Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made in New York, New York as of
December 5,
2006, between Escala Group, Inc., a Delaware corporation (the
"Company"), and
Matthew Walsh ("Executive").
WHEREAS, the Company and Executive are parties to an Employment
Agreement,
dated as of May 11, 2006 (the "Original Agreement");
WHEREAS, the parties desire to amend the Original Agreement in
certain
respects;
NOW,
THEREFORE, in consideration of the mutual covenants and
agreements
hereinafter set forth, the Original Agreement is hereby amended and
restated in
its entirety, and the Company and Executive agree as follows:
1. Term.
Unless earlier terminated in accordance with Section 4 hereof, the
term of
this
Agreement shall be the period commencing as of the date hereof
and
ending on June 30, 2009 (the "Term").
2. Employment.
a.
Employment by
the Company. Executive agrees to be employed by the
Company during the Term upon the terms and subject to the
conditions
set forth in this Agreement. Executive shall serve as the Chief
Financial Officer, President and Acting Chief Executive Officer of
the
Company and shall report to the Board of Directors of the Company
(the
"Board of Directors"). Executive agrees to (i) serve as a member
of
the Board of Directors, without additional remuneration if
appointed
or elected to such position, (ii) resign as a member of the Board
of
Directors upon termination of his employment for any reason by him
or
the Company, and (iii) execute such documents and take such
other
action, if any,
as may be requested by the Company to give effect to
any such resignation.
b.
Performance of
Duties. Throughout the Term, Executive shall faithfully
and diligently perform Executive's duties in conformity with
the
directions of the Company and serve the Company to the best of
Executive's ability. Executive shall devote his full business time
and
best efforts to the business and affairs of the Company. In his
capacity as the Chief Financial Officer, President and Acting
Chief
Executive Officer of the Company, Executive shall have such duties
and
responsibilities as are customary for Executive's position and
any
other duties or responsibilities consistent with his position he
may
be assigned by the Board of Directors.
c.
Place of
Performance. Executive shall be based at the Company's
offices in West Caldwell, New Jersey. Executive recognizes that
his
duties will require, at the Company's expense, travel to domestic
and
international locations.
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3. Compensation and Benefits.
a.
Base Salary. The
Company agrees to pay to Executive a base salary
("Base Salary") at the annual rate of $450,000. Payments of the
Base
Salary shall be payable in equal installments in accordance with
the
Company's standard payroll practices.
b.
Annual
Performance Bonus for Fiscal Years 2007-2009. Executive shall
be eligible to receive an annual cash bonus (the "Performance
Bonus")
for each of fiscal years 2007, 2008 and 2009. The Performance
Bonus,
if any, will be based on the extent to which individual and
Company-wide performance goals established by the Company for each
of
fiscal years 2007, 2008 and 2009 have been met, but in no event
will
the Performance Bonus be less than (i) $100,000 per year, plus (ii)
an
additional amount equal to $100,000 in the event that during
such
fiscal year a sale or disposition of the assets comprising the
North
American Philatelic Auction Division is consummated (such amounts
are
hereinafter referred to as the "Guaranteed Performance Bonus").
Each
Performance Bonus, if any, shall be paid within thirty days
following
the issuance of financial statements for the fiscal year in respect
of
which such bonus is payable, provided that in no event shall
the
Performance Bonus be paid later than the March 14 next
occurring
following the end of such fiscal year. Except as provided in
Sections
5(c)(ii), 5(d)(ii) and 5(d)(iii), Executive must be employed by
the
Company on the last day of the fiscal year to be eligible for
the
Performance Bonus.
c.
Restricted
Stock. The Company shall grant Executive 50,000 restricted
shares of the Company's common stock, to vest in substantially
equal
increments on each of June 30, 2007, June 30, 2008 and June 30,
2009.
The restricted shares shall be granted pursuant to a restricted
stock
agreement substantially in the form set forth on Exhibit A.
d.
Benefits and
Perquisites. Executive shall be entitled to participate
in, to the extent Executive is otherwise eligible under the
terms
thereof, the benefit plans and programs, and receive the benefits
and
perquisites, generally provided by the Company to executives of
the
Company, including without limitation disability insurance and
family
medical insurance (subject to applicable employee
contributions).
Executive shall be entitled to receive twenty (20) days of annual
paid
vacation.
e.
Business
Expenses. The Company agrees to reimburse Executive for all
reasonable and necessary travel, business entertainment and
other
business expenses incurred by Executive in connection with the
performance of his duties under this Agreement. Such
reimbursements
shall be made by the Company on a timely basis upon submission
by
Executive of vouchers in accordance with the Company's standard
procedures.
f.
Non-Accountable
Expense Allowance. The Company shall pay to Executive
a non-accountable expense allowance equal to $12,000 per annum
during
the Term, payable in advance by July 31 of each year hereunder.
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g.
Indemnification.
The Company shall indemnify Executive, to the fullest
extent permitted by law, for any and all liabilities to which he
may
be subject as a result of, in connection with or arising out of
his
employment by the Company hereunder, as well as the costs and
expenses
(including reasonable attorneys' fees) of any legal action brought
or
threatened to be brought against him or the Company or any of
its
affiliates as a result of, in connection with or arising out of
such
employment. Executive shall be entitled to the full protection of
any
insurance policies which the Company may elect to maintain
generally
for the benefit of its directors and officers.
h.
No Other
Compensation or Benefits; Payment. The compensation and
benefits specified in this Section 3 and in Section 5 of this
Agreement shall be in lieu of any and all other compensation
and
benefits. Payment of all compensation and benefits to Executive
specified in this Section 3 and in Section 5 of this Agreement
(i)
shall be made in accordance with the relevant Company policies
in
effect from time to time to the extent the same are
consistently
applied, including normal payroll practices, and (ii) shall be
subject
to all legally required and customary withholdings.
i.
Cessation of
Employment. In the event Executive shall cease to be
employed by the Company for any reason, then Executive's
compensation
and benefits shall cease on the date of such event, except as
otherwise specifically provided herein or in any applicable
employee
benefit
plan or program or as required by law.
4. Termination of Employment. Executive's employment hereunder may
be terminated
prior to the end of the Term under the following circumstances.
a.
Death.
Executive's employment hereunder shall terminate upon
Executive's death.
b.
Executive
Becoming Totally Disabled. The Company may terminate
Executive's employment hereunder at any time after Executive
becomes
"Totally Disabled." For purposes of this Agreement, Executive shall
be
"Totally Disabled" in the event Executive is unable to perform
the
duties and responsibilities contemplated under this Agreement for
a
period of 120 consecutive days due to physical or mental incapacity
or
impairment. During any period that Executive fails to perform
Executive's duties hereunder as a result of incapacity due to
physical
or mental illness (the "Disability Period"), Executive shall
continue
to receive the compensation and benefits provided by Section 3 of
this
Agreement until Executive's employment hereunder is terminated;
provided, however, that the amount of base compensation and
benefits
received by Executive during the Disability Period shall be reduced
by
the aggregate amounts, if any, payable to Executive under any
disability benefit plan or program provided to Executive by the
Company.
c.
Termination by
the Company for Cause. The Company may terminate
Executive's employment hereunder for Cause at any time after
providing
written notice to Executive. For purposes of this Agreement, the
term
"Cause" shall mean any of the following: (i) Executive's
material
neglect or failure or refusal to perform his duties under this
Agreement (other than as a result of total or partial incapacity
due
to physical or mental illness); (ii) any act by or omission of
Executive constituting gross negligence or willful misconduct
in
connection with the performance of his duties that could reasonably
be
expected to materially injure the reputation, business or
business
relationships of the Company or any of its affiliates; (iii)
Executive's conviction (including conviction on a nolo contendre
plea)
of a felony or any crime involving, in the good faith judgment of
the
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Company, fraud, dishonesty or moral turpitude; (iv) any
material
violation of the Company's Code of Ethics, as may be amended from
time
to time (the "Code of Ethics"); (v) the breach of an obligation
set
forth in Section 6; or (vi) any other material breach of this
Agreement; provided, however, that a termination by the Company
under
Sections 4(c)(i) or 4(c)(vi) for Cause shall be effective only
if,
within 14 days following delivery of a written notice by the
Company
to Executive that the Company is terminating his employment for
Cause
which specifies in reasonable detail the basis therefor, Executive
has
failed to cure the circumstances giving rise to Cause.
d.
Termination by
the Company Without Cause. The Company may terminate
Executive's employment hereunder at any time for any reason or
no
reason by giving Executive thirty (30) days prior written notice
of
the termination. Following any such notice, the Company may reduce
or
remove any and all of Executive's duties, positions and titles
with
the Company.
e.
Termination by
Executive for Good Reason. Executive may terminate his
employment hereunder for Good Reason at any time after
providing
written notice to the Company. For purposes of this Agreement,
the
term "Good Reason" shall mean any of the following: (i) the
Company
decreases or fails to pay the compensation or benefits described
in
Section 3; (ii) Executive no longer holds the office of
President;
(iii) Executive's job site is relocated to a location which is
more
than 100 miles from West Caldwell, New Jersey, unless the
parties
mutually agree to such relocation or (iv) a Change in Control
(as
defined below) occurs; provided, however, that a termination by
Executive for Good Reason shall be effective only if, within 14
days
following delivery of a written notice by Executive to the
Company
that Executive is terminating his employment for Good Reason
which
specifies in reasonable detail the basis therefor, the Company
has
failed to cure the circumstances giving rise to Good Reason.
f.
Termination by
Executive Without Good Reason. Executive may terminate
his employment hereunder at any time for any reason or no reason
by
giving the Company ninety (90) days prior written notice of the
termination. Following any such notice, the Company may reduce
or
remove any and all of Executive's duties, positions and titles
with
the Company, and any such reduction or removal shall not
constitute
Good Reason.
g.
Change in
Control. For purposes of this Agreement, "Change in Control"
of the Company shall be conclusively deemed to have occurred if any
of
the following, and only if any of the following, shall have
taken
place:
i. any "person"
(as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended ("Exchange
Act")), other than Afinsa Bienes Tangibles, S.A. ("Afinsa"),
any
of Afinsa's affiliates, any court-appointed administrator,
trustee or person acting in similar capacity on behalf of
Afinsa,
the Executive, any person with whom Executive is or was acting
in
concert, or their respective designee(s) or affiliate(s) or any
combination thereof, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty
percent
(50%) or more of the combined voting power of the
Company's then outstanding securities; provided, however, that
a
Change of Control shall not have occurred if all or some of the
Company's securities acquired by such person are acquired from
Afinsa or any of Afinsa's affiliates.
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ii. a merger or
consolidation of the Company is consummated with any
other corporation, other than (i) a merger or consolidation
which
would result in the holders of voting securities of the Company
outstanding immediately prior thereto continuing to hold more
than 50% of the combined voting power of the voting securities
of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act)
acquires more than 50% of the combined voting power of the
Company's then outstanding securities or a reverse takeover; or
iii. a complete liquidation of the Company occurs, or a sale or
disposition by the Company of all or substantially all of the
Company's assets is consummated.
5. Compensation Following Termination Prior to the End of the Term.
In the event
that Executive's employment hereunder is terminated prior to the
end of the
Term, Executive shall be entitled only to the following
compensation and
benefits upon such termination:
a.
General. On any
termination of Executive's employment, he shall be
entitled to:
i. any accrued
but unpaid Base Salary for services rendered through
the date of termination; provided, however, that in the event
Executive's employment is terminated pursuant to Section 4(b),
the amount of Base Salary received by Executive during the
Disability Period shall be reduced by the aggregate amounts, if
any, payable to
Executive under any disability benefit plan or
program provided to Executive by the Company;
ii. any Performance
Bonus not yet paid for any fiscal year ending
prior to the date of termination of Executive's employment
(payable as and when such bonus would have been paid had
Executive's employment continued);
iii. any vacation accrued to the date of termination;
iv. any accrued but
unpaid expenses through the date of termination
required to be reimbursed in accordance with Sections 3(e) of
this Agreement; and
v. receive any
benefits to which he may be entitled upon termination
pursuant to the plans and programs referred to in Section 3(d)
hereof in accordance with the terms of such plans and programs
or
as may be required by applicable law, provided that in the
event
of any termination other than pursuant to Sections 4(c) or 4(f)
hereof, Executive shall, if permissible under the terms of the
applicable plan or program, be entitled to receive medical
benefits for the greater of 12 months or the remainder of the
Term on the same basis that he had been receiving such benefits
immediately prior to such termination.
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b.
Termination by
the Company for Cause; Termination by Executive Without
Good Reason. In the event that Executive's employment is
terminated
prior to the expiration of the Term by the Company for Cause
pursuant
to Section 4(c) or by Executive without Good Reason pursuant to
Section 4(f), Executive shall be entitled only to those items
identified in Section 5(a).
c.
Termination by
Reason of Death or Executive Becoming Totally Disabled.
In the event that Executive's employment is terminated prior to
the
expiration of the Term by reason of Executive's death pursuant
to
Section 4(a) or Executive becoming Totally Disabled pursuant to
Section 4(b), Executive (or his estate, as the case may be) shall
be
entitled only to the following, to be paid as soon as
practicable
following the date of such termination, but in no event prior to
the
time such payment would not be subject to tax under Section 409A
of
the Internal Revenue Code of 1986, as amended (the "Code"):
i. those items
identified in Section 5(a);
ii. a lump sum equal
to the prorated portion of the Guaranteed
Performance Bonus for the fiscal year in which Executive's
employment terminated, based on the number of days Executive
was
employed by the Company in such fiscal year and
(iv) A lump sum payment equal to twelve months of the Base Salary
(as
determined pursuant to Section 3(a)).
d. Termination by the Company
Without Cause; Termination by Executive for
Good Reason. In the event that Executive's employment is
terminated
prior to the expiration of the Term by the Company without
Cause
pursuant to Section 4(d) or by Executive for Good Reason pursuant
to
Section 4(e), Executive shall be entitled only to the following, to
be
paid as soon as practicable following the date of termination, but
in
no event prior to the time such payment would not be subject to
tax
under Section 409A of the Code:
i. those items
identified in Section 5(a);
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ii. a lump sum equal
to the Guaranteed Performance Bonus for the
fiscal year in which Executive's employment terminated;
iii. in the event Executive terminates his employment for Good
Reason
pursuant to Section 4(e)(iv) ["Change of Control"], a lump sum
equal to the Guaranteed Performance Bonus for each fiscal year
remaining in the Term following the fiscal year in which
Executive's employment terminated; and
iv. a lump sum equal
to the Base Salary (as determined pursuant to
Section 3(a)) for twelve months; provided that such period
shall
be for the greater of (A) the remainder of the Term, and (B)
twelve months if Executive terminates his employment for Good
Reason pursuant to Section 4(e)(iv) ["Change of Control"];
e.
Effect of
Material Breach of Section 6 on Compensation and Benefits
Following Termination of Employment Pursuant to Section 5. If, at
the
time of termination of Executive's employment for any reason prior
to
the expiration of the Term or any time thereafter, Executive is
in
material breach of any covenant contained in Section 6 hereof,
Executive (or his estate, as applicable) shall not be entitled to
any
payment (or if payments have commenced, any continued payment)
under
Sections 5(c)(ii), 5(c)(iii), 5(d)(ii), 5(d)(iii) or 5(d)(iv).
f.
No Further
Liability; Release. Payment made and performance by the
Company in accordance with this Section 5 shall operate to
fully
discharge and release the Company and its directors, officers,
employees, affiliates, stockholders, successors, assigns, agents
and
representatives from any further obligation or liability with
respect
to Executive's employment and termination of employment. Other
than
providing the compensation and benefits provided for in
accordance
with this Section 5, the Company and its directors, officers,
employees, affiliates, stockholders, successors, assigns, agents
and
representatives shall have no further obligation or liability
to
Executive or any other person under this Agreement. The payment of
any
amounts pursuant to this Section 5 (other than payments required
by
law) is expressly conditioned upon the delivery by Executive to
the
Company of a release in form and substance satisfactory to the
Company
of any and all claims Executive may have against the Company and
its
directors, officers, employees, affiliates, stockholders,
successors,
assigns, agents and representatives arising out of or related
to
Executive's employment by the Company and the termination of
such
employment and his service, if any, as a member of the Board of
Directors and the cessation of such service.
6. Exclusive Employment; Noncompetition; Nonsolicitation;
Nondisclosure of
Proprietary Information; Surrender of Records; Inventions and
Patents; Code of
Ethics.
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6.1
No Conflict; No
Other Employment. During the period of Executive's
employment with the Company, Executive shall not: (i) engage in any
activity
which conflicts or interferes with or derogates from the
performance of
Executive's duties hereunder nor shall Executive engage in any
other business
activity, whether or not such business activity is pursued for gain
or profit
and including service as a director of any other company, except as
approved in
advance in writing by the Company; provided, however, that
Executive shall be
entitled to manage his personal investments and otherwise attend to
personal
affairs, including charitable, social and political activities, in
a manner that
does not unreasonably interfere with his responsibilities
hereunder, or (ii)
accept or engage in any other employment, whether as an employee or
consultant
or in any other capacity, and whether or not compensated
therefor.
6.2
Noncompetition;
Nonsolicitation.
a.
Executive
acknowledges and recognizes the highly competitive nature
of the Company's business and that access to the Company's
confidential records
and proprietary information renders him special and unique within
the Company's
industry. In consideration of the payment by the Company to
Executive of amounts
that may hereafter be paid to Executive pursuant to this Agreement
(including,
without limitation, pursuant to Sections 3 and 5 hereof) and other
obligations
undertaken by the Company hereunder, Executive agrees that during
(i) his
employment with the Company and (ii) the period beginning on the
date of
termination of employment for any reason and ending one year after
the date of
termination of employment (the "Covered Time"), Executive shall
not, directly or
indirectly, engage (as owner, investor, partner, stockholder,
employer,
employee, consultant, advisor, director or otherwise) in any
Competing Business,
provided that the provisions of this Section 6.2(a) will not be
deemed breached
merely because Executive owns less than 1% of the outstanding
common stock of a
publicly-traded company. For purposes of this Agreement, "Competing
Business"
shall mean (i) any business in which the Company is currently
engaged anywhere
in the world, including but not limited to (A) the marketing,
production and
sale of collectibles, including numismatic and philatelic material,
by auction,
as merchant-dealer or otherwise, and (B) the marketing, production
and sale of
third-party and owned material by auction; and (ii) any other
business which the
Company engages in anywhere in the world during the Term.
b.
In further
consideration of the payment by the Company to Executive
of amounts that may hereafter be paid to Executive pursuant to this
Agreement
(including, without limitation, pursuant to Sections 3 and 5
hereof) and other
obligations undertaken by the Company hereunder, Executive agrees
that during
his employment and the Covered Time, he shall not, directly or
indirectly, (i)
solicit, encourage or attempt to solicit or encourage any of the
employees,
agents, consultants or representatives of the Company or any of its
affiliates
to terminate his, her, or its relationship with the Company or such
affiliate;
(ii) solicit, encourage or attempt to solicit or encourage any of
the employees,
agents, consultants or representatives of the Company or any of its
affiliates
to become employees, agents, representatives or consultants of any
other person
or entity; (iii) solicit or attempt to solicit any customer, vendor
or
distributor of the Company or any of its affiliates with respect to
any product
or service being furnished, made, sold or leased by the Company or
such
affiliate; or (iv) persuade or seek to persuade any customer of the
Company or
any affiliate to cease to do business or to reduce the amount of
business which
any customer has customarily done or contemplates doing with the
Company or such
affiliate, whether or not the relationship between the Company or
its affiliate
and such customer was originally established in whole or in part
through
Executive's efforts. For purposes of this Section 6.2(b) only, the
terms
"customer," "vendor" and "distributor" shall mean
