EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 11, 1998 by and among LPA
HOLDING CORP., a Delaware corporation ("LPA Holdings"), LA PETITE
ACADEMY, INC., a Delaware corporation (the "Company"), and Xxxxxxx X.
Xxxx ("Executive").
RECITALS
In order to induce Executive to agree to serve as Chief
Financial Officer of the Company, LPA Holding Corp. and the Company
desire to provide Executive with compensation and other benefits on the
terms and conditions set forth in this Agreement.
Executive is willing to enter into such employment and perform
services for the Company on the terms and conditions set forth in this
Agreement.
It is therefore hereby agreed by and among the parties as
follows:
1. Employment.
(a) Subject to the terms and conditions of this Agreement,
the Company agrees to employ Executive during the term hereof
as Chief Financial Officer. In his capacity as Chief Financial
Officer of the Company, Executive shall have all of the
customary powers, responsibilities and authorities of chief
financial officers of corporations of the size, type and nature
of the Company, as they exist from time to time. Executive's
principal office shall be at the principal executive offices of
the Company in the Kansas City Metropolitan Area.
(b) Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as Chief Financial Officer
of the Company and agrees to devote his full working time and
efforts, to the best of his ability, experience and talent, to
the performance of services, duties and responsibilities in
connection therewith. Nothing in this Agreement shall preclude
Executive from engaging, consistent with his duties and
responsibilities hereunder, in charitable and community affairs
or from managing his personal investments.
2. Term of Employment. Executive's term of employment under this
Agreement shall commence on May 11, 1998 (the "Commencement Date") and,
subject to the terms hereof, shall terminate on the last day of the
Fiscal Year in August 1999 (the "Termination Date"); provided, however,
that on the last day of the Fiscal Year in August 1999 and on each
subsequent Fiscal Year end, the Termination Date shall automatically be
extended for a period of one year, unless either party shall have given
written notice to the other party not less than thirty days prior to the
Termination Date that the Termination Date shall not be so extended.
3. Compensation.
(a) Initial Base Salary. The Company shall pay Executive a
base salary ("Base Salary") at the annual rate of $170,000 with
the Base Salary from the Commencement Date through August 29,
1998 to be the product of $170,000 multiplied by a fraction,
the
numerator of which is the number of calendar days from the
Commencement Date through August 29, 1998 and the denominator
of which is 365. The Base Salary shall be payable in accordance
with the ordinary payroll practices of the Company.
(b) Adjustments to Base Salary. Executive's annual rate of
Base Salary shall be adjusted at the discretion of the Chief
Executive Officer, subject to the approval of the Board of
Directors of the Company (the "Board") on the first day of each
Fiscal Year. As used herein, "Fiscal Year" shall mean the
fiscal year ending on the Saturday closest to the last day of
August of each year. If increased in accordance with the
provisions hereof, the increased amount shall constitute
Executive's Base Salary hereunder.
(c) Annual Bonus. In addition to his Base Salary,
Executive shall be entitled to receive a cash bonus (the
"Bonus") with respect to each Fiscal Year (commencing with the
Fiscal Year ending August 28, 1999). The Bonus shall be paid
from the Company's two bonus pools (the "First Bonus Pool" and
the "Second Bonus Pool", respectively) as follows: The Bonus
shall be paid from the Company's two bonus pools (the "First
Bonus Pool" and the "Second Bonus Pool", respectively) as
follows:
(i) First Bonus Pool. Prior to the end of each Fiscal
Year, the Board shall determine the target EBITDA for the
immediately succeeding Fiscal Year ( the "Plan EBITDA")
and the aggregate size of the bonus pool for all
participants in the First Bonus Pool based on the
achievement of 95% of Plan EBITDA and 115% Plan EBITDA.
For purposes hereof, EBITDA shall be as defined in the
Indenture dated as of May 11, 1998, among the Company, PNC
Bank, as Trustees, and the other parties thereto. The
Executive shall be entitled to a Bonus from the First
Bonus Pool in an amount up to 75% of Base Salary as
follows:
(A) Subject to Section 6, on November 1, 1999,
and on each succeeding November 1, the Company shall
pay to Executive a bonus in cash of up to one quarter
of the Bonus from the First Bonus Pool based on the
achievement by the Executive of his personal
management by objectives ("MBO"), as established by
the Compensation Committee of the Board (the
"Committee"), and will be payable at the same time as
the remaining seventy-five percent; and
(B) Subject to Section 6, on November 1, 1999,
and on each succeeding November 1, the Company shall
pay to Executive a cash bonus based upon the
attainment of a specified percentage of the actual
EBITDA in relation to Plan EBITDA. No Bonus will be
payable in the event that actual EBITDA is less than
95% of Plan EBITDA and the maximum bonus of
three-quarters of 75% of Base Salary is payable only
when actual EBITDA is 115% or more of Plan EBITDA. If
actual EBITDA as a percentage of Plan EBITDA falls
within one of the gradations specified below, three
quarters of the percentage of Base Salary specified below
will be earned in even increments within the relevant
gradation.
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Actual EBITDA As % of Base Salary
% of Plan EBITDA Earned as Bonus
---------------- ---------------
95.0%-100.0% 0.0%-25.0%
100.1%-115.0% 25.1%-75.0%
(ii) Second Bonus Pool. The aggregate amount of the
Second Bonus Pool for all its participants will be equal
to 10% of the aggregate amount of the First Bonus Pool for
all its participants. The Executive will be entitled to
receive a bonus out of the Second Bonus Pool in an amount
to be determined by the Chief Executive Officer based on
the Executive's individual performance.
(d) 1998 Bonus. Notwithstanding anything to the contrary
contained herein with respect to the Bonus to be paid in
respect of Fiscal Year 1998, Executive shall participate in the
La Petite Academy Senior Management Bonus Plan - 1998 Fiscal
Year; provided, however, that the allocations of payments out
of the First Bonus Pool shall be allocated 75% based on
Consolidated EBITDA and 25% based on personal MBO.
(e) Compensation Plans and Programs. Executive shall
participate in any compensation plan or program, annual or
long-term, maintained by the Company on terms no less favorable
than those applicable to other senior management personnel of
the Company.
4. Employee Benefits.
(a) Employee Benefit Programs, Plans and Practices. During
the term of his employment hereunder, the Company shall provide
to Executive coverage under any employee benefit programs,
plans and practices (commensurate with his positions in the
Company and to the extent possible under any employee benefit
plan), in accordance with the terms hereof, which the Company
makes available to its senior executive officers, including but
not limited to (i) retirement, pension and profit-sharing and
(ii) medical, dental, hospitalization, life insurance, short
and long-term disability, accidental death and dismemberment
and travel accident coverage.
(b) Vacation and Fringe Benefits.
(i) Executive shall be entitled to a paid vacation
each calendar year in accordance with the Company's
vacation policy.
(ii) In addition, Executive shall be entitled to all
of the perquisites and fringe benefits normally accorded
senior executives of the Company (other than the Chief
Executive Officer).
5. Expenses. Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement,
including without limitation expenses for travel and similar items
related to such duties and responsibilities. The Company will reimburse
Executive for all such expenses upon presentation by Executive from time
to time of an itemized account of such expenditures.
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6. Termination of Employment.
(a) Termination Not for Cause or Termination for Good Reason.
(i) The Company may terminate Executive's employment at
any time, and Executive may terminate his employment at any
time. If Executive's employment is terminated by the Company
other than for Cause (as defined in Section 6(d)(ii) hereof) or
due to Executive's death or Permanent Disability (as defined in
Section 6(b) hereof) or Executive terminates his employment for
Good Reason (as defined in Section 6(a)(ii) hereof) (x) prior
to the last day of the Fiscal Year ending in August 1999,
Executive shall be entitled to receive from the Company, in
lieu of any other cash compensation provided for herein but not
in substitution for compensation already earned, the sum of (A)
Executive's Base Salary at its then current annual rate and (B)
any Bonus accrued by the Company hereunder for the benefit of
Executive in respect of the Fiscal Year preceding the Fiscal
Year in which such termination occurred and (y) after the last
day of the Fiscal Year ending in August 1999, Executive shall
be entitled to receive in lieu of any other cash compensation
provided for herein but not in substitution for compensation
already earned, Executive's Base Salary at its then current
rate for the remainder of the contract term then in effect. All
payments made by the Company under this subsection shall be
payable in accordance with the ordinary payroll practices of
the Company.
(ii) For purposes of this Agreement, "Good Reason" shall
mean the occurrence of any of the following events without
Executive's express prior written consent:
(A) the assignment to Executive by the Company of
duties substantially inconsistent with Executive's
positions, duties, responsibilities, titles and offices as
set forth in Section 1 hereof, or any material reduction
by the Company of Executive's duties or responsibilities
or any removal of Executive as the Chief Financial Officer
of the Company, except in connection with the termination
of Executive's employment for any other reason;
(B) a reduction by the Company in Executive's Base
Salary or Bonus (other than by reason of the terms of
Section 3(c) hereof) as in effect at the commencement of
employment hereunder or as the same may be increased from
time to time during the terms of this Agreement;
(C) any material breach by the Company of any
material provision of this Agreement;
(D) a relocation of the Company's executive offices
to a location more than fifty miles outside of the Kansas
City Metropolitan Area.
(b) Permanent Disability. If (i) Executive shall fail for a
period of six consecutive months during the term of his employment
hereunder, because of illness,
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physical or mental disability or other incapacity, to render the
services provided for by this Agreement or (ii) at such earlier time
as Executive submits satisfactory medical evidence that he has an
illness, physical or mental disability or other incapacity which is
expected to prevent him from returning to the performance of his
work duties for six months or longer ("Permanent Disability"), the
Company or Executive may terminate Executive's employment upon
written notice thereof, setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
Executive's employment under this Section 6(b), and Executive shall
receive or continue to receive, as the case may be:
(i) as soon as practicable after the date of termination
of Executive's employment pursuant to this Section 6(b), a cash
lump sum equal to any compensation payments deferred by
Executive, together with any applicable interest or other
accruals thereon;
(ii) any unpaid amounts, as of the date of such
termination, in respect of the Bonus for the Fiscal Year ending
before such termination, which shall be payable on the date on
which such Bonus is payable as specified in Section 3(c)(i)
hereof; and
(iii) such rights to payments under applicable plans or
programs, including but not limited to those described in
Section 3(d) hereof, as may be appropriate pursuant to the
terms of such plans or programs.
(c) Death. In the event of Executive's death during the term of
his employment hereunder, Executive's estate or designated
beneficiaries shall receive:
(i) as soon as practicable after the date of Executive's
death, a cash lump sum equal to any compensation payments
deferred by Executive, together with any applicable interest or
other accruals thereon;
(ii) any death benefits provided under the employee
benefit programs, plans and practices described in Section 4(a)
hereof, in accordance with their terms; and
(iii) such other payments under applicable plans or
programs, including but not limited to those described in
Section 3(d) hereof, as may be appropriate pursuant to the
terms of such plans or programs.
(d) Voluntary Termination by Executive: Discharge for Cause.
(i) In the event that Executive's employment is terminated
by the Company for Cause, as hereinafter defined, or by
Executive other than for Good Reason or other than as a result
of Permanent Disability or death, prior to the Termination
Date, Executive shall be entitled to receive all salary and
benefits to which Executive is entitled up to and including the
date of Executive's termination of employment hereunder,
including, without limitation, compensation payments deferred
by Executive. The obligations of the Company
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under this Agreement to make any further payments, or provide
any benefits specified herein, to Executive shall cease and
terminate on the date on which Executive's employment is
terminated by the Company for Cause or by Executive other than
for Good Reason or other than as a result of Permanent
Disability or death. Termination of Executive in accordance
with this Section 6(d) shall be communicated to Executive
pursuant to a notice from the Chief Executive Officer, after
obtaining a resolution of a majority of the Board determining
that Executive is subject to Discharge for Cause as defined
herein.
(ii) As used herein, the term "Cause" shall be limited to
(A) action by Executive involving willful malfeasance in
connection with his employment having a material adverse effect
on the Company, (B) material breach by Executive of this
Agreement or any other agreement entered into between Executive
and the Company, (C) continuing refusal by Executive in willful
breach of this Agreement to perform the duties ordinarily
performed by a chief financial officer (other than any such
failure resulting from his reasonably documented incapacity due
to physical or mental illness) after a written demand for
substantial performance is delivered to him by the Board, which
demand specifically identifies the manner in which the Board
believes that he has not substantially performed his duties or
(D) Executive being convicted of any felony (or any misdemeanor
involving the property or assets of the Company) under the laws
of the United States or any State. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire
Board at a meeting of the Board (after reasonable notice to
Executive and opportunity for him, together with counsel, to be
heard before the Board), finding that the Executive was guilty
of conduct set forth above in this subsection.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company and LPA Holdings Corp.
La Petite Academy, Inc.
14 Corporate Xxxxx
0000 X. 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Chairman of the Board
with a copy to:
LPA Investment LLC
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, N.Y. 10017
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To Executive:
Xxxxxxx X. Xxxx
c/o the Company at the above address
Any such notice or communication shall be sent certified or registered
mail, return receipt requested, postage prepaid, addressed as above (or
to such other address as such party may designate in a notice duly
delivered as described above), and the actual date of mailing shall
constitute the time at which notice was given.
8. Separability; Arbitration. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any
controversy or claim arising out of or relating to this Agreement or the
breach of this Agreement (other than Section 12 hereof) that cannot be
resolved by Executive on the one hand and the Company on the other,
including any dispute as to the calculation of Executive's benefits or
any payments hereunder, shall be submitted to arbitration in Chicago,
Illinois in accordance with Delaware law and the procedures of the
American Arbitration Association. The determination of the arbitrators
shall be conclusive and binding on the Company and Executive, and
judgment may be entered on the arbitrators' award in any court having
jurisdiction.
9. No Obligation to Mitigate Damages. Executive shall not be
required to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise, nor will
any payments under Section 6 hereof be subject to offset in respect of
any claims which the Company may have against Executive.
10. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of LPA Holdings and the Company, but neither this nor any
rights hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the laws of
intestate succession) or by LPA Holdings or by the Company, except that
LPA Holdings and the Company may assign this Agreement to any successor
(whether by merger, purchase or otherwise) to all or substantially all of
the stock, assets or businesses of LPA Holdings or the Company.
11. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
12. Nondisclosure of Confidential Information; Non-Competition.
(a) Executive shall not, without the prior written consent of
the Company, 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,
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 body or legislative body (including a committee
thereof) with purported or apparent jurisdiction to order Executive
to divulge, disclose or make accessible such information. For
purposes of this Section 12(a), "Confidential
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Information" shall mean non-public information concerning the
Company's financial data, strategic business plans, product
development (or other proprietary product data), customer lists,
marketing plans and other non-public, proprietary and confidential
information of the Company that is not otherwise available to the
public.
(b) For a period of one year commencing on Executive's date of
termination for any reason, Executive agrees that, without the prior
written consent of the Company, he shall not, directly or
indirectly, (ii) 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 material competition with the
business of the Company and/or its affiliates or (ii) solicit any
employees of the Company and/or its affiliates.
(c) For purposes of Section 12(b) hereof, a business shall be
deemed to be in competition with the Company if it is significantly
involved in the purchase, sale or other dealing in any property or
the rendering of any service significantly purchased, sold, dealt in
or rendered by the Company and/or its affiliates. As used in the
preceding sentence, the term "significantly" shall be deemed to
refer to activities generating gross annual sales of at least $25
million. Nothing in this Section 12 shall be construed so as to
preclude Executive from investing in any publicly held company
provided Executive's beneficial ownership of any class of such
company's securities does not exceed 5% of the outstanding
securities of such class.
(d) Executive and the Company agree that the foregoing covenant
not to compete is a reasonable covenant 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, such
court shall have the right, power and authority to excise or modify
such provision or provisions of such covenant as to the court shall
appear not reasonable and to enforce the remainder of the covenant
as so amended. Executive agrees that any breach of the covenants
contained in this Section 12 would irreparably injure the Company.
Accordingly, the Company may, in addition to pursuing any other
remedies they may have in law or in equity, obtain an injunction
against Executive from any court having jurisdiction over the
matter, restraining any further violation of this Section 12 by
Executive.
13. Beneficiaries; References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit
payable hereunder following Executive's death, and may change such
election, in either case by giving the Company written notice thereof. In
the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
14. Survivorship. 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
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such rights and obligations. The provisions of this Section 14 are in
addition to the survivorship provisions of any other section of this
Agreement.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the State of Delaware,
without reference to rules relating to conflict of laws.
16. Withholding. The Company shall be entitled to withhold from any
payment hereunder any amount required by law to be withheld.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.
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18.Entire Agreement. This Agreement reflects the entire agreement
and understanding of the parties hereto with respect to the subject
matter hereof and replaces and supercedes any prior agreements, including
any prior employment agreements, with respect to the subject matter
hereof.
LA PETITE ACADEMY, INC.
By:________________________________________
Name:
Title:
LPA HOLDING CORP.
By:________________________________________
Name:
Title:
___________________________________________
Executive
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