1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August 3,
1998, by and between Insignia/ESG Holdings, Inc., a Delaware corporation with an
office at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 (the "Company"), and Xxxxxx
Xxxxxx, an individual with an office at One Insignia Financial Plaza,
Greenville, SC 29062 (the "Executive"). This Agreement is effective as of the
date of the consummation of the spin-off of the Company from Insignia Financial
Group, Inc. ("IFG") to its shareholders, and as of such date the obligations of
IFG under the Amended and Restated Employment Agreement between IFG and the
Executive dated as of January 1, 1998 shall be assumed by the Company, and the
Company hereby assumes and agrees to pay (without duplication under this
Agreement) the rights thereunder regarding amounts owed by IFG thereunder if IFG
does not timely pay such amounts (in which case the Company will be subrogated
to the right of the Executive to collect such amounts from IFG).
BACKGROUND
The Company desires to assure itself of the services of the Executive for
the period provided in this Agreement, and the Executive is willing to serve in
the employ of the Company for such period upon the terms and conditions provided
in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on the effective date
hereof (the "Commencement Date") and ending three years from the Commencement
Date, or on such earlier date as provided herein (the "Expiration Date") (such
period, as it may be so terminated, being referred to herein as the "Employment
Period").
SECTION 2. DUTIES AND SERVICES.
(a) OFFICES. Subject to Section 2(d), during the Employment Period the
Executive shall serve as Chief Operating Officer of the Company and, at the
Company's request, as an officer or director of one or more of its subsidiaries.
In the performance of his duties hereunder, the Executive shall report to and
shall be responsible only to the Chief Executive Officer and the Board of
Directors of the Company. The Executive agrees to his employment as described in
2
this Section 2. The parties hereto understand and agree that the Executive has
substantial business interests outside of the scope of this Agreement,
including, without limitation, at Metropolitan Asset Enhancement, L.P. and
Insignia Properties Trust, and under an employment or consulting agreement with
IFG, and both parties hereby consent to such arrangements. The Executive shall
be available to travel as the needs of the business of the Company reasonably
require.
(b) OFFICE. During the Employment Period, the Company shall provide the
Executive with an office located in Greenville, SC or at 000 Xxxx Xxxxxx, Xxx
Xxxx, XX, whichever the Executive chooses, or at such other location as the
Company and the Executive shall mutually agree. The Company will provide the
Executive with an office and executive secretary reasonably acceptable to him,
and other reasonable support appropriate to his duties hereunder.
(c) PRIMARY RESPONSIBILITIES. Subject to Section 2(a) and 2(d), during the
Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) CONSULTING. If (i) without the prior written consent of the Executive,
the Executive's title, powers or duties within the Company have been
substantially diminished, other than as a result of a Termination For Cause, (as
defined in Section 7(a)(iv)), (ii) an Extraordinary Transaction (as defined in
Section 4(c)) or a Material Asset Disposition (as defined in Section 4(d)) has
taken place, or (iii) Xxxxxx X. Xxxxxx has elected to convert that certain
Employment Agreement, dated as of August 3, 1998, by and between the Company and
Xx. Xxxxxx (the "Xxxxxx Employment Agreement") into a consulting agreement, then
the Executive may elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
substantial other business interests, including under an employment or
consulting agreement with IFG. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to compensation, bonus,
payments and benefits) shall continue unabridged during the period of
consulting. The other provisions of this Agreement also shall remain in effect
except that (i) Section 2(a) shall be deleted and the remainder of Section 2
shall be modified by this Section 2(d), (ii) Section 7(a)(iv)(B) and Section
7(a)(iv)(C) shall be deleted, and (iii) references to salary (and Base Salary)
in Section 4(a) and elsewhere in this Agreement shall be deemed to refer to a
consulting fee (and Base Consulting Fee), and such Base Consulting Fee shall be
paid to the executive in twelve monthly installments, payable on the first day
of each calendar month. The "Employment Period" shall be deemed to include the
period during which the Executive is obligated to provide consulting services
hereunder and therefore, to the extent permitted by law, the conversion shall
not be deemed a termination or resignation for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits
2
3
equivalent to those he would have received had there been no termination. The
Executive shall not be obligated to consult for more than five days or portions
of a day in any calendar month.
SECTION 3. KEY MAN LIFE INSURANCE. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Executive's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
SECTION 4. COMPENSATION. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) BASE SALARY. Subject to the provisions of Section 7, a base salary at
the rate of $500,000 per annum ("Base Salary"), which Base Salary shall be paid
to the Executive in accordance with the customary executive payroll policy of
the Company as in effect from time to time; provided, however, that the Base
Salary, as in effect at any time and from time to time, may be further increased
by action of the Board of Directors; and further provided, however, that in no
event shall the Base Salary be decreased at any time or from time to time
without the prior consent of the Executive, which consent may be granted or
withheld in the Executive's sole discretion.
(b) ANNUAL DISCRETIONARY BONUS. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by the
Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of the consummation of the sale of the present residential business of IFG to
Apartment Investment and Management Company pursuant to an amended and restated
merger agreement dated May 26, 1998 (the "AIMCO Merger") in any year, the
Company shall, immediately after the consummation of the AIMCO Merger, pay to
the Executive an amount equal to X times Y, where X equals: (a) if the
consummation of the AIMCO Merger occurs in 1998, the amount of the discretionary
bonus the Executive received from IFG with respect to 1997, (b) if the
consummation of the AIMCO Merger occurs in 1999, the amount of the discretionary
bonus the Executive received from the Company with respect to 1998, divided by
the number of days between the effective date of this Agreement and the end of
1998, and multiplied by 365, or (c) if the consummation of the AIMCO Merger
occurs after 1999, the amount of the discretionary bonus the Executive received
3
4
with respect to the year prior to the year in which the consummation of the
AIMCO Merger occurred, and Y equals a fraction the numerator of which is the
number of days between the beginning of the year and the occurrence of the
consummation of the AIMCO Merger and the denominator of which is 365.
(c) EXTRAORDINARY TRANSACTION.
An "Extraordinary Transaction" as used herein means the occurrence of any
one or more of the following:
(i) the Company ceases to be required to file reports under Section
13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor to that Section;
(ii) (a majority of the members of the Board of Directors of the
Company are not persons who (a) had been directors of the Company for at least
the preceding 12 consecutive months or (b) when they initially were elected to
the Board (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative vote of
two-thirds of the directors who were Continuing Directors at the time of the
nomination or election by the Board and (y) were not elected as a result of an
actual or threatened solicitation of proxies or consents by a person other than
the Board of Directors of the Company or an agreement intended to avoid or
settle such a proxy solicitation (the directors described in clauses (a) and (b)
being "Continuing Directors");
(iii) (any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any of
its present affiliates (as such term is defined in Rule 405 promulgated under
the Securities Act of 1933, as amended) ("Affiliates"), or any employee benefit
plan of the Company or any of its present Affiliates) is or becomes the
"beneficial owner" (as defined in Rule 13(d) (3) under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(iv) (the purchase of Common Stock of the Company ("Common Stock")
pursuant to any tender or exchange offer or otherwise made by any "person,"
including a "group" (as such terms are used in Sections 13 (d) and 14 (d) of the
Exchange Act), other than the Company, any of its present Affiliates, or any
employee benefit plan of the Company or any of its present Affiliates, which
results in "beneficial ownership" (as so defined) of 30% or more of the
outstanding Common Stock;
(v) (the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a transaction having a
similar effect (unless such merger, consolidation or similar action is with a
subsidiary of the Company or with another company, a majority of whose
outstanding capital stock is owned by the same persons or entities who own a
majority of the Company's outstanding Common Stock at such time), where (A) the
4
5
majority of the Common Stock of the Company is no longer held by the persons who
were the stockholders of the Company immediately prior to the transaction, (B)
the sale, lease, exchange or other disposition of all or substantially all of
the assets of the Company but excluding the trading of marketable securities
held as portfolio securities or (C) the Company's Common Stock is converted into
cash, securities or other property (other than the common stock of a company
into which the Company is merged), provided, however, that, in the event that
the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by virtue
of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise.
(d) MATERIAL ASSET DISPOSITION BONUS. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed by the
Executive and consistent with the prior terms of the Executive's employment, the
Company (or, in the case of clause (iii) below, the spin-off entity or, in
default thereof, the Company) shall pay to the Executive immediately before the
consummation of such Material Asset Disposition, a cash bonus equal to the Bonus
Percentage of the consideration (valued as set forth below) received by the
Company or its shareholders as a result of such Material Asset Disposition;
provided, however, that if the Material Asset Disposition giving rise to the
cash bonus contemplated by this Section 4(d) is the consummation of the AIMCO
Merger, the Company shall pay such cash bonus immediately after the consummation
of the AIMCO Merger, and the amount of such cash bonus shall be equal to .25% of
the consideration (valued as set forth below) received by IFG or its
shareholders as a result of the consummation of the AIMCO Merger (not including
the value of the distribution of shares of the Company to shareholders of IFG).
The Bonus Percentage shall be .25% if the Executive is a consultant to the
Company, or makes himself reasonably available to consult for the Company with
respect to the assets and liabilities of the Company as they existed immediately
after the spin-off of Insignia/ESG Holdings, Inc. to the Company's shareholders,
at the time the definitive agreement regarding such Material Asset Disposition
is executed. The Bonus Percentage shall be .5% if the Executive is an employee
of the Company (for this purpose only, the word "employee" not including a
consultant under this Agreement), whether under this Agreement or otherwise, at
the time the definitive agreement regarding such Material Asset Disposition is
executed. If the Executive has been Terminated For Cause, or is otherwise not
employed by the Company and not available to consult for the Company, at the
time the definitive agreement regarding such Material Asset Disposition is
executed, then the Bonus Percentage shall be 0%.
A "Material Asset Disposition" as used herein means, without duplication
for the same matter: (i) a transaction which results in a majority of the equity
interest in the Company being beneficially owned by any "person" or "persons,"
including any "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act), other than any of the Company's present Affiliates; (ii) a sale
or series of sales by the Company of subsidiaries, divisions, assets (other than
marketable securities), or operating businesses representing in the aggregate
20% or more of
5
6
the Company's 1998 budgeted EBITDA (which shall include for purposes of this
Agreement EBITDA for all contemplated subsidiaries of the Company) and each such
sale after such threshold has been reached or, if the AIMCO Merger is
consummated, a sale or series of sales by the Company of subsidiaries,
divisions, or assets (other than marketable securities), or operating businesses
regardless of size; (iii) a spin off, or series of spin offs, of any of the
Company's divisions, operating businesses or subsidiaries that meet the 1998
budgeted EBITDA threshold set forth in (ii) above (or, if the AIMCO Merger is
consummated, any such spin off, regardless of size) which is followed by a
subsequent Extraordinary Transaction (as defined above, but with reference to
the spun off entity rather than the Company) of the subsidiary, division or
business spun off within five years following such spin off; (iv) any
transaction which results in any one or more of the Company's divisions,
subsidiaries or operating businesses, representing in the aggregate 20% or more
of the Company's EBITDA, being owned by a third party or, if the AIMCO Merger is
consummated, any transaction, regardless of size, which results in any one or
more of the Company's divisions, subsidiaries, or operating businesses being
owned by a third party; or (v) the consummation of the AIMCO Merger. In the
event a Material Asset Disposition is consummated in one or more steps,
including, without limitation, by way of second-step merger, any additional
consideration paid or to be paid in any subsequent step in the Material Asset
Disposition in respect of (x) subsidiaries, divisions, assets (other than
marketable securities), or operating businesses of the Company and (y) capital
stock of the Company (and any securities convertible into, or options, warrants
or other rights to acquire, such capital stock) shall be included for purposes
of calculating the bonus payable pursuant to this Section 4(d). "Consideration"
shall not include the assumption, directly or indirectly, or repayment of
indebtedness or other liabilities of the Company but shall include the
assumption, directly or indirectly, or repayment of securities similar to the
IFG Trust Convertible Preferred Securities now outstanding. If all or a portion
of the consideration paid in the Material Asset Disposition is other than cash
or securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Material Asset Disposition is consummated
as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the Board of Directors and the Executive are unable to come to
agreement on the fair market value of such non-cash consideration following the
provisions of this Section 4(d), then, at the request of either, an independent
valuation expert agreeable to both shall be appointed to determine the fair
market value of such non-cash consideration, and the determination of such
independent expert shall be binding on both the Executive and the Company. If
such non-cash consideration consists of common stock, options, warrants or
rights for which a public trading market existed prior to the consummation of
the Material Asset Disposition, then the value of such securities shall be
determined by the closing or last sales price thereof on the date of the
consummation of the Material Asset Disposition; provided, however, that if such
non-cash consideration consists of newly-issued, publicly-traded common stock,
options, warrants or rights for which no public trading market existed prior to
the consummation of the Material Asset Disposition, then the value thereof shall
be the average of the closing prices for the 20 trading days subsequent to the
fifth trading day after the consummation of the Material Asset Disposition. In
such event, the portion of the bonus payable to the Executive pursuant to this
Section 4(d) attributable to such securities shall be paid on the 30th trading
day subsequent to consummation of the Material Asset Disposition. If no public
market exists for the common stock, options, warrants or other
6
7
rights issued in the Material Asset Disposition, then the value of thereof shall
be as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the non-cash consideration paid in the Material Asset
Disposition consists of preferred stock or debt securities (regardless of
whether a public trading market existed for such preferred stock or debt
securities prior to consummation of the Material Asset Disposition or exists
thereafter), the value hereof shall be the face or principal amount, as the case
may be. Any amounts payable by a purchaser to the Company, any shareholder of
the Company or any Affiliate of either the Company or any shareholder of the
Company in connection with a non-competition, employment, consulting, licensing,
supply or other agreement shall be deemed to be part of the consideration paid
in the Material Asset Disposition. If all or a portion of the consideration
payable in connection with the Material Asset Disposition includes contingent
future payments, then the Company shall pay to the Executive, upon consummation
of such Material Asset Disposition, an additional cash fee, determined in
accordance with this Section 4(d) as, when and if such contingency payments are
received. However, in the event of an installment purchase at a fixed price and
a fixed time schedule, the Company agrees to pay the Executive, upon
consummation of the Material Asset Disposition, a cash fee determined in
accordance with this Section 4(d) based on the present value of such installment
payments using a discount rate of 6.5%. For purposes of this Section 4(d), in no
case shall the "consideration" received by the Company be greater than the total
market capitalization of the Company at the time of the Material Asset
Disposition.
(e) FRINGE BENEFIT PROGRAMS. In addition to the other benefits provided to
the Executive hereunder and to the extent he satisfies the eligibility
requirements thereof and to the extent permitted by law, participation in fringe
benefit programs made available generally to employees or independent
contractors of the Company, including, without limitation, pension, profit
sharing, stock purchase, savings, bonus, disability, life insurance, health
insurance, hospitalization, dental, deferred compensation and other plans and
policies authorized on the date hereof or in the future.
(f) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed in writing to be a member by the Chief Executive Officer
of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone expense
in accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(g) PERQUISITES. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company, except as
otherwise provided herein:
(i) the Executive shall be entitled to reasonable business usage of
aircraft owned or leased by the Company as determined by the Chief Executive
Officer of the Company.
7
8
With prior consent from the Chief Executive Officer of the Company, the
Executive may utilize such aircraft for personal use and in such event the cost
of such use shall be added to and included in the Executive's compensation for
federal, state and local income tax purposes;
(ii) subject to the provisions of Section 7 hereof, the Company will
provide to the Executive disability insurance coverage identical to the
disability insurance coverage provided to senior executives of the Company from
time to time;
(iii) the Executive shall be entitled to use of a full-time car and
driver in New York City, New York, which car and driver shall also be available
for use by all other executives of the Company as the need shall arise;
(iv) the Executive shall be entitled to full reimbursement for
expenses incurred in respect of professional continuing education; and
(v) the Executive shall be entitled to reasonable consultations with
financial and tax advisors or counselors, including annual income tax
preparation and audits relating to the period during which the Executive was
employed by the Company (whether or not under this Agreement) and whether such
audit expense is incurred during or after the Employment Period.
(h) VACATIONS, ETC. Leaves-of-absence in accordance with the then regular
procedures of the Company governing senior executives, and four weeks of paid
vacation per year on a noncumulative basis.
(i) PARACHUTE LIMIT. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(i)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(c) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon
8
9
a change in ownership or effective control or change in ownership of a
substantial portion of assets (as described in Code Section 280G(b)(2)(A)(i)) of
any unvested awards of shares of restricted stock of the Company previously
granted to Executive and options or warrants to purchase shares of the Company
previously granted to Executive. Notwithstanding the foregoing, the Company
shall treat any of the amounts described in (i) through (iii) above as a
Parachute Payment solely to the extent required under applicable law.
(j) PURCHASE OF INSURANCE. Following the Executive's cessation of
employment with the Company for any reason, (i) the Executive shall have the
right to continue, at the Executive's sole cost, any or all life insurance
policies on the life of the Executive maintained by the Company during the
Employment Period and to designate the beneficiaries and owners thereof, and
(ii) the Executive and his dependents shall have the right to purchase from or
through the Company or its successor, at the Executive's or his dependents' sole
cost, individual and dependent care health insurance coverage. Notwithstanding
anything in this Agreement to the contrary, the provisions of this Section 4(j)
shall continue regardless of the cessation of the Executive's employment by the
Company. In the case of the death of the Executive, whether during or after the
Employment Period, the rights under Section 4(j)(ii) of the persons who were the
Executive's dependents at the time of his death shall continue in full force and
effect for the duration of each of their lives.
(k) VESTING. In the event of (a) a termination of Executive's employment
for any reason other than a Termination for Cause or voluntary termination by
the Executive, including, but not limited to a Death Termination Event,
Disability Termination Event, Termination Without Cause or in the event of (b)
the occurrence of an Extraordinary Transaction, an Influence Change Event (as
such term is defined in the Xxxxxx Employment Agreement), or an Extraordinary
Stock Event (as such term is defined in the Xxxxxx Employment Agreement)
(whether or not resulting in a termination of Executive's employment), all
options and warrants then granted to the Executive will immediately vest and be
exercisable by the Executive.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EXECUTIVE. The
Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties hereunder
with or without reasonable accommodations.
9
10
SECTION 6. NON-SOLICITATION; CONFIDENTIALITY.
(a) NON-SOLICITATION.
(1) In recognition of the close personal contact the Executive
has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the position
of trust in which the Company holds the Executive, the Executive further
covenants and agrees that while the Executive is employed by the Company and for
a period lasting for one (1) year following the cessation of the Executive's
employment with the Company, the Executive will not, if such action would have a
material adverse effect on the Company, in direct competition with the Company
(where competition is measured as of the date the Executive ceases to be
employed by the Company), either for himself or as an officer, director,
employee, agent, representative, independent contractor or in any relationship
to any person, partnership, corporation, or other entity (except the Company or
its Affiliates or subsidiaries), solicit, directly or by assisting others,
business from any of the Company's customers or clients who were customers or
clients of the Company as of the date of the cessation of the Executive's
employment and with whom the Executive has had material contact (as defined
below) during the twelve (12) month period preceding the date of cessation of
the Executive's employment with the Company in the event of a cessation of
employment with the Company or, absent such cessation, during the twelve (12)
months preceding the solicitation, for the purpose of providing goods or
services to said customers and clients. For purposes of this Agreement,
"material contact" exists between the Executive and any of the Company's
customers or clients (i) with whom the Executive actually dealt; or (ii) whose
dealings with the Company were handled, coordinated or supervised by the
Executive; or (iii) about whom the Executive obtained confidential information
in the ordinary course of business through the Executive's association with the
Company.
(2) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not solicit any employee, broker or sales
person of the Company, or any of its respective subsidiaries or affiliates to
leave their employ for the employ of a person or entity which directly competes
with the Company, or any of its respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not purchase for his own account any
limited partnership units of partnerships that, on the date of purchase, are
controlled directly or indirectly by the Company, except that the provisions of
this sentence shall not be deemed breached merely because the Executive owns,
immediately after a purchase, not more than one percent of the outstanding
units. Should the Executive breach the foregoing sentence, all his options
issued by the Company or any of its subsidiaries shall be canceled and all of
his restricted stock issued by the Company or any of its subsidiaries (whether
or not then vested) which he then owns shall be forfeited. For purposes of this
Section 6(a)(3), "purchase" shall mean the payment of cash only
10
11
for such limited partnership units and shall not include payment of cash for
interests in an entity whose assets consist in whole or in part of such limited
partnership units.
(4) The Executives covenants and agrees that he will not, either
for himself or as an officer, director, employee, agent, representative, or
independent contractor of any person, partnership, corporation, or other entity
(except the Company or its Affiliates or subsidiaries), interfere with any
contract that exists between the Company and any customers or clients of the
Company as of the effective date of this Agreement.
The Executive acknowledges that the foregoing provisions are intended to
protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
(b) CONFIDENTIALITY. All confidential information which the Executive may
now possess, may obtain during or after his employment with Company, or may
create prior to the end of his employment with the Company or otherwise relating
to the business of the Company or any of its subsidiaries or affiliates or of
any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the cessation
of his employment, or used by him except during his employment with the Company
in the business and for the benefit of the Company and its subsidiaries and
Affiliates. In addition, the Executive agrees not to disclose, publish or make
accessible to any other person, from and after the date of this Agreement,
during the Employment Period or at any time thereafter, any of the terms or
provisions of this Agreement, except the Executive's accountants who need such
information to advise him, prepare his tax returns, make required filings and
the like; provided, however, that the Executive will be responsible for causing
any such accountants to be aware of and to abide by the obligations contained in
this Section 6(b) and will be responsible for any breach of such obligations by
any of them. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide the
Company with prompt written notice so that the Company may seek a protective
order or other appropriate remedy and/or waive in writing compliance with the
provisions of this Section 6(b) and in the event that such protective order or
other remedy is not obtained, or should the Company waive in writing compliance
with the provisions of this Section 6(b), the Executive will furnish only that
portion of the confidential information which is so legally required. The
Executive shall return all tangible evidence of such confidential information to
the General Counsel of the Company prior to or at the cessation of his
employment.
(c) INTERPRETATION. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to post
a bond in any proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 6 are necessary and reasonable to protect the Company
in the conduct of its businesses. If any restriction contained in this Section 6
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope
11
12
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form such restriction shall then be enforceable in
the manner contemplated hereby. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
(d) INVESTORS. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall restrict the right of the Executive to solicit or receive,
on his own behalf or on behalf of others, any investment or any funds in any
form from any person, regardless of whether such person is an investor in the
Company or in any current or former affiliate of the Company.
SECTION 7. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death Termination
Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is physically
or mentally incapacitated or disabled or otherwise unable to fully discharge his
duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at the
time of determination, the estate of the Executive and (B) in the event that the
last will and testament of the Executive has been probated at the time of
determination, the legatees of the Executive who are entitled under such will to
the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's employment
hereunder upon a good faith determination by a majority vote of the members of
the Board of Directors of the Company that termination of this Agreement is
necessary by reason of (A) the Executive shall be convicted of a felony, (B) the
Executive shall commit any act or omit to take any action in bad faith and to
the material detriment of the Company and Executive shall not have cured the
same within 30 days after the Company sends written notice thereof, or (C)
Executive shall breach in a material way any material term of this Agreement and
fail to correct such breach within 30 days after the Company sends written
notice thereof.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment by the Company
hereunder that is not a Termination For Cause, a Death Termination Event, or a
Disability Termination Event but shall not include a conversion of this
Agreement to a consulting agreement.
12
13
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death Termination
Event, this Agreement will terminate automatically upon the date that such Death
Termination Event occurred (subject to the last sentence of this Section 7 and
to the last two sentences of Section 4(j)), whereupon the Executive's Estate
shall receive the consideration set forth in Sections 4(a) through (d) through
the date three years from the Commencement Date. In addition, the Executive's
Estate shall be entitled to receive the payments contemplated by Section 4(c)
and Section 4(d) if the event giving rise to such payment occurs, or a
definitive agreement regarding such event is executed, before or within 180 days
after the Death Termination Event.
(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 7 and to the last two sentences of Section 4(j)), whereupon the
Executive shall continue to receive the consideration set forth in Sections 4(a)
through (d) and Section 4(g)(iii) through the date three years from the
Commencement Date. In addition, the Executive shall be entitled to receive the
payments contemplated by Section 4(c) and Section 4(d) if the event giving rise
to such payment occurs, or a definitive agreement regarding such event is
executed, before or within 180 days after the Disability Termination Event.
(d) TERMINATION FOR CAUSE. The Executive and the Company agree that the
Company shall have the right to effectuate a Termination For Cause in accordance
with the terms of this Agreement at any time. Upon the occurrence of a
Termination For Cause, this Agreement will terminate upon the date that such
Termination For Cause occurs (subject to the provisions of Section 9), whereupon
(i) the Executive shall not be entitled to receive any additional payments
hereunder other than the Base Salary, as then in effect, to and including the
date that such Termination For Cause occurs and (ii) the Company shall be
entitled to any and all remedies and damages available to it.
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the provisions of Section 9 and to
the last two sentences of Section 4(j)), whereupon the Executive shall continue
to receive the consideration set forth in Sections 4(a) through (d) and Section
4(g)(iii) through the date three years from the Commencement Date. In addition,
the Executive shall be entitled to receive the payments contemplated by Section
4(c) and Section 4(d) if the event giving rise to such payment occurs, or a
definitive agreement regarding such event is executed, on or before the date
three years from the Commencement Date.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the Executive,
including, but not limited to a Death Termination Event, Disability Termination
Event, or Termination Without Cause, all options, warrants and restricted stock
then held by and/or granted to the Executive will immediately vest and be
exercisable by the Executive but in the event of the occurrence of an
Extraordinary Transaction, no options, warrants or restricted stock then held by
and/or granted to the Executive will immediately vest as a result thereof.
13
14
SECTION 8. WITHHOLDING. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
SECTION 9. SURVIVAL. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the periods
stated therein.
SECTION 10. MODIFICATION. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
SECTION 11. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. WAIVER. Any waiver by either party of a breach of any
provision of Agreement shall not operate as a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
SECTION 13. BINDING EFFECT. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
SECTION 14. HEADINGS. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 15. ENFORCEMENT. Should the Executive xxx to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to
14
15
the Executive as may be necessary, so that after deducting the taxes imposed on
all payments made to the Executive pursuant to this paragraph, the Executive is
left on an after tax basis with an amount equal to his claim for indemnification
prior to the payments described in this sentence.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina, without
reference to the conflict of law provisions thereof.
SECTION 18. CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
SECTION 19. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE
COURT.
15
16
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
EXECUTIVE
----------------------------------------
Name: Xxxxxx Xxxxxx
16