EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is being made as of the 29th
day of December, 1997 by and among MARKETING SERVICES GROUP, INC., ("MSGI"), a
Nevada corporation, having its principal office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, XXXXXXX X. XXXXXXX ("Employee"), an individual residing at 000 Xxxxx
Xxxx, Xxxxxxx, XX 00000, and Media Marketplace, Inc., a Pennsylvania
corporation, and Media Marketplace Media Division, Inc., a Pennsylvania
corporation (each a "Company", collectively, the "Companies").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement among MSGI,
Employee and Xxxxxx X. Xxxxxxx, dated December 8, 1997 the Companies
contemporaneously herewith will become wholly-owned subsidiaries of MSGI; and
WHEREAS, MSGI desires to have Employee continue as President
and Chief Executive Officer of the Companies and Employee desires to be employed
by the Companies as President and Chief Executive Officer of each, upon the
terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual premises and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Nature of Employment; Term of Employment.
(a) MSGI and each Company hereby employs Employee and Employee agrees to serve
each Company as its President and Chief Executive Officer, upon the terms and
conditions contained herein, for a term commencing as of the date hereof and
continuing until December 31, 2000 (the "Initial Term"). This Agreement shall
automatically be renewed for one (1) additional year period (the "Renewal Term"
and the Initial Term collectively, the "Employment Term") upon terms no less
favorable than the terms existing in the third year of the Employment Term,
unless MSGI or Employee gives written notice to the other party of its intention
not to renew this Agreement at least sixty (60) days prior to the expiration of
the Initial Term.
(b) MSGI shall consider electing Employee to MSGI'S Board of Directors within 30
days following the end of MSGI's first fiscal year of the Initial Term. MSGI
will maintain directors' and officers' liability insurance coverage for Employee
throughout the period that Employee serves on MSGI's Board of Directors to the
same extent it maintains such insurance for all other officers and directors of
MSGI. Whenever during the Employment Term, Employee is not a member of MSGI's
Board of Directors, he shall be given due notice of, and shall have the right to
attend, each meeting of MSGI's Board of Directors and shall be given all
information provided to Board Members.
2. Duties and Powers as Employee.
During the Employment Term, Employee agrees to devote all of his full working
time, energy and efforts to the business of the Companies. In performance of his
duties, Employee shall be subject to the reasonable direction of the Chief
Executive Officer of MSGI and the Board of Directors of MSGI. Employee shall be
available to travel as may reasonably be required by the needs of the Companies'
or MSGI's business. Employee agrees that the Companies or MSGI may obtain a life
insurance policy on the life of Employee naming the Companies or MSGI as the
beneficiary thereof. Employee shall consult with the Chief Executive Officer of
MSGI on any single expenditure by either of the Companies in excess of $10,000
or compensation payments by either of the Companies to an employee or a
consultant that alone or in the aggregate exceeds $75,000 per annum. Subject to
the foregoing obligations to consult, Employee shall have sole authority over
all staffing decisions for the Companies.
3. Compensation.
As compensation for his services hereunder, MSGI and the Companies shall pay
Employee a salary (the "Base Salary"), payable in equal semi-monthly
installments, in the aggregate at the annual rate of $250,000 for each year of
the Employment Term. Except as otherwise provided by this Agreement, Employee
shall participate in all present or future employee benefits of the Companies or
MSGI for which officers of MSGI or officers of a Company are eligible. The
benefits received by Employee from such benefit plans shall be no less favorable
to him than benefits (including life and disability insurance and medical
benefits) currently received by Employee from the Companies. During the
Employment Term, Employee shall be eligible for consideration for stock options
and bonuses to the same extent as are other key management personnel of MSGI and
the Companies.
4. Earnout
MSGI and the Companies shall pay Employee an earnout payment (the "Earnout
Payment") of up to $1,000,000 a year for each year beginning January 1st and
ending December 31st for the years of 1998, 1999 and 2000 (each a "Calendar
Year"), calculated for the purposes of this Section 4 as follows for each
Calendar Year:
(a) In the event that EBIT (as defined herein) for a Calendar Year equals or
exceeds 85% of the EBIT Target (as defined herein) for such Calendar Year,
Employee shall be paid an Earnout Payment for a Calendar Year equal to
$1,000,000 multiplied by the product (which product of this subclause (i) and
(ii) shall not be in excess of the value of one (1)) of (i) actual Metro Net
Xxxxxxxx (as defined herein) for the year divided by the Metro Net Target (as
defined herein) for the Calendar Year, and (ii) actual EBIT divided by the EBIT
Target for the appropriate Calendar Year. For example, if 1998 EBIT is $680,440
(approximately 90% of the EBIT Target) and actual Metro Net Xxxxxxxx for 1998
are $765,000 (approximately 50% of $1,530,229), Employee's Earnout Payment for
Calendar Year 1998 will be approximately $450,000.
(b) No Earnout Payment shall be payable to Employee for any Calendar Year for
which actual EBIT is less than 85% of the EBIT Target; provided, however, that,
regardless of actual EBIT, Employee shall receive the full Earnout Payment in
any Calendar Year for which 100% of the Metro Net Target is achieved, as
measured by actual Metro Net Xxxxxxxx.
(c) If no Earnout Payment is due Employee as provided in subclause (a) and (b)
of this Section in any one Calendar Year (i) Employee shall be entitled to an
Earnout Payment in the next succeeding Calendar Year based on the same formula
and values for Metro Net Target and EBIT Target as the Calendar Year for which
no earnout was payable; (ii) the EBIT Target and Metro Net Target for the
remaining Calendar Year(s), if any, will be correspondingly adjusted forward to
apply to the next Calendar Year(s) thereafter, and (iii) MSGI shall have the
option to extend Employment Term for one additional year.
(d) The Earnout Payment shall be paid not later than forty-five (45) days after
the last day of each Calendar Year (the "Payment Date"). MSGI shall pay Employee
each Earnout Payment in shares ("Earnout Shares") of common stock of MSGI, par
value $.01 per share ("Common Stock"); provided, however, that Employee may
elect to receive up to twenty-five percent (25%) of the Earnout Payment in a
Calendar Year in cash; provided, further, MSGI and Employee may mutually agree
that fifty percent (50%) of the Earnout Payment in a Calendar Year may be
payable in cash. The Earnout Shares shall be unregistered shares of common stock
which MSGI shall cause to be registered under the Securities Act of 1933 within
90 days of receipt by Employee. The Earnout Shares shall be valued at the
average of the closing prices for Common Stock as reported by NASDAQ for the
last 30 trading days prior to the three (3) business days before the Payment
Date.
(e) For purposes of calculating Earnout Payment in Calendar Year 1998, the
actual Metro Net Xxxxxxxx for 1998 shall include 1997 xxxxxxxx for Fairfield
Mint, XxXxxx Travel and New England Journal of Medicine, and xxxxxxxx for
business introduced by the Companies to MSGI between October 3, 1997 and
December 31, 1997.
(f) At any time up to June 30, 1998 Employee, at his sole discretion, shall be
entitled to defer the beginning of the term of his Earnout Payments to commence
on July 1, 1998, and if such election is made the Calendar Year(s) for all
purposes of this Agreement shall begin on July 1, for the years 1998, 1999, 2000
and end on June 30, respectively, for the years 1999, 2000 and 2001. MSGI shall
give Employee, not more than 30 days after the end of each month, a report of
actual Metro Net Xxxxxxxx for such month.
(g) The Board of Directors of MSGI shall consider each year, after a meeting of
which Employee is permitted to make a presentation to the Board, whether, and if
so to what extent, the actual Metro Net Xxxxxxxx for that Calendar Year shall be
deemed to include MSGI's xxxxxxxx for telemarketing, Internet or other services
to clients originally introduced to MSGI, for those services or others, by the
Companies.
(h) In no event, shall Employee be entitled to any Earnout Payment for any
period following December 31, 2000; provided, however, (i) if the Calendar Year
is extended to December 31, 2001 pursuant to the operation of Section 4(c), the
Employee shall not be entitled to any such payout for any period following such
extended date, (ii) if Employee has made the election set forth in Section 4(f)
then he shall not be entitled to any such payout for any period following June
30, 2001 or (iii) if Employee has made the election set forth in Section 4(f)
and if the Calendar Year is extended pursuant to the operation of Section 4(c),
the Employee shall not be entitled to any Earnout Payment after June 30, 2002.
(i) Upon the written request of Employee, MSGI the Companies and Employee shall
amend this Agreement as requested by Employee and agreed upon by MSGI solely for
the purpose of re-allocating Earnout Payment due Employee. Nothing in this
Section 4(i) shall affect the computation of the Earnout Payment as set forth in
this Section 4.
(j) The parties hereto acknowledge that the determination of Earnout Payment
shall not be adversely impacted by MSGI's inability to service the computer
processing needs of the Company's clients; provided, that Employee shall notify
the Chief Executive Officer of MSGI in writing, in accordance with Section 14
hereof, of such inability and; provided, further, that MSGI shall have 30 days
from receipt of such notice to cure any defect.
For the purposes of this Agreement EBIT Target and Metro Net Target shall have
the following values in each Calendar Year:
Calendar Year EBIT Target Metro Net Target
------------- ----------- ----------------
1998 $ 756,000 $1,530,229
1999 1,025,000 1,660,451
2000 1,182,000 1,803,122
provided, however, that the Metro Net Target for each Calendar Year shall be
reduced by the same percentage as EBIT for that same year exceeded the
applicable EBIT Target.
For the purposes of this Agreement, "EBIT" is defined as earnings of the
Companies before charges for increased depreciation expense attributable to the
transactions contemplated by this Agreement, interest expense and taxes, without
any allocations to the Companies of expenses of MSGI including, without
limitation, any allocations for MSGI's general administrative and overhead
expenses or goodwill, MSGI's audit expenses by Coopers & Xxxxxxx'x or any other
accounting firm employed by MSGI.
For the purposes of this Agreement, "Metro Net Xxxxxxxx" is defined as all
xxxxxxxx of MSGI, its subsidiaries and affiliates for electronic data processing
services for clients originally introduced by the Companies, net only of
external charges which are defined as charges for National Change of Address,
data/phone appendage, shipping, computer storage media and sales tax.
5. Expenses; Vacations; Location.
Employee shall be entitled to reimbursement for reasonable travel and other
out-of-pocket expenses reasonably incurred in the performance of his duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of MSGI. Employee shall be entitled
to six (6) weeks paid vacation time in accordance with then regular procedures
of MSGI governing executives as determined from time to time by the MSG's Board
of Directors and communicated, in writing to Employee. Employees principal
office shall not be relocated without his written consent to a location more
than 25 miles from its present location.
6. Representations and Warranties of Employee.
Employee represents and warrants to the MSGI and the Companies that: (i)
Employee is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder or the other rights of the Companies and MSGI hereunder; and (ii)
subject to a hearing impairment disclosed to MSGI, Employee is under no physical
or mental disability that would hinder the performance of his duties under this
Agreement.
7. Non-Competition.
(a) Employee agrees that during the Employment Term he will not engage in, or
otherwise directly or indirectly be employed by, or act as a consultant, or be a
director, officer, employee, owner, agent, member or partner of, any other
business or organization that is or shall then be competing with the Companies
or MSGI, except that in each case the provisions of this Section 7 will not be
deemed breached merely because Employee owns not more than five percent (5.0%)
of the outstanding common stock of a corporation, if, at the time of its
acquisition by Employee, such stock is listed on a national securities exchange,
is reported on NASDAQ, or is regularly traded in the over-the-counter market by
a member of a national securities exchange.
(b) If this Agreement is terminated "For Cause" (as defined in Section 10,
hereof), Employee, for a period of three (3) years from the date of termination,
shall not, directly or indirectly, solicit or encourage any person who was a
customer of the Companies or MSGI during the three years prior to the date of
such termination to cease doing business with the Companies or MSGI or to do
business with any other enterprise that is engaged in the same or similar
business to that of the Companies or MSGI. If this Agreement is terminated other
than for Cause, the restrictions in the preceding sentence shall be applicable
to Employee for only a period of one (1) year from the date of termination.
(c) Employee acknowledges that: (i) the consideration for this Agreement not to
compete includes the consideration he received in the Earnout Shares; (ii)
monetary damages are not sufficient to compensate MSGI and the Companies for a
breach of this Agreement; (iii) MSGI and the Companies shall be irreparably
harmed if Employee breaches this covenant not to compete; and (iv) the issuance
of injunctive relief on behalf of MSGI and the Companies is appropriate to
remedy any such breach.
8. Inventions; Patents; Copyrights.
Any interest in patents, patent applications, inventions, copyrights,
developments and processes ("Such Inventions") which Employee now or hereafter
during the period he is employed by the Companies under this Agreement may,
directly or indirectly, own or develop relating to the fields in which the
Companies or MSGI may then be engaged shall belong to the Companies or MSGI; and
forthwith upon request of the Companies or MSGI, Employee shall execute all such
assignments and other documents and take all such other action as the Companies
or MSGI may reasonably request in order to vest in the Companies or MSGI all of
his right, title, and interest in and to Such Inventions, free and clear of all
liens, charges, and encumbrances.
9. Confidential Information.
Any information concerning the business and affairs of MSGI or the Companies
that is not generally available to the public ("Confidential Information") which
Employee may now possess, may obtain during the Employment Term, or may create
prior to the end of the period he is employed by the Companies under this
Agreement, relating to the business of the Companies or MSGI or of any customer
or supplier of the Companies or MSGI, shall not be published, disclosed or made
accessible by him other than in the ordinary conduct of his duties hereunder to
any other person, firm, or corporation during the Employment Term or any time
thereafter without the prior written consent of the Companies and MSGI. Employee
shall return all tangible evidence of such Confidential Information to the
Companies or MSGI prior to or at the termination of his employment.
10. Termination.
(a) Notwithstanding anything herein contained, if on or after the date hereof
and prior to the end of the Employment Term, Employee is terminated "For Cause"
then the Companies shall have the right to give notice of termination of
Employee's services hereunder as of a date to be specified in such notice, and
this Agreement shall terminate on the date so specified. Termination "For Cause"
shall mean Employee shall: (i) be convicted of a felony crime, (ii) commit any
act or omit to take any action in bad faith and to the material detriment of the
Companies or MSGI, (iii) commit an act of moral turpitude to the material
detriment of the Companies or MSGI, (iv) commit an act of fraud against the
Companies or MSGI, or (v) materially breach any term of this Agreement and fail
to correct such breach within ten (10) days after written notice thereof;
provided, that in the case of a termination pursuant to (ii), (iii) or (iv) such
determination must be made by the Board of Directors of MSGI after a meeting at
which Employee was given an opportunity to explain such actions. In the event
this Agreement is terminated "For Cause" pursuant to Section 10(a), then
Employee shall be entitled to receive only the Base Salary at the rate provided
in Section 3 to the date on which termination shall take effect plus any
compensation which is accrued but unpaid on the date of termination.
(b) In the event that Employee shall be physically or mentally incapacitated or
disabled or otherwise unable fully to discharge his duties hereunder for a
period of six (6) months, then this Agreement shall terminate upon ninety (90)
days written notice to Employee, and no further compensation (other than accrued
but unpaid Base Salary or bonus through the date of termination) shall be
payable to Employee, except as may otherwise be provided under any disability
insurance policy.
(c) In the event that Employee shall die, then this Agreement shall terminate on
the date of Employee's death, and no further compensation (other than accrued
but unpaid Base Salary or bonus through the date of death) shall be payable to
Employee, except as may otherwise be provided under any insurance policy or
similar instrument.
(d) In the event this Agreement is terminated without cause, Employee shall be
paid an Earnout Payment consisting of a single lump sum distribution in the
stock of MSGI (with no present value adjustment) equal to the $1,000,000 for
each Calendar Year, or any portion thereof, remaining as of the date of such
termination. Such payments shall be made within 60 days from the date of such
termination. The value of the Common Stock of MSGI used in such payments shall
be based on the average closing price of the Common Stock on NASDAQ for the
thirty days after such termination.
11. Merger.
In the event of a future disposition of the properties and business of MSGI,
substantially as an entirety, by merger, consolidation, sale of assets, sale of
stock, or otherwise where 51% or more of MSGI Common Stock is acquired by a
party which is not an affiliate of MSGI ("Change of Control"), Employee shall
receive an Earnout Payment consisting of a single lump sum distribution (with no
present value adjustment) equal to $1,000,000 for each Calendar Year, or any
portion thereof, remaining as of the date of the Change of Control.
12. Survival.
The covenants, agreements, representations, and warranties contained in or made
pursuant to this Agreement shall survive Employee's termination of employment,
irrespective of any investigation made by or on behalf of any party.
13. Modification.
This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be sent by telecopier, by Federal Express,
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 14). In
the case of a notice to the Companies or MSGI, a copy of such notice (which copy
shall not constitute notice) shall be delivered to Camhy Xxxxxxxxx & Xxxxx LLP,
0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxx X. Annex, Esq.
In the case of a notice to Employee, a copy of such notice (which copy shall not
constitute notice) shall be delivered to Drinker Xxxxxx & Xxxxx, Suite 300, 0000
Xxxxxxxxx Xxxxx, Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxx. Notice to the
estate of Employee shall be sufficient if addressed to Employee as provided in
this Section 14. Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, all other notices shall be
deemed given when sent, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
15. Waiver.
Any waiver by either party of a breach of any provision of this Agreement shall
not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and signed by the party against
who the waiver is asserted.
16. Binding Effect.
Employee's rights and obligations under this Agreement shall not be transferable
by assignment or otherwise, such rights shall not be subject to encumbrance or
the claims of Employee's creditors, and any attempt to do any of the foregoing
shall be void. The provisions of this Agreement shall be binding upon and inure
to the benefit of Employee and his heirs and personal representatives, and shall
be binding upon and inure to the benefit of the Companies and its successors and
those who are its assigns.
17. Headings.
The headings in this Agreement are solely for the convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
18. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. It shall be governed by, and construed in accordance with,
the laws of the State of New York, without given effect to the rules governing
the conflicts of laws. Each of the parties hereto agrees that such court may
award reasonable legal fees and expenses to the prevailing party. Each of the
parties hereto irrevocably submits to the jurisdiction of the courts of the
State of New York, and of any federal court located in the State of New York, in
connection with any action or proceeding arising out of or relating to, or a
breach of, this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
MARKETING SERVICES GROUP, INC.
By: /s/ J. Xxxxxx Xxxxxxx
------------------------------
Title: Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxxxx
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MEDIA MARKETPLACE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Title: President
MEDIA MARKETPLACE MEDIA DIVISION, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Title: President
