EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of July 1,
2000, by and between ARCADE MARKETING, INC. (the "Company"), a Delaware
corporation, and KENNETH A. BUDDE (the "Employee"), an individual residing at
5611 Mountain Breeze Drive, Chattanooga, Tennessee 37421;
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of, among other things,
manufacturing, marketing and distributing olfactory, cosmetic/skincare/beauty
care (including but not limited to treatment, makeup and lipstick) and flavor
sampling and interactive advertising products and encapsulated ingredients and
printed materials as they relate to sampling and is in the process of developing
single dosage products and is engaged in manufacturing, marketing and
distributing nail and hair care sampling products, scented greeting card
products and also engages in, or provides, creative services, sales promotion
services, marketing communications services, direct mail and response services,
data base marketing services, point of sale merchandising and sampling and
multimedia in-store advertising and/or merchandising; and
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to be employed by the Company, on the terms and conditions of this
Agreement; and
WHEREAS, the Employee is not a party to any other contract or subject to
the terms of any other agreement, which contract or agreement would prohibit him
from being a party to this Agreement or otherwise being employed by the Company;
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Employment Term. The term of this Agreement shall commence on July 1,
2000 (the "Effective Date") and shall expire on June 30, 2001. Thereafter, this
Agreement shall automatically renew for successive additional terms of twelve
months each unless either party shall give the other written notice of
nonrenewal at least sixty (60) days prior to the end of the then current term.
Any notice of nonrenewal by the Company shall be treated as a Notice of
Termination given pursuant to Section 7(d). Any notice of nonrenewal by the
Employee shall be treated as a Notice of Termination given pursuant to Section
7(e). The initial term and all such renewal terms are hereinafter collectively
called the "Employment Term."
2. Employment. (a) Subject to the provisions of Section 7 hereof, the
Company agrees to employ the Employee during the Employment Term. During the
Employment Term, the Employee shall be employed as a Senior Vice President and
the Chief Financial Officer of the Company or in such other management capacity
as may later be decided by the Chief Executive Officer of the Company (the
"CEO"). During the Employment Term, Employee shall perform such management
services as the CEO may from time to time designate. The Employee shall report
to the President of the Company or the parent company CFO as may be designated
by the CEO. The Employee's primary place of employment shall be the Company's
facility in
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Chattanooga, Tennessee; however, the Employee shall undertake such travel as is
reasonable and customary in the execution of the Employee's duties hereunder.
(b) During the Employment Term, excluding periods of vacation, sick leave
and disability to which the Employee is entitled, the Employee agrees to devote
his full business time, attention, knowledge and skills, faithfully and
diligently to the best of his ability, to the business and affairs of the
Company and its affiliates.
3. Compensation.
(a) Base Salary. During the Employment Term, the Company agrees to pay, or
to cause to be paid to the Employee, an annual base salary of one hundred ninety
thousand dollars ($190,000.00) or as may be increased from time to time in the
sole discretion of the CEO (hereinafter referred to as the "Base Salary." Such
Base Salary shall be earned and accrued on a per day basis and be payable in
accordance with the Company's customary practices applicable to its executive
employees.
(b) Annual Bonus. The Employee shall be eligible to participate in the
Salaried Employees Bonus Plan adopted by the Company for each fiscal year ending
during the Employment Term (each, a "Bonus Plan") pursuant to which the Employee
may earn an annual bonus (the "Annual Bonus"). If the Company's financial goals
as set forth in the Bonus Plan are met and if the other criteria set forth in
the Bonus Plan are met, the amount of the Annual Bonus for which the Employee
may be eligible during any fiscal year may be up to a target as determined for
each year's Bonus Plan (the "Target Amount"). Under certain circumstances as set
forth in the Bonus Plan for the applicable fiscal year, the Employee may be
eligible for an Annual Bonus in an amount in excess of the Target Amount. The
Annual Bonus shall be payable to the Employee on the later of ten (10) days
after the Company's auditors deliver their audit opinion/certification report of
the relevant fiscal year's annual financial statements of the Company or sixty
(60) days after the end of the relevant fiscal year, beginning with the fiscal
year ending June 30, 2000; provided, however, that for any such fiscal year, the
amount of the Annual Bonus shall be prorated based on the number of weeks within
such fiscal year during which the Employee is employed by the Company. The
Employee acknowledges that the performance of his duties are subject to the
direction of the President (or parent company CFO) and that his entitlement to
an Annual Bonus as set forth herein shall have no impact on the discretion of
the President (or parent company CFO) in delegating authority and duties to him.
If the Employee's employment is terminated, the Employee shall only be entitled
to receive an Annual Bonus for the fiscal year of the Company during which the
Termination Date (as defined in Section 9(b) ) occurs to the extent specified in
Section 8. To the extent that an Annual Bonus is payable under Section 8, such
Annual Bonus shall be payable notwithstanding any provision of the Bonus Plan
requiring an employee to be employed by the Company on the date a bonus is
payable.
(c) Stock Option Plan. During the Employment Term, the Employee shall be
entitled to participate as an executive employee in the stock option plan of AHC
I Acquisition Corp., the remote parent corporation of the Company, in accordance
with the terms of such plan, as it may be amended from time to time.
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4. Employee Benefits. During the Employment Term, the Employee shall be
entitled to participate in all employee benefit plans, practices and programs
maintained by the Company and made available to employees of the same or similar
position at the Company, generally, including, without limitation, any
retirement, profit sharing, savings, medical, hospitalization, disability,
dental, life or travel accident insurance benefit plans, but only to the extent
maintained by the Company and only to the extent that the Employee qualifies
under the terms of such plans. Unless otherwise provided herein, the
compensation and benefits under, and the Employee's participation in, such
plans, practices and programs shall be on the same basis and terms as are
applicable to employees of the same or similar position at the Company.
5. Expenses. The Employee shall be entitled to receive, in accordance with
normal Company practices, prompt reimbursement of all expenses reasonably
incurred by him in connection with the performance of his duties hereunder or
for promoting, pursuing or otherwise furthering the business or interests of the
Company.
6. Vacation and Sick Leave.
(a) The Employee shall be entitled to annual vacation in accordance with
the policies periodically established for similarly situated employees of the
Company; provided, however, that in no event shall the Employee's annual
vacation entitlement be less than four (4) weeks during each twelve-month period
of the Employment Term, provided that the Employee must schedule such vacation
at times approved by the President so that it does not interfere with the
performance of his duties under this Agreement.
(b) The Employee shall be entitled to sick leave and personal days (without
loss of pay) in accordance with the Company's policies in effect from time to
time.
7. Termination. During the Employment Term, the Employee's employment
hereunder may be terminated under the following circumstances:
(a) Cause. The Company may terminate the Employee's employment at any time
for "Cause." For purposes of this Agreement, "Cause" means:
(i) the material failure or neglect by the Employee to perform his duties
hereunder or any other material breach or violation of any of the terms and
conditions of this Agreement; or
(ii) if the Employee should be convicted of a violation of the laws of the
United States or any state thereof, that violation involving personal dishonesty
or being punishable as a felony.
(b) Disability. If the Employee fails, because of physical or mental
illness or other incapacity, for a period of sixty (60) days in the aggregate
during any twelve-month period to substantially perform his duties under this
Agreement ("Disability"), the Company may terminate the Employee's employment
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(c) Death. The Employee's employment shall terminate immediately upon the
death of the Employee.
(d) Upon Notice by Company. The Company may terminate the Employee's
employment at any time without Cause by giving a Notice of Termination.
(e) Upon Notice by Employee. The Employee may terminate his employment at
any time by giving a Notice of Termination not less than sixty (60) days prior
to the Termination Date.
8. Compensation Upon Termination. Upon termination of the Employee's
employment during the Employment Term, the Employee shall be entitled to the
following benefits:
(a) If the Employee's employment with the Company shall be terminated by
reason of death or disability or by the Company pursuant to Section 7(d), the
Company shall pay the Employee (i) only that portion of his Base Salary which
has been earned and is accrued but unpaid through the Termination Date, (ii) if,
but only if, the Termination Date is after the end of the ninth full month of
the Company's fiscal year, his Annual Bonus prorated for the number of weeks in
such fiscal year during which the Employee has been employed by the Company
under this Agreement, provided that such Annual Bonus has been earned in
accordance with the Bonus Plan for the fiscal year during which the Termination
Date occurs, (iii) reimbursement for reasonable and necessary expenses incurred
by the Employee on behalf of the Company during the period ending on the
Termination Date, and (iv) accrued vacation pay. If the Employee's employment is
terminated by the Company pursuant to Section 7(d), the Company shall also pay
to the Employee severance pay equal to one hundred percent (100%) of the
Employee's Base Salary as at the Termination Date ("Severance Pay Amount") and
shall provide such COBRA benefits as are required under applicable law. The
Severance Pay Amount shall be payable in accordance with the normal payroll
frequency practices beginning in the month following the month in which the
Termination Date occurs, until the Severance Pay Amount is paid in full. The
prorated Annual Bonus shall be payable not later than ninety (90) days following
the end of the Company's fiscal year; provided, however, that notwithstanding
anything in this Agreement to the contrary, the Employee shall not be entitled
to receive any portion of the Annual Bonus for the fiscal year in which the
Termination Date occurs if the Termination Date occurs prior to the end of the
ninth full month of such fiscal year.
(b) If the Employee's employment with the Company shall be terminated (1)
by the Company for Cause, or (2) by the Employee, the Company shall pay the
Employee (i) only that portion of his Base Salary which has been earned and is
accrued but unpaid through the Termination Date, and (ii) reimbursement for
reasonable and necessary expenses incurred by the Employee on behalf of the
Company during the period ending on the Termination Date. The Employee shall not
be entitled to receive any other benefits or compensation, including without
limitation all or any part of any Annual Bonus for the Company's fiscal year
during which the Termination Date occurs.
9. Definitions.
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(a) Notice of Termination. For purposes of the Agreement, a "Notice of
Termination" shall mean a written notice of termination of the Employee's
employment, signed by the CEO if from the Company and by the Employee if from
the Employee, which indicates the specific termination provision in this
Agreement, if any, relied upon.
(b) Termination Date, Etc. For purposes of this Agreement, Termination Date
shall mean (i) in the case of the Employee's death, his date of death, (ii) if
the Employee's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination for Cause
under Section 7(a)(ii) shall not be less than seven (7) days from the date such
Notice of Termination is given and in the case of a termination by the Employee
under Section 7(e) shall not be less than sixty (60) days from the date such
Notice of Termination is given).
10. Restrictive Covenants.
(a) Covenants Against Competition. The Employee acknowledges that (i) the
Company is currently engaged in the business of manufacturing, marketing and
distributing, directly and through licensees (collectively, the "Activities"),
olfactory, cosmetic/skin care/beauty care (including but not limited to
treatment, makeup, and lipstick) and flavor sampling and interactive advertising
products and encapsulated ingredients and printed materials as they relate to
sampling, and is in the process of developing single dosage products and is
currently engaged in the Activities with respect to nail and hair care sampling
products and scented greeting card products, and also engages in, or provides,
creative services, sales promotion services, marketing communications services,
direct mail and response services, data base marketing services, point of sale
merchandising and sampling, multimedia in-store advertising and/or merchandising
(each a "Business Line" and collectively, the "Company Business"); (ii) the
Company Business is conducted throughout North America, Europe (including the
United Kingdom), South America, Asia and Australia (the "Restricted Area");
(iii) the Employee's work for the Company will give the Employee access to trade
secrets of, and confidential information concerning, the Company; and (iv) the
agreements and covenants contained in this Agreement are essential to protect
the business and good will of the Company. Accordingly, the Employee covenants
and agrees as follows:
(i) Non-Compete. During the period of the Employee's employment hereunder
and for a period of one (1) year thereafter or for a period of one year
following the payment in full of any Severance Pay Amount to which the Employee
is entitled, whichever is the longer period (the "Restricted Period"), the
Employee shall not (except by reason of and in the Employee's capacity as an
employee of the Company), and shall not permit any of his affiliates to, either
themselves, or as a stockholder, partner, associate, employee, director,
officer, advisor, consultant, owner, agent, creditor, coventurer or any person,
or otherwise, directly or indirectly, establish, engage in, become employed by
or associated with, any business, trade or occupation which is competitive with
the Company Business in the Restricted Area or which involves the development,
design, licensing, sale, distribution or manufacture of any products or services
which are competitive with the Company Business in the Restricted Area.
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(ii) Interference with Employment Relationships. The Employee shall not,
and will not permit his affiliates to, during the Restricted Period, hire,
solicit or cause others to hire or solicit, or take any action which is
calculated to persuade, or have the effect of persuading, any employees,
representatives or agents of the Company or its affiliates (i) who are engaged
in the Company Business, or (ii) whom the Employee has become aware of, or has
come in contact with, including during the course of the negotiation of this
Agreement and the consummation of the transactions contemplated hereby, to
terminate their employment or other relationship with the Company or its
affiliates.
(iii) Interference with Business Relationships. The Employee shall not and
will not permit any of his affiliates to, during the Restrictive Period,
interfere in any way with the relationship (or prospective relationship which is
under cultivation) between the Company or its affiliates and any customer,
supplier, licensee or prospect of the Company or its affiliates. Without
limiting the foregoing, the Employee shall not request, encourage, advise or
attempt to persuade in any manner (including by making unfavorable or negative
comments with respect to the Company, or its affiliates, products or conduct of
business) any customers, suppliers or licensees of the Company or its affiliates
to curtail or cancel such customer's, supplier's or licensees business
relationship with the Company or its affiliates.
(iv) Confidential Information. The Employee acknowledges that the Company
has a legitimate and continuing proprietary interest in the protection of its
confidential information and that it has invested substantial sums and will
continue to invest substantial sums to develop, maintain and protect
confidential information. The Employee agrees that, during and after the
Restricted Period, the Employee shall, and shall cause his affiliates to, keep
secret and retain in strictest confidence, and shall not use or disclose to any
person whatsoever for their benefit or the benefit of others any proprietary,
confidential or secret matters used in, associated with or related to the
Company or the Company Business ("Confidential Information") including know-how,
technology, financial information, trade secrets, customer lists, names or
identities, details of client or consultant contracts, pricing policies,
operational methods, marketing plans or strategies, product development
techniques or plan, business acquisition plans, new personnel acquisition plans,
methods of manufacture, processes, formulas, designs and design projects,
computer programs, inventions and research projects of the Company, its
affiliates, or any other entity which may hereafter become an affiliate thereof,
learned, acquired or developed by the Employee while employed by the Company.
Notwithstanding the foregoing, Confidential Information shall not include
information which (i) is already in the public domain through no breach of the
Employee or his affiliates of this Agreement or any other agreement with the
Company, (ii) the Employee can provide evidence reasonably satisfactory to the
Company that such information was legally in his possession without restriction
prior to the Effective Date, or (iii) is disclosed in any printed patent or
other publications without breach of any duty of confidentiality.
(v) Property of the Company. All memoranda, notes, lists, records,
engineering drawings, technical specifications and related documents and other
documents or papers (and all copies thereof) relating to the Company or the
Company Business, including such items stored in computer memories, microfiche
or by any other means, made or compiled by or on behalf of the Employee during
the course of the Employee's employment by the Company, or made available to the
Employee during the course of the Employee's employment by the Company
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relating to the Company, its affiliates or any entity which may hereafter become
an affiliate thereof (collectively, "Company Property"), shall be the property
of the Company. The Employee shall promptly deliver to the Company all Company
Property upon the termination of the Employee's employment with the Company, or
at any other time upon request, and shall not retain any Company Property in any
form whatsoever.
(vi) Original Material. The Employee acknowledges that the compensation
paid to the Employee by the Company during the Employee's employment by the
Company is intended to and does compensate the Employee for the Employee's
originality, innovativeness and inventiveness as it relates to the Company
Business. The Employee agrees that any inventions, discoveries, improvements,
ideas, concepts or original works of authorship relating to the Company
Business, including computer apparatus, programs and manufacturing techniques,
whether or not protectable by patent or copyright, that have been originated,
developed, make conceived, authored or reduced to practice by the Employee alone
or jointly with others during the Employee's employment with the Company shall
be the property of and belong exclusively to the Company. The Employee shall
promptly and fully disclose to the Company the origination or development by the
Employee of any such material and shall provide the Company with any information
that it may reasonably request about such material.
(vii) Post-Employment Property. The Employee agrees that any and all
intellectual property which the Employee invents, discovers, originates, makes,
conceives, creates or authorizes either solely or jointly with others and which
is the result of or is substantially derived from Confidential Information is
reduced to writing, drawings or practice after the termination of the Employee's
employment by the Company for any reason, with or without cause, shall be the
sole and exclusive property of the Company. The Employee shall promptly and
fully disclose all such property to the Company.
(b) Rights and Remedies Upon Breach. If the Employee breaches, or threatens
to commit a breach of, any of the provisions contained in Section 10 of this
Agreement (the "Restrictive Covenants"), the Company shall have the following
rights and remedies, each of which rights and remedies shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
(i) Specific Performance. Recognizing that the remedy at law for any breach
or threatened breach of the covenants contained in this Section 10 may be
inadequate, in the event of any breach or threatened breach of such covenants by
the Employee, in addition to any and all other legal and equitable remedies
which may be available, the Company, or its successors or assigns, may obtain
temporary and permanent injunctive relief, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such breach and without notice.
(ii) Accounting. The Company shall have the right and remedy to require the
Employee to account for and pay over to the Company all compensation, profits,
moneys, accruals, increments or other benefits derived or received by the
Employee as the result of any action constituting a breach of the Restrictive
Covenants.
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(iii) Tolling. If the Employee engages in any business in violation of the
Restrictive Covenants, the running of the periods of limitation referred to in
this Section 10 shall be tolled until such violation shall cease and shall begin
to run again only when the Employee shall be in compliance with the provisions
of such covenants, whether voluntarily or pursuant to an order of a court.
(c) Independence of Covenants. The covenants contained in this Section 10
shall be construed as independent of any other provisions of this Agreement, and
the existence of any other claim or cause of action by the Employee against the
Company shall not constitute a defense to the enforcement of the Restrictive
Covenants.
(d) Severability of Covenants. The Employee acknowledges and agrees that
the Restrictive Covenants are reasonable and valid in duration and geographical
scope and in all other respects. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, (i) the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect without regard to the invalid portions, or (ii) such
Restrictive Covenants may be reduced or limited by such court so as to make such
Restrictive Covenants valid and the remainder of the Restrictive Covenants shall
not thereby be affected.
11. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its Successors and Assigns. The term "Company" as used herein shall
include such Successors and Assigns. The term "Successors and Assigns" as used
herein shall mean a corporation or other entity acquiring all or substantially
all the assets and business of the Company, as the case may be (including this
Agreement), whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee, his beneficiaries or legal
representative, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal personal representative.
12. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be sent by nationally-recognized
overnight delivery service or certified, registered or express mail, postage
prepaid, return receipt requested, addressed as set forth below; receipt shall
be deemed to occur on the earlier of the date of actual receipt or receipt by
the sender of confirmation that the delivery or transmission was completed or
that the addressee has refused to accept such delivery or has changed its
address without giving notice of such change as set forth herein.
(a) if to the Company, to:
Arcade Marketing, Inc.
120 East 56th Street
New York, New York 10022
Attention: Chairman & CEO
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with a copy to counsel for the Company:
Baker, Donelson, Bearman & Caldwell
1800 Republic Centre
633 Chestnut Street
Chattanooga, Tennessee 37450
Attention: Thomas O. Helton, Esquire
(b) if to the Employee, to:
Mr. Kenneth A. Budde
5611 Mountain Breeze Drive
Chattanooga, Tennessee 37421
Either party may change its address for notice hereunder by notice to the
other party hereto in accordance with the terms of this Section.
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and the company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a wavier of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
14. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Tennessee without giving
effect to the conflict of law principles thereof.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
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16. Entire Agreement. This Agreement constitute the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Employee has executed this Agreement as of
the day and year first above written.
ARCADE MARKETING, INC.
By
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Title:
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Kenneth A. Budde
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