EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT is entered into on April 25, 1997, effective
as of April 1, 1997, among Xxxxx X. Xxxxxx (the "Executive"), Xxxx Sports Corp.,
a Delaware corporation (the "Holding Company"), and Xxxx Sports, Inc., a
California corporation (the "Operating Company"). The Holding Company and the
Operating Company are collectively referred to herein as the "Company."
WHEREAS, the Company is engaged primarily in the business of designing,
manufacturing, producing, distributing, marketing, advertising and selling auto
racing helmets, bicycles, bicycle helmets, bicycle accessories and related
products;
WHEREAS, the Executive serves as Senior Vice President, Chief Financial
Officer, Treasurer and Secretary of the Holding Company and the Operating
Company;
WHEREAS, the Executive's abilities and services are unique and
essential to the prospects of the Company; and
WHEREAS, the Company and the Executive desire to enter into this
Agreement to provide for the continued employment of the Executive by the
Company upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Employment; Term.
The Company hereby employs the Executive and the Executive hereby
agrees to be employed by the Company upon the terms and subject to the
conditions contained in this Agreement. The term of this Agreement shall
commence as of April 1, 1997 and shall end on March 31, 2000, unless earlier
terminated pursuant to Section 4 hereof. As used herein, the term "Employment
Period" shall mean the period from April 1, 1997 until the expiration of the
term of this Agreement or the earlier termination of the term hereof pursuant to
Section 4 hereof.
2. Position; Duties; Responsibilities. The Company shall employ the
Executive as the Senior Vice President, Chief Financial Officer, Treasurer and
Secretary of the Holding Company and the Operating Company. The Executive's
principal office for the performance of her duties under this Agreement shall be
located in San Jose, California. The Executive shall faithfully and loyally
perform to the best of her abilities all the duties reasonably assigned to her
hereunder, shall devote such business
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time, attention and effort to the affairs of the Company as is reasonably
necessary for the proper performance of such duties and shall use her reasonable
best efforts to promote the interests of the Company. Notwithstanding the
foregoing, the Executive may serve as a director, officer or paid consultant of
business corporations other than the Company or civic or community organizations
or entities, provided that such activities do not violate the terms of any of
the covenants set forth in Section 7 hereof and such activities are approved
prior to the commencement thereof by the Chairman of the Board and Chief
Executive Officer of the Holding Company (the "Company CEO").
3. Compensation.
(a) Base Salary. During the Employment Period, the Company shall pay to
the Executive an annual base salary at the rate of $160,000 per annum, payable
in accordance with the Company's executive payroll policy. Such base salary
shall be reviewed annually, commencing April 1, 1998, and may be increased (but
shall not be decreased) annually, in the sole discretion of the Company. The
Executive's base salary, as such base salary may be increased annually
hereunder, is referred to herein as the "Base Salary."
(b) Annual Performance Bonus. (i) The Executive shall be entitled to
receive an annual performance bonus payable in cash for each full fiscal year of
the Company during the term of this Agreement in accordance with the Company's
management incentive program, as in effect from time to time. The Executive
shall participate in such program at a level which would result in a performance
bonus equal to 50% of her Base Salary if the target level of performance were
achieved. The annual performance bonus to which the Executive is entitled
pursuant to this Section 3(b) is referred to herein as the "Bonus."
(ii) The payment of each Bonus shall be made within 30 days after the
Company's independent accountants shall have certified the Company's
consolidated financial statements for the fiscal year to which such Bonus
relates.
(iii) If the Company's fiscal year changes, the Executive's opportunity
to earn the Bonus shall not be materially and adversely affected.
(c) Stock Options. In the discretion of the Company's Management Stock
Incentive Committee, the Executive shall be eligible to receive options to
purchase shares of Holding Company common stock ("Common Stock") pursuant to the
terms of the Xxxx Sports Management Stock Incentive Plans.
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(d) Perquisites. During the Employment Period, the Executive shall be
entitled to a cash automobile allowance in the amount of $400 per month.
(e) Reimbursement of Expenses. The Company shall reimburse the
Executive for all expenses necessarily and reasonably incurred by her in
connection with the business of the Company, upon presentation of proper
receipts or other proof of expenditure and subject to such reasonable guidelines
or limitations provided to the Executive and applied prospectively, as
established by the Company.
(f) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and sick leave in accordance with Company policy.
(g) Participation in Benefit Plans. During the Employment Period, the
Executive shall be entitled to participate in any profit sharing plan,
retirement plan, group life insurance plan or other insurance plan or medical
expense plan maintained by the Company for its senior executives generally,
which plans shall not differ in value in any manner materially adverse to the
Executive from those in which the Executive currently participates.
4. Termination.
(a) Death. Upon the death of the Executive, this Agreement shall
automatically terminate and all rights of the Executive and her heirs, executors
and administrators to compensation and other benefits hereunder shall cease,
except for (i) Base Salary which shall have accrued to the date of death and
(ii) the rights to indemnification under Section 5 hereof.
(b) Disability. The Company may, at its option, terminate this
Agreement upon written notice to the Executive if the Executive, because of
physical or mental incapacity or disability, fails in any material respect to
perform the services required of her hereunder for a continuous period of 120
days or any 180 days out of any 12-month period. Upon such termination, all
obligations of the Company hereunder shall cease, except for (i) Base Salary
which shall have accrued to the date of termination and (ii) the rights to
indemnification under Section 5 hereof. In the event of any dispute regarding
the existence of the Executive's incapacity hereunder, the matter shall be
resolved by the determination of a majority of three physicians qualified to
practice medicine in the state of the Executive's residence, one to be selected
by each of the Executive and the Company and the third to be selected by such
two designated physicians. For this purpose, the Executive shall submit to
appropriate medical examinations.
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(c) Cause. (i) The Company may, at its option, terminate the
Executive's employment under this Agreement for "Cause" (as hereinafter
defined). A termination for Cause shall not take effect until and unless the
Company complies with this Section 4(c)(i). The Executive shall be given written
notice by the Company of the intention to terminate her employment hereunder for
Cause (the "Cause Notice"). The Cause Notice shall state the particular
action(s) or inaction(s) giving rise to termination for Cause. The Executive
shall have 10 days after the Cause Notice is given to cure the particular
action(s) or inaction(s), to the extent a cure is possible. If the Executive so
effects a cure, the Cause Notice shall be deemed rescinded and of no force or
effect.
(ii) As used in this Agreement, the term "Cause" shall mean any one or
more of the following:
(A) the Executive's refusal to perform specific directives of
the Company CEO or such other officer of the Company to whom the
Executive reports, which directives are consistent with the scope and
nature of the Executive's duties and responsibilities as set forth
herein;
(B) the Executive's admission or conviction of a felony or of
any crime involving moral turpitude, fraud, embezzlement, theft or
misrepresentation;
(C) any gross or willful misconduct of the Executive resulting
in substantial loss to the Company or substantial damage to the
Company's reputation; or
(D) any breach by the Executive of any one or more of the
covenants contained in Section 6 or 7 hereof, other than an inadvertent
and unintentional breach of a covenant contained in Section 6 having an
inconsequential effect upon the Company or any of its controlled
affiliates.
(iii) The exercise of the right of the Company to terminate this
Agreement pursuant to this Section 4(c) shall not abrogate the rights or
remedies of the Company in respect of the breach giving rise to such
termination.
(iv) If the Company terminates the Executive's employment for Cause,
she shall be entitled to:
(A) accrued Base Salary through the date of the termination of
her employment;
(B) any Bonus owing but not yet paid for any fiscal year ended
on or before the Executive's termination of employment for Cause;
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(C) any amounts owing but not yet paid pursuant to Section
3(e); and
(D) other or additional benefits in accordance with applicable
plans and programs of the Company.
(v) Notwithstanding anything to the contrary contained in this
Agreement, if, following a termination of the Executive's employment for Cause,
a court of competent jurisdiction, in a final determination, determines that the
Executive was not guilty of the conduct that formed the basis for the
termination, the Executive shall be entitled to the payments and the economic
equivalent of the benefits she would have received had her employment been
terminated by the Company without Cause.
(d) Termination Without Cause. If, during the Employment Period, the
Company terminates the employment of the Executive hereunder for any reason
other than a reason set forth in Section 4(a), 4(b) or 4(c):
(i) concurrent with such termination, the Company shall pay to the
Executive an amount equal to her Base Salary accrued through the date of
termination;
(ii) the Company shall continue to pay the Executive her Base Salary
and all other benefits (excluding Bonus) which would otherwise be payable
hereunder for a period of 18 months following the date of termination and the
Executive's coverage under the medical, dental, life and long-term disability
insurance policies maintained by the Company shall remain in effect during such
period;
(iii) all of the Executive's options to purchase Common Stock shall be
immediately 100% exercisable;
(iv) the Executive shall be entitled to any amounts owing but not yet
paid pursuant to Section 3(e); and
(v) the Executive shall be entitled to her rights to indemnification
under Section 5 hereof.
(e) Termination for Good Reason. (i) If, during the Employment Period,
the Executive terminates her employment hereunder for "Good Reason" (as such
term is defined in Section 4(e)(ii) hereof, she shall be entitled to all of the
payments and benefits specified by Sections 4(d)(i) through 4(d)(v) hereof,
inclusive.
(ii) For purposes of this Agreement, "Good Reason" shall mean, without
the Executive's express written consent, the occurrence of any one or more of
the following events:
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(A) a material breach of this Agreement by the Company;
(B) any change in the Executive's responsibilities described
in Section 2 in any respect which is materially adverse to the
Executive;
(C) a diminution of any of the Executive's significant duties
or the assignment to the Executive of any duties inconsistent with her
duties or the material impairment of the Executive's ability to
function in the positions described in Section 2 hereof, in each case
only after the Company shall have had an opportunity to cure (any such
cure to be effected within 30 days after appropriate written notice of
the basis for Good Reason is given to the Company by the Executive);
(D) a material reduction of any benefit or perquisite enjoyed
by the Executive, unless a plan providing a substantially similar
economic opportunity is substituted or all comparable executives suffer
a substantially similar reduction or failure;
(E) the relocation of the Executive's office to a location
more than 50 miles from San Jose, California; or
(F) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to
all or substantially all of the assets of the Company within 15 days
after a merger, consolidation, sale of assets or similar transaction.
(f) Voluntary Termination. If, during the Employment Period, the
Executive voluntarily terminates her employment hereunder for any reason other
than Good Reason, she shall be entitled to the payments specified by Sections
4(c)(iv)(A) through 4(c)(iv)(D) hereof, inclusive.
5. Indemnification. To the fullest extent permitted by law, the
Restated Certificate of Incorporation of the Holding Company and the Articles of
Incorporation of the Operating Company, the Executive (and her heirs, executors
and administrators) shall be indemnified by the Company and its successors and
assigns. The obligations of the Company pursuant to this Section 5 shall survive
the termination of the Employment Period, except as otherwise provided herein.
6. Confidentiality. The Executive shall at all times during the
Employment Period and thereafter hold in confidence any and all Confidential
Information (as hereinafter defined) that may have come or may come into her
possession or within her knowledge concerning the products, services, processes,
businesses, suppliers, customers and clients of the Company or
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its controlled affiliates. The Executive agrees that neither she nor any person
or enterprise controlled by her will for any reason directly or indirectly, for
herself or any other person, use or disclose any trade secrets, proprietary or
confidential information, inventions, manufacturing or industrial processes or
procedures, patents, trademarks, trade names, customer lists, service marks,
service names, copyrights, applications for any of the foregoing, or licenses of
other rights in respect thereof (collectively, "Confidential Information"),
owned or used by, or licensed to, the Company or any of its controlled
affiliates, provided that the Executive may disclose Confidential Information
which has become generally available to the public other than as a result of a
breach of this Agreement by the Executive or pursuant to an order of a court of
competent jurisdiction or of a governmental agency, department or commission.
Upon termination of her employment under this Agreement, the Executive shall
promptly surrender to the Company all documents she believes contain
Confidential Information and that are within her possession or control, other
than documents to which the Executive is or was a party or that relate to the
Executive or the basis, or purported basis, on which her employment was
terminated.
7. Noncompetition and Nonsolicitation. (a) Subject to the following
sentence, the Executive agrees that from the date hereof and subsequent to the
termination of her employment under this Agreement and continuing for a period
of two years (the "Noncompete Period"), neither she nor any person or enterprise
controlled by her will become a stockholder, lender, director, officer, agent or
employee of a corporation or member of or lender to a partnership, engage as a
sole proprietor in any business, act as a consultant to any of the foregoing or
otherwise engage directly or indirectly in any business, that is in competition
with the business then conducted by the Company or any of its controlled
affiliates in any state in the United States or any other country in which the
Company or any of its controlled affiliates has engaged in such business during
the term of the Executive's employment under this Agreement; provided, however,
that the foregoing shall not prohibit the Executive from owning less than two
percent of the outstanding securities of any class of capital stock of a
corporation the securities of which are regularly traded or quoted on a national
securities exchange or on an inter-dealer quotation system.
(b) The Executive agrees that during the Noncompete Period, neither she
nor any person or enterprise controlled by her will (i) solicit for employment
or employ any person who was employed by the Company or any of its controlled
affiliates at any time within one year prior to the time of the act of
solicitation or (ii) in any way cause, influence, induce or attempt to persuade
any person who was employed by the Company or any of its controlled affiliates
at any time within one year
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prior to the time of such act to terminate her employment relationship with the
Company or any of its affiliates.
(c) Relief, Reformation; Severability. The Executive acknowledges that
there is no adequate remedy at law for a breach of this Section 7 and that, in
the event of such a breach or attempted breach, the Company shall be entitled to
injunctive or other equitable relief to prevent any such breach, attempted
breach or continuing breach, without prejudice to any other remedies for damages
or otherwise. The Executive agrees that the covenants contained in this
Agreement are separate and are reasonable in their scope and duration and that
the Executive shall not raise any issue of reasonableness as a defense in any
proceeding to enforce any of such covenants. Notwithstanding the foregoing, in
the event that a covenant contained in this Agreement shall be deemed by any
court to be unreasonably broad in any respect, the parties agree that the court
may modify such covenant for the purpose of making such covenant reasonable in
scope and duration. The validity, legality or enforceability of the remaining
provisions of this Agreement shall not be affected by any such modification.
8. Inventions. The Executive hereby assigns to the Company her entire
right, title and interest in and to all discoveries and improvements, patentable
or otherwise, trade secrets and ideas, writings and copyrightable material,
which may be conceived by the Executive or developed or acquired by her during
the term of her employment by the Company, which may pertain directly or
indirectly to the Company's business. The Executive agrees to disclose fully all
such developments to the Company upon its request, which disclosure shall be
made in writing promptly following any such request. The Executive shall, upon
the Company's request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable the
Company to file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries.
9. Remedies. The Executive acknowledges that any material breach of
this Agreement will cause irreparable harm to the Company, that such harm will
be difficult if not impossible to ascertain, and that the Company shall be
entitled to equitable relief, including injunction, against any actual or
threatened breach hereof, without bond and without liability should such relief
be denied, modified or vacated. Neither the right to obtain such relief nor the
obtaining of such relief shall be exclusive of or preclude the Company from any
other remedy.
10. Insurance. The Company may, at its election and for its benefit,
insure the Executive against disability, accidental loss or death and the
Executive shall submit to such physical examinations and supply such information
as may be required in connection therewith.
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11. Assignment. The rights and benefits of the Executive hereunder
shall not be assignable, whether by voluntary or involuntary assignment or
transfer. This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of the Company, and the heirs, executors and
administrators of the Executive, and shall be assignable by the Company to any
entity acquiring substantially all of the assets of the Company, whether by
merger, consolidation, sale of assets or similar transaction.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered, sent by
certified or registered mail or sent by overnight courier service as follows: if
to the Executive, to her address as set forth in the records of the Company, and
if to the Company, to the address of its principal executive offices, attention:
Chief Executive Officer, with a copy to Xxxxx X. Xxxxxx, Esq., Sidley & Austin,
Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or to any other address
designated by any party hereto by notice similarly given.
13. Waiver of Breach. A waiver by the Company or the Executive of any
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any other or subsequent breach by the other
party.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof. This Agreement may be
modified only by an agreement in writing signed by the parties hereto.
15. Costs. In the event that a dispute shall arise between the parties
hereto and such dispute is resolved by a court of competent jurisdiction, all
reasonable attorneys' fees and costs of the Company and the Executive and all
other costs and expenses of the Company and the Executive associated with such
dispute shall be borne by the Company; provided that if it is determined that
the claims of the Executive were without reasonable basis, each party shall bear
her or its own attorneys' fees and costs.
16. Applicable Law. The terms of this Agreement shall be governed by
and construed in accordance with the internal laws (as opposed to the conflict
of laws provisions) of the State of Illinois.
17. Prior Agreements. This Agreement supersedes all prior agreements
between the Executive and the Company concerning the Executive's employment with
the Company, and none of such agreements shall be of any further force or effect
whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
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XXXX SPORTS CORP.
By_________________________________
Xxxxx X. Xxx
Chairman of the Board and
Chief Executive Officer
XXXX SPORTS, INC.
By_________________________________
Xxxxx X. Xxx
Chairman of the Board
and Chief Executive Officer
EXECUTIVE:
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Xxxxx X. Xxxxxx
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