AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of the 16th day of October, 1998, 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 Xxxxxx
X. Xxxxxx residing at X.X. Xxx 000, 00 Xxxx Xxxxx, Xxxxxxxxx, Xxxx 00000 (the
"Executive").
RECITALS
WHEREAS, Executive is a director and officer of the Company and has
been instrumental in the success of the Company; and
WHEREAS, the Company and Executive entered into a certain Executive
Employment Agreement dated January 1, 1997 (the "Original Employment Agreement")
and the parties desire to amend and restate the terms of the Original Employment
Agreement as set forth herein; and
WHEREAS, it is the express intent of the parties hereto that the terms
of this Agreement shall replace and supersede, in their entirety, the terms of
the Original Employment Agreement.
NOW THEREFORE, in consideration of the mutual agreements set forth
herein, the parties, intending to be legally bound, agree as follows:
1. Employment.
a) Amendment and Restatement. Although Executive's Base Salary
is calculated from the date hereof, and the Signing Bonus is effective as of the
date hereof, for all other purposes, the date of the Original Employment
Agreement shall be considered the date hereof. For example, the Option Grant has
not been changed or duplicated and vests pursuant to its terms from the date of
the Original Employment Agreement.
b) Position. The Company hereby agrees to continue the
employment of Executive, and Executive hereby accepts continued employment by
the Company as President of the Company.
c) Performance. Executive agrees to devote her full time,
energies and attention to the performance of her duties and functions hereunder,
to exercise her 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.
d) Responsibilities. Executive shall be responsible for the
duties assigned to her by the Board of Directors or by the Chief Executive
Officer of the Company. She shall be subject and report to the Board of
Directors and the Chief Executive Officer. Executive is engaged to act as the
President of the Company and shall perform all of the usual duties inherent in
such position as well as such other duties as may from time to time be delegated
to her 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 her services, a Base
Salary payable in accordance with the Company's standard payroll policy at the
annual rate of $105,000. 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 her 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. For the year 1998, the Executive's Base Salary shall be considered
to be the average of the Base Salary received by the Executive for 1998.
c) Option Grants. The Company hereby grants options to
purchase 100,000 shares of the Company's Common Stock (the Option). The Options
were not exercisable on the date of the Original Employment Agreement, but shall
vest and become exercisable at a rate of 25,000 shares of Common Stock on
January 1, 1998; an additional 25,000 shares of Common Stock on January 1, 1999;
an additional 25,000 shares of Common Stock on January 1, 2000; and the final
25,000 shares of Common Stock on January 1, 2001. The Options will vest and
become exercisable on such dates regardless of whether Executive is employed on
such dates with the Company. The Options will expire and be non-exercisable 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
her 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 her 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
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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 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.
d) Signing Bonus. The Company hereby grants to Executive, as a Signing
Bonus, an option to purchase 100,000 shares of the Company's unregistered Common
Stock at the purchase price of $2.50 per share. The option shall expire ten (10)
years from the date of the execution of this agreement, and may be exercised by
Executive at any time.
3. Expenses. The Company shall pay or reimburse Executive during her
employment hereunder for all reasonable travel and other expenses incurred by
Executive in the performance of her duties and obligations hereunder upon
submission of appropriate supporting documentation. In addition, the Company
shall pay or reimburse Executive during her 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 her 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 her 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 her acting as an officer, agent, or employee of the Company, and such
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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 her during the
course of her employment, either before or after the effective date of the
Agreement, are the property of the Company. Therefore, Executive agrees that she
will not disclose to any unauthorized person or use for her own account or for
the benefit of any third party (other than the Company and its subsidiaries) any
of such information, 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 her
employment, all memoranda, notes, plans, records, reports and other documents
(and copies thereof) relating to the Company and its subsidiaries, which she may
then possess or have under her control, provided, however, that Executive may
retain copies of her director files, initial public offering files and Company
presentation files.
b) Except as may be otherwise provided 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 Executive's employment with the Company, or (ii) the
termination of any consulting arrangement between the Company 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 Executive's employment with the Company.
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8. Term and Termination.
a) Term. The term of this Agreement shall commence as
described in Paragraph 1(a) hereof, 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 Executive to the office
of President; (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 Base Salary and Bonus paid in the year
prior to the year of termination.
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(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 Base Salary and Bonus paid in the year ending December 31, 2002.
(iii) In the event Executive becomes disabled (as
hereinafter defined) during the term hereof, the Company shall pay severance
compensation to Executive in the amount derived by multiplying the factor 2.99
by the sum of Executive's Base Salary and Bonus paid in the year prior to the
year in which the 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 Base
Salary and Bonus paid in the year prior to the year in which Executive becomes
disabled. Such severance compensation shall be paid in a lump sum as soon as
practicable following the date of disability. The Company also agrees to
maintain in force during the term of this Agreement a life insurance policy on
the life of Executive in face amount equal to five times Base Salary, 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 her 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.
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9. Change of Control; Executive's Stock Options. In the event any
person, 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, 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 delegate 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.
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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 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/ Xxxxxxx X. Xxxxxx
----------------------------------------
Title: CEO
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EXECUTIVE:
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Print Name: Xxxxxx X. Xxxxxx
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