Exhibit A EMPLOYMENT AND CONSULTING AGREEMENT
Exhibit
A
EMPLOYMENT
AND CONSULTING AGREEMENT
THIS
AGREEMENT (the “Agreement”), made in New York, New York as of July 1, 2005,
between ▇▇▇▇ ▇▇▇▇▇▇▇ Auctions, Inc., a Delaware corporation (the “Company”), and
▇▇▇▇ ▇▇▇▇▇▇▇ (“Executive”).
WHEREAS,
the Company has employed Executive as its President and Chief Executive Officer
since July 1, 1992;
WHEREAS,
the Company desires to continue to employ Executive in a modified capacity
as
its Head of the U.S. and Asia Philatelic Auction Division, and Executive desires
to accept such continued employment on the terms and conditions hereinafter
set
forth;
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants and agreements hereinafter
set forth, the Company and Executive agree as follows:
1. Term.
Unless
earlier terminated in accordance with Section 4 hereof, the term of Executive’s
employment under this Agreement shall be the three-year period commencing as
of
the date hereof and ending on June 30, 2008 (the “Term”).
2. Employment.
(a) Employment
by the Company.
Executive agrees to continue to be employed by the Company during the Term
upon
the terms and subject to the conditions set forth in this Agreement. Executive
shall serve as the Head of the U.S. and Asia Philatelic Auction Division of
the
Company and shall report to the President and Chief Executive Officer of the
Company. Executive agrees to serve as a member of the Board of Directors of
the
Company, without additional remuneration, if appointed or elected to such
position.
(b) Performance
of Duties.
Throughout the Term, Executive shall faithfully and diligently perform
Executive’s duties in conformity with the directions of the Company and serve
the Company to the best of Executive’s ability. Executive shall devote his full
business time and best efforts to the business and affairs of the Company.
In
his capacity as the Head of U.S. and Asia Philatelic Auction Division of the
Company, Executive shall have responsibility for philatelic auctions conducted
by the Company, Ivy & ▇▇▇▇▇▇▇ Philatelic Auctions, Inc., ▇.▇. ▇▇▇▇▇▇, Inc.,
▇▇▇▇ ▇▇▇▇▇▇▇ Galleries, Inc., Nutmeg Stamp Sales, Inc. and ▇▇▇▇ ▇▇▇▇ Stamp
Auctions, Ltd. in North America and Asia and shall have such duties and
responsibilities as are customary for Executive’s position and any other duties
or responsibilities he may be assigned by the President and Chief Executive
Officer of the Company.
(c)
Place of Performance.
Executive shall be initially based at the Company’s offices in West ▇▇▇▇▇▇▇▇,
New Jersey. Executive
recognizes that his duties will require, at the Company’s expense, travel to
domestic and international locations, including, without limitation, the
Company’s New York offices.
3. Compensation
and Benefits.
(a) Base
Salary.
The
Company agrees to pay to Executive a base salary (“Base Salary”) at the annual
rate of (i) $500,000 during the first year of the Term, (ii) $550,000
during the second year of the Term, and (iii) $600,000 during the third year
of
the Term. Payments of the Base Salary shall be payable in equal installments
in
accordance with the Company’s standard payroll practices.
(b) Standard
Bonus.
The
Company shall pay Executive a $50,000 cash bonus (the “Standard Bonus”) for each
fiscal year during the Term. The Standard Bonus shall be paid within thirty
days
following the issuance of financial statements for the fiscal year in respect
of
which such bonus is payable, provided that in no event shall the Standard Bonus
be paid later than the March 14 next occurring following the end of such fiscal
year (the “Standard Bonus Payday”). Except as provided in Section 5(a)(ii),
Executive must be employed by the Company on the Standard Bonus Payday to be
eligible for the Standard Bonus.
(c) Retention
Bonus.
The
Company shall pay Executive a cash retention bonus (the “Retention Bonus”),
provided that Executive remains employed through June 30, 2008. The Retention
Bonus shall be equal to (i) $45,750, less (ii) (A) 50,000 multiplied by (B)
the
Share Price Differential. For purposes of this Section 3(c), the “Share Price
Differential” means the amount, if any, by which the closing price of the
Company’s common stock on July 1, 2005, exceeds the average of closing prices of
the Company’s common stock as reported in the Wall Street Journal for the period
between June 1, 2008 and June 30, 2008. Payment of the Retention Bonus, if
any,
shall be made on July 31, 2008; provided, however, that if necessary to comply
with Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended
(the “Code”), and applicable administrative guidance and regulations, such
payment shall be made on December 31, 2008.
(d) Performance-Based
Compensation.
Executive will be eligible to receive performance-based compensation pursuant
to
the ▇▇▇▇ ▇▇▇▇▇▇▇ Incentive Compensation Program set forth on Annex A
hereto.
(e) Benefits
and Perquisites.
During
Executive’s employment hereunder, Executive shall be entitled to participate in,
to the extent Executive is otherwise eligible under the terms thereof, the
benefit plans and programs, and receive the benefits and perquisites, generally
provided by the Company to executives of the Company, including without
limitation disability insurance and family medical insurance (subject to
applicable employee contributions). Executive shall be entitled to receive
four
weeks of annual paid vacation during his employment hereunder.
(f)
Business
Expenses.
The
Company agrees to reimburse Executive for all reasonable and necessary travel,
business entertainment and other business expenses incurred by Executive in
connection with the performance of his duties under this Agreement. Such
reimbursements shall be made by the Company on a timely basis upon submission
by
Executive of vouchers in accordance with the Company’s standard
procedures.
2
(g) Car
Lease.
Executive may lease an automobile in his own name and at Company expense.
Executive shall cause the vehicle to be properly insured and maintained. During
Executive’s employment hereunder, the Company shall reimburse Executive for all
reasonable costs associated with such lease, including lease costs, costs of
insurance, routine maintenance, and service and repair of the vehicle, provided
that the Company’s obligation pursuant to this Section 3(g) shall not exceed
$1,000 per month.
(h) Indemnification.
The
Company shall indemnify Executive, to the fullest extent permitted by law,
for
any and all liabilities to which he may be subject as a result of, in connection
with or arising out of his employment by the Company hereunder, as well as
the
costs and expenses (including reasonable attorneys’ fees) of any legal action
brought or threatened to be brought against him or the Company as a result
of,
in connection with or arising out of such employment. Executive shall be
entitled to the full protection of any insurance policies which the Company
may
elect to maintain generally for the benefit of its directors and
officers.
(i) No
Other Compensation or Benefits; Payment.
Except
as otherwise provided in Section 6, the compensation and benefits specified
in
this Section 3 and in Section 5 of this Agreement shall be in lieu of any and
all other compensation and benefits. Payment of all compensation and benefits
to
Executive specified in this Section 3 and in Section 5 of this Agreement (i)
shall be made in accordance with the relevant Company policies in effect from
time to time to the extent the same are consistently applied, including normal
payroll practices, and (ii) shall be subject to all legally required and
customary withholdings.
(j) Cessation
of Employment.
In the
event Executive shall cease to be employed by the Company for any reason, then
Executive’s compensation and benefits shall cease on the date of such event,
except as otherwise specifically provided herein or in any applicable employee
benefit plan or program or as required by law.
4. Termination
of Employment. Executive’s employment hereunder may be terminated prior to the
end of the Term under the following circumstances.
(a) Death.
Executive’s employment hereunder shall terminate upon Executive’s
death.
(b) Executive
Becoming Totally Disabled.
The
Company may terminate Executive’s employment hereunder at any time after
Executive becomes “Totally Disabled.” For purposes of this Agreement, Executive
shall be “Totally Disabled” in the event Executive is unable to perform the
duties and responsibilities contemplated under this Agreement for a period
of
120 consecutive days due to physical or mental incapacity or impairment. During
any period that Executive fails to perform Executive’s duties hereunder as a
result of incapacity due to physical or mental illness (the “Disability
Period”), Executive shall continue to receive the compensation and benefits
provided by Section 3 of this Agreement until Executive’s employment hereunder
is terminated; provided, however, that the amount of base compensation and
benefits received by Executive during the Disability Period shall be reduced
by
the aggregate amounts, if any, payable to Executive under any disability benefit
plan or program provided to Executive by the Company.
3
(c) Termination
by the Company for Cause.
The
Company may terminate Executive’s employment hereunder for Cause at any time
after providing written notice to Executive. For purposes of this Agreement
(other than Section 6 hereof), the term “Cause” shall mean any of the following:
(i) Executive’s neglect or failure or refusal to perform his duties under this
Agreement (other than as a result of total or partial incapacity due to physical
or mental illness); (ii) any act by or omission of Executive constituting gross
negligence or willful misconduct in connection with the performance of his
duties that could reasonably be expected to materially injure the reputation,
business or business relationships of the Company or any of its affiliates;
(iii) Executive’s conviction (including conviction on a nolo contendre
plea) of
a felony or any crime involving, in the good faith judgment of the Company,
fraud, dishonesty or moral turpitude; (iv) any material violation of the
Company’s Code of Ethics, as may be amended from time to time (the “Code of
Ethics”); (v) the breach of an obligation set forth in Section 7; or
(vi) any other material breach of this Agreement; provided, however, that a
termination by the Company under Sections 4(c)(i) or 4(c)(vi) for Cause shall
be
effective only if, within 14 days following delivery of a written notice by
the
Company to Executive that the Company is terminating his employment for Cause,
Executive has failed to cure the circumstances giving rise to Cause.
(d) Termination
by the Company Without Cause.
The
Company may terminate Executive’s employment hereunder at any time for any
reason or no reason by giving Executive thirty (30) days prior written notice
of
the termination. Following any such notice, subject to the provisions of Section
6, the Company may reduce or remove any and all of Executive’s duties, positions
and titles with the Company.
(e) Termination
by Executive.
Executive may terminate his employment hereunder at any time for any reason
or
no reason by giving the Company thirty (30) days prior written notice of the
termination. Following any such notice, the Company may reduce or remove any
and
all of Executive’s duties, positions and titles with the Company.
5. Compensation
Following Termination Prior to the End of the Term. In the event that
Executive’s employment hereunder is terminated prior to the end of the Term,
Executive shall be entitled only to the following compensation and benefits
upon
such termination:
(a) General.
On any
termination of Executive’s employment, he shall be entitled to:
|
(i)
|
any
accrued but unpaid Base Salary for services rendered through the
date of
termination; provided, however, that in the event Executive’s employment
is terminated pursuant to Section 4(b), the amount of Base Salary
received
by Executive during the Disability Period shall be reduced by the
aggregate amounts, if any, payable to Executive under any disability
benefit plan or program provided to Executive by the Company;
|
4
|
(ii)
|
any
Standard Bonus not yet paid for any fiscal year ending prior to the
date
of termination (payable as and when such bonus would have been paid
had
Executive’s employment continued), provided that Executive shall not
receive such amount if his employment is terminated by the Company
for
Cause;
|
|
(iii)
|
any
vacation accrued to the date of
termination;
|
|
(iv)
|
any
accrued but unpaid expenses through the date of termination required
to be
reimbursed in accordance with Sections 3(f) and 3(g) of this Agreement;
and
|
|
(v)
|
receive
any benefits to which he may be entitled upon termination pursuant
to the
plans and programs referred to in Section 3(e) hereof in accordance
with
the terms of such plans and programs or as may be required by applicable
law.
|
|
(vi)
|
any
amounts payable in accordance with, and subject to, the ▇▇▇▇ ▇▇▇▇▇▇▇
Incentive Compensation Program.
|
(b) Termination
by Reason of Death or Executive Becoming Totally Disabled; Termination by the
Company for Cause; Termination by Executive.
In the
event that Executive’s employment is terminated prior to the expiration of the
Term by reason of Executive’s death pursuant to Section 4(a) or Employee
becoming Totally Disabled pursuant to Section 4(b), by the Company for Cause
pursuant to Section 4(c), or by Executive pursuant to Section 4(e), Executive
(or, if applicable, his estate) shall be entitled only to those items identified
in Section 5(a).
(c) Termination
by the Company Without Cause.
In the
event that Executive’s employment is terminated prior to the expiration of the
Term by the Company without Cause pursuant to Section 4(d), Executive shall
be
entitled only to the following:
|
(i)
|
those
items identified in Section 5(a).
|
|
(ii)
|
the
continued payment of the Base Salary (as determined pursuant to Section
3(a)) for the remainder of the Term (such sums to be paid at the
times and
in the amounts such Base Salary would have been paid had Executive’s
employment not been terminated); provided, however, that if necessary
to
comply with Section 409A(a)(2)(B)(i) of the Code, and applicable
administrative guidance and regulations, the payment of such sums
shall be
made as follows: (A) no payments shall be made for a six-month period
following the date of termination, (B) an amount equal to six months
of
Base Salary (or, if applicable, such lesser amount as would have
accrued
between the date of termination and the end of the Term) shall be
paid in
a lump sum six months following the date of termination, and (C)
during
the period beginning six months following the date of termination
through
the remainder, if any, of the Term, payment of the Base Salary shall
be
made at the times and in the amounts such Base Salary would have
been paid
had Executive’s employment not been
terminated
|
5
|
(iii)
|
Payment
of the Retention Bonus, provided that the Retention Bonus shall be
equal
to (A) $45,750, less (B) (1) 50,000 multiplied by (2) the Early
Termination Share Price Differential. The “Early Termination Share Price
Differential” means the amount, if any, by which the closing price of the
Company’s common stock on July 1, 2005, exceeds the average common stock
price of the Company for the period between thirty days preceding
the date
of termination and the date of termination. Payment of the Retention
Bonus
pursuant to this Section 5(c)(iii), if any, shall be made thirty
days
following the date of termination. All stock prices shall be as reported
in the Wall Street Journal, calculated as of the market close on
the
applicable dates.
|
(d) Effect
of Material Breach of Section 7 on Compensation and Benefits Following
Termination of Employment Pursuant to Section 5.
If, at
the time of termination of Executive’s employment for any reason prior to the
expiration of the Term or any time thereafter, Executive is in material breach
of any covenant contained in Section 7 hereof, Executive (or his estate, as
applicable) shall not be entitled to any payment (or if payments have commenced,
any continued payment) under Sections 5(c)(ii) or 5(c)(iii).
(e) No
Further Liability; Release.
Payment
made and performance by the Company in accordance with this Section 5 shall
operate to fully discharge and release the Company and its directors, officers,
employees, subsidiaries, affiliates, stockholders, successors, assigns, agents
and representatives from any further obligation or liability with respect to
Executive’s employment and termination of employment. Other than providing the
compensation and benefits provided for in accordance with this Section 5 and,
if
applicable, Section 6, the Company and its directors, officers, employees,
subsidiaries, affiliates, stockholders, successors, assigns, agents and
representatives shall have no further obligation or liability to Executive
or
any other person under this Agreement. The payment of any amounts pursuant
to
this Section 5 (other than payments required by law) is expressly conditioned
upon the delivery by Executive to the Company of a release in form and substance
satisfactory to the Company of any and all claims Executive may have against
the
Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives arising out of
or
related to Executive’s employment by the Company and the termination of such
employment.
6
6. Consultancy
Following Termination of Employment.
(a) Consulting
Period.
Executive shall serve as a consultant to the Company pursuant to the terms
of
this Section 6 if Executive’s employment hereunder is terminated (i) upon
expiration of the Term on June 30, 2008; (ii) by the Company without Cause
pursuant to Section 4(d); or (iii) by Executive pursuant to Section 4(e).
Executive shall serve in such capacity during the period (the “Consulting
Period”) commencing with such termination of employment and ending upon the
earlier of:
(i) Executive’s
death;
(ii) Executive’s
having become Totally Disabled (as defined in Section 4(b));
(iii) Executive’s
termination of the consultancy on thirty days’ prior written notice to the
Company;
(iv) The
Company’s notice to Executive of termination of the Consulting Period for Cause.
Solely for purposes of this Section 6, “Cause” shall mean any of the following:
(a) Executive’s substantial and continuing failure or refusal to perform his
duties under this Section 6; (b) any act by or omission of Executive
constituting willful misconduct in connection with the performance of his
consulting duties that could reasonably be expected to materially injure the
reputation, business or business relationships of the Company or any of its
affiliates; (c) Executive’s conviction (including conviction on a nolo contendre
plea) of
a felony or any crime involving, in the good faith judgment of the Company,
fraud, dishonesty or moral turpitude; (d) any material violation of the
Company’s Code of Ethics; or (e) the breach of an obligation set forth in
Section 7; provided, however, that a termination by the Company under clause
(a)
hereof for Cause shall be effective only if, within 14 days following delivery
of a written notice by the Company to Executive that the Company is terminating
his consultancy for Cause, Executive has failed to cure the circumstances giving
rise to Cause; or
(v) June
30,
2018, unless the Company, in its sole discretion, elects to extend the
Consulting Period pursuant to Section 6(b), in which case the Consulting Period
shall end (unless earlier terminated pursuant to clauses (i) - (iv) of this
Section 6(a)) on June 30, 2023.
(b) Extension
of Consulting Period.
If the
Consulting Period is not terminated before June 30, 2018, then on or before
June
30, 2018, the Company may, in its sole discretion, elect to extend the
Consulting Period until June 30, 2023. If the Company elects not to extend
the
Consulting Period pursuant to this Section 6(b), the Company shall continue
to
pay Executive the Consulting Fees (as defined below) until June 30, 2021.
7
(c)
Consulting Fees.
During
the Consulting Period, Executive shall be paid consulting fees (the “Consulting
Fees”) at an annual rate equal to 65% of the Base Salary on the date of
termination of Executive’s employment, provided that during any period Executive
is receiving payments pursuant to Section 5(c)(ii), such payments shall
constitute full consideration for Executive’s consulting work pursuant to this
Section 6. The Consulting Fees shall be paid monthly in arrears. The payment
of
Consulting Fees shall be subject to all legally required and customary
withholdings. Except as otherwise provided in the second sentence of Section
6(b), the Consulting Fees shall end on the last date of the Consulting Period,
and the Company shall have no obligations to Executive subsequent to the
termination of the consultancy, except as required by law.
(d) Consulting
Duties.
As a
consultant to the Company, Executive shall act as a goodwill ambassador on
behalf of the Company, maintaining and expanding client relationships on behalf
of the Company in consultation with the President and Chief Executive Officer
of
the Company. Executive shall not be required to work on a full-time basis during
the Consulting Period.
(e) Relationship
of the Parties.
(i) During
the Consulting Period, Executive shall not be authorized to, and shall not,
act
as an agent of the Company and shall not be entitled to enter into any
agreements, incur any obligations on behalf of the Company, or be authorized
to
bind the Company in any manner whatsoever. No form of joint venture, partnership
or similar relationship between the parties is intended or hereby
created.
(ii) During
the Consulting Period, all of Executive’s activities will be at Executive’s own
risk, and Executive shall have sole responsibility for arrangements to guard
against physical, financial, and other risks, as appropriate.
7. Exclusive
Employment; Noncompetition; Nonsolicitation; Nondisclosure of Proprietary
Information; Surrender of Records; Inventions and Patents; Code of
Ethics.
7.1 No
Conflict; No Other Employment.
During
the period of Executive’s employment with the Company, Executive shall not:
(i) engage in any activity which conflicts or interferes with or derogates
from the performance of Executive’s duties hereunder nor shall Executive engage
in any other business activity, whether or not such business activity is pursued
for gain or profit and including service as a director of any other company,
except as approved in advance in writing by the Company; provided, however,
that
Executive shall be entitled to manage his personal investments and otherwise
attend to personal affairs, including charitable, social and political
activities, in a manner that does not unreasonably interfere with his
responsibilities hereunder, or (ii) accept or engage in any other employment,
whether as an employee or consultant or in any other capacity, and whether
or
not compensated therefor. During the Consulting Period, Executive shall not
engage in any activity which conflicts or interferes with or derogates from
the
performance of Executive’s consulting duties hereunder.
8
7.2 Noncompetition;
Nonsolicitation.
(a) Executive
acknowledges and recognizes the highly competitive nature of the Company’s
business and that access to the Company’s confidential records and proprietary
information renders him special and unique within the Company’s industry. In
consideration of the payment by the Company to Executive of amounts that may
hereafter be paid to Executive pursuant to this Agreement (including, without
limitation, pursuant to Sections 3, 5, and 6 hereof) and other obligations
undertaken by the Company hereunder, Executive agrees that during (i) his
employment with the Company, (ii) the Consulting Period, and (iii) the length
of
time that Executive is receiving payments from the Company following the
termination of his employment pursuant to Section 5 or the termination of the
consultancy pursuant to Section 6, but in no event less than one year following
the later of the date of termination of his employment for any reason and the
termination of the consultancy for any reason (together, the “Covered Time”),
Executive shall not, directly or indirectly, engage (as owner, investor,
partner, stockholder, employer, employee, consultant, advisor, director or
otherwise) in any Competing Business, provided that the provisions of this
Section 7.2(a) will not be deemed breached merely because Executive owns less
than 1% of the outstanding common stock of a publicly-traded company. For
purposes of this Agreement, “Competing Business” shall mean (i) any business in
which the Company is currently engaged anywhere in the world, including but
not
limited to (A) the marketing, production and sale of collectibles, including
numismatic and philatelic material, by auction, as merchant-dealer or otherwise,
and (B) the marketing, production and sale of third-party and owned material
by
auction; and (ii) any other business which the Company engages in anywhere
in
the world during the Term or the Consulting Period.
(b) In
further consideration of the payment by the Company to Executive of amounts
that
may hereafter be paid to Executive pursuant to this Agreement (including,
without limitation, pursuant to Sections 3, 5, and 6 hereof) and other
obligations undertaken by the Company hereunder, Executive agrees that during
his employment, the Consulting Period, and the Covered Time, he shall not,
directly or indirectly, (i) solicit, encourage or attempt to solicit or
encourage any of the employees, agents, consultants or representatives of the
Company or any of its affiliates to terminate his, her, or its relationship
with
the Company or such affiliate; (ii) solicit, encourage or attempt to
solicit or encourage any of the employees, agents, consultants or
representatives of the Company or any of its affiliates to become employees,
agents, representatives or consultants of any other person or entity; (iii)
solicit or attempt to solicit any customer, vendor or distributor of the Company
or any of its affiliates with respect to any product or service being furnished,
made, sold or leased by the Company or such affiliate; or (iv) persuade or
seek to persuade any customer of the Company or any affiliate to cease to do
business or to reduce the amount of business which any customer has customarily
done or contemplates doing with the Company or such affiliate, whether or not
the relationship between the Company or its affiliate and such customer was
originally established in whole or in part through Executive’s efforts. For
purposes of this Section 7.2(b) only, the terms “customer,” “vendor” and
“distributor” shall mean a customer, vendor or distributor who has done business
with the Company or any of its affiliates within twelve months preceding the
later of the termination of Executive’s employment and the termination of the
Consulting Period.
(c) During
Executive’s employment with the Company, the Consulting Period, and the Covered
Time, Executive agrees that upon the earlier of Executive’s (i)
negotiating with any Competitor (as defined below) concerning the possible
employment of Executive by the Competitor, (ii) receiving an offer of employment
from a Competitor, or (iii)
becoming employed or otherwise engaged by a Competitor, Executive will (A)
immediately provide notice to the Company of such circumstances and (B) provide
copies of Section 7 of this Agreement to the Competitor. Executive further
agrees that the Company may provide notice to a Competitor of Executive’s
obligations under this Agreement, including without limitation Executive’s
obligations pursuant to Section 7 hereof. For purposes of this Agreement,
“Competitor” shall mean any entity (other than the Company or any of its
affiliates) that engages, directly or indirectly, in any Competing
Business.
9
(d) Executive
understands that the provisions of this Section 7.2 may limit his ability to
earn a livelihood in a business similar to the business of the Company or its
affiliates but nevertheless agrees and hereby acknowledges that the
consideration provided under this Agreement, including any amounts or benefits
provided under Sections 3, 5 and 6 hereof and other obligations undertaken
by
the Company hereunder, is sufficient to justify the restrictions contained
in
such provisions. In consideration thereof and in light of Executive’s education,
skills and abilities, Executive agrees that he will not assert in any forum
that
such provisions prevent him from earning a living or otherwise are void or
unenforceable or should be held void or unenforceable.
7.3 Proprietary
Information.
Executive acknowledges that during the course of his employment with the Company
and any consultancy, he will necessarily have access to and make use of
proprietary information and confidential records of the Company and its
affiliates. Executive covenants that he shall not during the Term, the
Consulting Period, or at any time thereafter, directly or indirectly, use for
his own purpose or for the benefit of any person or entity other than the
Company, nor otherwise disclose, any proprietary information to any individual
or entity, unless such disclosure has been authorized in writing by the Company
or is otherwise required by law. Executive acknowledges and understands that
the
term “proprietary information” includes, but is not limited to: (a) the software
products, programs, applications, and processes utilized by the Company or
any
of its affiliates; (b) the name and/or address of any customer or vendor of
the Company or any of its affiliates or any information concerning the
transactions or relations of any customer or vendor of the Company or any of
its
affiliates with the Company or such affiliate or any of its or their partners,
principals, directors, officers or agents; (c) any information concerning any
product, technology, or procedure employed by the Company or any of its
affiliates but not generally known to its or their customers, vendors or
competitors, or under development by or being tested by the Company or any
of
its affiliates but not at the time offered generally to customers or vendors;
(d) any information relating to the computer software, computer systems, pricing
or marketing methods, sales margins, cost of goods, cost of material, capital
structure, operating results, borrowing arrangements or business plans of the
Company or any of its affiliates; (e) any information which is generally
regarded as confidential or proprietary in any line of business engaged in
by
the Company or any of its affiliates; (f) any business plans, budgets,
advertising or marketing plans; (g) any information contained in any of the
written or oral policies and procedures or manuals of the Company or any of
its
affiliates; (h) any information belonging to customers or vendors of the Company
or any of its affiliates or any other person or entity which the Company or
any
of its affiliates has agreed to hold in confidence; (i) any inventions,
innovations or improvements covered
by this Agreement; and (j) all written, graphic and other material relating
to any of the foregoing. Executive acknowledges and understands that information
that is not novel or copyrighted or patented may nonetheless be proprietary
information. The term “proprietary information” shall not include information
generally available to and known by the public or information that is or becomes
available to Executive on a non-confidential basis from a source other than
the
Company, any of its affiliates, or the directors, officers, employees, partners,
principals or agents of the Company or any of its affiliates (other than as
a
result of a breach of any obligation of confidentiality).
10
7.4 Confidentiality
and Surrender of Records.
Executive shall not during the Term, the Consulting Period, or at any time
thereafter (irrespective of the circumstances under which Executive’s employment
by the Company or the consultancy terminates), except as required by law,
directly or indirectly publish, make known or in any fashion disclose any
confidential records to, or permit any inspection or copying of confidential
records by, any individual or entity other than in the course of such
individual’s or entity’s employment or retention by the Company. Upon
termination of employment for any reason, termination of the Consulting Period,
or request by the Company, Executive shall deliver promptly to the Company
all
property and records of the Company or any of its affiliates, including, without
limitation, all confidential records. For purposes hereof, “confidential
records” means all correspondence, reports, memoranda, files, manuals, books,
lists, financial, operating or marketing records, magnetic tape, or electronic
or other media or equipment of any kind which may be in Executive’s possession
or under his control or accessible to him which contain any proprietary
information. All property and records of the Company and any of its affiliates
(including, without limitation, all confidential records) shall be and remain
the sole property of the Company or such affiliate during the Term, the
Consulting Period, and thereafter.
7.5 Inventions
and Patents.
All
inventions, innovations or improvements (including policies, procedures,
products, improvements, software, ideas and discoveries, whether patent,
copyright, trademark, service ▇▇▇▇, or otherwise) conceived or made by
Executive, either alone or jointly with others, in the course of his employment
by or consulting for the Company, belong to the Company. Executive will promptly
disclose in writing such inventions, innovations or improvements to the Company
and perform all actions reasonably requested by the Company to establish and
confirm such ownership by the Company, including, but not limited to,
cooperating with and assisting the Company in obtaining patents, copyrights,
trademarks, or service marks for the Company in the United States and in foreign
countries.
7.6 Enforcement.
Executive acknowledges and agrees that, by virtue of his position, his services
and access to and use of confidential records and proprietary information,
any
violation by him of any of the undertakings contained in this Section 7 would
cause the Company and/or its affiliates immediate, substantial and irreparable
injury for which it or they have no adequate remedy at law. Accordingly,
Executive agrees and consents to the entry of an injunction or other equitable
relief by a court of competent jurisdiction restraining any violation or
threatened violation of any undertaking contained in this Section 7. Executive
waives posting by the Company or its affiliates of any bond otherwise necessary
to secure such injunction or other equitable relief. Rights and remedies
provided for in this Section 7 are cumulative
and shall be in addition to rights and remedies otherwise available to the
parties hereunder or under any other agreement or applicable
law.
11
7.7 Code
of Ethics.
Nothing
in this Section 7 is intended to limit, modify or reduce Executive’s obligations
under the Code of Ethics. Executive’s obligations under this Section 7 are in
addition to, and not in lieu of, Executive’s obligations under the Code of
Ethics. To the extent there is any inconsistency between this Section 7 and
the
Code of Ethics which would permit Executive to take any action or engage in
any
activity pursuant to this Section 7 which he would be barred from taking or
engaging in under the Code of Ethics, the Code of Ethics shall
control.
8. Key
Man
Insurance. Executive recognizes and acknowledges that the Company or its
affiliates may seek and purchase one or more policies providing key man life
insurance with respect to Executive, the proceeds of which would be payable
to
the Company or such affiliate. Executive hereby consents to the Company or
its
affiliates seeking and purchasing such insurance and will provide such
information, undergo such medical examinations (at the Company’s expense),
execute such documents, and otherwise take any and all actions reasonably
necessary or desirable in order for the Company or its affiliates to seek,
purchase, and maintain in full force and effect such policy or
policies.
9. Assignment
and Transfer.
(a) Company.
This
Agreement shall inure to the benefit of and be enforceable by, and may be
assigned by the Company without Executive’s consent to, any purchaser of all or
substantially all of the Company’s business or assets or those of the U.S. and
Asia Philatelic Auction Division of the Company, or to any successor to the
Company or any assignee thereof (whether direct or indirect, by purchase,
merger, consolidation or otherwise).
(b) Executive.
The
parties hereto agree that Executive is obligated under this Agreement to render
personal services during the Term and the Consulting Period of a special,
unique, unusual, extraordinary and intellectual character, thereby giving this
Agreement special value. Executive’s rights and obligations under this Agreement
shall not be transferable by Executive by assignment or otherwise, and any
purported assignment, transfer or delegation thereof shall be void; provided,
however, that if Executive shall die, all amounts then payable to Executive
hereunder shall be paid in accordance with the terms of this Agreement to
Executive’s estate.
10. Miscellaneous.
(a) Other
Obligations.
Executive represents and warrants that neither Executive’s employment with the
Company nor Executive’s performance of Executive’s obligations hereunder will
conflict with or violate or otherwise are inconsistent with any other
obligations, legal or otherwise, which Executive may have. Executive covenants
that he shall perform his duties hereunder in a professional manner and not
in
conflict or violation, or otherwise inconsistent with other obligations legal
or
otherwise, which Executive may have.
(b) Nondisclosure;
Other Employers.
Executive will not disclose to the Company, use, or induce the Company to use,
any proprietary information, trade secrets or confidential business information
of others. Executive represents and warrants that Executive does not possess
any
property, proprietary information, trade secrets and confidential business
information belonging to any prior employers.
12
(c) Cooperation.
In
addition to performing consulting duties during the Consulting Period, following
termination of employment with the Company for any reason, Executive shall
cooperate with the Company, as requested by the Company, to effect a transition
of Executive’s responsibilities and to ensure that the Company is aware of all
matters being handled by Executive.
(d) Mitigation.
Executive shall not be required to mitigate damages or the amount of any payment
provided to him under Section 5 of this Agreement by seeking other employment
or
otherwise, nor shall the amount of any payments provided to Executive under
Section 5 be reduced by any compensation earned by Executive as the result
of
employment by another employer after the termination of Executive’s employment
or otherwise.
(e) Protection
of Reputation.
During
the Term, the Consulting Period, and thereafter, Executive agrees that he will
take no action which is intended, or would reasonably be expected, to harm
the
Company or any of its affiliates or its or their reputation or which would
reasonably be expected to lead to unwanted or unfavorable publicity to the
Company or its affiliates.
(f) Governing
Law.
This
Agreement shall be governed by and construed (both as to validity and
performance) and enforced in accordance with the internal laws of the State
of
New York applicable to agreements made and to be performed wholly within such
jurisdiction, without regard to the principles of conflicts of law or where
the
parties are located at the time a dispute arises.
(g) Arbitration.
|
(i)
|
General.
Executive and the Company specifically, knowingly, and voluntarily
agree
that they shall use final and binding arbitration to resolve any
dispute
(an “Arbitrable Dispute”) between Executive, on the one hand, and the
Company (or any affiliate of the Company), on the other hand. This
arbitration agreement applies to all matters relating to this Agreement
and Executive’s employment with, termination of employment from the
Company, consulting for the Company, and termination of the consultancy,
including without limitation disputes about the validity, interpretation,
or effect of this Agreement, or alleged violations of it, any payments
due
hereunder and all claims arising out of any alleged discrimination,
harassment or retaliation, including, but not limited to, those covered
by
Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act of 1967, as amended, and the Americans
With Disabilities Act or
any other federal, state or local law relating to discrimination
in
employment.
|
13
|
(ii)
|
Injunctive
Relief.
Notwithstanding anything to the contrary contained herein, the Company
and
any affiliate of the Company (if applicable) shall have the right
to seek
injunctive or other equitable relief from a court of competent
jurisdiction to enforce Section 7 of this Agreement. For purposes
of
seeking enforcement of Section 7, the Company and Executive hereby
consent
to the jurisdiction of any state or federal court sitting in the
City,
County and State of New York.
|
|
(iii)
|
The
Arbitration.
Any arbitration pursuant to this Section 10(g) will take place in
New
York, New York, under the auspices of the American Arbitration
Association, in accordance with the National Rules for the Resolution
of
Employment Disputes of the American Arbitration Association then
in
effect, and before a panel of three arbitrators selected in accordance
with such rules. Judgment upon the award rendered by the arbitrators
may
be entered in any state or federal court sitting in the City, County
and
State of New York.
|
|
(iv)
|
Fees
and Expenses.
In any arbitration pursuant to this Section 10(g), each party shall
be
responsible for the fees and expenses of its own attorneys and witnesses,
and the fees and expenses of the arbitrators shall be divided equally
between the Company, on the one hand, and Executive, on the other
hand.
|
|
(v)
|
Exclusive
Forum.
Except as permitted by Section 10(g)(ii) hereof, arbitration in the
manner
described in this Section 10(g) shall be the exclusive forum for
any
Arbitrable Dispute. Except as permitted by Section 10(g)(ii), should
Executive or the Company attempt to resolve an Arbitrable Dispute
by any
method other than arbitration pursuant to this Section 10(g), the
responding party shall be entitled to recover from the initiating
party
all damages, expenses, and attorneys’ fees incurred as a result of that
breach.
|
(h) Entire
Agreement.
This
Agreement contains the entire agreement and understanding between the parties
hereto in respect of Executive’s employment and consultancy and supersedes,
cancels and annuls any prior or contemporaneous written or oral agreements,
understandings, commitments and practices between them respecting Executive’s
employment or consultancy, including all prior employment agreements between
the
Company and Executive (including, without limitation, Executive’s employment
agreement with the Company, dated as of May 14, 1993, as amended), which
agreement(s) hereby are terminated and shall be of no further force or
effect.
14
(i) Amendment.
This
Agreement may be amended only by a writing which makes express reference to
this
Agreement as the subject of such amendment and which is signed by Executive
and,
on behalf of the Company, by its duly authorized officer.
(j) Severability.
If any
provision of this Agreement or the application of any such provision to any
party or circumstances shall be determined by any court of competent
jurisdiction or arbitration panel to be invalid or unenforceable to any extent,
the remainder of this Agreement, or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid or unenforceable, shall not be affected thereby, and each provision
hereof shall be enforced to the fullest extent permitted by law. If any
provision of this Agreement, or any part thereof, is held to be invalid or
unenforceable because of the scope or duration of or the area covered by such
provision, the parties hereto agree that the court or arbitration panel making
such determination shall reduce the scope, duration and/or area of such
provision (and shall substitute appropriate provisions for any such invalid
or
unenforceable provisions) in order to make such provision enforceable to the
fullest extent permitted by law and/or shall delete specific words and phrases,
and such modified provision shall then be enforceable and shall be enforced.
The
parties hereto recognize that if, in any judicial or arbitral proceeding, a
court or arbitration panel shall refuse to enforce any of the separate covenants
contained in this Agreement, then that invalid or unenforceable covenant
contained in this Agreement shall be deemed eliminated from these provisions
to
the extent necessary to permit the remaining separate covenants to be enforced.
In the event that any court or arbitration panel determines that the time period
or the area, or both, are unreasonable and that any of the covenants is to
that
extent invalid or unenforceable, the parties hereto agree that such covenants
will remain in full force and effect, first, for the greatest time period,
and
second, in the greatest geographical area that would not render them
unenforceable.
(k) Construction.
The
headings and captions of this Agreement are provided for convenience only and
are intended to have no effect in construing or interpreting this Agreement.
The
language in all parts of this Agreement shall be in all cases construed
according to its fair meaning and not strictly for or against the Company or
Executive. As used herein, the words “day” or “days” shall mean a calendar day
or days.
(l) Nonwaiver.
Neither
any course of dealing nor any failure or neglect of either party hereto in
any
instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged
and,
in the case of the Company, by its duly authorized officer.
(m) Notices.
Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (i) in the
case
of the Company, to ▇▇▇▇ ▇▇▇▇▇▇▇ Auctions, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, attn.: General Counsel, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, 1177 Avenue of the
15
(n)
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.; and (ii)
in
the case of Executive, to Executive’s last known address as reflected in the
Company’s records, or to such other address as Executive shall designate by
written notice to the Company. Any notice given hereunder shall be deemed to
have been given at the time of receipt thereof by the person to whom such notice
is given if personally delivered or at the time of mailing if sent by registered
or certified mail.
(o) Assistance
in Proceedings, Etc.
Executive shall, without additional compensation, during and after the Term
and
the Consulting Period, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company
in
connection with any legal or quasi-legal proceeding, including any external
or
internal investigation, involving the Company or any of its
affiliates.
(p) Survival.
Cessation or termination of Executive’s employment or consultancy with the
Company shall not result in termination of this Agreement. The respective
obligations of Executive and the Company as provided in Sections 5, 6, 7, 9
and
10 of this Agreement shall survive cessation or termination of Executive’s
employment and consultancy hereunder.
(q) Section
409A of the Code.
Executive and the Company agree that in the event the Company reasonably
determines that the terms hereof would result in Executive being subject to
tax
under Section 409A of the Code, Executive and the Company shall negotiate in
good faith to amend this Agreement to the extent necessary to prevent the
assessment of any such tax, including by delaying the payment dates of any
amounts hereunder.
IN
WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
on
its behalf by an officer thereunto duly authorized and Executive has duly
executed this Agreement, all as of the date and year first written
above.
| ▇▇▇▇ ▇▇▇▇▇▇▇ AUCTIONS, INC. | EXECUTIVE: | |
| |
|
|
|
By:
|
||
|
Name ▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇▇▇ ▇▇▇▇▇▇▇ |
|
| Title: | ||
16
ANNEX
A
▇▇▇▇
▇▇▇▇▇▇▇ Incentive Compensation Program
1. Introduction
This
▇▇▇▇
▇▇▇▇▇▇▇ Incentive Compensation Program (the “Program”) is established by ▇▇▇▇
▇▇▇▇▇▇▇ Auctions, Inc. (the “Company”) to provide ▇▇▇▇ ▇▇▇▇▇▇▇ (“Executive”)
with “performance-based compensation” during his employment within the meaning
of Section 162(m)(4) of the Internal Revenue Code of 1986, as amended (the
“Code”). The Program has been approved by a committee of the Company’s Board of
Directors comprised solely of at least two independent directors (the
“Committee”) and is subject to approval by the shareholders of the Company.
Prior to any payment under the Program, the Committee shall certify the amount
of the Performance Bonus (as defined below) and/or the Long-Term Incentive
Award
(as defined below) to which Executive is entitled.
This
Program is an Annex to the employment and consulting agreement between Executive
and the Company, dated as of July 1, 2005 (the “Employment Agreement”), and the
provisions of the Employment Agreement, including without limitation, with
respect to arbitration of disputes, shall apply to this Program to the extent
not inconsistent with the terms of the Program.
2. Performance
Bonus.
The
Company shall pay Executive an annual performance cash bonus (the “Performance
Bonus”) for each fiscal year during the Term (as defined in the Employment
Agreement) equal to (A) an amount equal to the sum of (i) 10% of the Divisional
Pre-Tax Income (as defined below) and (ii) 1% of the Company Pre-Tax Income
(as
defined below), divided by (B) 2; provided, however, that in no event shall
the
total Performance Bonus exceed $250,000.
(a) The
term
“Divisional Pre-Tax Income” shall mean the net income of the Company’s U.S. and
Asia Philatelic Division before taxes and deductions for any bonus paid under
the Program, as determined by the Company in accordance with its standard
accounting practices. Allocations of expenses between divisions of the Company
shall be determined by the Company in accordance with its standard
practices.
(b) The
term
“Company Pre-Tax Income” shall mean the net income of the Company before taxes
and deductions for any bonus paid under the Program, less the Divisional Pre-Tax
Income, all as determined by the Company in accordance with its standard
accounting practices.
(c) The
Performance Bonus shall be paid within thirty days following the issuance of
financial statements for the fiscal year in respect of which such bonus is
payable, provided that in no event shall the Performance Bonus be paid later
than the March 14 next occurring following the end of such fiscal
year.
(d) Except
as
provided below, Executive must be employed by the Company on the last day of
the
fiscal year to be eligible for the Performance Bonus.
3. Long-Term
Incentive Award.
(a) The
Company will pay to Executive in shares of the Company’s common stock an amount
equal to 50% of the Appreciation in Stock Price (as defined below) for 100,000
shares of common stock of the Company. The “Appreciation in Stock Price” shall
mean the appreciation, if any, between (1) the closing price of the common
stock
of the Company on July 1, 2005, and (2) the Average Closing Price (as defined
below) for the period between June 1, 2008 and June 30, 2008.
(b) Payment
of the Long-Term Incentive Award, if any, shall be made on July 31, 2008;
provided, however, that if necessary to comply with Section 409A(a)(2)(B)(i)
of
the Code, and applicable administrative guidance and regulations, such payment
shall be made on December 31, 2008. The number of shares payable to Executive
shall be based on the closing price of the Company’s common stock on June 30,
2008.
(c) Except
as
provided below, Executive must be employed by the Company on June 30, 2008
to be
eligible for the Long-Term Incentive Award.
4. Termination
of Employment.
(a) Subject
to Sections 4(c) and 4(d) below, if Executive’s employment terminates by reason
of Executive’s death or becoming Totally Disabled (as defined in the Employment
Agreement) or is terminated by the Company without Cause (as defined in Section
4(c) of the Employment Agreement), Executive shall be entitled to:
(i) any
Performance Bonus not yet paid for any fiscal year ending prior to the date
of
Executive’s termination of employment (payable as and when such bonus would have
been paid had Executive’s employment continued);
(ii) a
prorated portion of the Performance Bonus for the fiscal year in which
Executive’s employment terminated, based on the number of days Executive was
employed by the Company in such fiscal year (the Performance Bonus to be
otherwise calculated and paid in accordance with, and subject to, the Program);
and
(iii) payment
of the Long-Term Incentive Award in accordance with, and subject to, Section
3
of the Program, provided that in such a case the Appreciation in Stock Price
shall be the appreciation, if any, between (1) the closing price of the common
stock of the Company on July 1, 2005, and (2) the Average Closing Price for
the
30-day period preceding the date of termination of employment. Payment of the
Long-Term Incentive Award, if any, shall be made thirty days following the
date
of termination of employment; provided, however, if necessary to comply with
Section 409A(a)(2)(B)(i) of the Code, and applicable administrative guidance
and
regulations, such payment shall be made six months following the date of
termination of employment.
2
(b)
If
Executive’s employment is terminated by the Company for Cause (as defined in
Section 4(c) of the Employment Agreement) or is terminated by Executive,
Executive shall be entitled only to any Performance Bonus not yet paid for
any
fiscal year ending prior to the date of Executive’s termination of employment
(payable as and when such bonus would have been paid had Executive’s employment
continued).
(c) The
payment of any amounts pursuant to Sections 4(a)(ii) and (iii) hereof is
expressly conditioned upon the delivery by Executive to the Company of a release
in form and substance satisfactory to the Company of any and all claims
Executive may have against the Company and its directors, officers, employees,
subsidiaries, affiliates, stockholders, successors, assigns, agents and
representatives arising out of or related to Executive’s employment by the
Company and the termination of such employment.
(d) If,
at
the time of termination of Executive’s employment for any reason, Executive is
in material breach of any covenant contained in Section 7 of the Employment
Agreement, Executive (or his estate, as applicable) shall not be entitled to
any
payment (or if payments have commenced, any continued payment) under Sections
4(a)(ii) and (iii) hereof.
5. Average
Closing Price.
For
purposes of the Program, “Average Closing Price” with respect to a specified
period of time shall mean the average of closing prices of the Company’s common
stock as reported in the Wall Street Journal for those dates during the
specified period on which the national stock exchanges are open for
business.
3