Exhibit 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of July 21, 1997, by
and between The Fortress Group, Inc., a Delaware corporation and Xxxxxx Xxxxxx
("Employee").
PRELIMINARY RECITALS
A. The Company is engaged in the construction and sale of detached and
unattached single family residential homes (the "Business");
B. Employee has extensive knowledge and a unique understanding of the
Business
C. The Company desires to employ Employee as its Chief Operating
Officer, and Employee desires to be employed by the Company as such, all under
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
of the parties hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Employment.
1.1 Engagement of Employee. The Company agrees to employ Employee as
Vice President and Chief Operating Officer of the Company, and Employee agrees
to accept such employment, all in accordance with the terms and conditions of
this Agreement, effective August 11, 1997.
1.2 Duties and Powers. At all times during the Employment Period (as
defined herein), the Company agrees that Employee will serve as Vice President
and Chief Operating Officer of the Company. He shall have such other
responsibilities, duties and authorities, and will render such services for the
Company and its affiliates as the Board of Directors of the Company (the
"Board") shall from time to time reasonably direct; provided, however, such
duties and responsibilities shall be commensurate with his position in the
Company. The Employee agrees primarily to devote his time to the affairs of the
Company and to carry out his duties and responsibilities faithfully. Fortress
covenants that it will use its best efforts through its President and Chairman
of the Board to recommend the appointment of Employee to the Company's Board of
Directors as soon as practicable following the effective date of the Employee's
employment.
1.3 Employment Period. Employee's employment under this Agreement shall
be for a period of three years commencing __________ (the "Initial Employment
Period"). This Agreement shall automatically renew for successive one-year
periods (each one-year period shall be referred to herein as a "Renewal Period")
unless either the Company or Employee, as the case may be, provides written
notice within ninety (90) days prior to the termination of any such period,
stating its/his desire to terminate this Agreement. The Initial Employment
Period and each successive Renewal Period shall be referred to herein together
as the "Employment Period". Notwithstanding anything to the contrary contained
herein, the Employment Period is subject to termination pursuant to Section 1.4
below.
1.4 Termination of Employment
(a) Termination by the Company For Cause. The Company has the
right to terminate Employee's employment under this Agreement, by notice
to Employee in writing at any time, (i) for "Cause" or (ii) due to the
death or the Disability of Employee. Any such termination shall be
effective upon the date of service of such notice pursuant to Section
6.6 hereof, except in the case of the death, in which such termination
shall become effective immediately upon the death of Employee.
"Cause," as used herein, means the occurrence of any of the
following events:
(i) final non-appealable conviction of (A) a felony or
(B) any crime involving moral turpitude;
(ii) the failure of Employee to comply with the
instructions of the Chief Executive Officer of The Fortress
Group, Inc., a Delaware corporation, otherwise consistent with
this Agreement after (A) written notice delivered to Employee
describing the breach and (B) Employee has failed to cure after a
period of 30 days as set forth in Section 1.4(c), below;
(iii) the good faith determination by the Board in the
exercise of its reasonable judgment that Employee has committed
an act or acts in the course of his employment constituting
fraud, provided Employee is given an opportunity, with at least
10 days notice, to disprove the allegation;
(iv) a material breach by Employee of any of the terms,
conditions or covenants set forth in Section 3 of this Agreement;
and
Employee shall be deemed to have a "Disability" for
purposes of this Agreement if he is unable to perform, by reason
of physical or mental incapacity, his material duties or
obligations under this Agreement, for a total period of 180 days
in any 360-day period. The Board shall determine, according to
the facts then available, whether and when the Disability of the
Employee has occurred. Such determination shall not be arbitrary
or unreasonable and the Board will take into consideration the
expert medical opinion of a physician chosen by the Company,
after such physician has completed an examination of Employee.
Employee agrees to make himself available for such examination
upon the reasonable request of the Company.
(b) Termination for Good Reason. Employee shall have the right at
any time to terminate his employment with the Company for any reason.
For purposes of this Agreement and subject to the Company's opportunity
to cure as provided in Section 1.4(c) below, the Employee shall have
"Good Reason" to terminate his employment hereunder if such termination
shall be the result of:
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(i) a material breach by the Company of the compensation
and benefits provisions of Section 2 hereof;
(ii) a material breach by the Company of any other term
of this Agreement.
(c) Notice and Opportunity to Cure. Notwithstanding the
foregoing, it shall be a condition precedent to the Company's right to
terminate the Employee's employment for "cause" and the Employee's right
to terminate for "good reason" that (1) the party seeking the
termination shall first have given the other party written notice
stating with specificity the reason for the termination ("breach") and
(2) if such breach is susceptible of cure or remedy, a period of 30 days
from and after the giving of such notice shall have elapsed without the
breaching party having effectively cured or remedied such breach during
such 30 day period, unless such breach cannot be cured or remedied
within 30 days, in which case the period for remedy or cure shall be
extended for a reasonable time (not to exceed an additional 30 days),
provided the breaching party as made and continues to make a diligent
effort to effect such remedy or cure.
2. Compensation and Benefits.
2.1 Salary. In consideration of Employee performing his duties under
this Agreement during the Employment Period, the Company will pay Employee a
base salary at a rate of $250,000 per annum (the "Base Salary"), payable in
accordance with the Company's regular payroll policy for salaried employees. The
Base Salary may be increased (but not decreased), from time to time during the
Employment Period, as determined by the Board, in its sole discretion. If the
Employment Period is terminated pursuant to Section 1.4 above, then the Base
Salary for any partial year will be prorated based on the number of days elapsed
in such year prior to the termination.
2.2 Incentive Compensation. Employee shall participate in Fortress'
Executive Compensation Program (the "Incentive Compensation Program"), as
amended, under which Employee shall be entitled to incentive compensation based
on the financial performance of the Company. Employee will participate at a .75
point share basis. For 1997 Employee's share will be a percentage of this based
upon that percentage of the calendar year he has been an employee of the
Company. For 1997, if the preceding calculation results in an incentive
compensation payment of less than $150,000, Fortress agrees to pay to Employee
an additional sum equal to the difference between $150,000 and the amount earned
under the Incentive Compensation Program. Incentive compensation earned by
Employee hereunder shall be payable in accordance with Company policy. Exhibit A
hereto provides a summary of the Plan as approved by Compensation Committee of
the Board on March 5, 1997.
2.3 Restricted Stock. Employee shall be granted a total of 30,000 shares
of Fortress Common Stock on the following dates, provided he is an employee of
the Company on the date in question: 10,000 shares on the first day of the month
following his sixth month of employment by the Company; 10,000 shares on the
eighteenth month of employment by the Company; and 10,000 shares on the
thirtieth month of employment by the Company.
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2.4 Stock Options. As of the effective date of this Agreement and for
each year of the Initial Employment Period of this Agreement, Employee shall be
entitled to receive options to purchase 12,500 shares of the common stock of The
Fortress Group, Inc. (the "Stock"), for a total of 50,000 shares, at the closing
price per share of the Stock reported on a consolidated basis for the Stock on
the principal stock exchange or market on which the Stock is traded on the date
of this Agreement as follows: (i) 12,500 shares on the date of this Agreement;
(ii) 12,500 shares on the first anniversary of this Agreement, (iii) 12,500
shares on the second anniversary of this Agreement, ) 12,500 shares on the third
anniversary of this Agreement. The options will be granted pursuant to the terms
and conditions of The Fortress Group, Inc. 1996 Stock Incentive Plan which is
hereby incorporated by reference.
2.5 Moving and Relocation Expenses. Fortress will reimburse Employee for
all normal and customary Moving Expenses from his Boca Raton, Florida residence
to a new residence in the Washington, D.C. metropolitan area ("Washington,
D.C."). For purposes of this Agreement "Moving Expenses" shall include --
(a) expenses of professional packers and movers to pack and move
Employee's household goods and personal effects from Boca Raton to the
new residence;
(b) expenses for a reasonable number of trips (including meals,
lodging, transportation expense, and car rental) to the Washington, D.C.
for the principal purpose of searching for a new residence; and
(c) expenses of traveling (including meals, lodging and other
related customary expenses) from Boca Raton to the new place of
residence in Washington, D.C.
2.6 Sale of Current Home. Fortress will reimburse Employee for the seven
(7%) percent brokerage commission he incurs upon the sale of his current place
of residence, not to exceed $25,000.
2.7 Temporary Commuting Expenses. Fortress will reimburse Employee for
reasonable expenses in connection with commuting from Boca Raton to Washington,
D.C. for a period of one year or until Employee moves his family to Washington,
D.C., whichever occurs first. The reimbursable expenses will include
transportation, lodging, and car rental.
2.8 Benefits, Expenses and Pension Plan. During the Employment Period,
the Company agrees to provide to Employee such vacation and other health and
insurance benefits as are generally provided, from time to time, to executive
officers of Fortress.
2.9 Compensation After Termination During Employment Period.
a) If the Company terminates Employee's employment during the
Employment Period for any reason (other than for "Cause" pursuant to
Section 1.4(a) of this Agreement) or Employee shall terminate his
employment for Good Reason, Employee shall be entitled to receive his
accrued benefits and as severance the lesser of (x) his Base Salary for
the period of time which would have been remaining in the Initial
Employment Period or any Renewal Period but not less than a sum of money
equal to one times this Base Salary at that time and (y) a sum of money
equal to two times this Base Salary at the time.
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(b) If the Company shall terminate Employee's employment during
the Employment Period pursuant to Sections 1.4(a), the Company shall
have no further obligations hereunder or otherwise with respect to
Employee's employment from and after the termination or expiration date
(except payment of Employee's Base Salary accrued through the date of
termination or expiration), and the Company shall continue to have all
other rights available hereunder (including, without limitation, all
rights under Section 3 hereof at law or in equity).
3. Covenants.
3.1 Employee's Acknowledgment. Employee acknowledges that:
(a) the Company is and will be engaged in the Business
during the Employment Period and thereafter;
(b) Employee will occupy a position of trust and
confidence with the Company after the date of this Agreement, and during
such period and Employee's employment under this Agreement, Employee
will become familiar with the Company's proprietary and confidential
information concerning the Company and the Business;
(d) the agreements and covenants contained in this
Section 3 are essential to protect the Company and the goodwill of the
Business and are a condition precedent to the Company entering into this
Agreement;
(e) Employee's employment with the Company has special,
unique and extraordinary value to the Company and the Company would be
irreparably damaged if Employee were to provide services to any person
or entity in violation of the provisions of this Agreement.
(f) Employee has means to support himself and his
dependents other than by engaging in the Business, or a business similar
to the Business, and the provisions of this Section 3 will not impair
such ability.
3.2 Non-Compete.
(a) Employee hereby agrees that during the Employment
Period and hereafter through the period ending with the second
anniversary of the last day of the Initial Employment Period and any
Renewal Period during which the termination date occurred, as the case
may be, (collectively, the "Restrictive Period"), he shall not, for any
reason whatsoever, directly or indirectly, for himself or on behalf of
or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as
an employee, independent contractor, consultant or advisor, or as
a sales representative, in any business which constructs or sells
single-family residential homes in any community in which
Fortress or its subsidiaries are doing business or commence doing
business during the term of this Agreement ("Territory").
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(ii) call upon any person who is, at that time, within
the Territory, an employee of the Company in a managerial
capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Company; provided,
that the Employee shall be permitted to call upon and hire any
member of his or her immediate family.
Employee may personally supervise and have built, or have the
Company build, one home designed and intended for use as his personal
residence and one home designed and intended for use as his secondary
residence. If built by the Company, Employee will be sold the home[s] at
a sales price to the Employee equal to the Company's cost of goods sold
for the construction of the home in question. In the event Employee
personally supervises and has built a home, the Company acknowledges
that the Employee may personally be given discounts from suppliers and
vendors for materials and services provided in the construction of the
home, and the Company covenants that it will do nothing to prevent or
discourage this benefit. Moreover, notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit the Employee from
acquiring as an investment not more than one (1%) percent of the capital
stock of a competing business whose stock is traded on a national
securities exchange or over the counter so long as the Employee does not
consult with or is not employed by such competitor.
(b) The provisions of subsection 3.2(a) notwithstanding, neither
this Agreement nor any of the provisions and recitals contained therein
shall prohibit Employee or his Affiliates from engaging, as an officer,
director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative, in any business
which develops real estate for commercial, industrial, multi-family or
attached single family uses, provided Employee and his Affiliates give
to the Company a right of first refusal on all detached single family
real estate so developed.
3.3 Interference with Relationships. Other than in the performance of
his duties hereunder, during the Restrictive Period, Employee shall not,
directly or indirectly, as employee, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity solicit or
encourage any present or future customer, supplier or other third party to
terminate or otherwise alter his, her or its relationship with the Company with
respect to the Business engaged in by the Company.
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3.4 Confidential Information. Other than in the performance of his
duties hereunder, during the Restrictive Period and thereafter, Employee shall
keep secret and retain in strictest confidence, and shall not, without the prior
written consent of the Company, furnish, make available or disclose to any third
party or use for the benefit of himself or any third party, any Confidential
Information. As used in this Agreement, "Confidential Information" shall mean
any information relating to the business or affairs of the Company or the
Business, including, but not limited to, information relating to financial
statements, employees, suppliers, construction, manufacturing and servicing
methods, equipment, programs, strategies and information, analyses, profit
margins, or other proprietary information used by Fortress, the Company or any
other subsidiary of Fortress in connection with the Business; provided, however,
that Confidential Information shall not include any information which is in the
public domain or becomes known in the industry through no wrongful act on the
part of Employee. Employee acknowledges that the Confidential Information is
vital, sensitive, confidential and proprietary to the Company and Fortress.
3.5 Blue-Pencil. If any court of competent jurisdiction shall at any
time deem the term of this Agreement or any particular Restrictive Covenant (as
defined) too lengthy or the territory too extensive, the other provisions of
this Section 3 shall nevertheless stand, the Restrictive Period herein shall be
deemed to be the longest period permissible by law under the circumstances and
the territory herein shall be deemed to comprise the largest territory
permissible by law under the circumstances. The court in each case shall reduce
the time period and/or territory to permissible duration or size.
3.6 Remedies. Employee acknowledges and agrees that the covenants set
forth in this Section 3 (collectively, the "Restrictive Covenants") are
reasonable and necessary for the protection of the Company's business interests,
that irreparable injury will result to the Company if Employee breaches any of
the terms of said Restrictive Covenants, and that in the event Employee breaches
or threatens to breach any such Restrictive Covenants, the Company will have no
adequate remedy at law. Employee accordingly agrees that in the event Employee
breaches or threatens to breach any of the Restrictive Covenants, the Company
shall be entitled to immediate temporary injunctive and other equitable relief,
without bond and without the necessity of showing actual monetary damages,
subject to hearing as soon thereafter as possible. Nothing contained herein
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or the threat of such a breach by Employee,
including the recovery of any damages which it is able to prove.
4. Effect of Termination.
4.1 For Cause or Voluntary Quitting. If the Employee terminates
employee's employment during the Employment Period other than for Good Reason as
defined in Section 1.4(b) or the Company terminates Employee's employment for
Cause pursuant to Sections 1.4(a) then, notwithstanding such termination, the
provisions contained in Sections 3 hereof shall remain in full force and effect.
4.2 Other Reasons. If the Company terminates Employee's employment
during the term of this Agreement or Renewal of it other than for Cause as
defined in Sections 1.4(a) or Employee terminates his employment for Good Reason
during the term of this Agreement or Renewal of it, then --
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(a) the provisions and covenants of Section 3.2 and 3.3 shall
have no effect and shall be unenforceable, and
(b) Employee shall receive severance pay as follows: Employee
shall be entitled to receive his accrued benefits and as Severance Pay
the lesser of (x) his Base Salary for the period of time which would
have been remaining in the Initial Employment Period or any Renewal
Period but not less than a sum of money equal to one times his Base
Salary at the time and (y) a sum of money equal to two times this Base
Salary at the time.
Furthermore, if Employee's employment is terminated pursuant to this Section
4.2, the right to receive Severance Pay as defined above shall be the exclusive
remedy in any action arising out of Employee's employment seeking damages or any
other form of monetary relief brought by Employee.
5. Income Tax Treatment. Employee and the Company acknowledge that it is
the intention of the Company to deduct all amounts paid under Section 2 hereof
as ordinary and necessary business expenses for income tax purposes. Employee
agrees and represents that he will treat all such amounts as required pursuant
to all applicable tax laws and regulations, and should he fail to report such
amounts as required, he will indemnify and hold the Company harmless from and
against any and all taxes, penalties, interest, costs and expenses, including
reasonable attorneys' and accounting fees and costs, which are incurred by
Company directly or indirectly as a result thereof.
6. Miscellaneous.
6.1 Assignment. No party hereto may assign or delegate any of its rights
or obligations hereunder without the prior written consent of the other party
hereto; provided, however, that the Company shall have the right to assign all
or any part of its rights and obligations under this Agreement (i) to any
affiliate of the Company to which the Business of the Company is assigned at any
time, any subsidiary or affiliate of the Company or any surviving entity
following any merger or consolidation of any of those entities with any entity
other than the Company or (ii) in connection with the sale of the Business by
the Company. Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective legal
representatives, heirs, successors and assigns of the parties hereto whether so
expressed or not.
6.2 Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement and all other agreements entered into by the parties hereto on
the date hereof set forth the entire understanding of the parties, and supersede
and preempt all prior oral or written understandings and agreements, with
respect to the subject matter hereof.
6.3 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
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6.4 Amendment; Modification. No amendment or modification of this
Agreement and no waiver by any party of the breach of any covenant contained
herein shall be binding unless executed in writing by the party against whom
enforcement of such amendment, modification or waiver is sought. No waiver shall
be deemed a continuing waiver or a waiver in respect of any subsequent breach or
default, either of a similar or different nature, unless expressly so stated in
writing.
6.5 Governing Law. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Virginia, without giving effect to provisions thereof regarding
conflict of laws. To the extent that any provision of this Agreement is
inconsistent with the laws of the State of Wisconsin, the parties agree to be
governed and abide by the law of the State of Virginia.
6.6 Notices. All notices, demands or other communications to be given or
delivered hereunder or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been properly served if (a) delivered
personally, (b) delivered by a recognized overnight courier service, (c) sent by
certified or registered mail, return receipt requested and first class postage
prepaid, or (d) sent by facsimile transmission followed by a confirmation copy
delivered by a recognized overnight courier service the next day. Such notices,
demands and other communications shall be sent to the addresses indicated below:
(a) If to Employee:
Xxxxxx Xxxxxx
(b) If to the Company:
The Fortress Group, Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Xx.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending
party. Date of service of such notice shall be (i) the date such notice
is personally delivered or sent by facsimile transmission (with issuance
by the transmitting machine of a confirmation of successful
transmission, (ii) three days after the date of mailing if sent by
certified or registered mail or (iii) one day after date of delivery to
the overnight courier if sent by overnight courier.
6.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement and shall become effective
when one or more counterparts have been executed by each of the parties hereto
and delivered to the other.
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6.8 Descriptive Headings; Interpretation. The descriptive headings in
this Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation. The Preliminary Recitals set forth above are
incorporated by reference into this Agreement.
6.9 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
interest, and no rule of strict construction will be applied against any party
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
THE FORTRESS GROUP, INC..
By: /s/ Xxxxx X. Xxxxxxx, Xx.
--------------------------
Its: President
--------------------------
EMPLOYEE:
/s/ Xxxxxx Xxxxxx
--------------------------
Xxxxxx Xxxxxx
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Exhibit A
THE FORTRESS GROUP, INC.
INCENTIVE COMPENSATION PLAN
A cash bonus pool will be set aside for the key executive officers of
the Company equal to 50% of the Company's pre-tax profit in excess of $1.35 per
share up to a maximum of 4% of pre-tax income. The pool will be divided between
the participants based upon unit values assigned to each participant expressed
as a fraction of a whole unit.
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