Exhibit 10.42
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 17th day of August, 1999, by and among L.S.
Wholesale, Inc., a Massachusetts corporation with its main office in St. Xxxxxx,
U.S.V.I. (the "Employer"), Little Switzerland, Inc., a Delaware corporation with
its main office in St. Xxxxxx, U.S.V.I. ("Little Switzerland"), and Xxxxxx X.
Xxxxxxxxxxx (the "Executive").
WITNESSETH
WHEREAS, the Executive possesses certain unique skills, talents and
judgment as well as the experience to provide the direction and leadership
required by the Employer; and
WHEREAS, the Employer and Executive desire to provide for the Executive's
employment by the Employer.
NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants contained herein, the Employer and the Executive mutually agree as
follows:
1. Employment. The Employer agrees to employ the Executive and the
----------
Executive agrees to be employed by the Employer on the terms and conditions
hereinafter set forth.
2. Effective Date and Term. The commencement date (the "Commencement
-----------------------
Date") of this Agreement shall be August 17, 1999. Subject to the provisions of
Section 5 hereof, the term (the "Term") of the Executive's employment hereunder
shall be for two (2) years from the Commencement Date. The last day of such
Term shall be August 18, 2001 and is herein sometimes referred to as the
"Expiration Date."
3. Compensation and Benefits. The compensation and benefits payable to the
-------------------------
Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
------
Agreement, the Employer shall pay the Executive a total salary as follows:
(1) Base Salary. For each twelve (12) month period of the Term, the
-----------
Employer shall pay the Executive a base salary at an annual rate (the "Base
Salary") equal to Two Hundred Thousand Dollars ($200,000). The Base Salary
shall be payable in periodic installments in accordance with the Employer's
usual practice for payment of compensation to its senior executives.
(2) Bonus. During the Term and as further set forth below, for each
-----
fiscal year during which the Executive is employed by the Employer pursuant
to this Agreement, in the event that Little Switzerland shall achieve
certain performance
criteria (the "Performance Criteria"), the Executive shall be entitled to
receive a bonus (the "Annual Bonus") in an amount of up to three-quarters
(75%) of the Base Salary earned for that fiscal year, which shall be
prorated for periods shorter than a full fiscal. The applicable
Performance Criteria for the 2000 fiscal year of Little Switzerland shall
be mutually agreed upon by the Employer and the Executive prior to
September 15, 1999 and the applicable Performance Criteria for the 2001
fiscal year of Little Switzerland shall be established by the Compensation
Committee of Little Switzerland prior to the beginning of such fiscal
year. For any fiscal year, the determination of whether the Performance
Criteria have been met and whether any Annual Bonus shall be paid shall be
made by the Compensation Committee of Little Switzerland. The Annual
Bonus, if any, shall be payable within ten (10) calendar days after the
date on which the Compensation Committee of Little Switzerland determines
from its business plan, financial reports and other relevant information
the extent to which, if any, the Performance Criteria have been achieved
and in any event not more than ninety (90) days after the end of the
Employer's fiscal year.
(b) Stock Bonus Plan. On the Commencement Date, the Executive will be
----------------
awarded an option (the "Option") to purchase 350,000 shares of common stock, par
value $.01 per share, of Little Switzerland upon the terms and conditions set
forth in the Non-Qualified Stock Option Agreement, dated as of the date hereof,
by and between the Executive and Little Switzerland.
(c) Special Benefits.
----------------
(1) Monthly Commute. The Executive shall be entitled to
---------------
reimbursement for reasonable expenses actually incurred in connection with
one round trip commute per month between the Executive's place of residence
in Boca Raton, Florida, U.S. and his place of residence in St. Xxxxxx,
U.S.V.I. The Executive shall account promptly for such expenses to the
Employer in the manner reasonably prescribed from time to time by the
Employer and in compliance with the Employer's policy.
(2) Automobile. During the Term of this Agreement, the Employer
----------
shall provide the Executive with the use of an automobile in St. Xxxxxx,
U.S.V.I. that is owned by the Employer. The Employer shall be responsible
for all reasonable maintenance and operation costs of such automobile.
(3) Apartment. During the Term of this Agreement, the Employer
---------
shall provide the Executive with use of an apartment that is leased by the
Employer. The Employer shall pay the costs associated with the rent and
utilities for such apartment.
2
(d) Special Bonus. The Employer shall pay the Executive a special
-------------
bonus in an aggregate amount equal to One Hundred Twenty Five Thousand
Dollars ($125,000) and payable in twelve monthly installments commencing on
September 1, 1999.
(e) Regular Benefits. The Executive shall be entitled to four (4)
----------------
weeks of vacation time during each year of the Terms. The Executive shall be
entitled to participate in any and all employee benefit plans, medical insurance
plans, life insurance plans, disability income plans, retirement plans and other
benefit plans (including, without limitation, any 401(k) plans) from time to
time in effect for senior executives of the Employer. Such participation shall
be subject to the terms of the applicable plan documents, generally applicable
policies of the Employer, applicable law and the discretion of the Board of
Directors, the Compensation Committee or any administrative or other committee
provided for in or contemplated by any such plan. Nothing contained in this
Agreement shall be construed to create any obligation on the part of the
Employer to establish any such plan or to maintain the effectiveness of any such
plan which may be in effect from time to time.
The Executive also shall be entitled to reimbursement for all ordinary and
necessary business expenses incurred by the Executive in connection with the
advancement of Little Switzerland's and the Employer's interests and the
discharge of his duties and responsibilities hereunder, including without
limitation, all travel and lodging expenses; provided, however, that the
-------- -------
Executive accounts promptly for such expenses to the Employer in the manner
reasonably prescribed from time to time by the Employer and in compliance with
the Employer's policy.
(f) Exclusivity of Salary and Benefits. The Executive shall not be
----------------------------------
entitled to any payments or benefits other than those provided under this
Agreement.
4. Capacity and Extent of Service.
------------------------------
(a) The Executive shall serve the Employer as President and Chief
Executive Officer beginning on the date hereof until the expiration of the Term
and shall serve the Employer in such other or additional offices in which he may
be reasonably requested to serve.
(b) The Executive shall serve as a member of the Board of Directors of
Little Switzerland beginning on the date hereof until his successor is duly
elected and qualified; provided, however, that upon termination of the
-------- -------
Executive's employment hereunder for any reason, the Executive agrees to
promptly resign his position as Director of Little Switzerland (if he is then
serving in such position) and to resign from such other positions of director or
officer of the Employer, Little Switzerland or any of their affiliates he then
holds. The Executive shall not vote in his capacity as a Director of Little
Switzerland on any matters related to this Agreement on which the Board of
Directors or any committee thereof of Little Switzerland shall vote, including,
without limitation, any termination pursuant to Section 5 below; provided,
--------
however, if he participates in a meeting of the Board of Directors pursuant to
-------
3
applicable law, then he may be included for purposes of determining whether
there is a quorum for such meeting. Pursuant to Article II of the Amended and
Restated Bylaws of Little Switzerland, as in effect on the date hereof, so long
as the Executive is employed by the Employer and remains a Director of Little
Switzerland, he shall not be entitled to receive any salary or other
compensation for his services as a Director of Little Switzerland, including,
without limitation, any director or committee member fees.
(c) During his employment hereunder, the Executive shall, subject to
the direction and supervision of the Board of Directors of the Employer, devote
his full business time, best efforts and business judgment, skill and knowledge
to the advancement of the Employer's and Little Switzerland's interests and to
the discharge of his duties and responsibilities hereunder. In accordance with
the foregoing, the Executive shall not engage in any other business activity,
except as may be approved by the Board of Directors of Little Switzerland;
provided, however, that nothing herein shall be construed as preventing the
-------- -------
Executive from:
(1) investing his assets in a manner not otherwise prohibited by
this Agreement, and in such form or manner as shall not require any
material services on his part in the operations or affairs of the companies
or other entities in which such investments are made;
(2) serving on the board of directors of any company, provided that
he shall not be required to render any material services with respect to
the operations or affairs of any such company; or
(3) engaging in religious, charitable or other community or
nonprofit activities which do not impair his ability to fulfill his duties
and responsibilities under this Agreement.
5. Termination. Notwithstanding the provisions of Section 2 hereof,
-----------
subject to the following provisions, the Executive's employment hereunder shall
terminate under the following circumstances without further liability on the
part of the Employer or Little Switzerland or right of the Executive to receive
any payments hereunder:
(a) Death. In the event of the Executive's death during the
-----
Executive's employment hereunder, the Executive's employment shall terminate on
the date of his death.
(b) Termination by the Employer for Cause. The Executive's employment
-------------------------------------
hereunder may be terminated for cause (as defined below) by written notice to
the Executive setting forth in reasonable detail the nature of such cause,
effective upon delivery of such notice. The determination of whether cause
existed for terminating the Executive's employment shall be made by a vote of at
least two-thirds of the Board of Directors of Little Switzerland. Only the
following shall constitute "cause" for termination pursuant to this Section
5.b.:
4
(i) Deliberate dishonesty of the Executive with respect to the
Employer or any subsidiary or affiliate thereof;
(ii) Conviction of the Executive of (A) a felony or (B) any crime
involving moral turpitude, deceit, dishonesty or fraud;
(iii) Gross negligence or willful misconduct of the Executive with
respect to the Employer or any subsidiary or affiliate thereof;
(iv) Failure to perform to the reasonable satisfaction of the Board
of Directors of Little Switzerland a substantial portion of the Executive's
duties and responsibilities assigned or delegated under this Agreement,
which failure continues for more than thirty (30) days, in the reasonable
judgment of the Board of Directors of Little Switzerland, after written
notice given to the Executive by the Board of Directors of Little
Switzerland; or
(v) Material breach by the Executive of any of the Executive's
obligations under this Agreement.
(c) Termination by the Employer Without Cause. Subject to the payment
-----------------------------------------
of the severance benefit pursuant to Section 5.f. hereof, the Executive's
employment with the Employer may be terminated without cause by a two-thirds
vote of all of the members of the Board of Directors of Little Switzerland on
written notice to the Executive effective upon thirty (30) days after the giving
of such notice.
(d) Termination by the Executive Without Cause. The Executive may
------------------------------------------
terminate his employment with the Employer without cause on written notice to
the Employer effective upon thirty (30) days after the giving of such notice.
(e) Disability. If, due to physical or mental illness, the Executive
----------
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder (a "Substantial Disability"), the Employer may
designate another executive to act in his place during the period of such
disability. For a period of up to two (2) months subsequent to the commencement
of a Substantial Disability, the Employer shall continue to pay to the Executive
his salary and benefits in accordance with Section 3 hereof. If, at the end of
such two-month period the Executive shall continue to have a Substantial
Disability, the Executive's employment may be terminated by a two-thirds vote of
all of the members of the Board of Directors of Little Switzerland. If any
question shall arise as to whether during any period the Executive suffered a
Substantial Disability, the Executive may, and at the request of the Employer
will, submit to the Employer a certification in reasonable detail by a physician
selected by the Executive or his guardian to whom the Employer has no reasonable
objection as to whether the Executive was so disabled and such certification
shall for the purposes of this Agreement be conclusive of the issue. If such
question shall arise and the Executive shall fail
5
to submit such certification, the Employer's determination of such issue shall
be binding on the Executive.
(f) Severance Benefit. In the event the Executive's employment
-----------------
hereunder is terminated pursuant to Section 5.c. hereof, on the date of such
termination, the Executive shall be entitled to receive a lump sum payment equal
to twelve (12) months of Base Salary, plus any accrued but unpaid Annual Bonus
which the Executive has earned pursuant to Section 3.a. of this Agreement.
6. Termination Subsequent to Change in Control.
-------------------------------------------
(a) In the event of a Terminating Event (as defined below) within one
(1) year from the date of a Change in Control (as defined below) of Little
Switzerland, as of the date of such Terminating Event, the Executive shall be
entitled to receive the following:
(1) a lump sum payment equal to (A) the number of months of Base
Salary remaining in the Term in the event such termination occurs on or
prior to August 17, 2000 or (B) twelve (12) months of Base Salary in the
event such termination occurs after August 18, 2000, whichever is
applicable; and
(2) any accrued but unpaid Annual Bonus which the Executive has
earned pursuant to Section 3.a. of this Agreement.
(b) For purposes of this Agreement, a "Terminating Event" shall mean
termination by the Employer or its successor entity of the Executive for any
reason other than death, cause or disability pursuant to Section 5.a., Section
5.b. or Section 5.e. above or termination by the Executive with "Good Reason."
(c) For purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred in the following instances: (i) when any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")), becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of Little Switzerland representing fifty percent (50%)
or more of the combined voting power of Little Switzerland's then outstanding
securities; (ii) the sale, transfer or other disposition of all or substantially
all of the assets of Little Switzerland to another person or entity; (iii) the
stockholders of Little Switzerland approve a plan of complete liquidation of
Little Switzerland; (iv) the merger, consolidation or other business combination
of Little Switzerland with any other corporation or entity, other than (1) a
merger or consolidation which would result in the voting securities of Little
Switzerland outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of Little Switzerland or such surviving entity
outstanding immediately after such merger or consolidation or (2) a
6
merger or consolidation effected to implement a recapitalization of Little
Switzerland (or similar transaction) in which no "person" (as hereinabove
defined) acquires more than fifty percent (50%) of the combined voting power of
Little Switzerland's then outstanding securities; or (v) the signing of an
agreement, contract or other arrangement providing for any of the transactions
described above in this definition of Change in Control.
(d) For purposes of this Agreement, "Good Reason" shall be deemed to
include the following:
(i) a reduction of the Executive's salary or benefits other than a
reduction that (1) is based on the Employer's financial performance or (2)
is similar to the reduction made to the salaries or benefits provided to
all or most other senior executives of the Employer; or
(ii) a significant change in the Executive's responsibilities and/or
duties which constitutes, when compared to the Executive's responsibilities
and/or duties before the Change of Control, a demotion; or
(iii) a material loss of title or office.
(e) The Executive shall provide the Employer with reasonable notice and
an opportunity to cure any of the events listed in Section 6.d. above and shall
not be entitled to compensation pursuant to this Section 6 unless the Employer
fails to cure within a reasonable period of time.
7. Noncompetition and Confidential Information.
-------------------------------------------
(a) Noncompetition. During the period of the Executive's employment by
--------------
the Employer pursuant to this Agreement, the Executive will not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent, employee,
co-venturer or otherwise, or through any Person (as defined in Section 9
hereof), compete in Little Switzerland's or the Employer's market area (defined
as any country or other jurisdiction in which Little Switzerland or the Employer
conducts business as of the effective date of termination) with the business
conducted by Little Switzerland or the Employer during the period of his
employment hereunder, nor will he attempt to hire any employee of Little
Switzerland or the Employer, assist in such hiring by any other Person,
encourage any such employee to terminate his or her relationship with Little
Switzerland or the Employer, or solicit or encourage any customer of Little
Switzerland or the Employer to terminate its relationship with Little
Switzerland or the Employer or to conduct with any other Person any business or
activity which such customer conducts or could conduct with Little Switzerland
or the Employer.
(b) Confidential information. The Executive will not disclose to any
------------------------
other Person (except as required by applicable law or in connection with the
performance of his
7
duties and responsibilities hereunder), or use for his own benefit or gain, any
confidential information of Little Switzerland or the Employer obtained by him
incident to his employment with the Employer. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of businesses or
facilities) of Little Switzerland or the Employer but does not include any
information which has become part of the public domain by means other than the
Executive's non-observance of his obligations hereunder.
(c) Relief; Interpretation. The Executive agrees that the Employer
----------------------
shall be entitled to injunctive relief for any breach by him of the covenants
contained in this Section 7. In the event that any provision of this Section 7
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its being extended over too great a period of time, too large a
geographic area, or too great a range of activities, it shall be interpreted to
extend only over the maximum period of time, geographic area, or range of
activities as to which it may be enforceable. For purposes of this Section 7,
the term "Employer" shall mean L.S. Wholesale, Inc. and any of its subsidiaries,
affiliates, predecessors and successors.
8. Conflicting Agreements. The Executive hereby represents and warrants
----------------------
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
9. Definition of "Person". For purposes of this Agreement: the term
----------------------
"Person" shall mean an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.
10. Taxation of Payments. The Employer shall undertake to make deductions,
--------------------
withholdings and tax reports with respect to payments and benefits under this
Agreement to the extent that it reasonably and in good faith believes that it is
required to make such deductions, withholdings and tax reports. All payments
made by the Employer under this Agreement shall be net of any tax or other
amounts required to be withheld by the Employer under applicable law. Nothing
in this Agreement shall be construed to require the Employer to make any
payments to compensate the Executive for any adverse tax effect associated with
any payments or benefits or for any deduction or withholding from any payment or
benefit.
11. Arbitration of Disputes. Any controversy or claim arising out of or
-----------------------
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration
8
Association ("AAA") in Wilmington, Delaware in accordance with the Employment
Dispute Resolution Rules of the AAA, including, but not limited to, the rules
and procedures applicable to the selection of arbitrators. In the event that
any person or entity other than the Executive or the Employer may be a party
with regard to any such controversy or claim, such controversy or claim shall
be submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 11 shall be specifically
enforceable. Notwithstanding the foregoing, this Section 11 shall not preclude
either party from pursuing a court action for the sole purpose of obtaining a
temporary restraining order or a preliminary injunction in circumstances in
which such relief is appropriate; provided, however, that any other relief
-------- -------
shall be pursued through an arbitration proceeding pursuant to this Section 11.
12. Assignment; Successors and Assigns, etc. Neither the Employer nor the
---------------------------------------
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
-------- -------
Agreement without the consent of the Executive in the event that the Employer
shall hereafter effect a reorganization, consolidate with or merge into any
other Person, or transfer all or substantially all of its properties or assets
to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Employer and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns.
13. Enforceability. If any portion or provision of this Agreement shall to
--------------
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. Waiver. No waiver of any provision hereof shall be effective unless
------
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. Notices. All notices, requests, demands and other communications
-------
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of the
Board of Directors. Any such notice shall be deemed to be effective and
therefore given upon the following dates: (i) if such notice is delivered in
person the date on which such delivery is done; or (ii) if such notice is sent
by registered or certified mail, postage prepaid, the date which is three (3)
days subsequent to the date on which such notice is mailed.
9
16. Amendment. This Agreement may be amended or modified only by a written
---------
instrument signed by the Executive and by a duly authorized representative of
the Employer.
17. Governing Law; Consent to Jurisdiction. It is the parties' intention
--------------------------------------
that the terms of employment under this Agreement shall be construed under and
be governed in all respects by the laws of the State of Delaware. To the extent
that any court action is permitted consistent with or to enforce Section 11 of
this Agreement, the parties hereby consent to the jurisdiction of the courts of
Delaware. Accordingly, with respect to any such court action, the Executive (a)
submits to the personal jurisdiction of such courts; (b) consents to service of
process; and (c) waives any other requirement (whether imposed by statute, rule
of court, or otherwise) with respect to personal jurisdiction or service of
process.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be taken to be
an original, but such counterparts shall together constitute one and the same
document.
[END OF TEXT]
10
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by each of the Employer and Little Switzerland, by their duly authorized
officers and/or directors, and by the Executive, as of the date first above
written.
L.S. WHOLESALE, INC.
By:/s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
LITTLE SWITZERLAND, INC.
By:/s/ Xxxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Acting President and Chief
Executive Officer
EXECUTIVE:
/s/ Xxxxxx X. Xxxxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxxxx
11
