expenses of counsel) reasonably incurred by the Executive in connection with any
such claim, action, proceeding or investigation, provided Executive first enters
into an appropriate agreement for repayment of such advances if indemnification
is found not to have been available. The Company currently maintains a policy of
directors' and officers' liability insurance covering Executive and,
nothwithstanding the expiration or earlier termination of this Agreement, the
Company shall maintain a directors' and officers' liability insurance policy
covering Executive for a period of time following such expiration or earlier
termination equal to the statute of limitations for any claim that may be
asserted against Executive for which coverage is available under such directors'
and officers' liability insurance policy. The provisions of this paragraph 4.1
shall survive the termination of this Agreement for any reason.
5. Protection of Confidential Information; Non-Competition.
5.1 Executive acknowledges that:
(a) As a result of his current employment with, and prior
retention as an employee of, the Company, Executive has obtained and
will obtain secret and confidential information concerning the
business of the Company and its subsidiaries and affiliates (referred
to collectively in this paragraph 5 as the "Company"), including,
without limitation, financial information, designs and other
proprietary rights, trade secrets and "know-how," customers and
sources of supply ("Confidential Information").
(b) The Company will suffer substantial damage which will be
difficult to compute if, during the period of his employment with the
Company or thereafter, Executive should enter a business competitive
with the Company or divulge Confidential Information.
(c) The provisions of this Agreement are reasonable and necessary
for the protection of the business of the Company.
(d) Executive agrees that he will not at any time, either during
the term of this Agreement or thereafter, divulge to any person or
entity any Confidential Information obtained or learned by him as a
result of his employment with, or prior retention by, the Company,
except (i) in the course of performing his duties hereunder, (ii) with
the Company's express written consent; (iii) to the extent that any
such information is in the public domain other than as a result of
Executive's breach of any of his obligations hereunder; or (iv) where
required to be disclosed by court order, subpoena or other government
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process. If Executive shall be required to make disclosure pursuant to
the provisions of clause (iv) of the preceding sentence, Executive
promptly, but in no event more than 72 hours after learning of such
subpoena, court order, or other government process, shall notify, by
personal delivery or by electronic means, confirmed by mail, the
Company and, at the Company's expense, Executive shall to the extent
practicable: (a) take all reasonably necessary and lawful steps
required by the Company to defend against the enforcement of such
subpoena, court order or other government process, and (b) permit the
Company to intervene and participate with counsel of its choice in any
proceeding relating to the enforcement thereof.
(e) Upon termination of his employment with the Company,
Executive will promptly deliver to the Company all memoranda, notes,
records, reports, manuals, drawings, blueprints and other documents
(and all copies thereof) relating to the business of the Company and
all property associated therewith, which he may then possess or have
under his control; provided, however, that Executive shall be entitled
to retain copies of such documents reasonably necessary to document
his financial relationship (both past and future) with the Company.
(f) During the period commencing on the date hereof and ending on
the date on which Executive's employment hereunder is terminated (such
date of termination is the "Employment Termination Date") (and, if
Executive's employment is terminated by the Company with "Cause", by
Executive without "Good Reason" or upon the expiration of the Term,
until the "Restricted Period End Date", as defined below), Executive,
without the prior written permission of the Company, shall not,
anywhere in the world, (i) be employed by, or render any services to,
any person, firm or corporation engaged in any business which is
directly or indirectly in competition with the Company ("Competitive
Business"); (ii) engage in any Competitive Business for his or its own
account; (iii) be associated with or interested in any Competitive
Business as an individual, partner, shareholder, creditor, director,
officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity; (iv) employ or retain, or have
or cause any other person or entity to employ or retain, any person
who was employed or retained by the Company while Executive was
employed by the Company; or (v) solicit, interfere with, or endeavor
to entice away from the Company, for the benefit of a Competitive
Business, any of its customers or other persons with whom the Company
has a contractual relationship. Notwithstanding the foregoing, nothing
in this Agreement shall preclude Executive from investing his personal
assets in the securities of any corporation or other business entity
which is engaged in a Competitive Business if such securities are
traded on a national stock exchange or in the over-the-counter market
and if such investment does not result in his beneficially owning, at
any time, more than 4.9% of the publicly-traded equity securities of
such Competitive Business. If the Executive's employment with the
Company is terminated by the Company with "Cause" or by the Executive
without "Good Reason", the "Restricted Period End Date" shall mean the
day before the first anniversary of the Employment Termination Date.
If the Executive's employment with the Company is terminated upon the
expiration of the Term, the "Restricted Period End Date" shall mean
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(i) the Employment Termination Date, if no payments are due to
Executive under the provisions of paragraph 6 hereof, (ii) the day
before the first anniversary of the Employment Termination Date, if a
payment of $500,000 is due to Executive under paragraph 6 hereof, and
(iii) the day before the second anniversary of the Employment
Termination Date, if a payment of at least $750,000 million is due the
Executive under paragraph 6.
(g) If Executive commits a breach, or threatens to commit a
breach, of any of the provisions of paragraphs 5.1(d) or 5.1(f), the
Company shall have the right and remedy:
(i) to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction, it
being acknowledged and agreed by Executive that the
services being rendered hereunder to the Company are of
a special, unique and extraordinary character and that
any such breach or threatened breach will cause
irreparable injury to the Company and that money
damages will not provide an adequate remedy to the
Company; and
(ii) require Executive to account for and pay over to the
Company all monetary damages suffered by the Company as
the result of any transactions constituting a breach of
any of the provisions of paragraphs 5.1(d) or 5.1(f),
and Executive hereby agrees to account for and pay over
such damages to the Company.
5.2 Each of the rights and remedies enumerated in this paragraph 5
shall be independent of the other, and shall be severally enforceable, and such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or equity.
5.3 In connection with any legal action or proceeding arising out of
or relating to this Agreement, the prevailing party in such action or proceeding
shall be entitled to be reimbursed by the other party for the reasonable
attorneys' fees and costs incurred by the prevailing party.
5.4 If Executive shall violate any covenant contained in paragraph
5.1(f), the duration of such covenant so violated shall be automatically
extended for a period of time equal to the period of such violation.
5.5 If any provision of paragraphs 5.1(d) or 5.1(f) is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination shall have the power to modify such scope,
duration, or area, or all of them, and such provision or provisions shall then
be applicable in such modified form.
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5.6 The provisions of this paragraph 5 shall survive the termination
of this Agreement for any reason.
6. Severance and Other Payments
6.1 Upon the expiration of this Agreement and provided that Executive
retires from employment by the Company, Executive shall be entitled to a
severance payment from the Company (the "Severance Payment") as determined in
accordance with the provisions of paragraphs 6.2, 6.3, 6.4 and 6.5 of this
Agreement.
6.2 If the cumulative pre-tax profit, as determined in accordance with
generally accepted accounting standards in the United States of America applied
on a consistent basis, of the Company for the fiscal years commencing on July 1,
2002 and ending on June 30, 2007 is less than $6,000,000, Executive shall not be
entitled to any Severance Payment.
6.3 If the cumulative pre-tax profit, as determined in accordance with
generally accepted accounting standards in the United States of America applied
on a consistent basis, of the Company for the fiscal years commencing on July 1,
2002 and ending on June 30, 2007 is at least $6,000,000 and not more than
$8,000,000, Executive shall receive a Severance Payment in the amount of
$500,000.
6.4 If the cumulative pre-tax profit, as determined in accordance with
generally accepted accounting standards in the United States of America of the
Company applied on a consistent basis, for the fiscal years commencing on July
1, 2002 and ending on June 30, 2007 is at least $8,000,000 and not more than
$10,000,000, Executive shall receive a Severance Payment in the amount of
$750,000.
6.5 If the cumulative pre-tax profit, as determined in accordance with
generally accepted accounting standards in the United States of America applied
on a consistent basis, of the Company for the fiscal years commencing on July 1,
2002 and ending on June 30, 2007 is more than $10,000,000, Executive shall
receive a Severance Payment equal to seven and one-half (7.5%) percent of the
cumulative pre-tax profit.
6.6 If, at any time during the Term and provided Executive is still
employed by the Company or paragraph 2.7(c) hereof is applicable, substantially
all of the assets of the Company are sold or the Company merges with or into
another entity in a transaction which results in a majority of the issued and
outstanding shares of capital stock or other ownership interests of the merged
entity being owned by shareholders or owners who did not own a majority of the
issued and outstanding shares of capital stock of the Company prior to any such
merger (an "Acquisition"), upon the closing of any such Acquisition Executive
shall be entitled to receive a payment from the Company in an amount equal to
the product obtained by multiplying (x) a fraction, the numerator of which is
the actual consideration paid for the Acquisition and the denominator of which
is the number of shares of capital stock of the Company issued and outstanding
on the closing date of any Acquisition, less $.75 times (y) 1,000,000 (the
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"Acquisition Payment Formula"). By way of illustration only, if the number of
shares of capital stock of the Company issued and outstanding on the closing
date of any Acquisition is 15,000,000 and the actual consideration paid for the
Acquisition is $30,000,000, Executive would be entitled to receive a payment
determined in accordance with the Acquisition Payment Formula of $1,250,000
($30,000,0000/15,000,000 = $2.00 - $.75 = $1.25 x 1,000,000 = $1,250,000). Any
amounts received by Executive pursuant to this paragraph 6.5 shall be deducted
from any Severance Payment due Executive pursuant to paragraphs 6.3, 6.4 and
6.5.
6.7 If at any time during the Term and provided Executive is still
employed by the Company or paragraph 2.7(c) hereof is applicable, the Xxxxx
Family (consisting of Xxxx X. Xxxxx, his spouse, parents, siblings, children,
nephews and nieces) disposes of substantially all of its stock in the Company in
one or a series of transactions (a "Xxxxx Family Disposition"), upon the closing
of such single transaction or the last of such series of such transactions,
Executive shall be entitled to receive a payment from the Company in an amount
equal to the product obtained by multiplying (x) the average amount received by
the Xxxxx Family on a share of stock in such transaction or transactions, less
75cents times (y) 1,000,000 (the "Alternative Acquisition Payment Formula"). By
way of illustration only, if the Xxxxx Family sold all of its stock in the
Company in a transaction in which it received $1.75 per share, Executive would
be entitled to receive a payment determined in accordance with the Alternative
Acquisition Payment Formula of $1,000,000 (($1.75-$.75) x 1,000,000). Any
amounts received by Executive pursuant to this paragraph 6.7 shall be deducted
from any Severance Payment due Executive pursuant to paragraphs 6.3, 6.4 and 6.5
hereof and any amounts of Severance Payment received by Executive pursuant to
paragraphs 6.3, 6.4 and 6.5 shall be deducted from any amounts due Executive
pursuant to this paragraph 6.7.
6.8 Any amounts due under the provisions of paragraph 6.3. 6.4, or 6.5
shall be paid by September 30, 2007 in a lump-sum cash payment and amounts due
under the provisions of paragraph 6.6 or 6.7 shall be paid within 90 day of the
applicable transaction in a lump-sum cash payment.
7. Miscellaneous Provisions
7.1 All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when (i) delivered personally to the
party to receive the same, or (ii) when mailed first class postage prepaid, by
certified mail, return receipt requested, addressed to the party to receive the
same at his or its address set forth below, or such other address as the party
to receive the same shall have specified by written notice given in the manner
provided for in this paragraph 7.1:
If to Executive:
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Xx. Xxxxxx Xxxxxx
000 00xx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
With a copy to:
Xxxx X. Xxxxxx, Esq.
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Fax No.: (000) 000-0000
If to the Company:
Movie Star, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chairman of the Board
With a copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
All notices shall be deemed to have been given as of the date of personal
delivery or mailing thereof.
7.2 This Agreement sets forth the entire agreement of the parties
relating to the employment of Executive and are intended to supersede all prior
negotiations, understandings and agreements. No provisions of this Agreement may
be waived or changed except by a writing by the party against whom such waiver
or change is sought to be enforced. The failure of any party to require
performance of any provision hereof or thereof shall in no manner affect the
right at a later time to enforce such provision.
7.3 All questions with respect to the construction of this Agreement,
and the rights and obligations of the parties hereunder, shall be determined in
accordance with the law of the State of New York applicable to agreements made
and to be performed entirely in New York.
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7.4 This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Company. This Agreement shall not be
assignable by Executive, but shall inure to the benefit of and be binding upon
Executive's heirs and legal representatives.
7.5 Should any provision of this Agreement become legally
unenforceable, no other provision of this Agreement shall be affected, and this
Agreement shall continue as if the Agreement had been executed absent the
unenforceable provision.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
MOVIE STAR, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
Chairman
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