AGREEMENT
THIS AGREEMENT made effective this 23rd day of January, 1996, by and
between Spec's Music, Inc. ("Spec's"), a Florida corporation, and Transition
Strategies, Inc. ("TSI").
WHEREAS, Spec's is engaged in the retail sale of music related products;
WHEREAS, TSI has a special expertise in financial consulting which would be
helpful to Spec's; and
WHEREAS, Spec's desires to retain the services of TSI as an independent
contractor.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other valuable consideration, acknowledged by each to be
satisfactory, the parties agree as follows:
1. TERM. This Agreement shall continue for three (3) years unless
terminated earlier in accordance with Section 5 ("Term").
2. FEE. Beginning February 5, 1996, Spec's shall pay TSI the amount of
Thirteen Thousand Seven Hundred and Fifty Dollars ($13,750.00) per month during
the first year of this Agreement and increase this to Fifteen Thousand Dollars
($15,000.00) per month in the second (2nd) year of the Term. There shall be an
annual review thereafter with the monthly fee to be determined by mutual
agreement of the parties. TSI shall be entitled to certain stock options as
described in Section 6. TSI shall be entitled to receive any bonuses to which
Xxxxxxx Xxxxxxxx may become entitled under any executive bonus plan approved by
the Board of Directors.
3. SERVICES PROVIDED. Beginning February 5, 1996, TSI shall provide the
services of Xxxxxxx Xxxxxxxx to act as Executive Vice President and Chief
Operating Officer on a full-time basis. During the average work week Xx.
Xxxxxxxx shall spend four (4) weekdays at the Spec's offices in Miami, Florida
and one (1) weekday at a location of Xx. Xxxxxxxx'x choice. Xx. Xxxxxxxx shall
be available at such location by both telephone and facsimile and shall provide
Spec's with written notice of any change in such location. Xx. Xxxxxxxx shall
report directly to the President of Spec's. Xx. Xxxxxxxx shall perform services
that are assigned to him from time to time by the Board of Directors. Neither
TSI nor Xx. Xxxxxxxx shall be deemed an employee of Spec's and Spec's shall not
control nor have the right to control the manner in which TSI or Xx. Xxxxxxxx
performs services under this Agreement. Without the prior written consent of
Spec's, neither TSI nor Xx. Xxxxxxxx shall undertake any other employment or
directorships.
4. EXPENSE ALLOWANCE. Beginning on February 5, 1996, Spec's shall reimburse
TSI for travel and entertainment expenses incurred by Xx. Xxxxxxxx on Spec's
behalf, if such expenses are incurred and documented in accordance with Spec's
existing reimbursement policy; provided, however, TSI shall be responsible for
any expenses incurred by Xx. Xxxxxxxx to travel to Miami or for food, lodging or
other expenses in Miami, to fulfill the requirement under this Agreement of Xx.
Xxxxxxxx'x presence at Spec's Miami offices.
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5. TERMINATION. Failure by either party to comply with the terms of this
Agreement shall entitle the other party to terminate this Agreement upon written
notice which contains the reason for the termination; provided, however, the
party receiving notice shall have ten (10) days within which to cure such
default.
In the event that Spec's shall terminate this Agreement for any reason
other than a breach by TSI, Spec's shall continue to pay TSI the monthly fee set
forth in Section 2 for a period of one (1) year if the termination occurs during
the first (1st) year of the Term, and for a period of eighteen (18) months if
the termination occurs after the first (1st) year of the Term.
6. OPTIONS.
(a) GRANT OF OPTIONS. Spec's hereby grants to TSI options (the
"Options") to purchase, in accordance with and subject to the terms and
conditions of this Section, which shall be deemed to be an employee benefit plan
for security law purposes, the sum of 208,000 shares of its common stock, par
value $.01 per share (the "Shares") at the per Share exercise price of $1.3125.
All Options shall expire two (2) years after the expiration or termination of
this Agreement.
(b) VESTING AND EXERCISE OF OPTIONS. The Options shall not vest nor be
exercisable prior to the effective date of this Agreement (the "First Exercise
Date"). After the First Exercise Date and until the Expiration Date, the Options
shall vest and first become exercisable at the rate of Eight Thousand Six
Hundred and Sixty Six (8,666) of the Shares underlying the Options per
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month; Options to purchase the remaining sixteen (16) Shares shall vest and be
exercisable two (2) years after the date of this Agreement. TSI agrees not to
exercise an amount of Options in any one (1) calendar year that has a fair
market value (defined as the fair market value of the Shares less the exercise
price) in excess of Seven Hundred and Fifty Thousand Dollars ($750,000.00).
Notwithstanding the foregoing provisions, each outstanding Option shall
become fully vested and exercisable immediately:
(i) if there occurs any transaction (which shall include a series of
transactions occurring within sixty (60) days or occurring pursuant to a plan),
that has the result that stockholders of Spec's immediately before such
transaction cease to own at least fifty one percent (51%) of the voting stock of
Spec's or any entity that results from the participation of Spec's in a
reorganization, recapitalization, consolidation, merger, share exchange,
liquidation or any other form of corporate transaction;
(ii) if the stockholders of Spec's shall approve a plan of merger,
consolidation, share exchange, reorganization, recapitalization, liquidation or
dissolution in which Spec's does not survive, unless (a) the approved merger,
consolidation, share exchange, reorganization, recapitalization, liquidation or
dissolution is subsequently abandoned, or (b) the entity surviving or resulting
from such transaction is controlled by substantially the same persons as was
Spec's, assumes all obligations of Spec's under these Options, and has a
financial condition and operations
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substantially equivalent or superior to those of Spec's immediately prior to the
transaction; or
(iii) if the stockholders of Spec's shall approve a plan for the
sale, lease, exchange or other disposition of all or substantially all the
property and assets of Spec's (unless such plan is subsequently abandoned).
(c) CHANGES IN CAPITAL STRUCTURE. In order to maintain the same
proportion between the Options and the Shares, the Options shall be adjusted by
the Board of Directors as to the number of shares subject to such Options in the
event of changes in the outstanding common stock of Spec's by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the effective date of this Agreement.
(d) NOTICE AND FORM OF PAYMENT. The Options may be exercised for the
number of Shares specified in a written notice delivered to Spec's at least ten
(10) days prior to the date on which purchase is requested, accompanied by full
payment in cash, in Shares, or in a combination thereof, at the discretion of
the Board of Directors. As a condition to the issuance of the Shares, the Board
may require such agreements or undertakings as it deems necessary or advisable
to assure compliance with applicable laws (including applicable securities
laws).
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(e) TRANSFERABILITY OPTIONS. The Options may not be sold, pledged,
assigned or transferred and may only be exercised by TSI.
(f) TERMINATION OF OPTIONS. In the event that this Agreement is
terminated, any Options that have not yet vested will terminate on such date.
(g) REGISTRATION OF SHARES. Spec's shall use its best efforts to
promptly, after the date of this Agreement, register the proposed grant of the
Options to TSI by filing a registration statement on Form S-8 with the
Securities and Exchange Commission. Once such registration statement is filed,
Spec's shall promptly grant the Options to TSI. Spec's shall use its best
efforts to cause such registration statement to remain effective until the
earlier of the following dates: the date TSI has exercised all of the Options,
or two (2) years after the expiration or termination date of this Agreement.
7. NOTICES. Any notice required or permitted under this Agreement shall be
sufficient if in writing and personally delivered or mailed to the party
executing this Agreement at the address indicated below such party's signature.
Any such notice shall be effective upon receipt, if personally delivered, or the
third (3rd) business day after mailing, if mailed.
8. MISCELLANEOUS.
(a) This Agreement may not be assigned by either party.
(b) This document shall be interpreted under Florida law.
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(c) This Agreement contains the entire agreement and all the contractual
obligations of the parties to each other. Any and all prior agreements,
understandings, verbal or written, are merged within this Agreement. Any
modification to this Agreement must be by mutual written consent.
IN WITNESS WHEREOF, each party has executed this Agreement on the date
indicated below the signature.
WITNESSES:
Spec's Music, Inc.
/s/ XXXXXXXX XXXXXX
-------------------------- By: /s/ XXX XXXXX
-----------------------------------
Xxx Xxxxx
/s/ XXXXXXXXX XXXXXXXXX
-------------------------- Title: President
Address: 0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Date: 2-15-96
---------------------------------
Transition Strategies, Inc.
/s/ XXXXXXXX XXXXXX
-------------------------- By: /s/ XXXXXXXX
-----------------------------------
/s/ XXXXXXXXX XXXXXXXXX
-------------------------- Title: President
Address:
------------------------------
------------------------------
Date: 2-15-96
---------------------------------
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