EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of August 21, 1998, by and
between BLUE FISH CLOTHING, INC., a Pennsylvania business
corporation with its principal offices at No. 0 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000 (hereinafter referred to as the
"Employer" or the "Corporation") and XXXXXXX X. XXXXX residing at
00 Xxxxx 0xx Xxxxxx, Xxxxxxxxx 0, Xxxxxx, XX 00000 (hereinafter
referred to as the "Employee"). The Employer and the Employee
are the "Parties" to this Agreement.
The Purpose of this Agreement is to define the relationship
between Employer and Employee.
In consideration of the mutual promises herein, and intending to be
legally bound, the Parties agree as follows:
1. Employment, Services and Duties.
a. The Employer hereby employs Employee, and Employee
hereby accepts employment as its President and Chief Executive
Officer, to render services in such administrative and
representational capacity in connection with the operation of the
Employer's business as may be required by the Board of Directors
and upon all of the terms and conditions set forth in this
Agreement.
b. Employee agrees to perform his services efficiently
and to the best of his ability.
c. On the effective date of this Agreement, the
Corporation's Board of Directors will vote to enlarge the Board
by one seat and shall vote to elect the Employee to fill the
vacancy created. Employee shall serve in such capacity subject
to the provisions of the Corporation's By-Laws. The Corporation
shall nominate the Employee for reelection at the next annual
meeting of the Corporation's Stockholders and at each succeeding
annual meeting so long as this Agreement is in effect and shall
use its best efforts to cause the election of the Employee to the
Board.
2. Term.
a. The term of employment under this Agreement shall
begin on the date of this Agreement, and shall continue for a
period of five (5) years, unless previously terminated as
provided herein. This Agreement shall continue in force for
successive one (1) year periods, unless either Party gives ninety
(90) days written notice of non-renewal prior to the close of the
initial five-year period or each subsequent one (1) year period
or previously terminated as provided herein.
b. Employee's employment may be terminated by the Employer:
(i) at any time for "Cause", provided, however,
that the employee has reasonable opportunity to be heard before
the Board of Directors. "Cause" shall mean: (1) Employee
breaches any material provision of this Agreement; (2) Employee
is convicted of a
felony; (3) Employee engages in theft, fraud or
embezzlement from the Employer, its customers or suppliers; (4)
Employee willfully or habitually refuses or neglects to comply
with explicit directives of the Board of Directors or Employee's
obligations under this Agreement or as an employee; (5) habitual
use of drugs or alcohol; or (6) Employee competes with Employer,
unless such competition is consented to by Employer;
(ii) if Employer corporation is dissolved;
(iii) if Employee is totally disabled for a period
exceeding six (6) months;
(iv) if the Employer fails to achieve (1) sales
projected or incurs a loss greater than projected on the Board
approved budget for the fiscal year ended December 31, 1998, or
(2) a minimum of ten percent (10%) annual sales growth and profit
(as measured by EBIT) of at least $200,000 for the fiscal year
ending December 31, 1999, or (3) a minimum of ten percent (10%)
annual sales growth and ten percent (10%) annual profit growth
for each fiscal year thereafter during the term of this
Agreement; exclusive, in each case, of sales or profits for
businesses acquired after the date of this Agreement. For
purposes of this paragraph, the sales and profit/loss shall be
calculated annually, based upon the Corporation's audited
financial statements; or
(v) if the Employee dies.
In the event of Employee's death during the term of
this Agreement, Employee's estate shall be entitled to receive
compensation due to Employee until the last day of the weekly
period in which his death shall have occurred and for any accrued
but unused vacation days.
If Employee's employment shall be terminated hereunder
for any reason other than death, he may, at his election, acquire
any insurance policies on his life owned by the Employer by
giving written notice of his election to Employer within thirty
(30) days after termination of his employment. Such policies
shall be transferred to Employee upon his payment to the Employer
of the then interpolated reserve value of said policy of
insurance plus a pro rated portion of any paid premium
representing the remaining portion of the premium period. In the
event any policy transferred to Employee as herein provided shall
not have an interpolated terminal reserve value, then the amount
to be paid to the Employee shall be its then fair market value
plus a pro rated portion of any paid premium representing the
remaining portion of the premium period.
c. Either Party may terminate this Agreement at any
time upon ninety (90) days prior written notice to the other
Party. In the event the Employer terminates this Agreement
without Cause, then the Employer shall continue to pay the
Employee's salary for a period of three (3) months plus one month
for each full year of employment or portion thereof.
Notwithstanding the foregoing, in the event of an occurrence of
any of the events set forth in Section 2.b. of this Agreement,
Employer may terminate this Agreement without prior notice and
compensate Employee only up through the date of termination and
for any accrued but unused vacation days. In addition, unless
terminated for Cause, if the Employer has met or exceeded sales
and profits projected on the Board approved budget through the
date of Employee's termination, the Employee shall be entitled to
receive bonuses under Schedule A, Section II
(including vesting of ISOs based on Board specified goals), prorated
for the percentage of the year that the Employee was employed; provided,
however, that pursuant to Internal Revenue Code Section 422,
stock options granted to the Employee shall terminate ninety (90)
days after termination of employment, unless otherwise determined
by the Compensation Committee (with resulting tax and accounting
consequences to the Employer and Employee). If the Employer has
not met projected sales and profits on the Board approved budget
as of the date of Employee's termination, Employee shall not be
entitled to receive any bonuses under Schedule A, Section II,
unless otherwise determined by the Compensation Committee.
3. Regular Compensation. For all of the services to be
rendered by Employee in any capacity hereunder, and in the
performance of any other reasonable duties assigned him by the
Employer, the Employer shall pay to the Employee compensation in
accordance with the Schedule of Compensation attached hereto as
Schedule A.
4. Adjustments to Regular Compensation. At the direction
of the Compensation Committee of the Board of Directors, the
Employer may from time to time adjust Employee's regular
compensation by entering any such change upon the Schedule of
Compensation attached hereto as Schedule A. Such entry shall
constitute an amendment to this Employment Agreement as of the
date of said entry and shall supersede the compensation provided
for in Section 3 of this Agreement and any other change or
changes in such compensation previously entered on Schedule A.
5. Bonuses. As an additional compensation for the services
to be rendered by Employee hereunder, Employee shall be eligible
to earn bonuses as set forth on Schedule A. Nothing shall
prohibit Employer, in its sole discretion, from paying Employee
bonuses in excess of the amounts as set forth on Schedule A.
6. Stock Options. As addition compensation for his
services on behalf of the Employer, the Employee shall be
entitled to receive the stock options to purchase shares of
Common Stock of the Employer as set forth on Schedule A.
7. Fringe Benefits. The Employee shall also be entitled to
participate in all fringe benefits authorized or adopted from
time to time by the Employer for its employees in general, except
for profit sharing (as this Agreement is in lieu of such
participation), including, by way of example and not by way of
limitation, participation in any pension, life insurance and
health insurance plans, according to the terms of those plans,
if, as and when adopted, as listed on Schedule B. Nothing in
this Agreement shall require the Employer to adopt or continue
any or all fringe benefit plans.
8. Life Insurance. Employer shall maintain life insurance
on the Employee in the amount of One Hundred Thousand Dollars
($100,000.00) which shall be payable to Employee's designated
beneficiary or, in the absence of such designation Employee's
personal representative.
9. Business Expenses. The Employer shall reimburse the
Employee from time to time for any business expenses in
accordance with the Company's expense reimbursement policies,
provided that the Employee shall present a list of such expenses
incurred during any calendar month to the Employer. Such
expenses may include any and all expenses related to scheduled
maintenance for the automobile procured by the Employee using the
automobile allowance set
forth on Schedule B. This list shall include receipts, paid bills,
or an extract from an account book which the Employee recorded at or
near the time of each expenditure, such documentary evidence showing;
(a) the amount of the expenditures; (b) the time, place and designation
of the type of entertainment and travel and other expenses; and (c) any
other information sufficient to establish its business relationship to
the Employer.
10. Vacation. The Employee shall be entitled to vacation
without reduction in compensation in accordance with the
provisions set forth on Schedule B.
11. Confidentiality of Files, Records, Systems and
Operating Procedures. All records and files concerning
activities of the Employer which are kept by the Employee during
the term of this Agreement shall belong to and remain the
property of the Employer and shall be kept entirely confidential.
All designs (excluding non-Blue Fish designs created by Employee
prior to the effective date of this Agreement), systems and
procedures used by Employer or Employee, shall belong to and
remain the property of the Employer. Employee shall not either
directly or indirectly, divulge any information to anyone
regarding such designs, systems and procedures, nor shall they or
any material pertaining to them be duplicated for use other than
in connection with the duties which are the subject of this
Agreement. Further, all records, files, designs, (other than
these, created by Employee and mentioned previously) and manuals
regarding systems and procedures shall be returned to the
Employer upon termination of employment of Employee by the
Employer and shall not in any manner, either directly or
indirectly, be used subsequently by the Employee for personal
gain.
12. Equitable Relief. The Parties agree that the remedy at
law for any breach of the terms of this Agreement would be
inadequate and further agree and consent that temporary and
permanent injunctive and other equitable relief, including
specific performance, may be granted in any proceeding which may
be brought to enforce any provision hereof without the necessity
of proof of actual damage or inadequacy of any legal remedy.
3. Miscellaneous.
a. Entire Agreement. This Agreement contains the
entire agreement between the Parties and supersedes any prior
understandings or written or oral agreements.
b. Amendment. This Agreement may be modified or
amended, provided, however, that no amendment shall be valid
unless made in writing and approved in writing by Employee and
Employer.
c. Governing Law. The Parties agree that it is their
intention that this Agreement and the performance hereunder and
all suits and special proceedings hereunder be construed in
accordance with and under and pursuant to the laws of the State
of New Jersey to the exclusion of the law of any other forum and
without regard to the jurisdiction in which any action or special
proceeding may be instituted.
d. Legal Construction. If for any reason any one or
more of the provisions of this Agreement shall be held or
declared to be void, invalid or illegal or unenforceable in any
respect, then such void, invalid, illegal or unenforceable
provision or provisions shall not affect any other
provisions of this Agreement, and this Agreement shall be construed
as if such void, invalid, illegal or unenforceable provision or
provisions had never been contained therein.
e. Parties Bound. This Agreement shall be binding upon
the Parties hereto and their respective heirs, executors,
administrators, successors and assigns.
f. Notice. Any notices provided for in this Agreement
shall be in writing and shall be, deemed duly given when
personally delivered to the Party to whom it is addressed, or, in
lieu of such personal delivery, when deposited in the United
States mail, certified and returned receipt requested, and
addressed to such Party at the address provided by such party for
the purpose of giving notice.
g. Waiver of Breach. The waiver by either Party of a
breach or violation of any provision of this Agreement shall not
operate as or be construed to be a waiver of any subsequent
breach or violation hereof.
h. Gender. All personal pronouns used in this
Agreement shall include other genders where used in the masculine
or feminine or neuter gender, and the singular shall include the
plural whenever and as often as may be appropriate.
i. Counterparts. This Agreement may be executed in any
number of counterparts, and each of such counterpart shall be
deemed to be an original for all purposes.
IN WITNESS WHEREOF, the Employer has caused the
Agreement to be signed by its duly authorized officers, and
Employee has hereto set his hand and seal as of the day and year
first herein above written.
EMPLOYEE EMPLOYER:
BLUE FISH CLOTHING, INC.
/s/ Xxxxxxx X. Xxxxx By:/s/ Xxxxxxxx Xxxxxxx
------------------------------ ------------------------------
Xxxxxxx X. Xxxxx Xxxxxxxx Xxxxxxx, Chairman
SCHEDULE A
SCHEDULE OF COMPENSATION
I. Base Compensation.
During the initial five (5) year term of Employee's
employment pursuant to this Agreement and thereafter, Employee
shall receive base compensation at an annualized amount of One
Hundred Ten Thousand Dollars ($110,000.00), payable in accordance
with the Corporation's payroll policies, less all required
governmental withholdings. Base Compensation shall be increased
by a cost-of-living adjustment based on the Consumer Price index
for the Philadelphia metropolitan area, as published by the
United States Bureau of Labor Statistics, for service commencing
on each of the annual anniversaries of the effective date of this
Agreement, effective for the next pay period after the
anniversary date.
II. Bonuses.
A) Stock Option Grant. Effective on the date of execution
of this Agreement, Employee shall be entitled to receive a nine-
year incentive stock option ("ISO") to purchase 200,000 shares of
the Employer's Common Stock (the "Shares"), and on January 1,
1999, (or such earlier time as the 200,000 share limitation in
the 1995 Stock Option Plan (or any successor plan) is enlarged)
Employee shall be entitled to receive a nine-year ISO to purchase
35,960 Shares, each option with an exercise price equal to the
fair market value of the Employer's Common Stock on the date of
the grant. The option to purchase 200,000 shares shall be vested
with respect to 78,654 shares upon grant, with the balance to
vest as provided below. The option to purchase 35,960 shares
shall be unvested at grant. Both options shall vest in full (i)
at least thirty (30) days prior to the merger of the Corporation
with and into another corporation or the sale of all or
substantially all of its stock or assets, or (ii) on the eighth
anniversary of the grant date (or on the immediately preceding
anniversary date(s) if necessary to comply with Internal Revenue
Code Section 422(d), as determined by the Compensation Committee
of the Board of Directors); provided, however, that the vesting
of each ISO may be accelerated by the Compensation Committee to
the most rapid vesting schedule permissible under Code Section
422 upon achievement of certain financial and non-financial goals
for the Employee established by the Compensation Committee. Such
goals shall be established for the fiscal years ended December
31, 1998 and December 31, 1999 prior to the execution of this
Agreement. For each succeeding year during the term of this
Agreement, Employee shall submit to the Compensation Committee by
November 15 of the preceding year, a list of proposed goals for
the following year. The Compensation Committee shall review the
Employee's recommendations and formulate final goals by December
31 of the preceding year. Except as noted above, each ISO shall
be granted pursuant to the Corporation's then current form of
Stock Option Grant which contains, among other things,
confidentiality and non-competition provisions.
B) Additional Stock Option Grant. The Employee shall be
entitled to earn additional ISOs with an exercise price equal to
fair market value on the date of grant, and with the most rapid
vesting schedule allowable under Code Section 422(d), as follows:
(1) When the Corporation's Shares have traded either
(a) over twenty (20) consecutive trading days at a
price of at least $3.00 per share, or (b) over a
three-month period at an average price of at least
$3.00 per share, he shall earn the right to
purchase an additional one percent (1%) of the then
issued and outstanding Shares.
(2) When the Corporation's Shares have traded either
(a) over twenty (20) consecutive trading days at a
price of at least $4.00 per share, or (b) over a
three-month period at an average price of at least
$4.00 per share, he shall earn the right to
purchase an additional one percent (1%) of the then
issued and outstanding Shares.
(3) When the Corporation's Shares have traded either
(a) over twenty (20) consecutive trading days at a
price of at least $5.00 per share, or (b) over a
three-month period at an average price of at least
$5.00 per share, he shall earn the right to
purchase an additional two percent (2%) of the then
issued and outstanding Shares; provided, however,
that if this provision is satisfied on or before
the second anniversary of the date of the
Agreement, he shall earn the right to purchase four
percent (4%) of the Corporation's then issued and
outstanding shares (rather than 2%).
(4) When the Corporation's shares have traded either
(a) over twenty (20) consecutive trading days at a
price of at least $7.00 per share, or (b) over a
three-month period at an average price of $7.00 per
share, he shall earn the right to purchase an
additional three percent (3%) of the then issued
and outstanding shares.
All stock options granted under this Section II.B. shall
vest in full at least thirty (30) days prior to the merger of the
Corporation with and into another corporation or sale of all or
substantially all of its stock or assets; provided, however, that
in the event of such merger or sale, the options shall be earned
at any time that the specified price per share is attained
(rather than after twenty (20) consecutive trading days at or
above the specified price or at or above a specified average
price over a thirty (30) day period).
C) Annual Cash Bonus. For the year ended December 31,
1999, and thereafter (unless amended by the Compensation
Committee prior to the commencement of the year to which it
applies), Employee shall be entitled to receive a cash bonus
based on achievement of sales and profit goals in the Board
approved budget for the applicable fiscal year as set forth below
(exclusive of sales or profits for businesses acquired after the
budget is approved):
Target Bonus: Four percent (4%) of EBIT, calculated
before profit sharing.
Goals Achieved Percent of Target Bonus Payable
-------------- -------------------------------
Sales only 0%
EBIT only, as follows:
with less than 85% of Sales Goal 70%
with greater than or equal to 85%
but less than 88% of Sales Goal 75%
with greater than or equal to 88%
but less than 91% of Sales Goal 80%
with greater than or equal to 91%
but less than 94% of Sales Goal 85%
with greater than or equal to 94%
but less than 97% of Sales Goal 90%
with greater than or equal to 97%
but less than 100% of Sales Goal 95%
Sales + EBIT 100%
Goals Achieved Percent of Target Bonus Payable
-------------- -------------------------------
If both Sales + EBIT goals are
met and either or both exceed:
For each 1% Sales Goal is exceeded: Add 3% to 100%
For each 1/2% EBIT Goal is
exceeded: Add 1.5% to 100%
To illustrate:
If 105% of Sales Goal and 102% 15% for Sales (5x3%)
of EBIT Goals are met: plus 6% for EBIT
(4x1.5%) = 121%
If 105% of Sales Goal but only 15% for Sales (5x3%)
100% EBIT Goal are met: plus 0% for EBIT = 115%
If 100% of Sales Goal and 102% 0% for Sales plus 6% for
of EBIT Goal are met: EBIT (4x1.5%) = 106%
SCHEDULE B
FRINGE BENEFITS
1. Vacation. The Employee shall be entitled to twenty (20)
days of absence from the performance of his duties with pay
during each year of this Agreement. Such time may not be accrued
or carried over from year to year, and the Employee will not be
paid for any unused time except with the express written approval
of the Employer or as required by law. In the event this
Agreement terminates other than at the end of a year, the
Employee's entitlement to vacation time shall be prorated to the
date of termination.
2. Sick Time and Holidays. The Employee shall be entitled
to sick time and holidays in accordance with the Corporation's
policies for managerial employees generally.
3. Medical Insurance (family coverage). 90% paid by Blue
Fish
4. Participation in Corporation's 401(k) Plan
5. $100,000 Life Insurance Policy with Employee designated
beneficiary
6. Blue Fish apparel and other store items at cost through
retail/wholesale (promotional articles available as needed)
7. Automobile allowance of $450 per month, with
Corporation-paid automobile insurance.
8. Employee shall not be entitled to participate in any
employee profit sharing plan (this Agreement being in lieu of
participation in such plan).
