Exhibit 10.2
[HOT TOPIC LOGO] 18305 E. San Jose Ave.
City of Industry, CA 91748
Office: 626-839-4681
Fax: 626-839-4686
Email: hottopic.com
EVERYTHING ABOUT THE MUSIC
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March 15, 2004
Mr. Chris J. Kearns
923 9th Street
Coronado, California 92118
Re: Employment Terms
Dear Chris:
Hot Topic, Inc. (the "Company") is pleased to offer you the position of Senior
Vice President and General Counsel, pursuant to the terms of this letter
agreement ("Agreement") and the attached offer of employment.
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 City
of Industry; however, some travel may be required in carrying out the course of
your duties.
2. BASE SALARY AND BENEFITS
Your annualized base salary will be $250,000 per year, paid bi-weekly, less
payroll deductions and all required withholdings. Your base salary will be
subject to annual review. Upon meeting each plan's eligibility requirements, you
will be able to elect to participate in the following standard Company benefits:
medical, dental, life, vision, short- and long-term disability insurance,
vacation, holidays, 401(k) Plan and the Employee Stock Purchase Plan. Details
about these benefit plans are available for your review. The Company may modify
its benefits plans from time to time, as it deems necessary.
Mr. Christopher J. Kearns
March 15, 2004
Page 2
3. BONUS
In addition to your base salary, you will be eligible to earn an annual
performance bonus ("Bonus") pursuant to the Company's EPS Plan, as approved by
the Board of Directors. Your target Bonus under the Plan will be fifty-percent
(50%) of your base salary based upon achievement of the goals set forth in the
Plan. 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. Your bonus for the current fiscal year
will be prorated based on your actual days of employment during the fiscal year.
You will not be eligible for any bonus payout in the event your employment is
terminated with or without Cause (as defined below) prior to the date on which
the Bonus is awarded.
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 50,000 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.
Mr. Christopher J. Kearns
March 15, 2004
Page 3
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 Chief Executive Officer 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 all
claims 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 you 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.
Mr. Christopher J. Kearns
March 15, 2004
Page 4
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 properly belonging to any
former employer or other person to whom you have an obligation of
confidentiality.
1O. 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.
Mr. Christopher J. Kearns
March 15, 2004
Page 5
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/ CHRISTOPHER J. KEARNS
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Christopher J. Kearns
4/12/04
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Date