Exhibit 16
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 23rd
day of April, 1999, by and between Foilmark, Inc., a Delaware corporation with a
mailing address of 0 Xxxxxxxx Xxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx (the "Company"),
and Xxxxx X. Xxxxx, Xx., an individual with a residence address of 00 Xxxxxxx
Xxxx Xxxx, Xxxxxxxx, XX 00000 ("Executive").
WITNESSETH:
WHEREAS, the Company is in the business of designing, developing,
manufacturing and marketing foils, films, applicating systems and supplies (the
"Business"). Executive has served as President, Chief Executive Officer and a
Director of the Company since 1992; and
WHEREAS, the Company has entered into an Agreement and Plan of Merger with
Holopak Technologies, Inc. ("Holopak") dated as of November 17, 1998 which
contemplates, among other things, the merger of Holopak with and into a
wholly-owned subsidiary of the Company and under which the execution and
delivery of this Agreement is contemplated contemporaneously with the
effectiveness of the merger; and
WHEREAS, the Company desires to employ Executive and Executive desires to
accept such employment on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinbelow set forth, the parties hereby agree as follows:
1. EMPLOYMENT PERIOD. The term of this Agreement and any renewal terms
thereof (the "Employment Period") shall commence on the date hereof and, subject
to termination by Executive or the Company as hereinafter provided, shall
continue until the fifth anniversary of the date hereof. At the end of the
initial Employment Period (and any renewal period provided for herein), this
Agreement shall automatically extend for additional periods of two years (a
"Renewal Period") unless either party hereto gives written notice of non-renewal
delivered not less than six months prior to the end of the Employment Period or
any Renewal Period.
2. EMPLOYMENT; DUTIES. Subject to the terms and conditions set forth
herein, the Company hereby employs Executive to act as President and Chief
Executive Officer of the Company during the Employment Period, and Executive
hereby accepts such employment. The duties assigned and authority granted to
Executive shall be as set forth in the By-laws of the Company and consistent
with the position of President and Chief Executive Officer including but not
limited to the supervision and oversight of the business and operations of
Foilmark and Foilmark subsidiaries and such other duties as determined by its
Board of Directors from time to time. Executive shall report to the Board of
Directors and is subject to the policies and directives of the Board. Executive
agrees to use his best efforts to promote the interests of the Company and shall
devote his full time and attention to the Company's business and affairs.
Executive shall also serve as a member of the Board of Directors of the Company
pursuant to a Voting Agreement dated
as of the date hereof, and such service shall be unrelated to his employment
with the Company and this Agreement.
3. SALARY AND BONUS.
(a) BASE SALARY. The Company agrees to pay Executive $260,000 per
year, payable weekly in arrears. Executive's base salary shall not be decreased
during the Employment Period or any Renewal Period. In addition, promptly after
the end of each fiscal year during the Employment Period, commencing with the
fiscal year ending June 30, 2000, and in conjunction with the completion of
audited financial statements of the Company for such fiscal year then ended, the
Board of Directors of the Company or its duly elected Compensation Committee,
subject to Board approval, shall review Executive's annual base salary in its
discretion, based upon the Company's performance and Executive's particular
contributions.
(b) BONUS. In addition to Executive's base salary, Executive may also
receive a cash bonus in an amount not exceeding one hundred percent (100%) of
the Executive's base salary, in the discretion of the Board of Directors based
upon the recommendation of the Compensation Committee of the Board of Directors,
the recommendation of which shall be made to, and acted upon by, the Board of
Directors not later than one (1) month after the publication of the Company's
audited financial statements. Seventy-five percent (75%) of such bonus shall be
based on a formulaic evaluation of actual results versus budget as set forth on
Schedule A hereto.
4. OTHER BENEFITS.
(a) INSURANCE AND OTHER BENEFITS. Executive shall be entitled to
participate in, and shall receive the benefits available under, the Company's
insurance programs (including health, disability and life insurance) and any
ERISA benefit plans, as the same may be adopted and/or amended from time to
time, and shall receive all other fringe benefits that are provided by the
Company to other senior executives. No other officer of the Company will have
any more favorable benefits than made available to the Executive.
(b) VACATION. Executive shall be entitled to an annual vacation of
such duration as may be determined by the Board of Directors, but not less than
that generally established for other executives of Company and in no event less
than four (4) weeks, without interruption of salary.
(c) AUTOMOBILE ALLOWANCE. The Company shall provide Executive with the
automobile allowance provided for the office of President and Chief Executive
Officer under the Company's automobile allowance policy. The automobile
allowance per month shall be $1,000 plus any operating allowance under said
policy ($1,200 per annum) and any excess mileage charges applicable to any
vehicle leased by Executive and used for business purposes.
(d) REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive
for all reasonable travel, entertainment and other expenses incurred or paid by
Executive in connection with, or related to, the performance of his duties or
responsibilities under this Agreement, provided that Executive submits to the
Company substantiation of such expenses sufficient to satisfy the record keeping
guidelines promulgated from time to time by the Internal Revenue Service.
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(e) SERVICE FEES. The Company shall reimburse Executive, in an
aggregate amount not to exceed $1,500 per year, for professional and other fees
incurred by Executive in connection with (i) an annual medical examination of
Executive and (ii) the annual planning for and preparation of Executive's
personal income tax returns. The Company shall also reimburse Executive for
estate planning services performed during the Employment Period, in an aggregate
amount not to exceed $2,500.
(f) 280G CAP. If any amount or benefits due or paid to Executive
("Payments") would constitute an Excess Parachute Payment under Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), such Payments shall
be reduced to the extent necessary so that no Payment to be made or benefit
provided to Executive shall be subject to the excise tax imposed under Section
4999 of the Code. The Company shall reduce or eliminate Payments which have not
yet been made before seeking reimbursement of any amounts previously paid to
Executive.
5. TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate this
Agreement with Cause upon thirty (30) days written notice to Executive. For
purposes of this Section 5, "Cause" shall mean: (a) conviction of a felony; (b)
declaration of unsound mind by a court of competent jurisdiction; (c) gross
neglect or dereliction of duty; (d) a crime involving moral turpitude; (e)
commission of an action which constitutes intentional misconduct or knowing
violation of law if such action in either event results both in an improper
substantial personal benefit and a material injury to the Company; or (f) a
breach by Executive of Sections 7 or 8 of this Agreement or a material breach of
any other provision of this Agreement. In the event of a termination with Cause,
the Executive shall be entitled under this Agreement solely to salary and
benefits accrued through date of termination.
6. TERMINATION AND SEVERANCE.
6.1 NOTICE/EVENTS/DEFINED TERMS.
(a) TERMINATION BY EXECUTIVE. Executive may terminate this Agreement
at any time by providing written notice to the Company of not less than thirty
(30) days. In such event Executive shall be entitled under this Agreement solely
to salary and benefits accrued through the date of termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate this Agreement at any time, without Cause by providing written notice
to the Executive of not less than thirty (30) days. As used in this Agreement,
the term "without Cause" shall mean termination by the Company for any reason
not specified in Section 5 hereof, other than (i) retirement upon reaching the
mandatory retirement age of sixty-five (65), or (ii) the death or disability of
Executive (for purposes of this Agreement, "disability" shall mean Executive's
incapacity due to physical or mental illness which has caused Executive to be
absent from the full-time performance of his duties with the Company for a
period of six (6) consecutive months or eight (8) months in any twelve (12)
month period). In the event of death or disability during the Employment Period,
the Executive shall be entitled under this Agreement solely to salary and
benefits accrued through the date of termination and the proceeds of life and
disability insurance.
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(c) CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (1) a Takeover Transaction occurs; or (2) the Company effectuates a
complete liquidation or a sale or disposition of all or substantially all of its
assets. A "Change in Control" shall not be deemed to include, however, a merger
or sale of stock, assets or business of the Company, if Executive immediately
after such event owns, or in connection with such event immediately acquires
(other than in the Executive's capacity as an equity holder of the Employer or
as a beneficiary of its employee stock ownership plan or profit sharing plan),
any stock of the buyer or any affiliate thereof which, at the time of
Executive's initial investment in such stock, had a purchase price or fair
market value greater than $100,000.
(d) TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean (i) a
merger or consolidation of the Company with, or an acquisition of the Company or
all or substantially all of its assets by, any other corporation, other than a
merger, consolidation or acquisition in which the individuals who were members
of the Board of Directors of the Company immediately prior to such transaction
continue to constitute a majority of the Board of Directors of the surviving
corporation (or, in the case of an acquisition involving a holding company,
constitute a majority of the Board of Directors of the holding company) for a
period of not less than twelve (12) months following the closing of such
transaction, or (ii) when any person or entity or group of persons or entities
(other than any trustee or other fiduciary holding securities under an employee
benefit plan of the Company) either related or acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) of securities of the Company representing more than fifty
percent (50%) of the total number of votes that may be cast for the election of
directors of the Company.
(e) TERMINATING EVENT. A "Terminating Event" shall mean: (i)
termination by the Company of the employment of Executive without Cause
occurring within twelve (12) months of a Change of Control; or (ii) resignation
of Executive from the employ of the Company, while Executive is not receiving
payments or benefits from the Company by reason of Executive's disability,
subsequent to any of the following events occurring within twelve (12) months of
a Change of Control: (A) a significant reduction in the nature or scope of
Executive's responsibilities, authorities, powers, functions or duties from the
responsibilities, authorities, powers, functions or duties exercised by
Executive immediately prior to the Change in Control; (B) a decrease in the
salary payable by the Company to Executive from the salary payable to Executive
immediately prior to the Change in Control; or (C) the relocation of the
Company's executive offices (or, if Executive is primarily located at the
Company's manufacturing facilities, such facilities) by more than 50 miles from
their current location in Newburyport, Massachusetts (unless such new location
is closer than to the Executive's then residence); provided, however, that a
Terminating Event shall not be deemed to have occurred solely as a result of
Executive being an employee of any direct or indirect successor to the business
or assets of the Company, rather than continuing as an employee of the Company,
following a Change in Control.
6.2 SEVERANCE.
(a) WITHOUT CAUSE. If the Company terminates this Agreement without
Cause, other than as a result of a Terminating Event, then commencing on the
date of termination of this
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Agreement, the Company shall provide Executive with a severance package which
shall consist of the following: (i) for a period equal to the greater (A) of the
remainder of the initial Employment Period (or any then existing renewal period
thereof) or (B) three (3) years after the date of termination (x) payment on the
first business day of each month of an amount equal to one-twelfth of
Executive's then current annual base salary under Section 3(a) hereof and (y)
continuation of all benefits under Section 4(a) and (ii) for a period equal to
the greater of (A) the remainder of the initial Employment Period (or any then
existing renewal period thereof) or (B) three (3) years after the date of
termination, payment on the first business day of each month of an amount equal
to one-twelfth of Executive's annual target bonus amount for the year of
termination, pro rated for the portion of the fiscal year occurring prior to
termination.
(b) WITH A TERMINATING EVENT. If the Company terminates this Agreement
as a result of a Terminating Event, then commencing on the date of such
termination and for a period equal to the greater of the remainder of the
initial Employment Period (or any then existing renewal period thereof) or three
(3) years after the date of termination, the Company shall provide Executive
with a severance package which shall consist of the following: (i) payment on
the first business day of each month an amount equal to one-twelfth of
Executive's then current annual base salary under Section 3(a) hereof; (ii)
payment on the first business day of each month of an amount equal to
one-twelfth of Executive's annual target bonus amount; and (iii) continuation of
all benefits under Section 4(a). In addition, if the Company terminates this
Agreement as a result of a Terminating Event, then the Company shall cause the
immediate vesting of all options and other rights granted to Executive under the
Company's stock plans.
(c) GENERAL RELEASE. As a condition precedent to receiving any
severance payment, Executive shall execute a release of any and all claims which
Executive or his heirs, executors, agents or assigns might have against the
Company, its subsidiaries, affiliates, successors, assigns and its past, present
and future employees, officers, directors, agents and attorneys; provided,
however, that such release would not extinguish the obligations of the Company
under indemnification or similar contractual arrangements between Company and
Executive.
(d) WITHHOLDING. Subject to Section 4(f), all payments made by the
Company under Section 6.2(a) or 6.2(b) this Agreement shall be net of any tax or
other amounts required to be withheld by the Employer under applicable law.
(e) DEATH OR DISABILITY. The death of the Executive during the time
the severance payments are being paid under this Section shall not terminate the
obligation of the Company to make such payments. The Company shall continue to
pay any amounts otherwise due to Executive under this Agreement for the
remainder of the period determined in Section 6.2 (a) or (b) to Executive's
estate.
(f) EFFECT OF NON-RENEWAL. In the event that the Company issues a
notice of non-renewal under Section 1 hereof prior to the expiration of the
initial Employment Period, the Executive shall be entitled to receive from the
Company an amount equal to his initial Base Salary ($260,000) for a period of
two years following said initial Employment Period payable in equal monthly
installments one-twelfth of said Base Salary on the first day of each month
following said initial Employment Period.
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7. NON-COMPETITION. (a) During the term of this Agreement and (i) in the
case of termination other than as a result of a Terminating Event and provided
that Executive continues to receive the severance payments provided for in
Section 6.2(a) to which he is entitled , for the greater of the remainder of the
Employment Period after the date of termination or three (3) years after the
date of termination or (ii) in the case of termination as a result of a
Terminating Event and provided that Executive continues to receive, or after
Executive has received, the severance payments provided for in Section 6.2(b) to
which he is entitled, for the greater of the remainder of the Employment Period
after the date of termination or three (3) years after the date of termination
of this Agreement, Executive will not directly or indirectly whether as a
partner, consultant, agent, employee, co-venturer, greater than two percent
owner or otherwise or through any other person (as hereafter defined): (A) be
engaged in any business or activity which is competitive with the business of
the Company in any part of the world in which the Company is or proposes to be
(as evidenced by a directive of the Board of Directors to that effect) at the
time of Executive's termination engaged in selling its products directly or
indirectly; or (B) attempt to recruit any employee of the Company, assist in
their hiring by any other person, or encourage any employee to terminate his or
her employment with the Company; or (C) encourage any customer of the Company to
conduct with any other person any business or activity which such customer
conducts or could conduct with the Company.
(b) For purpose of this Section 7, the term "Company" shall include
any person controlling, under common control with or controlled by, the Company
and The term "Person" shall mean an individual or corporation, association or
partnership in estate or trust or any other entity or organization.
(c) Executive recognizes and agrees that because a violation by him of
this Section 7 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
(d) Executive expressly agrees that the character, duration and scope
of this covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed. However,
should a determination nonetheless be made by a court of competent jurisdiction
at a later date that the character, duration or geographical scope of this
covenant not to compete is unreasonable in light of the circumstances as they
then exist, then it is the intention of both Executive and the Company that this
covenant not to compete shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of Executive which are reasonable
in light of the circumstances as they then exist and necessary to provide the
Company the intended benefit of this covenant to compete.
8. CONFIDENTIALITY COVENANTS. (a) Executive understands that Company may
impart to him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans, product
development information and the like (collectively "Confidential Information").
Executive hereby acknowledges Company's exclusive ownership of such Confidential
Information.
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(b) Executive agrees as follows: (i) only to use the Confidential
Information to provide services to the Company; (ii) only to communicate the
Confidential Information to fellow employees, agents and representatives of the
Company on a need-to-know basis; and (iii) not to otherwise disclose or use any
Confidential Information. Upon demand by the Company or upon termination of
Executive's employment, Executive will deliver to the Company all manuals,
photographs, recordings, and any other instrument or device by which, through
which, or on which Confidential Information has been recorded and/or preserved,
which are in my Executive's possession, custody or control. Executive
acknowledges that for purposes of this Section 8 the term "Company" means any
person or entity now or hereafter during the term of this Agreement which
controls, is under common control with, or is controlled by, the Company.
(c) Executive recognizes and agrees that because a violation by him of
this Section 8 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
9. GOVERNING LAW. This Agreement shall be governed by and interpreted and
governed in accordance with the laws of the Commonwealth of Massachusetts. To
the extent permitted by law each of the Executive and the Company hereby waive
any right to trial by jury in any proceeding which may be brought in respect of
this Agreement.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
11. NOTICES. All notices, requests, demands and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or certified
mail, return receipt requested.
(a) to the Company at:
Foilmark, Inc.
0 Xxxxxxxx Xxx
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn.: Chairman of the Board
(b) to Executive at:
00 Xxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Any such notice or other communication will be considered to have been
given (i) on the date of delivery in person, (ii) on the third day after mailing
by certified mail, provided that receipt of
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delivery is confirmed in writing, (iii) on the first business day following
delivery to a commercial overnight courier or (iv) on the date of facsimile
transmission (telecopy) provided that the giver of the notice obtains telephone
confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
12. SEVERABILITY. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such terms to the persons or under circumstances other than those as to which
it is invalid or unenforceable, shall be considered severable and shall not be
affected thereby, and each term of this Agreement shall be valid and enforceable
to the fullest extent permitted by law. The invalid or unenforceable provisions
shall, to the extent permitted by law, be deemed amended and given such
interpretation as to achieve the economic intent of this Agreement.
13. WAIVER. The failure of any party to insist in any one instance or more
upon strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as a
waiver of such terms, conditions, rights or privileges, but same shall continue
to remain in full force and effect. Any waiver by any party of any violation of,
breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and any successors and assigns of the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FOILMARK, INC.
By:
----------------------------------
Title:
EXECUTIVE:
-------------------------------------
Xxxxx X. Xxxxx, Xx.
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SCHEDULE A
FORMULA: BONUS/BUDGET COMPARISON
For each fiscal year during the Employment Period, the Board of Directors,
in its sole discretion, shall establish a budget for pretax income in accordance
with generally accepted accounting principles consistently applied ("GAAP") and
the formulaic portion of Executive's bonus will vary as a percentage of Base
Salary in relation to the percentage achievement of that budget as follows:
PERCENTAGE OF PORTION PERCENTAGE OF BASE SALARY EARNED AS
BUDGET ATTAINED FORMULAIC PORTION
Less than 80% 0%
80% 15%
90% 25%
100% 35%
110% 45%
120% 55%
130% 65%
140% and above 75%
For a percentage of budget achievement between the benchmarks, the percentage of
the Base Salary shall be linearly interpolated, provided that no bonus shall be
paid for achievement less than 80% of budget and the maximum formulaic portion
of bonus shall be 75% of Base Salary in any event. In the case of a partial
fiscal year, the Company shall adjust the bonus to correspond to the Company's
budget and the Base Salary for the portion of the applicable fiscal year that
shall be included in the Employment Period. Notwithstanding the foregoing, the
initial bonus period (the "Initial Bonus Period") shall be the period starting
with the Bonus Starting Date and ending on December 31, 1999, and the Company
shall use its budget for that period (a copy of which the Company has provided
to the Executive) to determine the eligibility for a bonus, and then apply the
applicable bonus percentage to that portion of the annual Base Salary
thereafter. Subsequent bonus periods shall begin on each January 1, thereafter
and end with the last day of the Company's fiscal year, and the Company shall
prepare a budget for that period and determine the Executive's eligibility for a
bonus in the manner described for the Initial Bonus Period. The bonus program
shall continue with each Renewal Period as defined in Section 1 of the
Agreement, with the bonus periods corresponding to the Company's fiscal year.
Bonuses shall continue to be calculated as described in this Schedule.
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