EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT is entered into on April 11, 1997,
effective as of February 15, 1997, among Xxxx X. Xxxxxx (the "Executive"), Xxxx
Sports Corp., a Delaware corporation (the "Holding Company"), and Xxxx Sports,
Inc., a California corporation (the "Operating Company"). The Holding Company
and the Operating Company are collectively referred to herein as the "Company."
WHEREAS, the Company is engaged primarily in the business of
designing, manufacturing, producing, distributing, marketing, advertising and
selling auto racing helmets, bicycle helmets, bicycle accessories and related
products;
WHEREAS, the Executive currently serves as the President,
North America of the Operating Company;
WHEREAS, the Executive's abilities and services are unique and
essential to the prospects of the Company; and
WHEREAS, the Company and the Executive desire to enter into
this Agreement to provide for the employment of the Executive by the Company
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereby agree as follows:
1. Employment; Term.
The Company hereby employs the Executive and the Executive
hereby agrees to be employed by the Company upon the terms and subject to the
conditions contained in this Agreement. The term of this Agreement shall
commence as of February 15, 1997 and shall end on February 15, 2000, unless
earlier terminated pursuant to Section 4 hereof. As used herein, the term
"Employment Period" shall mean the period from February 15, 1997 until the
expiration of the term of this Agreement or the earlier termination of the term
hereof pursuant to Section 4 hereof.
2. Position; Duties; Responsibilities. The Company shall
employ the Executive as the President and Chief Operating Officer of the Holding
Company and the Operating Company. The Executive shall faithfully and loyally
perform to the best of her abilities all the duties reasonably assigned to her
hereunder, shall devote such business time, attention and effort to the affairs
of the Company as is reasonably necessary for the proper performance of such
duties and shall use her reasonable best efforts to promote the interests of the
Company. Notwithstanding the foregoing, the Executive may serve as a director,
officer or paid consultant of business corporations other than the Company or
civic or community organizations or entities, provided that such activities do
not violate the terms of any of the covenants set forth in Section 7 hereof and
such activities are approved prior to the commencement thereof by the Chairman
of the Board and Chief Executive Officer of the Holding Company and the
Operating Company (the "Company CEO").
3. Compensation.
(a) Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate of $247,500 per
annum, payable in accordance with the Company's executive payroll policy. Such
base salary shall be reviewed annually, commencing July 1, 1997, and may be
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increased (but shall not be decreased) annually, in the sole discretion of the
Company. The Executive's base salary, as such base salary may be increased
annually hereunder, is referred to herein as the "Base Salary."
(b) Annual Performance Bonus. (i) The Executive shall be
entitled to receive an annual performance bonus payable in cash for each full
fiscal year of the Company during the term of this Agreement in accordance with
the Company's management incentive program, as in effect from time to time. The
annual performance bonus to which the Executive is entitled pursuant to this
Section 3(b) is referred to herein as the "Bonus."
(ii) The payment of each Bonus shall be made within 30 days
after the Company's independent accountants shall have certified the Company's
consolidated financial statements for the fiscal year to which such Bonus
relates.
(iii) If the Company's fiscal year changes, the Executive's
opportunity to earn the Bonus shall not be materially and adversely affected.
(c) Restricted Phantom Stock Units. (i) If during any 30
consecutive calendar day period (each such period being referred to herein as a
"Measuring Period") within the Employment Period after July 15, 1997, the
average of the closing prices of Holding Company common stock ("Common Stock"),
as reported in The Wall Street Journal NASDAQ National Market Issues, equals or
exceeds for the first time during the Employment Period after July 15, 1997 a
dollar amount set forth below under "Stock Price," the Company's Management
Stock Incentive Committee shall, within 15 days following the end of such
Measuring Period, award the Executive the number of restricted phantom stock
units (rounded to the nearest whole unit) having a value equal to the number set
forth below under "Phantom Stock Award Multiple" multiplied by a fraction, the
numerator of which is the Executive's Base Salary on the last day of such
Measuring Period and the denominator of which is the closing price of the Common
Stock (reported as described above) on the last day of such Measuring Period (or
if such day is not a day on which the Common Stock is traded, then on the next
preceding day on which the Common Stock was traded):
Phantom Stock
Stock Price Award Multiple
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$ 8.00 one
$ 9.00 one
$11.00 one
$13.00 two
The Executive shall be awarded restricted phantom stock units as described in
this Section 3(c)(i) for each dollar amount set forth above under "Stock Price"
which is exceeded as described above, notwithstanding that more than one such
dollar amount is exceeded during a single Measuring Period. A restricted phantom
stock unit is an amount of cash equal to the closing price of the Common Stock
(reported as described above) on the date of the determination of the value of
such unit, which unit is subject to the restrictions on vesting described in
this Section 3(c)(i). The Executive shall have no right to receive the amount of
any restricted phantom stock unit awarded to the Executive until such unit
becomes fully vested. All restricted phantom stock units awarded pursuant to
this Section 3(c)(i) shall become fully vested upon termination of the
Employment Period; provided, however, that in the event of the termination of
the Executive's employment voluntarily
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by the Executive pursuant to Section 4(e) hereof or by the Company for "Cause"
pursuant to Section 4(c) hereof (as such term is defined in such section), no
such restricted phantom stock units shall vest, and all such restricted phantom
stock units shall be forfeited. No interest shall accrue on restricted phantom
stock units awarded pursuant to this Section 3(c)(i). In the event of a stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar event,
each dollar amount set forth above under "Stock Price" shall be appropriately
adjusted so that the Executive's opportunity to be awarded restricted phantom
stock units shall not be materially and adversely affected.
(ii) If the Board of Directors of the Company adopts an
incentive plan which provides for the award of shares of restricted Common Stock
and such plan is approved by the stockholders of the Company, shares of
restricted Common Stock issuable pursuant to such plan shall be substituted for
the restricted phantom stock units described in Section 3(c)(i) hereof, as
provided in this Section 3(c)(ii). As of the date of approval of such plan by
the stockholders of the Company (the "Approval Date") (A) the Executive shall
have no further right to be awarded restricted phantom stock units pursuant to
Section 3(c)(i) hereof and, in lieu of such right, the Executive shall have the
right to be awarded one share of restricted Common Stock pursuant to such plan
for each restricted phantom stock unit to which the Executive would otherwise
have been entitled pursuant to Section 3(c)(i) hereof, and (B) one share of
restricted Common Stock issuable pursuant to such plan shall be substituted for
each restricted phantom stock unit awarded to the Executive pursuant to Section
3(c)(i) hereof prior to the Approval Date. The shares of restricted Common Stock
issuable to the Executive pursuant to this Section 3(c)(ii) shall be subject to
the same terms and conditions with respect to vesting as are applicable to the
restricted phantom stock units which may be awarded pursuant to Section 3(c)(i)
hereof. Prior to the vesting of a share of restricted Common Stock issued to the
Executive pursuant to this Section 3(c)(ii), the Executive shall have the right
to vote such share, but shall have no right to any dividends payable on shares
of Common Stock.
(d) Stock Options. In the discretion of the Company's
Management Stock Incentive Committee, the Executive shall be eligible to receive
options to purchase shares of Common Stock pursuant to the terms of the Xxxx
Sports Management Stock Incentive Plans.
(e) Perquisites. During the Employment Period, the Executive
shall be entitled to a cash automobile allowance in the amount of $400 per
month.
(f) Reimbursement of Expenses. The Company shall reimburse the
Executive for all expenses necessarily and reasonably incurred by her in
connection with the business of the Company, upon presentation of proper
receipts or other proof of expenditure and subject to such reasonable guidelines
or limitations provided to the Executive and applied prospectively, as
established by the Company.
(g) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation and sick leave in accordance with Company
policy.
(h) Participation in Benefit Plans. During the Employment
Period, the Executive shall be entitled to participate in any profit sharing
plan, retirement plan, group life insurance plan or other insurance plan or
medical expense plan maintained by the Company for its senior executives
generally, which plans shall not differ in value in any manner materially
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adverse to the Executive from those in which the Executive currently
participates.
4. Termination.
(a) Death. Upon the death of the Executive, this Agreement
shall automatically terminate and all rights of the Executive and her heirs,
executors and administrators to compensation and other benefits hereunder shall
cease, except (i) for Base Salary which shall have accrued to the date of death,
(ii) any restricted phantom stock units awarded pursuant to Section 3(c)(i)
hereof which have not been replaced by shares of restricted Common Stock, or any
shares of restricted Common Stock issued pursuant to Section 3(c)(ii) hereof,
shall be immediately 100% vested and (iii) for rights to indemnification under
Section 5 hereof.
(b) Disability. The Company may, at its option, terminate this
Agreement upon written notice to the Executive if the Executive, because of
physical or mental incapacity or disability, fails in any material respect to
perform the services required of her hereunder for a continuous period of 120
days or any 180 days out of any 12-month period. Upon such termination, all
obligations of the Company hereunder shall cease, except (i) for Base Salary
which shall have accrued to the date of termination, (ii) any restricted phantom
stock units awarded pursuant to Section 3(c)(i) hereof which have not been
replaced by shares of restricted Common Stock, or any shares of restricted
Common Stock issued pursuant to Section 3(c)(ii) hereof, shall be immediately
100% vested and (iii) for the rights to indemnification under Section 5 hereof.
In the event of any dispute regarding the existence of the Executive's
incapacity hereunder, the matter shall be resolved by the determination of a
majority of three physicians qualified to practice medicine in the state of the
Executive's residence, one to be selected by each of the Executive and the
Company and the third to be selected by such two designated physicians. For this
purpose, the Executive shall submit to appropriate medical examinations.
(c) Cause. (i) The Company may, at its option, terminate the
Executive's employment under this Agreement for "Cause" (as hereinafter
defined). A termination for Cause shall not take effect until and unless the
Company complies with this Section 4(c)(i). The Executive shall be given written
notice by the Company of the intention to terminate her employment hereunder for
Cause (the "Cause Notice"). The Cause Notice shall state the particular
action(s) or inaction(s) giving rise to termination for Cause. The Executive
shall have 10 days after the Cause Notice is given to cure the particular
action(s) or inaction(s), to the extent a cure is possible. If the Executive so
effects a cure, the Cause Notice shall be deemed rescinded and of no force or
effect.
(ii) As used in this Agreement, the term "Cause" shall mean
any one or more of the following:
(A) the Executive's refusal to perform specific
directives of the Company CEO, which directives are consistent with the scope
and nature of the Executive's duties and responsibilities as set forth herein;
(B) the Executive's admission or conviction of a
felony or of any crime involving moral turpitude, fraud, embezzlement, theft or
misrepresentation;
(C) any gross or willful misconduct of the Executive
resulting in substantial loss to the Company or substantial damage to the
Company's reputation; or
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(D) any breach by the Executive of any one or more of
the covenants contained in Section 6 or 7 hereof, other than an inadvertent and
unintentional breach of a covenant contained in Section 6 having an
inconsequential effect upon the Company or any of its controlled affiliates.
(iii) The exercise of the right of the Company to terminate
this Agreement pursuant to this Section 4(c) shall not abrogate the rights or
remedies of the Company in respect of the breach giving rise to such
termination.
(iv) If the Company terminates the Executive's employment for
Cause, she shall be entitled to:
(A) accrued Base Salary through the date of the
termination of her employment;
(B) any Bonus owing but not yet paid for any fiscal
year ended on or before the Executive's termination of employment for Cause;
(C) any amounts owing but not yet paid pursuant to
Section 3(e); and
(D) other or additional benefits in accordance with
applicable plans and programs of the Company.
(v) Notwithstanding anything to the contrary contained in this
Agreement, if, following a termination of the Executive's employment for Cause,
a court of competent jurisdiction, in a final determination, determines that the
Executive was not guilty of the conduct that formed the basis for the
termination, the Executive shall be entitled to the payments and the economic
equivalent of the benefits she would have received had her employment been
terminated by the Company without Cause.
(d) Termination Without Cause. If, during the Employment
Period, the Company terminates the employment of the Executive hereunder for any
reason other than a reason set forth in Section 4(a), 4(b) or 4(c):
(i) such termination shall be effective 90 days following
written notice thereof by the Company to the Executive;
(ii) concurrent with such termination, the Company shall pay
to the Executive an amount equal to her Base Salary accrued through the date of
termination;
(iii) the Company shall continue to pay the Executive her Base
Salary and all other benefits (excluding Bonus) which would otherwise be payable
hereunder for a period of 18 months following the date of termination;
(iv) any restricted phantom stock units awarded pursuant to
Section 3(c)(i) hereof which have not been replaced with shares of restricted
Common Stock, or any shares of restricted Common Stock issued pursuant to
Section 3(c)(ii) hereof, shall be immediately 100% vested;
(v) all of the Executive's options to purchase Common Stock
shall be immediately 100% exercisable;
(vi) the Executive shall be entitled to any amounts owing but
not yet paid pursuant to Section 3(f); and
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(vii) the Executive shall be entitled to her rights to
indemnification under Section 5 hereof.
(e) Voluntary Termination. If, during the Employment Period,
the Executive voluntarily terminates her employment hereunder for any reason
whatsoever, such termination shall be effective 90 days following written notice
thereof by the Executive to the Company and the Executive shall be entitled to
the payments and benefits specified by Sections 4(d)(ii), (iii), (vi) and (vii)
hereof, inclusive.
5. Indemnification. To the fullest extent permitted by law,
the Restated Certificate of Incorporation of the Holding Company and the
Articles of Incorporation of the Operating Company, the Executive (and her
heirs, executors and administrators) shall be indemnified by the Company and its
successors and assigns. The obligations of the Company pursuant to this Section
5 shall survive the termination of the Employment Period, except as otherwise
provided herein.
6. Confidentiality. The Executive shall at all times during
the Employment Period and thereafter hold in confidence any and all Confidential
Information (as hereinafter defined) that may have come or may come into her
possession or within her knowledge concerning the products, services, processes,
businesses, suppliers, customers and clients of the Company or its controlled
affiliates. The Executive agrees that neither she nor any person or enterprise
controlled by her will for any reason directly or indirectly, for herself or any
other person, use or disclose any trade secrets, proprietary or confidential
information, inventions, manufacturing or industrial processes or procedures,
patents, trademarks, trade names, customer lists, service marks, service names,
copyrights, applications for any of the foregoing, or licenses of other rights
in respect thereof (collectively, "Confidential Information"), owned or used by,
or licensed to, the Company or any of its controlled affiliates, provided that
the Executive may disclose Confidential Information which has become generally
available to the public other than as a result of a breach of this Agreement by
the Executive or pursuant to an order of a court of competent jurisdiction or of
a governmental agency, department or commission. Upon termination of her
employment under this Agreement, the Executive shall promptly surrender to the
Company all documents she believes contain Confidential Information and that are
within her possession or control, other than documents to which the Executive is
or was a party or that relate to the Executive or the basis, or purported basis,
on which her employment was terminated.
7. Noncompetition and Nonsolicitation. (a) Subject to the
following sentence, the Executive agrees that from the date hereof and
subsequent to the termination of her employment under this Agreement and
continuing for a period of two years (the "Noncompete Period"), neither she nor
any person or enterprise controlled by her will become a stockholder, lender,
director, officer, agent or employee of a corporation or member of or lender to
a partnership, engage as a sole proprietor in any business, act as a consultant
to any of the foregoing or otherwise engage directly or indirectly in any
business, that is in competition with the business then conducted by the Company
or any of its controlled affiliates in any state in the United States or any
other country in which the Company or any of its controlled affiliates has
engaged in such business during the term of the Executive's employment under
this Agreement; provided, however, that the foregoing shall not prohibit the
Executive from owning less than two percent of the outstanding securities of any
class of capital stock of a corporation the securities of which are regularly
traded or quoted on a national securities exchange or on an inter-dealer
quotation system.
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(b) The Executive agrees that during the Noncompete Period,
neither she nor any person or enterprise controlled by her will (i) solicit for
employment or employ any person who was employed by the Company or any of its
controlled affiliates at any time within one year prior to the time of the act
of solicitation or (ii) in any way cause, influence, induce or attempt to
persuade any person who was employed by the Company or any of its controlled
affiliates at any time within one year prior to the time of such act to
terminate her employment relationship with the Company or any of its affiliates.
(c) Relief, Reformation; Severability. The Executive
acknowledges that there is no adequate remedy at law for a breach of this
Section 7 and that, in the event of such a breach or attempted breach, the
Company shall be entitled to injunctive or other equitable relief to prevent any
such breach, attempted breach or continuing breach, without prejudice to any
other remedies for damages or otherwise. The Executive agrees that the covenants
contained in this Agreement are separate and are reasonable in their scope and
duration and that the Executive shall not raise any issue of reasonableness as a
defense in any proceeding to enforce any of such covenants. Notwithstanding the
foregoing, in the event that a covenant contained in this Agreement shall be
deemed by any court to be unreasonably broad in any respect, the parties agree
that the court may modify such covenant for the purpose of making such covenant
reasonable in scope and duration. The validity, legality or enforceability of
the remaining provisions of this Agreement shall not be affected by any such
modification.
8. Inventions. The Executive hereby assigns to the Company her
entire right, title and interest in and to all discoveries and improvements,
patentable or otherwise, trade secrets and ideas, writings and copyrightable
material, which may be conceived by the Executive or developed or acquired by
her during the term of her employment by the Company, which may pertain directly
or indirectly to the Company's business. The Executive agrees to disclose fully
all such developments to the Company upon its request, which disclosure shall be
made in writing promptly following any such request. The Executive shall, upon
the Company's request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable the
Company to file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries.
9. Remedies. The Executive acknowledges that any material
breach of this Agreement will cause irreparable harm to the Company, that such
harm will be difficult if not impossible to ascertain, and that the Company
shall be entitled to equitable relief, including injunction, against any actual
or threatened breach hereof, without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such relief
nor the obtaining of such relief shall be exclusive of or preclude the Company
from any other remedy.
10. Insurance. The Company may, at its election and for its
benefit, insure the Executive against disability, accidental loss or death and
the Executive shall submit to such physical examinations and supply such
information as may be required in connection therewith.
11. Assignment. The rights and benefits of the Executive
hereunder shall not be assignable, whether by voluntary or involuntary
assignment or transfer. This Agreement shall be binding upon, and inure to the
benefit of, the successors and assigns of the Company, and the heirs, executors
and administrators of the Executive, and shall be assignable by the Company to
any entity acquiring substantially all of the assets of the
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Company, whether by merger, consolidation, sale of assets or similar
transaction.
12. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and personally delivered,
sent by certified or registered mail or sent by overnight courier service as
follows: if to the Executive, to her address as set forth in the records of the
Company, and if to the Company, to the address of its principal executive
offices, attention: Chief Executive Officer, with a copy to Xxxxx X. Xxxxxx,
Esq., Sidley & Austin, Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or to
any other address designated by any party hereto by notice similarly given.
13. Waiver of Breach. A waiver by the Company or the Executive
of any breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other or subsequent breach by the
other party.
14. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may be modified only by an agreement in writing signed by the parties
hereto.
15. Costs. In the event that a dispute shall arise between the
parties hereto and such dispute is resolved by a court of competent
jurisdiction, all reasonable attorneys' fees and costs of the Company and the
Executive and all other costs and expenses of the Company and the Executive
associated with such dispute shall be borne by the Company; provided that if it
is determined that the claims of the Executive were without reasonable basis,
each party shall bear her or its own attorneys' fees and costs.
16. Applicable Law. The terms of this Agreement shall be
governed by and construed in accordance with the internal laws (as opposed to
the conflict of laws provisions) of the State of Illinois.
17. Prior Agreements. This Agreement supersedes all prior
agreements between the Executive and the Company concerning the Executive's
employment with the Company, including the Employment Agreement effective as of
June 13, 1995 between the Executive and the Operating Company, and none of such
agreements shall be of any further force or effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
XXXX SPORTS CORP.
By
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Xxxxx X. Xxx
Chairman of the Board and
Chief Executive Officer
XXXX SPORTS, INC.
By
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Xxxxx X. Xxx
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Chairman of the Board and
Chief Executive Officer
EXECUTIVE:
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Xxxx X. Xxxxxx
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