AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit10.3
PHYSICIANS
FORMULA, INC.
AMENDED
AND RESTATED
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made
as of May 6, 2008, by and between Physicians Formula, Inc., a New York
corporation (the "Company") and Xxxxxx
Xxxxxx ("Executive").
WHEREAS,
the Company and Executive are party to that certain employment agreement, dated
March 8, 2004 (the "Original Employment
Agreement").
WHEREAS,
the Company and Executive desire to amend and restate the Original Employment
Agreement in its entirety as set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Employment. The
Company shall employ Executive, and Executive agrees to continued employment
with the Company, upon the terms and conditions set forth in this Agreement for
the period beginning on the date hereof and ending as provided in paragraph 4
hereof (the "Employment
Period").
2. Position and
Duties.
(a) During
the Employment Period, Executive shall serve as Chief Financial Officer of
Physicians Formula Holdings, Inc. ("Parent"), the parent
company of the Company, and the Company and shall have the normal duties,
responsibilities, functions and authority of the Chief Financial Officer,
subject to the power and authority of Parent’s Board of Directors (the "Board") to expand or
limit such duties, responsibilities, functions and authority and to overrule
actions of officers of Parent or the Company, as applicable. During
the Employment Period, Executive shall render such administrative, and other
executive and managerial services to Parent and its Subsidiaries which are
consistent with Executive's position as the Board may from time to time
direct.
(b) During
the Employment Period, Executive shall report to the Chief Executive
Officer of Parent and shall devote his best efforts and his full business
time and attention (except for permitted vacation periods and reasonable periods
of illness or other incapacity) to the business and affairs of the Parent and
its Subsidiaries. Executive shall perform his duties,
responsibilities and functions to the Parent and its Subsidiaries hereunder to
the best of his abilities in a diligent, trustworthy, professional and efficient
manner and shall comply with Parent’s and its Subsidiaries' policies and
procedures in all material respects. During the Employment Period,
Executive shall not serve as an officer or director of, or otherwise perform
services for compensation for, any other entity without the prior written
consent of the Board; provided that Executive may
serve as an officer or director of or otherwise participate in purely
educational, welfare, social, religious and civic organizations so long as such
activities do not interfere with Executive's employment hereunder.
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(c) For
purposes of this Agreement, "Subsidiaries" shall
mean any corporation or other entity of which the securities or other ownership
interests having the voting power to elect a majority of the board of directors
or other governing body are, at the time of determination, owned by Parent,
directly or through one or more Subsidiaries.
3. Compensation and Benefits
During Employment Period.
(a) During
the Employment Period, Executive's base salary shall be $351,520 per annum or
such higher rate as the Board (or the Compensation Committee established by the
Board) may determine from time to time; provided that as soon as
reasonably practicable following publication of the index of wages and salaries
for all private industry white collar wages as published in the Employment Cost
Index by the Bureau of Labor Statistics after January 1, 2009, and annually
thereafter, the base salary shall be increased by no less than the amount
necessary to reflect any annual increase in such index (which shall be effective
as of January 1 of each such year) (as adjusted from time to time, the "Base Salary"), which
salary shall be payable by the Company in regular installments in accordance
with the Company's general payroll practices. In addition, during the
Employment Period, Executive shall be entitled to participate in all of the
Company's employee benefit programs for which senior executive employees of the
Company and its Subsidiaries are generally eligible.
(b) During
the Employment Period, the Company shall reimburse Executive for all reasonable
business expenses incurred by him in the course of performing his duties and
responsibilities under this Agreement which are consistent with the Company's
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to the Company's requirements with respect to
reporting and documentation of such expenses.
(c) In
addition to the Base Salary, Executive shall be eligible to receive an annual
bonus up to a maximum amount to be determined by the Board for each calendar
year during the Employment Period based upon achievement by Executive and
achievement by the Company of performance criteria and other goals established
by the Board (or the Compensation Committee established by the Board) on an
annual basis, in accordance with the Senior Executive Annual Bonus
Plan.
(d) All
amounts payable to Executive hereunder shall be subject to all required and
customary withholding by the Company.
4. Term.
The
Employment Period shall begin on the date hereof and, notwithstanding anything
in this Agreement to the contrary, expressed or implied, or Section 2924 of the
California Labor Code or any similar provision of applicable law, (a) the
Employment Period shall terminate immediately upon Executive's resignation,
death or Disability (as defined below) and (b) the Employment Period may be
terminated by the Company at any time for Cause (as defined below) or without
Cause. Except as otherwise provided herein, any termination of the
Employment Period by the Company shall be effective as of the date specified in
a written notice from the Company to Executive.
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5. Compensation and Benefits
After Termination of Employment Period.
(a) If the
Employment Period is terminated by the Company without Cause, Executive shall be
entitled to:
(i) continue
to receive his Base Salary at the then-current rate, payable in regular
installments, in accordance with the Company’s payroll payment schedule in
effect on the termination date, as special severance payments for a period of
twenty-four (24) months from the date of termination (the “Severance
Period”);
(ii) continued
use of a Company car for the Severance Period;
(iii) a portion
of the Target Annual Bonus pro-rated for the elapsed portion of the year to the
date of termination of employment, payable within 30 days after termination;
and
(iv) continue
to participate in all of the Company's employee benefit programs for which
senior executive employees of the Company and its Subsidiaries are generally
eligible (except for
any of the Company’s equity compensation plans) for the Severance
Period,
in each
case, if and only if Executive has executed and delivered to the Company a
general release of all claims against the Company and its directors, officers
and affiliates in form and substance satisfactory to the Company and only so
long as Executive has not revoked or breached the provisions of the general
release or breached the provisions of that certain Nonsolicitation and
Confidentiality Agreement, dated as of the date hereof, by and between the
Company and Executive, and does not apply for unemployment compensation
chargeable to the Company during the Severance Period, and Executive shall not
be entitled to any other salary, compensation or employee or other benefits
after termination of the Employment Period, except as specifically provided for
in the Company's employee benefit plans or as otherwise expressly required by
applicable law (such as COBRA).
(b) If a
Change in Control shall have occurred, and within one year following the Change
in Control the Employment Period is terminated by the Company without Cause,
Executive shall be entitled to the payments and benefits enumerated in clause
5(a) above, except that in lieu of 5(a)(iii) above the Executive shall be
entitled to the greater of:
(i) a
proportionate portion of the annual bonus award Executive would have earned if
the performance period had terminated on the date of the Change in Control,
based on the elapsed portion of the year to the date of the Change in Control
and the Company’s performance over that portion of the year, payable within 30
days after termination, and
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(ii) a portion
of the Target Annual Bonus pro-rated for the elapsed portion of the year to the
date of termination of employment, payable within 30 days after
termination;
in each
case, if and only if Executive has executed and delivered to the Company a
general release of all claims against the Company and its directors, officers
and affiliates in form and substance satisfactory to the Company and only so
long as Executive has not revoked or breached the provisions of the general
release or breached the provisions of that certain Nonsolicitation and
Confidentiality Agreement, dated as of the date hereof, by and between the
Company and Executive, and does not apply for unemployment compensation
chargeable to the Company during the Severance Period, and Executive shall not
be entitled to any other salary, compensation or employee or other benefits
after termination of the Employment Period, except as specifically provided for
in the Company's employee benefit plans or as otherwise expressly required by
applicable law (such as COBRA).
(c) Anything
in this Agreement to the contrary notwithstanding, in the event the Company
determines that any payment by the Company, Parent or any of its Subsidiaries in
connection with a Change in Control to or for the benefit of Executive (whether
paid or payable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would be
nondeductible by Parent for Federal income tax purposes because of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”), then the
amounts payable to Executive hereunder pursuant to clauses (a) and (b) above
(the “Severance Payments”) shall be reduced to the Reduced
Amount. The “Reduced Amount” shall
be that amount, if any, that maximizes the Severance Payments hereunder without
causing any Payment to be nondeductible by Parent because of Section 280G of the
Code.
(d) If the
Employment Period is terminated by the Company for Cause or is terminated upon
Executive's resignation, death or Disability pursuant to paragraph 4(a) above,
Executive shall only be entitled to receive his Base Salary through the date of
termination and shall not be entitled to any other salary, compensation or
employee or other benefits from the Company or its Subsidiaries thereafter,
except as otherwise specifically provided for under the Company's employee
benefit plans or as otherwise expressly required by applicable law (such as
COBRA).
(e) Except as
otherwise expressly provided herein, all of Executive's rights to salary,
bonuses, employee benefits and other compensation hereunder which would have
accrued or become payable after the termination of the Employment Period shall
cease upon such termination, other than those expressly required under
applicable law (such as COBRA).
(f) Notwithstanding
anything in this paragraph 5 to the contrary, if and to the extent that the
Company determines in good faith that (i) any payment or benefit that exceeds
two times the limit in effect under Section 401(a)(17) of the Code for the
calendar year of Executive’s termination (or, if less, two times Executive’s
annualized compensation for the preceding calendar year) and that is otherwise
payable to Executive under this paragraph 5 constitutes a “deferral of
compensation” under Section 409A of the Code (as set forth in Treasury
Regulations or binding administrative notices or rulings issued by the Internal
Revenue Service) and (ii) Executive is a “specified employee” within the meaning
of Section 409A(a)(2)(B)(i) of the Code, then the Company shall delay
commencement of any such payment or benefit until six months after Executive’s
last day of employment with the Company (the “409A Suspension
Period”). Within fourteen calendar days after the end of the 409A
Suspension Period, the Company shall pay Executive a lump sum payment in cash
equal to any payments and benefits that the Company would otherwise have been
required to provide under this paragraph 5 but for the imposition of the 409A
Suspension Period. Thereafter, Executive shall receive any remaining
payments and benefits due under this paragraph 5 in accordance with the terms of
this section (as if there had not been any suspension period
beforehand). It is the intention of the parties that the payments and
benefits to which Executive could become entitled in connection with termination
of employment under this Agreement comply with Section 409A of the Code. In the
event that the parties determine that any such benefit or right does not so
comply, they will negotiate reasonably and in good faith to amend the terms of
this Agreement such that it complies (in a manner that attempts to minimize the
economic impact of such amendment on Executive and the Company and its
affiliates).
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(g) For
purposes of this Agreement, "Cause" shall mean
with respect to Executive one or more of the following: (i) the
conviction of (or entry of a plea of guilty or nolo contendere to) a
felony or other crime involving moral turpitude or dishonesty, disloyalty or
fraud with respect to Parent or any of its Subsidiaries or any of their
customers or suppliers, (ii) reporting to work under the influence of alcohol or
illegal drugs, the use of illegal drugs (whether or not at the workplace) or
other repeated conduct causing Parent or any of its Subsidiaries substantial
public disgrace or disrepute or substantial economic harm, (iii) willful and
repeated failure to substantially perform duties as reasonably directed by the
Board which is not cured to the Board's reasonable satisfaction within 15
days after written notice thereof (which shall specifically identify the manner
in which the Board believes that Executive has not substantially performed his
duties) to Executive, (iv) a breach of Executive's duty of loyalty to
Parent or any of its Subsidiaries or affiliates or any act of dishonesty or
fraud with respect to Parent or any of its Subsidiaries or (v) any material
breach of this Agreement or any other agreement between Executive and Parent or
any of its affiliates (including, without limitation, that certain
Nonsolicitation and Confidentiality Agreement, dated as of the date hereof, by
and between Executive and the Company) which is not cured to the Board's
reasonable satisfaction within 15 days after written notice thereof to
Executive.
(h) For
purposes of this Agreement, "Disability" shall
mean Executive's inability to perform the essential duties, responsibilities and
functions of his position with the Parent and its Subsidiaries as a result of
any mental or physical disability or incapacity even with reasonable
accommodations of such disability or incapacity provided by Parent and its
Subsidiaries or if providing such accommodations would be unreasonable, all as
determined by the Board in its reasonable good faith
judgment. Executive shall cooperate in all respects with the Company
if a question arises as to whether he has become disabled (including, without
limitation, submitting to an examination by a medical doctor or other health
care specialists selected by the Company and authorizing such medical doctor or
such other health care specialist to discuss Executive's condition with the
Company) which is
not cured to the Board's reasonable satisfaction within 15 days after written
notice thereof to Executive.
(i) For
purposes of this Agreement, "Change of Control"
shall mean the occurrence of one of the following events:
(i) if any
"person" or "group" as those terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (as amended, the "Exchange Act") or any
successors thereto, other than any employee benefit plan of Parent or its
Subsidiaries or a trustee or other administrator or fiduciary holding securities
under an employee benefit plan of Parent or any of its Subsidiaries (an "Exempt
Person"), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act or any successor thereto), directly or indirectly, of
securities of Parent representing 50% or more of the combined voting power of
the Parent's then outstanding securities; or
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(ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board and any new directors whose election by the Board or
nomination for election by Parent’s stockholders was approved by at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election was previously so approved, cease
for any reason to constitute a majority thereof; or
(iii) consummation
of a merger or consolidation of Parent with any other corporation, other than a
merger or consolidation (A) which would result in all or a portion of the
voting securities of Parent outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of Parent or such surviving entity outstanding
immediately after such merger or consolidation or (B) by which the
corporate existence of Parent is not affected and following which Parent’s chief
executive officer and directors retain their positions with Parent (and
constitute at least a majority of the Board); or
(iv) consummation
of a sale or disposition by Parent of all or substantially all of Parent’s
assets, other than a sale to an Exempt Person;
provided,
however, that a transaction shall not constitute a Change of Control unless the
transaction also constitutes a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the Company’s
assets, within the meaning of Section 409A(a)(2)(A)(v) of the Code and the
regulations or other published guidance promulgated thereunder.
(j) For
purposes of this Agreement, "Target Annual Bonus" shall mean 50% of Executive’s
Base Salary in effect at the time of Executive’s termination.
6. Executive's
Representations. Executive hereby represents and warrants to
the Company that (i) the execution, delivery and performance of this Agreement
by Executive do not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has
consulted with independent legal counsel regarding his rights and obligations
under this Agreement and that he fully understands the terms and conditions
contained herein.
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7. Survival. Paragraphs
4 through 20, inclusive, shall survive and continue in full force in accordance
with their terms notwithstanding the expiration or termination of the Employment
Period.
8. Notices. Any
notice provided for in this Agreement shall be in writing and shall be either
personally delivered, sent by reputable overnight courier service or mailed by
first class mail, return receipt requested, to the recipient at the address
below indicated:
Notices to
Executive:
Xxxxxx Xxxxxx
000 X. Xxxxxx Xxxxxx
Xxx. 0000
Xxxxxxxx, XX 00000
Notices to the
Company:
Physicians
Formula, Inc.
0000 Xxxx
0xx
Xxxxxx
Xxxxx,
Xxxxxxxxxx 00000
Attention: Chief
Executive Officer
Telecopy: (000)
000-0000
or such
other address or to the attention of such other person as the recipient party
shall have specified by prior written notice to the sending
party. Any notice under this Agreement shall be deemed to have been
given when so delivered, sent or mailed.
9. Severability. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
action in any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
10. Complete
Agreement. This Agreement and the Nonsolicitation and
Confidentiality Agreement referred to herein embodies the complete agreement and
understanding among the parties hereto and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any
way.
11. No Strict
Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
party.
12. Counterparts. This
Agreement may be executed in separate counterparts (including by means of
telecopied signature pages), each of which is deemed to be an original and all
of which taken together constitute one and the same agreement.
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13. Successors and
Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive, the Company and their respective
heirs, successors and assigns, except that Executive may not assign his rights
or delegate his duties or obligations hereunder without the prior written
consent of the Company.
14. Choice of
Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of California, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
15. Amendment and
Waiver. The provisions of this Agreement may be amended or
waived only with the prior written consent of the Company (as approved by the
Board) and Executive, and no course of conduct or course of dealing or failure
or delay by any party hereto in enforcing or exercising any of the provisions of
this Agreement shall affect the validity, binding effect or enforceability of
this Agreement or be deemed to be an implied waiver of any provision of this
Agreement.
16. Insurance. Parent
or its Subsidiaries may, at its discretion, apply for and procure in its own
name and for its own benefit life and/or disability insurance on Executive in
any amount or amounts considered advisable. Executive agrees to
cooperate in any medical or other examination, supply any information and
execute and deliver any applications or other instruments in writing as may be
reasonably necessary to obtain and constitute such insurance.
17. Reimbursement of Payments on
Behalf of Executive. Parent and its Subsidiaries shall be
entitled to deduct or withhold from any amounts owing from Parent or any of its
Subsidiaries to Executive any federal, state, local or foreign withholding
taxes, excise tax, or employment taxes ("Taxes") imposed with
respect to Executive's compensation or other payments from Parent or any of its
Subsidiaries or Executive's ownership interest in Parent or any of its direct or
indirect parent companies (including, without limitation, wages, bonuses,
dividends, the receipt or exercise of equity options and/or the receipt or
vesting of restricted equity). In the event Parent or any of its
Subsidiaries does not make such deductions or withholdings, Executive shall
indemnify Parent and its Subsidiaries for any amounts paid with respect to any
such Taxes.
18. Arbitration.
(a) Except
with respect to disputes and claims arising under the Nonsolicitation and
Confidentiality Agreement (which the parties hereto may pursue in any court of
competent jurisdiction as specified below and with respect to which each party
shall bear the cost of his or its own attorneys' fees and expenses, except to
the extent otherwise required by applicable law), each party hereto agrees that
arbitration, pursuant to the procedures set forth in the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (as
adopted and effective as of June 1, 1997 or such later version as may then be in
effect) (the "AAA
Rules"), shall be the sole and exclusive method for resolving any claim
or dispute ("Claim") arising out
of or relating to the rights and obligations of the parties under this Agreement
and the employment of Executive by the Company (including, without limitation,
claims and disputes regarding employment discrimination, sexual harassment,
termination and discharge), whether such claim arose or the facts on which such
Claim is based occurred prior to or after the execution and delivery of this
Agreement. The parties hereto agree that (i) one arbitrator shall be
appointed pursuant to the AAA Rules to conduct any such arbitration, (ii) all
meetings of the parties and all hearings with respect to any such arbitration
shall take place in Los Angeles, California, (iii) each party to the arbitration
shall bear his or its own costs and expenses (including, without limitation, all
attorneys' fees and expenses, except to the extent otherwise required by
applicable law) and (iv) all costs and expenses of the arbitration proceeding
(such as filing fees, the arbitrator's fees, hearing expenses, etc.) shall be
borne equally by the parties hereto; provided that at the
conclusion of the arbitration, the arbitrator shall award costs and expenses
(including the costs of the arbitration previously advanced, the costs of
mediation as set forth in subparagraph (b) below, and the fees and expenses of
attorneys, accountants and other experts) to the parties hereto based upon the
relative fault of each such party as determined by the
arbitrator. The parties agree that the judgment, award or other
determination of any arbitration under the AAA Rules shall be final, conclusive
and binding on all of the parties hereto. Nothing in this paragraph
18 shall prohibit any party hereto from instituting litigation to enforce any
final judgment, award or determination of the arbitration. Each party
hereto hereby irrevocably submits to the jurisdiction of the federal courts
(and, if jurisdiction in the federal courts is not proper, then the state
courts) sitting in Los Angeles, California, and agrees that either court shall
be the exclusive forum for the enforcement of any such final judgment, award or
determination of the arbitration. Each party hereto irrevocably
consents to service of process by registered mail or personal service and waives
any objection on the grounds of personal jurisdiction, venue or inconvenience of
the forum. Each party hereto further agrees that each other party
hereto may initiate litigation in any court of competent jurisdiction to execute
any judicial judgment enforcing or not enforcing any award, judgment or
determination of the arbitration.
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(b) Notwithstanding
the foregoing, prior to any party hereto instituting any arbitration proceeding
hereunder to resolve any Claim, such party first shall submit the Claim to a
mediation proceeding between the parties hereto which shall be governed by the
prevailing procedures of the American Arbitration Association and shall be
conducted in Los Angeles, California. If the parties hereto have not
agreed in writing to a resolution of the Claim pursuant to the mediation within
45 days after the commencement thereof of if any party refuses to participate in
the mediation process, then the Claim may be submitted to arbitration under
paragraph (a) above. Each party hereto shall bear his or its own
costs and expenses incurred in connection with the mediation, and all costs and
expenses of the mediation proceeding shall be borne equally by the parties
hereto unless otherwise determined by the parties hereto.
19. Waiver of Jury
Trial. As a specifically bargained for inducement for each of
the parties hereto to enter into this Agreement (after having the opportunity to
consult with counsel), each party hereto expressly waives the right to trail by
jury in any lawsuit or proceeding relating to or arising in any way from this
Agreement or the matters contemplated hereby.
20. Third Party
Beneficiary. The parties agree that Parent is an
intended third party beneficiary of this Agreement.
* * * * *
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
| PHYSICIANS FORMULA, INC. | |||
|
|
By:
|
/s/ Xxxxxx
Xxxxxx
|
|
| Its: | Chief Executive Officer | ||
| /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | |||
|
Acknowledged
and Agreed:
|
|
By:
|
/s/ Xxxxxx Xxxxxx | |
| Its: | Chief Executive Officer | |
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