Exhibit 10.1
Execution
Copy
EMPLOYMENT
AGREEMENT
THIS AGREEMENT (this “
Agreement ”) is entered into as of this 18
th
day of April, 2006 by
and among Louis Mancini (the “ Executive ”) and
Brookstone, Inc., a Delaware corporation (the “
Company ”), and solely with respect to
Section 5.8 hereof, OSIM Brookstone Holdings, L.P. (“
OBH LP ”).
WHEREAS, the Company desires to
obtain the benefit of the experience, supervision and services of
the Executive in connection with the operation of the Company and
desires to employ the Executive upon the terms and conditions
hereinafter set forth, and the Executive is willing and able to
accept such employment on such terms and conditions.
NOW, THEREFORE, in consideration of
the premises and mutual agreements herein contained, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Executive agree
as follows:
1. Agreement to Employ; No
Conflicts . Upon the terms and subject to the conditions of
this Agreement, the Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company. Executive
represents that (a) he is entering into this Agreement
voluntarily and that his employment hereunder and compliance with
the terms and conditions hereof will not conflict with or result in
the breach by him of any agreement to which he is a party or by
which he may be bound, (b) he has not, and in connection with
his employment with the Company will not, violate any
non-competition, non-solicitation or other similar covenant or
agreement by which he is or may be bound, and (c) in
connection within his employment with the Company he will not use
any confidential or proprietary information he may have obtained in
connection with employment with any prior employer (other than the
Company prior to the date hereof).
2. Employment Duties . During
the Term (as defined below), the Executive shall serve as President
and Chief Executive Officer of the Company, subject to the
direction and control of the Board of Directors of the Company (the
“ Board ”), and in such capacity shall oversee
and direct the operations of the Company and shall perform such
other duties consistent with the responsibilities of a President
and Chief Executive Officer, and shall report to the Chairman of
the Board. The Executive shall also serve, at the request of the
Board, during all or any portion of the Term as a director of the
Company and as an officer or director of any of the Company’s
parent entities, subsidiaries or affiliates without any additional
compensation therefor other than as specified in this Agreement.
During the Term, the Executive shall devote all of his business
time, energy, experience and talents to such employment, shall
devote his best efforts to advance the interests of the Company and
its subsidiaries and affiliates and shall not engage in any other
business activities, as an employee, director, consultant or in any
other capacity, whether or not he receives any compensation
therefor, without the prior written consent of the Board.
Notwithstanding anything in this Agreement to the contrary, the
Executive shall have the right to devote reasonable time to
(i) subject to prior written notification to the Board,
serving as a director or member of a committee of any nonprofit
organization which does not create a conflict of interest with the
Company; (ii) engaging in charitable and community activities;
and (iii) serving as a member of the board of directors of
Sports Clip, Inc. provided, that such activities do not interfere
with the performance of his duties hereunder.
3. Term of Employment . The
term of the Executive’s employment hereunder shall commence
on the date hereof and continue until the third anniversary of the
date hereof (the “ Initial Term ”). Effective
upon the expiration of the Initial Term and each Additional Term
(as defined below), the Executive’s employment hereunder
shall be deemed to be automatically extended, upon the same terms
and conditions, for an additional period of one year (each, an
“ Additional Term ”), in each such case,
commencing upon the expiration of the Initial Term, or the
then-current Additional Term, as the case may be, unless, at least
eighteen (18) months prior to the expiration of the Initial
Term or twelve (12) months prior to the expiration of such
Additional Term (as applicable), either party hereto shall have
notified the other party hereto in writing that such extension
shall not take effect. Such written notice shall state the reasons
for such party’s decision not to extend the Initial Term or
then-current Additional Term and shall serve, for purposes of
Section 6 hereof, as written notice of the termination by the
Company or the Executive, as the case may be, of the
Executive’s employment hereunder for the reasons stated
therein. Unless otherwise agreed in writing by the Parties, there
shall be a maximum of three (3) Additional Terms. For purposes
of this Agreement, the Initial Term and each Additional Term, if
any, are collectively referred to as the
“Term.”
4. Place of Employment . The
Executive’s principal place of employment shall be at the
Company’s corporate headquarters located at One Innovation
Way, Merrimack, New Hampshire 03054. Notwithstanding the foregoing,
the Executive acknowledges that the duties to be performed by the
Executive hereunder are such that Executive may be required to
travel extensively, including to Asia.
5. Compensation; Reimbursement;
Equity Investment . During the Term, the Company shall pay or
provide to the Executive, in full satisfaction for his services
provided hereunder, the following:
5.1. Base Salary . During the
Term, the Company shall pay the Executive a base salary of $650,000
per year (“ Base Salary ”), payable in
accordance with the payroll policies of the Company for senior
executives as from time to time in effect, less such amounts as may
be required to be withheld by applicable federal, state and local
law and regulations (the “ Payroll Policies ”).
The Base Salary will be increased, effective as each anniversary of
the date hereof during the Term, commencing with the first
(1 st ) anniversary of the date
hereof, by an amount determined by multiplying the then-current
Base Salary by the percentage increase in the Consumer Price Index
— US City Average (or, if available, the Index for the region
in which the Company’s executive offices are located)
published by the Bureau of Labor Statistics of the United States
Department of Labor (or, if that Index is no longer published, by
any substantially equivalent successor thereto) (any such
applicable index, the “ CPI ”) in the calendar
year immediately preceding the date on which such Base Salary
increase is to be effected.
5.2. Cash Bonus .
(a) For the 2006, 2007 and 2008 fiscal years, in the event
that the Company achieves (as determined by the Board in good
faith) at least 100% of the annual EBITDA (as defined below) target
(as established by the Board) for such fiscal year (each, a “
Minimum EBITDA Target ”) after the accrual of all
management bonuses for such fiscal year, the Executive shall be
entitled to receive a cash bonus calculated as provided in this
Section 5.2(a). In the event that the Company achieves 100% of
the Minimum EBITDA Target for such fiscal year (after the accrual
of all management bonuses), the Executive shall be entitled to
receive a cash bonus equal to 33% of the Base Salary for the
applicable fiscal year. In the event that the Company achieves
greater
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than 100% of the Minimum EBITDA Target for such
fiscal year (after the accrual of all management bonuses), the
Executive shall be entitled to receive a cash bonus equal the sum
of the following: (i) 33% of the Base Salary; plus
(ii) 2.21% of the amount by which the EBITDA achieved by the
Company for such fiscal year exceeds the Minimum EBITDA Target for
such fiscal year; plus (iii) 1.04% of the amount, if any, by
which the EBITDA achieved by the Company for such fiscal year
exceeds the sum of (w) the Minimum EBITDA Target for such
fiscal year and (x) $5 million; plus (iv) 3.25% of the
amount, if any, by which the EBITDA achieved by the Company for
such fiscal year exceeds the sum of (w) the Minimum EBITDA
Target for such fiscal year and (x) $15 million.
By way of example, if the Company
achieves (A) EBITDA equal to the applicable Minimum EBITDA Target
for 2006, 2007 or 2008, after the accrual of all management bonuses
for the applicable fiscal year, the Executive’s cash bonus
would be an amount equal to 33% of the Base Salary for the
applicable fiscal year, (B) EBITDA exceeding the applicable Minimum
EBITDA Target for 2006, 2007 or 2008 by $5,000,000, after the
accrual of all management bonuses for the applicable fiscal year,
the Executive’s cash bonus would be an amount equal to 50% of
the Base Salary for the applicable fiscal year, (C) EBITDA
exceeding the applicable Minimum EBITDA Target for 2006, 2007 or
2008 by $15,000,000, after the accrual of all management bonuses
for the applicable fiscal year, the Executive’s cash bonus
would be an amount equal to 100% of the Base Salary for the
applicable fiscal year, (D) EBITDA exceeding the applicable Minimum
EBITDA Target for 2006, 2007 or 2008 by $20,000,000, after the
accrual of all management bonuses for the applicable fiscal year,
the Executive’s cash bonus would be an amount equal to 150%
of the Base Salary for the applicable fiscal year, and (E) less
than 100% of the Minimum EBITDA Target for such fiscal year, after
the accrual of all management bonuses for such fiscal year, the
Executive’s cash bonus would be equal to zero.
(b) With respect to each fiscal year
during the Term other than the 2006, 2007 and 2008 fiscal years,
the Executive shall be entitled to receive a cash bonus in such
amount and based upon the achievement of such performance and
strategic objectives as shall be established by the Board at the
beginning of such fiscal year.
(c) In the event the Company makes
an acquisition or disposition of a company or line of business or
other substantial change (including a substantial increase or
decrease in capital expenditures to the extent not accounted for in
the Minimum EBITDA Target or any performance and strategic
objectives set by the Board as provided in Section 5.2(b), as
the case may be) to the Company, the Minimum EBITDA Target or any
performance and strategic objectives set by the Board as provided
in Section 5.2(b), as the case may be, may be adjusted by the
Board, in good faith, to adjust for such acquisition, disposition
or other change.
(d) For the purpose hereof, “
EBITDA ” means the consolidated earnings of the
Company, including equity in the earnings from non-consolidated
subsidiaries, before interest, taxes, depreciation, amortization
and after deduction of all operating expenses, minority interest
expenses and incentive compensation, all as calculated in
accordance with generally accepted accounting principles
consistently applied, as reflected in the Company’s most
recent available audited consolidated financial statements for the
immediately preceding fiscal year.
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5.3. Expenses . The Company
shall pay or reimburse the Executive for ordinary and necessary
business expenses incurred by him in the performance of his duties
contemplated hereby in accordance with the Company’s usual
policies upon receipt from the Executive of written substantiation
of such expenses which is reasonably acceptable to the Company. The
Company agrees to reimburse the Executive for the reasonable fees
and expenses of his counsel, Honigman Miller Schwartz and Cohn LLP,
incurred through the date hereof in connection with the negotiation
of this Agreement, upon receipt by the Company of a copy of an
invoice substantiating such fees and expenses, provided that the
Company shall not be obligated to reimburse the Executive for any
such fees and expenses in excess of $15,000.
5.4. Benefits . During the
Term, the Executive shall be entitled to participate in all health,
life, disability, sick leave, life insurance, retirement and other
benefits generally made available by the Company to its senior
executives; provided , however , that the Company
shall be entitled to amend or terminate any employee benefit plans
which are applicable generally to the Company’s senior
executives, officers or other employees.
5.5. Reimbursement for Relocation
Expenses . The Company will reimburse Executive for all
reasonable costs associated with moving the personal belongings of
Executive and his family to a new residence within commuting
distance to the Company’s headquarters located at One
Innovation Way, Merrimack, New Hampshire 03054. The Company shall
further reimburse Executive for all reasonable costs associated
with locating a new residence and the commuting costs incurred by
Executive during the initial four months of Executive’s
employment in traveling from his current residence in Michigan to
the Company’s headquarters; provided , that the
aggregate amount subject to reimbursement by the Company under this
Section 5.5 shall not exceed $50,000. Notwithstanding the
forgoing, the Company shall also pay to the Executive sufficient
amounts on a net after tax basis to cover any increased federal,
state and local net income taxes (taking into account the
deductibility of state and local income taxes for federal income
tax purposes) imposed on Executive on any reimbursements made under
this Section 5.5.
5.6. Vacation . The Executive
shall be entitled to three weeks of annual paid vacation per year
during the Term, which shall accrue on a quarterly basis and which,
if unused, may accumulate up to five weeks, to be taken at a time
or times which do not unreasonably interfere with his duties
hereunder. Any vacation which accumulates in excess of such five
weeks shall be forfeited.
5.7. Equity Participation .
The Executive shall participate in the equity of OBH LP, the
indirect parent of the Company and OSIM Brookstone Holdings, Inc.,
the general partner of OBH LP and the ultimate parent of the
Company ( “OBH Inc.” ) as follows:
(a) Investment .
Substantially simultaneously herewith, the Executive will purchase
167,590 Class A Common Partnership Interests of OBH LP (
“Class A Interests” ) for an aggregate price
equal to $225,000, to be paid in cash. The Executive will also be
issued 167,590 Common Shares, par value $0.00001 per
share, of OBH Inc. ( “Common Shares”
).
(b) Incentive Class B
Interests . Concurrently with the execution and delivery of
this Agreement, the Executive has entered into the Restricted
Interest Award Agreement relating to the award to the Executive of
552,555 Class B Common Partnership Interests of OBH
LP
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( “Class B Interests” ) under
OBH LP’s management incentive program, subject to the terms
and conditions set forth therein.
(c) Partnership and Shareholders
Agreements . Concurrently with the execution and delivery of
this Agreement, the Executive has entered into Joinder Agreements
pursuant to which he agrees to become a party to the Second Amended
and Restated Partnership Agreement of OBH LP (the
“Partnership Agreement” ) and the Shareholders
Agreement (of OBH Inc.) (the “Shareholders
Agreement” ), each dated as of October 4, 2005, and
each among OBH Inc. and each of the holders of interests in OBH LP,
with respect to the Executive’s ownership of Class A
Interests, Class B Interests and Common Shares.
5.8. Put Right . Capitalized
terms used in this Section 5.8 but not otherwise defined in
this Agreement shall have the meanings given to them in the
Partnership Agreement
(a) On the fifth (5
th
) anniversary of
the date hereof (the “ Put Date ”), the
Executive shall have the right to require OBH LP to purchase (or to
cause its designee to purchase) (the “ Put Option
”), by delivery of a written notice (the “ Put
Notice ”) to OBH LP during the thirty (30) day
period following the Put Date (or, if the last day during such
period is not a Business Day, by no later than the first Business
Day thereafter) and OBH LP (or its designee) shall be required to
purchase any of the Class A Interests purchased by the
Executive in accordance with Section 5.7 hereof that are then
owned by Executive (collectively, the “ Put Securities
”) at a purchase price equal to the Put Price (as defined
below) of the Put Securities as of the Put Date.
(b) The closing of any purchase of
Put Securities by OBH LP (or its designee) from the Executive
pursuant to this Section 5.8 shall take place at the principal
office of the Company on such date within thirty (30) days
after the Put Date as OBH LP shall specify to the Executive in
writing. At such closing, the Executive shall deliver to OBH LP (or
its designee), against payment by OBH LP (or its designee) of the
purchase price for the Put Securities, at the option of OBH LP
(i) from any cash received by OBH LP from its subsidiaries
which are not also subsidiaries of Holdco and/or (ii) in
shares of the common stock of Holdco having a fair market value
equal to the purchase price for such Put Securities less the amount
paid in the manner described in subparagraph 5.8(b)(i) (“
Pass-Through Common Stock ”), certificates and/or
other instruments representing, together with appropriate transfer
powers duly endorsed with respect to, the Put Securities, or
legally binding written assignments thereof, free and clear of all
Liens (other than pursuant to securities laws or the Partnership
Agreement). In the event that OBH LP elects to deliver Pass-Through
Common Stock as provided in the preceding sentence, OBH LP shall
cause Holdco to purchase all shares of Pass-Through Common Stock
received by the Executive for cash in an amount equal to the fair
market value thereof, on the first (1 st ) Business Day following the
Executive’s receipt of such Pass-Through Common Stock.
Notwithstanding anything to the contrary in this Section 5.8
and on the basis that the Executive makes a timely 83(b) election
with respect to his acquisition of the Put Securities, the sale of
the Put Securities (or, if applicable, the Pass-Through Common
Stock) will be structured so that the character of any gain on such
sale will be long-term capital gains to the Executive for Federal
income tax purposes. The Executive agrees that he will not transfer
any shares of Pass-Through Common Stock he receives under this
Section 5.8(b) other than to Holdco in accordance with the
preceding sentence.
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(c) In the event that the Executive
shall have exercised the Put Option in accordance with the terms of
Section 5.8(a) hereof, OBH LP agrees that it shall not
exercise its rights under Section 9.6 of the Partnership
Agreement (the “ Call Right ”) with respect to a
termination of the Executive’s employment pending the closing
of the corresponding purchase of Put Securities under
Section 5.8(b). Notwithstanding anything to the contrary
contained in this Agreement, any exercise by the Executive of the
Put Option hereunder shall be deemed to have been automatically and
immediately revoked in the event that the Executive’s
employment is terminated by the Company hereunder for
Cause.
(d) For purposes of this
Section 5.8, the following capitalized terms shall have the
following meanings:
“ Put Price
” means, as of the Put Date, an amount equal to that portion
of the Equity Value that would be distributed to the Executive if
the Equity Value was distributed to the Limited Partners of OBH LP
in accordance with Section 7.1 of the Partnership Agreement on
such date assuming the exercise of all Vested Convertible
Interests.
“ Equity Value
” means as of the Put Date, an amount equal to (a) the
product of Consolidated EBITDA for the most recently completed
consecutive twelve (12) month period and 8.5, minus
(b) Consolidated Indebtedness as of the date of most recently
prepared consolidated balance sheet of OBH LP and its subsidiaries,
minus (c) the aggregate of the Preferred Value of the
Preferred Interests outstanding as of such date, plus (d) the
average amount of cash in all of the bank accounts of OBH LP and
its subsidiaries as of the last day of each of twelve
(12) immediately preceding fiscal months, determined in
accordance with GAAP.
(f) In the event that any Put
Securities shall be held by any Permitted Transferee (as defined in
the Partnership Agreement) of the Executive on the Put Date as a
result of the transfer of such Put Securities to such Person by the
Executive as a result of the Executive’s death, such Person
shall have the right to require OBH LP to purchase the Put
Securities held by such Person on the Put Date upon the same terms
and conditions set forth in this Section 5.8 as if such Person
was the Executive hereunder.
6. Termination . The
Executive’s employment hereunder may be terminated prior to
the expiration of the Term as follows:
6.1. Upon Death or Disability
. If during the Term, the Executive shall become physically or
mentally disabled, whether totally or partially, either permanently
or so that the Executive, in the good faith judgment of the Board,
is unable as a result of such disability to substantially and
competently perform his duties hereunder for a period of 90
consecutive days or for 90 days during any six month period during
the Term (a “ Disability ”), the Company may
terminate the Executive’s employment hereunder. In order to
assist the Board in making that determination, the Executive shall,
as reasonably requested by the Board, (a) make himself
available for medical examinations by one or more phy
