CONDITIONAL EMPLOYMENT AGREEMENT
CONDITIONAL EMPLOYMENT AGREEMENT (the "Agreement") between ZB Company, Inc.
(the "Company"), and Xxxx Xxxxxxxx (the "Employee").
WHEREAS, the Company and Employee anticipate that the Company will acquire
the assets of Zany Brainy, Inc. pursuant to the terms of an Asset Purchase
Agreement ("APA") executed on or about the date hereof;
WHEREAS, Employee is currently employed by Zany Brainy, Inc. and expects to
be terminated by Zany Brainy, Inc. upon "Closing" as that term is defined in the
APA (the "Closing"); and
WHEREAS, the Company wishes to employ the Employee and the Employee wishes
to be employed by the Company on the terms and conditions set forth herein;
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. CONDITIONAL AGREEMENT. This Agreement, and the parties rights and
obligations contained in it, is conditioned on, and does not become effective
until (a) Closing, (b) Employee's execution of a release acceptable to Company,
and (c) the occurrence of all conditions necessary to render said release fully
effective and enforceable.
2. TERM. The term of Employee's employment hereunder is for two years from
the date of Closing. Either party may terminate employment hereunder at any time
for any reason with or without cause or advance notice, consistent with the
terms herein.
3. DUTIES. During the term of this Agreement, Employee shall perform such
duties and functions as may be assigned to him from time to time by the
Company's Chief Executive Officer or his/her designee. Employee will devote his
full business time and energy to the business and affairs of the Company and
will use his best efforts and abilities faithfully and diligently to promote its
business interests. The Employee's services will be rendered in accordance with
such policies as the Company may establish for the conduct of its employees.
4. COMPENSATION. The Company shall compensate the Employee as follows:
(a) Salary. The Employee shall receive an annual salary equal to the annual
salary he last received while employed by Zany Brainy, Inc ("Base Salary"). Said
salary shall be payable in semi-monthly installments in conformity with the
Company's policy relating to its employees generally.
(b) Benefits. The Employee also shall be entitled to receive all benefits
for which he is eligible under the terms of any life and medical insurance
policy and any other plans or arrangements, which plans, programs or
arrangements the Company may provide for him ("Benefits") from time to time and
which shall be similar to those benefits received by other employees in
positions comparable to Employee's current position. Benefits shall in all
respects be paid in accordance with the then-existing plans, or policies,
programs, and/or arrangements establishing or governing such Benefits. The
Company reserves the right to add, terminate and/or amend any existing plans,
policies, programs and/or arrangements during the term of this Agreement and at
any other time.
5. RETENTION BONUS. Pursuant to the terms and conditions of the Zany
Brainy, Inc. "Severance Pay and Retention Bonus Plan", Employee shall be paid a
retention bonus in the amount set forth therein if employee is (i) continuously
employed by the Company on a full time basis from the date of Closing through
January 2, 2002 , (ii) employee is terminated by the Company prior to January 2,
2002 for other than death, disability, or cause, or (iii) Employee terminates
his employment hereunder for Good Reason.
6. TERMINATION OF EMPLOYMENT BY THE COMPANY.
(a) Death or Disability. In the event Employee dies or becomes permanently
disabled during the term of this Agreement or any extension thereof, Employee's
employment with the Company and the Company's obligations hereunder shall be
deemed to be terminated as of the date of such death or disability. Employee
will be deemed to be permanently disabled if he becomes physically or mentally
incapable of performing his duties hereunder with reasonable accommodation on a
full-time, on-site basis for over 120 consecutive days.
(b) For Cause. The Company may, by notice to the Employee, terminate this
Agreement, and all of its obligations hereunder to the Employee, accruing after
the date of such termination if the termination is for Cause. For purposes of
this Agreement, the term cause shall mean the following: Employee's (i)
dishonesty or misappropriation of funds; (ii) willful misconduct in the
performance of his duties, (iii) willful breach of a fiduciary duty to the
Company, (iv) intentional and continued failure to perform stated duties, (v)
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses), or any final cease and desist order, or (vi) material
breach of this Agreement.
(c) Other than Cause or Death or Disability. Company may terminate
Employee's employment at any time, for any reason, with or without cause,
consistent with the terms herein.
7. TERMINATION OF EMPLOYMENT BY THE EMPLOYEE.
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(a) Good Reason. Definition of Good Reason. The Employee shall have the
right to terminate his employment for Good Reason. Good Reason means (unless the
Employee and the Company shall execute a written agreement specifically stating
that the occurrence of such event shall not constitute "Good Reason" under this
Agreement) any one of the following:
(i) A requirement by the Company or the Board that the Employee relocate or
make his principal business location more than 50 miles from the current
executive offices of Zany Brainy, Inc.,
(ii) A reduction in Base Salary,
(iii) The Company's refusal to provide Employee with employment benefits as
required by Section 4 (b) above.
(iv) If, as of January 2, 2002 or at any time thereafter through the date
which is twenty-four months after the Closing, the scope of Employee's duties
and responsibilities is not substantially similar to the duties and
responsibilities and benefits with which he was charged when last employed by
Zany Brainy, Inc.
(b) Other Than Good Reason. Employee may terminate his employment at any
time, for any reason, with or without cause.
8. OBLIGATIONS OF THE COMPANY ON TERMINATION.
(a) Death or Disability. If Employee's employment is terminated by reason
of Employee's death or disability, this Agreement shall terminate without
further obligations to Employee or his legal representatives under this
Agreement, other than for (i) payment in the sum of (aa) Employee's annual base
salary through the date of termination to the extent not theretofore paid and
(bb) any sums accrued pursuant any Company deferred compensation plan and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (aa) and (bb) shall be hereafter referred to
as the "Accrued Obligations"), which shall be paid to Employee or his estate or
beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the
date of termination; and (ii) payment to Employee or his estate or beneficiary,
as applicable, any amounts due pursuant to the terms of any applicable welfare
benefit plans.
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(b) Cause. If Employee's employment is terminated by the Company for cause,
this Agreement shall terminate without further obligations to Employee other
than for the timely payment of Accrued Obligations. If it is subsequently
determined that the Company did not have cause for termination, then the
Company's decision to terminate shall be deemed to have been made under Section
6(c) and the amounts payable under Section 8(c) shall be the only amounts
Employee may receive for his termination.
(c) Other Than Cause, Death, Disability or Good Reason. If, prior to
twenty-four months after Closing, the Company terminates Employee's employment
for other than cause or death or disability or employee terminates this
Agreement for Good Reason, this Agreement shall terminate without further
obligations to Employee other than (i) the timely payment of Accrued
Obligations, (ii) within forty-five days of the date of termination and upon his
execution of a general release and waiver of claims against the Company
("Release"), and in consideration of Employee's obligations under Paragraphs 10
and 11 of this Agreement, the payment to Employee of severance in an amount
equal to his annual Base Salary, less applicable withholdings and deductions,
(iii) payment of the Retention Bonus as set forth in Paragraph 5 above if said
bonus has not already been paid, and (iv) for a period (the "Severance Benefit
Period") of twelve (12) months from the date of termination and continuation of
all health insurance, life insurance and disability insurance fringe benefits
for the shorter of the Severance Benefit Period or the date that substantially
equivalent or better benefits are provided by a subsequent employer of the
Employee (the "Insurance Benefit Period"). If such benefits cannot be continued
for Employee's benefit under the benefit plan provisions because of the
termination of Employee's employment with the Company, then, with respect to
health and dental coverage, Company shall reimburse Employee for the cost to him
of COBRA continuation coverage during the Insurance Benefit Period and, with
respect to disability and life insurance, and to the extent COBRA coverage is
not available, Employee shall be paid an amount sufficient to enable him to
purchase equivalent benefits from the same or other insurers provided, however,
that the maximum monthly amount that Company shall pay for such insurance
coverage is three times the monthly premium charged to employer for coverage for
Employee in the month immediately prior to his termination. Company shall
provide Employee with the Release as soon after termination hereunder as
practicable so that the payment of severance does not take place later than
forty-five days after termination.
9. CONFIDENTIAL INFORMATION. The Employee acknowledges that 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 of the Company
and covenants that he will not, either during or after his employment with the
Company, disclose any such Confidential Information to, or use of any such
Confidential Information for the benefit of, any person or entity other than the
Company and/or its affiliates for any reason whatsoever (except as may be
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required or appropriate for the proper discharge of his duties and
responsibilities under this Agreement) without the prior written authorization
of the Company's Managing Agent, except as may be required by law. In the event
that the Employee is subject to a subpoena or other order of any governmental
entity which might seek disclosure of Confidential Information, the Employee
shall furnish a copy of such subpoena or order to the Company's General Counsel,
00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, as soon as practicable but in
no event no later than forty-eight (48) hours after his receipt of such subpoena
or order. Confidential Information shall not include (i) information known to
Employee before he became employed by the Company, (ii) information in the
public domain or known generally in the industry through no fault of Employee,
and (iii) information that is not treated by the Company as confidential or is
disclosed by the Company to third parties without a duty of confidentiality
imposed on such third parties.
10. NON-COMPETITION.
(a) During his employment by the Company and for a period ending one year
after the last date on which Employee last performs services for the Company
(whether or not such services are rendered pursuant to this Agreement), 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
business that constitutes a competing business operating in the North American
continent as defined below. The restrictive period referred to in this paragraph
10(a) in no event shall exceed the length of the Severance Benefit Period
(defined above) if the Employee is terminated by the Company without cause or
resigns for Good Reason.
(b) As used in this Agreement, a "competing business" shall be (i) any
business that, at the time of the termination, primarily engages in, or plans to
engage primarily in, the sale of any combination of at least two of the
following children's merchandise categories: (a) multimedia/educational
merchandise, (b) video games and/or related hardware and software, (c) books,
(d) educationally-oriented or specialty market games and/or toys, (e)
educationally-oriented or specialty market audio tapes and/or videotapes, (f)
educationally-oriented or specialty market computer software products and (g)
educationally-oriented or specialty market arts and crafts supplies (the
"Company's Merchandise Assortment"); (ii) Lakeshore Learning Materials, KoB
Toys, Toys "R" Us, Inc., FAO Xxxxxxxx, XXX Operations, Inc. (d/b/a Store of
Knowledge), Learningsmith, Inc., Learning Express, Inc., Babies "R" Us, or any
subsidiaries, affiliates or Internet ventures of the aforementioned companies;
or (iii) any retailing business that, at the time of the termination, dedicates
more than 7,500 square feet of its retail selling space to any combination of at
least two of the Company's Merchandise Assortment in any one store. The 7,500
square foot calculation in subparagraph (iii) of this Paragraph 10(b) 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 Paragraph 10(b) shall mean that sixty-six and two-thirds percent (66.67%)
of the merchandise sold by the entity engaged, or to be engaged, in such
business is substantially similar to and competitive with the children's
merchandise sold by the Company.
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(c) Notwithstanding the restrictions contained in Paragraph 10, the
Employee shall be permitted to own no more than five percent (5%) 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.
(d) Notwithstanding any other provision in this Agreement, the provisions
set forth in Paragraphs 10(a-c) and 11 of this Agreement shall be binding on
Employee, and shall inure to the benefit of the Company, of any purchaser of
substantially all of the assets of the Company, of any successor of the Company,
of any entity formed by the merger or consolidation of the Company with another
entity, or of any entity that acquires the Company.
11. NO SOLICITATION. The Employee agrees that during the term of this
Agreement and for a period ending two 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 was employed by 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.
12. EQUITABLE RELIEF.
(a) Employee acknowledges that the restrictions contained in Paragraphs 9,
10, and 11 of this Agreement, individually and collectively, 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 Paragraphs 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.
(b) 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 Paragraphs 9, 10, and 11 above,
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
Paragraphs 9, 10, and 11 above 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.
(c) Subject to Xxxxxxxxx 00 (x) of this Agreement, the parties irrevocably
and unconditionally (i) agree that any suit, action or other legal proceeding
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arising out of this Agreement, including, without limitation, any action
commenced by the Company for preliminary and/or permanent injunctive relief
and/or other equitable relief, may be brought in any court of competent
jurisdiction in Pennsylvania; (ii) consent to the 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.
13. GOVERNING LAW AND OTHER REQUIREMENTS.
(a) This Agreement shall be governed by and interpreted under the laws of
the Commonwealth of Pennsylvania, without giving effect to the principles of
conflicts of laws thereof.
(b) This Agreement supersedes all prior agreements between the Company and
Employee and sets forth the entire understanding between the parties hereto with
respect to the subject matter hereof. This Agreement may not be changed,
modified, extended or terminated except upon written amendment executed by the
Employee and by the duly appointed representative of the Managing Agent of the
Company.
. (c) The language of this Agreement shall be construed in accordance with
its fair meaning and not for or against any party. The parties acknowledge that
each party and its counsel have reviewed and had the opportunity to participate
in the drafting of this Agreement and, accordingly, that the rule of
construction that would resolve ambiguities in favor of non-drafting parties
shall not apply to the interpretation of this Agreement or any portion of this
Agreement.
(d) In the event of any controversy, dispute or claim arising out of or
related to this Agreement or the Employee's employment by the Company, such
disputes will be resolved by (1) the Bankruptcy Court if said dispute arises
while the Zany Brainy, Inc. bankruptcy is pending and (2) binding arbitration,
conducted in Philadelphia, Pennsylvania, in accordance with the National Rules
of the American Arbitration Association governing employment disputes after the
dismissal of the Zany Brainy, Inc. Bankruptcy case. Nothing in this paragraph
shall be deemed to limit, compromise or affect the Company's right to seek
and/or obtain injunctive and/or other equitable relief from a court of competent
jurisdiction pursuant to Paragraphs 9 -12 above.
(e) All payments under this Agreement shall be made subject to applicable
federal, state, and local tax withholdings.
(f) 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 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
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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 or to impose
any such obligations on the Employee in conflict with or in any manner
inconsistent with the provisions of this Agreement.
(g) 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 except as provided
herein.
13. POWER AND AUTHORITY. The Company and Employee warrant and represent
that they have the power and authority to enter into this Agreement. Employee
warrants and represents that that he is not subject to any contractual or other
restriction that prevents or purports to prevent Employee from performing his
obligations under this Agreement.
14. SEVERABILITY. If any provision of this Agreement or 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.
15. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon the Company or
the Employee 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. Except as specifically provided in this Agreement, no delay or omission
by the Company in exercising any right, remedy or power hereunder or existing at
law or in equity shall 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 required by
law, indemnify the Employee in connection with his status as set forth herein.
Notwithstanding the generality of the foregoing, Employee is only indemnified by
Company for his conduct after the Closing that is within the course and scope of
his employment with Company. The Company shall also provide the Employee with
coverage as a named insured under any directors and officers liability insurance
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policy maintained for the Company's directors and officers to the extent
Employee is or becomes a director or officer of the Company.
17. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
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IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Conditional Employment Agreement as of the date(s)
written below.
Attest ZB COMPANY, INC.
Xxxxxxx X. Xxxxxxxx, Secretary By: Xxxxxxx X. Xxxxxx
Its: Vice President
Date: August 24, 2002 Date: August 24, 2001
Witness: EMPLOYEE
/s/ Xxxxxxx X. Xxxxx /s/ Xxxx Xxxxxxxx
(signature) (signature)
Xxxxxxx X. Xxxxx Xxxx Xxxxxxxx
(print name) (signature)
Date: August 24, 2001 Date: August 24, 2001
