EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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Employment Agreement ("Agreement") made and entered into this 28th the day of
March, 1997, by and between MS FARM JOURNAL CORPORATION, a Delaware corporation
(the "General Partner"), and XXXXXXXX XXXXXXXX, having a residence at the
address set forth beneath his signature below ("Employee").
WHEREAS, the General Partner desires to cause Farm Journal, Inc.
("Employer") to employ Employee to obtain the benefit of his services as
Chairman of the Board of Directors and Chief Executive Officer of Employer and
Employee desires to accept such employment.
NOW, THEREFORE, in consideration of the promises and of the respective
covenants and agreements set forth herein and for other good and valuable
consideration, the General Partner and Employee hereby agree as follows:
1. Employment. Upon the closing (the "Closing") of the acquisition
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(the "Acquisition") of Employer by Farm Journal Holdings Inc., (i) the General
Partner will cause Employer to employ Employee and to enter into a written
assumption of this Agreement and all obligations of Employer hereunder and (ii)
Employee hereby accepts employment with Employer on all the terms and conditions
of this Agreement.
2. Term. The term of this Agreement shall be for a period of five
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(5) years (the "Initial Term"), commencing no later than ten business days after
the Closing (the actual date Employee commences work for Employer, the
"Employment Date") and terminating on the fifth anniversary of the Employment
Date, unless sooner terminated as set forth in Sections 10 and 11. Unless either
party gives notice to the other to the contrary at least 60 days prior to the
end of the Initial Term or any Renewal Term (as defined below), this Agreement
shall be renewed upon the end of the Initial Term or such Renewal Term, as the
case may be for an additional one-year period (any such period one-year period
being referred to herein as a "Renewal Term"). The notice requirement set forth
in the immediately preceding sentence is for the convenience of the parties only
and shall not in any manner affect the rights, obligations and remedies of the
parties hereunder.
3. Compensation.
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(a) Salary. Employer agrees to pay Employee during the term of Employee's
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employment under this Agreement, a base salary at a rate of One Hundred
Seventy Thousand Dollars ($170,000) per year (such amount, as the same may
be increased by the Employer's Board of Directors (the "Board") the "Base
Salary"), payable periodically in accordance with the normal payment
schedule and practices of Employer. The Employee's Base Salary shall be
reviewed annually by Employer and Employee and performance raises may be
given when warranted in the sole discretion of Board. All payments shall
be subject to withholding and other applicable taxes.
(b) Bonus Payments. Employee shall be entitled to receive, in addition to the
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Base Salary, such bonus payments, if any, as the Board or the Compensation
Committee of the Board, in its sole discretion, may specify. The amount of
any annual bonus specified by the Board or such Compensation Committee may
be up to 100% of Employee's Base Salary.
The objectives to be followed by Employer in determining the amount of any
bonus may include both quantitative measures (including, for example and
without limitation, improving revenue, cash flow, net income, earnings per
share and return on assets) and qualitative measures (including, for
example and without limitation, developing a superior competitive position,
creating a corporate culture characterized by enthusiasm, productive
activity and high ethical standards and building an effective team at all
levels of the organization). Employee shall be entitled to receive on the
Employment Date an advance of $25,000, subject to all applicable
withholding requirements, in respect of, and to be credited against,
Employee's annual bonus.
4. Duties and Responsibilities.
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(a) As Officer and Employee. Employer hereby employs Employee upon the terms
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and conditions set forth in this Agreement, to serve as Chairman of the
Board and Chief Executive Officer of the Employer in which office Employee
shall perform the executive duties vested in such offices by the By-Laws of
the Employer, to be the most senior executive officer of Employer and to be
responsible for directing the business and affairs of Employer and for the
development and implementation of long-range objectives, policies and
plans, including strategies to increase the value of Employer over the term
of this Agreement, all subject to the input and approval of the Board.
(b) Sole Employment is with Employee. During his term of employment, Employee
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shall not directly or indirectly render any services of a business,
commercial or professional nature to any other person, firm, corporation or
organization, whether for compensation or otherwise, without the prior
written consent of the Board, except for such charitable, academic,
professional or trade services which do not interfere with Employee
performing his duties hereunder (as determined by the Board). Employee (i)
represents to Employer that Employee's execution, and performance of the
terms, of this Agreement does not and will not breach or otherwise violate
the terms of any agreement (whether or not in writing) of Employee with any
other person and (ii) agrees that any breach of such representation shall
constitute grounds for termination of Employee for cause under Section 10.
(c) As Director. The Board shall cause Employee to be nominated for election
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and, for so long as the Employer shall remain an indirect, wholly-owned
subsidiary of MS Farm International Limited Partnership (the "Partnership")
or one or more of its affiliates controlled by the General Partner, the
General Partner shall cause the Employee to be elected, as a director of
Employer during the entire employment term. As a director, Employee shall
serve as Chairman and on the Executive Committee and on such other
committees of the Board as the Board may request. Employee agrees that he
shall not be entitled to receive any compensation for serving as a director
of Employer or as a director, officer or employee of Employer's
subsidiaries or other affiliates other than the compensation to be paid to
Employee by Employer pursuant to this Agreement.
(d) Employee Acceptance. Employee hereby accepts the employment and duties
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contemplated herein, and Employee agrees to devote his full working time,
to the performance of his duties under this Agreement and the business of
Employer, and to
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comply with all significant lawful policies of the Employer which under
this Agreement may be in effect from time to time.
5. Expenses. Employer agrees to pay or reimburse Employee for all
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reasonable, ordinary and properly vouchered business expenses (including for
necessary business travel) and client entertainment expenses incurred after the
Employment Date in the performance of his services under this Agreement in
accordance with all applicable policies and procedures of Employer for expense
reimbursement.
6. Equity Participation and Other Benefits.
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(a) Purchase of Class A Limited Partner Interests. On the Employment Date,
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Employee shall purchase one Unit as defined in the Limited Partnership
Memorandum dated February 1997, of the Partnership (the "Partnership") (as
the same may be supplemented) of Class A Limited Partner interests of the
Partnership. Employee shall pay the purchase price of such Unit by (i) the
payment to the Partnership of $25,000 in cash and (ii) delivery of
Employee's full recourse promissory note (the "Note") in the principal
amount of $75,000, bearing interest at the prime rate, secured by all of
Employee's interest in the Partnership and the proceeds of the sale of
Employee's primary residence, maturing on the earlier of (x) the sale of
the Employee's primary residence or (y) the anniversary of issuance and
repayable from the proceeds of the sale of Employee's primary residence.
The Note shall be in form and substance satisfactory to the Partnership.
(b) Purchase of Class B Limited Partner Interests. In connection with the
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closing of the Acquisition of the Company by Farm Journal Holdings Corp.,
Employee will be entitled to purchase on the Employment Date an equity
participation interest in the Partnership as set forth on Annex A hereto.
(c) Other Benefit Plans. In addition to the compensation specified in Section
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3 hereinabove, during the term of Employee's employment with Employer,
Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement made available generally by
Employer, now or in the future, to its key management employees, subject to
and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements.
(d) Automobile. During the term of Employee's employment with Employer,
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Employer will reimburse to Employee up to $500 per month of expenses
incurred by Employee to lease a Chrysler Town & Country LXI car in addition
to the compensation provided in Section 3 hereinabove.
(e) Relocation Allowance. Employee shall be entitled to reimbursement of (i)
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the reasonable actual out-of-pocket costs up to $50,000 incurred by
Employee in connection with Employee's relocation to the greater
Philadelphia area if made within two years of Employee's Employment Date
and (ii) his temporary living expenses (up to $4,000 per month) in
Philadelphia for the period through July 1997.
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7. Employer's Authority. Employee agrees to observe and comply with
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the lawful rules and regulations of Employer respecting performance of duties,
reimbursement of expenses and other matters relating to Employer's business.
8. Covenant to Retain Employer's Confidences and Trade Secrets. By
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virtue of his employment, Employee will have continuing access to privileged and
confidential information, including without limitation trade secrets, relating
to Employer, or any of Employer's subsidiaries or affiliates, or any of their
respective businesses (any such information being referred to collectively
herein as "Confidential Information"). It is acknowledged and agreed that
Employer will suffer immeasurable and irreparable harm if Confidential
Information is used or exploited outside the scope of this Agreement or
Confidential Information is disclosed in breach of this Agreement. Accordingly,
during the period of his employment hereunder and following termination on of
his employment with Employer, Employee shall not, without the written consent of
the Board or of a person (other than Employee) authorized thereby, use, exploit
or disclose to any person any Confidential Information; provided, however, that
Confidential Information shall not include any information that already is
lawfully (and without breach of any duty or agreement to preserve
confidentiality) in the public domain or prevent Employee from using general
know-how not proprietary to Employer; and provided further that Employee shall
not be required to keep confidential any such information, and may disclose such
information, under the following circumstances:
Employee may disclose Confidential Information to another employee of
Employer or to representatives or warrants of Employer (such as independent
accountants and legal counsel) when such disclosure is reasonably necessary
or appropriate in connection with the performance by Employee of his duties
as an executive officer of Employer,
Employee may disclose Confidential Information at the express direction of
any authorized governmental entity acting within the scope of its
jurisdiction,
Employee may disclose Confidential Information pursuant to a subpoena or
other court process, or
Employee may disclose Confidential Information as otherwise required by law
or the rules, regulations or orders of any applicable regulatory body
acting within the scope of its jurisdiction,
but, before any such disclosure may be made under the foregoing clause (ii),
(iii) or (iv), Employee shall cause Employer (or if after the termination of
Employee's employment with Employer, shall afford to Employer a reasonable
opportunity) to exercise reasonably appropriate measures to object to such
disclosure and to provide for the confidential treatment of the information if
so disclosed. Employee acknowledges and agrees that all Confidential
Information, that has been learned, developed or created by him during and in
connection with his employment with Employer, shall belong to, and shall remain
the sole property of, Employer. Employee shall not be entitled to keep or
reproduce any such information or materials after his employment with Employer
terminates. Employee shall, at any time requested by Employer (either during or
after his employment with Employer), promptly make all disclosures, execute all
instruments and perform all acts reasonably necessary to vest in Employer, fully
and
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completely, all such rights and information, and Employee promptly shall deliver
to Employer all memoranda, notes, reports, lists and other documents (and all
copies thereof), in whatever media contained, which he may then have in his
possession, custody or control, and which contain any Confidential Information.
9. Covenant Not to Compete. Employee acknowledges that the services
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he will render to Employer are of a special and unique character, any loss of
which cannot adequately be compensated by damages or an action at law. In view
of the unique value to Employer of the services of Employee for which Employer
has contracted hereunder, the confidential information obtained by (or disclosed
to) Employee as a consequence of his employment with Employer and the harm that
would result to the business of Employer as a result of competition between
Employee and Employer; as a material inducement to Employer to enter into this
Agreement; and as a material inducement to Employer to pay Employee the
compensation provided in this Agreement on the terms and conditions hereof,
Employee covenants and agrees as follows:
(a) Employee will not (without the prior written consent of Employer (which
consent may be withheld by Employer in its sole discretion for any reason))
for so long as he shall be employed by Employer commencing with the
Employment Date and for a period ending on the first anniversary following
the termination of his employment with Employer under this Agreement for
any reason whatsoever, for his own account or otherwise, and whether alone
or in concert with others, directly or indirectly:
(i) compete with Employer in any manner in those segments of the
publishing, market research, data management business or any other
business activity in which Employer, at the time of termination, is
substantially engaged or which Employer then is actively pursuing (the
"Business"), or manage, operate, control, be employed by, participate
in, render financial or other assistance to or be connected in any
manner with the ownership, management, representatives, operations or
control of that part of any business that competes with any of the
Business, or solicit business as contemplated by paragraph (ii) below;
(ii) solicit or accept solicitations in competition with Employer in any
Business of any advertiser, customer or client of Employer at the time
of termination, or any person or entity who, within the one (1) year
immediately preceding the time of termination, was an advertiser,
customer or client of Employer or was solicited by Employer to be an
advertiser, customer or client;
(iii) offer employment to or employ any person who is, at the time of such
offer, or who had been within one (1) year prior to the time of such
offer, (x) an employee of Employer or its subsidiaries or (y) an
independent contractor or consultant of Employer engaged in editorial,
research, skilled production or data management, managerial or sales
work, unless, in the case of an employee, such person shall have been
terminated by Employer without cause, or shall have terminated his or
her employment with the consent of Employer, and shall have worked at
least six months at another employer prior to the date when such
person first is employed or offered employment by Employee; or
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(iv) request, suggest or cause any past, present or future advertisers,
customers or clients of the Employer, any of its subsidiaries or any
of their affiliates engaged in the Business, to cancel or terminate,
or change the terms of, any business relationship with the Employer,
or any of its affiliates or engaged in the Business or request or
cause any vendor, printer, manufacturer or material supplier to
cancel, terminate or change the terms of, any relationship with the
Employer, any of its subsidiaries or any of their affiliates related
to the Business.
(b) Employee shall not at any time, whether alone or in concert with others,
directly or indirectly say or perform acts that will disparage the
reputation, trade name, integrity and goodwill of the Employer, any of its
publications or businesses, the Partnership or any of the Employer's
officers, employees, agents, directors, stockholders and/or affiliates,
including, but not limited to, MS Farm Journal Corporation and Xxxxxx
Xxxxxx & Co., Inc. Employer shall not at any time, whether alone or in
concert with others, directly or indirectly, make statements to third
parties disparaging the reputation of Employee. For the avoidance of
doubt, such agreements by Employer and Employee shall not be breached by
any termination of Employee's employment under this Agreement or the
content of any pleadings, affidavits, depositions or singular matters
relating to a dispute between Employer and Employee.
(c) Employee acknowledges and agrees that Employer conducts its Business
throughout the continental United States and intends to conduct it in
certain non-United States jurisdictions. The specific provisions of this
covenant not to compete by Employee are limited to and binding only within
those markets and geographical boundaries, including without limitation the
continental United States, in which Employer is engaged in Business or
where Employer, at the time of termination, is actively and in good faith
pursuing the engagement of Business.
(d) Employee acknowledges that this Section is an essential element of this
Agreement, and that but for this Section, Employer would not have entered
into this Agreement. Employee also acknowledges that the provisions of
this Section are reasonable and necessary to protect the legitimate
interests of Employer and that any breach of the terms, covenants or
agreements set forth in this Section shall be competitively unfair and may
cause irreparable damage to Employer because of the special and unique
services to be performed by Employee under this Agreement and that recovery
of damages at law will not be an adequate remedy. Accordingly, Employee
agrees that for any breach or threatened breach of the terms, covenants and
agreements of this Section, in addition to any other rights or remedies
Employer may have, Employer may apply to any court of law or equity having
jurisdiction to enforce the specific performance of the foregoing
provisions and may apply for injunctive relief against any act which would
violate any such provisions. Employer agrees that for any breach of the
agreement of Employer set forth in the last sentence of clause (b) of this
Section 9, in addition to any other rights or remedies Employee may have,
Employee may apply to any court of law or equity having jurisdiction for
injunctive relief against statements by Employer that would violate such
agreement.
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10. Termination without Severance. Except for the covenants, terms
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and conditions contained in Sections 8, 9 and 14 (and, to the extent applicable
to said sections, Sections 15 through 19), this Agreement shall be terminated
immediately:
(a) Upon the death of Employee; or
(b) Upon the Total Disability of Employee. Total Disability shall mean any
condition of illness or physical or mental incapacity or disability which
prevents or appears reasonably likely to prevent Employee from performing
the essential functions of his position (as determined by a physician
mutually acceptable to Employer and Employee or a necessary representative
of Employee), with or without reasonable accommodation, on a full-time
basis for ninety (90) consecutive days or ninety (90) days within any one
hundred eighty (180) day period; or
(c) If Employee is fired with Cause. For purposes of this Agreement, "Cause"
shall mean any of the following, as determined by the Board:
(i) Employee's material breach of Sections 8 and 9 hereof or Employee's
material failure or Employee's refusal to follow lawful written
policies or directions of the Board (which the Board believes in good
faith to be in the best interests of Employer) or Employee's material
failure to perform his duties as set forth in Sections 4 and 7 of this
Agreement or as assigned by the Board from time to time in accordance
with Sections 4 and 7 of this Agreement;
(ii) Employee acts dishonestly and the same adversely affects Employer; or
(iii) Employee is or has engaged in gross misconduct which is employment
related, or Employee is convicted of a felony or any crime involving
moral turpitude, fraud or misrepresentation; or
(d) Employee fails to resign his current position and commence work with
Employer on or prior to ten business days after the Closing of the
Acquisition; or
(e) If Employee voluntarily quits his employment.
11. Termination with Severance. Except for the covenants, terms and
conditions contained in Sections 8 and 9 (and, to the extent applicable to said
sections, Sections 14 through 19), and subject to the terms and conditions of
this Section 11, this Agreement may be terminated upon either of the following
two events: (i) at the election of Employer at any time without Cause, by giving
written notice of such election to Employee; and (ii) at the election of
Employee, by giving written notice to the Board, if Employer (at a time when
Employee is not in material breach of this Agreement) is in material breach of
this Agreement and such breach continues for thirty (30) or more days after
Employee gives written notice of such material breach to the Board. In the event
of any termination pursuant to the foregoing sentence, Employee shall be
entitled, without any duty to mitigate, to continue to receive his then-existing
Base salary under Section 4(a) hereof for a period of three months following the
date of such termination; provided that such number of months shall increase by
one month for each completed full year of Employee's employment by Employer. The
rights of Employee under the
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foregoing sentence to his Base Salary and the obligations of Employer pertaining
thereto, are contingent upon (i) Employee executing and delivering to Employer
(in form and substance satisfactory to Employer) a release in favor of Employer,
all affiliates of Employer and all of Employer's and such affiliate's respective
stockholders, partners, officers, directors, employees, agents and
representatives, from any and all claims arising under this Agreement or as a
result of Employee's employment relationship with Employer or any of Employer's
predecessors or affiliates and (ii) Employee complying with all of his post-
termination obligations, including, but not limited to, his obligations under
Section 8 and 9 hereof.
12. Notices. All notices and other communications required or
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permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by reputable overnight
courier or by registered or certified mail (return receipt requested), postage
prepaid, or by telecopy (immediately followed by telephone confirmation of
delivery of such telecopy with the intended recipient of such notice or by
notice in writing sent promptly by registered or certified mail as provided
above), to the parties to this Agreement at the following addresses or at such
other address for a party as shall be specified by like notice:
(a) If to Employer, at:
Farm Journal, Inc.
Centre Square West
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Board of Directors
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to Employee, at his address set forth beneath his signature below with a
copy to:
Farm Journal, Inc.
Centre Square West
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been received on the
date of delivery, on the date that the telecopy is confirmed as having been
received, on the next business day after being sent by reputable overnight
courier or on the third business day after mailing, as the case may be.
13. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and undertakings, written and oral. This
Agreement may be amended only by a
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subsequent written agreement of Employee and Employer. No waiver by Employee or
by Employer of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar provision
or condition at the same or any prior or subsequent time. This Agreement shall
be binding upon and shall inure to the benefit of Employee, his heirs,
executors, administrators, beneficiaries and legal representatives and shall be
binding and inure to the benefit of Employer and its successors and assigns.
14. Merger and Consolidation, Assignment. (a) Upon the Closing of the
Acquisition, all rights and obligations of the General Partner under this
Agreement shall immediately be assigned to and assumed by Employer and the
General Partner shall have no further obligations of any kind hereunder. If
Employer at any time merges or consolidates with any other corporation or sells
or otherwise transfers all or a substantial portion of its assets or shares of
stock to another corporation or entity, the provisions of the Agreement shall be
binding upon the inure to the benefit of the corporation or entity surviving or
resulting from such merger of consolidation or to which such assets or shares of
stock have been sold or transferred. This Agreement, being personal to Employee,
may not be assigned by Employee.
(b) The execution of this Agreement by the General Partner shall not
obligate the General Partner in any manner with respect to the completion of the
Acquisition and Employee expressly acknowledges and agrees that (I) it shall
hold the General Partner and its affiliates harmless against any loss or damages
suffered by Employee as a result of the failure of the Acquisition to close
(regardless of the cause of such failure), (ii) that the General Partner shall
have no obligation to perform and pay the obligations of the Employer hereunder
and (iii) except with respect to the obligation of the General Partner under
Section 1 to cause Employer to employ Employee upon the Closing of the
Acquisition, the General Partner shall have no obligations or liability
hereunder.
15. Applicable Law and Jurisdiction.
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(a) This Agreement shall be governed by and construed in accordance with the
internal law of the State of New York without regard to its conflicts of
law principles.
(b) The parties agree that the exclusive place of jurisdiction for any action,
suit or proceeding relating to this Agreement shall be in the courts of the
United States of America sitting in the Borough of Manhattan in the City of
New York or, if such courts shall not have jurisdiction over the subject
matter thereof, in the courts of the State of New York sitting therein, and
each such party hereby irrevocably and unconditionally agrees to submit to
the jurisdiction of such courts for purposes of any such action, suit or
proceeding. Each party irrevocably waives any objection it may have to the
venue of any action, suit or proceeding brought in such courts or to the
convenience of the forum. Final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
16. Entire Agreement; Article and Section Headings. This Agreement
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sets forth the entire agreement of the parties hereto, and supersedes all prior
communications, whether oral
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or written, with respect to the subject matter hereof. The articles, section and
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
17. Reformation and Severability. In the event that any one or more
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of the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the same shall be construed and, if necessary,
reformed in substance, by limiting it so as to be valid and enforceable to the
maximum extent permitted by applicable law, and the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired and
shall remain in full force and effect to the fullest extent permitted by law.
The parties shall negotiate in good faith to replace an invalid, illegal or
unenforceable provision with a valid provision the economic effect of which is
as close as possible to that of the invalid, illegal or unenforceable provision.
18. Enforceability. The failure of either party at any time to
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require performance by the other party of any provision hereunder shall in no
way affect the right of that party thereafter to enforce the same, nor shall it
affect any other party's right to enforce the same, or to enforce any of the
other provisions in this Agreement, nor shall the waiver by either party of the
breach of any provision hereof be taken or held to be a waiver of any subsequent
breach of such provisions or as a waiver of the provision itself.
19. Survival. The respective obligations of, and benefits afforded
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to, Employee and Employer as provided in Sections 8, 9, 11 and 14 of this
Agreement (and, to the extent applicable to said Sections 8, 9, 11 or 14,
Sections 15 through 20), shall survive termination of this Agreement.
20. Other Agreements. Employee represents and warrants to Employer
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that Employee has not entered into any contract or agreement of any nature with
any person, firm or corporation which in connection with Employee's previous
employment, contains any restraints on Employee's future services.
21. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be a single agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first above written.
EMPLOYEE: MS FARM JOURNAL CORPORATION
/s/ Xxxxxxxx Xxxxxxxx By: /s/ X. Xxxx Xxxxxx, III.
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XXXXXXXX XXXXXXXX Title:
Employee's Residential Address:
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ANNEX A
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All terms not defined herein shall have the meaning set forth in the
Employment Agreement to which this Annex is attached.
Employee shall be granted the opportunity (subject to vesting) to realize
the financial benefit of a 10 year option at fair market value on 5% of the
limited partnership interests in MS Farm International Limited Partnership (the
"Partnership") on a fully diluted basis after giving effect to the limited
partnership interests issued at the closing of the acquisition ("Acquisition")
of the Company by Farm Journal Holding Inc. ("Holdings") (including interests
issued within six months thereafter, up to a maximum of 100 Units, i.e.,
$10,000,000) and the issuance of a similar interest to the Company's Chief
Operating Officer (the "Interest").
On the date Employee joins the Company, one fifth of such Interest shall
vest. Another four-fifths of such Interest shall vest in five equal
installments on each of the five anniversaries of the employment date (or at
such later date as the audited financials for the prior year are issued)
provided (i) that Employee continues to be employed by Employer on such date and
(ii) that the following financial targets are met:
First anniversary: EBITDA for the prior year
(1997) is at least $2.830 million (as shown on the
audited financials for the prior year)
Second anniversary: EBITDA for the prior year
(1998) is at least $3.643 million (as shown on the
audited financials for the prior year)
Third anniversary: EBITDA for the prior year
(1999) is at least $5.290 million (as shown on the
audited financials for the prior year)
Fourth anniversary: EBITDA for the prior year is at
least $5.819 million (110% of the
third anniversary target) and 20%
of the prior year's net revenues (as shown on the
audited financials for the prior year)
Fifth anniversary: EBITDA for the prior year is at
least $6.4 million and 20% of the
prior year's net revenues (as shown on the audited
financials for the prior year)
In the event of a firm underwritten initial public offering ("IPO") pursuant
to an effective registration statement on Form S-1 under the Securities Act of
1933, as amended (the "Act") at a value that implies a pre-IPO equity valuation
of the Company of at least three times the Partnership's investment in the
company, 25% of such Interest not then vested shall vest, with the remaining
amounts to be vested on a pro rata basis in accordance with the schedule, and
subject to the conditions, set forth above.
In the event the Company is subject to a "Change in Control" all such
Interest shall vest immediately. A "Change in Control" means any merger or
consolidation of Employer, any sale or other transfer of all or substantially
all of Employer's assets, or any sale of a majority of the capital stock of
Employer or of a majority of any class of equity of any stockholder of Employer,
if as a result of such transaction neither Xxxxxxx Ean Xxxxx, Xxxxxx Xxxxxx &
Co., Inc. nor any of its affiliates or associates (or any employee or associate
of Xxxxxx Xxxxxx & Co., Inc. or its affiliates) (including any of such person's
estates or heirs) shall own or control, directly or indirectly, a majority or
controlling voting interest in Employer or the successor to Employer. Employee
acknowledges and agrees that MS Farm Journal Corporation, as the general partner
of the Partnership, is an affiliate of Xxxxxx Xxxxxx & Co., Inc.
It is currently anticipated that the Interest will be implemented through
Employee purchasing for an amount to be agreed (e.g., $500) on the closing date
of the Acquisition a Class B Limited Partner interest of the Partnership. The
Class B Limited Partner interest shall be equivalent to the Class A Limited
Partner interest except that the proceeds of such sale will be used to purchase
junior stock ("Junior Stock") of Holdings representing 4% of the common stock of
Holdings actually acquired on such closing date with the proceeds of all Limited
Partner interests sold by the Partnership (and acquired with the proceeds of
Limited Partner interest sold within six months thereafter, up to a maximum of
100 Units, i. e., $10,000,000 (inclusive of Units sold on or prior to the
closing date of the Acquisition)).
The terms of the Junior Stock will include mandatory redemption and other
provisions to implement the vesting schedule set forth above. The Certificate
of Incorporation of Holdings will be amended to provide mandatory redemption
provisions in respect of the Junior Stock to provide for a mandatory redemption
at the original purchase price of shares of Junior Stock (or any shares of
capital stock issued in exchange for, on conversion of, as a dividend or other
distribution in respect of, or as part of a recapitalization involving the
Junior Stock) at such time and to the extent that such shares of capital stock
are no longer capable of being vested in favor of Employee.
The Junior Stock will be subject to the conversion provisions applicable
thereto under the Certificate of Incorporation of Holdings attached hereto. The
Junior Stock will have voting rights identical to the shares of stock into which
it may be converted from time to time.
In the event of an EPO, the Junior Stock will become convertible into the
stock that is the subject of such offering.
For purposes of this paragraph, Affiliate shall mean any person who is an
affiliate of Employer within the meaning of Rule 144 under the Act. So long as
Employee is an Affiliate,
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Employee shall be entitled to participate in any registration under the Act of
the sale securities of Holdings by controlling Affiliates. Such participation
shall be on the same terms as are made available to other Affiliates
participating in such registration, and, at the option of Employee, shall
include up to Employee's vested pro rata share of the Holdings equity securities
to be registered, based on the number of shares that are the subject of the such
registration held by Employee as compared to the total number of shares of the
same class of Employer equity beneficially held (within the meaning of
Securities and Exchange Commission Rule 13d-d under the Securities Exchange Act
of 1934, as amended) by all Affiliates.
All certificates representing the shares of Junior Stock (and any shares of
capital stock issued in exchange for, on conversion of, as a dividend or other
distribution in respect of, or as part of a recapitalization involving the
Junior Stock) shall bear a legend substantially in the following form, in
addition to any other legends that may be required under Federal or state
securities laws:
"The shares of stock represented by this certificate are subject to
mandatory redemption in accordance with the terms of the Certificate of
Incorporation of the Issuer."
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