Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS
AGREEMENT (this “Agreement”), made in New York,
New York as of November 13, 2007 between I.C.
Isaacs & Company, Inc., a Delaware corporation (the
“Company”), and Robert S. Stec
(“Executive”).
WHEREAS,
the Company has entered into an exclusive license agreement
(the “Girbaud Men’s Agreement”) with Girbaud
Design, Inc. and its affiliates, to manufacture and market
men’s jeanswear, casual, outerwear and active influenced
sportswear under the Girbaud brand and related trademarks (the
“Gibraud Marks”);
WHEREAS,
the Company has also entered into an exclusive license
agreement (the “Girbaud Women’s Agreement”)
with Latitude Licensing Corp. to manufacture and market
women’s jeanswear, casualwear and outerwear, including
active influenced sportswear under the Gibraud
Marks;
WHEREAS,
the Company will engage in negotiations with Girbaud Designs
and its affiliates, including Latitude Licensing Corp., to
extend the exclusive license agreements and to make other
changes to the Girbaud Men’s Agreement and the Girbaud
Women’s Agreement;
WHEREAS,
the Company desires that, from and after the full execution of
an agreement or agreements to extend the exclusive license
agreements, Executive shall service as its President and Chief
Executive Officer, and Executive desires to accept such
employment on the terms and conditions hereinafter set
forth;
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants and
agreements hereinafter set forth, the Company and Executive
agree as follows:
1.
Term .
This
Agreement shall become effective upon, and is conditional upon
the full execution of an agreement or agreements to extend the
exclusive licenses under the Girbaud Men’s Agreement and
the Girbaud Women’s Agreement (the “Extension
Agreement”). Unless earlier terminated in
accordance with Section 4 hereof, the term of this Agreement
shall commence on the date on which the Extension Agreement is
fully executed and shall end on December 31, 2009 (the
“Term”). The Term may be extended by
the Company for an additional two-year period by providing
Executive written notice of its election to extend the Term on
or before June 30, 2009.
2.
Employment .
(a)
Employment by the Company; Director . Executive
agrees to be employed by the Company during the Term upon the terms
and subject to the conditions set forth in this
Agreement. Executive shall serve as the President and
Chief Executive Officer of the Company and shall report to the
Board of Directors of the Company (the “Board of
Directors”). Executive is currently a member of
the Company’s Board of Directors and agrees to continue
serving in such capacity.
(b)
Performance of Duties . Throughout the Term,
Executive shall faithfully and diligently perform Executive’s
duties in conformity with the directions of the Board of Directors
and serve the Company to the best of Executive’s
ability. Executive shall devote substantially all of his
business time and best efforts to the business and affairs of the
Company. In his capacity as the President and Chief
Executive Officer of the Company, Executive shall have such duties
and responsibilities as are customary for Executive’s
positions and any other duties or responsibilities that he may be
assigned by the Board of Directors.
(c)
Place of Performance . Executive shall be
principally based at the Company’s offices in New York, New
York. Executive recognizes that his duties may require,
at the Company’s expense, travel to domestic and
international locations.
3.
Compensation and Benefits .
(a)
Base Salary . The Company agrees to pay to Executive
a base salary (“Base Salary”) at the annual rate of
$660,000 through December 31, 2008, and at the annual rate of
$700,000 thereafter. Payments of the Base Salary shall
be payable in accordance with the Company’s standard payroll
practices.
(b)
Sign-On Bonus . The Company shall pay Executive,
promptly after the effective date of this Agreement, a $150,000
cash payment as an inducement to enter into this
Agreement. Fifty percent of such cash payment (i.e.,
$75,000) shall be an advance of Executive’s annual
performance bonus pursuant to Section 3(c) hereof (the
“Advance Bonus Payment”).
(c)
Performance Bonus . During the Term, Executive shall be
eligible to receive an annual performance bonus equal to of 50% of
Base Salary (“Target Bonus”) for meeting the budgeted
financial targets for such year, 25% of Base Salary
(“Threshold Bonus”) for meeting 80% of the budgeted
financial targets for such year and 150% of Base Salary
(“Maximum Bonus”) for meeting 300% of the
budgeted financial targets for such year. The annual
performance bonus for a year, if any, shall be paid to the
Executive during the first 90 days of the year following the year
to which the bonus relates. Notwithstanding the
foregoing, the payment of the first $75,000 of bonuses earned by
Executive under this Section 3(c) shall be offset by the Advance
Bonus Payment.
(d)
Restricted Stock Units . The Company shall grant to
Executive 500,000 restricted stock units (individually, an
“RSU” and collectively, the
“RSUs”). Each RSU represents the obligation
of the Company to deliver a share of common stock of the Company,
in accordance with and subject to the provisions of the I.C. Isaacs
& Company, Inc. 2007 Stock Incentive Plan, as it may be amended
from time to time, and a Restricted Stock Unit Agreement in
substantially the form attached hereto as Exhibit A
. One third of the RSUs shall immediately vest upon the
grant of the RSUs and an additional one-third of the RSUs shall
vest on each of the first and second anniversary of the date on
which the RSUs are granted. The Company shall deliver to
Executive a share of Company common stock with respect to each
vested RSU on the third anniversary of the date on which the RSUs
are granted (the “Delivery Date”); provided, however,
if the Delivery Date is during a “blackout period”
under the Company’s policy regarding securities trading, then
the delivery of the shares of Company common stock to Executive
shall be delayed until the first day following the end of the
blackout period; provided further, that, in all events, such shares
shall be delivered to Executive no later than the later of (i) the
last day of the calendar year in which the Delivery Date occurs or
(ii) the 15 th day of the
third calendar month following the Delivery Date.
(e)
Benefits and Perquisites . Executive shall be
entitled to participate in any benefit plans and programs, or to
receive any benefits and perquisites, generally provided by the
Company to senior executives of the Company, including without
limitation family medical insurance (subject to applicable employee
contributions). Executive shall be entitled to receive
twenty (20) days of annual paid vacation.
(f)
Business Expenses . The Company agrees to reimburse
Executive, in accordance with its standard senior executive
policies from time to time in effect, for all reasonable and
necessary travel, business entertainment and other business
expenses incurred by Executive in connection with the performance
of his duties under this Agreement. Such reimbursements
shall be made by the Company on a timely basis upon submission by
Executive of reasonable documentation supporting such
expenses.
(g)
Payment . Payment of all compensation and benefits
to Executive specified in this Section 3 and in Section 5 of this
Agreement (i) shall be made in accordance with the relevant Company
policies in effect from time to time to the extent the same are
consistently applied, and (ii) shall be subject to all legally
required and customary withholdings.
(h)
Cessation of Employment . Subject to and as provided
in Section 5, in the event Executive shall cease to be employed by
the Company for any reason, then Executive’s compensation and
benefits, if any, shall cease on the date of such event, except as
otherwise specifically provided herein or as required by
law.
4.
Termination of Employment . Executive’s
employment hereunder may be terminated prior to the end of the Term
under the following circumstances.
(a)
Death . Executive’s employment hereunder shall
terminate upon Executive’s death.
(b)
Executive Becoming Totally Disabled . The Company
may terminate Executive’s employment hereunder at any time
after Executive becomes “Totally
Disabled.” For purposes of this Agreement,
Executive shall be “Totally Disabled” in the event
Executive is unable to perform the duties and responsibilities
contemplated under this Agreement for a period of 90 consecutive
days due to physical or mental incapacity or
impairment. During any period that Executive fails to
perform Executive’s duties hereunder as a result of
incapacity due to physical or mental illness (the “Disability
Period”), Executive shall continue to receive the
compensation and benefits provided by Section 3 of this Agreement
until Executive’s employment hereunder is terminated;
provided, however, that the amount of base compensation and
benefits received by Executive during the Disability Period shall
be reduced by the aggregate amounts, if any, payable to Executive
under any disability benefit plan or program provided to Executive
by the Company; and provided further that in no event shall such
payments be made for a period in excess of 29 months.
(c)
Termination by the Company for Cause . The Company
may terminate Executive’s employment hereunder for Cause at
any time after providing written notice to
Executive. For purposes of this Agreement, the term
“Cause” shall mean any of the following: (i)
the neglect or failure or refusal of Executive to perform any
material duty of Executive hereunder (other than as a result of
total or partial incapacity due to physical or mental illness),
which neglect or refusal has, in the good faith determination of
the Board, a negative impact on the Company; (ii) the engaging
by Executive in gross negligence or misconduct which is injurious
to the Company or any of its affiliates, monetarily or otherwise;
(iii) perpetration of an intentional and knowing fraud against or
affecting the Company or any of its affiliates or any customer,
client, agent, or employee thereof; (iv) any willful or intentional
act that could reasonably be expected to injure the reputation,
business, or business relationships of the Company or any of its
affiliates or Executive’s reputation or business
relationships; (v) Executive’s material failure to
comply with, and/or a material violation by Executive of, the
internal policies of the Company or any of its affiliates and/or
procedures or any laws or regulations applicable to
Executive’s conduct as an employee of the Company; (vi)
Executive’s conviction (including conviction on a nolo
contendere plea) of a felony or any crime involving fraud,
dishonesty or moral turpitude; (vii) the breach of a covenant set
forth in Section 6; or (viii) any other material breach by
Executive of this Agreement; provided, however, that, if
susceptible of cure, a termination by the Company under Sections
4(c)(i), 4(c)(v) or 4(c)(viii) shall be effective only if, within
14 days following delivery of a written notice by the Company to
Executive that the Company is terminating his employment for Cause,
Executive has failed to cure the circumstances giving rise to
Cause.
(d)
Termination by the Company Without Cause . The
Company may terminate Executive’s employment hereunder at any
time for any reason or no reason by giving Executive sixty (60)
days prior written notice of the termination. Following
any such notice, the Company may reduce or remove any and all of
Executive’s duties, positions and titles with the
Company.
(e)
Termination by Executive for Good Reason . Executive
may terminate his employment hereunder for Good Reason at any time
after providing written notice to the Company. For
purposes of this Agreement, the term “Good Reason”
shall mean any of the following: (i) the Company fails
to pay the compensation described in Sections 3(a), 3(b) and 3(c)
(in accordance with, and subject to, such provisions); (ii)
Executive no longer holds the offices of President and Chief
Executive Officer or an office of equivalent stature, or his
functions and/or duties are materially diminished by the Board of
Directors; or (iii) Executive’s job site is relocated to a
location outside of New York, New York, unless the parties mutually
agree to such relocation; provided, however, that a termination by
Executive for Good Reason shall be effective only if, within 14
days following delivery of a written notice by Executive to the
Company that Executive is terminating his employment for Good
Reason, the Company has failed to cure the circumstances giving
rise to Good Reason.
(f)
Termination by Executive Without Good Reason
. Executive may terminate his employment hereunder at
any time for any reason or no reason by giving the Company sixty
(60) days prior written notice of the
termination. Following any such notice, the Company may
reduce or remove any and all of Executive’s duties, positions
and titles with the Company, and any such reduction or removal
shall not constitute Good Reason.
5.
Compensation Following Termination Prior to the End of the Term
. In the event that Executive’s employment
hereunder is terminated prior to the end of the Term for any
reason, Executive shall be entitled only to the following
compensation and benefits upon such termination:
(a)
General . On any termination of Executive’s
employment, he shall be entitled to:
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(i)
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any
accrued but unpaid Base Salary for services rendered through the
date of termination; provided, however, that in the event
Executive’s employment is terminated pursuant to Section
4(b), the amount of Base Salary received by Executive during the
Disability Period shall be reduced by the aggregate amounts, if
any, payable to Executive under any disability benefit plan or
program provided to Executive by the Company;
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(ii)
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any
vacation accrued to the date of termination; and
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(iii)
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any
accrued but unpaid expenses through the date of termination
required to be reimbursed in accordance with Sections 3(f) of this
Agreement.
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(b)
Termination by the Company Without Cause; Termination by Executive
for Good Reason . In the event that
Executive’s employment is terminated prior to the expiration
of the Term by the Company without Cause pursuant to Section 4(d)
or by Executive for Good Reason pursuant to Section 4(e), Executive
shall be entitled only to the following:
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(i)
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those
items identified in Section 5(a);
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(ii)
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the
sign-on bonus pursuant to Section 5(b) hereof if not previously
paid;
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(iii)
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a
pro rata annual performance bonus pursuant to Section 5(c) hereof
for the year in which Executive’s employment is terminated,
determined by multiplying the amount Executive would have received
had employment continued through the end of the year by a fraction,
the numerator of which is the number of days during the year of
termination that Executive is employed by the Company and the
denominator of which is 365, and payable (after being offset by the
Advance Bonus Payment, to the extend applicable) at the time the
annual performance bonus would have been paid if Executive’s
employment had not terminated; and.
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(iv)
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the
continued payment of the Base Salary (as determined pursuant to
Section 3(a)) for 18 months (such sums to be paid at the times and
in the amounts such Base Salary would have been paid had
Executive’s employment not terminated).
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(c)
Termination by Company Without Cause After a Change in Control;
Termination by Executive for Good Reason After a Change in
Control . In the event that Executive’s
employment is terminated by the Company without Cause pursuant to
Section 4(d) or by Executive for Good Reason pursuant to Section
4(e), in either case, within 12 months after a Change in Control
but prior to the end of the Term, Executive shall be entitled to
only the following:
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(i)
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those
items identified in Section 5(a);
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(ii)
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the
sign-on bonus pursuant to Section 5(b) hereof if
not previously paid;
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(iii)
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an
amount equal to Executive’s Target Bonus pursuant to Section
5(c) hereof for the year in which Executive’s employment is
terminated, payable (after being offset by the Advance Bonus
Payment, to the extend applicable) at the time the annual
performance bonus would have been paid if Executive’s
employment had not terminated;
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(iv)
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the
continued payment of the Base Salary (as determined pursuant to
Section 3(a)) for 18 months (such sums to be paid at the times and
in the amounts such Base Salary would have been paid had
Executive’s employment not terminated); and
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(v)
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continued
eligibility for benefits provided under Section 3 hereof for 18
months, provided that Executive’s eligibility for such
benefits shall terminate to the extent that, Executive becomes
eligible for such benefits from a subsequent employer.
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“Change
of Control” shall mean (i) the sale of all or
substantially all of the assets of the Company, (ii) the sale
of more than 50% of the outstanding capital stock of the
Company in a non-public sale, (iii) the dissolution or
liquidation of the Company, or (iv) any merger, share
exchange, consolidation or other reorganization or business
combination of the Company if immediately after such
transaction either (A) persons who were members of the Board
of Directors of the Company immediately prior to such
transaction do not constitute at least a majority of the Board
of Directors of the surviving entity, or (B) persons who hold
a majority of the voting capital stock of the surviving entity
are not persons who held voting capital stock of the Company
immediately prior to such transaction.
(d)
No Further Liability; Release . Payment made and
performance by the Company in accordance with this Section 5 shall
operate to fully discharge and release the Company and its
directors, officers, employees, affiliates, stockholders,
successors, assigns, agents and representatives from any further
obligation or liability with respect to Executive’s
employment and termination of employment. Other than
providing the compensation and benefits provided for in accordance
with this Section 5, the Company and its directors, officers,
employees, affiliates, stockholders, successors, assigns, agents
and representatives shall have no further obligation or liability
to Executive or any other person under this
Agreement. The payment of any amounts pursuant to this
Section 5 (other than payments required by law) is expressly
conditioned upon the delivery by Executive to the Company of a
release in form and substance reasonably satisfactory to the
Company of any and all claims Executive may have against the
Company and its directors, officers, employees, affiliates,
successors, assigns, agents and representatives.
(d)
Offset; No Obligation to M
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