Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of December
13, 1998, (this "Agreement"), is between The Learning Company, Inc., a Delaware
corporation ("The Learning Company"), and Xxxxx X'Xxxxx (the "Executive").
WHEREAS, The Learning Company and the Executive have entered into an
Employment Agreement (the "Original Agreement") dated as of April 9, 1997;
WHEREAS, the Boards of Directors of Mattel, Inc., a Delaware
corporation ("Mattel") and The Learning Company have each approved the merger of
The Learning Company with and into Mattel (the "Merger") in accordance with the
Delaware General Corporation Law and pursuant to an Agreement and Plan of Merger
(the "Merger Agreement") dated as of December 13, 1998;
WHEREAS, The Learning Company and the Executive desire that the
Original Agreement terminate immediately prior to the "Effective Time" of the
Merger, as defined in the Merger Agreement (the "Effective Time"), and that the
Executive will become an employee of Mattel immediately at the Effective Time
pursuant to this Agreement;
WHEREAS, this Agreement will become effective only if the Merger is
consummated;
WHEREAS, Mattel will assume this Agreement immediately at the Effective
Time by operation of law;
WHEREAS, the Executive is a substantial shareholder and President of
The Learning Company;
WHEREAS, the covenants provided herein, including the Covenant Not To
Compete and Not to Solicit set forth in Section 11 are material, significant and
essential to effecting the transactions contemplated by the Merger Agreement;
and
WHEREAS, the Executive and The Learning Company desire to enter into
this Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Executive and The Learning Company agree as follows:
1. TERMINATION OF ORIGINAL AGREEMENT; 3 YEAR EMPLOYMENT PERIOD.
The Executive and The Learning Company hereby agree that immediately prior to
the Effective Time the Original Agreement shall terminate and be of no further
force or effect. The Executive and The Learning Company hereby agree that
immediately at the Effective Time, Mattel shall assume this Agreement and the
Executive shall become an employee of Mattel and the Executive hereby accepts
such employment and agrees to remain in the employ of Mattel for the period
commencing immediately after the Effective Time and ending on the third
anniversary of the Effective Time (the "EMPLOYMENT PERIOD"), unless sooner
terminated in accordance with Section
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4; PROVIDED, that, commencing on the third anniversary and each anniversary
thereafter the Employment Period may be extended for one year by the written
agreement of the parties hereto.
2. DUTIES.
(a) EXECUTIVE'S POSITION AND DUTIES. During the Employment
Period, the Executive's position shall be the President of The Learning Company
division of Mattel and its successors with such authority and responsibilities
that are consistent with the authority and responsibilities generally assigned
to executive officers of Mattel of similar rank and position as the Board of
Directors of The Learning Company may, acting in good faith, from time to time
reasonably assign to the Executive. In addition, the Executive shall report to
the officers of Mattel as Mattel may determine from time to time. The
Executive's services shall be performed from Mattel's offices in the area of
Boston, Massachusetts or any of Mattel's offices located in the State of
California, as Mattel may designate.
(b) FULL TIME. During the term of this Agreement, the
Executive agrees to devote his full business time to the business and affairs of
The Learning Company and to use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder to the extent
necessary to discharge such responsibilities, except for (i) services on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities; (ii) periods of
vacation and sick leave to which he is entitled; (iii) the management of
personal investments and affairs; and (iv) political fundraising. The Executive
will not engage in any outside business activity (as distinguished from personal
investment activity and affairs), including, but not limited to, activity as a
consultant, agent, partner or officer, or provide business services of any
nature directly or indirectly to a corporation or other business enterprise.
(c) EFFECT OF MERGER. The Executive hereby agrees that
neither The Learning Company's entering into the Merger Agreement and the
various other agreements related thereto or the consummation of the Merger or
any of the other transactions contemplated by the Merger Agreement and the
various other agreements related thereto, nor The Learning Company's and the
Executive's entering into or performing their obligations under this Agreement
constitute "Good Reason" within the meaning of such term under Section 3.3(a) of
the Original Agreement.
3. COMPENSATION.
(a) BASE SALARY. During the Employment Period, the Executive
shall receive a base salary ("BASE SALARY") paid at a bi-weekly rate at least
equal to $650,000 per annum. The Base Salary shall be reviewed at least once
every eighteen (18) months and may be increased at any time and from time to
time by action of the Board of Directors of Mattel or the Compensation Options
Committee thereof or any individual having authority to make such action in
accordance with Mattel's regular practices. Any increase in the Base Salary
shall not serve to limit or reduce any other obligation of Mattel hereunder and,
after any such increase, the Base Salary shall not be reduced.
(b) BONUS PROGRAMS. In addition to the Base Salary, during
the Employment Period, the Executive shall participate throughout the remainder
of the Employment Period in
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Mattel's cash, deferred bonus, incentive plans and programs ("BONUS PROGRAMS")
as may be in effect from time to time with respect to executives employed by
Mattel at a participation level reflecting the Executive's responsibilities,
including, but not limited to, the Management Incentive Plan ("MIP") and the
Long-Term Incentive Plan ("LTIP") as they may be modified from time to time and
any plans or programs substituted therefor; PROVIDED that, the determination of
the amounts to be paid pursuant to such plans or programs shall be made by the
Board of Directors of Mattel or a committee thereof authorized to take such
action and shall be made in accordance with Mattel's compensation practice and
the terms and provisions of such plans or programs; PROVIDED, FURTHER, that the
Executive's eligibility for and participation in each of the Bonus Programs
shall be at a level and on terms and conditions no less favorable than those
available to any comparably situated executive.
(c) INCENTIVE AND SAVINGS PLANS. In addition to the Base
Salary and participation in the Bonus Programs, during the Employment Period the
Executive shall be entitled to participate in all incentive and savings plans
and programs, including, but not limited to, stock option plans and retirement
plans (including, but not limited to, Mattel's 1997 Premium Price Stock Option
Plan and/or the 1996 Stock Option Plan), as may be in effect from time to time
with respect to executives employed by Mattel at the Executive's level so as to
reflect the Executive's responsibilities.
(d) BENEFIT PLANS. The Executive and/or his family, as the
case may be, shall be entitled to receive all amounts which he or his family is
or would have been entitled to receive as benefits under all medical, dental,
disability, group life, accidental death and travel accident insurance plans and
programs of Mattel in which the Executive is a participant as in effect from
time to time with respect to executives employed by Mattel. Mattel's Executive
Relocation Plan shall apply to the Executive.
(e) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies and practices of
Mattel as in effect from time to time with respect to executives employed by
Mattel.
(f) FRINGE BENEFITS. The Executive shall be entitled to
fringe benefits, commensurate with those available to comparable level
executives, including an automobile and related expenses as well as the use of a
company-issued gasoline credit card and financial and legal counseling in
accordance with the policies of Mattel as in effect from time to time with
respect to executives employed by Mattel.
(g) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the policies of Mattel as
in effect from time to time with respect to executives employed by Mattel. The
Executive will not receive payment for any vacation time unused at the end of
any year. The Executive shall be credited with his years of service with The
Learning Company for purposes of his vacation entitlement under Mattel's
vacation policies
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(h) STOCK OPTIONS. As of the Effective Time Mattel shall
grant to Executive Premium Price Options under Mattel's 1997 Premium Price Stock
Option Plan (the "Option Plan") with respect to 1,000,000 shares of Mattel's
common stock. The terms of such options shall be determined by the Board of
Directors of Mattel or a committee thereof authorized to take such action and
shall be made in accordance with Mattel's stock option grant practice and terms
and provisions of the Option Plan.
(i) CERTAIN AMENDMENTS. Nothing herein shall be construed to
prevent Mattel from amending, altering, eliminating or reducing any plans,
benefits or programs so long as it does not result in a diminution of the
compensation set forth in SECTION 3(a) or, except for across-the-board
compensation and benefits reductions which affect all similarly situated
executives of Mattel, a diminution in the aggregate of the compensation and
benefits set forth in SECTIONS 3(b) through (h).
(j) EXCISE TAX GROSS-UP PAYMENT. Mattel recognizes that the
Executive will receive, as a result of the Merger, payments (or benefits) in the
nature of compensation that are contingent on a change in ownership or control
of The Learning Company and that may constitute "parachute payments" within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended,
(the "Code") ("Change of Control Payments"), and that such payments may be
subject to the excise tax imposed by Section 4999 of the Code. Mattel agrees to
pay immediately to the Executive upon receipt of any such Change of Control
Payments an additional amount (the "Gross-up payment") equal to the sum of (x)
the excise tax imposed on the Change in Control Payments, (y) the excise tax
imposed on the Gross-up payment, and (z) the federal, state and local income
taxes imposed upon the Gross-up payment, and any interest and penalties thereon.
The Gross-up payment shall place the Executive in the same after-tax financial
position in which he would have been if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining the amount of the
Gross-up payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-up payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and the locality of the
Executive's residence on the date of termination, net of the maximum reduction
in federal income taxes which can be obtained from the deduction of such state
and local taxes. In the event that the excise tax is subsequently determined to
be less than the amount taken into account hereunder at the time the Change of
Control Payments are made, the Executive shall repay to Mattel at the time that
the amount of such reduction and excise tax is finally determined, the portion
of the Gross-up payment attributable to such reduction (plus the portion of the
Gross-up payment attributable to the excise tax and federal, state, and local
income tax imposed on the Gross-up payment being repaid by the Executive, if
such repayment results in a reduction in excise tax or in federal, state, and
local income tax deductions) plus interest on the amount of such repayment at
the rate provided in Section 1274(d) of the Code. In the event that the excise
tax is determined to exceed the amount taken into account hereunder at the time
the Change of Control Payments are made (including by reason of any payment the
existence or amount of which cannot be determined at the time the Gross-up
payment is made), Mattel shall make an additional Gross-up payment in respect to
such excess (plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
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4. TERMINATION.
(a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Executive's death. Mattel may terminate this Agreement,
after having established the Executive's Disability, by giving to the Executive
written notice of its intention to terminate his employment, and his employment
with Mattel shall terminate effective on the 90th day after receipt of such
notice (the "DISABILITY EFFECTIVE DATE"). For purposes of this Agreement, the
Executive's Disability shall occur and shall be deemed to have occurred only
when the Executive becomes entitled to receive disability benefits under
Mattel's Long-Term Disability Plan for exempt employees.
(b) CAUSE. Mattel may terminate the Executive' s employment
for "Cause" if a majority, consisting of at least 2/3 of the non-management
members of the Board of Directors of Mattel, determines that "Cause" exists. For
purposes of this Agreement, "CAUSE" means (i) an intentional act or acts of
dishonesty on the Executive's part which are intended to result in his
substantial personal enrichment at the expense of Mattel or any of its
affiliates; (ii) continuing and repeated violations by the Executive of his
obligations under SECTION 2 of this Agreement which are demonstrably willful and
deliberate on the Executive's part (other than due to incapacity to perform his
duties under this Agreement) and which resulted in material injury to Mattel or
any of its affiliates and which is not cured within thirty (30) days of
receiving written notice from Mattel specifying in reasonable detail the
obligations under this Agreement which Mattel contends were continuing and
repeatedly violated; (iii) conduct of a criminal nature which has or which is
more likely than not to have a material adverse effect on Mattel's or any of its
affiliates' reputation or standing in the community or on its continuing
relationships with its customers or those who purchase or use its products; or
(iv) intentional, fraudulent conduct in connection with the business or affairs
of Mattel or any of its affiliates.
(c) WITHOUT CAUSE. Mattel may terminate the Executive's
employment at any time, for any reason, with or without Cause by at least 30
days prior written notice to the Executive.
(d) GOOD REASON. The Executive may terminate his employment
at any time for Good Reason, provided that, in each case, Mattel has received
written notice describing the circumstances giving rise to his action, has been
afforded a reasonable opportunity to cure or correct the circumstances described
in the notice and has failed to substantially cure, correct or cease the
circumstances, as appropriate. For purposes of this Agreement, "GOOD REASON"
means the good faith determination by the Executive that any one or more of the
following have occurred:
(i) without the express written consent of the
Executive, any change(s) in any of the duties, authority, or
responsibilities of the Executive which is (are) inconsistent in any
substantial respect with the Executive's position, authority, duties,
or responsibilities as contemplated by SECTION 2 of this Agreement;
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(ii) any failure by Mattel to comply with any of the
material provisions of this Agreement, other than an insubstantial and
inadvertent failure remedied by Mattel within 30 days after receipt of
notice thereof given by the Executive;
(iii) any termination by Mattel of the Executive's
employment otherwise than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption
and agreement to perform this Agreement by a successor as contemplated
by SECTION 12(b); or
(e) WITHOUT GOOD REASON. The Executive may terminate his
employment at any time without Good Reason by at least 30 days prior written
notice to Mattel.
(f) NOTICE OF TERMINATION. Any termination of the
Executive's employment by Mattel for Cause or without Cause or by the Executive
for Good Reason or without Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with SECTION 4(b). Any
termination by Mattel due to Disability shall be communicated by Notice of
Termination to the other party hereto given in accordance with SECTION 4(a). For
purposes of this Agreement a "NOTICE OF TERMINATION" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon; (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated; and (iii) specifies the Date of Termination (defined
below).
(g) DATE OF TERMINATION. "DATE OF TERMINATION" means the
date of actual receipt of the Notice of Termination or any later date specified
therein (but not more than fifteen (15) days after the giving of the Notice of
Termination), as the case may be; PROVIDED that, (i) if the Executive's
employment is terminated by Mattel for any reason other than Cause or
Disability, the Date of Termination is the date on which Mattel notifies the
Executive of such termination by delivery of Notice of Termination; (ii) if the
Executive's employment is terminated due to Disability, the Date of Termination
is the Disability Effective Date; and (iii) if the Executive's employment is
terminated due to the Executive's death, the Date of Termination shall be the
date of death.
5. OBLIGATIONS OF MATTEL UPON TERMINATION. Other than as
specifically set forth or referenced in this Agreement, the Executive shall not
be entitled to any benefits on or after the Date of Termination.
(a) DEATH. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate without further
obligations by Mattel to the Executive's legal representatives other than those
obligations accrued hereunder or under the terms of the applicable Mattel plan
or program which takes effect at the date of his death.
(b) DISABILITY. If the Executive's employment is terminated
by reason of the Executive's disability, the Executive shall be entitled to
receive after the Disability Effective Date
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disability benefits, if any, at least equal to those then provided by Mattel to
disabled executives and/or their families.
(c) CAUSE. If the Executive's employment is terminated for
Cause or if the Executive terminates his employment without Good Reason, Mattel
shall pay the Executive his full Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, and Mattel shall
have no further obligations to the Executive under this Agreement.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If
Mattel terminates the Executive's employment other than for Cause or Disability
or the Executive terminates his employment for Good Reason, subject to the
Executives compliance with the covenants set forth in SECTION 11 hereof:
(i) Mattel shall pay to the Executive in a lump sum
in cash within 15 days after the Date of termination, if not
theretofore paid, the Executive's Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given; and
(ii) Mattel shall pay to the Executive $5,250,000 in
equal bi-monthly installments in accordance with its normal payroll
practices over a three year period.
(iii) Options which may be granted to the Executive
under Mattel's stock option plans other than options granted pursuant
to the 1997 Premium Stock Option Plan (the "STOCK OPTION Plans") and
which options have been granted for more than six months as of the Date
of Termination shall become immediately exercisable to the extent any
such options would have become vested during the term of this Agreement
and the Executive shall have a period of 90 days following the Date of
Termination (but in no event past the expiration of the term of the
option grant) to exercise all options granted under the Stock Option
Plans then exercisable or which become exercisable pursuant to this
clause (iii).
(iv) Mattel shall, promptly upon submission by the
Executive of supporting documentation, pay or reimburse to the
Executive any costs and expenses paid or incurred by the Executive
which would have been payable under SECTION 3(d) if his employment had
not terminated.
(v) If it is determined that any payment or
distribution by Mattel to the Executive pursuant to SECTION 5(d)
(determined without regard to any additional payments required pursuant
to this sentence) (a "PAYMENT") would be subject to the excise tax
imposed by Section 4999 of the Code with respect to a change in control
of Mattel which is subject to the provisions of Section 280G of the
Code, or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Executive shall be entitled to receive with
respect to each Payment an additional payment (a "GROSS-UP PAYMENT") in
an amount such that after payment by the
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Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by Mattel and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any stock option or other
agreement with Mattel. Except as otherwise provided herein, amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan or program of Mattel at or subsequent to the Date of Termination shall
be payable in accordance with such plan or program.
7. NO SET OFF, PAYMENT OF FEES. Except as provided herein,
Mattel's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including without limitation any set-off, counterclaim,
recoupment, defense or other right which Mattel may have against the Executive
or others. Mattel agrees to pay, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by Mattel or others of the validity
or enforceability of, or liability under, any provision of this Agreement other
than expenses relating to a claim by the Executive that he terminated for Good
Reason or that the termination for Cause was improper, in which case such fees
and expenses shall be paid only if the Executive prevails in whole or in part.
All amounts provided herein shall include, in each case, interest, compounded
quarterly, on the total unpaid amount determined to be payable under this
Agreement, such interest to be calculated on the basis of the prime commercial
lending rate announced by Bank of America National Trust and Savings Association
in effect from time to time during the period of such nonpayment. In the event
that the Executive shall in good faith give a Notice of Termination for Good
Reason and it shall thereafter be determined that Good Reason did not exist, the
employment of the Executive shall, unless Mattel and the Executive shall
otherwise mutually agree, be deemed to have terminated at the Date of
Termination specified in such purported Notice of Termination by mutual consent
of Mattel and the Executive and thereupon, the Executive shall be entitled to
receive only those payments and benefits which he would have been entitled to
receive at such date.
8. ARBITRATION OF DISPUTES.
(a) The parties agree that any disputes, controversies or
claims which arise out of or relate to this Agreement, the Executive's
employment or the termination of his employment, including, but not limited to,
any claim relating to the purported validity, interpretation, enforceability or
breach of this Agreement, and/or any other claim or controversy arising out of
the relationship between the Executive and Mattel (or the nature of the
relationship) or the continuation or termination of that relationship,
including, but not limited to, claims that a termination was for Cause,
including the determination of Mattel's Board of Directors in accordance with
SECTION 4(b), or for Good Reason, claims for breach of covenant, breach of an
implied covenant of good faith and fair dealing, wrongful termination, breach of
contract, or
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intentional infliction of emotional distress, defamation, breach of
right of privacy, interference with advantageous or contractual relations,
fraud, conspiracy or other tort or property claims of any kind, which are not
settled by agreement between the parties, shall be settled by arbitration under
the labor arbitration rules of the American Arbitration Association before a
board of three arbitrators, as selected thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and
the third by the two persons so selected, all in accordance with the labor
arbitration rules of the American Arbitration Association then in effect. In the
event that the arbitrator selected by the Executive and the arbitrator selected
by Mattel are unable to agree upon a third arbitrator, then the third arbitrator
shall be selected from a list of seven provided by the office of the American
Arbitration Association nearest to the Executive's residence with the parties
striking names in order and the party striking first to be determined by the
flip of a coin. The arbitration shall be held in a location to be mutually
agreed upon by the parties. In the absence of agreement, the Chairman of the
Board of Mattel shall determine the location.
(b) In consideration of the parties' agreement to submit to
arbitration all disputes with regard to this Agreement and/or with regard to any
alleged contract, or any other claim arising out of their conduct, the
relationship existing hereunder or the continuation or termination of that
relationship, and in further consideration of the anticipated expedition and the
minimizing of expense resulting from this arbitration remedy, the arbitration
provisions of this Agreement shall provide the exclusive remedy, and each party
expressly waives any right he or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other party
which could be submitted for resolution pursuant to this SECTION 8 must be
presented in writing by the claiming party to the other within one year of the
date the claiming party knew or should have known of the facts giving rise to
the claim, except that claims arising out of or related to the termination of
the Executive's employment must be presented by him within one year after the
Date of Termination. Unless the party against whom any claim is asserted waives
the time limits set forth above, any claim not brought within the time periods
specified shall be waived and forever barred.
(d) Mattel will pay all costs and expenses of the
arbitration to the extent provided in this SECTION 8. In the event expenses are
not paid by Mattel, and without diminishing the Executive's right to
reimbursement as provided in this Section, costs and expenses shall be paid as
follows: (x) the expenses of the neutral arbitrator and of a transcript of any
arbitration proceeding shall be divided equally between the Executive and
Mattel; and (y) each party shall bear the expenses of the arbitrator selected by
it and of the witnesses it calls.
(e) Any decision and award or order of a majority of the
arbitrators shall be binding upon the parties hereto and judgment thereon may be
entered in any court having jurisdiction.
(f) Each of the above terms and conditions of this SECTION 8
shall have separate validity and the invalidity of any part thereof shall not
affect the remaining parts.
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(g) Any decision and award or order of a majority of the
arbitrators shall be final and binding between the parties as to all claims
which were raised in connection with the dispute to the full extent permitted by
law. In all other cases, the parties agree that a decision of a majority of
arbitrators shall be a condition precedent to the institution or maintenance of
any legal, equitable, administrative, or other formal proceeding by Mattel or
the Executive in connection with the dispute, and that the decision and opinion
of the board of arbitrators may be presented in any other forum on the merits of
the dispute.
9. RELEASE. The Executive acknowledges and agrees that this
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Employment Period, and all amounts to which the Executive shall be entitled
whether during the term of employment or upon termination thereof. Accordingly,
upon Mattel's fulfilling its obligations to the Executive hereunder, the
Executive, on behalf of himself and his successors, assigns, heirs and any and
all other persons claiming through the Executive, if any, and each of them,
shall and does hereby forever relieve, release, and discharge Mattel and its
respective predecessors, successors, assigns, owners, attorneys,
representatives, affiliates, Mattel corporations, subsidiaries (whether or not
wholly-owned), divisions, partners and their officers, directors, agents,
employees, servants, executors, administrators, accountants, investigators,
insurers, and any and all other related individuals and entities, if any, and
each of them, in any and all capacities, from any and all claims, debts,
liabilities, demands, obligations, liens, promises, acts, agreements, costs and
expenses (including, but not limited to attorneys' fees), damages, actions and
causes of action, of whatever kind or nature, including, without limitation, any
statutory, civil or administrative claim, or any claims based on, arising out
of, related to or connected with the subject matter of this Agreement, the
Executive's employment or the termination thereof.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of Mattel all secret or confidential
information, knowledge or data relating to Mattel or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during his employment by Mattel or any of its affiliated companies
and which shall not be public knowledge and will continue to be bound by the
provisions of the Patent and Confidence Agreement previously executed by the
Executive. After termination of the Executive's employment with Mattel, he shall
not, without the prior written consent of Mattel, communicate or divulge any
such information, knowledge or data to anyone other than Mattel and those
designated by it.
11. COVENANT NOT TO COMPETE AND NON-SOLICITATION AGREEMENT.
(a) If the Date of Termination with respect to the
Executive's termination of employment for any reason occurs during the initial
three year term of the Period of Employment (the "Initial Term"), for a period
of three (3) years after the Date of Termination the Executive shall not,
without Mattel's prior written consent, engage as a sole proprietor, employee,
officer,
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director, agent or consultant or have a financial interest in, directly
or indirectly, whether as an investor, lender, guarantor, partner, member,
shareholder or any other type of principal whatsoever in a Restricted Business
anywhere within the United States, Canada, Mexico, Europe or any other nation or
geographic area in which Mattel, The Learning Company and their "affiliates," as
that term is defined in the Securities Exchange Act of 1934, as amended
(collectively, the "Companies"), do business or sell their products or services,
except as herein permitted, and shall not solicit the employment of or hire any
employee employed or retained by the Companies or any prior employee of the
Companies whose employment or retention by the Companies has ceased within six
months prior to the date of such solicitation.
(b) If the Period of Employment terminates at the end of the
Initial Term or if the Period of Employment is extended beyond the Initial Term,
for a period of two (2) years after the expiration of the Period of Employment
or after the Date of Termination, as the case may be, the Executive shall not,
without Mattel's prior written consent, engage as a sole proprietor, employee,
officer, director, agent or consultant or have a financial interest in, directly
or indirectly, whether as an investor, lender, guarantor, partner, member,
shareholder or any other type of principal whatsoever in a Restricted Business
anywhere within the United States, Canada, Mexico, Europe or any other nation or
geographic area in which the Companies do business or sell their products or
services, except as herein permitted, and shall not solicit the employment of or
hire any employee employed or retained by the Companies or any prior employee of
the Companies whose employment or retention by the Companies has ceased within
six months prior to the date of such solicitation.
(c) The term "Restricted Business" shall mean the following
activities, which the parties agree are competitive with the business activities
of the Companies: (a) the design, development, manufacture, licensing or sale or
other exploitation (through any channel of distribution, including but not
limited to wholesale, retail, school catalogue, internet or other electronic
formats) of (i) toys, (ii) games, (iii) electronic learning systems, (iv) toy
related collectibles, (v) consumer software or firmware in the education,
entertainment, edutainment, reference and/or productivity categories, whether
delivered by CD-ROM, DVD, proprietary platforms (e.g., Playstation; N64),
electronic delivery or any other media, but excluding traditional television and
radio, and (b) publishing of books and/or magazines targeted at children and/or
teenagers based on sales. In addition, if (x) the Date of Termination occurs
during the Initial Term, "Restricted Business" shall also include the provision
of any services or products on the internet for any company, business unit or
division which derives 25% or more of its revenues from internet services or
products and (y) if the Executive's employment terminates at the end of the
Period of Employment or if the Period of Employment is extended beyond the
Initial Term, "Restricted Business" shall also include the provision of any
services or products on the internet which are directly competitive with
services or products on the internet that are being provided by the Companies at
the expiration of the Initial Term or the Date of Termination, as the case may
be, except for ancillary and non-material services or products that represent
less than 5% of the Companies' internet revenues during the prior fiscal year.
(d) Notwithstanding the provisions of SECTIONS 11(a) and (b)
hereof to the contrary, the Executive may, without the prior consent of Mattel,
(i) work for the United States government, the government of any state or
political sub-division thereof, including any locality or
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any agency thereof, or for a non-profit charitable organization, (ii) invest in
mutual funds or place funds under investment management which investor owns or
holds stock or other ownership or financial interests in a corporation,
partnership, limited liability company or other business organization which
constitutes a Restricted Business; PROVIDED, HOWEVER, that any such mutual funds
or investment managers are independent and unaffiliated, with the Executive and
PROVIDED, FURTHER, that the Executive may not exercise any control over
investment policy or investment decisions, and (iii) except as set forth in the
preceding clause (ii), directly or indirectly own less than 2% of the issued and
outstanding stock of a corporation, partnership, limited liability company or
other business organization which is a Restricted Business, the shares or
interests of which are traded on a national securities exchange, national
over-the-counter market or NASDAQ.
12. SECTION 16. It is understood that Mattel does not intend to
treat the Executive as a reporting person under Section 16 of the Securities and
Exchange Act of 1934 except to the extent required by law.
13. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of Mattel shall not be assignable by the Executive
other than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon Mattel and its successors. Mattel shall require any successor to
all or substantially all of the business and/or assets of Mattel, whether direct
or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance reasonably satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as Mattel would be required to perform if no such
succession had taken place.
(c) Immediately at the Effective Time, this Agreement shall
be assumed, and hereby is assigned to, Mattel.
14. AMENDMENT; WAIVER. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and may
be amended, modified or changed only by a written instrument executed by the
Executive and Mattel. No provision of this Agreement may be waived except by a
writing executed and delivered by the party sought to be charged. Any such
written waiver will be effective only with respect to the event or circumstance
described therein and not with respect to any other event or circumstance,
unless such waiver expressly provides to the contrary.
15. ORIGINAL AGREEMENT. Immediately prior to the Effective Time
the Original Agreement shall terminate and be of no further force or effect.
Upon the termination of the Merger pursuant to the terms of the Merger Agreement
this Agreement shall terminate and be of no further force or effect and the
Original Agreement shall continue according to its terms.
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16. MISCELLANEOUS. This Agreement shall be governed by and
construed in accordance with the laws of the State of Massachusetts, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(a) All notices and other communications hereunder shall be
in writing; shall be delivered by hand delivery to the other party or mailed by
registered or certified mail, return receipt requested, postage prepaid; shall
be deemed delivered upon actual receipt; and shall be addressed as follows:
if to the Executive:
Xxxxx X'Xxxxx
00 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
if to The Learning Company:
The Learning Company, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
if to Mattel after the Effective Time:
Mattel, Inc.
000 Xxxxxxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. If it is determined by a court of competent jurisdiction in
any state or other geographic area that any restriction in SECTION 11 hereof is
excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state or area, it is the intention of the parties that such
restriction shall be modified or amended by the court to render it enforceable
to the maximum extent permitted by the law of that state or area.
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(c) Mattel may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
14
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.
EXECUTIVE: THE LEARNING COMPANY:
THE LEARNING COMPANY, INC.
/s/ Xxxxx X'Xxxxx By /s/ R. Xxxxx Xxxxxx
----------------------------- ----------------------------
Xxxxx X'Xxxxx
Attest: /S/ Xxxx X. Xxxxxx
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