NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into as of the 8th day of December,
1997 among Xxxx Sports Corp., a Delaware corporation (the "Company"), Xxxx
Sports, Inc., a California corporation and a wholly-owned subsidiary of the
Company (the "Subsidiary"), and Xxxxx X. Xxx (the "Executive").
WHEREAS, the Company and the Subsidiary are engaged primarily
in the business of designing, manufacturing, producing, distributing, marketing,
advertising and selling auto racing helmets, bicycle helmets, bicycle
accessories and related products;
WHEREAS, the Executive serves as the Chairman of the Board and
Chief Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of June 13, 1995;
WHEREAS, the Executive's abilities and services are unique and
essential to the prospects of the Company; and
WHEREAS, the Company and the Executive desire to enter into
this Agreement upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the Company, the Subsidiary
and the Executive hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by the Executive of
those duties and responsibilities of the Executive which do not differ in any
material respect from the duties and responsibilities of the Executive during
the 90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness) which is demonstrably
willful and deliberate on the Executive's part, which is committed in bad faith
or without reasonable belief that such breach is in the best interests of the
Company and which is not remedied in a reasonable period of time after receipt
of written notice from the Company specifying such breach or (2) the commission
by the Executive of a felony involving moral turpitude.
(c) "Change in Control" means:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of a conversion
or exchange privilege in respect of outstanding convertible or exchangeable
securities), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation involving the
Company, if, immediately after such reorganization, merger or consolidation,
each of the conditions described in clauses (i), (ii) and (iii) of subsection
(3) of this Section (1)(c) shall be satisfied; and provided further that, for
purposes of clause (B), if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 20%
or more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the Company
and such Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding Company Common
Stock or any additional Outstanding Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
66-2/3% of such Board; provided, however, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the vote
of at least 66-2/3% of the directors then comprising the Incumbent Board shall
be deemed to have been a member of the Incumbent Board; and provided further,
that no individual who was initially elected as a director of the Company as a
result of an actual or threatened election contest, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other
actual or threatened solicitation of proxies or consents by or on behalf of any
Person other than the Board shall be deemed to have been a member of the
Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation unless, in any such case, immediately
after such reorganization, merger or consolidation, (i) more than 60% of the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined voting
power of the then outstanding securities of such corporation entitled to vote
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generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation and in substantially the same
proportions relative to each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled by the
Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of such corporation or
20% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least 66-2/3% of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or
(4) approval by the stockholders of the Company of (i) a plan
of complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company other than
to a corporation with respect to which, immediately after such sale or other
disposition, (A) more than 60% of the then outstanding shares of common stock
thereof and more than 60% of the combined voting power of the then outstanding
securities thereof entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such sale or other disposition and in
substantially the same proportions relative to each other as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(B) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or such corporation (or any
corporation controlled by the Company) and any Person which beneficially owned,
immediately prior to such sale or other disposition, directly or indirectly, 20%
or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock thereof
or 20% or more of the combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of directors and (C) at least
66-2/3% of the members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition.
(d) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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(e) "Good Reason" means, without the Executive's express
written consent, the occurrence of any of the following events after a Change in
Control:
(1) any of (i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company or the Subsidiary immediately prior
to such Change in Control, (ii) a change in the Executive's reporting
responsibilities, titles or offices with the Company or the Subsidiary as in
effect immediately prior to such Change in Control, (iii) any removal or
involuntary termination of the Executive from the Company or the Subsidiary
otherwise than as expressly permitted by this Agreement or any failure to
re-elect the Executive to any position with the Company or the Subsidiary held
by the Executive immediately prior to such Change in Control or (iv) any breach
by the Company or the Subsidiary of the Employment Agreement among the Company,
the Subsidiary and the Executive, as amended, or any successor agreement thereto
(the "Employment Agreement");
(2) a reduction by the Company or the Subsidiary in the
Executive's rate of annual base salary as in effect immediately prior to such
Change in Control or as the same may be increased from time to time thereafter
or the failure by the Company to increase such rate of base salary each year
after such Change in Control by an amount which at least equals, on a percentage
basis, the mean average percentage increase in the rates of base salary for all
officers (within the meaning of Rule 3b-2 promulgated under the Exchange Act) of
the Company during the two full fiscal years of the Company immediately
preceding such Change in Control;
(3) any requirement of the Company or the Subsidiary that the
Executive (i) be based anywhere other than at the facility where the Executive
is located at the time of the Change in Control or (ii) travel on business to an
extent substantially more burdensome than the travel obligations of the
Executive immediately prior to such Change in Control;
(4) the failure of the Company or the Subsidiary to (i)
continue in effect any employee benefit plan or compensation plan in which the
Executive is participating immediately prior to such Change in Control, unless
the Executive is permitted to participate in other plans providing the Executive
with substantially comparable benefits, or the taking of any action by the
Company or the Subsidiary which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
plan, (ii) provide the Executive and the Executive's dependents welfare benefits
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies, (iii) provide fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive immediately prior to such
Change in Control or, if more favorable to the Executive, as
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in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies, (iv) provide an office or offices
of a size and with furnishings and other appointments, together with exclusive
personal secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and its affiliated
companies immediately prior to such Change in Control or, if more favorable to
the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies, (v) provide
the Executive with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive immediately prior to such Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies, or (vi) reimburse the Executive promptly for all reasonable
employment expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to such Change in
Control, or if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies; or
(5) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 8(b).
For purposes of this Agreement, any good faith determination
of Good Reason made by the Executive shall be conclusive; provided, however,
that an isolated, insubstantial and inadvertent action taken in good faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive shall not constitute Good Reason.
(f) "Nonqualifying Termination" means a termination of the
Executive's employment (1) by the Company or the Subsidiary for Cause, (2) by
the Executive for any reason other than a Good Reason, (3) as a result of the
Executive's death or (4) by the Company and the Subsidiary due to the
Executive's absence from his duties with the Company and the Subsidiary on a
full-time basis for at least 180 consecutive days as a result of the Executive's
incapacity due to physical or mental illness; provided, however, that a
termination of the Executive's employment by the Executive for any reason
whatsoever during the "Window Period" (hereinafter defined) shall not constitute
a Nonqualifying Termination.
(g) "Termination Period" means the period of time beginning
with a Change in Control and ending on the earliest to occur of (1) the
Executive's 70th birthday, (2) the Executive's death, and (3) two years
following such Change in Control.
(h) "Window Period" means the 30-day period commencing 90 days
after the date of a Change in Control.
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2. Noncompetition.
If during the Termination Period the employment of the
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then the Executive shall be bound by the following noncompetition covenants:
(a) Commencing on the date of such termination of employment
and continuing for a period of two years (the "Noncompetition Period"), neither
the Executive nor any person or enterprise controlled by him will become a
stockholder, lender, director, officer, agent or employee of a corporation or
member of or lender to a partnership, engage as a sole proprietor in any
business, act as a consultant to any of the foregoing or otherwise engage
directly or indirectly in any business, that is in competition with the business
then conducted by the Company, the Subsidiary or any of their controlled
affiliates in any state in the United States or any other country in which the
Company, the Subsidiary of any of their controlled affiliates has engaged in
such business during the term of the Executive's employment; provided, however,
that the foregoing shall not prohibit the Executive from owning less than two
percent of the outstanding securities of any class of capital stock of a
corporation the securities of which are regularly traded or quoted on a national
securities exchange or on an inter-dealer quotation system.
(b) The Executive acknowledges that there is no adequate
remedy at law for a breach of this Section 2 and that, in the event of such a
breach or attempted breach, the Company shall be entitled to injunctive or other
equitable relief to prevent any such breach, attempted breach or continuing
breach, without prejudice to any other remedies for damages or otherwise. The
Executive agrees that the covenants contained in this Section 2 are separate and
are reasonable in their scope and duration and that the Executive shall not
raise any issue of reasonableness as a defense in any proceeding to enforce any
of such covenants. Notwithstanding the foregoing, in the event that a covenant
contained in this Section 2 shall be deemed by any court to be unreasonably
broad in any respect, the parties agree that the court may modify such covenant
for the purpose of making such covenant reasonable in scope and duration. The
validity, legality or enforceability of the other provisions of this Agreement
shall not be affected by any such modification.
(c) The Executive acknowledges that any material breach of
this Section 2 will cause irreparable harm to the Company, that such harm will
be difficult if not impossible to ascertain, and that the Company shall be
entitled to equitable relief, including injunction, against any actual or
threatened breach hereof, without bond and without liability should such relief
be denied, modified or vacated. Neither the right to obtain such relief nor the
obtaining of such relief shall be exclusive of or preclude the Company from any
other remedy.
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3. Compensation. As compensation for the covenants contained
in Section 2 of this Agreement, the Company shall pay to the Executive, within 5
days following the date of the commencement of the Noncompetition Period, a
lump-sum cash amount equal to (i) three (3) times the Executive's highest annual
base salary from the Company, the Subsidiary and their affiliated companies in
effect during the 12-month period prior to the date of termination of the
Executive's employment, plus (ii) three (3) times the Executive's average annual
bonus paid or payable, including by reason of deferral, from the Company, the
Subsidiary and their affiliated companies over the five fiscal years of the
Company (or such portion thereof during which the Executive performed services
for the Company if the Executive shall have been employed by the Company for
less than such five fiscal year period) immediately preceding the fiscal year in
which the Change in Control occurs.
4. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of the Executive's employment
with the Company or the Subsidiary or involving the failure or refusal of the
Company or the Subsidiary to perform fully in accordance with the terms hereof,
the Company shall reimburse the Executive on a current basis, for all legal fees
and expenses, if any, incurred by the Executive in connection with such contest
or dispute, together with interest at a rate equal to the Prime Rate as
published in the "Money Rates" section of The Wall Street Journal, but in no
event higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives the Executive's statement
for such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Executive's claims in such contest or
dispute, the Executive shall be required to reimburse the Company, over a period
of 12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 4.
5. Operative Event. Notwithstanding any provision herein to
the contrary, no amounts shall be payable hereunder unless and until there is a
Change in Control.
6. Termination of Agreement.
(a) This Agreement shall be effective on the date hereof and
shall continue until terminated by the Company as provided in paragraph (b) of
this Section 6; provided, however, that this Agreement shall terminate in any
event upon the termination of the Executive's employment with the Company prior
to a Change in Control.
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(b) The Company shall have the right prior to a Change in
Control, in its sole discretion, pursuant to action by the Board, to approve the
termination of this Agreement, which termination shall not become effective
until the date fixed by the Board for such termination, which date shall be at
least 180 days after notice thereof is given by the Company to the Executive in
accordance with Section 9; provided, however, that no such action shall be taken
by the Board during any period of time when the Board has knowledge that any
person has taken steps reasonably calculated to effect a Change in Control
until, in the opinion of the Board, such person has abandoned or terminated its
efforts to effect a Change in Control; and provided further, that in no event
shall this Agreement be terminated in the event of a Change in Control.
7. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company or its
subsidiaries, and if the Executive's employment with the Company shall terminate
prior to a Change in Control, then the Executive shall have no further rights
under this Agreement; provided, however, that any termination of the Executive's
employment following a Change in Control shall be subject to all of the
provisions of this Agreement.
8. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company is or is not the surviving or
resulting corporation or as a result of any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.
(b) The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to in paragraph (a) of this Section
8, it will cause any successor or transferee unconditionally to assume, by
written instrument delivered to the Executive, all of the obligations of the
Company hereunder.
(c) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
9. Notices.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage prepaid,
addressed (1) if to the Executive, to Xxxxx X. Xxx, 0000 X. Xxxxxxxxx Xxxx,
Xxxxxxxx Xxxxxx, Xxxxxxx 00000, and if to the Company or the Subsidiary, to Xxxx
Sports Corp., 0000 Xxx Xxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000, attention
President with copies to the Secretary and the Chairman of the Compensation
Committee of the Board of Directors of
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Xxxx Sports Corp., or (2) to such other address as a party may have furnished to
the others in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(b) A written notice of the Executive's date of termination of
employment by the Company or the Executive, as the case may be, to the other,
shall (i) indicate the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, set 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) specify the termination
date (which date shall be not less than three days after the giving of such
notice by the Executive of termination during the Window Period and which date
shall not be less than 15 days after the giving of such notice under other
circumstances). The failure by the Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
10. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make any payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others.
(b) If there shall be any dispute between the Company and the
Executive in the event of any termination of the Executive's employment, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause, that the
determination by the Executive of the existence of Good Reason was not made in
good faith, or that the Company is not otherwise obligated to pay any amount or
provide any benefit to the Executive under Section 3, the Company shall pay all
amounts to the Executive that the Company would be required to pay or provide
pursuant to Section 3 as though such termination were by the Company without
Cause or by the Executive with Good Reason; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
11. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors.
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12. Governing Law; Validity. The interpretation, construction
and performance of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois without
regard to the principle of conflicts of laws. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which other provisions
shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
14. Joint and Several Obligation. Each duty and obligation of
the Company hereunder shall be the joint and several duty and obligation of the
Company and the Subsidiary.
15. Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by the Executive, by a duly authorized officer of the Company and by
a duly authorized officer of the Subsidiary. No waiver by a party hereto at any
time of any breach by another party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. Failure by the Executive, the Company or the
Subsidiary to insist upon strict compliance with any provision of this Agreement
or to assert any right the Executive, the Company or the Subsidiary may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
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IN WITNESS WHEREOF, the Company and the Subsidiary have each
caused this Agreement to be executed by a duly authorized officer of the Company
or the Subsidiary, as the case may be, and the Executive has executed this
Agreement as of the day and year first above written.
XXXX SPORTS CORP.
By:___________________________
Xxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
By:__________________________
Xxxxxxx X. Xxxxxxxx
Chairman, Compensation Committee
XXXX SPORTS, INC.
By:___________________________
Xxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXECUTIVE:
______________________________
Xxxxx X. Xxx
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