EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
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THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of February 17,
1998 and effective as of and simultaneous with the Merger (the "Effective
Date"), is 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, pursuant to an Agreement and Plan of Recapitalization (the
"Recapitalization Agreement") between the Company and HB Acquisition
Corporation, a Delaware corporation ("Newco"), Newco will merge with and into
(the "Merger") the Company and the Company will continue as the surviving
corporation (the "Surviving Corporation");
WHEREAS, the Executive currently serves as the President, North America
of the Operating Company pursuant to the terms of an Employment Agreement dated
April 11, 1997, as amended on August 29, 1997 (the "Prior Employment
Agreement");
WHEREAS, the Executive and the Company are parties to a Phantom Stock
Unit Agreement dated as of September 23, 1997 (the "Phantom Stock Agreement");
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 amend and restate the
Prior Employment Agreement in its entirety in the form of 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 the Effective Date
and shall continue until the fifth anniversary of the Effective Date (the
"Term"), unless earlier terminated pursuant to Section 4 hereof. As used herein,
the term "Employment Period" shall mean the period from the Effective Date until
the earlier to occur of (i) the expiration of the Term or (ii) the earlier
termination of Executive's employment hereunder pursuant to Section 4 hereof.
2. Position; Duties; Responsibilities.
2.1 Position; Duties. The Company shall employ the Executive
as the President and Chief Executive 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 by the Board of
Directors, 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 Board of
Directors of Holding Company.
2.2 Responsibilities. The Executive shall have direct and
general supervision, direction and control of the management, officers, business
and affairs of the Company, including the power and authority to make policy
decisions, including those which (i) relate to the Company's goals and plans,
(ii) have a substantial effect on the operation of the Company and its financial
position or results of operations or (iii) relate to its relations with
governmental bodies, consumers or the public generally.
2.3 Directorship. The Company shall take all actions
reasonably necessary to elect the Executive to the Board of Directors of the
Operating Company and the Holding Company and to maintain the Executive's
position as a director during the Employment Period.
3. Compensation.
3.1 Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate of $350,000 per
annum, payable in accordance with the Company's executive payroll policy. Such
base salary shall be reviewed annually, commencing on the first anniversary of
the Effective Date, and may be increased (but shall not be decreased) annually,
in the sole discretion of the Board of Directors 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."
3.2 Annual Performance Bonus.
(a) The Executive shall be entitled to receive an
annual performance bonus payable in cash for each full fiscal year of
the Company during the Employment Period in accordance with the
Company's management incentive program, as in effect from time to time.
For the Company's fiscal year ended June 30, 1998, the Company's
management incentive program shall be the Company's management
incentive program as in effect on the date hereof. As of the Company's
fiscal year ended June 30, 1999, the Company shall amend its current
management incentive program to include an additional measure for
determining the Executive's bonus based on the Company's Return on
Assets. The Company's Return on Assets in any fiscal year shall be
determined and defined by the Board of Directors of the Company. The
annual performance bonus to which the Executive is entitled pursuant to
this Section 3(a) is referred to herein as the "Bonus."
(b) 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.
(c) If the Company's fiscal year changes, the
Executive's opportunity to earn the Bonus shall not be materially and
adversely affected.
3.3 Stock Options. Upon the Effective Date, the Company shall
grant the Executive options to purchase shares of common equity of the Company
up to 41.76% of the Management Option Pool (the "Awarded Options"). The Awarded
Options shall have a term of ten years. The Management Option Pool shall
represent equity in the Company equal to twelve percent (12%) of the
fully-diluted common equity of the Company as of the Effective Date. Fifty
percent (50%) of the Awarded Options shall vest and be exercisable equally over
a five year period with 20% vesting beginning on the date that is one year after
the Effective Date (the "Time Vested Options"); fifty percent (50%) of the
Awarded Options shall vest and be exercisable over a five year period according
to annual performance criteria established by the Compensation Committee of the
Board of Directors of the Company (the "Performance Options"). To the extent not
inconsistent with anything contained in this Agreement, the terms and conditions
of the Awarded Options shall be determined by the Compensation Committee of the
Board of Directors of the Company. Notwithstanding the foregoing, the Company
and the Executive agree to cooperate to restructure the Awarded Options as
restricted stock subject to repurchase, which shall have the same economic terms
as the Awarded Options.
3.4 Perquisites. During the Employment Period, the Executive
shall be entitled to (i) the use of an automobile and reimbursement by the
Company for all expenses relating to the operation thereof and (ii)
reimbursement for all expenses relating to the Executive's commuting by
commercial airline between the San Xxxx and Los Angeles metropolitan areas.
3.5 Reimbursement of Expenses. During the Employment Period,
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.
3.6 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation and sick leave in accordance with Company
policy.
3.7 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
adverse to the Executive from those in which the Executive currently
participates. In addition, the Executive shall be reimbursed for all medical and
dental expenses that are not covered under the medical and dental plans
otherwise covering the Executive.
4. Termination.
4.1 Death. Upon the death of the Executive, the Employment
Period shall automatically terminate and all rights of the Executive and her
heirs, executors and administrators to compensation and other benefits hereunder
shall cease, except for (i) Base Salary and any prorated Bonus earned by the
Executive which shall have accrued to the date of death, (ii) any Awarded
Options which shall be immediately 100% vested and exercisable and (iii) for
rights to indemnification under Section 6 hereof.
4.2 Disability. The Company may, at its option, terminate the
Employment Period 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 for (i) Base Salary and
any prorated Bonus earned by the Executive which shall have accrued to the date
of termination, (ii) any Awarded Options which shall be immediately 100% vested
and exercisable and (iii) for the rights to indemnification under Section 6
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 Board
and the third to be selected by such two designated physicians. For this
purpose, the Executive shall submit to appropriate medical examinations.
4.3 Cause.
(a) 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 4.3(a). The Executive
shall be given written notice by the Board 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.
(b) As used in this Agreement, the term "Cause" shall
mean any one or more of the following:
(i) the Executive's refusal to perform
specific directives of the Board which are consistent
with the scope and nature of the Executive's duties
and responsibilities as set forth herein;
(ii) the Executive's admission or conviction
of a felony or of any crime involving moral
turpitude, fraud, embezzlement, theft or
misrepresentation;
(iii) any gross or willful misconduct of the
Executive resulting in substantial loss to the
Company or substantial damage to the Company's
reputation; or
(iv) any breach by the Executive of any one
or more of the covenants contained in Section 7 or 8
hereof, other than an inadvertent and unintentional
breach of a covenant contained in Section 7 having an
inconsequential effect upon the Company or any of its
controlled affiliates.
(c) The exercise of the right of the Company to
terminate this Agreement pursuant to this Section 4.3 shall not
abrogate the rights or remedies of the Company in respect of the breach
giving rise to such termination.
(d) If the Company terminates the Executive's
employment for Cause, she shall be entitled to:
(i) accrued Base Salary through the date of
the termination of her employment;
(ii) any Bonus owing but not yet paid for
any fiscal year ended on or before the Executive's
termination of employment for Cause;
(iii) any amounts owing but not yet paid
pursuant to Sections 3.4 and 3.5; and
(iv) other or additional benefits in
accordance with applicable plans and programs of the
Company and her rights to indemnification under
Section 6 hereof.
(e) 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.
4.4 Termination Without Cause. If the Board terminates the
employment of the Executive hereunder for any reason other than a reason set
forth in Section 4.1, 4.2 or 4.3:
(a) such termination shall be effective 90 days
following written notice thereof by the Company to the Executive;
(b) concurrent with such termination, the Company
shall pay to the Executive an amount equal to her Base Salary accrued
and any prorated Bonus earned by the Executive through the date of
termination;
(c) 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;
(d) all of the Executive's Awarded Options that are
vested at the time of such termination shall be immediately 100%
exercisable and that portion of Time Vested Options which would vest
and be exercisable within twelve months from the date of termination
shall vest and be immediately 100% exercisable and, if the criteria for
the Performance Options has been met for the fiscal year during which
the termination occurs (calculated on an annualized basis as of the
date of such termination) that portion of the Performance Options which
would vest and be exercisable in such fiscal year (but for the
Termination) shall vest and be 100% exercisable;
(e) the Executive shall be entitled to any amounts
owing but not yet paid pursuant to Section 3.4 or 3.5; and
(f) the Executive shall be entitled to her rights to
indemnification under Section 6 hereof.
4.5 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 specified by Sections 4.4(b), (c), (e) and (f) hereof, inclusive.
4.6 Termination for Good Reason. The Executive may terminate
her employment under this Agreement for Good Reason (as hereinafter defined),
upon notice to the
Company setting forth in reasonable detail the nature of such Good Reason. In
the event the Executive terminates this Agreement for Good Reason, the Executive
shall be entitled to the payments and benefits specified by Sections 4.4(a)
through 4.4(f). For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any one or
more of the following events:
(a) the material breach of this Agreement by the
Company;
(b) a material diminution of any of the Executive's
significant duties or the assignment to the Executive of any duties
inconsistent with her duties or the material impairment of the
Executive's ability to function in the positions described in Section
2.1 hereof, in each case only after the Company shall have had an
opportunity to cure (any cure to be effected within 30 days after
appropriate written notice of the basis for Good Reason is given to the
Company by the Executive); or
(c) a material reduction of any benefit or perquisite
enjoyed by the Executive or the failure to continue the Executive's
participation in any incentive compensation plan, unless a plan
providing a substantially similar economic opportunity is substituted
or all senior executives suffer a substantially similar reduction or
failure.
5. Options to Purchase.
5.1 Call Option. Upon any termination of the employment of the
Executive, the Company (or its designee) shall have the right to purchase and
upon exercise of such right the Executive shall have the obligation to sell, any
equity interests in the Company held by the Executive and exercisable at the
time of such termination on the following terms (the "Call Option"); it being
understood that all options and other restricted securities not exercisable at
the time of such termination of employment (in accordance with this Agreement)
will be terminated. Upon written notice delivered within one year of
termination, the Company (or its designee) may purchase all or any portion of
any such equity interests in the Company then held by the applicable Executive
at a price equal to the Fair Market Value of such securities.
5.2 Put Right. Upon the termination of the employment of the
Executive, the Executive shall have the right to sell to the Company, and upon
exercise of such right the Company (or its designee) shall have the obligation
to purchase, all or any portion of the equity interests in the Company held by
the Executive it being understood that all options and other restricted
securities not exercisable at the time of such termination of employment (in
accordance with this Agreement) will be terminated at a price equal to the Fair
Market Value of such securities (the "Put Option"). Notice of an intention to
sell securities pursuant to the Put Option must be delivered to the Company
within one year of the termination of the Executive's employment. The Company
shall have no obligation to purchase any securities pursuant to this Section 5.2
if such purchase is prohibited by or would give rise to any default or event of
default under the Company's financing documents; provided, however, that in such
circumstances the obligation to purchase securities pursuant to the Put Option
shall be extended until such time as such circumstances no longer exist.
5.3 Determination of Fair Market Value. For purposes of this
Section 5, the term "Fair Market Value" shall mean, as of any date, the fair
value as of the applicable date on the basis of a sale in an arms length private
sale between a willing buyer and a willing seller, neither acting under
compulsion (or, in the case of an option, the fair value of the shares of
capital stock that may then be purchased upon exercise thereof minus the
exercise price applicable thereto), as determined by the Board.
5.4 Termination. The provisions of this Section 5 will
terminate upon an initial public offering of the Company's equity securities.
6. 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 6 shall survive
the termination of the Employment Period.
7. 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 he 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 Confidential Information, 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 he 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. For purposes of this Agreement, the term
"Confidential Information" shall mean 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, owned or used by, or licensed to, the Company
or any of its controlled affiliates.
8. Restricted Activities.
8.1 Noncompetition. The Executive agrees that for two years
following the end of the Employment Period (the "Noncompete Period"), she shall
not, directly or indirectly, engage in any manner in any activity that is
directly or indirectly competitive or potentially competitive with the Company
or any of its affiliates or the business of the Company or any of its affiliates
as conducted or planned to be conducted during the Term and neither the
Executive nor any person or enterprise controlled by her will become a
stockholder, co-venturer, 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 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.
8.2 Non-solicitation. The Executive agrees that while she is
employed by the Company and during the Noncompete Period, neither she nor any
person or enterprise controlled by her will (i) solicit for employment or employ
any employee of the Company or any of its affiliates or any person who was
employed by the Company or any of its affiliates at any time within one year
prior to the time of the act of solicitation, (ii) in any way cause, influence,
induce, encourage or attempt to persuade any employee of the Company or any of
its affiliates or any person who was employed by the Company or any of its
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
or (iii) in any way, cause, influence, induce, encourage or attempt to persuade
any customer or vendor of the Company or any of its affiliates to terminate or
diminish its relationship or violate any agreement with any of them.
8.3 Relief, Reformation; Severability. The Executive
acknowledges that she has carefully read and considered all terms and conditions
of this Agreement, including the restraints imposed by Section 8 hereof. The
Executive acknowledges that there is no adequate remedy at law for a breach of
this Section 8 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 nature,
subject matter, geographic limitation, 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.
9. 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 prior to
and during the term of the Employment Period, 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.
10. 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 any such relief shall be exclusive of or preclude the Company from
any other remedy.
11. Insurance. The Company may, at its election and for its benefit,
ensure 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.
12. Expenses. The Company will reimburse the Executive for her
reasonable out of pocket costs and expenses of obtaining independent legal
advice relating to the negotiation of this Agreement and the Executive's equity
participation in Newco and the Surviving Corporation; provided that the maximum
payment under this Section 12 shall not exceed $10,000.
13. 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 Company, whether by
merger, consolidation, sale of assets or similar transactions.
14. 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 with
a copy to Xxxxxx X. Xxxx, Esq., 00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000, and if to the Company, to the address of its principal executive
offices, attention: Chief Financial Officer, or to any other address designated
by any party hereto by notice similarly given.
15. 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.
16. 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.
17. 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.
18. Prior Agreements. This Agreement supersedes all prior agreements
between the Executive and the Company concerning the Executive's employment with
the Company,
[The remainder of this page is intentionally left blank.]
including the Phantom Stock Agreement, 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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Title:
XXXX SPORTS, INC.
By
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Title:
EXECUTIVE:
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
