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Exhibit 10.27
April 12, 2001
Mr. Xxxxxx Xxxxxx
IOS Brands Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Dear Xxx:
This letter (this "Agreement") sets forth the terms of your
employment with IOS Brands Corporation ("IOS") and its subsidiaries, and
replaces and supercedes your prior employment agreement dated August 18, 1998.
Duties. You shall serve as Chairman of the Board, Chief
Executive Officer and President of IOS, as well as President and Chief Executive
Officer of its wholly owned subsidiary Florists' Transworld Delivery Inc.
("FTD"), through September 30, 2003, which term shall automatically renew for
two-year periods thereafter unless this Agreement is terminated as provided
herein upon notice by IOS and FTD prior to the commencement of any two-year
renewal period. You shall perform duties assigned by IOS and FTD from time to
time that are consistent with your positions. You shall devote your entire
business time to the affairs of IOS and its subsidiaries and affiliates, the
performance of your duties under this Agreement and the promotion of the
interests of IOS and its subsidiaries and affiliates.
Compensation. As full compensation for the performance by you
of your duties under this Agreement, FTD shall compensate you during your
employment as follows:
(a) Salary. FTD shall pay to you a salary of $450,000 per
year, payable in the periodic installments ordinarily paid by FTD to employees
of FTD at comparable levels to you. You shall be entitled to such merit
increases in base salary as the Board of Directors of FTD may determine, in its
discretion.
(b) Performance Bonus. In accordance with the terms of the FTD
executive bonus plan, FTD shall pay to you a performance bonus ("Performance
Bonus") based upon the following percentages of your base salary:
(i) 35% of your annual base salary level at the time of
payment, based upon achieving an EBITDA target level at
least equal to Level A (Minimum Level) but less than Level
B (Plan Level);
(ii) 70% of your annual base salary level at the time of
payment, based upon achieving an EBITDA target level at
least equal to Level B (Plan Level but less than Level C
(Maximum Level); or
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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(iii) 100% of your annual base salary at the time of payment,
based upon achieving an EBITDA target level at least
equal to Level C (Maximum Level).
For purposes of payment of the Performance Bonus, the EBITDA
target Levels A, B and C will be set each year by the Board of Directors of FTD.
If FTD attains an EBITDA between the threshold and mid-level targets (i.e.,
between Levels A and B) or between the mid-level and high-point targets (i.e.,
between Levels B and C), as the case may be, the amount of the Performance Bonus
shall be determined by linear interpolation between the relevant bonus
percentages and targets.
(c) Equity Incentive Awards. You have been entitled to
participate in the IOS/FTD equity incentive plan and any stock options or
restricted stock awards granted to you, including any granted prior to the date
hereof, shall be deemed to include vesting provisions that accelerate the
vesting of any unvested awards upon the occurrence of a Change of Control (as
defined below).
(d) Paid Vacation. You shall be entitled to four weeks of paid
vacation during each year of employment.
(e) Benefits. You shall be entitled to all additional
employment-related benefits that are made available from time to time to
employees of FTD at comparable levels to you, provided you satisfy any
eligibility requirements for such benefits.
(f) Expense Reimbursement. FTD shall reimburse you, in
accordance with the policies from time to time in effect for other employees of
FTD, for all reasonable and necessary travel expenses and other disbursements
made or incurred by you, for or on behalf of FTD or IOS, in the performance of
your duties under this Agreement.
Immediate Vesting of Awards Upon Change of Control.
(a) In the event a Change of Control occurs during your
employment, notwithstanding any provision of this Agreement or any other
agreement governing any equity incentive awards held by you, any outstanding
stock options or restricted stock awards granted by IOS, FTD or any subsidiary
of either company shall vest in full and become immediately exercisable, and any
restrictions relating thereto shall lapse, upon the occurrence of such Change of
Control. For purposes of this agreement, "Change of Control" shall mean:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934 (the "Exchange
Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the combined voting
power of the then-outstanding voting securities
entitled to vote generally in the election of
directors ("Voting Stock") of IOS or FTD,
respectively; provided, however, that for purposes
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April 12, 2001
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of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any
acquisition directly from IOS or FTD, (B) any
acquisition by IOS, FTD, any subsidiary of IOS or FTD
or any employee benefit plan (or related trust)
sponsored or maintained by IOS or FTD or any such
subsidiary or (C) any acquisition by any of Perry
Acquisition Partners, L.P., Xxxx Capital, Inc., Fleet
Private Equity Co. Inc. or any of their respective
affiliates;
(ii) a change in a majority of the members of the Board of
Directors of IOS or FTD, respectively, occurs (A)
within one year following the public announcement of
an actual or threatened election contest (within the
meaning of Rule 14a-11 under the Exchange Act) or the
filing of a Schedule 13D or other public announcement
indicating a Person intends to effect a change in
control of IOS or FTD or (B) as a result of a
majority of the members of the Board having been
proposed, designated or nominated by a Person (other
than IOS or FTD through their respective Boards of
Directors or duly authorized committees thereof or
through the exercise of contractual rights);
(iii) consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of IOS or FTD (a
"Business Combination"), in each case, unless,
following such Business Combination, (A) more than
50% of the Voting Stock of the entity resulting from
such Business Combination is held in the aggregate by
(1) the holders of securities entitled to vote
generally in the election of directors of IOS or FTD
immediately prior to such transaction, (2) any
employee benefit plan (or related trust) sponsored or
maintained by IOS or FTD or such entity or any
subsidiary of any of them or (3) any of Perry
Acquisition Partners, L.P., Xxxx Capital, Inc., Fleet
Private Equity Co. Inc. or any of their respective
affiliates and (B) at least half of the members of
the board of directors of the entity resulting from
such Business Combination were members of the Board
of Directors of IOS or FTD at the time of the
execution of the initial agreement, or the action of
the Board of Directors of IOS or FTD, providing for
such Business Combination; or
(iv) approval by the stockholders of IOS or FTD of a
complete liquidation or dissolution of IOS or FTD.
(b) If, during your employment, a Change in Control occurs
that does not involve the direct acquisition of shares of capital stock of
XXX.XXX INC. ("XXX.XXX"), then, at your election upon written notice given to
IOS not more than 30 days after such Change in Control, you may exchange any
shares of capital stock of XXX.XXX owned by you (including any shares subject to
options that vest or restricted stock that vests as a result of such Change in
Control transaction) for an amount in cash equal to the ten day trailing average
closing price for
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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such shares as quoted on the principal exchange or trading system on which such
shares are then listed or traded (or if such shares are not so listed or traded
at the fair market value as determined in good faith by the Board of Directors
of IOS at the time of such Change in Control); such cash amount to be offset by
an amount equal to any exercise price applicable to any such shares.
Payment of Promissory Notes and Gross Up Payment. Upon the
occurrence of a Change of Control during your employment, FTD shall cancel and
forgive all remaining obligations and liabilities you have that are evidenced by
any and all promissory notes payable by you to IOS or FTD and IOS shall be
obligated to make "gross up payments" to the extent required by law to cover
certain tax obligations in the manner contemplated by Exhibit A hereto.
Severance. IOS and FTD shall have the right to terminate your
employment by giving you written notice of the effective date of the
termination. If your employment is terminated (a) without "cause" by IOS or FTD
or (b) by you following your assignment to a position that represents a material
diminution in your operating responsibilities (it being understood that a change
in your title shall not by itself entitle you to terminate your employment and
receive the right to severance payments under this paragraph), FTD will pay you
continued salary for 24 months from the effective date of any such termination
under clause (a) or (b) above ("Termination Date"). FTD's obligations to make
continuing salary payments shall be subject to your best efforts to mitigate,
and you will promptly inform IOS and FTD of any subsequent employment. In
addition to the foregoing continued salary payments, on the Termination Date,
FTD shall cause you to be entitled to accelerated vesting of any options to
purchase capital stock of IOS, FTD or any subsidiary of either company (with
unrestricted rights to exercise any such stock options) and vesting of all
capital stock of IOS, FTD or any subsidiary of either company subject to
forfeiture under restricted stock awards in the same manner and extent as would
be the case in the event of a Change of Control. Your participation (including
dependent coverage) in any life, disability, group health and dental benefit
plans provided by FTD, in effect immediately prior to the Termination Date,
shall be continued after the Termination Date, in accordance with FTD policy
relating to such plans as of the Termination Date, until the earlier of (i) the
end of the 24-month severance period or (ii) the date on which you accept other
full-time employment. Following the Termination Date, neither IOS nor FTD shall
be obligated to (1) provide business accident insurance covering you or (2) make
contributions on your behalf to any qualified retirement and pension plans or
profit sharing plans.
For purposes of this Agreement, "cause" means any of the
following events that the IOS or FTD Board of Directors has determined, in good
faith, has occurred: (i) your continual or deliberate neglect of the performance
of your material duties; (ii) your failure to devote substantially all of your
working time to the business of IOS and its subsidiaries or affiliated
companies; (iii) your engaging willfully in misconduct in connection with the
performance of any of your duties, including, without limitation, the
misappropriation of funds or securing or attempting to secure personally any
profit in connection with any transaction entered into on behalf of IOS or its
subsidiaries or affiliated companies; (iv) your willful breach of any
confidentiality or nondisclosure agreements with IOS or FTD (including this
Agreement)
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April 12, 2001
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or your violation, in any material respect, of any code or standard of behavior
generally applicable to employees or executive employees of IOS or FTD; (v) your
violation of the separate confidentiality and non-competition agreement
described below and attached hereto as Exhibit B; or (vi) your engaging in
conduct that results in material injury to the reputation of IOS or its
subsidiaries or affiliated companies such as conviction for a felony or crime
involving fraud under Federal, state or local laws, or embezzlement.
Confidential Information and Non-Competition. You agree that
the separate agreement between you and FTD (attached hereto as Exhibit B and
made a part hereof, which provides for (a) non-disclosure of confidential
information, (b) non-competition and (c) non-solicitation of customers,
suppliers and employees) shall remain in full force and effect until three years
after your employment with FTD is terminated.
Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and assigns.
Miscellaneous. This Agreement shall be governed by the laws of
the State of Illinois, without regard to the conflicts-of-laws principles
thereof. You, IOS and FTD consent to jurisdiction and venue in any federal or
state court located in Chicago, Illinois. This Agreement and the accompanying
Exhibits A and B state our entire agreement and understanding regarding your
employment with IOS and FTD. This Agreement may be amended only by a written
document signed by each of you, IOS and FTD. No delay or failure to exercise any
right under this Agreement shall serve as a waiver of any such right. If any
provision of this Agreement is held to be partially or completely invalid or
unenforceable, then that provision shall only be ineffective to such extent of
its invalidity of unenforceability, and the validity or enforceability of any
other provision of this Agreement shall not be affected.
[intentionally left blank]
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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Any controversy relating to this Agreement shall be settled by
arbitration in Chicago, Illinois in accordance with the commercial arbitration
rules of the American Arbitration Association, except as otherwise provided in
the confidentiality and non-competition agreement attached hereto as Exhibit B
and made a part hereof. In the event of any inconsistency between this Agreement
and any personnel policy or manual of FTD with respect to any matter, this
Agreement shall govern the matter. You shall be entitled to be reimbursed for
your reasonable costs and expenses, including attorneys' fees, incurred in
connection with the enforcement of your rights under this Agreement to the
extent that you prevail in any such controversy.
Sincerely,
Xxxxxxx X. Xxxxx
Director
IOS Brands Corporation
Florists' Transworld Delivery, Inc.
Accepted as of this
_____day of March, 2001
________________________________
Xxxxxx X. Xxxxxx
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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Exhibit A
2. Certain Additional Payments by IOS. (a) Notwithstanding any
other provision of the employment agreement to the contrary, in the
event that it shall be determined (as hereafter provided) that any
payment (other than the Gross-Up Payment (as defined below) provided
for in this Exhibit A) or distribution by IOS or any of its
subsidiaries or affiliates to or for your benefit, whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement,
plan, policy, program or arrangement, including but not limited to any
stock option, performance share, performance unit, stock appreciation
right or similar right, or the lapse or termination of any restriction
on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto), by reason of being considered "contingent
on a change in ownership or control" of IOS, within the meaning of
Section 280G of the Code (or any successor provision thereto), or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then you shall be entitled to receive an
additional payment or payments (collectively, a "Gross-Up Payment").
The Gross-Up Payment shall be in an amount such that, after payment by
you of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the
Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of paragraph (f) below, all
determinations required to be made under this Exhibit A, including
whether any Excise Tax is payable by you and the amount of any such
Excise Tax and whether a Gross-Up Payment is required to be paid by IOS
to you and the amount of any such Gross-Up Payment, shall be made by a
nationally recognized accounting firm other than KPMG LLP (the
"Accounting Firm") selected by you in your sole discretion. You shall
direct the Accounting Firm to submit its determination and detailed
supporting calculations to both IOS and you within 30 calendar days
after the termination of your employment, if applicable, and any such
other time or times as may be requested by IOS or you. If the
Accounting Firm determines that any Excise Tax is payable by you, IOS
shall pay the required Gross-Up Payment to you within five business
days after receipt of such determination and calculations with respect
to any Payment to you. If the Accounting Firm determines that no Excise
Tax is payable by you, it shall deliver to IOS and you at the same time
as it makes such a determination an opinion that you have substantial
authority not to report any Excise Tax on his federal, state or local
income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision
thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments
that shall not have been made by IOS should have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event that IOS exhausts or fails to pursue its
remedies pursuant to paragraph (f) below and you thereafter are
required to make a payment of any Excise Tax, you shall direct the
Accounting Firm to determine the amount of the
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both IOS and you as promptly as
possible. Any such Underpayment shall be promptly paid by IOS to, or
for the benefit of, you within five business days after receipt of such
determination and detailed supporting calculations.
(c) IOS and you shall each provide the Accounting Firm access
to and copies of any books, records and documents in the possession of
IOS or you, as the case may be, reasonably requested by the Accounting
Firm and shall otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by paragraph (b) above. Any determination by
the Accounting Firm as to the amount of the Gross-Up Payment shall be
final, conclusive and binding upon IOS and you.
(d) The federal, state and local income or other tax returns
filed by you shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to any Excise Tax
payable by you. You shall make proper payment of the amount of any
Excise Tax and, at the request of IOS, shall provide to IOS true and
correct copies (with any amendments) of your federal income tax return
as filed with the Internal Revenue Service and any relevant
corresponding state and local tax returns as filed with the applicable
taxing authority, and such other documents reasonably requested by IOS,
evidencing such payment. If prior to the filing of your federal income
tax return or any relevant corresponding state or local tax return, the
Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, you shall within five business days pay to IOS the
amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by paragraph (b) above shall be borne by IOS. If such fees
and expenses are initially paid by you, IOS shall reimburse you the
full amount of such fees and expenses within five business days after
receipt from you of a statement therefor and reasonable evidence of
your payment thereof.
(f) You shall notify IOS in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by IOS of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no
later than ten business days after you actually receive notice of such
claim and you shall further apprise IOS of the nature of such claim and
the date on which such claim is requested to be paid (in each case, to
the extent known by you). You shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following
the date on which he gives such notice to IOS and (ii) the date that
any payment of any amount with respect to such claim is due. If IOS
notifies you in writing prior to the expiration of such period that it
desires to contest such claim, you shall:
(1) provide IOS with any written records or documents
in his possession relating to such claim reasonably
requested by IOS;
(2) take such action in connection with contesting such
claim as IOS shall reasonably request in writing
from time to time, including but
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Employment Agreement Between IOS and Xxxxxx Xxxxxx
April 12, 2001
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not limited to accepting legal representation with
respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by IOS;
(3) cooperate with IOS in good faith in order to
effectively contest such claim; and
(4) permit IOS to participate in any proceedings
relating to such claim;
provided, however, that IOS shall bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest and
shall indemnify and hold harmless you, on an after-tax basis, from and against
any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this paragraph (f), IOS
shall control all proceedings taken in connection with the contest of any claim
contemplated by this paragraph (f) and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim (provided that you may participate
therein at your own cost and expense) and may at its option either direct you to
pay the tax claimed and xxx for a refund or contest the claim in any permissible
manner, and you agree to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as IOS shall determine; provided, however, if IOS directs you
to pay the tax claimed and xxx for a refund, IOS shall advance the amount of
such payment to you on an interest-free basis and shall indemnify and hold you
harmless, on an after-tax basis, from any Excise Tax or income or other tax,
including interest or penalties with respect thereto, imposed with respect to
such advance; provided further, however, that any extension of the statute of
limitations relating to payment of taxes for your taxable year with respect to
which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, IOS control of any such contested claim shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and you shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
If, after the receipt by you of an amount advanced by IOS pursuant to paragraph
(f) above, you receive any refund with respect to such claim, you shall (subject
to IOS complying with the requirements of paragraph (f) above) promptly pay to
IOS the amount of such refund (together with any interest paid or credited
thereon after any taxes applicable thereto). If, after the receipt by you of an
amount advanced by IOS pursuant to paragraph (f) above, a determination is made
that you shall not be entitled to any refund with respect to such claim and IOS
does not notify you in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of any such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid by IOS to you pursuant to this Exhibit A.
