AMENDMENT NUMBER 1 TO EMPLOYMENT AGREEMENT
------------------------------------------
AMENDMENT NUMBER 1 TO EMPLOYMENT AGREEMENT, dated as of July 1, 2002 by
and between XXXXXX XXXXXX, LTD., a Delaware corporation (the "Company"), and
XXXXXXX XXXXXXX, an individual residing at 000 Xxxxxxxxxxx Xxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxx 00000 (the "Executive").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and Executive entered into an Employment Agreement
dated as of January 3, 2001 (the "Employment Agreement");
WHEREAS, the Company and the Executive both desire to modify certain
provisions of the Employment Agreement;
WHEREAS, capitalized terms not otherwise defined herein shall have the
meaning ascribed thereto in the Employment Agreement.
NOW, THEREFORE, the parties mutually agree as follows:
1. Section 1 "Employment" of the Employment Agreement shall be
deleted from the Employment Agreement and replaced with the following provision:
Section 1. Employment. Effective immediately, the
Company shall employ Executive and the Executive hereby accepts such
employment, as the Company's President and Chief Operating Officer,
subject to the terms and conditions set forth in this Agreement.
2. Section 2 "Duties; Exclusive Services; Best Efforts" of the
Employment Agreement shall be deleted from the Employment Agreement and replaced
with the following provision:
Section 2. Duties; Exclusive Services; Best
Efforts. The Executive shall perform all duties incident to the
position of President and Chief Operating Officer as well as any other
duties as may from time to time be assigned by the Chief Executive
Officer, and agrees to abide by all By-laws, policies, practices,
procedures or rules of the Company. The Executive agrees to devote his
best efforts, energies and skill to the discharge of the duties and
responsibilities attributable to his position, and to this end, he will
devote his full business time and attention exclusively to the business
and affairs of
the Company. The Executive also agrees that he shall not take personal
advantage of any business opportunities which arise during his
employment and which may benefit the Company. All material facts
regarding such opportunities must be promptly reported to the Board of
Directors for consideration by the Company. Notwithstanding the
foregoing, the Executive may donate his time and efforts to charitable
causes so long as such endeavors do not effect his ability to perform
his duties under this Agreement.
3. Section 3 "Term of Employment; Vacation" of the Employment
Agreement shall be deleted from the Employment Agreement and replaced with the
following provision:
Section 3. Term of Employment; Vacation.
(a) Unless extended in writing by both
the Company and the Executive, the term of the Executive's employment
shall be for a period commencing on July 1, 2002 and ending on January
1, 2005, subject to earlier termination by the parties pursuant to
Section 5 and 6 hereof (the "Term").
(b) The Executive shall be entitled to
four (4) weeks vacation during each year of the Term.
4. Section 4.1 "Salary" of the Employment Agreement shall be
deleted from the Employment Agreement and replaced with the following provision:
4.1 Salary. Effective July 1, 2002, the Company
shall pay to Executive a base salary of Three Hundred Seventy Five
Thousand dollars ($375,000) per annum, subject to increases in
accordance with the terms of the next sentence of this Section 4.1,
less such deductions as shall be required to be withheld by applicable
law and regulations. On each July 1st during the Term (commencing on
July 1, 2003), the base salary shall be increased by ten percent (10%)
of the then-current base salary; provided, however, that the Company
shall not be required to increase the Executive's then-current base
salary unless the Company earns a net income of at least $1 for the
fiscal year immediately preceding the July 1st on which the increase to
the Executive's then-current base salary shall be effective.
Executive's base salary, as in effect at any time, is hereinafter
referred to as the "Base Salary." The Base Salary payable to Executive
shall be paid at such regular weekly, biweekly or semi-monthly time or
times as the Company makes payment of its regular payroll in the
regular course of business.
5. Subsection (a) of Section 4.3 "Performance Bonuses" of the
Employment Agreement shall be deleted from the Employment Agreement and replaced
with the following provision:
4.3 Performance Bonuses.
(a) The Executive shall be entitled to receive a cash
performance bonus for each year of service under the Term (though due
and owing based on 2004 results following the expiration of the Term)
based upon the Company's net earnings before the payment of interest
expenses and taxes and deductions for depreciation ("EBIT-D") as
2
reflected in the Company's annual report on Form 10-K (or its annual
financial statements in the event that the Company no longer prepares
annual reports on form 10-K). On or prior to April 15, 2003, 2004 and
2005, the Company shall pay to the Executive a cash performance bonus
equal to four percent (4%) of the amount by which the aggregate EBIT-D
for the fiscal year ending on the most recent December 31st exceeds
EBIT-D for the fiscal year ending on the preceding December 31st
(collectively the "Annual Cash Bonus"). The Annual Cash Bonus for the
fiscal year ending December 31, 2004 shall be pro-rated for the period
of the Executive's employment during that period. For example, if
EBIT-D for the year ending December 31, 2001 equals $20,000,000, and
EBIT-D for the year ending December 31, 2000 was $15,000,000, the
Executive would be entitled to receive an Annual Cash Bonus equal to
$100,000 ($20,000,000 - $15,000,000 - $5,000,000 x .02 = $100,000).
6. The following language shall be added to the end of subsection
(c) of Section 4.3 of the Employment Agreement:
Notwithstanding anything to the contrary in this Agreement, in
the event the Executive's employment under this Agreement is
terminated for any reason other than (i) the Company
terminating the Executive's employment for Cause or (ii) the
Executive terminating his employment without Good Reason, the
Executive shall receive a pro rata Option Bonus based on the
performance of the Company for the full fiscal year in which
the Executive's employment was terminated. Said pro rata
Option Bonus shall be granted to the Executive on the June
30th immediately following the Termination Date and shall be
fully vested and immediately exercisable by the Executive on
the date of grant.
7. The following section shall be added as subsection (d) of
Section 4.3 of the Employment Agreement:
(d) In addition to the foregoing compensation
and benefits, (including but not limited to the Option Bonus described
immediately above in Section 4.3(c)), on September 24, 2002 the
Executive shall receive a grant of non-qualified stock options to
purchase 75,000 shares of Common Stock, which options shall be
exercisable at a price equal to the closing bid price of the Company's
shares of Common Stock as reported by the Nasdaq Stock Market on the
date of the Company's annual meeting immediately preceding the date of
grant, and on or about the date of the Company's annual meeting for
each year during the Term (beginning in 2003), the Executive shall
receive an additional grant of non-qualified stock options to purchase
75,000 shares of Common Stock which shall be exercisable at a price
equal to the closing bid price of the Company's shares of Common Stock
on the date of grant as reported by the Nasdaq Stock Market (the
"Additional Option Bonus"). The options comprising the Additional
Option Bonus shall vest quarterly over a one (1) year period commencing
on the applicable date of grant.
3
Notwithstanding anything to the contrary herein, in
the event of a Change of Control or the termination of the Executive's
employment under Section 5 or Section 6(b), (c) or (d)(i) prior to the
vesting in full of the options granted to date to the Executive under
Section 4.3(c) and (d) hereof, such options shall vest and become
immediately exercisable as of the earlier of the date of the Change of
Control or Termination Date.
8. The following section shall be added as subsection (e) of
Section 4.3 of the Employment Agreement:
(e) In addition to the foregoing compensation and
benefits, if the Executive is employed by the Company on January 1,
2005 (the "Stock Grant Date") the Company shall grant to the Executive
on the Stock Grant Date 20,000 common shares of the Company (the "2005
Stock Grant"). The Company shall not place any restrictions on any of
the shares granted to the Executive pursuant to the 2005 Stock Grant.
Moreover, notwithstanding anything to the contrary herein, in the event
of a Change of Control or the termination of the Executive's employment
under Section 5 or Section 6(b), (c) or (d)(i) prior to the Stock Grant
Date, the Company shall award to the Executive the 2005 Stock Grant as
of the earlier of the date of the Change of Control or the Termination
Date.
9. The following language shall be added as Section 4.6 of the
Employment Agreement:
4.6 Amendment Number 1 Signing Bonus. Upon execution of
this Agreement by the parties, the Company shall deliver to the
Executive a signing bonus of One Hundred Thousand Dollars
($100,000.00).
10. Section 7(b) shall be deleted from the Employment Agreement
and replaced with the following provision:
(b) Upon the termination of the Executive's
employment (i) as a result of the Executive's death or Disability, or
(ii) the termination of this Agreement by the Executive without 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 right to receive (x) the Unpaid Salary Amount and
(y) the Expense Reimbursement Amount and (z) accrued and unpaid amounts
owed to the Executive under Section 4.3 hereof through the Termination
Date, including a pro-rata entitlement to such amounts equal to the
awards to which the Executive would have been entitled for the
applicable fiscal year pro-rated for the period of the Executive's
employment during such fiscal year, including the grant of a vested,
pro-rated portion of the stock options to which Executive would have
been entitled under Sections 4.3(c) and (d) (collectively, the
"Additional Payments").
11. Section 9(a)(i) shall be deleted from the Employment Agreement
and replaced with the following provision:
4
(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 or with Xxxxxxx
Xxxx Productions, Inc., Candie's, Inc., Sketchers U.S.A., Inc. or Xxxxx
Apparel Group, Inc. or any division, subsidiary or affiliate of any
such entities (collectively, the "Footwear Companies") 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 of the Footwear Companies; or
12. Section 9(e) shall be deleted from the Employment Agreement
and replaced with the following provision:
(e) The term "Restricted Period," as used in
this Section 9, shall mean the period of Executive's actual employment
hereunder plus six (6) months after the date Executive's employment is
terminated for any reason by Executive or the Company, provided,
however, that in the event Executive's employment is terminated by the
Company without Cause or this Agreement expires in accordance with its
terms, the term "Restricted Period" shall only include the period of
Executive's actual employment hereunder.
13. The following shall be added as Section 10.12 of the
Employment Agreement:
10.12 Reasonableness of Covenants. Executive
acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon
him pursuant to Sections 8 and 9 hereof. Executive agrees that said
restraints are necessary for the reasonable and proper protection of
the Company and its subsidiaries and affiliates, and that each and
every one of the restraints is reasonable in respect to subject matter,
length of time, geographic area and otherwise. Executive further
acknowledges that, in the event any provision of Sections 8 and 9
hereof shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time,
too large a geographic area, too great a range of activities or
otherwise, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
14. All other provisions of the Employment Agreement shall remain
in full force and effect.
5
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
XXXXXX XXXXXX, LTD.
By: /s/ XXXXXXXX X. XXXXXX
-------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Executive Officer
/s/ XXXXXXX XXXXXXX
-----------------------------------------
Xxxxxxx Xxxxxxx
6
