EMPLOYMENT AGREEMENT
Exhibit
10.7
THIS
EMPLOYMENT AGREEMENT is made as of April 4, 2005, by and between
RC2
Corporation, a Delaware corporation (the "Company"), and Xxxx X.
Xxxxxx
(the "Employee"). Certain capitalized terms used herein are defined in
section 10 below.
RECITALS
A. The
Company and the Employee desire to terminate any and all prior agreements,
whether oral or written, between the parties and between the Employee and
the
Company relating to the Employee’s employment.
B. The
Company desires to employ the Employee and the Employee is willing to make
her
services available to the Company on the terms and conditions set forth
below.
AGREEMENTS
In
consideration of the premises and the mutual agreements which follow, the
parties agree as follows:
1. Employment.
The
Company hereby employs the Employee and the Employee hereby accepts employment
with the Company on the terms and subject to the conditions set forth in
this
Agreement.
2. Term.
The
term of the Employee's employment hereunder shall commence on the date
hereof
and shall continue until terminated as provided in section 6 below.
3. Duties.
The
Employee shall serve as the Chief Financial Officer of the Company and
will,
under the direction of the Company's Chief Executive Officer and the Board
of
Directors, faithfully and to the best of her ability, perform the duties
of such
position. The Employee shall be one of the principal executive officers
and
Senior Management of the Company and shall, subject to the control of the
Chief
Executive Officer and the Company's Board of Directors, have the normal
duties,
responsibilities and authority associated with such position. The Employee
shall
also perform such additional duties and responsibilities which may from
time to
time be reasonably assigned or delegated by the Chief Executive Officer
or Board
of Directors of the Company. The Employee agrees to devote her entire business
time, effort, skill and attention to the proper discharge of such duties
while
employed by the Company.
4. Compensation.
Effective April 4, 2005, the Employee shall receive a base salary of $230,000
per year, payable in regular and equal monthly installments (the "Base
Salary").
5. Fringe
Benefits.
(a) Vacation.
The
Employee shall be entitled to four weeks of paid vacation annually. The
Employee
and the Company shall mutually determine the time and intervals of such
vacation.
(b) Medical,
Health, Dental, Disability and Life Coverage.
The
Employee shall be eligible to participate in any medical, health, dental,
disability and life insurance policy in effect for the Senior Management
of the
Company.
(c) Incentive
Bonus and Stock Ownership Plans.
The
Employee shall be entitled to participate in any incentive bonus plan,
incentive
stock option or other stock ownership plan or other incentive compensation
plan
developed generally for the Senior Management of the Company, on a basis
consistent with her position and level of compensation with the Company.
Without
limiting the foregoing, Employee shall be entitled to participate on a
basis
consistent with past practice and her position and level of compensation
with
the Company in the annual Incentive Bonus Plan and Top Management Additional
Bonus Plan, together with all successor or other bonus plans (collectively,
the
"Bonus Plans"). In addition, Employee shall be entitled to receive annual
stock
option grants as provided on Schedule 5(c) attached hereto. The options
will be
granted pursuant to a Non-Statutory Stock Option Grant Agreement substantially
in the form of Exhibit A attached hereto.
(d) Automobile.
The
Company agrees to reimburse the Employee up to $600.00 per month, as such
amount
may be increased from time to time consistent with the Company's reimbursement
policy for the Senior Management of the Company to cover Employee's expenses
in
connection with her 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
her in connection with the performance of her 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.
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(f) Key
Man Insurance.
The
parties agree that the Company has the option to purchase one or more key
man
life insurance policies upon the life of the Employee. The Company shall
own and
shall have the absolute right to name the beneficiary or beneficiaries
of said
policy. The Employee agrees to cooperate fully with the Company in securing
said
policy, including, but not limited to submitting himself to any physical
examination which may be required at such reasonable times and places as
Company
shall specify.
(g) Life
and Disability Insurance.
During
the Employment Period, the Company shall provide coverage of at least $2
million
of life insurance and 75% of Base Salary of disability insurance. Such
insurance
policies to be owned by any one or more members of Employee’s immediate family
or by a trust for the primary benefit of Employee’s immediate family. The owner
of the policy shall have the power to designate the beneficiary and to
assign
any rights under the policy. The Company shall pay 100% of the premiums
required
under these policies; provided, however, that the Company shall not be
obligated
to pay greater than $20,000 for such premiums during any fiscal year. In
the
event that the premiums for such policies would exceed this limitation,
the
Company shall consult with the Employee to determine the allocation of
such
amount to the premiums for each type of policy to obtain such insurance
as may
be available for an aggregate of $20,000 per fiscal year.
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6. Termination.
(a) Termination
of the Employment Period.
The
Employment Period shall continue until the earlier of: (i) March 31, 2008
unless
the parties mutually agree in writing to extend the term of this Agreement
(such
date hereof or such extended date being referred to herein as the "Expected
Completion Date"), (ii) the Employee's death or Disability, (iii) the
Employee resigns or (iv) the Board of Directors determines that
termination
of Employee's employment is in the best interests of the Company (the
"Employment Period"). The last day of the Employment Period shall be referred
to
herein as the "Termination Date."
(b) Definitions.
(i) For
purposes of this Agreement, "Disability" shall mean a physical or mental
sickness or any injury which renders the Employee incapable of performing
the
services required of her as an employee of the Company and which does or
may be
expected to continue for more than six months during any 12-month period.
In the
event Employee shall be able to perform her 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 [a] violated the terms of section 7 or section 8
of this
Agreement in any material respect; [b] committed a felony or a crime
involving moral turpitude; [c] engaged in serious misconduct which
is
demonstrably and materially injurious to the Company and its Subsidiaries;
[d] engaged in fraud or dishonesty with respect to the Company or
any of
its Subsidiaries or made a material misrepresentation to the stockholders
or
directors of the Company with respect to an item, transaction or amount
in
excess of $10,000; or [e] committed acts of negligence in the performance
of her duties which are demonstrably and materially injurious to the Company.
In
all cases, termination for Cause shall be determined solely by the Board
of
Directors and require a two-thirds majority vote.
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(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, payments of the Employee's Base Salary
shall be made to the Employee for a period of six months after the Termination
Date in accordance with the normal payroll practices of the Company. In
addition, for a period of three years after the Termination Date, the Company
shall reimburse the Employee for amounts paid, if any, to continue medical,
dental and health coverage pursuant to the provisions of the Consolidated
Omnibus Budget Reconciliation Act, continue Employee's life insurance and
disability coverage, to the extent limited by section 5(g) and to the extent
permitted under applicable policies, and pay to the Employee a pro rata
portion
of any bonus payable for the year in which termination takes place (if
any)
based on the portion of the year occurring prior to the Termination Date.
In the
event of termination as a result of the death of Employee, Employee's designated
beneficiary or her estate shall be entitled to receive the Base Salary
accrued
prior to the Termination Date together with the proceeds of any life insurance
obtained pursuant to section 5(g), plus a lump sum payment when determinable
equaling Employee's pro rata portion of any bonus payable under the Bonus
Plans
for the year in which termination takes place (if any) based on the portion
of
the year occurring prior to the Termination Date.
(d) Termination
by the Company without Cause or by the Employee for Good Reason.
If
(i) the Employment Period is terminated by the Company for any reason
other
than for Cause, Disability or death, (ii) the Employment Period
is
terminated by the Company for what the Company believes is Cause or Disability,
and it is ultimately determined that the Employment Period was terminated
without Cause or Disability (iii) the Employee resigns for Good
Reason,
(iv) this Agreement is not renewed or otherwise extended by the Company
after
the Expected Completion Date, and the reason for such non-renewal or extension
is not related to a termination for Cause, Disability or death of the Employee,
the Employee shall be entitled to receive, as damages for such a termination,
resignation or non-renewal, her Base Salary from the Termination Date to
the
second anniversary of the Termination Date to be paid in accordance with
the
normal payroll practices of the Company plus a lump sum payment equaling
100% of
the average annual payments under the Bonus Plans over the preceding three
years, provided, however, that if such a termination or resignation described
in
(i), (ii), (iii) or (iv) above occurs at any time after the occurrence
of or in
contemplation of a Change of Control, then Employee shall be entitled to
receive
a
lump sum payment of her Base Salary from the Termination Date to the third
anniversary of the Termination Date plus 200% of the average annual payments
under the Bonus Plans over the preceding three years. If the Employee's
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employment
is terminated in the manner described in this section 6(d), for
a period of
three years from the Termination Date, the Company shall reimburse the
Employee
for amounts paid, if any, to continue medical, dental and health coverage
pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation
Act, continue Employee's life insurance and disability coverage to the
extent
limited by section 5(g) and to the extent permitted under the applicable
policies, and pay to the Employee the fringe benefits pursuant to section
5
which have accrued prior to the Termination Date.
(e) Termination
by the Company for Cause or by the Employee Without Good Reason.
If the
Employment Period is terminated by the Company with Cause or as a result
of the
Employee's resignation without Good Reason, the Employee shall not be entitled
to receive her 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.
(g) Acceleration
of Option Vesting.
Upon
completion of a Change of Control, all options to purchase stock of the
Company
held by the Employee shall immediately vest and become exercisable by the
Employee in accordance with their remaining terms. The Company agrees to
take
any and all actions necessary or appropriate to effectuate the acceleration
of
these options and to permit the Employee to exercise the options in accordance
with their terms from and after this accelerated vesting date.
7. Noncompetition
and Nonsolicitation.
The
Employee acknowledges and agrees that the contacts and relationships of
the
Company and its Affiliates with its customers, suppliers, licensors and
other
business relations are, and have been, established and maintained at great
expense and provide the Company and its Affiliates with a substantial
competitive advantage in conducting their business. The Employee acknowledges
and agrees that by virtue of the Employee's employment with the Company,
the
Employee will have unique and extensive exposure to and personal contact
with
the Company's customers and licensors, and that she will be able to establish
a
unique relationship with those Persons that will enable her, both during
and
after employment, to unfairly compete with the Company and its Affiliates.
Furthermore, the parties agree that the terms and conditions of the following
restrictive covenants are reasonable and necessary for the protection of
the
business, trade secrets and Confidential Information (as defined in
section 8 below) of the Company and its Affiliates and to prevent
great
damage or loss to the Company and its Affiliates as a result of action
taken by
the Employee. The Employee acknowledges and agrees that the noncompete
restrictions and nondisclosure of Confidential Information restrictions
contained in this Agreement are reasonable and the consideration provided
for
herein is sufficient to fully and adequately compensate the Employee for
agreeing to such restrictions. The Employee acknowledges that she could
continue
to actively pursue her career and earn sufficient compensation in the same
or
similar business without breaching any of the restrictions contained in
this
Agreement.
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(a) Noncompetition.
The
Employee hereby covenants and agrees that during the Employment Period
and for
two years thereafter (the "Noncompete Period"), except if employment is
terminated by the Company or its successor after a Change in Control or
this
Agreement is not renewed or extended by the Company or its successor after
the
Expected Completion Date then the Noncompete Period shall be six months,
she
shall not, directly or indirectly, either individually or as an employee,
principal, agent, partner, shareholder, owner, trustee, beneficiary,
co-venturer, distributor, consultant, representative or in any other capacity,
participate in, become associated with, provide assistance to, engage in
or have
a financial or other interest in any business, activity or enterprise which
is
competitive with the Company or any of its Affiliates or any successor
or assign
of the Company or any of its Affiliates. The ownership of less than a one
percent interest in a corporation whose shares are traded in a recognized
stock
exchange or traded in the over-the-counter market, even though that corporation
may be a competitor of the Company, shall not be deemed financial participation
in a competitor. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this section is invalid or unenforceable,
the parties agree that the court making the determination of invalidity
or
unenforceability shall have the power to reduce the scope, duration, or
area of
the term or provision, to delete specific words or phrases, or to replace
any
invalid or unenforceable term or provision with a term or provision that
is
valid and enforceable and that comes closest to expressing the intention
of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified. The term "indirectly" as used in this section
and
section 8 below is intended to include any acts authorized or directed
by or on
behalf of the Employee or any Affiliate of the Employee.
(b) Nonsolicitation.
The
Employee hereby covenants and agrees that during the Noncompete Period,
she
shall not, directly or indirectly, either individually or as an employee,
agent,
partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor,
consultant or in any other capacity:
(i) canvass,
solicit or accept from any Person who is a customer or licensor of the
Company
or any of its Affiliates (any such Person is hereinafter referred to
individually as a "Customer," and collectively as the "Customers") any
business
which in competition with the business of the Company or any of its Affiliates
or the successors or assigns of the Company or any of its Affiliates, including,
without limitation, the canvassing, soliciting or accepting of business
from any
Person which is or was a Customer of the Company or any of its Affiliates
within
two years preceding the date of this Agreement, during the Employment
Period or during the Noncompete Period;
(ii) advise,
request, induce or attempt to induce any of the Customers, suppliers, or
other
business contacts of the Company or any of its Affiliates who currently
have or
have had business relationships with the Company or any of its Affiliates
within
two years preceding the date of this Agreement, during the Employment Period
or
during the Noncompete Period, to withdraw, curtail or cancel any of its
business
or relations with the Company or any of its Affiliates; and
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(iii) hire
or
induce or attempt to induce any officer of the Company or any of its Affiliates
to terminate his or her relationship or breach any agreement with the Company
or
any of its Affiliates unless such person has previously been terminated
by the
Company; or
8. Confidential
Information.
The
Employee acknowledges and agrees that the customers, business connections,
customer lists, procedures, operations, techniques, and other aspects of
and
information about the business of the Company and its Affiliates (the
"Confidential Information") are established at great expense and protected
as
confidential information and provide the Company and its Affiliates with
a
substantial competitive advantage in conducting their business. The Employee
further acknowledges and agrees that by virtue of her past employment with
the
Company, and by virtue of her employment with the Company, she has had
access to
and will have access to, and has been entrusted with and will be entrusted
with,
Confidential Information, and that the Company would suffer great loss
and
injury if the Employee would disclose this information or use in a manner
not
specifically authorized by the Company. Therefore, the Employee agrees
that
during the Employment Period and for five years thereafter, she will not,
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, owner trustee, beneficiary, co-venturer distributor, consultant
or
in any other capacity, use or disclose or cause to be used or disclosed
any
Confidential Information, unless and to the extent that any such information
become generally known to and available for use by the public other than
as a
result of the Employee's acts or omissions. The Employee shall deliver
to the
Company at the termination of the Employment Period, or at any other time
the
Company may request, all memoranda, notes, plans, records, reports, computer
tapes, printouts and software and other documents and data (and copies
thereof)
relating to the Confidential Information, Work Product (as defined below)
or the
business of the Company or any of its Affiliates which she may then possess
or
have under her control. The Employee acknowledges and agrees that all
inventions, innovations, improvements, developments, methods, designs,
analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Affiliate' actual
or
anticipated business research and development or existing or future products
or
services and which are conceived, developed or made by the Employee while
employed by the Company and its Affiliates ("Work Product") belong to the
Company or such Affiliate, as the case may be.
9. Common
Law of Torts and Trade Secrets.
The
parties agree that nothing in this Agreement shall be construed to limit
or
negate the common law of torts or trade secrets where it provides the Company
and its Affiliates with broader protection than that provided
herein.
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10. Definitions.
"Affiliate"
means,
with respect to any Person, any other Person controlling, controlled by
or under
common control with such Person and any partner of a Person which is a
partnership.
“Change
of Control”
means:
(a) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of
either (i) the then outstanding shares of common stock of The Company
(the
"Outstanding Common Stock") or (ii) the combined voting power of
the then
outstanding voting securities of the Company entitled to vote generally
in the
election of directors (the "Outstanding Voting Securities"); provided,
however,
that the following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any acquisition
by
the Company, (iii) any acquisition by any employee benefit plan
(or related
trust) sponsored or maintained by the Company or any corporation controlled
by
the Company or (iv) any acquisition by any corporation pursuant
to a
transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this definition; or
(b) individuals
who, as of the date hereof, constitute the Board of Directors of the Company
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at
least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but
excluding, for this purpose, any such individual whose initial assumption
of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the
Board of Directors of the Company; or
(c) approval
by the stockholders of the Company of a reorganization, merger or consolidation
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities
who were the beneficial owners, respectively, of the Outstanding Common
Stock
and Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively,
the
then outstanding shares of common stock and the combined voting power of
the
then outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the corporation
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resulting
from such Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or more
Subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Common
Stock
and Outstanding Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company
or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed
prior to the Business Combination and (iii) at least a majority
of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the
execution of the initial agreement, or of the action of the Board of Directors
of the Company, providing for such Business Combination; or
(d) approval
by the stockholders of the Company of (i) a complete liquidation
or
dissolution of the Company or (ii) the sale or other disposition
of all or
substantially all of the assets of the Company, other than to a corporation,
with respect to which following such sale or other disposition, [a] more
than 60% of, respectively, the then outstanding shares of common stock
of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale
or other
disposition, of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be, [b] less than 30% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors is then beneficially owned,
directly
or indirectly, by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation), except to the extent that such
Person owned 30% or more of the Outstanding Common Stock or Outstanding
Voting
Securities prior to the sale or disposition, and [c] at least a
majority of
the members of the board of directors of such corporation were members
of the
Incumbent Board at the time of the execution of the initial agreement,
or of the
action of the Board of Directors of the Company, providing for such sale
or
other disposition of assets of the Company or were elected, appointed or
nominated by the Board of Directors of the Company.
"Person"
means
any individual, partnership, corporation, limited liability company,
association, joint stock company, trust, joint venture, unincorporated
organization and any governmental entity or any department, agency or political
subdivision thereof.
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“Senior
Management”
at any
time means the senior executive officers of the Company which will include,
without limitation, the Chief Executive Officer, President, Chief Operating
Officer, Chief Financial Officer and such other officers of the Company
as the
Board of Directors shall determine from time to time.
"Subsidiary"
means,
with respect to any Person, any corporation, partnership, association or
other
business entity of which (i) if a corporation, a majority of the
total
voting power of shares of stock entitled (without regard to the occurrence
of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by
that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a partnership, association or other business
entity, a
majority of the partnership or other similar ownership interest thereof
is at
the time owned or controlled, directly or indirectly, by any Person or
one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of partnership, association or other business
entity gains or losses or shall be or control any managing director or
general
partner of such partnership, association or other business entity.
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 her address appearing on the records of the Company, or to
such
other address as she may designate in writing to the Company.
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14. Severability.
In the
event that any provision shall be held to be invalid or unenforceable for
any
reason whatsoever, it is agreed such invalidity or unenforceability shall
not
affect any other provision of this Agreement and the remaining covenants,
restrictions and provisions hereof shall remain in full force and effect
and any
court of competent jurisdiction may so modify the objectionable provision
as to
make it valid, reasonable and enforceable. Furthermore, the parties specifically
acknowledge the above covenant not to compete and covenant not to disclose
confidential information are separate and independent agreements.
15. Complete
Agreement.
Except
as otherwise expressly set forth herein, this document embodies the complete
agreement and understanding among the parties hereto with respect to the
subject
matter hereof and supersedes and preempts any prior understandings, agreements
or representations by or among the parties, written or oral, which may
have
related to the subject matter hereof in any way. Without limiting the generality
of the foregoing, this Agreement supersedes the Employment Agreement, dated
as
of July 29, 2002, between the Company and the Employee (together with all
amendments thereto, the “Prior Agreement”). The Prior Agreement is hereby
terminated and shall cease to be of any further force or effect.
16. Amendment.
This
Agreement may only be amended by an agreement in writing signed by each
of the
parties hereto.
17. Governing
Law.
This
Agreement shall be governed by and construed exclusively in accordance
with the
laws of the State of Illinois, regardless of choice of law
requirements.
18. Benefit.
This
Agreement shall be binding upon and inure to the benefit of and shall be
enforceable by and against the Company, its successors and assigns and
the
Employee, her heirs, beneficiaries and legal representatives. It is agreed
that
the rights and obligations of the Employee may not be delegated or
assigned.
[Remainder
of page intentionally left blank. Signature page to follow.]
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IN
WITNESS WHEREOF, the parties have executed or caused this Employment Agreement
to be executed as of the date first above written.
RC2
CORPORATION - COMPENSATION COMMITTEE
/s/
Xxxx X.
Xxxxxxx
Xxxx
X.
Xxxxxxx, Director and
Compensation
Committee Chairman
/s/
Xxxx X.
Xxxxxxx
Xxxx
X.
Xxxxxxx, Director and
Compensation
Committee Member
/s/
Xxxxxx X.
Xxxxxx
Xxxxxx
X.
Xxxxxx, Director and
Compensation
Committee Member
/s/
Xxxx X.
Xxxxxx
Xxxx
X.
Xxxxxx
13
SCHEDULE
5(c)
INCENTIVE
STOCK OPTIONS
If
Employee is employed by the Company on February 1 of any year (beginning
with
February 1, 2005) during the Employment Period, she shall receive
options
to acquire not less than 20,000 shares as determined by the Board of Directors
of the Company. The grant of the options shall be made on the earlier of
(1) the
quarterly meeting of the Board of Directors held in February of the applicable
year or (2) February 28 of the applicable year. Additionally, as
of the
date of each grant above, Employee shall also be granted options to purchase
1,000 additional shares for every full percentage point that the three-year
compounded annual EPS growth rate as of December 31 of the prior year exceeds
25%. The total number of options granted in any fiscal year shall not exceed
100,000. The options to be granted pursuant to this Employment Agreement
shall
be granted using a Non-Statutory Stock Option Grant Agreement substantially
in
the form of Exhibit A to the Employment Agreement.
EXHIBIT
A
NON-STATUTORY
STOCK OPTION GRANT AGREEMENT
UNDER
THE
RC2 CORPORATION
2005
STOCK INCENTIVE PLAN
THIS
AGREEMENT, dated as _____________ (the date of grant), is between
_______________ ("Employee") and RC2 CORPORATION, a Delaware corporation
(the
"Company").
RECITALS
A. The
Company adopted the RC2 Corporation 2005 Stock Incentive Plan (the "Plan"),
which was approved by its Board of Directors (the "Board") and
stockholders.
B. The
Board
has designated Employee as a participant in the Plan.
C. Pursuant
to the Plan, Employee and the Company desire to enter into this Agreement
setting forth the terms and conditions of the options granted to Employee
under
the Plan.
AGREEMENTS
The
Employee and the Company agree as follows:
1. Grant
of Stock Option.
The
Company grants to Employee the right and option (hereinafter referred to
as the
"Option") to purchase all or any part of up to ________ shares of
the
Company's Common Stock (the "Option Shares") on the terms and conditions
set
forth below and in the Plan.
2. Option
Price.
The
purchase price of the Option Shares shall be $_____ per share.
3. Period
of Exercise.
Except
as provided under the Plan, unless the Option is terminated, Employee may
exercise this Option for up to, but not in excess of, the percent of shares
of
Common Stock subject to the Option during the periods specified
below:
|
Percentage
of Shares
|
||
|
of
Common Stock
|
On
or After
|
|
|
20%
|
February __,
2006
|
|
|
40%
|
February __,
2007
|
|
|
60%
|
February __,
2008
|
|
|
80%
|
February __,
2009
|
|
|
100%
|
February __,
2010
|
Employee's
right to
exercise the Option expires ten years from the date of grant (the "Option
Period").
4. Definitions.
Unless
provided to the contrary in this Agreement, the definitions of the Plan
and any
Amendments to the Plan shall apply to this Agreement.
5. Option
Designation.
The
option granted is a Non-Statutory Stock Option in accordance with
Article VII of the Plan.
6. Change
in Capital Structure.
The
Option rights and exercise price of such Option rights will be adjusted
in the
event of a stock dividend, stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, acquisition or other change in the
capital structure of the Company as determined by the Board of Directors
in
accordance with the Plan.
In
the
event of a Change in Control of the Company, as defined in the Plan, the
Option
will remain exercisable (subject to the expiration date of the Option)
as
provided in the Plan.
7. Nontransferability
of Option.
Options
shall not be transferable other than by will or the laws of descent and
distribution and shall be exercisable, during the Employee's lifetime,
only by
him.
8. Delivery
by the Company.
As soon
as practicable after receipt of all items referred to in Article VII
of the
Plan and any payment required by Article VII of the Plan, the Company
shall
deliver to the Employee certificate(s) issued in Employee's name for the
number
of Option Shares purchased by exercise of the Option. If delivery is by
mail,
delivery of Option Shares shall be deemed effected when the stock transfer
agent
of the Company shall have deposited the certificates in the United States
mail,
addressed to the Employee.
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9. Addresses.
All
notices or statements required to be given to either party hereto shall
be in
writing and shall be personally delivered or sent, in the case of the Company,
to its principal business office and, in the case of Employee, to her address
as
shown on the records of the Company or to such address as Employee designates
in
writing. Notice of any change of address shall be sent to the other party
by
registered or certified mail. It shall be conclusively presumed that any
notice
or statement properly addressed and mailed bearing the required postage
stamps
has been delivered to the party to which it is addressed.
10. Restrictions
Imposed by Law.
Notwithstanding any other provision of this Agreement, Employee agrees
that he
shall not exercise the Option and that the Company will not be obligated
to
deliver any shares of Common Stock or make any cash payment if counsel
to the
Company determines that such exercise, delivery or payment would violate
any law
or regulation of any governmental authority or any agreement between the
Company
and any national securities exchange upon which the Common Stock is listed.
The
Company shall in no event be obliged to take any affirmative action in
order to
cause the exercise of the Option or the resulting delivery of shares of
Common
Stock or other payment to comply with any law or regulation of any governmental
authority.
11. Employment.
Nothing
in this Agreement or the Plan shall limit the right of the Company or any
parent
or Subsidiary to terminate the Employee's employment or otherwise impose
any
obligation to employ the Employee.
12. Governing
Law.
This
Agreement shall be construed, administered and governed in all respects
under
and by the laws of the State of Delaware.
13. Provisions
Consistent with Plan.
This
Agreement is intended to be construed to be consistent with, and is subject
to,
all applicable provisions of the Plan, which is incorporated herein by
reference. In the event of a conflict between the provisions of this Agreement
and the Plan, the provisions of the Plan and shall prevail.
EMPLOYEE:
________________________________
RC2
CORPORATION
BY______________________________
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