Exhibit 10.9
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT
(this “ Agreement ”) is entered into as of
October 4, 2005 by and between Michael F. Anthony (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 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 perform such
duties and have such authority over the affairs and business of the
Company consistent with the responsibilities and authority of a
President and Chief Executive Officer, including but not limited to
(1) oversight and implementation of the Company’s
merchandizing, product buying, pricing and marketing activities and
strategies, (2) oversight of the Company’s personnel
decisions with respect to non-executive officers, including the
compensation, hiring and firing of such employees, and
(3) implementation of any annual operating budget or strategic
plan approved by the Board, including any capital expenditures set
forth therein, and (4) scheduling and attending executive
management meetings, staff meetings, merchandise planning sessions,
management by objective meetings, succession planning, personnel
reviews, floor set walk-throughs, strategic planning sessions and
other meetings and events consistent with the Executive’s
duties, in each case subject to the direction and control of the
Board. The Executive shall also serve during the Term as a director
of the Company and of the General Partner and, 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;
provided , that Executive may continue to serve as a
director of Omnia Corporation, Hartmarx Corporation and Citizens
Bank of New Hampshire without the prior written consent of the
Board provided that such services does not unreasonably interfere
with the performance of his duties hereunder.
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 second (2 nd ) and each subsequent
anniversary of date hereof (each, an “ Extension Date
”), the Term shall be automatically extended upon the same
terms and conditions for an additional period of
one (1) year from the scheduled expiration of the Term
(prior to giving effect to such one (1) year 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.
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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
$1,200,000 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 100% of his Base Salary (the “
Maximum Bonus ”). The bonus shall be equal to 50% of
the Maximum Bonus if the Company achieves (as determined by the
Board) 100% of the annual EBITDA target set forth in the
Company’s annual management plan (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 Maximum 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 Maximum
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 Maximum 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
Maximum 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.
(ii) 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.
(iii) 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
contemplated hereby in accordance with the Company’s usual
policies upon receipt from the Executive of written substantiation
of such expenses in accordance with the Company’s usual
policies. The Company agrees to reimburse Executive for the
reasonable fees and expenses of
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his counsel, Weil Gotshal &
Manges LLP, incurred through the date hereof in connection with the
negotiation of this Agreement and of that certain letter agreement,
dated as of April 15, 2005, between the Executive and Parent
(the “ Employment Letter ”) and the transactions
contemplated hereby and thereby upon receipt by the Company of a
copy of an invoice from Weil Gotshal substantiating such fees and
expenses.
(d) Benefits . During the
Term, the Executive shall be entitled to continue to participate in
all medical, dental, disability insurance, life insurance,
retirement (excluding the SERP (as defined below)), 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.
Section 6. Equity
Participation . The Executive shall participate in the
equity of OBH LP as follows:
(a) Reinvestment .
Concurrently with the execution and delivery of this Agreement, the
Executive has entered into the Reinvestment Agreement whereby the
Executive has agreed to purchase 456,266 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) 456,266 Common Shares, par value $0.00001 per share, of
the General Partner (“ Common Shares ”); and
(ii) 17,000 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 461,367 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
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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 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 and which 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
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(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) twenty-four (24) 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 (1 st ) 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 first (1 st ) anniversary of the
termination of employme
