EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is being made as of the 30th day of June
2000 between MARKETING SERVICES GROUP, INC., a Nevada corporation (the
"Company"), having its principal offices at 333 Seventh Avenue, New York, New
York 10001, and JEREMY BARBERA ("Employee"), an individual residing at: 225
Central Park West, New York, New York 10024.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") desires the
Company to continue to employ the Employee as Chairman and Chief Executive
Officer of the Company and to compensate him therefor; and
WHEREAS, the Employee desires to continue to serve as Chairman and Chief
Executive Officer of the Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual premises and agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment; Term of Employment. The Company hereby employs
Employee and Employee agrees to serve the Company upon the terms and conditions
contained herein, for a term, subject to the provisions of Section 7, commencing
effective as of January 1, 2000 and continuing until December 31, 2002 (the
"Initial Term"). This Agreement shall be automatically renewed annually for an
additional term of three (3) years, unless either party hereto shall provide
ninety (90) days notice to the other party hereto, of their intent not to renew
this Agreement.
2. Duties and Powers as Employee. (a) During the Term, the Employee shall
serve as Chairman and Chief Executive Officer of the Company and shall have the
authority, functions, duties, powers and responsibilities normally associated
with such position and as from time to time may be prescribed by the Board. The
Employee agrees, subject to his election as Chairman and Chief Executive Officer
and without additional compensation, to serve during the Employment Term in such
additional offices of comparable stature and responsibility to which he may be
elected from time to time in the Company's Subsidiaries (as defined in Section
10 below) and to serve as a director and as a member of any committee of the
Board and/or any of the Company's Subsidiaries.
(b) During the Employment Term and subject to the provisions of Section
2(e), (i) the Employee's services shall be rendered on a full-time, exclusive
basis, (ii) he will apply on a full-time basis all of his skill and experience
to the performance of his duties in such employment, and shall report only to
the Board of Directors, (iii) he shall have no other employment or outside
business activities and (iv) unless the Employee otherwise consents, the
location for the performance of his services shall be at the discretion of the
Board of Directors, subject to such reasonable travel as the performance of his
duties in the business of the Company may require.
(c) Employee agrees that the Company may obtain a life insurance policy on
the life of Employee naming the Company as the beneficiary thereof. The Company
will also purchase a life insurance policy for Employee equal to 2X the Base
Salary whereby the family of the Employee will serve as beneficiary.
(d) During the Employment Term, the Employee shall not, directly or
indirectly, without the prior written consent of the Board, render any services
to any Person (as defined in Section 10 below), other than the Company and its
Subsidiaries and other Persons in which the Company may have an interest, or
acquire any interest of any type in any such other Person that is in competition
with the Company or any of its Subsidiaries or in conflict with his full-time,
exclusive position as a senior executive officer of the Company; provided,
however, that the foregoing shall not be deemed to prohibit the Employee from
(i) acquiring, solely as an investment, securities of any person which are
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and which are publicly traded, so long as he is
not part of any group required to make any filing under Section 13(d) of the
Exchange Act in respect of such person and such securities do not constitute two
(2%) percent or more of any class of outstanding securities of such person, (ii)
acquiring, solely as an investment, any securities of any person (other than a
person that has outstanding securities covered by the preceding clause (i)) so
long as he remains a passive investor in such person and does not become part of
any control group thereof and so long as such person is not, directly or
indirectly, in competition with the Company or any of its Subsidiaries, or
(iii)(A) serving on the boards of directors of a reasonable number of other
corporations (none of which are in competition with the Company or its
Subsidiaries) or the boards of a reasonable number of trade associations and/or
charitable organizations or, with the prior written consent of the Board, to
provide consulting services for any such corporation, trade association and/or
charitable organization, (B) engaging in charitable activities and community
affairs and (C) managing his personal investments and affairs; provided that the
activities referred to in this clause (iii) do not in the aggregate interfere in
any material respect with the proper performance of his duties and
responsibilities as the Company's Chairman and Chief Executive Officer. For
purposes of the foregoing, a person shall be deemed to be in competition with
the Company or any of its Subsidiaries if it (or its Subsidiaries or Affiliates
(as defined in Section 10 below)) is then engaged in any line of business that
is substantially the same as any line of business in which the Company or any of
its Subsidiaries is engaged.
3. Compensation. (a) As base compensation for his services hereunder, the
Company shall pay Employee a base salary (the "Base Salary"), payable in weekly
installments, at the annual rate of Five Hundred Thousand ($500,000) Dollars for
the first full year of the Employment Term and an amount, not less than the Base
Salary, for each other full year of the Employment Term.
(b) In addition to the Base Salary, Employee shall receive for his services
hereunder options (the "Options") under the Company's 1991 Stock Option Plan
(the "Plan") to purchase eight hundred twenty five thousand (825,000) shares of
the common stock, $.01 par value per share, of the Company at a per share
exercise price equal to the fair market value of the Company's common stock on
June 30, 2000, which Options shall vest and become exercisable as follows: 50%
shall vest on December 31, 2000, 25% shall vest on December 31, 2001 and , 25%
shall vest on December 31, 2002, in accordance with the Company's current
practice and the standard terms and conditions of the Plan. In the event of a
termination of this Agreement pursuant to Section 7(d) or Section 8, any option
in the Company held by the Employee (including but not limited to the options
described herein) shall to the extent then unvested become immediately vested
and exercisable and shall remain so exercisable for a period of eighteen months
following such termination.
(c) During the Employment Term, the Employee shall be entitled to
participate in all employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or its employees generally,
as such plans or programs may be in effect from time to time, including without
limitation, pension, savings, 401(k) and other retirement plans or programs,
medical, dental, hospitalization, short-term and long-term disability and life
insurance plans, and any other employee benefit plans or programs that may be
sponsored by the Company from time to time, whether funded or unfunded. Employee
will continue to be entitled to receive automobile, parking and health club
benefits at the expense of the Company.
(d) Employee shall be eligible to receive bonuses, in a maximum amount
equal to up to one hundred percent (100%) of the Base Salary, for each year of
the Employment Term if and as determined by the Board of Directors of the
Company, subject to the approval of the Compensation Committee of the Company
(the "Compensation Committee"). Such bonuses, if any, shall be based upon the
Company meeting certain goals as established by the Compensation Committee, as
customized to the Employee's performance hereunder.
4. Expenses; Vacations. Employee shall be entitled to reimbursement for
reasonable travel and other out-of-pocket expenses reasonably incurred in the
performance of his duties hereunder, upon submission and approval of written
statements and bills in accordance with the then regular procedures of the
Company. Employee shall be entitled to twenty (20) days paid vacation time in
accordance with the then regular procedures of the Company governing executives
as determined from time to time by the Company's Board of Directors and
communicated, in writing, to Employee. Up to a maximum of five (5) days of
unused vacation from any one year of the Employment Term may be carried over
into the subsequent year; provided, however, that Employee may not use more than
twenty-five (25) vacation days in any single year. In consideration for
Employee's right to carry over unused vacation, Employee hereby waives his right
to be paid for any unused vacation time.
5. Representations and Warranties of Employee. Employee represents and
warrants to the Company that (a) Employee is under no contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder; (b) Employee's execution of this Agreement does not require
the consent of any person; (c) Employee is under no physical or mental
disability that would hinder his performance of duties under this Agreement; and
(d) this Agreement constitutes the valid and binding obligation of the Employee
enforceable against the Employee in accordance with its terms.
6. Restrictive Covenants. During the three (3) years following the end of
the Employee's employment by the Company (the "Covenant Period"):
(a) (i) The Employee agrees that he will not, directly or indirectly,
during the Covenant Period, for his own benefit or for the benefit of any other
Person, knowingly solicit the professional services of any Person employed by
the Company, any Subsidiary or any Affiliate thereof or any Person who had been
employed within three (3) months prior thereto, or otherwise interfere with the
relationship between the Company, any Subsidiary or any Affiliate thereof and
any of such Persons.
(ii) The Employee agrees that he will not, directly or indirectly, solicit
or encourage any Person who was a customer of the Company, any Subsidiary or any
Affiliate thereof during the three (3) years prior to the date of such
termination to cease doing business with the Company or to do business with any
other Person that is engaged in the same or similar business to that of the
Company.
(iii) If this Agreement shall be terminated other than pursuant to Section
7(a), then Employee, for a period of one (1) year from the date of termination,
shall not, directly or indirectly, solicit or encourage any Person who was a
customer of the Company, any Subsidiary or any Affiliate thereof during the
three (3) years prior to the date of such termination to cease doing business
with the Company or to do business with any other Person that is engaged in the
same or similar business to that of the Company.
(b) The Employee recognizes and acknowledges that, in connection with his
employment with the Company, he will have access to valuable trade secrets and
confidential information of the Company and its Subsidiaries and Affiliates
including, but not limited to, customer and supplier lists, business methods and
processes, marketing, promotional, pricing and financial information and data
relating to employees and agents (collectively, "Confidential Information") and
that such Confidential Information is being made available to the Employee only
in connection with the furtherance of his employment with the Company. The
Employee agrees that during the Employment Term and thereafter, he will not use
or disclose any of such Confidential Information to any Person, except that
disclosure of Confidential Information by the Employee will be permitted: (i) to
the Company, its Subsidiaries and Affiliates and their respective advisors; (ii)
if such Confidential Information has previously become available to the public
through no fault of the Employee; (iii) if required by any court or governmental
agency or body or is otherwise required by law; or (iv) if expressly consented
to by the Company.
(c) The parties agree that a violation of any provision of any of the
foregoing agreements not to compete or disclose, or any provision thereof, will
cause irreparable damage to the Company, and the Company shall be entitled
(without any requirement of posting a bond or other security), in addition to
any other rights and remedies which it may have, at law or in equity, to an
injunction enjoining and restraining the Employee from doing or continuing to do
any such act or any other violations or threatened violations of this Section 6.
(d) Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee now or hereafter
during any period he is employed by the Company may, directly or indirectly, own
or develop relating to the fields in which the Company may then be engaged shall
belong to the Company; and, forthwith upon request of the Company, Employee
hereby agrees that he shall execute all such assignments and other documents and
take all such other action as the Company may reasonably request in order to
vest in the Company all of his right, title, and interest in and to Such
Inventions, free and clear of all liens, charges, and encumbrances.
(e) The Employee acknowledges and agrees that the restrictive covenants set
forth in this Section 6 (the "Restrictive Covenants") are reasonable and valid
in geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full force and effect, without regard to
the invalid or unenforceable parts.
(f) If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable for any reason, such court shall have
the power to modify such Restrictive Covenant, or any part thereof, and, in its
modified form, such Restrictive Covenant shall then be valid and enforceable.
7. Termination. (a) Notwithstanding anything herein contained, if on or
after the date hereof and prior to the end of the Employment Term, Employee is
terminated For Cause (as defined below), then the Company shall have the right
to give notice of termination of Employee's services hereunder as of a date to
be specified in such notice (which may not be less than fourteen (14) days
following the mailing of such notice), and this Agreement shall terminate on the
date so specified. Termination "For Cause" shall mean Employee shall (i) be
convicted of a felony crime, (ii) commit any act, or omit to take any action, in
bad faith and to the material detriment of the Company, (iii) commit an act of
moral turpitude to the material detriment of the Company, (iv) commit an act of
fraud against the Company, (v) refuse to implement, or adhere to, reasonable
policies or directives of the Board, or (vi) materially breach any term of this
Agreement (including Employee's voluntary resignation or termination of this
Agreement prior to the end of the Employment Term) and fail to correct such
breach within ten (10) business days after written notice thereof; provided,
that in the case of a termination pursuant to (ii), (iii), (iv), (v) or (vi),
such determination must be made by the Board after a meeting at which Employee
was given an opportunity to explain such actions. In the event this Agreement is
terminated For Cause, then Employee shall be entitled to receive only his salary
at the rate provided in Section 3 to the date on which termination shall take
effect plus any compensation which is accrued but unpaid on the date of
termination.
(b) In the event that Employee shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his duties
hereunder for a period of sixty (60) consecutive or non-consecutive days during
the Employment Term, then this Agreement shall terminate upon notice in writing
to Employee, and no further compensation (other than accrued but unpaid salary
or bonus through the date of termination) shall be payable to Employee, except
as may otherwise be provided under any disability insurance policy or similar
instrument.
(c) In the event that Employee shall die during the Employment Term, then
this Agreement shall terminate on the date of Employee's death, and no further
compensation (other than accrued but unpaid salary or bonus through the date of
death) shall be payable to Employee, except as may otherwise be provided under
any insurance policy or similar instrument.
(d) In the event that this Agreement is terminated Without Cause, Employee
shall receive severance pay consisting of a single lump sum distribution (with
no present value adjustment) equal to 2.99 times the compensation paid during
the preceding 12 months, and all outstanding stock options shall fully vest and
become immediately exercisable.
8. Merger, Etc. In the event of a future disposition of the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, sale of stock, or otherwise, then the Company may elect to
assign this Agreement and all of its rights and obligations hereunder to the
acquiring or surviving corporation. Employee shall have the right to terminate
this Agreement by written notice given within three (3) months of the date of
such acquisition. Upon such termination, Employee shall receive severance pay
consisting of a single lump sum distribution (with no present value adjustment)
equal to 2.99 times the sum of the employee's annual base salary plus the
maximum annual bonus as outlined in section 3(d)), and all outstanding stock
options shall fully vest and become immediately exercisable.
9. Certain Additional Payments by the Company. Anything in this Agreement
to the contrary notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up" Payment) in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up payment equal to the Excise Tax imposed upon the
Payments.
(a) Subject to the provisions of Section 9 (c), all determination required
to be made under this Section 9, including whether and when a Gross-Up payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the certified
public accounting firm which serves as the Company's auditor immediately prior
to the Change of Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company or the Executive. In the
event that such Accounting Firm declines to act, the Company shall appoint
another nationally recognized accounting firm (which is acceptable to the
Executive) to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9 (c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive. (b) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than fifteen days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company, (iii) cooperate with the Company in
good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall ear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall defend, indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of expenses. Without limitation on the foregoing
provisions of this Section 9 (c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearing and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
defend, indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority. (d) If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9 (c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 9 (c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 9 (c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid. 10. Certain Definitions. As used herein, the following
terms shall have the following meanings:
"Affiliate" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "control," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
"Subsidiary" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than fifty (50%)
percent of the total voting power of shares of capital stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
person, (ii) such person and one or more Subsidiaries or Affiliates of such
person or (iii) one or more Subsidiaries or Affiliates of such person.
11. Survival. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement (unless otherwise stated
therein) shall survive the termination of this Agreement, irrespective of any
investigation made by or on behalf of any party.
12. Modification. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
13. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given, at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 13). In the case of a notice
to the Company, a copy of such notice (which copy shall not constitute notice)
shall be delivered to Camhy Karlinsky & Stein LLP, 1740 Broadway, 16th Floor,
New York, New York 10019, Attention: Alan I. Annex, Esq. Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 13. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address, which notice shall be deemed given at the time of receipt
thereof.
14. Waiver. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing and
signed by the party against whose waiver is asserted.
15. Withholding. All payments required to be made by the Company to the
Employee under this Agreement shall be subject to withholding taxes, Social
Security and other payroll deductions in accordance with the Company's policies
applicable to senior executives of the Company and the provisions of any
applicable employee benefit plan or program of the Company.
16. Binding Effect. Employee's rights and obligations under this Agreement
shall not be transferable by assignment or otherwise, such rights shall not be
subject to encumbrance or the claims of Employee's creditors, and any attempt to
do any of the foregoing shall be void. The provisions of this Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and those who are its assigns under Section 8.
17. Headings. The headings in this Agreement are solely for the convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
18. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by, and construed in accordance with, the laws of the State of New
York, without given effect to the rules governing the conflicts of laws. Each of
the parties hereto hereby irrevocably submits to the jurisdiction of the courts
of the State of New York, County of New York, and of any federal court located
in the State of New York, County of New York, in connection with any action or
proceeding arising out of or relating to, or a breach of, this Agreement. Each
of the parties hereto agrees that such court may award reasonable legal fees and
expenses to the prevailing party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
MARKETING SERVICES GROUP, INC.
By: /s/ Alan Annex
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Alan Annex, Secretary
By: /s/ Jeremy Barbera
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Jeremy Barbera,
Chairman & CEO
