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Genesis Direct - CMO Employment Agreement
EXHIBIT 10.6
FORM OF
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of March 1, 1998, is entered into by Genesis Direct, Inc., a Delaware corporation with its principal place of business at 100 Plaza Drive, Secaucus, New Jersey 07094 (the "Company"), and David M. Sable, residing at _________________ ("Executive").
Executive is now, and since its inception has been, Chief Marketing Officer of the Company. The Company recognizes the significant contribution which Executive has made to the success of the Company and understands that the future growth, profitability and success of the Company will be significantly enhanced by the continued employment of Executive. The Company, therefore, desires to offer Executive a compensation package to incentivize him and secure his future services.
NOW, THEREFORE, on the basis of the foregoing facts and in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:
1. Employment. The Company shall continue to employ Executive and
---------- Executive agrees to continue such employment upon the terms and subject to the conditions hereinafter set forth.
2. Term. The term of this Agreement (the "Term") shall commence on
---- March 1, 1998 (the "Commencement Date"), and shall continue in effect for a period of thirty-six (36) months, expiring on February 28, 2001, unless otherwise extended or terminated as hereinafter provided. The Term shall be automatically extended for additional twelve-month periods on March 1, 1999 and on each March 1 thereafter, unless the Company notifies Executive in writing, at least ninety (90) days prior to any such March 1 extension date that such extension shall not take place; provided that, if a Change of Control of the
------------- Company (as defined in Section 11) shall have occurred during the original or extended Term of this Agreement, this Agreement shall continue in effect for a period of not less than twenty-four (24) months beyond the month in which such Change of Control shall have occurred.
3. Position; Duties.
----------------
(a) The Company and Executive agree that during the Term and subject to the provisions hereof the Company shall employ Executive and Executive shall serve as Chief Marketing Officer of the Company. During the Term and subject to the provisions hereof Executive shall report directly to and shall be subject to the direction and supervision of the Board of Directors of the Company (the "Board"), which super vision shall be consistent with Executive's title and position. Executive shall have such authority and responsibilities as is delegated to him by the Board from time to time, which authority and responsibilities shall be consistent with his title and position.
(b) Executive agrees to devote substantially all of his business time in furtherance of the performance of his duties to the Company hereunder and to use his best efforts to advance the business and welfare of the Company. Notwithstanding the foregoing, Executive may devote reasonable time to the management of his personal investments and to participation in community and charitable affairs, so long as such activities do not meaningfully interfere with his duties under the Agreement.
(c) Executive shall be based at the Company's headquarters in Secaucus, New Jersey, or such other headquarters which the Company may have in the metropolitan New York City area. Executive shall not be obligated to relocate outside the metropolitan New York City area without his prior written consent.
4. Member of the Board.
-------------------
(a) Throughout the first thirty-six (36) months of the Term Executive shall serve as a member of the Board. Furthermore, if the Company shall at any time during the first thirty-six (36) months of the Term have an Executive Committee of the Board, Executive shall serve as a member of the Executive Committee unless either Warren Struhl or Hunter Cohen (collectively, together with Executive, hereinafter being referred to as the "Founders") serve on such Committee. The Company agrees that it shall nominate Executive for election as a Director of the Company (and, if applicable, a member of its Executive Committee) at all elections during the first thirty six (36) months of the Term unless Executive declines to stand for election.
(b) At all times throughout the balance of the Term, at least one of the Founders shall serve as a member of the Company's Nominating Committee.
5. Compensation.
------------
(a) Base Salary. As compensation for Executive's employment
----------- hereunder, the Company shall pay Executive a base salary, payable in equal installments consistent with the Company's current payroll practices for executives, at an annual rate of $300,000, which amount shall be increased to $400,000 upon the earlier to occur of (i) the consummation of an IPO (as hereinafter defined) or (ii) the date the Company secures additional capital (other than the contemplated GE bridge note for up to $10.5 million) sufficient to provide funding for operations and acquisitions (i.e. $50 million or more) during the Company's 1998 fiscal year (the earlier of such dates hereinafter being referred to as the "Implementation Date"), or such greater base salary as the Board may from time to time approve. Executive's base salary shall be subject to annual review and increase by the Board, with the first increase as a result of such a review to take effect March 1, 1999. Each annual increase shall be no less than the increase in the Consumer Price Index (as hereinafter defined), between the two immediately preceding February levels. Each such adjustment shall be made retroactively when the Consumer Price Index for the February next preceding the date of such adjustment becomes available.
For purposes of this Agreement an "IPO" is consummated the first time a registration statement filed under the Securities Act of 1933 with the Securities and Ex change Commission or any other Federal agency at the time administering the Securities Act of 1933, or any similar Federal statute (other than a registration statement filed on Form S-4 or any successor form thereto or a registration statement filed on Form S-8 or any successor form thereto with respect to the issuance of common stock of the Company ("Common Stock"), or securities convertible into or exercisable or exchangeable for, Common Stock or rights to acquire Common Stock or such securities, granted or to be granted to employees or directors of or consultants to the Company or its subsidiaries) respecting an offering, whether primary or secondary, of not less than 10% (or such lesser percentage as a lead underwriter shall determine is the maximum amount to be offered and sold pursuant to such registration statement) of the Common Stock then out standing on a fully-diluted basis is declared effective and the shares so registered are offered and sold which results in proceeds to the Company of not less than $30 million.
For purposes of this Agreement, the "Consumer Price Index" means Con sumer Price Index for All Urban Consumers, U.S. City Average, All Items (1982- 84=100), as reported by the Bureau of Labor Statistics of the U.S. Department of Labor. In the event that the Consumer Price Index is superseded, the superseding index shall be substituted for this Consumer Price Index in such a manner as to implement the intent of this Agreement that the Executive's base salary be adjusted annually, so that the purchasing power thereof be maintained at a level amount.
(b) Bonus. In addition to the base salary provided for in
----- Section 5(a) hereof, Executive shall be entitled to participate with other executives of the Company (as administered by the Company's Compensation Committee) in a management incentive program or other bonus program which the Company plans to adopt no later than the Implementation Date. Under such program Executive shall be entitled to receive an annual bonus equal to 0% to 25% of his base salary if performance results are less than a reasonable goal set forth by the Company in its annual business plan (which business plan is adopted by the Board prior to the annual performance period) and equal to 25% to 50% of his base salary if performance results exceed the goals set forth in the Company's business plan; provided, however, that if the Board fails to adopt an annual business plan as a result of the failure of the Founders to present a reasonable business plan to the Board, solely for purposes of determining the bonus payable under this Section 5(b), the Company's Compensation Committee may substitute reasonable goals, mutually acceptable to Executive and the Compensation Committee, based on the individual performance of Executive. In the event that the Company does not adopt any such plan or program, then, in lieu thereof, Executive shall be entitled to receive an annual bonus each April, beginning with April, 1999, during the Term in amount equal to 25% of the base salary paid to him in the 12 months preceding such April (including base salary paid to Executive for the period prior to the Commencement Date).
(c) Stock Option Awards.
-------------------
(i) Basic Award. The Company shall grant to
----------- Executive 10-year options covering, in total, one thousand nine hundred (1,900) shares of Common Stock. The option exercise price for five hundred (500) of the shares covered by the options (the "First Option Group") shall be four thousand five hundred dollars ($4,500) per share; the option exercise price for six hundred (600) of the shares covered by the options (the "Second Option Group") shall be six thousand five hundred dollars ($6,500) per share; and the option exercise price for eight hundred (800) of the shares covered by the options (the "Third Option Group") shall be eight thousand five hundred dollars ($8,500) per share. The options, which shall be substantially in the form attached hereto as Exhibit A, shall provide for vesting of the First Option Group on March 2, 1999, - --------- vesting of the Second Option Group on March 2, 2000, and vesting of the Third Option Group on March 2, 2001. The First Option Group shall be granted as of March 2, 1998. The Second and Third Option Groups shall be granted as of the consummation of an IPO.
(ii) Additional Options and/or Equity-Based
-------------------------------------- Awards. In addition to the options described in Section 5(c)(i), at each annual - ------ review, subject to the approval of the Compensation Committee, the Company shall consider granting to Executive a reasonable and competitive number of options to purchase Common Stock and/or other equity-based compensation awards, which options and/or awards shall be reasonably calibrated to incentivize Executive to help the Company achieve its financial goals.
(iii) General Terms. Notwithstanding the vesting
------------- schedule described in Section 5(c)(i) and any vesting schedule with respect to any grant made pursuant to Section 5(c)(ii), all such options shall provide (after they have been granted) for full vesting (i) upon a Change of Control (as defined in Section 11), and (ii) upon the termination of Executive's employment in a termination described in Section 7 hereof. The other terms of each such option shall, in the aggregate, be no less generous to Executive than options which as of the date hereof have been issued to the Company's senior executives, but in no event shall provide (other than as specified in the second following sentence) that the option shall lapse before the earlier to occur of (A) one (1) year following a termination of employment or (B) the expiration of the 10-year term. All such options shall also contain provisions for cashless exercise, tax liability protection, customary anti-dilution provisions and registration rights for the underlying common stock. Notwithstanding the second preceding sentence, each of the options shall provide that it will lapse 30 days following a termination of employment if the termination is by Executive without Good Reason (as defined in Section 7)(other than by death or for disability).
(d) Split Dollar Life Insurance. As an additional inducement to
--------------------------- the Executive to enter this Employment Agreement, as soon as practicable, but no
later than six weeks from the date hereof, the Company shall increase from two million dollars ($2,000,000) to four million dollars ($4,000,000) the face amount of life insurance on the life of Executive which is covered by a written split-dollar insurance agreement (the "Split Dollar Agreement") between the Company and one or more family members of Executive, under which the Company pays the full amount of annual premiums during the Term on a life insurance policy on the life of Executive and the Company has the right to recover its cumulative premium outlay on the earlier to occur of (i) termination of the Split Dollar Agreement or (ii) death of the insured, and the balance of the death benefit is payable to Executive's named beneficiary. Said increase in the face amount of life insurance shall be accomplished either by amendment of the existing Split Dollar Agreement to reflect the increase or by the adoption of a second Split Dollar Agreement covering the additional two million dollars ($2,000,000) of life insurance coverage, with terms substantially similar to the original Split Dollar Agreement.
(e) Other Benefits. Executive shall be entitled to receive such
-------------- benefits, compensation or rights as are generally made available to other members of senior management of the Company (but not less than those made available to other employees generally) including, without limitation, sick pay, participation in any pension, profit sharing, deferred compensation and any equity incentive plan and participation in any medical, disability and other welfare benefit plan now existing or hereafter adopted by the Company; provided, however, that in the event Executive fails to qualify for any medical or disability insurance plan that may be adopted by the Company, the Company shall pay to Executive an amount which would enable him to purchase an insurance plan from another carrier which provides substantially similar benefits to those provided to other members of senior management under the Company's plans. In addition, to the extent that such benefit is not made available under its general employee benefit plans, the Company shall maintain disability insurance for Executive which provides Executive with a disability benefit equal to 50% of his base salary (on an after-tax basis). Executive represents that as of the date hereof he has no knowledge of any medical condition which might prevent him from qualifying as a beneficiary under a standard medical or disability plan. During the Term, Executive's benefits shall be maintained at least at the same level as they are presently in effect on the date hereof.
(f) Vacation. Executive shall be entitled to four weeks of
-------- vacation time each year, to be pro-rated monthly for partial years, during the Term. If Executive does not utilize all vacation in the year earned, one-half of the unused vacation time in any year shall carry over to the next year.
6. Expenses and Fringe Benefits. Upon presentation by Executive of
---------------------------- documentation, expense statements, vouchers and/or such other supporting information as the Company may reasonably request, the Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, which are consistent with Company policies and Executive's
practices as of the date hereof. Without limiting the foregoing, the Company shall provide Executive with (i) a personal assistant; (ii) an office and office furniture commensurate with his title and position; and (iii) a first rate personal computer for his home and other technological equipment (as is developed from time to time) which Executive reasonably determines can meaningfully assist him in the performance of his duties and tasks hereunder. In addition, at the beginning of the Term and each third year thereafter the Company shall lease for Executive, for his exclusive use, a new automobile reasonably selected by Executive, consistent with its practice as of the date hereof, which automobile shall not cost more than $50,000. In addition to making lease and insurance payments for the automobile, the Company shall reimburse Executive for reasonable and proper maintenance expenses which he incurs for such automobile.
7. Termination of Executive Without Cause or by Executive With Good
---------------------------------------------------------------- Reason. - ------
(a) At any time prior to expiration of the Term, the Board may terminate Executive's employment without Cause (as defined in Section 9(b)), at any time, and Executive may terminate his employment with Good Reason (as defined in Subsection (b) of this Section 7), subject to payment by the Company of the severance amounts set forth in Subsections (c) and (d) of this Section 7.
(b) For purposes hereof the term "Good Reason" shall mean:
(i) during the first thirty-six (36) months of the Term, the failure of the Company to nominate Executive for election as a Director of the Company at any election or, if the Company has an Executive Committee, the failure of the Company to nominate Executive for election as a member of the Executive Committee of the Company at any election, unless (in either case) Executive declines to stand for election or unless, in the case of the Executive Committee, either Warren Struhl or Hunter Cohen are nominated; and for the balance of the Term, the failure of at least one of the Founders to serve as a member of the Company's Nominating Committee;
(ii) any purported termination of Executive's employment for Cause which is not effected pursuant to a notice described in Section 9 of this Agreement;
(iii) without Executive's express written consent, the assignment to Executive of any duties materially inconsistent with the offices held here under, or a material alteration or diminution in the nature or status of his responsibilities; or an adverse and material alteration in his reporting responsibilities, titles or offices, or any removal of him or failure to re-elect him to any of such positions, except in connection with the termination of his employment or retirement (which shall mean his voluntary termination of employment after having attained age 65);
(iv) any reduction in Executive's annual base salary or bonus opportunity provided for in Section 5 or a material reduction in fringe benefits as in effect on the date hereof or as the same may be increased during the Term;
(v) any relocation of Executive other than as permitted under Section 3(c); and
(vi) any material breach by the Company of any material provision of this Agreement which the Company fails to correct within thirty (30) working days after receiving written notice thereof; and
(vii) any termination of employment which occurs within two years following a Change of Control other than a termination by the Company for Cause.
Not less than ten (10) business days prior to terminating his employment for Good Reason, Executive shall provide the Company with notice of the same, which notice, to the extent applicable, shall provide the Company with an opportunity to cure any of the conditions specified in clauses (i) through (vii) of this Section 7(b) prior to the termination effective date.
In the event that Executive terminates his employment as a result of an event or change described in clause (iii) of this Section 7(b), such termination shall not be deemed to be for Good Reason unless Executive, within one hundred and eighty (180) days from the time the event or change has been brought to the attention of Executive), has notified the Compensation Committee of such event or change.
(c) In the event Executive is terminated by the Company with out Cause or Executive terminates his employment with Good Reason, in addition to paying Executive all unpaid compensation and benefits accrued through the date of termination of his employment (including any bonus for a prior year which has not been paid and a pro rata portion of the bonus payable for the year in which the termination occurs), the Company shall pay to Executive an amount equal to the sum of (i) two (2) times Executive's annual base salary (based on Executive's base salary prevailing at the time of the termination), plus (ii) two (2) times the highest annual bonus paid to Executive during the thirty-six (36) month period ending on the date of the termination (and, if the Company has not paid an annual bonus to Executive during such period due to its failure to establish a bonus program pursuant to Section 5(b), $400,000 in lieu thereof.) In addition, during the period that the Company is obligated to provide Executive and his dependents with continuation coverage under a group health plan under COBRA (determined without regard to whether Executive elects to pay the premium costs, but determined with regard to whether such coverage is cut off as a result of other employer coverage becoming effective), Company shall pay the premium costs for such
coverage to the same extent that it paid such costs prior to the termination of employment.
(d) Payment pursuant to Section 7(c) shall be made in twelve (12) equal monthly installments on the last day of each month after termination of this Agreement pursuant to this Section 7; provided, however, that if the
-------- ------- Executive's employment is terminated under the circumstances described in Section 11) (following a Change of Control), payment pursuant to Section 7(c) shall be made in a single lump sum within thirty (30) days of the termination date.
(e) The parties hereto expressly acknowledge and agree that the compensation and benefits payable to Executive upon a termination as specified in this Section 7 will constitute full, reasonable and adequate compensation for any such termination and that the payment of such compensation and benefits shall fully satisfy and discharge any and all obligations of the Company to Executive in connection with such termination.
(f) As a condition to making any payment provided under Section 7(c) the Company may require Executive to execute a release, pursuant to which release Executive and his heirs, successors and assigns relinquish and forever discharge the Company and any director, officer, employee, shareholder or agent of the Company from any and all claims, damages, losses, costs, expenses liabilities or obligations, whether known or unknown (other than any such claims, damages, losses, costs, expenses, liabilities or obligations (i) covered by any indemnification arrangement of the Company with Executive or (ii) arising under any written employee benefit plan or arrangement covering Executive) which Executive has incurred or suffered or may incur or suffer as a result of Executive's employment by the Company or the termination of such employment.
8. Termination By Executive Without Good Reason. Executive may
-------------------------------------------- terminate his employment hereunder without Good Reason, provided that Executive first gives to the Company a written notice of intent to terminate at least one hundred twenty (120) days prior to the effective date of any such termination. All rights of Executive under this Agreement shall terminate upon the effective date of the termination of employment; provided, however, the Company shall pay
-------- ------- to Executive any base salary earned through the effective date of the termination and any other compensation and benefits provided in Sections 5 and 6 to the effective date of such termination (including any bonus for a prior year which has not been paid, but not any portion of any bonus for the year in which the termination occurs). Notwithstanding anything to the contrary contained in Section 5(c) upon a termination of Executive's employment hereunder without Good Reason, Executive must exercise or forfeit all outstanding, unexercised vested options within 120 days of such termination and shall forfeit all outstanding unvested options which he has received pursuant to Section 5(c).
9. Termination of Executive For Cause.
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(a) Notwithstanding anything in this Agreement to the...
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