EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 11th day of
June, 2001, by and between Xxxxxxxx X. Fine (the "Executive") and X.X. Xxxxx,
Inc., a Delaware corporation (the "Company").
WHEREAS, the Executive possesses skills and experience which the
Company believes are of value to the success of the Company's business
operations; and
WHEREAS, the Company desires to receive the benefits of the skill and
experience of the Executive, subject to the terms and conditions of this
Agreement, and the Executive desires to provide the Company with such benefits
subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein set forth, the parties hereto agree as follows:
1. Position and Responsibilities. The Executive shall serve as
President of the Company and, in such capacity, shall be responsible for the
general management of the business, affairs and operations of the Company, shall
perform such duties as are customarily performed by a president of a company of
similar size and shall have such power and authority as shall reasonably be
required to enable him to perform his duties hereunder. The Executive shall
report to the Chief Executive Officer of the Company and shall at all times be
subject to the authority and control of the Board of Directors of the Company.
The Executive agrees to devote all of his business time, attention and services
to the diligent, faithful and competent discharge of such duties for the
successful operation of the Company's business.
2. Term. The term of the Executive's employment under this Agreement
shall commence on June 11, 2001 and shall continue until three (3) years from
this commencement date, unless earlier terminated as hereinafter provided.
3. Compensation and other Benefits. During the term of this Agreement,
the Company shall pay the Executive the following compensation, including the
following annual salary, bonuses, and other fringe benefits:
(a) Salary. In consideration of the services to be rendered by
the Executive to the Company, the Company shall pay to the Executive a base
salary of $325,000 per annum for the first year of employment, $350,000 per
annum for the second year of employment, and $375,000 per annum for the third
year of employment (such salary being hereafter referred to as the "Base
Salary"). Except as may otherwise be agreed, the Base Salary shall be payable in
conformity with the Company's customary practices for executive compensation as
such practices are established or modified from time to time but shall be
payable not less frequently than monthly. Salary payments shall be subject to
all applicable federal and state withholding, payroll and other taxes.
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(b) Bonuses. In consideration for executing this Agreement,
the Executive shall be entitled to a sign-on bonus in the amount of $50,000,
payable on July 1, 2001. In addition, the Executive shall also be entitled to a
minimum guaranteed bonus in the amount of $50,000 for each concluded calendar
year within the term, each such bonus to be paid during the month of March in
the calendar year following the year in which such bonus accrues, that is during
March of 2002, 2003, and 2004.
(c) Stock Options. Upon the commencement of his employment,
the Executive shall be granted 50,000 stock options as a participant in the X.X.
Xxxxx Arts & Crafts, Inc. Incentive Stock Option Plan, with the option price to
be set as of May 10, 2001. On or about July 31, 2002, and representing options
granted in the second year of this Agreement, the Executive shall be granted no
less than 50,000 additional stock options, 50,000 being the guaranteed minimum,
with the option price to be set at the time of the granting of such options. In
the third year of this Agreement, and in any subsequent year should the term of
this Agreement be extended, the Executive shall be a participant in the X.X.
Xxxxx Arts & Crafts, Inc. Incentive Stock Option Plan, the details of which have
been provided to the Executive, and further stock options grants shall be in
accordance with the provisions of that Plan. The foregoing grants shall be
subject to the three year vesting schedule consistent with the Company's
practice.
(d) 401(k) Plan. After ninety (90) consecutive days of
employment, the Executive shall be entitled to participate in the Company's
401(k) Plan.
(e) Vacation. The Executive shall be entitled to three (3)
weeks of vacation, annually. In the years subsequent to the tenth anniversary of
the Executive's employment, the Executive shall be entitled to four (4) weeks of
vacation, annually.
(f) Medical, Dental and Prescription Drug Benefits. The
Executive shall be entitled to receive medical, dental, and prescription drug
coverage for himself and his family in accordance with the terms of the X.X.
Xxxxx Group Health Plan.
(g) Life, AD&D, and Long Term Disability Insurance Benefits.
The Company shall provide Life, Accidental Death and Dismemberment ("AD&D"), and
Long Term Disability Insurance for the Executive in accordance with Company's
then current benefit plans.
4. Reimbursement of Job-Related Expenses and Allowances. The Company
shall provide reimbursement of job-related expenses and allowances in accordance
with the Company policy.
5. Relocation Expenses.
(a) Interim Living Expenses. The Company acknowledges that the
Executive will relocate his primary residence in order for the Executive to
perform the duties and obligations of this Agreement. In order to assist in that
relocation, the Company will provide the Executive with the use of a furnished
two (2) bedroom corporate apartment for a maximum of twelve (12) months,
including all utilities, maintenance, and cleaning services.
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(b) Real Estate Fees. In lieu of payment by the Company of
commissions and/or points related to the sale and purchase of his primary
residence, if applicable, a payment of $20,000 will be made by the Company to
the Executive at the time of the sale and purchase of his primary residence.
(c) Moving Expenses. To assist the Executive in the relocation
process, the Company will provide moving expenses as defined by and in
accordance with Company policy. In addition, the Company will provide the
Executive with a one time payment of $10,000 to defray other expenses generally
associated with the sale and purchase of his primary residence but not covered
under the Company policy, and will also pay for all expenses related to the
permanent transport of two personal automobiles.
6. Termination. The Executive's term of employment under this
Agreement may be earlier terminated as follows:
(a) At the Executive's Option. The Executive may terminate his
employment under this Agreement at any time upon at least two months' advance
written notice to the Company. In such event, the Executive shall be entitled
only to receive any accrued and unpaid prorated Base Salary through the date of
such termination, as well as reimbursement of any expenses covered by section 4
above which were incurred by the Executive prior to the date of such
termination. Should the Executive choose to terminate, the Company may in its
sole discretion choose to accept the Executive's resignation immediately upon
receipt, in which event the Executive shall only be entitled to receive any
accrued and unpaid prorated Base Salary through that date, as well as
reimbursement of any expenses covered by section 4 above which were incurred by
the Executive prior to that date.
(b) At the Company's Option, Without Cause. The Executive's
employment under this Agreement may be terminated without Cause (as hereinafter
defined): (i) at any time upon the mutual written agreement of the parties, (ii)
immediately upon the Executive's death, (iii) immediately upon the Executive's
total and permanent disability (as defined in Section 6(d) hereof), or (iv) by
the Company unilaterally upon five business day's prior written notice to the
Executive of the Company's intention to terminate the Agreement. In the event
that the Executive's employment is terminated without Cause during the term of
the Agreement, the Company shall continue to pay the Executive or his Estate his
Base Salary for the entire remaining term of this Agreement, as severance
compensation ("Severance"), except that in the case of subsection (b)(ii)
Severance shall be limited to six months' Base Salary and except that in the
case of subsection (b)(iii) Severance shall be limited to six months' Base
Salary and shall be reduced by any payments received as Long Term Disability
Insurance Benefits under Section 3(g). Severance payable hereunder shall be paid
(x) in such manner as is consistent with the Company's then customary practices
for executive compensation and (y) automatically terminated if and when the
Executive becomes employed by any third party.
(c) Termination For Cause. The Executive's employment under
this Agreement may be terminated by the Company upon written notice ("Notice")
to the Executive at any time for any of the following reasons, each of which
shall constitute "Cause": (i) any material breach of this Agreement by the
Executive or any material failure by the Executive to perform his duties under
this Agreement; (ii) the Executive's willful or gross misconduct, or willful or
gross negligence, in the performance of his duties under this Agreement; (iii)
the Executive's commission of fraud, embezzlement or other unlawful acts in
connection with the business of the Company or willful misrepresentation to the
shareholders or directors of the Company which is materially injurious to the
Company; (iv) the Executive's indictment for any felony; (v) the Executive's
intentionally causing the Company to commit a violation of local, state, or
federal law (vi) the Executive's willful refusal to comply with the policies,
directives, or decisions of the Company, i.e., the Chief Executive Officer, or
the Board of Directors; or (vii) any act by the Executive that involves a
conflict of interest with the Company except as permitted by this Agreement,
whether or not willful, and which has a substantial adverse effect on the
Company. Notwithstanding the foregoing, in the event of a subsection (c)(i) or
(c) (vii) occurrence, the Executive shall have five (5) days from receipt of
such Notice to cure to the reasonable satisfaction of the Company before being
deemed terminated for Cause.
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(d) Definition of Disability. The term "Disability" shall mean
the inability of the Executive to discharge properly his duties hereunder due to
physical or mental illness or injury for 90 business days in any period of 180
consecutive business days. The Executive shall be deemed to have become disabled
upon the expiration of such 90 days.
(e) Effect of Termination. Upon any termination of employment
pursuant to Section 6, this Agreement (other than sections 8 or 9 hereof) shall
terminate and the Company shall have no obligation of any kind whatsoever to the
Executive except to pay the Executive (i) the Base Salary and all accrued and
unpaid bonuses due him under Section 3 of this Agreement through the Termination
Date, the amount of such compensation due the Executive under Section 3(a)
hereof being apportioned for the period the Executive was actually employed and
(ii) in the event the Executive is terminated without Cause, Severance due to
him in accordance with Section 6(b). "Termination Date" shall mean the
Executive's last day of employment with the Company and shall constitute the end
of the Term of this Agreement.
7. Change in Control. If the Executive's employment is terminated by
the Company other than for Cause or his position and responsibilities under
section 1 above materially reduced, at any time during the period beginning on
the 180th day preceding the occurrence of a change in control (hereinafter
defined) of the Company and ending on the second anniversary following the
occurrence of a change in control of the Company, the Executive shall, subject
to paragraph (b) below, be paid, as severance compensation, the entire unpaid
Base Salary and Bonuses under Paragraphs 3(a) and 3(b) of this Agreement through
its remaining term, if any, plus as additional severance eighteen (18) months of
the Executive's then current Base Salary. All payments provided for hereunder
are to be paid in conformity with Company's then current customary practices for
executive compensation. For purposes of this Agreement, a "change in control" of
the Company shall be deemed to have occurred on the first of any of the
following dates:
(a) (i) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company or an affiliate with or into
another corporation other than a present affiliate of the Company, or to sell or
otherwise dispose of all or substantially all of the Company's assets, and (ii)
the persons who were the members of the Board of Directors of the Company or a
present affiliate prior to such approval will not represent a majority of the
directors of the surviving, resulting or acquiring entity or the parent thereof;
and (iii) such proposed transaction is consummated in accordance with the
stockholders agreement ; (b) the stockholders or Board of Directors of the
Company approve a plan of liquidation of the Company or an affiliate of the
Company; or (c) within any period of 24 consecutive months, persons who were
members of the Board of Directors of the Company or any present affiliate of the
Company immediately prior to such 24-month period, together with any persons who
were first elected as directors (other than as a result of any settlement of a
proxy or consent solicitation contest or any action taken to avoid such a
contest) during such 24-month period by or upon the recommendation of persons
who were members of the Board of Directors of the Company or a present affiliate
of the Company immediately prior to such 24-month period and who constituted a
majority of the Board of Directors of the Company or such present affiliate of
the Company at the time of such election, cease to constitute a majority of the
Board.
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Notwithstanding anything contained in section 7 above, in the
event all compensation to be provided to Executive conditioned upon the
occurrence of a change in control, whether under this Agreement or in connection
with any other agreement or benefit plan of the Company to which Executive is a
party or in which he participates, exceeds 2.99 times the Executive's "Base
Amount", as that term is defined under Section 280G of the Internal Revenue Code
and regulations of the Internal Revenue Service promulgated thereunder, the
total compensation to be paid to the Executive shall be reduced to an amount
that is $1.00 less than 2.99 times the Executive's Base Amount. Executive shall
have the right to determine which benefits to which he would otherwise be
entitled shall be reduced.
8. Confidentiality.
(a) During the course of the Executive's employment by the
Company, the Executive will have access to confidential and/or proprietary data
or information ("Confidential Information") of the Company and its subsidiaries
or affiliates (collectively referred to in this Section 8 as the "Company"). The
Executive agrees that he will not at any time, during the Term of this Agreement
and thereafter, divulge or communicate to any person (other than to a person
bound by confidentiality obligations similar to those contained herein and other
than as necessary in performing the Executive's duties hereunder) or use to the
detriment of the Company or for the benefit of any other person or entity, any
of such data or information. Notwithstanding the foregoing, if any such data or
information becomes known to the general public other than by Executive's
disclosure, then Executive's obligation hereunder shall terminate in respect of
such data or information. The provisions of this Section shall survive the
termination of the Executive's employment hereunder, whether by the normal
expiration thereof or otherwise. "Confidential Information" shall include,
without limitation, the business or products of the Company, personnel
information, financial information, customer or supplier lists, customer or
supplier information, product specifications, patents, trade secrets, software,
product composition and formulae, drawings and schematics, manufacturing
processes or methods, technical know-how, and pricing, marketing and advertising
information. The Executive acknowledges and agrees that any Confidential
Information that he heretofore acquired and hereafter will acquire was and will
be received in confidence and as a fiduciary with respect to the Company.
(b) Upon termination for any reason of the Executive's
employment under this Agreement or upon request of the Company at any time, the
Executive shall promptly deliver to the Company all documents and other
materials containing all Confidential Information in physical form, including
but not limited to all written materials, data compilations, records, software,
and other documents made by the Executive or coming into his possession during
his employment concerning any products, processes or equipment, manufactured,
used, developed, investigated or considered by the Company or otherwise
concerning the business or affairs of the Company.
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(c) With respect to the covenants contained in Section 8, the
Executive acknowledges that a violation thereof could cause irreparable injury
to the Company which would be difficult or impossible to measure and agrees that
money damages for any breach thereof will be an inadequate remedy and that,
therefore, the Company shall be entitled, in addition, to specific performance,
injunction, and/or any other mode of equitable relief to enforce its rights
hereunder.
9. Noncompetition.
(a) The Executive recognizes and acknowledges that the Company
has spent substantial money, time and effort over the years in developing and
solidifying its relationships with its suppliers, customers, and employees and
in developing the Confidential Information. Accordingly, the Executive agrees
that during the term of the Executive's employment with the Company and for a
period of two (2) years following the termination of such employment for any
reason, except in the case of a change in control under section 7 above, the
Executive shall not engage directly or indirectly in competition with the
Company or its subsidiaries or affiliates or by soliciting as executives or
managers any individuals who were executives or managers of the Company or its
subsidiaries or affiliates at the time of the Executive's termination of
employment with the Company. Competition shall include, without limitation, any
role as a sponsor, consultant, employee, partner or controlling- interest
stockholder which aids or abets any business primarily operating in the field of
arts and crafts supplies retailing in any state where the Company is operating
to compete or prepare for competition with the Company or its subsidiaries or
affiliates as hereinabove described. The Executive further agrees that he will
not for a period of two (2) years following the termination of his employment,
for his own account or for the account of any other person or entity, tortuously
interfere with the Company's relationship with any of its suppliers, customers
or employees.
(b) The Executive recognizes and acknowledges that the
restraints contained in subsection 9(a) are reasonable and enforceable in view
of the legitimate interests of the Company in protecting its Confidential
Information and customer goodwill, and that the geographic and temporal
limitations contained therein are reasonable and binding upon the Executive. The
Executive further agrees that any competitive activities in violation of this
section could cause irreparable injury to the Company or its subsidiaries or
affiliates and that such injury would be difficult or impossible to measure.
Accordingly, the Company and its subsidiaries and affiliates shall be entitled
to an injunction and other equitable remedies for any violation.
(c) The Executive further represents that he is under no
restrictive covenants or other obligations which prevent him from signing this
Agreement and fulfilling his obligations thereunder.
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10. Notices.
(a) Except as expressly set forth herein to the contrary, the
Executive shall be subject to the Company's rules, practices and policies
applicable to executives generally.
(b) Any notices required or permitted to be given hereunder by
either party to the other shall be sufficient if in writing and if delivered
personally, by overnight carrier, or by mail, registered or certified, postage
prepaid and return receipt requested. Mailed notices shall be addressed to the
parties at the following addresses:
If to the Company:
X.X. Xxxxx, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Mr. Xxxx Xxxxxx
with a copy to:
Xxxxxxx Xxxx Xxxx & Xxxxxxxxxx, LLP
000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to the Executive:
Xxxxxxxx X. Fine
0000 Xxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
subject to change by written notice in accordance with this paragraph. Notices
delivered personally or by overnight carrier shall be deemed communicated as of
actual receipt; mailed notices will be deemed communicated as of three (3) days
after mailing.
11. Amendment. Any modification of this Agreement will be effective
only if it is in writing and signed by the party to be charged.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey.
13. Severability. If any part of this Agreement shall be held or
declared to be invalid or unenforceable for any reason by any court of competent
jurisdiction, such provision shall be ineffective but shall not affect any other
part of this Agreement. Moreover, if one of more of the provisions of this
Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject so as to be unenforceable at law or in equity, such
provision or provisions shall be construed and reformed by the appropriate
judicial body by limiting and reducing such provision or provisions, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear. The parties acknowledge that the resulting agreement, as reformed,
represents the intentions of the parties and that they are to be bound by it.
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14. Waivers. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege hereunder,
nor any single or partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
15. Arbitration. Any disputes hereunder which cannot be resolved by
negotiation between the parties hereto shall be submitted to, and determined by,
arbitration in accordance with the Arbitration Rules of the American Arbitration
Association, and the parties hereto agree to be bound by the final award of the
arbitration panel (which shall be comprised of three members, one to be selected
by each of the Company and the Executive, and the third to be mutually selected
by the Company and the Executive) in any such proceeding. The arbitration panel
shall apply the law of the State of New Jersey and may order injunctive relief
against any party. Arbitration will be held in the State of New Jersey. or such
other place as the parties hereto may mutually agree. Judgment upon the award by
the arbitration panel may be entered and enforced in any court having
jurisdiction thereof.
16. Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Certification. BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY
CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR
REVIEW AND STUDY BEFORE EXECUTING IT, (B) HAS READ THIS AGREEMENT CAREFULLY
BEFORE SIGNING IT, (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THIS
AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS
RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS, (D) HAS BEEN ADVISED TO
SEEK AND HAS SOUGHT ADVICE OF COUNSEL BEFORE SIGNING, AND (E) UNDERSTANDS THE
EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
X.X. XXXXX, INC.
By: /s/ Xxxx X. Xxxxxx
-----------------------------
Name: /s/ Xxxx X. Xxxxxx
-----------------------------
Title: Chief Executive Officer
-----------------------------
/s/ Xxxxxxxx X. Fine
--------------------------------
Xxxxxxxx X. Fine
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