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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 0-21467
FIRST PRIORITY GROUP, INC
-------------------------
(Exact name of small business issuer as specified in its charter)
New York 11-2750412
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
270 Duffy Avenue
Hicksville, New York 11801
--------------------------
(Address of principal executive offices)
(516) 938-1010
--------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 4, 1996: 5,883,883 shares of common stock
Transitional Small Business Format (check one)
Yes |_| No |X|
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Part I Financial Information
Item 1. Financial Statements
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
ASSETS
Current Assets:
Cash and cash equivalents $ 951,808
Accounts receivable, less allowance for
doubtful accounts of $11,500 1,233,219
Inventory 6,521
Other current assets 20,528
-----------
Total current assets 2,212,076
Property and equipment, net 166,831
Security deposits 10,750
Other 7,619
-----------
$ 2,397,276
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,177,483
-----------
Total current liabilities 1,177,483
-----------
Shareholders' equity:
Common stock, $.015 par value, authorized
20,000,000 shares; issued 6,150,550 shares 92,258
Additional paid-in capital 1,942,643
Deficit (725,108)
-----------
1,309,793
Less common stock held in treasury, at
cost, 266,667 shares (90,000)
-----------
Total shareholders' equity 1,219,793
-----------
$ 2,397,276
===========
The accompanying notes are an integral part of these financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
September 30, September 30,
1996 1995
------------- -------------
(Unaudited) (Unaudited)
Revenue from operations $3,599,722 $2,423,933
Costs of revenue (principally charges incurred
at repair facilities for services) 2,992,848 2,027,974
---------- ----------
Gross profit 606,874 395,959
Operating expenses:
Selling, general and administration 475,024 393,284
---------- ----------
Income from operations 131,850 2,675
Interest and other income 6,502 1,699
---------- ----------
Income before income taxes 138,352 4,374
Provision for income taxes 1,500
---------- ----------
Net income $ 136,852 $ 4,374
========== ==========
Income per common share 0.02 NIL
========== ==========
The accompanying notes are an integral part of these financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
September 30, September 30,
1996 1995
------------- -------------
(Unaudited) (Unaudited)
Revenue from operations $9,650,709 $7,346,860
Costs of revenue (principally charges incurred
at repair facilities for services) 7,930,763 6,031,671
---------- ----------
Gross profit 1,719,946 1,315,189
Operating expenses:
Selling, general and administration 1,422,635 1,154,595
---------- ----------
Income from operations 297,311 160,594
Interest and other income 22,287 3,879
---------- ----------
Income before income taxes 319,598 164,473
Provision for income taxes 3,000 1,000
---------- ----------
Net income $ 316,598 $ 163,473
========== ==========
Income per common share 0.04 0.03
========== ==========
The accompanying notes are an integral part of these financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED
September 30, September 30,
1996 1995
------------- -------------
Cash flows from operating activities:
Net income $ 316,598 $ 163,473
--------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 28,305 21,434
Changes in assets and liabilites:
Accounts receivable (163,433) (112,427)
Other current assets (4,374) (6,813)
Inventory (6,521)
Security deposits (175)
Accounts payable and
accrued expenses 118,195 251,169
--------- ---------
Total adjustments (28,003) 153,363
--------- ---------
Net cash provided by operating
activities 288,595 316,836
--------- ---------
Cash flows from investing activities,
additions to property and equipment (78,597) (73,486)
--------- ---------
Cash flows used in financing activities,
borrowing (repayment) of notes payable (37,264) 39,865
--------- ---------
Net increase in cash and cash equivalents 172,734 283,215
Cash and cash equivalents at beginning of period 779,074 126,918
--------- ---------
Cash and cash equivalents at end of period $ 951,808 $ 410,133
========= =========
The accompanying notes are an integral part of these financial statements.
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FIRST PRIORITY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. UNAUDITED FINANCIAL STATEMENTS
The information contained in the condensed consolidated financial
statements for the period ended September 30, 1996 is unaudited, but includes
all adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's annual
statements and notes. These financial statements should be read in conjunction
with the Company's annual financial statement as reported in its most recent
annual report on Form 10-KSB.
2. BUSINESS OF THE COMPANY
The business of the Company was started in 1983. Thereafter, the original
company was merged into the present company after its formation on June 28,
1985, presently named First Priority Group, Inc. (the "Company"). The Company is
engaged directly and through its wholly-owned subsidiaries in automotive fleet
management and administration of automotive repairs for businesses, insurance
companies and members of affinity groups. The services provided by the Company
include the repair and maintenance of vehicles through approximately 8,000
independently owned and/or nationally recognized repair facilities. The Company
has recently added two new divisions: FPG Recovery Services, which provides
subrogation and premium recovery services directly to insurance companies; and
FPG Direct Marketing, which will market the Company's services as well as hard
goods through non-financial data-based businesses. The Company's office is
located at 270 Duffy Avenue, Hicksville, New York 11801 and its telephone number
is (516) 938-1010.
3. RESULTS OF OPERATIONS
The unaudited results of operations for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year.
4. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
The computation of earnings per common and common equivalent share is based
upon the weighted average number of outstanding common shares during the period
plus, when their effect is dilutive, common shares subject to stock options and
warrants.
The number of common and common equivalent shares utilized in the per share
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computations were 7,870,350 and 4,883,883 in the three months ended September
30, 1996 and September 30, 1995, respectively.
The number of common and common equivalent shares utilized in the per share
computations were 7,788,453 and 4,883,883 in the nine months ended September 30,
1996 and September 30, 1995, respectively.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
For the three months ended September 30, 1996 the Company's revenues from
operations increased by $1,175,789 (48.5%) to $3,599,722 from $2,423,933 for the
three months ended September 30, 1995. Gross profit increased $210,915 to
$606,874 for the third quarter of 1996 from $395,959 during the same period of
1995. For the nine months ended September 30, 1996 the Company's revenues from
operations increase by $2,303,849 (31.4%) to $9,650,709 from $7,346,860 for the
nine months ended September 30, 1995.
The gross profit percentage increased .6% to 16.9% for the three months
ended September 30, 1996 as compared to 16.3% for the same period of 1995. For
the nine months ended September 30, 1996 the gross profit percentage decreased
.1% to 17.8% from 17.9% for the same period of 1995. Fluctuations in gross
profit are attributable to the revenue derived from the sales mix of fleet
repair, direct appraisal and repair, and consumer oriented auto club programs.
Selling, general and administrative expenses increased $81,740 (20.8%) to
$475,024 for the third quarter of 1996 from $393,284 during the same period of
1995. For the first nine months of 1996 selling, general and administrative
expenses increased $268,040 (23.2%) to $1,422,635 from $1,154,595 during the
same period of 1995. The increase in selling, general, and administrative
expenses is related to increased salary expenses due to contractual agreements,
wage increases and an increase in labor force necessary to prepare the Company
to manage its increased business activities and the start up of the FPG Direct
Marketing and FPG Recovery Services Divisions.
The Company believes that it has adequate liquidity to support its cost of
operations for the foreseeable future.
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Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amendment to the Certificate of Incorporation
10.1 The Company's 1995 Incentive Stock Plan filed herein.
10.2 Employment Agreement between the Company and Paul Zucker dated
September 3, 1996 filed herein.
10.3 Employment Agreement between the Company and Steven Zucker dated
September 3, 1996 filed herein.
10.4 Employment Agreement between the Company and Donald Shanley dated
September 3, 1996 filed herein.
10.5 Employment Agreement between the Company and Barry J. Spiegel dated
September 3, 1996 filed herein.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
FIRST PRIORITY GROUP, INC.
Date: November 4, 1996 By: /s/ Michael Karpoff
-----------------------------
Michael Karpoff
Co-Chairman of the
Board of Directors,
President and Co-Chief
Executive Officer
Date: November 4, 1996 By: /s/ Barry Siegel
-----------------------------
Barry Siegel
Co-Chairman of the
Board of Directors, Co-
Chief Executive Officer,
Treasurer, Secretary and
Principal Financial and
Accounting Officer
11
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INDEX TO EXHIBITS
Exhibit Description Page No.
3.1 Amendment to the Certificate of Incorporation 13
10.1 The Company's 1995 Incentive Stock Plan filed herein. 16
10.2 Employment Agreement between the Company and
Paul Zucker dated September 3, 1996 filed herein. 22
10.3 Employment Agreement between the Company and
Steven Zucker dated September 3, 1996 filed herein. 30
10.4 Employment Agreement between the Company and
Donald Shanley dated September 3, 1996 filed herein. 38
10.5 Employment Agreement between the Company and
Barry J. Spiegel dated September 3, 1996 filed herein. 46
27 Financial Data Schedule 56
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Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
First Priority Group, Inc.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
* * * * *
WE, THE UNDERSIGNED, Michael Karpoff and Barry Siegel, being
respectively the Chairman of the Board and Secretary of First Priority Group,
Inc. hereby certify:
1. The name of the corporation is First Priority Group, Inc..
2. The certificate of incorporation of said corporation was filed by the
Department of State on the Twenty-Eighth day of June, 1985.
3. (a) The certificate of incorporation is amended to delete the present
Paragraph Fourth and to substitute the following in its place:
(b) To effect the foregoing, Paragraph Fourth relating to Authorized
Shares, Common Stock and the Preferred Stock is amended to read
as follows:
Fourth
A. Authorized Shares.
The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is 21,000,0000 shares, of which 1,000,000
shares shall be Preferred Stock, having a par value of $0.01 per share
("Preferred Stock"), and 20,000,000 shall be Common Stock, having a par value of
$0.015 per share ("Common Stock"). The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and issuance thereof in one
or more classes or series without the approval of the stockholders of the
Corporation.
B. Common Stock.
(1) Relative Rights.
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificate or certificates of designation filed to establish the respective
series of Preferred Stock. Each share of Common Stock shall have the same
relative rights as and be identical in all respects to all the other shares of
Common Stock.
(2) Voting Rights.
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the stockholders, except as otherwise provided in this
Certificate of Incorporation or by applicable law.
(3) Dividends.
Whenever there shall have been paid or declared and set aside for payment,
to the holders of shares
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of any class of stock having preference over the Common Stock as to the payment
of dividends, the full amount of dividends and of sinking fund or retirement
payments, if any, to which such holders are respectively entitled in preference
to the Common Stock, then the holders of record of the Common Stock and any
class or series of stock entitled to participate therewith as to dividends,
shall be entitled to receive dividends, when, as, and if declared by the Board
of Directors, out of any assets legally available for the payment of dividends
thereon.
(4) Dissolution, Liquidation, Winding Up.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate therewith in whole or in part, as to distribution of
assets, shall become entitled to participate in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid, or set aside
for payment, to the holders of any class of stock having preference over the
Common Stock in the event of dissolution, liquidation or winding up, the full
preferential amounts (if any) to which they are entitled, and shall have paid or
provided for payment of all debts and liabilities of the Corporation.
C. Preferred Stock.
(1) Issuance, Designations, Powers, Etc.
The Board of Directors expressly is authorized, subject to limitations
prescribed by the New York Business Corporation Law and the provisions of this
Certificate of Incorporation, to provide, by resolution and by filing an
amendment to the Certificate of Incorporation pursuant to the New York Business
Corporation Law, for the issuance from time to time of the shares of Preferred
Stock in one or more series, to establish from time to time the number of shares
to be included in each series, and to fix the designation, powers, preferences
and other rights of the shares of each such series and to fix the
qualifications, limitations and restrictions thereon, including, but without
limiting the generality of the foregoing, the following:
(a) the number of shares constituting that series and the distinctive
designation of that series;
(b) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) whether that series shall have voting rights, in addition to
voting rights provided by law, and, if so, the terms of such voting rights;
(d) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provisions for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the dates upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption dates;
(f) whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
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(g) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(h) any other relative powers, preferences and rights of that series,
and qualifications, limitations or restrictions on that series.
(2) Dissolution, Liquidation, Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock of
each series shall be entitled to receive only such amount or amounts as shall
have been fixed by the certificate of designations or by the resolution or
resolutions of the Board of Directors providing for the issuance of such series.
4. The amendment was authorized in the following manner:
Shareholders approval at Annual Shareholders Meeting held on September
30, 1996
IN WITNESS WHEREOF, we have signed this certificate on the Fourth day
of November, 1996 and we affirm the statements contained therein as true under
penalties of perjury.
/s/ Michael Karpoff
--------------------------------------
Michael Karpoff, Chairman of the Board
/s/ Barry Siegel
--------------------------------------
Barry Siegel, Secretary
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Exhibit 10.1
1995 Incentive Stock Plan
of
First Priority Group, Inc.
1. PURPOSES OF THE PLAN. This 1995 Incentive Stock Plan (the "Plan") is
designed to provide an incentive to employees (including directors and officers
who are employees), directors (who are not employees) and to consultants (who
are neither employees nor directors) of First Priority Group, Inc., a New York
corporation (the "Company"), and its present and future Subsidiary corporations,
as defined in Paragraph 19, and to offer an additional inducement in obtaining
the services of such individuals. The Plan provides for the grant of Incentive
Stock Options ("ISO") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and Non-statutory Options ("NSO"), but
the Company makes no warranty as to the qualification of any option as an ISO
under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12,
the aggregate number of shares of Common Stock $.015 par value per share of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed Three Million (3,000,000). Such shares of Common Stock may in the
discretion of the Board of Directors of the Company (the "Board of Directors")
consist either in whole or in part of authorized, but unissued shares of Common
Stock or shares of Common Stock held in the treasury of the Company. The Company
shall at all times during the term of the Plan reserve and keep available such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of the Plan. Subject to the provisions of Paragraph 13, any shares
of Common Stock subject to an option which for any reason expires, is canceled
or is terminated, unexercised or which ceases for any reason to be exercisable
shall again become available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a Stock
Option Committee (the "Committee") consisting of not less than three members of
the Board of Directors each of whom shall be a "disinterested person" within the
meaning of Rule 16b-3 (or any successor rule or regulation promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). A majority of
the members of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, and
any acts approved in writing by all members without a meeting shall be the acts
of the Committee.
Should the Board of Directors not appoint a Stock Option Committee, or not be
able to appoint to the Committee three members of the Board of Directors who
shall each be a "disinterested person" within the meaning of Rule 16b-3 (or any
successor rule or regulation promulgated under the Exchange Act, then the Plan
shall be administered by the Board of Directors, with all rights and obligations
of the Committee as set forth in the Plan, until such time as a properly
qualified Committee is appointed.
Subject to the express provisions of the Plan, the Committee shall have the
authority, in its sole discretion, except as set forth in Paragraph 4A, to
determine the employees, directors and consultants who shall receive options:
the times when they shall receive options; whether an option granted to an
employee shall be an ISO or a NSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole or in part
or in installments, and , if installments, the number of shares of Common Stock
to subject to each installment; whether the installments shall be cumulative;
the date each installment shall become exercisable and the term of each
installment; whether to accelerate the date of exercise of any installment;
whether shares of Common Stock may be issued on exercise of an option as partly
paid, and if so, the dates when future installments of the exercise price shall
become due and the amounts of such
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installments; the exercise price of each option; the form of payment of the
exercise price; the amount, if any, necessary to satisfy the Company's
obligation to withhold taxes; whether to restrict the sale or other disposition
of the shares of Common Stock acquired upon the exercise of an option and to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
Contract (as described in Paragraph 11), including without limitations,
contingencies relating to entering into a covenant not to compete with the
Company and its Subsidiaries, a division, a product line or other category,
and/or the period of continued employment for the optionee with the Company, or
its Subsidiaries, and to determine whether such contingencies have been met; to
construe the respective Contract and the Plan, with consent of the optionee, to
cancel or modify the option, provided such option as modified would be permitted
to be granted on such date under the terms of the Plan; and to make all other
determinations necessary or advisable for administering the Plan. The
determinations of the Committee on matters referred to in this Paragraph 3 shall
be conclusive. No member or former member of the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
option granted hereunder.
4. ELIGIBILITY OF GRANTS. The Committee may, consistent with the purpose of the
Plan, grant options from time to time, to employees (including officers and
directors who are employees), to directors who are not employees ("Non-employee
Directors")and/or consultants (who are neither employees or directors) of the
Company or any of its Subsidiaries. Options granted shall cover such number of
shares of Common Stock as the Committee may determine provided, however, that
the aggregate fair market value (determined as of the time the option with
respect to the stock is granted) of stock with respect to which ISO's are
exercisable for the first time by any individual during any calendar year (under
all plans of the individual's employer corporation and its Parent and Subsidiary
corporation) exceeds $100,000, such options shall be treated as options which
are not incentive stock options. The $100,000 limitation shall be applied by
taking options into account in the order in which they were granted.
A. Non-employee Director Stock Options.
(a) Eligibility. Each Non-Employee Director shall be granted options to
purchase shares of Common Stock in accordance with this Paragraph 4A. All
options granted under this Paragraph 4A shall constitute a NSO.
(b) Grants of Stock Option. Each Non-employee Director shall be granted
NSOs as follows:
(i) Time of grant. On the date following the end of the Company's
fiscal year in 1996 and each year thereafter, each Non-employee Director who is
a Non-employee Director after the end of the Company's fiscal year shall be
granted an option to purchase 15,000 shares of Common Stock at a purchase price
equal to the fair market value of a share of Common Stock on the date of grant
of such option.
(ii) Option Period and Exercisability. Each option granted under this
Paragraph 4A shall be exercisable in part or in full at any time after the grant
thereof provided: (1) each such option shall expire ten (10) ten years after its
date of grant or on such earlier date as is hereinafter provided and (2) no
Common Stock acquired upon the exercise of such options shall be sold or
transferred by the person exercising such option during the six month period
following the date of exercise of such option if such person shall be a director
of the Company on the date such option is exercised. An exercisable option, or
portion thereof, may be exercised in whole or in part only with respect to whole
shares of Common Stock. Options granted under this Paragraph 4A shall be
exercisable in accordance with Paragraph 7.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee, provided, however, that the
exercise price shall not be less than 100 percent of the fair market value of
the Common Stock subject to such option on the date of grant; and further
provided, that if, at the time an ISO is granted, the optionee owns, or is
deemed to own in excess of 10
17
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percent of the total combined voting power of all classes of stock of the
corporation or its Subsidiary corporations, the exercise price of such ISO shall
not be less than 110 percent of the fair market value of the Common Stock
subject to such ISO on the date of grant.
6. TERM. The term of each option granted pursuant to the Plan shall be such
term as is established by the Committee, in its sole discretion, at or before
the time such option is granted: provided, however, that the term of each ISO
granted pursuant to the Plan shall be for a period not exceeding 10 years from
the date of grant thereof, and further provided, that if, at the time an ISO is
granted, the optionee owns, or is deemed to own, stock possessing more than 10
percent of total combined voting power of all classes of stock of the Company,
or any of its Subsidiaries, the term of the ISO shall be for a period not
exceeding five years from the date of grant. Options shall be subject to earlier
termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company, at
its principal office (at present 270 Duffy Avenue, Hicksville, New York 11801,
Attention: Stock Option Committee), stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
thereof (or the amount due on exercise if the Contract permits, with previously
acquired shares of Common Shares having an aggregate fair market value, on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock.
A person entitled to receive Common Stock upon the exercise of an option shall
not have the rights of a shareholder with respect to such shares of Common Stock
until the date of issuance of a stock certificate is issued, any option holder
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a shareholder with respect
to such previously acquired shares.
In no case, may a fraction of a share of Common Stock be purchased or issued
under the Plan.
8. TERMINATION OF EMPLOYMENT. Any holder of an option granted to an
employee whose employment with the Company (and/or its Subsidiaries) has
terminated for any reason other than his or her death or Disability (as defined
in Paragraph 19) may exercise such option, to the extent exercisable on the date
of termination, at any time within three months after the date of termination;
but not thereafter and in no event after the expiration of the term of the
option; provided, however, that if his or her employment shall be terminated
either (a) for cause, or (b) without the consent of the Company, said option
shall be terminate immediately. Options granted to employees under the Plan
shall not be affected by any change in the status of the holder so long as he
continues to be a full-time employee of the Company, or any of its Subsidiaries
(regardless of having been transferred from one corporation to another).
For purposes of the Plan, an employment relationship shall be deemed to exist
between an individual and a corporation if, at the time of the determination,
the individual was an employee of such a corporation for purposes of Section
422(a) of the Code. As a result, an individual on military, sick leave or other
bona fide leave of absence shall continue to be considered an employee for
purposes of the Plan during such period if the leave does not exceed 90 days,
or, if longer, so long as the individual's right to reemployment with the
Company (or related corporation) is guaranteed whether by statute or by
contract. If the period of leave exceeds 90 days and individual's right to
reemployment is not guaranteed by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.
An option granted to a consultant may be exercised at any time during its term.
It shall not be affected by a change in the holder's relationship with the
Company or its Subsidiaries.
An option granted to a director, who is not an employee of the Company or a
Subsidiary, may exercise such option, to the extent it is exercisable on the
date of the end of his or her term as a member of the Board of
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Directors, at any time within one (1) year after the end of said term, unless
the Committee affirmatively extends the term of said option. Notwithstanding the
previous sentence, should the director be removed as a member of the Board of
Directors, for cause, the option shall terminated immediately.
Nothing in the Plan or in any option granted under the Plan shall confer on any
individual any right to continue in the employ, or to serve as a consultant or a
director of the Company or a Subsidiary, or interfere in any way with the right
of the Company, or any of its Subsidiaries to terminate the holder's employment
or consulting or remove the holder as a member of the Board of Directors, at any
time for any reason whatsoever without liability to the Company of any of its
Subsidiaries.
9. DEATH OF DISABILITY OF AN OPTIONEE. If an employee or director to whom
an option was granted dies (a) while he is employed by the Company, or its
Subsidiaries; or (b) within 90 days after termination of his employment (unless
such termination was for cause or without the consent of the Company; or (c)
while serving as a member of the Board of Directors of the Company; or (d)
within 90 days after the expiration of his or her term as a member of the Board
of Directors; or (e) within one year following the termination of his employment
by reason of Disability, the option may be exercised, to the extent exercisable
on the date of death, by his or her executor, administrator or other person at
the time entitled by law to his rights under such option, at any time within one
year after death, but not thereafter and in no event after the expiration of the
term of the option.
The holder of an option granted to an employee whose employment has terminated
by reason of Disability may exercise such option, to the extent exercisable upon
the effective date of such termination, at any time within one year after such
date, but not thereafter and in no event after the expiration of the term of the
option.
The term of an option granted to a consultant shall not be affected by the death
or Disability of the consultant. In such event, the option may be exercised by
the executor, administrator or other person a the time entitled by law to his
rights under such option to the extent exercisable at the time of the
consultant's death or Disability at any time during the term of the option, but
not thereafter.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of shares of Common Stock upon exercise. Nothing shall be construed as
requiring the Company to register shares subject to any option under the
Securities Act.
The Committee may require the optionee to execute and deliver to the Company his
or her representation and warranty in form and substance satisfactory to the
Committee, that the shares of Common Stock to be issued upon exercise of the
option are being acquired by the optionee for his own account, for investment
only and not with a view to the resale or distribution thereof. In addition, the
Committee may require the optionee to represent and warrant in writing that any
subsequent resale or distribution of shares of Common Stock by such optionee
will be made only pursuant to (i) a Registration Statement under the Securities
Act which is effective and current with respect to the shares of Common Stock
being sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the optionee shall provide
the Company with a favorable written opinion of counsel in form and substance
satisfactory to the Company, as to the applicability of such exemption to the
proposed sale or distribution.
In addition, if at any time the committee shall determine in its discretion that
the listing or qualification of the shares of Common Stock subject to such
option on any securities exchange or under any applicable law, or the consent,
or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of an option, or the issue of
shares of Common Stock thereunder, such
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option may not be exercised in whole or in part, unless such listing,
qualification, consent or approval shall have been effective or obtained free of
any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate contract which shall be duly executed by the Company and the
optionee, shall contain such terms and conditions not inconsistent herewith as
may be determined by the Committee (the "Contract").
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provisions of the Plan, in the event of any change in the outstanding Common
Stock by reason of a stock split, stock dividend, recapitalization, merger in
which the Company is the surviving corporation, split-up, combination or
exchange or the like, the aggregate number and kind of shares subject to the
Plan, the aggregate number and kind of shares subject to each outstanding option
and the exercise price thereof shall be appropriately adjusted by the Board of
Directors, including options granted pursuant to Paragraph 4A, whose
determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company, (b) a merger
in which the Company is not the surviving corporation or a consolidation, or (c)
any other capital reorganization in which more than 50 percent of the shares of
Common Stock of the Company entitled to vote are exchanged, any outstanding
options shall become exercisable in full.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Board of Directors, without
further approval of the Company's shareholders , may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time in such
respects as it may deem advisable, including without limitation, in order to
fully comply with the Code and Rule 16b-3 promulgated under the Exchange Act.
The Plan may not be amended without consent of the Company's shareholders for
those changes that require shareholders' approval under the Code. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing option affected thereby, adversely affect his rights
under such option. The power of the Committee to construe and administer any
options granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution,
and options may be exercised, during the lifetime of the holder thereof, only by
him or his legal representatives. Except to the extent provided above, options
may not be assigned, transferred, pledged, hypothecated or disposed of in any
way (whether by operation of law or otherwise) and shall not be subject to
execution attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and or shares of
Common Stock to be issued with respect thereto having an aggregate fair market
value equal to the amount which it determines is necessary to satisfy its
obligation to withhold Federal, state and local income taxes incurred by reason
of the grant or exercise of an option, its disposition, or the disposition of
the underlying shares of Common Stock. Alternatively, the Company may require
the holder to pay to the Company such amount, in cash, promptly upon demand. The
Company shall not be required to issue any shares of Common Stock pursuant to
any such option until all required payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise of
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from the registration requirements of the Securities Act, (b)
implement the provisions of the Plan or any agreement between the Company and
the optionee with respect to such shares of Common Stock, or (c) permit the
Company to determine the occurrence of a "disqualifying disposition", as
described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
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The Company shall pay all issuance taxes with respect to the issuance of shares
of Common Stock upon the exercise of an option granted under the Plan, as well
as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for its general corporate purpose as the
Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the shareholders substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary(ies). Term Subsidiary(ies) shall have the same definition as
"Subsidiary Corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition as "Parent
Corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent Corporation" shall mean
any corporation which engages with the company, its Parent or any Subsidiary in
a transaction to which Section 424(a) of the Code applies (or would apply if the
option assumed or substituted were an ISO), or any Parent or any subsidiary of
such corporation.
(d) Disability. The term "Disability" shall mean a permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted hereunder and
all related matters shall be governed by, and construed in accordance with, the
laws of the State of New York.
21. PARTIAL INVALIDITY. The invalidity or illegality of any provision
herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. This Plan shall be subject to approval by the
holders of a majority of the Company's outstanding shares of Common Stock
entitled to vote thereon. No options granted pursuant to this Plan shall be
exercised prior to such approval. Notwithstanding the foregoing, if this Plan is
not approved by a vote of the shareholders of the Company prior to the
expiration of the twelve month period commencing on the date this Plan is
adopted by the Board of Directors, then this Plan shall be terminated.
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Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated September 3, 1996 by and
between First Priority Group, Inc., a New York corporation with an address at
270 Duffy Avenue, Hicksville, New York (the "Company"), and PAUL ZUCKER, an
individual residing at 62 Buttonwood Drive, Dix Hills, New York 11746
("Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on
September 3, 1996 (the "Commencement Date") and shall continue for a period of
twenty-eight (28) months thereafter, terminating on December 31, 1998 (the
"Expiration Date"), unless earlier terminated under the terms and conditions
herein (the "Employment Term").
3. Duties
(a) Employee's responsibilities shall be to develop and manage the
direct mail marketing division of the Company, FPG Direct (the "Division"), with
full responsibility for the financial performance of the Division, and to
perform such other duties and services involving sales, marketing and program
development as shall from time to time be designated by the Board of Directors
or the Co-Chief Executive Officers ("CCEO") of the Company, or such other
executives or employees of the Company as may be designated by the Board of
Directors or the CCEO, as the case may be. Employee shall be based in Nassau or
Suffolk counties during the Employment Term and shall have the title of
President, FPG Direct.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
(a) Base Salary. Employee shall receive a salary, payable pursuant to
the Company's normal
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payroll procedures in place from time to time, during the Employment Term, in
the amount of:
Period Salary
- ------ ------
September 1, 1996 thru August 31, 1997 $100,000
September 1, 1997 thru August 31, 1998 $110,000
September 1, 1998 thru December 31, 1998 $125,000
subject to all required federal, state and local payroll deductions.
(b) Incentive Compensation. The Employee shall receive Incentive
Compensation equal to five percent (5%) of the pre-tax net income of the
Division paid no later than ninety (90) days following the end of the Company's
fiscal year.
(c) Stock Options. The Employee shall be granted an Incentive Stock
Option (the "Stock Option") under the Company's stock option plan providing the
Employee the right to purchase 250,000 shares of the Company's common stock at
the fair market price of the Company's common stock on the Commencement Date.
The Company will provide the Employee with a stock option contract for his
signature which will set out the terms of the option (the "Stock Option
Contract"). Such Stock Option shall be exercisable as follows:
(i) Definitions for use exclusively in this Paragraph 5:
(A) "Division Profit". The pre-tax net profit of the
Division at the end of each fiscal year ended during the Employment Term.
(B) "Base Profit". The highest Division Profit in the
preceding completed fiscal years attained by the Division during the Employment
Term. The Base Profit for the first fiscal year ended during Employment Term
shall be Zero Dollars ($0).
(C) "Option Profit". The difference resulting in subtracting
the Base Profit from the Division Profit from the most recently completed fiscal
year.
(D) "Division Profit Level 1". One Million and Five Hundred
Thousand Dollars ($1,500,000)
(E) "Division Profit Level 2".Three Million Dollars
($3,000,000).
(ii) The Employee shall be permitted to exercise Stock Options,
for the remaining term of the Stock Option Contract, with the right to purchase
the Company's common stock in the amounts as calculated using the following
formula:
(A) The Employee shall be able to exercise the Stock Options
equal to 500 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit be less than the Division
Profit Level 1.
(B) The Employee shall be able to exercise the Stock Options
equal to 625 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit equal or exceed Division
Profit Level 1, but not equal or exceed the Division Profit Level 2.
(C) The Employee shall be able to exercise the Stock Options
equal to 750 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit equal or exceed Division
Profit Level 2.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a Corporate American Express Card that he
shall use solely for business expenses which are reasonable and necessary for
the Employee to perform his duties under this Agreement in accordance with
policies established from time to time by the Company
7. Employee Benefits. During the Employment Term, Employee shall
participate, to the extent he is
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eligible under the terms and conditions thereof, in any health, life or
disability insurance or other employee benefit plans maintained by Employer (but
nothing herein shall obligate the Company to establish or maintain any such
benefit plan). Employee will not be covered under the Company's health insurance
until the Employee has been employed by the Company for more than ninety (90)
days.
8. Vacation and Sick Leave. Employee shall be entitled to three (3) weeks
of vacation per annum during the Employment Term, to be taken at such times as
may be mutually agreed upon by the Company and Employee. The Employee shall be
entitled to one (1) week of sick leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's salary payable pursuant to Paragraph 5 through
the date of Employee's death shall be paid to his estate. Employee's estate will
not be entitled to any other compensation upon termination of this Agreement
pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate, the
Company may, upon at least ten (10) days' prior written notice given at any time
after the expiration of such 45 or 90-day period, as the case may be, to
Employee of its intention to do so, terminate this Agreement as of such date as
may be set forth in the notice. In case of such termination, Employee shall be
entitled to receive his salary payable pursuant to Paragraph 5 through the date
of termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause (as
hereinafter defined). Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee the unpaid prorated salary pursuant to
Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) As used herein, the term "For Cause" shall mean:
(i) any breach of this Agreement by Employee that, in the case of
a breach that may be cured or remedied, is not cured or remedied to the
reasonable satisfaction of the Company within 30 days after notice is given by
the Company to Employee, setting forth in reasonable detail the nature of such
breach;
(ii) Employee's failure to perform his duties and services
hereunder to the satisfaction of the Board of Directors or CCEO of the Company
that, in the case of any such failure that may be cured or remedied, is not
cured or remedied to the reasonable satisfaction of the Company within 30 days
after notice is given by the Company to Employee, setting forth in reasonable
detail the nature of such failure;
(iii) any act, or failure to act, by Employee in bad faith and to
the detriment of the Company; or
(iv) commission by Employee of an act involving moral turpitude,
dishonesty, unethical business conduct, or any other conduct which significantly
impairs the reputation of the Company, its subsidiaries or affiliates.
(v) the conviction of the Employee of a felony, including the
plea of nolo contendere
(c) The Employee may terminate this Agreement should the Company not
provide the Division at least $500,000 for its use (the "Funds"), subject to the
terms of the loan agreement between the Company and its bank. The Funds provided
to the Division for its use shall be charged to the Division at the rate of the
Prime Rate plus 1/2% per annum, or such other rate that the Company should
borrow from its bank.
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(d) The Company may terminate this Agreement, upon thirty (30) days
written notice should the Division not attain, for three (3) consecutive months,
at least fifty percent (50%) of the pre-tax net income projections as set forth
in the "Direct Marketing Forecast & Projections Summary" attached to this
Agreement as Exhibit 1 (the "Forecast") and has not attained at least fifty
percent (50%) of the pre-tax net income projections as set forth in the Forecast
for the aggregate period commencing in September, 1996 through the date of such
termination notice.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "Confidential Information"). Employee agrees
that in consideration of the execution of this Agreement by the Company, he will
not use, or disclose to any third party, any of the Confidential Information,
other than as required to perform his services hereunder or as directed or
authorized by the Company's Board of Directors or President.
(b)
(i) Employee will not, at any time prior to the Expiration Date,
or if the Employee's employment shall terminate prior to the Expiration Date,
then for a period of one (1) year after the Employee ceases to be employed by
the Company, engage in or participate in any business activity, including, but
not limited to, acting as a director, officer, employee, agent, independent
contractor, partner, consultant, licensor or licensee, franchiser or franchisee,
proprietor, syndicate member, or shareholder that operates a program similar to
the program of the Division, conducted by the Division during the term of this
Agreement.
(ii) Any time during his employment by the Company or after the
Employee ceases to be employed by the Company, divulge to any persons, firms or
corporations, other than the Company (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third parties to
use, any such Confidential Information; and
(iii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited, for or on
behalf of the Employee or third parties, any business from persons, firms,
corporations or other entities who were at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company; and
(iv) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
accept or cause or authorize directly or indirectly to be accepted, for or on
behalf of the Employee or third parties, any business from any such customers of
this Company; and
(v) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited for
employment, for or on behalf of the Employee or third parties, any persons who
were at any
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<PAGE>
time within one year prior to the cessation of his employment hereunder,
employees of the Company; and
(vi) At any time during his employment by the Company and for a
period of one year after the Employee ceases to be employed by the Company,
employ or cause or authorize directly or indirectly to be employed, for or on
behalf of the Employee or third parties, any such employees of the Company; and
(vii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
compete with the Company in any fashion or work for, advise, be a consultant to
or an officer, director, agent or employee of or otherwise associate with any
person, firm, corporation or other entity which is engaged in or plans to engage
in a business or activity which competes with any business or activity engaged
in by the Company, or which is under development or in a planning stage by the
Company.
(viii) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(i), 11(b)(iii), 11(b)(iv) and 11(b)(vii) shall
not be operative for the one (1) year period following the Employee's cessation
of employment by the Company, so long as the Employee and/or any organization
with which he becomes associated does not engage in any business or activity
which competes or interferes with any business or activity engaged in by the
Company, or which is under development or is in a planning stage by the Company.
(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Employment Term for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
(a) Any patents, inventions, discoveries, applications, processes or
designs, devised, planned, applied, created, discovered or invented by Employee
in the course of Employee's employment under this Agreement and which pertain to
any aspect of the Company's or its respective subsidiaries' or affiliates'
businesses shall be the sole and absolute property of the Company, and Employee
shall make prompt report thereof to the Company and promptly execute any and all
documents reasonably requested to assure the Company the full and complete
ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
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13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non- solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Barry Siegel, Co-Chairman of the Board, with
a copy to Muenz & Meritz, P.C., Three Hughes Place, Dix Hills, New York 11746,
Attention: Lawrence A. Muenz, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
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18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
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20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST PRIORITY GROUP, INC.
By: /s/ Barry Siegel Dated:
------------------------- ------------------------------
Title: Co-Chairman of the Board
Paul Zucker
By: /s/ Paul Zucker Dated:
------------------------- ------------------------------
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Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated September 3, 1996 by and
between First Priority Group, Inc., a New York corporation with an address at
270 Duffy Avenue, Hicksville, New York (the "Company"), and STEVEN ZUCKER, an
individual residing at 3245 Gary Lane, Merrick, New York 11566 ("Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on
September 3, 1996 (the "Commencement Date") and shall continue for a period of
twenty-eight (28) months thereafter, terminating on December 31, 1998 (the
"Expiration Date"), unless earlier terminated under the terms and conditions
herein (the "Employment Term").
3. Duties
(a) Employee's responsibilities shall be to develop and manage the
direct mail marketing division of the Company, FPG Direct (the "Division"), with
full responsibility for the financial performance of the Division, and to
perform such other duties and services involving sales, marketing and program
development as shall from time to time be designated by the Board of Directors,
the Co-Chief Executive Officers ("CCEO") of the Company, the President of the
Division, or such other executives or employees of the Company as may be
designated by the Board of Directors or the CCEO, as the case may be. Employee
shall be based in Nassau or Suffolk counties during the Employment Term and
shall have the title of Vice President, FPG Direct.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
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(a) Base Salary. Employee shall receive a salary, payable pursuant to
the Company's normal payroll procedures in place from time to time, during the
Employment Term, in the amount of:
Period Salary
- ------ ------
September 1, 1996 thru August 31, 1997 $100,000
September 1, 1997 thru August 31, 1998 $110,000
September 1, 1998 thru December 31, 1998 $125,000
subject to all required federal, state and local payroll deductions.
(b) Incentive Compensation. The Employee shall receive Incentive
Compensation equal to five percent (5%) of the pre-tax net income of the
Division paid no later than ninety (90) days following the end of the Company's
fiscal year.
(c) Stock Options. The Employee shall be granted an Incentive Stock
Option (the "Stock Option") under the Company's stock option plan providing the
Employee the right to purchase 250,000 shares of the Company's common stock at
the fair market price of the Company's common stock on the Commencement Date.
The Company will provide the Employee with a stock option contract for his
signature which will set out the terms of the option (the "Stock Option
Contract"). Such Stock Option shall be exercisable as follows:
(i) Definitions for use exclusively in this Paragraph 5:
(A) "Division Profit". The pre-tax net profit of the
Division at the end of each fiscal year ended during the Employment Term.
(B) "Base Profit". The highest Division Profit in the
preceding completed fiscal years attained by the Division during the Employment
Term. The Base Profit for the first fiscal year ended during Employment Term
shall be Zero Dollars ($0).
(C) "Option Profit". The difference resulting in subtracting
the Base Profit from the Division Profit from the most recently completed fiscal
year.
(D) "Division Profit Level 1". One Million and Five Hundred
Thousand Dollars ($1,500,000)
(E) "Division Profit Level 2". Three Million Dollars
($3,000,000).
(ii) The Employee shall be permitted to exercise Stock Options,
for the remaining term of the Stock Option Contract, with the right to purchase
the Company's common stock in the amounts as calculated using the following
formula:
(A) The Employee shall be able to exercise the Stock Options
equal to 500 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit be less than the Division
Profit Level 1.
(B) The Employee shall be able to exercise the Stock Options
equal to 625 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit equal or exceed Division
Profit Level 1, but not equal or exceed the Division Profit Level 2.
(C) The Employee shall be able to exercise the Stock Options
equal to 750 shares for every $10,000 of Option Profit, subject to the terms of
the Stock Option Contract, should the Division Profit equal or exceed Division
Profit Level 2.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a Corporate American Express Card that he
shall use solely for business expenses which are reasonable and necessary for
the Employee to perform his duties under this Agreement in accordance with
policies established from time to time by the Company
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7. Employee Benefits. During the Employment Term, Employee shall
participate, to the extent he is eligible under the terms and conditions
thereof, in any health, life or disability insurance or other employee benefit
plans maintained by Employer (but nothing herein shall obligate the Company to
establish or maintain any such benefit plan). Employee will not be covered under
the Company's health insurance until the Employee has been employed by the
Company for more than ninety (90) days.
8. Vacation and Sick Leave. Employee shall be entitled to three (3) weeks
of vacation per annum during the Employment Term, to be taken at such times as
may be mutually agreed upon by the Company and Employee. The Employee shall be
entitled to one (1) week of sick leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's salary payable pursuant to Paragraph 5 through
the date of Employee's death shall be paid to his estate. Employee's estate will
not be entitled to any other compensation upon termination of this Agreement
pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate, the
Company may, upon at least ten (10) days' prior written notice given at any time
after the expiration of such 45 or 90-day period, as the case may be, to
Employee of its intention to do so, terminate this Agreement as of such date as
may be set forth in the notice. In case of such termination, Employee shall be
entitled to receive his salary payable pursuant to Paragraph 5 through the date
of termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause (as
hereinafter defined). Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee the unpaid prorated salary pursuant to
Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) As used herein, the term "For Cause" shall mean:
(i) any breach of this Agreement by Employee that, in the case of
a breach that may be cured or remedied, is not cured or remedied to the
reasonable satisfaction of the Company within 30 days after notice is given by
the Company to Employee, setting forth in reasonable detail the nature of such
breach;
(ii) Employee's failure to perform his duties and services
hereunder to the satisfaction of the Board of Directors or CCEO of the Company
that, in the case of any such failure that may be cured or remedied, is not
cured or remedied to the reasonable satisfaction of the Company within 30 days
after notice is given by the Company to Employee, setting forth in reasonable
detail the nature of such failure;
(iii) any act, or failure to act, by Employee in bad faith and to
the detriment of the Company; or
(iv) commission by Employee of an act involving moral turpitude,
dishonesty, unethical business conduct, or any other conduct which significantly
impairs the reputation of the Company, its subsidiaries or affiliates.
(v) the conviction of the Employee of a felony, including the
plea of nolo contendere
(c) The Employee may terminate this Agreement should the Company not
provide the Division at least $500,000 for its use (the "Funds"), subject to the
terms of the loan agreement between the Company and its bank. The Funds provided
to the Division for its use shall be charged to the Division at the rate of
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the Prime Rate plus 1/2% per annum, or such other rate that the Company should
borrow from its bank.
(d) The Company may terminate this Agreement, upon thirty (30) days
written notice should the Division not attain at least fifty percent (50%) of
the pre-tax net income projections as set forth in the "Direct Marketing
Forecast & Projections Summary" attached to this Agreement as Exhibit 1 (the
"Forecast") and has not attained at least fifty percent (50%) of the pre-tax net
income projections as set forth in the Forecast for the aggregate period
commencing in September, 1996 through the date of such termination notice.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "Confidential Information"). Employee agrees
that in consideration of the execution of this Agreement by the Company, he will
not use, or disclose to any third party, any of the Confidential Information,
other than as required to perform his services hereunder or as directed or
authorized by the Company's Board of Directors or President.
(b)
(i) Employee will not, at any time prior to the Expiration Date,
or if the Employee's employment shall terminate prior to the Expiration Date,
then for a period of one (1) year after the Employee ceases to be employed by
the Company, engage in or participate in any business activity, including, but
not limited to, acting as a director, officer, employee, agent, independent
contractor, partner, consultant, licensor or licensee, franchiser or franchisee,
proprietor, syndicate member, or shareholder that operates a program similar to
the program of the Division, conducted by the Division during the term of this
Agreement.
(ii) Any time during his employment by the Company or after the
Employee ceases to be employed by the Company, divulge to any persons, firms or
corporations, other than the Company (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third parties to
use, any such Confidential Information; and
(iii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited, for or on
behalf of the Employee or third parties, any business from persons, firms,
corporations or other entities who were at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company; and
(iv) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
accept or cause or authorize directly or indirectly to be accepted, for or on
behalf of the Employee or third parties, any business from any such customers of
this Company; and
(v) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to
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be solicited for employment, for or on behalf of the Employee or third parties,
any persons who were at any time within one year prior to the cessation of his
employment hereunder, employees of the Company; and
(vi) At any time during his employment by the Company and for a
period of one year after the Employee ceases to be employed by the Company,
employ or cause or authorize directly or indirectly to be employed, for or on
behalf of the Employee or third parties, any such employees of the Company; and
(vii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
compete with the Company in any fashion or work for, advise, be a consultant to
or an officer, director, agent or employee of or otherwise associate with any
person, firm, corporation or other entity which is engaged in or plans to engage
in a business or activity which competes with any business or activity engaged
in by the Company, or which is under development or in a planning stage by the
Company.
(viii) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(i), 11(b)(iii), 11(b)(iv) and 11(b)(vii) shall
not be operative for the one (1) year period following the Employee's cessation
of employment by the Company, so long as the Employee and/or any organization
with which he becomes associated does not engage in any business or activity
which competes or interferes with any business or activity engaged in by the
Company, or which is under development or is in a planning stage by the Company.
(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Employment Term for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
(a) Any patents, inventions, discoveries, applications, processes or
designs, devised, planned, applied, created, discovered or invented by Employee
in the course of Employee's employment under this Agreement and which pertain to
any aspect of the Company's or its respective subsidiaries' or affiliates'
businesses shall be the sole and absolute property of the Company, and Employee
shall make prompt report thereof to the Company and promptly execute any and all
documents reasonably requested to assure the Company the full and complete
ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
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13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non- solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Barry Siegel, Co-Chairman of the Board, with
a copy to Muenz & Meritz, P.C., Three Hughes Place, Dix Hills, New York 11746,
Attention: Lawrence A. Muenz, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
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18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST PRIORITY GROUP, INC.
By: /s/ Barry Siegel Dated:
------------------------- ------------------------------
Title: Co-Chairman of the Board
Steven Zucker
By: /s/ Steven Zucker Dated:
------------------------- ------------------------------
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Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated September 3, 1996 by and
between First Priority Group, Inc., a New York corporation with an address at
270 Duffy Avenue, Hicksville, New York (the "Company"), and DONALD SHANLEY, an
individual residing at 69 Bay Avenue, Huntington, New York 11743 ("Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on August
19, 1996 (the "Commencement Date") and shall continue for a period of
approximately twenty-eight (28) months thereafter, terminating on December 31,
1998 (the "Expiration Date"), unless earlier terminated under the terms and
conditions herein (the "Employment Term").
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3. Duties
(a) Employee's responsibilities shall be to develop and manage the
subrogation division of the Company, FPG Recovery Services Division (the
"Division"), with full responsibility for the financial performance of the
Division, and to perform such other duties and services involving sales,
marketing and program development as shall from time to time be designated by
the Board of Directors or the Co-Chief Executive Officers ("CCEO") of the
Company, or such other executives or employees of the Company as may be
designated by the Board of Directors or the CCEO, as the case may be. Employee
shall be based in Nassau or Suffolk counties during the Employment Term and
shall have the title of President, FPG Recovery Services Division.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
(a) Base Salary. The Employee shall not receive any Base Salary
throughout the term of this Agreement.
(b) Incentive Compensation. The Employee shall receive Incentive
Compensation equal to ten percent (10%) of the pre-tax net income of the
Division payable monthly.
(c) Stock Options. The Employee shall be granted an Incentive Stock
Option (the "Stock Option") under the Company's stock option plan providing the
Employee the right to purchase 500,000 shares of the Company's common stock at
the fair market price of the Company's common stock on the Commencement Date.
The Company will provide the Employee with a stock option contract for his
signature which will set out the terms of the option (the "Stock Option
Contract"). Such Stock Option shall be exercisable as follows:
(i) Definitions for use exclusively in this Paragraph 5:
(A) "Division Profit". The pre-tax net profit of the
Division at the end of each fiscal year ended during the Employment Term.
(B) "Base Profit". The highest Division Profit in the
preceding completed fiscal years attained by the Division during the Employment
Term. The Base Profit for the first fiscal year ended during Employment Term
shall be Zero Dollars ($0).
(C) "Option Profit". The difference resulting in subtracting
the Base Profit from the Division Profit from the most recently completed fiscal
year.
(D) "Division Profit Level 1". One Million and Five Hundred
Thousand Dollars ($1,500,000)
(E) "Division Profit Level 2".Three Million Dollars
($3,000,000).
(ii) The Employee shall be permitted to exercise Stock Options,
for the remaining term of the Stock Option Contract, with the right to purchase
the Company's common stock in the amounts as calculated using the following
formula:
(A) The Employee shall be able to exercise the Stock Options
equal to 1,000 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit be less than the
Division Profit Level 1.
(B) The Employee shall be able to exercise the Stock Options
equal to 1,250 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Level 1, but not equal or exceed the Division Profit Level 2.
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(C) The Employee shall be able to exercise the Stock Options
equal to 1,500 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Level 2.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a Corporate American Express Card that he
shall use solely for business expenses which are reasonable and necessary for
the Employee to perform his duties under this Agreement in accordance with
policies established from time to time by the Company
7. Employee Benefits
During the Employment Term, Employee shall participate, to the extent he is
eligible under the terms and conditions thereof, in any health, life or
disability insurance or other employee benefit plans maintained by Employer (but
nothing herein shall obligate the Company to establish or maintain any such
benefit plan). Employee will not be covered under the Company's health insurance
until the Employee has been employed by the Company for more than ninety (90)
days.
8. Vacation and Sick Leave
Employee shall be entitled to three (3) weeks of vacation per annum during
the Employment Term, to be taken at such times as may be mutually agreed upon by
the Company and Employee. The Employee shall be entitled to one (1) week of sick
leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's compensation payable pursuant to Paragraph 5
through the date of Employee's death shall be paid to his estate. Employee's
estate will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate, the
Company may, upon at least ten (10) days' prior written notice given at any time
after the expiration of such 45 or 90-day period, as the case may be, to
Employee of its intention to do so, terminate this Agreement as of such date as
may be set forth in the notice. In case of such termination, Employee shall be
entitled to receive his compensation payable pursuant to Paragraph 5 through the
date of termination. Employee will not be entitled to any other compensation
upon termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause (as
hereinafter defined). Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee the unpaid prorated compensation pursuant to
Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) As used herein, the term "For Cause" shall mean:
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(i) any breach of this Agreement by Employee that, in the case of
a breach that may be cured or remedied, is not cured or remedied to the
reasonable satisfaction of the Company within 30 days after notice is given by
the Company to Employee, setting forth in reasonable detail the nature of such
breach;
(ii) Employee's failure to perform his duties and services
hereunder to the satisfaction of the Board of Directors or CCEO of the Company
that, in the case of any such failure that may be cured or remedied, is not
cured or remedied to the reasonable satisfaction of the Company within 30 days
after notice is given by the Company to Employee, setting forth in reasonable
detail the nature of such failure. Failure of the Division to attain at least
fifty percent (50%) of the pre-tax net income projections as set forth in the
"Subrogation Forecast & Projections Summary" attached to this Agreement as
Exhibit 1 (the "Forecast") and failure to attain at least fifty percent (50%) of
the pre-tax net income projections as set forth in the Forecast for the
aggregate period commencing in September, 1996 through the date of such
termination notice, shall not be reason for termination of the Employee For
Cause; or
(iii) any act, or failure to act, by Employee in bad faith and to
the detriment of the Company; or
(iv) commission by Employee of an act involving moral turpitude,
dishonesty, unethical business conduct, or any other conduct which significantly
impairs the reputation of the Company, its subsidiaries or affiliates.
(v) the conviction of the Employee of a felony, including the
plea of nolo contendere
(c) The Company may terminate this Agreement, upon thirty (30) days
written notice should the Division not attain at least fifty percent (50%) of
the pre-tax net income projections as set forth in the "Subrogation Forecast &
Projections Summary" attached to this Agreement as Exhibit 1 (the "Forecast")
and has not attained at least fifty percent (50%) of the pre-tax net income
projections as set forth in the Forecast for the aggregate period commencing in
September, 1996 through the date of such termination notice.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, patient and case records, price lists, marketing and
sales strategies and procedures, operational and equipment techniques, business
plans and systems, quality control procedures and systems, special projects and
technological research, including projects, research and reports for any entity
or client or any project, research, report or the like concerning sales or
manufacturing or new technology, employee compensation plans and any other
information relating thereto, and any other records, files, drawings,
inventions, discoveries, applications or processes which are not in the public
domain (all the foregoing shall be referred to herein as the "Confidential
Information"). Employee agrees that in consideration of the execution of this
Agreement by the Company, he will not use, or disclose to any third party, any
of the Confidential Information, other than as required to perform his services
hereunder or as directed or authorized by the Company's Board of Directors or
President.
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(b)
(i) Employee will not, at any time prior to the Expiration Date,
or if the Employee's employment shall terminate prior to the Expiration Date,
then for a period of one (1) year after the Employee ceases to be employed by
the Company, engage in or participate in any business activity, including, but
not limited to, acting as a director, officer, employee, agent, independent
contractor, partner, consultant, licensor or licensee, franchiser or franchisee,
proprietor, syndicate member, or shareholder that operates a program similar to
the program of the Division, conducted by the Division during the term of this
Agreement.
(ii) Any time during his employment by the Company or after the
Employee ceases to be employed by the Company, divulge to any persons, firms or
corporations, other than the Company (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third parties to
use, any such Confidential Information; and
(iii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited, for or on
behalf of the Employee or third parties, any business from persons, firms,
corporations or other entities who were at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company; and
(iv) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
accept or cause or authorize directly or indirectly to be accepted, for or on
behalf of the Employee or third parties, any business from any such customers of
this Company; and
(v) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited for
employment, for or on behalf of the Employee or third parties, any persons who
were at any time within one year prior to the cessation of his employment
hereunder, employees of the Company; and
(vi) At any time during his employment by the Company and for a
period of one year after the Employee ceases to be employed by the Company,
employ or cause or authorize directly or indirectly to be employed, for or on
behalf of the Employee or third parties, any such employees of the Company; and
(vii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
compete with the Company in any fashion or work for, advise, be a consultant to
or an officer, director, agent or employee of or otherwise associate with any
person, firm, corporation or other entity which is engaged in or plans to engage
in a business or activity which competes with any business or activity engaged
in by the Company, or which is under development or in a planning stage by the
Company.
(viii) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(iii) and 11(b)(iv) shall not be operative for
the one (1) year period following the Employee's cessation of employment by the
Company, so long as the Employee and/or any organization with which he becomes
associated does not engage in any business or activity which competes or
interferes with any business or activity engaged in by the Company, or which is
under development or is in a planning stage by the Company.
(ix) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(i) and 11(b)(vii) shall not be operative for
the one (1) year period following the Employee's cessation of employment by the
Company, so long as the Employee and/or any organization with which he becomes
associated does not engage in any business or activity which competes or
interferes with any business or activity engaged in by the Company, or which is
under development or is in a planning stage by the Company, except for engaging
in the business of collection, location and skip tracing services, and the
business of the Division which is the business of subrogation.
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(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Employment Term for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
(a) Any patents, inventions, discoveries, applications, processes or
designs, devised, planned, applied, created, discovered or invented by Employee
in the course of Employee's employment under this Agreement and which pertain to
any aspect of the Company's or its respective subsidiaries' or affiliates'
businesses shall be the sole and absolute property of the Company, and Employee
shall make prompt report thereof to the Company and promptly execute any and all
documents reasonably requested to assure the Company the full and complete
ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non- solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with
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any person (other than the Company) requiring or restricting the use or
disclosure of any confidential information or the provision of any employment,
consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Barry Siegel, Co-Chairman of the Board, with
a copy to Muenz & Meritz, P.C., Three Hughes Place, Dix Hills, New York 11746,
Attention: Lawrence A. Muenz, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law
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rules thereof. Nothing contained in this Agreement shall be construed so as to
require the commission of any act contrary to law, and whenever there is any
conflict between any provision of this Agreement and any statute, law,
ordinance, order or regulation, contrary to which the parties hereto have no
legal right to contract, the latter shall prevail, but in such event any
provision of this Agreement so affected shall be curtailed and limited only to
the extent necessary to bring it within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST PRIORITY GROUP, INC.
By: /s/ Barry Siegel Dated:
------------------------- ------------------------------
Title: Co-Chairman of the Board
Donald Shanley
By: /s/ Donald Shanley Dated:
------------------------- ------------------------------
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Exhibit 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated September 3, 1996 by and
between First Priority Group, Inc., a New York corporation with an address at
270 Duffy Avenue, Hicksville, New York (the "Company"), and BARRY J. SPIEGEL, an
individual residing at 1097 Longview, Fort Lauderdale, Florida 33326
("Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on
September 1, 1996 (the "Commencement Date") and shall continue for a period of
twenty-eight (28) months thereafter, terminating on December 31, 1998 (the
"Expiration Date"), unless earlier terminated under the terms and conditions
herein (the "Employment Term").
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3. Duties
(a) Employee's responsibilities shall be to develop and manage the
affinity group services division of the Company, FPG Affinity Services Division
(the "Division"), with full responsibility for the financial performance of the
Division, and to perform such other duties and services involving sales,
marketing and program development as shall from time to time be designated by
the Board of Directors or the Co-Chief Executive Officers ("CCEO") of the
Company, or such other executives or employees of the Company as may be
designated by the Board of Directors or the CCEO, as the case may be. Employee
shall be based in Nassau or Suffolk counties during the Employment Term and
shall have the title of President, FPG Affinity Services Division.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
(a) Base Salary. Commencing on January 1, 1997, the Employee shall
receive an annual salary, payable pursuant to the Company's normal payroll
procedures in place from time to time, during the Employment Term, in the amount
of One Hundred Thousand Dollars ($100,000), subject to all required federal,
state and local payroll deductions.
(b) Incentive Compensation. The Employee shall receive Incentive
Compensation equal to twenty-five percent (25%) of the pre-tax net income of the
Division payable monthly, until the Employee's Base Salary and Incentive
Compensation equals Twenty Thousand and Eight Hundred Thirty-three Dollars and
33/100 Cents ($20,833.33) per month. Once the Employee's Base Salary and
Incentive Compensation exceeds Twenty Thousand and Eight Hundred Thirty-three
Dollars and 33/100 Cents ($20,833.33) per month, any excess Incentive
Compensation shall be paid at the rate of ten percent (10%) of the pre-tax net
income of the Division.
(c) Stock Options. The Employee shall be granted an Incentive Stock
Option (the "Stock Option") under the Company's stock option plan providing the
Employee the right to purchase 500,000 shares of the Company's common stock at
the fair market price of the Company's common stock on the Commencement Date.
The Company will provide the Employee with a stock option contract for his
signature which will set out the terms of the option (the "Stock Option
Contract"). Such Stock Option shall be exercisable as follows:
(i) Definitions for use exclusively in this Paragraph 5:
(A) "Division Profit". The pre-tax net profit of the
Division at the end of each fiscal year ended during the Employment Term.
(B) "Base Profit". The highest Division Profit in the
preceding completed fiscal years attained by the Division during the Employment
Term. The Base Profit for the first fiscal year ended during Employment Term
shall be Zero Dollars ($0).
(C) "Option Profit". The difference resulting in subtracting
the Base Profit from the Division Profit from the most recently completed fiscal
year.
(D) "Division Profit Level 1". One Million and Five Hundred
Thousand Dollars ($1,500,000)
(E) "Division Profit Level 2".Three Million Dollars
($3,000,000).
(ii) The Employee shall be permitted to exercise Stock Options,
for the remaining term of the Stock Option Contract, with the right to purchase
the Company's common stock in the amounts as
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calculated using the following formula:
(A) The Employee shall be able to exercise the Stock Options
equal to 1,000 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit be less than the
Division Profit Level 1.
(B) The Employee shall be able to exercise the Stock Options
equal to 1,250 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Level 1, but not equal or exceed the Division Profit Level 2.
(C) The Employee shall be able to exercise the Stock Options
equal to 1,500 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Level 2.
(iii) Notwithstanding the above, the Employee shall be able to
exercise his right to purchase up to 25,000 shares of the Company's common stock
on the one year anniversary of the Commencement Date, as long as the Employee is
employed by the Company under this Agreement on such anniversary date (the
Initial Option"). Moreover, as long as the Employee is employed by the Company
under this Agreement on December 31, 1997, the Employee may elect, on that date,
to exchange the Initial Option for a sum of Twenty-five Thousand Dollars
($25,000). Additionally, upon the expiration date of this Agreement, and his
continued employment through this date, the Company guarantees that pursuant to
this paragraph the Employee shall be able to exercise the right to purchase no
less than 25,000 shares of the Company's common stock, in addition to the
Initial Option.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a Corporate American Express Card that he
shall use solely for business expenses which are reasonable and necessary for
the Employee to perform his duties under this Agreement in accordance with
policies established from time to time by the Company
7. Employee Benefits
During the Employment Term, Employee shall participate, to the extent he is
eligible under the terms and conditions thereof, in any health, life or
disability insurance or other employee benefit plans maintained by Employer (but
nothing herein shall obligate the Company to establish or maintain any such
benefit plan). Employee will not be covered under the Company's health insurance
until the Employee has been employed by the Company for more than ninety (90)
days.
The Employee shall be reimbursed of to $500 per month for a car allowance
upon the Employee submitting supporting documentation.
The Employee shall be reimbursed for his moving expenses from Florida in
the amount not to exceed $5,000. The Employee must submit supporting
documentation with his request for reimbursement.
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8. Vacation and Sick Leave
Employee shall be entitled to three (3) weeks of vacation per annum during
the Employment Term, to be taken at such times as may be mutually agreed upon by
the Company and Employee. The Employee shall be entitled to one (1) week of sick
leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's salary payable pursuant to Paragraph 5 through
the date of Employee's death shall be paid to his estate. Employee's estate will
not be entitled to any other compensation upon termination of this Agreement
pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate, the
Company may, upon at least ten (10) days' prior written notice given at any time
after the expiration of such 45 or 90-day period, as the case may be, to
Employee of its intention to do so, terminate this Agreement as of such date as
may be set forth in the notice. In case of such termination, Employee shall be
entitled to receive his salary payable pursuant to Paragraph 5 through the date
of termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause (as
hereinafter defined). Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee the unpaid prorated salary pursuant to
Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) As used herein, the term "For Cause" shall mean:
(i) any breach of this Agreement by Employee that, in the case of
a breach that may be cured or remedied, is not cured or remedied to the
reasonable satisfaction of the Company within 30 days after notice is given by
the Company to Employee, setting forth in reasonable detail the nature of such
breach;
(ii) Employee's failure to perform his duties and services
hereunder to the satisfaction of the Board of Directors or CCEO of the Company
that, in the case of any such failure that may be cured or remedied, is not
cured or remedied to the reasonable satisfaction of the Company within 30 days
after notice is given by the Company to Employee, setting forth in reasonable
detail the nature of such failure;
(iii) any act, or failure to act, by Employee in bad faith and to
the detriment of the Company; or
(iv) commission by Employee of an act involving moral turpitude,
dishonesty, unethical business conduct, or any other conduct which significantly
impairs the reputation of the Company, its subsidiaries or affiliates.
(v) the conviction of the Employee of a felony, including the
plea of nolo contendere
(c) Following a Change in Control of the Company, should the Employee
be terminated under this Agreement, or should the Employee terminate this
Agreement due to the Employee's refusal to move his office to a location outside
of a fifty mile radius of the Employee's office location at the time that the
Change in Control occurred, then the Employee shall receive a severance payment
of One Hundred Thousand Dollars ($100,000), or the Total Compensation that would
have been payable to the Employee for on the remaining term of this Agreement,
which ever is more. Change in Control shall be defined as one person or entity
acquiring a majority of the voting common stock of the Company, or another
corporation merging into the Company, or the Company merging into another
corporation.
49
<PAGE>
Should this Agreement be terminated pursuant to Paragraph 10(c) and
such termination date does not coincide with the end of the Company's ownership
fiscal year, then for operation of Paragraph 5(c) the Division Profit for the
fiscal year in which termination shall have occurred shall be calculated using
the following formula:
The Division Profit shall be equal to the quotient found by dividing
the total year-to-date pre-tax net profit of the Division through the most
current fully completed month, just prior to the date of termination, by the
number of fully completed months in the current fiscal year, just prior to the
date of termination, multiplied by twelve (12).
The Employee shall then be eligible for the exercise of additional
stock options as set forth in Paragraph 5(c)(ii) using the Division Profit as
calculated above.
(d) The Company may terminate this Agreement, upon thirty (30) days
written notice should the Division not attain, for three (3) consecutive months,
at least fifty percent (50%) of the pre-tax net income projections as set forth
in the "Affinity Services Division Forecast & Projections Summary" attached to
this Agreement as Exhibit 1 (the "Forecast") and has not attained at least fifty
percent (50%) of the pre-tax net income projections as set forth in the Forecast
for the aggregate period commencing in September, 1996 through the date of such
termination notice. The Company and the Employee acknowledge that the Employee
may not be terminated, pursuant to this Subparagraph 10(d), prior to the
expiration of the sixteen (16) month period following the Commencement Date.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "Confidential Information"). Employee agrees
that in consideration of the execution of this Agreement by the Company, he will
not use, or disclose to any third party, any of the Confidential Information,
other than as required to perform his services hereunder or as directed or
authorized by the Company's Board of Directors or President.
(b)
(i) Employee will not, at any time prior to the Expiration Date,
or if the Employee's employment shall terminate prior to the Expiration Date,
then for a period of one (1) year after the Employee ceases to be employed by
the Company, engage in or participate in any business activity, including, but
not limited to, acting as a director, officer, employee, agent, independent
contractor, partner, consultant, licensor or licensee, franchiser or franchisee,
proprietor, syndicate member, or shareholder that operates a program similar to
the program of the Division, conducted by the Division during the term of this
Agreement.
(ii) Any time during his employment by the Company or after the
Employee ceases to be employed by the Company, divulge to any persons, firms or
corporations, other than the Company (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third parties
50
<PAGE>
to use, any such Confidential Information; and
(iii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited, for or on
behalf of the Employee or third parties, any business from persons, firms,
corporations or other entities who were at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company; and
(iv) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
accept or cause or authorize directly or indirectly to be accepted, for or on
behalf of the Employee or third parties, any business from any such customers of
this Company; and
(v) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited for
employment, for or on behalf of the Employee or third parties, any persons who
were at any time within one year prior to the cessation of his employment
hereunder, employees of the Company; and
(vi) At any time during his employment by the Company and for a
period of one year after the Employee ceases to be employed by the Company,
employ or cause or authorize directly or indirectly to be employed, for or on
behalf of the Employee or third parties, any such employees of the Company; and
(vii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
compete with the Company in any fashion or work for, advise, be a consultant to
or an officer, director, agent or employee of or otherwise associate with any
person, firm, corporation or other entity which is engaged in or plans to engage
in a business or activity which competes with any business or activity engaged
in by the Company, or which is under development or in a planning stage by the
Company.
(viii) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(i), 11(b)(iii), 11(b)(iv) and 11(b)(vii) shall
not be operative for the one (1) year period following the Employee's cessation
of employment by the Company, so long as the Employee and/or any organization
with which he becomes associated does not engage in any business or activity
which competes or interferes with any business or activity engaged in by the
Company, or which is under development or is in a planning stage by the Company.
(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Employment Term for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
(a) Any patents, inventions, discoveries, applications, processes or
designs, devised, planned, applied, created, discovered or invented by Employee
in the course of Employee's employment under this Agreement and which pertain to
any aspect of the Company's or its respective subsidiaries' or affiliates'
51
<PAGE>
businesses shall be the sole and absolute property of the Company, and Employee
shall make prompt report thereof to the Company and promptly execute any and all
documents reasonably requested to assure the Company the full and complete
ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non- solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Barry Siegel, Co-Chairman of the Board, with
a copy to Muenz & Meritz, P.C., Three Hughes Place, Dix Hills, New York 11746,
Attention: Lawrence A. Muenz, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
52
<PAGE>
53
<PAGE>
16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
54
<PAGE>
Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST PRIORITY GROUP, INC.
By: /s/ Barry Siegel Dated:
------------------------- ------------------------------
Title: Co-Chairman of the Board
Barry J. Spiegel
By: /s/ Barry J. Spiegel Dated:
------------------------- ------------------------------
55
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 951,808
<SECURITIES> 0
<RECEIVABLES> 1,233,219
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<INVENTORY> 6,521
<CURRENT-ASSETS> 2,212,076
<PP&E> 332,547
<DEPRECIATION> 165,716
<TOTAL-ASSETS> 2,397,276
<CURRENT-LIABILITIES> 1,177,483
<BONDS> 0
0
0
<COMMON> 92,258
<OTHER-SE> 1,127,535
<TOTAL-LIABILITY-AND-EQUITY> 2,397,276
<SALES> 9,650,709
<TOTAL-REVENUES> 9,672,996
<CGS> 0
<TOTAL-COSTS> 7,930,763
<OTHER-EXPENSES> 1,422,635
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<INCOME-PRETAX> 319,598
<INCOME-TAX> 3,000
<INCOME-CONTINUING> 316,598
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 316,598
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
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