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EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of
April 30, 1996, by and between Racing Champions, Inc., an Illinois corporation
(the "Company"), and Xxxx Xxxxx (the "Employee").
RECITAL
The Company desires to employ the Employee and the Employee is
willing to make his services available to the Company on the terms and
conditions set forth below. Certain capitalized terms used herein are defined
in Section 10 below.
AGREEMENTS
In consideration of the premises and the mutual agreements
which follow, the parties agree as follows:
1. Employment. The Company hereby employs the Employee
and the Employee hereby accepts employment with the Company on the terms and
subject to the conditions set forth in this Agreement.
2. Term. The term of the Employee's employment
hereunder shall commence on the date hereof and shall continue until terminated
as provided in section 6 below.
3. Duties. The Employee shall serve as the Vice
President-Sales of the Company and will, under the direction of the Company's
President, faithfully and to the best of his ability, perform the duties of
such position. The Employee shall be one of the principal executive officers
of the Company and shall, subject to the control of the Company's board of
directors (the "Board of Directors"), supervise the Company's independent sales
representatives and administer the sales functions of the Company. The Employee
shall also perform such additional duties and responsibilities which may from
time to time be reasonably assigned or delegated by the President of the
Company. The Employee agrees to devote his entire business time, effort skill
and attention to the proper discharge of such duties while employed by the
Company.
4. Compensation. The Employee shall receive a base
salary of $125,000 per year, payable in regular and equal monthly installments
(the "Base Salary"). The Employee's Base Salary shall be reviewed annually by
the Board of Directors of the Company to determine appropriate increases, if
any, in such Base Salary.
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5. Fringe Benefits.
(a) Vacation. The Employee shall be entitled to
two weeks of paid vacation annually, increasing to three weeks after three
years of employment by the Company and four weeks after six years of employment
by the Company (including employment by the Company prior to the term of this
Agreement). 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 senior
management of the Company (excluding Xxxxxx Xxxx, Xxxx Xxxxx and Xxxxx Xxxxx)
(collectively, the "Second Tier Management").
(c) Incentive Bonus and Stock Ownership Plans.
The Employee shall be entitled to participate in any incentive bonus or other
incentive compensation plan developed generally for the Second Tier Management
of the Company (including the Racing Champions, Inc. 1996 Key Employees
Performance Compensation Plan (the "1996 Bonus Plan")), on a basis consistent
with his position and level of compensation with the Company. The Employee
shall also be entitled to participate in any incentive stock option plan or
other stock ownership plan developed generally for the Second Tier Management
of the Company, on a basis consistent with his position and level of
compensation with the Company (including the Collectible Champions, Inc. 1996
Employee Stock Option Plan).
(d) Automobile. The Company agrees to reimburse
the Employee up to $400.00 per month, as such amount may be increased from time
to time consistent with the Company's reimbursement policy for Second Tier
Management of the Company to cover Employee's expenses in connection with his
leasing of an automobile. Additionally, the Company will pay for the gas used
for business purposes. All maintenance and insurance expense for the
automobile is the responsibility of the Employee.
(e) Reimbursement for Reasonable Business
Expenses. The Company shall pay or reimburse the Employee for reasonable
expenses incurred by him in connection with the performance of his duties
pursuant to this Agreement including, but not limited to, travel expenses,
expenses in connection with seminars, professional conventions or similar
professional functions and other reasonable business expenses.
(f) Key Man Insurance. The parties agree that
the Company has the option to purchase one or more key man life insurance
policies upon the life of the Employee. The 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.
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6. Termination.
(a) Termination of the Employment Period. The
Employment Period shall continue until (i) the second anniversary of the date
hereof unless the parties mutually agree to extend the term of this Agreement
(such anniversary of the date hereof or such extended date being referred to
herein as the "Expected Completion Date"), (ii) the Employee's death or
Disability, (iii) the Employee resigns or (iv) the Board of Directors
determines that termination of Employee's employment is in the best interests
of the Company.
(b) Definitions.
(i) For purposes of this Agreement,
"Disability" shall mean a physical or mental sickness or any injury
which renders the Employee incapable of performing the services
required of him as an employee of the Company and which does or may be
expected to continue for more than six (6) months during any 12-month
period. In the event Employee shall be able to perform his usual and
customary duties on behalf of the Company following a period of
disability, and does so perform such duties, or such other duties as
are prescribed by the Board of Directors or the President of the
Company, for a period of three continuous months, any subsequent
period of disability shall be regarded as a new period of disability
for purposes of this Agreement. The Company and the Employee shall
determine the existence of a Disability and the date upon which it
occurred. In the event of a dispute regarding whether or when a
Disability occurred, the matter shall be referred to a medical doctor
selected by the Company and the Employee. In the event of their
failure to agree upon such a medical doctor, the Company and the
Employee shall each select a medical doctor who together shall select
a third medical doctor who shall make the determination. Such
determination shall be conclusive and binding upon the parties hereto.
(ii) For purposes of this Agreement,
"Cause" shall be deemed to exist if the Employee shall have (1)
violated the terms of sections 7 or 8 of this Agreement; (2) failed
to substantially perform his duties to the reasonable satisfaction of
the Board of Directors; provided that so long as Xxxxxx Xxxx, Xxxx
Xxxxx or Xxxxx Xxxxx serves as a director of the Company, any
determination pursuant to this clause (2) must be approved by the
Requisite Founder Directors; (4) committed a felony or a crime
involving moral turpitude; (5) engaged in serious misconduct which is
demonstrably injurious to the Company or any of its Subsidiaries; (6)
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; or (5) committed acts of
negligence in the performance of his duties which are substantially
injurious to the Company.
(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
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set forth in Section 3 above shall not determine the location where
the Employee is "principally employed."
(c) Termination for Disability or Death. In the
event of termination for Disability or death, payments of the Employee's Base
Salary shall be made to the Employee, his designated beneficiary or his estate
for a period of six (6) months after the Termination Date in accordance with
the normal payroll practices of the Company. During this period, the Company
shall also reimburse the Employee for amounts paid, if any, to continue
medical, dental and health coverage pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act. During this period, the
Company will also continue Employee's life insurance and disability coverage,
to the extent permitted under applicable policies, and will pay to the Employee
the fringe benefits pursuant to section 5 which have accrued prior to the
Termination Date.
(d) Termination by the Company without Cause or
by the Employee for Good Reason. If (i) the Employment Period is terminated by
the Company for any reason other than for Cause, Disability or death, (ii) if
the Employment Period is terminated by the Company for what the Company
believes is Cause or Disability, and it is ultimately determined that the
Employment Period was terminated without Cause or Disability or (iii) the
Employee resigns for Good Reason, the Employee shall be entitled to receive, as
damages for such a termination, his Base Salary from the Termination Date to
the first anniversary of the Termination Date; provided that if the Employment
Period is terminated by the Company without Cause and the Requisite Founder
Directors, if any, do not approve such decision, the Employee shall be entitled
to receive his Base Salary from the Termination Date to the later of (A) the
Expected Completion Date and (B) the first anniversary of the Termination Date.
Such payment of Base Salary shall be made in accordance with the normal payroll
practices of the Company. During this period, the Company shall also reimburse
the Employee for amounts paid, if any, to continue medical, dental and health
coverage pursuant to the provisions of the Consolidated Omnibus Budget
Reconciliation Act. During this period, the Company will also continue
Employee's life insurance and disability coverage, to the extent permitted
under applicable policies, and will pay to the Employee the fringe benefits
pursuant to section 5 which have accrued prior to the date of termination.
(e) Termination by the Company for Cause or by
the Employee without Good Reason. If the Employment Period is terminated by
the Company with Cause or as a result of the Employee's resignation without
Good Reason, the Employee shall not be entitled to receive his Base Salary or
any fringe benefits or bonuses (except as specifically provided in the 1996
Bonus Plan) for periods after the Termination Date.
(f) Effect of Termination. The termination of
the Employment Period pursuant to section 6(a) shall not affect the Employee's
obligations as described in sections 7 and 8.
7. Noncompetition and Nonsolicitation. The Employee
acknowledges and agrees that the contacts and relationships of the Company and
its Subsidiaries with its customers, suppliers, licensors and other business
relations are, and have been, established and maintained at great expense and
provide the Company and its Subsidiaries with a substantial competitive
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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 he will be able to establish a unique
relationship with those Persons that will enable him, both during and after
employment, to unfairly compete with the Company and its Subsidiaries.
Furthermore, the parties agree that the terms and conditions of the following
restrictive covenants are reasonable and necessary for the protection of the
business, trade secrets and Confidential Information (as defined in section 8
below) of the Company and its Subsidiaries and to prevent great damage or loss
to the Company and its Subsidiaries as a result of action taken by the
Employee. The Employee acknowledges and agrees that the noncompete
restrictions and nondisclosure of Confidential Information restrictions
contained in this Agreement are reasonable and the consideration provided for
herein is sufficient to fully and adequately compensate the Employee for
agreeing to such restrictions. The Employee acknowledges that he could
continue to actively pursue his career and earn sufficient compensation in the
same or similar business without breaching any of the restrictions contained in
this Agreement. The Employee acknowledges that one business of the Company and
its Subsidiaries is the design, production (including, without limitation, the
obtention of the licenses necessary therefor), marketing and sale of die cast
metal replicas of vehicles.
(a) Noncompetition. The Employee hereby
covenants and agrees that during the Employment Period and for two (2) years
thereafter (the "Noncompete Period"), he shall not, directly or indirectly,
either individually or as an employee, principal, agent, partner, shareholder,
owner, trustee, beneficiary, co-venturer, distributor, consultant,
representative or in any other capacity, participate in, become associated
with, provide assistance to, engage in or have a financial or other interest in
any business, activity or enterprise which is competitive with the Company or
any of its Subsidiaries or any successor or assign of the Company or any of its
Subsidiaries. The ownership of less than a one percent interest in a
corporation whose shares are traded in a recognized stock exchange or traded in
the over-the-counter market, even though that corporation may be a competitor
of the 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, he shall not, directly
or indirectly, either individually or as an employee, agent, partner,
shareholder, owner, trustee, beneficiary, co-venturer, distributor, consultant
or in any other capacity:
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(i) canvass, solicit or accept from any
Person who is a customer or licensor of the Company or any of its
Subsidiaries (any such Person is hereinafter referred to individually
as a " Customer," and collectively as the "Customers") any business
which in competition with the business of the Company or any of its
Subsidiaries or the successors or assigns of the Company or any of its
Subsidiaries, including, without limitation, the canvassing,
soliciting or accepting of business from any Person which is or was a
Customer of the Company within two years preceding the date hereof or
with the Company or any of its Subsidiaries during the Noncompete
Period;
(ii) advise, request, induce or attempt
to induce any of the Customers, suppliers, or other business contacts
of the Company or any of its Subsidiaries who currently have or have
had business relationships with the the Company within two years
preceding the date hereof or with the Company or any of its
Subsidiaries during the Noncompete Period, to withdraw, curtail or
cancel any of its business or relations with the Company or any of its
Subsidiaries;
(iii) induce or attempt to induce any
employee, sales representative, consultant or other agent of the
Company or any of its Subsidiaries to terminate his relationship or
breach any agreement with the Company or any of its Subsidiaries; or
(iv) hire any person who was an employee,
sales representative, consultant or other agent of the Company or any
of its Subsidiaries at any time during the Noncompete Period.
8. Confidential Information. The Employee acknowledges
and agrees that the customers, business connections, customer lists,
procedures, operations, techniques, and other aspects of and information about
the business of the Company and its Subsidiaries (the "Confidential
Information") are established at great expense and protected as confidential
information and provide the Company and its Subsidiaries with a substantial
competitive advantage in conducting their business. The Employee further
acknowledges and agrees that by virtue of his past employment with the Company,
and by virtue of his employment with the Company, he has had access to and will
have access to, and has been entrusted with and will be entrusted with,
Confidential Information, and that the Company would suffer great loss and
injury if the Employee would disclose this information or use in a manner not
specifically authorized by the Company. Therefore, the Employee agrees that
during the Employment Period and for five (5) years thereafter, he will not,
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, owner, trustee, beneficiary, co-venturer, distributor, consultant
or in any other capacity, use or disclose, or cause to be used or disclosed,
any Confidential Information, unless and to the extent that any such
information become generally known to and available for use by the public other
than as a result of the Employee's acts or omissions. The Employee shall
deliver to the Company at the termination of the Employment Period, or at any
other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of the Company or any Subsidiary which he may
then possess or have under his control.
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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 Subsidiaries' actual or anticipated business,
research and development or existing or future products or services and which
are conceived, developed or made by the Employee while employed by the Company
and its Subsidiaries ("Work Product") belong to the Company or such Subsidiary,
as the case may be.
9. Common Law of Torts and Trade Secrets. The parties
agree that nothing in this Agreement shall be construed to limit or negate the
common law of torts or trade secrets where it provides the Company and its
Subsidiaries with broader protection than that provided herein.
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.
"Founder Director" at any time means Xxxxxx Xxxx, Xxxx Xxxxx
or Xxxxx Xxxxx if at such time such individual is a member of the Board.
"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.
"Requisite Founder Directors" at any time means (i) if there
are three Founder Directors at such time, any two Founder Directors, (ii) if
there are two Founder Directors at such time, any Founder Director or (iii) if
there is one Founder Directors at such time, such Founder Director.
"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
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covenant will be inadequate. Therefore, if the Employee engages in any act in
violation of the provisions of sections 7 and 8, the Employee agrees that the
Company shall be entitled, in addition to such other remedies and damages as
may be available to it by law or under this Agreement, to injunctive relief to
enforce the provisions of sections 7 and 8.
12. Waiver. The failure of either party to insist in any
one or more instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or a relinquishment of any right
granted hereunder or of the future performance of any such term, covenant or
condition.
13. Notices. Any notice to be given hereunder shall be
deemed sufficient if addressed in writing, and delivered by registered or
certified mail or delivered personally, in the case of the Company, to its
principal business office, and in the case of the Employee, to his address
appearing on the records of the Company, or to such other address as he may
designate in writing to the Company.
14. Severability. In the event that any provision shall
be held to be invalid or unenforceable for any reason whatsoever, it is agreed
such invalidity or unenforceability shall not affect any other provision of
this Agreement and the remaining covenants, restrictions and 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 December 20, 1994, 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. The parties hereby consent to the
jurisdiction of the state courts of the State of Illinois and of any federal
court in the venue of Illinois for the purpose of any suit, action or
proceeding arising out of or related to this Agreement, and expressly waive any
and all objections they may have as to venue in any of such courts.
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18. Benefit. This Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by and against the Company,
its successors and assigns and the Employee, his heirs, beneficiaries and legal
representatives. It is agreed that the rights and obligations of the Employee
may not be delegated or assigned.
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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.
RACING CHAMPIONS, INC.
By: /s/ Xxxxxx X. Xxxx
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Its: Vice President
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/s/ Xxxx X. Xxxxx
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Xxxx Xxxxx
