EXHIBIT 10.14
HOT TOPIC 18305 E. San Jose Ave.
City of Industry, CA 91748
Office: 626-839-4681
Fax: 626-8394686
Email: hottopic.com
EVERYTHING ABOUT THE MUSIC
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April 12, 2001
Tom Rail
42749 Settlers Ridge
Murrieta, CA 92562
RE: EMPLOYMENT TERMS
Dear Tom:
Hot Topic, Inc. (the "Company") is pleased to offer you the position of General
Manager - Torrid, pursuant to the terms of this letter agreement ("Agreement").
1. DUTIES
You will be expected to perform various duties consistent with your position.
You will report to the Company's Chief Executive Officer ("CEO"), unless
otherwise assigned by the Company. You will work at our facility located in the
City of Industry.
2. BASE SALARY
Your base salary will be $250,000 per year, less payroll deductions and all
required withholdings, which will be subject to annual review. You will be paid
semi-monthly and you will be eligible for the following standard Company
benefits: medical insurance, vacation, sick leave, holidays, 401k plan and
Employee Stock Purchase Plan. Details about these benefit plans are available
for your review. In addition, the Company plans to obtain a long-term disability
policy subject to the satisfaction of the certain underwriting criteria. The
Company may modify benefits from time to time, as it deems necessary.
3. BONUS
In addition to your base salary, you will be eligible to earn an annual
performance bonus ("Bonus") pursuant to the Company's EBIT Plan, as approved by
the Board of Directors. Your target Bonus under the Plan will be twenty five
percent of your base salary based upon achievement of the goals set forth in the
Plan. The Bonus will be pro-rated based on your actual time in position.
Assuming continuous employment, the Bonus will be awarded in the first quarter
of the Company's fiscal year. You must be employed on the date the Bonus is
awarded to be eligible for the Bonus.
4. AUTOMOBILE ALLOWANCE
The Company will pay for you to have a Company leased automobile of your choice,
provided that the value of the automobile does not exceed $60,000. The Company
will also reimburse you for expenses including gas, insurance and maintenance
for the automobile.
5. STOCK OPTIONS
Upon commencement of employment and subject to approval of the Company's Board
of Directors, you will be granted an Incentive Stock Option under the Company's
1996 Equity Incentive Plan to purchase 30,000 shares of the Company's Common
Stock (the "Stock Option"). The Stock Option will be governed by and granted
pursuant to a separate Stock Option Agreement. The exercise price per share of
the Stock Option will be equal to the fair market value of the Common Stock
established on the date of grant, subject to approval by the Board of Directors.
The Stock Option will be subject to vesting over four (4) years so long as you
continue to be employed with the Company, according to the following schedule:
twenty-five percent (25%) of the shares subject to the Stock Option will vest on
the last day of the twelfth full calendar month of your employment after the
date of grant and the remaining shares subject to the Stock Option will vest in
equal installments at the end of each monthly period thereafter for three (3)
years.
If you have questions regarding the tax implications of the Stock Option or any
part of your compensation package, please consult with your own tax advisor.
6. TERMINATION
The Company may terminate your employment at any time and for any or no reason,
with or without Cause (as defined herein) or advance notice, by giving written
notice of such termination. Similarly, you may terminate your employment with
the Company at any time at your election, in your sole discretion, for any or no
reason upon two weeks notice to the Company during which time you shall provide
reasonable transition assistance to the Company. The Company reserves the right
to ask you to expedite your resignation date and to leave prior to the end of
the two weeks notice period. The at-will nature of your employment relationship
may not be modified except by a written agreement with the CEO of the Company.
If the Company terminates your employment without Cause (as defined herein),
then upon your furnishing to the Company an executed release and waiver of
claims (a form of which is attached hereto as Exhibit A), you shall be entitled
to receive severance payments in the form of continuation of your base salary
and medical insurance benefits that are in effect at the time of your
termination, subject to standard payroll deductions and withholdings, for six
(6) months (the "Severance Period"). If you voluntarily resign or your
employment is terminated for Cause (as defined herein), all compensation and
benefits will cease immediately and you will receive no additional payments from
the Company other than your accrued base salary and accrued and unused vacation
benefits earned through the date of your termination.
For purposes of this Agreement, "Cause" shall mean (i) willful misconduct by
you, including, but not limited to, dishonesty which materially and adversely
reflects upon your ability to perform your duties for the Company, (ii) your
conviction of, or the entry of a pleading of guilty or nolo contendere by you
to, any crime involving moral turpitude or any felony, (iii) fraud, embezzlement
or theft against the Company, (iv) a material breach by you of any material
provision of any employment contract, assignment of inventions, confidentiality
and/or nondisclosure agreement between you and the Company, or (v) your willful
and habitual failure to attend to your duties as assigned by the CEO of the
Company, after written notice to Executive and no less than a 90 day period to
cure such failure provided such failure to perform is subject to cure with the
passage of time.
7. CHANGE OF CONTROL
Following a Change in Control (as defined herein) the vesting of your Stock
Options will be immediately accelerated such that one hundred percent (100%) of
the Stock Options shall be vested and exercisable. For purposes of this
Agreement, Change of Control is defined as follows: (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation and in which beneficial
ownership of securities of the Company representing at least fifty percent (50%)
of the combined voting power entitled to vote in the election of Directors has
changed; (iii) an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or subsidiary of the Company or other entity
controlled by the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors.
8. COMPANY POLICY
As a Company employee, you will be expected to abide by Company rules and
regulations and acknowledge in writing that you have read the Company's Employee
Handbook which will govern the terms and conditions of your employment. The
Company's Employee Handbook may be modified from time to time at the sole
discretion of the Company.
9. PROPRIETARY INFORMATION AGREEMENT
As a condition of employment, you will be required to sign and comply with the
attached Proprietary Information Agreement attached hereto as Exhibit B, which
prohibits unauthorized use or disclosure of the Company's proprietary
information, among other things.
In your work for the Company, you will be expected not to use or disclose any
confidential information, including trade secrets, of any former employer or
other person to whom you have an obligation of confidentiality. Rather, you will
be expected to use only that information which is generally known and used by
persons with training and experience comparable to your own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by the Company. During our discussions about
your proposed job duties, you assured us that you would be able to perform those
duties within the guidelines just described. You agree that you will not bring
onto Company premises any unpublished documents or property belonging to any
former employer or other person to whom you have an obligation of
confidentiality.
10. ENTIRE AGREEMENT
This Agreement, together with Exhibits attached hereto and the stock option
documents referred to herein, forms the complete and exclusive statement of the
terms of your employment with the Company. The employment terms in this
Agreement supersede any other agreements or promises made to you by anyone,
whether oral or written.
11. GOVERNING LAW
This Agreement will be governed by and construed according to the laws of the
State of California. You hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Los Angeles, California for any
lawsuit filed there against you by the Company arising from or related to this
Agreement. In the event of any litigation arising out of or relating to this
Agreement, its breach or enforcement, including an action for declaratory
relief, the prevailing party in such action or proceeding shall be entitled to
receive his or its damages, court costs, and all out-of-pocket expenses,
including attorneys fees. Such recovery shall include court costs, out-of-pocket
expenses, and attorneys fees on appeal, if any.
12. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon your heirs,
executors, administrators and other legal representatives and will be
for the benefit of the Company, its successors, and its assigns.
As required by law, this offer is subject to satisfactory proof of your right to
work in the United States.
Sincerely,
/S/ Betsy McLaughlin
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Betsy McLaughlin
Chief Executive Officer
Accepted:
/S/ Tom Rail
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Tom Rail
April 12, 2001
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Date
Attachment: Exhibit A: Waiver and Release
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
In consideration of the payments and other benefits set forth in
Section 5 of the Agreement dated April 12, 2001, to which this form is attached,
I, TOM RAIL, hereby furnish Hot Topic, Inc. (the "Company"), with the following
release and waiver ("Release and Waiver").
I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns affiliates and
Benefit Plans, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including my employment termination date with respect to any and all
claims including, but not limited to, claims relating to my employment and the
termination of my employment, claims pursuant to any federal, state or local law
relating to employment, including, but not limited to, discrimination claims,
claims under the California Fair Employment and Housing Act, and the Federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), or claims for
wrongful termination, breach of the covenant of good faith, contract claims,
tort claims, and wage or benefit claims, including but not limited to, claims
for salary, bonuses, commissions, stock, stock options, vacation pay, fringe
benefits, severance pay or any form of compensation.
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under the ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which I was already entitled as an executive of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the Release and Waiver granted
herein does not relate to claims which may arise after this Release and Waiver
is executed; (b) I have the right to consult with an attorney prior to executing
this Release and Waiver (although I may choose voluntarily not to do so); and if
I am over 40 years of age upon execution of this Release and Waiver: (c) I have
twenty-one (21) days from the date of termination of my employment with the
Company in which to consider this Release and Waiver (although I may choose
voluntarily to execute this Release and Waiver earlier); (d) I have seven (7)
days following the execution of this Release and Waiver to revoke my consent to
this Release and Waiver; and (e) this Release and Waiver shall not be effective
until the seven (7) day revocation period has expired.
Date: By:
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TOM RAIL