PHANTOM STOCK UNIT AGREEMENT
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PHANTOM STOCK UNIT AGREEMENT dated as of September 23, 1997,
effective as of August 28, 1997 (the "Effective Date"), between Xxxx Sports
Corp., a Delaware corporation (the "Company"), and Xxxxx X. Xxxxxx (the
"Executive").
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 Senior Vice
President, Chief Financial Officer, Treasurer and Secretary of the 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 further align the interests of the Executive with the
interests of the stockholders of the Company by providing additional incentives
to the Executive based upon future increases in the value of the shares of
common stock, $.01 par value, of the Company ("Common Stock").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereby agree as follows:
1. Phantom Stock Compensation. (a) As additional compensation
for the services provided by the Executive to the Company, effective as of the
Effective Date, the Company grants to the Executive, and the Executive is
credited with, 5,441 phantom stock units ("Units"). The Units shall, subject to
the provisions of this Agreement, become vested cumulatively as follows:
(1) On each of the first two annual anniversaries of the
Effective Date, one-half of the total number of Units granted
hereunder, subject to adjustment as provided in Section 1(c) hereof,
shall become vested; and
(2) Notwithstanding anything to the contrary contained in this
Section 1(a), all Units shall become vested upon a "Change in Control"
of the Company, as such term is defined in Appendix A to this
Agreement.
All Units which shall have become vested pursuant to this Section 1(a) are
hereinafter referred to as "Vested Units."
(b) The Company shall pay to the Executive as additional
compensation (the "Phantom Stock Benefit") an amount, determined as of the
Valuation Date (as hereinafter defined), equal to the product of (1) the number
of Units then credited to the Executive hereunder which shall have become Vested
Units pursuant to Section 1(a) hereof (after giving effect to the adjustments
provided for in Section 1(c) below) multiplied by (2) the Value (as hereinafter
defined) of one share of Common Stock on the Valuation Date. The Phantom Stock
Benefit shall be paid to the Executive in cash, subject to any applicable
payroll or other taxes required to be withheld, not later than the 30th day
following the Valuation Date. Nothing in this Section 1 shall be deemed to grant
to the Executive any right in or to, or any right to purchase or otherwise
acquire, any shares of Common Stock (or any securities convertible into Common
Stock).
(c) In the event of a change in the number of outstanding
shares of Common Stock by reason of any dividend payable in shares of Common
Stock, or by reason of any stock split, reverse stock split or combination of
shares, the number of Units credited to the Executive hereunder shall be
increased or decreased, as the case may be, in the same proportion. Any such
adjustment shall be made by the good faith determination of the Board, which
determination shall be conclusive.
(d) If the Company shall spin-off a significant subsidiary or
shall make a substantial non-cash distribution to its stockholders, in partial
liquidation or otherwise (excluding, however, any Change in Control of the
Company or any transaction or change described in Section 1(c) hereof, and it is
reasonable to expect that the future Value of the Common Stock would be
materially affected thereby, the Board shall modify the formula for determining
the Phantom Stock Benefit in an equitable manner to maintain the economic
benefit granted to the Executive pursuant to this Section 1.
(e) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(1) "Valuation Date" shall mean the earliest of (A) the date,
for each Unit granted hereunder, on which such Unit becomes a Vested
Unit, (B) the date of termination of the Executive's employment other
than for "Cause" (as defined in the Employment Agreement among the
Company, Xxxx Sports, Inc. and the Executive dated as of April 25,
1997) and (C) the effective date of any Change in Control.
(2) "Value" shall mean the arithmetic average of the Market
Price (as hereinafter defined) of a share of Common Stock for the 10
trading days preceding the Valuation Date, but in no event shall the
Value be less than the price per share of Common Stock paid prior to
the Valuation Date in any tender offer subject to Section 14(d) of the
Securities
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Exchange Act of 1934, as amended (or any statute hereafter substituted
therefor), which results in a Change in Control, as such price per
share shall be adjusted by the good faith determination of the Board to
reflect any change described in Section 1(c) occurring subsequent to
such tender offer.
(3) "Market Price" shall mean for any day the closing price of
a share of Common Stock, as reported in The Wall Street Journal as
NASDAQ National Market Issues.
(f) In the absence of manifest error, the determination of the
amount of the Phantom Stock Benefit by the Board in accordance with this Section
1 shall be binding upon the Executive and the Company.
2. Federal and State Withholding. The Company shall deduct
from the amounts payable to the Executive pursuant to this Agreement the amount
of all required federal and state withholding taxes in accordance with the
Executive's Form W-4 on file with the Company and all applicable social security
taxes.
3. 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 shall inure to
the benefit of, the successors and assigns of the Company, and the heirs,
executors and administrators of the Executive.
4. 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 the Executive's 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.
5. 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 such party's own attorneys' fees and costs.
6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Illinois without regard to principles of conflict of laws.
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7. Amendment and Waiver. The provisions of this Agreement may
be amended or waived only by the written agreement of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
8. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
XXXX SPORTS CORP.
By /s/ Xxxxx X. Xxx
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Xxxxx X. Xxx
Chairman of the Board and
Chief Executive Officer
EXECUTIVE:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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Appendix A
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For purposes of the Phantom Stock Unit Agreement dated as of
September 23, 1997 between Xxxx Sports Corp. (the "Company") and Xxxxx X.
Xxxxxx, "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of a conversion
or exchange privilege in respect of outstanding convertible or exchangeable
securities), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation involving the
Company, if, immediately after such reorganization, merger or consolidation,
each of the conditions described in clauses (i), (ii) and (iii) of section (3)
of this definition shall be satisfied; and provided further that, for purposes
of clause (B), if any Person (other than the Company or any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 20%
or more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the Company
and such Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding Company Common
Stock or any additional Outstanding Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
66-2/3% of such Board; provided, however, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the vote
of at least 66-2/3% of the directors then comprising the Incumbent Board shall
be deemed to have been a member of the Incumbent Board; and provided further,
that no individual who was
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initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall be deemed to have been a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation unless, in any such case, immediately
after such reorganization, merger or consolidation, (i) more than 60% of the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined voting
power of the then outstanding 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 or entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation and in substantially the same
proportions relative to each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled by the
Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of such corporation or
20% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least 66-2/3% of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or
(4) approval by the stockholders of the Company of (i) a plan
of 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, immediately after such sale or other
disposition, (A) more than 60% of the then outstanding shares of common stock
thereof and more than 60% of the combined voting power of the then outstanding
securities thereof entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of
the
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individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such sale or other disposition and in substantially the
same proportions relative to each other as their ownership, immediately prior to
such sale or other disposition, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person (other
than the Company, any employee benefit plan (or related trust) sponsored or
maintained by the Company or such corporation (or any corporation controlled by
the Company) and any Person which beneficially owned, immediately prior to such
sale or other disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 20% or more of
the then outstanding shares of common stock thereof or 20% or more of the
combined voting power of the then outstanding securities thereof entitled to
vote generally in the election of directors and (C) at least 66-2/3% of the
members of the board of directors thereof were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition.
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