EXHIBIT 10.2
June 29, 1995
Xx. Xxxxx X. Xxxxxxx Xx. Xxxxxxxxxxx X. Xxxxxx
00 Xxxxx Xxxxx 00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, Xx 00000
Xx. Xxxxxxx Xxxxxxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxx Xxxx, XX 00000
Gentlemen:
This letter will confirm our offer of employment to each of you (the
"Managers"), and any other individuals you wish to hire, in the form of direct
employment or through a consulting arrangement, at your option, to become the
senior management team of The Xxxx Corporation ("Xxxx"). As you know, Xxxx is
currently a designer and distributor of fashion costume jewelry (the "Jewelry
Business"). If you accept our offer of employment, you and your team will devote
your full time to the business of Xxxx and will enter into and develop the
business of telecommunications and computer staffing (the "Staffing Business").
The Jewelry Business of Xxxx will be reorganized under a new wholly-owned
subsidiary of Xxxx, which subsidiary will be managed by the existing management
group of Xxxx. Thereafter, the Staffing Business will constitute the operation
of Xxxx and Xxxx will divest itself of the subsidiary containing the Jewelry
Business. Subject to post transaction Xxxx board approval, you will have full
business autonomy and discretion to develop such business through both internal
growth and by acquisition, and will have available requisite resources to
accomplish such growth more fully described in Attachment A hereto.
This offer of employment shall remain open until July 15, 1995, and shall be
further subject to those terms and conditions set forth in Attachment A hereto,
which is a part of this letter. If you agree to the terms and conditions set
forth herein and in Attachment A hereto, please so indicate by executing this
letter in the spaces provided below. Following acceptance of this letter, the
parties will conclude a formal agreement more fully covering the matters agreed
to herein. Notwithstanding the contemplated formal agreement, it is the
intention of the parties that this letter
Xxxxxxx/Xxxxxxxxxx
Page Two
June 29, 1995
agreement be binding on them. Xxxx acknowledges that the Managers will be taking
certain actions affecting their current employment in reliance of this letter
agreement. We look forward to a fruitful relationship.
Sincerely,
THE XXXX CORPORATION
Xxxxx X. Xxxxxx
Director
ARTRA Guarantee
Xxxx is a subsidiary of ARTRA GROUP Incorporated ("ARTRA"). The agreements and
indemnities representations of Xxxx hereunder are acknowledged, confirmed and
guaranteed in full by ARTRA. ARTRA agrees that it shall cause Xxxx to fully
perform its covenants and agreements made herein, and will undertake any and all
actions necessary to cause Xxxx to perform such agreements or to make the
representations of Xxxx herein accurate and correct in all respects, including
but not limited to the advancement of funding to satisfy the liabilities of Xxxx
or adequately capitalize Xxxx in accordance with provisions hereof. ARTRA
further agrees to vote all its shares to achieve the objectives and obligations
contained herein including the election of the Managers' new Xxxx board of
directors.
All parties to this agreement agree that upon the latter of: (a) ARTRA GROUP's
divestiture of its Xxxx stock ownership; or (b) the divestiture by Xxxx of the
Jewelry Business, ARTRA GROUP's obligations under this agreement will terminate.
ARTRA GROUP INCORPORATED
By: ________________________________ ____________________
Xxxxx X. Xxxxxx Date
Its: ________________________________
Xxxxxxx/Xxxxxxxxxx
Page Three
June 29, 1995
MANAGERS:
Accepted and Agreed:
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Xxxxx X. Xxxxxxx Date
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Xxxxxxx Xxxxxxxxx Date
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Xxxxx X. Xxxxxx Date
ATTACHMENT A
1. Upon the commencement of the employment of Managers, which shall occur upon a
date designated by Managers following acceptance of this offer, Xxxx shall have
available for use exclusively in developing the Staff Business not less than
$500,000 (the "Cash Capital"). Within 90 days thereafter Xxxx shall have an
additional $500,000 cash available to the Staffing Business. Xxxx warrants and
represents that prior to the Managers' employment, Xxxx will be free and clear
of any liabilities except as expressly disclosed in writing to the Managers and
attached hereto. The obligations of the Jewelry Business will in no way impede
the profitability or financial condition of the Staffing Business.
2. Lori's capital structure shall be restructured so that in addition to shares
of common equity currently authorized and outstanding: (a) the Managers shall be
issued a number of common shares equal to twenty five percent (25%) of the total
outstanding shares of Xxxx, on a fully-diluted basis; (b) a number of additional
shares of common equity shall be authorized sufficient to fund, in part, the
acquisition and growth plans of Xxxx under the Managers; and (c) a number of
shares of common equity equal to not less than ten percent (10%) of all
outstanding common equity on a fully-diluted basis, shall be reserved for
issuance to management and employees of Xxxx, over a period of time, in the form
of stock options. In addition, in the event Managers are successful in acquiring
substantially all of the business of YIELD Global (as defined below), Managers
shall receive (i) a number of common shares equal to an additional ten percent
(10%) of outstanding Xxxx stock, on a fully-diluted basis, if the purchase price
for such acquisition is $4 million or less net (exclusive of cash, cash
equivalent and receivables), or (ii) a number of common shares equal to an
additional five percent (5%) of outstanding Xxxx stock on a fully diluted basis,
if the purchase price is greater than $4 million net (exclusive of cash, cash
equivalent and receivables) but $5 million or less.
3. Lori's board of directors shall be set at five (5) directors, four (4) of
whom shall be selected by the Managers. Upon acceptance by the Managers of this
offer, Xxxx agrees to nominate the four (4) directors of the Managers' choice
for the election to Lori's board.
4. Prior to the commencement of the employment of the Managers, Xxxx shall enter
into employment agreements with each of the Managers for a term of two (2)
years, on terms consistent with the employment agreements such individuals
currently have with their employer, including but not limited to: (a) all
indemnification benefits the Managers are entitled to receive under such prior
employment agreements; and (b) indemnification in full for any and all actions
brought against the Managers in whole or in part on account of their departure
from their previous employment and commencement of employment with Xxxx. Lori's
new board of directors shall have the authority to set reasonable compensation
and terms of employment for Lori's employees and management.
5. Xxxx shall obtain quotes on D & O insurance coverage for its directors and
corporate officers and retention of coverage will be left to the decision of the
newly constituted board of directors.
6. Following the execution of this letter Xxxx shall offer the Jewelry Business
for sale. Upon the sale of the Jewelry Business, all proceeds received therefrom
shall be reinvested, under the Managers' direction, in the business of Xxxx. In
the event that less than $2 million cash is received from such sale, ARTRA shall
contribute an amount equal to such deficiency as additional capital to Xxxx,
which contribution shall not dilute the Managers' equity ownership position in
Xxxx (the "Managers' Equity"). Further, if such sale is not concluded on or
before December 31, 1995, ARTRA shall lend to Xxxx, $2 million cash to be
utilized as working capital of Xxxx. Such loan shall be repaid from the proceeds
of the sale of the Jewelry Business. Any portion of such loan unpaid on account
of a deficiency in the sale price received for the Jewelry Business shall be
forgiven by ARTRA and treated as a contribution to capital of Xxxx, which
contribution shall not dilute the Managers' Equity in Xxxx. Inclusive of the
Cash Capital and the proceeds from the sale of the Jewelry Business (together
the "Initial Capital"), Xxxx shall have not less than the equivalent of $5
million, raised either through the contribution to capital by ARTRA, issuance or
sale of Xxxx securities, senior debt financing, or the sale of the Jewelry
Business assets, for the purpose of pursuing acquisitions and growth of the
Staffing Business. The portion of such cash not comprised of the Initial Capital
(the "Additional Capital") obtained through private or public offerings of debt
or equity, or through some other financing, (provided such funding is available
upon terms reasonably acceptable to Managers) shall not dilute the Managers'
Equity. In the event that Xxxx is unable to obtain the Additional Capital on
terms reasonably acceptable to the Managers on or before December 31, 1995,
ARTRA shall lend to Xxxx, the deficiency of Additional Capital raised by Xxxx,
which loan shall be repaid at such time as such Additional Capital is obtained.
7. Xxxx acknowledges that if the Managers accept its offer of employment they
will direct an offer by Xxxx to acquire the business of Spectrum Global Services
Inc. (d/b/a "YIELD Global"). Notwithstanding anything contained herein to the
contrary, in the event Xxxx is unable to conclude the financing arrangements
described herein prior to such acquisition, ARTRA shall provide to Xxxx bridge
financing sufficient to: (a) provide a deposit, in an amount to be determined in
Managers' discretion for such acquisition; and (b) conclude such transaction as
soon as possible, all of which shall be repaid from the Initial Capital or
Additional Capital otherwise obtained in accordance with the provisions hereof.
Xxxx acknowledges and agrees that the Managers shall pursue developing the
Staffing Business if Xxxx fails to acquire YIELD Global and that the obligations
of Xxxx hereunder are not dependent on the acquisition of YIELD Global.
8. ARTRA agrees that upon commencement of employment of the Managers, ARTRA will
vote its Xxxx shares in favor of the Managers' nominees for the board. In
addition, such agreement shall provide: (a) Managers with the proxy of ARTRA
with respect to the election of directors, which shall be irrevocable except in
the case where ARTRA shall have conclusively demonstrated that any such Manager
has (i) exhibited gross or reckless disregard of Lori's business, or (ii)
engaged in intentional wrongful conduct with regard to Lori's business,
including but not limited to embezzlement or intentional wrong doing which shall
have caused material damage to Lori's assets; and (b) reciprocal buy-out
provisions to be agreed upon. The agreement for proxy shall terminate at such
time as the Xxxx shares held by ARTRA are "spun off" or otherwise disposed of
to ARTRA shareholders, provided that no single ARTRA shareholder or any other
group of related shareholders holds directly, indirectly or beneficially more
than fifteen percent (15%) of Lori's outstanding capital stock following such
spin off.
9. Xxxx agrees to advance to, pay and/or reimburse Managers for all reasonable
legal and accounting fees and expenses incurred in connection with the Managers'
consideration and negotiation of employment arrangements with Xxxx.
10. Lori's and/or ARTRA's capital obligations per the terms of this agreement
shall not exceed $5 million total for the purpose of acquiring YIELD Global or
establishing a start up business previously referred to as the Staffing
Business.
