Exhibit 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of May 2, 2005
(the "Effective Date"), by and between Castle Brands, Inc, a Delaware
corporation (the "Company") and Xxxxx X. Xxxxxxxxx (the "Executive"). In
consideration of the mutual covenants contained in this Agreement, the Company
and the Executive agree as follows:
1. Definitions.
(a) "Change of Control" shall occur if the Company (a) is a party to a
merger, consolidation or exchange of securities which results in the holders of
voting securities of the Company outstanding immediately prior thereto failing
to continue to hold at least 50% of the combined voting power of the voting
securities of the Company, the surviving entity or a parent of the surviving
entity outstanding immediately after such merger, consolidation or exchange, or
(b) sells or disposes of all or substantially all of the Company's assets.
(b) "Disability" shall mean a mental or physical disability because of
which Executive cannot continue to perform the essential functions of his
position, with or without a reasonable accommodation.
(c) "Successor" shall mean any successor (whether direct or indirect)
by purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation or otherwise to all or substantially all of the assets of the
Company.
2. Employment Capacity; Employment at Will.
(a) As of the Effective Date, the Company agrees to employ the
Executive, and the Executive agrees to serve the Company, as Chief Operating
Officer of the Company, with such duties consistent with such capacity as may be
assigned to him by the Board of Directors or the President of the Company. The
Executive shall perform all services to be rendered hereunder faithfully, devote
his full business time and attention to the duties assigned to him by the Board
of Directors of the Company and use his best efforts to promote the business
interest of the Company.
(b) Employment of the Executive pursuant to the terms of this
Agreement shall continue from day to day until terminated by the Company or the
Executive, subject to the terms and conditions hereinafter set forth.
3. Compensation and Benefits. The Company agrees to compensate the
Executive for the services rendered by him during his employment as follows:
(a) Salary. Commencing on the Effective Date, the Company shall pay
the Executive an annual base salary of $270,000 ("Base Salary"), payable
semi-monthly in arrears in accordance with the standard payroll practices of the
Company. The Executive's Base Salary shall be reviewed at least annually at
which times it shall be subject to increase in the discretion of the Board of
Directors. Notwithstanding the foregoing, an increase in the Executive's Base
Salary to an annual base salary of $300,000 will be considered by the
Compensation Committee of the Board of Directors of the Company ("Compensation
Committee") in January 2006, based
on targeted achievements to be decided upon between the Executive and the
Chairman and Chief Executive Officer.
(b) Bonus. The Executive shall be eligible to receive an incentive
performance bonus up to a maximum of 100% of the Executive's Base Salary
("Incentive Performance Bonus"), subject to the successful achievement of a
series of goals and objectives to be agreed upon with the Chairman and Chief
Executive Office of the Company. The Incentive Performance Bonus will be paid
following the end of the Company's fiscal year. For the first year of
employment, the first $100,000 of the Incentive Performance Bonus, if any, shall
be payable to the Executive in January, 2006, after completion of the review of
achievements by the Compensation Committee of the Company, and the balance, if
any, shall be payable after the end of the Company's 2005 fiscal year (year
ending March 31, 2006). On all subsequent years the Incentive Performance Bonus
will be paid following the end of the Company's fiscal year.
(c) Stock Options. The Company shall grant to the Executive 150,000
stock options at a strike price of $8.00 per share, pursuant to a Stock Option
Agreement to be entered into between the Company and the Executive. The options
shall vest over a four year period with 25% of the shares vesting each year on
the anniversary of the Effective Date. Subject to the Executive's prior consent,
which consent shall not be unreasonably withheld, the Company shall have the
right to replace the stock options with an alternate form of compensation that
is of the same or greater economic value to the Executive.
(d) Benefits. (i) The Executive shall be permitted to participate in
the employee medical, retirement and insurance benefit plans applicable to
officers of the Company, and such other plans as may from time to time be made
available or applicable to the Executive, consistent with the policies of the
Company.
(ii) The Executive shall be permitted to take four (4) weeks of
paid vacation annually to be earned and used in accordance with the Company's
vacation policy. Accrued vacation not taken in any calendar year may be carried
forward or be usable in any subsequent calendar year in accordance with the
Company's vacation policy. Paid holidays may be taken in accordance with the
holiday policy and schedule of the Company as from time to time in effect.
(iii) The Company shall reimburse the Executive, consistent with
the Company's policies, for all reasonable and necessary out-of-pocket travel,
business entertainment and other business expenses incurred or expended by him
incident to the performance of his duties hereunder.
(e) Car Allowance. The Company shall provide the Executive with a car
allowance of $900 per month.
4. Termination and Termination Benefits
(a) Termination for Cause. Executive's employment under this Agreement
may be terminated for Cause without further liability on the part of the company
upon written notice from Chief Executive officer of any of the following:
2
(i) the failure by the Executive to perform the Executive's
duties or responsibilities under this Agreement (other than any such failure due
to physical or mental illness) and which Executive does not remedy within thirty
days after receipt of written notice from the Company, which notice identifies
the manner in which the Company believes that Executive has not performed his
duties and responsibilities;
(ii) a finding by the Company, after notice to the Executive and
an opportunity for him to be heard, that the Executive has engaged in any fraud,
embezzlement or material act of dishonesty affecting the Company; or
(iii) the Executive's conviction for a felony or any lesser crime
that would require his removal from any federal or state license or permit, or
which would require his removal from any such Company license or permit.
(b) Termination Without Cause. Subject to the payment of Termination
Benefits to the extent provided under Section 4(f), the Executive's employment
under this Agreement may be terminated by the Company without Cause upon written
notice to the Executive by the Chief Executive Officer.
(c) Termination by Reason of Disability. Subject to the payment of
Termination Benefits to the extent provided under Section 4(f), the Executive's
employment under this Agreement may be terminated by the Company by Reason of
Disability on the 30th day following the delivery to Executive of written notice
from the Company that Executive has been terminated by reason of Disability;
provided that any such notice given before the close of a continuous period of
three (3) months during which Executive shall have been incapable of performing
the essential functions of his position by reason of Disability shall be deemed
to be provided at the close of such period. The determination that Executive is
disabled within the meaning of this Agreement shall be made upon the advice of
an independent qualified physician, in the case of a physical disability, or an
independent qualified psychiatrist, in the case of a mental disability, who has
been selected by the Company with the approval of the Executive, which approval
shall not be unreasonably withheld.
(d) Resignation By the Executive for Good Reason. Subject to the
payment of Termination Benefits to the extent provided under Section 4(f), the
Executive may resign his employment under this Agreement for Good Reason upon
written notice to the Chief Executive Officer. Any of the following shall
constitute "Good Reason" for such resignation:
(i) the continued failure by the Company (or any Successor) to
perform its obligations under this Agreement for a period of thirty (30) days
after a written demand for substantial performance is delivered to the Company
by the Executive, which demand specifically identifies the manner in which
Executive believes that the Company has not performed its obligations;
(ii) a demotion or significant diminution of the Executive's
responsibilities and/or duties;
(iii) a material loss of title or office;
3
(iv) the relocation of Executive's principal work location (other
than on a temporary basis) to a location more than fifty (50) miles from
Executive's principal Work location as of the Effective Date; or
(v) a Change of Control of the Company.
(e) Resignation by the Executive Without Good Reason. The Executive
may resign his employment under this Agreement upon sixty (60) days written
notice to the Chief Executive Officer.
(f) Certain Termination Benefits. In the event the Company terminates
this Agreement of the Executive's employment with the Company is terminated
pursuant to Sections 4(b), 4(c) or 4(d) above, the Company shall provide to the
Executive the following termination benefits ("Termination Benefits" ), provided
the Executive signs the form of general release attached hereto as Exhibit A:
(i) If the termination occurs on or before the first anniversary
of the Effective Date of this Agreement, the Termination Benefits shall consist
of (A) continuation of the Executive's Salary at the rate then in effect for a
period of six (6) months, (B) the Incentive Performance Bonus with respect to
the year in which termination occurs (pro rated for the portion of the year in
which the Executive was so employed) and (C) continuation of group health plan
benefits ("Continuation Coverage") for a period of six (6) months or such longer
period as may be required under federal law. During the first six (6) months of
the Continuation Coverage period, the premium costs for the Continuation
Coverage shall be shared by the Company and the Executive in the same relative
proportion as in effect on the date of termination.
(ii) If the termination occurs after the first anniversary of the
Effective Date of this Agreement, the Termination Benefits shall consist of (A)
continuation of the Executive's Salary at the rate then in effect for a period
of twelve (12) months, (B) the Incentive Performance Bonus with respect to the
year in which termination occurs (pro rated for the portion of the year in which
the Executive was so employed), and (C) continuation of group health plan
benefits for a period of twelve (12) months or such longer period as may be
required under federal law. During the first twelve (12) months of the
Continuation Coverage period, the premium costs for the Continuation Coverage
shall be shared by the Company and the Executive in the same relative proportion
as an effect on the date of termination.
(g) Termination Upon Death. This Agreement will terminate
automatically upon the death of the Executive. In the event that the employment
of the Executive is terminated pursuant to this Section 4(g), the Company will
pay to the representative of the Executive the amount of all accrued but unpaid
Base Salary to the date of such termination, and the Incentive Performance Bonus
with respect to the year in which termination occurs (pro rated for the portion
of the year in which the Executive was so employed) in accordance with Company
policy.
(h) Other Entitlements. Nothing in this Section 4 shall deprive the
Executive of any accrued benefits to which he has acquired a vested right under
any employee benefit plan,
4
stock plan or deferred compensation arrangement, or to any health care
continuation coverage to the extent required by applicable law.
5. Nonsolicitation. In consideration of this Agreement and all the
provisions contained herein, and in view of the Executive's participation in and
access to the unique and valuable information of the current and proposed
business activities of the Company in all its aspects, the Executive covenants
and agrees that during the term of the Executive's employment (including any
subsequent period during which the Executive renders consulting or advisory
services to the Company) and thereafter for a period of (i) six months following
termination of employment, if such termination occurs on or before the first
anniversary of the Effective Date, or (ii) one year following termination of
employment, if such termination occurs after the first anniversary of the
Effective Date, the Executive shall not, directly or indirectly:
(i) solicit or induce, or assist other to solicit or induce, any
individual who is an actual or prospective employee, consultant or agent of the
Company to terminate his or her employment or prospective employment
relationship or offer employment to or hire or otherwise engage any such
individual; provided that nothing herein shall prevent general solicitation
through advertising or similar means which are not specifically directed at
employees of, consultants to or agent of the Company; or
(ii) solicit or induce, or assist others to solicit or induce,
any distributors, manufacturers, suppliers, customers or representatives with
whom the Company is doing business to terminate or otherwise curtail or impair
their business relationship with the Company.
6. Withholding. All payments provided for hereunder shall be reduced by
payroll taxes and withholding required by any federal, state or local law, and
any additional withholding to which the Executive has agreed in writing.
7. Successors, Assignment, etc. Except as hereinafter set forth, this
Agreement shall be binding upon and inure to the benefit of the Executive and
the Company and their respective permitted Successors. Neither this Agreement
nor any of the rights or benefits hereunder may be assigned by the Executive. In
the event the Company merges or consolidates with or into any other corporation
or sells or otherwise transfers substantially all of its assets to another
corporation, the provisions of this Agreement shall be binding upon and inure to
the benefit of the corporation surviving or resulting from the merger or
consolidation or to which such assets are sold or transferred.
8. Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
9. Notices. Any termination of Executive's employment by the Company or by
Executive other than by reason of death shall be communicated by written notice
of termination
5
to the other party hereto. In case of any termination of Executive's employment
by the Company for Cause or Disability, or by Executive for Good Reason, such
notice shall set forth the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail all facts claimed to
provide a basis under the provision indicated. The notice shall be hand
delivered or sent by registered or certified mail and mailed to Executive at the
last address he has filed with the Company's principal executive offices, or to
the Company at its principal executive offices.
10. Entire Agreement; Amendment; Waivers. This Agreement contains the
entire agreement between the parties relating to the subject matter hereof and
supersedes any prior or other understanding, agreements or representations
relating thereto. This Agreement may not be amended, modified or supplemented
except by an agreement in writing signed by the parties hereto. Waiver by any
part of any breach of this Agreement shall not operate or be construed as a
continuing waiver or as a waiver of any subsequent breach.
11. Governing Law. This Agreement has been executed and delivered in the
State of New York and its validity, interpretation, performance and enforcement
shall be governed by the laws of said State without regard to principles of
conflict of laws.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
IN WITNESS WHEREOF, this Agreement has been executed by the Company,
by its duly authorized officer, and by the Executive, as of the Effective Date.
CASTLE BRANDS INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman and CEO and President
/s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxxxx
6
EXHIBIT A
FORM OF GENERAL RELEASE
GENERAL RELEASE
1. (a) As a condition to and in consideration of the payments and benefits
described in Section 4(f) of the Agreement dated May 2, 2005 between Castle
Brands, Inc. and me relating to my employment with Castle Brands, Inc., and for
other good and valuable consideration, I, with the intention of binding myself
and my heirs, beneficiaries, trustees, administrators, executives, assigns and
legal representatives (collectively, the "Releasors"), hereby irrevocably and
unconditionally release, remise, and forever discharge Castle Brands Inc. and
the Releasees (as hereinafter defined) with respect to any and all agreements,
promises, rights, liabilities, claims, and demands of any kind whatsoever (upon
any legal or equitable theory, whether contractual, common law, or statutory,
under federal, state or local law or otherwise), whether known or unknown,
asserted or unasserted, fixed or contingent, apparent or concealed, that the
Releasors ever had, now have or hereafter can, shall or may have for, upon, or
by reason of any matter, cause or thing whatsoever existing, accruing, arising
or occurring at any time on or prior to the date I execute this General Release,
including, without limitation, (i) any and all rights and claims arising out of
or in connection with my employment by Castle Brands Inc., the terms and
conditions of such employment, or the termination of my employment; (ii) any and
all contract claims, claims for bonuses, claims for severance allowances or
entitlements; (iii) fraud claims, defamation, disparages and other personal
injury and tort claims; and (iv) claims under any federal, state, or municipal
employee benefit, wage payment, discrimination, or fair employment practices law
(e.g., on the basis of sex, religion, age, race, or disability), statute, or
regulation, and claims for costs and expenses (including but not limited to
experts' fees and attorneys' fees) with respect thereto. This General Release
includes, without limitation, any and all rights and claims under the Title VII
of the Civil Rights Act of 1964, as amended, the Employee Retirement Income
Security Act of 1974, the Americans with Disabilities Act of 1990, the U.S.
Pregnancy Discrimination Act, the U.S. Family and Medical Leave Act, the U.S.
Fair Labor Standards Act, the U.S. Equal Pay Act, The Workers Adjustment and
Notification Act, the Equal Pay Act of 1963, the Age Discrimination in
Employment Act of 1967, the Older Workers Benefit Protection Act of 1990, the
Civil Rights Act of 1866, the Family and Medical Leave Act of 1993, the Civil
Rights Act of 1991, the New York Conscientious Employee Protection Act, the New
York Equal Pay Act, the New York Smokers' Rights Law, the New York Family Leave
Act, the New York Genetic Privacy Act, and the New York Constitution, in each
case as such laws have been or may be amended. Nothing in this General Release
shall deprive me of any compensation that was earned but not paid prior to my
termination; accrued benefits to which I have acquired a vested right under any
employee benefit plan or policy, stock plan or deferred compensation
arrangement; any health care continuation coverage to the extent required by
applicable law; or any right that I may have under the Agreement dated May 2,
2005.
(b) For purposes of this General Release, the term "Castle Brands Inc.
and the Releasees" includes Castle Brands Inc., its past and present direct and
indirect affiliates, successors, assigns, and all of its and their past,
present, and future employees, officers, directors, attorneys, agents, and legal
representatives, whether acting as agents or in individual capacities,
and this General Release shall inure to the benefit of and shall be binding and
enforceable by all such entities and individuals.
2. (a) Opportunity to Review. I acknowledge that before signing this
General Release, I was given a period of at least 21 days in which to review and
consider it. I acknowledge that I was encouraged by Castle Brands, Inc. to
review this General Release, and that to the extent I wish to do so I have done
so. I further acknowledge that I have read this General Release in its entirety,
and that I fully understand the terms and legal effect of this General Release.
I am entering into this General Release voluntarily and of my own free will. If
I executed this General Release before the end of the 21-day period, such early
execution was completely voluntary, and I had reasonable and ample time in which
to review this General Release.
(b) Revocability. I agree that, for a period of seven days after I
sign this General Release (the "Revocation Period"), I have the right to revoke
it by providing notice, in writing (delivered by hand or by overnight mail), to
Castle Brands Inc., Attention: Xxxx Xxxxxxx. Notwithstanding anything contained
herein to the contrary, this General Release will not become effective and
enforceable until after the expiration of the Revocation Period.
Date signed: May 2, 2005
/s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
8
