EXHIBIT 10.31
ADVANCED AESTHETICS, LLC
EMPLOYMENT AGREEMENT
This Employment
Agreement
("Agreement") is
entered into by and among
Advanced Aesthetics, LLC, a Delaware limited liability
company (the "Company"),
Advanced Aesthetics, Inc., a Delaware
Corporation (the "Parent") and Jane Terker
(the "Executive") as of January 1, 2005
(the "Effective Date").
1. Employment.
The Company hereby employs the Executive and the
Executive hereby accepts employment by the Company
commencing on the
Effective
Date until terminated in accordance with
Section 5 herein (the "Term").
2. Positions
and Duties.
The Company
shall employ
Executive as the
President of the Company's Cosmedicine Division. As the President of the
Company's Cosmedicine Division, Executive shall report to the
Chief Executive
Officer of the Company and shall be
responsible for
developing,
implementing,
marketing and managing the daily
operations
and sales and growing
the line of
company products to be marketed and sold under the Cosmedicine mark (the
"Cosmedicine Products"). The Executive
shall perform her duties pursuant to this
Section 2, consistent with the written directives of the Company's Chief
Executive Officer or Board of Directors,
in the best interests
of the Company,
to the best of the Executive's ability and in a diligent manner, and the
Executive shall devote her full skills and
efforts and her entire business time
to the performance of those duties and to the
furtherance of the
interests of
the Company. All of such duties and
responsibilities
of Executive shall be
subject to such written policies,
guidelines and
procedures as are adopted from
time to time by the Chief Executive Officer or the Board of
Directors of the
Company (the "Board") during the Term. In addition, and without further
compensation, the Executive shall serve as
a member of the Board and as a member
of an advisory board to the board of directors of
one or more of the
Company's
affiliates, if so elected or appointed from
time to time; provided that any such
advisory role does not conflict or
interfere with any
duty owed by Executive to
the Company.
3. Remuneration.
------------
(a) The
Executive shall receive a base salary of not less than
$450,000 per year,
payable in accordance
with the Company's
customary payroll
practices. The Chief
Executive Officer may
review the
Executive's
salary from time to time and may
increase (but not
decrease) the salary during the Term in the
sole discretion
of the Chief
Executive Officer and/or the
Compensation Committee of the Board.
(b) In
addition to the Executive's base salary, the Company shall
pay to Executive the following bonuses to Executive not later
than thirty (30) days
following the first date on which the
applicable performance
measure has been
achieved (provided
that Executive is employed by the Company at the date on which
the applicable
performance measure
has been achieved and the
date of payment of such bonus):
(i) a bonus of
$175,000, payable upon the first date on which
Pierre
<PAGE>
Perrier and Johns Hopkins certifies for commercialization at
least ten (10) new products bearing the Johns Hopkins
Certification, as
defined in the Retail
Alliance
Agreement,
dated December 14, 2004 (the "Sephora Agreement"), between the
Company and Sephora USA, LLC ("Sephora");
(ii)
a bonus of $175,000,
payable upon the first date on which
Cosmedicine Products have been shipped to Sephora in an amount
sufficient to stock
each of the
Sephora Retail Stores (as
defined in the
Sephora Agreement) with at least ten (10)
Cosmedicine Product SKU's; and
(iii) a
bonus of $200,000,
payable upon the first date on which the
Company has shipped orders for Cosmedicine Products totaling
an aggregate total of
$5,000,000 during any
two consecutive
fiscal quarters during the Term.
Following the achievement of the foregoing
performance measures,
the Executive
and Chief Executive Officer or Board will mutually agree on additional
performance measures and payment schedule as a basis for the
payment of future
annual bonuses to the Executive (the "Subsequent Performance Bonus"). The
Subsequent Performance Bonus will be targeted to be no
less than $550,000
per
annum based on the achievement of such
additional performance measures.
(c) The
Parent hereby grants to the Executive an option to
purchase 150,000
shares of Parent's common stock at an
exercise price of
$4.00 per share
("Options"),
which such
Options shall vest
over a period of four years for as long as
the Executive is
employed by the Company so that at any given
day the number of vested options shall be equal to the
number
of days from the
Effective Date until
such date, divided
by
1,460 and multiplied
by the number of Options granted to the
Executive, except that
if her employment has been terminated
by the Company without
Cause or by Executive
for Good Reason
(each, as defined in Sections 5(a) and (e) below) then in each
such case,
the provisions of Sections 5(c) and (e) shall
control with
respect to the
acceleration
of vesting of any
unvested Options.
All such Options shall be subject to the
terms and conditions
of Parent's
2003 Stock
Option Plan as
amended, if at all,
during the Term (the "Option Plan"),
except that to the
extent there is a conflict between the
terms of this Agreement and the Option Plan, the terms of this
Agreement shall control. In addition to the foregoing
option,
Parent hereby
grants to the
Executive an option (on the same
terms, including,
but not limited to,
vesting and
exercise
price, as the foregoing Options) (the "Contingent Share
Option") to
purchase shares of common stock of the Parent
("Shares") based on the cumulative EBITDA contributed by the
sale of Cosmedicine
Products, as reasonably calculated and
agreed to in writing
by the Board and the
Executive for any
four consecutive
fiscal
quarters ("Cosmedicine Annual
EBITDA"), as follows:
(i) 40,000
Shares upon exceeding
$8,000,000 of Cosmedicine Annual
EBITDA;
(ii)
40,000 Shares upon exceeding $18,000,000 of Cosmedicine Annual
EBITDA;
-2-
<PAGE>
(iii)
40,000 Shares upon exceeding $35,000,000 of Cosmedicine Annual
EBITDA; and
(iv)
40,000 Shares upon exceeding $55,000,000 of Cosmedicine Annual
EBITDA.
For purposes of calculating the Cosmedicine Annual EBITDA, the following
guidelines will be followed: (A) Cosmedicine Annual EBITDA will
be based on the
price of the products sold to Sephora, (B) "backbar products" shall have the
same markup as wholesale products, (C) shared resources and corporate
allocations will be based on actual usage of
such resource by the
Cosmedicine
division and (D) all other calculations shall be performed in a manner to be
agreed upon in writing between the Board of Directors and Executive. In the
event that the parties do not agree on the
foregoing,
they will submit such
dispute to the Company's accountants to be resolved and if
the accountants
are
unwilling or unable to resolve such
dispute, the parties will submit the dispute
to arbitration to be conducted in New York,
New York by an arbitrator chosen by
the American Arbitration Association and in accordance with the Commercial
Arbitration Rules of the American
Arbitration Association.
4. Benefits;
Expenses. During the Term, the Executive (a) shall be
entitled, to the extent eligible, to participate in such health, medical,
welfare, retirement and savings benefit
plans and programs,
and perquisites of
the Company as are in effect during the
Term on terms
substantially
comparable
to those in effect for other senior
executives of the Company (collectively, the
"Benefit Plans"); and (b) shall be reimbursed for
all reasonable and necessary
expenses incurred by Executive in the
performance of her duties hereunder and as
a member of the Board or other advisory
board appointments
pursuant to
Section
2, upon the submission of appropriate
documentation with
respect thereto and in
accordance with applicable Company
policies.
5. Termination, Death and Disability.
---------------------------------
(a) The
Company may terminate this agreement and the Executive's
employment hereunder
at any time, upon written notice to
Executive, for "Cause", which shall mean
(i) the
commission
of fraud or
embezzlement
on the part of the
Executive;
(ii)
a breach by the Executive of Section 6 of this agreement;
(iii) the
conviction
of the Executive of, or the pleading by the
Executive of guilty or no contest to any felony, or any crime
involving moral turpitude on her part;
(iv)
the material (A)
failure or refusal of Executive to discharge
her
duties, responsibilities
and obligations under this
Agreement, except
for reasons beyond the control of the
Executive or (B)
failure or refusal of
Executive to comply
with a specific
written directive of the Board or Chief
Executive Officer,
but only if such
failure or refusal
(in
subsections (iv) (A) and (B)):
-3-
<PAGE>
(1) is inconsistent
with any provision of
this Agreement or
Executive's responsibilities hereunder;
(2) is not cured
within twenty
(20) days after receipt of
written notice
specifying
the nature of such failure or
refusal; or
(3) is not based on Executive's good faith belief, as
expressed by
prompt written notice given to the Chief
Executive Officer of the Company following consultation with
counsel that
performance of the specified action or direction
would be unlawful or inconsistent with the Company's policies
or code of business conduct.
In the event the Company terminates Executive's employment for Cause:
(A) Executive shall be entitled to receive such
base salary as has accrued but
has not been paid as of the date of
termination
("Termination Date") and (B) in
the event of termination pursuant to Section 5(a)(iv), the Executive shall be
entitled to exercise all Options as have
vested through the
Termination
Date.
Executive shall not be entitled to receive
any other payments or benefits of any
kind, except as required by applicable
law or under any of
the Agreements (as
defined in Section 17 below).
(b) In the event the
Company terminates
the Executive's employment
hereunder without Cause (other than as a result of
the death or
disability of
the Executive), the Company shall, in lieu of any and all other
payments or
benefits payable to the Executive,
pay to the
Executive:
(i) a cash lump
sum
payment, within thirty (30) days following
the Termination Date,
equal to the
accrued but unpaid base salary as of the
Termination Date, plus (ii) six months'
salary, if the Termination Date occurs on or before the
fourth anniversary
of
the Effective Date, payable over a period of six months following the
Termination Date. In addition and
notwithstanding any
provision in Section 3(b)
to the contrary, (A) fifty percent (50%) of all unvested Options to purchase
shares of common stock of Parent
granted to the
Executive pursuant to Section
3(c) shall vest and become exercisable
pursuant to the terms of the Option Plan,
(B) if any of the performance measures set forth in Section
3(b)(i), (ii) or
(iii) are met within six months of the Termination Date, Executive shall be
entitled to receive the applicable
bonus, as if such performance measure was
achieved during the Term of her
employment
and (C) if any of the
Cosmedicine
Annual EBITDA goals set forth in Section
3(c)(i), (ii), (iii) or (iv) are met
within six months of the Termination Date, Executive shall be entitled to
receive the Contingent Share Options, as if
such Cosmedicine Annual EBITDA goals
were achieved during the Term of her
employment.
(c) In the event of the death or disability (as reasonably determined
by the Company in accordance with all
applicable laws
