Exhibit 10.6
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT
(this “ Agreement ”) is entered into as of
October 4, 2005 by and between Steven C. Strickland (the
“ Executive ”) and Brookstone, Inc., a Delaware
corporation (the “ Company ”).
WHEREAS, the Company is party to
that certain merger agreement (the “ Merger Agreement
”), dated as of April 15, 2005 and amended as of
July 15, 2005, among the Company, Brookstone Holdings Corp.
(“ Parent ”) and Brookstone Acquisition Corp.
(“ Acquisition ”), pursuant to which, at the
Effective Time (as defined in the Merger Agreement) and subject to
the terms and conditions set forth therein, Acquisition will be
merged with and into the Company (the “ Merger
”);
WHEREAS, at the Effective Time (as
defined in the Merger Agreement) of the Merger, Acquisition will
cease to exist and the Company will become an indirect wholly-owned
subsidiary of Parent and of 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 operations of the Company
following the Merger and desires to continue the employment of the
Executive upon the terms and conditions set forth herein, and the
Executive is willing and able to accept such employment on such
terms and conditions;
WHEREAS, concurrently with the
execution and delivery of this Agreement, the Executive is entering
into a Reinvestment Agreement (the “ Reinvestment
Agreement ”), with the General Partner (as defined
below), OBH LP and each of the other limited partners of OBH LP and
a Restricted Interest Award Agreement (the “ Restricted
Award Agreement ”) with OBH LP; and
WHEREAS, OSIM Brookstone Holdings,
Inc. is the general partner of OBH LP (the “ General
Partner ”) and is responsible for the management of OBH
LP’s management and affairs.
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:
Section 1. Agreement to
Employ; No Conflicts . Upon the terms and subject to the
conditions of this Agreement, the Company hereby agrees to employ
the Executive, and the Executive hereby accepts such continued
employment with the Company. The 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 with his employment
with the Company he will not use any
confidential or proprietary information he may
have obtained in connection with his employment with any prior
employer.
Section 2. Employment
Duties . During the Term (as defined below), the Executive
shall serve as Vice President, Marketing of the Company, subject to
the direction of the Company’s Chief Executive Officer and
its Board of Directors (the “ Board ”), shall
oversee and direct the operations of the Company and shall perform
such other duties consistent with the responsibilities of such
position. The Executive shall also serve during the Term, at the
request of the Board, as an officer or director of any of the
Company’s subsidiaries or controlled affiliates as the Board
may deem appropriate, without any additional compensation therefor.
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.
Section 3. Term of
Employment . The term of the Executive’s employment
hereunder (the “ Term ”) shall commence on the
date hereof and continue until the third (3
rd
) anniversary of
the date hereof; provided , however , that effective
upon the expiration of the then current Term (the “
Extension Date ”), the Term shall be automatically
extended upon the same terms and conditions for an additional
period of eighteen months from the scheduled expiration of the Term
(prior to giving effect to such eighteen (18) month extension)
unless either party hereto shall have notified the other in writing
at least three (3) months prior to the Extension Date that
such party does not desire to have the Term so extended.
Section 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.
Section 5. Compensation;
Reimbursement . During the Term, the Company shall pay or
provide to the Executive, in full satisfaction for his services
provided hereunder, the following:
(a) Base Salary . During the
Term, the Company shall pay the Executive a base salary of $300,000
per year (“ Base Salary ”), payable not less
than monthly 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 ”).
(b) Cash Bonus .
(i) For each fiscal year of the
Company during the Term, the Executive will be eligible to receive
a cash bonus of up to $200,000 (the “ Maximum Bonus
”).
(ii) Eighty percent (80%) of
the Maximum Bonus (the “ EBITDA Bonus ”) shall
be payable to Executive based on the achievement of the annual
EBITDA target
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set forth in the Company’s
annual management plan (the “ Annual EBITDA Target
”). The bonus shall be equal to 50% of the EBITDA Bonus if
the Company achieves (as determined by the Board) 100% of the
Annual EBITDA Target after the accrual of all management bonuses
for such fiscal year and will increase or decrease on a linear
basis at a rate of 10% of EBITDA Bonus for each 1% of the Annual
EBITDA Target in excess of, or below, 100%, as applicable. By way
of example, if the Company achieves (A) 105% or more of the
Annual EBITDA Target after the accrual of all management bonuses
for a fiscal year, the bonus would be equal to the EBITDA Bonus,
(B) 102.5% of the Annual EBITDA Target after the accrual of
all management bonuses for such fiscal year, the bonus would be
equal to 75% of the EBITDA Bonus, (C) 97.5% of the Annual
EBITDA Target after the accrual of all management bonuses for such
fiscal year, the bonus would be equal to 25% of the EBITDA Bonus
and (D) 95% or less of the Annual EBITDA Target after the
accrual of all management bonuses for such fiscal year, the bonus
would be equal to zero.
(iii) The Executive shall be
eligible to receive twenty percent (20%) of the Maximum Bonus
in the discretion of the Board based upon the recommendation of the
Chief Executive Officer of the Company taking into account whether
the Company achieved certain pre-set operating objectives for the
applicable fiscal year.
(iv) 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 applicable Annual EBITDA Target) to the Company, the Annual
EBITDA Target may be adjusted by the Board, in good faith, to
adjust for such acquisition, disposition or other
change.
(v) 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.
(c) Expenses . The Company
shall pay or reimburse the Executive for ordinary and necessary
business expenses incurred by him in the performance of his duties
as an employee of the Company in accordance with the
Company’s usual policies upon receipt from the Executive of
written substantiation of such expenses which is acceptable to the
Company.
(d) Benefits . During the
Term, the Executive shall be entitled to continue to participate in
all medical, dental, disability insurance, life insurance,
retirement, savings, vacation and any other employee benefit plans
or programs (including all perquisites) in which the Executive
participates as of the date hereof or which are otherwise 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. For the avoidance of doubt, as used in
this Agreement, the phrase “employee benefit plans or
programs” does not include compensation, bonus or other
incentive plans or programs.
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Section 6. Equity
Participation . The Executive shall participate in the
equity of OBH LP as follows:
(a) Investment . Concurrently
with the execution and delivery of this Agreement, the Executive
has entered into the Reinvestment Agreement whereby the Executive
has agreed to purchase 24,000 Class A Common Partnership
Interests of OBH LP (the “ Reinvestment ”) on
the terms and conditions set forth therein. Pursuant to the
Reinvestment Agreement, the Executive has been issued
(i) 24,000 Common Shares, par value $0.00001 per share, of the
General Partner (“ Common Shares ”); and
(ii) 894 Class B Common Partnership Interests of OBH LP
(“ Class B Interests ”).
(b) Incentive Class B
Interests . Concurrently with the execution and delivery of
this Agreement, the Executive has entered into the Restricted Award
Agreement relating to the award to the Executive of 35,490 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 the Second Amended
and Restated Partnership Agreement of OBH LP (the “
Partnership Agreement ”) and the Shareholders
Agreement (of the General Partner), each dated the date hereof, and
each among the General Partner 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.
Section 7. Termination
. The Executive’s employment hereunder may be terminated as
follows:
(a) Upon Death or Disability
.
(i) 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 to perform his
duties hereunder for a period of 90 consecutive days or for 90 days
during any six month period (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 physicians chosen by the Board and (b) use his
best efforts to cause his own physicians to be available to discuss
with the Board such disability. If the Executive dies during the
Term, the Executive’s employment hereunder shall
automatically terminate as of the close of business on the date of
his death.
(ii) Upon termination for Disability
or death, the Company shall not be obligated to make any salary,
bonus or other payments or provide any benefits under this
Agreement (other than payments for services rendered or expenses
incurred through the date of such termination), provided ,
however , the Company shall (A) pay to the Executive,
or the Executive’s legal representative, the Base Salary
(less any amounts that the Executive may receive pursuant to any
Company-sponsored long-term disability insurance policy for senior
executives as and if in effect at the date of termination) in equal
installments in accordance with
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the Payroll Policies for a period of
twelve (12) months following such termination, and
(B) in the case of termination for Disability,
(I) provide continued medical and dental coverage under the
Company’s plans to the maximum extent permissible thereunder
for twelve (12) months following the date of such termination
and (II) if applicable, continue to provide disability insurance
coverage for the Executive to the extent necessary to continue
benefits which the Executive became entitled to receive prior to
the termination of his employment with the Company, provided
further , however , that the Company shall be
entitled to amend or terminate any plans which are applicable
generally to the Company’s senior executives, officers or
other employees.
(b) For Cause . The Company
may terminate the Executive’s employment hereunder at any
time, effective immediately upon written notice to the Executive,
for Cause (as defined below) and all of the Executive’s
rights to payments (other than salary payments for services already
rendered and expenses incurred through the date of such
termination) and any other benefits otherwise due hereunder shall
cease immediately. The Company shall have “ Cause
” for termination of the Executive if any of the following
has occurred:
(i) the Executive’s dishonesty
or bad faith in connection with the performance of his
duties;
(ii) a refusal or failure by the
Executive to use his best efforts to perform duties consistent with
the office(s) held by him as requested by the Board which would not
give rise to Good Reason is not cured within
thirty (30) days;
(iii) the Executive’s
conviction of a felony;
(iv) the failure of the Executive to
notify the Board of any material relationships between him and/or
any member of his immediate family member with any person or entity
with whom OBH LP or any of its subsidiaries has a material business
relationship; or
(v) a material breach of the
provisions of Section 8 or Section 10 of this Agreement
by the Executive which is not cured within
fifteen (15) days after notice thereof is delivered by
the Company .
(c) Without Cause
.
(i) The Company may terminate the
Executive’s employment hereunder without Cause at any time
upon written notice to the Executive. Upon such termination, the
Executive shall have the right to receive from the Company the Base
Salary (to be paid in equal installments in accordance with the
Payroll Policies), and continued medical and dental coverage under
the Company’s plans to the maximum extent permissible
thereunder, for the longer of (i) the remainder of the Term
and (ii) eighteen (18) months following the date of
such termination, provided , however , that the
Company shall be entitled to amend or terminate any plans which are
applicable generally to the Company’s senior executives,
officers or other employees. Notwithstanding the foregoing, if
during the period in which salary and/or benefits continue pursuant
to the preceding sentence, the Executive accepts other employment,
(A) subsequent to the first (1st) anniversary of the
termination of employment, his Base Salary shall be reduced by the
amount of his base compensation in his new employment subsequent to
the
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first (1st) anniversary of the
termination of employment, and (B) the continuation of his
medical and dental coverage hereunder shall immediately
cease.
(ii) It is further acknowledged and
agreed by the parties that the actual damages to the Executive in
the event of termination under this Section 7(c) would be
difficult if not impossible to ascertain, and, therefore, the
salary and benefit continuation provisions set forth in this
Section 7(c) shall be the Executive’s sole and exclusive
remedy in
