Employment Agreement - American Greetings Corp. and Edward Fruchtenbaum
CONFIDENTIAL
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made this _________ day of
______________ 1997, between Edward Fruchtenbaum ("Fruchtenbaum") and American
Greetings Corporation ("AG" or "Company").
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. POSITION: Fruchtenbaum is employed by AG as the Company's President
and Chief Operating Officer. Fruchtenbaum will perform any and all duties
commensurate with those positions.
2. TERM: This Agreement will be in effect for "rolling" three (3) year
terms commencing March 1, 1997; successive three (3) year terms will commence on
March 2, 1997, and on each day thereafter, and will terminate three (3) years
from each commencement date.
3. TERMINATION: It is understood that Fruchtenbaum's employment with
AG, whether pursuant to this Agreement or otherwise, is terminable at-will, and
may be terminated by either party at any time for any reason or for no reason.
This Agreement will end on the date that Fruchtenbaum ends his employment with
AG ("Termination Date"). Unless he voluntarily resigns, Fruchtenbaum will
continue to receive compensation pursuant to paragraph 4.a. below, at the then
current rate, for three (3) years after the Termination Date. As of the
Termination Date, Fruchtenbaum will no longer be an employee of AG and will not
be entitled to or receive any benefits or privileges of employment, except for
those provided herein and those post-employment benefits generally afforded such
former employees under AG's then current policies and procedures.
4. COMPENSATION: During the term of this Agreement, in addition to the
other regular benefits offered to Executive Officers (as designated by the AG
Board of Directors or otherwise), including but not limited to, the profit
sharing, 401(k), stock option and supplemental executive retirement plans,
health benefits and life insurance, Fruchtenbaum will receive the following
salary and benefits:
a. Beginning on March 1,1997, Fruchtenbaum will be paid an
annual base salary of $455,000, less payroll taxes and other withholdings as
required by law ("Base Salary"). Such Base Salary will be reviewed at or around
the end of each AG fiscal year thereafter and at that time may be increased at
the discretion of the AG Board of Directors. Unless Fruchtenbaum voluntarily
resigns, the then current Base Salary will be paid for three years from the
Termination Date, but Fruchtenbaum will not be eligible for bonuses under
subparagraphs 4.b., 4.c. or 4.e. below. If Fruchtenbaum voluntarily resigns,
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he will receive no further Base Salary or bonuses under subparagraphs 4.b., 4.c.
or 4.e. below after the Termination Date.
b. For each AG fiscal year, March 1 through February 28
("Fiscal Year") in which AG pays its officers and certain key employees a cash
bonus pursuant to the Company's regular Executive Incentive Compensation Plan,
Fruchtenbaum will receive such a bonus based upon a target bonus of 40% of his
then current annual Base Salary.
c. Fruchtenbaum shall further be eligible to receive a cash
bonus, if and when paid, under the terms of AG's current three year Special
Bonus Plan or other future long-term executive incentive compensation plans for
officers and certain key employees, in accordance with its/their terms. If the
Special Bonus Plan is not renewed or a similar plan is not instituted at the end
of the current three year Special Bonus Plan period, AG agrees to promptly
review, but not necessarily act upon, the need for such a bonus as an element of
Fruchtenbaum's compensation package.
d. 1. On February 28,1993, AG granted Fruchtenbaum 29,000
Class A Shares of AG Common Stock (after adjustment for the September 1993 stock
split) (the "1993 Grant"). Fruchtenbaum has a vested ownership in 23,000 shares
of the 1993 Grant; and 6,000 shares are not vested.
d. 2. On February 29,1996, AG granted Fruchtenbaum 30,000
Class A Shares of AG Common Stock (the "1996 Grant"). The 1996 Grant was
subsequently reduced to 26,000 shares when AG failed to attain its profit goal
for the fiscal year ending February 26,1996. Fruchtenbaum has a vested ownership
in 6,000 shares of the 1996 Grant; and 20,000 shares are not vested.
d. 3. The vesting schedules for the 1993 Grant and 1996 Grant
are hereby waived as to all shares that are not vested. The 26,000 granted but
not yet vested shares shall vest upon the earlier of (1) Fruchtenbaum's
retirement, which is defined as the voluntary cessation of all regular,
compensated employment in the greeting card industry, or similar self
employment, after Fruchtenbaum attains age 60, provided AG receives at least 12
months written notice in advance of the retirement date; (2) Fruchtenbaum's
death; (3) Fruchtenbaum's permanent disability, which is defined in subparagraph
4.d.5.(vii); or (4) termination of employment by AG.
d. 4. AG will provide Fruchtenbaum with certain registration
rights in connection with the 1993 Grant and 1996 Grant.
d. 5. The following shall apply to Shares granted pursuant to
subparagraphs 4.d.1 and 4.d.2.:
i) Declared dividends will be paid on only vested Shares.
ii) Voting rights will be exercisable on only vested Shares.
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CONFIDENTIAL
iii) Subject to applicable state and federal law, including but not
limited to Section 16 of the Securities Act of 1934, Shares may be sold or
otherwise disposed of at any time on or after they have vested.
iv) If Fruchtenbaum voluntarily resigns his employment with AG, all
Shares that have been granted, but not vested, will be forfeited as of the
effective date of such resignation.
v) If Fruchtenbaum retires or AG terminates Fruchtenbaum's employment,
any Shares that have been granted but have not vested as of the date that
Fruchtenbaum retires or AG mails or delivers written notice of termination to
Fruchtenbaum, as the case may be ("Notice Date"), shall vest as of the Notice
Date.
vi) If during the term of this Agreement Fruchtenbaum dies and his
death is not the result of suicide, all Shares that have been granted hereunder
will upon his death immediately vest in favor of his estate.
vii) If during the term of this Agreement Fruchtenbaum becomes totally
and permanently disabled, as determined by AG's then current disability
insurance carrier, and such disability is not self-inflicted ("Disability
Date"), all Shares that have been granted hereunder will immediately vest on the
Disability Date. The Shares Fruchtenbaum is entitled to receive under this
subparagraph (4.d.5.vii) are in addition to any and all disability benefits he
would otherwise be entitled to receive as an AG Executive Officer.
d. 6. The number of shares referred to in paragraph 4.d.3. above, will
be adjusted to reflect any future adjustments in the price and in the number or
kind of shares resulting from (a) any stock dividend, stock split, combination
of shares, recapitalisation or other change in the capital structure of AG, (b)
any merger, consolidation, separation, reorganization or partial or complete
liquidation, or (c) any other corporate transaction or event having an effect
similar to any of the foregoing.
e. In lieu of any additional stock grants provided under the previous
employment of May 18, 1992, as amended, Fruchtenbaum shall be eligible to
receive a cash bonus, less payroll taxes and withholdings required by law,
payable on or before April 15,1998, and annually thereafter on April 15. The
amount of the cash bonus shall be equal to the number of shares set forth in (1)
below multiplied by the price per share set forth in (2) below:
(1) Number of shares: 10,000 shares; except the number shall
be reduced to 6,000 shares if AG as a whole has not attained its profit goal for
the fiscal year just ended.
(2) Price per share: the closing price of AG Class A Common
Stock on March 1 of the current year. If no closing price is established on
March 1, the price for the next date thereafter on which a closing price is
established shall be used.
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CONFIDENTIAL
f. During the term of this Agreement, Fruchtenbaum shall own
at least 30,000 shares of AG Common Stock, which may be in the form of either
vested or unvested shares.
5. CONFIDENTIAL AND TRADE SECRET INFORMATION: Fruchtenbaum acknowledges
that in the course of his employment with AG he has and will have access to
confidential information and trade secrets ("Confidential Information"), misuse
or disclosure of which would adversely affect AG's business. Fruchtenbaum agrees
that he will not, either during his employment with AG or at any time
thereafter, use for himself or others, or disclose or convey to others (except
as is necessary in the ordinary course of his employment) any of AG's
Confidential Information. Confidential Information shall include documents so
marked, as well as any other information, oral or written, which a reasonable
person would believe to be confidential to or a trade secret of AG. This
paragraph shall not prohibit disclosure of information which has become public,
unless it became public through Fruchtenbaum's breach of this Agreement.
6. NON-COMPETITION: In consideration of AG's agreement to employ
Fruchtenbaum under the terms of this Agreement, Fruchtenbaum agrees that he will
not for the following periods engage anywhere in the United States or Canada,
directly or indirectly, in any business activities, either as principal, agent
or consultant or through any corporation, firm or organization in which he may
be an officer, director, employee, substantial shareholder, partner, member or
be otherwise affiliated that are in competition with AG's businesses at such
time: (i) for the period of his employment hereunder; (ii) if Fruchtenbaum
voluntarily resigns his employment with AG or retires, for three (3) years
thereafter; or (iii) if AG terminates Fruchtenbaum's employment with AG, for
three (3) years thereafter.
7. CONFLICT OF INTEREST: Fruchtenbaum represents and warrants that he
has no interest or obligation that is inconsistent with or in conflict with this
Agreement or that would prevent, limit or impair his performance of any part of
this Agreement.
8. MISCELLANEOUS:
a. This Agreement constitutes the entire understanding between
Fruchtenbaum and AG relating to the subject matter contained herein and this
Agreement supersedes any previous oral or written agreement(s) and
understandings. This Agreement may not be changed, modified, or altered without
the express written consent of Fruchtenbaum and AG.
b. Either party's failure to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive the other party of his/its rights thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
c. If any part or section of this Agreement is found to be
contrary to law or unenforceable, the remainder shall remain in force and
effect.
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CONFIDENTIAL
d. This Agreement will be governed by and construed in
accordance with the law of the State of Ohio. Any disputes that cannot be
resolved amicably shall be resolved by binding arbitration in Cleveland in
accordance with the applicable rules of the Center for Public Resources, or if
the Center for Public Resources' facilities are not available, the rules of the
American Arbitration Association.
e. Upon Fruchtenbaum's termination, regardless of the reason,
Fruchtenbaum will promptly surrender to AG any of its property in Fruchtenbaum's
possession including, but not limited to, all correspondence, memoranda, notes,
records, reports, plans, computer printouts, reproductions, slides, and any
other papers or items, and copies of papers and other items, received or made by
Fruchtenbaum in connection with his employment with AG.
9. REVIEW BY ADVISORS. Fruchtenbaum acknowledges that he has had ample
opportunity to consult with his legal and financial advisors, has carefully
considered this Agreement, and fully understands its provisions. He has not
relied on any other representations or statements, written or oral.
10. SURVIVAL. he following paragraphs shall survive the expiration or
termination of this A em n: 3. 4.a.; 4.d.3.; 4.d.4.; 4.d.5.; 4.d.6.; 5.; 6.; 7.;
8.d.; and 8.e.
AMERICAN GREETINGS CORPORATION EDWARD FRUCHTENBAUM
BY: /s/ Morry Weiss /s/ Edward Fruchtenbaum
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NAME:
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TITLE: DATE: 1/5/98
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DATE:
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