EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is being made as of the 7th day of July
2000 between MARKETING SERVICES GROUP, INC., a Nevada corporation (the
"Company"), having its principal offices at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, and XXXXXXX X. XXXXXXX ("Employee"), an individual residing at: 0
Xxxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxxx 00000.
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") desires the
Company to employ the Employee as the President of the Company, to have Employee
continue to serve as a director of Company and, if requested by the Company,
Chairman of the Board of Directors of Wired Empire, Inc., the Company's majority
owned subsidiary ("Wired") and to compensate him therefor; and
WHEREAS, the Employee desires to serve in the above referenced capacity, on
the terms and conditions set forth 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. The Company hereby employs
Employee and Employee agrees to serve the Company upon the terms and conditions
contained herein, for a term, subject to the provisions of Section 7, commencing
as of the date hereof and continuing until June 30, 2003 (the "Initial Term").
This Agreement shall be automatically renewed for an additional term of three
(3) years, unless either party hereto shall provide ninety (90) days prior
written notice to the other party hereto, of their intent not to renew this
Agreement. Notwithstanding the Initial Term or any extension thereof, the
Company reserves the right to terminate the Employee without cause pursuant to
section 7(d).
2. Duties and Powers as Employee. (a) During the Term, the Employee shall
serve as the President of the Company and, if requested by the Company, as
Chairman the Board of Directors of Wired and as managing partner of any Venture
Fund established by the Company. During the Term the Company shall cause the
Employee to serve as a member of the Board. The Employee, as President of MSGi
shall have the authority, functions, duties, powers and responsibilities
normally associated with such position and as from time to time may be
prescribed by the Board. The Employee agrees, without additional compensation,
to serve during the Employment Term in such additional offices of comparable
stature and responsibility to which he may be elected from time to time in the
Company's Subsidiaries (as defined in Section 9 below) and to serve as a
director and as a member of any committee of the Board and/or any of the
Company's Subsidiaries. The Employee shall be indemnified by the Company for his
lawful acts serving in any such capacity at the direction of the Company, to the
maximum extent permitted by applicable law.
(b) During the Employment Term and subject to the provisions of Section
2(d), (i) the Employee's services shall be rendered on a full-time, exclusive
basis, (ii) he will apply on a full-time basis all of his skill and experience
to the performance of his duties in such employment, and shall report only to
the Chairman of the Board and Chief Executive Officer of the Company, (iii) he
shall have no other employment or outside business activities and (iv) unless
the Employee otherwise consents, the location for the performance of his
services shall be as agreed upon between Employee and the Chairman of the Board,
(the Employee will be located in the Xxxxxx-xxxx 0 days per week and 2 days per
week in New York City) subject to such reasonable travel as the performance of
his duties in the business of the Company may require.
(c) Employee agrees that the Company may obtain a life insurance policy on
the life of Employee naming the Company as the beneficiary thereof. The Company
will also purchase a life insurance policy for Employee equal to 2X the Base
Salary whereby the designee of the Employee will serve as owner and/or
beneficiary.
(d) During the Employment Term, the Employee shall not, directly or
indirectly, without the prior written consent of the Board, render any services
to any Person (as defined in Section 9 below), other than the Company and its
Subsidiaries and other Persons in which the Company may have an interest, or
acquire any interest of any type in any such other Person that is in competition
with the Company or any of its Subsidiaries or in conflict with his full-time,
exclusive position as a senior executive officer of the Company; provided,
however the Employee may continue to serve as a consultant to AltaVista Company
pursuant to an Independent Contractor Services Agreement, a copy of which has
been provided to the Company, such activities for AltaVista Company do not
interfere in any material respect with the proper performance of his duties and
responsibilities as previously described and further, that the foregoing shall
not be deemed to prohibit the Employee from (i) acquiring, solely as an
investment, securities of any person which are registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and which are publicly traded, so long as he is not part of any group required
to make any filing under Section 13(d) of the Exchange Act in respect of such
person and such securities do not constitute two (2%) percent or more of any
class of outstanding securities of such person, (ii) acquiring, solely as an
investment, any securities of any person (other than a person that has
outstanding securities covered by the preceding clause (i)) so long as he
remains a passive investor in such person and does not become part of any
control group thereof and so long as such person is not, directly or indirectly,
in competition with the Company or any of its Subsidiaries, or (iii)(A) serving
on the boards of directors of a reasonable number of other corporations (none of
which are in competition with the Company or its Subsidiaries) and on the boards
of a reasonable number of trade associations and/or charitable organizations or,
with the prior written consent of the Board, which shall not be unreasonably
withheld to provide consulting services for any such corporation, trade
association and/or charitable organization, (B) engaging in charitable
activities and community affairs and (C) managing his personal investments and
affairs; provided that the activities referred to in this clause (iii) do not in
the aggregate interfere in any material respect with the proper performance of
his duties and responsibilities as previously described. For purposes of the
foregoing, a person shall be deemed to be in competition with the Company or any
of its Subsidiaries if it (or its Subsidiaries or Affiliates (as defined in
Section 9 below)) is then engaged in any line of business that is substantially
the same as any line of business in which the Company or any of its Subsidiaries
is engaged.
3. Compensation. (a) As base compensation for his services hereunder, the
Company shall pay Employee a base salary (the "Base Salary"), payable in weekly
installments, at the annual rate of Four Hundred Thousand ($400,000) Dollars for
the first full year of the Employment Term and an amount, not less than the Base
Salary, for each other full year of the Employment Term. The Base Salary shall
be subject to withholding taxes and any other taxes or similar deductions, as
provided in section 14.
(b) In addition to the Base Salary, during the Term it is anticipated that
Employee will be granted options which shall be to the maximum extent possible
qualify as incentive stock options for tax purposes for his services hereunder
options under the Company's 1991 Stock Option Plan (the "Plan"). The
Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") has initially approved the issuance of options to
purchase four hundred thousand (400,000) shares of the common stock, $.01 par
value per share, of the Company, at a per share price of the closing share price
of the Company as of the date of this Agreement. In addition, the Company shall
cause Wired to issue to Employee options to purchase two hundred thousand
(200,000) shares of common stock, $.01 par value per share of Wired at an
exercise price of $6.25 per share. All such options shall vest as to one third
of such underlying shares on the first three anniversaries of the date of
issuance. Employee acknowledges that such options constitute Employee's only
options in the Company as of the date hereof and that such options are in part
consideration of the restrictive covenant provided in Section 6 of this
Agreement.
(c) During the Employment Term, the Employee shall be entitled to
participate in all employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or its employees generally,
as such plans or programs may be in effect from time to time, including without
limitation, pension, savings, 401(k) and other retirement plans or programs,
medical, dental, hospitalization, short-term and long-term disability and life
insurance plans, and any other employee benefit plans or programs that may be
sponsored by the Company from time to time, whether funded or unfunded.
(d) Employee shall be eligible to receive bonuses, equal to up to fifty
percent (50%) of the Base Salary, for each year of the Employment Term if and as
determined by the Board of Directors of the Company, at its sole discretion,
subject to the approval of the Compensation Committee of the Company. Such
bonuses, if any, shall be based upon the Company meeting certain goals as
established by the Compensation Committee, as customized to the Employee's
performance hereunder, but shall, at all times, be awarded only in the
discretion of the Company.
(e) The Company anticipates that it will form one or more venture funds
(the "Funds"). The management entity of the fund will have a carried interest of
20-30% of profit after an agreed to return. The Employee will receive no less
than fifteen (15%) percent of such carried interest. The carried interest to the
Employee will vest as to each investment made in the fund 50% on the day of the
closing of the investment (with a follow on investment in a company treated as
made as of the date of the original investment) ; 25% one year after such date;
and, 25% two years after such date. The Company acknowledges that from time to
time employee may participate (using his own funds) in investments made by the
Company or the Fund. The Company shall permit such "co-investment", provided it
is disclosed to the Company and provided that it does not materially impact the
amount of participation by the Company or the Fund, as the case may be.
4. Expenses; Vacations. 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 the
Company. Employee shall be entitled to twenty (20) days paid vacation time in
accordance with the then regular procedures of the Company governing executives
as determined from time to time by the Company's Board of Directors and
communicated, in writing, to Employee. Up to a maximum of five (5) days of
unused vacation from any one year of the Employment Term may be carried over
into the subsequent year; provided, however, that Employee may not use more than
twenty-five (25) vacation days in any single year. In consideration for
Employee's right to carry over unused vacation, Employee hereby waives his right
to be paid for any unused vacation time.
5. Representations and Warranties of Employee. Employee represents and
warrants to the Company that as of the date of this Agreement: (a) 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 Company hereunder, it being acknowledged that Company
is fully aware of Employee's Consulting arrangement with AltaVista Company; (b)
Employee's execution of this Agreement does not require the consent of any
person; (c) Employee is under no physical or mental disability that would hinder
his performance of duties under this Agreement; and (d) this Agreement
constitutes the valid and binding obligation of the Employee enforceable against
the Employee in accordance with its terms.
6. Restrictive Covenants. During the two (2) years following the end of the
Employee's employment by the Company (the "Covenant Period"):
(a) Except as provided with respect to Employee's arrangement with
AltaVista Company, the Employee agrees that he will not, directly or indirectly,
as a partner, officer, employee, director, stockholder, proprietor, consultant,
representative, agent or otherwise become, be interested in, associate with or
render assistance to any Person: (i) engaged in the ownership, operation and/or
management of any direct marketing and/or Internet marketing business; or (ii)
engaged in such other line of business within a 250 mile radius of any location
at which the Company is then engaged therein if during the last full fiscal year
of the Company preceding the date of the termination of the Employee's
employment, such other line of business accounted for at least 5% of the
Company's revenue during such year. The foregoing provisions shall not, however,
prohibit the ownership by any Employee of securities in accordance with Section
2(d).
(b) (i) The Employee agrees that he will not, directly or indirectly,
during the Covenant Period, for his own benefit or for the benefit of any other
Person, knowingly solicit the professional services of any Person employed by
the Company, any Subsidiary or any Affiliate thereof or any Person who had been
employed within six (6) months prior thereto, or otherwise interfere with the
relationship between the Company, any Subsidiary or any Affiliate thereof and
any of such Persons.
(ii) If this Agreement is terminated pursuant to Section 7(a), then
Employee, for a period of two (2) years from the date of termination, shall not,
directly or indirectly, solicit or encourage any Person who was a customer of
the Company one (1) year prior to the date of termination, any Subsidiary or any
Affiliate thereof during the three (3) years prior to the date of such
termination to cease doing business with the Company or to do business with any
other Person that is engaged in the same or similar business to that of the
Company.
(iii) If this Agreement shall be terminated other than pursuant to Section
7(a), then Employee, for a period of one (1) year from the date of termination,
shall not, directly or indirectly, solicit or encourage any Person who was a
customer of the Company, any Subsidiary or any Affiliate thereof during the
three (3) years prior to the date of such termination to cease doing business
with the Company or to do business with any other Person that is engaged in the
same or similar business to that of the Company.
(c) The Employee recognizes and acknowledges that, in connection with his
employment with the Company, he will have access to valuable trade secrets and
confidential information of the Company and its Subsidiaries and Affiliates
including, but not limited to, customer and supplier lists, business methods and
processes, marketing, promotional, pricing and financial information and data
relating to employees and agents (collectively, "Confidential Information") and
that such Confidential Information is being made available to the Employee only
in connection with the furtherance of his employment with the Company. The
Employee agrees that during the Employment Term and thereafter, he will not use
or disclose any of such Confidential Information to any Person, except that
disclosure of Confidential Information by the Employee will be permitted: (i) to
the Company, its Subsidiaries and Affiliates and their respective advisors; (ii)
if such Confidential Information has previously become available to the public
through no fault of the Employee; (iii) if required by any court or governmental
agency or body or is otherwise required by law; or (iv) if expressly consented
to by the Company (v) if Employee knew of information prior to company
disclosure; (vi) if information is later disclosed by non-company source(s).
(d) The parties agree that a violation of any provision of any of the
foregoing agreements not to compete or disclose, or any provision thereof, will
cause irreparable damage to the Company, and the Company shall be entitled
(without any requirement of posting a bond or other security), in addition to
any other rights and remedies which it may have, at law or in equity, to an
injunction enjoining and restraining the Employee from doing or continuing to do
any such act or any other violations or threatened violations of this Section 6.
(e) Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee hereafter during
any period he is employed by the Company may, directly or indirectly, own or
develop relating to the fields in which the Company may then be engaged shall
belong to the Company; and, forthwith upon request of the Company, Employee
hereby agrees that he shall execute all such assignments and other documents and
take all such other action as the Company may reasonably request in order to
vest in the Company all of his right, title, and interest in and to Such
Inventions, free and clear of all liens, charges, and encumbrances.
(f) The Employee acknowledges and agrees that the restrictive covenants set
forth in this Section 6 (the "Restrictive Covenants") are reasonable and valid
in geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full force and effect, without regard to
the invalid or unenforceable parts.
(g) If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable for any reason, such court shall have
the power to modify such Restrictive Covenant, or any part thereof, and, in its
modified form, such Restrictive Covenant shall then be valid and enforceable.
7. 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 (as defined below), then the Company shall have the right
to give notice of termination of Employee's services hereunder as of a date to
be specified in such notice (which may not be less than fourteen (14) days
following the mailing of 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 which has material detriment to the Company, (ii)
commit any act, or omit to take any action, in bad faith and to the material
detriment of the Company, (iii) commit an act of moral turpitude to the material
detriment of the Company, (iv) commit an act of fraud against the Company, (v)
refuse to implement, or adhere to, reasonable policies or directives of the
Board, or (vi) materially breach any term of this Agreement (including
Employee's voluntary resignation or termination of this Agreement prior to the
end of the Employment Term) to the material detriment to the Company and fail to
correct such breach within ten (10) business days after written notice thereof;
provided, that in the case of a termination pursuant to (ii), (iii), (iv), (v)
or (vi), such determination must be made by the Board after a meeting at which
Employee was given an opportunity to explain such actions. In the event this
Agreement is terminated For Cause, then Employee shall be entitled to receive
only his 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, with or without reasonable accommodation, for a period of sixty (60)
consecutive days during the Employment Term, then this Agreement shall terminate
upon notice in writing to Employee, and no further compensation (other than
accrued but unpaid salary or bonus through the date of termination) shall be
payable to Employee, except as may otherwise be provided under any disability
insurance policy or similar instrument, but all outstanding options shall vest
and become fully exercisable
(c) In the event that Employee shall die during the Employment Term, then
this Agreement shall terminate on the date of Employee's death, and no further
compensation (other than accrued but unpaid 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 but all outstanding options shall
vest and become fully exercisable.
(d) In the event that this Agreement is terminated Without Cause by
Company, Employee shall receive severance pay consisting of a single lump sum
distribution (with no present value adjustment) equal to 2.99 times the Base
Salary paid during the preceding 12 months, in an amount not less than the
Employee's Base Salary, and all outstanding stock options shall fully vest and
become immediately exercisable. In connection with any termination Without Cause
hereunder, the Employee and the Company shall execute mutual releases in a form
reasonable satisfactory to both parties
(e) In the event that this Agreement is terminated Without Cause by
Employee, no further compensation (other than accrued but unpaid 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.
(f) Notwithstanding anything herein to the contrary, the Company shall pay
no severance by reason of the expiration of the Initial Term, or any renewal
thereof.
8. Mergers, Etc. In the event of a future disposition of the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, sale of stock, or otherwise, then the Company may elect to
assign this Agreement and all of its rights and obligations hereunder to the
acquiring or surviving corporation. Employee shall have the right to terminate
this Agreement by written notice given within three (3) months of the date of
such acquisition. Upon such termination, Employee shall receive severance pay
consisting of a single lump sum distribution (with no present value adjustment)
equal to 2.99 times the compensation paid during the preceding 12 months (or, in
the case such termination occurs prior to the employee's completion of 12 months
of service, the distribution shall equal 2.99 times the sum of the employee's
annual base salary plus the first year's bonus as outlined in section 3(d)), and
all outstanding stock options shall fully vest and become immediately
exercisable.
9. Certain Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "control," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
"Subsidiary" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than fifty (50%)
percent of the total voting power of shares of capital stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
person, (ii) such person and one or more Subsidiaries or Affiliates of such
person or (iii) one or more Subsidiaries or Affiliates of such person.
10. Survival. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement (unless otherwise stated
therein) shall survive the termination of this Agreement, irrespective of any
investigation made by or on behalf of any party.
11. 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 (including discussions
with respect to Employee's potential retention as a consultant), and may be
modified only by a written instrument duly executed by each party.
12. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by 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 13). In the case of a notice
to the Company, 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, Attention: Xxxx X. Annex, Esq. Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 13. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address, which notice shall be deemed given at the time of receipt
thereof.
13. 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 whose waiver is asserted.
14. Withholding. All payments required to be made by the Company to the
Employee under this Agreement shall be subject to withholding taxes, Social
Security and other payroll deductions in accordance with the Company's policies
applicable to senior executives of the Company and the provisions of any
applicable employee benefit plan or program of the Company.
15. Binding Effect. Employee's rights and benefits 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
Company and its successors and those who are its assigns under Section 8.
16. 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.
17. 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 hereby irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York, County of New York, and of any federal
court located in the State of New York, County of New York, in connection with
any action or proceeding arising out of or relating to, or a breach of, this
Agreement. Each of the parties hereto agrees that such court may award
reasonable legal fees and expenses to the prevailing party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
MARKETING SERVICES GROUP, INC.
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx, Chairman and CEO
/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx, President
