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E.L.F. BEAUTY, INC. | JA Cosmetics Holdings, Inc | JA Cosmetics US, Inc

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Title: EMPLOYMENT AGREEMENT
Date: 8/26/2016

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Exhibit 10.21

EXECUTION VERSION

EMPLOYMENT AGREEMENT

This Employment Agreement (this “ Agreement ”), is made and entered into on the 31st day of January, 2014, by and among J.A. Cosmetics US, Inc. (together with its successor, the “ Company ”), J.A. Cosmetics Holdings, Inc., the owner of all of the outstanding capital stock of the Company (together with its successor, “ Holdings ”), and Scott Milsten (“ Executive ”). This Agreement shall become effective as of the Effective Date (as hereinafter defined).

WHEREAS, the Company desires to employ Executive on the terms and conditions contained herein on January 31, 2014 (the “ Effective Date ”); and

WHEREAS, Executive desires to be employed by and render services to the Company upon and subject to the terms, conditions and other provisions set forth herein.

NOW THEREFORE, in consideration of the promises and mutual covenants and agreements contained herein, the adequacy of all of which consideration is hereby acknowledged, the parties hereby agree as follows:

 

 

1.

DEFINITIONS

The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

Board of Directors ” means the Board of Directors of Holdings.

Cause ” means (i) a breach by Executive of Executive’s obligations under Section 2.2 (other than as a result of physical or mental incapacity) which constitutes material nonperformance by Executive of his obligations and duties thereunder, which Executive has failed to remedy after the Board of Directors has given Executive written notice of, and at least fifteen (15) days to remedy, such breach, (ii) commission by Executive of an act of fraud, embezzlement, misappropriation, willful misconduct or breach of fiduciary duty against the Company (other than acts, such as making personal use of Company office supplies, as have only a de minimis effect on the Company), (iii) a material breach by Executive of Section 6 of this Agreement, (iv) Executive’s conviction, plea of no contest or nolo contendere, deferred adjudication or unadjudicated probation for any felony or any crime involving moral turpitude, (v) the failure of Executive to carry out, or comply with, in any material respect, any lawful directive of the Board of Directors (other than any such failure resulting from Executive’s physical or mental incapacity) which Executive has failed to remedy after the Board of Directors has given Executive written notice of, and at least fifteen (15) days to remedy, such failure, or (vi) Executive’s unlawful use (including being under the influence) or possession of illegal drugs. For purposes of the previous sentence, no act or failure to act on Executive’s part shall be deemed “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Company.

Disability ” means Executive’s inability to perform, with or without reasonable accommodation, the essential functions of his position hereunder for a period of 180 consecutive


days due to mental or physical incapacity, as determined by mutual agreement of a physician selected by the Company or its insurers and a physician selected by Executive; provided, however, if the opinion of the Company’s physician and Executive’s physician conflict, the Company’s physician and Executive’s physician shall together agree upon a third physician, whose opinion shall be binding.; provided , however , that Executive shall not be considered to have a Disability unless it is also treated as a disability under the Company’s long-term disability policy.

Good Reason ” means: (i) a material default in the performance of the Company’s obligations under this Agreement; (ii) a significant diminution of Executive’s responsibilities, duties or authority as General Counsel and Secretary, or a material diminution of Executive’s base compensation, unless such diminution is mutually agreed between Executive and the Company; or (iii) the relocation of Executive’s principal office, without his consent, to a location that is in excess of fifty (50) miles from San Francisco (it being understood and agreed that Executive’s travel for business purposes shall not be considered such a relocation); provided, however, that Executive’s termination will not be for Good Reason unless (x) Executive has given the Company at least thirty (30) days prior written notice of his intent to terminate his employment for Good Reason, which notice shall specify the facts and circumstances constituting Good Reason and be given within ninety (90) days of the initial occurrence thereof, (y) the Company has not remedied such facts and circumstances constituting Good Reason within thirty (30) days following the receipt of such notice, and (z) Executive terminates employment within six months following the expiration of such thirty (30)-day cure period.

Notice of Termination ” means a dated notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, (iii) specifies a Termination Date, except in the case of the Company’s termination of Executive’s employment for Cause, for which the Termination Date may be the date of the notice; provided , however , that Executive has been provided with any applicable cure period, and (iv) is given in the manner specified in Section 7.2 hereof. With the exception of termination of Executive’s employment due to Executive’s death, any purported termination of Executive’s employment by the Company for any reason, including without limitation for Cause or Disability, or by Executive for any reason, shall be communicated by a written “Notice of Termination” to the other party. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason, as applicable, shall not waive any right of the Company or Executive under this Agreement or preclude the Company or Executive from asserting such fact or circumstance in enforcing the Company’s or Executive’s rights under this Agreement.

Termination Date ” means (i) if Executive’s employment is terminated for Cause or Disability, the date specified in the Notice of Termination, (ii) in the case of termination of employment due to death, the date of Executive’s death, (iii) if either party elects not to extend the Term of this Agreement pursuant to Section 2.1, the close of business on the day immediately preceding the next scheduled Extension Date, or (iv) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or as specified in such Notice.

 

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2.

EMPLOYMENT

2.1 Agreement and Term. The Company hereby employs Executive as an employee of the Company, and Executive hereby accepts said employment and agrees to render such services to the Company, on the terms and conditions set forth in this Agreement. Unless terminated earlier as set forth herein, the term of employment under this Agreement shall commence on the Effective Date and shall end on the fifth anniversary thereof (the “ Term ”); provided , however , that commencing on the fifth anniversary of the Effective Date and on each anniversary thereafter (each an “ Extension Date ”), the Term shall be automatically extended for an additional one year period, unless either party gives written notice that the Term shall not be so extended at least sixty (60) days prior to the next Extension Date.

2.2 Position and Duties. Except as otherwise provided in this Agreement, during the Term of this Agreement, Executive shall serve as General Counsel and Secretary and shall report directly to the Chief Executive Officer. Executive shall perform duties, undertake the responsibilities, and exercise the authorities customarily performed, undertaken and exercised by persons situated in a similar capacity at a similar company. Executive shall carry out his duties and responsibilities at all times in compliance with the Company’s Manual of Corporate Authorities, as in effect from time to time, and in compliance with any other policies promulgated from time to time by the Company. Executive shall also perform such other duties, commensurate with his position, as reasonably requested by the Board of Directors. During the Term of this Agreement, Executive shall use his best efforts to serve the Company faithfully, diligently and competently and to the best of his ability, and to devote his full time business hours, energy, ability, attention and skill to the business of the Company; provided , however , that the foregoing is not intended to preclude Executive from noncompetitive activities, conducted outside normal business hours permitted under Section 2.3 hereof.

2.3 Outside Activities. It shall not be a violation of this Agreement for Executive to (i) deliver lectures or fulfill speaking engagements; (ii) manage personal investments; or (iii) subject to the prior consent of the Board of Directors (which consent shall not be unreasonably withheld), serve on industry trade, civic, or charitable boards or committees or on for-profit corporate boards of directors and advisory committees, as long as the activities set forth in (i) – (iii) (taken together or separately) do not materially interfere with the performance of Executive’s duties hereunder and are not in conflict or competitive with, or adverse to, the Company. Executive shall not, however, under any circumstances, provide services or advice in any capacity whatsoever for or on behalf of any entity that competes with or is competitive with the Company.

2.4 Location. During the Term, Executive shall be based in the San Francisco Bay Area.

 

 

3.

COMPENSATION AND BENEFITS

3.1 Salary. The Company shall compensate and pay Executive for his services at a rate equivalent to $325,000 per year, less payroll deductions and all required tax withholdings (“ Base Salary ”), which salary shall be payable in accordance with the Company’s customary payroll practices applicable to its executives, but no less frequently than monthly.

 

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3.2 Bonus. During the Term of this Agreement, Executive shall have the opportunity to earn annual performance bonuses based on performance criteria to be established by the Board of Directors after consultation with Executive. Executive shall be eligible to receive a target cash bonus of 40% of his Base Salary based upon the attainment of performance objectives established by the Board of Directors after consultation with Executive. Unless set forth otherwise herein, Executive must be actively employed with the Company through the end of the applicable fiscal year in order to receive any annual bonus payout pursuant to this subsection. Any bonus payable hereunder in respect of a fiscal year shall be paid at the same time annual bonuses are paid to other senior executives of the Company in respect of such fiscal year; but in any event within the fiscal year following the fiscal year of performance.

3.3 Employee Benefits. During the Term of this Agreement, to the extent eligible under the applicable plans or programs, Executive shall be entitled to participate in the employee benefits plans and programs made available to executive level employees of the Company generally, such as health, medical, dental and other insurance coverage and group retirement plans. The terms and conditions of Executive’s participation in any employee benefit plan or program shall be subject to the terms and conditions of such plan or program, as may be modified by the Company from time to time. Nothing in this Agreement shall preclude the Company from amending or terminating any employee benefit plan or program.

3.4 Co-Investment. On the Effective Date, Holdings will sell to a trust designated by Executive 48.1 shares of common stock and 649.519 shares of preferred stock (the “ Co-Investment Shares ”) for $650,000 in the aggregate pursuant to the Subscription Agreement between such trust and Holdings dated as of the Effective Date. The Co-Investment Shares will be subject to the Stockholders Agreement, dated as of the Effective Date, by and among Holdings and its stockholders, in the form attached hereto as Exhibit A (the “ Stockholders Agreement ”), and the Registration Rights Agreement, dated as of the Effective Date, by and among Holdings and its stockholders, in the form attached hereto as Exhibit B .

3.5 Grant of Options. Executive shall be granted under the 2014 Equity Incentive Plan of Holdings (the “ Equity Plan ”), on the Effective Date, options to purchase 134,550 shares of common stock of Holdings (the “ Options ”). Such grant shall be made pursuant to, and the terms of the Options shall be subject to, a stock option grant agreement between Executive and Holdings in the form attached as Exhibit C hereto. The Options will have a per-share exercise price equal to the fair market value of a share of common stock of Holdings on the Effective Date and a term of ten years from the date of grant.

3.6 Paid Leave. Executive shall be entitled to four weeks of paid vacation leave each year, subject an annual accrual cap of thirty (30) days. Executive shall also be entitled to all paid holidays to which executive level employees of the Company are entitled. Accrued unused vacation leave shall be paid in the event of a termination of employment.

 

 

4.

EXPENSES

4.1 Expenses. The Company shall reimburse Executive or otherwise provide for or pay for reasonable out-of-pocket expenses incurred by Executive in furtherance of or in connection with the business of the Company, including, but not limited to, travel and

 

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entertainment expenses commensurate with his duties hereunder (including attendance at industry conferences), subject to the Company’s policies as periodically reviewed by the Board of Directors and in effect from time to time, including without limitation such reasonable documentation and other limitations as may be established or required by the Company.

 

 

5.

TERMINATION

5.1 Termination Due to Death or Disability. If Executive’s employment is terminated by reason of Executive’s death or Disability, Executive or his estate shall be entitled to receive: (a) Executive’s accrued Base Salary through the Termination Date; (b) an amount for reimbursement, paid within sixty (60) days following submission by Executive (or if applicable, Executive’s estate) to the Company of appropriate supporting documentation for any unreimbursed business expenses properly incurred prior to the Termination Date by Executive pursuant to Section 4 and in accordance with Company policy; (c) any accrued and unpaid vacation pay, paid within sixty (60) days of the Termination Date; and (d) such employee benefits, if any, to which Executive (or, if applicable, Executive’s estate) or his dependents may be entitled under the employee benefit plans or programs of the Company, paid in accordance with the terms of the applicable plans or programs (the amounts described in clauses (a) through (d) hereof being referred to as the “ Accrued Rights ”). In addition, Executive or his estate shall be entitled to receive (x) in a lump sum in cash within two and one-half months after the Termination Date (or such earlier date as required by applicable law), the amount of any annual bonus earned for any previously completed fiscal year in accordance with Section 3.2 that has not been paid (the “ Accrued Bonus ”); and (y) an amount equal to the product of (i) the fraction of the current fiscal year that has elapsed through the date of Executive’s termination and (ii) the Board-approved annual bonus payout for Executive for such fiscal year based on actual Company performance for such fiscal year measured following the completion thereof, payable at the time the annual bonus would have been paid to Executive had he remained employed through the end of the such fiscal year (the “ Pro-Rata Bonus ”).

5.2 Termination by Executive without Good Reason and other than Disability or Death. In the event Executive terminates his employment for any reason other than Good Reason, Disability or death, Executive shall be entitled to receive the Accrued Rights, but following the Termination Date, Executive shall have no further rights to any other compensation or benefits under this Agreement, including without limitation any severance or continuation of benefits or otherwise.

5.3 Termination by the Company for Cause. In the event the Company terminates his employment for Cause, Executive shall be entitled to receive the Accrued Rights, but following the Termination Date, Executive shall have no further rights to any other compensation or benefits under this Agreement, including without limitation any severance or continuation of benefits or otherwise.

5.4 Termination by the Company Other Than for Death, Disability or Cause or by Executive for Good Reason. If Executive’s employment is terminated by the Company prior to the end of the Term for reasons other than death, Disability or Cause, or by Executive prior to the end of the Term for Good Reason, Executive shall be entitled to receive (a) an amount equal to his Base Salary, payable on a monthly basis, for a period of twelve (12) months

 

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following the Termination Date; (b) for a period of eighteen (18) months following the Termination Date that Executive is eligible to elect and does elect to continue coverage for himself and his eligible dependents under the Company’s group health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended (collectively, “ COBRA ”), medical and dental coverage as required by COBRA and prompt reimbursement for the premium costs charged to Executive for such COBRA continuation coverage; provided, however, that (i) such COBRA coverage shall terminate if and to the extent Executive becomes eligible to receive medical and dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to the Company by Executive) and (ii) the Company’s obligation to reimburse Executive for such premium costs shall cease if, upon the advice of legal counsel, the Company determines that it would reasonably be expected to be subject to any penalty, excise or other tax for providing discriminatory benefits; provided that, in such event, the Company shall implement reasonable comparable alternative payments or benefits to Executive that would avoid such penalty, excise tax or other tax; (c) the Accrued Bonus; (d) the Pro-Rata Bonus, provided that Executive has been employed for at least six (6) months of the fiscal year in which such termination occurs, and (e) the Accrued Rights; provided that the payments described in clauses (a), (b) and (d) shall be subject to Executive’s continued compliance with the provisions of Section 6 and of the release delivered under Section 5.9.

5.5 Termination by Mutual Consent. Notwithstanding any of the foregoing provisions of this Section 5, if at any time during the course of this Agreement the parties by mutual consent decide to terminate Executive’s employment, they may do so by separate agreement setting forth the terms and conditions of such termination.

5.6 Termination by Non-Extension of Term. Notwithstanding anything herein to the contrary, in the event either party elects not to extend the Term of this Agreement pursuant to Section 2.1 hereto, Executive’s employment with the Company hereunder shall automatically terminate upon expiration of the Term of this Agreement on the Termination Date. In the event of such non-extension of the Term, unless Executive’s employment is earlier terminated otherwise pursuant to Section 5 hereof, Executive shall be entitled to receive the Accrued Rights and the Accrued Bonus. Following the Termination Date, Executive shall have no further rights to any other compensation or benefits under this Agreement, including without limitation any severance or continuation of benefits or otherwise.

5.7 Payment of Severance. Subject to Section 7.13, any severance payments pursuant to Section 5.4(a) hereof shall be paid commencing on the sixtieth (60th) day following the Termination Date (with a lump sum catch-up payment for any installments otherwise payable within sixty (60) days following the Termination Date) and in accordance with the Company’s standard payroll schedule and practices.

5.8 Release of Claims; Offsets. As a condition to the receipt of any payments of benefits described hereunder subsequent to the termination of the employment of Executive (other than Accrued Rights), Executive shall be required to execute, and not subsequently revoke, within sixty (60) days following the termination of his employment a release in a form reasonably acceptable to the Company of all claims arising out of his employment or the termination thereof. Subject to the limitations of applicable wage laws, the Company’s

 

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obligations to pay the severance benefits hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or any of its affiliates, except to the extent that the severance benefits constitute “nonqualified deferred compensation” for purposes of Section 409A (as defined in Section 7.13) and such offset would result in the imposition of tax or other adverse tax consequences under Section 409A. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.

5.9 Cooperation with Company after Termination of Employment. Following termination of Executive’s employment for any reason, Executive shall reasonably cooperate with the Company in all matters relating to the winding up of his pending work on behalf of the Company including, but not limited to, any litigation in which the Company is involved


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