EXHIBIT 10.4
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT (the "Agreement") dated August 28, 1996 and
effective as of June 3, 1996, between Children's Concept, Inc. (the "Company")
and Xxxxx Xxxxxxxx (the "Employee").
WHEREAS, the Employee desires to be employed by the Company upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment. As of the date hereof, the Company hereby
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employs the Employee, and the Employee accepts such employment and agrees to
perform his duties and responsibilities hereunder, in accordance with the terms
and conditions hereinafter set forth.
1.1. Duties and Responsibilities.
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(a) During the term of this Agreement, the Employee shall serve
as President and Chief Executive Officer and he shall perform all duties
and accept all responsibilities reasonably incidental to such position and
such responsibilities reasonably related to such position as may be
assigned to him by the Company's Board of Directors, and he shall cooperate
fully with the Board of Directors and other executive officers of the
Company, including, without limitation, overall responsibility for the
sales, marketing and financial performance of the Company. The Employee
shall report directly to the Company's Board of Directors.
(b) The Employee represents to the Company that he is not subject
or a party to any employment agreement, non-competition covenant,
understanding or restriction which would prohibit the Employee from
executing this Agreement and performing fully his duties and
responsibilities hereunder, or which would in any manner, directly or
indirectly, limit or affect the duties and responsibilities which may now
or in the future be assigned to the Employee by the
Company or the scope of assistance to which he may now or in the future
provide to affiliates of the Company.
(c) The Employee shall at all times comply with policies and
procedures adopted by the Company for its employees, not inconsistent with
the terms of this agreement, including, without limitation, any procedures
and policies adopted by the Company regarding conflicts of interest.
(d) The duties and responsibilities and reporting relationship
set forth herein shall not be substantially changed without the mutual
agreement of the parties.
1.2. Extent of Service. The Employee agrees to use his best efforts
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to carry out his duties and responsibilities under Section 1.1 hereof and to
devote all his full time, attention and energy thereto. Except as provided in
Section 4 hereof, the foregoing shall not be construed as preventing Employee
from making investments in other businesses or enterprises, provided that
Employee agrees not to serve as a director, officer or advisor of, or to work
either on a part-time or independent contracting basis for, any other business
or enterprise during his employment with the Company without the prior written
approval of the Chairman of the Board of Directors of the Company.
1.3. Compensation. For all of the services rendered by the Employee
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hereunder, for the first twelve months of employment, the Company shall pay
Employee a salary of $250,000, less withholding required by law or agreed to by
Employee, payable in installments at such times as the Company customarily pays
its other senior officers (but in any event no less often than monthly). The
Company agrees that the Employee's salary and performance will thereafter be
reviewed at least annually by the Company on the same basis as other senior
level executives to determine if an increase is appropriate, which increase
shall be in the sole discretion of the Company. Except as otherwise provided
herein, and except for the Company's tax withholding obligations required by
applicable law, the Employee alone and
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not the Company shall be responsible for the payment of all federal, state and
local taxes in respect of the payments to be made and benefits to be provided
under this Agreement or otherwise.
1.4. Benefits. During the term of employment the Employee shall
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be provided such benefits and be permitted to participate in fringe benefit
plans. Such fringe benefit plans may be amended or terminated from time to time
by the Company in its sole discretion.
1.5. Incentive Compensation. In addition to the compensation set
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forth in Section 1.3 hereof, the Employee shall be entitled to participate in
the Company's Stock Option Program. Immediately upon his employment, Employee
shall receive a stock option grant of 400,000 shares of common stock at a xxxxx
xxxxx not to exceed $4.00 per share, such price to be determined by the Board of
Directors in its sole discretion. Such grant is and shall be subject to and
governed by all of the terms and conditions of the Stock Option Program,
including, without limitation, certain vesting and transfer restrictions.
1.6. Automobile Allowance. The Employee shall receive, in addition
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to his annual salary, a payment at the annual rate of $7,500, paid in monthly
installments, as an automobile allowance, less withholding required by law or
agreed to by Employee.
1.7. Vacation. The Employee shall be entitled to up to four(4)weeks
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of vacation per year, to be taken in accordance with the Company's vacation
policy as it may be established or amended by the Company from time to time.
1.8. Relocation Assistance. The Employee shall receive the
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following net relocation assistance payments after deduction of federal, state
or local taxes required by law:
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(a) Reimbursement for reasonable and necessary temporary
housing expenses up to a maximum of $2,000 in any month, for a maximum of
six (6) months, which payments shall cease upon termination of employment
or the establishment of a permanent housing arrangement;
(b) Reimbursement for all reasonable relocation expenses,
including, without limitation, (i) reasonable airline transportation in
coach class between Employee's residence in Australia and Philadelphia,
Pennsylvania for the Employee (two round trips) and members of the
Employee's immediate family (one round trip plus one one-way fare) who are
also relocating to the Philadelphia, Pennsylvania area and (ii) reasonable
settlement costs incurred in connection with the purchase of a new home in
the Philadelphia, Pennsylvania area, including, without limitation, (A)
mortgage fees up to 300 basis points and (B) reasonable attorney's fees up
to $1,000;
(c) Notwithstanding the other provisions of this Section 1.8,
the Employee agrees that (i) before seeking reimbursement from the Company
for expenses incurred hereunder, the Employee will attempt in good faith to
obtain reimbursement for all relocation expenses from the Employee's
previous employer to the full extent provided under the Employee's
employment agreement with such previous employer and that (ii) the Company
shall only be obligated to reimburse the Employee for expenses incurred
pursuant to this Section 1.8 to the extent not reimbursed by the Employee's
previous employer.
(d) $25,000 to cover additional incurred and non-accountable
relocation expenses;
(e) If and to the extent that any of the payments described in
subsections (a) or (b) of this Section 1.8 (and no other subsections) are
includible in Employee's income and are not deductible by Employee for
purposes of applicable federal, state or local income or employment taxes,
the Company shall pay Employee an additional amount such that the net
amount retained by Employee, after any
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required withholding by the Company and payment by the Employee of any
additional liability for federal, state and/or local income and/or
employment taxes directly attributable to the payments described in
subsections (a) or (b) of this Section 1.8 (and no other subsections),
shall be equal to the aggregate amount of the payments described in
subsections (a) and (b) of this Section 1.8 (and no other subsections).
2. Expenses. The Company shall reimburse the Employee on a
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timely basis for all ordinary and necessary out-of-pocket business expenses
incurred in connection with the discharge of his duties and responsibilities
hereunder, in line with Company policy and in accordance with the Company's
expense approval procedures then in effect upon presentation to the Company of
an itemized account and written proof of such expenses.
3. Confidential Information. The Employee recognizes and
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acknowledges that by reason of his employment by and service with the Company he
will have access to confidential information of the Company and its affiliates,
including, without limitation, information and knowledge pertaining to research
activities, products and services offered, inventions, innovations, designs,
ideas, plans, trade secrets, proprietary information, advertising, sales methods
and systems, sales and profit figures, customer lists, and relationships between
the Company and its customers, suppliers and others who have had or will have
business dealings with the Company ("Confidential Information"). Employee
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he will not, either during or after his employment with the
Company, disclose any such Confidential Information to any person for any reason
whatsoever (except as his duties as an officer of the Company may require)
without the prior written authorization of the Chairman of the Company's Board
of Directors, unless such information is in the public domain through no fault
of Employee or except as may be required by law.
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4. Non-Competition.
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4.1. During his employment by the Company and for a period of two
(2) years after that employment terminates, the Employee shall not, directly or
indirectly, engage in (as principal, partner, director, officer, agent,
employee, consultant, owner, independent contractor or otherwise, with or
without compensation) or hold a financial interest in any retailing business
that constitutes a competing business operating in the North American continent
as defined below.
4.2. As used in this Section 4, a "competing business" shall be (i)
any business that, at the time of the determination, primarily engages in, or
plans to primarily engage in, the sale of any combination of the following
children's merchandise: multimedia/educational merchandise, books,
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educationally-oriented or specialty market games and toys, audiotapes,
videotapes, computer software products and arts and crafts supplies (the
"Company's Merchandise Assortment") or (ii) any retailing business that, at the
time of the determination, dedicates more than 7,500 square feet of its retail
selling space to any combination of the Company's Merchandise Assortment in any
one store. The 7,500 square foot calculation in subparagraph (ii) of this
Section 4.2 shall exclude mass merchant products of a type not sold by the
Company at the time of the determination. The phrase "primarily engages in" used
in subparagraph (i) of this Section 4.2 shall mean that sixty-six and two-thirds
percent (66.67%) of the merchandise sold by such business is substantially
similar to that sold by the Company.
4.3. The definition of "competing business" contained in Section
4.2(ii) shall not apply if either (i) the Employee is terminated without cause
or (ii) there is a significant and involuntary reduction in the authority,
duties or responsibilities of the Employee hereunder.
4.4. The restrictions contained in this Section 4 shall not apply to
the ownership of five percent (5%) or less of the shares of any class of equity
securities of a company whose securities are traded on a national securities
exchange or The Nasdaq Stock Market.
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5. No Solicitation. The Employee agrees that during the period
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commencing on the first day of his employment with the Company and ending two
(2) years after the Employee last performs services for the Company (whether or
not such services are rendered pursuant to this Agreement), he will not, either
directly or indirectly, solicit the employment of any person who was employed by
the Company on a full or part-time basis at the time the Employee last performed
services for the Company unless such person (i) was involuntarily discharged by
the Company or such affiliate; or (ii) voluntarily terminated his or her
relationship with the Company or such affiliate prior to the Employee's
termination of employment.
6. Equitable Relief.
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6.1. Employee acknowledges that the restrictions contained in
Sections 3, 4 and 5 hereof are reasonable and necessary to protect the
legitimate interests of the Company, that the Company would not have entered
into this Agreement in the absence of such restrictions, and that any material
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee further represents and acknowledges that (i) he
has been advised by the Company to consult his own legal counsel in respect to
this Agreement; and (ii) that he has, prior to execution of this Agreement,
reviewed thoroughly this Agreement with his counsel.
6.2. The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as to an equitable accounting of all earnings, profits
and other benefits arising from any violation of Sections 3, 4 or 5 hereof,
which rights shall be cumulative and in addition to any other rights or remedies
to which the Company may be entitled. In the event that any of the provisions
of Sections 3, 4 or 5 hereof should ever be adjudicated to exceed the time,
geographic, product or service, or other limitations permitted by applicable law
in any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum time, geographic, product or service, or other
limitations permitted by applicable law.
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6.3. Subject to Section 14, the parties irrevocably and
unconditionally (i) agree that any suit, action or other legal proceeding
arising out of this Agreement, including, without limitation, any action
commenced by the Company for preliminary and permanent injunctive relief and
other equitable relief, may be brought in any court of competent jurisdiction in
Xxxxxxxxxx County, Pennsylvania; (ii) consent to the non-exclusive jurisdiction
of any such court in any such suit, action or proceeding; and (iii) waive any
objection which such party may have to the laying of venue of any such suit,
action or proceeding in any such court. The parties also irrevocably and
unconditionally consent to the service of any process, pleadings, notices or
other papers in a manner permitted by the notice provisions of Section 11
hereof.
6.4. The Employee agrees that, during the term of this Agreement,
and after the termination hereof for the applicable periods set forth in
Sections 3, 4 and 5, the Employee shall provide the Company a list (the "List")
of any business or enterprise (i) which the Employee may directly or indirectly
own, manage, operate, finance, join, control or participate in the ownership,
management, operation, financing, control or control of; or (ii) with which the
Employee may be connected with as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise, or in connection with
which the Employee may use or permit his name to be used. The List shall be
provided to the Company within four (4) business days of any event under clauses
(i) and (ii) above; provided, however, that with respect to any event relating
to Employee's employment with any business or enterprise under clause (ii), the
List shall be provided to the Company within four (4) business days of the
earlier to occur of: (A) the execution of an employment agreement with such
business or enterprise, (B) the commencement of employment with such business or
enterprise and (C) the acceptance, whether oral or written, of a position of
employment with such business or enterprise. The List shall include the name,
principal business address and telephone number of each business or enterprise
and the name, address and telephone number of the Chairman of the Board or
President of each such business or enterprise, or in the event the business or
enterprise does not have a Chairman or President, the name,
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address and telephone number of the employee or partner at each such business or
enterprise that has decision making authority. The Employee shall provide the
Company, within the same time periods set forth above, with an updated List as a
result of any change in the Employee's status with any business or enterprise
under clauses (i) and (ii) above, including the oral acceptance of any position
described in clauses (i) and (ii) above. Upon the Company's reasonable request,
the Employee shall provide a copy of Sections 3, 4 and 5 of this Agreement to
each such business or enterprise as the Company shall direct within two (2)
business days of such direction and provide the Company with evidence,
reasonably satisfactory to the Company, that the Employee has provided each such
business or enterprise with such information. The Company may also provide such
business or enterprise a copy of Sections 3, 4, or 5 at any time in the
Company's sole discretion. Notwithstanding the foregoing, the provisions of this
Section 6.4 shall not apply in respect of Sections 4 and 5 of this Agreement
after expiration of the time periods set forth therein or in the event that the
Company breaches its obligation under this Agreement.
7. Termination. This Agreement and the Employee's employment
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may be terminated at the will of either party at any time and for any reason
with or without cause, except that the Employee agrees to give the Company at
least thirty (30) days written notice of termination prior to the last date on
which he performs services for the Company.
7.1. In the event that the Company terminates the Employee's
employment for reasons other than cause or a Change of Control of the Company,
as those terms are defined herein, the Employee shall be entitled, as provided
in subparagraphs (a) and (b) below, (i) to receive his total salary installment
payments (base salary, bonus and incentive compensation earned as of such
termination date, subject to the terms and conditions set forth in the Company's
annual incentive plan) at the salary rate in effect at the time of the
termination of his employment, and (ii) to continue to participate in all
insured benefit plans for a period not to exceed six months, on the same terms
on which he was participating prior to the date of the termination of his
employment (collectively, the "Termination Benefits"):
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(a) If such termination occurs within eighteen (18) months of
the effective date hereof (on or before November 30, 1997), the Employee
will receive the Termination Benefits for a period equal to (i) twenty-four
(24) months minus (ii) the number of months that the Employee has been
employed by the Company. For the purposes solely of this subsection (a),
the Employee shall be deemed to have been employed for the entire month in
which such termination occurs.
(b) If such termination occurs after eighteen (18) months of
the date hereof (after November 30, 1997), the Employee will receive the
Termination Benefits for a period of six (6) months after the date of the
termination of his employment.
(c) "Cause" as used herein shall mean the failure of the
Employee to perform or observe any material terms or provisions of this
Agreement after notice and a reasonable opportunity to correct any problem
or to comply with any of the lawful directives of the Board of Directors of
the Company, dishonesty, conviction of a crime involving moral turpitude,
substance abuse, misappropriation of funds, or serious disparagement of the
Company, its products, management or employees.
7.2. In the event that subsequent to a Change of Control of the
Company, the Employee is involuntarily terminated or there is a significant
reduction in the authority, duties or responsibilities of the Employee as
provided in this Agreement or the compensation or benefits due hereunder, the
Employee shall receive the Termination Benefits for a period of twelve (12)
months regardless of the time period for which the Employee would have received
the Termination Benefits pursuant to Section 7.1.
7.3. The Employee may terminate his employment with the Company
within one (1) year after a Change of Control unless following a Change of
Control the successor organization offers to continue this Agreement for two (2)
years following such Change of Control or offers the Employee a two (2) year
contract incorporating substantially all of the terms of this Agreement
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and maintaining, at least, his then current salary and benefits. In the event
that the Employee terminates his employment in accordance with this section, he
shall be entitled to payments and benefits in accordance with Section 7.2.
7.4. A Change of Control for purposes of Sections 7.2 and 7.3 shall
be deemed to have occurred in the event of both of the following:
(a) Any of (i) the direct or indirect sale or exchange by the
shareholders of the Company of the stock of the Company, in a single or
series of related transactions, after which sale or exchange the
shareholders of the Company immediately prior to such transactions do not
retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company; (ii) a merger in which the
Company is a party after which merger the shareholders of the Company do
not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the surviving company or (iii) the sale,
exchange, or transfer of all or substantially all of the Company's assets
(other than a sale, exchange, or transfer to one or more corporations where
the shareholders of the Company before such sale, exchange, or transfer
retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the corporation(s) to which the assets were
transferred); and
(b) A change in either the composition or size of the Board of
Directors of the Company after which change a majority of members of the
Board of Directors immediately preceding such change are no longer members
of the Board of Directors.
7.5. During the period commencing six months after the date of
termination of the Employee, any liability of the Company for Termination
Benefits pursuant to Section 7.1 or Section 7.2, as the case may be, shall be
reduced by and to the extent of any earnings or benefits received or accrued for
the benefit of Employee as a result of Employee's employment, either
independently or by another employer, during the period,
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commencing six months after such termination, for which the Company is required
to pay or provide such Termination Benefits to the Employee.
8. Disability. In the event of the disability of the Employee,
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within the meaning of subsection 22(e)(3) of the Internal Revenue Code of 1986,
as amended, and is unable to work and remains continuously so Totally Disabled
for a period of one hundred and eighty (180) days, the Employee's employment, at
the Company's option, may be terminated by notice in writing to that effect.
Such termination shall take effect the last day of the month following the date
such notice is given. Employee's compensation and other benefits shall continue
during the term of the disability through the effective date of termination as
set forth above.
9. Survival. Notwithstanding the termination of this Agreement
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pursuant to Section 7 or otherwise, the Employee's obligations under Sections 3,
4 and 5 hereof shall survive and remain in full force and effect for the periods
therein provided, and the provisions for equitable relief against Employee in
Section 6 hereof shall continue in force.
10. Governing Law. This Agreement shall be governed by and
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interpreted under the laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflicts of laws thereof.
11. Notices. All notices and other communications required or
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permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand-delivered, mailed by
registered or certified mail (seven days after deposited if sent to or from
Australia), faxed (with confirmation received) or sent by an internationally
recognized courier service, as follows (provided that notice of change of
address shall be deemed given only when received):
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If to the Company, to:
Chairman of Board of Directors
Children's Concept, Inc.
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
With a required copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
If to Employee, to:
Xxxxx Xxxxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
or to such other names and addresses as the Company or the Employee, as the case
may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.
12. Contents of Agreement.
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12.1. This Agreement supersedes all prior agreements and sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof except that this Agreement may not be changed, modified, extended
or terminated except upon written amendment executed by the Employee and by the
Chairman of the Board of Directors or the Company (or a duly authorized
representative of the Board of Directors).
12.2. Employee acknowledges that from time to time the Company or its
affiliates may establish, maintain and distribute employee manuals or handbooks
or personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel policies and
procedures. Such manuals, handbooks and statements are intended only for
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general guidance. No policies, procedures or statements of any nature by or on
behalf of the Company (whether written or oral, and whether or not contained in
any employee manual or handbook, including the Company's Associate Handbook, as
the same may exist from time to time, or personnel policy manual), and no acts
or practices of any nature, shall be construed to modify this Agreement or to
create express or implied obligations of any nature to the Employee.
12.3. All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto, except that the duties and responsibilities of the
Employee hereunder are of a personal nature and shall not be assignable or
delegable in whole or in part by the Employee, and the Company may not transfer
or convey its rights hereunder to any third party other than an affiliate of the
Company without the prior express written consent of the Employee.
13. Severability. If any provision of this Agreement or
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application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder of this Agreement, and the
application of such provision to such person or circumstances in any
jurisdiction, shall not be affected thereby, and to this end the provisions of
this Agreement shall be severable.
14. Arbitration. In the event of any dispute or claim relating to
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or arising out of this Agreement, such disputes shall be fully, finally and
exclusively resolved by binding arbitration conducted by the American
Arbitration Association in Philadelphia, Pennsylvania.
15. Remedies Cumulative; No Waiver. No remedy conferred upon the
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Company by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by the Company in exercising any right, remedy or power
hereunder or existing at law or in equity shall
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be construed as a waiver thereof, and any such right, remedy or power may be
exercised by the Company from time to time and as often as may be deemed
expedient or necessary by the Company in its sole discretion.
16. Insurance and Indemnity. The Company shall, to the extent
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permitted by law, indemnify the Employee. The Company shall also provide the
Employee with coverage as a named insured under any directors and officers
liability insurance policy maintained for the Company's directors and officers.
This obligation to provide insurance and indemnify the Employee shall survive
expiration or termination of this Agreement with respect to proceedings or
threatened proceedings based on acts or omissions of the Employee occurring
during the Employee's employment with the Company or with any affiliated
company. Such obligations shall be binding upon the Company's successors and
assigns and shall inure to the benefit of the Employee's heirs and personal
representatives.
17. Miscellaneous. All section headings are for convenience only.
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This Agreement may be executed in several counterparts, each of which is an
original.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Employment Agreement as of the date first above written.
Attest: CHILDREN'S CONCEPT, INC.
______________________________ By:___________________________
Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxxxxxxxx,
Secretary Chairman of the Board
Witness: EMPLOYEE
______________________________ ______________________________
Xxxxx Xxxxxxxx
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