Exhibit 10.0
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of the 1st day of December, 1997, between THE
HAVANA GROUP, INC., a Delaware 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 employ Executive, and
Executive hereby accepts 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, Inc. and as the Chief Executive
Officer and Chairman of the Board of Kids Stuff, Inc. during the term of this
Agreement. Additionally, Executive may serve as an employee or officer of other
subsidiaries or affiliates of Xxxxxx Xxxx, Inc. Executive shall devote such
time to Xxxxxx Xxxx, Inc., subsidiaries or affiliates of Xxxxxx Xxxx, Inc.,
including Kids Stuff, Inc., 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 position(s)
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
$50,000. 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.
Notwithstanding the previous two sentences, in the event the Company's gross
revenues exceed $5M for a fiscal year during the term hereof, the Company shall
increase Executive's annual base salary at least to $100,000 from the beginning
of the following fiscal year and for the remainder of the term.
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 Grant. The Company hereby grants options to purchase
200,000 shares of the Company's Common Stock (the "Options"). Options to
purchase 40,000 shares of Common Stock vest and are exercisable on the date
hereof. The remainder of the Options shall vest and become exercisable with
respect to options to purchase 40,000 shares of Common Stock on each of the
first four anniversary dates January 1, 1998. 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 $6.00 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 $200,000 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 $500,000 of pretax net income for the
year ended December 31, 1998, the Company shall report such net income to
Executive in 1999. Executive will have to decide, within thirty (30) days of
receipt of the financial
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information, whether to modify or "lock-in" an amended exercise price for the
vested options (with the original grant date of December 1, 1997, options to
purchase 80,000 shares of Common Stock would be vested at that time). The
exercise price for the 80,000 of such vested Options could be lowered to $3.00
per share and locked-in with respect to the underlying shares (two $200,000
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 lowered exercise
price for all then vested Options with respect to which a lowered exercise price
had not previously been locked-in.
(d) The Company hereby grants to Executive Common Stock Purchase
Warrants to purchase 200,000 shares of common stock at $6.00 per share. The
Warrants, which expire December 1,12007, upon the completion of an initial
public offering of the Company's securities, automatically convert into Class A
Warrants identical to those sold to the public. The 200,000 Class A Warrants
and the shares issuable upon exercise thereof will be registered with the
Securities and Exchange Commission at the time the Company files its
Registration Statement for an Initial Public Offering at the sole cost of the
Company.
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.
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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, 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 (i) 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 (ii) 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 provided in Paragraph 1, Executive
shall not during the term of this Agreement work for or otherwise assist a
business or organization, 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.
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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.
8. Term and Termination.
a) Term. The term of this Agreement shall commence on December 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: (A) The failure of the Company to elect or
reelect or to appoint or reappoint Executive to the office of Chief Executive
Officer; (B) 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; (C) 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 (D) 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.
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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, 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 a policy on the life of Executive in
face amount 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 gross failure to manage the business of the
Company in accordance with normal business practices, or the material breach of
this Agreement.
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(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 NASD Bulletin Board (or such
other 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, Inc., 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, 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, and 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
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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, and 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 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.
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IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed as of the day and year first above written.
THE HAVANA GROUP, INC. EXECUTIVE
By: By:
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Name: Xxxxxxx X. Xxxxxx
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Title:
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