EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT entered into as of September 23, 1997, by and
between Pivot Rules, Inc., a New York corporation (the "Company") and Xxxxxxx
Xxxxxxxx ("Xxxxxxxx").
RECITALS
1. The Company desires to retain the services of Xxxxxxxx as the
Chief Creative Officer of the Company in accordance with the terms and
conditions of this Agreement.
2. Xxxxxxxx will serve the Company as its Chief Creative Officer
in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Xxxxxxxx agree
as follows:
1. TERM
The Company hereby agrees to employ Xxxxxxxx as the Chief Creative
Officer of the Company, and Xxxxxxxx hereby agrees to serve in such capacity,
for a term commencing within three weeks of the date hereof, and ending
December 31, 2000, upon the terms and subject to the conditions contained in
this Agreement.
2. DUTIES
During the term of this Agreement, Xxxxxxxx shall serve as the Chief
Creative Officer of the Company, and shall be responsible for the duties
attendant to such office, which duties will be generally consistent with his
position as an executive officer of the Company and such other managerial
duties and responsibilities with the Company as may be assigned by the
President and/or the Board of Directors of the Company and which are detailed
in appendix A.
The principal location of Xxxxxxxx'x employment shall be in the New
York City vicinity, although Xxxxxxxx understands and agrees that he will be
required to travel frequently for business reasons. Xxxxxxxx shall devote his
full professional and business time and best efforts to the performance of his
duties as the Chief Creative Officer of the Company during the term of this
Agreement; provided that Xxxxxxxx shall be permitted to continue to engage in
his freelance wedding design business on nights and weekends so long as it
does not interfere with the performance of his duties for the Company.
Xxxxxxxx shall not, directly or indirectly, render services to any other
person or entity, without the consent of the Board of Directors.
3. COMPENSATION
For services rendered by Xxxxxxxx to the Company during the term of
this Agreement, the Company shall pay him a base salary of $125,000 per year,
payable in accordance with the standard payroll practices of the Company,
subject to annual increases in the sole discretion of the Company's Board of
Directors, taking into account merit, corporate and individual performance and
general business conditions, including changes in the "cost of living index,"
but in no event shall his salary, after giving effect to such increase, be
less than the amounts set forth below:
Year Amount
---- ------
September 23, 1997 to December 31, 1998 $125,000
January 1, 1999 to December 31, 1999 $137,500
January 1, 2000 to December 31, 2000 $151,250
4. BONUS/OPTIONS
a. For each fiscal year during the term of this Agreement,
Xxxxxxxx shall be eligible to receive a bonus set by the Board of Directors in
its sole discretion, based on such factors as the Board deems appropriate;
provided that such bonus shall not exceed 25% of Xxxxxxxx'x base salary paid
during such fiscal year. Bonuses to be paid to Xxxxxxxx pursuant to this
paragraph 4a shall be paid within 30 days following completion of the audit of
the annual financial statements of the Company for the fiscal year in
question.
b. The Company hereby agrees to cause the issuance to
Xxxxxxxx of stock options ("Options") to purchase shares of the Company's
common stock, $.01 par value ("Common Stock") in accordance with the following
schedule: (i) Options to purchase 24,000 shares of Common Stock to be issued
on the date he commences employment with the Company. All Options shall be
issued pursuant to, and in accordance with, the Company's 1997 Stock Option
Plan (the "Plan") to the maximum extent permitted by law. The Options shall be
Incentive Stock Options (as defined in the Plan) and shall be exercisable at a
price equal to the greater of $5.00 per share of Common Stock or the Fair
Market Value (as defined in the Plan) of the Common Stock on the date of
issuance of such Option. Each Option shall vest over a 33 month period at a
rate of 3 1/3% (three and one third of a percent) per month, commencing May 1,
1998. In the event of the termination of Xxxxxxxx'x employment for any reason,
he shall have 30 days within which to exercise any vested Options and any
unvested or unissued Options shall be forfeited.
c. In addition to the bonus granted in 4a, Xxxxxxxx shall be
eligible to receive a one time bonus ("One Time Bonus") of $75,000 in the
event the Pivot Rules sportswear brand (excluding any other division's sales)
hits the agreed upon target net sales level ("Target Sales Level"). The Target
Sales level for calendar year 1999 is $20 million net sales as reflected in
the company's audited financial statements and for calendar year 2000 is $25
million net sales as reflected in the company's audited financial statements.
In the event Xxxxxxxx earns this bonus in
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1999, he is not eligible to earn it again in 2000. Bonuses to be paid to
Xxxxxxxx pursuant to this paragraph 4c shall be paid within 30 days
following completion of the audit of the annual financial statements of
the Company for the fiscal year in question.
5. EXPENSE REIMBURSEMENT AND PERQUISITES
a. During the term of this Agreement, Xxxxxxxx shall be
entitled to reimbursement of all reasonable and actual out-of-pocket expenses
incurred by him in the performance of his services to the Company consistent
with corporate policies, provided that the expenses are properly accounted
for.
b. During each calendar year of the term of this Agreement,
Xxxxxxxx shall be entitled to reasonable vacation with full pay; provided,
however, that Xxxxxxxx shall schedule such vacations at times convenient to
the Company.
c. During the term of this Agreement, the Company shall
provide Xxxxxxxx with major medical insurance coverage as determined by the
Company in its sole discretion, and Xxxxxxxx shall be entitled to participate
in all dental insurance and disability plans and other employee benefit plans
instituted by the Company from time to time on the same terms and conditions
as other employees of the Company, to the extent permitted by law.
d. During the term of this Agreement, the Company shall
purchase $250,000 of term life insurance for the benefit of Xxxxxxxx, so long
as it is available on commercially reasonable terms.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the offer of employment, severance
benefits and Options to be granted to Xxxxxxxx hereunder, and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, during the term of this Agreement and for a period equal to two
years thereafter, Xxxxxxxx shall not, without the prior written consent of the
Company, anywhere in the United States where the Company conducts business or
sells its products, directly or indirectly, (i) enter into the employ of or
render any services to any person, firm or corporation engaged in any business
which now or at the time, has material operations which are engaged in any
business activity competitive (directly or indirectly) with the business of
the Company (currently the design, sourcing and marketing of golf lifestyle
sportswear and/or moderate collections for men) including, for these purposes,
the two largest other businesses (excluding other smaller businesses), if any,
in which, at the time of termination of his employment the Company is engaged,
provided however, he will not be precluded from engaging in Men's Better
Collections, (in each case, a "Competitive Business"); (ii) engage in any
Competitive Business for his own account; (iii) become associated with or
interested in any Competitive Business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; (iv) employ or retain, or
have or cause any other person or entity to employ or retain, any person who
was
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employed or retained by the Company while Xxxxxxxx was employed by the
Company; or (v) solicit, interfere with, or endeavor to entice away from the
Company, for the benefit of a Competitive Business, any of its customers or
other persons with whom the Company has a contractual relationship. However,
nothing in this Agreement shall preclude Xxxxxxxx from investing his personal
assets in the securities of any corporation or other business entity which is
engaged in a Competitive Business if such securities are traded on a national
stock exchange or in the over-the-counter market and if such investment does
not result in his beneficially owning, at any time, more than three percent
(3%) of the publicly-traded equity securities of such Competitive Business.
x. Xxxxxxxx and the Company agree that the covenants of
non-competition and non-solicitation contained in this paragraph 6 are
reasonable covenants under the circumstances, and further agree that if, in
the opinion of any court of competent jurisdiction, such covenants are not
reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of these covenants
as to the court shall appear not reasonable and to enforce the remainder of
these covenants as so amended. Xxxxxxxx agrees that any breach of the
covenants contained in this paragraph 6 would irreparably injure the Company.
Accordingly, Xxxxxxxx agrees that the Company, in addition to pursuing any
other remedies it may have in law or in equity, may obtain an injunction
against Xxxxxxxx from any court having jurisdiction over the matter,
restraining any further violation of this paragraph 6.
7. TERMINATION
a. This Agreement, the employment of Xxxxxxxx, and
Xxxxxxxx'x position as Chief Creative Officer of the Company shall terminate
upon the first to occur of:
(i) his death;
(ii) his "permanent disability," due to injury or
sickness for a continuous period of four (4)
months, or a total of eight months in a twenty-four
month period (vacation time excluded), during which
time Xxxxxxxx is unable to attend to his ordinary
and regular duties;
(iii) a "Constructive Termination" by the Company, which,
for purposes of this Agreement, shall be deemed to
have occurred upon (A) the removal of Xxxxxxxx from
his position as Chief Creative Officer of the
Company, or (B) the material breach by the Company
of this Agreement; provided that no such breach
shall be considered a Constructive Termination
unless Xxxxxxxx has provided the Company with at
least thirty (30) days' prior written notice of
such breach and the Company has failed to cure such
breach within such thirty (30) day period;
(iv) the termination of this Agreement at any time
without cause by the Company;
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(v) non-renewal of this Agreement by the Company and/or
the Board of Directors;
(vi) the termination of this Agreement for cause, which,
for purposes of this Agreement, shall mean that (1)
Xxxxxxxx has been convicted of a felony or any
serious crime involving moral turpitude, or engaged
in materially fraudulent or materially dishonest
actions in connection with the performance of his
duties hereunder, or (2) Xxxxxxxx has willfully and
materially failed to perform his duties hereunder,
or (3) Xxxxxxxx has breached the terms and
provisions of this Agreement in any material
respect, or (4) Xxxxxxxx has failed to comply in
any material respect with the Company's policies of
conduct including with respect to trading in
securities; or
(vii) the termination of this Agreement by Xxxxxxxx,
which shall occur on not less than 60 days prior
written notice from Xxxxxxxx.
b. In the event that this Agreement is terminated, other
than as a result of a Constructive Termination or by the Company without
cause, the Company shall pay Xxxxxxxx his base salary only through the date of
termination and shall make no other payments under this Agreement. In the
event that this Agreement is terminated without cause by the Company pursuant
to paragraph 7(a)(iv) or through a Constructive Termination pursuant to
paragraph 7(a)(iii), the Company shall pay Xxxxxxxx, in lieu of all salary,
compensation payments and perquisites set forth in paragraphs 3, 4 and 5
(including bonus payments and option grants), severance payments (the
"Severance Payments") as follows:
(i) the then-current base salary for a period of ninety
(90) days, if Xxxxxxxx is terminated between
September__, 1997 and December 31, 1998;
(ii) the then-current base salary for a period of
one-hundred twenty (120) days, if Xxxxxxxx is
terminated between January 1, 1999 and December 31,
1999; or
(iii) the then-current base salary for a period of
one-hundred fifty (150) days, if Xxxxxxxx is
terminated between January 1, 2000 and December 31,
2000; provided that if he is terminated after July
1, 2000, he shall also be entitled to a pro rated
portion of the One Time Bonus to the extent not
previously paid and to the extent earned based upon
year end audited financial statements for the
calendar year 2000.
The Severance Payments shall be payable in periodic
installments in accordance with the Company's standard payroll practices,
provided however that any such One
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Time Bonus due under this paragraph 7b (iii) shall be paid within 30 days
following completion of the audit of the annual financial statements of the
Company for the fiscal year in question.
8. CONFIDENTIALITY; INVENTIONS
x. Xxxxxxxx recognizes that the services to be performed by
him are special, unique and extraordinary in that, by reason of his employment
under this Agreement, he may acquire or has acquired confidential information
and trade secrets concerning the operation of the Company, its predecessors,
and/or its affiliates, the use or disclosure of which could cause the Company,
or its affiliates substantial loss and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Xxxxxxxx covenants and agrees with the Company that he will not, directly or
indirectly, at any time during the term of this Agreement or thereafter,
except in the performance of his obligations to the Company or with the prior
written consent of the Board of Directors or as otherwise required by court
order, subpoena or other government process, directly or indirectly, disclose
any secret or confidential information that he may learn or has learned by
reason of his association with the Company. If Xxxxxxxx shall be required to
make such disclosure pursuant to court order, subpoena or other government
process, he shall notify the Company of the same, by personal delivery or
electronic means, confirmed by mail, within twenty-four (24) hours of learning
of such court order, subpoena or other government process and, at the
Company's expense, shall (i) take all reasonably necessary and lawful steps
required by the Company to defend against the enforcement of such subpoena,
court order or government process, and (ii) permit the Company to intervene
and participate with counsel of its choice in any proceeding relating to the
enforcement thereof. The term "confidential information" includes, without
limitation, information not in the public domain and not previously disclosed
to the public or to the trade by the Company's management with respect to the
Company's or its affiliates' facilities and methods, studies, surveys,
analyses, sketches, drawings, notes, records, software, computer-stored or
disk-stored information, processes, techniques, research data, marketing and
sales information, personnel data, trade secrets and other intellectual
property, designs, design concepts, manuals, confidential reports, supplier
names and pricing, customer names and prices paid, financial information or
business plans.
x. Xxxxxxxx confirms that all confidential information is
and shall remain the exclusive property of the Company. All memoranda, notes,
reports, software, sketches, photographs, drawings, plans, business records,
papers or other documents or computer-stored or disk-stored information kept
or made by Xxxxxxxx relating to the business of the Company shall be and will
remain the sole and exclusive property of the Company and shall be promptly
delivered and returned to the Company immediately upon the termination of his
employment with the Company.
x. Xxxxxxxx shall make full and prompt disclosure to the
Company of all inventions, improvements, ideas, concepts, discoveries,
methods, developments, software and works of authorship, whether or not
copyrightable, trademarkable or licensable, which are created, made, conceived
or reduced to practice by Xxxxxxxx during his services with the Company,
whether or not during normal working hours or on the premises of the Company
but
7
exclusive of wedding dress designs as contemplated by paragraph 2 (all of
which are collectively referred to in this Agreement as "Developments"). All
Developments shall be the sole property of the Company, and Xxxxxxxx hereby
assigns to the Company, without further compensation, all of his rights, title
and interests in and to the Developments and any and all related patents,
patent applications, copyrights, copyright applications, trademarks and
tradenames in the United States and elsewhere.
x. Xxxxxxxx shall assist the Company in obtaining,
maintaining and enforcing patent, copyright and other forms of legal
protection for intellectual property in any country. Upon the request of the
Company, Xxxxxxxx shall sign all applications, assignments, instruments and
papers and perform all acts necessary or desired by the Company in order to
protect its rights and interests in any Developments.
x. Xxxxxxxx agrees that any breach of this paragraph 8 will
cause irreparable damage to the Company and that, in the event of such breach,
the Company will have, in addition to any and all remedies of law, including
rights which the Company may have to damages, the right to equitable relief
including, as appropriate, all injunctive relief or specific performance or
other equitable relief. Xxxxxxxx understands and agrees that the rights and
obligations set forth in paragraph 8 shall survive the termination or
expiration of this Agreement.
9. LOAN
Subject to Xxxxxxxx'x employment with the Company not having
been terminated, for any reason prior to April 1, 1998, the Company shall
extend at Xxxxxxxx'x option a $50,000 loan to Xxxxxxxx on such date on the
following terms:
a. payment of principal in monthly installments of $757.58
for the then remaining 33 months of the term of the Employment Agreement;
b. monthly payments of interest on unpaid principal at the
rate of 8% per annum;
c. 50% of any cash bonuses paid to Xxxxxxxx shall be applied
to the $25,000 non-amortizing balance first and then to the amortizing balance
(in inverse order of maturity);
d. 100% of any Severance Payment will be applied to the loan
up to the amount then due.
x. Xxxxxxxx will execute a promissory note and confession of
judgement at the time of receipt of the loan;
f. the promissory note will provide that all remaining
principal and accrued interest thereon shall become due and payable
immediately at the end of the term of the Employment Agreement or in the event
of the termination of employment for any reason and the
8
promissory note shall also provide that Xxxxxxxx will waive the right to
assert any defense or counterclaim of whatsoever nature against his
obligation to repay the note; and
g. the promissory note will contain other customary terms.
h. The Company shall be entitled to deduct all payments due
per this paragraph 9 directly from Xxxxxxxx'x paycheck.
i. At the Company's sole option, it may elect to receive a
second mortgage on any coop or condo owned by Xxxxxxxx.
10. REPRESENTATIONS AND WARRANTIES
x. Xxxxxxxx represents and warrants to the Company that he
was advised to consult with an attorney of Xxxxxxxx'x own choosing concerning
this Agreement and that Xxxxxxxx has done so.
x. Xxxxxxxx represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Xxxxxxxx complies
with all laws applicable to Xxxxxxxx or to which his properties are subject
and does not violate, breach or conflict with any agreement by which he or his
assets are bound or affected.
11. GOVERNING LAW
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of New
York, without giving effect to its conflict of law provisions.
12. ENTIRE AGREEMENT
This Agreement contains all of the understandings between Xxxxxxxx
and the Company pertaining to Xxxxxxxx'x employment with the Company, and it
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into between them.
13. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing, signed by Xxxxxxxx and by
an officer of the Company duly authorized to do so. Except as otherwise
specifically provided in this Agreement, no waiver by either party of any
breach by the other party of any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.
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14. NOTICES
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or
to such other address as such party may subsequently designate by like notice:
If to the Company, to:
Pivot Rules, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: E. Xxxxxxx Xxxxx
With a copy to:
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
If to Xxxxxxxx, to:
Xxxxxxx Xxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxxxxx 0X
Xxx Xxxx, XX 00000
with a copy to:
Xxxx Xxxxxxxx
Xxxxxxx and Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
15. SEVERABILITY
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
16. TITLES
Titles of the Sections of this Agreement are intended solely
for convenience of reference and no provision of this Agreement is to be
construed by reference to the title of any Section.
16.5 PAGINATION
There is no page 1.
17. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
PIVOT RULES, INC.
By: /s/ E. Xxxxxxx Xxxxx
--------------------
E. Xxxxxxx Xxxxx
President
/s/ Xxxxxxx Xxxxxxxx
--------------------
Xxxxxxx Xxxxxxxx
APPENDIX A
DRAFT--FOR DISCUSSION PURPOSES ONLY
JOB DESCRIPTION-PIVOT RULES INC.
DATE: July 24, 1997
POSITION: Chief Creative Officer
REPORTS TO: This position reports to the CEO of the company
along with all of the division heads making up the
executive council. This position has all design
staff reporting to it.
POSITION PURPOSE: This position is responsible for the management and
direction of the creative department including
product design, packaging and corporate image. This
includes overseeing all visual aspects of the
Company's advertising, offices, showrooms,
tradeshow booths, concept shops, packaging,
stationery, public relations material, conception
and supervision of photography and design and
approval of collateral materials.
NATURE AND SCOPE: The incumbent is responsible for all visual
aspects of the company and assuring they fit
within the parameters of the mission statement.
These include the physical design of the offices,
showroom, common space, concept shops, tradeshow
booths and warehouse, all product design, hiring of
any future designers, visual approval of all
advertising and public relations material,
stationery design and dress code.
This person is responsible for developing and
guarding the Company's visual style and attitude
and for making sure all visual aspects of the
Company's business fit.
This person is responsible for showroom set up and
design, including mannequins, props, displays to
make sure it reflects and enhances the excitement
of the line. In addition, this person should
regularly review the state of the showroom to
ensure that the sales department is maintaining the
showroom in the desired manner.
The incumbent is responsible for assuring that the
companies design programs are cutting edge and
innovative and that a consistent theme is reflected
in all visual aspects of the company. This includes
the
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accumulation of research and development as well as
market information to forecast trends. This
position must ensure that new products can be made
to fit within the Company's pricing parameters.
This position is responsible for line direction and
planning as well as the development of new product
categories (including acquisitions).
This person is responsible for the tracking and
timely delivery of quality samples. In addition,
this person is responsible for developing the
design portion of and keeping to all relevant
aspects of the Company Time/Action Calendar.
This position must identify and define the complete
needs of a professional design organization
including defining the scope and areas of
responsibility of the entire design team. The goal
of this position should be to build a self
sustaining organization.
Budgets shall be prepared by October 15th. In
addition, this person will provide timely updates
of budget changes to the CFO.
PRINCIPLE FUNCTIONS OR ACCOUNTABILITIES:
o Promote and integrate mission statement, values and service
excellence in the conduct of your daily responsibilities.
o Vision to ensure all visual aspects/features of the company
consistent with mission statement and are integrated with
the Company's visual identity.
o Company earn reputation as a cool, innovative design and
creative organization through creative and technical
excellence coupled with research and development.
o Quality and timely delivery of samples.
o Meeting departmental budgets
o Implement 25 Fun Things by December 31, 1998
o Build a self sustaining design organization
LEVELS OF AUTHORITY:
General:
Complete: [more than] $5000
Act and Report: $5,000-15,000
Second Signatory: [less than] $15,000
