Document:

exv10w1

 

EXHIBIT 10.1

BABYUNIVERSE, INC.

2005 STOCK INCENTIVE PLAN

     1. ESTABLISHMENT, EFFECTIVE DATE AND TERM

     BabyUniverse, Inc., a Florida corporation, hereby establishes the “BabyUniverse, Inc. 2005
Stock Incentive Plan.” The Effective Date of the Plan shall be the date that the Plan was approved
by the stockholders of BabyUniverse, Inc. in accordance with its Bylaws and the laws of the State
of Florida, or such later date as is provided in the resolutions adopting the Plan. Unless earlier
terminated pursuant to Section 14(i) hereof, the Plan shall terminate on the tenth anniversary of
the Effective Date. Capitalized terms used herein are defined in Appendix 1 attached hereto.

     2. PURPOSE

     The purpose of the Plan is to advance the interests of the Company by allowing the Company to
attract, retain, reward and motivate Eligible Individuals by providing them with an opportunity to
acquire or increase a proprietary interest in BabyUniverse, Inc. and incentives to expend maximum
effort for the growth and success of the Company so as to strengthen the mutuality of the interests
between the Eligible Individuals and the stockholders of BabyUniverse, Inc.

     3. ELIGIBILITY

     Awards may be granted under the Plan to any Eligible Individual as determined by the Committee
from time to time on the basis of their importance to the business of the Company pursuant to the
terms of the Plan.

     4. ADMINISTRATION

          (a) Committee. The Plan shall be administered by the Committee, which shall have the
full power and authority to take all actions, and to make all determinations not inconsistent with
the specific terms and provisions of the Plan deemed by the Committee to be necessary or
appropriate to the administration of the Plan, any Award granted or any Award Agreement entered
into hereunder. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect as it may determine in its sole discretion. The decisions
by the Committee shall be final, conclusive and binding with respect to the interpretation and
administration of the Plan, any Award or any Award Agreement entered into under the Plan.

          (b) Advisors to Committee. The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of the Plan and may grant
authority to employees of the Company to execute agreements or other documents on behalf of the
Committee in connection with the administration of the Plan. The Committee may employ such legal
counsel, consultants, and agents as it may deem desirable for the administration of the Plan and
may rely upon any advice and any computation received from any

 

 

such counsel, consultant, or agent. The Company shall pay all expenses and costs incurred by
the Committee for the engagement of any such counsel, consultant, or agent.

          (c) Participants Outside the U.S. In order to conform with the provisions of local
laws and regulations in foreign countries in which the Company operates, the Committee shall have
the sole discretion to (i) modify the terms and conditions of the Awards granted under the Plan to
Eligible Individuals located outside the United States; (ii) establish subplans with such
modifications as may be necessary or advisable under the circumstances present by local laws and
regulations; and (iii) take any action which it deems advisable to comply with or otherwise reflect
any necessary governmental regulatory procedures, or to obtain any exemptions or approvals
necessary with respect to the Plan or any subplan established hereunder.

          (d) Liability and Indemnification. No Covered Individual shall be liable for any
action or determination made in good faith with respect to the Plan, any Award granted or any Award
Agreement entered into hereunder. The Company shall, to the maximum extent permitted by applicable
law and the Certificate of Incorporation and Bylaws of BabyUniverse, Inc., indemnify and hold
harmless each Covered Individual against any cost or expense (including reasonable attorney fees
reasonably acceptable to the Company) or liability (including any amount paid in settlement of a
claim with the approval of the Company), and amounts advanced to such Covered Individual necessary
to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any
act or omission to act in connection with the Plan, any Award granted or any Award Agreement
entered into hereunder. Such indemnification shall be in addition to any rights of indemnification
such individuals may have under applicable law or under the Certificate of Incorporation or Bylaws
of BabyUniverse, Inc. Notwithstanding anything else herein, this indemnification will not apply to
the actions or determinations made by a Covered Individual with regard to Awards granted to such
Covered Individual under the Plan or arising out of such Covered Individual’s own fraud or bad
faith.

     5. COMMON STOCK

          (a) Shares Available for Awards. The Common Stock that may be issued pursuant to
Awards granted under the Plan shall be treasury shares or authorized but unissued shares of the
Common Stock. The total number of shares of Common Stock that may be issued pursuant to Awards
granted under the Plan shall be Four hundred forty thousand nine
hundred fifty-nine (440,959) shares, subject to adjustment as
provided in the Plan.

          (i)
With respect to the shares of Common Stock reserved pursuant to this
Section, no more than Four-hundred thousand (400,000) of such shares
shall be issued as of Incentive Stock Options.

          (ii) With respect to the shares of
Common Stock reserved pursuant to this Section, no more than Four-hundred thousand (400,000) of such
shares shall be issued as Non-qualified Stock Options.

          (iii) With respect to the shares of
Common Stock reserved pursuant to this Section, no more than
Four-hundred thousand (400,000) of such shares shall be issued as Awards other than Options.

2

 

          (iv)
No more than 50,000 shares of Common Stock may be subject to grants of Options to
any one Eligible Individual during any one fiscal year.

          (v)
No more than 50,000 shares of Common Stock may be subject to grants of Performance
Shares, Restricted Stock, Restricted Stock Units, and Awards of Common Stock to any one
Eligible Individual during any one fiscal year.

          (vi) The maximum value at Grant Date of grants of Performance Units which may be
granted to any one Eligible Individual during any one fiscal year
shall be $1,000,000.

          (b) Reduction of Shares Available for Awards. Upon the granting of an Award, the
number of shares of Common Stock available under this Section hereof for the granting of further
Awards shall be reduced as follows:

          (i) In connection with the granting of an Award other than the granting of a
Performance Unit, the number of shares of Common Stock shall be
reduced by the number of shares of Common Stock subject to the Award.

          (ii) In connection with the granting of a Performance Unit, the number of shares of
Common Stock shall be reduced by an amount equal to the quotient of (A) the dollar amount in
which the Performance Unit is denominated, divided by (B) the Fair Market Value of a share
of Common Stock on the date the Performance Unit is granted.

          (c) Cancelled, Forfeited, or Surrendered Awards. If any Award is cancelled,
forfeited, exchanged, surrendered or terminated for any reason prior to exercise or becoming vested
in full, the shares of Common Stock that were subject to such Award will to the extent cancelled,
forfeited, exchanged, surrendered or terminated be available for future Awards granted under the
Plan as if said Award had never been granted.

          (d) Recapitalization. If the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares or other securities
of BabyUniverse, Inc. by reason of any recapitalization, reclassification, reorganization, stock
split, reverse split, combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock of BabyUniverse, Inc. or other increase or decrease in such
shares effected without receipt of consideration by BabyUniverse, Inc. occurring after the
Effective Date, an appropriate and proportionate adjustment shall be made by the Committee (i) in
the aggregate number and kind of shares of Common Stock available under the Plan; (ii) in the
number and kind of shares of Common Stock issuable upon exercise (or vesting) of outstanding Awards
granted under the Plan; (iii) in the Exercise Price per share of outstanding Awards granted under
the Plan and (iv) in the number of shares of Common Stock subject to Awards granted to Non-Employee
Directors under Section 10. Following an Initial Public Offering, no fractional shares of Common
Stock or units of other securities shall be issued pursuant to any such adjustment under this
Section 5(d), and any fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share or unit. Any adjustments made under this Section
5(d) with respect to any Incentive Stock Options must be made in accordance with Code Section 424.

3

 

     6. OPTIONS

          (a) Grant of Options. Subject to the terms and conditions of the Plan, the Committee
may grant to Eligible Individuals Options to purchase such number of shares of Common Stock on such
terms and conditions as the Committee may determine. Each grant of an Option must satisfy the
requirements set forth in this Section.

          (b) Type of Options. Each Option granted under the Plan may be designated by the
Committee, in its sole discretion, as either (i) an Incentive Stock Option, or (ii) a Non-qualified
Stock Option. Options designated as Incentive Stock Options that fail to continue to meet the
requirements of Code Section 422 shall be re-designated as Non-qualified Stock Options
automatically on the date of such failure to continue to meet such requirements without further
action by the Committee. In the absence of any designation, Options granted under the Plan will be
deemed to be Non-qualified Stock Options.

          (c) Exercise Price. Subject to the limitations set forth in the Plan relating to
Incentive Stock Options, the Exercise Price of an Option shall be fixed by the Committee and stated
in the respective Award Agreement, provided that the Exercise Price may not be less than Fair
Market Value of the Common Stock, or if greater, the par value of the Common Stock, as of the Grant
Date.

          (d) Limitation on Option Period. Subject to the limitations set forth in the Plan
relating to Incentive Stock Options, Options granted under the Plan and all rights to purchase
Common Stock thereunder shall terminate no later than the tenth anniversary of the Grant Date of
such Options, or on such earlier date as may be stated in the Award Agreement relating to such
Option. In the case of Options expiring prior to the tenth anniversary of the Grant Date, the
Committee may in its discretion, at any time prior to the expiration or termination of said
Options, extend the term of any such Options for such additional period as it may determine, but in
no event beyond the tenth anniversary of the Grant Date thereof.

          (e) Limitations on Incentive Stock Options. Notwithstanding any other provisions of
the Plan, the following provisions shall apply with respect to Incentive Stock Options granted
pursuant to the Plan.

          (i) Limitation on Grants. Incentive Stock Options may only be granted to
Section 424 Employees. The aggregate Fair Market Value (determined at the time such
Incentive Stock Option is granted) of the shares of Common Stock for which any individual
may have Incentive Stock Options which first become vested and exercisable in any calendar
year (under all incentive stock option plans of the Company) shall not exceed $100,000.
Options granted to such individual in excess of the $100,000 limitation, and any Options
issued subsequently which first become vested and exercisable in the same calendar year,
shall be treated as Non-qualified Stock Options.

          (ii) Minimum Exercise Price. In no event may the Exercise Price of an
Incentive Stock Option be less than 100% of the aggregate Fair Market Value of the Common
Stock as of the Grant Date.

4

 

          (iii) Ten Percent Stockholder. Notwithstanding any other provision of the Plan
to the contrary, in the case of Incentive Stock Options granted to a Section 424 Employee
who, at the time the Option is granted, owns (after application of the rules set forth in
Code Section 424(d)) stock possessing more than ten percent of the total combined voting
power of all classes of stock of BabyUniverse, Inc., such Incentive Stock Options (i) must
have an Exercise Price that is at least 110% of the aggregate Fair Market Value of the
Common Stock as of the Grant Date, and (ii) must not be exercisable after the fifth
anniversary of the Grant Date.

          (f) Vesting Schedule and Conditions. No Options may be exercised prior to the
satisfaction of the conditions and vesting schedule provided for in the Award Agreement relating
thereto. Unless otherwise provided in the applicable Award Agreement, Options will vest and become
exercisable on each anniversary of the Grant Date in equal annual installments over the four (4)
years following the Grant Date of the Option. Notwithstanding anything to the contrary in this
Plan, no Option shall be exercisable until the earlier of (i) an Initial Public Offering, (ii) a
Change in Control of BabyUniverse, Inc. or (iii) the date that is 6 months prior to the date the
Option terminates pursuant to its terms.

          (g) Exercise. When the conditions to the exercise of an Option have been satisfied,
the Participant may exercise the Option only in accordance with the following provisions. The
Participant shall deliver to BabyUniverse, Inc. an executed copy of the Option Exercise Form, a
copy of which is attached hereto as Exhibit A, and such Form shall be accompanied by payment in
full of the aggregate Exercise Price of the shares of Common Stock for which the Option is being
exercised, by one or more of the methods provided for in Section 6(h) below. Said notice must be
delivered to BabyUniverse, Inc. at its principal office and addressed to the attention of
BabyUniverse, Inc.’s Chief Financial Officer. The minimum number of shares of Common Stock with
respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser
of 100 shares or the maximum number of shares available for purchase under the Option at the time
of exercise. An attempt to exercise any Option granted hereunder other than as set forth in the
Plan shall be invalid and of no force and effect.

          (h) Payment. Payment of the Exercise Price for the shares of Common Stock purchased
pursuant to the exercise of an Option shall be made by one of the following methods:

          (i) by cash, certified or cashier’s check, bank draft or money order; or

          (ii) through the delivery to BabyUniverse, Inc. of shares of Common Stock which have
been previously owned by the Participant for the requisite period necessary to avoid a
charge to BabyUniverse, Inc.’s earnings for financial reporting purposes; such shares shall
be valued, for purposes of determining the extent to which the Exercise Price has been paid
thereby, at their Fair Market Value on the date of exercise; without limiting the foregoing,
the Committee may require the Participant to furnish an opinion of counsel acceptable to the
Committee to the effect that such delivery would not result in BabyUniverse, Inc. incurring
any liability under Section 16(b) of the Exchange Act.

5

 

     Notwithstanding the foregoing, the Committee may, in its sole and absolute discretion and to
the extent permitted by applicable law, permit such payment to be made by one of the following
methods or in any combination thereof as it may determine: (i) by the delivery of a promissory note
of the Participant to BabyUniverse, Inc. on such terms as the Committee shall specify in its sole
and absolute discretion; (ii) through a “cashless exercise sale and remittance procedure” pursuant
to which the Participant shall concurrently provide irrevocable instructions (1) to a brokerage
firm approved by the Committee to effect the immediate sale of the purchased shares and remit to
BabyUniverse, Inc., out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate Exercise Price payable for the purchased shares plus all applicable federal,
state and local income, employment, excise and other taxes required to be withheld by the Company
by reason of such exercise, and (2) to BabyUniverse, Inc. to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale; or (iii) any other
method as may be permitted by the Committee.

          (i) Termination of Employment, Retirement, Disability, or Death. Unless otherwise
provided in an Award Agreement, upon the termination of the employment or other service of a
Participant with the Company for any reason, all of the Participant’s outstanding Options (whether
vested or unvested) shall be subject to the rules of this paragraph. Upon such termination, the
Participant’s unvested Options shall expire and be cancelled. Vested Options shall be cancelled to
the extent not exercised in accordance with this Section. Notwithstanding the foregoing, the
Committee may provide, in its sole and absolute discretion, that following the termination of
employment or service of a Participant with the Company for any reason other than for Cause, a
Participant or the Participant’s estate, devisee or heir at law (whichever is applicable) may
exercise an Option (whether vested or unvested), in whole or in part, at any time subsequent to
such termination of employment or service and prior to termination of the Option pursuant to its
terms. Unless otherwise determined by the Committee, temporary absence from employment because of
illness, vacation, approved leaves of absence or military service shall not constitute a
termination of employment or service.

          (i) Termination for Reason Other Than Cause, Disability, Retirement or Death.
If a Participant’s termination of employment is for any reason other than Cause, Disability,
Retirement or death, any Option held by such Participant, may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period not to exceed
thirty (30) days from the date of such termination, and prior to the termination of the
Option pursuant to its terms.

          (ii) Disability. If a Participant’s termination of employment or service with
the Company is by reason of a Disability of such Participant, the Participant shall have the
right at any time within a period not to exceed one (1) year after such termination and
prior to termination of the Option pursuant to its terms, to exercise, in whole or in part,
any vested portion of the Option held by such Participant at the date of such termination;
provided, however, that if the Participant dies within such period, any vested Option held
by such Participant upon death shall be exercisable by the Participant’s estate, devisee or
heir at law (whichever is applicable) for a period not to exceed one (1) year after the
Participant’s death and prior to the termination of the Option pursuant to its terms.

6

 

          (iii) Termination by Reason of Retirement. If a Participant’s termination of
employment or service with the Company is by reason of Retirement, the Participant shall
have the right at any time within a period not to exceed ninety (90) days from the date of
such termination, and prior to the termination of the Option pursuant to its terms to
exercise, in whole or in part, any vested portion of the Option held by such Participant at
the date of such termination; provided, however, that, if the Participant dies within such
exercise period, any vested Option held by such Participant upon death shall be exercisable
by the Participant’s estate, devisee or heir at law (whichever is applicable) for a period
not to exceed one (1) year after the Participant’s death and prior to the termination of the
Option pursuant to its terms.

          (iv) Death. If a Participant dies while in the employment or service of the
Company, the Participant’s estate or the devisee named in the Participant’s valid last will
and testament or the Participant’s heir at law who inherits the Option has the right, at any
time within a period not to exceed one (1) year after the date of such Participant’s death
and prior to termination of the Option pursuant to its terms, to exercise, in whole or in
part, any portion of the vested Option held by such Participant at the date of such
Participant’s death.

          (v) Other Termination. In the event the termination is for Cause or is a
voluntary termination by the Participant within ninety (90) days after occurrence of an
event which would be grounds for termination of employment by the Company for Cause (without
regard to any notice or cure period requirement), any Option held by the Participant at the
time of the termination for Cause or the occurrence of the event which would be grounds for
termination of employment by the Company for Cause, as the case may be, shall be deemed to
have terminated and expired upon such termination or upon such occurrence of the event which
would be grounds for termination of employment by the Company for Cause.

     7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS

          (a) Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and
conditions of the Plan, the Committee may grant to such Eligible Individuals as the Committee may
determine, Restricted Stock or Restricted Stock Units, in such amounts, as the Committee shall
determine in its sole and absolute discretion. Each grant of Restricted Stock or Restricted Stock
Units shall satisfy the requirements as set forth in this Section.

          (b) Restrictions. The Committee shall impose such restrictions on any Restricted
Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including,
without limitation; time based vesting restrictions, or the attainment of Performance Goals.
Unless otherwise provided in the applicable Award Agreement, Restricted Stock and Restricted Stock
Units will vest and become exercisable on each anniversary of the Grant Date in equal annual
installments over the three (3) years following the Grant Date of the Restricted Stock or
Restricted Stock Units; provided, however, that no Restricted Stock or Restricted Stock Units will
vest or become exercisable until the earlier of (i) an Initial Public Offering, (ii) a Change in
Control of BabyUniverse, Inc. or (iii) the date that is 6 months prior to the date the Option
terminates pursuant to its terms. Shares of Restricted Stock or Restricted Stock Units

7

 

subject to the attainment of Performance Goals will be released from restrictions only after
the attainment of such Performance Goals has been certified by the Committee in accordance with
Section 8(c).

          (c) Certificates and Certificate Legend. With respect to a grant of Restricted Stock,
the Company may issue a certificate evidencing such Restricted Stock to the Participant or issue
and hold such shares of Restricted Stock for the benefit of the Participant until the applicable
restrictions expire. The Company may legend the certificate representing Restricted Stock to give
appropriate notice of such restrictions. In addition to any such legends, each certificate
representing shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:

“The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, are
subject to certain terms, conditions, and restrictions on transfer as set
forth in the BabyUniverse, Inc., Inc. 2005 Stock Incentive Plan, and in an
Agreement entered into by and between the registered owner of such shares
and the Company, dated ___. A copy of the Plan and the Award
Agreement may be obtained from the Secretary of BabyUniverse, Inc.”

          (d) Removal of Restrictions. Except as otherwise provided in the Plan, shares of
Restricted Stock shall, subject to any applicable federal or state securities law, become freely
transferable by the Participant upon the lapse of the applicable restrictions. Once the shares of
Restricted Stock are released from the restrictions, the Participant shall be entitled to have the
legend required by paragraph (c) above removed from the share certificate evidencing such
Restricted Stock and the Company shall pay or distribute to the Participant all dividends and
distributions held in escrow by the Company with respect to such Restricted Stock. Upon the lapse
of the applicable restrictions with respect to any Restricted Stock Units, BabyUniverse, Inc. shall
deliver to the Participant, one share of Common Stock for each Restricted Stock Unit and any
Dividend Equivalents credited with respect to such Restricted Stock Units, if any. Unless
otherwise provided in an Award Agreement, the Committee may, in its sole discretion, elect to pay
cash or part cash and part Common Stock in lieu of delivering only Common Stock for Restricted
Stock Units. If a cash payment is made in lieu of delivering Common Stock, the amount of such cash
payment for each share of Common Stock to which a Participant is entitled shall be equal to the
Fair Market Value of the Common Stock on the date on which the applicable restrictions lapsed with
respect to the related Restricted Stock Unit and any Dividend Equivalents credited with respect to
such Restricted Stock Units, if any.

          (e) Stockholder Rights. Until the expiration of all applicable restrictions, the
Restricted Stock shall be treated as outstanding, the Participant holding shares of Restricted
Stock may exercise full voting rights with respect to such shares and shall be entitled to receive
all dividends and other distributions paid with respect to such shares while they are so held. If
any such dividends or distributions are paid in shares of Common Stock, such shares shall be
subject to the same restrictions on transferability and forfeitability as the shares of Restricted
Stock with respect to which they were paid. Notwithstanding anything to the contrary, at the
discretion of the Committee, all such dividend and distributions may be held in escrow by the
Company until all restrictions on the respective Restricted Stock have lapsed. A Participant shall

8

 

not have any right with respect to Restricted Stock Units granted under the Plan to vote on
any matter submitted to BabyUniverse, Inc.’s stockholders until the shares of Common Stock
attributable to such Restricted Stock Units have been issued.

          (f) Termination of Service. Unless otherwise provided in a Award Agreement, if a
Participant’s employment or service with the Company terminates for any reason, all nonvested
shares of Restricted Stock held by the Participant and any dividends or distributions held in
escrow by BabyUniverse, Inc. with respect to such Restricted Stock shall be forfeited immediately
and returned to the Company, and all nonvested Restricted Stock Units and related Dividend
Equivalents shall be forfeited. Notwithstanding this paragraph, all grants of Restricted Stock or
Restricted Stock Units that vest solely upon the attainment of Performance Goals shall be treated
pursuant to the terms and conditions that would have been applicable under Section 8(d) as if such
grants of Restricted Stock or Restricted Stock Units were Awards of Performance Shares or
Performance Units.

     8. PERFORMANCE SHARES AND PERFORMANCE UNITS

          (a) Grant of Performance Shares and Performance Units. Subject to the terms and
conditions of the Plan, the Committee may grant to such Eligible Individuals as the Committee may
determine, Performance Shares and Performance Units, in such amounts, as the Committee shall
determine in its sole and absolute discretion. Each grant of a Performance Share or a Performance
Unit shall satisfy the requirements as set forth in this Section.

          (b)  Terms and Conditions of Performance Shares and Performance Units. The applicable
Award Agreement shall set forth (i) the number of Performance Shares or the dollar value of
Performance Units granted to the Participant; (ii) the Performance Period and Performance Goals
with respect to each such Award; (iii) the threshold, target and maximum shares of Common Stock or
dollar values of each Performance Share or Performance Unit and corresponding Performance Goals,
and (iv) any other terms and conditions as the Committee determines in its sole and absolute
discretion. The Committee shall establish, in its sole and absolute discretion, the Performance
Goals for the applicable Performance Period for each Performance Share or Performance Unit granted
hereunder. Performance Goals for different Participants and for different grants of Performance
Shares and Performance Units need not be identical.

          (c) Determination and Payment of Performance Units or Performance Shares Earned. As
soon as practicable after the end of a Performance Period, the Committee shall determine the extent
to which Performance Shares or Performance Units have been earned on the basis of the Company’s
actual performance in relation to the established Performance Goals as set forth in the applicable
Award Agreement and shall certify these results in writing. As soon as practicable after the
Committee has determined that an amount is payable or should be distributed with respect to a
Performance Share or a Performance Unit, the Committee shall cause the amount of such Award to be
paid or distributed to the Participant or the Participant’s estate, devisee or heir at law
(whichever is applicable). Unless otherwise provided in an Award Agreement, the Committee shall
determine in its sole and absolute discretion whether payment with respect to the Performance Share
or Performance Unit shall be made in cash, in shares of Common Stock, or in a combination thereof.
For purposes of making payment or a distribution

9

 

with respect to a Performance Share or Performance Unit, the cash equivalent of a share of
Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the
Committee designates the Performance Shares or Performance Units to be payable.

          (d) Termination of Employment. Unless otherwise provided in an Award Agreement, if a
Participant’s employment or service with the Company terminates for any reason, all of the
Participant’s outstanding Performance Shares and Performance Units shall be subject to the rules of
this Section.

          (i) Termination for Reason Other Than Retirement, Death, or Disability. If a
Participant’s employment or service with the Company terminates prior to the expiration of a
Performance Period with respect to any Performance Units or Performance Shares held by such
Participant for any reason other than Retirement, death, or Disability the outstanding
Performance Units or Performance Shares held by such Participant for which the Performance
Period has not yet expired shall terminate upon such termination and the Participant shall
have no further rights pursuant to such Performance Units or Performance Shares.

          (ii) Termination of Employment for Retirement, Death, or Disability. If a
Participant’s employment or service with the Company terminates by reason of the
Participant’s Retirement, death or Disability prior to the end of a Performance Period , the
Participant, or the Participant’s estate, devisee or heir at law (whichever is applicable)
shall be entitled to a payment of the Participant’s outstanding Performance Units and
Performance Shares at the end of the applicable Performance Period, pursuant to the terms of
the Plan and the Participant’s Award Agreement; provided, however, that the Participant
shall be deemed to have earned only that proportion (to the nearest whole unit or share) of
the Performance Units or Performance Shares granted to the Participant under such Award as
the number of months of the Performance Period which have elapsed since the first day of the
Performance Period for which the Award was granted to the end of the month in which the
Participant’s termination of employment or service, bears to the total number of months in
the Performance Period, subject to the attainment of the Performance Goals associated with
the Award as certified by the Committee. The right to receive any remaining Performance
Units or Performance Shares shall be canceled and forfeited.

     9. STOCK AWARDS

     Subject to the terms and conditions of the Plan, the Committee may grant to such Eligible
Individuals as the Committee may determine, shares of Common Stock, in such amounts, as the
Committee shall determine in its sole and absolute discretion. Such Common Stock may be issued in
satisfaction of awards granted under any other plan sponsored by the Company or compensation
payable to an Eligible Individual.

     10. AWARD GRANTS TO NON-EMPLOYEE DIRECTORS

          (a) Grants Subject to Award Agreements. All Non-Employee Directors shall be eligible
to receive Awards pursuant to the terms of this Section and shall, in the sole

10

 

discretion of the Board, be eligible to receive any other type of Award permitted under the
Plan. Any Award granted to any Non-Employee Director hereunder shall, in addition to being subject
to the terms and conditions of this Section 10, be subject to the terms and conditions contained in
the Award Agreement applicable to such Award, including, but not limited to, any restrictions on
vesting. Notwithstanding anything to the contrary in this Plan, no Option granted under this
Section 10 shall be exercisable until the earlier of (i) an Initial Public Offering, (ii) a Change
in Control of BabyUniverse, Inc. or (iii) the date that is 6 months prior to the date the Option
terminates pursuant to its terms.

          (b) Method of Exercise. When the conditions for vesting applicable to any Awards
granted pursuant to this Section 10 have been satisfied, Non-Employee Directors may exercise
Options granted under this Section only in accordance with the following provisions. The
Non-Employee Director shall deliver to BabyUniverse, Inc. a written notice stating that the
Non-Employee Director is exercising the Option and specifying the number of shares of Common Stock
which are to be purchased pursuant to the Option, and such notice shall be accompanied by payment
of the aggregate Exercise Price of the shares of Common Stock for which the Option is being
exercised in accordance with Section 6(h) above. Said notice must be delivered to BabyUniverse,
Inc. at its principal office and addressed to the attention of BabyUniverse, Inc.’s Chief Financial
Officer. The minimum number of shares of Common Stock with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of 100 shares or the maximum number
of shares available for purchase under the Option at the time of exercise. An attempt to exercise
any Option granted hereunder other than as set forth in the Plan shall be invalid and of no force
and effect.

          (c) Termination. Any Awards held by a Non-Employee Director shall be subject to the
following provisions upon the termination of such Non-Employee Director’s service with the Company.

          (i) Termination of Directorship for Reason other than Cause or Death. If a
Non-Employee Director’s directorship terminates for any reason other than Cause or death,
the Non-Employee Director or the Non-Employee Director’s estate, devisee or heir at law
(whichever is applicable) shall have the right at any time within a period not to exceed
three (3) years from the date of such termination, and prior to the termination of the
Options pursuant to their terms to exercise, in whole or in part, any vested portion of the
Options held by such Non-Employee Director at the date of such termination. Upon such
termination, the Non-Employee Director’s unvested Options shall expire, except as otherwise
provided by the Committee.

          (ii) Termination of Directorship for Cause. Upon a Non-Employee Director’s
removal, failure to stand for reelection or failure to be re-nominated for Cause, or if the
Company obtains information after a Non-Employee Director’s directorship terminates that
such Non-Employee Director had engaged in conduct that would have justified removal for
Cause during the Non-Employee Director’s directorship, all outstanding Options held by such
Non-Employee Director shall expire immediately and the Non-Employee Director or the
Non-Employee Director’s estate, devisee or heir at law (whichever is applicable) shall have
no further right to purchase shares of Common Stock pursuant to such Options.

11

 

          (iii) Death. If a Non-Employee Director’s directorship terminates by reason of
such director’s death, all nonvested Options held by such director shall vest and become
fully exercisable and the Non-Employee Director’s estate, devisee or heir at law (whichever
is applicable) shall have the right at any time within a period not to exceed three (3)
years from the date of the director’s death, and prior to the termination of the Options
pursuant to their terms to exercise, in whole or in part, any vested portion of the Options
held by such Non-Employee Director upon death.

     11. OTHER AWARDS

     Awards of shares of Common Stock, phantom stock and other awards that are valued in whole or
in part by reference to, or otherwise based on, Common Stock, may also be made, from time to time,
to Eligible Individuals as may be selected by the Committee. Such awards may be made alone or in
addition to or in connection with any other Award granted hereunder. The Committee may determine
the terms and conditions of any such award. Each such award shall be evidenced by an Award
Agreement between the Eligible Individual and the Company which shall specify the number of shares
of Common Stock subject to the award, any consideration therefore, any vesting or performance
requirements and such other terms and conditions as the Committee shall determine in its sole and
absolute discretion.

     12. CHANGE IN CONTROL AND OTHER CORPORATE EVENTS

          (a) Change in Control. Unless otherwise provided in an Award Agreement, in the event
of a Change in Control, the Committee may, in its sole and absolute discretion, provide on a case
by case basis (i) that some or all outstanding Awards may become immediately exercisable or vested,
without regard to any limitation imposed pursuant to this Plan, (ii) that all Awards shall
terminate, provided however, that Participants shall have the right for a reasonable period as the
Committee in its sole discretion shall determine and designate, to exercise any vested Awards in
whole or in part, subject to any terms and conditions as the Committee shall establish, (iii) that
all Awards shall be honored, assumed or substituted for by new rights (the “Alternative Awards”)
granted by the Participants’ employer immediately following the Change in Control (provided that
such Alternative Awards must have economic value substantially equivalent to the Awards at the time
of the Change in Control), or (iv) that any or all Awards shall be purchased by the Company without
the consent of the Participants, based on such terms and conditions as the Committee shall
determine which shall be communicated to the Participants, provided that any such purchases by the
Company must be made for consideration having economic value substantially equivalent to the Awards
at the time of the Change in Control. With respect any Awards subject to performance-based vesting
which become vested upon a Change in Control, all Performance Goals shall be deemed satisfied as of
the date of the Change in Control.

          (b) Change in Status of Affiliates. Unless otherwise provided in an Award Agreement
or otherwise determined by the Committee, in the event that an entity which was previously a part
of the Company is no longer a part of the Company, as determined by the Committee in its sole
discretion, the employment or other services of a Participant employed by such entity may be
treated in the sole discretion of the Committee as terminated if such Participant is not employed
by the Company immediately after such event.

12

 

     13. REQUIREMENTS OF LAW

          (a) Stockholder Approval. Notwithstanding anything to the contrary herein, no Awards
shall be made pursuant to the Plan prior to the date on which the Plan is approved by the
stockholders of BabyUniverse, Inc. in accordance with its Bylaws and the laws of the State of
Delaware and the rules and regulations of the securities exchange on which the Common Stock is
traded.

          (b) Violations of Law. The Company shall not be required to sell or issue any shares
of Common Stock under any Award if the sale or issuance of such shares would constitute a violation
by the individual exercising the Award, the Participant or the Company of any provisions of any law
or regulation of any governmental authority, including without limitation any provisions of the
Sarbanes-Oxley Act, and any other federal or state securities laws or regulations. Any
determination in this connection by the Committee shall be final, binding, and conclusive. The
Company shall not be obligated to take any affirmative action in order to cause the exercise of an
Award, the issuance of shares pursuant thereto or the grant of an Award to comply with any law or
regulation of any governmental authority.

          (c) Registration. At the time of any exercise or receipt of any Award, the Company
may, if it shall determine it necessary or desirable for any reason, require the Participant (or
Participant’s heirs, legatees or legal representative, as the case may be), as a condition to the
exercise or grant thereof, to deliver to the Company a written representation of present intention
to hold the shares for their own account as an investment and not with a view to, or for sale in
connection with, the distribution of such shares, except in compliance with applicable federal and
state securities laws with respect thereto. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered to the Participant
(or Participant’s heirs, legatees or legal representative, as the case may be) upon the
Participant’s exercise of part or all of the Award or receipt of an Award and a stop transfer order
may be placed with the transfer agent. Each Award shall also be subject to the requirement that,
if at any time the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the Award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of or in connection with, the issuance or purchase of the shares
thereunder, the Award may not be exercised in whole or in part and the restrictions on an Award may
not be removed unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to The Company in its sole
discretion. The Participant shall provide the Company with any certificates, representations and
information that the Company requests and shall otherwise cooperate with the Company in obtaining
any listing, registration, qualification, exemption, consent or approval that the Company deems
necessary or appropriate. The Company shall not be obligated to take any affirmative action in
order to cause the exercisability or vesting of an Award, to cause the exercise of an Award or the
issuance of shares pursuant thereto, or to cause the grant of Award to comply with any law or
regulation of any governmental authority.

          (d) Withholding. The Committee may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes that the Company is required by any
law or regulation of any governmental authority, whether federal, state or

13

 

local, domestic or foreign, to withhold in connection with the grant or exercise of an Award,
or the removal of restrictions on an Award including, but not limited to: (i) the withholding of
delivery of shares of Common Stock until the holder reimburses the Company for the amount the
Company is required to withhold with respect to such taxes; (ii) the canceling of any number of
shares of Common Stock issuable in an amount sufficient to reimburse the Company for the amount it
is required to so withhold; (iii) withholding the amount due from any such person’s wages or
compensation due to such person; or (iv) requiring the Participant to pay the Company cash in the
amount the Company is required to withhold with respect to such taxes.

          (e) Governing Law. The Plan shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.

     14. GENERAL PROVISIONS

          (a) Award Agreements. All Awards granted pursuant to the Plan shall be evidenced by
an Award Agreement. Each Award Agreement shall specify the terms and conditions of the Award
granted and shall contain such provisions, as the Committee shall deem appropriate. The terms of
each Award Agreement need not be identical for Eligible Individuals provided that all Award
Agreements comply with the terms of the Plan.

          (b) Purchase Price. To the extent the purchase price of any Award granted hereunder
is less than par value of a share of Common Stock and such purchase price is not permitted by
applicable law, the per share purchase price shall be equal to the par value of a share of Common
Stock.

          (c) Prospective Employees. Notwithstanding anything to the contrary, any Award
granted to a Prospective Employee shall not become vested prior to the date the Prospective
Employee first becomes an employee of the Company.

          (d) Issuance of Certificates; Stockholder Rights. BabyUniverse, Inc. shall deliver to
the Participant a certificate evidencing the Participant’s ownership of shares of Common Stock
issued pursuant to the exercise of an Award as soon as administratively practicable after
satisfaction of all conditions relating to the issuance of such shares. A Participant shall not
have any of the rights of a stockholder with respect to such Common Stock prior to satisfaction of
all conditions relating to the issuance of such Common Stock, and, except as expressly provided in
the Plan, no adjustment shall be made for dividends, distributions or other rights of any kind for
which the record date is prior to the date on which all such conditions have been satisfied. The
Committee in its absolute and sole discretion may credit a Participant’s Award with Dividend
Equivalents with respect to any Awards. To the extent that dividends and distributions relating to
an Award are held in escrow by the Company, or Dividend Equivalents are credited to an Award, a
Participant shall not be entitled to any interest on any such amounts. The Committee may not grant
Dividend Equivalents to an Award subject to performance-based vesting to the extent the grant of
such Dividend Equivalents would limit the Company’s deduction of the compensation payable under
such Award for federal tax purposes pursuant to Code Section 162(m).

14

 

          (e) Transferability of Awards. A Participant may not Transfer an Award other than by
will or the laws of descent and distribution. Awards may be exercised during the Participant’s
lifetime only by the Participant. No Award shall be liable for or subject to the debts, contracts,
or liabilities of any Participant, nor shall any Award be subject to legal process or attachment
for or against such person. Any purported Transfer of an Award in contravention of the provisions
of the Plan shall have no force or effect and shall be null and void, and the purported transferee
of such Award shall not acquire any rights with respect to such Award. Notwithstanding anything to
the contrary, the Committee may in its sole and absolute discretion permit the Transfer of an Award
to a Participant’s “family member” as such term is defined in the Form S-8 Registration Statement
under the Securities Act of 1933, under such terms and conditions as specified by the Committee.
In such case, such Award shall be exercisable only by the transferee approved of by the Committee.
To the extent that the Committee permits the Transfer of an Incentive Stock Option to a “family
member”, so that such Option fails to continue to satisfy the requirements of an incentive stock
option under the Code such Option shall automatically be re-designated as a Non-Qualified Stock
Option.

          (f) Buyout and Settlement Provisions. The Committee may at any time on behalf of
BabyUniverse, Inc. offer to buy out any Awards previously granted based on such terms and
conditions as the Committee shall determine which shall be communicated to the Participants at the
time such offer is made.

          (g) Use of Proceeds. The proceeds received by BabyUniverse, Inc. from the sale of
Common Stock pursuant to Awards granted under the Plan shall constitute general funds of
BabyUniverse, Inc.

          (h) Modification or Substitution of an Award. Subject to the terms and conditions of
the Plan, the Committee may modify outstanding Awards. Notwithstanding the following, no
modification of an Award shall adversely affect any rights or obligations of the Participant under
the applicable Award Agreement without the Participant’s consent. The Committee in its sole and
absolute discretion may rescind, modify, or waive any vesting requirements or other conditions
applicable to an Award. Notwithstanding the foregoing, without approval of the stockholders of
BabyUniverse, Inc., an Award may not be modified to reduce the exercise price thereof nor may an
Award at a lower price be substituted for a surrender of an Award, provided that (i) the foregoing
shall not apply to adjustments or substitutions in accordance with Section 5 and (ii) if an Award
is modified, extended or renewed and thereby deemed to be in issuance of a new Award under the Code
or the applicable accounting rules, the exercise price of such Award may continue to be the
original Exercise Price even if less than Fair Market Value of the Common Stock at the time of such
modification, extension or renewal.

          (i) Amendment and Termination of Plan. The Board may, at any time and from time to
time, amend, suspend or terminate the Plan as to any shares of Common Stock as to which Awards have
not been granted; provided, however, that the approval by a majority of the votes present and
entitled to vote at a duly held meeting of the stockholders of BabyUniverse, Inc. at which a quorum
representing a majority of all outstanding voting stock is, either in person or by proxy, present
and voting on the amendment, or by written consent in accordance with applicable state law and the
Certificate of Incorporation and Bylaws of BabyUniverse, Inc. shall

15

 

be required for any amendment (i) that changes the class of individuals eligible to receive
Awards under the Plan, (ii) that increases the maximum number of shares of Common Stock in the
aggregate that may be subject to Awards that are granted under the Plan (except as permitted under
Section 5 or Section 14 hereof), (iii) if approval of such amendment is necessary to comply with
federal or state law (including without limitation Section 162(m) of the Code and Rule 16b-3 under
the Exchange Act) or with the rules of any stock exchange or automated quotation system on which
the Common Stock may be listed or traded, or (iv) if such amendment eliminates a requirement
provided herein that the stockholders of BabyUniverse, Inc. must approve an action to be undertaken
under the Plan. Except as permitted under Section 5 or Section 14 hereof, no amendment, suspension
or termination of the Plan shall, without the consent of the holder of an Award, alter or impair
rights or obligations under any Award theretofore granted under the Plan. Awards granted prior to
the termination of the Plan may extend beyond the date the Plan is terminated and shall continue
subject to the terms of the Plan as in effect on the date the Plan is terminated.

          (j) Notification of 83(b) Election. If in connection with the grant of any Award any
Participant makes an election permitted under Code Section 83(b), such Participant must notify the
Company in writing of such election within ten (10) days of filing such election with the Internal
Revenue Service.

          (k) Detrimental Activity. All Awards may be subject to cancellation by the Committee
in its sole and absolute discretion, if the Participant engages in any Detrimental Activity. To
the extent that a Participant engages in any Detrimental Activity prior to, or during the one year
period after, any exercise or vesting of an Award but prior to a Change in Control, the Company
shall be entitled to recover from the Participant at any time within two (2) years after the
exercise or vesting of the Award but prior to a Change in Control, and the Participant shall pay
over to the Company with respect to any Award previously held by such Participant (i) an amount
equal to the excess of the Fair Market Value of the Common Stock for which any Option was exercised
over the Exercise Price paid (regardless of the form by which payment was made) with respect to
such Option; (ii) any shares of Common Stock granted pursuant to any Award other than an Option,
and if such shares are not still owned by the Participant, the Fair Market Value of such shares on
the date they were issued, or if later, the date all vesting restrictions were satisfied; and (iii)
any cash or other property (other than Common Stock) received by the Participant from the Company
pursuant to an Award.

          (l) Disclaimer of Rights. No provision in the Plan, any Award granted or any Award
Agreement entered into pursuant to the Plan shall be construed to confer upon any individual the
right to remain in the employ of or service with the Company or to interfere in any way with the
right and authority of the Company either to increase or decrease the compensation of any
individual, including any holder of an Award, at any time, or to terminate any employment or other
relationship between any individual and the Company. The grant of an Award pursuant to the Plan
shall not affect or limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or
assets.

16

 

          (m) Unfunded Status of Plan. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments as to which a Participant
has a fixed and vested interest but which are not yet made to such Participant by the Company,
nothing contained herein shall give any such Participant any rights that are greater than those of
a general creditor of the Company.

          (n) Nonexclusivity of Plan. The adoption of the Plan shall not be construed as
creating any limitations upon the right and authority of the Board to adopt such other incentive
compensation arrangements (which arrangements may be applicable either generally to a class or
classes of individuals or specifically to a particular individual or individuals) as the Board in
its discretion determines desirable.

          (o) Other Benefits. No Award payment under the Plan shall be deemed compensation for
purposes of computing benefits under any retirement plan of the Company or any agreement between a
Participant and the Company, nor affect any benefits under any other benefit plan of the Company
now or subsequently in effect under which benefits are based upon a Participant’s level of
compensation.

          (p) Headings. The section headings in the Plan are for convenience only; they form no
part of the Plan and shall not affect its interpretation.

          (q) Pronouns. The use of any gender in the Plan shall be deemed to include all
genders, and the use of the singular shall be deemed to include the plural and vice versa, wherever
it appears appropriate from the context.

          (r) Successors and Assigns. The Plan shall be binding on all successors of the
Company and all successors and permitted assigns of a Participant, including, but not limited to, a
Participant’s estate, devisee, or heir at law.

          (s) Severability. If any provision of the Plan or any Award Agreement shall be
determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in such jurisdiction in accordance
with their terms, and all provisions shall remain enforceable in any other jurisdiction.

          (t) Notices. Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, to
BabyUniverse, Inc., to its principal place of business, attention: [Vice President-Human
Resources], and if to the holder of an Award, to the address as appearing on the records of the
Company.

17

 

APPENDIX 1

DEFINITIONS

     “Award” means any Common Stock, Option, Performance Share, Performance Unit, Restricted Stock,
Restricted Stock Unit or any other award granted pursuant to the Plan.

     “Award Agreement” means a written agreement entered into by BabyUniverse, Inc. and a
Participant setting forth the terms and conditions of the grant of an Award to such Participant.

     “BabyUniverse, Inc.” means BabyUniverse, Inc., Inc., a Delaware corporation.

     “Board” means the board of directors of BabyUniverse, Inc.

     “Cause” means, with respect to a termination of employment or service with the Company, a
termination of employment or service due to a Participant’s dishonesty, fraud, insubordination,
willful misconduct, refusal to perform services (for any reason other than illness or incapacity)
or materially unsatisfactory performance of the Participant’s duties for the Company; provided,
however, that if the Participant and the Company have entered into an employment agreement or
consulting agreement which defines the term Cause, the term Cause shall be defined in accordance
with such agreement with respect to any Award granted to the Participant on or after the effective
date of the respective employment or consulting agreement. The Committee shall determine in its
sole and absolute discretion whether Cause exists for purposes of the Plan.

     “Change in Control” shall be deemed to occur upon:

          (a) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other
than BabyUniverse, Inc., any trustee or other fiduciary holding securities under any employee
benefit plan of the Company, or any the Company owned, directly or indirectly, by the stockholders
of BabyUniverse, Inc. in substantially the same proportions as their ownership of common stock of
BabyUniverse, Inc.), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of BabyUniverse, Inc. representing twenty-five
percent (25%) or more of the combined voting power of BabyUniverse, Inc.’s then outstanding
securities;

          (b) during any period of twelve (12) consecutive months, individuals who at the beginning of
such period constitute the Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in
paragraph (a), (c), or (d) of this section) whose election by the Board or nomination for election
by BabyUniverse, Inc.’s stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the twelve-month period or whose
election or nomination for election was previously so approved, cease for any reason to constitute
at least a majority of the Board;

          (c) a merger, consolidation, reorganization, or other business combination of the
BabyUniverse, Inc. with any other entity, other than a merger or consolidation which would result
in the voting securities of BabyUniverse, Inc. outstanding immediately prior thereto

A-1

 

continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of BabyUniverse, Inc. or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of BabyUniverse, Inc. (or similar transaction) in which no person
acquires more than fifty percent (50%) of the combined voting power of BabyUniverse, Inc.’s then
outstanding securities shall not constitute a Change in Control; or

          (d) the stockholders of BabyUniverse, Inc. approve a plan of complete liquidation of
BabyUniverse, Inc. or the consummation of the sale or disposition by BabyUniverse, Inc. of all or
substantially all of BabyUniverse, Inc.’s assets other than (x) the sale or disposition of all or
substantially all of the assets of BabyUniverse, Inc. to a person or persons who beneficially own,
directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the
outstanding voting securities of BabyUniverse, Inc. at the time of the sale or (y) pursuant to a
spin-off type transaction, directly or indirectly, of such assets to the stockholders of
BabyUniverse, Inc..

     “Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.

     “Committee” means a committee or sub-committee of the Board consisting of two or more members
of the Board, none of whom shall be an officer or other salaried employee of the Company, and each
of whom shall qualify in all respects as a “non-employee director” as defined in Rule 16b-3 under
the Exchange Act, and as an “outside director” for purposes of Code Section 162(m). If no
Committee exists, the functions of the Committee will be exercised by the Board; provided, however,
that a Committee shall be created prior to the grant of Awards to a Covered Employee and that
grants of Awards to a Covered Employee shall be made only by such Committee. Not withstanding the
foregoing, with respect to the grant of Awards to non-employee directors, the Committee shall be
the Board.

     “Common Stock” means the common stock, $.01 par value per share, of BabyUniverse, Inc.

     “Company” means BabyUniverse, Inc. and all entities whose financial statements are required to
be consolidated with the financial statements of BabyUniverse, Inc. pursuant to United States
generally accepted accounting principles and any other entity determined to be an affiliate as
determined by the Committee in its sole and absolute discretion.

     “Covered Employee” means “covered employee” as defined in Code Section 162(m)(3).

     “Covered Individual” means any current or former member of the Committee, any current or
former officer of the Company, or any individual designated pursuant to Section 4(b).

     “Detrimental Activity” shall mean (i) the disclosure to anyone outside the Company, or the use
in other than the Company’s business, without written authorization from the Company, of any
confidential information or proprietary information, relating to the business of the Company,
acquired by a Participant prior to a termination of the Participant’s employment or service with
the Company; (ii) activity while employed or providing services that results, or if

A-2

 

known could result, in the termination of the Participant’s employment or service that is
classified by the Company as a termination for Cause; (iii) any attempt, directly or indirectly, to
solicit, induce or hire (or the identification for solicitation, inducement or hiring of) any
non-clerical employee of the Company to be employed by, or to perform services for, the Participant
or any person or entity with which the Participant is associated (including, but not limited to,
due to the Participant’s employment by, consultancy for, equity interest in, or creditor
relationship with such person or entity) or any person or entity from which the Participant
receives direct or indirect compensation or fees as a result of such solicitation, inducement or
hire (or the identification for solicitation, inducement or hire) without, in all cases, written
authorization from the Company; (iv) any attempt, directly or indirectly, to solicit in a
competitive manner any current or prospective customer of the Company without, in all cases,
written authorization from the Company; (v) the Participant’s Disparagement, or inducement of
others to do so, of the Company or their past and present officers, directors, employees or
products; (vi) without written authorization from the Company, the rendering of services for any
organization, or engaging, directly or indirectly, in any business, which is competitive with the
Company, or which organization or business, or the rendering of services to such organization or
business, is otherwise prejudicial to or in conflict with the interests of the Company, provided
however that competitive activities shall only be those competitive with any business unit of the
Company with regard to which the Participant performed services at any time within the two (2)
years prior to the termination of the Participant’s employment or service; or (vii) any other
conduct or act determined by the Committee, in its sole discretion, to be injurious, detrimental or
prejudicial to any interest of the Company. For purposes of subparagraphs (i), (iii), (iv) and
(vi) above, the Chief Executive Officer and the General Counsel of the Company shall each have
authority to provide the Participant with written authorization to engage in the activities
contemplated thereby and no other person shall have authority to provide the Participant with such
authorization.

     “Disability” means a “permanent and total disability” within the meaning of Code Section
22(e)(3); provided, however, that if a Participant and the Company have entered into an employment
or consulting agreement which defines the term Disability for purposes of such agreement,
Disability shall be defined pursuant to the definition in such agreement with respect to any Award
granted to the Participant on or after the effective date of the respective employment or
consulting agreement. The Committee shall determine in its sole and absolute discretion whether a
Disability exists for purposes of the Plan.

     “Disparagement” means making any comments or statements to the press, the Company’s employees
or any individual or entity with whom the Company has a business relationship which would adversely
affect in any manner: (i) the conduct of the business of the Company (including, without
limitation, any products or business plans or prospects), or (ii) the business reputation of the
Company or any of its products, or its past or present officers, directors or employees.

     “Dividend Equivalents” means an amount equal to the cash dividends paid by the Company upon
one share of Common Stock subject to an Award granted to a Participant under the Plan.

     “Effective Date” shall mean the date that the Plan was approved by the stockholders of
BabyUniverse, Inc. in accordance with its Bylaws and the laws of the State of Florida.

A-3

 

     “Eligible Individual” means any employee, officer, director (employee or non-employee
director) of the Company and any Prospective Employee to whom Awards are granted in connection with
an offer of future employment with the Company.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Exercise Price” means the purchase price of each share of Common Stock subject to an Award.

     “Fair Market Value” means, unless otherwise required by the Code, as of any date, (i) the last
sales price reported for the Common Stock on the applicable date, as reported by the national
securities exchange in the United States on which it is then traded, (ii) if not traded on any such
national securities exchange, as quoted on an automated quotation system sponsored by the National
Association of Securities Dealers, Inc., or if the Common Stock shall not have been reported or
quoted on such date, on the first day prior thereto on which the Common Stock was reported or
quoted; or (iii) if the Common Stock is not readily traded on a national securities exchange or
quoted on any automated quotation system sponsored by the National Association of Securities
Dealers, Inc., the Fair Market Value shall be determined in good faith by the Committee; provided,
however, that the Committee may modify the definition of Fair Market Value to reflect any changes
in the trading practices of any exchange or automated system sponsored by the National Association
of Securities Dealers, Inc. on which the Common Stock is listed or traded. For purposes of the
grant of any Award, the applicable date shall be the day prior to the date on which the Award is
granted.

     “Grant Date” means the date on which the Committee approves the grant of an Award or such
later date as is specified by the Committee and set forth in the applicable Award Agreement.

     “Incentive Stock Option” means an “incentive stock option” within the meaning of Code Section 422.

     “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

     “Initial Public Offering” shall be deemed to have occurred if there is a closing of an
underwritten public offering by BabyUniverse, Inc. pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended, covering the offer and sale of
BabyUniverse Inc.’s Common Stock for the account of the Company for cash.

     “Non-Employee Director” means a director of BabyUniverse, Inc. who is not an active employee
of the Company.

     “Option” means an option to purchase Common Stock granted pursuant to Sections 6 or 10 of the
Plan.

     “Participant” means any Eligible Individual who holds an Award under the Plan and any of such
individual’s successors or permitted assigns.

     “Performance Goals” means the specified performance goals which have been established by the
Committee in connection with an Award. Performance Goals will be based on one or

A-4

 

more of the following criteria, as determined by the Committee in its absolute and sole
discretion: (i) the attainment of certain target levels of, or a specified increase in,
BabyUniverse, Inc.’s enterprise value or value creation targets; (ii) the attainment of certain
target levels of, or a percentage increase in, BabyUniverse, Inc.’s after-tax or pre-tax profits
including, without limitation, that attributable to BabyUniverse, Inc.’s continuing and/or other
operations; (iii) the attainment of certain target levels of, or a specified increase relating to,
BabyUniverse, Inc.’s operational cash flow or working capital, or a component thereof; (iv) the
attainment of certain target levels of, or a specified decrease relating to, BabyUniverse, Inc.’s
operational costs, or a component thereof (v) the attainment of a certain level of reduction of, or
other specified objectives with regard to limiting the level of increase in all or a portion of
bank debt or other of BabyUniverse, Inc.’s long-term or short-term public or private debt or other
similar financial obligations of BabyUniverse, Inc., which may be calculated net of cash balances
and/or other offsets and adjustments as may be established by the Committee; (vi) the attainment of
a specified percentage increase in earnings per share or earnings per share from BabyUniverse,
Inc.’s continuing operations; (vii) the attainment of certain target levels of, or a specified
percentage increase in, BabyUniverse, Inc.’s net sales, revenues, net income or earnings before
income tax or other exclusions; (viii) the attainment of certain target levels of, or a specified
increase in, BabyUniverse, Inc.’s return on capital employed or return on invested capital; (ix)
the attainment of certain target levels of, or a percentage increase in, BabyUniverse, Inc.’s
after-tax or pre-tax return on stockholder equity; (x) the attainment of certain target levels in
the fair market value of BabyUniverse, Inc.’s Common Stock; (xi) the growth in the value of an
investment in the Common Stock assuming the reinvestment of dividends; and (xii) the attainment of
certain target levels of, or a specified increase in, EBITDA (earnings before income tax,
depreciation and amortization). In addition, Performance Goals may be based upon the attainment by
a subsidiary, division or other operational unit of BabyUniverse, Inc. of specified levels of
performance under one or more of the measures described above. Further, the Performance Goals may
be based upon the attainment by BabyUniverse, Inc. (or a subsidiary, division or other operational
unit of BabyUniverse, Inc.) of specified levels of performance under one or more of the foregoing
measures relative to the performance of other corporations. To the extent permitted under Code
Section 162(m) of the Code (including, without limitation, compliance with any requirements for
stockholder approval), the Committee may (i) designate additional business criteria upon which the
Performance Goals may be based; (ii) modify, amend or adjust the business criteria described herein
or (iii) incorporate in the Performance Goals provisions regarding changes in accounting methods,
corporate transactions (including, without limitation, dispositions or acquisitions) and similar
events or circumstances. Performance Goals may include a threshold level of performance below which
no Award will be earned, levels of performance at which an Award will become partially earned and a
level at which an Award will be fully earned.

     “Performance Period” means the period during which Performance Goals must be achieved in
connection with an Award granted under the Plan.

     “Performance Share” means a right to receive a fixed number of shares of Common Stock, or the
cash equivalent, which is contingent on the achievement of certain Performance Goals during a
Performance Period.

A-5

 

     “Performance Unit” means a right to receive a designated dollar value, or shares of Common
Stock of the equivalent value, which is contingent on the achievement of Performance Goals during a
Performance Period.

     “Person” shall mean any person, corporation, partnership, joint venture or other entity or any
group (as such term is defined for purposes of Section 13(d) of the Exchange Act), other than a
Parent or Subsidiary.

     “Plan” means this BabyUniverse, Inc., Inc. 2004 Stock Incentive Plan.

     “Prospective Employee” means any individual who has committed to become an employee of the
Company within sixty (60) days from the date an Award is granted to such individual.

     “Restricted Stock” means Common Stock subject to certain restrictions, as determined by the
Committee, and granted pursuant to Section 7 hereunder.

     “Restricted Stock Unit” means the right to receive to receive a fixed number of shares of
Common Stock, or the cash equivalent, granted pursuant to Section 7 hereunder.

     “Retirement” means a termination of employment of a Participant (other than for Cause or
within ninety (90) days after an event which would be grounds for a termination of employment for
Cause) who has attained (1) at least age sixty-five (65); or (2) at least age sixty-two (62) and
performed ten (10) or more years of service with the Company (or its predecessors).

     “Section 424 Employee” means an employee of BabyUniverse, Inc. or any “subsidiary corporation”
or “parent corporation” as such terms are defined in and in accordance with Code Section 424. The
term “Section 424 Employee” also includes employees of a corporation issuing or assuming any
Options in a transaction to which Code Section 424(a) applies.

     “Transfer” means, as a noun, any direct or indirect, voluntary or involuntary, exchange, sale,
bequeath, pledge, mortgage, hypothecation, encumbrance, distribution, transfer, gift, assignment or
other disposition or attempted disposition of, and, as a verb, directly or indirectly, voluntarily
or involuntarily, to exchange, sell, bequeath, pledge, mortgage, hypothecate, encumber, distribute,
transfer, give, assign or in any other manner whatsoever dispose or attempt to dispose of.

A-6exv10w2

 

Exhibit 10.2

EMPLOYMENT CONTRACT

between

BABYUNIVERSE, INC.

and

JOHN C. TEXTOR

 

 

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	 

 

 

EMPLOYMENT CONTRACT

     THIS EMPLOYMENT CONTRACT (“Contract”) is made and entered as of the 1st day of April 2005
between BABYUNIVERSE, INC., a Florida corporation (“Employer”), and John C. Textor (“Employee”).

RECITALS

     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 Executive
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 three (3) years commencing as of April 1, 2005 (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 Executive 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 Executive Officer 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.

 

 

     B. Place of Performance. The Duties shall be performed in Fort Lauderdale, 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 Fort Lauderdale, 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 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.

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
Ninety Thousand Dollars ($90,000.00) on an annualized basis (the “Base Salary”), which amount shall
be paid in accordance with Employer’s customary payroll practices.

2

 

          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.

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 Severence, 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 one

3

 

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.

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 four (4) 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
seventy-five (75) miles outside of Fort Lauderdale, 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:

4

 

          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.

     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

5

 

     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.

     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 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
contractor physicians 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.

6

 

     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’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

7

 

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.
	

	 	5601 NW 9th Avenue, Suite 104
	

	 	Fort Lauderdale, FL 33309
	

	 	Attn: Chairman of the Board
	

	 	 
	If to Employee:

	 	John C. Textor
	

	 	11450 SE Dixie Highway, Ste. 204
	

	 	Hobe Sound, Florida 33455

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.

     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.

8

 

     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).

9

 

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 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

10

 

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 Broward 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.

11

 

     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:

	 	 

	Name:

	 	 

	Title:

	 	 

	 
	 	 
	John C. Textor
	 
	 	 
	

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}]]