AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT
NO. 1
TO
AMENDMENT
(“Amendment”) made as of this 11th day of March 2008 to the employment agreement
dated as of January 30, 2005 (the “Employment Agreement”) among Finlay
Enterprises, Inc., a Delaware corporation (the “Parent”), Finlay Fine Jewelry
Corporation, a Delaware corporation (the “Operating Company”), and Xxxxxx X.
Xxxxxx (the “Executive”). The Parent and the Operating Company are hereinafter
referred to at times collectively as the “Company”.
WHEREAS,
the
Company and the Executive have previously entered into the Employment Agreement;
WHEREAS,
the
Company and the Executive
desire
to amend the Employment Agreement.
NOW,
THEREFORE,
effective March 11, 2008, the Employment Agreement is hereby amended as
follows:
1. Section
9
of the Employment Agreement is hereby amended to insert a new sentence at the
end of the first sentence to read as follows:
“Payment
of the Severance Amount pursuant to this Section 9 shall be subject to the
Delay
Period under Section 15(c) hereof.”
2. Clause
(A) of Section 10(b)(ii) of the Employment Agreement is hereby amended to read
as follows:
“(F)
subject to the Delay Period under Section 15(c), 50% of his Base Salary through
the end of the Employment Term,”
3. Clause
(F) of Section 10(b)(ii) of the Employment Agreement is hereby amended to read
as follows:
“(F)
subject to the Delay Period under Section 15(c), the Severance Amount
and”
4. Clause
(E) of Section 10(c)(i) of the Employment Agreement is hereby amended to read
as
follows:
“(E)
receive the insurance and other benefits provided to Executive under Section
5(b) and 5(e) hereof in accordance therewith, (F) be entitled to receive any
amounts earned but unpaid prior to Executive’s date of termination pursuant to
Sections 3, 4, and 5(a) hereof (including accrued but unused vacation), which
amounts shall be payable within ten (10) days after such termination of
employment and (G) receive reimbursement pursuant to Section 7 hereof for
eligible expenses incurred prior to Executive’s date of termination, which
reimbursements shall be made no later than March 15 of the calendar year next
following the calendar year in which such reimbursable expenses are incurred
(items (E) through (G), the “Accrued
Amounts”),
provided that payments pursuant to items (A) through (D) shall be subject to
the
Delay Period under Section 15(c) hereof.”
5. Section
10(c)(ii) of the Employment Agreement is hereby amended in its entirety to
read
as follows:
“(ii)
Subject to Section 10(f), if Executive’s employment is terminated during the
Employment Term (x) by the Company without Cause or by Executive for Good Reason
coincident with or following a Change of Control, or (y) by Executive for any
reason within ninety (90) days following a Change of Control, Executive shall
be
entitled to (A) subject to the Delay Period under Section 15(c) hereof, a cash
lump sum payment, payable within 10 days after such termination of employment,
equal to the product of (x) 2.99 times (y) Executive’s “base amount,” as defined
in Section 280G(b)(3) of the Code (the “Executive Base Amount”), (B) subject to
the Delay Period under Section 15(c) hereof, all of the Restricted Stock
issuable under Sections 4(c) and 6 hereof for the entire stated Employment
Term,
and (C) the Accrued Amounts. All other benefits, if any, due Executive following
Executive’s termination of employment pursuant to this Subsection 10(c)(ii)
shall be determined in accordance with the plans, policies and practices of
the
Company.
Subject
to Section 10(f) and the Delay Period under Section 15(c) as applicable, if
Executive’s employment is terminated during the Employment Term by the Company
without Cause or by the Executive for Good Reason within ninety (90) days prior
to a Change of Control, Executive shall (i) continue to be entitled to the
benefits and payments provided under Section 10(c)(i) in the form and at the
times provided thereunder, plus (ii) be entitled to the benefits and payments
provided under Section 10(c)(ii) in the form and at the time provided under
Section 10(c)(ii) payable on a Change of Control, solely to the extent that
the
benefits and payments under Section 10(c)(ii) exceed the benefits and payments
under Section 10(c)(i).”
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6. Section
10(c)(iii) of the Employment Agreement is hereby amended to include a new
subsection (E) following subsection (D) to read as follows:
“(E)
the
failure of the acquirer or successor corporation following a Change of Control
to expressly assume the Company’s obligations under this Agreement and extend
the Employment Term so that the unexpired portion thereof is not less than
3
years or otherwise offer Executive a contract on terms no less favorable to
Executive than those provided in this Agreement providing for a term lasting
at
least 3 years.”
7. Section
10(d) of the Employment Agreement is hereby amended in its entirety to read
as
follows:
“(d)
Termination by Executive. If Executive terminates his employment with the
Company for any reason during the Employment Term (other than an early
termination by Executive under Section 1 hereof, a termination by Executive
for
Good Reason or a termination by Executive for any reason within ninety (90)
days
following a Change of Control), Executive shall be entitled to the same payments
he would have received if his employment had been terminated by the Company
for
Cause.”
8. Section
10(e)(ii) of the Employment Agreement is hereby amended to read as follows:
“(ii)
during any twelve (12) month period, individuals who at the beginning of such
period constituted the Parent Board (together with any new directors whose
election by the Parent Board or whose nomination for election by the Parent’s
stockholders was approved by a vote of at least a majority of the directors
then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for
any reason to constitute a majority of the directors then in office unless
such
majority of the directors then in office has been elected or nominated for
election by the Principal or his Related Parties or”
9. Section
10(f)(i) of the Employment Agreement is hereby amended in its entirety to read
as follows:
“(i)
In
the event it is determined pursuant to Clause (ii) below, that part or all
of
the consideration, compensation or benefits to be paid to Executive under this
Agreement in connection with Executive's termination of employment whether
prior
to or following a Change of Control or under any other plan, arrangement or
agreement in connection therewith, constitutes a “parachute payment” (or
payments) under Section 280G(b)(2) of the Code, then, if the aggregate present
value of such parachute payments (the “Parachute Amount”) exceeds 2.99 times the
Executive Base Amount, the amounts constituting “parachute payments” which would
otherwise be payable to or for the benefit of Executive shall be reduced in
accordance with Clause (iii) below to the extent necessary so that the Parachute
Amount is equal to 2.99 times the Executive Base Amount. Notwithstanding the
foregoing, if it is determined that stockholder approval of the payment of
such
compensation and benefits will reduce the applicability of Section 280G of
the
Code to such payment, promptly after request by Executive, the Company will
undertake reasonable efforts to hold such a meeting to obtain such approval
or
to solicit such approval by written consent, and to obtain such
approval.”
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10. Section
10(f)(iii) of the Employment Agreement is hereby amended in its entirety to
read
as follows:
“(iii)
If
the final determination made pursuant to Clause (ii) of this Section 10(f)
results in a reduction of the payments that would otherwise be paid to Executive
except for the application of Clause (i) of this Section 10(f), the benefits
payable to Executive under 10(c)(ii)(B) shall be eliminated or reduced to the
extent necessary in order to not exceed the limitation under Section 10(f)(i),
and then to the extent necessary pursuant to Section 10(f)(i), the amounts
payable to Executive under Section 10(c)(ii)(A) shall be reduced. Within ten
days following such determination, the Parent shall pay to or distribute to
or
for the benefit of Executive such amounts as are then due to Executive under
this Agreement and shall promptly pay to or distribute to or for the benefit
of
Executive in the future such amounts as become due to Executive under this
Agreement.”
11. The
language “Unforeseen Personal Hardship” in Section 10(j) of the Agreement is
hereby amended to read as follows:
“for
any
reason within ninety (90) days following a Change of Control”
12. A
new
sentence is hereby added to the end of Section 10(j) of the Agreement to read
as
follows:
“The
Executive shall pay the balance of such compensation and benefits expense no
later than thirty (30) days following the close of the fiscal year in which
the
compensation and benefits expense is incurred.”
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13. Clause
(i) of Section 11(a) is amended to read as follows:
“(i)
in
the event of a termination of Executive's employment with Cause or Executive's
voluntary termination of employment (other than for Good Reason or for any
reason within ninety (90) days following a Change of Control), for a period
of
eighteen months following such termination of employment and”
14. The
following language is hereby inserted following “Good Reason” in clause (ii) of
Section 11(a):
“or
for
any reason within ninety (90) days following a Change of Control”
15. A
new
Section 15 is hereby added to the Agreement to read as follows:
“15.
Section 409A of the Code.
(a)
It is
intended that the payments and benefits under this Agreement be exempt from,
or
comply with, Section 409A of Code and the regulations and guidance promulgated
thereunder (collectively “Code Section 409A”), and all provisions of this
Agreement shall be construed in a manner consistent with the requirements for
avoiding taxes or penalties under Code Section 409A. If any provision of this
Agreement (or of any award of compensation, including equity compensation or
benefits) would cause Executive to incur any additional tax or interest under
Code Section 409A, the Company shall, upon the specific request of
Executive, use its reasonable business efforts to in good faith reform such
provision to comply with Code Section 409A; provided, that to the maximum
extent practicable, the original intent and economic benefit to Executive and
the Company of the applicable provision shall be maintained, but the Company
shall have no obligation to make any changes that could create any additional
economic cost or loss of benefit to the Company. The Company shall have no
liability with regard to any failure to comply with Code Section
409A.
(b)
A
termination of employment shall not be deemed to have occurred for purposes
of
any provision of this Agreement providing for the payment of any amounts or
benefits upon or following a termination of employment unless such termination
is also a “Separation from Service” within the meaning of Section 409A and, for
purposes of any such provision of this Agreement, references to a “termination,”
“termination of employment” or like terms shall mean Separation from Service.
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(c)
If
Executive is deemed on the date of termination of his employment to be a
“specified employee,” within the meaning of that term under Section
409A(a)(2)(B) of the Code and using the identification methodology selected
by
the Company from time to time, or if none, the default methodology, then with
regard to any payment or the providing of any benefit made subject to this
Section 15(c), to the extent required to be delayed in compliance with
Section 409A(a)(2)(B) of the Code, and any other payment, the provision of
any
other benefit or any other distribution of equity that is required to be delayed
in compliance with Section 409A(a)(2)(B) of the Code, such payment, benefit
or
distribution shall not be made or provided prior to the earlier of (i) the
expiration of the six-month period measured from the date of Executive’s
Separation from Service or (ii) the date of Executive’s death (the “Delay
Period”). On the first day of the seventh month following the date of
Executive’s Separation from Service or, if earlier, on the date of his death,
all payments delayed pursuant to this Section 15(c) (whether they would
have otherwise been payable in a single sum or in installments in the absence
of
such delay) shall be paid or reimbursed to Executive in a lump sum, and any
remaining payments and benefits due under this Agreement shall be paid or
provided in accordance with the normal payment dates specified for them
herein.
Promptly following the expiration of such six-month period, all compensation
suspended pursuant to the foregoing sentence (whether it would have otherwise
been payable in a single sum or in installments in the absence of such
suspension) shall be paid or reimbursed to Executive in a lump sum.
(d)
With
regard to any provision herein that provides for reimbursement of costs and
expenses or in-kind benefits, except as permitted by Code Section 409A, (i)
the
right to reimbursement or in-kind benefits shall not be subject to liquidation
or exchange for another benefit, (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits, provided during any taxable year shall
not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year, provided,
that
the foregoing clause (ii) shall not be violated with regard to expenses
reimbursed under any arrangement covered by Section 105(b) of the Code solely
because such expenses are subject to a limit related to the period the
arrangement is in effect and (iii) such payments shall be made on or before
the
last day of Executive’s taxable year following the taxable year in which the
expense was incurred.”
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IN
WITNESS WHEREOF,
the
undersigned has caused this Amendment to be executed this 11th day of March,
2008.
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EXECUTIVE
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/s/
Xxxxxx X.
Xxxxxx
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Xxxxxx
X. Xxxxxx
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FINLAY
ENTERPRISES, INC.
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By:
/s/ Xxxxx X.
Xxxxxxxx
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Title: Senior
Vice President, Treasurer and Chief
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Financial
Officer
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FINLAY
FINE JEWELRY CORPORATION
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By:
/s/ Xxxxx X.
Xxxxxxxx
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Title: Senior
Vice President, Treasurer and Chief
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Financial
Officer
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