Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This employment agreement (the “Agreement”) is dated June 18, 2004, between
Excelligence Learning Corporation (“Employer”) and Diane Kayser (“Employee”).

 

Recitals

 

WHEREAS, Employer desires the services of Employee in order to retain Employee’s
experience, abilities, and knowledge, and is therefore willing to engage her
services on the terms and conditions set forth herein; and

 

WHEREAS, Employee desires to be employed by Employer and is willing to do so on
the terms and conditions set forth herein.

 

NOW THEREFORE, in consideration of the above recitals and of the mutual promises
and conditions set forth in this Agreement, it is agreed as follows:

 

1. Duration: Subject to earlier termination as provided in this Agreement,
Employee shall be employed for a term beginning on July 12, 2004 (the “Effective
Date”), and continuing through July 11, 2006.

 

2. Place of Employment: Unless the parties agree otherwise in writing, during
the employment term Employee shall perform the services Employee is required to
perform under this Agreement at Employer’s headquarters (which are currently
located at 2 Lower Ragsdale Drive, Suite 200, Monterey, California, 93940);
provided, however, that Employer may from time to time require Employee to
travel temporarily to other locations on Employer’s business.

 

3. Duties and Authority: Upon the Effective Date, Employer shall employ Employee
as its Financial Director. Employee shall remain employed in such capacity until
the last day of employment of Employer’s current Chief Financial Officer. Upon
the last day of employment of Employer’s current Chief Financial Officer, and in
no event later than August 31, 2004, Employer shall employ Employee as Executive
Vice President and Chief Financial Officer. Employee shall have the full power
and authority to manage and conduct business for the Employer, subject to the
directions and policies of Employer as they may be, from time to time, stated
either orally or in writing.

 

4. Reasonable Time and Effort: During Employee’s employment, Employee shall
devote such time, interest, and effort to the performance of this Agreement as
may be fairly and reasonably necessary. Except with the prior written approval
of the Chief Executive Officer, Employee, during the term of this Agreement or
any renewal thereof, will not engage directly or indirectly, in any other
business activity (whether or not pursued for pecuniary advantage) that is or
may be competitive with, or that might place her in a competing position to,
that of Employer or any of its Affiliates. For this purpose, “Affiliate” or
“Affiliates” shall mean any partnership, joint venture, limited liability
company or corporation that, directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common

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Control with, Employer. For this purpose, the term “Control” includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a partnership, joint venture, limited liability
company or corporation, whether through the ownership of voting securities, by
contract or otherwise.

 

5. Salary: During the term of this Agreement, Employer agrees to pay Employee a
base salary of $225,000 per year. The base salary shall be payable as a current
salary on a bi-weekly basis. Employer, in its sole discretion, may increase
Employee’s base salary or any other benefits but may not decrease Employee’s
salary during the term of this Agreement.

 

If, during the term of this Agreement, Employee’s employment is terminated for
any reason apart from the reasons set forth in the sections below titled
“Termination,” “Termination Because of Death,” and/or “Termination Because of
Disability,” Employer shall continue to pay Employee’s base salary in effect at
the time of Employee’s termination of employment through July 11, 2006. In such
case, Employee will have no obligation to mitigate her lost compensation and
Employer will also reimburse Employee’s insurance premiums incurred as a result
of the continuation of Employee’s benefits coverage required by COBRA.

 

Whenever compensation is payable to Employee during a time when Employee is
partially or totally disabled and such disability would entitle Employee to
disability income or to salary continuation payments from Employer according to
the terms of any plan now or hereafter provided by Employer or according to any
policy of Employer in effect at the time of such disability, Employee shall
apply for such disability income or salary continuation, and the compensation
payable to Employee under this Agreement shall be inclusive of any such
disability income or salary continuation and shall not be in addition to such
disability income or salary continuation. If disability income is payable to
Employee by an insurance company under an insurance policy paid for by Employer,
the compensation payable to Employee under this Agreement shall be inclusive of
the amounts paid to Employee by that insurance company and shall not be in
addition to the amounts paid to Employee by that insurance company.

 

6. Bonus: On each anniversary of the Effective Date, Employee shall receive a
guaranteed bonus of 25% of her base salary and shall be eligible to receive an
additional discretionary bonus of 25% of her base salary, such discretionary
bonus to be awarded by Employer’s Chief Executive Officer and/or Board of
Directors principally based on Employee’s performance during the year preceding
the eligibility date; provided, however, that before any such discretionary
bonus is paid to Employee, it must be approved by the compensation committee of
the Board of Directors or the independent members of the Board of Directors, as
appropriate at such time, in accordance with applicable law. Bonuses provided
for in section titled “Bonus” shall not be owing and payable to Employee if
Employee’s employment is terminated prior to the anniversary date of the
Effective Date of this Agreement pursuant to the sections titled “Termination,”
“Termination Because of Death,” and/or “Termination Because of Disability.”

 

Employee has notified Employer that she would have received a $50,000 bonus from
her current employer (“Eddie Bauer Employment”) in the third quarter of 2004 and
that, because of Employee’s expected termination of the Eddie Bauer Employment
due to her entry into

 

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this Agreement, Employee may not receive such bonus. As a result, Employer
agrees to pay Employee $50,000, on a one-time basis only, on the first
anniversary of the Effective Date, if, as of such date, Employee has not
received any or all of the $50,000 bonus earned through the Eddie Bauer
Employment and this Agreement has not been terminated pursuant to the sections
titled “Termination,” “Termination Because of Death,” and/or “Termination
Because of Disability.” If Employee receives any portion of the $50,000 owing
from the Eddie Bauer Employment, the amount owing to Employee by Employer under
this paragraph shall be reduced by such amount. Employer’s agreement to make
this one-time payment of up to $50,000 is contingent upon Employee’s personal
attorney tendering a demand letter to Eddie Bauer in a form mutually agreeable
to the parties hereto, and thereafter engaging in negotiations to the extent
such attorney reasonably believes would be productive in order to try to secure
payment of the $50,000 bonus, or portion thereof, owing from Eddie Bauer, taking
into account the cost-effectiveness of such efforts. If Employee recovers
payment of any or all of the $50,000 owing from Eddie Bauer after receiving
payment of $50,000 from Employer pursuant to this paragraph, Employee shall
promptly reimburse Employer for the amount equal to what was received from Eddie
Bauer.

 

7. Moving Reimbursement and Housing Allowances: In consideration of Employee’s
move from her current residence in Bellevue, Washington, Employer shall pay for
the reasonable expenses of Employee’s move to Monterey, California, such amount
not to exceed $10,000 (the “Moving Reimbursement”). If Employee voluntarily
resigns her position with Employer prior to the first anniversary of the
Effective Date, or if Employee is terminated for “cause” (as defined in Section
12) prior to the first anniversary of the Effective Date, Employee agrees to
reimburse Employer for one hundred percent (100%) of the Moving Reimbursement.
The Moving Reimbursement shall be paid to Employee promptly upon receipt of
receipts and other documentation evidencing Employee’s payment of such costs.
Employee also shall be entitled to a temporary housing allowance for the
reasonable costs of temporary housing in or near Monterey, California for the
three months following the Effective Date. Such housing allowance shall be
limited to the time Employee is paying rental expenses for her temporary
housing, and shall not exceed a total of $5,000 for the three-month period and
shall be paid to Employee promptly upon receipt of receipts and other
documentation evidencing Employee’s payment of such costs.

 

8. Additional Benefits: During the employment term, Employee shall be entitled
to receive all other benefits of employment generally available to Employer’s
other senior managerial employees as she becomes eligible for them, including
medical, dental, life and disability insurance benefits, and participation in
Employer’s 2001 Amended and Restated Stock Option and Incentive Plan, pension
plan, quarterly bonus plan and/or profit-sharing plan.

 

Employer reserves the right to modify, suspend or discontinue any and all of the
above benefit plans, policies and practices at any time without notice to or
recourse to Employee so long as such action is taken generally with respect to
other similarly situated persons and does not single out Employee.

 

9. Stock Options: Employee shall be entitled to options to purchase up to 50,000
shares of Employer’s common stock pursuant to, and governed by, Employer’s 2001
Amended and Restated Stock Option and Incentive Plan. Such options shall vest
1/2 on each of the two (2)

 

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successive anniversaries of the date of grant. Employee’s option grant also is
contingent upon approval of the independent members of the Employer’s Board of
Directors, such approval not to be unreasonably withheld, and Employee’s
execution of a separate stock option agreement.

 

10. Paid Time Off: Employee shall be entitled to 20 business days of Paid Time
Off (“PTO”) each calendar year. PTO will continue to accrue so long as
Employee’s total accrued PTO does not exceed 30 business days. In the event
Employee’s accrued PTO should reach 30 business days, Employee will cease to
accrue further PTO until Employee’s accrued PTO falls below that level. Other
than the accrual and maximum accrual of PTO as set forth in this section of the
Agreement, Employee’s PTO shall be governed by the PTO provisions of the
Excelligence Learning Corporation Employee Manual.

 

11. Expense Reimbursement: During the employment term, to the extent that such
expenditures satisfy the criteria under the Internal Revenue Code for
deductibility by Employer (whether or not fully deductible) for federal income
tax purposes as ordinary and necessary business expenses, Employer shall
reimburse Employee promptly for reasonable business expenses, including travel,
entertainment, parking, business meetings, and professional dues, made and
substantiated in accordance with the policies and procedures established from
time to time by Employer with respect to Employer’s other similarly situated
employees.

 

12. Termination: Employer may terminate this Agreement at any time for cause.
Under this Agreement, the term “cause” shall mean (i) misappropriation of any
material funds or property of Employer or of any of its related companies; (ii)
unjustifiable material neglect of duties under this Agreement; (iii) conviction
of a felony involving moral turpitude; (iv) gross misconduct and/or the failure
to act in good faith to the material detriment of Employer; or (v) willful and
bad faith failure to obey reasonable and material orders given by Employer. If
this Agreement is terminated as set forth in this paragraph, then payment of the
specified salary earned and benefits accrued as of the date of the termination
shall be payment in full of all compensation payable under this Agreement.

 

13. Termination Because of Death: In the event that Employee dies during the
term of this Agreement, this Agreement shall be terminated on the last day of
the calendar month of her death and Employer shall be required to pay to
Employee’s estate the specified salary and any additional benefits accrued by
Employee at the time of her death.

 

14. Termination Because of Disability: If, at the end of any calendar month
during the initial term or any renewal term of this Agreement, Employee is and
has been for the three (3) consecutive full calendar months then ending, or for
80% or more of the normal working days during the six (6) consecutive full
calendar months then ending, unable due to mental or physical illness or injury
to perform Employee’s duties under this Agreement, Employer shall have the right
to, subject to applicable federal and state law, to terminate Employee’s
employment, and Employer shall only be obligated to pay Employee the specified
compensation earned and benefits accrued by Employee at the time of her
termination by Employer.

 

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15. Agreement Survives Combination or Dissolution: This Agreement shall not be
terminated by Employer’s voluntary or involuntary dissolution or by any merger
in which Employer is not the surviving or resulting corporation, or on any
transfer of all or substantially all of Employer’s assets. In the event of any
such merger or transfer of assets, the provisions of this Agreement shall be
binding on and inure to the benefit of the surviving business entity or the
business entity to which such assets shall be transferred.

 

16. Notices: All notices that either party is required or may desire to serve
upon the other may be served either personally or sent certified mail / return
receipt requested or sent by overnight delivery addressed to the other party, or
to such other address as either party may provide in writing to the other party,
as follows:

 

To Employer: Ronald Elliott, Excelligence Learning Corporation, 2 Lower Ragsdale
Dr., #200, Monterey, CA 93940.

To Employee: Diane Kayser, Excelligence Learning Corporation, 2 Lower Ragsdale
Dr., #200, Monterey, CA 93940, with a copy to Arnie Herz, Esq., 14 Vanderventer
Ave., Ste. 255, Port Washington, NY 11050.

 

17. Employee Manual: Employee acknowledges that Employee has been provided a
copy of the Excelligence Learning Corporation Employee Manual. It is agreed and
understood that the Employee Manual represents guidelines that the Company may
change from time to time in its sole discretion. It is not intended to be a
contract. To the extent that this Agreement conflicts with the Employee Manual,
the terms of this Agreement pertain to Employee’s employment.

 

18. Nondisclosure of Confidential Information or Trade Secrets: In the course of
Employee’s employment with Employer, Employee will have access to confidential
records and data pertaining to Employer’s customers and its operations. Such
information is considered secret and is disclosed to Employee in confidence.
Furthermore, all memoranda, notes, records, computer files, and other documents
or tangible material made or compiled by Employee, or made available to Employee
during the term of this Agreement concerning the business of Employer, shall be
the sole property of Employer and shall be delivered to Employer on the
expiration or termination of this Agreement, or at another time on request.
During Employee’s employment with Employer and thereafter, Employee shall keep
in confidence and shall not directly or indirectly disclose any secret or
confidential information belonging to Employer or any of its related companies
except as required in the course of Employee’s employment by Employer and/or
authorized in writing by Employer, or required by law.

 

19. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.

 

20. Waiver: The failure by either party to exercise or enforce any terms or
conditions under this Agreement shall not be deemed to be a waiver of that
party’s right to exercise or enforce any such term or condition in the future.
The waiver by either party of any breach, default, or omission in the
performance of any of the terms or conditions of this Agreement by the other
party shall not be deemed to be a waiver of any other breach, default, or
omission.

 

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21. Severability: If any part of this Agreement is invalidated or rendered
unenforceable by any court of competent jurisdiction or by any regulation or
legislation to which it is subject, the remaining provisions and that provision
found invalid or unenforceable as it may apply to other circumstances, shall
remain in full force and effect. In such event, the parties shall promptly
negotiate in good faith to amend this Agreement by replacing such stricken
provision with a valid and enforceable provision that fulfills the original
intention of the invalid or unenforceable provision.

 

22. Entire Agreement: This Agreement constitutes the entire Agreement of the
parties with respect to the subject matter hereof and cancels and supersedes all
previous agreements or understandings relating thereto, whether written or oral,
between the parties.

 

23. Arbitration: In the event that there shall be a dispute between the parties
arising out of or relating to this Agreement or the breach thereof, other than
Section 18 hereof, the parties agree that such dispute shall be resolved by
final and binding arbitration before a sole arbitrator in Monterey, California
administered by the American Arbitration Association (“AAA”) in accordance with
AAA’s Labor Arbitration Rules then in effect. Depositions may be taken and other
discovery may be obtained during such arbitration proceedings to the same extent
as authorized in civil judicial proceedings. Any award issued as a result of
such arbitration shall be final and binding between the parties thereto, and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement is sought. The prevailing party in any legal action (including
arbitration) shall be entitled to recover any and all reasonable attorneys’ fees
and other costs reasonably incurred in connection therewith.

 

24. Amendment: This Agreement shall only be amended or waived by a writing that
explicitly refers to this Agreement and that is signed by both parties.

 

25. Execution: The parties, having carefully read this Agreement and having
consulted or having been given an opportunity to consult legal counsel, hereby
acknowledge their agreement to all of the foregoing terms and conditions by
executing this Agreement. Each signatory hereto represents and warrants that it
is authorized to sign this Agreement on behalf of the respective party. This
Agreement may be executed in any number of counterparts, and each such
counterpart shall be an original and together they shall constitute one
agreement.

 

EMPLOYER   EMPLOYEE

By:

 

/s/ Ronald Elliott

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By:

 

/s/ Diane Kayser

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Ronald Elliott

      Diane Kayser    

Chief Executive Officer

           

Excelligence Learning Corporation

           

Date: June 23, 2004

      Date: June 18, 2004

 

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