EXHIBIT 10.28
EXECUTION
COPY
CONSULTING
AGREEMENT
THIS CONSULTING
AGREEMENT dated as of April 9, 2007 between PERFORMANCE
ENHANCEMENT PARTNERS, LLC (‘‘Consultant’’),
a Florida limited liability company having its place of business at
,
and MOVIE STAR, INC., a New York corporation having its principal
office at 1115 Broadway, New York, New York 10010
(‘‘Company’’).
WHEREAS, the Company
desires to retain Consultant to provide the Company with the
personal services of Peter G. Cole
(‘‘Cole’’) to (i) facilitate the timely and
successful completion of the transactions contemplated by the
Agreement and Plan of Merger (‘‘Merger
Agreement’’), dated as of December 18, 2006,
by and among the Company, Fred Merger Corp. and FOH Holdings, Inc.
(‘‘FOH’’), and (ii) serve as the Executive
Chairman of the Company following the closing of the transactions
contemplated by the Merger Agreement (the
‘‘Merger’’); and
WHEREAS, the Consultant
is willing to provide such services to the Company upon the terms
and conditions hereinafter set forth.
IT IS AGREED:
1.
Services .
1.1
General .
(a) During
the Pre-Merger Term (as defined herein), Consultant shall provide
the Company with the personal services of Cole to act as the lead
member of the Board of Directors of the Company. The Company and
Consultant acknowledge that Cole’s primary functions and
duties as lead director shall be to facilitate the timely and
successful completion of the Merger.
(b) During
the Post-Merger Term (as defined herein), Consultant shall provide
the Company with the personal services of Cole to serve as the
Executive Chairman of the Company. All of Cole’s powers and
authority in any capacity shall at all times be subject to the
direction and control of the Company’s Board of Directors.
The Board may assign to Cole such general management and
supervisory responsibilities and executive duties for the Company
or any subsidiary of the Company, including serving as a director,
as are consistent with Cole’s status as Executive Chairman.
The Company and Consultant acknowledge that Cole’s primary
functions and duties as Executive Chairman shall be to: oversee
post-Merger operations integration; lead strategic planning
initiatives; instill best practices within a performance-based
culture; when established, directly oversee holding company
operating activities; and organize and lead board
meetings.
1.2
Full-Time Position . Consultant
agrees to cause Cole to devote substantially all of his business
time, energies and attention to the business and affairs of the
Company in the performance of his duties hereunder. Consultant will
not, without the prior written consent of the Company, during the
term of this Agreement, be engaged in any other commercial activity
whether or not pursued for gain, profit or other pecuniary
advantage; provided, however, that Cole may continue to serve as a
director of Previsor, Inc. Further, Cole agrees to devote
substantially all of his business time, energies and attention to
the business and affairs of the Consultant and the performance of
Consultant’s obligations to the Company as hereinbefore
described. Nothing herein shall be construed as preventing Cole
from making and supervising personal investments, provided they
will not interfere with the performance of his duties hereunder or
violate the provisions of Section 5.4 hereof.
1.3
Location . Consultant and Cole are
based in
.
Cole shall undertake such travel, within or outside the United
States, as is reasonably necessary in the interests of the Company
to fully perform his duties hereunder.
2.
Term.
2.1 The
period referred to herein as the ‘‘Pre-Merger
Term’’ commenced as of January 1, 2007
(‘‘Commencement Date’’) and shall continue
until the closing date of the Merger, unless terminated earlier as
hereinafter provided in this Agreement. The period referred to
herein as the ‘‘Post-Merger Term’’ shall
commence on the closing date of the Merger and shall continue until
July 26, 2008, unless terminated earlier as hereinafter
provided in this Agreement. The Company shall have the option to
extend the Agreement for up to two additional six-month periods
(each, an ‘‘Extension Period’’) by giving
Consultant written notice of not less than ninety (90) days prior
to the expiration of the Post-Merger Term or any such Extension
Period. The period of the Pre-Merger Term, the Post-Merger Term and
any Extension Period are collectively referred to herein as the
‘‘Term.’’
3.
Consulting Fees .
3.1
One-Time Engagement Fee . Unless this
Agreement is terminated earlier as provided herein, the Company
shall issue to Consultant 100,000 shares of the Company’s
common stock, $.01 par value (‘‘Common
Stock’’) on the closing date of the Merger. The number
of shares of Common Stock to be issued shall be determined as if
such shares were issued immediately prior to the record date of any
stock split effected by the Company on or before the closing date
of the Merger.
3.2 Base
Consulting Fee . During the Term, the
Company shall pay Consultant a consulting fee at the annual rate of
$400,000 (‘‘Base Consulting Fee’’), payable
in four equal quarterly installments in arrears, with the first
payment to be made on or about April 1, 2007. As of the
Commencement Date, the Base Consulting Fee shall be paid to
Consultant in lieu of any director fees payable to Cole for
services as a member of the Company’s Board of
Directors.
3.3
Additional Consulting Fee .
(a) For the
year ending July 28, 2007 (which shall be the fiscal year
end of the Company following the closing of the Merger), the
Company shall pay Consultant such additional consulting fee, if
any, as determined on a discretionary basis by the Board of
Directors of the Company (with Cole not participating in the
determination) based upon the recommendation of the Company’s
Compensation Committee.
(b) For the
fiscal year ending July 26, 2008, the Company shall pay
Consultant an additional consulting fee in accordance with the
terms of a plan (‘‘Bonus Plan’’) intended
to be adopted by the Company’s Compensation Committee
following the closing of the Merger, but not later than
September 30, 2007 (‘‘Bonus Plan Adoption
Date’’). Such additional consulting fee shall not be
less than $100,000 (‘‘Minimum Guarantee’’).
If the Company elects to extend this Agreement for one or both
Extension Periods, the Company shall pay Consultant an additional
consulting fee for each Extension Period as provided in the Bonus
Plan, with the Minimum Guarantee to be prorated for partial
years.
(c) Any
amounts due under this Section 3.3 shall be payable to the
Consultant within 90 days of the end of the applicable fiscal year
in a cash lump-sum payment.
3.4
Options .
(a) Post
Merger Term Options . As additional
compensation for Consultant entering into this Agreement and
agreeing to be bound by its terms and for the services to be
rendered by Consultant hereunder, unless this Agreement is
terminated earlier as provided herein, on the closing date of the
Merger, the Company shall grant to Consultant a non-qualified
option (‘‘Option’’) to purchase 275,000
shares of Common Stock under the Company’s 2000 Performance
Equity Plan (‘‘Plan’’). The Option shall be
evidenced by a Stock Option Agreement, dated the closing date of
the Merger (‘‘Grant Date’’), in the form
attached hereto as Exhibit A-1. The Option shall have an exercise
price equal to the Fair Market Value (as defined in the Plan) of a
share of Common Stock on the Grant Date. Except as otherwise
provided in the Stock Option Agreement, 75,000 shares will vest on
the Grant Date, 100,000 shares will vest on
January 3, 2008 and 100,000 shares will vest on
July 26, 2008. The Option shall expire on the day
immediately preceding the fifth anniversary of the Grant
Date.
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(b)
Extension Period Options . If the
Company elects to extend this Agreement for one or both Extension
Periods, unless this Agreement is terminated earlier as provided
herein, upon the commencement date of each Extension Period, the
Company shall grant to Consultant a non-qualified option (each, an
‘‘Extension Option’’) to purchase 50,000
shares of Common Stock under the Plan. Each Extension Option shall
be evidenced by a Stock Option Agreement, dated the commencement
date of the relevant Extension Period (‘‘Extension
Option Grant Date’’), in the form attached hereto as
Exhibit A-2 . Each Extension Option shall have an exercise
price equal to the Fair Market Value (as defined in the Plan) of a
share of Common Stock on each Extension Option Grant Date. Except
as otherwise provided in the Stock Option Agreement, all 50,000
shares will vest on the six-month anniversary of the applicable
Extension Option Grant Date. Each Extension Option shall expire on
the day immediately preceding the fifth anniversary of the
applicable Extension Option Grant Date.
3.5
Expenses . The Company will pay or
reimburse Consultant for all transportation, hotel and other
expenses reasonably incurred by Consultant on business trips
(including expenses reasonably incurred on business trips between
Florida and the Company’s principal offices in New York) and
for all other ordinary and reasonable out-of-pocket expenses
actually incurred by Consultant in the conduct of the business of
the Company against itemized vouchers submitted with respect to any
such expenses and approved in accordance with customary
procedures.
4.
Termination .
4.1
Death . If Cole dies during the Term,
this Agreement shall immediately terminate and the Company shall
pay to Consultant the amount set forth in Section
4.7(a).
4.2
Disability . The Company, by written
notice to Consultant, may terminate this Agreement if Cole shall
fail because of illness or incapacity to render services of the
character contemplated by this Agreement for ninety (90)
consecutive calendar days in any consecutive six calendar month
period. Upon such termination, the Company shall pay to Consultant
the amount set forth in Section 4.7(a).
4.3 By
Company for ‘‘Cause
’’. The Company, by written
notice to Consultant, may terminate this Agreement for
‘‘Cause.’’ As used herein,
‘‘Cause’’ shall mean: (a) if Consultant (i)
cannot or will not provide the personal services of Cole to the
Company as provided herein other than as a result of Cole’s
death or disability; (ii) the refusal, or failure resulting from
the lack of good faith efforts, by Cole to carry out specific
directions of the Board which are of a material nature and
consistent with his then current status with the Company; or (iii)
the refusal, or failure resulting from the lack of good faith
efforts, by Cole to perform a material part of his duties
hereunder; (b) the commission by Consultant or Cole of a material
breach of any of the provisions of this Agreement; (c) fraud or
dishonest action by Consultant or Cole in its or his relations with
the Company or any of its subsidiaries or affiliates, or with any
customer or business contact of the Company or any of its
subsidiaries or affiliates (‘‘dishonest’’
for these purposes shall mean Cole knowingly making a material
misstatement or omission, or knowingly committing a material
improper act, for his personal benefit); or (d) the conviction of
Consultant or Cole of any crime involving an act of moral
turpitude. Notwithstanding the foregoing, no
‘‘Cause’’ for termination shall be deemed
to exist with respect to the acts of Cole and/or Consultant
described in clauses (a) or (b) above, unless the Company shall
have given written notice to Consultant specifying the
‘‘Cause’’ with reasonable particularity
and, within thirty (30) calendar days after such notice, Cole
and/or Consultant shall not have cured or eliminated the problem or
event giving rise to such ‘‘Cause;’’
provided, however, that a repeated breach after notice and cure of
any provision of clauses (a) or (b) above involving the same or
substantially similar actions or conduct, shall be grounds for
termination for ‘‘Cause’’ without any
additional notice from the Company. Upon such termination, the
Company shall pay to Consultant the amount set forth in Section
4.7(b).
4.4 By
Consultant for ‘‘Good Reason
’’. The Consultant, by written
notice to the Company, may terminate this Agreement if a
‘‘Good Reason’’ exists. For purposes of
this Agreement, ‘‘Good Reason’’ shall mean
the occurrence of any of the following circumstances without
Consultant’s or Cole’s prior express written consent:
(a) a substantial and material breach of this Agreement by the
Company; (b) a failure by the Company to make any payment to
Consultant when due, unless the
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payment is not material
and is being contested by the Company, in good faith; (c) a
material and adverse change in Consultant’s compensation
described in Section 3 of this Agreement with which Consultant
disagrees; or (d) if during the Post-Merger Term or an Extension
Period, there is a ‘‘change of control’’
of
