EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
as of July 17th, 1998 by and between KW-A, LLC, a California limited liability
company having an address of 000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxxxxx,
Xxxxxxxxxx 00000 ("Company") and Xxxxx Xxxxxxxxxxx, a Nevada resident, having an
address of 0 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxx 00000 ("Employee"), with
reference to the following facts and circumstances:
RECITALS:
X. Xxxxxxx-Xxxxxx Properties, Ltd., an Illinois corporation ("The
Business"), a wholly owned subsidiary of Xxxxxxx Xxxxxx, Properties, Ltd., a
Delaware corporation (KWP), which is a wholly owned subsidiary of
Xxxxxxx-Xxxxxx, Inc., a Delaware corporation (KWI), has entered into a Services
Agreement with Company to manage, market, construct, develop and acquire real
estate and real estate related assets. Employee is experienced in all of their
said aspects of real estate. The Business is an intended beneficiary of the
provisions of this Agreement.
B. Company desires to employ Employee and Employee desires to be
employed by Company for the purposes and on the terms and conditions set forth
in this Agreement.
C. This Agreement replaces and supersedes in their entirety any and
all prior agreements, express or implied, written or oral, performed or
unperformed, pertaining to the employment of Employee and the compensation to be
paid to him therefor, and all such prior agreements and understandings are
hereby terminated and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual convenants set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Company and Employee agree as follows:
1. Employment. Company hereby employs Employee and Employee hereby
accepts employment to perform the duties described in Section 2 below, on the
terms, conditions and covenants set forth in this Agreement.
2. Services Provided. Employee shall be responsible for the operation
of The Business in an efficient and professional manner. To that end, Employee
shall serve as President and Chief Executive Officer of The Business and
Chairman of its Management Committee and as Manager of Company subject to the
policy guidelines and directives, which are provided to him by Company, KWI, KWP
and The Business from time to time during the term of this Agreement. Employee
shall have no authority to bind or obligate Company, The Business, KWP or KWI to
the purchase or sale of any real property, or to any other financial commitment,
including without limitation, the borrowing of any monies on a secured or
unsecured basis, without obtaining the prior written authorization of KWI as to
the other matters or responsibilities as Company and Employee's duties also
shall include such other matters or responsibilities as Company and Employee may
jointly agree upon from time to time during the term of this Agreement. The
initial directors of The Business shall be Xxxxxxx X. XxXxxxxx, Xxxxx
Xxxxxxxxxxx, Xxxxxxx Xxxx, and Xxxx Xxxxxxxxx. The other initial officers of The
Business shall be Xxxxxxx X. XxXxxxxx, Chief Executive Officer, Xxxxxxx Xxxx,
Chief Financial Officer and Treasurer, and Xxxx Xxxxxxxxx, Secretary.
During the term of this Agreement and while employed by the Company,
Employee shall devote substantially all of his business time to his duties
hereunder. He shall, to the best of his ability, perform such duties in a manner
which will faithfully and diligently further the business and interests of the
Company and shall not, directly or indirectly, whether as a partner, employee,
creditor, shareholder or otherwise promote, participate or engage in any
activity or other business competitive with the Company's business, except on
behalf of or for the benefit of The Business and/or the Company or KWI, serve as
an officer for any other real estate management company, without The Business's
prior written consent and such consent shall not be unreasonably withheld.
Notwithstanding the provisions noted above, the Company and The
Business acknowledge that the Employee has made and will continue to make
personal investments that will require Employee's investments to the full extent
desired by Employee so long as such personal investment activity shall not be
competitive with The Business and does not detract from Employee's ability to
devote substantially all of his energies and productive interests to the
performance of his duties and responsibilities under this Agreement. Employee
may invest in real estate for his own account and render investment advisory or
property management advisory services in his individual capacity (and not for or
on behalf of the Company, KWI, KWP or The Business) to an entity in which
Employee has invested and to any immediate member of Employee's family.
Employee shall, at all times during the Term, strictly adhere to and
comply with all of Company's policies, rules and procedures as they currently
exist and as they may be changed by the Company so long as they are consistent
with section 2. Employee agrees that to the best of his ability and experience
he will at all times loyally and conscientiously perform all of the duties and
obligations required of him expressly or by implication by the terms of this
Agreement.
3. Term of Employment. Employee shall be employed by the Company
pursuant to this Agreement for a term (the "Term") beginning on the date hereof
and continuing through to, and terminating at the close of business on December
31, 2000 (unless earlier terminated pursuant to Section 10).
4. Compensation.
(a) Salary.
Company shall pay a basic salary to Employee at the rate of $33,333.
Per month for the period of this contract, payable in bi-monthly equal
installments ($33,333. Per month total), subject to such deductions and
withholdings as Company may from time to time be required to make pursuant to
applicable law, governmental regulation or order. The basic salary may be
increased only at the sole discretion of The Business (without the vote of
Employee).
(b) Bonuses.
(i) Incentive Bonus: Year ending December 31, 1998. Employee shall be
entitled to an incentive bonus of $270,000, payable on January 31, 1999 (if
Employee is then an employee of the Company) upon The Business achievement of
$4,300,000 pre-tax, pre-bonus Net Profits for the period of July 1, 1998 through
December 31, 1998. In the even the Net Profits for the period from July 1, 1998
through December 31, 1998 are less than $4,300,000, the incentive bonus
described in this Section 4(b)(i), shall be reduced by 31.25%.
Employee shall be entitled to an additional bonus for the year ending
December 31, 1998 according to the following formula. Employee shall receive
35.3% of: (i) a sum equal to 10% of the Net Profits in excess of $4,300,000 up
to and including $7,000,000' and (ii) a sum equal to 20% of the Net Profits in
excess of $7,000,000. Any bonus earned by Employee according to this formula
shall be paid to Employee by not later than January 31, 1999.
(ii) Incentive Bonus: Calendar year beginning January 1, 1999.
Employee shall be entitled to an annual bonus for each calendar year of the term
of this Agreement commencing with the calendar year January 1, 1999 according to
the following formula. Employee shall receive a percentage of a portion of the
Net Profits of The Business. The portion of Net Profits shall be an amount equal
of the sum of 20% of the Net Profits less $3,333,000 (the Bonus Pool). Employee
shall receive 35.3% of the amount of the Bonus Pool up to the first $1,700,000
thereof. To the extent that the Bonus Pool exceeds $1,700,000.
Employee will be eligible for a discretionary bonus based on the sole
and absolute discretion of the Compensation Committee of The Business. The
Compensation Committee of The Business shall be composed of Xxxxx Xxxxxxxxxxx,
Xxxxxxx XxXxxxxx and Xxxxx Xxxxxx.
Net Profits, for the purpose of this section, shall mean the gross
revenues realized by The Business during the applicable period, less costs and
expenses properly charged to such gross revenues according to generally
acceptable accounting principles as determined by KWI's Chief Financial Officer,
including, without limitation, the salaries, bonuses and benefits of all the
employees of The Business and the salaries and benefits of Company members
assigned to The Business.
(iii) Add-On Bonus: Employee shall be entitled to an Add-On Bonus of
$135,000, payable on June 30, 1999 and $135,000 payable on January 3, 2000. In
the even the Net Profits for the period from July 1, 1998 through December 31,
1998 are less than $4,300,000, the total Add-On Bonus described in this Section
4(b)(iii), shall be reduced by 31.25% and the reduced amount shall be paid in
equal one-half shares as provided above.
(c) Stock Options.
KWI shall grant to Employee under KWI's 1992 Incentive and
Nonstatutory Stock Option Plan non-transferable incentive and nonstatutory
options to purchase an aggregate of 50,000 shares of common stock at an exercise
price equal to the price of the common stock on the date hereof on such terms
and conditions (including, without limitation, the vesting of such shares in
three equal shares on the date hereof and on the first and second annual
anniversaries hereof, so long as Employee is an employee of the Company on each
such date) as are set forth in the Stock Option Agreement between KWI and the
Employee.
5. Other Benefits. During the term of his employment and subject to
applicable eligibility requirements of position, tenure, salary, age, health and
other qualifications as may be set forth in the Xxxxxxx Employee Handbook or
pursuant to the terms of the applicable benefit provider, Employee shall
participate in such benefit plans or programs as are available to Xxxxxxx
Financial Ltds., other employees and to senior management of KWI including
without limitation medical, dental, disability and life insurance, and 401K
plan.
6. Business Expenses. Employee will be required to incur ordinary and
necessary travel and other business expenses in connection with the performance
of his duties, and Employee shall be entitled to reimbursement from Company for
such expenses in accordance with Company's policies and procedures.
7. Non-Competition. For all periods that Employee is employed pursuant
to this Agreement and for a period of twelve (12) months thereafter, unless
Company has terminated Employee without cause.
Employee shall not: (i) provide or offer or attempt to provide,
whether as an officer, director, employee, partner, stockholder, independent
contractor or otherwise, property management services to any person or entity
other than for Employee's personal account; (ii) interfere with The Business
relations with any person or entity who at any time during such period was a
Client (which means past, and present and potential clients); or (iii) induce or
attempt to induce, directly or indirectly, any professional employee of The
Business or the Company to terminate his or her employment, or hire or attempt
to hire, directly or indirectly, any such person.
Employee represents and warrants that the is not restricted or
prohibited in any way from entering into this Agreement or performing services
hereunder, at any time, whether by non-competition, covenant, or otherwise, and
shall indemnify, defend and hold the Company harmless from and against any
damages, claims, costs (including attorneys' fees) or liabilities as a result of
the incorrectness of such representation and warranty.
8. Trade Secrets. Employee has not disclosed to Company, and Employee
has been advised that Company will not accept at any time during the course of
Employee's employment at Company, the disclosure of any trade secret (as that
term is defined in California Civil Code Section 3426 et. seq.) the disclosure
or misappropriation of which by Employee would constitute a breach by Employee
of any obligation to any third party, including any former employer. Employee
represents and warrants he has informed Company of the existence of any and all
agreements, including covenants not to compete, between Employee and third
parties which may in any way relate to, impact, or prevent Employee's employment
at Company. Employee represents and warrants he has not taken any act prior to
signing this Agreement that constitutes a breach of any agreement which may in
any way relate to, impact, or prevent Employee's employment at Company.
9. Confidentiality and Proprietary Information. Employee recognizes
that he will occupy a position of trust with respect to business information of
a confidential or proprietary nature which is the property of the Company and
which has been and will be imparted to him from time to time in the course of
the performance of his duties under this Agreement. All agreements, documents,
studies, analyses, comparables, data, statistics, marketing materials, leads and
lead lists developed or prepared by Employee or others in Company's employ
during the term of this Agreement shall be and remain confidential and shall be
the sole property of Company. Employee hereby acknowledges that Company develops
and utilizes valuable procedures, confidential information and copyrighted
materials, including, but not limited to, names of property owners who may wish
to sell their property by auction or other means, names of potential purchasers,
leads and lead lists, studies and analyses, methods of obtaining auction
prospects, marketing and auction procedures and various brochure and other
printed materials, all of which constitute a valuable part of Company's assets
built up by Company's ingenuity, time, labor and expense over a period of many
years and all of which constitute Company trade secrets. Employee agrees that:
(a) He shall not at any time, whether during the term or thereafter,
use, divulge or disclose directly or indirectly any confidential or proprietary
information of the Company to any person, except that he may use and disclose to
other Company personnel such confidential and proprietary information in the
course of the performance of his duties hereunder or when legally required to do
so in connection with any pending litigation or administrative inquiry; and
(b) He shall return promptly upon the termination of this Agreement or
otherwise upon the request of the Company any and all copies of any
documentation or materials containing any confidential or proprietary
information of the Company.
For the purposes of this Agreement, the term "confidential or
proprietary information" of the Company shall include all information which is
owned by the Company and which is not at the time publicly available or
generally known to persons engaged in businesses similar to that of the Company,
including practices, procedures and methods and other facts relating to the
business of the Company; practices, procedures and methods and other facts
related to sales, marketing, advertising, promotions, financial matters,
clients, client lists of the Companies and similar information of a confidential
and proprietary nature. Employee agrees that his breach of this Section 10 will
cause irreparable harm to the Company. Employee agrees that the remedy available
to the Company, the Company shall be entitled to injunctive relief for any
actual or threatened breach of this Section 10 without proof that any actual
damages have been caused by such breach, and without any need to post bond or
similar security.
10. Termination.
(a) This Agreement shall be terminated upon the expiration of its term
pursuant to Section 3 or by The Business or the Company for cause if Employee
fails to cure a curable default within 30 calendar days after written notice
from The Business or the Company specifying the nature of the default. No notice
of default and cure period need be provided to the Employee in respect of any
non-curable default by Employee including, by way or example and not by way of
limitation, theft, fraud, embezzlement, the disclosure of confidential and/or
proprietary information to competitors of The Business or the Company or
providing other services to such competitors during the term of this Agreement.
The term for "cause" shall be defined as:
(i) The unlawful theft or conversion of substantial monies or other
property, the commission of fraud or embezzlement, or the disclosure of
confidential and/or proprietary information to competitors of The Business or
the Company or providing other services to such competitors during the term o
this Agreement;
(ii) Employee's willful, continual and material neglect or failure to
discharge his duties, responsibilities or obligations (other than that which
arises solely due to physical or mental disability);
(iii) The material and persistent failure of Employee to comply with
the policies or directives of Company and/or failure to take direction from
Company management; and
(iv) The reasonable determination by the chief executive officer of
KWI, following the completion of any intra-company sexual harassment
investigation as may be required by and conducted in accordance with any legal
requirement, that an allegation(s) of sexual harassment is sufficiently
substantiated such that any non-executive employee of KWI or The Business would
be terminated under similar circumstances.
(b) Employee's employment with Company shall cease upon the date of
his death or physical or mental disability to the extent that Employee becomes
disabled for more than ninety (90) consecutive days or one hundred twenty(120)
days in the aggregate in any 12-month period to perform his duties on a
full-time basis. Upon termination for death or physical or mental disability,
Employee shall be entitled to receive the compensation described in Section
4(a), (b) and (c) to the date of termination.
(c) If the term of the Agreement is terminated by Company without
cause, then Company shall continue to pay Employee the salary and other benefits
describe in Sections 4 above during and for the remainder of the term of the
Agreement, together with such other compensation as Employee may be entitled to
under the provisions of Section 5, Benefits (or if such benefits cannot be
provided pursuant to the terms of the applicable plans, comparable benefits due
hereunder and remaining to be paid during the Term in the ordinary course,
provided that the payment of fringe or comparable benefits shall be subject to
the availability thereof at a cost not exceeding what was previously being paid
by the Company). If Employee terminates this Agreement, then Company shall not
pay Employee the salary and other benefits which Employee would have been
entitled to for the remainder of the term of the Agreement under Sections 4(a),
(b), (c) and Section 5 above.
(d) If the term of Employee's employment is terminated for cause, then
Employee shall be entitled to receive only the compensation described in Section
4 above earned to the date of termination.
(e) This Agreement may be terminated by Employee at any time, provided
that such termination shall have the effect set forth as follows:
Termination of this Agreement pursuant to this Section 10 shall not
relieve Employee of his obligations to comply with Sections 8 and 9 hereof,
which provisions shall survive the termination of this agreement. Material
breach of Company shall include a reduction in Employee's authority per
requisite position, title or responsibility, (other than such a reduction by the
Company because of temporary illness or disability or such a reduction which
affects all of the Company Senior executives on a substantially equal or
proportionate basis as a result of financial conditions of the Company) the
relocation of Company's primary place of business or the relocation of Employee
by the Company more than 50 miles from its present location.
11. Alternative Dispute Resolution. The parties to this Agreement
specifically desire an early resolution of any dispute between them, which
arises out of this Agreement. It is therefore, agreed that any controversy
arising out of this Agreement, whether dealing with breach interpretation or
otherwise, shall be heard by a reference ("Referee") pursuant to the provision
of Section 638 of the Code of Civil Procedure and in accordance with the
provisions described below; provided, however, that if injunctive relief is
sought, the complaining party may seek such relief from the Los Angels Superior
Court without the use of a Referee.
(a) Enforcement of Agreement. This reference provision may be enforced
by the filing of a complaint or petition or motion seeking specific enforcement.
Service of such motion on the opposing party shall constitute the "Claim Date"
for the purposes of this provision.
(b) Selection of Referee. The Referee shall be a retired Judge of the
Court selected by mutual agreement of the parties. If the parties cannot agree
then a Referee shall be appointed by the Los Angeles Superior Court in
accordance with Section 640 of the Code of Civil Procedure. Each party shall be
entitled to only one disqualification pursuant to Section 170.6 of the Code of
Civil Procedure. The parties hereby waive their right to a trial by jury and
agree that their dispute shall be tried by the Referee so selected.
(c) Decisional Rules. The trial shall be conducted and the issues
determined in compliance with all judicial rules and all statutory and
decisional law of the State of California as if the matter were formally
litigated in Superior Court. All rules of evidence as set forth in the
California Evidence Code; other statutory and decisional law of California and
all relevant Los Angeles County Superior Court Rules and California Rules of
Court shall be applicable to any proceeding before the Referee.
(d) Discovery. The parties to this Agreement expressly waive their
right to engage in any discovery with the exception of depositions and requests
for the inspection, production and copying of documents. Interrogatories,
requests for admissions and depositions upon written interrogatories shall not
be permitted. The Referee shall be authorized to issue subpoenas requiring
attendance at hearings and/or trial. All discovery permitted by the Agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the Referee. The Referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including legal objections raised to such discovery or unavailability of a
witness due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice. Request for production or inspection of documents shall be
responded to within ten (10) days after service. All disputes relating to
discovery shall be submitted to the Referee whose decision shall be final and
binding upon the parties.
(e) Hearings and Trial. Except as set forth in this Agreement, the
Referee shall determine the manner in which the proceeding is conducted
including the time and place of all hearings, the order or presentation or
evidence, and all other questions that arise with respect to the course of the
proceeding. All proceedings and hearings conducted before the Referee except for
trial, shall be conducted without a court reporter unless one is requested by a
party. The trial shall be conducted without a jury on consecutive dates, as
opposed to being conducted piecemeal on various dates separated by postponements
or adjournments. The trial shall be conducted in a courtroom or in surroundings
with formality as close to a courtroom as possible. The referee shall set the
matter for hearing within sixty (60) days after the Claim Date and try all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date.
(f) Decision of Referee. The Referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The Referee shall issue a single judgment at the close of the proceeding, which
shall dispose of all of the claims of the parties that are the subject of the
reference. Any decision rendered by the Referee shall be final, binding and
conclusive and judgment shall be entered pursuant to Section 644 of the Code of
Civil Procedure in any court in the State of California having jurisdiction.
(g) Appeal. The judgment entered upon the decision of the Referee
shall be subject to all post-trial procedures and to appeal in the same manner
as an appeal from any order or judgment in a civil action.
12. Miscellaneous.
(a) Assignment. This Agreement is for the unique personal services of
Employee and may not be assigned by Employer without the express written consent
of Company and its affiliates. In the event of a sale or merger of Company, the
Business and/or KWI, this Agreement shall be binding upon and inure to the
benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto. Successors shall not interfere with the
performance of Employee in a manner that would be detrimental with his ability
to earn the bonus and the vesting of stock options.
(b) Severability. Each provision, sub-provision or term of this
Agreement is intended to be severable and shall continue in full force and
effect although other provisions herein may be determined invalid or void for
any reason.
(c) Attorneys' Fees. In the event suit is brought to enforce the terms
of this Agreement, the prevailing party shall be entitled to costs and
reasonable attorneys' fees, including without limitation those costs and fees
incurred upon any appeal, as awarded by the Court.
(d) Entire Agreement; Amendments. This Agreement contain the entire
agreement of the parties with respect to the subject matter covered hereby and
may be amended, waived or terminated only by an instrument in writing signed by
the parties hereto. This Agreement shall be interpreted according to its fair
meaning and not for or against the party which drafted same.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California. Venue for any action or
proceeding which is commenced to interpret or enforce the terms and provisions
of this Agreement shall lie only in the County of Los Angeles, California.
(g) Indemnity. The Business agrees to indemnify Employee from, and to
hold Employee harmless against all expenses of and liability from litigation,
arbitration or administrative proceedings and all costs related thereto,
including reasonable attorneys' fees, judgments or verdicts travel costs and
lodging, witness fees to expert witnesses, accountants' fees which may arise
from having to defend against any claim or action naming Employee because at the
pertinent times on which such claim or action is alleged to have arisen Employee
was an Officer or Director of this Company or any of its subsidiaries or
affiliates, and he was then performing his said duties under this Agreement.
This indemnification and hold harmless provisions shall apply to alleged acts of
omission or acts performed negligently or by mistake or misjudgment, but shall
not apply to proven willful acts such as intentional fraud.
(h) Employee shall work out of the Nevada office.
(i) The Business hereby unconditionally guarantees all covenants and
obligations of Company pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date and year first written above.
THE BUSINESS: COMPANY:
XXXXXXX-XXXXXX KW-A, LLC
PROPERTIES, LTD., a California limited
an Illinois corporation liability company
By: /s/ Xxxxxxx XxXxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
-------------------------- -----------------------
Name: Xxxxxxx X. XxXxxxxx Name: Xxxxx Xxxxxxxxxxx
Title: Chief Executive Officer Title:
EMPLOYEE:
/s/ Xxxxx Xxxxxxxxxxx
--------------------------
Print Name: Xxxxx Xxxxxxxxxxx
The undersigned parent of the Business hereby unconditionally
guarantees all covenants and obligations of whatsoever nature of Company and The
Business contained in this Employment Agreement. The undersigned agrees to
nominate Employee to its Board of Directors and to the Compensation Committee of
its board. Employee shall be named as an insured on all applicable liability
insurance policies.
XXXXXXX-XXXXXX, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. XxXxxxxx
--------------------------
Name: /s/ Xxxxxxx X XxXxxxxx
Title: Chief Executive Officer
