EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 7th day of June, 1996, by and between
SEWING MACHINE EXCHANGE, INC., an Illinois corporation with offices located at
1840 South Michigan Avenue, Chicago, Illinois 60616 (the "Company") and MARTIN
KRASNITZ, residing at 330 West Diversy, Chicago, Illinois 60657 (the
"Executive"). W I T N E S S E T H : WHEREAS, simultaneously herewith, Hirsch
International Corp. ("Hirsch") has acquired all of the capital stock of the
Company pursuant to the terms of a Stock Purchase Agreement of even date
herewith (the "Purchase Agreement"); and WHEREAS, prior to said acquisition,
Executive owned fifty (50%) percent of the capital stock of and is President of
the Company and heretofore was a full time employee of the Company; and WHEREAS,
pursuant to the terms of the Purchase Agreement, the parties have simultaneously
entered into this Employment Agreement. NOW, THEREFORE, the parties, intending
to be legally bound, agree as follows:
1. Employment.
The Company hereby employs the Executive and Executive agrees to serve the
Company and its corporate "Affiliates" (as such term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) and to continue to perform his usual and customary duties together with
such other
reasonable duties as shall be assigned to him from time to time by the
Board of Directors of the Company and Hirsch. The services to be provided by
Executive hereunder shall be principally provided in the Chicago, Illinois area,
although Executive acknowledges that in the course of his employment hereunder
he may be required, from time to time, to travel on behalf of the Company.
2. Term.
The employment of Executive hereunder shall be effective and commence on
the date hereof (the "Effective Date"), and shall terminate as of the close of
business on the fifth anniversary of the Effective Date (the "Term").
3. Duties and Nature of Executive's Services.
Executive agrees to serve as Vice President of the Company and agrees to
serve the Company and its Affiliates faithfully and to the best of his ability.
During the first two years of the Term, Executive shall devote his entire
business time, attention, energy, skill and experience to the performance of his
duties hereunder and shall not engage, directly or indirectly, in any other
business, employment or occupation which is competitive with the business of the
Company and its Affiliates. During the final three years of the Term, Executive
shall devote only so much time to the performance of his duties hereunder as he
shall determine, it being intended that the time committed shall be only so much
as shall allow Executive to qualify for coverage under the Company's then
existing medical plan for executives of Hirsch; provided, however, that the
Company or Hirsch shall not be required to prosecute any claim against its
medical insurance carrier that shall disclaim liability for medical insurance
coverage as a result of Executive's failure to qualify as a full time employee
of the Company and Executive agrees to indemnify and hold the Company harmless
from any claim by such insurance carrier that it paid claims to Executive
resulting in damage to such carrier, in breach of the Company's (or Hirsch's)
agreement with the carrier.
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4. Compensation.
4.1. As full compensation for all services to be rendered by the Executive
to the Company or its Affiliates under or pursuant to the terms of this
Agreement, the Company shall pay to the Executive a base salary (the "Base
Compensation") as follows: Two Hundred Fifty-Five Thousand ($255,000) Dollars
per year during the first and second years of the Term, and Thirty Thousand
($30,000) Dollars per year during the third, fourth and fifth years of the Term.
The Base Compensation shall be payable at such regular times and intervals as
the Company customarily pays its employees from time to time.
4.2. During the term of his employment hereunder, Executive shall be
entitled to participate in all life insurance, medical, retirement, pension and
other non-incentive and non-bonus plans and perquisites of Hirsch now in effect
or hereafter adopted and made generally available by Hirsch to its senior
executive officers; provided that Executive qualifies under and is eligible to
participate in such plans and perquisites in accordance with the terms and
subject to the conditions thereof. The Company shall have the right at any time
and from time to time to change insurance carriers and to modify the scope of
coverage and other terms of insurance policies and other plans covering its
senior executive officers. The Executive shall not be eligible to participate in
any executive bonus or other long-term compensation or incentive plans of
Hirsch.
4.3. During the first two years of the Term, the Executive shall also be
entitled to the full-time use of a Company automobile (same model currently
being used by Executive or its equivalent). The Company shall purchase all
relevant insurance for said automobile (or reimburse Executive for cost of same)
and shall reimburse the Executive for all fuel and repairs to said automobile.
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4.4. The Company shall deduct from the Executive's Base Compensation, bonus
or incentive compensation any federal, state or city withholding taxes, social
security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any federal, state or city laws,
rules or regulations.
4.5. The Company shall reimburse the Executive, or cause him to be
reimbursed, for all reasonable out-of-pocket expenses incurred by him in the
performance of his duties hereunder or in furtherance of the business and/or
interests of the Company; provided, however, that the Executive shall have
previously furnished to the Company an itemized account, satisfactory to the
Company, in substantiation of such expenditures.
5. Grant of Stock Option. In addition to the Compensation described in
Section 4 hereof, Hirsch has simultaneously entered into a Non-Qualified Stock
Option Agreement with Executive entitling Executive to purchase up to an
aggregate of 132,500 shares of Hirsch's Class A Common Stock.
6. Indemnification. The Company undertakes, to the fullest extent permitted
by law, to indemnify and hold the Executive harmless from and against all
claims, damages, losses and expenses, including reasonable attorneys' fees and
disbursements, arising out of the performance by the Executive of his duties
pursuant to this Agreement, in furtherance of the Company's business and within
the scope of his employment.
7. Termination.
7.1. If the Executive dies or becomes disabled during the Term, his Base
Compensation and all other rights under this Agreement shall terminate at the
end of the month during which death or disability occurs. For purposes of this
Agreement, the Executive shall be deemed to be "disabled" if he has been unable
to perform his duties for
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six (6) consecutive months or nine (9) months in any twelve (12) month
period, all as determined in good faith by the Board of Directors of the
Company.
7.2. The Company shall, in the manner described in Section 7.3 hereof, have
the right to terminate the employment of Executive under this Agreement and
Executive shall forfeit the right to receive any and all further payments
hereunder, other than the right to receive any compensation and reimbursements
then due and payable to Executive pursuant to Section 4 hereof to the date of
termination, if Executive shall commit any of the following acts or any of the
following acts occur ("Event of Default"): (a) Material breach of any of the
material provisions or covenants of this Agreement;
(b) Material breach of any of the material representations, warranties,
covenants or agreements contained in the Purchase Agreement; except if (i) the
existence of such breach is being contested in good faith or (ii) such breach
did not constitute fraud or bad faith by the Executive and the Company or Hirsch
has been fully indemnified by the Executive with respect to such breach;
(c) Gross negligence in the performance of his duties or obligations
hereunder, or, without proper cause, wilful refusal or habitual neglect to
perform his employment duties or obligations under this Agreement;
(d) Any material act of willful misconduct, dishonesty or breach of trust
which directly or indirectly causes the Company or any of its Affiliates to
suffer any loss, fine, civil penalty, judgment, claim, damage or expense;
(e) Indictment for or conviction of, or plea of guilty or nolo contendere
to, a felony or indictable offense (unless committed in the reasonable, good
faith belief that the Executive's actions were in the best interests of the
Company and its stockholders and would not violate criminal law);
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(f) A court or other tribunal of competent jurisdiction shall have issued
an order prohibiting the Company from employing Executive; or
(g) Any repeated violation (after written notice) or material violation of
the Company's discipline rules as set forth in the Company's Employee handbook,
a copy of which has heretofore been delivered to the Executive, as may be
modified from time to time at the sole discretion of the Company.
7.3. If the Company elects to terminate this Agreement upon the occurrence
of any Event of Default, it shall deliver notice thereof to the Executive,
describing with reasonable detail, the action or omission of the Executive
constituting the act of default (the "Termination Notice"), and thereupon no
further payments of any type shall be made or shall be due or payable to
Executive hereunder, except as provided in Section 7.2 hereof; provided,
however, with respect to any act of default set forth in Clauses (a), (c), (f)
and (g) of Section 7.2 hereof, prior to termination by the Company of
Executive's employment, Executive shall first have an opportunity to cure or
remedy such act of default within thirty (30) days following the Termination
Notice.
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8. Restrictive Covenants.
8.1. Covenant Not to Compete. The Executive covenants and undertakes that,
for the period equal to the longer of his employment with the Company or its
Affiliates or five (5) years from the date hereof, he will not, without the
prior written consent of the Company, directly or indirectly, and whether as
principal, agent, officer, director, employee, consultant, or otherwise, alone
or in association with any other person, firm, company, or other business
organization, carry on, or be engaged, concerned, or take part in, or render
services to, or own, share in the earnings of, or invest in the stock, bonds, or
other securities of any person, firm, company, or other business organization
(other than Hirsch) engaged in a business in the Continental United States which
is similar to or in competition with any of the businesses carried on by the
Company, Hirsch, or any Affiliates thereof (a "Similar Business"); provided,
however, that the Executive may invest in stock, bonds, or other securities of
any Similar Business (but without otherwise participating in the activities of
such Similar Business) if (i) such stocks, bonds, or other securities are listed
on any national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934; and (ii) his investment
does not exceed, in the case of any class of the capital stock of any one
issuer, 2% of the issued and outstanding shares, or in the case of bonds or
other securities, 2% of the aggregate principal amount thereof issued and
outstanding. The restrictions contained in this Section 8.1 shall not be
operative if the promissory note of Hirsch delivered at closing shall be in
default and such default shall not be duly cured or the Company shall be in
material breach of a material provision hereof and, after due notice thereof,
the Company shall fail to cure such default within 30 days after receipt of
notice or if such default is not reasonably capable of being cured within such
30
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day period, then the Company shall undertake to cure the default within
such 30 day period and act diligently thereafter to effect such cure.
8.2. Confidential Information; Covenant not to Disclose.
8.2.1. During the term of this Agreement and thereafter, Executive agrees
not to divulge, furnish or make accessible to anyone (other than in the regular
course of business of the Company and its Affiliates) any knowledge or
information (whether or not in writing) relating to the business and affairs of
the Company, including, without limitation, knowledge or information with
respect to trade secrets, formulae, computer programs, intellectual or
industrial property, designs, processes, plans or materials (collectively,
"Company Property") of the Company, its parent or any of its Affiliates, or with
respect to any other material proprietary, confidential or non-public aspects of
the business or affairs of the Company and any of its Affiliates.
8.2.2. Any Company Property (whether or not protected or eligible for
protection by common law or by registered patent, trademark or copyright),
relating to the business of the Company or any of its Affiliates, which
Executive may acquire knowledge of, become privy to, develop or produce while in
the employ of the Company, shall be and remain the exclusive property, right,
title and interest of Company. Executive agrees promptly to execute and deliver
to the Company, at the Company's expense, any and all instruments deemed
necessary or convenient by the Company to effect the disclosure and assignment
of all such Company Property to it.
8.2.3. Executive agrees that during the term (including any renewal term)
of this Agreement and for a period of five (5) years thereafter, or, if
Executive's employment by the Company shall be longer than said term, then for a
period of five (5)
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years following the termination or expiration of his employment by the Company
(whether pursuant to the terms of this Agreement or otherwise), he will not:
(a) directly or indirectly solicit, encourage, assist, entice, raid or
induce any executive, managerial or supervisory level employee of the Company or
any Affiliate to be employed by any person, firm or corporation other than the
Company or any Affiliate;
(b) directly or indirectly approach any employee of the Company or any
Affiliate for the purposes specified in Clause (a) above; or
(c) authorize or knowingly approve the taking of any of the action
specified in Clause (a) above by other persons on behalf of any person, firm or
corporation, or assist any person, firm or corporation in taking any such
action.
8.2.4. Executive agrees that during the term of his employment by the
Company (whether pursuant to the terms of this Agreement or otherwise), he will
not enter into on behalf of the Company or any Affiliate, or cause the Company
or any Affiliate to directly or indirectly enter into, any transactions with any
business enterprise in which he, any of his Affiliates or any member of his
immediate family is, to his knowledge, interested as a partner, trustee,
beneficiary, director, officer, attorney-in-fact, employee, shareholder, lender
of money or guarantor, without the prior consent of the Company's board of
directors; provided, however, that nothing contained herein shall restrict any
transactions with any corporation, partnership or business enterprise in which
Executive, any of his Affiliates and/or any member of Executive's immediate
family (consisting of Executive's spouse, siblings and children), individually
or in the aggregate, owns less than five (5%)
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percent of the publicly traded capital stock or other equity interests of
such corporation, partnership or business enterprise.
8.2.5. Upon termination of his employment hereunder, Executive will return
to the Company all of the property of the Company and its Affiliates in his
possession.
8.2.6. If any provision of this Section 8.2 is held by any court of
competent jurisdiction to be unenforceable because of the scope, duration or
area of applicability, such provision shall be deemed modified to the extent the
court modifies the scope, duration or area of applicability of such provision to
make it enforceable.
8.3. Covenant to Report; Patents, etc.
8.3.1. Executive agrees to promptly communicate and disclose to the Company
in writing all inventions, discoveries and improvements, in any form whatsoever,
(hereinafter "Inventions") including, without limitation, all software,
programs, routines, techniques, procedures, training aides and instructional
manuals conceived, developed or made by him during his employment by the
Company, whether solely or jointly with others, and whether or not patentable or
copyrightable, which relate to any matters or business of the type carried on or
being developed by the Company and its Affiliates. The Executive shall also
promptly communicate and disclose to the Company all other data obtained by him
concerning the business or affairs of the Company and its Affiliates in the
course of his employment by the Company.
8.3.2. All written materials, records and documents made by the Executive
or coming into his possession during the Term concerning the business or affairs
of the Company and its Affiliates shall be the sole property of the Company;
and, upon the termination of the Term or upon the request of the Company during
the Term, the Executive
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shall promptly deliver the same to the Company. The Executive agrees to
render to the Company such reports of the activities undertaken by the Executive
or conducted under the Executive's direction pursuant hereto during the Term as
the Company may request.
9. Injunction. It is recognized and hereby acknowledged by the Executive
that a breach or violation by the Executive of any of the covenants or
agreements contained in this Agreement may cause irreparable harm and damage to
the Company and its Affiliates, the monetary amount of which may be virtually
impossible to ascertain. As a result, the Executive recognizes and acknowledges
that the Company shall be entitled to an injunction, without posting any bond or
security in connection therewith, from any court of competent jurisdiction
enjoining and restraining any breach or violation of any of the restrictive
covenants contained in Section 8 of this Agreement by the Executive or his
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other rights
or remedies the Company may possess. Nothing contained in this Section 9 shall
be construed to prevent the Company from seeking and recovering from the
Executive damages sustained as a result of any breach or violation by the
Executive of any of the covenants or agreements contained in this Agreement, and
that in the event of any such breach, the Company shall avail itself of all
remedies available both at law and at equity.
10. Compliance with Other Agreements. The Executive represents and warrants
to the Company that the execution of this Agreement by him and the performance
of his obligations hereunder will not, with or without the giving of notice, the
passage of time or both, conflict with, result in the breach of any provision of
or the termination of, or
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constitute a default under, any agreement to which the Executive is a party
or by which the Executive is or may be bound.
11. Miscellaneous.
11.1. Notices. Any notice or other communication to a party under this
Agreement shall be in writing, and if by use of the mail shall be considered
given when mailed by certified mail, return receipt requested, to the party at
the following address or at such other address as the party may specify by
notice to the other in the manner prescribed herein:
If to the Company: c/o Hirsch International Corp.
200 Wireless Boulevard
Hauppauge, New York 11788
Attention: Henry Arnberg, President
With a copy to: Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Raymond S. Evans, Esq.
If to the Executive: Martin Krasnitz
330 West Diversy
Chicago, Illinois 60657
With a copy to: Gardner, Carton & Douglas
321 North Clark Street
Chicago, Illinois 60610
Attention: David A. Rubenstein, Esq.
11.2. Benefit. This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their legal representatives,
successors and assigns. Insofar as the Executive is concerned, this Agreement
being personal, cannot be assigned.
11.3. Validity. The invalidity or unenforceability of any provisions hereof
shall in no way affect the validity or enforceability of any other provision.
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11.4. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the subject matter hereof, and supersedes
all existing agreements between them. It may only be changed or terminated by an
instrument in writing signed by both parties. The covenants of the Executive
contained in Article 8 of this Agreement shall survive the termination of this
Agreement and the expiration of the Term.
11.5. Illinois Law to Govern. This Agreement shall be governed by,
construed and interpreted in accordance with the laws of the State of Illinois.
11.6. Corporate Action. The execution and delivery of this Agreement by the
Company has been authorized and approved by all requisite corporate action.
11.7. Waiver of Breach. The failure of either party to insist on strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Waiver of any term
or provision of this Agreement must be in writing.
11.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9. Paragraph Headings. Paragraph headings are inserted herein for
convenience only and are not intended to modify, limit or alter the meaning of
any provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have set their hands and executed
this Agreement as of the day and year first above written.
SEWING MACHINE EXCHANGE, INC.
By: \s\ Kenneth Shifrin
-------------------------------
Kenneth Shifrin, Vice President
\s\ Martin Krasnitz
-------------------------------
Martin Krasnitz
THE UNDERSIGNED HEREBY (a) GUARANTEES PAYMENT OF THE AMOUNTS DUE TO
EXECUTIVE UNDER SECTION 4 OF THIS AGREEMENT; (b) GUARANTEES THE COMPANY'S
INDEMNIFICATION IN SECTION 6 OF THIS AGREEMENT; AND (c) AGREES TO THE OPTION
GRANT DE-CRIBED IN SECTION 5 OF THIS AGREEMENT.
HIRSCH INTERNATIONAL CORP.
By: \s\ Henry Arnberg
--------------------------
Henry Arnberg, President
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