EXECUTIVE EMPLOYMENT
AGREEMENT
This employment agreement (the
“Agreement”) is made this 9th day of December 2003,
(the “Effective Date”) by and between I.C. Isaacs &
Company LP, a Delaware limited partnership (“the
Company”), and Peter Rizzo, (the
“Executive”).
1.
Employment; Director; Board
Observation Rights . The
Company hereby employs the executive as its Chief Executive
Officer. The Executive will provide his services hereunder
principally at the Company’s offices in New York, New York
and will report to the Chairman of the Board of Directors of the
Company’s parent, I.C. Isaacs & Company, Inc.
(“Isaacs”). In the event that Isaacs’ Board of
Directors (the “Board”) shall determine to appoint or
nominate the Executive to serve as a member of the Board, he agrees
to serve as a member of the Board. During the Term of this
Agreement (as hereinafter defined), and until such time as the
Executive shall be appointed or elected to serve as a member of the
Board, the Executive shall receive written notice of each meeting
of the Board at least five business days prior to the date of each
such meeting, and the Executive shall be permitted to attend as an
observer all meetings of the Board; provided that in the
case of telephonic meetings conducted in accordance with the Bylaws
and applicable law, the Executive only shall be entitled to receive
actual notice thereof not less than 24 hours prior to any such
meeting, and the Executive shall be given the opportunity to listen
to such telephonic meetings. The Executive shall be entitled to
receive all written materials and other information (including
copies of meeting minutes) given to directors in connection with
such meetings at the same time such materials and information are
given to the directors. If Isaacs proposes to take any action by
written consent in lieu of a meeting of the Board, the Executive
shall receive written notice thereof prior to the effective date of
such consent describing in reasonable detail the nature and
substance of such action.
2.
Term .This Agreement shall become effective on the
Effective Date and shall continue until December 31, 2006 (the
“Initial Term”). This Agreement shall be automatically
extended for additional periods of one calendar year (each, a
“Renewal Term”) commencing with calendar year 2007
unless, on or before June 30 of the last calendar year of the
Initial Term or the then current Renewal Term, as the case may be,
either party gives notice to the other of its or his intention not
to extend the Agreement beyond the end of the Initial Term or the
then current Renewal Term. The Initial Term and all Renewal Terms
taken together are hereinafter collectively referred to as the
“Term.”
3.
Base Salary
.The Executive’s base salary
during the Term shall be paid in accordance with the
Company’s normal payroll practices at a rate of $500,000 per
annum (the “Base Salary”). The payment of the
Executive’s base salary and all other payments made and to be
made to the Executive under this Agreement shall be made net of all
current and lawful withholdings and deductions, including those for
federal, state and local taxes. The Executive’s Base Salary
during each Renewal Term shall be 10% greater than the Base Salary
that he shall have received during the last year of the Initial
Term or the immediately preceding Renewal Term, as the case may be.
The Executive may be considered for periodic merit increases in
base salary based on the business performance objectives of the
Company or other goals as determined by the Board or the
Compensation Committee thereof in its discretion.
4.
Incentive Compensation
.In addition to his base salary, the
Executive shall be entitled to receive incentive compensation
calculated and paid, as follows:
(a)
Initial Term and all Renewal
Terms . The Executive
shall be eligible to receive the following bonuses with respect to
calendar years 2004, 2005, 2006 and each Renewal Term:
(i) In the event that the earnings before interest
and taxes achieved by Isaacs during any of such years shall
be:
1)
not less than 95% of, and not more
than 110% of, the “EBIT Target” specified by the
Company for such year, the Company shall pay the Executive a bonus
of $105,000;
2)
not less than 111% of, and not more
than 130% of, the “EBIT Target” specified by the
Company for such year, the Company shall pay the Executive a bonus
of $140,000; or
3)
more than 130% of the “EBIT
Target” specified by the Company for such year, the Company
shall pay the Executive a bonus of $175,000;
(ii) in the event that the increase in cash and cash
equivalents reflected on the consolidated statement of cash flows
contained in Isaacs’ annual audited financial statements for
any of such years shall be:
1) not less than 95% of, and not more than 110% of,
the “Cash Flow Target” specified by the Company for
such year, the Company shall pay the Executive a bonus of
$84,000;
2) not less than 111% of, and not more than 130%
of, the “Cash Flow Target” specified by the Company for
such year, the Company shall pay the Executive a bonus of $112,000;
or
3) more than 130% of the “Cash Flow
Target” specified by the Company for such year, the Company
shall pay the Executive a bonus of $140,000; and
(iii) in the event that the number of turns of the
Company’s inventory during any of such years shall
be:
1) not less than 95% of, and not more than 110% of,
the “Inventory Turns Target” specified by the Company
for such year, the Company shall pay the Executive a bonus of
$21,000;
2)
not less than 111% of, and not more
than 130% of, the “Inventory Turns Target” specified by
the Company for such year, the Company shall pay the Executive a
bonus of $28,000; or
3)
more than 130% of the
“Inventory Turns Target” specified by the Company for
such year, the Company shall pay the Executive a bonus of
$35,000.
(b)
Definitions
. For purposes of this Agreement,
the term:
(i) “EBIT Target” shall mean the amount
that the Company shall designate as the earnings before interest
and taxes that Isaacs must achieve in order for the Executive to
earn the bonus described in Sections 4 (a) (i) and 4 (b) (i) of
this Agreement;
(ii) “Cash Flow Target” shall mean the
amount that the Company shall designate as the cash provided by
operating activities that Isaacs must achieve in order for the
Executive to earn the bonus described in Sections 4 (a) (ii) and 4
(b) (ii) of this Agreement; and
(iii) “Inventory Turns Target” shall mean
the number of turns of the Company’s inventory that the
Company must achieve, as designated by the Company, in order for
the Executive to earn the bonus described in Sections 4 (a) (iii)
and 4 (b) (iii) of this Agreement.
(c) The EBIT Target, Cash Flow Target and Inventory
Turns Target shall (i) not be greater than any of the EBIT Targets,
Cash Flow Targets and Inventory Turns Targets applicable to any
other senior executive of the Company; (ii) be determined by the
Compensation Committee of the Board after consultation with the
Executive; and (iii) be specified in writing by the Company not
later than February 28, 2004 with respect to calendar year 2004,
and not more than 60 days after the first day of each other year
during the Initial Term and each Renewal Term with respect to such
year.
(d) Determination of the achievement of:
(i) the EBIT Target shall be made by adding the sum
of the interest expense net of interest income, and income tax
expense (but not income tax benefit) reflected on the consolidated
statement of operations contained in Isaacs Financial Statements
for the year in question from the line item entitled Net
income” on such consolidated statement of
operations;
(ii) the Cash Flow Target shall be made by reference
to the line item entitled “cash provided by operating
activities” reflected on the consolidated statement of cash
flows contained in the Isaacs Financial Statements for the year in
question; and
(iii) the Inventory Turns Target shall be made by
reference to the quotient obtained by dividing:
1) the cost of goods sold reflected on the
consolidated statement of operations contained in the Isaacs
Financial Statements for the year in question by
2) the quotient derived by dividing the sum of the
beginning and ending inventories for the year in question, as
determined by reference to the notes to the Isaacs Financial
Statements for such year, by the number 2.
(e) Each of the bonuses described in Sections 4(a)
which shall be earned during any calendar year or part thereof
during the Term shall be paid not more than 10 days after the date
upon which Isaacs’ Annual Report on Form 10-K for the year in
question shall be filed with the SEC.
(f) Anything elsewhere contained in this Agreement
to the contrary notwithstanding, in the event that the aggregate
amount of the incentive compensation that the Executive shall
receive pursuant to Sections 4(a) (i), (ii) and (iii) hereof shall
be less than $125,000, the Company shall pay the difference between
$125,000 and such aggregate amount to the Executive. Payment of
such amount shall be made in accordance with the provisions of
Section 4(e) of this Agreement.
5.
Stock Options
.In addition to his base salary, and
the incentive compensation entitlements described in Section 4, the
Executive also shall receive a non-qualified stock option (the
“Option”) to purchase 500,000 shares of Isaacs’
common stock, par value $.0001 per share (the “Common
Stock”), pursuant to Isaacs’ Amended and Restated
Omnibus Stock Option Plan, as amended (the “Option
Plan”). The Option shall be granted under, and shall be
subject to all of the terms and conditions of, the Option Plan. Any
unexercised portion of the Option shall be exercisable,
notwithstanding any contrary provision or requirement contained in
the Option Plan, for a period of five years commencing on the
Effective Date (the “Option Term”), provided that (i)
the Executive shall have been in the continuous employ of the
Company during the Initial Term; and (ii) the Executive’s
employment shall not be terminated for “Cause” (as such
term is hereinafter defined) at any time during the Option Term.
The Option shall be exercisable at the price per share which must
be applied to all non-qualified stock options granted under the
Option Plan on the E
