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EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
5th day of February 1999, between COLLECTORS UNIVERSE, INC., a Delaware
Corporation (the "Company" or "CUI"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), with
reference to the following:
A. Effective as of January 4, 1999, ▇▇▇▇▇ became employed as the Chief
Executive Officer of Professional Coin Grading Service, Inc., ("PCGS"), pursuant
to an employment agreement with PCGS (the "PCGS Agreement").
B. On this date PCGS became a wholly-owned subsidiary and is now the
predecessor of the Company. With the consent of PCGS, ▇▇▇▇▇ is resigning his
position with PCGS to become Chief Executive Officer of CUI, and the PCGS
Agreement is being terminated concurrently herewith by mutual agreement of PCGS
and ▇▇▇▇▇.
▇. ▇▇▇▇▇ and the Company desire to document the terms and provisions
governing his employment as Chief Executive Officer of CUI and that is the
purpose of this Agreement.
NOW, THEREFORE, in consideration of the respective promises of each
party made to the other and other good and valuable consideration, the receipt
of which is hereby acknowledged by each of the parties, it is agreed as follows:
1. EMPLOYMENT AS CHIEF EXECUTIVE OFFICER/CORPORATE STRUCTURE AND
OBJECTIVES.
1.1 Employment as Chief Executive Officer. CUI agrees to
employ ▇▇▇▇▇ in the position of Chief Executive Officer, and ▇▇▇▇▇ agrees to
serve in that position on a full time basis, on the terms and subject to the
conditions contained in this Agreement. The parties acknowledge that for
purposes of this Agreement, "CUI" shall include each existing Affiliate of CUI
(as hereinafter defined) and any corporation, limited liability company,
partnership or other entity that, during the term of this Agreement, becomes an
Affiliate of CUI, so that CUI and its Affiliates may operate under a unified
management structure. The term "Affiliate" when used with reference to CUI shall
mean any corporation, limited liability company, partnership or other entity
with respect to which CUI owns either directly, or indirectly through any other
entity, 80% or more of the outstanding voting power. References in this
Agreement to "Directors" shall include the boards of directors of any such
corporations, the managers of any such limited liability companies, and the
general partners of any such partnerships, that are Affiliates of CUI, as
appropriate.
1.2 Objectives. The parties agree that the primary business
objectives of CUI and, therefore, of its Chief Executive Officer, shall be:
(a) to maintain and expand the leadership position of
CUI in the traditional collectibles marketplace; and
(b) to drive CUI toward a leadership position in the
field of Internet-based electronic commerce for the collectibles
market, possibly leading toward a successful IPO or merger in the
one-to-four year time frame;
Provided, however, that, the foregoing objectives shall be subject to
refinements and adjustments from time to time by action of the CUI Board of
Directors.
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2. DUTIES AND RESPONSIBILITIES.
2.1 Duties and Responsibilities. ▇▇▇▇▇'▇ duties and
responsibilities as Chief Executive Officer shall be to exercise full
responsibility and authority over the strategic planning, implementation, and
day-to-day operations of CUI and its Affiliates, in concert with the Chairman of
the Board of CUI, who is ▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), and subject to the supervision and
direction of the CUI Board of Directors. These responsibilities shall include
planning corporate activities, managing corporate finance and administration,
computer technology, and marketing. Consistent with budgets approved by the CUI
Board of Directors, ▇▇▇▇▇ shall have the authority to hire and terminate
personnel consistent with the above responsibilities; provided, however, that
the hiring or termination of employment of any individual holding a position of
Vice President or above shall require the approval of the CUI Board of
Directors. The President of each of CUI's Affiliates shall report to ▇▇▇▇▇ and,
while those Affiliates shall remain relatively independent, ▇▇▇▇▇ shall have the
responsibility and authority to take the actions necessary to cause each
Affiliate to be operated in a unified and efficient manner consistent with CUI's
business objectives as delineated from time to time by the CUI Board of
Directors.
2.2 No Conflicting Duties. Executive hereby represents and
warrants that he is under no contractual or other commitments (written or oral)
that are inconsistent with his obligations set forth in this Agreement,
including, but not limited to, any employment, services, consulting,
non-competition, trade secret or confidentiality agreements. Without limiting
the generality of the foregoing, Executive represents that none of the
information that he needs or will use in performing his duties hereunder belongs
to any other person or entity.
3. RIGHTS TO DISCOVERIES, INTELLECTUAL PROPERTY, ETC. Concurrently
herewith, ▇▇▇▇▇ shall enter into and deliver to CUI the Employee Confidentiality
Agreement in the form attached hereto as Attachment A.
4. COMPENSATION. ▇▇▇▇▇'▇ compensation for all services rendered to CUI
or to any Affiliate of CUI (including PCGS) shall be as follows:
4.1 A base salary of $360,000 per year, subject to annual
review by the Board of Directors of CUI.
4.2 An annual bonus in an amount equal to 2% of CUI's annual
pre-tax profit (determined from its audited financial statements), commencing
with the fiscal year ending June 30, 2000.
4.3 Medical insurance coverage under CUI's group plan, on the
same terms and conditions as other CUI employees.
4.4 Pursuant to the PCGS Agreement ▇▇▇▇▇ received a one-time
$100,000 payment to enable him to pay the expenses related to his relocation to
Southern California. Subject to the provisions of Section 6.4, he shall be
entitled to retain that payment.
4.5 ▇▇▇▇▇ has shall be entitled, at any time during the
Initial Term of this Agreement to borrow amounts from CUI aggregating up to, but
not to exceed, a principal sum of $180,000 (the "Loans"). Borrowings by ▇▇▇▇▇
pursuant hereto shall (i) be evidenced by a note in the form of Exhibit B hereto
(the "Note"), (ii) bear interest at a rate of nine percent (9%) per annum, (iii)
be due and payable on February 4, 2002 (the "Maturity Date"), subject to annual
mandatory prepayments equal to the sum of accrued but unpaid interest and the
lesser of ▇▇▇▇▇'▇ annual bonus or $30,000, and (iv) secured by a pledge to CUI
of 101,000 shares of CUI common stock owned by ▇▇▇▇▇. ▇▇▇▇▇ agrees to take such
action and execute such documents as shall be reasonably required by CUI to
effect said loan and the pledge of such shares as security therefor.
Notwithstanding anything to the contrary that may be contained
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elsewhere in this Agreement, for each period of twelve consecutive months of
employment with CUI (measured from the commencement date of his employment with
PCGS) that is completed by ▇▇▇▇▇ (each such 12-month period, a "Contract Year"),
a total of $30,000 of the principal amount of the indebtedness under the Note
shall be cancelled and forgiven, provided, however, that if there is a
termination of ▇▇▇▇▇'▇ employment with CUI for any reason in any Contract Year
prior to the Maturity Date, there shall be no partial cancellation and
forgiveness of any principal sum for the portion of the Contract Year in which
such termination of employment occurred.
5. GRANT OF STOCK OPTION. There was granted to ▇▇▇▇▇ by PCGS, pursuant
to the PCGS Agreement, an option to purchase up to 4,137 shares of PCGS common
stock at an exercise price of $483.00 per share (the "PCGS Option"). The parties
acknowledge that, as a result of and pursuant to the acquisition by CUI of PCGS,
effective as of this date, the PCGS Option was converted into an option (the
"CUI Option") entitling ▇▇▇▇▇ to purchase up to 950,000 shares of CUI common
stock (the "Option Shares") at an exercise price of $2.11 per share and pursuant
to the terms of an Incentive Stock Option Agreement.
6. TERM AND TERMINATION.
6.1 Initial Term. Unless ▇▇▇▇▇'▇ employment is sooner
terminated pursuant to provisions hereinafter set forth in this Section 6, the
term of ▇▇▇▇▇'▇ employment shall be three (3) years measured from January 4,
1999 (the "Initial Term").
6.2 Termination by ▇▇▇▇▇. If ▇▇▇▇▇ terminates this Agreement
for any reason (other than due to his death or disability), CUI shall continue
to pay his base salary and extend medical benefits coverage for a period of
three (3) months or until ▇▇▇▇▇ accepts other employment, whichever period is
shorter; provided, however, that if ▇▇▇▇▇ terminates this Agreement prior to
completing one (1) year of employment with CUI, he shall refund any sums paid to
him under Subsection 4(d) of this Agreement and the entire principal amount of
the Loan then outstanding, and all accrued and unpaid interest thereon, shall
become and be payable in full on the earlier of the 90th day following such
termination of employment or the date ▇▇▇▇▇ accepts employment with any other
person or entity.
6.3 Termination or Non-Renewal by CUI. If, for any reason
other than Cause or the death or disability of ▇▇▇▇▇, ▇▇▇ (i) terminates this
Agreement at any time, (ii) does not agree to extend the Initial Term for an
additional period subsequent to the Initial Term and also has not entered into a
new employment agreement with ▇▇▇▇▇ by the end of the Initial Term, CUI shall
continue to pay ▇▇▇▇▇'▇ base salary and extend medical benefits coverage
unconditionally for a period of one (1) year thereafter, and ▇▇▇▇▇ shall be
entitled to retain the sum paid to him under Subsection 4(d) above (the
"Severance Compensation"). ▇▇▇▇▇ shall nevertheless be liable to repay the then
remaining principal sum of the Note, together with interest, in accordance with
the terms of the Note. In the event that the Initial Term of this Agreement is
extended for one or more periods beyond the Initial Term (each an "Extension
Term"), ▇▇▇▇▇ shall be entitled to Severance Compensation as set forth above in
the event he is terminated without Cause (other than due to his disability or
death) during such Extension Term or CUI allows this Agreement to expire at the
end of the Extension Term without having entered into a new employment agreement
with ▇▇▇▇▇.
6.4 Termination For Cause. If PCGS terminates this Agreement
and ▇▇▇▇▇'▇ employment for Cause, PCGS may terminate salary and medical coverage
benefits immediately on such termination of employment. If such a termination
for Cause occurs prior to January 4, 2000, he shall repay the sum paid to him as
described in Subsection 4.4 above of the PCGS Agreement to CUI and shall pay the
entire unpaid principal amount of and all accrued and unpaid interest under the
Note on the earlier of the 90th day following such termination of employment for
Cause or the date ▇▇▇▇▇ accepts
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employment with any other person or entity. For purposes of this Section,
"Cause" shall be defined as the occurrence of any of the following:
(a) ▇▇▇▇▇'▇ conviction of an act that, under
applicable law or government regulations, constitutes a felony, or that
constitutes a misdemeanor involving moral turpitude,
(b) ▇▇▇▇▇'▇ commission of an act that subjects the
Company, CUI or any Affiliate to civil or criminal penalties or fines
or civil liabilities; or
(c) ▇▇▇▇▇ breaches or violates, and fails to cure
within fifteen (15) days of demand therefor by CUI any such breach or
violation of, (i) any of his covenants contained in the Non-Competition
Agreement or (ii) any of his covenants in his Employee Confidentiality
Agreement, or (iii) any policies from time to time adopted by CUI's
Board of Directors and made applicable generally to the officers of
CUI, including, but not limited to any conflict of interest policies.
▇▇▇▇▇ acknowledges that he was not previously employed in the
collectibles industry, and that the restrictions imposed by Section
3(c) hereof will not unreasonably impair his ability to earn a living
upon termination of this Agreement.
(d) ▇▇▇▇▇'▇ excessive absenteeism (other than for
illness), or
(e) ▇▇▇▇▇'▇ insubordination with respect to any
lawful direction of the CUI Board of Directors.
6.5 Termination on Disability or Death. ▇▇▇▇▇'▇ employment
shall terminate immediately, without notice, upon his becoming totally disabled
(as hereinafter defined) or upon his death. Any such termination shall not
constitute a termination without Cause. In the event of a termination due to
▇▇▇▇▇'▇ total disability or death, CUI shall continue to pay ▇▇▇▇▇'▇ base salary
and extend medical benefits coverage unconditionally for a period of one (1)
year either to ▇▇▇▇▇, in the event of a termination due to disability, or to his
dependents in the event of a termination due to his death. In such event, ▇▇▇▇▇
or his dependents (as the case may be) shall be entitled to retain the sum paid
to him under Subsection 4(d) above and shall repay the remaining principal sum
of the Note, together with interest, in accordance with the terms of the Note.
For purposes of this Agreement, the term "totally disabled" or "total
disability" means ▇▇▇▇▇'▇ inability, due to a physical or mental illness, injury
or impairment, to perform a substantial portion of his duties for a period of
120 or more consecutive days, or for an aggregate of 180 days (whether or not
consecutive) in any 12-month period, as determined by the CUI Board of
Directors.
6.6 Effect of Breach by CUI. In the event that CUI commits a
material breach of this Agreement and fails to cure such breach within thirty
(30) days of its receipt of a written notice from ▇▇▇▇▇ specifying the nature of
such breach, ▇▇▇▇▇ shall be entitled to terminate his employment with the
Company as his sole right and remedy therefor, effective on ten (10) days' prior
written notice to CUI and, in such event, such termination of employment shall
be deemed to constitute a termination of ▇▇▇▇▇'▇ employment by CUI pursuant to
Section 6.3 hereof, with the same consequences as if such breach and failure to
cure by the Company constituted a termination of ▇▇▇▇▇'▇ employment by the
Company pursuant to that Section 6.3
6.6 Exclusivity of Remedies. In the event of any termination
of ▇▇▇▇▇'▇ employment, whether by ▇▇▇▇▇ or by CUI, and whether such termination
is or is not for Cause, the respective rights and remedies and the respective
obligations of the parties hereto under this Section 6 shall constitute the sole
and exclusive rights, remedies and obligations of the parties arising out of or
in connection with any termination of this Agreement and ▇▇▇▇▇'▇ employment with
CUI, and each party disclaims and other
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rights or remedies it or he (as the case may be) would, but for the provisions
of this Section 6, have under this Agreement or applicable law by reason of such
termination of employment.
7. WAIVER; REMEDIES. No failure to exercise and no delay on the part of
either party in exercising any right or power hereunder or granted by law will
operate as a waiver thereof; any single or partial exercise of any right, power
or privilege shall not preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. Waiver by either party of any
right or other matter may only be made by an instrument in writing signed by the
party to be charged. The rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights and remedies provided by law or
by any other agreement between the parties.
8. INDEMNIFICATION. CUI and ▇▇▇▇▇ shall enter into an indemnification
agreement substantially in the form of Attachment D hereto (the "Indemnification
Agreement").
9. ENTIRE AGREEMENT/AMENDMENT. This Agreement is the entire agreement
of the parties with respect to its subject matter, and supersedes any other
prior or contemporaneous agreements or understandings between the parties
relating to the subject matter of this Agreement. This Agreement may be amended
at any time by a writing signed by the parties.
10. CONSTRUCTION. This Agreement is the result of arms'-length
negotiations between the parties hereto and no provision hereof shall be
construed against a party by reason of the fact that such party or its legal
counsel drafted said provision.
11. NO ASSIGNMENT. No party may transfer or assign any of its rights or
obligations under this Agreement and any attempt to do so shall be null and
void; provided, however, that CUI shall be entitled, on ten (10) days notice to
▇▇▇▇▇, but without the consent of ▇▇▇▇▇, to assign this Agreement to any
corporation or other entity that acquires more than a majority of the
outstanding common stock of CUI or all or substantially all of the assets of
CUI, whether by purchase, merger, consolidation or otherwise.
12. BINDING ON SUCCESSORS. Subject to Section 11 hereof, this Agreement
shall be binding on the parties and their respective heirs, legal
representatives and successors and assigns.
13. SECTION HEADINGS. Section and Subsection headings are for
convenience of reference only and shall not affect the meaning or have any
bearing on the interpretation of any provision of this Agreement.
14. SEVERABILITY. If any provision of this Agreement be held invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions hereof shall not be affected or impaired in any way.
15. GOVERNING LAW. This Agreement shall be construed according to the
internal laws of the State of California, excluding choice of law rules.
16. EXCLUSIVE JURISDICTION/WAIVER OF JURY TRIAL/ATTORNEY'S FEES TO
PREVAILING PARTY.
16.1 Jurisdiction. The courts of Orange County, California
shall have exclusive jurisdiction of any controversy or claim arising out of or
relating to this Agreement or any of the Agreements being entered into pursuant
to the express terms of this Agreement, and each party hereto agrees not to
challenge the subject-matter or personal jurisdiction of such courts, the
convenience of such
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courts as forums for such controversies and claims or the adequacy of service of
process delivered by certified or registered mail.
16.2 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
LAW EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES SUCH PARTY'S RIGHTS TO A
TRIAL BY JURY WITH RESPECT IN ANY LEGAL PROCEEDING THAT MAY BE BROUGHT AS A
RESULT OF ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN THE PARTIES RELATING TO OR
ARISING OUT OF THIS AGREEMENT AND EACH PARTY EXPRESSLY AND IRREVOCABLY AGREES
THAT THE TRIER OF FACT IN ANY SUCH PROCEEDING SHALL BE THE JUDGE.
16.3 Attorneys Fees. The court shall award to the prevailing
party, in addition to any other relief deemed appropriate, the prevailing
party's attorney's fees and costs of litigation, whether or not those are
otherwise available to the prevailing party by statute.
17. AUTHORITY. CUI represents and warrants to ▇▇▇▇▇ that it has the
requisite corporate power and authority, and ▇▇▇▇▇ represents and warrants to
CUI that he has the legal capacity and right, to enter into this Agreement and
to perform its or his respective obligations under this Agreement and that this
Agreement has been duly executed by such party.
18. TERMINATION OF PCGS AGREEMENT. ▇▇▇▇▇ acknowledges and agrees that
the PCGS Agreement is hereby terminated and shall be of no further force or
effect and that PCGS, as well as CUI, may rely on his agreement in this Section
18. ▇▇▇▇▇ further acknowledges that PCGS has performed all of its obligations
under the PCGS Agreement required of it prior to the termination thereof.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute the same instrument.
COLLECTORS UNIVERSE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Chairman
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
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