EMPLOYMENT AGREEMENT'
This Employment Agreement (the Agreement") by and between METRO GLOBAL
MEDIA, INC., a Delaware company ("Metro"), FANZINE INTERNATIONAL INC., a New
Jersey Corporation (the "Company"), and XXXXXX X. XXXXXXXXX ("Executive"), an
individual, is entered into and effective as of the 31st day of July, 1998. This
Agreement supersedes any other employment agreements or understandings, written
or oral, between the Company and Executive.
RECITALS:
The following statement are true and correct:
A. Metro, the Company, Executive and certain other individuals are
parties to a Stock Purchase Agreement of even date herewith (the "Stock Purchase
Agreement"), pursuant to which Metro acquired all of Executive's shares of stock
of the Company.
B. As of the date of this Agreement, the company and certain subsidiaries
of Metro are engaged primarily in tile business of the production, publishing,
distribution and sale of periodicals in the United States and in various foreign
countries.
C. Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's and Metro's customers, specific manners of doing business,
including the processes, techniques and trade secrets utilized by the Company
and Metro, and future plans with respect thereto, all of which has been, and
will be, established and maintained at great expense to the Company and Metro.
This information is a trade secret and constitutes the valuable goodwill of the
Company and Metro.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
AGREEMENTS
1. Employment and Duties
a) The Company hereby employs Executive in an executive position and
Executive hereby accepts this employment upon the terms and conditions herein
contained. Executive shall be responsible for participating in the overall
management of the Company, shall be general counsel to the Company, and shall be
responsible for the supervision of the legal affairs of the Company, and the
management of all internal and external attorneys used by the Company. Subject
to Section l (c) hereof, Executive agrees to devote so much of his business
time, attention and efforts as may be necessary to fulfill his obligations
hereunder to promote and further the business of the Company.
b) Executive shall faithfully adhere to, execute and fulfill all
lawful policies established by the Company.
c) Executive shall not, during the term of his employment hereunder,
be engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes in any material respect with
Executive's duties and responsibilities hereunder. The foregoing limitations
shall not be construed as prohibiting Executive from (I) making personal
investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of Section 3 hereof, or (ii) operating any or all
of the businesses described oil Exhibit "A" to this Agreement.
2. Compensation. For all services rendered by Executive, the Company
shall compensate Executive as follows:
a) Base Salary. Effective the date hereof, the base salary payable
to Executive shall be $100,000 per year, payable on a regular basis in
accordance with the Company's standard payment procedures, but not less often
than monthly (the "Base Salary"). In addition, on at least an annual basis, the
Company will review Executive's performance and may make increases to such base
salary if, in its discretion, any such increase is warranted.
b) Executive Perquisites, Benefits and Other Compensation.
Executive. shall be entitled to receive additional benefits and compensation
from the Company in such form and to the extent specified below:
I) Coverage, subject to contributions required of employees
generally, for Executive and his dependent family members under health,
hospitalization, disability, dental, life and other insurance plans that the
Company may have in effect from time to time for the benefit of its employees,
provided, however that the benefits pursuant to the same may not exceed benefits
under policies for Metro's executive employees.
ii) Reimbursement for all business travel and other out-of-
pocket expenses (including providing Executive with an automobile and insurance
therefor) reasonably incurred by Executive in the performance of his services
pursuant to this Agreement. All reimbursable expenses shall be appropriately
documented in reasonable detail by Executive upon submission of any request for
reimbursement, and in a format and manner consistent with The Company's expense
reporting policy. The automobile provided to Executive shall be leased for a
period of not more than three (3) years, and the lease payments required to be
paid by the Company therefor shall not exceed $1,200.00 per month.
c) Incentive Compensation. In addition to the Base Salary, during
the Term (as hereinafter defined), the Company shall pay to Executive additional
compensation, in an amount equal to 13.612% (the "Rate") of the Pre-Tax Net
Earnings (as hereinafter defined)
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of the Company for each Fiscal Year (the "Incentive Compensation"). The
Incentive Compensation shall be paid quarterly within thirty days of the end of
each of the Company's fiscal quarters, or at such other time or times as the
boards of directors of both Metro and the Company shall deem appropriate.
Notwithstanding the foregoing, and unless agreed to the contrary by the boards
of directors of both the Company and Metro, (I) the Company shall, at all times,
hold in reserve in its bank account an amount equal to the Company's net
operating expenses for the Company's prior fiscal quarter, and (ii) in the event
that the Company has a net operating loss for any fiscal quarter, the
distribution of Incentive Compensation shall be deferred until such loss is
recouped by the Company. For purposes of this Agreement, the term "Pre Tax Net
Earnings" shall mean gross revenues of the Company for a Fiscal Year less all
costs (including salaries, wages, benefits and related employment expenses)
incurred in connection with the business operations of the Company other than
(I) taxes; (ii) interest; (iii) depreciation and amortization; and (iv) the
Incentive Compensation and the Deferred Compensation paid to Executive and to
Xxxxxxx Xxxxxx, Xxxxxx X. Xxxxxxxxx and Xxxx Senior (the "Related Executives")
pursuant to Employment Agreements of even date herewith with terms similar to
those herein (the "Related Agreements"). No general overhead of, or office
costs, or expense incurred by Metro or the Company shall be included in the
calculation of Pre-Tax Net Earnings unless such expense is incurred directly for
the benefit of the Company and approved in advance by the Company's Board of
Directors.
d) Deferred Compensation. After termination of this Agreement for
any reason, the Company shall pay to Executive (or Executive's Estate
Representative, in the event of Executive's death) deferred compensation, in an
amount equal to six (6) times Applicable Pre-Tax Net Earnings. For the purposes
of this Agreement, the term "Applicable Pre-Tax Net Earnings" shall mean the
greater of (I) the Pre-Tax Net Earnings for the Fiscal Year in which the
termination took place, or (ii) the average Pre-Tax Net Earnings for the prior
Fiscal Years during the term of this Agreement, multiplied by the Rate. Payments
of Deferred Compensation shall be made to Executive on a quarterly basis (i.e.,
every three months) over a period of six years following the termination date.
e) Bonus Shares. If the Company generates Pre-Tax Net Earnings
After Compensation as hereinafter defined) in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "Minimum Earnings Level") during either the
second or third year following the date of this Agreement, then Metro shall
issue to Executive, as a bonus, shares of the non-restricted, publicly traded
common stock of Metro (the "Bonus Shares"), as hereinafter provided. For
purposes of this Agreement, "Pre-Tax Net Earnings After Compensation" with
respect to any period shall mean Pre-Tax Net Earnings for such period less the
Incentive Compensation and Deferred Compensation paid or payable for such period
to Executive hereunder and to the Related Executives pursuant to the Related
Agreements. The number of Bonus Shares to be issued shall be determined as
follows:
(I) If the Minimum Earnings Level is exceeded in the second year
following the date of this Agreement, the number of Bonus Shares
to be
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issued by Metro to Executive shall be determined by multiplying
by two the amount by which Pre-Tax Net Earnings After
Compensation exceeds the Minimum Earnings Level and dividing such
product by the average closing price of the shares of Metro's
common stock for the thirty (30) day period immediately preceding
the award of the Bonus Shares.
(ii) If the Minimum Earnings Level is attained during the third
year following the date of this Agreement, the number of Bonus
Shares to be issued by Metro to Executive shall be determined by
dividing the amount by which Pre-Tax Net Earnings After
Compensation exceeds the Minimum Earnings Level by the average
closing price of the shares of Metro's common stock for the
thirty (30) day period immediately preceding the award of the
Bonus Shares.
(iii) If any fractional shares result from the calculation of
Bonus Shares, the number of Bonus Shares shall be rounded down to
the next lesser whole number.
(iv) Any Bonus Shares issued to Executive hereunder shall not be
subject to Article 13 of the Stock Purchase Agreement, which
provides for the redemption or return of shares of the stock of
Metro upon the Occurrence of certain contingencies.
f) Apportionment. If Executive's employment is terminated for any reason
on any date other than the last day of a Fiscal Year, Executive's Deferred
Compensation for the year of termination shall be reduced by the aggregate
amount of Incentive Compensation received by Executive during Such fiscal Year.
g) Add-On Rights. During the Term of this Agreement, no asset of the
Company shall be sold without the affirmative vote of a majority of the
Company's Board of Directors. Additionally, during the terms of this Agreement
no additional shares of stock of the Company shall be issued, nor any shares of
the Company stock sold, transferred, conveyed or encumbered, without the
affirmative vote of a majority of the Company's Board of Directors. In the event
that the Company's Board of Directors approves the sale of all or any part of
the Company's stock, Executive shall have the option to terminate this
Agreement, and waive his right to any Incentive Compensation and Deferred
Compensation in exchange for 13.612% of the Net Proceeds of such sale. For the
purposes of this Agreement, the term "Net Proceeds" shall mean gross proceeds,
less normal and reasonable professional fees incurred in connection with such
sale.
3. Non-Competition Agreement.
a) Executive will not, during the period of his employment by or with the
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Company, and for a period of six (6) months (subject to extension, provided
below) immediately following the termination of his employment under this
Agreement (the "Restricted Period"), for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
company, partnership, corporation or business of whatever nature:
i) engage, as an officer, director, shareholder, owner, partner,
joint venture, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the
development, distribution or sale of any non-adult sophisticate publication or
related services or products in competition with the Company, Metro or any of
Metro's other subsidiaries in any state of the United States of America or in
any foreign country in which the Company, Metro or any such subsidiary is
conducting or has conducted business (the "Territory");
ii) call upon any person who is an employee of the Company or Metro
or any of its other subsidiaries in a managerial or sales capacity for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company or Metro or any of its other subsidiaries;
iii) call upon any person or entity which is, or which has been
within two (2) years prior to that time, a customer of the Company or Metro or
any of its other subsidiaries for the purpose of soliciting or selling products
or services in direct competition with the Company or Metro or any of it other
subsidiaries;
iv) call upon any prospective acquisition candidate, on Executive's
own behalf or on behalf of any competitor, which candidate was either called
upon by the Company or Metro or any of its other subsidiaries or for which the
Company or Metro or any of its other subsidiaries made an acquisition analysis
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be decided
to prohibit Executive from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or an over-the-counter or similar market; (ii)
engaging in any business which Executive is involved in as of the date of this
Agreement, which businesses are specifically set forth on Exhibit "A" attached
hereto; or (iii) participating in any project which is offered to, but rejected
by, the Company and Metro in accordance with Section 6 below.
The Company may elect to extend the term of the Restricted Period for up to
an additional twenty-four (24) months (for a total of thirty (30) months from
the termination of Executive's employment) by notifying Executive of such
decision, in writing, during the Restricted Period; provided, however, that if
the Company makes such election it shall pay to Executive during such extension
his Base Salary in accordance with Section 2(a) above. If the Company elects to
extend the Restricted Period as provided above, the Restricted Period shall
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deemed to be a thirty (30) month period from the termination of Executive's
employment under this Agreement (or such shorter period during which the Company
elects to continue to pay the Base Salary to Executive as provided above), and
the restrictions set forth above shall continue during such Restricted Period,
as extended.
b) Because of the difficulty of measuring economic losses to the Company
and Metro as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company and Metro
for which they would have no adequate remedy, Executive agrees that the
foregoing covenant may be enforced by the Company or Metro in the event of any
breach or threatened breach by him, by injunctions, restraining orders and other
appropriate equitable relief
c) The covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable and the
Agreement shall thereby be reformed.
d) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Metro (other than for nonpayment of any sums due and owing pursuant to this
Agreement), whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Metro or the Company of such
covenants. It is specifically agreed that the Restricted Period (as may be
extended by the Company) during which the agreements and covenants of Executive
made in this Section 3 shall be effective, shall be computed by excluding from
such computation any time during which Executive is in violation of any
provision of this Section 3.
4. Term, Termination, Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for five (5) years, ending on August
1, 2003, unless sooner terminated as herein provided. Thereafter, Executive
shall have the option to renew this agreement for all additional three (3) year
term, on the terms and conditions contained herein. Thereafter, this Agreement
shall automatically renew for successive one (1) year terms, on the terms and
conditions as contained herein, unless either party gives the other written
notice of his or its intention to not renew this Agreement, at least sixty (60)
days prior to the end of the initial term or the then current renewal term, as
the case may be. The initial term and any renewal terms shall be referred to
collectively as the "Term."
This Agreement and Executive's employment may be terminated in any of the
following ways:
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a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate other than
the Deferred Compensation due in accordance with Section 2(d) above.
b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Executive shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Executive's employment
hereunder provided Executive is unable to resume his full-time duties at the
conclusion of such notice period. In the event this Agreement is terminated as a
result of Executive's disability, Executive shall receive from the Company (I)
the Base Salary at the rate then in effect for the lesser of the time period
remaining under the Term of this Agreement or for one (1) year, and such amount
shall be payable during such period in a manner consistent with the Company's
standard pay practices, and (ii) the Deferred Compensation, in accordance with
Section 2(d) above. The amount payable as Base Salary hereunder shall be
decreased by the amount of disability benefits otherwise actually paid to
Executive by the Company or under any insurance procured by the Company or
Metro.
C. Good Cause. The Company may terminate this Agreement tell (10) days
after written notice to Executive for good cause, which shall be: (I)
Executive's willful or material breach of this Agreement; (ii) Executive's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of the Company; (iii) Executive's conviction of (a) a crime in which the Company
or Metro is a victim, or (b) a felony involving weapons, intentional violence or
larceny of funds from any person or business which has a substantial and
material adverse impact on Metro's or the Company's ability to conduct business;
or (C) any crime which, pursuant to applicable SEC rules or regulations,
prohibits continued employment of an employee of a subsidiary of a publicly
traded company. In the event of a termination for good cause, as enumerated
above, Executive shall have no right to any severance compensation, but shall be
entitled to the payment of Deferred Compensation for the period and on the other
terms provided for in Section 2(d) above.
5. Return of Company Property. All records, designs, publications,
business plans, financial statements, manuals, memoranda, lists and other
property delivered to or compiled by Executive for or on behalf of the Company
or Metro (or their representatives, vendors or customers) which pertains to the
business of the Company or Metro shall be and remain the property of the Company
or Metro, as the case may be, and be subject at all times to their direction and
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Metro which is collected by Executive shall be
delivered promptly to the Company without request by it upon termination of
Executive's employment.
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6. Publication Ideas. Executive shall disclose promptly and offer to the
Company and Metro, in writing, any and all significant conceptions and ideas for
publications, projects, improvements and valuable discoveries which are
conceived or made by Executive, solely or jointly with another, during the
period of employment, and which are directly related to the business or
activities of the Company or which Executive conceives as a result of his
employment by the Company (each a "Publication Idea"). The Board of Directors of
the Company shall, within twenty (20) days of receipt of written notification of
a Publication Idea, notify Executive and Metro in writing of whether or not the
Company elects to pursue the Publication Idea. If the Company elects not to
pursue a Publication Idea, Metro shall, within twenty (20) days of its receipt
of the Company's written decision regarding said Publication Idea, notify the
Executive and the Company in writing whether Metro elects to pursue the
Publication Idea. If either the Company or Metro elects to pursue the
Publication Idea, the Executive will assign all his interests therein to the
Company or Metro (or the nominee of either), as the case may be. Whenever
requested to do so by the Company or Metro, Executive shall execute any and all
applications, assignments or other instruments that the Company or Metro shall
deem necessary to apply for and obtain copyright or trademark protection in the
United States or any foreign country or to otherwise protect the Company's
interest in any of its publications. If neither the Company nor Metro elects to
pursue a Publication Idea, the Executive may pursue such Publication Idea on his
own behalf, so long as the pursuit thereof does not affect the Employee's
ability to fulfill his duties hereunder.
7. Trade Secrets. Executive agrees that he will not, during or after the
Term of this Agreement, disclose the specific terms of the Company's or Metro's
or any of Metro's other subsidiaries' relationships or agreements with their
respective significant vendors or customers or any other significant and
material trade secret of the Company or Metro or any of Metro's other
subsidiaries, whether in existence or proposed, to any person, Firm,
partnership, corporation or business for any reason or purpose whatsoever.
8. No Prior Agreements. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition,
invention or secrecy agreement between Executive and such third party which was
in existence as of the date of this Agreement.
9 Assignment: Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences and the express provisions of Section
10 hereof, this Agreement shall be binding upon, inure to the benefit of, and be
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enforceable by, the parties hereto and their respective heirs, legal
representatives, successors and assigns.
10. Complete Agreement. Executive has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement. This
written Agreement is the filial, complete and exclusive statement and expression
of the agreement between the Company and Executive and all of the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of the Company, Metro and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving such term.
11. Notice. Whenever any notice is required or permitted hereunder, it
shall by given in writing and addressed at follows:
To the Company or Metro: Metro Global Media, Inc.
One Xxxxx Xxxx Xxxxx
Xxxxxxxx, XX 0000 0
Attn Xxxxxxx Xxxxxxx
With a copy to: Lipsitz, Green, Xxxxxxxxx
Roll, Sallsbury & Cambria LLP
00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
Attn Xxxxxxx Xxxxxxxxx, Esq.
To Executive: Xxxxxx Xxxxxxx
00 Xxxxx Xxx
Xxxxxxxxxx, XX 00000
with a copy to; Xxxxxxx Xxxxxx, Esq.
Fifteen Xxxxxxx Road
Scarsdale, New York 10583
Notice shall be deemed given and effective on the day following the delivery of
the same via overnight carrier (Federal Express, UPS, Postal Service, etc.) Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section II.
12. Severability: Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
section headings herein are for reference purposes only and are not
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intended in any way to describe, interpret, define or limit the extent or intent
of the Agreement or of any part hereof.
13. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of New York.
14. Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
METRO GLOBAL MEDIA, INC.
By:________________________________________
Its:_______________________________________
FANZINE INTERNATIONAL, INC.
By:________________________________________
Its:_______________________________________
___________________________________________
Xxxxxx X. Xxxxxxxxx
SCHEDULE A
Xxxxxx X. Xxxxxxxx & Associates, Ic. - a newsstand marketing, consultation and
distribution company.
Maxstone Media Group, LLC (through their stock ownership of Salmill Enterprises,
Inc.)
_ An adult sophisticate publisher
Goldtree Publishing, Inc. - A publisher of adult sophisticate, fitness and Afro-
American culture magazines.
Millennium Publishing Partners, Inc. - A publisher of adult sophisticate, hair
style, and health digest magazines.
Celebrity Style, Inc. - The owner of trademarks for magazines published by
Goldtree
