EMPLOYMENT AGREEMENT
Exhibit
99.1
THIS
EMPLOYMENT AGREEMENT is made as of
November 5, 2008, by and between RC2 Corporation, a Delaware corporation
(the "Company"), and Xxxxx X. Xxxxxxxxx (the "Employee"). Certain
capitalized terms used herein are defined in Section 10 below.
RECITALS
A. The
Company and the
Employee desire to terminate any and all prior agreements, whether oral or
written, between the parties and between the Employee and the Company relating
to the Employee's employment.
B. The
Company desires to
employ the Employee and the Employee is willing to make his services available
to the Company on the terms and conditions set forth below.
AGREEMENTS
In
consideration of the premises and
the mutual agreements which follow, the parties agree as follows:
1. Employment. The
Company hereby employs the Employee and the Employee hereby accepts employment
with the Company on the terms and subject to the conditions set forth in this
Agreement.
2. Term. The
term of the Employee's employment hereunder shall commence on the date hereof
and shall continue until terminated as provided in Section 6 below.
3. Duties. The
Employee shall serve as the Chief Financial Officer of the Company and will,
under the direction of the Company's Chief Executive Officer and Board of
Directors, faithfully and to the best of his ability, perform the duties of
such
position. The Employee shall be one of the principal executive
officers and Senior Management of the Company and shall, subject to the control
of the Company's Chief Executive Officer and Board of Directors, have the normal
duties, responsibilities and authority associated with such
position. The Employee shall also perform such additional duties and
responsibilities which may from time to time be reasonably assigned or delegated
by the Chief Executive Officer or Board of Directors of the
Company. The Employee agrees to devote his entire business time,
effort, skill and attention to the proper discharge of such duties while
employed by the Company, except for the finalization of a purchase accounting
projects currently in progress with clients related to his previous consulting
business, which will (a) not exceed more than 80 hours between the
commencement date of his employment and December 31, 2008 and (b) will be spent
outside of normal business hours.
4. Compensation. Effective
November 5, 2008, the Employee shall receive a base salary of $300,000 per
year,
payable in regular and equal monthly installments (the "Base
Salary"). The Base Salary shall be reviewed on April 1, 2009 and
subsequent to April 1, 2009 on an annual basis by the Company and increased
on
April 1st
of each
year (commencing on April 1, 2009) by the greater of 4% or the most recently
published increase in the Consumer Price Index.
5. Fringe
Benefits.
(a) Vacation. The
Employee shall be entitled to four weeks of paid vacation
annually. The Employee and the Company shall mutually determine the
time and intervals of such vacation.
(b) Medical,
Health, Dental,
Disability and Life Coverage. The Employee shall be eligible
to participate in any medical, health, dental, disability and life insurance
policy in effect for the Senior Management of the Company. The
Company shall also pay for an annual executive medical physical.
(c) Incentive
Bonus and Stock
Ownership Plans. The Employee shall be entitled to participate
in any incentive bonus plan, incentive stock option or other stock ownership
plan or other incentive compensation plan developed generally for the Senior
Management of the Company, on a basis consistent with his position and level
of
compensation with the Company. Without limiting the foregoing,
Employee shall be entitled to participate on a basis consistent with past
practice and his position and level of compensation with the Company in the
annual Incentive Bonus Plan, together with all successor or other bonus plans
(collectively, the "Bonus Plans"). The Employee's Target Bonus under
the Bonus Plans shall be reviewed annually by the Company and shall be not
less
than the amount determined under Schedule 5(c). In addition, Employee
shall be entitled to receive annual stock option grants as provided on Schedule
5(c) attached hereto. The options will be granted pursuant to a
Non-Statutory Stock Option Grant Agreement substantially in the form of Exhibit
A attached hereto.
(d) Automobile. The
Company agrees to reimburse the Employee up to $750.00 per month, as such amount
may be increased from time to time consistent with the Company's reimbursement
policy for the Senior Management of the Company to cover Employee's expenses
in
connection with his leasing or ownership 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.
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(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.
(g) Life
and Disability
Insurance. During the Employment Period, the Company shall
provide coverage of at least $2 million of life insurance and 75% of Base Salary
of disability insurance. Such insurance policies to be owned by any
one or more members of Employee's immediate family or by a trust for the primary
benefit of Employee's immediate family. The owner of the policy shall
have the power to designate the beneficiary and to assign any rights under
the
policy. The Company shall pay 100% of the premiums required under
these policies; provided, however, that the Company shall not be obligated
to
pay greater than $20,000 for such premiums during any fiscal year. In
the event that the premiums for such policies would exceed this limitation,
the
Company shall consult with the Employee to determine the allocation of such
amount to the premiums for each type of policy to obtain such insurance as
may
be available for an aggregate of $20,000 per fiscal year.
6. Termination.
(a) Termination
of the
Employment Period. The Employment Period shall continue until
the earlier of: (i) March 31, 2011 unless the parties mutually agree
in writing to extend the term of this Agreement (such date hereof or such
extended date being referred to herein as the "Expected Completion Date"),
(ii) the Employee's death or Disability, (iii) the Employee resigns or
(iv) the Board of Directors determines that termination of Employee's
employment is in the best interests of the Company (the "Employment
Period"). The last day of the Employment Period shall be referred to
herein as the "Termination Date."
.
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(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 months during any 12-month period. In the event
Employee shall be able to perform his usual and customary duties on behalf
of
the Company following a period of disability, and does so perform such duties
or
such other duties as are prescribed by the Board of Directors for a period
of
three continuous months, any subsequent period of disability shall be regarded
as a new period of disability for purposes of this Agreement. The
Company and the Employee shall determine the existence of a Disability and
the
date upon which it occurred. In the event of a dispute regarding
whether or when a Disability occurred, the matter shall be referred to a medical
doctor selected by the Company and the Employee. In the event of
their failure to agree upon such a medical doctor, the Company and the Employee
shall each select a medical doctor who together shall select a third medical
doctor who shall make the determination. Such determination shall be
conclusive and binding upon the parties hereto.
(ii) For
purposes of this
Agreement, "Cause" shall be deemed to exist if the Employee shall have [a]
violated the terms of Section 7 or Section 8 of this Agreement in any
material respect; [b] knowingly committed a felony or a crime involving
moral turpitude; [c] intentionally engaged in serious misconduct which is
demonstrably and materially injurious to the Company and its Subsidiaries;
[d] intentionally engaged in fraud or dishonesty with respect to the
Company or any of its Subsidiaries or made a material misrepresentation to
the
stockholders or directors of the Company with respect to an item, transaction
or
amount in excess of $10,000; or [e] knowingly committed acts of negligence
in the performance of his duties which are demonstrably and materially injurious
to the Company. In all cases, termination for Cause shall be
determined solely by the Board of Directors and require a two-thirds majority
vote.
(iii) For
purposes of this
Agreement, "Good Reason" shall mean (1) the material diminution of the
Employee's duties set forth in Section 3 above or (2) the relocation
of the offices at which the Employee is principally employed to a location
which
is more than 50 miles from the offices at which the Employee is principally
employed as of the date hereof; provided, that travel necessary for the
performance of the Employee's duties set forth in Section 3 above shall not
determine the location where the Employee is "principally
employed."
(iv) For
purposes of this
Agreement, "Specified Employee" shall mean a "key employee" of the Company
while
any of its stock is publicly traded on an established securities market or
otherwise. A "key employee" for this purpose means an individual
whose compensation hereunder is subject to Code Section 409A and who meets
the
requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii), applied in
accordance
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with
the
regulations under Code Section 416, but disregarding Code Section 416(i)(5),
and
Treasury Regulation Section 1.409A-1(i) at any time during the 12 month period
ending on December 31 of each year. If the individual meets the
definition of a "key employee" as of a December 31 of an applicable year,
the individual shall be treated as a key employee for the entire 12 month period
beginning on April 1 of the following year.
(c) Termination
for Disability
or Death. In the event of termination for Disability, payments
of the Employee's Base Salary shall be made to the Employee for a period of
six
months after the Termination Date in accordance with the normal payroll
practices of the Company. In addition, for a period of three years
after the Termination Date, the Company shall reimburse the Employee for amounts
paid, if any, to continue medical, dental and health coverage pursuant to the
provisions of the Consolidated Omnibus Budget Reconciliation Act, continue
Employee's life insurance and disability coverage, to the extent limited by
Section 5(g), and pay to the Employee a pro rata portion of any bonus payable
for the year in which termination takes place (if any). The Company
shall pay the Employee the actual current year bonus earned, as determined
at
year-end, pro-rated by the number of months employed in the year of
termination. In the event of termination as a result of the death of
Employee, Employee's designated beneficiary or his estate shall be entitled
to
receive the Base Salary accrued prior to the Termination Date together with
the
proceeds of any life insurance obtained pursuant to Section 5(g), plus a payment
when determinable equaling Employee's pro rata portion of any bonus payable
under the Bonus Plans for the year in which termination takes place (if
any). The Company shall pay the Employee's designated beneficiary or
his estate the actual current year bonus earned, as determined at year-end,
pro-rated by the number of months employed in the year of
termination.
(d) Termination
by the Company
without Cause or by the Employee for Good Reason. If
(i) the Employment Period is terminated by the Company for any reason other
than for Cause, Disability or death, (ii) the Employment Period is
terminated by the Company for what the Company believes is Cause or Disability,
and it is ultimately determined that the Employment Period was terminated
without Cause or Disability (iii) the Employee resigns for Good Reason or
(iv) this Agreement is not renewed or otherwise extended by the Company after
the Expected Completion Date, and the reason for such non-renewal or extension
is not related to a termination for Cause, Disability or death of the Employee,
the Employee shall be entitled to receive, as damages for such a termination,
resignation or non-renewal, his Base Salary from the Termination Date to the
second anniversary of the Termination Date (the "Salary Continuation Severance
Payments") to be paid in accordance with the normal payroll practices of the
Company plus a lump sum payment (the "Bonus Severance Payment") 50% of the
then
current year Target Bonus, provided, however, that if such a termination or
resignation described in (i), (ii), (iii) or (iv) above occurs at any time
after
the occurrence of or in contemplation of a Change of Control, then Employee
shall be entitled to receive a lump sum payment (the "Change of Control
Severance Payment") of his Base Salary from the Termination Date to the third
anniversary of the Termination Date plus the greater of 200% of the average
annual payments under the Bonus Plans over the preceding three years or 100%
of
his current year Target Bonus amount.
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If
the
Employee's employment is terminated in the manner described in this
Section 6(d), for a period of three years from the Termination Date, the
Company shall reimburse the Employee for amounts paid, if any, to continue
medical, dental and health coverage pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act, continue Employee's life
insurance and disability coverage to the extent limited by Section 5(g), and
pay
to the Employee the fringe benefits pursuant to Section 5 which have accrued
prior to the Termination Date. Notwithstanding the
foregoing, if the Employee is a Specified Employee as of the date of his
termination under this Section 6(d), then:
(i) unless
the Employee's
termination or resignation hereunder is after the occurrence of or in
contemplation of a Change of Control, the Company shall [a] pay the
Employee the lump sum Bonus Severance Payment as provided in this Section 6(d)
above and the normal Salary Continuation Severance Payments as provided in
this
Section 6(d) above, but only to the extent that the aggregate of such payments
for the first six months following Employee's termination or resignation
hereunder (the "Six Month Period") is less than the maximum amount that may
be
paid under the exception to Code Section 409A provided under Treasury Regulation
Section 1.409A-1(b)(9)(iii) (the "Severance Exception Limit"), [b] to the extent
any amount payable with the Six Month Period is in excess of the Severance
Exception Limit (the "Delayed Amount"), on the first regular payroll date on
or
after the first day of the month that follows the six month anniversary of
the
Employee's Termination Date (the "Delayed Payment Date"), make a lump sum
payment to the Employee in an amount equal to the sum of the Delayed Amount
plus
interest on such amount at the Interest Rate from the Employee's Termination
Date to the Delayed Payment Date and [c] thereafter pay to the Employee the
remainder of the Salary Continuation Severance Payments until the second
anniversary of the Termination Date in accordance with the normal payroll
practices of the Company; and
(ii) upon
the Employee's
termination or resignation hereunder after the occurrence of or in contemplation
of a Change of Control, the Company shall [a] pay the Employee a lump sum within
five business days following his termination or resignation hereunder an amount
equal to the lesser of the Change of Control Severance Payment or the applicable
Severance Exception Limit and [b] deposit a lump sum payment of the balance
of
the Change of Control Severance Payment in a rabbi trust in the form provided
in
Revenue Procedure 92-64 or any successor guidance issued by the Internal Revenue
Service, which shall be administered by an independent trustee, which amount
shall be invested by the rabbi trust in a bank certificate of deposit or money
market account and which rabbi trust shall pay such amount (together with any
interest or earnings thereon) to the Employee on the first business day
on or after the Delayed Payment Date.
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For
purposes of this Section 6(d) only, (x) "Termination Date" shall mean the
date the Employee separates from service within the meaning of Code Section
409A. The Company shall not defer or accelerate amounts payable under
this Section 6(d) except as permitted under Code Section 409A and (y) "Interest
Rate" shall mean the U.S. Bank Prime Rate in effect from time to time as
published in the Wall
Street Journal.
(e) Termination
by the Company
for Cause or by the Employee Without Good Reason. If the
Employment Period is terminated by the Company with Cause or as a result of
the
Employee's resignation without Good Reason, the Employee shall not be entitled
to receive his Base Salary or any fringe benefits or bonuses for periods after
the Termination Date. If termination occurs as a result of the
Employee's resignation without Good Reason, the Company shall pay the Employee
the actual current year bonus earned, as determined at year-end, pro-rated
by
the number of months employed in the year of termination.
(f) Effect
of
Termination. The termination of the Employment Period pursuant
to Section 6(a) shall not affect the Employee's obligations as described in
Sections 7 and 8.
(g) Acceleration
of Option
Vesting. Upon completion of a Change of Control or upon
termination of employment due to death or Disability of the Employee, all
options to purchase stock of the Company held by the Employee shall immediately
vest and become exercisable by the Employee in accordance with their remaining
terms (subject, in the case of termination of employment due to death or
Disability, to the period of exercise set forth in
Section 6(h)). The Company agrees to take any and all actions
necessary or appropriate to effectuate the acceleration of these options and
to
permit the Employee to exercise the options in accordance with their terms
from
and after this accelerated vesting date.
(h) Exercise
of Options
Following Termination of Employment. If the Employee's
employment is terminated for any reason other than a termination by the Company
for Cause, the Employee (or his designated beneficiary or his estate in the
event of the termination of the Employee's employment due to death) may exercise
any stock options vested as of the Termination Date (after giving effect to
any
acceleration of vesting pursuant to Section 6(g)) at any time prior to the
original expiration date of the stock option or within twelve months after
the
Termination Date, whichever period is shorter.
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7. Noncompetition
and
Nonsolicitation. The Employee acknowledges and agrees that the
contacts and relationships of the Company and its Affiliates with its customers,
suppliers, licensors and other business relations are, and have been,
established and maintained at great expense and provide the Company and its
Affiliates with a substantial competitive advantage in conducting their
business. The Employee acknowledges and agrees that by virtue of the
Employee's employment with the Company, the Employee will have unique and
extensive exposure to and personal contact with the Company's customers and
licensors, and that 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 Affiliates. Furthermore,
the parties agree that the terms and conditions of the following restrictive
covenants are reasonable and necessary for the protection of the business,
trade
secrets and Confidential Information (as defined in Section 8 below) of the
Company and its Affiliates and to prevent great damage or loss to the Company
and its Affiliates as a result of action taken by the Employee. The
Employee acknowledges and agrees that the noncompete restrictions and
nondisclosure of Confidential Information restrictions contained in this
Agreement are reasonable and the consideration provided for herein is sufficient
to fully and adequately compensate the Employee for agreeing to such
restrictions. The Employee acknowledges that 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.
(a) Noncompetition. The
Employee hereby covenants and agrees that during the Employment Period and
for
two years thereafter (the "Noncompete Period"), except if employment is
terminated by the Company or its successor after a Change of Control or this
Agreement is not renewed or extended by the Company or its successor after
the
Expected Completion Date then the Noncompete Period shall be six months, 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 Affiliates or any successor or assign
of the Company or any of its Affiliates. The ownership of less than a
one percent interest in a corporation whose shares are traded in a recognized
stock exchange or traded in the over-the-counter market, even though that
corporation may be a competitor of the Company, shall not be deemed financial
participation in a competitor. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this section
is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with
a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and
this Agreement shall be enforceable as somodified. 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.
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(b) Nonsolicitation. The
Employee hereby covenants and agrees that during the Noncompete Period, he
shall
not, directly or indirectly, either individually or as an employee, agent,
partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor,
consultant or in any other capacity:
(i) canvass,
solicit or
accept from any Person who is a customer or licensor of the Company or any
of
its Affiliates (any such Person is hereinafter referred to individually as
a
"Customer," and collectively as the "Customers") any business which in
competition with the business of the Company or any of its Affiliates or the
successors or assigns of the Company or any of its Affiliates, including,
without limitation, the canvassing, soliciting or accepting of business from
any
Person which is or was a Customer of the Company or any of its Affiliates within
two years preceding the date of this Agreement, during the Employment
Period or during the Noncompete Period;
(ii) advise,
request,
induce or attempt to induce any of the Customers, suppliers, or other business
contacts of the Company or any of its Affiliates who currently have or have
had
business relationships with the Company or any of its Affiliates within two
years preceding the date of this Agreement, during the Employment Period or
during the Noncompete Period, to withdraw, curtail or cancel any of its business
or relations with the Company or any of its Affiliates; and
(iii) hire
or induce or
attempt to induce any officer or other senior manager of the Company or any
of
its Affiliates to terminate his or her relationship or breach any agreement
with
the Company or any of its Affiliates unless such person has previously been
terminated by the Company.
8. Confidential
Information. The Employee acknowledges and agrees that the
customers, business connections, customer lists, procedures, operations,
techniques, and other aspects of and information about the business of the
Company and its Affiliates (the "Confidential Information") are established
at
great expense and protected as confidential information and provide the Company
and its Affiliates with a substantial competitive advantage in conducting their
business. The Employee further acknowledges and agrees that by virtue
of her past employment with the Company, and by virtue of 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.
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Therefore,
the Employee agrees that during the Employment Period and for five 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 of its Affiliates which he may then possess
or
have under his control. The Employee acknowledges and agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Affiliate's actual
or
anticipated business research and development or existing or future products
or
services and which are conceived, developed or made by the Employee while
employed by the Company and its Affiliates ("Work Product") belong to the
Company or such Affiliate, as the case may be.
9. Common
Law of Torts and
Trade Secrets. The parties agree that nothing in this
Agreement shall be construed to limit or negate the common law of torts or
trade
secrets where it provides the Company and its Affiliates with broader protection
than that provided herein.
10. Definitions.
"Affiliate"
means,
with respect to any Person, any other Person controlling, controlled by or
under
common control with such Person and any partner of a Person which is a
partnership.
"Change
of Control"
means:
(a) the
acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either
(i) the then outstanding shares of common stock of The Company (the
"Outstanding Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the
election of directors (the "Outstanding Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (iv) any
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acquisition
by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this definition;
or
(b) individuals
who, as of
the date hereof, constitute the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute
at
least a majority of the Board of Directors of the Company; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a
Person other than the Board of Directors of the Company; or
(c) approval
by the
stockholders of the Company of a reorganization, merger or consolidation (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of
such transaction owns the Company through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such
Business Combination of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly,
30%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the
action of the Board of Directors of the Company, providing for such Business
Combination; or
(d) approval
by the
stockholders of the Company of (i) a complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of all or substantially
all of the assets of the Company, other than to a corporation, with respect
to
which following such sale or other disposition,
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[a] more
than 60% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be, [b] less than 30% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation), except to the extent that such
Person owned 30% or more of the Outstanding Common Stock or Outstanding Voting
Securities prior to the sale or disposition, and [c] at least a majority of
the members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the
action of the Board of Directors of the Company, providing for such sale or
other disposition of assets of the Company or were elected, appointed or
nominated by the Board of Directors of the Company.
"Code"
means the
Internal Revenue Code of 1986, as amended or corresponding provisions of
subsequent superseding federal tax laws, as amended.
"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.
"Senior
Management" at
any time means the senior executive officers of the Company which will include,
without limitation, the Chief Executive Officer, President, Chief Operating
Officer, Chief Financial Officer and such other officers of the Company as
the
Board of Directors shall determine from time to time.
"Subsidiary"
means,
with respect to any Person, any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence
of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is
at
the time owned or controlled, directly or indirectly, by any Person or one
or
more Subsidiaries of that Person or a combination
thereof.
12
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.
"Treasury
Regulations"
shall include proposed, temporary and final regulations promulgated under the
Code in effect as of the date of this Agreement and the corresponding sections
of any regulations subsequently issued that amend or supersede such
regulations.
11. Specific
Performance. The Employee acknowledges and agrees that
irreparable injury to the Company may result in the event the Employee breaches
any covenant or agreement contained in Sections 7 and 8 and that the remedy
at law for the breach of any such covenant will be
inadequate. Therefore, if the Employee engages in any act in
violation of the provisions of Sections 7 and 8, the Employee agrees that
the Company shall be entitled, in addition to such other remedies and damages
as
may be available to it by law or under this Agreement, to injunctive relief
to
enforce the provisions of Sections 7 and 8.
12. Waiver. The
failure of either party to insist in any one or more instances, upon performance
of the terms or conditions of this Agreement shall not be construed as a waiver
or a relinquishment of any right granted hereunder or of the future performance
of any such term, covenant or condition.
13. Notices. Any
notice to be given hereunder shall be deemed sufficient if addressed in writing
and delivered by registered or certified mail or delivered personally, in the
case of the Company, to its principal business office, and in the case of the
Employee, to his address appearing on the records of the Company, or to such
other address as he may designate in writing to the Company.
14. Severability. In
the event that any provision shall be held to be invalid or unenforceable for
any reason whatsoever, it is agreed such invalidity or unenforceability shall
not affect any other provision of this Agreement and the remaining covenants,
restrictions and 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.
13
16. Amendment. This
Agreement may only be amended by an agreement in writing signed by each of
the
parties hereto.
17. Governing
Law. This Agreement shall be governed by and construed
exclusively in accordance with the laws of the State of Illinois, regardless
of
choice of law requirements.
18.
Benefit. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against the Company, its successors
and assigns and the Employee, his heirs, beneficiaries and legal
representatives. It is agreed that the rights and obligations of the
Employee may not be delegated or assigned.
[Remainder
of page intentionally left blank. Signature page to
follow.]
14
IN
WITNESS WHEREOF, the parties have
executed or caused this Employment Agreement to be executed as of the date
first
above written.
RC2
CORPORATION – COMPENSATION COMMITTEE
/s/ Xxxx
X.
Xxxxxxx
Xxxx
X.
Xxxxxxx, Director and Compensation
Committee
Chairman
/s/ Xxxxxx
X.
Xxxxxxxxx
Xxxxxx
X.
Xxxxxxxxx, Director and
Compensation
Committee Member
/s/ Xxxxxxx
X.
Xxxxxxxx,
Xx.
Xxxxxxx
X. Xxxxxxxx, Xx., Director and
Compensation
Committee Member
/s/ Xxxxx
X.
Xxxxxxxxx
Xxxxx
X.
Xxxxxxxxx
15
SCHEDULE
5(c)
TARGET
INCENTIVE BONUS / INCENTIVE STOCK OPTIONS
The
Employee shall receive 60,000
options to be granted within 3 days from the first date of his employment under
this Employment Agreement and shall be granted using a Non-Statutory Stock
Option Grant Agreement substantially in the form of Exhibit A to the Employment
Agreement. Also Employee shall be eligible for any “2nd
half”
bonus paid based on the July through December 2008 operating results of the
Company to Senior Management.
If
Employee is employed by the Company
on February 1 of any year (beginning with February 1, 2009) during the
Employment Period, he shall have a targeted incentive bonus (the "Target Bonus")
of not less than 1.70 times Employee's then Base Salary and receive options
to acquire shares with a value of not less than $950,000 (determined in
accordance with GAAP consistent with prior practice); provided, however, that
the Company shall not be required to grant to the Employee in any year options
to acquire more than the maximum number of shares which may be issued under
the
Company's Stock Incentive Plan. The grant of the options subsequent
to the initial grant outlined in the preceding paragraph shall be made on the
earlier of (1) the quarterly meeting of the Board of Directors held in February
of the applicable year or (2) February 28 of the applicable
year. The options to be granted pursuant to this Employment Agreement
shall be granted using a Non-Statutory Stock Option Grant Agreement
substantially in the form of Exhibit A to the Employment Agreement.
EXHIBIT
A
NON-STATUTORY
STOCK OPTION GRANT AGREEMENT
UNDER
THE
RC2 CORPORATION
2005
STOCK INCENTIVE PLAN
THIS
AGREEMENT, dated as _____________
(the date of grant), is between _______________ ("Employee") and RC2
CORPORATION, a Delaware corporation (the "Company").
RECITALS
A. The
Company adopted the
RC2 Corporation 2005 Stock Incentive Plan (the "Plan"), which was approved
by
its Board of Directors (the "Board") and stockholders.
B. The
Board has designated
Employee as a participant in the Plan.
C. Pursuant
to the Plan,
Employee and the Company desire to enter into this Agreement setting forth
the
terms and conditions of the options granted to Employee under the
Plan.
AGREEMENTS
The
Employee and the Company agree as
follows:
1. Grant
of Stock
Option. The Company grants to Employee the right and option
(hereinafter referred to as the "Option") to purchase all or any part of up
to
________ shares of the Company's Common Stock (the "Option Shares") on the
terms and conditions set forth below and in the Plan.
2. Option
Price. The purchase price of the Option Shares shall be
$_____ per share.
3. Period
of
Exercise. Except as provided under the Plan, unless the Option
is terminated, Employee may exercise this Option for up to, but not in excess
of, the percent of shares of Common Stock subject to the Option during the
periods specified below:
|
Percentage
of Shares
|
||
|
of
Common Stock
|
On
or After
|
|
|
20%
|
||
|
40%
|
||
|
60%
|
||
|
80%
|
||
|
100%
|
||
Employee's
right to exercise the
Option expires ten years from the date of grant (the "Option Period"), subject
to Section 12 below.
Upon
completion of a Change of Control
(as defined in the Employee's Employment Agreement with the Company dated as
of
November 5, 2008 (as amended from time to time, the "Employment Agreement")
or
upon termination of the Employee's employment due to death or Disability (as
defined in the Employment Agreement) of the Employee, this Option shall
immediately vest and become exercisable by the Employee in accordance with
its
remaining terms (subject, in the case of termination of employment due to death
or Disability, to the period of exercise set forth in Section 12
below). The Company agrees to take any and all actions necessary or
appropriate to effectuate the acceleration of this Option and to permit the
Employee to exercise this Option in accordance with its terms from and after
this accelerated vesting date.
4. Definitions. Unless
provided to the contrary in this Agreement, the definitions of the Plan and
any
Amendments to the Plan shall apply to this Agreement.
5. Option
Designation. The option granted is a Non-Statutory Stock
Option in accordance with Article VII of the Plan.
6. Change
in Capital
Structure. The Option rights and exercise price of such Option
rights will be adjusted in the event of a stock dividend, stock split, reverse
stock split, recapitalization, reorganization, merger, consolidation,
acquisition or other change in the capital structure of the Company as
determined by the Board of Directors in accordance with the Plan.
7. Nontransferability
of
Option. Options shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable, during the
Employee's lifetime, only by him.
2
8. Delivery
by the
Company. As soon as practicable after receipt of all items
referred to in Article VII of the Plan and any payment required by
Article VII of the Plan, the Company shall deliver to the Employee
certificate(s) issued in Employee's name for the number of Option Shares
purchased by exercise of the Option. If delivery is by mail, delivery
of Option Shares shall be deemed effected when the stock transfer agent of
the
Company shall have deposited the certificates in the United States mail,
addressed to the Employee.
9. Addresses. All
notices or statements required to be given to either party hereto shall be
in
writing and shall be personally delivered or sent, in the case of the Company,
to its principal business office and, in the case of Employee, to his address
as
shown on the records of the Company or to such address as Employee designates
in
writing. Notice of any change of address shall be sent to the other
party by registered or certified mail. It shall be conclusively
presumed that any notice or statement properly addressed and mailed bearing
the
required postage stamps has been delivered to the party to which it is
addressed.
10. Restrictions
Imposed by
Law. Notwithstanding any other provision of this Agreement,
Employee agrees that he shall not exercise the Option and that the Company
will
not be obligated to deliver any shares of Common Stock or make any cash payment
if counsel to the Company determines that such exercise, delivery or payment
would violate any law or regulation of any governmental authority or any
agreement between the Company and any national securities exchange upon which
the Common Stock is listed. The Company shall in no event be obliged
to take any affirmative action in order to cause the exercise of the Option
or
the resulting delivery of shares of Common Stock or other payment to comply
with
any law or regulation of any governmental authority.
11. Employment. Nothing
in this Agreement or the Plan shall limit the right of the Company or any parent
or Subsidiary to terminate the Employee's employment or otherwise impose any
obligation to employ the Employee.
12. Effect
of Termination of
Employment. If the Employee's employment is terminated for any
reason other than a termination by the Company for Cause, the Employee (or
his
designated beneficiary or his estate in the event of the termination of the
Employee's employment due to death) may exercise any part of this Option vested
as of the Termination Date (after giving effect to any acceleration of vesting
pursuant to Section 3) at any time prior to the original expiration date of
this Option or within twelve months after the date of termination of employment,
whichever period is shorter.
3
13. Governing
Law. This Agreement shall be construed, administered and
governed in all respects under
and by the laws
of the State of Delaware.
14. Provisions
Consistent with
Plan. This Agreement is intended to be construed to be
consistent with, and is subject to, all applicable provisions of the Plan,
which
is incorporated herein by reference. In the event of a conflict
between the provisions of this Agreement and the Plan, the provisions of the
Plan shall prevail.
EMPLOYEE:
________________________________
RC2
CORPORATION
BY______________________________
4
