Exhibit 2
EMPLOYMENT AGREEMENT
AGREEMENT dated this 30th day of September, 1996 between Childrobics,
Inc., a New York corporation with offices at 200 Smith Street, Farmingdale, New
York 11735 (the "Company"), and Gerard A. Reda residing at 15 Greenwood Lane,
St. James, New York 11780 ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive to serve as the
Company's President and Chief Executive Officer and to manage the day-to-day
affairs and operations of the Company and to perform such other services as
typically performed by executive senior management, and Executive desires to
accept such employment, all on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which the
parties acknowledge, the parties agree as follows:
1. Employment and Duties
The Company hereby employs Executive for the term of this
Agreement and Executive hereby accepts such employment as the President and
Chief Executive Officer of the Company on the terms and conditions set forth in
this Agreement.
2. Employment Term
Unless terminated at an earlier date pursuant to the terms of
this Agreement, the term of employment hereunder (the "Employment Term") shall
be five years, commencing on the date hereof (the "Commencement Date").
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3. Services
a. Executive shall perform such duties as typically
performed by a President and Chief Executive Officer of a publicly-held
corporation, which duties shall include, but shall not be limited to, the
management of the day-to-day affairs and operations of the Company including the
hiring of all personnel and as otherwise shall be consistent with the provisions
of the By-laws in effect on the date hereof, subject to the direction of the
Board of Directors of the Company (the "Board"). Executive shall serve the
Company faithfully and to the best of his ability and shall devote his full
business time and attention to the affairs of the Company, subject to reasonable
absences for vacation and illness as determined by the Board.
b. The headquarters for the performance of Executive's
services during the term of this Agreement shall be the principal executive
offices of the Company in Farmingdale, New York, unless otherwise mutually
agreed by Executive and the Company, subject to such reasonable travel in the
performance of Executive's duties as the business of the Company may require.
c. During the term of this Agreement, the Company
shall use its best efforts to nominate Executive to serve as a member of the
Board and such other committees of the Board to which Executive may be
appointed.
4. Compensation and Expense Reimbursement
a. Salary. Executive shall be entitled to receive for
all services rendered by Executive in any capacity an annual salary at the
rate of $250,000 (payable in equal installments in accordance with the then
prevailing practices of the Company, but in no event less frequently than
monthly), subject to adjustment upon terms agreed upon by the Board and
Executive after the first anniversary of the Commencement Date.
b. Expenses. Executive will be reimbursed for all
reasonable and necessary expenses incurred by Executive in carrying out the
duties contemplated under this Agreement, in
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accordance with then prevailing Company procedure, as such practices may be
changed from time to time by the Board.
c. Stock Options. Executive shall be granted options
at the discretion of the Board based upon the performance of the Company and the
performance of Executive.
d. Vacations. Executive shall be entitled to four (4)
weeks paid vacation per year, to be taken at such times in accordance with the
then prevailing Company practices for Executive.
e. Benefits. Executive shall be entitled to
participate in all group health and other insurance programs and all other
fringe benefit or retirement plans or other compensatory plans which the Company
currently makes, or may hereafter elect to make, available to its executives
generally on terms no less favorable than those provided to other executives
which the Company shall establish, in addition to the supplemental disability
set forth in Section 7 hereof; provided, however, that Executive shall receive
such health and other insurance benefits substantially similar to those
currently being received by him from Just Kiddie Rides, Inc.
In addition, the Company shall purchase life insurance in the
amount of $2,000,000 on the life of Executive, the beneficiary of which shall be
named by Executive.
f. Automobile. The Company shall provide the
Executive, at the Company's expense, with use of an automobile similar to the
automobile currently used by Executive, which automobile shall include a
cellular phone.
5. Termination for Cause
In the event of: (a) fraud against the Company, conviction of
a felony, the intentional disclosure of confidential information (unless
required by applicable law or court or other order) having a material adverse
effect on the Company's operations or the market price of the Company's stock,
aiding a competitor to the detriment of the Company, its subsidiaries or
affiliates, intentionally engaging in conduct which brings disrepute or
otherwise is damaging to the reputation
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of the Company, its subsidiaries or affiliates, performing competitive services
or acting in a competitive capacity for any other person, firm or corporation
without the prior written consent of the Company; or (b) willful misconduct,
gross negligence, prolonged and unexcused (subject to Paragraph 6 hereof)
absenteeism by Executive in connection with Executive's employment hereunder, a
breach by Executive of the terms of this Agreement which has a material adverse
effect on the Company, or Executive's willful or intentional failure to
implement the reasonable business requests or directions of the Board, the
Company shall have the right to give Executive a termination notice, specifying
the nature of the breach or failure. If such termination notice is given
pursuant to clause (a) above, the Employment Term shall terminate upon the
giving of such notice. If such termination notice is given pursuant to clause
(b) above, the Employment Term shall terminate thirty (30) days after the giving
of such notice if the circumstances described in such notice have not been
remedied by Executive within such thirty (30)-day period. Upon the effective
date of termination of the Employment Term pursuant to this Paragraph 5, the
Company shall have no further obligation to Executive hereunder, except for (i)
the provisions of Paragraphs 8 and 10, and (ii) accrued and unpaid salary, and
other previously earned, accrued and unpaid benefits from the Company and its
employee benefit plans through the date of termination.
6. Termination without Cause
If the Company shall terminate Executive's employment other
than for cause, death or disability:
a. The Company shall pay Executive accrued and unpaid
salary, and other previously earned, accrued and unpaid benefits from the
Company and its employee benefit plans through the date of termination (the
"Termination Date").
b. The Company shall pay as liquidated damages to
Executive and in lieu of any further salary payments hereunder for periods after
the Termination Date, a one-time payment
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equal to 250% of Executive's annual salary as of the Termination Date, which
amount shall be payable within one year of the Termination Date;
c. In addition to the liquidated damages amounts that
are payable to Executive, the following shall apply: (i) Executive shall
continue to participate in, and accrue benefits under all retirement plans or
other compensatory plan of the Company for the remaining term of this Agreement
as if the termination of employment of Executive had not occurred (with
Executive being deemed to receive annually for the purposes of such plans
Executive's then annual salary as of the Termination Date under Section 4 of
this Agreement), except to the extent that such continued participation and
accrual is expressly prohibited by law, or to the extent such plan constitutes a
"qualified plan" under Section 401 of the Internal Revenue Code of 1986, as
amended ("Code"), by the terms of the plan, in which case the Company shall
provide Executive an equivalent, unfunded, non-qualified benefit; (ii) Executive
shall be entitled to continue to receive all other employee benefits and then
existing fringe benefits referred to in Section 4 hereof for the remaining term
of this Agreement as if the termination of employment had not occurred; and
(iii) all insurance or other provisions for indemnification, defense or
hold-harmless of officers or directors of the Company that are in effect on the
date the notice of termination is sent to Executive shall continue for the
benefit of Executive with respect to all of his acts and omissions while an
officer or director as fully and completely as if such termination had not
occurred, and until the final expiration or running of all periods of limitation
against action which may be applicable to such acts or omissions.
If any payment or benefit to Executive under this Agreement
would be considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code and if, after reduction for any applicable federal excise
tax imposed by Section 4999 of the Code ("Excise Tax") and federal income tax
imposed by the Code, Executive's net proceeds of the amounts payable and the
benefits provided under this Agreement would be less than the amount of the
Executive's net
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proceeds resulting from the payment of the Reduced Amount (hereinafter defined),
after reduction for federal income taxes, then the amount payable and the
benefits provided under this Agreement shall be limited to the Reduced Amount.
The "Reduced Amount" shall be the largest amount that could be received by
Executive under this Agreement such that no amount paid to Executive under this
Agreement and any other agreement, contract or understanding heretofore or
hereafter entered into between Executive and the Company ("Other Agreements")
and any formal or informal plan or other arrangement heretofore or hereafter
adopted by the Company for the direct or indirect provision of compensation to
Executive (including groups or classes of participants or beneficiaries of which
Executive is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for Executive ("Benefit Plan") would
be subject to the Excise Tax. In the event that the amount payable to Executive
shall be limited to the Reduced Amount, then Executive shall have the right, in
Executive's sole discretion, to designate those payments or benefits under this
Agreement, any other agreements, and/or any Benefit Plans, that should be
reduced or eliminated so as to avoid having the payment to Executive under this
Agreement be subject to the Excise Tax.
7. Illness or Incapacity
In the event of any disability, illness or other incapacity
which prevents Executive from performing services as contemplated herein, the
Company shall continue to pay to Executive his annual salary at the time of
incapacity until disability insurance policy of up to $10,000 per month, which
shall be maintained and paid for by the Company in addition to the benefits set
forth in Section 4(d) hereof, becomes effective. If Executive shall be
incapacitated for more than 120 consecutive days or 180 days in any consecutive
12-month period, the Company shall have the right to terminate this Agreement
upon 10 days' prior written notice with no further liability, except for accrued
and unpaid salary, and other previously earned, accrued and unpaid benefits from
the Company and its employee benefit plans through the date of such termination,
provided that such
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termination shall not prejudice any rights of Executive under any disability
policies being maintained by the Company for Executive under the terms of this
Agreement. In the event that the Executive is disabled, the Company shall
continue to provide the spouse and dependents of Executive, at the expense of
the Company, with health and life insurance for the term of this Agreement.
Notwithstanding any such termination, the provisions of Paragraph 9 will
continue to apply.
8. Death
This Agreement shall terminate automatically upon the death of
Executive. In such event, the Company shall pay the estate of Executive, in
addition to any amounts to which Executive's estate would otherwise be entitled
under the Company's retirement plans and group life insurance policy, within 30
days after the date of death, all compensation earned under Paragraph 4 through
the date of termination. The Company shall continue to provide the spouse and
dependents of Executive, at the expense of the Company, with health insurance
then provided generally to dependents of employees of the Company, for a period
of one (1) year following the death of the Executive. Neither the estate or
other legal representative of the Executive nor the Company shall have any
further rights or obligations under this Agreement.
9. Non-Competition and Trade Secrets
a. Confidentiality and Work Product. During the term
of this Agreement and thereafter without limitation of time, Executive shall not
knowingly divulge, furnish, or make available to any third person, company,
corporation or other organization (including but not limited to customers,
competitors or government officials), except in the course of performing his
duties as an Executive hereunder or with the Company's prior written consent,
trade secrets or other confidential information concerning the Company, its
subsidiaries or affiliates or the business of any of the foregoing, including
without limitation, confidential methods of operation and organization and
confidential sources of supply and customer lists, but Executive may make
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disclosures as required by applicable law or orders without prior written notice
to the Company. For purposes of this Paragraph 9, information shall not be
deemed confidential if it (i) is within the public domain or (ii) becomes
publicly known other than through disclosure by Executive in violation of this
provision.
b. Non-Competition. During the Employment Term and for
a period of one (1) year thereafter, Executive agrees not to directly or
indirectly, own, control, manage, operate, participate or invest in, including
as an officer, director, shareholder, employee, consultant, agent, or otherwise
be connected with, in any manner, any business, enterprise or venture which is
engaged in the children's entertainment business, including, without limitation,
the sale or lease of vending machines, and any other business engaged in by the
Company during the Employment Term, except that nothing in this subparagraph
shall be deemed to prohibit the acquisition or holding of not more than five
percent (5%) of the shares or other securities of a publicly-owned corporation
if such securities are traded on a national securities exchange or over the
counter.
c. Solicitation. During the Employment Term and for a
period of one (1) year thereafter, Executive agrees not to directly or
indirectly solicit, employ or retain or arrange to have any other person, firm
or other entity solicit, employ, retain, or otherwise participate in the
employment or retention of, any person who is then, or who has been, within the
preceding six months, an employee, consultant, technician or engineer of the
Company, its subsidiaries or affiliates.
d. In the event Executive shall violate any provisions
of this Paragraph 9 (which provisions Executive hereby acknowledges are
reasonable and equitable), Executive shall no longer be entitled to and hereby
waives any and all rights to any termination payment under this Agreement.
10. Indemnification and Insurance
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a. The Company shall indemnify and hold harmless, and
in any threatened or filed action or proceeding, defend Executive against all
expenses, liabilities and losses (including attorneys' fees, judgments and
fines, and amounts paid or to be paid in any settlement) reasonably incurred or
suffered by Executive in connection with Executive's services as a director or
officer of the Company to the full extent permitted by the Bylaws of the Company
as in effect on the Commencement Date or, if greater, as permitted by applicable
state law; provided that the indemnity offered shall never be greater than
permitted by applicable state law. To the extent that a change in law permits
greater indemnification than is currently provided by the Bylaws of the Company
and a corresponding amendment shall not be made in said Bylaws of the Company,
it is the intent of the parties hereto that Executive shall enjoy the greater
benefits so afforded by such change.
b. Executive shall be covered by a policy or policies
of insurance, in reasonable and customary amounts, with respect to: (i)
directors' and officers' liability; (ii) errors and omissions; and (iii) general
liability. Executive shall be a named insured or additional insured under such
policies, without right of subrogation against him. The obligations set forth in
this Paragraph 10 shall survive any termination of this Agreement.
c. Executive's rights to indemnification and insurance
pursuant to this Paragraph 10 shall not be exclusive of any other right which
Executive may have or hereafter acquire under any statute, or policies or
provisions of the Company. This Paragraph 10 shall not be deemed to affect any
rights to subrogation which may exist in any policy of directors' and officers'
liability.
11. Separability
Executive agrees that the provisions of Paragraph 8 hereof
constitute independent and separable covenants, for which Executive is receiving
consideration which shall survive the
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termination of employment and which shall be enforceable by the Company
notwithstanding any rights or remedies the Company may have under any other
provision hereof.
12. Specific Performance
Executive acknowledges that:
(i) the services to be rendered under the provisions of this
Agreement are of a special character and it would be difficult to replace
such services;
(ii) the Company is relying on the covenants contained herein,
including, without limitation, those contained in Paragraph 9 above, as a
material inducement for entering into this Agreement;
(iii) the Company may be damaged if the provisions hereof are
not specifically enforced; and
(iv) the award of monetary damages may not adequately protect
the Company in the event of a breach hereof by Executive.
By virtue thereof, Executive agrees and consents that if
Executive breaches any of the provisions of this Agreement, the Company, in
addition to any other rights and remedies available under this Agreement or
otherwise, shall (without any bond or other security being required and without
the necessity of proving monetary damages) be entitled to a temporary and/or
permanent injunction to be issued by a court of competent jurisdiction
restraining Executive from committing or continuing any violation of this
Agreement, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy
which the Company may have.
13. Miscellaneous
a. Entire Agreement; Amendment. This Agreement
constitutes the entire employment agreement between the parties and may not be
modified, amended or terminated (other than pursuant to the terms hereof) except
by a written instrument executed by the parties hereto.
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All other agreements between the parties pertaining to the employment or
remuneration of Executive not specifically contemplated hereby or incorporated
or merged herein are terminated and shall be of no further force or effect.
b. Assignment. This Agreement is not assignable by
Executive without the prior written consent of the Company and any purported
assignment by Executive of Executive's rights and/or obligations under this
Agreement shall be null and void. This Agreement may be assigned by the Company
at any time, upon delivery of written notice to Executive (with Executive's
consent, not to be unreasonably withheld), to any successor to the business of
the Company, or to any subsidiaries or affiliates of the Company. In the event
that Executive does not consent to the assignment of this Agreement, the Company
shall have the right to terminate this Agreement automatically with no further
liability, except for accrued and unpaid salary, and other previously earned,
accrued and unpaid benefits from the Company and its employee benefit plans.
c. Waivers, etc. No waiver of any breach or default
hereunder shall be considered valid unless in writing, and no such waiver shall
be deemed a waiver of any subsequent breach or default of the same or similar
nature. The failure of any party to insist upon strict adherence to any term of
this Agreement on any occasion shall not operate or be construed as a waiver of
the right to insist upon strict adherence to that term or any other term of this
Agreement on that or any other occasion.
d. Provisions Overly Broad. In the event that any term
or provision of this Agreement shall be deemed by a court of competent
jurisdiction to be overly broad in scope, duration or area of applicability, the
court considering the same shall have the power and hereby is authorized and
directed to modify such term or provision to limit such scope, duration or area,
or all of them, so that such term or provision is no longer overly broad and to
enforce the same as so limited. Subject to the foregoing sentence, in the event
that any provision of this Agreement
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shall be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall attach only to such provision and shall not affect or
render invalid or unenforceable any other provision of this Agreement.
e. Notices. Any notice permitted or required hereunder
shall be in writing and shall be deemed to have been given on the date of
delivery or, if mailed by certified mail, postage prepaid, return receipt
requested, documented overnight courier, or by facsimile transmission, on the
date mailed or transmitted.
(i) If to Executive to:
Gerard A. Reda at his address
set forth in the preamble to this Agreement
with a copy to:
Joan Agestino, Esq.
Simonetti & Agnostino
250 Old Country Road
Garden City, New York 11530
(ii) If to the Company to:
the address set forth in the preamble
to this Agreement
Attention: President
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Kenneth R. Koch, Esq.
Telecopy: (212) 697-6686
f. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York governing contracts made
and to be performed in New York without regard to conflict of law principles
thereof.
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g. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
h. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and each party may become a party
hereto by executing a counterpart hereof. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EXECUTIVE CHILDROBICS, INC.
/s/ Gerard A. Reda By: /s/Gerard A. Reda
- -------------------- -------------------------
Gerard A. Reda Name: Gerard A. Reda
Title: President
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