EMPLOYMENT AGREEMENT
This Agreement is made this 10th day of July, 1998 by and between Rose Hills
Company ("the Company") and Xxxxxx Xxxx ("Xxxx").
WHEREAS, it is the mutual intent of the parties hereto that Xxxx be employed as
the President and Chief Operating Officer of the Company, and
WHEREAS, it is the intent to set forth in this Agreement the terms and
conditions of said employment.
In consideration of these premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Employment
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1.1 During the term of this Agreement, and subject to its terms and
conditions, Xxxx shall be employed as President and Chief Operating Officer of
the Company. In said capacity, Xxxx shall report to the Chief Executive Officer
of the Company or to such other person(s) as the Board of Directors of the
Company ("the Board") may, from time to time direct, and shall have such powers,
responsibilities and authorities as may be, from time to time, assigned to him
by the Board.
1.2 This Agreement shall continue in effect without interruption until
terminated according to its terms.
1.3 During the term hereof, Xxxx shall devote his full working time and
efforts, to the best of his ability, experience and talent, to the performance
of services, duties and responsibilities as an officer of the Company.
2. Compensation
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2.1 During the term hereof, Xxxx shall be paid by the Company a base
salary ("Base Salary") at the rate of $250,000 per annum, provided that said
Base Salary shall be reviewed annually. Any increase in the Base Salary shall
be at the sole discretion of the Board. In the event that the Board, in the
exercise of said discretion, increases the Base Salary, the Base Salary, as so
increased, shall thereafter be the "Base Salary" for the purposes of this
Agreement.
2.2 In addition to his Base Salary, Xxxx shall be paid an annual bonus
("the Bonus") based upon the Company's performance in each fiscal year as
measured against EBITDA targets established for the Company. The amount of the
Bonus will be in the range of 0%-100% of the Base Salary according to the
schedule set forth in Exhibit A. The EBITDA target for 1998 shall be as set
forth in Exhibit A. EBITDA targets for years after 1998 shall be determined by
the Board, in its sole discretion. For the purposes of this Agreement the term
"EBITDA" shall be defined as in the Put/Call Agreement dated November 19, 1996
("the Put/Call Agreement"), among Blackstone Capital Partners II Merchant
Banking Fund L.P., Xxxxxxxxxx Xxxx Hills Offshore Capital Partners II L.P., and
Blackstone Family Investment Partnership II L.P. (collectively "Blackstone")
Xxxxxx Group International Inc. and The Xxxxxx Group Inc. (collectively
"Xxxxxx"), Roses Delaware, Inc. and RHI Management Direct L.P.
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2.3 In the event that (i) there is a sale of all of Blackstone's stock in RH
Holdings Inc. to Xxxxxx or its affiliates prior to the termination of this
Agreement, and (ii) through the end of the year most recently completed prior to
the closing of said sale, the Company has achieved cumulative EBITDA of at least
95% of the cumulative EBITDA Target as set forth in Exhibit B hereto, Xxxx shall
receive, within 30 days of such sale, a payment ("the Long Term Incentive
Payment") as calculated according to Exhibit B.
3. Employee Benefits
-----------------
3.1 The Company shall provide Xxxx, during the term of this Agreement,
coverage under employee pension and welfare benefit programs, plans and
practices consistent with such benefits as are made available from time to time
to other senior executives of the Company ("Benefits").
3.2 Xxxx shall be entitled to no less than twenty business days paid
vacation in each calendar year, which shall be taken at such time as is
consistent with Xxxx'x responsibilities hereunder. Unless otherwise approved by
the Board, any vacation days not taken in any calendar year shall be forfeited
without pay therefor.
4. Termination
-----------
4.1 Xxxx shall have the right to terminate this Agreement at any time upon
90 days notice to the Company. In the event that Xxxx so terminates, he shall
be entitled, at the time the termination becomes effective, to a lump sum
payment from the Company (i) in respect of vacation accrued, but not used
("Vacation Payment") and (ii) for compensation earned under the terms of
paragraphs 2.1 and 2.2 hereof, but not paid ("Compensation Payment") as of the
effective date of the termination. Said Compensation Payment shall not include
all or any part of the Long Term Incentive Payment or any Bonus in respect of
the year in which said termination occurs. If Xxxx terminates this Agreement,
he shall not be entitled to receive any payment, benefit, or compensation from
the Company, by way of Base salary, Bonus, Long Term Incentive Payment,
benefits, severance payment or otherwise, except as expressly set forth in this
paragraph.
4.2 The Company shall have the right to terminate this Agreement and
Xxxx'x employment with the Company for cause at any time. As used herein, the
term "Cause" shall include (i) willful malfeasance or willful misconduct by Xxxx
in connection with his employment, (ii) any failure or refusal by Xxxx to
perform his duties hereunder or to follow any lawful direction from the Board
which refusal or failure continues after Xxxx has been given notice by the
Company that it deems that such failure or refusal has occurred, (iii) any
breach by Xxxx of Section 5 herein or any other material breach of this
Agreement, or (iv) the commission by Xxxx of any violation of law in connection
with the performance of his duties hereunder, any misdemeanor involving moral
turpitude or any felony. Except as explicitly provided in this paragraph, the
Company shall not be required to provide Xxxx with advance notice of termination
for cause.
4.3 In the event that Xxxx is terminated for cause under the terms of
paragraph 4.2, he shall be entitled to receive a lump sum payment from the
Company in respect of the Vacation Payment and the Compensation Payment. Said
Compensation Payment shall not include all or any part of the Long Term
Incentive Payment or any Bonus in respect of the year in which said termination
occurs. If Xxxx is terminated for cause under paragraph 4.2, he shall not be
entitled to receive any payment, benefit, or compensation from the Company, by
way of Base salary, Bonus, Long Term Incentive Payment, benefits, severance
payment or otherwise, except as expressly set forth in this paragraph 4.3.
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4.4 The Company shall have the right to terminate this Agreement at any
time, with or without reason, or for any reason, upon 24 months notice to Xxxx.
In the event of a termination under this paragraph, Xxxx shall be entitled to
receive:
(a) his Base Salary through the effective date of the termination ("the
Termination Date"),
(b) Benefits, as defined in paragraph 3.1 hereof, through the Termination Date,
(c) Bonus, to the extent payable under paragraph 2.2 hereof, in respect of any
year completed prior to the Termination Date,
(d) if the termination becomes effective at any time in a year ("the Termination
Year") other than at year-end, a pro rated portion of the Bonus in respect of
the Termination Year, based upon the number of months completed in the
Termination Year as of the Termination Date (the "Termination Bonus"). Said
Termination Bonus shall be calculated, after the close of the Termination Year,
by multiplying (i) the Bonus to which Xxxx would have been entitled for the
entire year, as per Exhibit A, if he had not been terminated before the end of
the year, by (ii) 0.083 for each complete calendar month during which Xxxx was
employed by the Company during that year. For example, if this Agreement were
to be terminated during the sixth month of a year, the Termination
Bonus payable to Xxxx for that year would be calculated as:
TB = B x 5(.083)
where TB = The Termination Bonus to be paid,
B = The Bonus that Would have been payable if this Agreement had not
been terminated before year-end, and
5 = The number of complete months of employment prior to
termination, and
(e) if, as at the end of the last complete year prior to the Termination Date,
the Company's Cumulative EBITDA has been in excess of 95 % of the applicable
Cumulative EBITDA Target, as per Exhibit B hereto, a pro rated portion of the
Long Term Incentive Payment ("the Pro Rated LTIP") which shall be calculated by
multiplying (i) the number of calendar months completed, as of the Termination
Date, since January 1, 1998, by $ 10,400, provided that, in no event, shall the
Pro Rated LTIP exceed $ 900,000.
If this Agreement is terminated by the Company other than for cause, Xxxx shall
not be entitled to receive any payment, benefit, or compensation from the
Company, by way of Base salary, Bonus, Long Term Incentive Payment, benefits,
severance payment or otherwise, except as expressly set forth in this paragraph
4.4.
5. Confidential Information; Non-Competition
-----------------------------------------
5.1 Xxxx shall not, without the prior written consent of the Company, use ,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company, Loewen, Blackstone, or any of their respective
affiliates, except (i) while employed by the Company, in the business of and for
the benefit of the Company, or (ii) when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the Company, or by any administrative agency
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or legislative body ( including a committee thereof) with jurisdiction to order
Xxxx or the Company to divulge, disclose or make accessible such information.
For the purposes of this paragraph 5. 1, "Confidential Information" shall mean
all non-public information concerning the financial data, strategic business
plans, product development (or other proprietary product data), customer lists,
marketing plans and other nonpublic, proprietary and confidential information of
the Company, Blackstone, Loewen, or any of their parent, subsidiary or
affiliated companies, or customers that is not otherwise available to the public
(other than by Xxxx'x breach of this Agreement).
5.2 During the period of his employment hereunder and for two years
thereafter, Xxxx agrees that, without the prior written consent of the Company,
(a) he will not, either directly or indirectly, either as principal, manager,
agent consultant, officer, stockholder, partner, investor, lender, or employee,
or in any other capacity, carry on, be engaged in or have any financial interest
in, any business which is in competition with the business of the Company or
Xxxxxx or any of their parent, subsidiary or affiliated companies, and (b) he
will not, on his own behalf or on behalf of any person , firm or company other
than the Company, directly or indirectly, solicit or offer employment to any
person who has been employed by the Company, Xxxxxx, Blackstone or any of their
parent, subsidiary or affiliated companies at any time during the 12 months
immediately preceding such solicitation.
5.3 For the purposes of paragraph 5.2, a business shall be deemed to be in
competition with the Company or Xxxxxx if it owns, operates or manages a funeral
home or cemetery property that is located within 25 miles of any funeral home or
cemetery property owned, operated or managed by the Company or Xxxxxx within the
State of California, or if it is engaged as the material part of its business in
the consolidation of funeral home or cemetery properties as a national or North
America wide basis. Xxxx further agrees that he will not compete within a 25
mile radius of any funeral home or cemetery property owned, operated or managed
by Xxxxxx, that Xxxx had management responsibilities for on October 1, 1998.
Nothing in this Agreement shall be construed to xxx Xxxx from accepting
employment with a funeral home or cemetery property or in any other geographic
region.
5.4 Xxxx and the Company agree that the covenant of paragraphs 5.2 and 5.3
are reasonable under the circumstances, and further agree that if in the opinion
of any court of competent jurisdiction such restraint is not reasonable in any
respect, that, without further action by the parties, said covenant shall be
deemed modified so as to have the broadest possible scope, consistent with the
opinion of said court, and shall be enforceable as so modified.
5.5 Xxxx agrees that any breach of the covenants of this section 5 would
cause irreparable injury to the Company, Xxxxxx and Blackstone for which
monetary damages would not be an adequate remedy. Accordingly, Xxxx agrees
that, in the event of such breach, the Company, Xxxxxx or Blackstone, in
addition to pursuing any other remedies that they may have in law or in equity,
(i) may cease making any payments otherwise required by this Agreement, and (ii)
shall be entitled to a temporary iiijlinction and permanent injunction
restraining any further violation of this Agreement by Xxxx.
6. Arbitration
-----------
6.1 Any and all disputes and claims arising from or in relation to this
Agreement, with the exception of (i) an action by the Company, Xxxxxx or
Blackstone for injunctive relief under section 5 of this Agreement, or (ii) an
action by Xxxx under federal or state laws against discrimination in employment,
shall be resolved through arbitration in Los Angeles California under the
auspices and rules of the American Arbitration Association. Any action for
injunctive relief under section 5 hereof or under
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federal or state anti-discrimination laws may be brought in any court of
competent jurisdiction.
6.2 ln the event that either party to this Agreement, or Xxxxxx or
Blackstone brings a claim or action for enforcement of this Agreement, or
otherwise relating to or arising from this Agreement, the prevailing party shall
be entitled to recover his or its costs of suit including a reasonable
attorney's fee.
7. Successors and Assigns
----------------------
7.1 This Agreement shall inure to the benefit of and be binding upon the
undersigned parties hereto and their respective successors and assigns.
7.2 Xxxx may not assign his performance of this Agreement without the
prior, expressed written, consent of the Company.
8. Survival of Covenants
---------------------
8.1 The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations. Without limiting the
generality of the foregoing, the provisions of section 5 hereof shall remain in
effect as long as necessary to give effect thereto, notwithstanding the
termination of this Agreement.
9. Governing Law
-------------
9.1 This Agreement shall be construed, interpreted and governed in
accordance with the laws of the state of California without reference to rules
relating to conflicts of laws.
10. Effect on Prior Agreements
--------------------------
10.1 This Agreement contains the entire understanding between the parties
relating TO THE subject matter hereof and supersedes in all respects any prior
or other agreement OR understanding between the Company, Blackstone, Xxxxxx or
any of their affiliates and Xxxx relating TO the subject matter.
11. Counterparts
------------
11.1 This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.
ROSE HILLS COMPANY
By: /s/ XXXXXX X. XXXXXXX
---------------------
Its CHAIRMAN
---------------------
XXXXXX XXXX
/s/ XXXXXX X. XXXX
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SCHEDULE A
Annual Incentive Bonus
----------------------
For the fiscal year ended December 31, 1998, and, for each succeeding year
during the term of the Employment Agreement, a bonus payment will be made based
on the relationship between the audited EBITDA (as defined in tile Put/Call
Agreement) for the, year in question and the Projected EBITDA (as described
below) for that year. For the purposes of this comparison, the audited EBITDA
will be adjusted to take into account an accrual for these bonus payments.
Projected EBITDA for the year ended December3l, 1998 (before adjustments for
acquisitions) shall be $32.7 million. EBITDA targets for 1999 and later years,
will be set by the Board of Directors, on or before February 1 of the bonus
year. For the purposes of determining the amount of any annual bonus, the
Projected FBITDA for the year will be adjusted by adding, to the Projected
EBITDA initially established by the Board of Directors, the budgeted EBITDA for
any acquisition during the year.
The realization matrix for the annual bonus will be:
Percent Projected Percent Salary
EBITD Attained Paid as Bonus
-------------- -------------
Less than 90% .0%
90% 25.0%
91% 27.5%
92% 30.0%
93% 32.5%
94% 35.0%
95% 37.5%
96% 40.0%
97% 42.5%
98% 45.0%
99% 47.5%
100% 50.0%
101% 55.0%
102% 60.0%
103% 65.0%
104% 70.0%
105% 75.0%
106% 90.0%
107% 85.0%
108% 90.0%
109% 95.0%
110% or greater 100.0%
SCHEDULE B
Cumulative EBITDA Targets
-------------------------
For the purpose of calculating the Long Term Incentive Payment to Xxxx under
paragraph 2.3 of the Employment Agreement, the following cumulative EBITDA
targets shall apply, provided that, in the event of acquisitions during the term
of said Agreement, the cumulative EBITDA targets shall be increased by the
budget EBITDA of said acquisitions:
January 1, 1998 through December 31, 1998 $ 32,700,000
through December 31, 1999 $ 70,600,000
through December 31, 2000 $113,500,000
through December 31, 2001 $161,500,000
through December 31, 2002 $212,800,000
through December 31, 2003 $267,600,000
through December 31, 2004 $326,200,000
through December 31, 2005 $388,900,000
Long Term Incentive Bonus
-------------------------
In order for Xxxx to earn the Long Term Inventive Bonus, the Company must have
achieved, through the Exercise Date (as that term is defined in the Put/Call
Agreement) 95% of the cumulative EBITDA target as set forth above (adjusted for
acquisitions). In the event that the Exercise Date is not the last day of a
calendar year, the cumulative EBITDA target will be prorated based on the
portion of the calendar year completed as of the Exercise Date.
If 95% of the applicable cumulative EBITDA target has been achieved at the
Exercise Date, the Long Term Incentive Bonus shall be calculated as follows:
EXERCISE DATE AMOUNT
Prior to January 1, 2002 $500,000
January 1, 2002 to December 31, 2002 $600,000
January 1, 2003 to December 31, 2003 $700,000
January 1, 2004 to December 31, 2004 $800,000
January 1, 2005 or thereafter $900,000
