EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.37
This
employment agreement (the “Agreement”) is made this 9th day of December 2003,
(the “Effective Date”) by and between I.C. Xxxxxx & Company LP, a Delaware
limited partnership (“the Company”), and Xxxxx Xxxxx, (the
“Executive”).
1. Employment;
Director; Board Observation Rights.
The
Company hereby employs the executive as its Chief Executive Officer. The
Executive will provide his services hereunder principally at the Company’s
offices in New York, New York and will report to the Chairman of the Board
of
Directors of the Company’s parent, I.C. Xxxxxx & Company, Inc. (“Xxxxxx”).
In the event that Xxxxxx’ Board of Directors (the “Board”) shall determine to
appoint or nominate the Executive to serve as a member of the Board, he agrees
to serve as a member of the Board. During the Term of this Agreement (as
hereinafter defined), and until such time as the Executive shall be appointed
or
elected to serve as a member of the Board, the Executive shall receive written
notice of each meeting of the Board at least five business days prior to the
date of each such meeting, and the Executive shall be permitted to attend as
an
observer all meetings of the Board; provided
that in
the case of telephonic meetings conducted in accordance with the Bylaws and
applicable law, the Executive only shall be entitled to receive actual notice
thereof not less than 24 hours prior to any such meeting, and the Executive
shall be given the opportunity to listen to such telephonic meetings. The
Executive shall be entitled to receive all written materials and other
information (including copies of meeting minutes) given to directors in
connection with such meetings at the same time such materials and information
are given to the directors. If Xxxxxx proposes to take any action by written
consent in lieu of a meeting of the Board, the Executive shall receive written
notice thereof prior to the effective date of such consent describing in
reasonable detail the nature and substance of such action.
2. Term.This
Agreement shall become effective on the Effective Date and shall continue until
December 31, 2006 (the “Initial Term”). This Agreement shall be automatically
extended for additional periods of one calendar year (each, a “Renewal Term”)
commencing with calendar year 2007 unless, on or before June 30 of the last
calendar year of the Initial Term or the then current Renewal Term, as the
case
may be, either party gives notice to the other of its or his intention not
to
extend the Agreement beyond the end of the Initial Term or the then current
Renewal Term. The Initial Term and all Renewal Terms taken together are
hereinafter collectively referred to as the “Term.”
3. Base
Salary.The
Executive’s base salary during the Term shall be paid in accordance with the
Company’s normal payroll practices at a rate of $500,000 per annum (the “Base
Salary”). The payment of the Executive’s base salary and all other payments made
and to be made to the Executive under this Agreement shall be made net of all
current and lawful withholdings and deductions, including those for federal,
state and local taxes. The Executive’s Base Salary during each Renewal Term
shall be 10% greater than the Base Salary that he shall have received during
the
last year of the Initial Term or the immediately preceding Renewal Term, as
the
case may be. The Executive may be considered for periodic merit increases in
base salary based on the business performance objectives of the Company or
other
goals as determined by the Board or the Compensation Committee thereof in its
discretion.
NYC/124413.4
4. Incentive
Xxxxxxxxxxxx.Xx
addition to his base salary, the Executive shall be entitled to receive
incentive compensation calculated and paid, as follows:
(a) Initial
Term and all Renewal Terms.
The
Executive shall be eligible to receive the following bonuses with respect to
calendar years 2004, 2005, 2006 and each Renewal Term:
(i) In
the
event that the earnings before interest and taxes achieved by Xxxxxx during
any
of such years shall be:
1) not
less
than 95% of, and not more than 110% of, the “EBIT Target” specified by the
Company for such year, the Company shall pay the Executive a bonus of
$105,000;
2) not
less
than 111% of, and not more than 130% of, the “EBIT Target” specified by the
Company for such year, the Company shall pay the Executive a bonus of $140,000;
or
3) more
than
130% of the “EBIT Target” specified by the Company for such year, the Company
shall pay the Executive a bonus of $175,000;
(ii) in
the
event that the increase in cash and cash equivalents reflected on the
consolidated statement of cash flows contained in Xxxxxx’ annual audited
financial statements for any of such years shall be:
1) not
less
than 95% of, and not more than 110% of, the “Cash Flow Target” specified by the
Company for such year, the Company shall pay the Executive a bonus of
$84,000;
2) not
less
than 111% of, and not more than 130% of, the “Cash Flow Target” specified by the
Company for such year, the Company shall pay the Executive a bonus of $112,000;
or
3) more
than
130% of the “Cash Flow Target” specified by the Company for such year, the
Company shall pay the Executive a bonus of $140,000; and
(iii) in
the
event that the number of turns of the Company’s inventory during any of such
years shall be:
1) not
less
than 95% of, and not more than 110% of, the “Inventory Turns Target” specified
by the Company for such year, the Company shall pay the Executive a bonus of
$21,000;
2) not
less
than 111% of, and not more than 130% of, the “Inventory Turns Target” specified
by the Company for such year, the Company shall pay the Executive a bonus of
$28,000; or
3) more
than
130% of the “Inventory Turns Target” specified by the Company for such year, the
Company shall pay the Executive a bonus of $35,000.
(b) Definitions.
For
purposes of this Agreement, the term:
(i) “EBIT
Target” shall mean the amount that the Company shall designate as the earnings
before interest and taxes that Xxxxxx must achieve in order for the Executive
to
earn the bonus described in Sections 4 (a) (i) and 4 (b) (i) of this Agreement;
(ii) “Cash
Flow Target” shall mean the amount that the Company shall designate as the cash
provided by operating activities that Xxxxxx must achieve in order for the
Executive to earn the bonus described in Sections 4 (a) (ii) and 4 (b) (ii)
of
this Agreement; and
(iii) “Inventory
Turns Target” shall mean the number of turns of the Company’s inventory that the
Company must achieve, as designated by the Company, in order for the Executive
to earn the bonus described in Sections 4 (a) (iii) and 4 (b) (iii) of this
Agreement.
(c) The
EBIT
Target, Cash Flow Target and Inventory Turns Target shall (i) not be greater
than any of the EBIT Targets, Cash Flow Targets and Inventory Turns Targets
applicable to any other senior executive of the Company; (ii) be determined
by
the Compensation Committee of the Board after consultation with the Executive;
and (iii) be specified in writing by the Company not later than February 28,
2004 with respect to calendar year 2004, and not more than 60 days after the
first day of each other year during the Initial Term and each Renewal Term
with
respect to such year.
(d) Determination
of the achievement of:
(i) the
EBIT
Target shall be made by adding the sum of the interest expense net of interest
income, and income tax expense (but not income tax benefit) reflected on the
consolidated statement of operations contained in Xxxxxx Financial Statements
for the year in question from the line item entitled Net income” on such
consolidated statement of operations;
(ii) the
Cash
Flow Target shall be made by reference to the line item entitled “cash provided
by operating activities” reflected on the consolidated statement of cash flows
contained in the Xxxxxx Financial Statements for the year in question;
and
(iii) the
Inventory Turns Target shall be made by reference to the quotient obtained
by
dividing:
1) the
cost
of goods sold reflected on the consolidated statement of operations contained
in
the Xxxxxx Financial Statements for the year in question by
2) the
quotient derived by dividing the sum of the beginning and ending inventories
for
the year in question, as determined by reference to the notes to the Xxxxxx
Financial Statements for such year, by the number 2.
(e) Each
of
the bonuses described in Sections 4(a) which shall be earned during any calendar
year or part thereof during the Term shall be paid not more than 10 days after
the date upon which Xxxxxx’ Annual Report on Form 10-K for the year in question
shall be filed with the SEC.
(f) Anything
elsewhere contained in this Agreement to the contrary notwithstanding, in the
event that the aggregate amount of the incentive compensation that the Executive
shall receive pursuant to Sections 4(a) (i), (ii) and (iii) hereof shall be
less
than $125,000, the Company shall pay the difference between $125,000 and such
aggregate amount to the Executive. Payment of such amount shall be made in
accordance with the provisions of Section 4(e) of this Agreement.
5. Stock
Xxxxxxx.Xx
addition to his base salary, and the incentive compensation entitlements
described in Section 4, the Executive also shall receive a non-qualified stock
option (the “Option”) to purchase 500,000 shares of Xxxxxx’ common stock, par
value $.0001 per share (the “Common Stock”), pursuant to Xxxxxx’ Amended and
Restated Omnibus Stock Option Plan, as amended (the “Option Plan”). The Option
shall be granted under, and shall be subject to all of the terms and conditions
of, the Option Plan. Any unexercised portion of the Option shall be exercisable,
notwithstanding any contrary provision or requirement contained in the Option
Plan, for a period of five years commencing on the Effective Date (the “Option
Term”), provided that (i) the Executive shall have been in the continuous employ
of the Company during the Initial Term; and (ii) the Executive’s employment
shall not be terminated for “Cause” (as such term is hereinafter defined) at any
time during the Option Term. The Option shall be exercisable at the price per
share which must be applied to all non-qualified stock options granted under
the
Option Plan on the Effective Date. The Executive’s right to purchase Common
Stock pursuant to the Option shall vest ratably on the first, second and third
anniversaries, of the Effective Date. The Option shall further provide that,
in
the event that that the Executive’s employment shall be terminated for any
reason other than for “Cause” or as a result of the Executive’s death, he (or
his estate, as the case may be) shall be entitled to exercise the Option, to
the
extent that it shall have vested on the Termination Date (as such term is
hereinafter defined), during the one year period ending on the date immediately
preceding the first anniversary of the Termination Date or such shorter period
as shall remain until the expiration date of the Option.
6. Benefits.During
the Term, the Executive shall also be entitled to participate in or receive
benefits under all of the Company’s benefit plans, programs, arrangements and
practices, including pension, disability, and group life, sickness, accident
or
health insurance programs, if any, as may be established from time to time
by
the Company for the benefit of executive employees serving in similar capacities
with the Company (and/or its affiliates), in accordance with the terms of such
plans, as amended by the Company from time to time; it being understood that
there is no assurance with respect to the establishment of such plans or, if
established, the continuation of such plans during the term of this
Agreement.
7. Vacation
and Sick Leave.
(a) The
Executive shall be entitled to a total of four weeks of vacation each year,
such
vacation to be in accordance with the terms of the Company’s announced policy
for executive employees, as in effect from time to time. The Executive may
take
his vacation at such time or times as shall not interfere with the performance
of his duties under this Agreement.
(b) The
Executive shall be entitled to paid sick leave and holidays in accordance with
the Company’s announced policy for executive employees, as in effect from time
to time.
8. Expenses.
The
Company shall reimburse the Executive for all reasonable expenses incurred
in
connection with his duties on behalf of the Company, (including, in the case
of
air travel in excess of 500 miles, business class service, if offered and
available on flights to the destination in question, and first class service
if
business class is not so offered and/or available) provided that the Executive
shall keep, and present to the Company, records and receipts relating to
reimbursable expenses incurred by him. Such records and receipts shall be
maintained and presented in a format, and with such regularity, as the Company
reasonably may require in order to substantiate the Company’s right to claim
income tax deductions for such expenses. Without limiting the generality of
the
foregoing, the Executive shall be entitled to reimbursement for any
business-related travel, business-related entertainment, and other costs and
expenses reasonably incident to the performance of his duties on behalf of
the
company.
9. Termination
of Employment for Cause.Notwithstanding
the provisions of Section 2 of this Agreement, the Executive’s employment (and
all of his rights and benefits under this Agreement) shall terminate immediately
and without further notice upon the happening of any one or more of the
following events (each of which individually, and all of which collectively,
shall be hereinafter referred to as “Cause”):
(a) The
Executive has been or is guilty of (i) a criminal offense involving moral
turpitude, (ii) criminal or dishonest conduct pertaining to the business or
affairs of the Company (including, without limitation, fraud and
misappropriation), (iii) any act or omission the intended or likely consequence
of which is material injury to the Company’s business, property or reputation
(iv) gross negligence or willful misconduct, the likely consequence of which
is
material injury to the Company’s business.
(b) The
Executive persists, for a period of 15 days after receipt of written notice
from
the Company, in willful breach in the performance of his duties under this
Agreement;
(c) The
Executive’s death; or
(d) The
Executive’s resignation for any reason other than as a result of a Change of
Control (as hereinafter defined).
Upon
a
termination of the Executive’s employment for Cause, the Company shall pay the
Executive his base salary through the effective date of the termination of
his
employment (the “Termination Date”), and the Executive shall immediately
thereafter forfeit all rights and benefits he otherwise would have been entitled
to receive under this Agreement, including but not limited to any right to
(i)
receive compensation and incentive compensation pursuant to Sections 3 and
4 of
this Agreement, except to the extent that such benefits shall have vested and
continue after the termination of the Executive’s employment under the terms of
the applicable benefit plans and programs; and (ii) exercise any then
unexercised portion of the Option. The Company and the Executive thereafter
shall have no further obligations under this Agreement except as otherwise
provided in this Section and in Section 12 of this Agreement.
10. Termination
of Employment by the Company Without Cause.
Notwithstanding the provisions of Section 2 of this Agreement, the Company
may
elect (a) not to renew this Agreement at the End of the Initial Term or any
Renewal Term; or (b) to terminate the Executive’s employment as provided under
this Agreement, at any time, for reasons other than for Cause by notifying
the
Executive in writing of such termination. If the Executive’s employment is
terminated pursuant to this Section 10, the Company shall pay to the Executive,
in accordance with the normal payroll practices of the Company, an amount equal
to 1) the Executive’s Base Salary for a period of 12 months commencing on the
Termination Date; and 2) a pro-rata portion of any incentive compensation that
otherwise would have become due and payable to the Executive pursuant to the
provisions of Section 4(a) hereof, subject, to the extent applicable, to the
provisions of Section 4(f) hereof, if the Executive’s employment had not been
terminated prior to the then current year of the Initial Term or the then
current Renewal Term (the “Pro-Rata Bonus”), as the case may be. Such Pro-Rata
Bonus shall be calculated by multiplying the total amount of the incentive
compensation payable pursuant to Section 4(a) and, if applicable, Section 4(f)
hereof, for the year in question by a fraction, the numerator of which shall
be
the number of days that shall have elapsed between the beginning of such year
and the date of termination of this Agreement, and the denominator of which
shall be 360. In addition to the foregoing payments, the Executive’s
participation in all of the Company’s benefit plans, programs, arrangements and
practices, including all disability, medical, life insurance and similar
programs, but excluding the Option Plan and any pension, 401-K or similar
retirement income or profit sharing plans, shall continue during such 12 month
period. The termination of the Executive’s employment by the Company as a result
of his continuous and uninterrupted inability to perform his duties and
responsibilities under this Agreement, on behalf of the Company for a period
of
not less than180 days from the first day of such inability to perform his duties
shall be considered to be a termination without cause hereunder.
11. Change
of Control.
(a) Anything
elsewhere contained in this Agreement to the contrary notwithstanding, if
Executive’s employment is terminated:
(i) other
than for Cause by the Company within 90 days prior to a “Change of Control” (as
defined herein), or
(ii) other
than for Cause by the Company (or its successor corporation) at any time after
a
Change of Control, or
(iii) as
a
result of Executive’s resignation within 60 days following a Change of Control
(in which case, the effective date of such resignation shall be deemed to be
the
“Termination Date”),
Executive
shall receive, in lieu of any payments that he might otherwise be entitled
to
receive pursuant to Section 10 of this Agreement, an amount equal to 1) the
Executive’s Base Salary for a period of 12 months commencing on the Termination
Date; and 2) the Pro Rata Bonus payable with regard to the year during which
the
Termination Date occurs. All of such payments shall be made in accordance with
the normal payroll practices of the Company then in effect.
(b) For
purposes of this Agreement, a “Change of Control” shall occur if:
(i) any
“Person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than François Girbaud, Marithé
Bachellerie and/or any Person directly or indirectly controlled by either or
both of them, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of Xxxxxx representing
50% or more of the total voting power represented by Xxxxxx’ then outstanding
voting securities;
(ii) any
merger or consolidation of Xxxxxx with any other Person that has been approved
by the stockholders of Xxxxxx, other than a merger or consolidation which would
result in the voting securities of Xxxxxx outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving Person) more than fifty percent (50%)
of
the total voting power represented by the voting securities of Xxxxxx or such
surviving Person outstanding immediately after such merger or consolidation,
or
the stockholders of Xxxxxx approve a plan of complete liquidation of Xxxxxx;
or
(iii) any
sale,
merger, dissolution or other disposition of the Company; or
(iv) any
sale
or other disposition, in one transaction or a series of related transactions,
of
all or substantially all the Company’s assets; or
(v) a
change
in the composition of the Board occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent Directors.
“Incumbent Directors” will mean directors who either 1) are directors of Xxxxxx
as of the Effective Date, or 2) are elected, or nominated for election, to
the
Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination. For purposes of the
preceding, individuals who are elected pursuant to clause 2) also shall be
considered Incumbent Directors.
12. Confidential
Information.The
Executive agrees that, during the term of his employment with the Company,
and
for a period of one year after the termination of his employment for any reason
whatsoever (including the non-renewal of this agreement by either party), he
shall not disclose to any person or use the same in any way, other than in
the
discharge of his duties under this Agreement in connection with the business
of
the Company, any trade secrets or confidential or proprietary information of
the
Company, including, without limitation, any information or knowledge relating
to
(i) the business, operations or internal structure of the Company, (ii) the
clients (or customers) or potential clients (or potential customers) of the
Company, (iii) any method and/or procedure (such as records, programs, systems,
correspondence, or other documents), relating or pertaining to projects
developed by the Company or contemplated to be developed by the Company, or
(iv)
the Company’s business, which information or knowledge the Executive shall have
obtained during the term of this Agreement, and which is otherwise of a secret
or confidential nature. Further, upon leaving the employ of the Company for
any
reason whatsoever, the Executive shall not take with her, without prior written
consent of the Company, any documents, forms or other reproductions of any
data
or any information relating to or pertaining to the Company, any clients (or
customers) or potential clients (or potential customers) of the Company, or
any
other confidential information or trade secrets and will promptly return any
such materials already in his possession to the Company. The provisions of
this
Section 12 shall survive the termination of this Agreement.
13. Miscellaneous.
(a) Notices.Any
notice, demand, claim, or consent or other communication to be given hereunder
(“Notice”) shall be given in writing and shall be sent by overnight delivery
service, such as Federal Express or Airborne, and addressed, in the case of
the
Company, to its principal office in New York, New York, or in the case of the
Executive, to the last address that the Executive has given to the
Company.
(b) Benefit;
Non-Assignment.This
Agreement shall be binding upon and inure to the benefit of, the parties, their
successors, assigns, personal representatives, distributes, heirs and legatees.
Neither party shall have the right to assign this Agreement, or to delegate
its
or his respective obligations hereunder, except that the Company may assign
this
Agreement and all of its rights hereunder to any parent or the Company, any
wholly owned subsidiary of such parent or to any successor in interest to the
Company.
(c) Governing
Law.This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York, without giving effect to the principles
of
conflicts of law thereof.
(d) Resolution
of Disputes.Any
dispute regarding any aspect of this Agreement or any act which allegedly has
or
would violate any provision of this Agreement will be submitted to binding
arbitration. Such arbitration shall be conducted before a single arbitrator
sitting in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect. Each party will be entitled to limited
discovery, to consist of a maximum of three depositions (maximum two hours
each), document discovery and 25 written interrogatories per party, which will
be completed within 120 days following the selection of the arbitrator. Judgment
may be entered on the award of the arbitrator in any court having competent
jurisdiction. In any such proceeding, the prevailing party shall be entitled
to
recover its legal fees and expenses from the losing party.
(e) Headings.The
headings used in this Agreement are solely for convenience of reference and
will
not be deemed to limit, characterize, or in any way affect any provision of
this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no heading had been used.
(f) Merger;
Modification; Amendment.
This
Agreement (i) represents the complete terms of the parties’ agreement regarding
the subject matter set forth herein; (ii) supersedes any and all prior oral
or
written agreements and/or understandings between and among the parties with
respect to the subject matter hereof; and (iii) may not be amended or modified
except in a writing signed by both parties. There are no representations,
inducements or promises not set forth herein on which either party has relied
or
may rely.
(g) Execution
in Counterparts.This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original, and all of which, when taken together, shall be deemed
to be one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first hereinabove written.
I.C.
XXXXXX & COMPANY L.P.
By:
I.C.
XXXXXX & COMPANY, INC.
By:
/s/ Xxxxxx X Xxxxxxxxx
Name:
Xxxxxx X Xxxxxxxxx
Title:
GVP
/s/
Xxxxx X Xxxxx
Xxxxx
Xxxxx
Guaranty
of Payment and Performance
The
undersigned hereby guaranties the payment of all sums, and the performance
of
all obligations, that that shall become due and owing by I.C. Xxxxxx &
Company LP to Xxxxx Xxxxx pursuant to the foregoing agreement.
I.C.
XXXXXX & COMPANY, INC.
By:
/s/
Xxxxxx X Xxxxxxxxx
Xxxxxx
X
Xxxxxxxxx
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