EXHIBIT 10.1 EMPLOYMENT AGREEMENT

 

                                                                    Exhibit 10.1

 

 

                              EMPLOYMENT AGREEMENT

 

 

            THIS AGREEMENT (the "Agreement"), made in New York, New York as

of September 27, 2005, between Greg Manning Auctions, Inc., a Delaware

corporation (the "Company"), and Jose Miguel Herrero ("Executive").

 

            WHEREAS, the Company desires to employ Executive as its President

and Chief Executive Officer, and Executive desires to accept such employment

on the terms and conditions hereinafter set forth;

 

            NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and

agreements hereinafter set forth, 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, 2008 (the "Term").

 

            2. Employment.

 

               (a) Employment by the Company; Director. 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 President

and Chief Executive Officer of the Company and shall report to the Board of

Directors of the Company (the "Board of Directors"). Executive agrees to serve

as a member of the Board of Directors, without additional remuneration (except

as set forth in Section 3(n), if appointed or elected to such position.

 

               (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 President and 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 he may be assigned by the Board of Directors.

 

               (c) Place of Performance. Executive shall be based at the

Company's offices in New York, New York. Executive recognizes that his duties

will require, at the Company's expense, travel to domestic and international

locations.

 

               (d) Position of Chairman of the Board of Directors.

 

                   (i) In the event the position of Chairman of the Board of

Directors becomes available during the Term, the Board of Directors may, in its

sole discretion,

 

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appoint Executive to such role. If Executive is appointed to such role, he shall

(A) continue to also serve as the Company's President and Chief Executive

Officer at the Company's offices in New York, New York, and (B) continue to

receive the compensation and benefits provided for under Section 3 of this

Agreement, except to the extent the terms of this Agreement are amended by the

parties.

 

                   (ii) In the event the position of Chairman of the Board of

Directors is offered to Executive during or at the end of the Term, the parties

shall negotiate in good faith to determine an appropriate compensation package

based on, among other things, the responsibilities, scope and expected time

commitment of the position at such time.

 

                   (iii) In the event Executive is Chairman of the Board of

Directors following the end of the Term, (A) Executive may perform the duties of

such position either in New York, New York, or Madrid, Spain, and (B) such

position may be either full-time or part-time (each of (A) and (B), at

Executive's option).

 

            3. Compensation and Benefits.

 

               (a) Base Salary. The Company agrees to pay to Executive a base

salary ("Base Salary") at the annual rate of $500,000 commencing as of July 1,

2005 and continuing through June 30, 2006. On each of July 1, 2006 and July 1,

2007, Executive's Base Salary shall be increased by an amount equal to the Base

Salary in effect on June 30 of the applicable year multiplied by the percentage

increase, if any, in the CPI as of June 30 for the fiscal year then ended as

compared to the CPI as of June 30 for the fiscal year prior to the year then

ended. For purposes of this Section 3(a), "CPI" means the "Consumer Price Index:

New York, New York, All Items - Urban Wage Earners and Clerical Workers,"

published by the United States Bureau of Labor Statistics of the United States

Department of Labor. Payments of the Base Salary shall be payable in equal

installments in accordance with the Company's standard payroll practices,

provided that the Base Salary payments for the period between July 1, 2005 and

the date hereof shall be included in the Base Salary payments for the initial

payroll period of the Term.

 

               (b) Signing Bonus. Subject to the following sentence of this

Section 3(b), the Company shall pay a signing bonus of $690,000, payable in

three installments as follows: (i) $200,000 shall be paid within ten days after

the parties' execution of this Agreement, (ii) $245,000 shall be paid on June

30, 2006, and (iii) $245,000 shall be paid on July 2, 2007 (each individual

payment, an "Installment Signing Bonus Payment" and the date each individual

payment is scheduled to be made, an "Installment Signing Bonus Payment Date").

Notwithstanding the foregoing, (i) Executive must be employed by the Company on

the Installment Signing Bonus Payment Date to be eligible to receive the

corresponding Installment Signing Bonus Payment, and (ii) in the event

Executive's employment terminates for any reason prior to June 30, 2008,

Executive shall repay to the Company within thirty days following such

termination a prorated portion of the immediately preceding Installment Signing

Bonus Payment paid to Executive, based on the number of days Executive was

employed between July 1 of the year such payment was made and June 30 of the

following year, provided that Executive shall have no obligation to repay in

whole or in part the initial Installment Signing Bonus Payment of $200,000.

 

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               (c) Retention Bonus. The Company shall pay Executive a cash

retention bonus (the "Retention Bonus"), provided that Executive remains

employed through June 30, 2008. The Retention Bonus shall be equal to (i)

$391,500, less (ii) (A) 100,000 multiplied by (B) the Share Price Differential,

provided that in no event shall such Retention Bonus be less than $300,000. For

purposes of this Section 3(c), the "Share Price Differential" means the amount,

if any, by which the closing price of the Company's common stock on July 1,

2005, exceeds the average of closing prices of the Company's common stock as

reported in the Wall Street Journal for the period between June 1, 2008 and June

30, 2008. Payment of the Retention Bonus, if any, shall be made on July 31,

2008; provided, however, that if necessary to comply with Section

409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the "Code"),

and applicable administrative guidance and regulations, such payment shall be

made on December 31, 2008.

 

               (d) Performance-Based Compensation. Executive will be eligible to

receive performance-based compensation pursuant to the Jose Miguel Herrero

Incentive Compensation Program set forth on Annex A hereto.

 

               (e) 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 thirty (30) days of annual paid vacation.

 

               (f) 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.

 

               (g) Car Lease. Executive may lease an automobile in his own name

and at Company expense. Executive shall cause the vehicle to be properly insured

and maintained. During Executive's employment hereunder, the Company shall

reimburse Executive for all reasonable costs associated with such lease,

including lease costs, costs of insurance, routine maintenance, and service and

repair of the vehicle, provided that the Company's obligation pursuant to this

Section 3(g) shall not exceed $1,000 per month, plus the reasonable costs of

parking.

 

               (h) Housing. Between the date this Agreement is executed and the

date that Executive's family relocates to New York, New York (the "Family

Relocation Date"), the Company shall make available to Executive, at the

Company's expense, a furnished apartment in New York, New York, provided that

such apartment shall also be available during such period for use by other

senior executives of the Company and its affiliates when visiting New York, New

York. Commencing on the Family Relocation Date and continuing throughout the

period of Executive's employment hereunder, the Company shall make available to

Executive, at the Company's expense, a furnished apartment in New York, New York

for the exclusive use of Executive and his family.

 

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                (i) Trips to Spain. During Executive's employment hereunder, the

Company will reimburse the reasonable expenses of Executive and his family for

two trips to Spain per year. Reimbursable expenses shall include reasonable

expenses for business class round-trip tickets, transportation-related expenses

and car rental.

 

               (j) Schools. During Executive's employment hereunder, the Company

will reimburse the reasonable tuition-related expenses of Executive's two

children, including tuition fees at a private school in the metropolitan New

York City area.

 

               (k) Moving Expenses Following Termination of Employment. If

Executive's employment terminates for any reason other than by the Company for

Cause or by the Executive without Good Reason (as each such term is defined

below), the Company will reimburse the reasonable moving expenses incurred by

Executive within three months following such termination in connection with any

relocation to Spain.

 

               (l) Other Relocation Expenses. During Executive's employment

hereunder, the Company will reimburse other reasonable expenses incurred by

Executive in connection with relocating to New York, New York after Executive's

consultation with the Chairman of the Board of Directors.

 

                (m) 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 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.

 

               (n) Director Benefits. Executive shall be entitled to the

benefits provided under the Company's Discretionary Compensation Policy for

Employee-Directors and Certain Executive Officers.

 

               (o) Life Insurance Policy. During Executive's employment

hereunder, the Company shall pay the premiums on a term life insurance policy on

Executive's behalf in the principal amount of $1,000,000, provided that the

Company's obligation with respect to such premiums shall not exceed $5,000 per

annum. Executive shall be responsible for designating the beneficiary of such

policy.

 

               (p) Discretion to Award Additional Compensation and Benefits. In

the event that during the Growth Strategy development, there are any material

changes in the size and complexity of the Company or other extraordinary

circumstances, the Compensation Committee of the Board of Directors may

determine in its sole discretion to award Executive a discretionary bonus or to

increase the compensation and benefits provided for in this Agreement.

 

               (q) 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.

 

 

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               (r) 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 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 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, Executive has failed to cure the circumstances giving rise

to Cause.

 

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               (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 and Chief Executive Officer or an office of

equivalent stature, or his functions and/or duties are materially diminished;

(iii) Executive's job site is relocated to a location which is more than fifty

(50) miles from New York, New York, unless the parties mutually agree to such

relocation; (iv) a Change in Control (as defined below) occurs; or (v) the

position of Chairman of the Board of Directors becomes available during the Term

and (A) Executive is not appointed to that position, or (B) the Company fails to

offer such position to Executive in accordance with Section 2(d)(ii); 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, 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") or any of Afinsa's

affiliates, 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;

 

                   (ii) a merger or consolidation of the Company is consummated

with any other corporation, other than (i) a merger or consolidation with any of

its affiliates (including, but not limited to, Afinsa) or any of Afinsa's

affiliates, (ii) 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, (iii) a merger or consolidation of the Company

with any corporation 50% or more

 

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of the combined voting power of which is held by Afinsa, any of Afinsa's

affiliates, Executive, any person with whom Executive is or was acting in

concert, or their respective designee(s) or affiliate(s) or any combination

thereof, or (iv) 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, provided that this provision shall not apply to a sale or

disposition of the Company's assets to an affiliate of the Company (including,

without limitation, Afinsa) or any of Afinsa's affiliates, if such affiliate

agrees to succeed to the Company's obligations under this Agreement.

 

            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 vacation accrued to the date of termination;

 

                  (iii)     any accrued but unpaid expenses through the date of

                           termination required to be reimbursed in accordance

                           with Sections 3(f), 3(g), 3(i), 3(j), and 3(l) of

                           this Agreement; and

 

                  (iv)      receive any benefits to which he may be entitled upon

                            termination pursuant to the plans and programs

                           referred to in Section 3(e) hereof in accordance with

                           the terms of such plans and programs or as may be

                           required by applicable law.

 

                  (v)       any amounts payable in accordance with, and subject

                           to, the Jose Miguel Herrero Incentive Compensation

                           Program.

 

 

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               (b) Termination by Reason of Death. 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), Executive's estate shall be entitled

only to the following:

 

                   (i)      those items identified in Section 5(a);

 

                   (ii)     A lump sum payment equal to twelve months of the Base

                           Salary (as determined pursuant to Section 3(a)). Such

                            sum shall be paid on or about sixty (60) days

                           following the date of termination.

 

                   (iii)    Payment of the Retention Bonus, provided that the

                           Retention Bonus shall be equal to (A) $391,500, less

                           (B) (1) 100,000 multiplied by (2) the Early

                           Termination Share Price Differential. The "Early

                           Termination Share Price Differential" means the

                            amount, if any, by which the closing price of the

                           Company's common stock on July 1, 2005, exceeds the

                           average common stock price of the Company for the

                           period between thirty days preceding the date of

                           termination and the date of termination. Payment of

                           the Retention Bonus pursuant to this Section

                           5(b)(iii), if any, shall be made thirty days

                           following the date of termination. All stock prices

                           shall be as reported in the Wall Street Journal,

                           calculated as of the market close on the applicable

                            dates.

 

               (c) 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).

 

               (d) Termination by Reason of Executive Becoming Totally Disabled;

Termination by the Company Without Cause; Termination by Executive for Good

Reason; Failure to Appoint Executive to, or Continue Him in, the Position of

Chairman of the Board of Directors at the End of the Term; The Company's Breach

of Section 2(d)(ii). In the event that Executive's employment is terminated

prior to the expiration of the Term by reason of Executive becoming Totally

Disabled pursuant to Section 4(b), by the Company without Cause pursuant to

Section 4(d) or by Executive for Good Reason pursuant to Section 4(e), or the

Company fails to appoint Executive to, or continue him in, the position of

Chairman of the Board of Directors at the end of the Term (provided that

Executive is employed through the end of the Term) or the Company fails to offer

such position to Executive at the end of the Term in accordance with Section

2(d)(ii) (provided that Executive is employed through the end of the Term),

Executive shall be entitled only to the following:

 

                   (i)      those items identified in Section 5(a);

 

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                   (ii)     the continued payment of the Base Salary (as

                           determined pursuant to Section 3(a)) for the greater

                           of (A) the remainder of the Term, and (B) twelve

                           months (such sums to be paid at the times and in the

                           amounts such Base Salary would have been paid had

                           Executive's employment not been terminated), provided

                            that such period shall be for the greater of (A) the

                           remainder of the Term, and (B) twenty-four months if

                           (1) Executive terminates his employment for Good

                            Reason pursuant to Section 4(e)(v), or (2) (x)

                           Executive is employed through the end of the Term,

                           and (y) Executive is not appointed to, or the Company

                           does not continue him in, the position of Chairman of

                           the Board of Directors at the end of the Term or the

                           Company fails to offer such position to Executive at

                           the end of the Term in accordance with Section

                           2(d)(ii). Notwithstanding the foregoing, if necessary

                           to comply with Section 409A(a)(2)(B)(i) of the Code,

                           and applicable administrative guidance and

                            regulations, the payment of such sums shall be made

                           as follows: (A) no payments shall be made for a

                           six-month period following the date of termination,

                           (B)