XXXXX XXXXXXX EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") has been entered
into, effective as of the second day of December 1996, between SHARPER IMAGE
CORPORATION, a Delaware corporation (the "Company"), and XXXXX XXXXXXX
("Executive") to provide for the employment of Executive on the terms and
conditions set forth herein.
WHEREAS, the Company wishes to employ Executive as the Company's Vice
Chairman and to assure itself of the continued employment efforts of Executive
for the period provided in this Agreement, and Executive is willing to continue
to serve in the employ of the Company on a full-time basis in such position for
such period upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, intending to be legally bound, the Company and Executive agree as
follows:
1. Employment. The Company hereby employs Executive, and Executive hereby
accepts such employment by the Company, upon the terms and conditions herein
provided.
2. Term of Employment. Executive's employment with the Company pursuant
to this Agreement shall commence on December 2, 1996 and shall continue through
January 31, 1999, unless such employment is sooner terminated or subsequently
extended as hereinafter provided. Unless earlier terminated, this Agreement
shall continue in effect after January 31, 1999, unless either the Company or
Executive elects to terminate this Agreement by providing not less than thirty
(30) days prior written notice to the other party. The period during which this
Agreement continues in effect shall constitute the "Employment Period". In the
event of a termination of this Agreement, Executive shall be entitled to receive
severance benefits in accordance with Section 7 hereof.
3. Positions and Responsibilities.
(a) Position. During the Employment Period, Executive shall serve
as the Company's Vice Chairman and shall be responsible for the general
management of the business and affairs of the Company, reporting directly to the
Chairman of the Board and Chief Executive Officer ("CEO") and the Board of
Directors of the Company (the "Board").
(b) Duties. During the Employment Period, and subject to the
control of the Board, Executive shall oversee all functional heads of the
organization, and will lead and motivate the management team. Executive shall
work with the CEO to develop overall strategy and ensure that sales and profit
goals are achieved. Executive shall have full profit and loss responsibility for
the Company, including all sales, operations, merchandising, marketing, human
resources, systems, finance, stores and administration. In addition,
Executive shall perform such other executive and/or administrative duties
consistent with the office of Vice Chairman as from time to time may be assigned
to Executive by the Board, but subject to the conditions in this Agreement.
Executive shall devote Executive's full business time and attention to, and
exert Executive's best efforts in, the performance of Executive's duties
hereunder, so as to promote the business of the Company. Executive's principal
place of business shall be at the Company's corporate offices in San Francisco,
California.
(c) Death or Incapacity of Chief Executive Officer. In the event
of the death or incapacity of the CEO during the Employment Period, Executive
shall be automatically promoted to serve as the Company's CEO, subject to the
review and discretion of the Board.
4. Compensation. For all services rendered by Executive pursuant to this
Agreement, the Company shall pay Executive, and Executive agrees to accept, the
salary, bonuses and other benefits described below in this Section 4.
(a) Salary. The Company shall pay Executive an annual base salary
("Base Salary") as determined by the Board in accordance with this Section 4,
payable at periodic intervals in accordance with the Company's payroll practices
for salaried employees. Executive's Base Salary shall be Three Hundred
Twenty-Five Thousand Dollars ($325,000.00) for the period from the commencement
of Executive's employment through the last day of the pay period ending after
December 6, 1998. Commencing on the first day of the first pay period of the
Company following December 6, 1998, Executive's Base Salary shall be increased
to Three Hundred Fifty Thousand Dollars ($350,000). In accordance with Section
4(c) hereof, the amount of the Base Salary shall be reviewed by the Board on at
least an annual basis for the fiscal year ending January 31, 2000 and all future
years, and any modifications will be effective as of the date determined
appropriate by the Board.
(b) Bonuses. In addition to Base Salary, Executive shall be
entitled to receive a bonus payment of Fifty Thousand Dollars ($50,000.00) on
December 5, 1998 in the event Executive is employed by the Company on that date.
In addition Executive shall be entitled to receive an annual bonus ("Bonus") for
each fiscal year of the Company ending with or within the Employment Period in
which the earnings per share for that fiscal year have increased fifteen percent
(15%) over the prior fiscal year. For these purposes, earnings per share shall
be calculated after deducting all management bonuses. The amount of the Bonus
shall be calculated at the end of each fiscal year according to the following
formula: the Bonus shall equal the earnings per share for such fiscal year
multiplied by Two Hundred Thousand (200,000).
(c) Annual Compensation Review. Notwithstanding anything herein
to the contrary, Executive's compensation, consisting of salary, bonus and stock
option grants, shall be reviewed not less than annually by the Board of
Directors.
2.
(d) Health Care. During the Employment Period, Executive shall be
eligible to participate in any health insurance programs and medical plans
available to officers or employees of the Company.
(e) Participation in Benefit and Equity Compensation Plans.
During the Employment Period, Executive shall be eligible to receive all
benefits, including those under equity participation and bonus programs, to
which key employees are or become eligible under such plans or programs as may
be established by the Board.
(f) Stock Option Grants. In addition to the other benefits to
which the Executive shall be entitled to under this Agreement, upon commencement
of the Employment Period, the Company shall grant to Executive two stock options
under the Company's Stock Option Plan (the "Plan"). Both options shall be
governed under the terms of the Plan.
The first option grant (the "First Option") shall be for One
Hundred Fifty Thousand (150,000) shares of the Company's common stock that will
vest according to the following schedule: Fifty Thousand (50,000) shares on
February 1, 1997, Fifty Thousand (50,000) shares on February 1, 1998, and Fifty
Thousand (50,000) shares on February 1, 1999. Such shares will vest only if
Executive is employed by the Company on such dates and shall vest in accordance
with the terms of the Plan and the First Option.
The second option grant (the "Second Option") shall be for One
Hundred Fifty Thousand (150,000) shares of the Company's common stock. The
Second Option shall vest entirely upon the Executive's completion of seven (7)
years of continuous employment with the Company. However, the vesting of the
Second Option shall accelerate by the following specified amounts in the event
that any of the following conditions are satisfied: (i) in the event that the
Company's earnings per share for the fiscal year ending January 31, 2000 equals
or exceeds $.89 or the closing price of the Company's common stock has equalled
or exceeded Eight Dollars ($8.00) per share for each of the twenty (20) trading
days immediately preceding January 31, 2000, then Fifty Thousand (50,000) shares
of the Second Option shall vest on January 31, 2000; (ii) in the event that the
Company's earnings per share for the fiscal year ending January 31, 2001 equals
or exceeds $1.05 or the closing price of the Company's stock has exceeded Ten
Dollars ($10.00) per share for each of the twenty (20) trading days immediately
preceding January 31, 2001, then Fifty Thousand (50,000) shares of the Second
Option shall vest on January 31, 2001; (iii) in the event that the Company's
earnings per share for the fiscal year ending January 31, 2002 equals or exceeds
$1.25 or the closing price of the Company's common stock has equalled or
exceeded Twelve Dollars ($12.00) per share for each of the twenty (20) trading
days immediately preceding January 31, 2002, then Fifty Thousand (50,000) shares
of the Second Option shall vest on February 1, 2002. The shares subject to the
Second Option shall vest only if Executive is employed by the Company on said
dates. The vesting of the First Option and the Second Option shall be
accelerated in accordance with the terms of the Plan; provided, however, that
the vesting of the Second Option shall be accelerated only if the change of
control
3.
event causing such acceleration has occurred following June 2, 1997. The First
Option and the Second Option shall be ten year grants and shall contain and be
subject to all other standard terms applicable to the other stock option grants
under the Plan. Promptly following the commencement of the Employment Period,
the Company will prepare and execute the appropriate stock option agreements for
the Executive to reflect the two option grants described in this Section 4(f).
(g) 401(k) Plan Benefits. In addition to the other benefits to
which Executive shall be entitled to under this Agreement, Executive shall be
entitled to participate in the Company's 401(k) Plan and shall be entitled to
receive the full benefit of contributions to be made by the Company for the
benefit of Executive under the terms of the 401(k) Plan.
5. Vacation. During the Employment Period, Executive shall be entitled to
vacation in accordance with the Company policy in effect for executive officers.
6. Indemnification. The Company shall maintain indemnification of
Executive pursuant to the provisions of the Company's Certificate of
Incorporation and Bylaws to the fullest extent of Delaware law and all other
applicable law, and shall provide Executive with indemnification pursuant to the
Company's standard indemnification agreement and any director's and officer's
liability insurance policy maintained by the Company.
7. Severance Benefits.
(a) Termination of Employment. In the event Executive's
employment terminates for any reason then Executive shall be entitled to receive
severance benefits as follows:
(i) Voluntary Resignation. If Executive's employment
terminates by reason of Executive's voluntary resignation (and such termination
is not an Involuntary Termination or a termination for Cause), then Executive
shall not be entitled to receive severance benefits under this Agreement.
(ii) Involuntary Termination Other Than For Cause. If
Executive's employment is terminated as a result of an Involuntary Termination
other than for Cause, then the following severance benefits shall be paid or
otherwise provided to Executive: (A) if such termination occurs during the first
two years of the Employment Period, Executive shall be entitled to receive
severance payments, in the form of monthly cash payments in accordance with the
Company's payroll policies, for the remainder of the initial two-year Employment
Term under this Agreement at the Base Salary rate in effect at the time of
termination, but in no event shall Executive receive fewer than twelve (12)
monthly payments at such Base Salary rate following termination; (B) if the
termination occurs following the completion of two years of the Employment
Period, Executive shall be entitled to receive twelve (12) monthly payments at
the Base Salary rate for the period following
4.
termination until Executive accepts any position with another employer, at which
time Executive shall receive no further payments.
(iii) Termination for Cause. If Executive's employment is
terminated for Cause, then Executive shall not be entitled to receive any
severance payments or other severance benefits under this Section 8. Executive's
benefits will be continued under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination.
(b) Benefit Reduction. Should any of Executive's severance
benefits under this Section 8 (including any severance payments and any
accelerated vesting of outstanding options or shares of stock) be deemed to be
parachute payments under Code Section 280G, then, first, the dollar amount of
any severance payment and, secondly, the accelerated vesting of any options or
shares of stock, will be reduced to the extent (and only to the extent)
necessary to provide Executive with the maximum after-tax benefit available,
after taking into account any parachute excise tax which might otherwise be
payable by Executive under Code Section 4999 and any analogous State income tax
provision.
8. Noncompetition and Confidential Information. While employed by the
Company, Executive will not directly or indirectly manage, operate, participate
in, be employed by, perform consulting services for, or otherwise be connected
in any manner with, any firm, person, corporation, or enterprise which would be
competitive with the business of the Company. Executive will not at any time
disclose to others any confidential information relating to the Company or to
the business of the Company and confirms that such information constitutes the
exclusive property of the Company. The foregoing shall not preclude Executive's
investment in any such firm, corporation or enterprise provided that at any one
time Executive and members of Executive's immediate family do not own more than
one percent (1%) of any voting securities of any such entity.
9. Failure to Comply. If for any reason Executive shall cease to render
services as required by this Agreement without the written consent of the
Company, or if Executive shall breach the provisions of Section 8 hereof, then,
except as provided in Section 7 hereof, Executive will thereby relinquish all
rights to any benefits hereunder (other than vested stock options or other
vested benefits), and the Company shall reserve whatever rights, if any, it may
have against Executive under this Agreement or otherwise.
10. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
or to all or substantially all of the Company's business and/or assets shall
assume the obligations under this Agreement and shall perform the obligations
under this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a succession.
5.
11. Notices. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to Executive shall be
addressed to Executive at the home address from which Executive most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notice shall
be directed to the attention of its Secretary.
12. Miscellaneous Provisions.
(a) Definition of Terms. The capitalized terms in this Agreement
shall have the meanings set forth in this Agreement or in Appendix A hereto.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Executive and by an authorized officer or
representative of the Company (other than Executive). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other condition
or provision or of the same condition or provision of another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(e) Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity of
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled by arbitration in the County of
San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration proceedings shall be
nonbinding and any claim with respect to this Agreement, whether or not
previously the subject of an arbitration proceeding, may be brought in any court
of competent jurisdiction.
6.
(g) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(h) Assignment by Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company; provided, however,
that if there is any such assignment, the Company will guarantee all payments
and the performance of all obligations under this Agreement. In the case of any
such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation or other entity that actually employs Executive.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this day and year first above written.
SHARPER IMAGE CORPORATION EXECUTIVE
By: /s/ Xxxxxxx Xxxxxxxxxx /s/ Xxxxx Xxxxxxx
------------------------- ---------------------
Xxxxxxx Xxxxxxxxxx Xxxxx Xxxxxxx
Chairman of the Board and Chief
Executive Officer
7.
APPENDIX A
Definitions
Cause. "Cause" shall mean (i) the material breach by Executive
of one or more of Executive's obligations under this Agreement which are not
otherwise corrected within ten (10) days following the Company's written notice
to Executive of such breach, (ii) conviction of a felony, (iii) repeated
unexplained or unjustified absence, (iv) willful breach of fiduciary duty under
this Agreement or (v) gross negligence or willful misconduct where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
Involuntary Termination. "Involuntary Termination" shall mean
termination by the Company of Executive's employment for any reason other than
for Cause, and shall include Executive's voluntary resignation following (i) the
material breach by the Company of one or more of its obligations under this
Agreement which are not otherwise corrected within ten (10) days following
Executive's written notice to the Company of such breach, or (ii) the occurrence
of any of the following events without Executive's express prior written
consent: (A) a change in Executive's position with the Company which materially
reduces Executive's level of responsibilities, (B) a relocation of Executive's
place of employment by more than twenty (20) miles from the Company's current
executive offices without Executive's prior consent, or (c) the assignment of
additional material job responsibilities or a reduction in job responsibilities
inconsistent with Executive's position with the Company and Executive's prior
responsibilities.
1.
