EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of December 24, 2013
(the “Effective Date”) by and between Xcel Brands, Inc. a Delaware corporation
(the “Company”), and Isaac Mizrahi (the “Executive”), each a “Party” and
collectively the “Parties.”  Unless otherwise indicated, capitalized terms used
herein are defined in Section 2.1.

 

WHEREAS, the Executive serves as the Company’s Chief Design Officer of the Isaac
Mizrahi Brand pursuant to an employment agreement dated as of May 19, 2011 (the
“Original Agreement”); and

 

WHEREAS, the Parties desire to amend the terms of the Executive’s employment
with the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, as defined below, it is agreed by and between the Executive and
the Company as follows:

 

ARTICLE I
EMPLOYMENT TERMS

 

1.1. Employment.  The Company will employ the Executive, and the Executive
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the Effective Date and ending as
provided in Section 1.4(a) hereof (the “Employment Period”). The Original
Employment Agreement is hereby terminated, other than Sections 1.5, 1.6, 1.7,
1.8 and 1.10 thereof which shall survive and continue full force and effect in
accordance with their terms.

 

1.2. Position and Duties.

 

(a) Generally.  The Executive shall:

 

(i) serve as the Chief Design Officer of the “Isaac Mizrahi” brand, and in such
capacity shall be responsible for providing input to the Company’s President of
the Isaac Mizrahi brand with respect to the creation of the Company’s design
vision for the Isaac Mizrahi Brand, shall perform such duties as are customarily
performed by an officer with similar title and responsibilities of a company of
a similar size (including, without limitation, the performance of Executive’s
duties and obligations under agreements with the Company’s licensees or any
other third-party pursuant to which Executive is obligated to perform personal
services, but not including Executive’s duties under agreements pursuant to the
Retained Media Rights) and shall have such power and authority as shall
reasonably be required to enable him to perform his duties hereunder; provided,
however, that in exercising such power and authority and performing such duties,
he shall (x) at all times be subject to the authority, control and direction of
the Chairman and CEO of the Company and (y) abide by Product Media and Press
Guidelines attached hereto as Exhibit A;

 

(ii) Make such In-Store Appearances material to the Company’s business as
reasonably requested by the Company, provided that in no event shall Executive
be required to make more than twenty-four (24) In-Store Appearances in any
calendar year (exclusive of any travel days), as pro-rated for partial calendar
years during the Term, and the Company shall use commercially reasonable efforts
to accommodate Executive’s schedule with respect to the Retained Media Rights,
and provided, further that it is anticipated that the Company will request that
the Executive make between 12-24 appearances per year (as pro-rated for partial
calendar years during the Term); and

 

 

 

 

(iii) Make appearances on direct-response television limited to (A) appearances
on QVC pursuant to the license agreement between IM Brands, LLC and QVC, Inc.
such that the Company will not be in a breach of Section 4 of the QVC Agreement,
as in effect on the date hereof, (B) travel to Toronto, Canada for four personal
physical appearances per calendar year for The Shopping Channel, subject to the
Company and Executive agreeing on travel arrangements for such appearances, and
(C) such other appearances as may be mutually agreed in writing by the Company
and the Executive. Notwithstanding anything herein to the contrary, Executive
agrees that his appearances on QVC shall include two (2) one-hour “static” shows
per week (in addition to “hits” before and after, and on the same day as, each
such show), provided that after March 1, 2015, if Executive informs the Company
in writing and demonstrates to the Company’s reasonable satisfaction that he has
obligations pertaining to Retained Media Rights that conflict with Executive’s
schedule on QVC, the Company shall use commercially reasonable efforts to
accommodate Executive’s schedule with respect to the Retained Media Rights, and
Executive shall only be required to appear on QVC for one (1) one-hour show per
week (in addition to“hits” before and after, and on the same day as, such show)
and “Today’s Special Value” programs consistent with past practice and such
other appearances consistent with past practices which do not conflict with
Executive’s schedule with respect to the Retained Media Rights.

 

(b) Duties and Responsibilities.  The Executive shall report to the Chairman and
CEO of the Company and shall devote his full business time and attention to the
business and affairs of the Company and its Subsidiaries.  The Company
acknowledges that the Executive has a commitment with respect to the St. Louis
Opera and that Executive will be in St. Louis from approximately May 4, 2014 to
May 24, 2014 in connection with such commitment. Notwithstanding anything to the
contrary herein, the Company acknowledges and agrees that the performance by
Executive of such commitment shall not be in breach of any of the terms herein
and that Executive shall not be available for appearances as contemplated under
Section 1.2(a)(ii) and (iii) during such time period. The Executive shall
perform his duties and responsibilities in a diligent, trustworthy, businesslike
and efficient manner.  The Executive shall not engage in any other business
activities that conflict with the Executive’s duties, responsibilities and
obligations hereunder.  During the Employment Period, the Executive shall
promptly bring to the Company all investment or business opportunities and
creative design ideas relating to the Business, of which the Executive becomes
aware.

 

(c) Notwithstanding anything to the contrary in this Section 1.2, Executive may
engage in the Retained Media Rights, in each case so long as such activity does
not have a materially negative impact upon or materially conflict with the
Executive’s duties hereunder.

 

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(d) Principal Office.  The principal place of performance by the Executive of
his duties hereunder shall be at the Company's principal executive offices in
Manhattan, New York, although, subject to the terms hereof, the Executive may be
required to travel, upon reasonable advance notice, outside of the area where
the Company's principal executive offices are located in connection with the
business of the Company.  Except as set forth herein, all required travel shall
be in accordance with the Company’s travel policy.

 

1.3. Compensation.

 

(a) Base Salary.  The Executive’s base salary shall be $1,000,000 per annum (the
“Base Salary”).  The Base Salary will be payable to the Executive by the Company
in regular installments in accordance with the Company’s general payroll
practices.  The Executive shall receive such increases (but not decreases) in
his Base Salary as the Board of Directors of the Company (the “Board”), or the
compensation committee of the Board, may approve in its sole discretion from
time to time. The Executive’s Base Salary will be reviewed for potential upwards
adjustments at such times, after September 30, 2016, as annual salary reviews
are conducted for executives of the Company.

 

(b) Bonus. The Executive shall be eligible to receive an annual cash bonus (the
“Bonus”) of up to $1,000,000 (the “Maximum Bonus”) for each calendar year
commencing in 2014 (subject to Section 1.4 hereof) during the Term (or any
partial calendar year during the Term) in accordance with this Section 1.3(b).
The Bonus, if any, shall consist of the DRT Revenue Bonus, if any, and the
Collaboration Bonus, if any, as determined in accordance with the below:

 

(1)DRT Revenue Bonus

 

The DRT Revenue Bonus (the “DRT Revenue Bonus”) for any calendar year shall be
equal to (i) 10% of the aggregate of DRT Revenue, until the Bonus payable for
such calendar year equals $500,000 and (ii) thereafter, 5% of DRT Revenue, until
the Bonus payable for such calendar year equals the Maximum Bonus.

 

(2)Collaboration Bonus

 

The Collaboration Bonus (the “Collaboration Bonus”) for any calendar year shall
be equal to 5% of IM Collaboration Revenue. As soon as practicable after the end
of after the applicable calendar year, but in no event later than sixty (60)
days following the end of such calendar year, the Company shall deliver to the
Executive (i) a statement prepared by the Company of the calculation of the
amount of the DRT Revenue Bonus and Collaboration Bonus; and (ii) supporting
documentation of such calculations for the applicable period (collectively, (i)
and (ii), the “Reconciliation”).   The Bonus, if any, shall be paid to the
Executive not later than thirty (30) days after delivery of the Reconciliation
to the Executive.  In addition to, and not in lieu of, the foregoing, the
Executive shall have the right to participate in all employee bonus plans
offered to other employees, and such other bonus payments as the Board, or the
compensation committee of the Board, may approve in its sole discretion.  Such
bonus payments, if any, shall be paid at the same time paid to other recipients
but in no event later than sixty (60) days after the end of the applicable
calendar year or fiscal period.  All bonuses payable under this Section 1.3(b)
shall be, collectively, referred to herein as “Bonus.”

 

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(c) Withholding.  All payments made under this Agreement (including Base Salary,
Bonus payments, and other amounts) shall be subject to withholding for income
taxes, payroll taxes and other legally required deductions.

 

(d) Automobile Allowance. The Company will reimburse the Executive an amount up
to $750.00 per month relating to the use of an automobile, plus gas and tolls
for travel between the Executive’s home and the QVC studio for appearances
pursuant to Section 1(a)(iii).

 

(e) Expenses.  The Company will reimburse the Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement that are consistent with the Company’s policies in effect at that time
with respect to travel, entertainment and other business expenses, subject to
the Company’s requirements with respect to reporting and documentation of such
expenses.  All expense reimbursement payments for documented expenses shall be
made in accordance with the Company expense reimbursement policy.  In addition,
the Company shall reimburse the Executive for up to $110,000 of non-accountable
expenses each calendar year (pro-rated for any partial calendar year during the
Employment Period), without regard to whether such expenses would be
reimbursable under the Company’s expense reimbursement policy.  All expense
reimbursement payments for non-accountable expenses shall be made within thirty
(30) days after the date that the Executive notifies the Company of such
expense; provided, however, that the Executive shall notify the Company of such
expenses no later than six (6) months after the end of the calendar year in
which such expenses were incurred.

 

(f) Vacation; Holiday Pay and Sick Leave.  The Executive shall be entitled to
four (4) weeks’ paid vacation in each calendar year, which if and to the extent
not taken during any year may be carried forward to any subsequent
year.  Executive shall receive holiday pay and paid sick leave as provided to
other executive employees of the Company.

 

(g) Additional Benefits.  During the Employment Period, the Executive shall be
entitled to participate (for himself and, as applicable, his dependents) in the
group medical, life, 401(k) and other insurance programs, equity and
equity-based incentive plans, employee benefit plans and perquisites which may
be adopted by the Board, or the compensation committee of the Board, from time
to time, for participation by the Company’s senior management or executives, as
well as dental, life and disability insurance coverage, with payment of, or
reimbursement for, such insurance premiums by the Company, subject to, in all
cases, the terms and conditions established by the Board with respect to such
plans (collectively, the “Benefits”); provided, however, that the Board, in its
reasonable discretion, may revise the terms of any Benefits so long as such
revision does not have a disproportionately negative impact on the Executive
vis-à-vis other Company employees to the extent applicable.

 

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(h) Indemnification.  The Executive shall be entitled to indemnification by the
Company in the same circumstances and to the same extent as the other executive
officers and directors of the Company, which indemnification shall in no event
be less favorable to the Executive than the fullest scope of indemnification
permitted by applicable Delaware law (or any such greater scope of
indemnification provided by agreement or by the terms of the Company’s
Certificate of Incorporation or By-Laws to any executive officer or director of
the Company).

 

(i) D&O Insurance.  The Company shall acquire and maintain Directors’ and
Officers’ insurance for the Company’s directors and officers (including the
Executive), with coverage in amounts reasonably sufficient to protect the
Company’s directors and officers, but in all events with coverage in amounts no
less than such amounts customarily maintained by similarly situated
companies.  Upon a Change of Control, the Company shall purchase, or cause to be
purchased, a tail policy for the period of one year in an amount reasonably
sufficient to protect the Company’s former directors and officers, but in all
events with coverage in amounts no less than such amounts obtained by similarly
situated companies in similar events.

 

(j) Other Benefits.  During the Employment Period, the Company shall: (i) employ
a full-time executive assistant for the Executive (whose salary shall be
consistent with other staff of the Company at similar levels); (ii) reimburse
Executive for up to Five Thousand Dollars ($5,000) per year for Executive to
acquire and maintain a life insurance policy on the Executive; (iii) allow the
Executive to participate in the Company’s disability insurance policy (the
“Disability Policy”, which shall name the Executive as loss payee; (iv) pay for
directly, or reimburse the Executive, for the Executive’s cell phone and
internet expenses, home office supplies and computer maintenance; and (v)
provide for first class airfare for the Executive and economy (or coach) class
airfare for a “show stylist” and luxury accommodations for the Executive and
accommodations pursuant to the Company’s travel policy for such “show stylist”,
or such other travel arrangements with respect to appearances made by Executive
pursuant to Section 1.2(a)(iii)(B).

 

1.4. Term and Termination.

 

(a) Duration.  This Agreement shall be effective upon the Closing (as defined in
the Purchase Agreement).  The Employment Period shall commence on the Effective
Date and the initial term shall terminate on September 30, 2016 (the “Initial
Term”), unless earlier terminated by the Company or the Executive as set forth
in this Section 1.4.  After the Initial Term, the Company shall have the option
to renew this Agreement for two successive one-year periods (each a “Renewal
Period”) on the same terms and conditions as those in effect during the third
year of the Initial Term.  The Initial Term plus any Renewal Period exercised by
the Company is referred to herein as the “Term”.  Thereafter, the Term shall
renew automatically for one-year periods, unless either party gives the other
party written notice of its intention not to renew the Agreement no later than
30 days prior to the expiration of the then current Term. The Employment Period
shall be terminated prior to the then-applicable expiration of the Term upon the
first to occur of (i) termination of the Executive’s employment by the Company
for Cause, (ii) termination of the Executive’s employment by the Company without
Cause, (iii) the Executive’s resignation with Good Reason, (iv) the Executive’s
resignation other than for Good Reason, or (v) the Executive’s death or
Disability.  The Executive shall not terminate the Employment Period, with or
without Good Reason, unless he gives the Company written notice that he intends
to terminate the Employment Period at least 30 days prior to the Executive’s
proposed Termination Date.  As a condition to Executive receiving any payments
or benefits under Section 1.4(b)(2) and (3) or Section 1.4(c) (except amounts
payable pursuant to Section 1.4(b)(1)), the Executive shall execute and deliver
to the Company the General Release of claims relating solely to the Executive’s
employment with the Company within 60 days after the Termination Date in the
form attached hereto as Exhibit B.  If the Executive does not execute and
deliver the General Release within that time period then the amounts otherwise
payable pursuant to Section 1.4(b)(2) shall be forfeited.  The first payment
under this Section 1.4 shall include any amounts payable under this Section 1.4
for periods prior to execution of such General Release.

 

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(b) Severance Upon Termination Without Cause, Upon Resignation by the Executive
For Good Reason or Failure to Renew Term.  If the Employment Period is
terminated by the Company without Cause or if the Executive resigns for Good
Reason, or if the Company fails to renew the Term (in which case termination of
the Executive’s employment shall be effective at the expiration of the
then-current Term), then the Executive will be entitled to receive (1) any
unpaid Base Salary through and including the date of termination or resignation
and any other amounts, including any amounts due for Bonus, or other
entitlements then due and owing to the Executive as of the Termination Date; (2)
an amount equal to the Executive’s Base Salary (at the rate that would have been
effect pursuant to Section 1.3(a) had such employment not been terminated) for
the longer of (x) six (6) months from the Termination Date, and (y) the
remainder of the then-current Term, but in no event exceeding eighteen (18)
months (as the case may be, the “Severance Period”), payable in substantially
equal installments over the Severance Period in accordance with the Company’s
normal payroll practices; provided, however, that prior to the date that is six
months and one day after the Termination Date, no payments would be made that
exceed the lesser of two times: (i) the sum of (A) the Executive’s Base
Salary (at the rate in effect on the date of termination), (B) the Bonus paid to
Executive  pursuant to Section 1.3(b) in the prior calendar year, and (C) any
other taxable compensation paid to the Executive in the prior calendar year; or
(ii) the maximum amount that may be taken into account under a qualified plan
pursuant to section 401(a)(17) for the year in which the Executive has a
termination of employment; and any amount in excess of the applicable limits
shall be paid on the date that is six months and one day after the Termination
Date; and (3) continue to participate in the Company’s group medical plan on the
same basis as he previously participated or, if such participation would violate
the provisions of Section 409A of the Code or applicable nondiscrimination
regulations under the Patient Protection and Affordable Care Act (PPACA),
receive reimbursement for, COBRA premiums (or, if COBRA coverage is not
available, reimbursement of premiums paid for other medical insurance in an
amount not to exceed the COBRA premium) for the Severance Period; provided that
if the Executive is provided with health insurance coverage by a successor
employer, any such coverage by the Company under subclause (3) shall cease (each
of (1), (2) and (3) referred to as the “Severance Payment”).  The Executive also
shall be entitled to receive payment for (i) all reimbursable expenses or other
entitlements then due and owing to the Executive as of the Termination Date
under Section 1.3(d) (other than non-accountable expenses which shall be
reimbursed pursuant to clause (ii) below), which payments shall be made in
accordance with the Company expense reimbursement policy; provided, however, in
no event shall any expense reimbursements by the Company be made later than the
last day of the calendar year after the calendar year in which the expense was
incurred, and (ii) all non-accountable expenses incurred prior to the
Termination Date that are reimbursable under Section 1.3(d), which payments
shall be made in accordance with the terms of Section 1.3(d).  If the Executive
breaches his obligations under Section 1.6, 1.7, 1.8 or 1.9 of this Agreement,
the Company’s obligation to make any Severance Payments and provide any Benefits
shall cease as of the date of such breach; provided, that if the Executive cures
such breach within 10 days of receiving written notice from the Company of such
breach (which notice the Company shall provide promptly to the Executive after
learning of such breach), the Company shall promptly pay all Severance Payments
not made during such period of dispute and resume making Severance Payments and
providing Benefits promptly following such cure.

 

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(c) Severance upon a Change of Control.  Anything contained herein to the
contrary notwithstanding, in the event the Executive's employment hereunder is
terminated within six (6) months following a Change of Control by the Company
without Cause or by the Executive with Good Reason, the Executive shall be
entitled to receive the Severance Payment as described in sub-section (b) above;
provided, however, that in lieu of the calculation contained in Section
1.4(b)(2), Executive shall be entitled to receive a lump sum amount within 60
days after the Termination Date equal to two times the sum of (i) the
Executive's Base Salary (at the average rate that would have been effect
pursuant to Section 1.3(a) during the two years following the Termination Date)
and (ii) the Bonus paid or due to the Executive pursuant to Section 1.3(b) in
the year prior to such Change of Control, if any; provided, however, that prior
to the date that is six months and one day after the Termination Date, no
payment would be made that exceeds the lesser of two times: (i) the sum of (A)
the Executive’s Base Salary (at the rate in effect on the date of termination),
(B) the Bonus paid to Executive  pursuant to Section 1.3(b) in the prior
calendar year, and (C) any other taxable compensation paid to the Executive in
the prior calendar year, or (ii) the maximum amount that may be taken into
account under a qualified plan pursuant to Section 401(a)(17) of the Code for
the year in which the Executive has a termination of employment, and any amount
in excess of such limits shall be paid on the date that is six months and one
day after the Termination Date; and further provided, however, that if such lump
sum severance payment, either alone or together with other payments or benefits,
either cash or non-cash, that the Executive has the right to receive from the
Company, including, but not limited to, accelerated vesting or payment of any
deferred compensation, options, stock appreciation rights or any benefits
payable to the Executive under any plan for the benefit of employees, would
constitute an "excess parachute payment" (as defined in Section 280G of the
Code), then such lump sum severance payment or other benefit shall be reduced to
the largest amount that will not result in receipt by the Executive of an
“excess parachute payment.” The determination of the amount of the payment
described in this subsection shall be made by the Company's independent auditors
at the sole expense of the Company.  For purposes of clarification the value of
any options described above will be determined by the Company's independent
auditors using a Black-Scholes valuation methodology.

 

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(d) Death and Disability.  In the event of the Company terminates this Agreement
due to the death of the Executive, the Company shall pay the Executive his Base
Salary through the date of termination, at the rate then in effect, and all
expenses or accrued Benefits arising prior to such termination which are payable
to the Executive pursuant to this Agreement through the date of
termination.  Any other rights and benefits the Executive may have under
employee benefit plans and programs of the Company generally in the event of the
Executive’s Disability shall be determined in accordance with the terms of such
plans and programs.  In the event of Executive’s death, any rights and benefits
that the Executive’s estate or any other person may have under employee benefit
plans and programs of the Company generally in the event of the Executive’s
death shall be determined in accordance with the terms of such plans and
programs.

 

(e) Salary and Other Payments Through Termination.  If the Executive’s
employment with the Company is terminated during the Term (i) by the Company for
Cause or (ii) by the Executive other than for Good Reason, the Executive will be
entitled to receive his Base Salary through the Termination Date, but will not
be entitled to receive any Severance Payments or Benefits after the Termination
Date.  The Executive shall also be entitled to receive payment for (i) all
reimbursable expenses or other entitlements then due and owing to the Executive
as of the Termination Date under Section 1.3(d) (other than non-accountable
expenses which shall be reimbursed pursuant to clause (ii) below), which
payments shall be made in accordance with the Company expense reimbursement
policy; provided, however, in no event shall any expense reimbursements by the
Company be made later than the last day of the calendar year after the calendar
year in which the expense was incurred, and (ii) all non-accountable expenses
incurred prior to the Termination Date that are reimbursable under Section
1.3(d), which payments shall be made in accordance with the terms of Section
1.3(d).

 

(f) Other Rights.  Except as set forth in this Section 1.4, all of the
Executive’s rights to receive Base Salary, Benefits and annual bonuses hereunder
(if any) which accrue or become payable after the termination of the Employment
Period shall cease upon such termination.

 

(g) Continuing Benefits. Notwithstanding Section 1.4(f), termination pursuant to
this Section 1.4 shall not modify or affect in any way whatsoever any vested
right of the Executive to benefits payable under any retirement or pension plan
or under any other employee benefit plan of the Company, and all such benefits
shall continue, in accordance with, and subject to, the terms and conditions of
such plans, to be payable in full to, or on account of, the Executive after such
termination.

 

(h) No Duty of Mitigation.  The Executive shall not be required to mitigate the
amount of any payment provided for in this Article I by seeking other employment
or otherwise,  nor shall the amount of any payment or benefit provided for under
Article I be reduced by any compensation earned by Executive after the
Termination Date.

 

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(i) Acceleration of Vesting.  If the Company shall terminate the Executive's
employment without Cause or the Executive terminates his employment with Good
Reason, then notwithstanding the vesting and exercisability schedule in any
stock option or other grant agreement between the Company and the Executive, all
unvested stock options, shares of restricted stock and other equity awards
granted by the Company to the Executive pursuant to any such agreement shall
immediately vest, and all such stock options shall become exercisable and shall
remain exercisable for the remaining term of the applicable option.  In the
event of conflict between any stock option or other grant agreement between the
Company and the Executive and this Agreement, the stock option or other grant
agreement shall control.

 

1.5. Confidential Information.

 

(a) The Executive shall not disclose or, directly or indirectly, use at any
time, during the Employment Period or thereafter, any Confidential Information
(as defined below) of which the Executive is or becomes aware, whether or not
such information is developed by him, alone or with others, except to the extent
that (i) such disclosure or use is required by the Executive’s performance of
the duties assigned to the Executive by the Board, (ii) the Executive is
required by subpoena or similar process to disclose or discuss any Confidential
Information, provided, that in such case, the Executive shall promptly inform
the Company in writing of such event, shall reasonably cooperate with the
Company in attempting to obtain a protective order or to otherwise limit or
restrict such disclosure to the greatest extent possible, and shall disclose
only that portion of the Confidential Information as is strictly required, or
(iii) such Confidential Information is or becomes generally known to and
available for use by the public, other than as a result of any action or
inaction directly or indirectly by the Executive.  At the Company’s expense, the
Executive shall take all reasonable steps to safeguard Confidential Information
in his possession and to protect it against disclosure, misuse, espionage, loss
and theft.  The Executive acknowledges that the Confidential Information
obtained by him during the course of his employment with the Company is the sole
and exclusive property of the Company and its Subsidiaries, as applicable.

 

(b) The Executive understands that the Company and its Subsidiaries will receive
from third parties confidential or proprietary information (“Third Party
Information”) subject to a duty on the part of the Company and its Subsidiaries
to maintain the confidentiality of such information and to use it only for
certain limited purposes.  During the Employment Period and in the period
specified in such confidentiality agreements, and without in any way limiting
the provisions of Section 1.5(a) above, the Executive will hold Third Party
Information in confidence, consistent with the obligations applicable to
Confidential Information of the Company generally, and will not disclose to
anyone (other than personnel and agents of the Company or its Subsidiaries who
need to know such information in connection with their work for the Company or
its Subsidiaries) or use, except in connection with his work for the Company or
its Subsidiaries, Third Party Information unless expressly authorized by the
Board in writing.

 

(c) As used in this Agreement, the term “Confidential Information” means
information that is not generally known to the public and that is related in any
way to the actual or anticipated business of the Company, its Subsidiaries, its
Affiliates or any of their respective predecessors in interest, including but
not limited to (i) business development, growth and other strategic business
plans, (ii) properties available for acquisition, financing development or sale,
(iii) accounting and business methods, (iv) services or products and the
marketing of such services and products, (v) fees, costs and pricing structures,
(vi) designs, (vii) analysis, (viii) drawings, photographs and reports, (ix)
computer software, including operating systems, applications and program
listings, (x) flow charts, manuals and documentation, (xi) data bases, (xii)
inventions, devices, new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice, (xiii) copyrightable
works, (xiv) all technology and trade secrets, (xv) confidential terms of
material agreements and customer relationships, and (xvi) all similar and
related information in whatever form or medium.  Confidential Information shall
not include any information that has become generally available to the public
prior to the date the Executive proposes to disclose or use such information or
general know-how of the Executive.

 

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1.6. Inventions and Patents.  Executive acknowledges that all discoveries,
concepts, ideas, inventions, innovations, improvements, developments, products,
methods, processes, techniques, programs, designs, analyses, drawings, reports,
patents, copyrightable works and mask works (whether or not including any
Confidential Information) and all issuances, registrations or applications
related thereto, all other proprietary information or intellectual property and
all similar or related information (whether or not patentable)(collectively,
“Intellectual Property”) conceived, developed, contributed to, made, or reduced
to practice by Executive (either alone or with others) while employed by Company
or any of its Subsidiaries or Affiliates or using the materials, facilities or
resources of the Company or any of its Subsidiaries or Affiliates (collectively,
“Company Works”) is the sole and exclusive property of the Company and its
Subsidiaries; provided, however, that the term Company Works shall not include,
and the Executive shall exclusively own, (i) all Intellectual Property
conceived, developed, contributed to, made, or reduced to practice by Executive
in connection with the performance of the Retained Media Rights, and (ii) the
Original Physical Sketch Rights, provided that, with respect to any original
physical sketch retained by the Executive, the Executive delivers a high
resolution copy thereof to the Company; and provided, further, that,
notwithstanding the foregoing, no present or future Intellectual Property Rights
purchased by the Buyer under the Purchase Agreement shall be owned by Executive
pursuant to this Section 1.6. Executive hereby assigns all right, title and
interest in and to all Company Works to the Company and its Subsidiaries and
waives any moral rights he may have therein, without further obligation or
consideration.  Any copyrightable work constituting Company Works prepared in
whole or in part by the Executive will be deemed “a work made for hire” under
Section 201(b) of the 1976 Copyright Act, and the Company and its Subsidiaries
shall own all of the rights comprised in the copyright therein.  The Executive
shall promptly and fully disclose in writing all Company Works to the Company
and shall cooperate with the Company and its Subsidiaries to protect, maintain
and enforce the Company’s and its Subsidiaries’ interests in and rights to such
Company Works (including, without limitation, providing reasonable assistance in
securing patent protection and copyright registrations and executing all
affidavits, assignments, powers-of-attorney and other documents as reasonably
requested by the Company, whether such requests occur prior to or after
termination of the Executive’s employment with the Company).

 

1.7. Delivery of Materials Upon Termination of Employment.  As requested by the
Company from time to time and in any event upon the termination of the
Executive’s employment with the Company, the Executive shall promptly deliver to
the Company, or at the Company’s election destroy, all copies and embodiments,
in whatever form or medium, of all Confidential Information, Company Works and
other property and assets of the Company and its Subsidiaries in the Executive’s
possession or within his control (including, but not limited to, office keys,
access cards, written records, notes, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes, computers and handheld devices (including all software, files and
documents thereon) and any other materials containing any Confidential
Information or Company Works) irrespective of the location or form of such
material and, if requested by the Company, shall provide the Company with
written confirmation that all such materials have been delivered to the Company
or destroyed, as applicable.

 

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1.8. Non-Compete and Non-Solicitation Covenants.

 

(a) The Executive acknowledges and agrees that the Executive’s services to the
Company and its Subsidiaries are unique in nature and that the Company and its
Subsidiaries would be irreparably damaged if the Executive were to violate his
obligations under this Section 1.8.  The Executive further acknowledges that, in
the course of his employment with the Company, he will become familiar with the
Company’s and its Subsidiaries’ trade secrets and with other Confidential
Information.  During the Employment Period, he shall not, directly or
indirectly, whether for himself or for any other Person, permit his name to be
used by or participate in any business or enterprise (including, without
limitation, any division, group or franchise of a larger organization) that
engages or proposes to engage in the Business in the Restricted Territories,
other than the Company and its Subsidiaries or except as otherwise directed or
authorized by the Board.  During the one year period following the Termination
Date, unless the Executive’s employment hereunder was terminated without Cause
or was terminated by the Executive for Good Reason, the Executive shall not,
directly or indirectly, whether for himself or for any other Person, permit his
name to be used by or participate in any business or enterprise (including,
without limitation, any division, group or franchise of a larger organization)
that engages or proposes to engage in the IM Business in the Restricted
Territories, other than the Company and its Subsidiaries or except as otherwise
directed or authorized by the Board.  For purposes of this Agreement, the term
“participate in” shall include, without limitation, having any direct or
indirect interest in any Person, whether as a sole proprietor, owner,
stockholder, partner, member, joint venturer, creditor or otherwise, or
rendering any direct or indirect service or assistance to any Person (whether as
a director, officer, supervisor, employee, agent, consultant or
otherwise).  Nothing herein will prohibit the Executive from (i) mere passive
ownership of not more than three percent (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, and (ii) engaging in the
exploitation of the Retained Media Rights, subject, during the Employment
Period, to the restrictions in Section 1.2(c) hereof.  As used herein, the
phrase “mere passive ownership” shall include voting or otherwise granting any
consents or approvals required to be obtained from such Person as an owner of
stock or other ownership interests in any entity pursuant to the charter or
other organizational documents of such entity, but shall not include, without
limitation, any involvement in the day-to-day operations of such entity.

 

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(b) During the Nonsolicitation Period, the Executive will not directly, or
indirectly through another Person, 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 of 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 with the Company or any of its Subsidiaries, or hire
any such person unless such person’s employment was terminated by the Company or
any of its Subsidiaries, or in any way interfere with the relationship between
any such customer, supplier, licensee, employee or business relation and the
Company or any of its Subsidiaries.  The Executive acknowledges and agrees that
the Company and its Subsidiaries would be irreparably damaged if the Executive
were to breach any of the provisions contained in this Section 1.8(b).

 

(c) Executive acknowledges that this Agreement, and specifically, this Section
1.8, does not preclude Executive from earning a livelihood, nor does it
unreasonably impose limitations on Executive’s ability to earn a living.  In
addition, Executive agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to Executive of its
enforcement by injunction or otherwise.

 

1.9. Enforcement.  If, at the time of enforcement of Section 1.5, 1.6, 1.7, 1.8
or 1.10, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, the Parties agree that, to the extent
permitted by applicable law, the maximum period, scope or geographical area
reasonable under such circumstances will be substituted for the period, scope or
area.  Because the Executive’s services are unique and because the Executive has
access to Confidential Information and Company Works, the Parties agree that
money damages would be an inadequate remedy for any breach of Section 1.5, 1.6,
1.7, 1.8 or 1.10.  Therefore, in the event of a breach or threatened breach of
Section 1.5, 1.6, 1.7, 1.8 or 1.10, the Company or any of its Subsidiaries or
any of their respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions hereof (without posting
a bond or other security).  The Parties hereby acknowledge and agree that (a)
performance of the services of the Executive hereunder may occur in
jurisdictions other than the jurisdiction whose law the Parties have agreed
shall govern the construction, validity and interpretation of this Agreement,
(b) the law of the  State of New York shall govern construction, validity and
interpretation of this Agreement to the fullest extent possible, and (c) Section
1.5, 1.6, 1.7, 1.8 or 1.10 shall restrict the Executive only to the extent
permitted by applicable law.

 

1.10. Survival.  Sections 1.4, 1.5, 1.6, 1.7, 1.8 and 1.10 will survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.

 

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ARTICLE II
DEFINED TERMS

 

2.1. Definitions.  All capitalized terms used but not defined herein shall have
the meanings given to such terms in the Purchase Agreement.  For purposes of
this Agreement, the following terms will have the following meanings:

 

“Business” means the business of acquiring and licensing consumer brands
worldwide.

 

“Cause” means with respect to the Executive, the occurrence of one or more of
the following:  (i) conviction of, or entry of a plea of guilty or nolo
contendere to, a felony involving moral turpitude, misappropriation of Company
property, embezzlement of Company funds, violation of the securities laws or
material dishonesty with respect to the Company; (ii) persistent and repeated
refusal to comply with no less than three written lawful directives of the
Chairman and CEO or Board with respect to an item material to the business
prospects and/or operations of the Company, other than such directives requiring
the Executive in his reasonable judgment after consultation with counsel, to act
in a manner inconsistent with his fiduciary obligations or those inconsistent
with the Executive’s position as Chief Design Officer; (iii) reporting to work
under the influence of alcohol or illegal drugs, or the use of illegal drugs
(whether or not at the workplace), or (iv) any willful breach of Section 1.6,
1.7, 1.8 or 1.9 of this Agreement.  Notwithstanding the foregoing, termination
by the Company for Cause (other than pursuant to clause (i) above) shall not be
effective until and unless (i) Executive fails to cure such alleged act or
circumstance within 30 days of receipt of notice thereof, to the satisfaction of
the Board in the exercise of its reasonable judgment (or, if within such 30-day
period the Executive commences and proceeds to take all reasonable actions to
effect such cure, within such reasonable additional time period (no longer than
60 days) as may be necessary), and (ii) notice of intention to terminate for
Cause has been given by the Company within forty-five (45) days after the Board
learns of the act, failure or event constituting “Cause,” and (iii) the Board
has voted (at a meeting of the Board duly called and held as to which
termination of Executive is an agenda item) by a vote of at least a two-thirds
of the members of the Board (other than Executive) to terminate Executive for
Cause after Executive has been given notice of the particular acts or
circumstances which are the basis for the termination for Cause and has been
afforded an opportunity to appear with counsel and present his positions at such
meeting and to present his case thereat, and (iv) the Board has given notice of
termination to Executive within five days after such meeting voting in favor of
termination.

 

“Change of Control” means the occurrence of any of the following (i) a merger or
consolidation to which the Company is a party (other than one in which the
stockholders of the Company prior to the event own a majority of the voting
power of the surviving or resulting corporation) (ii) a sale, lease, transfer,
exclusive license or other disposition of all or substantially all of the assets
of the Company, or (iii) a sale or transfer by the Company’s stockholders of
voting control, in a single transaction or a series of transactions.

 

“Code” means the Internal Revenue Code of 1986 and the Treasury regulations
thereunder, each as amended from time to time.

 

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“Collaboration” shall mean a project undertaken by the Company with one or more
third-parties to co-market the third-party’s products and any of the Isaac
Mizrahi brands but excluding other agreements relating to the design and
licensing of “IsaacMizrahiLIVE!” brand and/or IML Products with respect to
projects in which the Executive is not directly involved in such design
services.

 

“Disability” shall have the meaning set forth in a policy or policies of long
term disability insurance, if any, the Company obtains for the benefit of itself
and/or its employees.  If there is no definition of “disability” applicable
under any such policy or policies, if any, then the Executive shall be
considered disabled due to mental or physical impairment or disability despite
reasonable accommodations by the Company and its Subsidiaries, to perform his
customary or other comparable duties with the Company or its Subsidiaries
immediately prior to such disability for a period of at least 120 consecutive
days or for at least 180 non-consecutive days in any 12 month period.

 

“DRT Revenue” means Excess QVC DRT Revenue and TSC DRT Revenue.

 

“Effective Date” means the Closing Date (as defined in the Purchase Agreement).

 

“Excess QVC DRT Revenue” for a calendar year means (i) Gross Royalty Revenue in
excess of $8,000,000 from Net Retail Sales (as each term is defined in the QVC
Agreement) under the QVC Agreement for such calendar year, as determined in
accordance with U.S. generally accepted accounting principles multiplied by (ii)
a fraction, (a) the numerator of which is the number of hours during which the
Executive appears on QVC Shows during such calendar year divided by (b) the
total hours of QVC Shows during such calendar year.

 

“Fiscal Year” means the fiscal year of the Company and its Subsidiaries.

 

“Good Reason” means the occurrence, without the Executive’s written consent, of
one or more of the following events:  (i) the Company reduces the amount of
Executive’s Base Salary, (ii) the Company requires that the Executive relocate
his principal place of employment to a site that is more than 15 miles from the
Company’s offices in Manhattan, New York, or if the Company changes the location
of its headquarters with the consent of Executive to a location that is more
than 15 miles from such location, (iii) the Company materially reduces the
Executive’s responsibilities or removes the Executive from the position of Chief
Design Officer – Isaac Mizrahi Brand other than pursuant to a termination of his
employment for Cause, or upon the Executive’s death or Disability, (iv) the
failure or unreasonable delay of the Company to provide the Executive any of the
payments contemplated hereby, or (v) the Company otherwise materially breaches
the terms of this Agreement; provided that no such event shall constitute Good
Reason hereunder unless (a) the Executive shall have given written notice to the
Company of the Executive’s intent to resign for Good Reason within 30 days after
the Executive becomes aware of the occurrence of any such event, which notice
shall describe in reasonable detail the event or events constitution the basis
for the Executive’s intention to resign for Good Reason and (b) such event or
occurrence, if a breach susceptible to cure, shall not have been cured or
otherwise shall not have been resolved to the Executive’s reasonable
satisfaction, in each case within 30 days of the Company’s receipt of such
notice; provided, however, except in the case of a failure to make a timely
payment that is caused by a third party payroll service provider, in which case
the Company shall have ten (10) Business Days to cure, as to any breach by the
Company of its obligation to make any payment to Executive when due, the
Executive shall have no notice obligation and the Company shall have no right to
cure.  In such case the Executive’s resignation shall become effective on the
31st day after the Company’s receipt of the aforementioned notice.

 

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“IM Business” means the licensing, promotion via any form of media, and
marketing of the IM Brands or the Isaac Mizrahi image and likeness for any
commercial use relating to the manufacture, sale and/or distribution of
clothing, related accessories, home goods (i.e., home furnishings, home décor,
tabletop, cookware and kitchen prep items), food products and any and all other
goods and services; provided, however, notwithstanding anything to the contrary
herein, the Business shall not include the Retained Media Rights.

 

“IM Collaboration Revenue” shall mean revenue derived from fees relating to
Material Services performed by the Executive from Collaborations, net of
payments to licensing agents, and calculated in accordance with GAAP, but
excluding fees paid to the Company related to licensing its trademarks or
providing design services related to such Collaborations. In the event any
Collaboration includes (i) licensing or design services provided by the Company
and (ii) Material Services performed by the Executive on behalf of the Company,
then the Collaboration Revenue shall equal fifty percent (50%) of the revenues
from such Collaboration, or such other allocation as the parties may agree in
writing.

 

“IML Products” means any products under the “IsaacMizrahiLIVE!” brand or a
sub-brand that are sold through direct-response television networks.

 

“In-store Appearances” means the Executive’s personal physical presence at
department stores and/or other retail stores to promote Isaac Mizrahi branded
products on behalf of the Company and/or its licensees as requested by the
Company, but does not include any such appearances relating to Collaborations
for which the Executive is eligible to receive a Collaboration Bonus pursuant to
Section 1.3(b)(2) or non-physical presence participation, such as appearances
through web casting, social media, video conferencing or conference calls.

 

“Material Services” means services of Executive that require one or more service
days of Executive including photography, filming of videos, appearances, design
work by Executive, or other services but excluding social media efforts and
In-store Appearances by or on behalf of Executive.

 

“Nonsolicitation Period” means the Employment Period and 12 months thereafter.

 

“Original Physical Sketch Rights” means the right of the Executive to retain any
physical original sketches created by the Executive (alone or with others), and
the right to display them from time  to time in museums, exhibits and other
non-retail forums, provided that, except for the foregoing rights, such term
does not include any rights to Intellectual Property associated with such
sketches, nor does it include the right to exploit, present or publicly display
such sketches in connection with the sale or promotion of goods and services or
to otherwise use them for the purpose of developing competing goods, products or
services.

 

15

 

 

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or the United States of America any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.

 

“Purchase Agreement” means the Asset Purchase Agreement, dated May 19, 2011, by
and among the Company, IM Ready-Made, LLC and certain other parties thereto.

 

“QVC Agreement” means the Second Amended and Restated Agreement and Consent to
Assignment by and among QVC, Inc., IM Brands, LLC, IM Ready Made, LLC, XCel
Brands, Inc. and the Executive dated September 28, 2011, as amended to date and
from time to time.

 

“QVC Shows” means direct-response television shows airing on the QVC, Inc.
shopping channel on which IML Products are featured and sold.

 

“Restricted Territories” means the United States and the rest of the world.

 

“Retained Media Rights” shall have the meaning ascribed to such term in the
Purchase Agreement.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association, or business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of  partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof.  For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director or
general partner of such limited liability company, partnership, association, or
other business entity.  For purposes hereof, references to a “Subsidiary” of any
Person shall be given effect only at such times that such Person has one or more
Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a
Subsidiary of the Company.

 

“Termination Date” means the effective date of the Executive’s termination of
employment with the Company.

 

“TSC DRT Revenue” for a calendar year means net royalty revenue for such
calendar year, as determined in accordance with U.S. generally accepted
accounting principles, received by the Company from The Shopping Channel from
sales of IML Products directly related to direct response television shows
airing on The Shopping Channel on which the Executive appeared during such
calendar year.

 

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2.2. Other Definitional Provisions.

 

(a) Section references contained in this Agreement are references to sections in
this Agreement, unless otherwise specified.  Each defined term used in this
Agreement has a comparable meaning when used in its plural or singular
form.  Each gender-specific term used in this Agreement has a comparable meaning
whether used in a masculine, feminine or gender-neutral form.

 

(b) Whenever the term “including” (whether or not that term is followed by the
phrase “but not limited to” or “without limitation” or words of similar effect)
is used in this Agreement in connection with a listing of items within a
particular classification, that listing will be interpreted to be illustrative
only and will not be interpreted as a limitation on, or an exclusive listing of,
the items within that classification.

 

ARTICLE III
MISCELLANEOUS TERMS

 

3.1. Defense of Claims.  The Executive agrees that, during the Employment
Period, and for a period of six months after termination of the Executive’s
employment, upon request by the Company, the Executive shall reasonably
cooperate with the Company in connection with any matters the Executive worked
on during his employment with the Company and any related transitional
matters.  In addition, during the Employment Period and thereafter, the
Executive agrees to reasonably cooperate with the Company in the defense of any
claims or actions that may be made by or against the Company that affect the
Executive’s prior areas of responsibility or involve matters about which the
Executive has knowledge, except if the Executive’s reasonable interests are
adverse to the Company in such claim or action and provided that after the
Employment Period such level of cooperation shall be reasonable and shall take
due account of the Executive’s work and personal commitments. The Company agrees
to promptly reimburse the Executive for all of the Executive’s reasonable travel
and other direct expenses incurred, or to be reasonably incurred, to comply with
the Executive’s obligations under this Section 3.1.

 

3.2. Nondisparagement.  The Executive agrees to refrain from making any false or
disparaging statements, in public or private, which is reasonably likely to
materially impair the reputation, goodwill or commercial interest of the
Company.  The Company agrees to refrain from making any false or disparaging
statements, in public or private, which is reasonably likely to materially
impair the reputation, goodwill or commercial interest of the
Executive.  Notwithstanding anything to the contrary contained herein, nothing
in this Agreement shall prohibit or restrict either party from, truthfully and
in good faith: (i) making any disclosure of information required by law; (ii)
providing information to, or testifying or otherwise assisting in any
investigation or proceeding brought by, any federal regulatory or law
enforcement agency or legislative body, any self-regulatory organization, or the
Company’s or the Executive’s designated legal, compliance or human resources
officers; or (iii) filing, testifying, participating in or otherwise assisting
in a proceeding relating to an alleged violation of any federal, state or
municipal law relating to fraud, or any rule or regulation of the Securities and
Exchange Commission or any self-regulatory organization.

 

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3.3. Morals Clause.  Executive shall not commit any act or do anything which
might reasonably be considered: (i) to be immoral, deceptive, scandalous or
obscene; or (ii) to injure, tarnish, damage or otherwise negatively affect the
reputation and goodwill associated with the Company or the IM Brands.

 

3.4. Source of Payments.  All payments provided under this Agreement, other than
payments made pursuant to a plan which provides otherwise and except as
otherwise provided herein, shall be paid in cash from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets shall be made, to assure payment. The Executive shall have
no right, title or interest whatsoever in or to any investments which the
Company or its Subsidiaries may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right shall be no greater than the
right of an unsecured creditor of the Company.

 

3.5. Notices. Any notice provided for in this Agreement must be in writing and
must be either personally delivered, mailed by first class mail (postage prepaid
and return receipt requested), sent by reputable overnight courier service
(charges prepaid) or sent by facsimile (with receipt confirmed) to the recipient
at the address or facsimile number indicated below:

 

To the Company:

 

475 Tenth Avenue
4th Floor
New York, New York 10018

 

With a copy (which shall not constitute notice) to:

 

Blank Rome
The Chrysler Building
405 Lexington Avenue
New York, NY 10174-0208
Attn:  Robert Mittman, Esquire
Facsimile: (212) 885-5557

 

To the Executive:

 

Isaac Mizrahi
475 Tenth Avenue, 4th Floor
New York, NY  10018

 

With a copy (which shall not constitute notice) to:

 

Robinson & Cole LLP
666 Third Avenue, 20th Floor
New York, NY  10017
Attention:  Eric J. Dale, Esq.
Facsimile: 212-451-2999

 

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or such other address or to the attention of such other Person as the recipient
Party will have specified by prior written notice to the sending Party.  Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.

 

3.6. Severability.  Subject to the express provisions of Section 1.10 relating
to certain specified changes, whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

3.7. Complete Agreement.  This Agreement embodies the complete agreement and
understanding among the Parties with regard to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the Parties, written or oral, which may have related to the subject
matter hereof in any way.  To the extent that this Agreement provides greater
benefits to the Executive than available under the Company’s employee handbook
or other corporate policies, then this Agreement shall prevail.

 

3.8. Counterparts.  This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.

 

3.9. Assignment.  Without the Executive’s consent, the Company may not assign
its rights and obligations under this Agreement except (i) to a “Successor” (as
defined below) or (ii) to an entity that is formed and controlled by the Company
or any of its Subsidiaries, provided that in the case of (ii) the Company shall
remain liable for all of its obligations hereunder.  This Agreement is personal
to the Executive, and the Executive shall not have the right to assign the
Executive’s interest in this Agreement, any rights under this Agreement or any
duties imposed under this Agreement, nor shall the Executive have the right to
pledge, hypothecate, transfer, assign or otherwise encumber the Executive’s
right to receive any form of compensation hereunder without the prior written
consent of the Board.  As used in this Section 3.9, “Successor” shall include
any Person that at any time, whether by purchase, merger or otherwise, directly
or indirectly acquires all or substantially all of the assets of, or ownership
interests in, the Company and its Subsidiaries.

 

3.10. Successors and Assigns.  This Agreement is intended to bind and inure to
the benefit of and be enforceable by the Company, the Executive, and their
respective heirs, successors and permitted assigns.

 

3.11. Choice of Law.  This Agreement and the performance of the parties
hereunder shall be governed by the internal laws (and not the law of conflicts)
of the State of New York. Any claim or controversy arising out of or in
connection with this Agreement, or the breach thereof, shall be adjudicated
exclusively by the Supreme Court, New York County, State of New York, or by a
federal court sitting in Manhattan in New York City, State of New York. The
parties hereto agree to the personal jurisdiction of such courts and agree to
accept process by regular mail in connection with any such dispute.

 

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3.12. Waiver of Jury Trial.  AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH
OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY
TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS
AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

3.13. Legal Fees and Court Costs.  In the event that any action, suit or other
proceeding in law or in equity is brought to enforce the provisions of this
Agreement, and such action results in the award of a judgment for money damages
or in the granting of any injunction in favor of the Company, all expenses
(including reasonable attorneys' fees) of the Company in such action, suit or
other proceeding shall be paid by the Executive. In the event that any action,
suit or other proceeding in law or in equity is brought to enforce the
provisions of this Agreement, and such action results in the award of a judgment
for money damages or in the granting of any injunction in favor of the
Executive, all expenses (including reasonable attorneys' fees and travel
expenses) of the Executive in such action, suit or other proceeding shall be
paid by the Company.

 

3.14. Remedies.  Subject to the provisions of Section 3.1, each Party will be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs caused by any breach of any provision of this Agreement and to
exercise all other rights existing in its favor.  Nothing herein shall prohibit
any arbitrator or judicial authority from awarding attorneys’ fees or costs to a
prevailing Party in any arbitration or other proceeding to the extent that such
arbitrator or authority may lawfully do so.

 

3.15. Amendment and Waiver.  The provisions of this Agreement may be amended or
waived only with the prior written consent of the Company and the Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement will affect the validity, binding effect or enforceability of this
Agreement.

 

3.16. Third Party Beneficiaries.  This Agreement will not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns and other than, in the event of the Executive’s death, his
estate, to which all of Executive’s rights and remedies set forth herein shall
accrue

 

3.17. The Executive’s Representations.  The Executive hereby represents and
warrants to the Company that (a) the execution, delivery and performance of this
Agreement by the Executive do not and shall not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment or
decree to which the Executive is a party or by which he is bound, (b) the
Executive is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other Person (or other agreement
with any other person containing a restriction on the Executive’s right to do
business or obligating him to do business with any other Person on a priority or
preferential basis), (c) upon the execution and delivery of this Agreement by
the Company, this Agreement shall be the valid and binding obligation of the
Executive, enforceable in accordance with its terms and (d) upon the execution
and delivery of this Agreement by the Company, Executive shall not be in
violation of clause (i) set forth in the definition of Cause and shall not be
disabled.

 

20

 

 

3.18. Amendment to Comply with Section 409A of the Code.  To the extent that
this Agreement or any part thereof is deemed to be a nonqualified deferred
compensation plan subject to Section 409A of the Code and the Treasury
Regulations (including proposed regulations) and guidance promulgated
thereunder, (a) the provisions of this Agreement shall be interpreted in a
manner to the maximum extent possible to comply in good faith with Code Section
409A and (b) the parties hereto agree to amend this Agreement for purposes of
complying with Code Section 409A promptly upon issuance of any Treasury
regulations or guidance thereunder, provided, that any such amendment shall not
materially change the present value of the benefits payable to the Executive
hereunder or otherwise materially adversely affect the Executive, the Company,
or any affiliate of the Company, without the consent of such party.

 

[SIGNATURE PAGE FOLLOWS]

 

 

21

 

 

IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of
the date first written above.

 

  XCEL BRANDS, INC.         By: /s/ Seth Burroughs   Name: Seth Burroughs  
Title: Executive Vice President         /s/ Isaac Mizrahi   Isaac Mizrahi

 

 

 

[Signature Page to Employment Agreement]

22

 

 

EXHIBIT A

 

IML PRODUCT MEDIA AND PRESS GUIDELINES

 

 

 

Guidelines

 

During Executive’s employment with the Company, responses to all media inquiries
by Executive will be limited to statements regarding the fact of his employment
by the Company and the title of his position, and the Talking Points below. Any
other questions will be directed to the Company to address. Executive shall not
make any statements to the Media and Press that (i) disparage the Company, the
Isaac Mizrahi Business (including products sold as part of the Isaac Mizrahi
Business) or licensees and other partners of the Company, or (ii) substantially
deviate from the Talking Points herein.

 

Talking Points

 

·Xcel acquired the Isaac Mizrahi brand in September 2011.

 

·Per company policy, all requests for comments or statements should be made to
Xcel’s public relations department.

 

·No comment.

 

 

 

 

 

EXHIBIT B

 

FORM OF RELEASE

 

I, Isaac Mizrahi, on behalf of myself and my heirs, successors and assigns, in
consideration of the performance by Xcel Brands, Inc., a Delaware Corporation
(together with its Subsidiaries, the “Company”), of its material obligations
under the Employment Agreement, dated as of May 19, 2011 (the “Agreement”), do
hereby release and forever discharge as of the date hereof the Company, its
Affiliates, each such Person’s respective successors and assigns and each of the
foregoing Persons’ respective present and former directors, officers, partners,
stockholders, members, managers, agents, representatives, employees (and each
such Person’s respective successors and assigns) (collectively, the “Released
Parties”) to the extent provided below.

 

1. I understand that any payments or benefits paid or granted to me under
Section 1.4(b) of the Agreement represent, in part, consideration for signing
this General Release and are not salary, wages or benefits to which I was
already entitled.  I understand and agree that I will not receive the payments
and benefits specified in Section 1.4(b) of the Agreement unless I execute this
General Release and do not revoke this General Release within the time period
permitted hereafter or breach this General Release.  This General Release shall
be deemed rescinded in the event that the Company does not make such payments
and make available such benefits in accordance with Section 1.4(b) of the
Agreement.

 

2. I knowingly and voluntarily release and forever discharge the Company and the
other Released Parties from any and all claims, controversies, actions, causes
of action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for
costs and attorneys’ fees, or liabilities whatsoever in law and in equity, both
past and present (through the date of this General Release), whether under the
laws of the United States or another jurisdiction and whether known or unknown,
suspected or claimed against the Company or any of the Released Parties which I,
my spouse, or any of my heirs, executors, administrators or assigns, have or may
have, solely to the extent that such claims, controversies, actions, causes of
action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for
costs and attorneys’ fees, or liabilities arise out of or are connected with my
employment with, or my separation from, the Company (including, but not limited
to, any allegation, claim or violation, arising under:  Title VII of the Civil
Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967, as amended (including the Older
Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the
Americans with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
and Notification Act; the Employee Retirement Income Security Act of 1974; any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil or
human rights law, or under any other local, state, or federal law, regulation or
ordinance; or under any public policy, contract or tort, or under common law; or
arising under any policies, practices or procedures of the Company; or any claim
for wrongful discharge, breach of contract, infliction of emotional distress, or
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters) (all of the foregoing collectively
referred to herein as the “Claims”); provided, however, that nothing contained
in this General Release shall apply to, or release the Company from, (i) any
obligation of the Company contained in the Agreement to be performed after the
date hereof and amounts claimed under the Agreement pursuant to a good faith and
pending dispute as of the date hereof, (ii) any vested or accrued benefits
pursuant to any employee benefit plan, program or policy of the Company, (iii)
any rights to indemnification from the Company under the Company’s Certificate
of Incorporation, Bylaws, any indemnification agreement and/or applicable law;
and (iv) any right to insurance proceeds related to my position as an officer
and/or director of the Company or any of its Affiliates; (v) any rights as a
stockholder of the Company of any Affiliates of, or successor to, the Company;
(vi) any rights under the Asset Purchase Agreement dated May 19, 2011, by and
among the Company, IM Ready-Made, LLC and certain other parties thereto (as
amended, the “Purchase Agreement”) and any Related Agreement (as defined in the
Purchase Agreement).

 

 

 

 

3. I represent that I have made no assignment or transfer of any right, claim,
demand, cause of action, or other matter covered by paragraph 2 above.

 

4. I agree that this General Release does not waive or release any rights or
claims that I may have under the Age Discrimination in Employment Act of 1967
which arise after the date I execute this General Release.  I acknowledge and
agree that my separation from employment with the Company in compliance with the
terms of the Agreement shall not serve as the basis for any claim or action
(including, without limitation, any claim under the Age Discrimination in
Employment Act of 1967).

 

5. In signing this General Release, I acknowledge and intend that it shall be
effective as a bar to each and every one of the Claims hereinabove mentioned or
implied. I expressly consent that this General Release shall be given full force
and effect according to each and all of its express terms and provisions,
including those relating to unknown and unsuspected Claims (notwithstanding any
state statute that expressly limits the effectiveness of a general release of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied. I acknowledge and
agree that this waiver is an essential and material term of this General Release
and that without such waiver the Company would not have agreed to the terms of
the Agreement.  I covenant that I shall not directly or indirectly, commence,
maintain or prosecute or sue any of the Released Persons either affirmatively or
by way of cross-complaint, indemnity claim, defense or counterclaim or in any
other manner or at all on any Claim covered by this General Release.  I further
agree that in the event I should bring a Claim seeking damages against the
Company, or in the event I should seek to recover against the Company in any
Claim brought by a governmental agency on my behalf, this General Release shall
serve as a complete defense to such Claims. I further agree that I am not aware
of any pending charge or complaint of the type described in paragraph 2 as of
the execution of this General Release.

 

6. I agree that neither this General Release, nor the furnishing of the
consideration for this General Release, shall be deemed or construed at any time
to be an admission by the Company, any Released Party or myself of any improper
or unlawful conduct.

 

 

 

 

7. I agree that this General Release is confidential and agree not to disclose
any information regarding the terms of this General Release, except to my
immediate family and any tax, legal or other counsel I have consulted regarding
the meaning or effect hereof or as required by law, and I will instruct each of
the foregoing not to disclose the same to anyone.

 

8. Any non-disclosure provision in this General Release does not prohibit or
restrict me (or my attorney) from responding to any inquiry about this General
Release or its underlying facts and circumstances by the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any other
self-regulatory organization or governmental entity.

 

9. Without limitation of any provision of the Agreement, I hereby expressly
re-affirm my obligations under Sections 1.5, 1.6, 1.8, 1.10 and 3.1.

 

10. Whenever possible, each provision of this General Release shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this General Release is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this General Release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

“Affiliate” means, with respect to any Person, any Person that controls, is
controlled by or is under common control with such Person or an Affiliate of
such Person.

 

“Person” means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, investment fund, any other business entity and a
governmental entity or any department, agency or political subdivision thereof.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association, or business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of  partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof.  For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director or
general partner of such limited liability company, partnership, association, or
other business entity.

 

 

 

 

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

 

(a) I HAVE READ IT CAREFULLY;

 

(b) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,
INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;
THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

 

(c) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

 

(d) I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE AGREEMENT AND THIS
RELEASE) BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND
CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

 

(e) I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE
SUBSTANTIALLY IN ITS FINAL FORM ON _______________ __, _____ TO CONSIDER IT AND
THE CHANGES MADE SINCE THE _______________ __, _____ VERSION OF THIS RELEASE ARE
NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;

 

(f) THE CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT
MATERIAL OR WERE MADE AT MY REQUEST.

 

(g) I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO
REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL
THE EIGHTH DAY FOLLOWING EXECUTION OF THE AGREEMENT;

 

(h) I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE
ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

 

(i) I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED,
WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

 

DATE: ___________ __, ______ /s/ Isaac Mizrahi          Isaac Mizrahi

 

Acknowledged and agreed as of the date first written above:

 

Xcel Brands, Inc.         By: /s/ Seth Burroughs     Name: Seth Burroughs    
Title: Executive Vice President