EXHIBIT 10-16
EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") dated as of
January 1, 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 a consultant to the
Company under a Consulting Agreement dated August 21, 1995 (the
"Consulting Agreement") since such date;
II. WHEREAS, the Company desires to memorialize the retention
of the full-time services of the Executive hereby and cancel the
Consulting Agreement, and the Executive is willing to cancel such
agreement and to accept full-time employment for a period of two (2)
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
Senior Vice President of Manufacturing of the Company. The Executive
shall devote his customary working time to the business of the Company
and shall perform his 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 One Hundred Twenty-Five Thousand Dollars
($125,000) per calendar year (the "Yearly Salary"), which shall be
paid each week beginning on the Execution Date as compensation for
services to be rendered by him pursuant to this Agreement, such
compensation being based in part upon the level of compensation
previously received by the Executive as a consultant to the Company;
and
b. A yearly profit sharing (bonus) share of 100% of a total
profit share (bonus) unit (a "Unit"). A Unit is equal to the sum of
1/4 % of the net operating income of the prior year plus 1 1/2 % of
the increase in net operating income of the current year over the
prior year. The time frame for profit sharing (bonus) calculation
purposes for this program will begin as of the first day in January
following the Execution Date. Should you be dismissed for any
reason other than for Cause, or be unable to continue your work due
to death or permanent disability, your profit share (bonus) for the
year involved will be prorated based on the earnings to date.
Should you resign your position at the Company for other than Good
Reason, no profit share (bonus) for the year in which the
resignation takes place will be due or paid.
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. Two (2) weeks of paid vacation per calendar year, or such
greater period as may be approved from time to time by the President
of the Company;
b. Health insurance (Company pays 60% and Executive pays 40%
of the plan options selected);
c. Long-term disability insurance (Company pays 100%);
d. Life insurance equal to one year's base earnings up to a
capped limit of $150,000 (Company pays 100%); 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".
4. OTHER COMPENSATION. Upon the Execution date you shall be
entitled to the following other compensation (the "Other
Compensation"):
a. A grant of 5,000 shares of the Company's non-registered
Common Stock (subject to the acceptance and ratification of such
grant by the Board of Directors). Such Common Stock to be held in
escrow for the first twelve (12) months of employment and turned
over to you after the escrow period. Should you not be in the
employ of the Company at that time, the shares shall be returned to
the Company, except should death or disability occur during that
time, your designee shall be awarded the shares; and
b. The issuance of 10,000 stock options (subject to the
acceptance and ratification of such grant by the Board of
Directors). The Board will establish the options value and
conditions of stock acquisition at the time of the option grant
under the traditional valuation procedures and conditions followed
in the past for such grants.
5. TERM. This Agreement shall be effective for a period of
two 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 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 and (II) six months;
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,
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 what the Executive would have received
for twenty-four (24) calendar months, assuming a level of
Compensation and Benefits existing at the date of the Acquisition of
Control.
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 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 three (3) 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 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 of 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
35% or more of the total number of votes that may be case 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) unsatisfactory performance of his or her duties as
an officer of 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 six consecutive calendar months.
d. "Good Reason" shall mean:
(i) any Acquisition of Control of the Company; and
(ii) 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 to terminate 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, amended or
terminated except by an instrument in writing signed by all parties
hereto. 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
enforce 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, Chief Executive Officer
and President
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title:Senior Vice President Manufacturing
