Exhibit 10
EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") dated as of August
15, 1996 by and between Xxxxxx X. Xxxxxxx, residing at 000 Xxxxxx Xxxxx,
Xxxxxx, Xxx Xxxx 00000 (the "Executive") and Artistic Greetings Incorporated,
a Delaware corporation with a business address of Xxx Xxxxx Xxxxxx, X.X. Xxx
0000, Xxxxxx, Xxx Xxxx 00000 (the "Company").
I. WHEREAS, the Executive served as the Senior Vice President of
Manufacturing of the Company under an employment agreement dated January 1,
1996 since such date (the "Prior Employment Agreement");
II. WHEREAS, the Company desires to memorialize the retention of
the full-time services of the Executive hereby and cancel the Prior Employment
Agreement, and the Executive is willing to cancel such agreement and to accept
full-time employment for a period of three (3) years subsequent to the date of
execution of this Agreement (the "Execution Date");
III. WHEREAS, the Company is seeking to address the following
issues in connection with the Executive's employment with, and services to,
the Company:
1. The Company's desire to compensate the Executive at a level
sufficient to induce the Executive to continue his efforts toward the
advancement of the Company's business; and
2. The Company's desire to provide for and fund a non-competition
agreement with the Executive to ensure the protection of its investment in the
advancement of its business under the management of the Executive.
IV. WHEREAS, the Company desires and agrees, in consideration of
the objectives described above, to employ the Executive on the terms and
conditions set forth herein; and
V. WHEREAS, the Executive is desirous and willing to accept
employment with the Company on the terms and conditions expressed herein.
NOW, THEREFORE, the Executive and the Company hereby enter into this
Agreement on the terms and conditions hereinafter set forth (certain
capitalized terms used herein shall be defined in Section 9 hereof).
1. EMPLOYMENT AND DUTIES. The Executive shall serve as the Chief
Executive Officer and President of the Company (the "Duties"). The Executive
shall devote his customary working time to the business of the Company and
shall perform the Duties in a diligent, effective and loyal manner.
2. COMPENSATION. The Executive shall be compensated by the
Company (the "Compensation") for the services to be rendered by him pursuant
to this Agreement in the following manner:
a. A base salary of Two Hundred Thousand Dollars ($200,000) per
calendar year (the "Yearly Salary"), which shall be (i) paid each week
beginning on the Execution Date; and (ii) reviewed by the Company on an
annual basis with increases of such Yearly Salary granted to the
Executive in the sole discretion of the Company based upon, among other
things, the Executive's performance of his Duties during the prior
period.
b. A percentage of (i) 100% of a Share Unit (as hereinafter
defined) calculated from January 1, 1996 to August 31, 1996 and (ii) 150%
of a Share Unit calculated from September 1, 1996 and thereafter. A
Share Unit is equal to the sum of 1/4 % of the Net Operating Income (as
hereinafter defined) of the prior year (if Net Operating Income is
negative, such number equals zero) plus 1 1/2 % of the increase in Net
Operating Income of the current year over the prior year (a "Share
Unit"). Net Operating Income is equal to Net Income before (i) interest
and investment income (expense), (ii) taxes, (iii) bonuses and (iv)
extraordinary items. The amount of the Executive's percentage Share Unit
shall be reviewed by the Company on an annual basis with increases of
such Share Unit granted to the Executive in the sole discretion of the
Company based upon, among other things, the Executive's performance of
his Duties during the prior period. Bonuses shall be paid no later than
March 15th of the following year. Should the Executive be Terminated for
Cause, no bonus for the year in which the Termination occurs will be due
or payable.
3. BENEFITS. During the Term of this Agreement, and thereafter as
may be specifically provided herein, the Executive shall be entitled to
receive the following benefits (collectively, the "Benefits"):
a. Four (4) weeks of paid vacation per calendar year, or such
greater period as may be approved from time to time by the Board of
Directors of the Company;
b. Health insurance (Company pays 75% and Executive pays 25% of
the plan options selected);
c. Long-term disability insurance (Company pays 100%);
d. Life insurance equal to one year's base earnings; and
e. Contribution (profit) sharing as a full participant in the
Company's 401K Profit Sharing Plan under the conditions outlined in the
Company's plan manual entitled "Savings Plan;" and
f. Reimbursement for all expenses incurred by the Executive for
dues and/or membership fees incurred by the Executive for any local
social or health club.
4. OTHER COMPENSATION. Upon the Execution date the Executive
shall be entitled to the following other compensation (the "Other
Compensation"): The issuance of options to purchase 25,000 shares of the
Company's common stock (each a "Stock Option"). The Board has
established the value of each Stock Option at $3.93, which is the closing
price of the Company's common stock traded on the NASDAQ-NMS on August
14, 1996.
5. TERM. This Agreement shall be effective for a period of three
years from the Execution Date (the "Term").
6. TERMINATION OF EMPLOYMENT. "Termination" shall mean termination
of the Executive's employment with the Company prior to the end of the Term,
as of a date specified in a Termination Notice delivered by either:
a. (i) The Company, for any reason other than the Executive's
death, disability or for Cause or (ii) the Executive for Good Reason, in
either event, the Company shall (A) make Payment (any amount due under
this Section 6 is referred to as a "Payment") to the Executive, within
thirty (30) days of such Termination, of an amount equal to the product
of (x) one-twelfth of Yearly Salary and (y) the greater of (I) the
remaining number of calendar months of the Term of this Agreement or (II)
eighteen months; (B) cause any outstanding Stock Options held by the
Executive to automatically vest as of the date of the Termination Notice;
and (C) make Payment to the Executive, within thirty (30) days of such
Termination, an amount equal to the Executive's pro rata share of the
Executive's bonus (as determined in accordance with Section 2(b) hereof)
up through the last day of the calendar month immediately prior to the
date of the Termination Notice.
b. (i) The Executive in resignation at any time without Good
Reason or (ii) the Company for Cause, and in either event, the Company
shall continue to pay to the Executive the Compensation and Benefits
provided for under this Agreement only until the effective date of such
Termination;
c. The Executive as a result of disability prior to the
expiration of the Term of this Agreement, in which event, the Executive
shall receive the Compensation and Benefits for the remainder of the Term
of this agreement; and
d. The Executive in the event of an Acquisition of Control and if
Executive is not retained pursuant to an employment agreement under
Section 9(d)(i), the Company shall pay to the Executive the Compensation
and Benefits, within thirty (30) days of such Acquisition of Control in a
lump-sum amount equal to the amount due therefore, including such
Benefits as are described in sections 6(a)(ii)(B) and 6(a)(ii)(C).
In the Event of the Executive's death prior to the expiration of
the Term of this Agreement, the Company shall make a lump-sum payment to the
Executive's estate within thirty (30) days of such death in the amount of the
present value (applicable present value interest factor shall be the Federal
Rate described in Section 1274 of the Internal Revenue Code, hereinafter
referred to as the "Code") of the Compensation and Benefits for the remainder
of the Term of this Agreement.
Any calculation of an amount of Compensation and Benefits to be
paid under this Section 6 shall be made using a rate of Compensation and
Benefits that was applicable immediately prior to the death of the Executive
or prior to the date of any Termination Notice hereunder.
7. LIMITATION ON CERTAIN PAYMENTS. Notwithstanding anything to
the contrary contained herein, if any of the Payments provided for in this
Agreement, together with any other payments of Compensation which the
Executive receives from the Company, would constitute a "Parachute Payment"
(as defined in Section 280G(b)(2) of the Code), the Payments pursuant to this
Agreement shall be reduced to the largest amounts as will result in no portion
of such Payments being subject to the excise tax imposed in Section 4999 of
the Code; provided however, that the Executive and the Company shall mutually
agree to the amount of such Payments as otherwise would be paid but for the
foregoing limitation of this Section 6, in equal installments such that the
present value (applicable present value discount rate shall be in accordance
with Section 280G(d)(4) of the Code) of such installments will result in no
portion of such Payments to be treated as Parachute Payments under the Code.
The first such installment shall be payable when such amount would otherwise
have been payable; provided further, however, that the Executive and the
Company shall mutually agree to the allocation of any reductions required by
this Section 7.
8. COVENANT NOT TO COMPETE. The Executive hereby covenants and
agrees that, during the period of five (5) years from the Execution Date (the
duration of such Noncompete Period being subject to the penultimate paragraph
of this Section 8 (the "Noncompete Period")), the Executive will not:
a. For himself or on behalf of any other person, firm,
partnership or corporation, call upon any customer of the Company for the
purpose of soliciting or providing to such customer any products or
services which are the same as or similar to those provided to customers
by the Company. For purposes of this Agreement, "customers of the
Company" shall include, but not be limited to, all customers acquired by
the Company, or contacted or solicited by the Executive during his
employment with the Company;
b. For himself or on behalf of any other person, firm,
partnership or corporation, directly or indirectly seek to persuade any
director, officer or employee of the Company to discontinue that
individual's status or employment with the Company in order to become
employed in any activity similar to or competitive with the business of
the Company, nor will the Executive solicit or retain any such person for
such purpose; and
c. Directly or indirectly, alone or as an employee, independent
contractor of any type, partner, officer, director, creditor, substantial
(i.e., 5% or greater) stockholder or holder of any option or right to
become a substantial stockholder in any entity or organization, engage
within the United States of America in any business pertaining to the
sale, distribution, manufacture, marketing, production or provision of
products or services similar to or in competition with any products or
services produced, designed, manufactured, sold, distributed or rendered,
as the case may be, by the Company.
The parties agree that the Compensation provided for in Section 2
hereof, shall constitute fair and adequate consideration not only for the
Executive's services to be performed during the Term, but also for his
agreement under this Section 8 for the duration of the Noncompete Period.
The provisions of this Section 8 shall survive any Termination. If
any of the restrictions on competitive activities contained in this Section 8
shall for any reason be held by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject,
such restrictions hall be construed so as to thereafter be limited or reduced
to be enforceable to the extent compatible with applicable law as it shall
then exist; it being understood that by the execution of this Agreement the
parties hereto regard such restrictions as reasonable and compatible with
their respective rights and expectations.
9. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings when utilized in this Agreement:
a. "Acquisition of Control" shall mean:
(i) upon the sale or other disposition to a person, entity or
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (other than the Executive or a group which includes the
Executive), of shares of the Company having 45% or more of the total
number of votes that may be cast for the election of Directors of the
Company; and
(ii) stockholder approval of a transaction for the
acquisition of the Company, or substantially all of its assets, by
another entity or through a merger reorganization, consolidation or other
business combination to which the Company is a party.
b. "Cause" shall mean any action by the Executive which is
reasonably believed by the Company to constitute: (i) fraud; (ii)
embezzlement or misappropriation; (iii) felony; (iv) moral turpitude; or
(v) willful or bad faith conduct materially injurious to the Company,
other than as a result of the Executive's death or disability.
c. "Disability" shall mean any physical or mental incapacity,
illness or injury that renders the Executive unable to provide full-time
services to the Company as contemplated by this Agreement for more than
three consecutive calendar months.
d. "Good Reason" shall mean:
(i) an Acquisition of Control of the Company and if an
employment agreement, reasonably satisfactory to the Executive, for the
continuation of the employment of the Executive is not executed;
(ii) any action by the Company which reduces or limits the
Executive's authority to act as Chief Executive Officer; and
(iii) The Company's failure to perform in a timely manner its
material obligations under this Agreement, a reduction in the amount of
the Executive's base Compensation or Benefits or the breach by the
Company of any other provision of this Agreement.
e. "Termination Notice" shall mean a written notice which:
(i) may be given by either the Company or the Executive for
any of the reasons set forth in Section 6 hereof;
(ii) sets forth the specific provision of this Agreement
relied upon by the Company for the Termination the Executive's employment
or by the Executive to resign from such employment;
(iii) sets forth in reasonable detail the facts and
circumstances claimed to provide the basis for the Termination of the
Executive's employment; and
(iv) sets forth a Termination Date (which shall not be less
than 30 days or more than 60 days following the delivery of a Termination
Notice).
10. NOTICES. Any notice required or desired to be given hereunder
relating to this Agreement shall be effective if in writing and delivered
personally or by certified mail, postage prepaid, return receipt requested to
a party at the address for such party previously set forth in this Agreement
or to such other address as a party may specify by written notice to the other
party similarly given.
11. BENEFIT. This Agreement and the rights and obligations contained
herein shall be binding upon and inure to the benefit of the Company, its
successors and assigns, and upon the Executive, his legal representatives,
heirs and distributees.
12. WAIVER. The waiver of any party of a breach of any provision of
this Agreement shall not operate as or be construed as a waiver of any
subsequent breach.
13. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and may not be altered or amended except by an
instrument in writing signed by all parties hereto. The Prior Employment
Agreement is hereby cancelled, and is expressly and mutually revoked by the
parties, it having no further force or effect. In the event of any conflict
between this Agreement and the terms of any of the Company's employment
policies, manuals, or other statements regarding employment generally, now
existing or hereafter promulgated, the terms of this Agreement shall control.
14. PARTIAL INVALIDITY. The invalidity or enforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
15. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York.
16. HEADINGS. The headings contained in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Execution Date.
ARTISTIC GREETINGS INCORPORATED
By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title: Chairman of the Board of Directors
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer and President
