Document:

Exhibit 10.12

LOAN AGREEMENT

THIS LOAN AGREEMENT (the
“Agreement”) is made as of July 26, 2006, by and among LASERSIGHT
INCORPORATED, a Delaware corporation, with an address of 6848 Stapoint
Court, Winter Park, Florida 32792, and LASERSIGHT TECHNOLOGIES, INC., a
Delaware corporation, with an address of 6848 Stapoint Court, Winter Park,
Florida 32792 (collectively, “Borrower”), and NEW INDUSTRIES
INVESTMENT CONSULTANTS (HK) LTD. (together with any subsequent holder of this
Note, hereinafter called “Lender”), with an address of 1606
Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.

RECITALS

WHEREAS, Borrower and General Electric Capital Corporation (“GE”) entered into that certain three-year Third Amended and Restated Secured Term Note (the “GE Note”) in the original principal amount of $2,149,249.23 on August 30, 2004, and the GE Note bears interest at the rate of nine percent (9%) per annum and is secured by substantially all of the Company’s assets (the “GE Loan”).

WHEREAS, as of the date hereof the total unpaid amount due GE under the GE Note is approximately $629,434, consisting of $476,077 in principal and $153,357 in fees.

WHEREAS, on June 7, 2006, Borrower received written notice (the “Notice”) from GE of non-monetary defaults under the GE Note, and on June 16, 2006, Borrower received a waiver letter from GE, which indicated that GE would waive the specified defaults, if all of Borrower’s obligations under the GE Note are paid in full on or before July 31, 2006.

WHEREAS, Borrower desires to establish certain financing arrangement with and borrow funds from Lender to pay off the GE Loan in full before July 31, 2006.

WHEREAS, Lender is willing to establish such arrangements for and make loans to Borrower, on the terms and conditions set forth below.

WHEREAS, Lender has full knowledge of the terms and conditions of the GE Note and all collateral loan documents made between Borrower and GE, including all modifications and amendments thereto.

WHEREAS, the parties desire to define the terms and conditions of their relationship and to reduce their agreements to writing.

NOW, THEREFORE, in consideration of the promises and the covenants contained in this Agreement, and for other consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

LOAN

	
  
TERMS:
  	
  
The   maximum aggregate principal amount of the Loan shall be THREE MILLION and   No/100 US Dollars (US$3,000,000.00) inclusive of all costs and expenses,   collectively, (the “Maximum Loan Amount”). Funding may be provided in one or   more advances, pursuant to the mutual agreed amount and schedule for each   advance, but not more frequently than once per week.  In no case shall Lender be required to   advance more than the Maximum Loan Amount, except in Lender’s sole discretion   as otherwise provided in this Agreement. All funds will be deposited into   Borrower’s bank account (SunTrust Bank, Account No. 1000018574961) and will   be drawn on by Borrower only. The monies from the Loan will be used by   Borrower to pay off GE loans and to increase Borrower’s working capital. The   amount of Seven Hundred Fifty Thousand and No/100 Dollars (US$750,000.00)   shall be disbursed to Borrower’s bank account pursuant to Borrower’s
 directions on or before July 28, 2006.    No portion of the indebtedness evidenced hereby shall be convertible   to any security, right, option, warrant or similar interest in Borrower.
  
	
   
  	
  
 
  
	
  
PREPAYMENT:
  	
  
The   Loan may be paid off in full or in part without penalty except there shall be   no refund for fees and costs.
  
	
  
 
  	
  
 
  
	
  
INTEREST:
  	
  
A.     Interest   shall accrue on the unpaid balance due under the Agreement at the rate of   nine percent (9%) per annum.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
B.     Interest   on the unpaid principal balance of the Loan shall accrue and be due on the   maturity date of the Loan at which time the entire balance of principal,   fees, costs, expenses, and accrued unpaid interest thereon shall be due and   payable in full.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
C.     Interest   payments will be computed on a 30-day month and a 360-day year.
  
	
  
 
  	
  
 
  
	
   
  	
  
D.     If   the entire amount due under the Loan is not paid on the maturity date,   interest shall accrue from the maturity date at the rate of twelve percent   (12%) per annum on all amounts then outstanding.
  
	
  
 
  	
  
 
  
	
  
PROMISSORY NOTE:
  	
  
At   Closing, Borrower shall execute and deliver to Lender a promissory note   evidencing Borrower’s unconditional obligation to repay Lender for the   principal amount received.
  

2

	
  
FEES & COSTS:
  	
  
A.     Borrower   shall pay to Lender a fee of $15,000.00 in connection with the closing of   this transaction.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
B.     Borrower   agrees to pay for Lender’s reasonable transaction costs relating to this   Loan.  Borrower will pay all   reasonable costs and expenses reasonably required to satisfy the conditions   hereof and the making of the Loan as provided hereunder.  Such costs and expenses shall be paid as   provided hereunder, or upon demand if the Loan does not close.  Such obligations shall survive termination   of this Agreement.
  
	
   
  	
  
 
  
	
  
 
  	
  
C.     The   costs and expenses set forth in this section shall be considered part of the   Loan.
  

CONDITIONS

The parties agree to that all conditions of the Loan, including but not limited to, the COLLATERAL/OTHER RIGHTS, COVENANTS, DEFAULT/REMEDIES, CONDITIONS, ADMINISTRATION, MATURITY DATE shall be the same and in full effect as those set forth in the Promissory Note and the Security Agreement dated December 1, 2003 and the Restated Promissory Note dated August 31, 2004, made by Borrower in favor of Lender (collectively, “Prior Loan Documents”), except only for the terms and conditions set forth and explicitly expressed in this Agreement.  In the event of a conflict between a provision contained in this Agreement and a provision contained in the Prior Loan Documents, the provision contained in this Agreement shall supersede and govern.

MISCELLANEOUS

Except as expressly provided in the “Conditions” section above, this Agreement embodies the entire understanding and agreement by and between Borrower and Lender with respect to the subject matter hereof. This Agreement shall be governed in all respects by and construed in accordance with the internal laws of the State of Florida, except for its conflict of laws provisions.  

This Agreement may be executed in any number of counterparts by the parties hereto separately; each of which when so executed and delivered shall be deemed an original, and all the counterparts together shall constitute one and the same instrument.

All notices and other communications required or permitted to be given hereunder shall be given in writing (and for these purposes writing includes facsimile), shall be addressed to the appropriate party at the address of such party set forth in the preamble of this Agreement, or at such other address or place as such party may subsequently designate in writing, and said notice shall be deemed given upon receipt by the party. 

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This Agreement shall be deemed effective as of the above stated date upon execution by all parties to this Agreement in the appropriate space below.

	
  
LENDER:
  
	
  
NEW INDUSTRIES INVESTMENT CONSULTANTS (HK)   LTD.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
By: 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
Print Name: 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  Title: 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
Date: 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  
	
  
BORROWER:
  
	
  
LASERSIGHT TECHNOLOGIES, INC.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
By: 
  	
  
/s/ Danghui Liu
  	
  
 
  
	
   
  	
  

  	
  
 
  
	
  
Print Name: 
  	
  
Danghui Liu
  	
  
 
  
	
  
Title: 
  	
  
President & CEO
  	
  
 
  
	
  
Date: 
  	
  
August 1, 2006
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
LASERSIGHT PATENTS, INC.
  
	
  
 
  	
  
 
  	
  
 
  
	
  By: 
  	
  
/s/ Danghui Liu
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
Print Name: 
  	
  
Danghui Liu
  	
  
 
  
	
  
Title: 
  	
  
President
  	
  
 
  
	
  
Date: 
  	
  
August 1, 2006
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  
LASERSIGHT INCORPORATED
  
	  
	  
	  

	
  By: 
  	
  
/s/ Danghui Liu
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
Print Name: 
  	
  
Danghui Liu
  	
  
 
  
	
  
Title: 
  	
  
President
  	
  
 
  
	
  
Date: 
  	
  
August 1, 2006
  	
  
 
  

4

PROMISSORY NOTE

$7500,000

Orlando, Florida

July 26, 2006

          This Promissory Note is entered into effective as of July 26, 2006.   

          FOR VALUE RECEIVED, LASERSIGHT TECHNOLOGIES, INC, a Delaware corporation, and LASERSIGHT INCORPORATED, a Delaware corporation, (together, jointly and severally, hereinafter called “Maker”) promise to pay to the order of NEW INDUSTRIES INVESTMENT CONSULTANTS (HK) LTD. (together with any subsequent holder of this Note, hereinafter called “Holder”), at its office at 1606 Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong, or at such other place as Holder may from time to time designate, the principal sum of SEVENTY FIVE THOUSAND AND 00/100 DOLLARS ($7500,000.00), with interest thereon from the date hereof at an interest rate of nine percent (9%) per annum.  The foregoing interest and principal will be payable as follows:

	
  
 
  	
  
On   the first day of each month, accrued interest shall be paid in full.
  
	  
	  

	
  
 
  	
  
On   June 30, 2007 (“Maturity Date”), the entire principal balance of this note,   together with all accrued interest and all other charges, fees, costs and   expenses, shall be paid in full.
  

          In addition, on the execution date of the Note, Maker shall pay Holder the additional sum of $15,000.00 as an origination fee.

          This Note may be paid off in full or in part without penalty except there shall be no refund for fees and costs.

          Interest hereunder, if not paid when due, may at Holder’s option, without notice to Maker, be added to the principal balance and bear interest at the interest rate applicable to principal.

          If the entire principal balance is not paid in full by the maturity date, Maker will pay interest thereafter at the rate of twelve (12%) per annum from the maturity date of the Loan.

          All payments hereunder will first be credited to interest and lawful charges then accrued and the remainder to principal.

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          All interest on this Note will be computed on the basis of the actual number of days elapsed in a 360-day year.

          Maker, endorser, surety, guarantor, or other parties to this Note (all of whom are hereinafter called “Obligor”) jointly and severally agree as follows:

          Obligor will be in default under this Note upon: (a) nonpayment of any interest or principal or any other monetary obligation under this Note within five (5) days after the due date; (b) failure of any Obligor to perform any non-monetary agreement under this Note or under any other part of this loan transaction within thirty (30) days after receipt of written notice of such failure (or in the event that such default cannot reasonably be cured within the 30-day period, the failure of such Obligor to commence curing such default within the 30-day period); (c) the taking of possession of any substantial part of the property of any Obligor at the instance of any governmental authority; or (d) falsity in any material respect of, or any material omission in, any representation or statement made to Holder by or on behalf of any Obligor in connection with this Note. 

          Holder will have all of the rights and remedies of a creditor and, to the extent applicable, of a secured party under all applicable law.  Without limiting the generality of the foregoing, upon the occurrence of any default under this Note, Holder may at its option and without notice or demand, except as provided below, declare the entire unpaid principal and accrued interest accelerated and due and payable at once, together with any and all other liabilities of any Obligor or any of such liabilities selected by Holder.  Notwithstanding the foregoing, prior to exercising its rights for a default, Holder shall provide written notice to Maker and at least three (3) days to cure such default. 

          In no event will Holder be entitled to unearned or unaccrued interest or other charges or rebates, except as may be authorized by law; nor will any such party be entitled or receive at any time any such charges not allowed or permitted by law, or any interest in excess of the highest lawful rate.  Any payments of interest in excess of the highest lawful rate will be credited by Holder on interest accrued or principal or both; except that Maker will have an option to demand refund as to any such interest or charges in excess of the highest lawful rate.  Maker acknowledges, stipulates and agrees that the proceeds of this Note are used by Maker solely towards the business operations of the Obligor with the intent to enhance the value of the Issuer.

          No delay or omission on the part of Holder in exercising any right hereunder will operate as a waiver of such right or of any other rights under this Note.  Presentment, demand, protest, notice of dishonor, and all other notices are hereby waived by each and every Obligor.  Obligor, jointly and severally, promises and agrees to pay all costs of collection and reasonable attorney’s fees, including reasonable attorney’s fees of any suit, out of court, in trial, on appeal, in bankruptcy proceedings or otherwise, incurred or paid by Holder in enforcing this Note or preserving any right or interest of Holder hereunder.  Any notice to Maker will be sufficiently served for all purposes if placed in the mail, postage prepaid, addressed to, or left upon the premises at the address shown below or any other address shown on Holder’s records.

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          Each Obligor hereby expressly consents to any and all extensions, modifications, and renewals, in whole or in part, including but not limited to changes in payment schedules and interest rates, and all delays in time of payment or other performance which Holder may grant or permit at any time and from time to time without limitation and without any notice to or further consent of any Obligor.  Each Obligor will also be bound by each of the foregoing terms, without the requirement that Holder first go against any security interest otherwise held by Holder.

          This Note has been negotiated and prepared in, and shall be governed by the laws of, the State of Florida.

          The Holder is acquiring this Promissory Note, solely for its own account and not as a nominee for any other party, for investment purposes only, and not with a view to the sale or distribution thereof within the meaning of Section 2(11) of the Act.  The Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof in a manner contrary to the Securities Act or the securities laws of any other applicable jurisdictions.  The Holder is an “Accredited Investor” as that term is defined in Rule 501(a) promulgated under the Act.

          WAIVER OF JURY TRIAL.  OBLIGOR AND HOLDER (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY AGREE AS FOLLOWS: (A) EACH OF THEM KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION (AN “ACTION”) BASED UPON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY RELATED DOCUMENTS, INSTRUMENTS, OR AGREEMENTS (WHETHER ORAL OR WRITTEN AND WHETHER EXPRESS OR IMPLIED AS A RESULT OF A COURSE OF DEALING, A COURSE OF CONDUCT, A STATEMENT, OR OTHER ACTION OF EITHER PARTY); (B) NEITHER OF THEM MAY SEEK A TRIAL BY JURY IN ANY SUCH ACTION; (C) NEITHER OF THEM WILL SEEK TO CONSOLIDATE ANY SUCH ACTION (IN WHICH A JURY TRIAL HAS BEEN WAIVED) WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; AND (D) NEITHER OF THEM HAS IN ANY WAY
AGREED WITH OR REPRESENTED TO THE OTHER OF THEM THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

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LASERSIGHT   TECHNOLOGIES, INC.,
   a Delaware corporation
  	
  
 
  	
  
LASERSIGHT   INCORPORATED,
   a Delaware corporation
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  By:
  	
  
/s/   Danghui Liu
  	
  
 
  	
  
By:
  	
  
/s/   Danghui Liu
  
	
  
 
  	
  

  	
  
 
  	
  
 
  	
  

  
	
  
Name:
  	
  
Danghui Liu
  	
  
 
  	
  
Name:
  	
  
Danghui Liu
  
	
  
Title:
  	
  
President
  	
  
 
  	
  
Title:
  	
  
President   & CEO
  
	
  
 
  	
  
6848   Stapoint Ct.
  	
  
 
  	
  
 
  	
  
6848   Stapoint Ct.
  
	
   
  	
  Winter Park,   FL 32792
  	
   
  	
   
  	
  Winter Park,   FL 32792
  

8Exhibit 10.1

EMPLOYMENT CONTRACT

between

BABYUNIVERSE, INC.

and

John P. Studdard

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
  	
  
3
  
	
  
 
  	
   
 
	
  
Article VI   — Vacation
  	
  
3
  
	
  
 
  	
   
 
	
  
Article VII   — Termination of Employment
  	
  
3
  
	
  
 
  	
   
 
	
  
Article VIII   — Resignation
  	
  
4
  
	
  
 
  	
   
 
	
  
Article IX   — Non-Competition
  	
  
4
  
	
   
  	
   
 
	
  
Article X   — Notices
  	
  
5
  
	
  
 
  	
   
 
	
  
Article XI   — Construction of Contract
  	
  
6
  
	
  
 
  	
   
 
	
  
Article XII   — Change in Control
  	
  
6
  
	
  
 
  	
   
 
	
  
Article XIII   — Miscellaneous
  	
  
6
  

EMPLOYMENT CONTRACT

     THIS EMPLOYMENT CONTRACT (“Contract”) is made and entered as of the 3rd day of  April, 2006 between BABYUNIVERSE, INC., a Florida corporation (“Employer”), and John P. Studdard (“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 Information Officer and Executive Vice President 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 three (3) years commencing as of April 3, 2006 (the “Commencement Date”) and ending three (3) years 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 Information Officer and Executive Vice President  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 Information Officer and Executive Vice President  and such other executive and managerial duties as normally associated with such positions, subject to the direction of the Board of Directors 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.  During the term of this Contract Employee will report directly to the CEO.

     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 CEO 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 Board of Directors.

     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 Board of Directors 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.

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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 of _one hundred eighty thousand Dollars and Zero Cents ($180,000.00) on an annualized basis (the “Base Salary”), which amount shall be paid in accordance with Employer’s customary payroll practices.

          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 Company’s Board of Directors.

          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.

          5.       Stock Options. Commencing   upon the Commencement Date, Employee shall receive a grant of 50,000 stock   options in accordance with the then current option plan with an exercise   price equal to the closing price per share of BabyUniverse, Inc. common stock   on the date of execution of this agreement. The options will vest over three years   in quarterly increments beginning on July 1, 2006. If a change in ownership   occurs as defined in Article XII of this agreement, all outstanding options   shall immediately vest upon execution of the change in control.

          6.       Integration Bonus.   Employer shall pay employee a $25,000 bonus in the form of cash, stock   options or some combination thereof within 30 days of completion of the   technology integration of any acquired entity. Integration is defined to   mean  combining or integrating the   acquired entity’s telephony systems, data networks and information technology   systems into the Baby Universe enterprise.    This bonus will not be paid for integration work regarding   DreamTimeBaby.com.  In addition to the   foregoing, this bonus will be paid upon the successful launch of either   BabyUniverse.com, PoshTots.com or a subsequent acquisition on a new front-end   ecommerce system.

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.

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          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 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 three twelfths 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 beyond 3 years. Notwithstanding anything to the contrary in the foregoing, the Severance shall never exceed one half 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 three (3 ) weeks paid vacation annually or such other time as authorized by the Board of Directors during which time Employee’s compensation shall be paid in full. Vacation Days 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 fifty (50) 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 mean:

          1. Employee’s material breach of any provision of this Contract; provided, however, that in the event Employer believes that this Contract has been breached, it shall provide Employee with written notice of such breach and provide Employee with a thirty (30) day period in which to cure or remedy such breach;

          2. The commission by Employee, in the reasonable determination of the Employer’s Board of Directors, of a crime, or an act of fraud or dishonesty against Employer, its subsidiaries or affiliates; or

          3. 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.

3

     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 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 two (2) 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.

     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 two (2) 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 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 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.

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     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 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 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 502
  
	
  
 
  	
  
 
  	
  
Jupiter, FL 33477
  
	
  
 
  	
  
 
  	
  
Attn: Chairman of the   Board
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
If to Employee:
  	
  
John Studdard
  
	
  
 
  	
  
 
  	
  
1400 Caribbean Road East
  
	
  
 
  	
  
 
  	
  
Lake Clarke Shores, FL   33406
  

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.

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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.

     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 six (6) month period commencing on the date of the Change of Control and ending on the date with is (6) months thereafter (the “Six Month 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 Six Month 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).

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.

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     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 Broward 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 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 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 Textor
  
	
  
 
  	
  
 
  	
  

  
	
   
  	
  Name:
  	
  John Textor
  
	
   
  	
  Title:
  	
  Chief Executive Officer
  
	
   
  	
   
  	
   
  
	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  Employee:
  	
  /s/John P. Studdard
  
	
   
  	
   
  	
  

  
	
   
  	
   
  	
  John P. Studdard
  

8

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