Exhibit 10.17
EMPLOYMENT AGREEMENT
BY AND BETWEEN: XXXXX XXXXX & SONS, INC., a corporation duly incorporated
according to the laws of Canada, having its head office
at 0000, Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx, herein acting
and represented by its Chairman, Xxxxxxx Xxxxx di
Montelera, duly authorized for the purposes hereof as
he hereby declares (hereinafter referred to as the
"EMPLOYER"),
AND: XXXXXX X. XXXXXXXXXXXX, residing and domiciled at
00 Xxxxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx, Xxxxxx Xxxxxx of
America (hereinafter referred to as the "EMPLOYEE")
--------------------------------------------------------------------------------
WHEREAS pursuant to an agreement entered into as of the 15th day of May, 1996
(the "1996 Agreement"), the EMPLOYEE was hired as the President and Chief
Executive Officer of JOALLIERS BIRKS INC./BIRKS JEWELLERS INC., a
predecessor-in-title of the EMPLOYER;
WHEREAS the 1996 Agreement was superseded and replaced by an agreement entered
into by and between the EMPLOYER and the EMPLOYEE on the 19th day of June, 1998
extending the term of employment of EMPLOYEE as President and Chief Executive
Officer of the EMPLOYER to March 31, 2002, the whole upon the terms and
conditions set forth therein (the "1998 Agreement");
WHEREAS the 1998 Agreement was amended and renewed by way of an employment
agreement dated October 24, 2001 (the "2001 Agreement");
WHEREAS the 2001 Agreement was amended by way of an amending agreement dated
December 20, 2002 (the "Amendment");
WHEREAS the EMPLOYER is engaged in the business of the operation of a chain of
retail stores specializing in jewellery, timepieces, crystal and giftware (the
"Business");
- 2 -
WHEREAS the EMPLOYEE is a resident of the United States of America who possesses
certain expertise in the fields in which the EMPLOYER specializes and who is not
currently legally prevented from working in Canada or travelling abroad;
WHEREAS the EMPLOYER and the EMPLOYEE wish to amend certain of the terms and
conditions and to provide for the renewal of the 2001 Agreement and its
Amendment, the whole upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, FOR THE REASONS SET FORTH ABOVE, AND IN CONSIDERATION OF THE
MUTUAL PREMISES AND AGREEMENTS HEREINAFTER SET FORTH, THE PARTIES HERETO
ACKNOWLEDGE AND AGREE AS FOLLOWS:
1. PRELIMINARY
1.1 The preamble hereto shall form an integral part hereof as if recited herein
at length.
1.2 The parties acknowledge that this Agreement constitutes the entire
agreement between the parties concerning the employment of the EMPLOYEE by the
EMPLOYER during the term hereof and supersedes any and all prior negotiations,
agreements or understandings with respect thereto. Without limiting the
generality of the foregoing, this Agreement supersedes and replaces the terms
and conditions originally set forth in the 1998 Agreement, unless otherwise
specified herein.
2. NATURE OF SERVICES
2.1 The EMPLOYER hereby engages and hires the EMPLOYEE to continue to be its
President and Chief Executive Officer during the term of this Agreement and the
EMPLOYEE hereby accepts and agrees to such engagement and employment. In
addition, the EMPLOYEE hereby agrees to serve as a director of the EMPLOYER
should he be elected as such by the shareholders(s) of the EMPLOYER, provided
the insurance described in Section 4.6 is available and the EMPLOYEE is
indemnified by the EMPLOYER to the fullest extent permitted by law.
2.2 It is hereby agreed that the EMPLOYEE shall provide his services to the
EMPLOYER in Canada and spend in Canada the time necessary to appropriately
provide effective and quality leadership to the Senior Management Team and shall
also provide his services outside of Canada by participating in trade shows and
other business travel.
2.3 The EMPLOYEE shall perform such executive duties and have such
responsibilities as are consistent with his capacity as President and Chief
Executive Officer, as well as those duties and responsibilities which the Board
of Directors of the EMPLOYER may reasonably delegate to the EMPLOYEE from time
to time.
2.4 The EMPLOYEE shall have control over the organization of his work and shall
be responsible, in his best judgment, for determining the means and methods for
performing his services hereunder. The EMPLOYEE shall have, subject to the
general directions of
- 3 -
the Board of Directors, full power and authority to manage the business and
affairs of the EMPLOYER, including power and authority to enter into contracts,
engagements or commitments of every nature or kind in the ordinary course of
business in the name of or on behalf of the EMPLOYER and to engage and employ
and to dismiss all managers and other employees of the EMPLOYER.
2.5 The EMPLOYEE shall perform his duties as President and Chief Executive
Officer diligently and conscientiously and loyally and shall use his best
efforts to promote the interests of the EMPLOYER.
2.6 During the term of employment, the EMPLOYEE shall devote himself to the
business of the EMPLOYER and shall not be employed or engaged in any capacity in
promoting, undertaking or carrying on any other business, without the prior
written approval of the EMPLOYER. The EMPLOYER hereby acknowledges that the
EMPLOYEE may render consulting services to Iniziativa S.A. or any successor
thereto, in connection with its international operations and that the EMPLOYEE
also serves as a member of the Board of Directors of Brazilian Emeralds Inc. and
may serve as a member of the Board of Directors of The Xxxxxxx Company with all
of the duties commensurate with such positions. The EMPLOYER further
acknowledges that the EMPLOYEE has, since October 1, 2002, been employed by
Mayors Jewelers Inc. ("Mayors") as President and Chief Executive Officer, and
has agreed to serve on the Board of Directors of that company. The EMPLOYER
continues to hold a substantial interest in Mayors and therefore fully approves
EMPLOYEE's involvement in this company.
3. TERM
3.1 The term of this Agreement and the continued employment of the Employee
(the "Term") shall begin on April 1, 2005 and shall terminate on the 31st day of
March, 2008. Until March 31, 2005, the 2001 Agreement and its Amendment shall
continue to govern the employment relationship of the EMPLOYER and the EMPLOYEE
save and except for Sections 8.2 and 8.3 hereof which shall apply immediately
and bind both the EMPLOYER and the EMPLOYEE as and from the date hereof. For the
purposes of this Agreement, a "Contract Year" shall mean the twelve (12) month
period commencing on April 1st of a particular calendar year and terminating on
March 31st of the immediately subsequent calendar year.
3.2 The parties agree to negotiate in good faith for the renewal of this
Agreement or extension of the employment of the EMPLOYEE by the EMPLOYER for a
further period of three (3) years, upon such terms and conditions as they may
then determine, prior to the end of March, 2007. Either party shall be entitled,
however, to definitively terminate their relationship on March 31, 2008 by
sending to the other, on or before March 31, 2007, a written notice of such
desire to terminate. In the event that the EMPLOYER terminates the relationship
and should the EMPLOYEE be unable to find another suitable employment position
commencing April 1, 2008, then the EMPLOYER shall compensate the EMPLOYEE by
continuing to pay to the EMPLOYEE the same base salary as that which was payable
to him pursuant to Section 4.1 during the fiscal year terminating March 31,
- 4 -
2008, as increased, where applicable, by the amount that would otherwise have
constituted his salary increase for the period April 1, 2008 to March 31, 2009
pursuant to Section 4.2 hereof, the whole for the period in which the EMPLOYEE
is unable to find a suitable position, to a maximum of twelve (12) months.
Should the EMPLOYER so desire, however, the EMPLOYEE shall continue to render
services to the EMPLOYER during the period in which such additional compensation
is paid. Notwithstanding the generality of the foregoing, in the event that the
EMPLOYEE makes a diligent attempt to negotiate the renewal of this Agreement
prior to the end of March, 2007, but the EMPLOYER has neither finalized its
decision with respect thereto nor provided the EMPLOYEE with a written notice of
termination, then the maximum period within which the additional compensation
hereunder shall be paid, in the event that the EMPLOYER subsequently determines
not to renew this Agreement, shall be extended by one month for each month
between March 31, 2007 and the date upon which the written notice of termination
is ultimately delivered to the EMPLOYEE.
4. REMUNERATION AND BENEFITS
4.1 In consideration of the services to be rendered pursuant to this Agreement,
the EMPLOYER shall pay to the EMPLOYEE a base salary of a minimum of $US
364,000, which amount will be determined in accordance with Section 4.2 of the
2001 Agreement, during the first (1st) Contract Year ending March 31, 2006, and
a minimum base salary, subject to the provisions of Section 4.2 below, of $US
364,000 (or such greater amount paid to the EMPLOYEE in the first Contract Year)
for the three Contract Years ending March 31, 2007, March 31, 2008 and March 31,
2009.
The amount described above shall be paid in arrears on a bi-weekly basis.
4.2 The base salary of the EMPLOYEE will be adjusted annually, at the beginning
of each Contract Year, and the EMPLOYEE will also be entitled to a bonus (the
"Special Net Income Bonus"), in both cases, based upon the percentage of the
adjusted net income goal of the EMPLOYER (as established on an annual basis in
the profit plan and compared to the adjusted net income goal set forth in the
strategic plan of the EMPLOYER approved by the Board of Directors of the
EMPLOYER, the most recent of which shall be approved in July or November, 2004)
actually earned by the EMPLOYER during the preceding Contract Year, the whole in
accordance with the provisions of this Section 4.2. No amount will be payable to
the EMPLOYEE, on account of the Special Net Income Bonus or salary increase
pursuant hereto, unless the net income earned by the EMPLOYER, during the
relevant Contract Year, is at least 80% of the adjusted net income goal of the
EMPLOYER for such Contract Year. The maximum amount payable to the EMPLOYEE
pursuant hereto, in the event that 100% of the adjusted net income goal is
achieved, will be as follows:
- 5 -
MAXIMUM
CUMULATIVE SALARY MAXIMUM SPECIAL NET
INCREASE BASED ON INCOME BONUS BASED
CUMULATIVE PRIOR CONTRACT ON CURRENT CONTRACT
CONTRACT YEAR TARGET AMOUNT YEAR'S RESULTS YEAR'S RESULTS
---------------- ------------- ----------------- ---------------------------
April 1, 2005 to $US100,000 $US100,000 $US100,000
March 31, 2006
April 1, 2006 to $US150,000 $US100,000 $US150,000 less current
March 31, 2007 year's salary increase
April 1, 2007 to $US200,000 $US100,000 $US200,000 less cumulative
March 31, 2008 salary increases during
prior and current years
April 1, 2008 to N.A. $US150,000 N.A.
March 31, 2009
The maximum Special Net Income Bonus shall be subject to adjustment based on a
comparison of the adjusted net income goal of the EMPLOYER established annually
and the amount of the adjusted net income goal for such Contract Year stipulated
in the strategic plan. If the adjusted net income goal of the EMPLOYER
established for any Contract Year is more than ninety percent (90%) of the
amount of the adjusted net income goal for such Contract Year stipulated in the
strategic plan, then there shall be no adjustment to the Special Net Income
Bonus. If the adjusted net income goal of the EMPLOYER established for any
Contract Year is ninety percent (90%) or less (the "Percentage") of the amount
of the adjusted net income goal for such Contract Year stipulated in the
strategic plan, then the amount of the Special Net Income Bonus cumulative
target shown above shall be proportionately adjusted by multiplying such
cumulative target amount by the Percentage. However, if the Special Net Income
Bonus is adjusted in accordance with the foregoing and the actual net income of
the EMPLOYER is determined to be more than 100% of the adjusted net income goal,
then the Special Net Income Bonus shall be proportionately increased so that if
the net income of the EMPLOYER is equal to or greater than the adjusted net
income goal for such Contract Year stipulated in the strategic plan, the
EMPLOYEE shall receive 100% of the maximum Special Net Income Bonus. In
addition, if the adjusted net income goal of the EMPLOYER established annually
exceeds the amount of the adjusted net income goal for such Contract Year
stipulated in the strategic plan, then, for the purposes of determining the
Special Net Income Bonus, the amount stipulated in the strategic plan for such
Contract Year shall be used.
The strategic plan or profit plan adjusted net income goal shall be reevaluated
and adjusted, if necessary, by the Human Resource Committee of the EMPLOYER in
case of a major uncontrollable event that causes a dramatic change in the
EMPLOYER's ability to achieve such goals such as a terrorist attack which
- 6 -
dramatically impacts retail sales for an extended period of time. In addition,
the adjusted net income goal shall be re-established for any combined entity
resulting from a merger of the EMPLOYER with any other entity or a consolidation
of the business of the EMPLOYER with that of another, if appropriate.
At the end of each Contract Year, the salary increase for the following Contract
Year shall be calculated by multiplying the percentage of the adjusted net
income goal actually earned by the EMPLOYER during such Contract Year by the
Target Amount set forth above with respect to such year. The Special Net Income
Bonus shall be calculated at the same time, in accordance with the above table
and potential adjustments and shall be payable to the EMPLOYEE within ten (10)
days following the issue of the audited financial statements of the EMPLOYER for
the relevant Contract Year. For the purposes hereof, the net income shall be
determined by the auditors of the EMPLOYER, solely from the relevant audited
financial statements of the EMPLOYER. Three examples follow which assume that
the EMPLOYEE's base salary for the first Contract Year is $364,000 and that the
adjusted net income goal established for each Contract Year is at least 90% of
the corresponding adjusted net income goal provided in the strategic plan:
(i) In the event that 100% of the adjusted net income goal is achieved by the
EMPLOYER in each of the Contract Years ending 2006 through 2008, then the
amounts due to the EMPLOYEE hereunder would be as follows:
Contract Salary Special Net
Year Ending Increase Income Bonus Salary
----------- -------- ----------------------------------- ----------
2006 Nil $US100,000 $US364,000
2007 $US100,000 $US150,000 - $US100,000 = $US50,000 $US464,000
2008 $US50,000 $US200,000 - $US150,000 = $US50,000 $US514,000
2009 $US50,000 N.A. $US564,000
(ii) If the actual net income earned by the EMPLOYER during the Contract Year
ending March 31, 2006 were less than 80% of the adjusted net income goal,
but the actual net income earned by the EMPLOYER in the Contract Years
ending March 31, 2007 and March 31, 2008 were 100% of the adjusted net
income goal, then the results would be as follows:
Contract Salary Special Net
Year Ending Increase Income Bonus Salary
----------- -------- ------------------------------------ ----------
2006 Nil Nil $US364,000
2007 Nil $US150,000 $US364,000
2008 $US100,000 $US200,000 - $US100,000 = $US100,000 $US464,000
2009 $US100,000 N.A. $US564,000
(iii) the actual net income earned by the EMPLOYER during the Contract Year
ending March 31, 2006 was 87% of the adjusted net income goal, while the
actual net income earned by the EMPLOYER in the Contract Years ending
- 7 -
March 31, 2007 and March 31, 2008 was 92% of the adjusted net income goal,
then the results would be as follows:
Contract Salary Special Net
Year Ending Increase Income Bonus Salary
----------- -------- ------------------------------------------------- ----------
2006 Nil $US87,000 $US364,000
2007 $US87,000 $US138,000 - $US87,000 = $US51,000 $US451,000
2008 $US51,000 $US184,000 - ($US87,000 + $US51,000) = $US46,000 $US502,000
2009 $US46,000 N.A. $US548,000
If the EMPLOYEE is awarded his full salary increase for the first Contract Year
ending March 31, 2006 based on the 2001 Agreement, then the EMPLOYEE's base
salary would be $US 464,000 and the above examples would have to be adjusted
accordingly.
Another three examples follow which explain the adjustments to the Special Net
Income Bonus, if necessary:
(i) in the event that the adjusted net income goal for Contract Year Ending
2006 stipulated in the strategic plan is $4 Million but as established for
such year is $3 Million, then the Special Net Income Bonus shall be
reduced by 25% to $75,000. If the actual net income earned by the EMPLOYER
during the Contract Year ending March 31, 2006 is $3 Million, then the
EMPLOYEE would receive a Special Net Income Bonus of $75,000 for Contract
Year Ending 2006 and a salary increase of $75,000 for Contract Year Ending
2007.
(ii) in the event that the adjusted net income goal for Contract Year Ending
2006 stipulated in the strategic plan is $5 Million but as established for
such year is $4 Million, then the Special Net Income Bonus shall be
reduced by 20% to $80,000. If the actual net income earned by the EMPLOYER
during the Contract Year ending March 31, 2006 is $5 Million, then the
EMPLOYEE would receive a Special Net Income Bonus of $100,000, as 100% of
the strategic plan adjusted net income goal was achieved. In addition the
EMPLOYEE would receive a salary increase of $100,000 in Contract Year
Ending 2007.
(iii) In the event that the adjusted net income goal for 2006 stipulated in the
strategic plan is $6.2 Million but as estimated for such year is $6
Million, then the Special Net Income Bonus shall not be adjusted as the
adjusted net income goal established for such year is within 90% of the
amount stipulated in the strategic plan.
4.3 In addition to the base salary and Special Net Income Bonus, the EMPLOYEE
shall also be entitled to an annual performance-based bonus (the "Performance
Bonus") for
- 8 -
each Contract Year throughout the Term, in an amount ranging from 0% to 150% of
his base salary during the relevant Contract Year, based upon certain results
achieved by the EMPLOYER, as set forth in this Section 4.3 and in accordance
with the performance criteria set forth in Exhibit A. The target for the
Performance Bonus shall be 100% of the EMPLOYEE'S base salary, and the
Performance Bonus shall be made of two (2) elements in the following proportions
(i) quantifiable operating results objectives of the EMPLOYER (60% to
75%); and
(ii) strategic objectives (25% to 40%).
Exhibit A provides an example of the objectives and respective bonus allocation
weight in each category. Each Contract Year, the EMPLOYEE, the EMPLOYER's
Compensation Committee and a shareholder representative of the EMPLOYER (who is
currently Filippo Recami) shall meet and determine the objectives, the level,
amount and respective bonus allocation weight within each category which shall
be based on the profit plan objectives of the EMPLOYER. The parties shall have
the flexibility to adjust the range of objectives (eg. the prior year base
amounts and the 150% maximum amount) from year to year provided such adjustments
are reasonable and mutually agreed by the parties. Such determinations shall be
made no later than thirty (30) days after the approval of the profit plan by the
EMPLOYER's Board of Directors for the ensuing Contract Year.
Notwithstanding anything contained in this Section 4.3, it is agreed and
understood that the thresholds for determining the EMPLOYEE's Performance Bonus
should be consistent with the senior management performance bonus plan currently
in place for senior management of the EMPLOYER. The EMPLOYEE shall not be
eligible for any bonus under such plan as his bonuses are contained in this
Agreement. The parties further acknowledge that the current thresholds under
such plan require at least 75% of the adjusted net income for any fiscal year of
the EMPLOYER to be achieved for a performance bonus to be paid. Such threshold
is subject to change and may be established at a different level in the future.
If the threshold for such plan is achieved, it is the intention of the parties
that the EMPLOYEE will also receive his Performance Bonus in accordance with
Exhibit A and the terms hereof. Therefore, if the actual adjusted net income for
a given fiscal year of the EMPLOYER is less than 75% of the goal (provided that
such percentage is still the threshold under the senior management performance
bonus plan), the EMPLOYEE shall not be eligible for the Performance Bonus.
For greater certainty, the EMPLOYEE shall not be required to pay any amount to
the EMPLOYER in the event that the calculation of the annual bonus results in a
negative amount for any particular year.
An annual profit plan shall be prepared by the EMPLOYEE and the EMPLOYER's
senior management team prior to the beginning of each fiscal year and submitted
to the Board of Directors. The final profit plan for any fiscal year shall be
mutually agreed upon for presentation to the Board of Directors by the EMPLOYER
and the EMPLOYEE and approved by the Board of Directors.
- 9 -
Payment of the Performance Bonus shall be due within ten (10) days following the
issue of the audited financial statements for the relevant Contract Year.
4.4 The EMPLOYEE shall be entitled to five (5) weeks paid vacation leave in
each calendar year throughout the Term. The EMPLOYEE shall be entitled to carry
forward any unused vacation time for one (1) calendar year, which shall accrue
in his favour until used.
4.5 The EMPLOYER shall reimburse the EMPLOYEE for the entire cost of a term
life insurance policy on his life and the life of his spouse and/or a long-term
disability policy, in an aggregate amount not exceeding $US 18,000 per Contract
Year, the whole upon proof of payment thereof by the EMPLOYEE.
4.6 The EMPLOYER shall provide the EMPLOYEE with comprehensive health and
dental insurance in such amounts as is available to all other executives of the
EMPLOYER and in this regard, the EMPLOYEE shall not be prejudiced by the fact
that he and his family reside in the United States. The EMPLOYER shall also
provide the EMPLOYEE with adequate "Directors and Officers" liability insurance
coverage, commensurate with existing coverage and industry standards.
4.7 Recognizing the requirement for entertainment of suppliers, special
customers and others by the EMPLOYEE, the EMPLOYER shall pay for initiation fees
and annual golf and other club memberships of the EMPLOYEE, to a maximum of $CDN
10,000 per Contract Year.
4.8 In addition, the EMPLOYEE shall be reimbursed for all reasonable expenses
incurred by him in the fulfilment of his duties hereunder, the whole upon the
presentation of appropriate receipts or vouchers.
4.9 In the event that the EMPLOYEE should decide to move his family to Canada,
the EMPLOYER shall reimburse the EMPLOYEE for all costs of such move and will
work together with the EMPLOYEE to minimize the taxes and costs which will
become payable by the EMPLOYEE upon his becoming a resident of Canada (for
example, by compensating the EMPLOYEE for the increased mortgage or other costs
of living in Montreal, the whole without being obliged to increase his aggregate
remuneration hereunder).
4.10 For greater clarity, all calculations made under the terms of Section 4.2
and 4.3 hereof shall be made without reference to any sums that the EMPLOYER may
receive on account of any interest it may have in the securities of Mayors
Jewelers Inc. or of any other corporation unless such sums were provided for in
EMPLOYER's business plan. In addition, the impact on inter-company accounts as
between the EMPLOYER and Mayors (such as, without limitation, consulting fees,
dividends or sale of common stock, etc.) shall be reviewed and determined by the
Human Resources Committee of the EMPLOYER on an annual basis so that the
EMPLOYER and the EMPLOYEE mutually agree as to the impact of these inter-company
accounts on the calculations.
- 10 -
4.11 The EMPLOYEE shall have access to and be entitled to the non-exclusive use
of a company car and company apartment when in Montreal performing his duties
for EMPLOYER. While such use shall be non-exclusive, the EMPLOYEE shall be
entitled to such use on a priority basis.
4.12 The parties acknowledge that the EMPLOYEE is entitled to certain benefits
in this Agreement and pursuant to his Employment Agreement with Mayors. It is
the intention of the parties that the EMPLOYEE shall not be entitled to the
duplication of any such benefits. However, benefits such as dental and health
insurance coverage should be available to the EMPLOYEE both in Canada and the
United States.
5. STOCK OPTIONS
5.1 The EMPLOYER hereby confirms the grant to the EMPLOYEE, in 1996, of an
option to subscribe for that number of shares which, immediately following their
issue, would represent two percent (2%) of the issued and outstanding shares in
the capital stock of the EMPLOYER (on a fully diluted basis), upon the terms and
conditions originally set forth in the 1996 Agreement, as clarified in the 1998
Agreement, and as further clarified herein, as follows:
(a) the purchase price shall be an amount equal to $CDN 6.00 per share,
which the parties, together with the auditors of the EMPLOYER, had
determined to be the fair market value for such shares as at the
original date of the grant of such option (the "Exercise Price"). The
parties acknowledge that this price was determined based on the then
current number of issued and outstanding shares being 2,379,100. In
the event that the shares in the capital stock of the EMPLOYER are
consolidated or split, or in the event that any new shares are issued
prior to the exercise of the option, then the purchase price and/or
the number of shares, as the case may be, will be adjusted
accordingly;
(b) the option shall be exercisable at any time prior to the expiry of a
period of three (3) months following the date upon which the EMPLOYEE
ceases to be employed by the EMPLOYER, by notice in writing to the
EMPLOYER;
(c) in the event of the death of the EMPLOYEE, the estate of the EMPLOYEE
shall continue to be entitled to exercise the option hereunder for a
period of three (3) months following the date of his death;
(d) the EMPLOYEE (or his estate, as the case may be) shall have a put
option, exercisable at any time within (I) the six (6) month period
following the death or departure of the EMPLOYEE, or (II) the three
(3) month period following a notice by the EMPLOYER or its parent
company, Iniziativa S.A., of an impending change of control of the
EMPLOYER, to require Iniziativa S.A., to purchase his shares, for a
price equal to the fair market value thereof, as determined by the
auditors of the EMPLOYER, in a manner consistent with
- 11 -
the method used by Coopers & Xxxxxxx to establish the Exercise Price
(the "Put Price"). The Purchase Price shall be payable, in full,
within fifteen (15) days following the exercise of the put option
herein described, unless the exercise of the option to subscribe and
the exercise of the put option occur simultaneously, in which event
Iniziativa S.A. or the EMPLOYER, shall simply remit to the EMPLOYEE
(or his estate, as the case may be), an amount equal to the difference
between the Put Price and the Exercise Price within such fifteen (15)
day period. In the event that the EMPLOYER shall have offered its
securities to the public on or before the date of the death or
departure of the EMPLOYEE, then the put option shall automatically
expire upon such offering. For the purposes hereof a "change of
control" shall mean any sale or transfer of shares or any other act or
transaction which will result, directly or indirectly, in any party
other than Iniziativa S.A., or entities with which it is currently
related, owning more than fifty percent (50%) of the voting shares in
the capital stock of the EMPLOYER. For greater certainty, the EMPLOYER
and Iniziativa S.A. shall be required to give notice to the EMPLOYEE
of any proposed change of control such that the EMPLOYEE shall have
sufficient time to exercise his option hereunder; and
(e) Iniziativa S.A. shall have a call option to require the EMPLOYEE to
sell his shares of the EMPLOYER, upon the terms and conditions
described in paragraph 5.1(d), mutatis mutandis. In the event that any
securities of the EMPLOYER are offered to the public within six (6)
months following the exercise of the call option herein described, or
substantially all of the shares of the EMPLOYER are sold to an arm's
length third party within the same period, then the EMPLOYER shall be
obliged to pay to the EMPLOYEE (or his estate, as the case may be), an
amount equal to the difference between the proceeds which the EMPLOYEE
would have received had he still owned two percent (2%) of the shares
of the EMPLOYER at the time of the public offering or sale and the
price actually paid upon the exercise of the call option.
5.2 The EMPLOYER hereby confirms, as well, the grant to the EMPLOYEE in 1998,
of a second option to subscribe for an additional two percent (2%) of the issued
and outstanding shares in the capital stock of the EMPLOYER as at January 1,
1999, regardless of the date of exercise of this option (and not on a
fully-diluted basis after January 1, 1999), namely, 126,272 out of a total of
6,313,618 shares then issued and outstanding, the whole upon the terms and
conditions set forth in the 1998 Agreement, as clarified herein, as follows:
(a) the option exercise price is an amount equal to $CDN 6.25 per share,
which the parties had determined to be the fair market value of the
shares as at January 31, 1999, based upon the report prepared by
Coopers & Xxxxxxx on March 31, 1999;
- 12 -
(b) the EMPLOYEE agrees that following the exercise of this second
option, he shall vote the shares issued pursuant thereto (only) in
accordance with the instructions of Xxxxxxx Xxxxx di Montelera, until
the earlier of
(i) the termination of the employment of the EMPLOYEE hereunder; or
(ii) an offer to the public of the securities of the EMPLOYER.
(c) the option shall be exercisable at any time prior to the expiry of a
period of three (3) months following the date upon which the EMPLOYEE
ceases to be employed by the EMPLOYER, by notice in writing to the
EMPLOYER. In the event of the death of the EMPLOYEE, the estate of the
EMPLOYEE shall continue to be entitled to exercise the option
hereunder for a period of three (3) months following the date of his
death;
(d) The EMPLOYEE (or his estate, as the case may be) shall have a put
option, exercisable solely in the event that the shareholder(s) of the
EMPLOYER decided not to proceed with an initial public offering of the
shares of the EMPLOYER in accordance with any reasonable offer to take
the EMPLOYER public proposed by a reputable securities underwriter,
the whole upon the terms and conditions set forth in paragraph 5.1(d),
mutatis mutandis.
5.3 In addition to the options described in Sections 5.1 and 5.2 above, the
EMPLOYER hereby confirms the grant to the EMPLOYEE in 2001, of a third option to
subscribe for an additional two percent (2%) of the issued and outstanding
shares in the capital stock of the EMPLOYER as at April 1, 2002, regardless of
the date of the exercise of this option (and not on a fully-diluted basis after
April 1, 2002), upon the following terms and conditions:
(a) this third option will be exercisable at any time after April 1,
2002, and the option exercise price will be an amount equal to the
fair market value of the shares as at April 1, 2002, the whole as
determined by auditors of the EMPLOYER, in a manner consistent with
the method used by Coopers & Xxxxxxx to establish the Exercise Price,
the fair market value of the shares of the EMPLOYER as at January 1,
1999 and the fair market value of the shares of the EMPLOYER as at
March 31, 2001; and
(b) the provisions of paragraphs (b), (c) and (d) of Section 5.2 shall
also apply to this third option, mutatis mutandis.
5.4 For the purposes of this Article 5, in the event that an offering of the
securities of a corporation which owns a majority of the shares in the capital
stock of the EMPLOYER is made to the public, rather than an offering of the
shares of the EMPLOYER itself, or, alternatively, the EMPLOYER is involved in a
reverse takeover with Mayors or a similar business reorganization that results
in a new entity the stock of which is publicly traded, then the provisions
hereof which refer to an offering of securities of the EMPLOYER shall be
automatically deemed to mean and refer to an offering of the securities of the
- 13 -
corporation owning a majority of the shares of the EMPLOYER or to the reverse
takeover transaction, mutatis mutandis. For greater certainty, any options
herein granted to the EMPLOYEE shall be convertible, at the option of the
EMPLOYEE, into an appropriate number of shares of the corporation which has
offered its securities to the public or trades on a recognized stock exchange.
5.5 Notwithstanding the existing terms of the stock options described in
Sections 5.1, 5.2 and 5.3 hereof, the parties agree that the exercise period for
all stock options shall be extended on April 1, 2005 so that they are all
exercisable at any time prior to the expiry of a period of twenty-four (24)
months following the date of the termination of employment of the EMPLOYEE, for
any reason whatsoever including death. In the event of the retirement of the
EMPLOYEE at the expiry of the Term, all of these options shall remain valid and
exercisable for ten (10) years following the date of retirement.
6. TERMINATION
6.1 In the event of the death of the EMPLOYEE or the non-renewal of this
Agreement, then this Agreement shall be terminated automatically and the
EMPLOYEE (or his estate, as the case may be) shall be entitled, thereafter, to
the following payments:
(a) The base salary described in Section 4.1 which shall have accrued to
the date of such death or departure;
(b) Any accrued but unpaid vacation pay;
(c) Any Special Net Income Bonus and Performance Bonus earned in
connection with each Contract Year terminating prior to the date of
such death or non-renewal, as well as a pro-rated Special Net Income
Bonus and a pro-rated Performance Bonus for the number of months in
which services were rendered hereunder prior to the date of such death
or non-renewal.
6.2 This Agreement may also be terminated by the EMPLOYER in the event of a
just and sufficient cause for such termination, provided that the EMPLOYEE shall
be provided with a written notice of the alleged cause and a chance to defend
his actions and/or eliminate the cause within a period of thirty (30) days, save
and except where the EMPLOYER is able to establish theft of its property, in
which case the termination may be effected without notice or delay. Termination
of the EMPLOYEE's employment with Mayors Jewelers Inc. for cause shall be deemed
to constitute cause for termination of this Agreement.
6.3 In the event that the EMPLOYER is unable to obtain the renewal of his work
permit for any reason during the term of this Agreement, then the EMPLOYEE
hereby agrees to continue to render his services hereunder from the United
States for a transition period of up to six (6) months, to allow the EMPLOYER to
find a suitable replacement, at the end of which this Agreement shall be
automatically terminated, save and except that the provisions of Section 3.2
hereof shall apply, mutatis mutandis, such that the EMPLOYER
- 14 -
shall continue to be obliged to pay the EMPLOYEE an amount equal to his then
base salary for such period until the EMPLOYEE is able to find suitable
employment, to a maximum of twelve (12) months.
7. CONFIDENTIAL INFORMATION AND NON-COMPETITION COVENANT
7.1 For the purposes of this Agreement, the term "Confidential Information"
shall mean, but shall not be limited to, any technical or non-technical data,
budgets, business plans, pricing policies, financial records and any information
regarding the EMPLOYER's marketing, sales or dealer network, which is not
generally known to the public through legitimate origins, but shall not include
any information and knowledge which the EMPLOYEE himself possessed at the
commencement of his employment with the EMPLOYER.
7.2 Unless otherwise required by law or expressly authorized in writing by the
EMPLOYER, the EMPLOYEE shall not, at any time during or after his employment by
the EMPLOYER, directly or indirectly, in any capacity whatsoever, except in
connection with services to be performed hereunder, divulge, disclose or
communicate to any person, moral or physical, entity, firm or any other third
party, or utilize for his personal benefit or for the benefit of any other
party, any Confidential Information.
7.3 During the Term of this Agreement and for a period terminating:
(a) in the event that the EMPLOYEE does not desire to renew this Agreement
upon the expiry of the Term: December 31, 2008; or
(b) in the event that the EMPLOYER does not desire to renew this Agreement
upon the expiry of the Term: December 31, 2008; or
(c) in the event that this Agreement is terminated by the EMPLOYEE prior
to the expiry of the Term: twelve (12) months following the date of
such termination;
then the EMPLOYEE, provided he shall have received all amounts due to him
hereunder to the date of the termination of his employment or the expiry of the
period described in Section 3.2, as the case may be, on account of base salary,
vacation pay, Special Net Income Bonus, Performance Bonus, purchase price for
shares of the EMPLOYER or otherwise, shall not, on his own behalf or on behalf
of another, either alone or in combination with others, directly or indirectly,
in any capacity whatsoever, engage in the Business, for and on behalf of any
entity whose operations are located principally in Canada.
8 NO DUPLICATION OF BENEFITS
8.1 The parties acknowledge that the EMPLOYEE is entitled to certain benefits
in this Agreement and pursuant to his Employment Agreement with Mayors. It is
the intention of
- 15 -
the parties that the EMPLOYEE shall not be entitled to the duplication of any
such benefits. However, benefits such as dental and health insurance coverage
should be available to the EMPLOYEE both in Canada and the United States.
8.2 However, in the event of the merger or consolidation of the EMPLOYER and
Mayors, both this Agreement and the EMPLOYEE's employment agreement with Mayors
will bind the successor entity and the EMPLOYEE should not lose any rights,
monetary benefits or compensation as a result. The parties also agree that the
terms of the Mayors Employment Agreement will prevail and the compensation
(including salary, bonuses and benefits) payable hereunder will be added to such
agreement. To the extent that as a result of such merger the EMPLOYEE no longer
receives the equivalent after tax value of both agreements, then the successor
entity of the EMPLOYER and Mayors will compensate the EMPLOYEE accordingly. All
stock options then held by the EMPLOYEE will also be converted into options of
the successor entity (to the extent that they are not or have not been exercised
by the EMPLOYEE) on the same basis of conversion as the shares of the respective
entities with no lesser terms and conditions of exercise than as provided in
this Agreement.
8.3 The combined or resulting compensation of the EMPLOYEE (in the event of a
merger or consolidation of the EMPLOYER and MAYORS) and the amended agreement,
if any, will be presented to the Compensation Committee of surviving entity to
ensure the EMPLOYEE receives an appropriate combined compensation package
considering the nature and specifics of his duties and position and the market
in general.
9 MISCELLANEOUS
9.1 The EMPLOYEE and the EMPLOYER acknowledge and agree that the covenants,
terms and provisions contained in this Agreement and the rights of the parties
hereunder cannot be transferred, sold, assigned, pledged, or hypothecated;
provided, however that this Agreement shall be binding upon and shall enure to
the benefit of the EMPLOYER and any successor to or assignee of all or
substantially all of the business and property of the EMPLOYER.
9.2 In the event of the reorganization of the EMPLOYER, then it is hereby
acknowledged and agreed that the provisions hereof which are binding upon it,
will continue to bind its successors or the entity resulting from the merger,
amalgamation or other combination or arrangement of the EMPLOYER with any other
person or entity.
9.3 The EMPLOYEE hereby represents and warrants that, in entering into this
Agreement, he is not in violation of any contract or agreement, whether written
or oral, with any other person, moral or physical, firm, partnership,
corporation or any other entity to which he is a party or by which he is bound
and will not violate or interfere with the rights of any other person, firm,
partnership, corporation or other entity.
9.4 This Agreement contains the entire agreement between the parties and shall
not be modified except in writing by the parties hereto.
- 16 -
9.5 The waiver by the EMPLOYER or the EMPLOYEE of any breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of any
other breach of the same or any other term or condition hereof.
9.6 The parties hereto agree that this Agreement shall be construed as to both
validity and performance and shall be enforced in accordance with and governed
by the laws of the Province of Quebec and the laws of Canada applicable therein.
9.7 The parties hereto have requested and hereby confirm that this Agreement as
well as any notice, document, or proceeding relating to same be drawn up in
English; Les parties aux presentes ont demande et par les presentes confirment
leur demande que la presente convention ainsi que tous avis, documents, ou
procedures s'y rapportant soient rediges en anglais.
(Signatures on next page)
- 17 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the dates indicated below.
SIGNED AT ROME , XXXXX XXXXX & SONS, INC.
THIS 27TH DAY OF SEPTEMBER, 2004.
PER: /S/ XXXXXXX XXXXX DI MONTELERA
-------------------------------
XXXXXXX XXXXX DI MONTELERA
SIGNED AT MONTREAL
THIS 1ST DAY OF SEPTEMBER, 2004.
/S/ XXXXXX X. XXXXXXXXXXXX
------------------------------
XXXXXX X. XXXXXXXXXXXX
INTERVENTION
AND THERE INTERVENED HERETO, Iniziativa S.A. who, after taking cognizance of the
foregoing Agreement, agrees to be bound hereby insofar as its interests may
appear and to guarantee all obligations of the EMPLOYER in favour of the
EMPLOYEE hereunder.
SIGNED AT , INIZIATIVA S.A.
-------------------------
THIS 25TH DAY OF SEPTEMBER, 2004.
PER: /S/ FILIPPO RECAMI
-------------------------------
FILIPPO RECAMI
EXHIBIT A
APPENDIX II
PERFORMANCE BONUS APPRAISAL CRITERIA
EXAMPLE (*) (**)
150% OF
50% OF INCREASE/ INCREASE IN BONUS FY TARGET ACTUAL
DECREASE IN PP PP VS ALLOCATION 2007 ADJUSTED BONUS BONUS
COMPANY OBJECTIVES PRIOR YEAR VS PRIOR YR PLAN PRIOR YR WEIGHT ACTUAL % VALUE VALUE
------------------ ---------- ---------------- ---- ------------ ---------- ------ -------- ------ -------
Bonus Payout %
QUANTITATIVE OPERATING
RESULTS OBJECTIVES
(60 - 75%)
Sales 130,000K 135,000K 140,000K 145,000K 10% 142,500K 12.5% 36,400 45,500
Gross Profit 40,000K 45,000K 50,000K 55,000K 15% 50,000K 15.0% 54,600 54,600
Operating Expense 70,000K 65,000K 60,000K 55,000K 20% 65,000K 10.0% 72,800 36,400
Net Income 0 475K 949K 1,424K 20% 712K 15.0% 72,800 54,600
Financial Debt/Equity 2.5 2.25 2.0 1.75 10% 2.25 5.0% 36,400 18,200
Ratio
--------- ------- -------
SUB TOTAL 75% 57.5% 273,000 209,300
--------- ------- -------
FY
STRATEGIC OBJECTIVE 2007
(25-40%) WEIGHT ACTUAL % VALUE
------------------ ---------- ------ -------- -------
EXAMPLES:
Development of Private 25% Over 30% 91,000 109,200
Label Achieved
Goals
--------- ------- -------
25% 30% 109,200
--------- ------- ------- -------
TOTAL 100% 87.5% 364,000* 318,500
--------- ------- -------
-----------
* For this example the Target Bonus Value is calculated using 100% of
EMPLOYEE's hypothetical annual base of $364,000 for Fiscal Year 2007
** EXTRACT OF SECTION 4.3 OF THIS AGREEMENT STATES THAT IF THE ACTUAL ADJUSTED
NET INCOME FOR A GIVEN FISCAL YEAR OF THE EMPLOYER IS LESS THAN 75% OF THE
GOAL (PROVIDED THAT 75% IS STILL THE THRESHOLD UNDER THE SENIOR MANAGEMENT
PERFORMANCE BONUS PLAN), THE EMPLOYEE SHALL NOT BE ELIGIBLE FOR THE
PERFORMANCE BONUS.
