EXHIBIT 10.1
------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of November 8, 2007, between
THE XXXXX XXXXXX COMPANIES INC., a Delaware corporation (the "Company"), and
XXXXXXXX XXXXX, a resident of Rome, Italy (the "Executive" or "you"),
W I T N E S S E T H:
WHEREAS, the Company and its subsidiaries are principally engaged in
the business of manufacturing, marketing and selling skin care, makeup,
fragrance and hair care products and related services (the "Business"); and
WHEREAS, the Company desires to retain the services of the Executive
from March 3, 2008 through June 30, 2011 and the Executive desires to provide
services in such capacities to the Company, upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") and the Stock Plan Subcommittee of the
Compensation Committee have approved the terms of this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment Term.
The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to enter into employment from March 3, 2008 through June 30, 2011,
unless terminated sooner pursuant to Section 6 hereof (the "Term of
Employment"). The four-month period commencing on March 3, 2008 and ending on
June 30, 2008 shall be the "First Contract Year" hereunder, and subsequent
twelve-month periods shall be subsequent Contract Years.
2. Duties and Extent of Services.
(a) During the Term of Employment, the Executive shall serve as
President and Chief Operating Officer reporting to the Chief Executive Officer.
The intention of the parties hereto is that the Executive will be the successor
to the Chief Executive Officer of the Company and, subject to the Executive's
performance of his duties for the Company and its subsidiaries and affiliates
being satisfactory to the Board of Directors, such decision to succeed the Chief
Executive Officer shall be made no later than July 1, 2009 with effect no later
than July 1, 2010. In such capacities, the Executive shall render such
executive, managerial, administrative and other services as customarily are
associated with and incident to such positions, and as the Company may, from
time to time, reasonably require of him consistent with such positions.
(b) The Executive shall also hold such other positions and
executive offices of the Company and/or of any of the Company's subsidiaries or
affiliates as may from time to time be agreed by the Executive or assigned by
the Chief Executive Officer or the Board of Directors, consistent with his
position as President and Chief Operating Officer of the Company. The Executive
shall not be entitled to any compensation other than the compensation provided
8
for herein for serving during the Term of Employment in any other office or
position of the Company or any of its subsidiaries or affiliates, unless the
Board of Directors of the Company or the appropriate committee thereof shall
specifically approve such additional compensation.
(c) The Executive shall be a full-time employee of the Company and
shall exclusively devote all his business time and efforts faithfully and
competently to the Company and shall diligently perform to the best of his
ability all of the duties required of him as President and Chief Operating
Officer and in the other positions or offices of the Company or its subsidiaries
or affiliates assigned to him hereunder. Notwithstanding the foregoing
provisions of this section, the Executive may serve as a non-management director
of such business corporations (or in a like capacity in other for-profit or
not-for-profit organizations) as the Chief Executive Officer (at the time
Executive is not the Chief Executive Officer) or the Board of Directors of the
Company may approve, such approval not to be unreasonably withheld.
(d) The Executive shall comply with the Company's stock ownership
guidelines applicable to the Executive as they may be implemented and/or amended
by the Board of Directors or the Compensation Committee of the Board of
Directors.
3. Base Salary and Incentive Bonus Compensation; Supplemental
Deferral.
(a) Base Salary. As compensation for all services to be rendered
pursuant to this Agreement and as payment for the rights and interests granted
by Executive hereunder, the Company shall pay or cause any of its subsidiaries
to pay the Executive a base salary (the "Base Salary") during the Term of
Employment subject to the provisions of Section 3(d) below at the annualized
rate of not less than $1,300,000.00. The Base Salary shall be reviewed for
adjustment by the Compensation Committee of the Board of Directors of the
Company in the event that the Executive succeeds the Chief Executive Officer in
accordance with Section 2(a) hereof, in conformity with standards generally
applicable to executive officers of the Company. Subject to Section 6(l) of this
Agreement, all amounts of Base Salary provided for hereunder shall be payable in
accordance with the regular payroll policies of the Company in effect from time
to time.
(b) Sign On Bonus. The Company shall pay to the Executive a "sign
on" bonus of $1,000,000.00 within thirty (30) days of the first day of
employment of the Executive at the Company under this Agreement; provided the
Executive continues to be employed by the Company hereunder on the payment date.
(c) Incentive Bonus Compensation. The Compensation Committee has
established for the Executive the target bonus payout for the aggregate
opportunities that may be awarded in respect of each fiscal year of the Company
under the Company's Executive Annual Incentive Plan or any subsequent Bonus Plan
for executives that is approved by the stockholders of the Company (the "Bonus
Plan") in respect of each Contract Year after the First Contract Year under this
Agreement. The target bonus payout for the aggregate opportunities in respect of
each twelve (12) month Contract Year shall be no less than $2,500,000.00. In
respect of the First Contract Year, the target bonus payout for the aggregate
opportunities shall be an amount computed by multiplying $2,500,000.00 by a
fraction, the numerator of which is the number of months (including fractions
thereof) from the Employee's first day of employment under this Agreement
through June 30, 2008 and the denominator of which is twelve (12) months, such
amount to be guaranteed. Such target bonus payout for the aggregate
opportunities shall be reviewed for adjustment by the Compensation Committee of
the Board of Directors of the Company in the event that the Executive succeeds
the Chief Executive Officer in accordance with Section 2(a) hereof, in
2
conformity with standards generally applicable to executive officers of the
Company. Opportunities for each twelve (12) month Contract Year shall be subject
to the terms and conditions of the Bonus Plan, which are incorporated herein by
reference; provided, however, that except with respect to bonuses deferred in
accordance with Section 3(d) hereof, and as otherwise indicated under Section 6,
the bonus payout with respect to any fiscal year shall be paid to Executive no
later than the 15th day of the third month following the end of such fiscal
year.
(d) Deferral.
(i) Deferral Elections--In General. The Executive may elect
to defer payment of all or any part of any incentive bonus compensation payable
under Sections 3(b) and 3(c) by making an election, in a manner prescribed by
the Company, on or before December 31 of the calendar year before the Contract
Year begins (or such earlier date as may be necessary to comply with the
applicable tax laws and regulations).
(ii) Deferral Elections--Performance-Based Compensation. For
any incentive bonus compensation that qualifies as performance-based
compensation under Treas. Reg. Section 1.409A-1(e) and is based upon a
performance period of at least twelve (12) months, the Executive may make a
deferral election at any time before the date that is six (6) months before the
applicable performance period ends, but only if (i) the incentive bonus
compensation is not readily ascertainable when the election is made and (ii) the
service provider has performed services continuously from the later of the
beginning of the performance period or the date the performance criteria are
established.
(iii) Amounts Subject to Section 162(m). Except for
compensation payable in respect of the First Contract Year (including Base
Salary provided for in Section 3(a), the "sign on" bonus provided for in Section
3(b) and the incentive bonus compensation in respect of the First Contract Year
provided in Section 3(c)), if any amount of Base Salary, any amount payable
under the Bonus Plan, or any other amount payable to the Executive is not
currently deductible under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), or like or successor provisions (a "Non-Deductible
Amount"), the Company will defer payment of the Non-Deductible Amount until
section 162(m) no longer applies to the Executive.
(iv) Payment of Amounts Deferred and Vested. Subject to
Section 6(l), amounts credited to the Executive's Deferred Compensation Account
will be paid to the Executive (or the Executive's designated beneficiary if the
Executive dies before payment), subject to applicable withholding taxes on, or
as soon as practicable after, the date the Executive separates from service with
the Company (as defined in Treas. Reg. section 1.409A-1(h)). The Non-Deductible
Amount will be paid at the earliest date at which the Company reasonably expects
that the deduction will not be limited or eliminated by Code section 162(m). The
Company, in its sole discretion, may provide an investment facility for all or a
portion of such deferred amounts, but is not required to do so.
(v) Any amounts so deferred will be credited to a bookkeeping
account in the name of the Executive as of the date scheduled for payment (the
"Deferred Compensation Account"). The Deferred Compensation Account will be
credited with interest as of each June 30 during the term of deferral,
compounded annually, at an annual rate equal to the annual rate of interest
announced by Citibank N.A. in New York, New York as its base rate in effect on
such June 30, but limited to a maximum annual rate of 9%.
3
(e) Supplemental Deferral. (i) The Company shall credit to a
bookkeeping account in the name of the Executive an annual supplemental deferral
amount during the Term of Employment computed by taking the difference between
$485,000.00 (the gross amount of the pension contributions made on behalf of the
Executive by his former employer, using an effective tax rate of approximately
forty-two (42) percent) and the actual vested annual accruals and contributions
made to the Company's qualified and non-qualified pension and qualified
retirement savings plans on behalf of the Executive. Such amounts shall be
credited with interest as of each June 30 for the duration of this supplemental
pension bookkeeping account, compounded annually, at a rate per annum equal to
the annual rate of interest announced by Citibank N.A. in New York, New York as
its base rate in effect on such June 30, but in no event shall such rate exceed
9%.
(ii) Subject to Section 6(l), amounts credited to the
Executive's supplemental deferral account will be paid to the Executive (or the
Executive's designated beneficiary if the Executive dies before payment),
subject to applicable withholding taxes on, or as soon as practicable after, the
date the Executive separates from service with the Company (as defined in Treas.
Reg. section 1.409A-1(h)). The supplemental deferral will be paid at the
earliest date at which the Company reasonably expects that the deduction will
not be limited or eliminated by Code section 162(m). The Company, in its sole
discretion, may provide an investment facility for all or a portion of such
deferred amounts, but is not required to do so.
4. Equity-Based Compensation.
(a) General; One-Time Award. The Company shall recommend to the
Stock Plan Subcommittee of the Compensation Committee that the Executive be
awarded under the terms and conditions of the Amended and Restated Fiscal 2002
Share Incentive Plan (the "Share Incentive Plan"), which are incorporated herein
by reference, or successor plan and subject to the provisions of Section 6(k)
below, equity-based compensation awards in accordance with the policies and
procedures of the Company as in effect from time to time for its Executive
Officers. The terms of such equity-based compensation awards shall be set forth
in separate grant letters approved by the Stock Plan Subcommittee of the
Compensation Committee. The recommended one-time equity-based compensation
awards shall be of an equivalent value to a grant of stock options with respect
to 100,000 shares of the Company's Class A Common Stock and determined in
accordance with procedures generally utilized by the Company for its financial
reporting at the time of grant.
(b) Annual Awards. In respect of each Contract Year after the
First Contract Year, the Company shall recommend to the Stock Plan Subcommittee
of the Compensation Committee that the Executive be awarded under the terms and
conditions of the Amended and Restated Fiscal 2002 Share Incentive Plan (the
"Share Incentive Plan"), which are incorporated herein by reference, or
successor plan and subject to the provisions of Section 6(k) below, equity-based
compensation awards in accordance with the policies and procedures of the
Company as in effect from time to time for its Executive Officers. The terms of
such equity-based compensation awards shall be set forth in separate grant
letters approved by the Stock Plan Subcommittee of the Compensation Committee.
The recommended annual equity-based compensation awards shall be of an
equivalent value to a grant of stock options with respect to 250,000 shares of
the Company's Class A Common Stock and determined in accordance with procedures
generally utilized by the Company for its financial reporting at the time of
grant.
4
(c) Certain Conditions. Executive acknowledges and agrees that any
grant of equity-based compensation otherwise provided for in this Section 4
shall be effective as provided herein only to the extent permitted by the Share
Incentive Plan, and this Agreement shall not obligate the Company to adopt any
successor plan providing for the grant of equity-based compensation. If
authority over the Company's equity compensation programs is changed from the
Stock Plan Subcommittee to the Compensation Committee (or other committee), then
after such change, references herein to the Stock Plan Subcommittee shall be to
the appropriate committee.
5. Benefits.
(a) Standard Benefits. During the Term of Employment, the
Executive shall be entitled to participate in all pension and retirement
savings, fringe benefit and welfare plans, including life insurance, medical,
health and accident, disability, and vacation plans and programs maintained by
the Company from time to time for senior executives at a level commensurate with
his position. The Executive acknowledges that participation in such programs may
result in the receipt by him of additional taxable income.
(b) Perquisite Reimbursement; Financial Counseling. During the
Term of Employment, the Company shall reimburse the Executive for the actual
expenses incurred by him in connection with his professional standing, in
accordance with the guidelines set out in the Company's Senior Executive
Compensation Program Perquisite Plan and upon presentation of proper expense
statements or vouchers or such other supporting information as the Company may
reasonably require of the Executive. Such reimbursement shall generally occur
within seventy-five (75) days after the end of the calendar year of presentment,
provided that such presentment occurs within ninety (90) days after the date the
related expense were incurred. Notwithstanding the above, to the extent that the
expenses were incurred in one calendar year and presentment occurs in the
following calendar year, such reimbursement shall occur by the end of the
calendar year in which the presentment occurs. In no event shall the gross
amount of such reimbursements be greater than $15,000.00 in respect of any
calendar year during the Term of Employment, nor shall amounts that are not
reimbursed in one calendar year up to the $15,000.00 per year limitation be able
to be used in another calendar year or otherwise be made available to the
Executive. Additionally, the Company will pay directly to the service provider
following presentment of invoice(s) reasonably acceptable to the Company up to
$5,000.00 per year for reasonable financial counseling services for the
Executive, and in no event shall amounts up to the $5,000.00 per year limitation
that are not paid in one calendar year be able to be used in another calendar
year or otherwise be made available to the Executive. The Executive acknowledges
that participation in such programs will result in the receipt by him of
additional taxable income.
(c) Executive Auto. The Executive will participate in the
Executive Automobile Program of the Company, and may elect to be provided an
automobile having an acquisition value of up to $50,000.00. Alternatively, the
Executive may receive an automobile allowance in the gross monthly amount of
$1,100.00. The Executive acknowledges that participation in this program will
result in the receipt by him of additional taxable income.
(d) Expenses. The Company agrees to reimburse the Executive for
all reasonable and necessary travel (inclusive of first class air travel),
business entertainment and other business out-of-pocket expenses incurred or
expended by him in connection with the performance of his duties hereunder upon
presentation of proper expense statements or vouchers or such other supporting
5
information as the Company may reasonably require of the Executive. The timing
of payment of such reimbursements and presentation by the Executive of expenses
incurred shall be in accordance with the rules described in Section 5(b).
(e) Spousal Travel. The Executive may upon prior approval of the
Chief Executive Officer (or the Chairman of the Board if the Executive is the
Chief Executive Officer) or his or her designee, arrange for his spouse or
domestic partner to accompany him on up to two (2) business related travel
itineraries per fiscal year, on a reasonable basis, at Company expense. Any
reimbursement for such travel shall require presentation of proper expense
statements or vouchers or such other supporting information as the Company may
reasonably require of the Executive, in accordance with the timeframe described
in Section 5(b). The Executive acknowledges that participation in this program
will result in the receipt by him of additional taxable income.
(f) Executive Term Life Insurance. During the Term of Employment,
the Company shall pay premiums on a term life insurance policy with a face
amount of $5,000,000.00. Such obligation to pay premiums is subject to standard
underwriting conditions. The Executive acknowledges that this coverage will
result in the receipt by him of additional taxable income.
(g) Relocation Allowances and Expenses. The Company shall pay to
the Executive relocation allowances and expenses related to the Executive's
relocation from Rome, Italy to the New York area in accordance with the
Company's international relocation policy in effect from time to time.
6. Termination.
(a) Permanent Disability. In the event of the "permanent
disability" (as hereinafter defined) of the Executive during the Term of
Employment, the Company shall have the right, upon written notice to the
Executive, to terminate the Executive's employment hereunder, effective upon the
giving of such notice (or such later date as shall be specified in such notice).
In the event of such termination, the Company shall have no further obligations
hereunder, except that the Executive shall be entitled to receive (i) any
accrued but unpaid salary and other amounts to which the Executive otherwise is
entitled hereunder prior to the date of his termination of employment, such
salary to be paid in accordance with Section 3(a) and such other amounts to be
paid in accordance with applicable payment provisions herein; (ii) bonus
compensation earned but not paid under Section 3(c) hereof that relates to any
Contract Year ended prior to the date of his termination of employment, to be
paid in accordance with Section 3(c) hereof; (iii) a pro-rata portion of the
annual bonus payout that the Executive would have been entitled to receive had
he remained in employment through the end of the Contract Year during which
termination due to permanent disability occurred, based on the portion of the
Contract Year that has elapsed prior to such termination, and paid in accordance
with Section 3(c) hereof; (iv) reimbursement for financial counseling services
specified under Section 5(b) hereof in the amount of $5,000.00 for a period of
one (1) year from the date of termination, in accordance with Section 5(b)
hereof; and (v) his Base Salary under Section 3(a) hereof for a period of one
(1) year from the date of termination as a result of permanent disability (the
"Disability Continuation Period"), paid in accordance with Section 6(l)(i)
hereof; provided, however, that the Company shall only be required to pay that
amount of the Executive's Base Salary which shall not be covered by short-term
disability payments or benefits or long-term disability payments or benefits, if
any, to the Executive under any Company plan or arrangement. In addition, upon
termination for permanent disability, the Executive shall continue to
6
participate, to the extent permitted by applicable law and regulations and the
applicable benefit plan, program or arrangement, in the supplemental deferral
arrangement discussed in Section 3(e) hereof, and in any and all healthcare,
life insurance and accidental death and dismemberment insurance benefit plans,
programs or arrangements of the Company during the Disability Continuation
Period (disregarding any required delay in payments under Section 6(l)).
Thereafter, the Executive's rights to participate in such programs and plans, or
to receive similar coverage, if any, shall be as determined under such programs.
Because continued participation in any qualified pension and qualified
retirement savings plans of the Company is not permitted during the Disability
Continuation Period, the Company shall provide to the Executive, subject to
Section 6(l), cash payments, to be paid in accordance with Section 6(l)(i),
equal to the sum of (x) the maximum qualified defined contribution retirement
savings plan match for pre-tax and after-tax contributions allowable by the plan
and by applicable laws and regulations for each year during the Disability
Continuation Period (or other period as expressly provided herein), and (y) the
excess of the benefit that would have been received by the Executive had he been
credited with additional years of age and service equal to the Disability
Continuation Period (or other period as expressly provided herein) over the
actual benefit to which the Executive is entitled, in each case, under any and
all qualified and non-qualified defined benefit pension plans and qualified
defined contribution retirement savings plans in which the Executive
participates as of the date of termination of employment, calculated as of and
based upon the Executive's date of termination (such sum, the "Pension
Replacement Payment"). Notwithstanding the above, any amounts payable under this
Section 6(a) that are separation pay as described under Treas. Reg.
ss.1.409A-1(b)(9)(iii)(A) shall be paid no later than December 31 of the second
calendar year following the year in which the Executive's termination for
permanent disability occurs; any amounts payable under this Section 6(a) that
are not otherwise exempt from Code section 409A are subject to, and payable in
accordance with, Section 6(l) of this Agreement. Except as otherwise provided in
this Section 6(a), the Company will have no further obligations under Sections
3, 4 and 5 hereof or otherwise. For purposes of this Section 6(a), "permanent
disability" means any disability as defined under the Company's applicable
disability insurance policy or, if no such policy is available, any physical or
mental disability or incapacity that renders the Executive incapable of
performing the services required of him in accordance with his obligations under
Section 2 hereof for a period of six (6) consecutive months or for shorter
periods aggregating six (6) months during any twelve-month period.
(b) Death. In the event of the death of the Executive during the
Term of Employment, Executive's employment and this Agreement shall
automatically terminate. In the event of such termination the Company shall have
no further obligations hereunder, except to pay the Executive's beneficiary or
legal representative (i) any accrued but unpaid salary and other amounts to
which the Executive otherwise is entitled hereunder prior to the date of his
death, in accordance with Section 3(a) and other applicable payment provisions
herein; (ii) bonus compensation earned but not paid under Section 3(c) hereof
that relates to any Contract Year ended prior to the date of his death, in
accordance with Section 3(c) hereof; (iii) a pro-rata portion of the annual
bonus payout the Executive would have been entitled to receive had he remained
in the employ of the Company through the end of the Contract Year during which
termination due to his death occurred, based on the portion of the Contract Year
that has elapsed prior to such termination, and paid in accordance with Section
3(c) hereof; (iv) reimbursement for financial counseling services specified
under Section 5(b) hereof in the amount of $5,000.00 per year for a period of
one (1) year from the date of termination, in accordance with Section 5(b)
hereof; and (v) for a period of one (1) year from the date of his death, the
Executive's Base Salary as established under Section 3(a) hereof as of the date
of his death, paid in accordance with Section 3(a) hereof; provided, however,
7
that, except as otherwise provided in this Section 6(b), the Company will have
no further obligations under Sections 3, 4 and 5 hereof or otherwise.
(c) Termination Without Cause. The Company shall have the right,
upon ninety (90) days' prior written notice given to the Executive, to terminate
the Executive's employment for any reason whatsoever (excluding for Cause (as
defined below)). In the event of such termination, the Company shall have no
further obligations hereunder, except that the Executive shall be entitled to
(i) receive any accrued but unpaid salary and other amounts to which the
Executive otherwise is entitled hereunder prior to the date of his termination
without Cause, such salary to be paid in accordance with Section 3(a) and such
other amounts to be paid in accordance with applicable payment provisions
herein; (ii) receive bonus compensation earned but not paid under Sections 3(b)
and (c) hereof that relates to any Contract Year ended prior to the date of his
termination without Cause, to be paid in accordance with Sections 3(b) and (c)
hereof; (iii) receive a pro-rata portion of the annual bonus payout that the
Executive would have been entitled to receive had he remained in employment
through the end of the Contract Year during which the termination without Cause
occurred, based on the portion of the Contract Year that has elapsed prior to
such termination, and paid in accordance with Section 3(c) hereof; (iv) receive
as damages (A) for a period ending on a date two (2) years from the date of
termination without Cause, to be paid in accordance with Section 6(l)(i), his
Base Salary as established under and in accordance with Section 3(a) hereof and
(B) bonus compensation equal to fifty percent (50%) of the average of the actual
annual bonuses paid or payable (with respect to completed Contract Years) to the
Executive during the Term of Employment, or, if such termination occurs prior to
the payment of any bonus hereunder, $1,250,000.00, to be paid in accordance with
Section 6(l)(i); (v) receive reimbursement for financial counseling services
specified under Section 5(b) hereof in the amount of $5,000.00 for each year
during a period of two (2) years from the date of termination, in accordance
with Section 5(b) hereof; and (vi) participate for a period ending on a date two
(2) years from the date of termination without Cause (the "Without Cause
Continuation Period"), to the extent permitted by applicable law and regulations
and the applicable benefit plan, program or arrangement, in the supplemental
deferral arrangement discussed in Section 3(e) hereof, and in any and all
healthcare, life insurance and accidental death and dismemberment insurance
benefit plans, programs or arrangements, on terms identical to those applicable
to full-term senior officers of the Company. Because continued participation in
any qualified pension and qualified retirement savings plans of the Company is
not permitted during the Without Cause Continuation Period, the Company shall
provide to the Executive, subject to Section 6(l), cash payments, to be paid in
accordance with Section 6(l)(i), equal to the Pension Replacement Payment (as
defined in Section 6(a)) with respect to the Without Cause Continuation Period.
Notwithstanding the above, any amounts payable under this Section 6(c) that are
separation pay as described under Treas. Reg. ss.1.409A-1(b)(9)(iii)(A) shall be
paid no later than December 31 of the second calendar year following the year in
which the Executive's termination pursuant to this Section 6(c) occurs; any
amounts payable under this Section 6(c) that are not otherwise exempt from Code
section 409A are subject to, and payable in accordance with, Section 6(l) of
this Agreement. Except as otherwise provided in this Section 6(c), the Company
will have no further obligations under Sections 3, 4 and 5 hereof or otherwise.
In the event of termination pursuant to this Section 6(c), the Executive shall
not be required to mitigate his damages hereunder.
(d) Cause. The Company shall have the right, upon notice to the
Executive, to terminate the Executive's employment under this Agreement for
"Cause" (as defined below), effective upon the Executive's receipt of such
notice (or such later date as shall be specified in such notice), and the
Company shall have no further obligations hereunder, except to pay the Executive
his accrued but unpaid salary, in accordance with Section 3(a) hereof, and
8
provide the Executive with any benefit under the employee benefit programs and
plans of the Company as determined under such programs and plans upon and as of
such a termination for Cause. Except as otherwise provided in this Section 6(d),
the Company will have no further obligations under Sections 3, 4 and 5 hereof or
otherwise.
For purposes of this Agreement, "Cause" means:
(i) a material breach of, or the willful failure or refusal
by the Executive to perform and discharge duties or obligations he has agreed to
perform or assume under this Agreement (other than by reason of disability or
death) that, if capable of correction, is not corrected within ten (10) business
days following notice thereof to the Executive by the Company, such notice to
state with specificity the nature of the breach, failure or refusal;
(ii) willful misconduct by the Executive, unrelated to the
Company or any of its subsidiaries or affiliates, that could reasonably be
anticipated to have a material adverse effect on the Company or any of its
subsidiaries or affiliates (the determination of Cause to be made by the Chief
Executive Officer (or the Chairman of the Board if the Executive is the Chief
Executive Officer) in his or her reasonable judgment or the Company's Board of
Directors in its reasonable judgment);
(iii) the Executive's gross negligence, whether related or
unrelated to the business of the Company or any of its subsidiaries or
affiliates which could reasonably be anticipated to have a material adverse
effect on the Company or any of its subsidiaries or affiliates that, if capable
of correction, is not corrected within ten (10) business days following notice
thereof to the Executive by the Company, such notice to state with specificity
the nature of the conduct complained of (the determination of Cause to be made
by the Chief Executive Officer (or the Chairman of the Board if the Executive is
the Chief Executive Officer) in his or her reasonable judgment or the Company's
Board of Directors in its reasonable judgment);
(iv) the Executive's failure to follow a lawful directive of
the Chief Executive Officer (or the Chairman of the Board if the Executive is
the Chief Executive Officer)) or the Board of Directors of the Company that is
within the scope of the Executive's duties for a period of ten (10) business
days after notice from Chief Executive Officer (or the Chairman of the Board if
the Executive is the Chief Executive Officer) or the Board of Directors of the
Company specifying the performance required;
(v) any violation by the Executive of a policy contained in
the Code of Conduct of the Company (the determination of Cause to be made by the
Chief Executive Officer (or the Chairman of the Board if the Executive is the
Chief Executive Officer) in his or her reasonable judgment or the Company's
Board of Directors in its reasonable judgment);
(vi) drug or alcohol abuse by the Executive that materially
affects the Executive's performance of his duties under this Agreement; or
(vii) conviction of, or the entry of a plea of guilty or nolo
contendere by the Executive for, any felony.
(e) Termination by Executive. The Executive shall have the right,
exercisable at any time during the Term of Employment, to terminate his
employment for any reason whatsoever, upon ninety (90) days' prior written
notice to the Company. Upon such termination, the Company shall have no further
obligations hereunder other than to (i) pay the Executive his accrued but unpaid
9
salary, in accordance with Section 3(a) hereof; (ii) provide bonus compensation,
if any, earned but not paid under Sections 3(c) hereof that relates to any
Contract Year ended prior to the date of such a termination by the Executive, in
accordance with Sections 3(c) hereof; and (iii) provide the Executive with any
benefit under the employee benefit programs and plans of the Company as
determined under such programs and plans upon and as of such a termination by
the Executive to the extent that any such benefit is permitted by applicable law
and regulations and provided that any such benefit shall not be provided beyond
a period ending on a date two (2) years from the date of such termination by the
Executive. Any amounts payable under this Section 6(e) that are not otherwise
exempt from Code section 409A are subject to, and payable in accordance with,
Section 6(l) of this Agreement. Except as otherwise provided in this Section
6(e), the Company will have no further obligations under Sections 3, 4 and 5
hereof or otherwise.
(f) Termination by Executive for Material Breach. The Executive
shall have the right, exercisable by notice to the Company, to terminate his
employment effective ninety (90) days after the giving of such notice, if, at
any time during the Term of Employment, the Company shall be in material breach
of its obligations hereunder; provided, however, that such notice must be
provided to the Company within thirty (30) days of the date on which the
Executive obtains knowledge or reasonably should obtain knowledge of such
material breach; and provided further, that such termination will not become
effective if within thirty (30) days after receiving the notice the Company
shall have cured all such material breaches of its obligations hereunder. For
purposes of this Section 6(f), a material breach shall only be, (i) a material
reduction in the Executive's authority, functions, duties or responsibilities
provided in Section 2 hereof, (ii) the Company's failure to make the decision to
elect the Executive to the office of Chief Executive Officer of the Company on
or prior to July 1, 2009 or to elect the Executive to the office of Chief
Executive Officer of the Company on or prior to July 1, 2010; provided on each
such date Executive is still employed by the Company and has not otherwise given
notice of his intent to terminate employment, or (iii) the Company's failure to
pay any award that the Executive is entitled to receive pursuant to the terms of
this Agreement. Such termination shall be deemed to be a termination without
Cause and shall be controlled by the provisions of Section 6(c) hereof. Any
amounts payable under this Section 6(f) that are not otherwise exempt from Code
section 409A are subject to, and payable in accordance with, Section 6(l) of
this Agreement. Except as otherwise provided in this Section 6(f), the Company
will have no further obligations under Sections 3, 4 and 5 hereof or otherwise.
(g) Change of Control.
(i) Definitions. For purposes of this Agreement,
(A) a "Change of Control" shall be deemed to have
occurred upon any of the following events:
(i) On or after the date there are no shares of Class B
Common Stock, par value $.01 per share, of the Company outstanding,
any person as such term is used in Section 13(d) of the Exchange Act
or person(s) acting together which would constitute a "group" for
purposes of Section 13(d) of the Exchange Act (other than the
Company, any subsidiary, any employee benefit plan sponsored by the
Company or any member of the Lauder family or any family-controlled
entities (collectively, the "Lauder Family")) shall acquire (or
shall have acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person(s)) and shall
"beneficially own" (as defined in Rule 13d-3 under the Exchange
10
Act), directly or indirectly, at least thirty (30) percent of the
total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of the Board; or
(ii) During any period of twelve consecutive months, either
(A) the individuals who at the beginning of such period constitute
the Board of Directors or any individuals who would be "Continuing
Directors" (as hereinafter defined) cease for any reason to
constitute at least a majority thereof (B) at any meeting of the
shareholders of the Company called for the purpose of electing
directors, a majority of the persons nominated by the Board for
election as directors shall fail to be elected; or
(iii) Consummation of a sale or other disposition (in one
transaction or a series of transactions) of all or substantially all
of the assets of the Company; or
(iv) Consummation of a merger or consolidation of the Company
(A) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a
wholly-owned subsidiary of the Company in which all shares of the
Company's common stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for common stock
of the subsidiary) or (B) pursuant to which all shares of the
Company's common stock are converted into cash, securities or other
property, except in either case, a consolidation or merger of the
Company in which the holders of the shares of Common Stock
immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the shares of Common Stock of the
continuing or surviving corporation immediately after such
consolidation or merger or in which the Board immediately prior to
the merger or consolidation would, immediately after the merger or
consolidation, constitute a majority of the board of directors of
the continuing or surviving corporation.
Notwithstanding the foregoing, (X) changes in
the relative beneficial ownership among members of the Lauder family and
family-controlled entities shall not, by itself, constitute a Change of Control
of the Company, (Y) any spin-off of a division or subsidiary of the Company to
its stockholders shall not constitute a Change of Control of the Company.
(B) "Continuing Directors" shall mean (1) the
directors in office on the date hereof and (2) any successor to such directors
and any additional director who after the date hereof was nominated or selected
by a majority of the Continuing Directors in office at the time of his or her
nomination or selection.
(C) "Good Reason" means the occurrence of any of the
following, without the express written consent of the Executive, within two (2)
years after the occurrence of a Change in Control:
(1) (a) the assignment to the Executive of any
duties inconsistent in any material adverse respect with the Executive's
position, authority or responsibilities as contemplated by Section 2 hereof, or
(b) any other material adverse change in such position, including title,
authority or responsibilities;
11
(2) any failure by the Company to comply with
any provisions of Sections 3, 4 or 5 hereof, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of notice
thereof given by the Executive, provided that the Executive provides such notice
within ninety (90) days after the initial date of such failure by the Company
and provided the Company has been provided at least thirty (30) days during
which it may remedy such failure;
(3) the Company's requiring the Executive to be
based at any office or location more than fifty (50) miles from that location at
which he performed his services specified under the provisions of Section 2
immediately prior to the Change in Control, except for travel reasonably
required in the performance of the Executive's responsibilities; or
(4) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a successor as
contemplated by Section 14, unless such assumption occurs by operation of law.
(ii) Termination for Good Reason. Within two (2) years after
the occurrence of a Change of Control, the Executive may terminate his
employment for Good Reason. Such termination shall be deemed to be a termination
without Cause and shall be controlled by the provisions of Section 6(c) and
Section 6(l) hereof, including the required delay in payment for the six-month
period following the date of termination for any amounts determined to be
subject to Code section 409A, as described in Section 6(l). Except as otherwise
provided in this Section 6(g)(ii), the Company will have no further obligations
under Sections 3, 4 and 5 hereof or otherwise.
(h) Certain Limitations.
(i) Notwithstanding anything to the contrary contained
herein, in the event that any amount or benefit paid or distributed to the
Executive pursuant to this Agreement, taken together with any amounts or
benefits otherwise paid or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"), are or become subject
to the tax (the "Excise Tax") imposed under Section 4999 of the Code, or any
similar tax that may hereafter be imposed, the Covered Payments shall be reduced
(but not below zero) until no portion of such payments would be subject to
Excise Tax.
(ii) For purposes of determining whether any of the Covered
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" to the extent they exceed the "2.99 base amount threshold"
within the meaning of Section 280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless, and except to the extent
that, in the good faith judgment of the Company's independent certified public
accountants appointed prior to the date of the change in ownership or control or
tax counsel selected by such accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in part)
either do not constitute "parachute payments" or are otherwise not subject to
such Excise Tax, and
12
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.
(i) Non-Renewal. In the event (A) the Company does not offer the
Executive renewal of the Term of Employment on the basis of terms no less
favorable, in the aggregate, than those pending at the time of the conclusion of
the Term of Employment and, as a result, the Company terminates the Executive's
employment with the Company or (B) the Company does not offer prior to June 30,
2011 continued employment of the Executive on the basis of terms no less
favorable, in the aggregate, than those pending at the time of the conclusion of
the Term of Employment and, as a result the Executive terminates his employment
with the Company by giving notice on or prior to July 31, 2011, then in each
case such termination shall be deemed to be a termination without Cause and
shall be controlled by the provisions of Section 6(c) and Section 6(l) hereof,
including the required delay in payment for the six-month period following the
date of termination for any amounts determined to be subject to Code section
409A, as described in Section 6(l). Except as otherwise provided in this Section
6(i), the Company will have no further obligations under Sections 3, 4 and 5
hereof or otherwise. This provision 6(i) shall not apply (i) if the offer of
continued employment (A) is for an unstated period of time or for a period of
less than three (3) years and four (4) months, (b) contains no guaranteed
bonuses or "sign on" bonus, (c) omits a benefit not available to other executive
officers or (d) does not include reference to the Executive becoming Chief
Executive Officer of the Company or (ii) if at the time of renewal any of (x)
the Board of Directors, (y) the Compensation Committee and/or the Stock Plan
Subcommittee of the Board of Directors or (z) the stockholders of the Company
have changed the Company's policy regarding the use of written employment
agreements for executive officers, the form of equity-based compensation, or the
mix of cash and non-cash compensation.
(j) Continued Employment Beyond the Non-Renewal or Expiration of
the Term of Employment. Unless the parties otherwise agree in writing,
continuation of Executive's employment with the Company beyond the non-renewal
or expiration of the Term of Employment shall be deemed an employment-at-will
and shall not be deemed to extend any of the provisions of this Agreement, and
Executive's employment may thereafter be terminated at will by either Executive
or the Company.
(k) Effect of Termination. In addition to the foregoing, in the
event that this Agreement shall be terminated pursuant to the provisions of
subparagraphs 6(a), 6(b), 6(c), 6(f), 6(g) or 6(i) above, and the Executive is
not considered to be retirement eligible under the terms and conditions of the
Company's qualified defined benefit pension plan, if any, notwithstanding
anything to the contrary contained in the Company's Share Incentive Plan or
other similar equity plan, (i) all stock options granted to the Executive during
the Term of Employment shall become immediately exercisable and shall be
exercisable until the earlier to occur of (A) the end of the stock option term
as set forth in the applicable option agreement(s); or (B) the first anniversary
of the date that Base Salary continuation payments end, after which all such
option awards shall expire and be of no further force or effect and (ii) all
restricted stock units and performance share units granted to the Executive
shall continue to vest through the last date that Base Salary continuation
payments, if any, are made hereunder. The vesting and exercisability provided
for in the previous sentence shall be subject to all provisions relating to
post-employment exercises set forth in the applicable Share Incentive Plan and
option agreement(s). Subject to the preceding sentences, upon the termination of
the Executive's employment hereunder for any reason, the Company shall have no
further obligations hereunder, except as otherwise provided herein. The
Executive, however, shall continue to have the obligations provided for in
13
Sections 7 and 8 hereof. Furthermore, upon any such termination, the Executive
shall be deemed to have resigned immediately from all offices and directorships
held by him in the Company or any of its subsidiaries.
(l) Section 409A of the Code. It is the intention of the parties
to this Agreement that no payment or entitlement pursuant to this Agreement will
give rise to any adverse tax consequences to the Executive under Section 409A of
the Code and Department of Treasury regulations and other interpretive guidance
issued thereunder, including that issued after the date hereof (collectively,
"Section 409A"). The Agreement shall be interpreted to that end and, consistent
with that objective and notwithstanding any provision herein to the contrary,
the Company may unilaterally take any action it deems necessary or desirable to
amend any provision herein to avoid the application of or excise tax under
Section 409A. Further, no effect shall be given to any provision herein in a
manner that reasonably could be expected to give rise to adverse tax
consequences under that provision. The Company shall from time to time compile a
list of "specified employees" as defined in, and pursuant to, Treas. Reg.
Section 1.409A-1(i). Notwithstanding any other provision herein, if the
Executive is a specified employee on the date of termination, no payment of
compensation under this Agreement shall be made to the Executive during the
period lasting six (6) months from the date of termination unless the Company
determines that there is no reasonable basis for believing that making such
payment would cause the Executive to suffer any adverse tax consequences
pursuant to Section 409A of the Code. If any payment to the Executive is delayed
pursuant to the foregoing sentence, such payment instead shall be made on the
first business day following the expiration of the six-month period referred to
in the prior sentence, unless specified otherwise in Section 6(l)(i) hereof.
Although the Company shall consult with Executive in good faith regarding
implementation of this Section 6(l), neither the Company nor its employees or
representatives shall have liability to the Executive with respect to any
additional taxes that the Executive may be subject to in the event that any
amounts under this Agreement are determined to violate Code section 409A.
(i) Notwithstanding the above, amounts described as being
subject to payment in accordance with the provisions of this Section 6(l)(i)
shall be subject to a delay in payment for a six-month period following the date
of termination and shall be paid as follows: For any Base Salary under Section
6(a)(v) or Section 6(c)(iv)(A) to be continued beyond the date of termination
and for any Pension Replacement Payment, all payments that would have been made
during the six-month period immediately following the date of termination shall
be made in a single cash payment on the first business day following the
expiration of such six-month period, and as of the first business day following
the expiration of such six-month period all such payments shall resume in
accordance with the regular payroll practices of the Company until the end of
the specified period; any bonus payments under Section 6(c)(iv)(B) shall be paid
in a single lump sum payment on the first business day following the expiration
of such six-month period.
(m) Release of Claims. As a condition precedent to the receipt of
payments and benefits pursuant to this Section, the Executive, or, in the case
of his death or Disability that prevents the Executive from performing his
obligation under this Section 6(m), his personal representative, and his
beneficiary, if applicable, will execute an effective general release of claims
against the Company and its subsidiaries and affiliates and their respective
directors, officers, employees, attorneys and agents in a form substantially
similar to general releases signed by other key employees of the Company
receiving post-employment termination payments and benefits; provided, however,
that such effective release will not affect any right that the Executive, or in
the event of his death, his personal representative or beneficiary, otherwise
14
has to any payment or benefit provided for in this Agreement or to any vested
benefits the Executive may have in any employee benefit plan of Company or any
of its subsidiaries or affiliates, or any right the Executive has under any
other agreement between the Executive and the Company or any of its subsidiaries
or affiliates that expressly states that the right survives the termination of
the Executive's employment.
(n) Relocation. In the event of termination of the Executive's
employment hereunder for any reasons other than for "Cause" pursuant to Section
6(d) hereof, the Company shall reimburse the Executive for the actual cost of
relocating Executive and his family from the New York City area to Rome, Italy.
Such reimbursement shall be subject to the Executive actually undertaking
relocation within one (1) year from the termination of his employment and will
be capped at the amount reimbursed with respect to his relocation from Rome,
Italy to the New York City area.
7. Confidentiality; Ownership.
(a) The Executive agrees that he shall forever keep secret and
retain in strictest confidence and not divulge, disclose, discuss, copy or
otherwise use or suffer to be used in any manner, except in connection with the
Business of the Company, its subsidiaries or affiliates and any other business
or proposed business of the Company or any of its subsidiaries or affiliates,
any "Protected Information" in any "Unauthorized" manner or for any
"Unauthorized" purpose (as such terms are hereinafter defined).
(i) "Protected Information" means trade secrets,
confidential or proprietary information and all other knowledge, know-how,
information, documents or materials owned, developed or possessed by the Company
or any of its subsidiaries or affiliates, whether in tangible or intangible
form, pertaining to the Business or any other business or proposed business of
the Company or any of its subsidiaries or affiliates, including, but not limited
to, research and development, operations, systems, data bases, computer programs
and software, designs, models, operating procedures, knowledge of the
organization, products (including prices, costs, sales or content), processes,
formulas, techniques, machinery, contracts, financial information or measures,
business methods, business plans, details of consultant contracts, new personnel
hiring plans, business acquisition plans, customer lists, business relationships
and other information owned, developed or possessed by the Company or its
subsidiaries or affiliates; provided that Protected Information shall not
include information that becomes generally known to the public or the trade
without violation of this Section 7.
(ii) "Unauthorized" means: (A) in contravention of the
policies or procedures of the Company or any of its subsidiaries or affiliates;
(B) otherwise inconsistent with the measures taken by the Company or any of its
subsidiaries or affiliates to protect their interests in any Protected
Information; (C) in contravention of any lawful instruction or directive, either
written or oral, of an employee of the Company or any of its subsidiaries or
affiliates empowered to issue such instruction or directive; or (D) in
contravention of any duty existing under law or contract. Notwithstanding
anything to the contrary contained in this Section 7, the Executive may disclose
any Protected Information to the extent required by court order or decree or by
the rules and regulations of a governmental agency or as otherwise required by
law or to his legal counsel and, in connection with a determination under
Section 6(h), to accounting experts; provided that the Executive shall provide
the Company with prompt notice of such required disclosure in advance thereof so
that the Company may seek an appropriate protective order in respect of such
required disclosure.
15
(b) The Executive acknowledges that all developments, including,
without limitation, inventions (patentable or otherwise), discoveries, formulas,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or any business or planned
business of the Company or any of its subsidiaries or affiliates that, alone or
jointly with others, the Executive may conceive, create, make, develop, reduce
to practice or acquire during the Executive's employment with the Company or any
of its subsidiaries or affiliates (collectively, the "Developments") are works
made for hire and shall remain the sole and exclusive property of the Company.
The Executive hereby assigns to the Company, in consideration of the payments
set forth in Section 3(a) hereof, all of his right, title and interest in and to
all such Developments. The Executive shall promptly and fully disclose all
future material Developments to the Board of Directors of the Company and, at
any time upon request and at the expense of the Company, shall execute,
acknowledge and deliver to the Company all instruments that the Company shall
prepare, give evidence and take all other actions that are necessary or
desirable in the reasonable opinion of the Company to enable the Company to file
and prosecute applications for and to acquire, maintain and enforce all letters
patent and trademark registrations or copyrights covering the Developments in
all countries in which the same are deemed necessary by the Company. All
memoranda, notes, lists, drawings, records, files, computer tapes, programs,
software, source and programming narratives and other documentation (and all
copies thereof) made or compiled by the Executive or made available to the
Executive concerning the Developments or otherwise concerning the Business or
planned business of the Company or any of its subsidiaries or affiliates shall
be the property of the Company or such subsidiaries or affiliates and shall be
delivered to the Company or such subsidiaries or affiliates promptly upon the
expiration or termination of the Term of Employment.
(c) During the Term of Employment, the Company, its subsidiaries
and affiliates shall have the exclusive right to use the Executive's name and
image throughout the world in its advertising and promotional materials in
connection with the advertising and promotion of the Company, its subsidiaries
and affiliates, and their products. After the expiration of the Term of
Employment, the Company, it subsidiaries and affiliates shall have the
non-exclusive right in perpetuity to use the Executive's name and image
throughout the world solely in connection with promotional materials related to
the history of the Company, it subsidiaries and affiliates, and their products.
The consideration for such rights is the payments set forth in Section 3(a)
hereof. The rights conveyed hereby may be assigned by the Company, its
subsidiaries or affiliates to a successor in the interest of the Company or the
relevant subsidiary or affiliate or their businesses or product lines.
(d) The provisions of this Section 7 shall, without any limitation
as to time, survive the expiration or termination of the Executive's employment
hereunder, irrespective of the reason for any termination.
8. Covenant Not to Compete. The Executive agrees that during the
Executive's employment with the Company or any of its subsidiaries or affiliates
and for a period of two (2) years commencing upon the expiration or termination
of the Executive's employment for any reason whatsoever (the "Non-Compete
Period"), the Executive shall not, directly or indirectly, without the prior
written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of its subsidiaries or
affiliates to terminate his, her or its employment with the Company or such
subsidiary or affiliate, to become employed by any person, firm or corporation
16
other than the Company or such subsidiary or affiliate or approach any such
employee, consultant, agent or independent contractor for any of the foregoing
purposes, or authorize or assist in the taking of any such actions by any third
party (for purposes of this Section 8 (a), the terms "employee," "consultant,"
"agent" and "independent contractor" shall include any persons with such status
at any time during the six (6) months preceding any solicitation in question);
or
(b) directly or indirectly engage, 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, wherever located, which is engaged, directly or indirectly, in
competition with the Business or any business of the Company or any of its
subsidiaries or affiliates as conducted or any business proposed to be conducted
at the time of the expiration or termination of the Executive's employment with
the Company and its subsidiaries and affiliates; provided, however, that nothing
in this Section 8(b) shall be construed to preclude the Executive from making
any investments in the securities of any business enterprise whether or not
engaged in competition with the Company or any of its subsidiaries or
affiliates, to the extent that such securities are actively traded on a national
securities exchange or in the over-the-counter market in the United States or on
any foreign securities exchange and represent, at the time of acquisition, not
more than 3% of the aggregate voting power of such business enterprise.
To ensure that the Company is able to enforce these provisions in Sections 8(a)
and (b) above, the Executive and the Company further agree that if such
noncompetition and nonsolicitation requirements should be violated during this
additional two-year period after the Executive's termination of employment, the
remedy (determined at the Company's option) shall be either equitable relief (in
the form of an injunction to stop the violation), or liquidated damages payable
by the Executive to the Company in an amount equal to (a) (i) (A) twenty-four
(24) minus (B) the number of full months between the date of Executive's
termination and the date of breach ("Months Complied") divided by (ii) 12, times
(b) one year's Base Salary in effect at the time of termination.
In other words:
Twenty-four (24) - Months Complied
----------------------------- x One Year's Base Salary
12
If equitable relief is elected by the Company as an alternative to liquidated
damages, any equitable relief shall not include any forfeiture or cash refund of
monies or benefits. If liquidated damages is elected by the Company, the Company
may elect not to pay amounts that would otherwise be payable but for the breach;
provided that, the Executive would remain liable to the Company to the extent
that the liquidated damages exceeded the amounts not paid by the Company. The
foregoing shall have no impact on the operation of the provisions of any other
compensation program of the Company or its subsidiaries, including without
limitation the Amended and Restated Fiscal 2002 Share Incentive Plan.
9. Specific Performance. The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
17
the other current or planned businesses of it and its subsidiaries and
affiliates. By reason of this, the Executive consents and agrees that if the
Executive violates any of the provisions of Sections 7 or 8 hereof, the Company
and its subsidiaries and affiliates would sustain irreparable injury and that
monetary damages would not provide adequate remedy to the Company and that the
Company shall be entitled to have Section 7 or 8 hereof specifically enforced by
any court having equity jurisdiction. Nothing contained herein shall be
construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing any other remedies available to it or them for such breach or
threatened breach, including the recovery of damages from the Executive. This
provision shall, without any limitation as to time, survive the expiration or
termination of the Executive's employment hereunder, irrespective of the reason
for any termination.
10. Deductions and Withholding. The Executive agrees that the
Company or its subsidiaries or affiliates, as applicable, shall withhold from
any and all compensation paid to and required to be paid to the Executive
pursuant to this Agreement, all Federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with applicable
statutes or regulations from time to time in effect and all amounts required to
be deducted in respect of the Executive's coverage under applicable employee
benefit plans. For purposes of this Agreement and calculations hereunder, all
such deductions and withholdings shall be deemed to have been paid to and
received by the Executive.
11. Entire Agreement. Except for the Amended and Restated Fiscal
2002 Share Incentive Plan, the Executive's outstanding stock option and other
equity-compensation agreements, the Executive Annual Incentive Plan, the
Executive Perquisites Program, the Executive Automobile Program, the term life
insurance arrangement between the Company and the Executive, the Company's
qualified and non-qualified defined benefit pension plans, the Company's
qualified defined contribution retirement savings plan and applicable successor
plans or agreements, this Agreement embodies the entire agreement of the parties
with respect to the Executive's employment, compensation, perquisites and
related items and supersedes any other prior oral or written agreements,
arrangements or understandings between the Executive and the Company or any of
its subsidiaries or affiliates, and any such prior agreements, arrangements or
understandings are hereby terminated and of no further effect. This Agreement
may not be changed or terminated orally but only by an agreement in writing
signed by the parties hereto.
12. Waiver. The waiver by the Company of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
13. Governing Law; Jurisdiction.
(a) This Agreement shall be subject to, and governed by, the laws
of the State of New York applicable to contracts made and to be performed
therein, without regard to conflict of laws principles.
(b) Any action to enforce any of the provisions of this Agreement
shall be brought in a court of the State of New York located in the Borough of
Manhattan of the City of New York or in a Federal court located within the
Southern District of New York. The parties consent to the jurisdiction of such
courts and to the service of process in any manner provided by New York law.
18
Each party irrevocably waives any objection which it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in
such court and any claim that such suit, action or proceeding brought in such
court has been brought in an inconvenient forum and agrees that service of
process in accordance with the foregoing sentences shall be deemed in every
respect effective and valid personal service of process upon such party.
14. Assignability. The obligations of the Executive may not be
delegated and, except with respect to the designation of beneficiaries in
connection with any of the benefits payable to the Executive hereunder, the
Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void and without effect. The Company and the Executive agree
that this Agreement and all of the Company's rights and obligations hereunder
may be assigned or transferred by the Company to and shall be assumed by and be
binding upon any successor to the Company. Unless assumption occurs by operation
of law, the Company shall require any successor by an agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent as the Company
would be required to perform if no such succession had taken place. The term
"successor" means, with respect to the Company or any of its subsidiaries, any
corporation or other business entity which, by merger, consolidation, purchase
of the assets or otherwise acquires all or a majority of the operating assets or
business of the Company.
15. Severability. If any provision of this Agreement or any part
thereof, including, without limitation, Sections 7 and 8 hereof, as applied to
either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, or the validity or
enforceability of this Agreement, which shall be given full effect without
regard to the invalid or unenforceable part thereof.
If any court construes any of the provisions of Section 7 or 8
hereof, or any part thereof, to be unreasonable because of the duration of such
provision or the geographic scope thereof, such court may reduce the duration or
restrict or redefine the geographic scope of such provision and enforce such
provision as so reduced, restricted or redefined.
16. Notices. All notices to the Company or the Executive permitted
or required hereunder shall be in writing and shall be delivered personally, by
telecopier or by courier service providing for next-day or two-day delivery or
sent by registered or certified mail, return receipt requested, to the following
addresses:
The Company:
The Xxxxx Xxxxxx Companies Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
19
The Executive:
Xxxxxxxx Xxxxx
Xxx Xxxxxxx Xxxxxxxxx, 00-x
00000 Xxxx
Xxxxx
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day or two-day
delivery, the next business day or two business days, as applicable, following
deposit with such courier service; and if sent by certified or registered mail,
three days after deposit (postage prepaid) with the U.S. mail service.
17. No Conflicts. The Executive hereby represents and warrants to
the Company that his execution, delivery and performance of this Agreement and
any other agreement to be delivered pursuant to this Agreement will not (i)
require the consent, approval or action of any other person or (ii) violate,
conflict with or result in the breach of any of the terms of, or constitute (or
with notice or lapse of time or both, constitute) a default under, any
agreement, arrangement or understanding with respect to the Executive's
employment to which the Executive is a party or by which the Executive is bound
or subject. The Executive hereby agrees to indemnify and hold harmless the
Company and its directors, officers, employees, agents, representatives and
affiliates (and such affiliates' directors, officers, employees, agents and
representatives) from and against any and all losses, liabilities or claims
(including interest, penalties and reasonable attorneys' fees, disbursements and
related charges) based upon or arising out of the Executive's breach of any of
the foregoing representations and warranties.
18. Legal Fees. Following a Change of Control, the Company shall
reimburse the Executive up to $20,000.00, in the aggregate, for all legal fees
and related expenses (including the costs of experts, evidence and counsel)
reasonably and in good faith incurred by the Executive in an action (i) by the
Executive to obtain or enforce any right or benefit to which the Executive is
entitled under this Agreement or (ii) by the Company to enforce a
post-termination covenant referred to in Section 7 or 8 against the Executive,
in each case, provided that the Executive substantially prevails in such action.
Such amount shall be reimbursed to the Executive by the end of the calendar year
in which the Executive substantially prevails in such action, based on the date
of any settlement, judgment, or other official document evidencing same.
19. Cooperation. During the Term of Employment and thereafter,
Executive shall provide reasonable cooperation in connection with any action or
proceeding (or any appeal therefrom) that relates to events occurring during
Executive's employment with the Company.
20. Paragraph Headings. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
20
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
THE XXXXX XXXXXX COMPANIES INC.
By: /s/ Xxx XxXxxx
--------------------------------
Name: Xxx XxXxxx
Title: Executive Vice President,
Global Human Resources
/s/ Xxxxxxxx Xxxxx
--------------------------------------
Xxxxxxxx Xxxxx
21
