EXHIBIT 10.31
ADVANCED AESTHETICS, LLC
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into by and among
Advanced Aesthetics, LLC, a Delaware limited liability company (the "Company"),
Advanced Aesthetics, Inc., a Delaware Corporation (the "Parent") and Xxxx Xxxxxx
(the "Executive") as of January 1, 2005 (the "Effective Date").
1. Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment by the Company commencing on the Effective
Date until terminated in accordance with Section 5 herein (the "Term").
2. Positions and Duties. The Company shall employ Executive as the
President of the Company's Cosmedicine Division. As the President of the
Company's Cosmedicine Division, Executive shall report to the Chief Executive
Officer of the Company and shall be responsible for developing, implementing,
marketing and managing the daily operations and sales and growing the line of
company products to be marketed and sold under the Cosmedicine xxxx (the
"Cosmedicine Products"). The Executive shall perform her duties pursuant to this
Section 2, consistent with the written directives of the Company's Chief
Executive Officer or Board of Directors, in the best interests of the Company,
to the best of the Executive's ability and in a diligent manner, and the
Executive shall devote her full skills and efforts and her entire business time
to the performance of those duties and to the furtherance of the interests of
the Company. All of such duties and responsibilities of Executive shall be
subject to such written policies, guidelines and procedures as are adopted from
time to time by the Chief Executive Officer or the Board of Directors of the
Company (the "Board") during the Term. In addition, and without further
compensation, the Executive shall serve as a member of the Board and as a member
of an advisory board to the board of directors of one or more of the Company's
affiliates, if so elected or appointed from time to time; provided that any such
advisory role does not conflict or interfere with any duty owed by Executive to
the Company.
3. Remuneration.
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(a) The Executive shall receive a base salary of not less than
$450,000 per year, payable in accordance with the Company's
customary payroll practices. The Chief Executive Officer may
review the Executive's salary from time to time and may
increase (but not decrease) the salary during the Term in the
sole discretion of the Chief Executive Officer and/or the
Compensation Committee of the Board.
(b) In addition to the Executive's base salary, the Company shall
pay to Executive the following bonuses to Executive not later
than thirty (30) days following the first date on which the
applicable performance measure has been achieved (provided
that Executive is employed by the Company at the date on which
the applicable performance measure has been achieved and the
date of payment of such bonus):
(i) a bonus of $175,000, payable upon the first date on which
Xxxxxx
Xxxxxxx and Xxxxx Xxxxxxx certifies for commercialization at
least ten (10) new products bearing the Xxxxx Xxxxxxx
Certification, as defined in the Retail Alliance Agreement,
dated December 14, 2004 (the "Sephora Agreement"), between the
Company and Sephora USA, LLC ("Sephora");
(ii) a bonus of $175,000, payable upon the first date on which
Cosmedicine Products have been shipped to Sephora in an amount
sufficient to stock each of the Sephora Retail Stores (as
defined in the Sephora Agreement) with at least ten (10)
Cosmedicine Product SKU's; and
(iii) a bonus of $200,000, payable upon the first date on which the
Company has shipped orders for Cosmedicine Products totaling
an aggregate total of $5,000,000 during any two consecutive
fiscal quarters during the Term.
Following the achievement of the foregoing performance measures, the Executive
and Chief Executive Officer or Board will mutually agree on additional
performance measures and payment schedule as a basis for the payment of future
annual bonuses to the Executive (the "Subsequent Performance Bonus"). The
Subsequent Performance Bonus will be targeted to be no less than $550,000 per
annum based on the achievement of such additional performance measures.
(c) The Parent hereby grants to the Executive an option to
purchase 150,000 shares of Parent's common stock at an
exercise price of $4.00 per share ("Options"), which such
Options shall vest over a period of four years for as long as
the Executive is employed by the Company so that at any given
day the number of vested options shall be equal to the number
of days from the Effective Date until such date, divided by
1,460 and multiplied by the number of Options granted to the
Executive, except that if her employment has been terminated
by the Company without Cause or by Executive for Good Reason
(each, as defined in Sections 5(a) and (e) below) then in each
such case, the provisions of Sections 5(c) and (e) shall
control with respect to the acceleration of vesting of any
unvested Options. All such Options shall be subject to the
terms and conditions of Parent's 2003 Stock Option Plan as
amended, if at all, during the Term (the "Option Plan"),
except that to the extent there is a conflict between the
terms of this Agreement and the Option Plan, the terms of this
Agreement shall control. In addition to the foregoing option,
Parent hereby grants to the Executive an option (on the same
terms, including, but not limited to, vesting and exercise
price, as the foregoing Options) (the "Contingent Share
Option") to purchase shares of common stock of the Parent
("Shares") based on the cumulative EBITDA contributed by the
sale of Cosmedicine Products, as reasonably calculated and
agreed to in writing by the Board and the Executive for any
four consecutive fiscal quarters ("Cosmedicine Annual
EBITDA"), as follows:
(i) 40,000 Shares upon exceeding $8,000,000 of Cosmedicine Annual
EBITDA;
(ii) 40,000 Shares upon exceeding $18,000,000 of Cosmedicine Annual
EBITDA;
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(iii) 40,000 Shares upon exceeding $35,000,000 of Cosmedicine Annual
EBITDA; and
(iv) 40,000 Shares upon exceeding $55,000,000 of Cosmedicine Annual
EBITDA.
For purposes of calculating the Cosmedicine Annual EBITDA, the following
guidelines will be followed: (A) Cosmedicine Annual EBITDA will be based on the
price of the products sold to Sephora, (B) "backbar products" shall have the
same markup as wholesale products, (C) shared resources and corporate
allocations will be based on actual usage of such resource by the Cosmedicine
division and (D) all other calculations shall be performed in a manner to be
agreed upon in writing between the Board of Directors and Executive. In the
event that the parties do not agree on the foregoing, they will submit such
dispute to the Company's accountants to be resolved and if the accountants are
unwilling or unable to resolve such dispute, the parties will submit the dispute
to arbitration to be conducted in New York, New York by an arbitrator chosen by
the American Arbitration Association and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
4. Benefits; Expenses. During the Term, the Executive (a) shall be
entitled, to the extent eligible, to participate in such health, medical,
welfare, retirement and savings benefit plans and programs, and perquisites of
the Company as are in effect during the Term on terms substantially comparable
to those in effect for other senior executives of the Company (collectively, the
"Benefit Plans"); and (b) shall be reimbursed for all reasonable and necessary
expenses incurred by Executive in the performance of her duties hereunder and as
a member of the Board or other advisory board appointments pursuant to Section
2, upon the submission of appropriate documentation with respect thereto and in
accordance with applicable Company policies.
5. Termination, Death and Disability.
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(a) The Company may terminate this agreement and the Executive's
employment hereunder at any time, upon written notice to
Executive, for "Cause", which shall mean
(i) the commission of fraud or embezzlement on the part of the
Executive;
(ii) a breach by the Executive of Section 6 of this agreement;
(iii) the conviction of the Executive of, or the pleading by the
Executive of guilty or no contest to any felony, or any crime
involving moral turpitude on her part;
(iv) the material (A) failure or refusal of Executive to discharge
her duties, responsibilities and obligations under this
Agreement, except for reasons beyond the control of the
Executive or (B) failure or refusal of Executive to comply
with a specific written directive of the Board or Chief
Executive Officer, but only if such failure or refusal (in
subsections (iv) (A) and (B)):
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(1) is inconsistent with any provision of this Agreement or
Executive's responsibilities hereunder;
(2) is not cured within twenty (20) days after receipt of
written notice specifying the nature of such failure or
refusal; or
(3) is not based on Executive's good faith belief, as
expressed by prompt written notice given to the Chief
Executive Officer of the Company following consultation with
counsel that performance of the specified action or direction
would be unlawful or inconsistent with the Company's policies
or code of business conduct.
In the event the Company terminates Executive's employment for Cause:
(A) Executive shall be entitled to receive such base salary as has accrued but
has not been paid as of the date of termination ("Termination Date") and (B) in
the event of termination pursuant to Section 5(a)(iv), the Executive shall be
entitled to exercise all Options as have vested through the Termination Date.
Executive shall not be entitled to receive any other payments or benefits of any
kind, except as required by applicable law or under any of the Agreements (as
defined in Section 17 below).
(b) In the event the Company terminates the Executive's employment
hereunder without Cause (other than as a result of the death or disability of
the Executive), the Company shall, in lieu of any and all other payments or
benefits payable to the Executive, pay to the Executive: (i) a cash lump sum
payment, within thirty (30) days following the Termination Date, equal to the
accrued but unpaid base salary as of the Termination Date, plus (ii) six months'
salary, if the Termination Date occurs on or before the fourth anniversary of
the Effective Date, payable over a period of six months following the
Termination Date. In addition and notwithstanding any provision in Section 3(b)
to the contrary, (A) fifty percent (50%) of all unvested Options to purchase
shares of common stock of Parent granted to the Executive pursuant to Section
3(c) shall vest and become exercisable pursuant to the terms of the Option Plan,
(B) if any of the performance measures set forth in Section 3(b)(i), (ii) or
(iii) are met within six months of the Termination Date, Executive shall be
entitled to receive the applicable bonus, as if such performance measure was
achieved during the Term of her employment and (C) if any of the Cosmedicine
Annual EBITDA goals set forth in Section 3(c)(i), (ii), (iii) or (iv) are met
within six months of the Termination Date, Executive shall be entitled to
receive the Contingent Share Options, as if such Cosmedicine Annual EBITDA goals
were achieved during the Term of her employment.
(c) In the event of the death or disability (as reasonably determined
by the Company in accordance with all applicable laws) of the Executive during
the Term, the Executive's employment shall terminate as of the date of death or
the date of notice from the Company to the Executive terminating her employment
due to her disability (the "Notice Date"), as the case may be, and within thirty
(30) days from the date of death or Notice Date, the Company shall pay to
Executive or the estate of the Executive, a lump sum payment in cash in an
amount equal to the sum of (i) all base salary accrued but not paid through the
date of death or Notice Date, (ii) any
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earned but unpaid bonus payments, as of the date of death or disability of
Executive and (iii) any amounts due to Executive under any Benefit Plan or
company policy applicable to Executive at such time. In addition, Executive
shall be entitled to exercise all Options as have vested through the Termination
Date.
(d) The Executive may terminate her employment hereunder for "Good
Reason" upon notice to the Company setting forth in reasonable detail the nature
of such Good Reason. The following shall constitute Good Reason for termination
by the Executive, provided that Executive provides notice of Good Reason
hereunder within thirty (30) days from the date she knew or reasonably should
have known of the existence of such Good Reason:
(i) any material adverse change in the position, title,
responsibilities and reporting requirements as compared to those set
forth in Section 2; provided, however, that the Company's failure to
continue the Executive's appointment or election as a member of an
advisory board of any of its affiliates or as a member of the board of
directors of the [Company or] Parent shall not constitute "Good Reason"
under this Agreement;
(ii) any material breach of this Agreement by the Company,
including the failure of the Company to pay base salary and bonus in
the manner provided in Sections 3(a) and (b), or to provide the
benefits in accordance with the terms of the applicable Benefit Plans;
provided, that the Company has failed to cure such breach within twenty
(20) business days following receipt of written notice from the
Executive specifying in detail the nature thereof;
(iii) any material breach of the Agreement by the Parent with
respect to its obligations under Section 3(c) of this Agreement or
under the Option Plan or under any other Benefit Plans; provided, that
the Parent has failed to cure such breach within twenty (20) business
days following receipt of written notice from the Executive specifying
in detail the nature thereof;
(iv) the Executive is required to principally perform her
duties from a location outside the city of New York, New York, other
than any traveling reasonably necessary in order to perform her duties
under this Agreement, it being understood by Executive that the
Company's principal executive offices are located in Florida and that
she will be required to travel to Florida from time to time;
(v) following the occurrence of a Change of Control, the
acquiring or surviving entity does not agree in writing to assume all
obligations of the Company under this Agreement or under any Benefit
Plans as are in effect as of the date of such Change of Control, or in
the case of the Parent, the obligations of the Parent under Sections
3(c) and 15 of this Agreement, the Option Plan or under any other
Benefit Plans as are in effect as of the date of such Change of
Control. For purposes hereof, "Change of Control" means any one or more
of the following events:
i. any transaction by the Company or Parent, as the case may be,
or by
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any person (as such term is used in Rule 13d-5 under the
Exchange Act) or group (as such term is defined in Sections
3(a)(9) and 13(d)(3) of the Exchange Act) (collectively,
"Persons"), which has a direct or indirect ownership interest
in the Company or Parent that results in fifty percent (50%)
or more of the constituent ownership interests in the Company
or Parent being sold, assigned, transferred, shared, divided,
conveyed or otherwise disposed of to a person not a beneficial
owner of the Company or Parent on the date of this Agreement,
provided, that any sale, assignment, transfer or disposal to
the current beneficial owners of the Company or Parent or any
of their respective subsidiary or affiliated companies
(collectively, the "Companies") or an initial public offering
or reverse merger of the Company or Parent into a public
company shall not constitute a Change of Control;
ii. consummation of a merger, reorganization, consolidation, or
similar transaction (any of the foregoing, a "Merger"), other
than a reverse merger of the Company or Parent into a public
company, unless the Persons who were, immediately before such
Merger, the beneficial owners of any equity interest in the
Company or the Parent, as the case may be, entitled to be
voted ("Voting Interests"), are the beneficial owners,
immediately after such Merger, directly or indirectly, in the
aggregate, of more than fifty percent (50%) of the common
stock and any other voting securities of the entity resulting
from such Merger in substantially the same relative
proportions as they owned the Voting Interests of immediately
before the Merger;
iii. consummation of a transfer or sale of all or substantially all
of the assets of the Company or the Parent, as the case may
be, unless the Persons who were the beneficial owners of the
Voting Interests of the Company or the Parent immediately
before such sale, are the beneficial owners, immediately after
such sale, directly or indirectly, in the aggregate, of more
than fifty percent (50%) of the common stock and any other
voting securities of the entity or entities that own such
assets immediately after the sale; or
iv. The Board or the shareholders of the Company, or the board of
directors or shareholders of the Parent, as the case may be,
approve a plan of liquidation of the Company, or Parent, as
applicable.
In the event of termination in accordance with this Section 5(e), the Executive
will be entitled to the same pay and benefits she would have been entitled to
receive had the Executive been terminated by the Company other than for Cause
and in accordance with Section 5(b) above.
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6. Confidentiality; Nonsolicitation; Noncompetition.
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(a) Executive acknowledges the time and expense incurred by the
Companies in developing proprietary and confidential information in connection
with their respective businesses and operations. Executive agrees that she will
not, except as required to perform her duties under this Agreement, or as
required by law or court order, divulge, communicate, use to the detriment of
the Companies or for the benefit of any other person, firm or entity, or
misappropriate in any way, any confidential information or trade secrets
relating to the Companies or any of their businesses, which have not been
publicly disclosed, including, without limitation, business strategies,
operating plans, acquisition strategies (including the identities of (and any
other information concerning) possible Merger or acquisition candidates), pro
forma financial information, market analyses, acquisition terms and conditions,
personnel information, trade processes, programming code and methodologies,
customer lists and relationships, supplier lists, or other non-public
proprietary and confidential information relating to the Companies.
(b) During the Term and for a period of one year after the expiration
of the Term or termination of this Agreement by its terms, the Executive shall
not, directly or indirectly, for herself or on behalf of any other person, firm
or entity, (i) employ, engage or retain any person who, as of, or at any time
during the 12-month period prior to, the Termination Date is or was an employee
of the Company, except for any such employee whose employment was involuntarily
or constructively terminated by the Company; or (ii) contact any supplier or
customer of the Company for the purpose of inducing any such supplier or
customer to suspend or terminate his/her/its business relationship with the
Company.
(c) The Executive acknowledges that her employment hereunder and
agreements herein (including the agreements of this Section 6 are reasonable and
necessary for the protection of the Companies. Accordingly, the Executive shall
be bound by the provisions of this Section 6 to the maximum extent permitted by
law, it being the intent and spirit of the parties that the foregoing shall be
fully enforceable.
(d) In the event Executive violates any provision of this Section 6,
the Company, in addition to any other rights and remedies available to it under
this Agreement or otherwise, shall be entitled to pursue an injunction to be
issued or specific enforcement to be required, restricting the Executive from
committing or continuing any such violation.
7. Amendment and Modification. This agreement may not be amended,
modified or changed except in writing, signed by Executive, and the Company or
the Parent, as applicable.
8. Waiver of Compliance; Consents. No course of dealing of any party
hereto, no omission, failure or delay on the part of any party hereto in
asserting or exercising any right hereunder, and no partial or single exercise
of any right hereunder by any party hereto shall constitute or operate as a
waiver of any such right or any other right hereunder. No waiver of any
provision hereof shall be effective unless in writing and signed by or on behalf
of the party to be charged therewith. No waiver of any provision hereof shall be
deemed or construed as a continuing waiver, as a waiver in respect of any other
or subsequent breach or default of such provision, or as a waiver of any other
provision hereof unless expressly so stated in writing and signed by or on
behalf of the party to be charged therewith. Whenever this agreement requires or
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permits consent by or on behalf of a party, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 8.
9. Notices. All notices and other communications required or permitted
to be given pursuant to this agreement shall be in writing signed by the sender,
and shall be deemed duly given (a) on the date delivered if personally
delivered, (b) on the date sent by telecopier with automatic confirmation by the
transmitting machine showing the proper number of pages were transmitted without
error, (c) on the next business day after being sent by Federal Express or other
recognized overnight mail service for next day or next business day delivery, or
(d) five business days after mailing, if mailed by United States postage-prepaid
certified or registered mail, return receipt requested, in each case addressed
to the parties at the following respective addresses (or such other address as
either party hereto may at any time, or from time to time, direct by notice
given to the other party in accordance with this section):
If to the Company, to:
000 Xxxxxx Xxxx
Xxxx Xxxx Xxxxx, XX 00000
Facsimile: 000-000-0000
Attn: President
If to the Executive, to the address set forth beneath the Executive's
signature hereto, with a copy to:
McGuireWoods LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxx Bart
10. Liability Insurance. Executive shall be covered by the Directors
and Officers insurance policy as in existence from time to time and applicable
to officers and directors of Parent and Company.
11. Public Announcement. Executive shall be given a reasonable
opportunity to review and comment on any public announcement by any of the
Companies relating to this Agreement or Executive's employment by the Company or
service as a member of the Board or advisory board.
12. Approvals. The Company and Parent each represent and warrant to
Executive that they each have taken all corporate action necessary to authorize
and to enter into this Agreement.
13. No Offset. The obligations of the Company or Parent under this
Agreement and otherwise to perform their obligations hereunder shall not be
affected by any circumstances, including set-off, counterclaim, recoupment,
defense or other claim, right or action which the
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Company may have against Executive or others. Any claim which either the Company
or Parent may have against Executive, whether for a breach of this Agreement or
otherwise, shall be brought in a separate action or proceeding and not as part
of any action or proceeding brought by Executive to enforce any rights against
the Company or Parent under this Agreement.
14. No Mitigation. In no event shall Executive be obligated to seek
other employment or to take any other action to mitigate the amounts payable to
Executive under any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned as a result of
Executive's employment by another employer, except that any continued welfare
benefits provided for pursuant to Section 4 shall not duplicate any benefits
that are provided to Executive and his family by such other employer and shall
be secondary to any coverage provided by such other employer.
15. Attorney's Fees. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, each party shall bear its own attorneys' fees and other costs
incurred in that action or proceeding, except to the extent that the Executive
is entitled to indemnification of such fees and costs pursuant to any statute,
contract or policy in effect during the Term, then, in each such case, such
statute, contract or policy shall control.
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of Executive and the successors and
permitted assigns of the Company and the Parent, to the extent of its
obligations hereunder. This Agreement shall be assignable by the Company or the
Parent, as applicable, to any entity which is owned, directly or indirectly,
entirely by the Company or Parent or to an acquiror of all or substantially all
of the assets of the Company or the Parent. The Company or Parent, as
applicable, shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation or otherwise) to all or a substantial portion of its assets
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Regardless of whether such an agreement is executed, this
Agreement shall be binding on any successor of the Company or Parent, as
applicable, in accordance with the operation of law, and such successor or
assignee shall be deemed "the Company" for all purposes under this Agreement.
17. Governing Law, Jurisdiction and Venue. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
applicable to agreements made and to be performed entirely in such state and
without regard to conflicts of law principles. The Parties hereby consent to the
jurisdiction of the United States District Court for the Southern District of
New York and of any of the courts of the State of New York located within the
Southern District of New York in any dispute arising under this Agreement and
agree further that service of process or notice in any such action, suit or
proceeding shall be effective if in writing and delivered as provided in Section
9 hereof.
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18. Entire Agreement. This Agreement, the Stock Option Plan and the
Benefit Plans (collectively, the "Agreements") contain, and are intended as, a
complete statement of all the terms of the arrangements between and among the
parties with respect to the matters set forth herein, supersedes any and all
prior agreements and understandings between and among the parties with respect
to those matters and cannot be changed or terminated orally. There are no
promises, representations, warranties, covenants or undertakings concerning the
subject matter of this Agreement, other than those set forth in the Agreements.
19. Survival of Executive's Rights. Each of the provisions of this
Agreement which by their terms are to be performed after, or which expressly
survive, the expiration or termination of this Agreement or the Termination
Date, shall survive the termination of Executive's employment, the expiration or
termination of the applicable Agreements, or both.
[The next page is the signature page]
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The parties have executed and delivered this Employment Agreement as of
the date first written above.
ADVANCED AESTHETICS, LLC
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name:
Title:
ADVANCED AESTHETICS, INC.
(as to its obligations under Sections
3(c), 5(b), 5(d), 12 and 16)
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name:
Title:
XXXX XXXXXX
/s/ Xxxx Xxxxxx
----------------------------------------
Address:
00 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
