EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 30,
1999, by and between Racing Champions, Inc., an Illinois corporation (the
"Company"), and Xxxxxx X. Xxxx (the "Employee"). The Company is a wholly-owned
Subsidiary of Racing Champions Corporation, a Delaware corporation (the
"Parent").
RECITAL
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. Certain capitalized terms used herein are defined in section 10
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 Executive
Officer of the Company and will, under the direction of the Company's board of
directors (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 of the Company and shall, subject to the control of the 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 Board of Directors. 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.
4. Compensation. The Employee shall receive a base salary of
$500,000 per year, payable in regular and equal monthly installments (the "Base
Salary"). The Employee's Base Salary shall be reviewed annually by the Board of
Directors of the Company to determine appropriate increases, if any, in such
Base Salary.
5. Fringe Benefits.
(a) Vacation. The Employee shall be entitled to five 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 other two most senior
executives of the Parent and its Subsidiaries (collectively, the "Senior
Management").
(c) Incentive Bonus and Stock Ownership Plans. The Employee
shall be entitled to participate in any incentive bonus or other incentive
compensation plan developed generally for the Senior Management of the Parent
and its Subsidiaries on a basis consistent with his position and level of
compensation. The Employee shall also be entitled to participate in any
incentive stock option plan or other stock ownership plan developed generally
for the Senior Management of the Parent and its Subsidiaries, on a basis
consistent with his position and level of compensation (including the Racing
Champions Corporation Stock Incentive Plan).
(d) Automobile. The Company agrees to reimburse the Employee
up to $990.00 per month, as such amount may be increased from time to time
consistent with the Company's reimbursement policy for 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.
(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 Parent and 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 Parent and 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 the
Parent and the Company shall specify.
6. Termination.
(a) Termination of the Employment Period. The Employment
Period shall continue until (i) the second anniversary of the date hereof unless
the parties mutually agree to extend the term of this Agreement (such
anniversary of the date hereof or such extended date
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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.
(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 him as an employee of the
Company and which does or may be expected to continue for more than six (6)
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.
(ii) For purposes of this Agreement, "Cause" shall be
deemed to exist if the Employee shall have (1) violated the terms of section 7
or 8 of this Agreement; (2) committed a felony or a crime involving moral
turpitude; (3) engaged in serious misconduct which is demonstrably injurious to
the Parent or any of its Subsidiaries; (4) engaged in fraud or dishonest with
respect to the Parent or any of its Subsidiaries or made a material
misrepresentation to the stockholders or directors of the Parent or the Company;
or (5) committed acts of negligence in the performance of his duties which are
substantially injurious to the Parent or any of its Subsidiaries.
(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."
(c) Termination for Disability or Death. In the event of
termination for Disability or death, payments of the Employee's Base Salary
shall be made to the Employee, his designated beneficiary or his estate for a
period of six (6) months after the Termination Date in accordance with the
normal payroll practices of the Company. During this period, the Company shall
also 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.
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During this period, the Company will also continue Employee's life insurance and
disability coverage, to the extent permitted under applicable policies, and will
pay to the Employee the fringe benefits pursuant to section 5 which have accrued
prior to the Termination Date.
(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) if 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 or (iii) the Employee resigns for
Good Reason, the Employee shall be entitled to receive, as damages for such a
termination, his Base Salary from the Termination Date to the later to occur of
(i) the Expected Completion Date or (ii) the first anniversary of the
Termination Date. Such payment of Base Salary shall be made in accordance with
the normal payroll practices of the Company. During this period, the Company
shall also 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. During this period, the Company will also
continue Employee's life insurance and disability coverage, to the extent
permitted under applicable policies, and will pay to the Employee the fringe
benefits pursuant to section 5 which have accrued prior to the date of
termination.
(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.
7. Noncompetition and Nonsolicitation. The Employee acknowledges
and agrees that the contacts and relationships of the Parent and its
Subsidiaries with its customers, suppliers, licensors and other business
relations are, and have been, established and maintained at great expense and
provide the Parent and its Subsidiaries 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 Parent's and its
Subsidiaries' customers and licensors, and that he will be able to establish a
unique relationship with those Persons that will enable him, both during and
after employment, to unfairly compete with the Parent and its Subsidiaries.
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 Parent and its Subsidiaries and to prevent great damage or loss to
the Parent and its Subsidiaries 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
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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. The Employee acknowledges that one business of the Parent and
its Subsidiaries is the design, production (including, without limitation, the
obtaining of the licenses necessary therefor), marketing and sale of die cast
metal replicas of vehicles.
(a) Noncompetition. The Employee hereby covenants and agrees
that during the Employment Period and for two (2) years thereafter (the
"Noncompete Period"), 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 Parent or any of its Subsidiaries or
any successor or assign of the Parent or any of its Subsidiaries. The ownership
of less than a one percent 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 Parent, 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 Parent or any of its Subsidiaries (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 Parent
or any of its Subsidiaries or the successors or assigns of the Parent or any of
its Subsidiaries, including, without limitation, the canvassing, soliciting or
accepting of business from any Person which is or was a Customer of the Parent
or any of its Subsidiaries within two years preceding the date hereof or with
the Parent or any of its Subsidiaries during the Noncompete Period;
(ii) advise, request, induce or attempt to induce any of
the Customers, suppliers, or other business contacts of the Parent or any of its
Subsidiaries who currently have or have had business relationships with the
Parent within two years preceding the date hereof or with the Parent or any of
its Subsidiaries during the
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Noncompete Period, to withdraw, curtail or cancel any of its business or
relations with the Parent or any of its Subsidiaries;
(iii) induce or attempt to induce any employee, sales
representative, consultant or other agent of the Parent or any of its
Subsidiaries to terminate his relationship or breach any agreement with the
Parent or any of its Subsidiaries; or
(iv) hire any person who was an employee, sales
representative, consultant or other agent of the Parent or any of its
Subsidiaries at any time during the Noncompete Period.
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 Parent and its Subsidiaries (the "Confidential Information") are
established at great expense and protected as confidential information and
provide the Parent and its Subsidiaries 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 (5) 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 Parent or
any of its Subsidiaries 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 Parent's or any of its Subsidiaries' 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 Parent and
its Subsidiaries ("Work Product") belong to the Parent or such Subsidiary, 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 Parent and its Subsidiaries with
broader protection than that provided herein.
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10. Definition.
"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.
"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.
"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.
11. Specific Performance. The Employee acknowledges and agrees
that irreparable injury to the Company may result in the event the Employee
breaches any covenant or agreement contained in sections 7 and 8 and that the
remedy at law for the breach of any such covenant will be inadequate.
Therefore, if the Employee engages in any act in violation of the provisions of
sections 7 and 8, the Employee agrees that the Company shall be entitled, in
addition to such other remedies and damages as may be available to it by law or
under this Agreement, to injunctive relief to enforce the provisions of sections
7 and 8.
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.
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
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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.
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. The parties hereby consent to the
jurisdiction of the state courts of the State of Illinois and of any federal
court in the venue of Illinois for the purpose of any suit, action or proceeding
arising out of or related to this Agreement, and expressly waive any and all
objections they may have as to venue in any of such courts.
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.
IN WITNESS WHEREOF, the parties have executed or caused this
Employment Agreement to be executed as of the date first above written.
RACING CHAMPIONS, INC.
By: /s/ Xxxx X. Xxxxx
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Its: President
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/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
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