EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 28th day of January, 1997, by and
between DONNKENNY APPAREL, INC., a Delaware corporation (the "Company"), and
Xxxxxx X. Xxxx ("Executive").
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement, and Executive is willing
to provide such services to the Company for said period, and upon the other
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Services Provided. The Company agrees to utilize the services of
Executive, and Executive agrees to provide such services, for the period stated
in Paragraph 2 hereof and upon the other terms and conditions herein provided.
2. Term and Duties.
(a) Term of Agreement, The term of this Agreement will commence as
of February 1, 1997, and will continue through January 31, 1999; provided,
however, that the Company may terminate Executive's employment hereunder for
any reason, and Executive may terminate his employment hereunder for any
reason, in each case upon not less than 60 days' prior written notice to the
other.
(b) Duties. During the period of his employment hereunder,
Executive shall serve as Chief Financial Officer, Vice President-Finance and
Assistant Secretary of the Company, or as otherwise directed by the Board of
Directors or the Chief Executive Officer of the Company. Except for illness,
vacation periods, and reasonable leaves of absence, Executive shall devote all
of his business time, attention, skill, and efforts to the faithful performance
of his duties in said offices, and will use his best efforts to further the
Company's business interests.
3. Compensation and Reimbursement of Expenses.
(a) Compensation. For all services rendered by Executive to the
Company during the term of this Agreement, the Company shall pay Executive a
base salary (retroactive to November 4, 1996, Executive's date of employment
with the Company) of $335,000 per year (the "Base Salary"), subject to increase
as provided below; plus an annual bonus (the "Bonus"). The amount of the Bonus
shall be determined by the Board of Directors of the Company (or by a committee
designated by the Board of Directors), taking into account the performance of
Executive and the Company during the year in respect of which the Bonus is
payable. The Base Salary shall be paid in accordance with the Company's normal
payroll policies. The Bonus shall be payable at or as soon as practicable after
the end of each calendar year (generally after completion of the annual audit),
in cash. The Base Salary shall increase on November 4, 1997 to $350,000 per
year.
(b) Reimbursement of Expenses and Administrative Support. The
Company shall pay or reimburse Executive, upon the presentation of appropriate
documentation of such expenses, for all reasonable travel and other expenses
incurred by Executive in performing his obligations under this Agreement. The
Company further agrees to furnish Executive with office space and
administrative support, and any other assistance and accommodations as shall be
reasonably required by Executive in the performance of his duties under this
Agreement.
(c) Automobile Allowance. The Company agrees to lease for the
benefit of Executive an automobile selected by Executive and will pay directly
the lease payments with respect thereto up to $1,200 monthly and will pay or
reimburse Executive for all gasoline, insurance, parking, maintenance and
similar expenses (the "Car Arrangement") during the term of this Agreement.
(d) Stock Options and Other Compensation. In addition to the
payments provided above, Executive shall be entitled to participate during the
term of Executive's employment in the Company's benefit programs for which key
executives of the Company are or become eligible, on the same terms as other
key executives of the Company. In addition to and without limiting the
generality of the foregoing, (i) Executive is hereby granted pursuant to the
Company's Restricted Stock Plan 5,000 restricted shares of
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Common Stock of the Company at a purchase price of $0 per share, vested in full
on November 4, 1996; (ii) Executive shall be entitled to receive options to
purchase 100,000 shares of Common Stock of the Company pursuant to the
Company's Incentive Stock Option Plan, with the purchase price upon exercise to
be equal to $4.43 per share (the closing price on January 28, 1997) and with
vesting of the right to exercise such options as follows: (A) 33,334 options
may be exercised on November 4, 1997, (B) 33,333 options may be exercised on
November 4, 1998 and (C) 33,333 options may be exercised on November 4, 1999;
provided, however, that the vesting of such options shall be accelerated in the
event of a Change in Control (as defined herein), (iii) the Company shall pay
50% of the premiums, up to a maximum of $6,250 annually, relating to that
certain life insurance policy in the amount of $500,000, which policy is owned
by Executive, (iv) the Company shall provide, in addition to any such insurance
regularly provided to the Company's executives and/or employees, long-term
disability insurance which will pay at least sixty percent (60%) of Executive's
Base Salary (as such salary may be adjusted from time to time), (v) the Company
shall reimburse Executive for any costs incurred by Executive for health
insurance for him and his immediate family during the period from the date of
his employment with the Company (i.e., November 4, 1996) and the date on which
Executive and his immediate family became eligible to participate in the
Company's health plans and (vi) the Company shall reimburse Executive for his
legal fees incurred in connection with the preparation, amendment and
enforcement of this Agreement, up to a maximum of $4,000.
(e) Vacation. Executive shall be entitled to four (4) weeks paid
vacation in each calendar year.
(f) Deductions. All payments made under this Agreement shall be
subject to such deductions at the source as from time to time may be required
to be made pursuant to any law, rule, regulation or order.
4. Participation in Benefit Plans.
(a) In addition to the payments provided in Paragraphs 3 and 5
hereof, Executive shall be entitled to participate, during the term of this
Agreement, in the Company's benefit programs, including but not limited to
group hospitalization, health, dental care, death benefit, or other present or
future group employee benefit plans or
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programs of the Company for which key executives are or shall become eligible
(collectively, the "Benefit Plans"), on the same terms as other key executives
of the Company.
(b) In the event that Executive shall, by reason of illness or
mental or physical disability or incapacity, be unable to perform the duties
and responsibilities required to be performed by him on behalf of the Company,
the payments of Base Salary specified in Paragraph 3(a) hereof shall continue
for a period of one hundred eighty (180) days (the "Continuation Period"),
after the date (the "Cessation Date") on which Executive ceases to perform his
duties and responsibilities required to be performed by him on behalf of the
Company pursuant hereto. Such payments of Base Salary, and the Company's
obligation to pay Executive the Base Salary, shall terminate at the end of the
Continuation Period; provided, however, that such payments shall be resumed
upon the resumption by Executive of his activities on behalf of the Company
pursuant hereto.
5. Payments to Executive Upon Termination of Agreement.
(a) Termination. Upon the occurrence of an Event of Termination (as
hereinafter defined) during the term of this Agreement, the provisions of this
Paragraph 5 shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following:
(i) The termination by the Company of this Agreement for any
reason, other than a breach by Executive of this Agreement as
described in Paragraph 6 hereof;
(ii) Executive's termination of this Agreement, pursuant to:
A. An adverse change by the Company of the then applicable
Base Salary, Car Arrangement or Benefits payable to Executive or
the then applicable opportunity to be paid a Bonus hereunder
(other than in connection with such a change which is applicable
to all members of the Company's senior management), and any such
material change shall be deemed a continuing breach of this
Agreement.
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B. A merger (other than a merger in which the Company is
the surviving corporation) or consolidation of the Company with
or into another entity, a sale of all or substantially all of the
assets of the Company, or a liquidation or dissolution of the
Company (collectively, a "Change in Control"); or
C. Any breach in any material respect of this Agreement by
the Company.
Upon the occurrence of any event described in clauses A, B, or C
above, Executive shall have the right to elect to terminate this Agreement,
upon not less than thirty (30) days prior written notice to the Company given
within a reasonable period of time not to exceed, except in case of a
continuing breach, three (3) calendar months after the event giving rise to
Executive's right to terminate this Agreement.
(b) Continuation of Payments. Upon the occurrence of a termination
of this Agreement pursuant to an Event of Termination, the Company shall pay to
Executive the Base Salary at the rate in effect at the time such termination
occurs and an amount equal to the Bonus paid to Executive in the year
immediately preceding the year in which such termination occurs (collectively,
the "Severance Payments"). Such payments shall commence on the first day of the
month following the month in which such termination occurs and shall continue
for the longer of (a) the remaining term of this Agreement or (b) six (6)
months after such termination (the "Severance Period"). Upon the occurrence of
a termination of this Agreement pursuant to an Event of Termination, Executive
shall continue to be entitled to receive the Car Arrangement and Benefits
payable to Executive pursuant hereto, and to participate, at the expense of the
Company, in the Benefit Plans, during the Severance Period.
6. Termination for Breach by Executive.
(a) Executive shall be considered in breach of this Agreement, and
the Agreement shall be subject to termination by the Company, in the following
circumstances:
(i) Executive shall engage in willful misconduct in the
performance of his duties hereunder; or
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(ii) Conviction of Executive of any illegal act made or
undertaken in carrying out his duties on behalf of the Company, any
crime involving the property of the Company or any felony; or
(iii) If Executive shall die.
(b) In the event the Company elects to terminate this Agreement
pursuant to Paragraph 6(a), the Company shall give a thirty (30) day written
notice of termination to Executive setting out, in detail, the reasons for such
termination. Upon the expiration of such thirty (30) day notice period, this
Agreement shall be wholly terminated subject to the payment to Executive of any
Compensation or other amounts owing as at the date of such termination. During
such thirty (30) day notice period, Executive will not be entitled to receive
any Compensation, to reimbursement of expenses or to administrative support as
otherwise provided in Paragraph 3 hereof.
7. Ownership.
(a) Executive hereby covenants and agrees that, during the
continuance of his employment hereunder, all rights, title and interest in and
to any intellectual or industrial property, including without limitation, all
works, ideas, processes, systems and improvements to or relating to the
Company's operations (collectively, the "Improvements"), that are created or
suggested by Executive in connection with his duties at the Company, and each
of them, together with all patents and trademarks therein, if any, shall be and
remain the exclusive property of the Company and of the Company's assignees and
successors.
(b) Executive hereby covenants and agrees to fully disclose all
such Improvements, as and when such are created and shall promptly upon the
Company's request, and without further consideration other than that provided
for herein, but at no expense to Executive, make all such applications, execute
all such papers, and do all such things as may be necessary or desirable so
that the property rights with respect to such Improvements shall vest in the
Company and so that the Company may obtain, own and exploit, for its own
benefit, letters patent and other property rights with respect to such
Improvements in all and any countries.
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8. Confidential Information.
(a) Executive shall not, either during the term of this Agreement
or at any time thereafter, disclose any confidential or proprietary information
of the Company or any of its affiliates to any person or entity other than the
employees, officers and directors of the Company, and shall not use for his own
purposes or for any purpose other than the purposes of the Company any
confidential or proprietary information of the Company or any of its affiliates
which Executive may possess. "Confidential or proprietary information" shall
mean business or customer lists, pricing information, commission arrangements,
system designs and computer programs) and other information which is not known
or generally available from sources outside the Company or its affiliates.
(b) Upon termination of this Agreement, all documents, records,
notebooks and similar repositories of confidential or proprietary information,
including all copies thereof, then in Executive's possession, whether prepared
by Executive or others, will be left with the Company.
9. Covenant Not to Compete. Executive agrees that, during the
Non-Compete Period (as hereinafter defined), Executive shall not, directly or
indirectly, without the prior written consent of the Company, participate, or
make any financial investment in, or become employed by or render consulting,
advisory or other services to or for any person, firm, corporation or other
business enterprise (a "Competitor"), which is engaged, directly or indirectly,
in the business of designing, manufacturing, importing or marketing men's,
women's or children's sportswear or intimate apparel; provided, however,
nothing contained in this Section 9 shall be construed to preclude Executive
from making any investment in the securities of any business enterprise if such
securities are traded on a national securities exchange or in the
over-the-counter market in the United States or on any foreign securities
exchange and Executive's holdings of such securities represent, at the time of
acquisition, not more than 5% of the aggregate voting power of such business
enterprise. For the purposes hereof, "Non-Compete Period" shall mean the term
of this Agreement and, in the event of any termination of this Agreement by
Executive other than following the occurrence of any event described in clauses
A, B or C in
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paragraph 5(a)(ii), the six-month period following the termination of this
Agreement by Executive.
10. Arbitration. Any disputes, differences or controversies arising
under this Agreement shall be settled and finally determined by arbitration
before a panel of three arbitrators in New York, New York, chosen and otherwise
acting in accordance with the rules of the American Arbitration Association in
force and hereafter adopted. The arbitrators shall be requested to settle such
dispute not later than 30 days following their appointment. The arbitrators
shall make their award (which shall be binding on the parties) in accordance
with and based upon all the provisions of this Agreement and judgment upon any
award rendered by the arbitrators shall be entered in any court having
jurisdiction thereof. It is understood and agreed, however, that any award
entered by the arbitrators shall be entered in any court having jurisdiction
thereof. It is understood and agreed, however, that the arbitrators are not
authorized or entitled to include as part of any award rendered by them,
special, exemplary or punitive damages or amounts in the nature of special,
exemplary or punitive damages regardless of the nature or form of the claim or
grievance that has been submitted to arbitration.
11. Effect of Prior Agreements. This Agreement sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes any prior agreement between the Company or any
predecessor of the Company and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
any kind elsewhere provided and not expressly provided in this Agreement.
12. Binding Agreement. This Agreement shall be binding upon, and inure
to the benefit of, Executive and the Company and their respective permitted
successors and assigns.
13. Modification and Waiver.
(a) Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
(b) Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel against the enforcement of
any
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provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
14. Governing Law. This Agreement has been executed and delivered in
the State of New York, and its validity, interpretation, performance and
enforcement shall be governed by the laws of said state.
15. Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the addressee or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive:
Xxxxxx X. Xxxx
00 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to the Company:
Donnkenny Apparel, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chairman
or at such other address as either party shall have informed the other in
writing in accordance herewith. Notice shall be effective when actually
received by the addressed.
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IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the day and year first above written.
DONNKENNY APPAREL, INC.
By: /s/ Xxxxxx Appelle
--------------------------------
Name: Xxxxxx Appelle
Title: Chairman
/s/ Xxxxxx X. Xxxx
-----------------------------------
Xxxxxx X. Xxxx
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