EX-10 3 refac8k_ex10-2.txt EXHIBIT 10.2 - EMPLOYMENT AGREEMENT Exhibit 10.2 ------------ EMPLOYMENT AGREEMENT BETWEEN RAYMOND A. CARDONNE, JR. AND REFAC Dated as of April 1, 2005 THIS EMPLOYMENT AGREEMENT (the "Agreement") made as of April 1, 2005 (the "Effective Date") between REFAC, a Delaware corporation ("REFAC"), and Raymond A. Cardonne ("CARDONNE"). CARDONNE was heretofore employed by REFAC pursuant to the terms of an employment agreement dated November 7, 2003 (the "Prior Agreement") with an employment term that expired on March 31, 2005. The parties hereto desire enter into the contractual arrangement as set forth in this Agreement effective as of the Effective Date. The parties hereto desire to modify the contractual arrangements between them and replace them with this Agreement effective as of the Effective Date. In consideration of the premises and the respective agreements of the parties herein contained, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Subject to the provisions hereof, REFAC shall continue to employ CARDONNE and CARDONNE shall continue to serve as Senior Vice President and Chief Financial Officer of REFAC. 2. Term. The employment of CARDONNE by REFAC hereunder will continue until December 31, 2006, unless further extended by agreement of CARDONNE and REFAC or until sooner terminated as hereinafter provided. 3. Duties. (a) Regular Duties. CARDONNE will continue to perform such duties and have such powers as are customary for the chief financial officer of a publicly-held corporation of a size and engaging in a business comparable to the business that REFAC is then conducting. (b) Responsible to the Board. CARDONNE will report and be directly responsible to the Board of Directors of REFAC (the "Board") or the Chief Executive Officer of REFAC. (c) Time Devoted to REFAC's Affairs. CARDONNE will devote substantially all his working time and efforts to the business and affairs of REFAC and will not, without the prior authorization of the Board, have any active engagement in or responsibility with respect to any business or commercial enterprise other than REFAC or a subsidiary of REFAC; provided, however, CARDONNE may enter into separate arrangements for his own account with Palisade Capital Management, L.L.C. ("Palisade") and/or any of its affiliated companies that are engaged in private equity or investment management pursuant to which he may become a member, partner, officer, director or stockholder of such entity or may provide consulting or professional services thereto provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 4. Place of Performance. In connection with CARDONNE's employment by REFAC, CARDONNE will be based in the New York City metropolitan area, except for required travel on REFAC's business to an extent consistent with REFAC's business requirements and his responsibilities hereunder. 5. Base Salary and Incentive Compensation. (a) Base Salary. During the Employment Period, CARDONNE's salary will be $200,000 per annum ("Base Salary"). Payment of such salary will be made in accordance with REFAC's customary pay practices for senior officers and will be subject to such payroll deductions as are required by law or by the terms of any applicable benefit plan of REFAC. (b) Incentive Compensation. In addition to the Base Salary as set forth in Section 5(a) of this Agreement, the Company may, in its sole discretion, pay to CARDONNE additional incentive compensation in cash and/or equity upon the achievement of certain performance goals. (c) Stock Option. In connection with the entering into of this Agreement, REFAC shall grant CARDONNE an option to purchase fifty thousand (50,000) shares of REFAC common stock with an exercise price equal to the closing price of REFAC's common stock on the date immediately preceding the grant (the "Stock Option"). One-third of the Stock Option shall vest on the date of grant and one-third shall vest on each of the next two (2) anniversaries of the date of grant. Such Stock Option shall be subject to the terms and conditions as set forth in a stock option agreement entered into by and between REFAC and CARDONNE. 6. Fringe Benefits, Expenses and Related Matters. (a) Expenses. During the term of CARDONNE's employment hereunder, CARDONNE will be entitled to receive prompt reimbursement for all reasonable expenses incurred by CARDONNE in performing services hereunder, including all reasonable expenses of travel and living expenses while away from home on business or at the request of and in the service of REFAC, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by REFAC. (b) Other Benefits. CARDONNE will be entitled to participate in or receive benefits under any employee benefit plan or arrangement now or in the future made available by REFAC generally to its executive employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangement, including health insurance and life insurance benefits. (c) Vacations. CARDONNE will be entitled to four weeks of paid vacation per calendar year, prorated for any portion thereof and to all paid holidays given by REFAC in accordance with REFAC's regular paid holidays policy. 7. Facilities and Support Services Furnished. REFAC will furnish CARDONNE with office space, secretarial assistance and such other facilities and services as shall be suitable to CARDONNE's position and adequate for the performance of his duties as herein set forth. 8. Termination. CARDONNE's employment hereunder may be terminated under the following circumstances: (a) Death. CARDONNE's employment hereunder will terminate immediately upon his death. (b) Disability. REFAC may terminate CARDONNE's employment hereunder if CARDONNE should become permanently disabled. For the purposes of this Agreement, permanent disability ("Disability") means CARDONNE's inability, by virtue of physical or mental illness or injury, to perform his regular duties on a full-time, continuous basis for 120 consecutive days. CARDONNE's disability will be established if a qualified medical doctor selected by the parties so certifies in writing. If the parties are unable to agree on the selection of such a doctor, each party will designate a qualified medical doctor who together will select a third doctor who will make the determination. CARDONNE will make himself available for an examination by a doctor selected in accordance with this paragraph (b). (c) Cause. REFAC may terminate CARDONNE's employment hereunder for Cause at any time during the Employment Period hereof as hereinafter set forth. For purposes of this Agreement, REFAC will have "Cause" to terminate CARDONNE's employment hereunder upon (i) the willful and continued failure, in the reasonable judgment of the Board, by CARDONNE to perform substantially his duties with REFAC (other than any such failure resulting from his death or Disability) after a written demand for substantial performance is delivered to CARDONNE by the Board which specifically identifies the manner in which it is believed that CARDONNE has not substantially performed his duties, or (ii) the conviction of CARDONNE (or the entering by CARDONNE of a plea of guilty or nolo contendere) for any felony or any lesser crime which involved REFAC or its property. For purposes of clause (i) of this definition, no act, or failure to act, on CARDONNE's part shall be deemed "willful" unless done, or omitted to be done, by CARDONNE not in good faith and without reasonable belief that this act, or failure to act, was in the best interest of REFAC. Notwithstanding the foregoing, CARDONNE will not be deemed to have been terminated for Cause within the meaning of clauses (i) and (ii) without (1) reasonable notice to CARDONNE setting forth the reasons for REFAC's intention to terminate for Cause, (2) an opportunity for CARDONNE, together with his counsel, to be heard before the Board, and (3) delivery to CARDONNE of a Notice of Termination, as defined in paragraph (e) of this Section 8, from the Board finding that, in the good faith opinion of the Board, clause (i) or (ii) hereof may be invoked, and specifying the particulars thereof in detail. (d) Good Reason. CARDONNE may terminate his employment with REFAC for Good Reason at any time during the Employment Period. For purposes of this Agreement, CARDONNE will have "Good Reason" to terminate his employment with REFAC upon: (i) the assignment to CARDONNE of any duties materially inconsistent with his status as Chief Financial Officer of REFAC (or such other comparable senior level executive position that is acceptable to CARDONNE) or a substantial adverse alteration in the nature or status of his responsibilities; (ii) a reduction by REFAC in CARDONNE 's Base Salary set forth in Section 5 hereof; (iii) the relocation of CARDONNE 's principal place of employment to a location more than thirty-five (35) miles from Fort Lee, New Jersey except where such relocation does not result in CARDONNE 'S commute from his principal residence to his principal place of employment being greater than such commute as of the Effective Date; (iv) the failure by REFAC to pay to CARDONNE any portion of CARDONNE 's compensation hereunder or under the Prior Agreement within fourteen (14) days of the date such compensation is due; (v) a Change in Control of REFAC (as defined in below) and (vi) any other material breach of this Agreement by REFAC which is not cured within ten (10) days of a written notice by CARDONNE. CARDONNE 's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. CARDONNE 's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. For purposes of this Agreement, a Change in Control shall be deemed to have occurred when (i) Palisade Concentrated Equity Partnership, L.P. and/or its affiliates cease(s) to own, in the aggregate, at least thirty-five percent (35%) of the outstanding common stock of REFAC or (ii) any person, entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) that is not affiliated with Palisade acquires in one or a series of transaction(s) more than fifty percent (50%) of the outstanding common stock of REFAC. (e) Notice of Termination. Any termination of CARDONNE's employment by REFAC or by CARDONNE (other than termination pursuant to Section 8(a)) during the Employment Period will be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" means a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of CARDONNE's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if CARDONNE's employment is terminated by his death, the date of his death, (ii) if CARDONNE's employment is terminated pursuant to paragraph (b) of this Section 8, three weeks after Notice of Termination, (iii) if CARDONNE's employment is terminated pursuant to paragraph (c) or (d) of this Section 8, the date specified in the Notice of Termination, and (iv) if CARDONNE's employment is terminated for any other reason, the date specified in the Notice of Termination. (g) CARDONNE Cooperation. From and after the earlier to occur of (i) delivery of a Notice of Termination and (ii) termination of CARDONNE's employment hereunder (other than termination due to CARDONNE's death) CARDONNE will, to the best of his knowledge, disclose or provide for the disclosure to REFAC or any successor thereof, orally or in writing as appropriate, all information of a material nature relating to existing or prospective clients and licensees and as to any other matters in which CARDONNE shall prior to his Date of Termination have been personally involved or as to which CARDONNE will have acquired special knowledge, and CARDONNE will thereafter answer to the best of his knowledge any questions that REFAC may from time to time submit with respect to any such aforesaid matters. 9. Compensation Upon Termination or During Disability. (a) Disability. During any period that CARDONNE fails or is unable to perform his duties hereunder as a result of Disability, CARDONNE will continue to receive his full salary at the rate then in effect for such period until his employment is terminated, provided that such payments will be reduced by the amounts, if any, paid to CARDONNE under any disability benefit plans of REFAC or under the Social Security disability insurance program. Following the termination of his employment, CARDONNE's benefits will be determined in accordance with REFAC's retirement, insurance, and other applicable programs and plans then in effect, if any. Following the termination of CARDONNE's employment due to Disability, REFAC will pay CARDONNE any compensation deferred in accordance with Section 11 hereof and the Stock Option shall become immediately vested and exercisable on the Date of Termination and shall remain exercisable as to all shares subject thereto (by CARDONNE or his heirs, distributees or legal representatives, as applicable) for the remainder of the term of the Stock Option. (b) Death. If CARDONNE 's employment should be terminated by his death, REFAC will (i) pay any accrued salary and other compensation and benefits through the date of death to CARDONNE 's spouse, or, if he leaves no spouse, to his estate, (ii) pay or cause the payment to CARDONNE's beneficiary, or if he specified no beneficiary, to his estate, the death benefits payable pursuant to REFAC's life insurance program in effect at the date of death, if any, (iii) pay any compensation deferred in accordance with Section 11 hereof, to CARDONNE's spouse, or, if he leaves no spouse, to his estate, and (iv) the Stock Option shall become immediately vested and exercisable on the Date of Termination and shall remain exercisable as to all shares subject thereto (by CARDONNE's heirs, distributees or legal representatives, as applicable) for the remainder of the term of the Stock Option. (c) Cause. If CARDONNE's employment should be terminated by REFAC for Cause or by CARDONNE during the Employment Period, REFAC will pay CARDONNE his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus any compensation deferred in accordance with Section 11 hereof and all other amounts to which CARDONNE is entitled as of the Date of Termination under any benefit plan of REFAC at the time such payments are due, and REFAC will have no further obligations to CARDONNE under this Agreement. (d) Without Cause. CARDONNE's employment with REFAC may not be terminated by REFAC during the Employment Period for reasons other than those described in Section 8(a), 8(b) or 8(c) unless, prior to such termination CARDONNE has together with his counsel had an opportunity to appear and be heard at a meeting of the Board which was called and held (after reasonable notice to CARDONNE) for the purpose of considering such a termination. In the event that CARDONNE's employment is terminated by REFAC during the Employment Period for reasons other than those described in Section 8(a), 8(b) or 8(c), REFAC will (i) pay CARDONNE a lump sum equal to the sum of (A) his full salary that would have been payable for the remainder of the Employment Period absent such termination at the rate in effect at the time Notice of Termination is given and (B) any compensation deferred in accordance with Section 11 hereof, (ii) provide, except to the extent that CARDONNE shall receive similar benefits from a subsequent employer, the life, health and similar welfare benefits which CARDONNE would have been entitled to during the remainder of the Employment Period absent such termination and (iii) the Stock Option shall become immediately vested and exercisable on the Date of Termination and shall remain exercisable as to all shares subject thereto (by CARDONNE or his heirs, distributees or legal representatives, as applicable) for the remainder of the term of the Stock Option. (e) Good Reason. In the event that CARDONNE's employment is terminated by CARDONNE during the Employment Period for Good Reason, REFAC will (i) pay CARDONNE a lump sum equal to the sum of (A) his full Base Salary that would have been payable for the remainder of the Employment Period absent such termination at the rate in effect at the time Notice of Termination is given, and (B) any compensation deferred in accordance with Section 11 hereof (ii) provide, except to the extent that CARDONNE shall receive similar benefits from a subsequent employer, the life, health and similar welfare benefits which CARDONNE would have been entitled to during the remainder of the Employment Period absent such termination under any such benefit plan of REFAC, and (iii) the Stock Option shall become immediately vested and exercisable on the Date of Termination and shall remain exercisable as to all shares subject thereto (by CARDONNE or his heirs, distributees or legal representatives, as applicable) for the remainder of the term of the Stock Option; provided, however, that in the event that CARDONNE terminates employment for Good Reason solely as a result of a Change in Control, then such Stock Option shall remain exercisable for a period of one (1) year following the Date of Termination and shall thereafter expire. (f) Mitigation of Payments. CARDONNE will not be required to mitigate the amount of any lump sum payment or bonus entitlement provided for in this Section 9 by reducing it by the amount of any compensation earned by CARDONNE as the result of employment by another employer after the Date of Termination, or otherwise. However, he will be required to mitigate the costs of the other benefits provided for in this Section 9. 10. Noncompetition. CARDONNE will not, except as hereinafter set forth, engage in any Competitive Activity (as hereinafter defined) during the Employment Period or for a period of one year following the termination of CARDONNE 's employment for any reason. For purposes of this Section, "Competitive Activity" will mean directly or indirectly: owning, managing, controlling, investing in, or otherwise being connected with, in any manner, whether as an officer, director, employee, partner, investor, consultant, lender or otherwise, any business entity or activity which is engaged in, or is in any way related to, any business conducted by REFAC or any subsidiary companies that it may own during the Employment Period other than businesses that are being wound down from prior activities of REFAC. Notwithstanding the above, nothing herein contained will prohibit CARDONNE from investing in securities of a business entity if the securities of such entity are listed for trading on a national securities exchange or traded in the over-the-counter market and CARDONNE 's holdings therein represent less than five (5%) percent of the total number of shares or principal amount of other securities of such entity outstanding. 11. Section 162 (m). In the event that any payment or benefit received or to be received by CARDONNE in connection with his employment by REFAC would otherwise not be deductible (in whole or part), by REFAC as a result of the operation of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the delivery of the non-deductible portion of such payment or benefit to CARDONNE by REFAC shall be deferred until the earliest date on which it may be delivered to CARDONNE without being subject to the limit on deductibility imposed by Section 162(m) of the Code. CARDONNE will be paid any amount deferred pursuant to the Prior Agreement in accordance with the terms of this Section 11. 12. Successors; Binding Agreement. (a) Should any entity succeed (whether by purchase, merger, consolidation or similar transaction) to all or substantially all of the business and/or assets of REFAC, CARDONNE shall continue to perform all of his duties and obligations hereunder. (b) REFAC will require any successor (whether by purchase, merger, consolidation or similar transaction) to all or substantially all of the business and/or assets of REFAC, by agreement in form and substance reasonably satisfactory to CARDONNE, to expressly assume and agree to perform this Agreement in substantially the same manner and to substantially the same extent that REFAC would be required to perform it if no such succession had taken place. (c) This Agreement and all rights of CARDONNE hereunder shall inure to the benefit of and be enforceable by CARDONNE's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If CARDONNE should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to CARDONNE's devisee, legatee, or other designee or, if there be no such designee, to CARDONNE's estate. 13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: If to CARDONNE: Raymond A. Cardonne 81 Katydid Drive Branchburg, New Jersey 08876 If to REFAC: REFAC 1 Bridge Plaza - Suite 550 Fort Lee, New Jersey 07024 Copy to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036 Attention: Stephen Banker, Esq. or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by CARDONNE and such other officer of REFAC as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. All compensation payable to CARDONNE pursuant to this Agreement shall be subject to all applicable withholding taxes, normal payroll withholding and any other amounts required by law to be withheld. 15. Validity. If any term or provision of this Agreement or the application thereof to any person, entity or circumstance should to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to any person, entity or circumstance other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement (including, to the extent permitted by law, any such term or provision which has been held to be otherwise invalid or unenforceable) shall be deemed valid and enforceable to the fullest extent permitted by law. 16. Counterparts and Facsimile Signature. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. In the event that any signature is delivered via facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original signature. 17. Arbitration. Any dispute or controversy arising under or in connection with this Agreement will be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 18. Confidentiality. As an officer and director of REFAC, CARDONNE is privy to information generally regarded as confidential and often proprietary with respect to REFAC, its business relationships, negotiations and activities. Such information may include details of REFAC's business and client relationships (past, present and prospective) and related REFAC and client plans, products, property rights, technical and market data. By reason of the foregoing: (a) CARDONNE will not at any time divulge or negligently permit the communication of any of the foregoing types of information in any way that could conflict with the interests of REFAC, any subsidiary companies it may own during the Employment Period or any of their respective clients, customers or business associates. (b) For a period of two (2) years after the Date of Termination, neither CARDONNE nor any company which CARDONNE directly or indirectly owns, controls or manages shall employ or solicit the employment of any present or future employee of REFAC or any subsidiary company it may own during the Employment Period. 19. Breach of Noncompetition and/or Confidentiality Covenant. Each of the parties hereto acknowledges that in the event of any breach of Section 10 and/or 18 of this Agreement by CARDONNE, REFAC would be irreparably harmed and could not be made whole by monetary damages. Therefore REFAC, in addition to any other remedy to which it may be entitled at law or in equity, may compel specific performance of such Sections 10 and/or 18 of this Agreement, as the case may be. CARDONNE hereby acknowledges and agrees that the covenants contained in Sections 10 and 18 of this Agreement are reasonable and fully necessary for the protection of the legitimate interests of REFAC and are not oppressive to the interest of CARDONNE. 20. Entire Agreement. (a) Except as otherwise provided in Section 20(b), as of the Effective Date, this Agreement shall supersede the Prior Agreement in its entirety and the Prior Agreement shall be of no further force or effect. Subject to the foregoing, this Agreement together with the stock option agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, agreements, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto. (b) Notwithstanding the provisions of Section 20(a) or anything contained herein to the contrary, it is expressly understood and agreed that CARDONNE is entitled to the Success Bonus (as defined in the Prior Agreement) earned by him under the Prior Agreement and that same shall be payable at the time and in the amount specified therein. 21. Survival. The obligations of the parties set forth in Sections 8(g) and 9 through 19 of this Agreement shall survive the expiration of the Employment Period of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of April 1, 2005. /s/ Raymond A. Cardonne, Jr. ------------------------------- Raymond A. Cardonne, Jr. REFAC By: /s/ Jeffrey D. Serkes ------------------------------- Name: Jeffrey D. Serkes Title: Director