EXHIBIT
10.5
EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this
“Agreement”) is entered into the 5th day of June, 2009
by and between Parlux Fragrances, Inc. (the “Company”)
and Frank A. Buttacavoli (the “Executive” and, together
with the Company, the “Parties”).
WHEREAS, the Company desires to continue
to employ the Executive and the Executive agrees to continue to be
employed by the Company as the Executive Vice President and Chief
Operating Officer of the Company on the terms and conditions set
forth in this Agreement;
WHEREAS, the terms of this Agreement have
been reviewed and approved by the members of the Compensation
Committee of the Board of Directors of the Company (the
“Committee”).
NOW THEREFORE, in consideration of the
mutual covenants and agreements contained herein, and for other
valuable consideration the receipt and adequacy of which is hereby
acknowledged, the Parties hereby agree as follows:
1.
Position and Duties
. The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts and agrees to continue
to serve as the Executive Vice President and Chief Operating
Officer of the Company. The Executive shall report to the
Company's Chief Executive Officer. Subject to the advice,
consent and direction of the Company’s Board of Directors,
the Executive will perform all duties and responsibilities and will
have all authority inherent in the position of Executive Vice
President and Chief Operating Officer.
2.
Term of Agreement and
Employment .
The term of the Executive’s
employment under this Agreement will be for an initial period of
approximately three (3) years, beginning on the date hereof, and
terminating on March 31, 2012 (the “Term”). The
Term may be extended for two (2) consecutive one (1) year periods,
as follows: The Executive will, at his option if he so
desires, provide written notice both to the Chief Executive Officer
and to the Chair of the Compensation Committee of the Company's
Board of Directors, not less than six months prior to, but not more
than eight months prior to, the expiration of the current Term
stating his desire to extend the Term for one additional year.
If the Executive does not provide such notice timely, then
this Agreement will expire of the end of its then current Term.
If the Executive provides such notice timely, then the Chair
of the Compensation Committee will, after consulting with the
Executive and the Chief Executive Officer and after convening a
meeting of the Compensation Committee (and taking such other
actions as the Chair deems necessary), advise the Executive within
60 days of the Committee's decision either to extend the Term of
this Agreement for the additional one year period or not to extend
the Term of this Agreement for the additional one year period.
The Committee's decision to extend or to not extend the Term
will be final and binding on the parties.
3.
Definitions .
A.
Cause . For purposes of this Agreement,
“Cause” for the termination of the Executive’s
employment hereunder shall be deemed to exist if, in the good faith
judgment of the Company’s Board of Directors: (i) the
Executive commits fraud, theft or embezzlement; (ii) the Executive
commits an act of dishonesty affecting the Company or a felony or a
crime involving moral turpitude; (iii) the Executive willfully
breaches any non-competition, confidentiality or non-solicitation
agreement with the Company; (iv) the Executive breaches any of the
material terms of this Agreement and fails to cure such breach
within 30 days after the receipt of written notice of such breach
from the Company; (v) the Executive engages in gross negligence or
willful misconduct that causes unreasonable harm to the business
and operations of the Company; or (vi) the Executive’s
unreasonable failure or refusal to diligently perform the duties
and responsibilities required to be performed by the Executive
under the terms of this Agreement.
B.
Company Transaction Events
. For purposes of this Agreement,
(i) a “Going Private Event” means a transaction in
which 90% or more of the issued and outstanding shares of the
capital stock of the Company are to be sold or exchanged (pursuant
to an agreement, tender or exchange offer or otherwise) by the
holders thereof for cash or for securities, so that upon the
closing of such a transaction (or a second step merger related
thereto), Parlux common stock is no longer traded on any public
stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized
trading market (e.g., Nasdaq OTCBB) and the holders of Parlux
common stock prior to the closing of such a transaction hold cash
or non-publicly traded securities in a private company after the
transaction, (ii) a “Company Merger Event” means a
transaction in which 90% or more of the issued and outstanding
shares of the capital stock of the Company are to be exchanged
(pursuant to an agreement, exchange offer or otherwise) by the
holders thereof for securities of any public company, so that upon
the closing of such a transaction (or a second step merger related
thereto), all Parlux common stock has been exchanged or converted
into securities of a public company that are traded on a public
stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized
trading market (e.g., Nasdaq OTCBB) and the holders of Parlux
common stock prior to the closing of such a transaction hold
publicly traded securities in a public company after the
transaction.
C.
Good Reason . For purposes of this Agreement, termination
by the Executive of his employment for “Good Reason”
shall mean a termination by the Executive following a “Good
Reason Event” provided (i) the Executive provides notice to
the Company of such Good Reason Event within 90 days of the initial
existence of such Good Reason Event; (ii) the notice provides the
Company with 30 days during which it may remedy the Good Reason
Event; and (iii) the Company fails to remedy the Good Reason Event
within such 30 day period. A “Good Reason Event shall
be deemed to occur upon (i) a material diminution in the
Executive’s authority, duties, or responsibilities, or (ii)
any action or inaction of the Company which constitutes a material
breach of this Agreement, or (iii) if any Going
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Private Event or Company Merger Event
closes with a successor entity acquiring the business and
operations of the Company and such successor entity does not,
within ten (10) days following the closing, expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform had no
such successor entity acquired the Company's business and
operations.
4.
Compensation
.
A.
Annual Base Salary
. Unless terminated pursuant to
Section 8 hereof, Executive shall be paid an annual base salary of
$400,000 during the Term, and for any extension of the Term
pursuant to Section 2 (as applicable, the “Annual Base
Salary”). The Annual Base Salary shall be payable at
such regular times and intervals as the Company customarily pays
its executives from time to time, but in no event less frequently
than monthly.
B.
Executive Bonus Plan
. The Executive shall be entitled
to participate in an executive bonus plan (the “Bonus
Plan”), the terms and conditions of which shall be
established by the Committee for each fiscal year and which will
provide that Executive will be able to earn an annual bonus of up
to 50% of the Annual Base Salary, based upon achievement by the
Company of certain financial measures and management objectives as
determined by the Committee. To the extent earned, bonuses
shall be paid no later than 75 days following the end of the
fiscal year in which the bonus was earned.
5.
Executive Benefits
. The Executive will be entitled to the greater of four
weeks of paid vacation, or the maximum number of "Paid Time Off
(PTO)" days provided by the Company to employees of similar
longevity and classification, per fiscal year. Except as
otherwise provided in this Agreement, the Executive will be
eligible for and may participate in, without action by the Board or
any committee thereof, any benefits and perquisites available to
executive officers of the Company, including any group health,
dental, disability, or other form of executive benefit plan or
program of the Company existing from time to time on the same terms
and conditions as is available to all other executives
(collectively, the “Executive Benefits”).
Executive shall receive additional term life insurance
coverage with an annual cost to the Company not to exceed $2,000
per year, and shall be provided with an automobile allowance of
$800 per month, at the Company’s expense.
6.
Stock Options
. As additional consideration for the Executive’s
services hereunder and the covenants contained herein, the Company
shall grant Executive an option on the date hereof (the
“Option”) to purchase 100,000 shares of common stock of
the Company (the “Common Stock”) pursuant to the
Company’s 2007 Stock Incentive Plan (the “2007
Plan”). The Option (i) shall provide for an exercise
price equal to the market price of the Common Stock as of the close
of trading on the date hereof and (ii) shall further provide that
the Option shall vest as provided on Schedule A, unless terminated
pursuant to Section 8 hereof. Immediately prior to the
closing of a Going Private Event or a Company Merger Event, any
unvested portion of the Option shall fully vest and be
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exercisable by the Executive prior to the
closing of the Going Private Event or Company Merger Event;
provided , however, that if the Company Merger Event is with
a public company that any individual shareholder or group of
affiliated shareholders of the Company beneficially owns 10% or
more of for a period of at least six months prior to the closing of
the Company Merger Event (an “Affiliated Public
Company”), then the vesting of the unvested portion of the
Executive’s Option shall not be accelerated so long as the
Executive’s Option to purchase shares of the Common Stock of
the Company is converted into an option to purchase shares of the
common stock of the Affiliated Public Company with the same
economic value as of the date of the closing of the
transaction.
7.
Death or Disability
. The Executive’s employment will terminate
immediately upon the Executive’s death. If the
Executive becomes physically or mentally disabled so as to become
unable for a period of more than three consecutive months to
perform the Executive’s duties hereunder on a substantially
full-time basis, the Executive’s employment will terminate as
of the end of such three-month and this shall be considered a
“disability” under this Agreement. The Executive
agrees to submit to reasonable examination by a licensed physician
selected by the Company to confirm existence or extent of any
disability. Such termination shall not affect the
Executive’s benefits under the Company’s disability
insurance program, if any, then in effect.
8.
Termination . The
Executive may terminate this Agreement for any reason upon not less
than one hundred eighty (180) days written notice. The
Company may terminate this Agreement for Cause with no prior
notice, or for any other reason upon one hundred eighty (180) days
written notice.
A.
Termination of Employment Other Than
by Resignation of Executive or Termination for Cause
. Upon the termination of this
Agreement for any reason (including termination of employment by
the Executive for Good Reason, termination by the Company without
Cause, or termination upon the death or disability of the
Executive) other than by the resignation of Executive without Good
Reason or a termination by the Company for Cause, the following
shall apply:
B.
Termination Payment
. The Executive, or his estate and
heirs following his death, shall be entitled (A) to continue to
receive, except as provided in Section 10 of this Agreement, his
Annual Base Salary in effect at the time of such termination for a
period of twelve (12) months following the date of such termination
(the “Severance Period”), (B) to have any unvested
portion of his Option fully vest as of the date of such
termination, and (C) except as provided in Section 10 of this
Agreement, to be paid any bonus that would have been earned by
Executive through the date of his termination at such time as
th
