Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of this 26th
day of August, 1997, between Renaissance Cosmetics, Inc. ("Company"), 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Xxxxxxx Xxxxxx, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Executive").
W I T N E S S E T H
WHEREAS, Executive was appointed President of the Company effective as
of May 1, 1997; and
WHEREAS, Executive was appointed Chief Executive Officer of the Company
effective as of May 28, 1997;
WHEREAS, as an incentive to Executive to accept the positions of
President and Chief Executive Officer, the Company has agreed to employ
Executive under the terms and conditions hereof.
NOW, THEREFORE, the parties agree that effective on the date hereof:
1. Title and Responsibilities. During the Term (as defined below) of
this Agreement, Executive will be employed as the President and Chief Executive
Officer of the Company and President of such subsidiaries of the Company as may
be designated by the Board of Directors of the Company at any time and from time
to time (the "Subsidiaries" and, together with the Company, the "Companies").
Executive will have responsibility for managing the day to day affairs of the
Companies subject to policies and procedures established by, and the ultimate
authority of, the boards of directors of the Companies.
2. Salary and Bonus. During the Term of this Agreement, Executive's
salary will be as follows: (i) for the Company's fiscal year ending March 31,
1998, $360,000 (on an annualized basis), (ii) for the Company's fiscal year
ending March 31, 1999, $390,000 and (iii) for the Company's fiscal year ending
March 31, 2000 (and the portion of the following fiscal year to the expiration
of this Agreement), $450,000 (on an annualized basis) ("Base Salary"). During
the Term of this Agreement, Executive will be eligible for an annual bonus of
100% (or greater, if applicable) of Base Salary ("Eligible Bonus"), based on
certain objectives to be established by the Board of Directors not later than
the end of the of the first fiscal quarter of the subject fiscal year, and to
include all relevant factors including annual EBITDA targets and targets related
to return on assets and return on capital. In this connection, the parties agree
that such objectives will be the same objectives which are provided by the
Company to senior executives of the Company. Any Eligible Bonus, if earned, will
be paid in cash no later than 30 days after the audited financials are available
following the end of the applicable annual period but will be deemed due and
payable, regardless
of Executive's status on the payment date, so long as Executive is employed by
the Company on the last business day of the applicable annual period.
3. Term. The term ("Term") of this Agreement will commence on July 1,
1997 and will expire on June 30, 2000, unless renewed as provided for in this
Section 3 or upon termination of Executive's employment as provided in Section 7
hereof. The Term shall automatically renew for successive one year periods from
the then scheduled expiration date unless, not less than 90 days prior thereto,
either the Company or the Executive notifies the other of its or his intention
not to renew, in which case this Agreement shall expire at the end of the then
current Term.
4. Election to Board of Directors. The Board of Directors of the
Company will include the Executive. The Company agrees to indemnify Executive
(in his capacity as an officer and director) to the fullest extent permitted by
law and as provided in that certain Amended and Restated Indemnification
Agreement, dated as of May 28, 1997, by and between the Company and Executive.
5. Benefits and Other Matters.
(a) Insurance. The Company will provide retirement, employee
welfare and benefit (pre- and post-retirement) and fringe benefit plans to
Executive no less favorable than those made available to the Company's executive
employees generally. Executive will be fully vested for all purposes under all
such plans. In addition, the Company will purchase for Executive (who will be
the owner) a $5 million life insurance policy and a disability policy on terms
mutually satisfactory to both the Company and Executive, subject to Executive
satisfying industry insurability criteria.
(b) Vacation. Executive will be entitled to 4 weeks of
vacation per year. Unused vacation will accrue for the following year; however,
Executive agrees not to take more than 5 weeks of vacation in any one year. Upon
expiration of this Agreement or termination of Executive's employment for any
reason, Executive will be entitled to receive payment (based on the Base Salary
in effect in the year of termination) for any accrued but unused vacation
through the date of termination.
(c) Reimbursement of Expenses. The Company will reimburse
Executive for all reasonable out-of-pocket expenses actually incurred by
Executive in connection with performing his obligations hereunder upon receipt
from Executive of standard documentation supporting such expenses. For purposes
hereof, "reasonable" shall include first-class travel and hotel expenses.
(d) Miscellaneous Benefits.
(i) Executive will be entitled to the use of an executive
class company car at Employer's expense (subject to the last sentence of this
paragraph (i)) on terms no less favorable than those provided to the Company's
executives generally ("Executive's Vehicle"). The Company may, in its
discretion, lease or acquire Executive's Vehicle for Executive's use, consistent
with the Company's prior practice; provided, however, that the purchase price of
Executive's Vehicle (or the purchase price implicit in the lease rate) including
all taxes shall not exceed $80,000.
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(ii) The Company will not require Executive to move his
residence during the Term. If, however, Executive moves his residence from its
location as of the date hereof (A) at the request of the Board of Directors or
(B) as a result of a relocation of the Company's principal executive offices
which causes Executive's commuting time by car to be longer than such commuting
time as of the date hereof, the Company will pay the costs of relocation,
including, without limitation, any loss Executive incurs in connection with the
sale of his residence. In the event Executive is required to spend an extended
continuous period of time away from his residence in one location, the Company
will reimburse him for the cost of renting an apartment for him and his family
in such location. The Company will reimburse Executive for any liability
(including tax liability) incurred by Executive in connection with Executive's
permanent or temporary relocation as described in this paragraph (ii) and with
the reimbursements to be made by the Company pursuant to this paragraph (ii).
(iii) The Company will reimburse Executive for the cost of
purchasing and installing computer and related equipment, dedicated telephone
lines, a fax machine and other reasonable expenditures for similar office
equipment necessary for Executive to perform his obligations hereunder for use
in his home office and will provide Executive with a notebook computer for use
while traveling or working in any of the Company's offices. At the expiration of
the Term hereof as provided in Section 3 or upon the termination of Executive's
employment by the Company without Cause (as defined below) or by Executive for
Good Reason (as defined below, other than by reason of Executive's death), all
such equipment provided to Executive or for which the Company reimbursed
Executive (the "Equipment") and Executive's Vehicle will become the property of
Executive (at no cost to Executive). The Company will reimburse Executive for
any tax liability incurred by Executive upon the transfer of ownership to
Executive of the Equipment and Executive's Vehicle. In the event Executive dies
during the Term hereof, ownership of the Equipment and Executive's Vehicle
shall, at the election of Executive's estate, be transferred to Executive's
estate.
6. Non-Compete.
(a) Executive agrees that he will not compete with the
Companies in the mass-market fragrance, color cosmetics, or artificial or
natural nail products business during the period of his employment hereunder.
The scope of this non-compete is worldwide. In addition, upon termination of
this Agreement in accordance with Section 3 hereof or termination of Executive's
employment for any reason, the Company (or its successor) may elect to have this
non-compete apply for a period of one or two years from the date of termination
(the "Enforcement Election").
Upon termination of this Agreement in accordance with Section
3 hereof or in the event Executive's employment is terminated by the Company
without Cause (as defined below) or by the Executive for any reason, and the
Company makes the Enforcement Election, Executive shall be entitled to receive
from the Company payment of $500,000 per year for each year the Company elects
to enforce this non-compete provision (the "Election Payment"). At the time the
Company makes the Enforcement Election, the full amount of the Election Payment
shall be placed in escrow with an escrow agent ("Escrow Agent") mutually
acceptable to the Company and Executive. The terms of the escrow shall include
those set forth on Schedule A hereto and such other terms as are
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mutually agreed to by the Company, Executive and Escrow Agent. The Company shall
make all reasonable efforts to structure the escrow arrangement in a manner
which shall protect the escrowed Election Payment from the claims of creditors
of the Company, including any claims arising in a bankruptcy or similar
proceeding filed by or against the Company.
In the event that Executive's employment is terminated by the
Company with Cause, and the Company makes the Enforcement Election, Executive
shall be entitled to receive from the Company payment of $1,000 per year for
each year the Company elects to enforce this non-compete. Payment of the full
amount will be made directly to Executive by the Company at the time the Company
makes the Enforcement Election.
Any payments to which Executive is entitled under this
paragraph (a) are in addition to, and not in replacement of, any payments to
which Executive is otherwise entitled under Section 7 hereof.
(b) The Company shall give written notice of its election to
enforce the non-compete provisions hereof (the "Enforcement Election Notice") to
Executive as follows:
(i) if the Company gives notice of termination of this
Agreement in accordance with Section 3 hereof, the Company shall give the
Enforcement Election Notice simultaneously with the notice of termination;
(ii) if the Company terminates Executive's employment with or
without Cause (as defined below), the Company shall give the Enforcement
Election Notice within 15 days after the date of termination;
(iii) if Executive gives notice of termination of this
Agreement in accordance with Section 3 hereof, the Company shall give the
Enforcement Election Notice within 15 days after receipt by the Company of the
termination notice; and
(iv) if Executive terminates his employment with or without
Good Reason, the Company shall give the Enforcement Election Notice within 15
days after the date of termination.
(c) Nothing herein shall prohibit Executive from being a
passive owner of not more than 3% of any publicly-traded class of capital stock
of any entity engaged in a competing business.
(d) If a determination is made that any temporal, territorial
or activity-related restriction on competition contained in paragraph (a) above
is too broad to permit enforcement thereof to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
parties agree that paragraph (a) may be judicially reformed, revised, modified
or partially enforced in any proceeding brought to enforce such paragraph.
Subject to the foregoing, if any portion of paragraph (a) is deemed invalid or
unenforceable by a court of law, such portion shall be considered to be
automatically deleted from paragraph (a). However, any such deletion shall apply
only to that portion of any provision so adjudicated, and the operation of such
provision
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shall only be deemed inapplicable in the particular jurisdiction in which the
adjudication is made.
7. Termination.
(a) The Company may terminate the employment of Executive at
any time, with or without Cause (as defined below), subject to the provisions
hereof. Executive may terminate his employment at any time, with or without Good
Reason (as defined below), subject to the provisions hereof.
(b) If (i) the Company terminates the employment of Executive
with Cause, or (ii) the Executive terminates his employment without Good Reason,
the Executive shall be entitled to receive only accrued but unpaid Base Salary
and other benefits to which Executive is entitled through the date of
termination, plus unreimbursed expenses incurred through the date of
termination.
(c) In the event that the Company terminates the employment of
Executive for reasons other than for Cause or Executive terminates his
employment for Good Reason, Executive shall be entitled to (i) the amount of any
accrued but unpaid Base Salary and other benefits to which Executive is entitled
through the date of termination, and unreimbursed expenses incurred through the
date of termination, plus (ii) the greater of (x) the applicable Base Salary for
each year (or pro rated for any part thereof) through the end of the Term or (y)
one year's Base Salary (as in effect in the year of termination) (in each case,
net of any severance benefits payable to Executive under the Company's severance
policy as may then be in effect) and (iii) a bonus equal to the Bonus Amount, as
defined on Schedule B hereto ((ii) and (iii) are together referred to as the
"Severance Payments"). Executive shall also be entitled to receive the full
benefits (as described in Section 5(a) hereof) he was receiving immediately
prior to the termination date for the period in which he is receiving Severance
Payments. In addition, the Option (as defined in each of the Option Agreements
of even date herewith) shall be/become exercisable as provided in such Option
Agreements. In the event the termination is pursuant to (d)(ii)(D) below,
Executive (or his estate) shall also be entitled to receive all benefits to
which Executive (or his estate) is entitled under the insurance policies
referred to in Section 5(a) above.
(d) For purposes of this Agreement:
(i) "Cause" shall be limited to the following:
(A) Deliberate dishonesty or willful misconduct in
the performance of Executive's responsibilities resulting in
an effect materially adverse to the Company's business,
financial condition or results of operation;
(B) Executive shall be convicted of a felony
involving moral turpitude which materially adversely reflects
on the Company; or
(C) Breach by Executive of the provisions of Section
6 hereof.
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A determination that Cause exists shall be made by the Board
of Directors.
(ii) "Good Reason" shall mean termination at the election of
Executive based on (A), (B) or (C) below (provided that such termination occurs
within 90 days of the date on which the event described in (A), (B), or (C)
below becomes effective) or by reason of an event described in (D) below:
(A) Without Executive's express written consent, the
assignment of Executive to a position other than President and
Chief Executive Officer of the Company and President of the
Subsidiaries with day-to-day responsibility and authority for
the operation of the business of the Companies or a material
diminution in Executive's duties as President and Chief
Executive Officer except in connection with the termination of
his employment for Cause, normal retirement, death of
Executive, or termination by the Executive other than for Good
Reason;
(B) A reduction in Executive's fringe or retirement
benefits that is not applied by the Company to executives
generally or, in the case of any benefit unique to Executive,
a more than immaterial reduction in such benefit, or a
reduction by the Company in Executive's Base Salary or
Eligible Bonus;
(C) The (I) merger or consolidation of the Company
into or with any other entity, (II) change in control of the
Company (which, for purposes hereof, shall mean Xxxx Xxxx
Equity Partners, L.P. no longer controls the Board of
Directors of the Company) or (III) sale, transfer or other
disposition of all or substantially all of the assets of the
Company ((I), (II) and (III) are collectively referred to as a
"Restructuring Event"), unless the entity which survives the
Restructuring Event shall assume and agree to perform the
obligations of the Company hereunder pursuant to an instrument
reasonably acceptable to Executive; or
(D) Executive dies or becomes mentally or physically
disabled for such period of time and under circumstances which
entitle Executive to receive disability benefits under the
terms of the Company's long-term disability insurance policy
then maintained by the Company.
(e) In the event that, during the period in which Executive is
receiving Severance Payments and the other benefits described in paragraph (c)
hereof (collectively, the "Severance Benefits"), Executive secures full-time
employment with any third party, Executive shall notify the Company of such
employment prior to the commencement thereof. Effective immediately upon the
commencement of Executive's new employment, the Severance Benefits shall cease
and the Company shall have no further obligation to Executive with respect to
Severance Benefits.
(f) In the event the Company elects to terminate this
Agreement in accordance with Section 3 hereof, Executive shall be entitled to
receive one year's Base Salary after the expiration hereof (at the rate in
effect for the year immediately prior to the expiration).
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(g) All Severance Payments or payments under (f) of this
Section 7 shall be made monthly, in advance.
8. Key Man Life Insurance. Executive will provide the Company with such
information, and execute such documents, as may be necessary for the Company to
purchase a key man life insurance policy covering Executive.
9. Arbitration. Subject to Section 13(b) hereof, the parties hereto
agree to submit any dispute hereunder to binding arbitration. Arbitration shall
be conducted in New York, New York under the commercial rules of the American
Arbitration Association by a panel of three arbitrators. The aforementioned
arbitrators shall be chosen as follows: The Company and Executive shall each
designate one arbitrator from a list of acceptable and qualified arbitrators
which will be provided by the American Arbitration Association. The two
arbitrators so designated shall then choose the panel's third arbitrator who
shall be an attorney-at-law and who shall serve as the Chairman of the panel;
provided that if either party fails to designate an arbitrator within 10 days of
receipt of the Association's list or if the two arbitrators are unable to agree
on the appointment of the third arbitrator within 10 days of the later of the
date of their respective appointments, such arbitrator shall be designated by
the American Arbitration Association. If any arbitrator resigns or is unable to
continue serving as such, the successor to such arbitrator shall be appointed by
the party who appointed such arbitrator or by the remaining arbitrators if they
appointed such arbitrator, or by the American Arbitration Association, as the
case may be. A stenographic record of the arbitration must be maintained, the
panel, including the successor arbitrator, may rely on such record and no
rehearing shall be required. Subject to Section 10 hereof, each of the parties
shall pay the fees and expenses of the arbitrator appointed by it and each shall
pay one-half the fees and expenses of the third arbitrator and any other
expenses of the arbitration, unless the arbitrators determine that the losing
party shall bear the cost of the arbitration. The decision of the arbitrators
with respect to any issues subject to arbitration shall be final and binding on
the parties and may be entered into any court of competent jurisdiction by
either party, or application may be made to such court for judicial confirmation
of the award and order of enforcement, as the case may be. The demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. Notwithstanding the foregoing, it is hereby
agreed that no arbitration panel shall have any power to (i) add to, alter or
modify the terms and conditions of this Agreement, (ii) decide any issue which
does not arise from the interpretation or application of the provisions of this
Agreement or (iii) award any punitive damages under this Agreement.
10. Enforcement. If either party is required to arbitrate or seek
judicial enforcement of his or its rights under this Agreement, the party
prevailing in such proceeding shall be entitled to be reimbursed by the other
for all reasonable attorney fees and expenses.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
12. Entire Agreement. This Agreement supersedes all prior negotiations
and understandings of any kind with respect to the subject matter hereof and,
except for the Option Agreement which shall remain in full force and effect in
accordance with its terms, contains all of the terms and provisions of agreement
between the parties hereto with respect to the subject matter
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hereof. Any representation, promise or condition, whether written or oral, not
specifically incorporated herein, shall be of no binding effect upon the
parties.
13. Severability; Specific Performance; Assignment; Survival.
(a) If any portion of this Agreement is held invalid or
unenforceable by a court of competent jurisdiction, that portion only shall be
deemed deleted as though it had not been included herein but the remainder of
this Agreement shall remain in full force and effect.
(b) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of Section 6 hereof would be
inadequate and, in recognition of this fact, Executive agrees that, in the event
of such a breach or threatened breach, the Company, without posting any bond,
shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available.
(c) This Agreement shall not be assignable by Executive except
pursuant to the laws of descent and distribution, and then only for purposes of
enforcing Executive's rights under Section 7.
(d) Notwithstanding anything to the contrary herein, in the
event of a termination of this Agreement, the provisions of Section 6 hereof
shall survive and be enforceable in accordance with their terms.
14. Taxes. In the event that any payment or benefit (within the meaning
of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")) to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement, the Option Agreement or
otherwise in connection with, or arising out of, his employment with the Company
or a change in control (within the meaning of Section 280G of the Code) (a
"Payment" or "Payments") would be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes, including Excise Tax, imposed on the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed on the Payments.
15. Valid and Binding. The Company represents that it has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement, and that this Agreement is valid, binding and
enforceable against the Company in accordance with its terms.
16. Notices. All notices or other communications in connection with the
Agreement shall be in writing and may be given by personal delivery or mailed,
certified mail, return receipt requested, postage prepaid or by a nationally
recognized overnight courier to the parties at the addresses set forth below (or
at such other address as the Company or Executive may specify in a notice to the
Executive or Company, as the case may be):
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If to the Company: Renaissance Cosmetics, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
attn: Group Vice President,
Corporate Development and
Human Resources
If to Executive: Xxxxxxx Xxxxxx
c/o Renaissance Cosmetics, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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IN WITNESS WHEREOF, the undersigned has caused its duly
authorized officer to execute this Agreement as of the date first above written.
RENAISSANCE COSMETICS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
Agreed to by:
-------------------------------------------
XXXXXXX XXXXXX
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SCHEDULE A
TO EMPLOYMENT AGREEMENT
ESCROW TERMS
The terms of the escrow described in Section 6(a) of the Employment
Agreement shall include the following:
1. The Election Payment shall be held in an interest-bearing
account (the "Escrow Account").
2. The term of the escrow shall be the number of years for
which the Company elects to enforce the non-compete provisions of Section 6(a).
3. The principal amount of the Election Payment shall be
distributed to Executive by the Escrow Agent monthly, in advance, during the
term hereof, with the first payment to be made within __ days after the Election
Payment is deposited into the Escrow Account.
4. Interest earned on the escrowed Election Payment shall be
paid first to the Escrow Agent to cover the Escrow Agent's fees and any
remaining interest shall be distributed to the Company on terms agreed to be the
Company in the Escrow Agreement.
5. Any disputes arising between the parties in connection with
the Employment Agreement shall be settled by arbitration as more fully described
in Section 9 of the Employment Agreement.
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SCHEDULE B
TO EMPLOYMENT AGREEMENT
BONUS AMOUNT
The calculation of Bonus Amount shall be as follows:
The Bonus Amount shall be equal to the Base Salary in the year of
termination multiplied by the Applicable Percentage (as defined below).
Applicable Percentage ("AP") shall be calculated as follows:
AP = A, unless A is less than B, in which case AP shall be
equal to C
where
A = the dollar amount of Executive's bonus for the fiscal year
immediately preceding the year in which termination occurs
(the "Prior Year") divided by Executive's base salary in the
Prior Year;
B = the dollar amount of Executive's bonus for the fiscal year
immediately preceding the Prior Year (the "Second Prior Year")
divided by Executive's base salary in the Second Prior Year;
and
C = (A + B)/2
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