EXHIBIT 10.11
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of the 1st day of January, 1997, between KIDS
STUFF, INC., an Ohio Corporation with its principal offices at 0000 Xxxxxx
Xxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxx, Xxxx 00000 (the "Company") and Xxxxxxx
X. Xxxxxx residing at X.X. Xxx 000, 00 Xxxx Xxxxx, Xxxxxxxxx, Xxxx 00000 (the
"Executive").
AGREEMENT
In consideration of the mutual agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT.
a) POSITION. The Company hereby agrees to continue the
employment of Executive, and Executive hereby accepts continued employment by
the Company as Chairman of the Board and Chief Executive Officer of the Company.
b) PERFORMANCE. Except as set forth below, Executive agrees to
devote his full time, energies and attention to the performance of his duties
and functions hereunder, to exercise his best efforts, judgment, skills, and
talents exclusively in the business and affairs of the Company and, in the
performance thereof, to comply with the policies of and be subject to the
direction of the Board of Directors of the Company. Notwithstanding the above,
the Company recognizes and acknowledges that Executive will continue to serve as
the Chief Executive Officer of Xxxxxx Xxxx Co., Ltd. during the term of this
Agreement. Additionally, Executive may serve as an employee or officer of other
subsidiaries or affiliates of Xxxxxx Xxxx Co., Ltd. Executive shall devote such
time to Xxxxxx Xxxx Co., Ltd., subsidiaries or affiliates of Xxxxxx Xxxx Co.,
Ltd. as he deems appropriate. Executive shall be entitled to the compensation
set forth below regardless of the percentage of working hours that Executive
devotes to the affairs of the Company.
c) RESPONSIBILITIES. Executive shall be responsible for the
duties assigned to him by the Board of Directors or by an executive officer of
the Company with authority to assign duties and shall be subject and report to
the Board of Directors and/or any such other executive officer. Executive is
engaged to act as the Company's Chairman of the Board and Chief Executive
Officer and shall perform all of the usual duties inherent in such positions as
well as such other duties as may from time to time be delegated to him by the
Board of Directors.
2. COMPENSATION.
a) BASE SALARY. The Company agrees to pay Executive and
Executive agrees to accept as compensation for all of his services, a base
salary payable in accordance with the Company's standard payroll policy at the
annual rate of $125,000. The Board of Directors or the Compensation Committee of
the Board of Directors shall review the Executive's performance on an annual
basis and shall determine, in its discretion, whether to increase the base
salary.
b) BONUSES. Executive shall be eligible to receive, in
addition to his base salary, an annual cash bonus under the Company's bonus
program for key management personnel administered by the Board of Directors or
the Compensation Committee of the Board of Directors under which a cash bonus
will be payable based upon the Company's performance and Executive's personal
performance, with a range of bonus from 0 to 50% of Executive's prior year's
base salary.
c) OPTION GRANTS. The Company hereby grants options to
purchase 100,000 shares of the Company's Common Stock (the Option). The Options
are not exercisable on the date hereof. The Options shall vest and become
exercisable with respect to options to purchase 25,000 shares of Common Stock on
each of the first four anniversary dates of this Agreement. The Options will
vest and become exercisable on such dates regardless of whether Executive is
employed on such dates by the Company. The Options will expire and be
nonexercisable ten years from the date hereof.
The exercise price of the Option shall be $5.00 per share of Common
Stock, subject to adjustment as set forth below. The exercise price for vested
options may be decreased if (i) the Company meets certain performance goals, and
(ii) Executive timely elects to "lock-in" a lower exercise price with respect to
his vested options.
The exercise price for vested options may be reduced by $1.00 per share
for each $500,000 of pretax net income of the Company for the prior fiscal year.
The Company shall report to Executive, promptly upon audited financial
statements for the prior fiscal year becoming available, the pretax net income
of the Company for that year. Executive shall have thirty (30) days in which to
decide, with respect to his vested options for which an alternative exercise
price has not previously been locked-in, whether to adjust the exercise price of
such vested options based upon the pretax income of the Company for the prior
year. FOR EXAMPLE, if the Company has $1,100,000 of pretax net income for the
year ended December 31, 1997, the Company shall report such net income to
Executive in 1998. Executive will have to decide, within thirty (30) days of
receipt of the financial information, whether to modify or "lock-in" an amended
exercise price for the vested options (with the original grant date of January
1, 1997, options to purchase 25,000 shares of Common Stock would be vested at
that time). The exercise price for such vested options could be lowered to $3.00
per share and locked-in with respect to the underlying shares (two $500,000
increments of pretax net profit (no additional adjustment for the $100,000
partial increment)).
If Executive locks-in the new exercise price, that price will be the
exercise price for those shares for the entire term of the option. However,
Executive may determine not to so lock-in the
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exercise price. In that event, Executive may, in the subsequent year(s), elect
to lock-in a new exercise price for ALL vested options with respect to which
alternate exercise price has not previously been locked-in. In no event shall
Executive be allowed to lock-in a new exercise price subsequent to any election
that Executive can make to lock-in a new exercise price based on the Company's
pretax net income for the year ending December 31, 2001.
3. EXPENSES. The Company shall pay or reimburse Executive during his
employment hereunder for all reasonable travel and other expenses incurred by
Executive in the performance of his duties and obligations hereunder upon
submission of appropriate supporting documentation. In addition, the Company
shall pay or reimburse Executive during his employment for expenses incurred by
Executive in personal financial and legal counseling (including income tax
preparation and counseling, financial planning, financial counseling and
financial management and legal services on personal matters) in amounts not to
exceed in the aggregate $5,000 annually, and supplemental medical/dental
expenses up to the maximum of $1,500 annually. To the extent reimbursement by
the Company of any of Executive's expenses set forth in the preceding sentence
results in taxable income to Executive, the Company shall pay Executive, in
addition, an amount sufficient to gross-up such expenses so that Executive shall
not bear any personal out-of-pocket expenses with respect thereto. The Company
shall also, during the term hereof, provide Executive with a Company automobile
for his exclusive use, of a make and model mutually agreed upon by Executive and
the Company from time to time, at the Company's expense.
4. BENEFIT PLANS. Executive shall be entitled to participate in all of
the Company sponsored employee benefit plans.
5. VACATION. Executive shall be entitled to at least one month of
vacation during each twelve-month period of his employment hereunder.
6. INDEMNIFICATION. The Company shall to the full extent permitted by
law and not inconsistent with the provisions of the Certificate of Incorporation
and By-laws of the Company indemnify Executive if Executive shall become, or
shall be threatened with becoming, a party to any action, suit, or proceeding by
reason of his acting as an officer, agent, or employee of the Company, and such
indemnification shall not be deemed exclusive of any other rights to which
Executive may be entitled as a matter of law or in accordance with any
agreement, document, instrument, or under any policy of insurance carried by the
Company and such indemnification shall survive termination of this Agreement.
7. CONFIDENTIAL INFORMATION.
a) Executive acknowledges that the information, observations
and data regarding the Company and its subsidiaries obtained by him during the
course of his employment, either before or after the effective date of the
Agreement, are the property of the Company. Therefore, Executive agrees that he
will not disclose to any unauthorized person or use for his own account or for
the benefit of any third party (other than the Company and its subsidiaries) any
of such information,
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observations or data without the prior express written approval of the Board of
Directors of the Company. Notwithstanding the foregoing, Executive may disclose
information, observations or data to the extent that (a) the same become
generally known to and available for use by the public other than as a result of
acts or omissions to act by Executive in violation of this paragraph 7 or (b)
such disclosure is required by law or legal process. Executive agrees to deliver
to the Company, at the termination of his employment, all memoranda, notes,
plans, records, reports and other documents (and copies thereof) relating to the
Company and its subsidiaries, which he may then possess or have under his
control, provided, however, that Executive may retain copies of his director
files, initial public offering files and Company presentation files.
b) Except as may be otherwise provide in Paragraph 1,
Executive shall not during the term of this Agreement engage in, or otherwise,
whether or not such business or organization now is or shall then be competing
with the Company, or invest in the securities (other than a portfolio
investment, including without limitation investment in mutual funds, not
exceeding 2% of outstanding securities of a firm listed on a national stock
exchange or traded in the Nasdaq Stock Market) of any other business or
organization if such business or organization now is or shall then be competing
with the Company; provided, however, that Executive may serve on the board of
directors or the board of trustees of other businesses or organizations with the
approval of the Board of Directors of the Company.
c) For a period of one year subsequent to the later to occur
of (i) the termination of Executives employment with Kids Stuff, or (ii) the
termination of any consulting arrangement between Kids Stuff and Executive,
Executive shall not compete directly or indirectly be associated with, or act as
an independent contractor or consultant to, or be a director, officer, employee,
owner, or partner of, any other business or organization that competes with the
business of the Company as then conducted. Nothing contained herein will be
deemed to require the Company to enter into a consulting agreement with the
Executive upon termination of Executives employment with the Company.
8. TERM AND TERMINATION.
a) TERM. The term of this Agreement shall commence on
January 1, 1997 and shall terminate on December 31, 2002 unless earlier
terminated as provided in Section 8(b) below.
b) TERMINATION.
(i) This Agreement and Executive's employment
hereunder may be terminated by the Company at any time with Cause (as
hereinafter defined) on 30 days prior written notice.
(ii) This Agreement and Executive's employment
hereunder may be terminated by Executive on 30 days prior written notice upon
the occurrence of any one of the following events: (1) The failure of the
Company to elect or reelect or to appoint or reappoint
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Executive to the office of Chief Executive Officer; (2) A material change by the
Company in Executive's functions, duties, or responsibilities which change would
cause Executive's position with the Company to become of less dignity,
responsibility or scope from the position and responsibilities described in
Section 1 hereof; (3) The liquidation or dissolution, or consolidation, merger
or other business combination (including assumption of control by a shareholder
or consortium of shareholders) of the Company, or transfer of all or
substantially all of its assets, unless any such consolidation, merger or other
business combination does not adversely affect Executive's position or the
dignity or responsibilities of Executive, in Executive's judgment; and (4) Any
material breach of this Agreement by the Company. PROVIDED, HOWEVER, that this
Section 8(b)(ii) shall not be effective unless Executive's beneficial ownership
of the Company's outstanding voting capital stock (within the meaning of Section
13(d) of the Securities Exchange Act of 1934) is less than 50% of the Company's
total outstanding voting capital stock.
c) EFFECT OF TERMINATION. Upon termination of this Agreement
neither party shall have any further obligation to the other party, except as
provided in Section 8(d) below and under the provisions of any outstanding stock
options held by Executive at the time of termination, and except that the
provisions of Sections 6 and 7(a) if applicable, shall survive termination of
the Agreement.
d) PAYMENTS TO EXECUTIVE ON TERMINATION.
(i) In the event that this Agreement is terminated
by the Company without Cause or Executive terminates this Agreement pursuant to
Section 8(b)(ii), the Company shall pay in a lump sum on the date of termination
severance compensation to Executive in the amount derived by multiplying the
factor 2.99 by the sum of Executive's salary and bonus paid in the year prior to
the year of termination.
(ii) In the event this Agreement expires and
Executive is not rehired in the same position under the terms and conditions of
a new executive employment agreement acceptable to Executive and the Company
superseding this Agreement, the Company shall pay in a lump sum on the date of
termination severance compensation to Executive in an amount equal to the sum of
Executive's salary and bonus paid in the year ending December 31, 2002.
(iii) In the event Executive dies or becomes disabled
(as hereinafter defined) during the term hereof, the Company shall pay severance
compensation to Executive, or his estate, as the case may be, in the amount
derived by multiplying the factor 2.99 by the sum of Executive's salary and
bonus paid in the year prior to the year in which the death or disability
occurs, reduced to a lesser amount determined by multiplying said amount by a
fraction, the numerator of which is the number of whole or partial months
remaining from the date of death or disability, as the case may be, to December
31, 2002 and the denominator is 60; provided, however, that such severance
compensation shall in no event be less than Executive's salary and bonus paid in
the year prior to the year in which Executive dies or becomes disabled. Such
severance compensation shall be paid in a lump sum as soon as practicable
following the date of death or disability. The Company also agrees to maintain
in force during the term of this Agreement policy on the life of Executive in
face amount
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equal to two times base salary as of the date hereof, the proceeds of which will
be paid to Executive's estate.
(iv) In addition to the severance payment provided in
subparagraphs (i), (ii) or (iii) above, Executive's participation in the
Company-sponsored employee health benefit plan shall be continued at Company
expense for a maximum period of eighteen months so long as Executive is alive
and is not elsewhere earlier employed on a full time basis.
e) DEFINITIONS. For the purposes of this Agreement:
(i) Cause shall mean acts of moral turpitude, and
the willful repeated or habitual neglect of Executive's obligations under this
Agreement, the misuse of corporate funds, the failure to manage the business of
the Company in accordance with normal business practices, or the material breach
of this Agreement.
(ii) Disabled shall mean the physical or mental
inability of Executive to perform his duties hereunder for a period of three
consecutive months as determined by an independent physician chosen by the
Company and approved by Executive.
(iii) Fair Market Value of the Company's stock on the
applicable date shall mean the mean of the highest and lowest quoted selling
prices of such stock on the composite tape of the Nasdaq SmallCap Market (or
such other national market or exchange on which the Company's common stock is
then traded) on the applicable date, or if the Company's common stock was not
traded on such exchange on such date, on the next preceding date on which the
common stock was traded.
f) REPLACEMENT. Notwithstanding the above, the Board of
Directors, with the consent of Executive, may hire a replacement to serve as the
Chairman of the Board and Chief Executive Officer of the Company. Executive
shall assist in the orderly transition of duties and responsibilities for such
period as is mutually agreed upon by the Company and Executive. During such
transition period, Executive shall be entitled to all benefits and compensation
provided for herein. At the conclusion of the transition period, Executive's
employment with the Company shall cease. Executive shall receive the severance
compensation set forth in Section 8(d)(ii) upon termination of his employment
and shall be entitled to received the health plan benefits set forth in Section
8(d)(iv) thereafter.
9. CHANGE OF CONTROL; EXECUTIVE'S STOCK OPTIONS. In the event any
person other than Executive, Xxxxxx Xxxx Co., Ltd., Xxxxxx X. Xxxxxx or their
affiliates, by any means of purchase or acquisition, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or any successor provision
thereto) of more than 50% of the outstanding shares of the Company's common
stock, or commences a tender offer pursuant to Regulation 14-C promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, or any successor provision thereto, which, if successful,
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would result in such person becoming the beneficial owner of more than 50% of
such shares, then all of Executive's options to purchase common stock of the
Company outstanding at the time of the event and which were granted six months
or more prior to the event shall immediately become exercisable in full and upon
the written election of Executive, given to the Company within 180 days of the
event, the Company shall repurchase for cash all or any part of the options as
specified in the written election, at a price per share equal to the difference
between the Fair Market Value of the Company's stock on the date of the event
and the option exercise price per share.
In the event of the execution of an agreement of reorganization, merger
or consolidation of the Company with one or more corporations as a result of
which the Company is not to be the surviving corporation or the execution of an
agreement of sale or transfer of all or substantially all of the assets of the
Company, then all of Executive's options to purchase common stock of the Company
outstanding at the time of the event and which were granted six months or more
prior to the event shall immediately become exercisable in full and upon the
written election of Executive given to the Company within 180 days of the event,
the Company shall repurchase for cash all or any part of the options as
specified in the written election, at a price per share equal to the difference
between the Fair Market Value of the Company's stock on the execution date and
the option exercise price per share.
10. MISCELLANEOUS.
a) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
b) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, the heirs and legal
representatives of Executive, and the successors and assigns of the Company,
except that Executive may not assign this Agreement or any of Executive's duties
or services hereunder.
c) NO WAIVERS. The failure of either party to insist upon the
strict performance of any of the terms, conditions, and provisions of this
Agreement shall not be construed as a waiver or relinquishment of future
compliance therewith, and said terms, conditions, and provisions shall remain in
full force and effect. No waiver of any term or condition of this Agreement on
the part of either party shall be effective for any purpose whatsoever unless
such waiver is in writing and signed by such party.
d) MODIFICATION. This Agreement may not be changed, amended,
or modified except by a writing signed by both parties.
e) NOTICES. Any notice, request, demand, waiver, consent,
approval, or other communication which is required to be or may be given under
this Agreement shall be in writing and shall be deemed given only if delivered
to the party personally or sent to the party by registered or certified mail,
return receipt requested, postage prepaid, to the parties at the addresses set
forth herein
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or to such other address as either party may designate from time to time by
notice to the other party sent in like manner.
f) GOVERNING LAW. This Agreement constitutes the entire
agreement between the parties and shall be governed by and construed in
accordance with the laws of the State of Ohio applicable to agreements made and
to be performed solely within such state.
g) HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not be deemed to be a part of this
Agreement or to affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed as of the day and year first above written.
KIDS STUFF, INC.
By: /s/ XXXXXX X. XXXXXX
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Title: Executive Vice President
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EXECUTIVE:
By: /s/ XXXXXXX X. XXXXXX
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Print Name: XXXXXXX X. XXXXXX
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