EXHIBIT 10.6
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT (the "Agreement") dated July 31, 1996 and
effective as of May 22, 1995, between Children's Concept, Inc. (the "Company")
and Xxxxxx X. Xxxxxxx (the "Employee").
WHEREAS, 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
employs the Employee, and 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.
(a) During the term of this Agreement, the Employee shall
serve as Chief Financial Officer and Chief Administrative Officer and shall
perform all duties and accept all responsibilities reasonably related to
such position as may be assigned to him by the Company's Chief Executive
Officer, and he shall cooperate fully with the Board of Directors and other
executive officers of the Company. The Employee shall report directly to
the Chief Executive Officer.
(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
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efforts 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 5 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 Chief Executive Officer of the Company.
1.3. Compensation. For all of the services rendered by the Employee
hereunder, the Company shall pay Employee an annual salary at the rate of
$200,000, 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). If Employee's employment
is not earlier terminated, he shall receive a bonus payment of $25,000 after six
months of employment and an additional bonus payment of $25,000 after twelve
months of employment, less withholding required by law or agreed to by
Employee. If Employee's employment is not earlier terminated, his annual salary
after twelve months of employment shall be increased to a rate of $225,000, and
he shall be entitled to receive a bonus payment of $25,000, or such other bonus
as may be mutually agreed upon by the Company and the Employee, less withholding
required by law or agreed to by the Employee. One-half of this $25,000 bonus
will be paid after 18 months of employment, and the
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remainder will be paid after 24 months of employment. 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, the Employee
alone and 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
be provided such benefits and be permitted to participate in fringe benefit
plans, if any, or no less favorable a basis as other senior officers of the
Company. Such fringe benefit plans may be amended or terminated from time to
time by the Company in its sole discretion. The Company will reimburse Employee
for COBRA payments made to his previous employer for the first three months of
employment.
1.5. Incentive Compensation. In addition to the compensation set
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 140,000 shares of common stock at the
xxxxx xxxxx of $4.00 per share, which 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 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 three (3) weeks
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.
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1.8. Relocation Assistance. The Employee shall receive the
following net relocation assistance payments after deduction of federal, state
or local taxes required by law:
(a) Reimbursement for reasonable and necessary temporary
housing expenses up to a maximum of $2,000 in any month, for a maximum of
twelve months, which payments shall cease upon termination of employment or
the establishment of a permanent housing arrangement;
(b) Reimbursement for reasonable air transportation expenses
between Albany, NY and Philadelphia, PA for the Employee and his spouse up
to a maximum reimbursement of $10,000;
(c) Reimbursement for real estate commission and other
reasonable expenses incurred in connection with the sale of Employee's home
in Albany, NY in the approximate amount of $5,000;
(d) Reimbursement for reasonable settlement costs incurred in
connection with the purchase of a new home in the Philadelphia, PA area in
the approximate amount of $5,000; and
(e) Reimbursement for reasonable and necessary moving
expenses incurred by the Employee in moving his household from Albany, NY
to the Philadelphia, PA area.
(f) If and to the extent the Company reasonably believes that
any of the payments described in subsections (a), (b), (c), (d) or (e) of
this Section 1.8 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 required withholding by
the Company and payment by 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), (b), (c), (d) or
(e) of this Section 1.8, shall be equal to
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the aggregate amount of the payments described in subsections (a), (b),
(c), (d) and (e) of this Section 1.8.
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 and 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 Company's Chief Executive
Officer, unless such information is in the public domain through no fault of
Employee or except as may be required by law.
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
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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") and has more than 7,500 square feet of
retail selling space in any one store 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.
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
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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. The 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 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.
6.3. The Employee irrevocably and unconditionally (i) agrees 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
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competent jurisdiction in Xxxxxxxxxx County, Pennsylvania; (ii) consents to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding; and (iii) waives any objection which Employee may have to the laying
of venue of any such suit, action or proceeding in any such court. Employee also
irrevocably and unconditionally consents 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 he will provide, and that the Company
may similarly provide, a copy of Sections 3, 4, and 5 of this Agreement to any
business or enterprise (i) which he 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 he may be
connected with as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise, or in connection with which he may use
or permit his name to be used; provided, however, that this provision 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 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
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plan) at the salary rate in effect at the time of the termination of his
employment, and to continue to participate in all insured benefit plans, on the
same terms on which he was participating prior to the date of the termination of
his employment (collectively, the "Termination Benefits") as follows:
(a) If such termination occurs within twelve (12) months of the
date hereof (on or before May 22, 1996), the Employee will receive the
Termination Benefits for a period of twelve (12) months after the date of
the termination of his employment.
(b) If such termination occurs after twelve (12) months but
within eighteen months (18) of the date hereof (after November 12, 1996 but
on or prior to May 11, 1997), the Employee will receive the Termination
Benefits for a period of nine (9) months after the date of the termination
of his employment.
(c) If such termination occurs after eighteen (18) months of the
date hereof (after May 11, 1997), the Employee will receive the Termination
Benefits for a period of six (6) months after the date of the termination
of his employment.
(d) "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 an opportunity to correct any problem or to
comply with any of the lawful directives of the Chief Executive Officer or
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 or the
compensation or benefits due hereunder, the Employee shall receive the
Termination Benefits for a period of twelve (12) months regardless of the
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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 and
maintaining, at least, his then current salary and benefits and providing stock
options or other equity on the same basis as it offers to other senior
executives (including, without limitation, other Executive Vice Presidents and
Chief Operating Officer) of such successor organization. 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: (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).
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
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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, commencing six months after such termination, for which the Company
is required to pay or provide such Termination Benefits to 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 or mailed
by registered or certified mail, 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:
Xxxxx Xxxxxxxxxxxx
Children's Concept, Inc.
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
With a required copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
If to Employee, to:
Xxxxxx X. Xxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxx, 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
Chief Executive Officer of the Company.
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 general
guidance. No policies, procedures or statements of any
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nature by or on behalf of the Company (whether written or oral, and whether or
not contained in any employee manual or handbook 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.
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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 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
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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 Employment Agreement as of the date first above written.
Attest: CHILDREN'S CONCEPT, INC.
______________________________ By ___________________________
Name: Name:
Title: Title:
Witness: EMPLOYEE
______________________________ ______________________________
Xxxxxx X. Xxxxxxx
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