Document:

RC2 Exhibit 10.18 to December 2004 Form 10-K

Exhibit
10.18

 

EMPLOYMENT
AGREEMENT

This
Employment Agreement is made as of June 4, 2004, by and between RC2
Corporation, a Delaware corporation and subsidiaries (the "Company"), and Thomas
Lowe (the "Employee"). Certain capitalized terms used herein are defined in
section 10 below.

RECITALS

A.
 RC2
Brands, Inc., a wholly owned subsidiary of the Company (the "Purchaser"), has
acquired substantially all of the assets of Playing Mantis, Inc., an Indiana
corporation (the "Seller"), pursuant to an Asset Purchase Agreement, dated as of
the date hereof (the "Purchase Agreement").

B.
 The
execution and delivery of this Agreement is a condition to the consummation of
the transactions contemplated by the Purchase Agreement.

C.
 The
Company and the Employee desire to enter into an employment
arrangement.

D.
 The
Company has determined that it is in the best interests of the Company and its
shareholders to enter into this Agreement setting forth the obligations and
duties of both the Company and the Employee.

E.
 The
Company wishes to assure itself of the services of the Employee for the period
hereinafter provided, and the Employee is willing to be employed by the Company
for said period, upon the terms and conditions provided in this
Agreement.

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 Executive Vice President of the Company under the
direction of the Company's Chief Executive Officer and President. The Employee
will focus his efforts during 2004 on the product lines formerly marketed by the
Seller. 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, President 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;
provided that the Employee may devote reasonable business time and attention to
the windup of the affairs of the Seller and to civic and charitable activities
as long as such activities do not materially interfere with the performance of
the Employee's duties hereunder.

4.
 Compensation. The
Employee shall receive a base salary of $145,831 for the remainder of 2004 (i.e.
$20,833 per month) and $250,000 per year thereafter during the Employment
Period, payable in regular and equal monthly installments (the "Base Salary").
The Employee's Base Salary will be reviewed annually in the first quarter of
each year by the Chief Executive Officer and President of the Company to
determine appropriate increases, if any, in such Base Salary.

5.
 Fringe
Benefits.

(a)
 Vacation. The
Employee shall be entitled to four weeks of paid vacation annually under the
terms of the Company's stated vacation policy. The Employee and the Company
shall mutually determine the time and intervals of such vacation.

(b)
 Medical,
Health, Dental, Disability and Life Coverage. The
Employee shall be eligible to participate in any medical, health, dental,
disability and life insurance policy in effect for Senior Management of the
Company on a basis consistent with his position and level of compensation with
the Company.

(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 management of the Company, on a basis consistent with
his position and level of compensation with the Company; provided, however, that
the Employee will not be entitled to any incentive or other bonus for
performance in 2004. Without limiting the foregoing, beginning with respect to
performance in 2005, Employee shall be entitled to participate in the annual
Management Incentive Bonus Plan on a basis consistent with past practice and his
position and level of compensation with the Company, with a target bonus amount
equal to the Employee's Base Salary in 2005 and 2006.

 

2

(d)
 Automobile. The
Company agrees to reimburse the Employee up to $600.00 per month, as such amount
may be increased from time to time consistent with the Company's reimbursement
policy for management of the Company to cover Employee's expenses in connection
with his leasing of an automobile. Additionally, the Company will pay for the
gas used for business purposes. All maintenance and insurance expense for the
automobile is the responsibility of the Employee.

(e)
 Reimbursement
for Reasonable Business Expenses. The
Company shall pay or reimburse the Employee for reasonable expenses incurred by
him in connection with the performance of his duties pursuant to this Agreement
including, but not limited to, travel expenses, expenses in connection with
seminars, professional conventions or similar professional functions and other
reasonable business expenses.

(f)
 Key
Man Insurance. The
parties agree that the Company has the option to purchase one or more key man
life insurance policies upon the life of the Employee. The Company shall own and
shall have the absolute right to name the beneficiary or beneficiaries of said
policy. The Employee agrees to cooperate fully with the Company in securing said
policy, including, but not limited to submitting himself to any physical
examination which may be required at such reasonable times and places as Company
shall specify.

(g)
 Product
Samples. During
the Employment Period and thereafter during the Noncompete Period pursuant to
section 7, the Company will provide to the Employee at no charge promptly
after release six samples of each product either sold under trademarks acquired
from the Seller or as to which the Employee has participated in the design or
marketing.

6.
 Termination.

(a)
 Termination
of the Employment Period. The
Employment Period shall continue until the earlier of: (i) December 31, 2006
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."

3

(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 (1) violated the terms of section 7 or section 8 of
this Agreement; (2) failed to substantially perform his duties to the
reasonable satisfaction of the Chief Executive Officer, the President or the
Board of Directors; (3) committed a felony or a crime involving moral
turpitude; (4) engaged in serious misconduct which is demonstrably
injurious to the Company or any of its Subsidiaries; (5) engaged in fraud
or dishonesty with respect to the Company or any of its Subsidiaries or made a
material misrepresentation to the stockholders or directors of the Company; or
(6) committed acts of recklessness in the performance of his duties which
are substantially injurious to the Company or any of its
Subsidiaries.

(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 other than the offices at which the Employee is
principally employed as of the date hereof or the Employee's principal
residence; 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."

4

(c)
 Termination
for Disability or Death. In the
event of termination for Disability or death, payments of the Employee's Base
Salary shall be made to the Employee, his designated beneficiary or his estate
for a period of six months after the Termination Date in accordance with the
normal payroll practices of the Company. During this period, the Company shall
also reimburse the Employee for amounts paid, if any, to continue medical,
dental and health coverage pursuant to the provisions of the Consolidated
Omnibus Budget Reconciliation Act. During this period, the Company will also
continue Employee's life insurance and disability coverage, to the extent
permitted under applicable policies, and will pay to the Employee the fringe
benefits pursuant to section 5 which have accrued prior to the Termination
Date.

(d)
 Termination
by the Company without Cause or by the Employee for Good Reason. If
(i) the Employment Period is terminated by the Company for any reason other
than for Cause, Disability or death, (ii) the Employment Period is
terminated by the Company for what the Company believes is Cause or Disability,
and it is ultimately determined that the Employment Period was terminated
without Cause or Disability or (iii) the Employee resigns for Good Reason,
the Employee shall be entitled to receive, as damages for such a termination,
his Base Salary for a period elected by the Company at its option (by written
notice to the Employee delivered within ten business days after the Termination
Date) of either [a] one year from the Termination Date (in which case, the
Noncompete Period pursuant to section 7 will end one year from the
Termination Date) or [b] 18 months from the Termination Date (in which case
the Noncompete Period pursuant to section 7 will end 18 months from the
Termination Date); provided, however, that if such termination or resignation
occurs at any time after the occurrence of or in contemplation of a Change of
Control, then Employee shall be entitled to receive his Base Salary from the
Termination Date to the second anniversary of the Termination Date (the period
during which the Employee is entitled to receive his Base Salary pursuant hereto
is referred to as the "Severance Period"). If the Company fails to provide
written notice to the Employee electing the Severance Period pursuant to clause
[a] or [b] above with the ten-business day period, the Severance Period shall be
deemed to be one year from the Termination Date. Such payment of Base Salary
shall be made in accordance with the normal payroll practices of the Company.
During the Severance Period, the Company shall also reimburse the Employee for
amounts paid, if any, to continue medical, dental and health coverage pursuant
to the provisions of the Consolidated Omnibus Budget Reconciliation Act. During
the Severance Period, the Company will also continue Employee's life insurance
and disability coverage and will pay to the Employee the fringe benefits
pursuant to section 5 which have accrued prior to the date of
termination.

5

(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.

(f)
 Effect
of Termination. The
termination of the Employment Period pursuant to section 6(a) shall not
affect the Employee's obligations as described in sections 7 and
8.

7.
 Noncompetition
and Nonsolicitation. The
Employee acknowledges and agrees that the contacts and relationships of the
Company and its 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 after
the Employment Period for the length of the applicable Severance Period if the
Employment Period is terminated pursuant to section 6(d) (other than
following a Change of Control) or for 18 months after the Employment Period if
the Employment Period is terminated pursuant to section 6(c) due to the
Disability of the Employee, pursuant to Section 6(d) following a Change of
Control or pursuant to section 6(e) (the "Noncompete Period"), he shall
not, directly or indirectly, either individually or as an employee, principal,
agent, partner, shareholder, owner, trustee, beneficiary, co-venturer,
distributor, consultant, representative or in any other capacity, participate
in, become associated with, provide assistance to, engage in or have

6

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 or one of its Affiliates, shall not be deemed
financial participation in a competitor. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this section is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. The term "indirectly" as
used in this section and section 8 below is intended to include any acts
authorized or directed by or on behalf of the Employee or any Affiliate of the
Employee.

(b)
 Nonsolicitation. The
Employee hereby covenants and agrees that during the Noncompete Period, he shall
not, directly or indirectly, either individually or as an employee, agent,
partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor,
consultant or in any other capacity:

(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;

(iii) induce or
attempt to induce any employee, sales representative, consultant or other agent
of the Company or any of its Affiliates to terminate his relationship or breach
any agreement with the Company or any of its Affiliates; or

7

(iv)
 hire any
person who was an employee, sales representative, consultant or other agent of
the Company or any of its Affiliates at any time during the Noncompete
Period.

(c)
 Extension
of Covenants. In the
event of a breach by the Employee of any covenant set forth in Section 7(a)
or (b) of this Agreement, the term of such covenant will be extended by the
period of the duration of such breach.

(d)
 Non-Disparagement. The
Employee will not, at any time during or after the Noncompete Period, disparage
the Company or any of the Company's Affiliates, or any of their respective
stockholders, directors, officers, employees or agents. 

(e)
 Notice
of Other Employers. During
the Noncompete Period, the Employee will, within ten days after accepting any
employment with any person other than the Company or any of its Affiliates,
advise the Company of the identity of the prospective employer. The Company may
serve notice upon such employer that the Employee is bound by this Agreement and
furnish such employer with a copy of this Agreement or relevant portions
thereof.

(f)
 Stockholder
Inventory. During
the Noncompete Period, the Employee will not market, sell or otherwise dispose
of any of the Stockholder Inventory identified in Schedule 6.05 to the
Purchase Agreement.

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 his past employment with the
Company, and by virtue of his employment with the Company, he has had access to
and will have access to, and has been entrusted with and will be entrusted with,
Confidential Information, and that the Company would suffer great loss and
injury if the Employee would disclose this information or use in a manner not
specifically authorized by the Company. Therefore, the Employee agrees that
during the Employment Period and for five 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, 

8

printouts
and software and other documents and data (and copies thereof) containing the
Confidential Information or Work Product (as defined below) or relating to 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 Affiliates' business,
research and development or existing or planned 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 20% 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 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

9

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, 20%
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, [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 20% of, respectively, the then
outstanding shares of common stock of such corporation and the 

10

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 20% 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.

"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, Executive Vice Presidents, 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. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of partnership, association or other business
entity gains or losses or shall be or control any managing director or general
partner of such partnership, association or other business entity.

11.
 Specific
Performance. The
Employee acknowledges and agrees that irreparable injury to the Company may
result in the event the Employee breaches any covenant or agreement contained in
sections 7 and 8 and that the remedy at law for the breach of any such
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.

11

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.

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.]

12

IN
WITNESS WHEREOF, the parties have executed or caused this Employment

Agreement
to be executed as of the date first above written.

RC2
CORPORATION

By:
/s/
Curtis W.
Stoelting                   
 

Curtis W.
Stoelting,

Chief
Executive Officer

 

/s/
Thomas
Lowe                                  

Thomas
Lowe

 

 

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Exhibit 4.4    
    

 
  EXECUTION COPY    
    

 
 

LIMITED WAIVER
  TO REVOLVING CREDIT AGREEMENT    
    

        This LIMITED WAIVER TO REVOLVING CREDIT AGREEMENT (this "Limited Waiver") is dated as of July 3, 2003, by
and among (a) FRIENDLY ICE CREAM CORPORATION, a Massachusetts corporation (the "Borrower"), (b) the undersigned Required Lenders and
(c) FLEET NATIONAL BANK, as administrative agent for the Lenders a party to the Revolving Credit Agreement (as hereinafter defined) (in such capacity, the
"Administrative Agent"). Capitalized terms as used and not otherwise defined in this Limited Waiver shall have the meanings assigned to such terms in
the Revolving Credit Agreement. 

        WHEREAS,
the Borrower, the Lenders and the Administrative Agent are parties to that certain Revolving Credit Agreement, dated as of December 17, 2001 (as heretofore amended or
otherwise amended, modified, or amended and restated, the "Revolving Credit Agreement"); 

        WHEREAS,
the Borrower has requested that the Required Lenders (a) allow the Borrower to repurchase certain of the bonds that were issued in connection with the Senior Note
Indenture (as defined in the Revolving Credit Agreement) in an amount up to $3,000,000 and (b) waive the application of certain requirements contained in the Revolving Credit Agreement in order
to allow the acquisition and/or development by the Borrower of a new restaurant location; and 

        WHEREAS,
pursuant to the terms, subject to the conditions and in reliance on the representations and warranties contained in this Limited Waiver, the undersigned Required Lenders are
prepared to (a) allow the Borrower to repurchase certain of the bonds that were issued in connection with the
Senior Note Indenture (as defined in the Revolving Credit Agreement) in an amount up to $3,000,000 and (b) waive the application of certain requirements contained in the Revolving Credit
Agreement in order to allow the acquisition and/or development by the Borrower of a new restaurant location; 

        NOW
THEREFORE, in consideration of the premises and the mutual covenants contained in this Limited Waiver, the Borrower, the Administrative Agent and the undersigned Required Lenders
hereby agree as follows. 

        SECTION 1. Limited Waiver.    

        (a)   The
Required Lenders hereby waive (i) the application of clause (g) of the definition of "Permitted Excess Cash Flow Prepayments" in Section 1.1 of
the Revolving Credit Agreement, solely as it applies to the Borrower's repurchase of certain of the bonds that were issued in connection with the Senior Note Indenture in an amount up to $3,000,000 on
or before July 31, 2003 (the "Bond Repurchase"), and (ii) any requirement under the Revolving Credit Agreement that the Bond Repurchase be
characterized as a Capital Expenditure or used in any way in the calculation of Excess Cash Flow, Fixed Charge Coverage Ratio or any other calculation involving Permitted Excess Cash Flow Prepayments.
The Borrower hereby agrees that the Bond Repurchase shall be at or below One Hundred and Three Percent (103%) of par and that, notwithstanding the foregoing, clauses (a) through (f) of
the definition of "Permitted Excess Cash Flow Prepayments" shall apply to the Bond Repurchase. 

        (b)   The
Required Lenders hereby waive, solely with respect to the acquisition of and/or development by the Borrower of that certain restaurant location at Bunker Hill Mall,
5 Austin Street, Unit E-107, Charlestown, Massachusetts 02129 (the "Charlestown Acquisition"), the application to such Charlestown
Acquisition of clause (d) of the definition of "Permitted Acquisitions" in Section 1.1 of the Revolving Credit Agreement. Notwithstanding the foregoing, the Borrower hereby acknowledges
that all other terms, conditions and limitations contained in the Revolving Credit Agreement, including but not limited to any limitations otherwise provided by the application of the definition of
"Permitted Acquisitions", shall apply to the Charlestown Acquisition. 

 

        SECTION 2. Representations and Warranties.    The Borrower hereby represents and warrants to the
Administrative Agent and each Lender, on and as of the date hereof, as follows: 

        (a)   This
Limited Waiver has been duly executed and delivered by the Borrower. The execution and delivery by the Borrower of this Limited Waiver and the performance by the
Borrower of this Limited Waiver and the Revolving Credit Agreement have been duly authorized by proper corporate or other proceedings by the Borrower, and this Limited Waiver and the Revolving Credit
Agreement constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with the terms hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity and except to the extent that
availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 

        (b)   No
Default or Event of Default exists on the date hereof after giving effect to the limited waiver described in  Section 1 hereof. 

        SECTION 3. Effectiveness.    This Limited Waiver shall become effective as of the date hereof only upon
the Administrative Agent's receipt of the duly executed counterpart signature pages to this Limited Waiver from the Required Lenders and the Borrower. 

        SECTION 4. APPLICABLE LAW.    THIS LIMITED WAIVER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. 

        SECTION 5. Expenses.    The Borrower shall pay, in accordance with Section 16.2 of the Revolving
Credit Agreement, all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution, delivery and
enforcement of this Limited Waiver, including, but not limited to, the reasonable fees, expenses and disbursements of Bingham McCutchen LLP. 

        SECTION 6. Miscellaneous.    

        6.1.  From
and after the date hereof, this Limited Waiver shall be deemed a Loan Document for all purposes of the Revolving Credit Agreement and the other Loan Documents and
each reference to Loan Documents in the Revolving Credit Agreement and the other Loan Documents shall be deemed to include this Limited Waiver. This Limited Waiver may be executed in any number of
counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of a signature page by facsimile
transmission shall be effective as delivery of a manually executed counterpart of this Limited Waiver. 

        6.2.  Except
as expressly provided herein, (a) this Limited Waiver shall not limit the rights of or otherwise adversely affect the Lenders under the Revolving Credit
Agreement or any other Loan Document, and (b) the Lenders reserve the right to insist on strict compliance with the terms of the Revolving Credit Agreement and the other Loan Documents, and the
Borrower expressly acknowledges such reservation of rights. The grant of the consent and waiver herein will not, either alone or taken with other waivers of provisions of the Revolving Credit
Agreement or any other Loan Document or consents with respect thereto, be deemed to create or be evidence of a course of conduct. Any future or additional waiver of any provision of the Revolving
Credit Agreement, or of any other Loan Document to which the Lenders are a party or have consented, or consent with respect thereto shall be effective only if set forth in a writing separate and
distinct from this Limited Waiver and duly executed by such parties as are required by Section 16.12 of the Revolving Credit Agreement. 

[Remainder of page intentionally left blank]

2

        IN WITNESS WHEREOF, the undersigned have caused this Limited Waiver to be executed and delivered as an agreement as of the date first written above. 

	 	 	BORROWER
	

 	
 	

FRIENDLY ICE CREAM CORPORATION
	

 	
 	

By:	

/s/  PAUL HOAGLAND      

	 	 	 	 	Name: Paul Hoagland

Title:
	

 	
 	
REQUIRED LENDERS
	

 	
 	

FLEET NATIONAL BANK,

    individually and as Administrative Agent

    and as Lender
	

 	
 	

By:	

/s/  ROBERT W. MACELHINEY      

	 	 	 	 	Name:    Robert W. MacElhiney

Title:    Director
	

 	
 	

CITIZENS BANK,

    individually and as Lender
	

 	
 	

By:	

/s/  CINDY CHEN      

	 	 	 	 	Name:    Cindy Chen

Title:    Vice President
	

 	
 	

BANKNORTH, N.A.,

    individually and as Lender
	

 	
 	

By:	

/s/  MARIA P. GONCALVES      

	 	 	 	 	Name:    Maria P. Goncalves

Title:    Vice President

QuickLinks

Exhibit 4.4

EXECUTION COPY

LIMITED WAIVER TO REVOLVING CREDIT AGREEMENT

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