EMPLOYMENT AGREEMENT
Exhibit
10.18
THIS
EMPLOYMENT AGREEMENT is made as of July 31, 2006, by and between RC2
Corporation, a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx
(the "Employee"). Certain capitalized terms used herein are defined in
section 10 below.
RECITALS
A. The
Company and the Employee desire to terminate any and all prior agreements,
whether oral or written, between the parties and between the Employee and
the
Company relating to the Employee's employment.
B. The
Company desires to employ the Employee and the Employee is willing to make
his
services available to the Company on the terms and conditions set forth
below.
AGREEMENTS
In
consideration of the premises and the mutual agreements which follow, the
parties agree as follows:
1. Employment.
The
Company hereby employs the Employee and the Employee hereby accepts employment
with the Company on the terms and subject to the conditions set forth in
this
Agreement.
2. Term.
The
term of the Employee's employment hereunder shall commence on the date
hereof
and shall continue until terminated as provided in section 6
below.
3. Duties.
The
Employee shall serve as the Chief Operations Officer of the Company and
will,
under the direction of the Company's Chief Executive Officer, President
and the
Board of Directors, faithfully and to the best of his ability, perform
the
duties of such position. The Employee shall be one of the principal executive
officers and Senior Management of the Company and shall, subject to the
control
of the Chief Executive Officer, President and the Company's Board of Directors,
have the normal duties, responsibilities and authority associated with
such
position. The Employee shall also perform such additional duties and
responsibilities which may from time to time be reasonably assigned or
delegated
by the Chief Executive Officer, President or Board of Directors of the
Company.
The Employee agrees to devote his entire business time, effort, skill and
attention to the proper discharge of such duties while employed by the
Company.
1
4. Compensation.
The
Employee shall receive a base salary of $210,000 per year, payable in regular
and equal
monthly installments (the "Base Salary"), or such greater amount as may
be
agreed to by the parties.
5. Fringe
Benefits.
(a) Vacation.
The
Employee shall be entitled to four weeks of paid vacation annually. The
Employee
and the Company shall mutually determine the time and intervals of such
vacation.
(b) Medical,
Health, Dental, Disability and Life Coverage.
The
Employee shall be eligible to participate in any medical, health, dental,
disability and life insurance policy in effect for the Senior Management
of the
Company.
(c) Incentive
Bonus and Stock Ownership Plans.
The
Employee shall be entitled to participate in any
incentive bonus plan, incentive stock option or other stock ownership plan
or
other incentive compensation plan developed generally for the Senior Management
of the Company, on a basis consistent with his position and level of
compensation with the Company. Without limiting the foregoing, Employee
shall be
entitled to participate on a basis consistent with past practice and his
position and level of compensation with the Company in the annual Incentive
Bonus Plan and Top Management Additional Bonus Plan, together with all
successor
or other bonus plans (collectively, the "Bonus Plans"). In addition, Employee
shall be entitled to receive annual stock option grants as provided on
Schedule 5(c) attached hereto. The options will be granted pursuant to a
Non-Statutory Stock Option Grant Agreement substantially in the form of
Exhibit A attached hereto.
(d) Automobile.
The
Company agrees to reimburse the Employee up to $600 per month, as such
amount
may be increased from time to time consistent with the Company's reimbursement
policy for the Senior Management of the Company to cover Employee's expenses
in
connection with his leasing of an automobile. Additionally, the Company
will pay
for the gas used for business purposes. All maintenance and insurance expense
for the automobile is the responsibility of the Employee.
(e) Reimbursement
for Reasonable Business Expenses.
The
Company shall pay or reimburse the Employee for reasonable expenses incurred
by
him in connection with the performance of his duties pursuant to this Agreement
including, but not limited to, travel expenses, expenses in connection
with
seminars, professional conventions or similar professional functions and
other
reasonable business expenses.
2
(f) Key
Man
Insurance.
The
parties agree that the Company has the option to purchase one or more key
man
life insurance policies upon the life of the Employee. The Company shall
own and
shall have the absolute right to name the beneficiary or beneficiaries
of said
policy. The Employee agrees to cooperate fully with the Company in securing
said
policy, including, but not limited to submitting himself to any physical
examination which may be required at such reasonable times and places as
Company
shall specify.
(g) Life
and Disability Insurance.
During
the Employment Period, the Company shall provide coverage of at least
$2.0 million of life insurance and 75% of Base Salary of disability
insurance. Such insurance policies to be owned by any one or more members
of
Employee's immediate family or by a trust for the primary benefit of Employee's
immediate family. The owner of the policy shall have the power to designate
the
beneficiary and to assign any rights under the policy. The Company shall
pay
100% of the premiums required under these policies; provided, however,
that the
Company shall not be obligated to pay greater than $20,000 for such premiums
during any fiscal year. In the event that the premiums for such policies
would
exceed this limitation, the Company shall consult with the Employee to
determine
the allocation of such amount to the premiums for each type of policy to
obtain
such insurance as may be available for an aggregate of $20,000 per fiscal
year.
6. Termination.
(a) Termination
of the Employment Period.
The
Employment Period shall continue until the earlier of: (i) March 31, 2008
unless the parties mutually agree in writing to extend the term of this
Agreement (such date hereof or such extended date being referred to herein
as
the "Expected Completion Date"), (ii) the Employee's death or Disability,
(iii) the Employee resigns or (iv)
the
Board of Directors determines that termination of Employee's employment
is in
the best interests of the Company (the "Employment Period"). The last day
of the
Employment Period shall be referred to herein as the "Termination
Date."
(b) Definitions.
(i) For
purposes of this Agreement, "Disability" shall mean a physical or mental
sickness or any injury which renders the Employee incapable of performing
the
services required of his as an employee of the Company and which does or
may be
expected to continue for more than six months during any 12-month period.
In the
event Employee shall be able to perform his usual and customary duties
on behalf
of the Company following a period of disability, and does so perform such
duties
or such other duties as are prescribed by the Board of Directors for a
period of
three continuous months, any subsequent period of disability shall be regarded
as a new period of disability for purposes of this Agreement. The Company
and
the Employee shall determine the existence of a Disability and the date
upon
which it occurred. In the event of a dispute regarding whether or when
a
Disability occurred, the matter shall be referred to a medical doctor selected
by the Company and the Employee. In the
event
of their failure to agree upon such a medical doctor, the Company and the
Employee shall each select a medical doctor who together shall select a
third
medical doctor who shall make the determination. Such determination shall
be
conclusive and binding upon the parties hereto.
3
(ii) For
purposes
of this Agreement, "Cause" shall be deemed to exist if the Employee shall
have
[a] intentionally violated the terms of section 7 or section 8 of this
Agreement in any material respect; [b] committed a felony or a crime involving
moral turpitude; [c] engaged in serious misconduct which is demonstrably
and
materially injurious to the Company's business, taken as whole [d] engaged
in
fraud or dishonesty with respect to the Company or any of its Subsidiaries
or
made a material misrepresentation to the stockholders or directors of the
Company with respect to an item, transaction or amount in excess of $10,000;
or
[e] committed acts of negligence in the
performance of his duties which are demonstrably and materially injurious
to the
Company's business, taken as a whole.
In
all cases,
termination for Cause shall be determined solely by the Board of Directors
and
require a two-thirds majority vote.
(iii) For
purposes of this Agreement, "Good Reason" shall mean (1) the material diminution
of the Employee's duties set forth in section 3
above or (2) the relocation of the offices at which the Employee is principally
employed to a location which is more than 50 miles from the offices at
which the
Employee is principally employed as of the date hereof; provided, that
travel
necessary for the performance of the Employee's duties set forth in
section 3 above shall not determine the location where the Employee is
"principally employed" or (3) Company's non-performance of its material
obligations hereunder.
(c) Termination
for Disability or Death.
In the
event of termination for Disability, payments of the Employee's Base Salary
shall be made to the Employee for a period of six months after the Termination
Date in accordance with the normal payroll practices of the Company. In
addition, for a period of three years after the Termination Date, the Company
shall reimburse the Employee for amounts paid, if any, to continue medical,
dental and health coverage pursuant to the provisions of the Consolidated
Omnibus Budget Reconciliation Act, continue Employee's life insurance and
disability coverage, to the extent limited by section 5(g) and to the
extent permitted under applicable policies, and pay to the Employee a pro
rata
portion of any bonus payable for the year in which termination takes place
(if
any) based on the portion of the year occurring prior to the Termination
Date.
In the event of termination as a result of the death of Employee, Employee's
designated beneficiary or his estate shall be entitled to receive the Base
Salary accrued prior to the Termination Date together with the proceeds
of any
life insurance obtained pursuant to section 5(g), plus a lump sum payment
when determinable equaling Employee's pro rata portion of any bonus payable
under the Bonus Plans for the year in which termination takes place (if
any)
based on the portion of the year occurring prior to the Termination
Date.
4
(d) Termination
by the Company without Cause or by the Employee
for Good Reason.
If (i)
the Employment Period is terminated by the Company for any reason other
than for
Cause, Disability or death, (ii) the Employment Period is terminated
by the
Company for what the Company believes is Cause or Disability, and it
is
ultimately determined that the Employment Period was terminated without
Cause or
Disability (iii) the Employee resigns for Good Reason, (iv) this Agreement
is
not renewed or otherwise extended by the Company after the Expected Completion
Date, and the reason for such non-renewal or extension is not related
to a
termination for Cause, Disability or death of the Employee, the Employee
shall
be entitled to receive, as damages for such a termination, resignation
or
non-renewal, his Base Salary from the Termination Date to the second
anniversary
of the Termination Date to be paid in accordance with the normal payroll
practices of the Company plus a lump sum payment equaling 100% of the
average
annual payments under the Bonus Plans over the preceding three years
(or if in
the case of less than three years participation in the Bonus Plans, then
the
average shall be determined based on the actual number of years of participation
in the Bonus Plans), provided, however, that if such a termination or
resignation described in (i), (ii), (iii) or (iv) above occurs at any
time after
the occurrence of or in contemplation
of a Change of Control, then Employee shall be entitled to receive a
lump sum
payment of his Base Salary from the Termination Date to the third anniversary
of
the Termination Date plus 200% of the average annual payments under the
Bonus
Plans over the preceding three years (or if in the
case
of less than three years participation in the Bonus Plans, then the average
shall be determined based on the actual number of years of participation
in the
Bonus Plans). If the Employee's employment is terminated in the manner
described
in this section 6(d) (i)-(iv), for a period of three years from the
Termination Date, the Company shall reimburse the Employee for amounts
paid, if
any, to continue medical, dental and health coverage pursuant to the
provisions
of the Consolidated Omnibus Budget Reconciliation Act, continue Employee's
life
insurance and disability coverage to the extent limited by section 5(g) and
to the extent permitted under the applicable policies, and pay to the
Employee
the fringe benefits pursuant to section 5 which have accrued prior to the
Termination Date.
(e) Termination
by the Company for Cause or by the Employee Without
Good Reason.
If the
Employment Period is terminated by the Company with Cause or as a result
of the
Employee's resignation without Good Reason, the Employee shall not be entitled
to receive his Base Salary or any fringe benefits or bonuses for periods
after
the Termination Date.
(f) Effect
of Termination.
The
termination of the Employment Period pursuant to section 6(a) shall not
affect the Employee's obligations as described in sections 7
and 8.
5
(g) Acceleration
of
Option Vesting.
Upon
completion of a Change of Control, all options to purchase stock of the
Company
held by the Employee shall immediately vest and become exercisable by the
Employee in accordance with their remaining terms. The Company agrees to
take
any and all actions necessary or appropriate to effectuate the acceleration
of
these options and to permit the Employee to exercise the options in accordance
with their terms from and after this accelerated vesting date.
7. Noncompetition
and Nonsolicitation.
The
Employee acknowledges and agrees that the contacts and relationships of
the
Company and its Affiliates with its customers, suppliers, licensors and
other
business relations are, and have been, established and maintained at great
expense and provide the Company and its Affiliates with a substantial
competitive advantage in conducting their business. The Employee acknowledges
and agrees that by virtue of the Employee's employment with the Company,
the
Employee will have unique and extensive exposure to and personal contact
with
the Company's customers and licensors, and that he will be able to establish
a
unique relationship with those Persons that will enable his, both during
and
after employment, to unfairly compete with the Company and its Affiliates.
Furthermore, the parties agree that the terms and conditions of the following
restrictive covenants are reasonable and necessary for the protection of
the
business, trade secrets and Confidential Information (as defined in
section 8 below) of the Company and its Affiliates and to prevent great
damage or loss to the Company and its Affiliates as a result of action
taken by
the Employee. The Employee acknowledges and agrees that the noncompete
restrictions and nondisclosure of Confidential Information restrictions
contained in this Agreement are reasonable and the consideration provided
for
herein is sufficient to fully and adequately compensate the Employee for
agreeing to such restrictions. The Employee acknowledges that he could
continue
to actively pursue his career and earn sufficient compensation in the same
or
similar business without breaching any of the restrictions contained in
this
Agreement.
(a) Noncompetition.
The
Employee hereby covenants and agrees that during the Employment Period
and for
two years thereafter (the "Noncompete Period"), except if employment is
terminated by the Company or its successor after a Change in Control or
this
Agreement is not renewed or extended by the Company or its successor after
the
Expected Completion Date then the Noncompete Period shall be six months,
he
shall not, directly or indirectly, either individually or as an employee,
principal, agent, partner, shareholder, owner, trustee, beneficiary, co-venturer
distributor, consultant, representative or in any other capacity, participate
in, become associated with, provide assistance to, engage in or have a
financial
or other interest in any business, activity or enterprise which is competitive
with the Company or any of its Affiliates
or any successor or assign of the Company or any of its Affiliates. The
ownership of less than a one percent
6
interest
in a corporation whose shares are traded in a
recognized stock exchange or traded in the over-the-counter market, even
though
that corporation may be a competitor of the Company, shall not be deemed
financial participation in a competitor. If the final judgment of a court
of
competent jurisdiction declares that any term or provision of this
section is invalid or unenforceable, the parties agree that the court
making the determination of invalidity or unenforceability shall have the
power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or
provision with a term or provision that is valid and enforceable and that
comes
closest to expressing the intention of the invalid or unenforceable term
or
provision, and this Agreement shall be enforceable as so modified. The
term
"indirectly"
as used
in this section and section 8 below is intended to include any acts
authorized or directed by or on behalf of the Employee or any Affiliate
of the
Employee.
(b) Nonsolicitation.
The
Employee hereby covenants and agrees that during the Noncompete Period,
he shall
not, directly or indirectly, either individually or as an employee, agent,
partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor,
consultant or in any other capacity:
(i) canvass,
solicit or accept from any Person who is a customer or licensor of the
Company
or any of its Affiliates (any such Person is hereinafter referred to
individually as a "Customer," and collectively as the "Customers") any
business
which in competition with the business of the Company or any of its Affiliates
or the successors or assigns of the Company or any of its Affiliates, including,
without limitation, the canvassing, soliciting or accepting of business
from any
Person which is or was a Customer of the Company or any of its Affiliates
within
two years preceding the date of this Agreement, during the Employment Period
or
during the Noncompete Period;
(ii) advise,
request, induce or attempt to induce any of the Customers, suppliers, or
other
business contacts of the Company or any of its Affiliates who currently
have or
have had business relationships with the Company or any of its Affiliates
within
two years preceding the date of this Agreement, during the Employment Period
or
during the Noncompete Period, to withdraw, curtail or cancel any of its
business
or relations with the Company or any of its Affiliates;
and
(iii) hire
or
induce or attempt to induce any officer of the Company or any of its Affiliates
to terminate his or his relationship or breach any agreement with the Company
or
any of its Affiliates unless such person has previously been terminated
by the
Company; or
7
8. Confidential
Information.
The
Employee acknowledges and agrees that the customers, business connections,
customer lists, procedures, operations, techniques, and other aspects of
and
information about the business of the Company and its Affiliates (the
"Confidential Information") are established at great expense and protected
as
confidential information and provide the Company and its Affiliates with
a
substantial competitive advantage in conducting their business. The Employee
further acknowledges and agrees that by virtue of his past employment with
the
Company, and by virtue of his employment with the Company, he has had access
to
and will have access to, and has been entrusted with and will be entrusted
with,
Confidential Information, and that the Company would suffer great loss
and
injury if the Employee would disclose this information or use in a manner
not
specifically authorized by the Company. Therefore, the Employee agrees
that
during the Employment Period and for five years thereafter, he will not,
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, owner trustee, beneficiary, co-venturer distributor, consultant
or
in any other capacity, use or disclose or cause to be used or disclosed
any
Confidential Information, unless and to the extent that any such information
become generally known to and available for use by the public other than
as a
result of the Employee's acts or omissions. The Employee shall deliver
to the
Company at the termination of the Employment Period, or at any other time
the
Company may request, all memoranda, notes, plans, records, reports, computer
tapes, printouts and software and other documents and data (and copies
thereof)
relating to the Confidential Information, Work Product (as defined below)
or the
business of the Company or any of its Affiliates which he may then possess
or
have under his control. The Employee acknowledges and agrees that all
inventions, innovations, improvements, developments, methods, designs,
analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Affiliate'
actual or anticipated business research and development or existing or
future
products or services and which are conceived, developed or made by the
Employee
while employed by the Company and its Affiliates ("Work Product") belong
to the
Company or such Affiliate, as the case may be.
9. Common
Law of Torts and Trade Secrets.
The
parties agree that nothing in this Agreement shall be construed to limit
or
negate the common law of torts or trade secrets where it provides the Company
and its Affiliates with broader protection than that provided
herein.
10.
Definitions.
"Affiliate" means, with respect to any Person, any other Person controlling,
controlled by or under common control with such Person and any partner
of a
Person which is a partnership.
8
"Change
of Control" means:
(a) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more
of
either (i) the then outstanding shares of common stock of The Company (the
"Outstanding Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the
election of directors (the "Outstanding Voting Securities"); provided,
however,
that the following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by
the Company or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this definition; or
(b) individuals
who, as of the date hereof, constitute the Board of Directors of the Company
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at
least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but
excluding, for this purpose, any such individual whose initial assumption
of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the
Board of Directors of the Company; or
(c) approval
by the stockholders of the Company of a reorganization, merger or consolidation
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who
were the beneficial owners, respectively, of the Outstanding Common Stock
and
Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively,
the
then outstanding shares of common stock and the combined voting power of
the
then outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of
such transaction owns the Company through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such
Business Combination of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, (ii) no Person
9
(excluding
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial
agreement, or of the action of the Board of Directors of the Company, providing
for such Business Combination; or
(d) approval
by the
stockholders of the Company of (i) a complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of all or substantially
all of the assets of the Company, other than to a corporation, with respect
to
which following such sale or other disposition, [a] more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities
of such
corporation entitled to vote generally in the election of directors is
then
beneficially owned, directly or indirectly, by all or substantially all
of the
individuals and entities who were the beneficial owners, respectively,
of the
Outstanding Common Stock and Outstanding Voting Securities immediately
prior to
such sale or other disposition in substantially the same proportion as
their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Common Stock and Outstanding Voting Securities, as the case
may be,
[b] less than 30% of, respectively, the then outstanding shares of common
stock
of such corporation and the combined voting power of the then outstanding
voting
securities of such corporation entitled to vote generally in the election
of
directors is then beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of the Company
or such
corporation), except to the extent that such Person owned 30% or more of
the
Outstanding Common Stock or Outstanding Voting Securities prior to the
sale or
disposition, and [c] at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of
the execution of the initial agreement, or of the action of the Board of
Directors of the Company, providing for such sale or other disposition of
assets of the Company or were elected, appointed or nominated by the Board
of
Directors of the Company.
"Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization and any governmental entity or any department,
agency or political subdivision
thereof.
10
"Senior
Management" at any time means the senior executive officers of the Company
which will include, without limitation, the Chief Executive Officer,
President,
Chief Operations Officer, Chief Financial Officer and such other officers
of the
Company as the Board of Directors shall determine from time to
time.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without
regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or
indirectly, by that Person or one or more of the other Subsidiaries of
that
Person or a combination thereof, or (ii) if a partnership, association
or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly,
by
any Person or one or more Subsidiaries of that Person or a combination
thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity
if
such Person or Persons shall be allocated a majority of partnership,
association
or other business entity gains or losses or shall be or control any managing
director or general partner of such partnership, association or other
business
entity.
12. Waiver.
The
failure of either party to insist in any one or more instances, upon performance
of the terms or conditions of this Agreement shall not be construed as
a waiver
or a relinquishment of any right granted hereunder or of the future performance
of any such term, covenant or condition.
13. Notices.
Any
notice to be given hereunder shall be deemed sufficient if addressed in
writing
and delivered by registered or certified mail or delivered personally,
in the
case of the Company, to its principal business office, and in the case
of the
Employee, to his address appearing on the records of the Company, or to
such
other address as he may designate in writing to the Company.
11
14. Severability.
In the
event that any provision shall be held to be invalid or unenforceable for
any
reason whatsoever, it is agreed such invalidity or unenforceability shall
not
affect any other provision of this Agreement and the remaining covenants,
restrictions and provisions hereof shall remain in full force and effect
and any
court of competent jurisdiction may so modify the objectionable provision
as to
make it valid, reasonable and enforceable. Furthermore, the parties specifically
acknowledge the above covenant not to compete and covenant not to disclose
confidential information are separate and independent agreements.
15. Complete
Agreement.
Except
as otherwise expressly set forth herein, this document embodies the complete
agreement and understanding among the parties hereto with respect to the
subject
matter hereof and supersedes and preempts any prior understandings, agreements
or representations by or among the parties, written or oral, which may
have
related to the subject matter hereof in any way. Without limiting the generality
of the foregoing, this Agreement supersedes the Employment Agreement, dated
as
of July 29, 2002, between the Company and the Employee (together with all
amendments thereto, the "Prior Agreement"). The Prior Agreement is hereby
terminated and shall cease to be of any further force or effect.
16. Amendment.
This
Agreement may only be amended by an agreement in writing signed by each
of the
parties hereto.
17. Governing
Law.
This
Agreement shall be governed by and construed exclusively in accordance
with the
laws of the State of Illinois, regardless of choice of law
requirements.
18. Benefit.
This
Agreement shall be binding upon and inure to the benefit of and shall be
enforceable by and against the Company, its successors and assigns and
the
Employee, his heirs, beneficiaries and legal representatives. It is agreed
that
the rights and obligations of the Employee may not be delegated or
assigned.
[Remainder
of page intentionally left blank. Signature page to
follow.]
12
IN
WITNESS
WHEREOF, the parties have executed or caused this Employment Agreement
to be
executed as of the date first above written.
|
RC2 CORPORATION-
COMPENSATION
COMMITTEE
|
|
|
/s/
Xxxx X. Xxxxxxx
|
|
| Xxxx X. Xxxxxxx, Director and Compensation Committee Chairman | |
|
/s/
Xxxxxx X. Xxxx
|
|
|
Xxxxxx X.
Xxxx, Director and Compensation Committee Member
|
|
|
/s/
Xxxxxx X. Xxxxxx
|
|
|
Xxxxxx X.
Xxxxxx, Director and Compensation Committee Member
|
|
|
/s/
Xxxxxxx X. Xxxxxx
|
|
|
Xxxxxxx X.
Xxxxxx
|
13
SCHEDULE 5(c)
INCENTIVE
STOCK OPTIONS
If
Employee is employed by the Company on February 1 of any year during the
Employment Period, he shall receive options to acquire not less than 15,000
shares as determined by the Board of Directors of the Company. The grant
of the
options shall be made on the earlier of (l) the quarterly meeting of the
Board
of Directors held in February of the applicable year or (2) February 28 of
the applicable year. Additionally, as of the date of each grant above,
Employee
shall also be granted options to purchase 1,000 additional shares for every
full
percentage point that the three-year compounded annual EPS growth rate
as of
December 31 of the prior year exceeds 25%. The total number of options
granted in any fiscal year shall not exceed 100,000. The options to be
granted
pursuant to this Employment Agreement shall be granted using a Non-Statutory
Stock Option Grant Agreement substantially in the form of Exhibit A to the
Employment Agreement.
14
EXHIBIT A
NON-STATUTORY
STOCK OPTION GRANT AGREEMENT
UNDER
THE
RC2 CORPORATION
2005
STOCK INCENTIVE PLAN
THIS
AGREEMENT, dated as_______________ (the date of grant), is between
__________________ ("Employee") and RC2 CORPORATION, a Delaware corporation
(the
"Company").
RECITALS
A. The
Company adopted the RC2 Corporation 2005 Stock Incentive Plan (the "Plan"),
which was approved by its Board of Directors (the "Board") and
stockholders.
B. The
Board
has designated Employee as a participant in the Plan.
C. Pursuant
to the Plan, Employee and the Company desire to enter into this Agreement
setting forth the terms and conditions of the options granted to Employee
under
the Plan.
AGREEMENTS
The
Employee and the Company agree as follows:
1. Grant
of Stock Option.
The
Company grants to Employee the right and option (hereinafter referred to
as the
"Option") to purchase all or any part of up to ______________ shares of
the
Company's Common Stock (the "Option Shares") on the terms and conditions
set
forth below and in the Plan.
2. Option
Price.
The
purchase price of the Option Shares shall be $________ per share.
3. Period
of Exercise.
Except
as provided under the Plan, unless the Option is terminated, Employee may
exercise this Option for up to, but not in excess of, the percent of shares
of
Common Stock subject to the Option during the periods specified
below:
15
|
Percentage
of Shares
of
Common Stock
|
On
or After
|
|
20%
|
February
__, 2006
|
|
40%
|
February
__, 2007
|
|
60%
|
February
__, 2008
|
|
80%
|
February
__,2009
|
|
100%
|
February
__, 2010
|
Employee's
right to exercise the Option expires ten years from the date of grant (the
"Option Period").
4. Definitions.
Unless
provided to the contrary in this Agreement, the definitions of the Plan
and any
Amendments to the Plan shall apply to this Agreement.
5. Option
Designation.
The
option granted is a Non-Statutory Stock Option in accordance with
Article VII of the Plan.
6. Change
in Capital Structure.
The
Option rights and exercise price of such Option rights will be adjusted
in the
event of a stock dividend, stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, acquisition or other change in the
capital structure of the Company as determined by the Board of Directors
in
accordance with the Plan.
In
the
event of a Change in Control of the Company, as defined in the Plan, the
Option
will remain exercisable (subject to the expiration date of the Option)
as
provided in the Plan.
7. Nontransferability
of Option.
Options
shall not be transferable other than by will or the laws of descent and
distribution and shall be exercisable, during the Employee's lifetime,
only by
him.
8. Delivery
by the Company.
As soon
as practicable after receipt of all items referred to in Article VII of the
Plan and any payment required by Article VII of the Plan, the Company shall
deliver to the Employee certificate(s) issued in Employee's name for the
number
of Option Shares purchased by exercise of the Option. If delivery is by
mail,
delivery of Option Shares shall be deemed effected when the stock transfer
agent
of the Company shall have deposited the certificates in the United States
mail,
addressed to the Employee.
16
9. Addresses.
All
notices or statements required to be given to either party hereto shall
be in
writing and shall be personally delivered or sent, in the case of the Company,
to its principal business office and, in the case of Employee, to his address
as
shown on the records of the Company or to such address as Employee designates
in
writing. Notice of any change of address shall be sent to the other party
by
registered or certified mail. It shall be conclusively presumed that any
notice
or statement properly addressed and mailed bearing the required postage
stamps
has been delivered to the party to which it is addressed.
10.
Restrictions
Imposed by Law.
Notwithstanding any other provision of this Agreement, Employee agrees
that he
shall not exercise the Option and that the Company will not be obligated
to
deliver any shares of Common Stock or make any cash payment if counsel
to the
Company determines that such exercise, delivery or payment would violate
any law
or regulation of any governmental authority or any agreement between the
Company
and any national securities exchange upon which the Common Stock is listed.
The
Company shall in no event be obliged to take any affirmative action in
order to
cause the exercise of the Option or the resulting delivery of shares of
Common
Stock or other payment
to
comply with any law or regulation of any governmental authority.
11.
Employment.
Nothing
in this Agreement or the Plan shall limit the right of the Company or any
parent
or Subsidiary to terminate the Employee's employment or otherwise impose
any
obligation to employ the Employee.
12.
Governing
Law.
This
Agreement shall be construed. administered and governed in all respects
under
and by the laws of the State of Delaware.
13.
Provisions
Consistent with Plan.
This
Agreement is intended to be construed to be consistent with, and is subject
to,
all applicable provisions of the Plan, which is incorporated herein by
reference. In the event of a conflict between the provisions of this Agreement
and the Plan, the provisions of the Plan shall prevail.
EMPLOYEE:
_____________________________________
RC2
CORPORATION
BY__________________________________
17
