EMPLOYMENT AGREEMENT
Exhibit 10.45
EXECUTION COPY
THIS EMPLOYMENT AGREEMENT dated as of January 29, 2009 by and between FREDERICK’S OF HOLLYWOOD
GROUP INC., a New York corporation having its principal office at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (“Company”), and XXXXXX XXXXX, residing at (“Executive”).
WHEREAS, the Company desires to employ Executive as its Chief Executive Officer pursuant to
the terms and conditions herein set forth, superseding all prior agreements between the Company,
its subsidiaries and/or predecessors and Executive.
IT IS AGREED:
1. Employment, Duties and Acceptance.
1.1. General. During the Term (as defined herein), the Company shall employ Executive
as its Chief Executive Officer (“CEO”). All of Executive’s powers and authority in any capacity
shall at all times be subject to the direction and control of the Company’s Board of Directors.
Executive shall report directly to the Board of Directors of the Company. The Board may assign to
Executive such general management and supervisory responsibilities and executive duties for the
Company or any subsidiary of the Company, including serving as a director, as are consistent with
Executive’s status as CEO. The Company and Executive acknowledge that Executive’s primary
functions and duties as CEO shall be to manage and supervise the overall operations of the
Company’s business.
1.2. Full-Time Position. Executive accepts such employment and agrees to devote
substantially all of his business time, energies and attention to the performance of his duties
hereunder. Nothing herein shall be construed as preventing Executive from making and supervising
personal investments, provided they will not interfere with the performance of Executive’s duties
hereunder or violate the provisions of Section 6.4 hereof.
1.3. Location. Executive shall be based in New England. Executive shall undertake
such travel, within or outside the United States, as is reasonably necessary in the interests of
the Company to fully perform his duties hereunder.
2. Term. The term of Executive’s employment hereunder commenced as of January 2, 2009 and
shall continue for a period of two (2) years until January 2, 2011 (“Term”), unless terminated
earlier as hereinafter provided in this Agreement, or unless extended by mutual written agreement
of the Company and Executive. Unless the Company and Executive have otherwise agreed in writing,
if Executive continues to work for the Company after the expiration of the Term, his employment
thereafter shall be under the same terms and conditions provided for in this Agreement, except that
his employment will be on an “at will” basis and the provisions of Sections 4.4 and 4.6(d) shall no
longer be in effect.
3. Compensation and Benefits.
3.1. Annual Base Salary. During the Term, the Company shall pay to Executive a salary
(“Base Salary”) at the annual rate of $600,000. Executive’s compensation shall be paid in equal,
periodic installments in accordance with the Company’s normal payroll procedures.
3.2. Annual Performance Bonus. In addition to Base Salary, for each of the fiscal
years ending July 31, 2010 and July 30, 2011, Executive shall be eligible to earn a target annual
incentive bonus equal to sixty-five percent (65%) of his Base Salary (“Bonus”), which bonus shall
be based on achieving targeted performance goals as determined by the Company’s Compensation
Committee after consultation with the Executive. The Bonus payable to Executive, if any, for the
fiscal year ending July 30, 2011 shall be prorated to compensate Executive for the period from
August 1, 2010 to the end of the Term. No Bonus shall be paid for the fiscal year ending July 25,
2009. Any amounts due under this Section 3.2 shall be payable to the Executive within 90 days of
the end of the applicable fiscal year in a cash lump-sum payment.
3.3. Benefits. Executive shall be eligible to participate in the welfare benefit
plans, practices, policies and programs (including, but not limited to, medical, dental, short and
long-term disability, employee life, group life and accidental death insurance plans and programs)
and all savings and retirement plans in accordance with the terms and conditions of such plans,
policies and programs maintained by the Company for its senior executives.
3.4. Insurance. The Company shall, at its own cost and expense, maintain (i) a life
insurance policy on the life of Executive that shall provide a death benefit to Executive’s
beneficiary in the amount of $1,500,000 and that shall be owned by Executive and (ii) a disability
insurance policy that shall provide a non-taxable benefit of at least $10,000 per month payable to
Executive until Executive attains the age of 64 and that shall be owned by Executive.
Notwithstanding the foregoing, Executive hereby acknowledges that the cost of premiums for such
life insurance and disability insurance policies shall be considered taxable income for Executive
in the year paid by the Company and shall be reported by the Company to the Internal Revenue
Service as taxable income.
3.5. Vacation. Executive shall be entitled to five weeks of paid vacation during each
calendar year and to a reasonable number of other days off for religious and personal reasons in
accordance with the Company’s policies and procedures applicable to senior executives of the
Company. Notwithstanding anything to the contrary provided herein, the amount accrued for vacation
time not taken in any calendar year shall be limited to a maximum of two weeks.
3.6. Automobile. During the Term, Executive shall be entitled to an automobile
allowance of $1,250 per month.
3.7. Expenses. The Company will pay or reimburse Executive for all transportation,
hotel and other expenses reasonably incurred by Executive on business trips and for all other
ordinary and reasonable out-of-pocket expenses actually incurred by him in the conduct of the
business of the Company against itemized vouchers submitted with respect to any such expenses and
approved in accordance with customary procedures.
2
3.8. Stock Options.
(a) As additional compensation for Executive entering into this Agreement and agreeing to be
bound by its terms and for the services to be rendered by Executive hereunder, the Company hereby
grants to Executive a ten-year non-qualified option (“Option”) to purchase 360,000 shares of the
Company’s common stock, $.01 par value (“Common Stock”) under the Company’s 1988 Stock Option Plan
(“Plan”).
(b) The Option shall be evidenced by a Stock Option Agreement, dated the date of this
Agreement (“Grant Date”), in the form attached hereto as Exhibit A. The Option shall have an
exercise price equal to the Fair Market Value (as defined in the Plan) of a share of the Common
Stock on the Grant Date. Except as otherwise provided in the Stock Option Agreement, 120,000
shares will vest on each of (i) the Grant Date, (ii) January 2, 2010 and (iii) January 2, 2011.
The Option shall expire on January 28, 2019.
3.9. Stock Grant. The Company hereby grants to Executive an aggregate of 100,000
shares of restricted stock under the Company’s 2000 Performance Equity Plan (“Stock Grant”), which
shall be evidenced by a Restricted Stock Agreement, dated the date of this Agreement, in the form
attached hereto as Exhibit B. 50,000 of such shares of Common Stock associated with the Stock
Grant shall vest on each of January 2, 2010 and 2011, provided that (a) Executive is employed by
the Company on each such date and (b) Executive has completed the Stock Purchase (defined in
Section 3.10 below) in accordance with the terms of the Restricted Stock Agreement.
3.10. Stock Purchase. Executive agrees to purchase a minimum of 250,000 shares of the
Company’s Common Stock in the open market for his own account under a Rule 10b5-1 trading plan to
be entered into during the first open window period during which Executive is able to enter into a
10b5-1 trading plan in accordance with the terms of the Company’s Xxxxxxx Xxxxxxx Policy (the
“Stock Purchase”). Executive agrees to continue to own and hold any shares purchased subject to
this Section 3.10 throughout the term of Executive’s employment with the Company.
4. Termination.
4.1. Death. If Executive dies during the term of this Agreement, Executive’s
employment hereunder shall terminate and the Company shall pay to Executive’s estate the amount set
forth in Section 4.6(a).
4.2. Disability. The Company, by written notice to Executive, may terminate
Executive’s employment hereunder if Executive shall fail because of illness or incapacity to render
services of the character contemplated by this Agreement for ninety (90) consecutive calendar days
in any consecutive twelve calendar month period. Upon such termination, the Company shall pay to
Executive the amount set forth in Section 4.6(b).
4.3. By Company for “Cause”. The Company, by written notice to Executive, may
terminate Executive’s employment hereunder for “Cause.” As used herein, “Cause” shall mean: (a)
the refusal, or failure resulting from the lack of good faith efforts, by Executive to carry out
specific directions of the Board which are of a material nature, or the refusal, or failure
resulting
3
from the lack of good faith efforts, by Executive to perform a material part of Executive’s
duties hereunder; (b) the commission by Executive of a material breach of any of the provisions of
this Agreement; (c) fraud or dishonest action by Executive in his relations with the Company or any
of its subsidiaries or affiliates, or with any customer or business contact of the Company or any
of its subsidiaries or affiliates (“dishonest” for these purposes shall mean Executive knowingly
making a material misstatement or omission, or knowingly committing a material improper act, for
his personal benefit); or (d) the conviction of Executive of any crime involving an act of moral
turpitude. Notwithstanding the foregoing, no “Cause” for termination shall be deemed to exist with
respect to Executive’s acts described in clauses (a) or (b) above, unless the Company shall have
given written notice to Executive specifying the “Cause” with reasonable particularity and, within
thirty (30) calendar days after such notice, Executive shall not have cured or eliminated the
problem or thing giving rise to such “Cause;” provided, however, that a repeated breach after
notice and cure of any provision of clauses (a) or (b) above involving the same or substantially
similar actions or conduct, shall be grounds for termination for “Cause” without any additional
notice from the Company. Upon such termination, the Company shall pay to executive the amount set
forth in Section 4.6(c).
4.4. By Employee for “Good Reason”. The Executive, by written notice to the Company,
may terminate Executive’s employment hereunder if a “Good Reason” exists. For purposes of this
Agreement, “Good Reason” shall mean the occurrence of any of the following circumstances without
the Executive’s prior express written consent: (a) a substantial and material breach of this
Agreement by the Company; (b) a failure by the Company to make any payment to Executive when due,
unless the payment is not material and is being contested by the Company, in good faith; or (c) a
material and adverse change in Executive’s compensation and benefits described in Section 3 of this
Agreement with which Executive disagrees. Notwithstanding the foregoing, “Good Reason” shall not
be deemed to exist with respect to the Company’s acts described in clauses (a), (b) or (c) above,
unless the Executive shall have given written notice to the Company specifying the Good Reason with
reasonable particularity and, within thirty (30) calendar days after such notice, the Company shall
not have cured or eliminated the problem or thing giving rise to such Good Reason; provided,
however, that a repeated breach after notice and cure of any provision of clauses (a), (b) or (c)
above involving the same or substantially similar actions or conduct, shall be grounds for
termination for Good Reason without any additional notice from the Executive. Upon such
termination, the Company shall pay to Executive the amount set forth in Section 4.6(d).
4.5. By Company Without “Cause”. The Company may terminate Executive’s employment
hereunder without “Cause”. Upon such termination, the Company shall pay to Executive the amount
set forth in Section 4.6(d).
4.6. Compensation Upon Termination.
(a) Payment Upon Death. In the event that Executive’s employment is terminated
pursuant to Section 4.1, the Company shall no longer be under any obligation to Executive or his
legal representatives pursuant to this Agreement except for (i) the Base Salary due Executive
pursuant to Section 3.1 hereof through the date of termination, (ii) any Bonus which would have
become payable under Section 3.2 for the year in which the employment was terminated prorated by
multiplying the full amount of the Bonus by a fraction, the numerator of
4
which is the number of “full calendar months” worked by Executive during the year of
termination and the denominator of which is 12 (a “full calendar month” is a month in which the
Executive worked at least two weeks), which Bonus will be calculated and paid after the Company’s
fiscal year end and in accordance with the Company’s customary procedures (“Pro-Rated Bonus”),
(iii) all earned and previously approved but unpaid Bonuses for any year prior to the year of
termination, (iv) all valid expense reimbursements and (v) all accrued but unused vacation pay.
(b) Payment Upon Disability. In the event that Executive’s employment is terminated
pursuant to Section 4.2, the Company shall no longer be under any obligation to Executive or his
legal representatives pursuant to this Agreement except for (i) the Base Salary due Executive
pursuant to Section 3.1 hereof through the date of termination, (ii) any Pro-Rated Bonus which
would have become payable under Section 3.2 for the year in which the employment was terminated,
which Pro-Rated Bonus will be calculated and paid after the Company’s fiscal year end and in
accordance with the Company’s customary procedures, (iii) all earned and previously approved but
unpaid Bonuses for any year prior to the year of termination, (iv) all valid expense
reimbursements; (v) all accrued but unused vacation pay; and (vi) medical coverage at the Company’s
expense through the date of termination.
(c) Payment Upon Termination by the Company For “Cause”. If the Company terminates
Executive’s employment hereunder pursuant to Section 4.3, the Company shall have no further
obligations to the Executive hereunder, except the Company shall pay to Executive his Base Salary,
all valid expense reimbursements and all unused vacation pay required by law through the date of
termination.
(d) Payment Upon Termination by Company Without Cause or by Executive for “Good
Reason”. In the event that Executive’s employment is terminated pursuant to Section 4.4 or
4.5, the Company shall have no further obligations to Executive hereunder except for: (i) the Base
Salary due Executive pursuant to Section 3.1 hereof for a period of: (A) four (4) months from the
date of termination if such date is prior to July 2, 2009; (B) six (6) months from the date of
termination if such date is between July 2, 2009 and January 2, 2010; or (C) eight (8) months from
the date of termination if such date is after January 2, 2010 and prior to the end of the Term;
(ii) any Pro-Rated Bonus which would have become payable under Section 3.2 for the year in which
the employment was terminated, which Pro-Rated Bonus will be calculated and paid after the
Company’s fiscal year end and in accordance with the Company’s customary procedures; (iii) all
earned and previously approved but unpaid Bonuses; (iv) all valid expense reimbursements; (v) all
accrued but unused vacation pay; (vi) accelerated vesting of the portion of the Option (as defined
in Section 3.8) that would otherwise have vested within the one-year period following termination
as set forth in the Stock Option Agreement; and (vii) continued vesting of the Stock Grant (as
defined in Section 3.9) as set forth in the Restricted Stock Agreement. In order and to the extent
necessary to comply with Internal Revenue Code Section 409A (“Section 409A”), all cash amounts due
under this paragraph 4.6(d) shall be payable to Executive in a lump-sum cash payment on the
six-month anniversary of the date of Executive’s termination of employment.
4.7. Resignation as Director Upon Termination of Employment. If Executive’s
employment hereunder is terminated for any reason, then Executive shall, at the Company’s
5
request, resign as a director of the Company and all of its subsidiaries, effective upon the
occurrence of such termination.
5. Executive Indemnity. The Company agrees to indemnify Executive and hold Executive
harmless against all costs, expenses (including, without limitation, reasonable attorneys’ fees)
and liabilities (other than settlements to which the Company does not consent, which consent shall
not be unreasonably withheld) (collectively, “Losses”) reasonably incurred by Executive in
connection with any claim, action, proceeding or investigation brought against or involving
Executive with respect to, arising out of or in any way relating to Executive’s employment with the
Company or Executive’s service as a director of the Company; provided, however, that the Company
shall not be required to indemnify Executive for Losses incurred as a result of Executive’s
intentional misconduct or gross negligence (other than matters where Executive acted in good faith
and in a manner he reasonably believed to be in and not opposed to the Company’s best interests).
Executive shall promptly notify the Company of any claim, action, proceeding or investigation under
this paragraph and the Company shall be entitled to participate in the defense of any such claim,
action, proceeding or investigation and, if it so chooses, to assume the defense with counsel
selected by the Company; provided that Executive shall have the right to employ counsel to
represent him (at the Company’s expense) if Company counsel would have a “conflict of interest” in
representing both the Company and Executive. The Company shall not settle or compromise any claim,
action, proceeding or investigation without Executive’s consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be required if the settlement
entails only the payment of money and the Company fully indemnifies Executive in connection
therewith. The Company further agrees to advance any and all expenses (including, without
limitation, the fees and expenses of counsel) reasonably incurred by the Executive in connection
with any such claim, action, proceeding or investigation, provided Executive first enters into an
appropriate agreement for repayment of such advances if indemnification is found not to have been
available.
6. Protection of Confidential Information; Non-Solicitation.
6.1. Acknowledgement. Executive acknowledges that:
(a) As a result of his employment with the Company, Executive has obtained and will obtain
secret and confidential information concerning the business of the Company and its subsidiaries and
affiliates (referred to collectively in this Section 6 as the “Company”), including, without
limitation, financial information, designs and other proprietary rights, trade secrets and
“know-how,” customers and sources (“Confidential Information”).
(b) The Company will suffer substantial damage which will be difficult to compute if, during
the period of his employment with the Company or thereafter, Executive should divulge Confidential
Information.
(c) The provisions of this Agreement are reasonable and necessary for the protection of the
business of the Company.
6.2. Confidentiality. Executive agrees that he will not at any time, either during
the Term or thereafter, divulge to any person or entity any Confidential Information obtained or
6
learned by him as a result of his employment with, or prior retention by, the Company, except:
(i) in the course of performing his duties hereunder; (ii) with the Company’s express written
consent; (iii) to the extent that any such information is in the public domain other than as a
result of Executive’s breach of any of his obligations hereunder; or (iv) where required to be
disclosed by court order, subpoena or other government process. If Executive shall be required to
make disclosure pursuant to the provisions of clause (iv) of the preceding sentence, Executive
promptly, but in no event more than two (2) business days after learning of such subpoena, court
order, or other government process, shall notify, by personal delivery or by electronic means,
confirmed by mail, the Company and, at the Company’s expense, Executive shall: (a) take all
reasonably necessary and lawful steps required by the Company to defend against the enforcement of
such subpoena, court order or other government process and (b) permit the Company to intervene and
participate with counsel of its choice in any proceeding relating to the enforcement thereof.
6.3. Documents. Upon termination of his employment with the Company, Executive will
promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings,
blueprints and other documents (and all copies thereof) relating to the business of the Company and
all property associated therewith, which he may then possess or have under his control; provided,
however, that Executive shall be entitled to retain copies of such documents reasonably necessary
to document his financial relationship (both past and future) with the Company.
6.4. Non-Solicitation. During the period commencing on the date hereof and ending on
the date which is one year after the date upon which Executive’s employment hereunder is
terminated, Executive, without the prior written permission of the Company, shall not, anywhere in
the world, (i) employ or retain, or have or cause any other person or entity to employ or retain,
any person who was employed or retained by the Company at any time within 180 days prior to the
termination of Executive’s employment; or (ii) solicit, interfere with, or endeavor to entice away
from the Company, for the benefit of any person, firm or corporation engaged in any business which
is directly or indirectly in competition with the Company, any of its customers or other persons
with whom the Company has a contractual relationship.
6.5. Injunctive Relief. If Executive commits a breach, or threatens to commit a
breach, of any of the provisions of Sections 6.2, 6.3 or 6.4, the Company shall have the right and
remedy to seek to have the provisions of this Agreement specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique and extraordinary character and that any such
breach or threatened breach will cause irreparable injury to the Company and that money damages
will not provide an adequate remedy to the Company. The rights and remedies enumerated in this
Section 6.5 shall be in addition to, and not in lieu of, any other rights and remedies available to
the Company under law or equity. In connection with any legal action or proceeding arising out of
or relating to this Agreement, the prevailing party in such action or proceeding shall be entitled
to be reimbursed by the other party for the reasonable attorneys’ fees and costs incurred by the
prevailing party.
6.6. Modification. If any provision of this Section 6 is held to be unenforceable
because of the scope, duration or area of its applicability, the tribunal making such determination
7
shall have the power to modify such scope, duration, or area, or all of them, and such
provision or provisions shall then be applicable in such modified form.
6.7. Survival. The provisions of this Section 6 shall survive the termination of this
Agreement for any reason.
7. Miscellaneous Provisions.
7.1. Notices. All notices provided for in this Agreement shall be in writing, and
shall be deemed to have been duly given when (i) delivered personally to the party to receive the
same, or (ii) when mailed first class postage prepaid, by certified mail, return receipt requested,
addressed to the party to receive the same at his or its address set forth below, or such other
address as the party to receive the same shall have specified by written notice given in the manner
provided for in this Section 7.1. All notices shall be deemed to have been given as of the date of
personal delivery or mailing thereof.
If to Executive:
Mr. Xxxxxx Xxxxx
If to the Company:
Frederick’s of Hollywood Group Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
with a copy to:
Xxxxxxxx Xxxxxx
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
7.2. Entire Agreement; Waiver. This Agreement, the Stock Option Agreement and the
Restricted Stock Agreement set forth the entire agreement of the parties relating to the employment
of Executive and are intended to supersede all prior negotiations, understandings and agreements.
No provisions of this Agreement, the Stock Option Agreement or the Restricted Stock Agreement may
be waived or changed except by a writing by the party against whom such waiver or change is sought
to be enforced. The failure of any party to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce such provision.
8
7.3. Governing Law. All questions with respect to the construction of this Agreement,
and the rights and obligations of the parties hereunder, shall be determined in accordance with the
law of the State of New York applicable to agreements made and to be performed entirely in New
York.
7.4. Binding Effect; Nonassignability. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company. This Agreement shall not be
assignable by Executive, but shall inure to the benefit of and be binding upon Executive’s heirs
and legal representatives.
7.5. Severability. Should any provision of this Agreement become legally
unenforceable, no other provision of this Agreement shall be affected, and this Agreement shall
continue as if the Agreement had been executed absent the unenforceable provision.
7.6. Section 409A. This Agreement is intended to comply with the provisions of
Section 409A. To the extent that any payments and/or benefits provided hereunder are not
considered compliant with Section 409A, the parties agree that the Company shall take all actions
necessary to make such payments and/or benefits become compliant.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| /s/ Xxxxxx Xxxxx | ||||||
| XXXXXX XXXXX | ||||||
| FREDERICK’S OF HOLLYWOOD GROUP INC. | ||||||
| By: | /s/ Xxxxx Xxxx | |||||
| Xxxxx Xxxx Executive Chairman |
||||||
10
