XCEL BRANDS, INC. (NASDAQ:XELB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
On February 24, 2020, Xcel Brands, Inc. (the “Company”) entered into an employment agreement with Isaac Mizrahi, a principal stockholder of the Company, for Mr. Mizrahi to continue to serve as Chief Design Officer of the Isaac Mizrahi brand. The term of the employment agreement expires on December 31, 2022, subject to earlier termination, and may be extended, at the Company’s option for two successive one-year terms (each, a “Renewal Period”). Mr. Mizrahi’s base salary shall be $1,800,000, $2,000,000 and $2,100,000 per annum during the term of the agreement and $2,250,000 and $2,400,000 during 2023 and 2024 if the term is extended, in each case, subject to adjustment in the event Mr. Mizrahi does not make a specified number of appearances on QVC. Mr. Mizrahi shall be eligible to receive an annual cash bonus (the “bonus”) up to an amount equal to $2,500,000 less base salary for 2020 and $3,000,000 less base salary for 2021, 2022 and any year during the Renewal Period. The Bonus shall consist of the DRT Revenue, Bonus, the Bricks and Mortar Bonus, the Endorsement Bonus and the Monday Bonus, if any, as determined in accordance with the below:
“DRT Bonus” means for any calendar year an amount equal to 10% of the aggregate net revenue related to sales of Isaac Mizrahi brand products through direct response television. The DRT Revenue Bonus shall be reduced by the amount of the Monday Bonus.
“Bricks-and-Mortar Bonus” means for any calendar year an amount equal to 10% of the net revenues from sales of products under the Isaac Mizrahi brand but excluding DRT revenue and endorsement revenues.
“Endorsement Bonus” means for any calendar year an amount equal to 40% of revenues derived from projects undertaken by the Company with one or more third parties solely for Mr. Mizrahi to endorse the third party’s products through the __ of Mr. Mizrahi’s name, likeness and/or image and neither the Company nor Mr. Mizrahi provides licensing or design.
“Monday Bonus” means $10,000 for each appearance by Mr. Mizrahi on QVC on Mondays (subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.
Mr. Mizrahi is required to devote his full business time and attention to the business and affairs of the Company and its subsidiaries; however, Mr. Mizrahi is the principal of IM Ready, LLC and Laugh Club, Inc. (“Laugh Club”), and accordingly, he may undertake promotional activities related thereto (including the promotion of his name, image, and likeness) through television, video, and other media (and retain any compensation he receives for such activities) (referred to as “Retained Media Rights”) so long as such activities (i) do not utilize the IM Trademarks, (ii) do not have a mutually negative impact upon or materially conflict with Mr. Mizrahi’s duties under the employment agreement, or (iii) are consented to by the Company. The Company believes that it benefits from Mr. Mizrahi’s independent promotional activities by increased brand awareness of IM Brands and the IM Trademarks.
Severance. If Mr. Mizrahi’s employment is terminated by us without “cause”, or if Mr. Mizrahi resigns with “good reason”, then Mr. Mizrahi will be entitled to receive his unpaid base salary and cash bonuses through the termination date and an amount equal to his base salary in effect on the termination date for the longer of six months and the remainder of the then-current term, but in no event exceeding 18 months. If Mr. Mizrahi’s employment is terminated by us without cause or if Mr. Mizrahi resigns with Good Reason, in each case within six months following a change of control (as defined in the employment agreement), Mr. Mizrahi shall be eligible to receive a lump sum payment equal to two times the sum of (i) his base salary (at an average rate that would have been in effect for such two year period following termination) plus (ii) the bonus paid or due to Mr. Mizrahi in the year prior to the change in control.
Non-Competition and Non-Solicitation. During the term of his employment by the Company and for a one-year period after the termination of such employment (unless Mr. Mizrahi’s employment was terminated without cause or was terminated by him for good reason), Mr. Mizrahi may not permit his name to be used by or to participate in any business or enterprise (other than the mere passive ownership of not more than 3% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages, or proposes to engage in the Company’s business anywhere in the world other than the Company and its subsidiaries. Also during his employment and for a one-year period after the termination of such employment, Mr. Mizrahi may not, directly or indirectly, solicit, induce or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any or its subsidiaries; or solicit, induce or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment wit the company or any of its subsidiaries; or hire any such person unless such person’s employment was terminated by the company or any