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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this ___ day of
______, 1997, by and between Xxxx X. Xxxxxxxxx, a resident of the State of
Kansas (the "Employee"), and Alternative Living Services, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company, Tango Merger Corporation, a Kansas corporation
and a wholly owned subsidiary of the Company ("Merger Sub"), and Sterling House
Corporation, a Kansas corporation ("Twister"), have entered into that certain
Agreement and Plan of Merger, dated July 30, 1997 (the "Merger Agreement"),
whereby Merger Sub will be merged with and into Twister, with Twister as the
surviving corporation, and Twister shall become a wholly owned subsidiary of
the Company (the "Merger");
WHEREAS, the Employee has been an employee and officer of Twister;
WHEREAS, after the Merger, Twister, as a wholly owned subsidiary of
the Company, will continue to carry on the business previously carried on by
Twister;
WHEREAS, the Company desires to employ Employee as an executive
officer of the Company effective at the Effective Time (as defined in the
Merger Agreement);
WHEREAS, the Company, on the one hand, and Employee, on the other
hand, desires to enter into this Agreement, pursuant to which Employee will be
employed by the Company on the terms and conditions hereinafter set forth, and
to make certain other agreements;
NOW THEREFORE, in consideration of the premises and of the promises
and agreements hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION l. Employment; Effective Date; Waiver of Severance
Payments.
Subject to the terms and conditions hereof, the Company hereby employs
the Employee, and the Employee hereby accepts such employment, commencing as of
the Closing Date, (as defined in the Merger Agreement). Except as set forth in
Section 4.10 hereof, as a condition to the Company entering into this
Agreement, the Employee shall waive, and Employee hereby waives, any rights
which Employee may have to severance or termination payments, including, but
not limited to, rights to salary, bonuses or benefits, payable upon the
termination of any employment agreement or arrangement which Employee may have
in effect with
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Twister prior to the Closing Date (the "Twister Employment
Agreement").
SECTION 2. Position.
2.1. Title. The Employee shall serve as an executive officer of the
Company with the title of Senior Vice President and, as such, shall report
directly to the _____________________ of the Company; provided, however, that
at no time shall the Employee be requested to perform duties which are not
commensurate with his status as an executive officer of the Company. Employee
also consents to serve, without additional compensation, if elected, as a
director of the Company.
2.2 Location. Employee's location of employment shall be at Twister's
principal executive offices in Wichita, Kansas; provided, however, that
Employee agrees to relocate his residence to Wisconsin on or after June 1, 1998
and that thereafter the location of his employment shall be at the Company's
principal executive offices in Brookfield, Wisconsin; provided, further, that
the Company may not transfer Employee to any other location without Employee's
prior written consent unless the transfer results from the relocation of the
Company's principal executive offices and the actual relocation thereto of
other executive officers of the Company holding positions and responsibilities
comparable to those of Employee.
2.3. Responsibilities. The Employee's responsibilities shall be [to be
determined by the Chief Executive Officer and the President of the Company]. In
addition, Employee shall have such additional responsibilities as directed by
the President of the Company from time to time. The Employee agrees to devote
his time during normal business hours to the business and affairs of the
Company (except as otherwise provided herein), to use his best efforts to
promote the interests of the Company and to perform faithfully and efficiently
the responsibilities assigned to him in accordance with the terms of this
Agreement, to the extent necessary to discharge such responsibilities. This
shall not preclude the Employee from (i) performing services on civic or
charitable boards or committees not significantly interfering with the
performance of his responsibilities under this Agreement, and (ii) taking
periods of vacation and sick leave to which the Employee is entitled.
SECTION 3. Term.
3.1. Term. The initial term of employment of the Employee (the
"Initial Term") hereunder shall commence on the Closing Date and shall continue
until the earlier (a) the first anniversary date of the Closing Date or (b) the
occurrence of any of the following events:
(i) the death or disability of the Employee (disability
meaning a physical illness or incapacity that prevents the Employee
from performing all of the
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substantial and material duties of Employee's then current position of
employment with the Company; provided, however, that a disability
shall be considered to exist only if the Employee is prevented for a
period of three (3) consecutive months following the date such
condition commenced and at the end of such three (3) month period
Employee remained so prevented, or if, prior to the expiration of such
three (3) month period, the Employee's attending physician provides
the Company with a written prognosis that the illness, injury or other
incapacity that results in the Employee's current disabled condition
may be reasonably expected to prevent the Employee from performing all
of the substantial and material duties of Employee's then current
position of employment with the Company for a period of at least six
(6) consecutive months;
(ii) the mutual written agreement of the parties hereto to
terminate the Employee's employment hereunder;
(iii) the Company's termination of the Employee's employment
hereunder for "cause." For purposes of this Agreement, "cause" for
termination of the Employee's employment shall exist only (x) if the
Employee is convicted of, or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony; (y) if the Employee
has engaged in conduct or activities materially damaging to the
Company, monetarily or otherwise (it being understood, however, that
neither conduct nor activities pursuant to the Employee's exercise of
Employee's good faith business judgment nor unintentional physical
damage to any property of the Company by the Employee shall be a
ground for such a determination by the Company); or (z) if the
Employee has willfully and continuously failed to substantially
perform Employee's duties hereunder (other than any such failure
resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Employee that specifically identifies the manner in which the Company
believes that the Employee has not substantially performed those
duties, and the Employee has failed to resume substantial performance
of such duties on a continuous basis within fourteen (14) days after
receiving such demand. Termination for cause shall be made only upon
vote of not less than a majority of the directors then in office,
after reasonable notice to the Employee and an opportunity for the
Employee, together with counsel, to be heard before a duly called
meeting of the Board; or
(iv) the Employee's termination of employment with the
Company for "good reason" upon reasonable notice to the Company. For
purposes of this Agreement
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"good reason" shall exist if (x) the Company materially fails to
comply with any of the provisions of this Agreement, other than
isolated, insubstantial or inadvertent failures not occurring in bad
faith and which are remedied by the Company promptly after receipt of
notice thereof given by the Employee[, or (y) the Company changes the
duties of the Employee hereunder in any manner which constitutes a
diminution of the duties to be performed by the Employee under this
Agreement].
The Initial Term hereof, and any renewal term, shall be automatically renewed
for an additional one (l) year period unless either the Employee or the Company
gives notice to the other party that it does not wish to renew this Agreement
at least ninety (90) days preceding the expiration of the Initial Term or any
renewal term, as the case may be.
3.2. Payments Upon Termination. If Employee's employment is terminated
by the Company for "cause" or by the Employee for any reason other than "good
reason," the Company shall pay Employee the Base Salary (as defined below)
through the effective date of termination at the rate in effect when notice of
termination is given, and the Company shall have no further obligations to the
Employee under this Agreement, subject to the rights and benefits the Employee
may have under employee benefits plans and programs of the Company in existence
as of the effective date of such termination, if any, which shall be determined
in accordance therewith. If the Employee's employment is terminated by the
Company for any reason other than for "cause" or by Employee for "good reason,"
the Company shall continue to pay Employee the Base Salary at the rate in
effect at the time a notice of termination is given, together with any
applicable bonuses and rights and benefits the Employee may have under employee
benefits plans and programs of the Company in existence as of the date of such
termination, all for the twelve (12) month period following such termination
(the "Extended Period"); provided, however, such payments of Base Salary and
provision of bonuses, rights and benefits hereunder during the Extended Period
shall not be due and payable by the Company to Employee if Employee (i) shall
violate the provisions of Section 5 hereof or (ii) during the Extended Period
shall engage in or render any services to or be employed by any Competing
Business (as defined below) in the Area (as defined below) in the capacity of
officer, managerial or executive employee, director, consultant or shareholder
(other than as the owner of less than one percent (1%) of the shares of a
publicly-owned corporation whose shares are traded on a national securities
exchange or in the NASDAQ National Market System).
SECTION 4. Compensation.
4.1. Base Salary. For the Initial Term of employment hereunder,
Employee shall be paid a salary (the "Base Salary") at the annual rate of One
Hundred Ninety Thousand Dollars
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($190,000), payable in equal installments in accordance with the payroll
payment practices from time to time adopted by the Company, subject to required
payroll withholding provisions. Employee's Base Salary shall be reviewed
annually by the Board of Directors of the Company, a committee thereof or the
President, but shall in no event be reduced to less than Employee's initial
Base Salary as provided above without the consent of Employee.
[4.2. Bonus. The Company shall pay the Employee a bonus in an amount
equal to 30% of the Base Salary on the earlier to occur of (i) the first
anniversary of the Closing Date or (ii) the date on which Employee's employment
is terminated by the Company for any reason other than for "cause" or by
Employee for "good reason."]
4.3. Incentive Bonuses. As additional compensation hereunder, the
Company may, in the sole discretion of the Board of Directors, pay Employee an
annual bonus (the "Annual Bonus") for each fiscal year during the term of the
Employee's employment hereunder. Subject to Section 3.2 of this Agreement, if
the Employee's employment hereunder is terminated pursuant to the terms of this
Agreement prior to the end of a calendar year, the Employee's Annual Bonus with
respect to that year shall be prorated for such portion of that year as
Employee was employed by the Company.
4.4. Stock Options. The Board of Directors of the Company shall grant
to Employee, as of the Closing Date, options to purchase ___________ (______)
[to be determined by the Company and Twister prior to the Effective Time]
shares of common stock of the Company pursuant to the terms of the Company's
1995 Incentive Compensation Plan, which options shall vest and first become
exercisable at the rate of 25% per year on the first, second, third and fourth
anniversary of the date of grant, such that all of these options shall be equal
to the last sale price of the Company's common stock on the Closing Date, as
reported by the American Stock Exchange. Such options shall no longer be
exercisable as of and following the tenth (10th) anniversary of the date of
grant of such options.
4.5. Insurance.
(a) Life and Other Insurance. The Company shall provide to the Employee
such term life and group travel, accident, accidental death and dismemberment
insurance and long and short term disability insurance, or their equivalents,
as is provided from time to time for other executive officers of the Company of
comparable stature and title. The Company shall be entitled, at its sole option
and expense, to arrange for and keep in effect, during the term of the
Employee's employment hereunder, so long as Employee is insurable, key man
insurance on the Employee in an amount determined by the Board of Directors,
such policy or policies to name the Company or its designee as the beneficiary
under such policy or policies. The Employee shall reasonably
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cooperate with the Company in procuring such key man insurance as the Company
shall elect to purchase.
(b) Medical Insurance. During the term of the Employee's employment
hereunder, the Company shall, at its expense, provide or arrange for and keep
in effect, hospitalization, major medical and similar medical and health
insurance for the Employee and his family, as is provided from time to time for
executive officers of the Company of comparable stature and title.
4.6. Vacation. The Employee shall be entitled to four (4) weeks paid
vacation during each year of his employment hereunder in accordance with the
Company's vacation policy for executive employees.
4.7. Retirement Benefits. During the term of employment hereunder, the
Employee shall have the same rights as comparable executive officers of the
Company to participate in all profit-sharing, pension and other retirement
plans as are now, or as may hereafter be, established by the Company for such
executives.
4.8. Out-of-Pocket Expenses. The Company shall reimburse the Employee
for all reasonable out-of-pocket expenses incurred by the Employee in
connection with the performance of his duties hereunder upon presentation to
the Company of appropriate vouchers therefor.
4.9. Automobile. During the term of Employee's employment hereunder,
the Company shall pay to the Employee an automobile allowance of $600.00 per
month, plus mileage in accordance with the Company's mileage reimbursement
policy, as in effect from time to time.
4.10 Moving and Relocation Expenses. In addition to the salary and
benefits set forth in this Section 4, the Company shall provide to Employee the
following benefits in connection with his moving and relocating to Wisconsin:
(i) the Company agrees that, to the extent that the Employee
has not received benefits to which he is entitled pursuant to Section
10 of the Twister Employment Agreement as of the commencement of
Employee's employment hereunder, the Employee shall be entitled to
receive such benefits from the Company.
(ii) until such time as Employee shall have completely
relocated to Wisconsin, the Company shall (A) provide Employee a two
(2) bedroom furnished apartment (at a monthly rental rate not to exceed
$1500.00), and (B) reimburse Employee for all reasonable costs and
expenses in commuting from Wichita, Kansas to Brookfield, Wisconsin.
(iii) the Company shall pay on behalf of Employee or reimburse
Employee, at Employee's option, for the actual
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costs paid to third parties relating to Employee's relocation to
Wisconsin, including, but not limited to, (a) reasonable moving
company expenses and insurance, and (b) reasonable travel expenses for
Employee and his spouse from Kansas to Wisconsin in order to enable
Employee and his spouse to locate a suitable residence in Wisconsin.
SECTION 5. Restrictive Covenants.
(a) Employee acknowledges that the covenants herein are necessary to
protect the goodwill and other value of the Company and in view of the unique
and essential nature of the services Employee is to perform hereunder, the
irreparable injury that would befall the Company should Employee breach such
covenants.
(b) The Employee further acknowledges that Employee's services to be
provided hereunder are of a special, unique and extraordinary character and that
Employee's position with the Company will place Employee in a position of
confidence and trust with the customers and other employees of the Company and
allow Employee access to Confidential Information (as defined below).
(c) The Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 5 are fair and reasonable
and that such restrictions will not prevent the Employee from earning a
livelihood.
(d) The Employee further acknowledges that (i) the Company is engaged in
the business of developing, owning, acquiring and operating assisted living
facilities and specialty care facilities for the treatment of individuals
suffering from Alzheimer's disease; (ii) the Company conducts its business
activity in and throughout the Area (as defined below); and (iii) Competing
Businesses (as defined below) are engaged in businesses like and similar to the
business of the Company.
(e) Having acknowledged the foregoing, the Employee covenants and agrees
with the Company that Employee will not, directly or indirectly:
(i) while in the Company's employ and after the termination of
his employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information disclosed to the Employee or of which the Employee became
aware by reason of his employment with the Company;
(ii) while in the Company's employ and through the period
ending eighteen (18) months after the termination of his employment for
any reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or
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executive employee of the Company (whether or not such employment is
full time or is pursuant to a written contract with the Company); and
(iii) while in the Company's employ and through the period
ending twelve (12) months after the termination of his employment
(whether voluntarily or involuntarily) for any reason whatsoever,
except for (x) termination by the Company without cause or (y)
termination by the Employee for "good reason" or (z) expiration of the
Initial Term without renewal pursuant to Section 3.1 hereof by virtue
of notice of nonrenewal given by the Company to the Employee pursuant
to Section 3.1 hereof, engage in or render any services to or be
employed by any Competing Business in the Area in the capacity of
officer, managerial or executive employee, director, management or
strategic consultant or shareholder (other than as the owner of less
than one (l%) percent of the shares of a publicly-owned corporation
whose shares are traded on a national securities exchange or on the
NASDAQ National Market System).
(f) The Employee agrees that upon the termination of Employee's employment
for any reason whatsoever (whether voluntarily or involuntarily), Employee will
not take with Employee or retain without written authorization, and Employee
will promptly deliver to the Company, originals and all copies of all papers,
files or other documents containing any Confidential Information and all other
property belonging to the Company and in Employee's possession or under
Employee's control.
(g) For purposes of this Section 5, the term (i) "Area" means a twenty-five
(25) mile radius of any congregate living community or assisted living or
specialty care facility owned, managed or operated by the Company at the time
the Employee's employment hereunder is terminated; (ii) "Competing Business"
means the business of developing, owning, acquiring or operating assisted living
facilities, specialty assisted care facilities for the treatment of individuals
suffering from Alzheimer's disease or congregate living communities; and (iii)
"Confidential Information" means any and all data, knowledge and information
relating to the business of the Company (whether or not constituting a trade
secret) that is, has been or will be obtained by or disclosed to the Employee or
of which the Employee became or becomes aware as a consequence of or through
Employee's relationship with the Company and that has value to the Company and
is not generally known by its competitors, provided, however, that no
information will be deemed confidential unless it is known to the Employee to be
confidential information or has been reduced to writing and marked clearly and
conspicuously as confidential information. Confidential Information shall not
include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company),
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or that has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means. Confidential
Information includes, but is not limited to, information relating to the
Company's financial affairs, processes, services, customers, executive officers
or employees compensation, research, development, purchasing, accounting or
marketing.
(h) The Employee acknowledges that irreparable loss and injury would result
to the Company upon the breach of any of the covenants contained in this Section
5 and that damages arising out of such breach would be difficult to ascertain.
The Employee hereby agrees that, in addition to any other remedies provided at
law or in equity, the Company may petition and obtain from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by the
Employee of any covenant contained in this Section 5. The parties hereto agree
that all references to the Company in this Section 5 shall include, unless the
context otherwise requires, all subsidiaries and affiliates of the Company.
SECTION 6. Miscellaneous.
6.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the Employee, Employee's executor, administrator, heirs,
personal representatives, successors and assigns, and upon the Company and its
successors and assigns; provided, however, that the obligations and duties of
the Employee may not be assigned or delegated.
6.2. Governing Law. This Agreement shall be deemed to be made in, and
all respects shall be interpreted, construed, enforced and governed by and in
accordance with, the laws of the State of Wisconsin, without giving effect to
any principles of conflicts of laws.
6.3. Invalid Provisions. The parties hereto agree that the agreements,
provisions and covenants contained in this Agreement (including, without
limitation, the agreements, provisions and covenants contained in Section 5
hereof) are severable and divisible, that none of such agreements, provisions or
covenants depends upon any other provision, agreement or covenant or its
enforceability, and that each such agreement, provision and covenant constitutes
an enforceable obligation between the Company and the Employee. Consequently,
the parties hereto agree that neither the invalidity nor the unenforceability of
any agreement, provision or covenant of this Agreement shall affect the other
agreements, provisions or covenants hereof, and this Agreement shall remain in
full force and effect and be construed in all respects as if such invalid or
unenforceable agreement, provision or covenant were omitted.
6.4. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and
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shall not affect in any way the meaning or interpretation of this
Agreement.
6.5. Notices. All communications provided for hereunder shall be in
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to the Employee, addressed to:
Xxxx Xxxxxxxxx
Windsor at Cederbrook
0000 Xxxx Xxxxx, Xxx. 000
Xxxxxxx, Xxxxxx 00000
Facsimile: ( ) -
----- -------
(b) If to the Company, addressed to:
Alternative Living Services, Inc.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
6.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
6.7. Waiver of Breach. The waiver by the Company or by the Employee of
a breach of any provision, agreement or covenant of this Agreement by the
Employee or by the Company, respectively, shall not operate or be construed as a
waiver of any prior or subsequent breach of the same or any other provision
agreement or covenant.
6.8. Entire Agreement. This Agreement is intended by the parties hereto
to be the final expression of their agreement and is the complete and exclusive
statement thereof notwithstanding any representation or statements to the
contrary
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heretofore made. This Agreement replaces in its respective entirety any and all
prior agreements, arrangements, understandings or commitments between the
Company and/or any of its predecessors and affiliates and the Employee relating
to the Employee's employment or other services rendered to or for the benefit
of the Company and/or any of its predecessors and affiliates. This Agreement
may be modified only by written instrument signed by each of the parties
hereto.
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IN WITNESS WHEREOF, the Employee has duly executed, and the Company has
caused this Agreement to be duly executed by its duly authorized officers, and
the parties have caused this Agreement to be delivered, all as of the day and
year first written above.
COMPANY:
ALTERNATIVE LIVING SERVICES, INC.
By:
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Its:
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EMPLOYEE:
---------------------------------
Xxxx X. Xxxxxxxxx
