Exhibit 10.22
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This FIRST AMENDMENT (the "Amendment"), made and entered into effective
as of the 1st day of August, 2001, by and between SHERWOOD BRANDS, INC., a
Maryland corporation (the "Company"), and XXXXX XXXXXXX (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive entered into that certain
Employment Agreement, dated as of May 1, 1998 (the "Agreement");
WHEREAS, the Agreement, pursuant to its Section 2.2, automatically
renewed on August 1, 2001 for a new three year term; and
WHEREAS, the Executive and the Company now mutually desire to amend the
Agreement.
NOW, THEREFORE, effective as of the 1st day of August, 2001, the
Employment Agreement shall be amended as follows:
1. Section 2.1 of the Agreement shall be deleted in its entirety
and replaced with the following:
"Term of Employment. The term of this Agreement, and the
employment of the Executive hereunder, shall commence on
August 1, 2001 and shall expire on July 31, 2004, unless
sooner terminated in accordance with the terms and conditions
hereof."
2. Section 3.1 of the Agreement shall be deleted in its entirety
and replaced with the following:
"Base Salary. For the period August 1, 2001 through July 31,
2002, the Executive shall receive a base salary at the annual
rate of $451,333 (the "Base Salary"), with such Base Salary
payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other
taxes. The Base Salary shall be reviewed, at least annually,
for merit increases and may, by action and in the discretion
of the Compensation Committee or the Board, be increased at
any time or from time to time. In addition, on August 1, 2002,
and each subsequent August 1 prior to the Expiration Date, the
Base Salary shall be increased by the greatest of: (i) five
percent (5%); (ii) that percentage by which the Consumer Price
Index, for the Rockville, Maryland area published by the
United States government (the "Index") for the immediately
preceding fiscal year exceeds such index for the next
preceding fiscal year. If
1
publication of the Index is discontinued, the parties hereto
shall accept comparable statistics on the cost of living for
the Rockville, Maryland area as computed and published by an
agency of the United States government, or if no such agency
computes and publishes such statistics, by any regularly
published national financial periodical that does compute and
publish such statistics.
3. Section 3.2 of the Agreement shall be deleted in its entirety
and replaced with the following:
"Awards. During the term of this Agreement, the Executive
shall be eligible to receive performance and annual incentive
awards (the "Awards") payable in cash in accordance with
Section 8 of the SHERWOOD BRANDS, INC. 1998 EXECUTIVE
COMPENSATION PLAN, as may be amended from time to time (the
"Executive Plan"). Except as otherwise provided for in this
Section 3.2, the Awards, if any, shall be determined pursuant
to such formulae as the Committee or the Board, in its sole
and absolute discretion, shall set forth from time to time in
accordance with the Executive Plan, except that:
(i) In no event shall the Awards payable to the
Executive in any fiscal year while this Agreement is in effect
be less than his pro-rata share of the Bonus Pool.
(ii) The "Bonus Pool" for the fiscal year ended July
31, 2001 shall not be less than 15% of the amount, if any, by
which pre-tax profits for that fiscal year exceeds $1,440,000
(the "Base Year Bonus Pool").
(iii) For fiscal years beginning on or after August
1, 2001 during the term of this Agreement, the Bonus Pool
shall be equal to the product of:
(x) the sum of 100% plus the percentage, if
any, by which the earnings before interest, taxes,
depreciation and amortization (EBITDA) of the Company
for the fiscal year, calculated prior to any
deduction for any Awards made from the Bonus Pool for
that year (the "Adjusted EBITDA") exceeds the
Company's EBITDA for the Company's fiscal year ended
July 31, 2001, calculated prior to any deduction for
any Awards made from the Bonus Pool for that year
(the "Adjusted Base Year EBITDA"), multiplied by
(y) the Base Year Bonus Pool.
If the Adjusted EBITDA for the fiscal year for which the Award
is being determined does not exceed the Adjusted Base Year
EBITDA, then the Bonus Pool for that year shall be equal to
the product of the Base Year Bonus Pool times the percentage
of the result of dividing the Adjusted EBITDA for such fiscal
year by the Adjusted Base Year EBITDA. If the
2
Adjusted EBITDA for the fiscal year is less than $2,000,000
than the Bonus Pool for that year shall be zero, or such other
amount, if any, as the Board shall determine.
(iv) The Bonus Pool for any fiscal year, as
determined above, shall be shared by the Executive and
whomever of Xxxx Xxxxxxx, Xxxx Xxxxxxxx, and Xxxxx Xxxxxxx
shall be employed by the Company for any portion of the fiscal
year for which the Bonus Pool is being determined, pro rata,
based upon the amount of Base Salary paid to each of them,
respectively, by the Company during that fiscal year.
"Pre-tax profits" shall mean those profits of the Company for
any fiscal year determined prior to the reduction for any
federal or state income taxes and prior to the grant of any
Awards to the Executive or any other individual under the
Executive Plan and determined in accordance with generally
accepted accounting principles as consistently applied. EBITDA
shall have the same meaning for purposes of this Agreement as
it is given for purposes of the Company's financial
statements, and shall be determined in accordance with
generally accepted accounting principles as consistently
applied. Any Awards payable pursuant to this Section 3.2 are
sometimes hereinafter referred to as "Incentive Compensation."
Each period for which Incentive Compensation is payable under
the Executive Plan is sometimes hereinafter referred to as a
Bonus Period. Unless otherwise specified by the Committee or
the Board pursuant to the Executive Plan, the Bonus Period
shall be the fiscal year of the Company."
4. Section 5.4(iv) of the Agreement shall be deleted in its
entirety and replaced with the following:
"(iv) pay to the Executive the greater of (1) the
Incentive Compensation payable under such formula, if any, set
forth by the Committee or the Board in its discretion pursuant
to Section 3.2 hereof; provided such formula takes into
account the relationship that the portion of the year in which
the termination occurs that the Executive was employed by the
Company bears to the total year, and if not, a portion of the
Incentive Compensation payable under such formula which bears
the same relationship to the Incentive Compensation as the
number of days the Executive was employed by the Company
during the year in which the termination occurs bears to 365,
payable in the time and manner specified under such formula,
or (2) his pro-rata portion of the Bonus Pool, if any, for the
Bonus Period in which such termination occurs, in the time,
manner, and amount provided in Section 3.2 hereof,"
5. After Section 5.5 of the Agreement shall be inserted new
Section 5.5A, which shall read as follows:
3
"Retirement. If the Executive's employment is terminated under
Section 5.4 or 5.5 hereof, or by expiration of this Agreement
under Section 2 hereof, after the Executive has attained the
age of [65], the Executive shall be entitled to the following
benefits in addition to any benefits provided by the
applicable termination provision:
(i) The Company shall continue to provide health
and dental insurance, as provided under Section
4.2 hereof, under the Company's health and
dental plans for as long as it shall be
permissible and practical. Thereafter, the
Company shall reimburse the Executive for the
cost of purchasing comparable coverage, until
the Executive's death;
(ii) The Company shall cause the title to the
automobile provided to the Executive under
Section 4.4 hereof to be transferred to the
Executive, free and clear of any
encumbrances. The Company shall continue to
pay the insurance premiums for the
automobile so long as it is owned and
operated by the Executive as his primary
vehicle;
(iii) The Company shall continue to furnish the
Executive within office, secretarial help
and other reasonable facilities and services
consistent with Section 4.3 of this
Agreement, until the Executive's death.
(iv) The Executive will provide consulting
services to the Company for three years for
which the Company shall pay the Executive
$150,000 per annum.
The provisions of this Section 5.5A shall survive the term of
this Agreement."
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed effective as of the day and year first above written.
EXECUTIVE COMPANY
SHERWOOD BRANDS, INC., a Maryland
corporation
/s/ Xxxxx Xxxxxxx By: /s/ [ILLEGIBLE]
-------------------- ------------------------
Xxxxx Xxxxxxx Name:
Title:
4
