EMPLOYMENT AGREEMENT
This employment contract (the "Agreement") is entered into and made
effective as of September ___, 2006 (the "Effective Date") by and between
American Racing Capital, Inc., a Nevada corporation (the "Company"), and D. Xxxx
Xxxxx, a resident of the State of Nevada (the "Employee").
RECITALS
WHEREAS, the Company desires to employ and retain the Employee for the
term specified herein in order to advance the business and interests of the
Company on the terms and conditions set forth herein; and
WHEREAS, the Employee desires to provide his services to the Company in
such capacities, on and subject to the terms and conditions hereof; and
WHEREAS, the Company desires to provide the Employee with certain options
to acquire stock in the Company in order that the Employee may have the
opportunity to participate in the growth and performance of the Company, as set
forth herein; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
1. Adoption of Recitals. The Company and Employee hereto adopt the above
recitals as being true and correct.
2. Employment.
(a) Subject to the terms and conditions set forth herein, the
Company hereby employs Employee, and Employee hereby agrees to serve the Company
for a three-year period from the Effective Date of this Agreement ("Employment
Period").
3. Duties and Responsibilities.
(a) During the Employment Period, the Employee shall serve as
President and Chief Executive Officer of the Company. In such role, Employee
shall perform all executive and administrative duties, all functions and
privileges incumbent with the position of President and Chief Executive Officer,
and any other duties as reasonably prescribed by the Board of Directors of the
Company (the "Board") from time to time; provided, however, that such duties and
responsibilities are consistent with Employee's position. Employee shall also
serve as a member of the Board. During the Employment Period, Employee shall
perform and discharge faithfully, diligently, in good faith and to the best of
Employee's ability such duties and responsibilities. The Employee agrees to
devote as much of his time as is reasonably necessary to accomplish his duties
and obligations under this Agreement.
(b) Other Activities. The Employee, during the Employment Period,
may engage in other activities for compensation outside his employment with the
Company, as long as these activities do not materially interfere with or detract
from the performance of Employee's duties or constitute a breach of any of the
provisions contained in this Agreement. Those activities will include but shall
not be limited to serving in a consulting role to any other affiliate or
subsidiary of the Company.
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4. Compensation.
(a) Base Salary. During the Employment Period, the Company shall pay
to Employee an annual base salary ("Base Salary") of One Hundred Twenty Thousand
Dollars ($120,000.00) payable on a bi-monthly basis or otherwise in accordance
with the Company's customary payroll practices, throughout the term of such
employment subject to the provisions of Section 6 hereof (governing
Terminations), and subject to any applicable tax and payroll deductions. The
Base Salary shall increase by five percent (5%) (the "Annual Salary Increase")
on the anniversary date of the Effective Date on the same date each year during
the Employment Period. The Board shall review the Annual Salary Increase and
shall have the authority to modify the terms of the Annual Salary Increase. Any
such modifications in the Annual Salary Increase shall be communicated to the
Employee thirty (30) days prior to the date when the Annual Salary Increase
would be effectuated.
(b) Bonus. In addition to the Salary, Employee shall be entitled to
such bonuses and benefits as may be determined by the Board. Any bonus granted
pursuant to this Section 4(b) shall be paid within forty-five (45) days after
the end of the fiscal year for which such bonus is earned.
(c) Stock Options. During the Employment Period, the Company may
issue to the Employee stock options (the "Stock Option") to acquire 250,000
shares of the Company's common stock, par value $.001 per share ("Common
Stock"). The number of shares to be acquired pursuant to the Stock Option may be
determined by the Board of Directors at the time of issuance and may differ from
the number set for herein. After the expiration, or exercise of the Stock
Option, Employee shall be entitled to participate in the Company's regular
employee stock option program in the same manner as the other executives of the
Company and its affiliates.
(d) Other Benefits. During the Employment Period, Employee shall be
entitled to apply to participate in any and all employee benefit plans, programs
or arrangements (collectively the "Plans"), implemented by the Company and
available to employees of the Company, including medical, 401(k) plans, or
similar plans, at such time when the Company will be able to adopt and implement
these plans. Employee's participation in such plans shall be governed by the
terms of the respective plans.
(e) Fringe benefits.
(i) During the Employment Period, the Company shall pay for
directly or reimburse Employee for all reasonable, customary and necessary
business-related expenses incurred by Employee in connection with the duties of
Employee hereunder, in accordance with the applicable Company policy, as may be
revised from time to time, and upon submission by Employee to the Company of
such written evidence of such expense as the Company may require.
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(ii) The Employee shall be entitled to four (4) vacation weeks
as provided in the Company's policies. Employee's vacation accrual shall be
capped at two (2) years' worth of vacation (which in aggregate shall be no more
than eight (8) weeks of vacation.
(iii) Nothing paid to Employee under any Company Plan,
bonuses, or fringe benefit arrangements shall be deemed to be in lieu of Base
Salary payable to Employee hereunder.
5. Restrictive Covenants.
(a) Non Disclosure of Confidential Information.
(i) During and at all times after the Employment Period, the
Employee shall not, directly or indirectly, without the prior written consent of
the Board, or a person duly authorized thereby, other than a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Employee of the duties of Employee as an employee of the Company,
access, maintain, keep, disclose or use for the benefit of himself or herself or
any other person, corporation, partnership, joint venture, association, or other
business organization, any of the trade secrets or Confidential Information of
the Company. If Employee is legally required to disclose any Confidential
Information, Employee will notify Company prior to doing so by providing Company
with written notice ten (10) days in advance of the intended or compelled
disclosure. Notice shall be provided as defined in Section 7 below. For the
purposes of this Agreement, "Confidential Information" shall mean all
information, whether written or oral, tangible or intangible, of a private,
secret, proprietary or confidential nature, of or concerning the Company or any
of its subsidiaries or affiliates and their business and operations, and all
files, letters, memoranda, reports, records, computer disks or other computer
storage medium, data, models or any photographic or other tangible materials
containing such information including without limitation, any sales, promotional
or marketing plans, programs, techniques, practices or strategies, any expansion
plans (including existing and entry into new geographic and/or product markets),
and any customer lists.
(ii) The Employee hereby assigns to the Company all right,
title and interest in such Work Product made or conceived by the Employee alone
or jointly with others (whether during the Employment Period or any period of
employment with the Company or any of its affiliates following the Employment
Period) which relates to the business of the Company or any such affiliate. This
assignment shall include (a) the right to file and prosecute patent applications
on such Work Product in any and all countries, (b) the patent applications filed
and patents issuing thereon and (c) the right to obtain copyright, trademark or
trade name protection for any such Work Product. The Employee shall promptly and
fully disclose all such Work Product to the Company and reasonably assist the
Company, at the Company's expense, in obtaining and protecting the rights
therein (including patents thereon) in any and all countries; provided, however,
that said Work Product will be the property of the Company, whether or not
patented or registered for copyright, trademark or trade name protection, as the
case may be. Work Product conceived by the Employee, which is not related to the
business of the Company, will remain the property of the Employee. For the
purposes of this Agreement, "Work Product" shall mean the data, materials,
documentation, computer programs, inventions, (whether or not patentable), and
all works of authorship, including all worldwide rights therein under patent,
copyright, trade secret, confidential information, or other proprietary right.
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(b) Non-Competition. In consideration of his employment and the
other benefits arising under this Agreement, the Employee agrees that during the
Employment Period, and for (i) the greater of the balance of the Employment Term
or two (2) years following the termination of this Agreement by the Company "for
cause" or termination of this Agreement by the Employee or (ii) six months in
the event the Employee is terminated "without cause" (provided that he Company
continues to make the payments due the Employee hereunder), the Employee (or any
affiliate) shall not directly or indirectly:
(i) During the Employment Period, the Employee (or any
affiliate) shall not directly or indirectly:
(ii) Own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be employed or retained by,
render services to, provide financing (equity or debt) or advice to, or
otherwise be connected in any manner with any business that at any time competes
with any business of the Company (such as auto, motorbike, or vehicle racing,
driving school or motorsports related, anywhere in North America); provided,
however, that nothing contained herein shall prevent the purchase or ownership
by the Employee of less than 1% of the outstanding equity securities of any
class of securities of a company registered under Section 12 of the Securities
Exchange Act of 1934, as amended;
(iii) For any reason, (1) induce any customer or supplier of
the Company or any of its subsidiaries or affiliates to patronize or do business
with any business directly or indirectly in competition with the businesses
conducted by the Company or any of its subsidiaries or Affiliates in any market
in which the Company or any of its subsidiaries or Affiliates does business; (2)
canvass, solicit or accept from any customer or supplier of the Company or any
of its subsidiaries or affiliates any such competitive business; or (3) request
or advise any customer or vendor of the Company or any of its subsidiaries or
Affiliates to withdraw, curtail or cancel any such customer's or vendor's
business with the Company or any of its subsidiaries or Affiliates; and
(iv) For any reason, employ, or knowingly permit any company
or business directly or indirectly controlled by him, to employ, any person who
was employed by the Company or any of its subsidiaries or affiliates at or
within the prior one (1) year, or in any manner seek to induce any such person
to leave his or her employment; provided such restriction shall not apply to
general solicitations or advertisements posted on the web or published in a
newspaper or other media.
(c) Need for Restrictions. The Employee acknowledges and agrees that
each of the restrictive covenants contained in this Section 5 is reasonable and
necessary to protect the legitimate business interests of the Company,
including, without limitation, the need to protect the Company's trade secrets
and the Confidential Information.
(d) Breach of Restrictive Covenants. In the event of a breach by the
Employee of any restrictive covenant set forth in Section 5, the Employee agrees
that such a breach would cause irreparable injury to the Company, and that if
the Company shall bring legal proceedings against the Employee to enforce any
restrictive covenant, the Company shall be entitled to seek all available civil
remedies, at law or in equity, including, without limitation, an injunction,
damages, attorneys' fees, and costs. Employee agrees that given the significance
of the Company's Confidential Information, Employee, as a material part of this
Agreement, acknowledges and agrees that he will not oppose the Company's request
to post only the minimum bond required by law in the event the relief sought by
the Company requires that the Company post a bond. Employee specifically agrees
that he or she will not make any argument or seek any order from the court
requiring the posting of a bond greater than the minimum imposed by any
applicable statute.
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(e) Construction, Survival. If the period of time or scope of any
restrictions specified in this Section 5 should be adjudged unreasonable, void,
or unenforceable in any proceeding, then the period of time or scope shall be
reduced or altered so that the restrictions may be enforced as is adjudged to be
reasonable and consistent with public policy and law. All the provisions of this
Section 5 shall survive the Employment Period.
(f) Successors and Assigns. The restrictive covenant may be enforced
by the Company and its successors and assigns.
6. Termination.
(a) Termination upon Death. Employee's employment hereunder shall
terminate upon the death of Employee; provided, however, that for purposes of
this Agreement the Date of Termination based upon the death of Employee shall de
deemed to have occurred on the last day of the month in which the death of the
Employee shall have occurred.
(b) Termination upon Incapacity. If the Employee is unable to
perform the essential functions of his position, with or without reasonable
accommodation, for a period in excess of twelve (12) weeks during the previous
twelve (12) months, due to a physical or mental illness, disability or
condition, the Company may terminate Employee's employment hereunder at the end
of any calendar month by giving written Notice of Termination to Employee. Any
questions as to the existence, extent or potentiality of illness or incapacity
of Employee upon which the Company and Employee cannot agree shall be determined
by a qualified independent physician selected and paid for by the Company who is
acceptable to Employee or his personal representative, as the case may be. The
determination of such physician certified in writing to the Company and to
Employee shall be final and conclusive for all purposes of this Agreement.
Section 6 (b) is intended to be interpreted and applied consistent with the
Americans with Disabilities Act and Sections 503 and 504 of the Rehabilitation
Act of 1973; the Family and Medical Leave Act of 1993; the California Fair
Housing and Employment Act; and any state or local ordinance prohibiting
discrimination, harassment and/or retaliation on the basis of a disability.
(c) Termination for Cause. The Company may terminate Employee's
employment hereunder for Cause by giving written Notice of Termination to
Employee (as defined below in Section 6 (f) hereof. The Date of Termination
shall be specified in the Notice of Termination and may be immediate. For the
purpose of this Agreement, the Company shall have "Cause" to terminate
Employee's employment hereunder upon Employee's (i) continued failure to
materially perform and discharge the duties and responsibilities of Employee
under this Agreement after receiving written notice specifically setting forth
such failures and allowing Employee thirty (30) days to cure such failures, if
so curable, (provided, however, that after one such notice has been given to
Employee during the Employment Period, Company is no longer required to provide
time to cure subsequent failures for the reasons specified in the initial notice
under this Subsection 6(c)(i)), or (ii) any breach by Employee of the provisions
of Sections 5; or (iii) Employee is convicted of a felony under federal or state
law involving moral turpitude, or a determination by the Board, after
consideration of all available information and following the procedures set
forth below, that Employee has willfully and materially violated Company
policies or procedures involving discrimination, harassment, alcohol or
substance abuse, or workplace violence; or (iv) misconduct which, in the opinion
and sole, but reasonable discretion of the Company, is materially injurious to
the Company, or which constitutes a material breach of this Agreement, Company
policy, or Employee's duties to the Company; provided however that Employee
shall have thirty (30) days following written notice of such breach or violation
to cure the breach or violation, (v) Employee's actions or omissions that
constitute fraud, or gross misconduct that have a material adverse effect on the
Company.
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(d) Termination by the Company without Cause. The Company may
terminate the Employee's employment at any time without Cause upon thirty (30)
calendar days notice by delivering written notice to the Employee. The Date of
Termination shall be specified in the Notice of Termination; provided however,
that the Date of Termination shall not be earlier than thirty (30) calendar days
after delivery of the Notice of Termination.
(e) Termination by the Employee for Good Reason. Employee may
terminate this Agreement for Good Reason. For purposes of this Agreement `Good
Reason' shall mean (i) a material breach by the Company or its affiliate of its
obligations under this Agreement, or any other agreement between Employee and
the Company or a Company affiliate, or (ii) any material change in the
assignment of duties or responsibilities to Employee by the Board which are
inconsistent in a material and adverse respect with Employee's position causing
it to be of materially less stature or responsibility. Any such breach by the
Company, if curable, may be cured within ten (10) days after notice thereof to
the Company.
(f) Termination by the Employee. Employee may terminate this
Agreement by delivering written notice to the Company. The Employee shall
provide ninety (90) calendar days written notice to the Company. The Date of
Termination shall be specified in the Notice of Termination; provided however,
that the Date of Termination shall not be earlier than ninety (90) calendar days
after delivery of the Notice of Termination.
(g) Notice of Termination. Notice of Termination to effectuate a
termination under Section 6 shall be made in accordance with Notice defined in
Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice, in writing, which shall indicate the specific termination provision of
this Agreement relied upon as the basis for the Termination and the Date of
Termination. The Date of Termination shall not be earlier than the date such
Notice of Termination is delivered (as defined above); provided however, that
the Company, at its option, may elect to have the Employee not report to work
after the date of the written notice.
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(h) Date of Termination. "Date of Termination" means the date on
which this Agreement shall terminate (except for those provisions which survive
termination as specified in this Agreement) in accordance with the provisions of
this Section 6.
(i) Obligation to Pay.
(i) For Terminations under Subsection 6(a), the estate of
Employee shall be paid all sums otherwise payable to Employee, including without
limitation all pro-rated Base Salary, Bonuses or other benefits accrued or
accruable to Employee through the end of the month in which the death of
Employee occurred. The Bonuses will be pro-rated to the Date of Termination and
will be pro-rated after receipt of year-end results.
(ii) For Terminations under Subsection 6(b), the Employee or
the person charged with legal responsibility for the Employee's estate shall be
paid all sums otherwise payable to the Employee, including the pro-rated Base
Salary, Bonuses and other benefits accrued or accruable to the Employee through
the Date of Termination, and the Company shall have no further obligation to the
Employee under this Agreement. The Bonuses will be pro-rated to the Date of
Termination and will be pro-rated after receipt of year-end results to the
extent any additional sums would be owed after receipt of year end results.
(iii) For Terminations for Cause under Subsection 6(c), the
Company shall pay the Employee his Base Salary and benefits accrued through the
Date of Termination. The Employee shall receive pro-rated Bonuses and benefits
through the Date of Termination and will not be entitled to receive any other
Bonuses or benefits not earned or accrued as of the Date of Termination. The
Bonuses will be pro-rated to the Date of Termination and will be pro-rated after
receipt of year-end results. The Company shall have no further obligation to the
Employee under this Agreement.
(iv) For Terminations without Cause under Subsection 6(d), the
Employee shall be entitled to the lesser of (i) the Base Salary for the
remainder of the Employment Period, as well as medical and dental benefits
included in section 4(d) of this Agreement (provided that such benefits are in
place at the time of termination), without regard to the Date of Termination set
forth in the Notice of Termination or (ii) the Base Salary for two (2) years, in
one lump sum. The Employee shall receive pro-rated Bonuses and benefits through
the Date of Termination and will not be entitled to receive any other Bonuses or
benefits not earned or accrued as of the Date of Termination. The Bonuses will
be pro-rated to the Date of Termination and will be pro-rated after receipt of
year-end results.
(v) For Terminations for Good Reason under Subsection 6(e),
the Employee shall be entitled to the lesser of (i) the Base Salary for the
remainder of the Employment Period, as well as medical and dental benefits
included in section 4(d) of this Agreement provided that such benefits are in
place at the time of termination), without regard to the Date of Termination set
forth in the Notice of Termination or (ii) the Base Salary for two (2) years, in
one lump sum. The Employee shall receive pro-rated Bonuses and benefits through
the Date of Termination and will not be entitled to receive any other Bonuses or
benefits not earned or accrued as of the Date of Termination. The Bonuses will
be pro-rated to the Date of Termination and will be pro-rated after receipt of
year-end results.
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(vi) For Terminations by the Employee under Subsection 6(f),
the Company shall pay the Employee his Base Salary and benefits accrued through
the Date of Termination. The Employee shall receive pro-rated Bonuses and
benefits through the Date of Termination and will not be entitled to receive any
other Bonuses or benefits not earned or accrued as of the Date of Termination.
The Bonuses will be pro-rated to the Date of Termination and will be pro-rated
after receipt of year-end results. The Company shall have no further obligation
to the Employee under this Agreement.
7. Notice. For the purpose of this Agreement, notices and all other
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
or three (3) business days after being mailed by certified mail, return receipt
requested, postage prepaid, two (2) business days after being provided to a
courier for next business day delivery, or 24 hours after being sent by
telecopy:
in the case of the Company to: American Racing Capital
X.X. Xxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Facsimile:
in the case of Employee to: D. Xxxx Xxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (not constituting notice) to:
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or to such other address as either party shall designate by giving written
notice of such change to the other party.
8. Director's and Officer's Liability Insurance. To protect the Employee
from any liability, loss, claims, damages, or costs, including legal fees and
costs, prior to any public offering of any securities of the Company, the
Company, at such time when the Company shall have sufficient funds to do so,
shall purchase and maintain director's and officer's liability insurance (the
"D&O Insurance") in an amount not less than One Million Dollars ($1,000,000), or
in such amount as is later agreed upon by the Employee and the Company and which
shall include a duty to defend clause. The policy shall name the Employee by
name or title as an insured in each (and all) of his duties and titles,
including President, Chief Executive Officer and member of the Board.
9. Prior Agreements. The Employee represents to the Company (a) that there
are no restrictions, agreements, or understandings whatsoever to which the
Employee is a party which would prevent or make unlawful, impractical, or
impossible the Employee's execution of this Agreement or employment hereunder,
or which would prevent him fully, faithfully, and completely from performing all
of his obligations to the Company, (b) that the Employee's execution of this
Agreement and employment hereunder shall not constitute a breach of any
contract, agreement or understanding, oral or written, to which the Employee is
a party or by which the Employee is bound, and (c) that the Employee is free and
able to execute this Agreement and to enter into employment by the Company. A
written or oral notice or complaint that Employee breached this provision or
violated a restrictive covenant or an agreement not to disclose confidential
information shall subject the Employee, at the Company's sole discretion, to
immediate termination with cause, irrespective of any advance notice provisions
contained in Section 8 above. The Employee also agrees to fully indemnify the
Company for any and all direct damages, costs and/or reasonable attorney's fees
incurred by the Company that result or arise in any manner from any claims that
were related to the Employee's breach of a restrictive covenant, an agreement
not to disclose confidential information, or other duties and obligations
Employee owed or owes to any third party; provided however, that Employee shall
not be responsible for special or consequential damages, nor shall any such
damages exceed the amount of monetary compensation paid to Employee hereunder.
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10. Right to Review and Seek Counsel. The Employee hereby acknowledges
that he has actively engaged in the discussion and negotiation of this Agreement
and its terms and has had full and fair opportunity to discuss and review the
Agreement and its terms with any legal or other advisor of his choice and has
either done so, or voluntarily declined to do so. Employee further agrees that
this Agreement has been fully negotiated by parties acting at arms' length with
full opportunity to negotiate terms such that this Agreement and all of its
terms shall be deemed to have been drafted mutually by both parties.
11. Waiver. The waiver by the Company of a breach or threatened breach of
this Agreement by the Employee shall not be construed as a waiver of any
subsequent breach by the Employee. Inaction or silence by the Company shall not
be deemed a waiver. No waiver of any breach is effective unless expressly stated
in writing and signed by a duly authorized member of the Board or its authorized
designee.
12. Entire Agreement/Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
approved by the Board and agreed to in writing signed by Employee and such
officer as may be specifically authorized by the Board. This Agreement contains
the entire understanding of the parties hereto and no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party, which are not set forth
expressly in this Agreement. This Agreement supersedes all negotiations,
preliminary agreements, and all prior and contemporaneous discussions and
understandings of the parties hereto and/or their affiliates. The Employee
acknowledges that he has not relied on any prior or contemporaneous discussions
or understandings in entering into this Agreement.
13. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Nevada without regard to conflicts of
law.
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14. Consent to Personal Jurisdiction and Venue. Each party hereby consents
to personal jurisdiction and exclusive venue of the Federal and State courts
located in San Diego, California, and waive any objections to such courts based
on venue in connection with any claim or dispute arising under this Agreement.
For purposes of this Section, the term "Employee" includes any business entity
owned or controlled by the Employee.
15. Headings and Captions. The titles and captions of paragraphs and
subparagraphs contained in this Agreement are provided for convenience of
reference only, and shall not be considered terms or conditions of this
Agreement.
16. Validity. 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 shall remain in full force and effect.
17. Survival. The provisions of this Agreement shall not survive the
termination of Employee's employment hereunder, except that all the provisions
of Section 5, Section 8, Section 9, and Section 10 shall survive termination of
this Agreement and termination of Employee's employment, and be binding upon the
parties.
18. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns, and the Employee
agrees that this Agreement may be assigned by the Company. This Agreement is not
assignable by the Employee.
19. Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall be deemed to be an original
but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day, month and year first above mentioned.
American Racing Capital, Inc. Employee
By:
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Name: By: /s/ D. Xxxx Xxxxx
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Title: D. Xxxx Xxxxx
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