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Exhibit
10.2
EMPLOYMENT
AGREEMENT
This Agreement (the
“Agreement”), by and between Alloy, Inc. (the
“Company”) and James K. Johnson, Jr.
(“Executive”), is effective as of December 6, 2007
(the “Effective Date”). In consideration of the mutual
promises and covenants contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, the Company and Executive
hereby agree as follows:
1. Employment .
Subject to the terms and conditions of this Agreement, the Company
will employ Executive, and Executive agrees to serve the Company,
as its Chief Operating Officer reporting to the Board of Directors
of the Company (the “Board”). Executive shall have the
responsibilities, duty and authority commensurate with the position
of chief executive officers customarily exercised by a person
holding such position in a company of the size and nature of the
Company. The principal location at which Executive will perform
such services will be the Company’s corporate headquarters in
New York, New York. Executive shall also be nominated for
appointment as a director during each election held during the Term
(as defined below) for directors of the class of which Executive is
a member.
2. Term of Employment
. Subject to the terms of this Agreement, Executive’s
employment under this Agreement will begin on the Effective Date
and will continue until the third anniversary date of the Effective
Date (the “Initial Term”), provided that on the third
anniversary of the Effective Date and each subsequent anniversary
of the Effective Date, the term of Executive’s employment
hereunder will be automatically extended for an additional period
of one year (each a “Subsequent Term”) unless either
Executive or the Company has given written notice at least
90 days prior to the effective date of such automatic
extension that such automatic extension will not occur (a
“Non-Renewal Notice”). The Initial Term and any
Subsequent Term are referred to herein as the
“Term.”
3.
Compensation.
(a) Base Salary .
While Executive is employed hereunder, the Company will pay
Executive a base salary at the annual rate of $450,000 (the
“Base Salary”). The Base Salary shall be reviewed by
the Board or a duly authorized committee or sub-committee of the
Board of the Company (the “Committee”) as soon as
practicable after the end of each fiscal year during the Term,
beginning with the fiscal year ending on January 31, 2008.
Based upon such reviews, the Committee annually may increase, but
shall not decrease, the Base Salary. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to
Executive under this Agreement. The Base Salary will be payable in
substantially equal installments in accordance with the
Company’s payroll practices as in effect from time to time.
The Company shall deduct from each such installment all amounts
required to be deducted or withheld under applicable law or under
any employee benefit plan in which Executive
participates.
(b) Annual Cash Bonus
. Beginning with the Company’s fiscal year ending on
January 31, 2008, as soon as practicable after the end of each
fiscal year of the Company, the Committee shall review
Executive’s performance under this Agreement in order to
determine the appropriate cash bonus Executive should receive for
such year. Executive’s annual cash bonus shall be at a target
of no less than seventy-five percent (75%) of his then current
Base Salary, with a
maximum annual cash bonus of one hundred
fifty percent (150%) of his then current Base Salary
(“Cash Target Amount”). The amount of Executive’s
annual cash bonus for the fiscal year ending January 31, 2008,
if any, shall be based on the degree to which the Company and/or
the Executive met its or his objective performance objectives set
forth on Schedule A attached hereto and incorporated herein (the
“Objective Criteria “).
(c) Equity
Compensation . Beginning with the Company’s fiscal year
ending on January 31, 2008, Executive shall be eligible to
receive an annual long-term incentive award equal in value to two
hundred percent (200%) of his then current Base Salary, with a
maximum award equal in value to three hundred percent
(300%) of his then current Base Salary (the “LTI Target
Amount” and together with the Cash Target Amount, the
“Target Amount”). The actual amount of
Executive’s annual long term incentive award, if any, shall
be based on the degree to which the Company and/or the Executive
met, for the fiscal year ending January 31, 2008 the Objective
Criteria, or, for fiscal years commencing with the fiscal year that
begins February 1, 2008, its or his objectives as established
in accordance with the terms of the Executive Bonus Plan (the
“EBP”), subject to the following:
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(i)
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one-third (1/3 rd ) of the value of the LTI Target Amount
grant shall be made in the form of restricted stock awards with the
Company’s right of repurchase lapsing as to one-third (1/3
rd
) of such shares on each
of the first three annual anniversary dates of the date of grant
(the “Grant Date”) or another date determined by the
Board to be appropriate (the “Vest Date”), and the
number of such shares to be granted based on the closing price of
the Company’s common stock (“Common Stock”) on a
date consistent with then Company policy for granting equity awards
(the “Measurement Date”), which as of the Effective
Date is March 30th of each year, (the “Time Vesting
Restricted Stock”);
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(ii)
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one-third (1/3 rd ) of the value of the LTI Target
Amount shall be made in the form of restricted stock awards with
100% of the Company’s right of repurchase lapsing when the
average closing price of a share of the Common Stock, as quoted on
Nasdaq for ten consecutive trading days, exceeds twenty percent
(20%) of the closing price of a share of Common Stock as
quoted on Nasdaq on the Measurement Date (the “Vesting
Premium”), and with the actual number of restricted shares to
be granted based on an appropriate formula using the closing price
of the Common Stock on the Measurement Date; provided, however,
notwithstanding the foregoing, one-third of such restricted shares
shall vest no earlier than the first anniversary of the Grant Date
or the Vest Date, one-third of such restricted shares shall vest no
earlier than the second anniversary of the Grant Date or the Vest
Date, and one-third of such restricted shares shall vest no earlier
than the third anniversary of the Grant Date or the Vest Date (the
“Performance Based Vesting Restricted Stock”);
and
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(iii)
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one-third (1/3 rd ) of the value of the LTI Target
Amount shall be made in the form of stock options that shall vest
in three equal installments on each of the first, second and third
anniversaries of the Grant Date or the Vest Date, with the number
of options determined using the Black-Scholes method of valuation,
or other valuation as deemed appropriate by the Committee, and with
the exercise price of such options not less than the Fair Market
Value (as such term is defined in the option or incentive plans
under which such award is made) per share of Common Stock of the
Company (the “Options”).
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The remaining terms of such
equity grants, if any, shall be determined by the Committee and
notwithstanding anything contained herein to the contrary such
terms shall be subject to the terms and conditions of the option or
incentive plans under which such grants are made and on a basis
consistent with equity grant policies of the Company then in
effect.
(d) Payment of Cash Bonus
and Issuance of Equity Grant. It is the expectation of the
Company and Executive that Executive (i) shall be entitled to
receive up to the appropriate Target Amount determined upon the
achievement of the Company and the Executives of the Objective
Criteria for fiscal year ending January 31, 2008 and the
performance objectives established in accordance with the
Company’s EBP for fiscal years ending January 31, 2009
and beyond, based on performance within an acceptable range as
determined and certified by the Board or the Committee, as may be
appropriate, and (ii) may receive less than the Target Amount
based upon the extent to which the Objective Criteria or such
performance objectives are not met.
(e) General Provisions
. All shares of common stock or other equity securities awarded to
Executive shall be registered on Form S-3, S-8 or any successor
form or other applicable form under the Securities Act of 1933, and
the Company shall, subject to the provisions of the appropriate
equity plan or plans under which they are granted, seek to keep
such registration effective at all required times. All unvested
Options and Time Vesting Restricted Stock subject to the
Company’s repurchase rights, if any, shall vest
automatically, and the Company’s repurchase rights, if any,
shall terminate automatically, without any action on the part of
Executive or the Company, on the date of a Change of Control (as
defined below), unless otherwise provided for in the agreement
granting the such Option or Time Vesting Restricted Stock awards.
Notwithstanding anything contained herein to the contrary, to the
extent the premium paid for each share of Company common stock in
connection with a Change in Control is equal to or greater than the
Vesting Premium for Performance Based Vesting Restricted Stock, the
Company’s repurchase rights for such Performance Based
Vesting Restricted Stock shall automatically lapse on the date of
such Change of Control without any action on the part of Executive
or Company.
(f) Change of Control
. For purposes of this Agreement, a “Change of Control”
means that any of the following events has occurred:
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(i) |
Any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”),
other than the Company, any employee benefit plan of the Company or
any entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan, together with all
“affiliates” and “associates” (as such
terms are defined in Rule 12b-2 under the Exchange Act) becomes the
beneficial owner or owners (as defined in Rule 13d-3 and 13d-5
promulgated under the Exchange Act), directly or indirectly, of
more than 50% of the outstanding equity securities of the Company,
or otherwise becomes entitled, directly or indirectly, to vote more
than 50% of the voting power entitled to be cast at elections for
directors (“Voting Power”) of the Company; |
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(ii) |
A consolidation or merger (in one transaction or a series of
related transactions) of the Company pursuant to which the holders
of the Company’s equity securities immediately prior to such
transaction or series of related transactions would not be the
holders, directly or indirectly, immediately after such transaction
or series of related transactions of more than 50% of the Voting
Power of the entity surviving such transaction or series of related
transactions; |
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(iii) |
The sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of
the assets of the Company; or |
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(iv) |
The liquidation or dissolution of the Company or the Company
ceasing to do business. |
(g) Vacation .
Executive will be entitled to paid time off in accordance with the
Company’s policies for its senior executives as in effect
from time to time, but not less than 28 days paid time off in each
fiscal year. Accrued unused vacation may be carried over from year
to year, but will be deemed forfeited if not used within the first
fiscal quarter of the succeeding year.
(h) Fringe Benefits .
Executive will be entitled to participate in the same manner as
other senior executives of the Company in any employee benefit
plans which the Company provides or may establish for the benefit
of its senior executives generally (including, without limitation,
group life, disability, medical, dental and other insurance, tax
benefit and planning services, 401(k), retirement, pension,
profit-sharing and similar plans) (collectively, the “Fringe
Benefits”), provided that the Fringe Benefits will not
include any stock option or similar plans relating to the grant of
equity securities of the Company. Nothing provided for herein shall
limit the Company’s right to amend, modify or terminate any
Fringe Benefit plan sponsored, maintained or contributed to by the
Company.
(i) Reimbursement of
Expenses . The Company will reimburse Executive for all
ordinary and reasonable out-of-pocket business expenses that are
incurred by Executive in furtherance of the Company’s
business in accordance with the Company’s policies with
respect thereto as in effect from time to time.
(j) Indemnification .
The Company shall indemnify Executive to the fullest extent
permitted by its charter and by-laws and by applicable law against
all costs, charges and expenses, including, without limitation,
attorneys’ fees, incurred or sustained by Executive in
connection with any action, suit or proceeding to which Executive
may be made a party by reason of being an officer, director or
employee of the Company. In connection with the foregoing,
Executive shall be covered under all liability insurance policies
that protect other officers of the Company.
4. Termination .
(a) Death or
Disability . This Agreement and Executive’s employment
shall terminate automatically upon Executive’s death. If the
Company determines in good faith that the Disability of Executive
has occurred (pursuant to the definition of
“Disability” set forth below), it may give to Executive
written notice of its intention to terminate Executive’s
employment. In such event, Executive’s employment with the
Company shall terminate effective on the thirtieth day after
receipt by Executive of such notice given at any time after a
period of one hundred twenty (120)
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consecutive days of Disability or a
period of one hundred eighty (180) days of Disability within
any twelve (12) consecutive months, and, in either case, while
such Disability is continuing (“Disability Effective
Date”); within the thirty (30) days after such receipt,
Executive shall not have returned to full-time performance of
Executive’s duties. For purposes of this Agreement,
“Disability” means Executive’s inability to
substantially perform his duties hereunder, with reasonable
accommodation, as evidenced by a certificate signed either by a
physician mutually acceptable to the Company and Executive or, if
the Company and Executive cannot agree upon a physician, by a
physician selected by agreement of a physician designated by the
Company and a physician designated by Executive; provided, however,
that if such physicians cannot agree upon a third physician within
thirty (30) days, such third physician shall be designated by
the American Arbitration Association. Until the Disability
Effective Date, Executive shall be entitled to all compensation
provided for under Section 3 hereof. It is understood that
nothing in this Section 4 shall serve to limit the
Company’s obligation sunder Section 5 hereof.
(b) By the Company For
Cause. The Company may terminate Executive’s employment
at any time during the Term immediately for “Cause.”
For purposes of this Agreement, “Cause” shall mean
(i) Executive’s conviction of a felony, either in
connection with the performance of his obligations to the Company
or which otherwise materially and adversely affe
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