Employment Agreement - Vermont Teddy Bear Co. Inc. and R. Patrick Burns
The Vermont Teddy Bear Co., Inc.
Shelburne, Vermont 05482
June 30, 1996
Mr. R. Patrick Burns
Shelburne, VT 05482
Dear Pat:
This letter is to follow up on our recent discussions and confirm our
agreement concerning the terms of your continued employment by The Vermont
Teddy Bear Co., Inc. (the "Company"). Except as specifically set forth in
this letter, this agreement is intended to amend and supersede your existing
Employment Agreement, dated July 31, 1995 (the "July 31 Agreement"). Our
agreement is as follows:
1. Position. You shall continue to be employed as President and Chief
Executive Officer of the Company and you shall continue to devote all of
your business time, attention, skill and efforts to the business and affairs
of the Company, with such duties as shall be assigned to you by the Board of
Directors. You shall be based at the Company's Shelburne, Vermont offices.
2. Term. Your employment shall continue for a term ending June 30,
2000, unless earlier terminated in accordance with this agreement.
3. Base Salary. Commencing July 1, 1996 and continuing during the
term, your base salary shall be $187,500. You have agreed to forego the base
salary payable to you under the July 31 Agreement for the 3-month period
commencing April 1, 1996 and ending June 30, 1996.
4. Annual Bonus. You will be entitled to a bonus for each fiscal year
during the term, based upon the Company's net operating profit, calculated
and payable as follows:
Fiscal year 1997-10% of operating profit in excess of $500,000 and a
non-qualified stock option to purchase 15,000 shares of the Company's
Common Stock at an exercise price of $0.01 per share. The non-
qualified stock option shall be granted by the Company in fiscal year
1997, vesting as of February 1, 1997.
Fiscal Year 1998-10% of operating profit in excess of $1,000,000.
Fiscal Year 1999-10% of operating profit in excess of $1,500,000.
Fiscal Year 2000-10% of operating profit in excess of $2,000,000.
The options or cash bonus shall be issued or paid as the case may be, within
sixty (60) days following the end of the fiscal year to which the bonus
relates.
5. Stock Options. In addition to the stock options you are entitled to
receive under the July 31 Agreement, you shall be entitled to receive
additional incentive stock options, subject to shareholder approval of
appropriate amendments to the Company's 1993 Incentive Stock Option Plan, to
purchase 450,000 shares of the Company's common stock. These options shall
vest one quarter annually on July 1 of each year commencing July 1, 1997.
6. Benefits. You shall continue to receive all of the Company benefits
set forth in the July 31 Agreement, including (a) reimbursement of your
reasonable travel expenses from your home in Maine to Shelburne, (b) rent up
to $1,450 per month (and related utility expenses of a furnished apartment
within reasonable commuting distance of the Company's offices, (c) a company
car of your choice, subject to the Company's approval which shall not be
unreasonably withheld, and (d) participation in all other benefit plans
available to senior executive employees of the Company in accordance with
the policies and procedures currently, or then in effect, as the case may
be.
7. Indemnification. The Company shall indemnify you (and your estate)
in accordance with the Company's by-laws as in effect from time to time.
This indemnification by the Company shall survive termination or expiration
of this Agreement.
8. Termination. This Agreement may be terminated by either you or by
the Company at any time. If your employment is terminated by (a) you for
"Good Reason" or (b) the Company, for any reason other than for "Cause" at
any time, (i) you shall receive, in lieu of any other payment or benefit
except as set forth in this paragraph, and in a lump sum, an amount equal to
18 months base salary, plus bonus for the year in which your employment was
terminated pro rated for the period you were employed, (ii) an amount equal
to the outstanding amount due to the Company by you under your Loan
Agreement, dated July 31, 1995; and (iii) all your outstanding stock options
which were subject to vesting on or prior to the end of the fiscal year in
which your employment was terminated shall immediately vest and all your
stock options shall continue to be exercisable for a period of ten years
after the date of their grant. Upon a termination of employment by the Company
at any time (other than for "Cause") the Company shall provide you with
reasonable outplacement services. Upon a termination by the Company for
"Cause" or by you without "Good Reason", you shall not be entitled to
receive any further payments or benefits following the date of your
termination.
If your employment is terminated on account of your death or your disability
which lasts (or is likely, based on reasonable medical evidence, to last)
for more than six consecutive months and renders you unable to perform your
duties under this Agreement, all outstanding stock options which were
subject to vesting on or prior to the end of the fiscal year in which your
employment was terminated shall immediately vest and all your stock options
shall continue to be exercisable for a period of ten years after the date of
their grant. Upon such termination for your death or disability, neither you
nor your estate shall be entitled to receive the salary continuation
referred to in clause (i) with respect to a termination by the Company for
any reason other than "Cause", but you or your estate shall be entitled to
the lump sum payment referred to in clause (ii) with respect to a
termination by the Company for any reason other than "Cause" and to such
further payments or benefits provided under plans or policies of the Company
in effect from time to time.
In the event that your employment is terminated within ninety days prior to,
or six months after, a "Change in Control", in addition to the other
benefits to which you would be entitled in the event of a termination by the
Company for any reason other than "Cause", all your stock options shall
continue to be exercisable for a period of ten years after the date of their
grant.
For purposes of this Agreement the terms "Good Reason", "Cause" and "Change
in Control" shall have the meanings defined in the July 31 Agreement.
9. Covenant Not To Compete. During the term and for a period of
eighteen (18) months following termination of your employment with the
Company, you shall not, directly or indirectly, whether as stockholder,
officer, director, employee, consultant or otherwise (except as a beneficial
of less than 5% of the number of shares of any publicly traded securities)
engage in any business that, with respect to 5% or more of its sales,
competes with the Company in the business of marketing and selling stuffed
teddy bears.
10. Subject to Board and Shareholder Approval. The terms of this
Agreement are subject to approval by the Company's Board of Directors and,
as indicated in Section 5, above, the additional incentive stock option is
subject to shareholder approval of appropriate amendments to the Company's
1993 Incentive Stock Option Plan. So long as the terms of this Agreement
receive the approval of the Company's Board of Directors and Shareholders,
you hereby waive and forever release any claim you may have now or in the
future against the Company for compensation that you have agreed to forego,
as described in Section 3, above.
If the foregoing correctly sets forth your understanding of our Agreement,
please sign and return the enclosed copy of this letter to me.
Sincerely,
THE VERMONT TEDDY BEAR CO., INC.
By: /s/ Fred Marks
Fred Marks, Chairman of the Board
ACKNOWLEDGED AND AGREED TO:
/s/ Patrick Burns
R. Patrick Burns
The Vermont Teddy Bear Co., Inc.
Shelburne, Vermont 05482
R. Patrick Burns
Shelburne, VT 05482
Dear Pat:
This letter amends our Letter Agreement, dated July 31, 1995 (the "July 31
Agreement") regarding the terms of a Loan made, and to be made, to you by The
Vermont Teddy Bear Co., Inc. (the "Company").
Under the July 31 Agreement, the Company agreed to advance the Loan to you in
an amount up to $100,000 in eight equal monthly installments commencing August
4, 1995. With your consent, the Company advanced $75,000 of the Loan, but the
balance of the Loan has not yet been advanced. We have agreed that the amount
of the loan shall be increased to $116,818.18 and that the balance of the Loan,
$41,818.18, will be advanced to you on or after, at your request, July 1, 1995.
The Loan shall continue to bear interest at the Applicable Federal Rate.
The Loan shall be repaid, and the entire amount of the Loan then outstanding
shall become immediately due and payable upon demand by the Company, upon the
termination of your employment with the Company. However, if you are still in
the employ of the Company, the Company shall cancel all outstanding principal
amounts and related interest charges on June 29, 2000.
Except as specifically set forth herein, this Letter Agreement amends and
supersedes the July 31 Agreement.
If the foregoing correctly sets forth your understanding of our agreement,
please sign and return the enclosed copy of this letter to me.
Sincerely,
THE VERMONT TEDDY BEAR CO., INC.
By: /s/ Fred Marks
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Fred Marks, Chairman of the Board
ACKNOWLEDGED AND AGREED TO:
/s/ R. Patrick Burns
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R. Patrick Burns