Exhibit 10.1
EMPLOYMENT CONTRACT
between
BABYUNIVERSE, INC.
and
MICHAEL R. HULL

 

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TABLE OF CONTENTS

         
Article I — Recitals
    1  
 
       
Article II — Term
    1  
 
       
Article III — Duties
    1  
 
       
Article IV — Compensation And Other Benefits
    2  
 
       
Article V — Business Expenses
    4  
 
       
Article VI — Vacation
    4  
 
       
Article VII — Termination of Employment
    4  
 
       
Article VIII — Resignation
    5  
 
       
Article IX — Non-Competition
    6  
 
       
Article X — Notices
    8  
 
       
Article XI — Construction of Contract
    8  
 
       
Article XII — Change in Control
    9  
 
       
Article XIII — Miscellaneous
    10  

 

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EMPLOYMENT CONTRACT
     THIS EMPLOYMENT CONTRACT (“Contract”) is made and entered as of the 28th
day of November, 2006 between BABYUNIVERSE, INC., a Florida corporation
(“Employer”), and Michael R. Hull (“Employee”).
R E C I T A L S
     A. Employee and Employer desire to enter into this Contract to memorialize
the employment relationship between Employer and Employee.
     B. Subject to the terms and conditions of this Contract, Employee is the
Chief Financial Officer of Employer.
     NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto mutually agree as follows:
Article I — Recitals
     The above stated Recitals are true and correct and are incorporated by
reference into this Contract.
Article II — Term
     The initial term of this Contract shall be one (1) year commencing as of
December 11, 2006 (the “Commencement Date”) and ending one (1) year thereafter
unless terminated earlier as provided herein (the “Initial Term”). The Initial
Term shall be extended for successive one (1) year periods unless either party
gives the other thirty (30) days prior written notice of its intent not to renew
prior to the expiration of the then current term.
Article III — Duties
     A. In General. Upon the terms and subject to the conditions of this
Contract, Employer hereby employs Employee and Employee hereby accepts such
employment with Employer for the term of this Contract as the Chief Financial
Officer of Employer. Employee shall have the powers and duties with respect to
Employer’s business interests (the “Businesses”) as set forth in the Bylaws of
Employer for its Chief Financial Officer and such other executive and managerial
duties as normally associated with such positions, subject to the direction of
the Chief Executive Officer or the President of the Company in accordance with
the reasonable policies adopted from time to time by the Board of Directors and
communicated by written notice to Employee (the “Duties”). During the term of
this Contract and subject to Article III.D below, Employee shall devote
substantially all of Employee’s business time, attention, skill and efforts to
the faithful performance of the Duties.

 

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     B. Place of Performance. The Duties shall be performed in Jupiter, Florida,
except for such travel in the ordinary course of Employer’s business as may from
time to time be reasonably required. Employee’s principal place of business
shall be at the executive offices of Employer in Jupiter, Florida.
     C. Delegation. Notwithstanding anything to the contrary contained in this
Article III, Employee shall have the right and authority to delegate
responsibility to one or more personnel as Employee deems appropriate, and is
hereby authorized to hire on behalf of Employer additional agents, employees and
other representatives which in Employee’s reasonable opinion, and subject to the
prior approval of the president of the Employer, are necessary to handle the
affairs of Employer, and to terminate the employment of any and all agents,
employees and other representatives of Employer, other than appointed officers
of Employer, the termination of whom shall be subject to the prior approval by
Employer’s Chief Executive Officer or President.
     D. Other Activities. Employee shall use Employee’s best efforts for the
benefit of Employer by whatever activities Employee reasonably deems appropriate
to maintain and improve Employer’s standing in the community generally and among
other members of the industries in which Employer is from time to time engaged,
including such entertaining for business purposes as Employee reasonably
considers appropriate. Employee shall not, without the approval of the Chief
Executive Officer or the President of Employer, render services of a business
nature to any other person or entity, if such activities would interfere with
the performance of Employee’s Duties as required under this Contract or
otherwise prevent Employee from devoting substantially all of Employee’s
business time, attention, skill and efforts to the performance of Employee’s
Duties as required under this Contract. Subject to the foregoing limitations,
the following activities shall be deemed to be permissible: (i) owning or
managing real or personal property owned by Employee or Employee’s family
members; (ii) owning any business which does not compete, directly or
indirectly, with Employer; and (iii) holding directorships or similar positions
in any organization which is not competing with Employer and which is approved
by the Board of Directors of Employer.
Article IV — Compensation And Other Benefits
     A. Base Salary, Signing Bonus, Annual Bonus and Employee Benefit Plans. For
all services rendered by Employee in any capacity during Employee’s employment
under this Contract (including any renewals hereof), Employer shall pay to
Employee as compensation the sum of the amounts set forth in the following
subparagraphs 1 through 4.
          1. Base Salary. Commencing upon the Commencement Date, Employee shall
be paid the sum One Hundred Thirty Five Thousand Dollars ($135,000.00) on an
annualized basis (the “Base Salary”), which amount shall be paid in accordance
with Employer’s customary payroll practices and shall be subject to adjustment
from time to time, as determined by the Compensation Committee of the Board of
Directors of Employer.

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          2. Annual Bonus. On or before one hundred twenty (120) days subsequent
to the completion of Employer’s preceding fiscal year, Employee shall be
eligible to receive a cash bonus, such bonus to be within the sole discretion of
the Compensation Committee of the Board of Directors of Employer.
          3. Benefit Plans. During the term of Employee’s employment with
Employer, Employee shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other executives of Employer (“Investment Plans”) and Employee shall be eligible
for participation in and shall receive all benefits under, welfare benefit
plans, practices, policies and programs applicable generally to other executives
of Employer, including but not limited to comprehensive medical and dental
coverage (“Welfare Plans”).
          4. Dues. Employer shall pay the dues of such professional associations
and societies of which Employee is a member in furtherance of Employee’s Duties,
including without limitation CPE credits and other professional certifications
and continuing education requirements associated with being a CPA.
     B. Payments Upon Termination.
          1. Termination by Employer for Cause; Voluntary Unilateral Decision by
Employee Without Cause; Death or Disability. If Employee’s employment is
terminated (i) by Employer for Cause (as hereinafter defined at Article VII.B);
(ii) by Employee by a voluntary unilateral decision by Employee without Cause
(as defined at Article VII.A); or (iii) as a result of Employee’s death or
Disability (as defined below), then Employee shall be entitled to: (1) the base
salary pursuant to Article IV.A.1 earned through the date of termination;
(2) accrued vacation under Article VI hereof; and (3) all applicable
reimbursements from Employer due under Article V hereof. As used in this
Contract, the term “Disability” means (A) Employee’s incapacity due to a
permanent mental or physical illness that prevents Employee from performing
Employee’s duties hereunder for 26 consecutive weeks or (B) a physical condition
that renders the performance by Employee of Employee’s duties hereunder a
serious threat to the health and well being of Employee. Disability shall be
determined by a physician selected by Employee (or Employee’s legal
representative) and reasonably acceptable to Employer.
          2. Termination for Reasons Other than Termination by Employer for
Cause; Voluntary Unilateral Decision by Employee or Death or Disability. If
Employee’s employment is terminated for any reason by either party, other than
as a result of termination by Employer for Cause (as defined at Article VII.B),
a termination by a voluntary unilateral decision by Employee without Cause (as
defined at Article VII.A) or a termination as a result of Employee’s death or
Disability, Employee shall be entitled to: (1) any applicable Severance, as such
term is defined below, (2) all amounts set forth in items (1), (2) and (3) of
Article IV.B.1 above. For purposes of this Contract, clauses (1) and (2) of this
Article IV.B.2 of this Contract shall collectively be referred to as the
“Termination Benefits.” Payment of the Termination Benefits shall be conditioned
upon the execution by Employee of a valid release, to be prepared by Employer,
in which Employee releases Employer, to the maximum extent permitted by law,
from any and all

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claims Employee may have against Employer that relate to or arise out of
Employee’s employment or termination of employment. “Severance” shall be
calculated initially as one twelfth of the Base Salary, with an additional one
twelfth of the Base Salary for each full year that this Agreement and any
extension thereof shall be in effect. Notwithstanding anything to the contrary
in the foregoing, the Severance shall never exceed one half of the Base Salary
nor shall it be less than one twelfth of the Base Salary.
Article V — Business Expenses
     A. Business Expenses. Employee is authorized to incur reasonable expenses
to execute and/or promote the Businesses of Employer, including, but not limited
to, expenses related to maintenance of professional licenses and expenses for
reasonable entertainment, travel, and similar items, in each case, in accordance
with the policies, practices and procedures of Employer. Employer will reimburse
Employee for all reasonable travel or other expenses incurred while on business.
Employer will not reimburse Employee for automobile expense associated with
traveling to Employer’s offices.
Article VI — Vacation
     Employee will be entitled to fifteen (15) days of paid time off in
accordance with the Employer’s vacation policy annually or such other time as
authorized by the Board of Directors during which time Employee’s compensation
shall be paid in full. Days of paid time off that are unused in any calendar
year may not be accumulated and carried forward and used in future years.
Article VII — Termination of Employment
     A. Termination by Employee. Employee may terminate Employee’s employment
with Employer at any time upon notice to Employer for “Cause.” As used in this
Paragraph A, the term “Cause” shall mean:
          1. Employer’s material breach of this Contract; provided, however,
that in the event Employee believes that this Contract has been materially
breached, Employee shall provide Employer with written notice of such breach and
provide Employer with a thirty (30) day period in which to cure or remedy such
breach;
          2. Assignment to Employee of regular duties inconsistent with
Employee’s position, or status with Employer; or
          3. The relocation of Employer’s principal executive offices to a
location more than forty (40) miles outside of Jupiter, Florida without
Employee’s prior consent.
     B. Termination by Employer. Employee’s employment may be terminated by
Employer at any time upon notice to Employee for “Cause.” As used in this
Paragraph B, the term “Cause” shall

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mean: (i) commission of any act of fraud or gross negligence by Employee in the
course of employment hereunder that, in the case of gross negligence, has a
material adverse effect on the business or financial condition of Employer or
any of its affiliates; (ii) willful material misrepresentation at any time by
you to the President and Chief Executive Officer or the Board of Directors of
Employer; (iii) Employee’s willful failure or refusal to comply with any of
Employee’s material obligations hereunder or to comply with a reasonable and
lawful instruction of the President and Chief Executive Officer or the Board of
Directors of Employer; (iv) engagement by Employee in any conduct or the
commission by Employee of any act that is, in the reasonable opinion of the
Board of Directors of Employer, materially injurious or detrimental to the
substantial interest of Employer or any of its affiliates; (v) Employee’s
indictment for any felony, whether of the United States or any state thereof or
any similar foreign law to which Employee may be subject; (vi) any failure
substantially to comply with any written rules, regulations, policies or
procedures of Employer furnished to Employee that, if not complied with, could
reasonably be expected to have a material adverse effect on the business of
Employer or any of its affiliates; (vii) the use by Employee of an illegal
substance, including, but not limited to, marijuana, cocaine, heroin, and all
other illegal substances, and/or the dependence by Employee upon the use of
alcohol, which, in any case, in the opinion of both Employee’s family physician
and a physician chosen by Employer, materially impairs Employee’s ability to
perform Employee’s Duties hereunder, which dependence is not cured or
rehabilitated, as determined by Employee’s physician, within three (3) months of
receipt of written notice from Employer to Employee; or (viii) any willful
failure to comply with Employer’s policies regarding insider trading.
     C. Death or Disability. This Contract shall terminate upon the death or the
Disability of Employee. Employee or Employee’s heirs or estate (as the case may
be) shall be entitled to the compensation provided for with respect to a
termination by death or Disability in this Contract.
     D. Termination of Obligations. Upon the resignation of Employee or
termination of Employee’s employment in accordance with the provisions of this
Article VII, all obligations of Employee and Employer hereunder shall be
terminated except as otherwise provided herein.
     E. No Mitigation. If Employee’s employment under this Contract terminates
for any reason, with or without Cause, Employee shall have no obligation to seek
other employment in mitigation of damages; and no compensation received by
Employee from other employment or other sources shall be considered as a
mitigation of the amounts owing to Employee hereunder.
Article VIII — Resignation
     Any termination of employment under this Contract, whether or not
voluntary, will automatically constitute a resignation of Employee as an officer
of Employer and all subsidiaries of Employer and if requested to do so by
Employer’s Board of Directors, shall resign as a member of the Board of
Directors of Employer and all subsidiaries of Employer; provided, however, that
Employee shall execute such resignation documents as Employer may reasonably

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request in order to evidence such resignation and this provision shall survive
the termination of this Contract.
Article IX — Non-Competition
     A. Non-Competition. While in the employment of Employer and for the period
of three (3) years thereafter (the “Non-Competition Period”), unless otherwise
agreed to in writing by Employer, Employee will not, directly or indirectly,
own, manage, operate, join, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with any business that is engaged in selling brand name baby, toddler, kids or
maternity products or the provision of online content regarding parenting,
families or babies.
     B. Confidential Information. During and after the term of the Contract,
Employee shall not directly or indirectly, divulge, furnish or make accessible
to any party not authorized by Employer to receive it, any of the proprietary or
confidential information or knowledge of Employer, including without limitation,
any financial information, marketing plans, strategies, trade secrets, data,
know-how, processes, techniques and other proprietary information of Employer or
its subsidiaries (the “Confidential Information”), other than in the course of
performing Employee’s duties hereunder and with the consent of Employer, which
consent shall not unreasonably be withheld, and in accordance with Employer’s
policies and regulations, as established from time to time, for the protection
of the Employer’s Confidential Information. The term “Confidential Information”
does not include, and there shall be no obligation hereunder with respect to
information (including office practices and procedures) that is obvious, or that
may readily be determined by any person reasonably knowledgeable in the industry
in which Employer operates by diligent review and examination of public sources,
or that becomes generally available to the public other than as a result of a
disclosure by Employee or any agent or other representative thereof. Employee
shall not have any obligation hereunder to keep confidential any Confidential
Information to the extent disclosure of any thereof is required by law, or
determined in good faith by Employee to be necessary or appropriate to comply
with any legal or regulatory order, regulation or requirement; provided,
however, that in the event disclosure is required by law, Employee shall provide
Employer with reasonable notice of such requirement so that Employer may seek an
appropriate protective order and Employee shall reasonably cooperate with
Employer’s efforts to seek such a protective order. Upon termination of
employment on the expiration of the Contract, all tangible evidence of such
confidential or proprietary information in the possession of Employee shall be
returned to Employer, and Employee shall not make or retain any copies or
excerpts thereof. Employee further agrees not to use any Confidential
Information for the benefit of any person or entity other than Employer or its
subsidiaries.
     C. Non-Solicitation. During the term of the Contract and for a period of
three (3) years thereafter (the “Non-Solicitation Period”), Employee shall not
influence or attempt to influence customers or suppliers of Employer or any of
its present or future subsidiaries either directly or indirectly, to divert
their business from Employer to any individual, partnership, firm, corporation,
or other entity that is in competition with the business of Employer or any

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subsidiary of Employer at any time during the Non-Solicitation Period. During
the Non-Solicitation Period, Employee shall not directly or indirectly solicit
any of Employer’s employees or independent contractors to work for (as an
employee or independent contractor) any business, individual, partnership, firm,
corporation, or other entity in competition with the business of Employer or any
subsidiary of Employer at any time during the Non-Solicitation Period.
     D. Patents/Assignment and Transfer of Inventions. Employee shall disclose,
assign and transfer to the Company any and all ideas, concepts, discoveries,
inventions, developments, improvements, trade secrets, technical data, know-how
or other materials conceived, devised, invented, developed or reduced to
practice or tangible medium by Employee or any of Employee’s affiliates, or
under Employee’s direction, during the term of this Agreement (hereinafter
“Inventions”). If any patents shall be developed by Employee or any patents
shall result from the knowledge of Employee during the term of this Agreement,
Employee shall assign such patents to the Employer. Employee also agrees to
execute such documents and perform such activities as the Employer may
reasonably request to obtain such patents and to assist the Employer, as
reasonably requested by the Employer’s Board of Directors in defending its
patents.
     E. Remedies. In the event of an actual or threatened breach by the Employee
of this Article IX, including any subparagraph hereof, Employer shall be
entitled to an injunction restraining Employee from its prohibited conduct. If
the court should hold that the duration and/or scope (geographic or otherwise)
of the covenants contained herein are unreasonable, then, to the extent
permitted by law, the court may prescribe a duration and/or scope (geographic or
otherwise), that is reasonable and the parties agree to accept such
determination, subject to their rights of appeal. Nothing contained herein shall
be construed as prohibiting Employer or any third party from pursuing any of the
remedies available to it for such breach or threatened breach, including
recovery of damages from Employee. In any action or proceeding to enforce the
provisions of this Article IX, the prevailing party (other than Employee in the
event Employee prevails as a result of a determination that the duration and/or
scope (geographic or otherwise) of the covenants contained herein are
unreasonable) shall be reimbursed by the other party for all costs incurred in
such action or proceeding, including, without limitation, all court costs and
filing fees and all reasonable attorneys’ fees, incurred either at the trial
level or at the appellate level. If Employee shall be in violation of any of the
restrictive covenants contained in this Contract, then the time limitation
otherwise applicable to such restrictive covenant shall be extended for a period
of time equal to the period of time during which such breach or breaches occur.
If Employer seeks injunctive relief from such breach in any court, then the
covenant shall be extended for a period of time equal to the pendency of such
proceedings, including all appeals. The existence of any claim or cause of
action by Employee against Employer, whether predicated upon this Contract or
otherwise, shall not constitute a defense to the enforcement by Employer of the
foregoing restrictive covenant, but shall be litigated separately.
     F. Acknowledgments by Employee. Employee understands that the restrictions
set forth in this Article IX may limit Employee’s ability to earn a livelihood
in a business similar to the business of Employer or any subsidiary thereof, but
Employee nevertheless believes that

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Employee has received and will receive sufficient consideration and other
benefits as an employee of Employer and as otherwise provided hereunder to
justify clearly such restrictions which, in any event (given Employee’s
education, skills and ability), Employee does not believe would prevent
Employee’s from earning a living. Employee acknowledges that the geographic
boundaries, scope of prohibited activities, and duration of this Article IX are
reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the goodwill of Employer’s proprietary information, plans
and services and to protect the other legitimate business interests of Employer.
Article X — Notices
     Any notice, request, demand, offer, payment or communication required or
permitted to be given by any provision of this Contract shall be deemed to have
been delivered and given for all purposes if written and if (a) delivered
personally or by courier or delivery service, at the time of such delivery; or
(b) directed by registered or certified United States mail, postage and charges
prepaid, addressed to the intended recipient, at the address specified below, at
such time that the intended recipient or its agent signs or executes the
receipt:

     
If to Employer:
  BabyUniverse, Inc.
150 South US Highway One, Suite 500
Jupiter, Florida 33410
Attn: Chairman of the Board
 
   
If to Employee:
  Michael R. Hull
4417 Wellington Shores Drive
Wellington, Florida 33467

     Any party may change the address to which notices are to be mailed by
giving written notice as provided herein to the other party. Commencing
immediately after the receipt of such notice, such newly designated address
shall be such person’s address for purposes of all notices or other
communications required or permitted to be given pursuant to this Contract.
Article XI — Construction of Contract
     A. Florida Law. This Contract shall be considered for all purposes a
Florida document and shall be construed pursuant to the laws of the State of
Florida, and all of its provisions shall be administered according to and its
validity shall be determined under the laws of the State of Florida without
regard to any conflict or choice of law issues.
     B. Gender and Number. Whenever appropriate, references in this Contract in
any gender shall be construed to include all other genders, references in the
singular shall be construed to include the plural, and references in the plural
shall be construed to include the singular, unless the context clearly indicates
to the contrary.

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     C. Certain Words. The words “hereof,” “herein,” “hereunder,” and other
similar compounds of the word “here” shall mean and refer to the entire Contract
and not to any particular article, provision or paragraph unless so required by
the context.
     D. Captions. Paragraph titles or captions contained in this Contract are
inserted only as a matter of convenience and/or reference, and they shall in no
way be construed as limiting, extending, defining or describing either the scope
or intent of this Contract or of any provision hereof.
     E. Severability. The invalidity or unenforceability of any provision
hereunder (or any portion of such a provision) shall not affect the validity or
enforceability of the remaining provisions (or remaining portions of such
provisions) of this Contract.
Article XII — Change in Control
     This Contract shall continue in full force and effect notwithstanding any
change in control, merger, consolidation or reorganization of any kind involving
Employer or the sale of all or substantially all of its assets. This Contract
shall be binding upon Employer and Employee and their respective heirs,
executors, administrators, successors and assigns.
     Notwithstanding anything to the contrary contained herein, if at any time
during the term of this Contract and any renewal thereof, there shall be a
Change in Control (as hereinafter defined) of Employer, and if such Change in
Control results in a diminution in Employee’s compensation, responsibilities or
position such that Employee cannot in good faith continue to fulfill the
responsibilities for which he is employed, as determined by Employee in his sole
discretion during the ninety (90) day period commencing on the date of the
Change of Control and ending on the date which is ninety (90) days thereafter
(the “Ninety Day Period”), and if such Change in Control did not occur due to
Employee’s intentional bulk sale of voting shares of Employer owned by him
directly to such control persons or group, then Employee shall have the option
of terminating this Contract upon ten (10) days’ written notice provided that
such notice be received by Employer within the Ninety Day Period and, in such
event Employer shall pay to Employee at the time of such termination the
Termination Benefits. Said lump sum payment shall be in lieu of any and all
compensation due to Employee for the years that would otherwise be remaining for
the term of this Contract. Upon receipt of said lump sum payment, this Contract
and all rights and duties of the parties shall be terminated.
     As used herein, “Change in Control” shall mean the occurrence of any one of
the following: (i) Employer enters into an agreement of reorganization, merger,
or consolidation pursuant to which Employer or a subsidiary is not the surviving
corporation; (ii) Employer sells substantially all of its assets to a purchaser
other than a subsidiary; or (iii) shares of stock of Employer representing in
excess of fifty percent (50%) of the total combined voting power of all
outstanding classes of stock of Employer are acquired, in one transaction or a
series of transactions, by a single purchaser or group of related purchasers (as
such terms are defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended).

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Article XIII — Miscellaneous
     A. Entire Contract. This Contract (and all other documents executed
simultaneously herewith or pursuant hereto) constitutes the entire agreement
among the parties pertaining to the subject matter hereof, and supersedes and
revokes any and all prior or existing agreements, written or oral, relating to
the subject matter hereof, and this Contract shall be solely determinative of
the subject matter hereof.
     B. Restrictive Covenant. In the event the non-competition, non-solicitation
clause or any other restrictive covenant of this Contract shall be deemed
unenforceable, invalid or overbroad in whole or in part for any reason, then any
arbitration panel or court of competent jurisdiction is hereby authorized,
requested and instructed to reform such provision(s) to provide for the maximum
competitive restraints upon Employee’s activities (in time and geographic area),
which may then be legal and valid.
     C. Waiver. Either Employer or Employee may, at any time or times, waive (in
whole or in part) any rights or privileges to which Employee or it may be
entitled hereunder. However, no waiver by any party of any condition or of the
breach of any term, covenant, representation or warranty contained in this
Contract, in any one or more instances, shall be deemed to be or construed as a
further continuing waiver of any other condition or of any breach of any other
terms, covenants, representations or warranties contained in this Contract, and
no waiver shall be effective unless it is in writing and signed by the waiving
party.
     D. Attorneys’ Fees. In the event that either party shall be required to
retain the services of an attorney to enforce any of Employee’s or its rights
hereunder, the prevailing party in any arbitration or court action shall be
entitled to receive from the other party all costs and expenses including (but
not limited to) court costs and attorneys’ fees (whether in the arbitration or
in a court of original jurisdiction or one or more courts of appellate
jurisdiction) incurred by him or it in connection therewith. The parties hereby
expressly confer on the arbitrator the right to award costs and attorneys’ fees
in the arbitration.
     E. Dispute Resolution. Except for any dispute or controversy in which
Employer is seeking injunctive relief pursuant to Article IX, Employee and
Employer shall settle by arbitration any dispute or controversy arising in
connection with this Contract, whether or not such dispute involves a plan
subject to the Employee Retirement Income Security Act of 1974, as amended. Such
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association before a panel of three arbitrators sitting in Palm
Beach County, Florida or such other location as shall be mutually agreed by the
parties. The award of the arbitrators shall be final and nonappealable, and
judgment may be entered on the award of the arbitrators in any court having
proper jurisdiction. THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD PUNITIVE
DAMAGES UNDER ANY CIRCUMSTANCES (WHETHER IT BE EXEMPLARY DAMAGES, TREBLE
DAMAGES, OR ANY OTHER PENALTY OR PUNITIVE TYPE OF DAMAGES) REGARDLESS OF WHETHER
SUCH DAMAGES MAY

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BE AVAILABLE UNDER APPLICABLE LAW, EMPLOYEE AND EMPLOYER HEREBY EACH WAIVING
THEIR RIGHT, IF ANY, TO RECOVER PUNITIVE DAMAGES IN CONNECTION WITH ANY SUCH
CLAIMS, DISPUTES OR DISAGREEMENTS REGARDLESS OF WHETHER SUCH CLAIM, DISPUTE OR
DISAGREEMENT ARISES UNDER THE LAW OF CONTRACTS, TORTS, (INCLUDING, WITHOUT
LIMITATION, NEGLIGENCE OF EVERY KIND AND STRICT LIABILITY WITHOUT FAULT), OR
PROPERTY, OR AT COMMON LAW OR IN EQUITY OR OTHERWISE. EMPLOYEE ACKNOWLEDGES THAT
BY SIGNING THIS AGREEMENT) EMPLOYEE IS WAIVING ANY RIGHT THAT EMPLOYEE MAY HAVE
TO A JURY TRIAL OR, OTHER THAN AS PROVIDED BY SECTION 16, A TRIAL BEFORE A JUDGE
IN CONNECTION WITH, OR RELATING TO, A CLAIM.
     F. Venue. Without limiting Paragraph E above, any litigation arising
hereunder shall be instituted only in Palm Beach County, Florida, the place
where this Contract was executed, and all parties hereto agree that venue shall
be proper in said county for all such legal or equitable proceedings.
     G. Assignment. The rights and obligations of the parties under this
Contract shall inure to the benefit of and shall be binding upon their
successors, assigns, and/or other legal representatives. Additionally, covenants
in this Contract which are for the benefit of Employer also shall run in favor
of Employer’s subsidiaries. This Contract shall not be assignable by Employer or
Employee. The services of Employee are personal and Employee’s obligations may
not be delegated by Employee’s except as otherwise provided herein.
     H. Amendment. This Contract may not be amended, modified, superseded,
canceled, or terminated, and any of the matters, covenants, representations,
warranties or conditions hereof may not be waived, except by a written
instrument executed by Employer and Employee or, in the case of a waiver, by the
party to be charged with such waiver.
     I. No Third Party Beneficiary. Nothing expressed or implied in this
Contract is intended or shall be construed to confer upon or give any person,
other than Employer and Employee and their respective successors and permitted
assigns, any rights or remedies under or by reason of this Contract.
     J. Indemnification. To the fullest extent permitted by law and Employer’s
certificate of incorporation and by-laws, Employer shall promptly indemnify
Employee for all amounts (including, without limitation, judgments, fines,
settlement payments, losses, damages, costs and expenses (including reasonable
attorneys’ fees)) incurred or paid by the Employee in connection with any
action, proceeding, suit or investigation arising out of or relating to the
performance by Employee of services for (or acting as a fiduciary of any
Employee benefit plans, programs or arrangements of) Employer or any of its
subsidiaries or affiliates, including as a director, officer or employee of
Employer or any such subsidiary or affiliate. Employer also agrees to maintain a
directors’ and officers’ liability insurance policy covering Employee to the
extent Employer provides such coverage for its other executive officers.

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     K. Tax Withholding. All payments to the Employee under this Contract will
be subject to the withholding of all applicable employment and income taxes.
     L. Counterparts. This Contract may be executed in one or more counterparts,
and any such counterpart shall, for all purposes, be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
     IN WITNESS WHEREOF, Employer and Employee have caused this Contract to be
executed on the day and year first above written.

            BABYUNIVERSE, INC.
      By:   /s/ John C. Textor         Name:   John C. Textor        Title:  
Chief Executive Officer        Michael R. Hull
      /s/ Michael R. Hull                  

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