EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT dated May 29, 1996, is between Medallion
Financial Corp., a Delaware corporation with its principal place of business at
205 East 42nd Street, Suite 2020, New York, NY 10017 (the "Company"), and Alvin
-------
Murstein residing at 6 Sandpiper Court, Old Westbury, NY 11568 (the
"Executive").
---------
WHEREAS, the Executive is presently employed by the Company as the Chief
Executive Officer of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") desires to
-----
provide for the continued employment of the Executive, which the Board believes
is in the best interests of the Company and its shareholders, and the Executive
is willing to commit himself to serve the Company, on the terms and conditions
herein provided;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
The Company agrees to employ the Executive, and the Executive agrees to
serve the Company, on the terms and conditions set forth herein.
1. Title; Capacity. The Executive shall serve as Chief Executive Officer
---------------
of the Company and shall be based at the Company's headquarters in New York
City. The Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Executive
agrees to abide by the rules, regulations, instructions, personnel practices and
policies of the Company and any changes therein which may be adopted from time
to time by the Company.
The Company further agrees to use its best efforts to cause the Executive
to be nominated as a member of the Board and a member of the Executive Committee
(if such a committee is created).
2. Term of Employment. The Company agrees to employ the Executive, and
------------------
the Executive agrees to serve the Company for a period commencing on May 29,
1996 (the "Commencement Date") and continuing for five years thereafter (such
-----------------
period, including all extensions thereto, to be collectively referred to as the
"Employment Period"), unless otherwise terminated pursuant to the terms hereof.
-----------------
The Employment Period shall automatically renew annually for a new five-year
term unless prior to the end of the first year of each five-year term, either
the Company or the Executive provides notice to the other party to this
Agreement of its intention not to extend the Employment Period beyond the then
current five-year term. Any notice given pursuant to this Section shall be
provided in accordance with the terms of Section 8.1 hereof and shall be
provided not later than 30 days prior to the end of such one-year period.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Executive, in monthly
------
installments, an annual base salary of $250,000 for the one-year period
commencing on the Commencement Date. Such salary shall be subject to
adjustment thereafter as determined by mutual agreement between the Board
and the Executive.
3.2 Bonus and Fringe Benefits. The Executive shall be entitled to
-------------------------
participate in all bonus and benefit programs or plans that the Company
establishes
-2-
and makes available to its employees to the extent that the Executive's
position, tenure, salary, and other qualifications make him eligible to
participate.
3.3 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Executive for all reasonable travel, entertainment and other expenses
incurred or paid by the Executive in connection with, or related to, the
performance of his duties, responsibilities or services under this
Agreement, upon presentation by the Executive of documentation, expense
statements, vouchers and/or such other supporting information as the
Company may reasonably request, provided, however, that the amount
-------- -------
available for such travel, entertainment and other expenses may be fixed in
advance by the Board.
3.4 Insurance. The Executive shall be entitled to health insurance
---------
coverage, term life insurance and long term disability insurance to the
extent that the Executive's position, tenure, salary, age, health and other
qualifications make him eligible to participate.
3.5 Vacation. The Executive shall be entitled to six weeks paid
--------
vacation per year.
4. Employment Termination. The employment of the Executive by the
----------------------
Company pursuant to this Agreement may be terminated under the following
circumstances:
4.1 Expiration of Term. Expiration of the Employment Period in
------------------
accordance with Section 2.
4.2 Death. Upon the death of the Executive.
-----
4.3 Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall have failed to perform the
services contemplated under this Agreement for a period of 270 consecutive
days, or a total of at least 300
-3-
calendar days during any 365-day period, or a determination of disability
shall have been made by a physician satisfactory to both the Executive and
the Company, provided that if the Executive and the Company do not agree on
a physician, the Executive and the Company shall each select a physician
and these two together shall select a third physician whose determination
as to disability shall be binding on both parties.
4.4 Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall
have "Cause" to terminate the Executive's employment hereunder in the
-----
event:
(i) the Executive shall have willfully failed and continued to
fail substantially to perform the duties (other than any failure
resulting from the Executive's incapacity due to physical or mental
illness or any actual or anticipated failure after the issuance by him
of a Notice of Termination, as defined in Section 4.6), for 30 days
after a written demand for performance is delivered to the Executive
on behalf of the Company which specifically identifies the manner in
which it is alleged that the Executive has not substantially performed
his duties; provided that the Company's economic performance or
--------
failure to meet any specific projection shall not, in and of itself,
constitute "Cause"; or
-----
(ii) the Executive shall have engaged in (A) any material
misappropriation of funds, properties or assets of the Company, it
being understood that "material" for these purposes shall take into
--------
account both the amount of funds, properties or assets misappropriated
and the circumstances thereof (including the intent of the Executive
in connection therewith) or (B)
-4-
any malicious damage or destruction of any property or assets of the
Company, whether resulting from the Executive's wilful actions or
omissions or the Executive's gross negligence; or
(iii) the Executive shall (A) have been convicted of a crime
involving moral turpitude or constituting a felony or (B) entered a
plea of nolo contendere to any such crime, either of which has had a
material adverse effect upon the business of the Company; or
(iv) the Executive shall have (A) materially breached his
obligations under Section 6 hereof or (B) breached any of the other
material provisions of this Agreement and such breach shall remain
uncured by the Executive within 30 days following receipt of notice
from the Company specifying such breach.
4.5 Termination by the Executive. The Executive may terminate his
----------------------------
employment hereunder (i) upon 90 days written notice or (ii) for Good
Reason (as defined below).
For purposes of this Agreement, "Good Reason" shall exist if there is
-----------
a Change in Control (as defined below) of the Company and one or more of
the following events shall have occurred (without the Executive's express
written consent):
(a) the assignment to the Executive of any duties
inconsistent with his status as Chief Executive Officer of the
Company, his removal from the position of Chief Executive Officer
of the Company, or a substantial alteration in the nature or
status of his responsibilities from those in effect immediately
prior to the Change in Control;
-5-
(b) a reduction by the Company of the Executive's annual
base salary in effect on the date immediately prior to the Change
in Control;
(c) the relocation of the Company's principal executive
offices to a location outside mid-town New York City or a
requirement that the Executive shall be based anywhere other than
the Company's principal executive offices except for required
travel on the Company's business to an extent substantially
consistent with his business travel obligations prior to the
Change in Control;
(d) the failure by the Company to continue in effect any
bonus plan in which the Executive was participating immediately
prior to the Change in Control; or
(e) the failure by the Company to continue to provide the
Executive with benefits at least as favorable as those enjoyed by
him under any of the Company's pension, life insurance, medical,
health and accident, disability, deferred compensation or savings
plans in which he was participating at the time of the Change in
Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive him of any material fringe benefit enjoyed by him at the
time of the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation days to
which he was entitled at the time of the Change in Control.
-6-
For purposes of this Agreement, a "Change in Control" of the Company
-----------------
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended.
4.6 Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than termination
pursuant to Section 4.2) shall be communicated by Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
---------
Termination" shall mean a written notice which shall indicate the specific
-----------
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances which provide a basis for
termination of the Executive's employment under the provision so indicated.
4.7 Date of Termination. "Date of Termination" shall mean (i) if the
------------------- -------------------
Executive's employment is terminated pursuant to Section 4.1, the date on
which the Employment Period expires pursuant to Section 2, (ii) if the
Executive's employment is terminated pursuant to Section 4.2, the date of
the Executive's death, (iii) if the Executive's employment is terminated
pursuant to Section 4.3, 30 days after the Notice of Termination is given
(provided that the Executive shall not have returned to the performance of
his duties on a full-time basis during such 30 day period), (iv) if the
Executive's employment is terminated pursuant to Section 4.4 or subsection
(i) of Section 4.5, the date specified in the Notice of Termination,
provided that in the case of a Section 4.4 termination it is at least 30
days subsequent to the date of the issuance of such Notice of Termination
and in the case of a subsection (i) of Section 4.5 termination it is at
least 90 days subsequent to the date of the issuance of such
-7-
Notice of Termination, (v) if the Executive's employment is terminated
pursuant to subsection (ii) of Section 4.5, the date specified in such
Notice of Termination, and (vi) if the Executive's employment is terminated
other than as provided herein, the date specified in the Notice of
Termination, provided that it is at least 30 days subsequent to the date of
the issuance of such Notice of Termination.
5. Compensation Upon Termination.
-----------------------------
5.1 If the Executive's employment is terminated under the provisions
of Sections 4.1, 4.4 or subsection (i) of Section 4.5, the Company shall
pay to the Executive his full salary, bonus and benefits through the Date
of Termination.
5.2 If the Executive's employment is terminated by the Executive's
death under the provisions of Section 4.2, the Company shall pay to the
Executive's estate the Executive's full salary, bonus and benefits to the
Executive through the Date of Termination.
5.3 If the Executive's employment is terminated under the provisions
of Section 4.3, the Company shall pay to the Executive his full salary,
bonus and benefits through the Date of Termination. During any period that
the Executive fails to perform his duties hereunder as a result of
disability (as defined in Section 4.3), the Executive shall continue to
receive his full salary, bonus and benefits through the Date of
Termination.
5.4 If the Company shall terminate the Executive's employment other
than as provided herein or the Executive shall terminate his employment
pursuant to subsection (ii) of Section 4.5, then:
(i) The Company shall pay the Executive his full salary, bonus
and benefits through the Date of Termination.
-8-
(ii) Subject to subsection (iv) of this Section 5.4, in lieu of
any further salary payments to the Executive for periods subsequent to
the Date of Termination, the Company shall pay as severance pay to the
Executive an amount equal to the remainder of the salary, bonus and
value of the fringe benefits which the Executive would be entitled to
receive for the balance of the Employment Period.
(iii) The Company shall pay all other damages to which the
Executive may be entitled as a result of such termination, including
damages for any and all legal fees and expenses incurred by him as a
result of such termination.
(iv) In the event that (A) any payment or benefit received or to
be received by the Executive in connection with a Change in Control of
the Company or the termination of the Executive's employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company) (collectively referred to herein as
"Severance Payments") would not be deductible (in whole or part) as a
-------------------
result of section 280G of the Internal Revenue Code of 1986, as
amended, (the "Code") by the Company, an affiliate or other person
----
making such payment or providing such benefit and (B) it shall be
determined that the net amount retained by the Executive, after
deduction of the excise tax imposed by section 4999 of the Code and
any federal, state and local income and employment taxes on the
Severance Payments, does not exceed 110% of the net amount retained by
the Executive after applying the limitations of this subsection (iv)
of Section 5.4 and after deduction of any federal, state and local
income and employment taxes on the
-9-
Severance Payments as so reduced, the Severance Payments shall be
reduced until no portion of the Severance Payments is not deductible,
or the Severance Payments are reduced to zero. For purposes of this
limitation (i) no portion of the Severance Payments the receipt or
enjoyment of which the Executive shall have effectively waived in
writing prior to the date of payment of the Severance Payments shall
be taken into account, (ii) no portion of the Severance Payments shall
be taken into account which in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to the Executive
does not constitute a "parachute payment" within the meaning of
-----------------
section 280G(b)(2) of the Code, (iii) the Severance Payments shall be
reduced only to the extent necessary so that the Severance Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of
the tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Severance Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and
(4) of the Code. For purposes of determining the income taxes on the
Severance Payments, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in
the calendar year in which the Severance Payments are to be made and
local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence
-10-
on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and
local taxes.
6. Proprietary Information and Developments.
----------------------------------------
6.1 Proprietary Information.
-----------------------
(i) The Executive agrees that all information and know how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs (collectively,
"Proprietary Information") is and shall be the exclusive property of
-----------------------
the Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods,
techniques, projects, developments, plans, research data, financial
data, personnel data, and lists of borrowers, advertisers, fleet and
taxi owners. The Executive will not disclose any Proprietary
Information to others outside the Company or use the same for any
unauthorized purposes without written approval by the Board, either
during or after his employment, unless and until such Proprietary
Information has become public knowledge without fault by the
Executive.
(ii) The Executive agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, or other written,
photographic, or other tangible material containing Proprietary
Information, whether created by the Executive or others, which shall
come into his custody or possession, shall be and are the exclusive
property of the Company to be used by the Executive only in the
performance of his duties for the Company.
(iii) The Executive agrees that his obligation not to disclose
or use information, know-how and records of the types set forth in
subsection (i) and
-11-
(ii) above, also extends to such types of information, know-how,
records and tangible property of borrowers, advertisers, fleet and
taxi owners or other third parties who may have disclosed or entrusted
the same to the Company or to the Executive in the course of the
Company's business.
6.2 Other Agreements. The Executive hereby represents that he is not
----------------
bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential
or proprietary information in the course of his employment with the Company
or to refrain from competing, directly or indirectly, with the business of
such previous employer or any other party. The Executive further
represents that his performance of all the terms of this Agreement and as
an employee of the Company does not and will not breach any agreement to
keep in confidence proprietary information, knowledge or data acquired by
him in confidence or in trust prior to his employment with the Company.
7. Non-Competition, Non-Solicitation.
---------------------------------
7.1 Non-solicitation of Employees. The Executive agrees that during
-----------------------------
the term of the Executive's employment with the Company, the Executive
shall not directly recruit, solicit or otherwise induce or attempt to
induce any employees of the Company to leave the employment of the Company.
7.2 Non-competition. The Executive agrees that during the term of
---------------
the Executive's employment with the Company, the Executive shall not
directly or indirectly, except as a passive investor in publicly held
companies and except for investments held at the date hereof, engage in
competition with the Company or any of its subsidiaries, or own or control
any interest in, or act as director, officer or employee of, or consultant
to, any firm, corporation or institution directly engaged in
-12-
competition with the Company or any of its subsidiaries; provided the
Company or one of its subsidiaries are actively engaged in such business at
the time the Executive's employment by the Company is terminated.
8. Miscellaneous.
-------------
8.1 Notices. All notices required or permitted under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.1.
8.2 Pronouns. Whenever the context may require, any pronouns used in
--------
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
8.3 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement.
8.4 Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Executive.
8.5 Governing Law. This Agreement shall be construed, interpreted
-------------
and enforced in accordance with the laws of the State of Delaware.
8.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Executive are personal and shall not be assigned by him.
-13-
8.7 Waivers. No delay or omission by the Company in exercising any
-------
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
8.8 Captions. The captions of the sections of this Agreement are for
--------
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
8.9 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
-14-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
MEDALLION FINANCIAL CORP.
By: /s/ Andrew Murstein
---------------------------------
Title: President
------------------------------
EXECUTIVE
/s/ Alvin Murstein
--------------------------------------
Alvin Murstein
-15-