EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 29, 2001, by and between
Adesso-Madden, Inc., a New York corporation (the "Company"), and Xxxxxx
Xxxxxxxxx, an individual residing at 00 Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxx Xxxx
00000 (the "Executive").
W I T N E S E T H :
- - - - - - - - -
WHEREAS, the Company has retained the services of the Executive since
September 1995; and
WHEREAS, the Company desires to continue to retain the services of the
Executive, and the Executive desires to continue to render services to the
Company, upon the terms and conditions hereinafter set forth; and
WHEREAS, the parties elect to terminate all prior arrangements,
agreements and understandings between the Company and the Executive with respect
to Executive' s employment with the Company and replace such arrangements,
agreements, and understandings with this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties mutually agree as
follows:
Section 1. Employment. The Company hereby employs Executive and
the Executive hereby accepts such employment, as the President of the Company,
subject to the terms and conditions set forth in this Agreement.
Section 2. Duties. The Executive shall serve as the President of
the Company and shall properly perform such duties as may be lawfully assigned
to him from time to time by the Board of Directors of the Company and the Chief
Executive Officer of Xxxxxx Xxxxxx, Ltd., the parent corporation of the Company
("SML"). The Board of Directors of the Company shall be comprised of three (3)
directors as follows: the Executive; the Chief Executive Officer of SML; and the
Chief Financial Officer of SML. If requested by the Company, the Executive shall
serve on the Board of Directors of the Company or SML or any committee thereof
without additional compensation. During the term of this Agreement, the
Executive shall devote all of his business time to the performance of his duties
hereunder unless otherwise authorized by the Board of Directors. The Executive
is entitled to four (4) weeks paid vacation during each year of the Term (as
hereinafter defined).
Section 3. Term of Employment. The term of the Executive's
employment shall be for a period of thirty six (36) months commencing on the
date hereof (the "Term"), subject to earlier termination by the parties pursuant
to Section 6 hereof.
Section 4. Compensation of Executive.
--------------------------
4.1 Salary. The Company shall pay to Executive (i) an annual
base salary of three hundred thousand dollars ($300,000) during the first year
of the Term, (ii) an annual base salary of three hundred fifteen thousand
dollars ($315,000) during the second year of the Term, and (iii) an annual base
salary of three hundred thirty thousand dollars ($330,000) during the third year
of the Term, less such deductions as shall be required to be withheld by
applicable law and regulations (the "Base Salary"). All salaries payable to
Executive shall be paid at such regular time or times as the Company makes
payment of its regular payroll in the regular course of business, but in no case
shall it be less than bi-weekly.
4.2 Cash Performance Bonus. During the term of this
Agreement, the Executive shall be entitled to receive a cash performance bonus
based upon increases in the Company's net pre-tax profit as reported in the
2
Company's year-end financial statements ("Net Profit"). By April 15, 2002, 2003
and 2004, the Company shall pay to the Executive a cash bonus equal to four
percent (4%) of the amount by which Net Profit for the fiscal year ending on the
most recent December 31st exceeds Net Profit for the fiscal year ending on the
preceding December 31st (the "Annual Cash Bonus"). For example, if Net Profit
for the year ending December 31, 2001 equals $3,000,000, and Net Profit for the
year ending December 31, 2000 was $1,000,000, the Executive would be entitled to
receive an Annual Cash Bonus equal to $80,000 ($3,000,000 - $1,000,000 =
$2,000,000 x .04 = $80,000).
4.3 Stock Option Bonus. On each of June 30, 2001, 2002 and
2003, SML shall grant to the Executive stock options (the "Options") to purchase
34,000, 33,000 and 33,000 shares of SML common stock, respectively. The Options
shall (i) be exercisable for a period of 7 years following the date of grant,
(ii) be issued in accordance with the terms and conditions of the Company's
stock plan, (iii) vest quarterly over a one (1) year period commencing on the
date of grant and (iv) have an exercise price equal to the closing bid price of
SML's shares of common stock on the date of grant as reported by The Nasdaq
Stock Market (or other principal exchange on which the SML shares of common
stock are traded). The Company shall use its best efforts to issue the Options
as incentive stock options.
4.4 Signing Bonus. Upon execution of this Agreement, the
Company shall pay to the Executive a signing bonus equal to $35,000 payable
in immediately available funds, less such withholding as required by applicable
laws and regulations.
4.5 Expenses. During the Term, the Company shall, in
accordance with the policies and practices established by the Company and SML,
reimburse the Executive for all reasonable and necessary travel expenses and
other disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder. In addition, the Company shall
provide the Executive with a monthly auto lease allowance in an amount not to
exceed $850 per month.
3
4.6 Benefits. The Executive shall be permitted during the
Term to participate in any hospitalization or disability insurance plans, health
programs, pension plans, bonus plans or similar benefits that may be available
to other executives of SML to the extent the Executive is eligible under the
terms of such plans or programs. The Company agrees to provide the Executive
with a paid health insurance plan.
5. Death or Disability of the Executive. If the Executive
(i) dies or (ii) is incapacitated or disabled by accident, sickness or otherwise
so as to render the Executive mentally or physically incapable of performing the
services required to be performed under this Agreement for a period of 120
consecutive days or 180 days in any period of 360 consecutive days (a
"Disability"), the Company may, at the time or during the period of such
Disability, at its option, terminate the employment of the Executive under this
Agreement immediately upon giving the Executive written notice to that effect.
6. Termination.
------------
(a) The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement at any time
for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean any of the following: (i) failure or neglect, by the Executive to perform
the duties of the Executive's position which failure or neglect has a material
adverse effect on the Company; (ii) failure of the Executive to obey lawful
orders given by the Board of Directors and such failure has a material adverse
effect on the Company; (iii) material misconduct by the Executive in connection
with the performance of his duties; (iv) commission by the Executive of an act
involving moral turpitude, dishonesty, theft or unethical business conduct, or
4
conduct which materially impairs or injures the reputation of, or xxxxx, the
Company or SML; (v) disloyalty by the Executive, including without limitation,
aiding a competitor; (vi) failure by the Executive to devote his full business
time and best efforts to the Company's business and affairs; (vii) failure by
the Executive to work exclusively for the Company; (viii) failure to cooperate
in any investigation by the Company; (ix) any material breach of this Agreement
or Company rules; or (x) the Executive's abuse of alcohol or other drugs or
controlled substances. A termination pursuant to this Section 6(a) shall take
effect 20 days after the giving of written notice to the Executive unless the
Executive shall, during such 20-day period, remedy to the reasonable
satisfaction of the Board of Directors of the Company the misconduct, disregard,
abuse or breach specified in such notice; provided, however, that such
termination shall take effect immediately upon the giving of such notice if the
Board of Directors of the Company shall, in its reasonable discretion, have
determined that such misconduct, disregard, abuse or breach is not remediable
(which determination shall be stated in such notice).
(b) The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement (except as
hereinafter provided) at any time during the Term without Cause by giving the
Executive written notice of such termination, to be effective 30 days following
the giving of such written notice.
(c) The Executive may terminate this Agreement by delivering
written notice to the Company within thirty (30) days following (i) the
effective date of a Change of Control (as hereinafter defined) or (ii) an event
constituting Good Reason (as hereinafter defined).
As used herein, the term "Change of Control" shall mean: (i) when any
"person" as defined in Section 3(a)(9) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of the Exchange Act,
but excluding SML or any subsidiary or any affiliate of SML or any employee
benefit plan sponsored or maintained by SML or any subsidiary of SML (including
any trustee of such plan acting as trustee), becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of securities of SML representing
50% or more of the combined voting power of SML's then outstanding securities;
or (ii) when, during any period of twenty-four (24) consecutive months, the
5
individuals who, at the beginning of such period, constitute the Board of
Directors (the "Incumbent Directors") cease for any reason other than death to
constitute at least a majority thereof, provided, however, that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or through the operation of this proviso; or (iii) the occurrence of a
transaction requiring stockholder approval under Delaware law for the
acquisition of SML by an entity other than SML or a subsidiary or an affiliated
company of SML through purchase of assets, or by merger, or otherwise.
As used herein, the term "Good Reason" shall mean (i) a material breach
by the Company or SML of its obligations under this Agreement, or (ii) a
material diminution of the duties of the Executive.
For convenience of reference, the date upon which any termination of
the employment of the Executive pursuant to Sections 5 or 6 shall be effective
shall be hereinafter referred to as the "Termination Date".
7. Effect of Termination of Employment.
------------------------------------
(a) Upon the termination of the Executive's employment for
Cause, neither the Executive nor the Executive's beneficiaries or estate shall
have any further rights to compensation under this Agreement or any claims
against the Company arising out of this Agreement, except the right to receive
(i) the unpaid portion of the Base Salary provided for in Section 4.1, earned
through the Termination Date (the "Unpaid Salary Amount"), (ii) reimbursement
for any expenses for which the Executive shall not have theretofore been
reimbursed, as provided in Section 4.5 (the "Expense Reimbursement Amount"),
(iii) the Additional Payments (as hereinafter defined) less an amount equal to
the actual costs and damages sustained by the Company as a result of, or related
to, the actions by the Executive constituting Cause and (iv) all Options vested
as of the Termination Date (the "Vested Options").
6
(b) Upon the termination of the Executive's employment as a
result of the Executive's death or Disability, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights to
compensation under this Agreement or any claims against the Company arising out
of this Agreement, except the right to receive (i) the Unpaid Salary Amount,
(ii) the Expense Reimbursement Amount (iii) accrued and unpaid amounts owed to
the Executive under Section 4.2 hereof through the Termination Date, including a
pro-rata entitlement to such amounts equal to the award to which the Executive
would have been entitled at the end of the applicable fiscal period pro-rated
for the period of the Executive's employment during such fiscal period
(collectively, the "Additional Payments"), (iv) severance compensation equal to
the Base Salary for a period of three (3) months, (v) the Additional Payments
and (vi) the Vested Options.
(c) Upon the termination of the Executive's employment by
the Company without Cause and not as a result of a Disability, or by the
Executive for Good Reason neither the Executive nor the Executive's
beneficiaries or estate shall have any further rights to compensation under this
Agreement or any claims against the Company arising out of this Agreement,
except the Executive shall have the right to receive (i) the Unpaid Salary
Amount, (ii) the Expense Reimbursement Amount, (iii) severance compensation
equal to the Base Salary for the greater of (a) the remaining term of this
Agreement (as if this Agreement was not terminated) and (b) twelve (12) months,
all of which is payable within thirty (30) days following the Termination Date,
(iv) the Additional Payments, (v) the Additional Payments and (vi) the Vested
Options.
(d) Upon the termination of this Agreement by the Executive
in accordance with Section 6(c) following a Change of Control, neither the
Executive nor the Executive's beneficiaries or estate shall have any further
rights to compensation under this Agreement or any claims against the Company
arising out of this Agreement, except the Executive shall have the right to
receive (i) the Unpaid Salary Amount, (ii) the Expense Reimbursement Amount,
(iii) severance compensation equal to the greater of (x) the Base Salary for the
remaining term of this Agreement (as if this Agreement was not terminated) and
(y) the Base Salary then in effect for a period of twelve (12) months, (iv) the
Additional Payments and (v) the Vested Options.
7
8. Confidential Information; Inventions. (a) Executive
recognizes that he has had and will continue to have access to secret and
confidential information regarding the Company, including but not limited to its
customer list, products, know-how, and business plans. Executive acknowledges
that such information is of great value to the Company, is the sole property of
the Company, and has been and will be acquired by him in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, not otherwise in the public
domain, other than in the ordinary course of business during his employment
hereunder. The provisions of this Section 8 shall survive Executive's employment
hereunder.
(b) The Company has hired the Executive to work full time so
that anything the Executive produces during the Term and in connection with his
performance under this Agreement is the property of the Company. Any writing,
invention, design, system, process, development or discovery conceived,
developed, created or made by the Executive, alone or with others, during the
period of his employment hereunder and applicable to the business of the
Company, whether or not patentable, registrable, or copyrightable shall become
the sole and exclusive property of the Company.
(c) The Executive shall disclose the same promptly and
completely to the Company and shall, during the period of his employment
hereunder and at any time and from time to time hereafter, (i) execute all
documents requested by the Company for vesting in the Company the entire right,
title and interest in and to the same, (ii) execute all documents requested by
the Company for filing such applications for and procuring patents, trademarks,
service marks or copyrights as the Company, in its sole discretion, may desire
to prosecute, and (iii) give the Company all assistance it may reasonably
require, including the giving of testimony in any suit, action, investigation or
other proceeding, in order to obtain, maintain and protect the Company's right
therein and thereto.
8
9. Covenant Not To Compete.
------------------------
(a) Executive recognizes that the services to be performed by him
hereunder are special, unique and extraordinary. The parties confirm that it is
reasonably necessary for the protection of Company that Executive agree, and
accordingly, Executive does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 9(e) below):
(i) except as provided in Subsection (d) below, be engaged
in the manufacturing, sourcing, sale, marketing or
distribution of footwear products or provide technical
assistance, advice or counseling regarding the footwear
industry to any competitor of the Company or SML or
transact business, either on his own behalf or as an
officer, director, stockholder, partner, consultant,
associate, employee, owner, agent, creditor, independent
contractor, or co-venturer of any third party with any
such competitor; or
(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf
of herself or any third party, any employee or agent of
Company or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or
indirectly, for or on behalf of himself or any third party, at any time during
the term of the Agreement and during the Restricted Period solicit any customers
of the Company or any affiliate thereof in a manner which directly or indirectly
competes with the Company.
(c) If any of the restrictions contained in this Section 9 shall
be deemed to be unenforceable by reason of the extent, duration or geographical
scope thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form this Section shall then be
enforceable in the manner contemplated hereby.
9
(d) This Section 9 shall not be construed to prevent Executive
from owning, directly or indirectly, in the aggregate, an amount not exceeding
one percent (1%) of the issued and outstanding voting securities of any class of
any company whose voting capital stock is traded on a national securities
exchange or on the over-the-counter market other than securities of the Company.
(e) The term "Restricted Period," as used in this Section 9, shall
mean the period of Executive's actual employment hereunder plus twelve (12)
months thereafter.
(f) The provisions of this Section 9 shall survive the end of
the Restricted Period as provided in Section 9(e) hereof.
(g) In the event that the Executive breaches the terms and
provisions of Section 9(a)(i) above, the Company may terminate all unvested
options comprising the Option Bonus and shall be the Company's sole remedy
hereunder.
10. Miscellaneous.
--------------
10.1 Representations and Warranties of the Executive.
The Executive hereby represents and warrants to the Company as follows: (i) the
Executive has the legal capacity and unrestricted right to execute and deliver
this Agreement and to perform all of his obligations hereunder; (ii) the
execution and delivery of this Agreement by the Executive and the performance of
his obligations hereunder will not violate or be in conflict with any fiduciary
or other duty, instrument, agreement, document, arrangement or other
understanding to which the Executive is a party or by which he is or may be
bound or subject; and (iii) the Executive is not a party to any instrument,
agreement, document, arrangement or other understanding with any person (other
than the Company) requiring or restricting the use or disclosure of any
confidential information or the provision of any employment, consulting or other
services. The Executive agrees to indemnify the Company for any costs,
liabilities or expenses incurred by the Company as a result of a breach by the
Executive of this Section 10.1.
10.2 Injunctive Relief. Executive acknowledges that the
services to be rendered under the provisions of this Agreement are of a special,
unique and extraordinary character and that it would be difficult or impossible
to replace such services. Accordingly, Executive agrees that any breach or
10
threatened breach by him of Section 8 or Section 9 of this Agreement shall
entitle the Company, in addition to all other legal remedies available to it, to
apply to any court of competent jurisdiction to seek to enjoin such breach or
threatened breach. The parties understand and intend that each restriction
agreed to by Executive hereinabove shall be construed as separable and divisible
from every other restriction, that the unenforceability of any restriction shall
not limit the enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole or in part
as the circumstances warrant. In the event that any restriction in this
Agreement is more restrictive than permitted by law in the jurisdiction in which
Company seeks enforcement thereof, such restriction shall be limited to the
extent permitted by law.
10.3 Assignments. Neither Executive nor the Company may
assign or delegate any of their rights or duties under this Agreement without
the express written consent of the other.
10.4 Entire Agreement. This Agreement constitutes and
embodies the full and complete understanding and agreement of the parties with
respect to Executive's employment by Company, supersedes all prior
understandings and agreements, whether oral or written, between the Executive
and Company, and shall not be amended, modified or changed except by an
instrument in writing executed by the party to be charged. The invalidity or
partial invalidity of one or more provisions of this Agreement shall not
invalidate any other provision of this Agreement. No waiver by either party of
any provision or condition to be performed shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.5 Binding Effect. This Agreement shall inure to the
benefit of, be binding upon and enforceable against, the parties hereto and
their respective successors, heirs, beneficiaries and permitted assigns.
10.6 Headings. The headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage prepaid, or by
11
private overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party may hereafter
give notice of in accordance with the provisions hereof. Notices shall be deemed
given on the sooner of the date actually received or the third business day
after sending.
10.8 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to such State's conflicts of laws provisions. Each of the
parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of the Supreme Court of the State of New York, in New York County,
and of the United States District Court for the Southern District of New York in
connection with any suit, action or other proceeding concerning the
interpretation of this Agreement or enforcement of Sections 8 or 9 of this
Agreement. The Executive waives and agrees not to assert any defense that the
court lacks jurisdiction, venue is improper, inconvenient forum or otherwise.
The Executive waives the right to a jury trial and agrees to accept service of
process by certified mail at the Executive's last known address.
10.9 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one of the same instrument.
10.10 Separability. If any of the restrictions contained in
this Agreement shall be deemed to be unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form this Agreement shall
then be enforceable in the manner contemplated hereby.
10.11 Post Employment Obligations. (a) All records, files,
lists, including computer generated lists, drawings, documents, equipment and
similar items relating to the Company's business which the Executive shall
prepare or receive from the Company shall remain the Company's sole and
exclusive property. Upon termination of this Agreement, the Executive shall
promptly return to the Company all property of the Company in his possession.
12
The Executive further represents that he will not copy or cause to be copied,
print out or cause to be printed out any software, documents or other materials
originating with or belonging to the Company. The Executive additionally
represents that, upon termination of his employment with the Company, he will
not retain in his possession any such software, documents or other materials.
(b) The Executive agrees that during his employment he
shall, at the request of the Company, render all assistance and perform all
lawful acts that the Company considers necessary or advisable in connection with
any litigation involving the Company or any director, officer, employee,
shareholder, agent, representative, consultant, client or vendor of the Company.
In addition, following the Executive's employment with the Company, the
Executive shall provide the assistance and perform the acts set forth in the
preceding sentence at such times as are reasonably acceptable to him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ADESSO MADDEN, INC.
By: /s/ XXXXXX XXXXXX
------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
/s/ XXXXXX XXXXXXXXX
------------------------------
Xxxxxx Xxxxxxxxx
With respect to Sections 4.3 and 4.6 only:
XXXXXX XXXXXX, LTD.
By: /s/ XXXXXX XXXXXX
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
13
