EXHIBIT 10
EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") dated as of
May 1, 1997 by and between Xxxxxx X. Xxxxxxx, residing at 000 Xxxxx X,
Xxxxxxxxxx Xxxx, Xxxxxx, Xxx Xxxx 00000 (the "Executive") and Artistic
Greetings Incorporated, a Delaware corporation with a business address of
Xxx Xxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxx, Xxx Xxxx 00000 (the "Company").
I. WHEREAS, the Executive has served as the Senior Vice
President Administration/Corporate Development, General Counsel and
Assistant Secretary of the Company under an employment agreement dated
November 1, 1996 (the "Prior Employment Agreement");
II. WHEREAS, the Company desires to memorialize the retention of
the full-time services of the Executive hereby and cancel the Prior
Employment Agreement, and the Executive is willing to cancel such agreement
and to accept full-time employment for a period of three (3) years
subsequent to the date of execution of this Agreement (the "Execution
Date");
III. WHEREAS, the Company is seeking to address the following
issues in connection with the Executive's employment with, and services to,
the Company:
1. The Company's desire to compensate the Executive at a level
sufficient to induce the Executive to continue his efforts toward the
advancement of the Company's business; and
2. The Company's desire to provide for and fund a non-
competition agreement with the Executive to ensure the protection of its
investment in the advancement of its business under the management of the
Executive.
IV. WHEREAS, the Company desires and agrees, in consideration of
the objectives described above, to employ the Executive on the terms and
conditions set forth herein; and
V. WHEREAS, the Executive is desirous and willing to accept
employment with the Company on the terms and conditions expressed herein.
NOW, THEREFORE, the Executive and the Company hereby enter into
this Agreement on the terms and conditions hereinafter set forth (certain
capitalized terms used herein shall be defined in Section 9 hereof).
1. EMPLOYMENT AND DUTIES. The Executive shall serve as the
Chief Operating Officer and Executive Vice President of the Company, as well
as General Counsel and Assistant Secretary (the "Duties"). The Executive
shall devote his customary working time to the business of the Company and
shall perform the Duties in a diligent, effective and loyal manner.
2. COMPENSATION. The Executive shall be compensated by the
Company (the "Compensation") for the services to be rendered by him pursuant
to this Agreement in the following manner:
a. A base salary of One Hundred Forty-Six Thousand Dollars
($146,000) per calendar year (the "Yearly Salary"), which shall be (i)
paid each week beginning on the Execution Date; and (ii) reviewed by
the Company on an annual basis with increases of such Yearly Salary
granted to the Executive in the sole discretion of the Company based
upon, among other things, the Executive's performance of his Duties
during the prior period.
b. 100% of a Share Unit (as hereinafter defined) calculated
from January 1, 1997 and thereafter. A Share Unit is equal to the sum
of 1/4 % of the Net Operating Income (as hereinafter defined) of the
prior year (if Net Operating Income is negative, such number equals
zero) plus 1 1/2 % of the increase in Net Operating Income of the
current year over the prior year (a "Share Unit"). Net Operating
Income is equal to Net Income before (i) interest and investment income
(expense), (ii) taxes, (iii) bonuses and (iv) extraordinary items. The
amount of the Executive's percentage Share Unit shall be reviewed by
the Company on an annual basis with increases of such Share Unit
granted to the Executive in the sole discretion of the Company based
upon, among other things, the Executive's performance of his Duties
during the prior period. Bonuses shall be paid no later than March
15th of the following year. Should the Executive be Terminated for
Cause, no bonus for the year in which the Termination occurs will be
due or payable.
3. BENEFITS. During the Term of this Agreement, and thereafter
as may be specifically provided herein, the Executive shall be entitled to
receive the following benefits (collectively, the "Benefits"):
a. Four (4) weeks of paid vacation per calendar year, or such
greater period as may be approved from time to time by the Board of
Directors of the Company;
b. Health insurance (Company pays 75% and Executive pays 25% of
the plan options selected);
c. Long-term disability insurance (Company pays 100%);
d. Life insurance equal to one year's base earnings; and
e. Contribution (profit) sharing as a full participant in the
Company's 401K Profit Sharing Plan under the conditions outlined in the
Company's plan manual entitled "Savings Plan;" and
f. Reimbursement for all expenses incurred by the Executive for
dues and/or membership fees incurred by the Executive for any local
social or health club.
4. TERM. This Agreement shall be effective for a period of
three years from the
Execution Date (the "Term").
5. TERMINATION OF EMPLOYMENT. "Termination" shall mean
termination of the Executive's employment with the Company prior to the end
of the Term, as of a date specified in a Termination Notice delivered by
either:
a. (i) The Company, for any reason other than the Executive's
death, disability or for Cause or (ii) the Executive for Good Reason,
in either event, the Company shall (A) make Payment (any amount due
under this Section 6 is referred to as a "Payment") to the Executive,
within thirty (30) days of such Termination, of an amount equal to the
product of (x) one-twelfth of Yearly Salary and (y) the greater of (I)
the remaining number of calendar months of the Term of this Agreement
or (II) eighteen months; (B) cause any outstanding Stock Options held
by the Executive to automatically vest as of the date of the
Termination Notice; and (C) make Payment to the Executive, within
thirty (30) days of such Termination, an amount equal to the
Executive's pro rata share of the Executive's bonus (as determined in
accordance with Section 2(b) hereof) up through the last day of the
calendar month immediately prior to the date of the Termination Notice.
b. (i) The Executive in resignation at any time without Good
Reason or (ii) the Company for Cause, and in either event, the Company
shall continue to pay to the Executive the Compensation and Benefits
provided for under this Agreement only until the effective date of such
Termination;
c. The Executive as a result of disability prior to the
expiration of the Term of this Agreement, in which event, the Executive
shall receive the Compensation and Benefits for the remainder of the
Term of this agreement; and
d. The Executive in the event of an Acquisition of Control and
if Executive is not retained pursuant to an employment agreement under
Section 9(d)(i), the Company shall pay to the Executive the
Compensation and Benefits, within thirty (30) days of such Acquisition
of Control in a lump-sum amount equal to the amount due therefore,
including such Benefits as are described in sections 6(a)(ii)(B) and
6(a)(ii)(C).
In the Event of the Executive's death prior to the
expiration of the Term of this Agreement, the Company shall make a lump-sum
payment to the Executive's estate within thirty (30) days of such death in
the amount of the present value (applicable present value interest factor
shall be the Federal Rate described in Section 1274 of the Internal Revenue
Code, hereinafter referred to as the "Code") of the Compensation and
Benefits for the remainder of the Term of this Agreement.
Any calculation of an amount of Compensation and Benefits to
be paid under this Section 6 shall be made using a rate of Compensation and
Benefits that was applicable immediately prior to the death of the Executive
or prior to the date of any Termination Notice hereunder.
6. LIMITATION ON CERTAIN PAYMENTS. Notwithstanding anything
to the contrary contained herein, if any of the Payments provided for in
this Agreement, together with any other payments of Compensation which the
Executive receives from the Company, would constitute a "Parachute Payment"
(as defined in Section 280G(b)(2) of the Code), the Payments pursuant to
this Agreement shall be reduced to the largest amounts as will result in no
portion of such Payments being subject to the excise tax imposed in Section
4999 of the Code; provided however, that the Executive and the Company shall
mutually agree to the amount of such Payments as otherwise would be paid but
for the foregoing limitation of this Section 6, in equal installments such
that the present value (applicable present value discount rate shall be in
accordance with Section 280G(d)(4) of the Code) of such installments will
result in no portion of such Payments to be treated as Parachute Payments
under the Code. The first such installment shall be payable when such
amount would otherwise have been payable; provided further, however, that
the Executive and the Company shall mutually agree to the allocation of any
reductions required by this Section 7.
7. COVENANT NOT TO COMPETE. The Executive hereby covenants and
agrees that, during the period of five (5) years from the Execution Date
(the duration of such Noncompete Period being subject to the penultimate
paragraph of this Section 8 (the "Noncompete Period")), the Executive will
not:
a. For himself or on behalf of any other person, firm,
partnership or corporation, call upon any customer of the Company for
the purpose of soliciting or providing to such customer any products or
services which are the same as or similar to those provided to
customers by the Company. For purposes of this Agreement, "customers
of the Company" shall include, but not be limited to, all customers
acquired by the Company, or contacted or solicited by the Executive
during his employment with the Company;
b. For himself or on behalf of any other person, firm,
partnership or corporation, directly or indirectly seek to persuade any
director, officer or employee of the Company to discontinue that
individual's status or employment with the Company in order to become
employed in any activity similar to or competitive with the business of
the Company, nor will the Executive solicit or retain any such person
for such purpose; and
c. Directly or indirectly, alone or as an employee, independent
contractor of any type, partner, officer, director, creditor,
substantial (i.e., 5% or greater) stockholder or holder of any option
or right to become a substantial stockholder in any entity or
organization, engage within the United States of America in any
business pertaining to the sale, distribution, manufacture, marketing,
production or provision of products or services similar to or in
competition with any products or services produced, designed,
manufactured, sold, distributed or rendered, as the case may be, by the
Company.
The parties agree that the Compensation provided for in Section 2
hereof, shall constitute fair and adequate consideration not only for the
Executive's services to be performed during the Term, but also for his
agreement under this Section 8 for the duration of the Noncompete Period.
The provisions of this Section 8 shall survive any Termination.
If any of the restrictions on competitive activities contained in this
Section 8 shall for any reason be held by a court of competent jurisdiction
to be excessively broad as to duration, geographical scope, activity or
subject, such restrictions hall be construed so as to thereafter be limited
or reduced to be enforceable to the extent compatible with applicable law as
it shall then exist; it being understood that by the execution of this
Agreement the parties hereto regard such restrictions as reasonable and
compatible with their respective rights and expectations.
8. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings when utilized in this Agreement:
a. "Acquisition of Control" shall mean:
(i) upon the sale or other disposition to a person, entity
or "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (other than the Executive or a group which
includes the Executive), of shares of the Company having 45% or more of
the total number of votes that may be cast for the election of
Directors of the Company; and
(ii) stockholder approval of a transaction for the
acquisition of the Company, or substantially all of its assets, by
another entity or through a merger reorganization, consolidation or
other business combination to which the Company is a party.
b. "Cause" shall mean any action by the Executive which is
reasonably believed by the Company to constitute: (i) fraud; (ii)
embezzlement or misappropriation; (iii) felony; (iv) moral turpitude;
or (v) willful or bad faith conduct materially injurious to the
Company, other than as a result of the Executive's death or disability.
c. "Disability" shall mean any physical or mental incapacity,
illness or injury that renders the Executive unable to provide full-
time services to the Company as contemplated by this Agreement for more
than three consecutive calendar months.
d. "Good Reason" shall mean:
(i) an Acquisition of Control of the Company and if an
employment agreement, reasonably satisfactory to the Executive, for the
continuation of the employment of the Executive is not executed;
(ii) any action by the Company which reduces or limits the
Executive's authority to act in accordance with the Duties, and
(iii) The Company's failure to perform in a timely manner
its material obligations under this Agreement, a reduction in the
amount of the Executive's base Compensation or Benefits or the breach
by the Company of any other provision of this Agreement.
e. "Termination Notice" shall mean a written notice which:
(i) may be given by either the Company or the Executive for
any of the reasons set forth in Section 6 hereof;
(ii) sets forth the specific provision of this Agreement
relied upon by the Company for the Termination the Executive's
employment or by the Executive to resign from such employment;
(iii) sets forth in reasonable detail the facts and
circumstances claimed to provide the basis for the Termination of the
Executive's employment; and
(iv) sets forth a Termination Date (which shall not be less
than 30 days or more than 60 days following the delivery of a
Termination Notice).
9. NOTICES. Any notice required or desired to be given
hereunder relating to this Agreement shall be effective if in writing and
delivered personally or by certified mail, postage prepaid, return receipt
requested to a party at the address for such party previously set forth in
this Agreement or to such other address as a party may specify by written
notice to the other party similarly given.
10. BENEFIT. This Agreement and the rights and obligations
contained herein shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and upon the Executive, his legal
representatives, heirs and distributees.
11. WAIVER. The waiver of any party of a breach of any
provision of this Agreement shall not operate as or be construed as a waiver
of any subsequent breach.
12. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and may not be altered or amended except by an
instrument in writing signed by all parties hereto. The Prior Employment
Agreement is hereby canceled, and is expressly and mutually revoked by the
parties, it having no further force or effect. In the event of any conflict
between this Agreement and the terms of any of the Company's employment
policies, manuals, or other statements regarding employment generally, now
existing or hereafter promulgated, the terms of this Agreement shall
control.
13. PARTIAL INVALIDITY. The invalidity or enforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
14. APPLICABLE LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York.
15. HEADINGS. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Execution Date.
ARTISTIC GREETINGS INCORPORATED
By: /S/XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
By: /S/XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
