Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 17, 2002 to be effective on
February 18, 2002 (the "Effective Date"), by and between Assisted Living
Concepts, Inc., a Nevada corporation with a principal address at 00000 XX Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx X, Xxxxxxxx, Xxxxxx 00000-0000 (together with its
successors and assigns, the "Corporation") and Xxxxxx Xxxx, an individual
residing at 00000 Xxxxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxx 00000 (the "Employee").
WITNESSETH:
WHEREAS, the Corporation desires to employ the Employee as the
President and Chief Executive Officer of the Corporation; and
WHEREAS, the Employee desires to be so employed by the Corporation; and
WHEREAS, the Corporation and the Employee desire to set forth in
writing their agreements regarding the employment and compensation of the
Employee;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Corporation and the Employee
agree as follows:
1. Employment. The Corporation hereby employs the Employee as the
President and Chief Executive Officer of the Corporation, for the Term (as
defined in Section 7) of this Agreement, and the Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
2. Duties; Location. In his capacity as the President and Chief
Executive Officer of the Corporation, the Employee shall timely and faithfully
perform and discharge the duties of such position set forth in the by-laws of
the Corporation, as amended and in effect from time to time, as well as such
other duties as shall be prescribed from time to time by the Board of Directors
of the Corporation, provided however, that Employee shall have the duties,
responsibilities and authority associated with the position of the President and
Chief Executive Officer and shall not be requested to perform duties not
commensurate with such position. The Employee shall report to, and be subject to
the supervision and control of, the Board of Directors of the Corporation. The
Employee shall also serve as a Director of the Corporation, and as an officer
and/or Director of affiliates of the Corporation, and shall do so without
additional compensation. The Employee shall devote his full time to the business
of the Corporation and shall faithfully perform the executive duties assigned to
him to the best of his ability, provided however, Employee may serve on civic or
charitable boards or committees, fulfill speaking engagements, and manage a
financial portfolio of personal investments so long as such activities do not
interfere with the performance of Employee's duties hereunder.
Exhibit 10.19
Employee's location of employment shall be at the Company's principal
executive offices in Portland, Oregon. The Corporation may not transfer Employee
to any other location without Employee's prior written consent unless the
transfer is at the Corporation's expense and results from the relocation of the
Company's principal executive offices and the relocation thereto of other
executive officers of the Corporation.
3. Compensation. As compensation for the services to be rendered by the
Employee to the Corporation pursuant to this Agreement during the Term:
(a) Salary. The Corporation shall pay the Employee a base
salary at the annualized rate of Two Hundred Seventy-Five Thousand Dollars
($275,000.00), payable in accordance with the Corporation's usual payroll
practices, and subject to withholding therefrom of federal and state income
taxes, any other employment taxes required to be collected or withheld by the
Corporation, and other amounts required or requested by Employee to be withheld.
Such salary shall be subject to annual review but not reduction by the Board of
Directors and Compensation Committee of the Corporation.
(b) Bonus. The Corporation shall pay the Employee a bonus to
be calculated according to the following formula: the bonus shall be in the
amount of fifty thousand dollars ($50,000) for each million dollars of earnings
of the Corporation, for fiscal year 2002, before depreciation, amortization
(excluding the amortization on loan fees and other finance costs shown in the
other expense section of the projected income statement for 2002, as presented
to the Board of Directors on January 3, 2002) and taxes, excluding any one-time
gain from the sale of assets and any one-time charge. The bonus shall be
calculated after the Corporation's audit for the year 2002. The Corporation
shall pay the Employee an advance against the bonus of $25,000 per quarter,
commencing April 1, 2002. If the bonus is insufficient to cover the advances,
such advances shall be applied to the following year's bonus to the extent they
exceed the 2002 bonus. The Employee's bonus for the years 2003 and 2004 shall be
determined by the Board of Directors and Compensation Committee of the
Corporation , but the basis for determining the bonus, as set forth above, shall
not be changed in such a way as to reduce the amount of the bonus unless
Employee receives base salary and bonus for the year in question of at least six
hundred thousand dollars ($600,000).
(c) Insurance, etc. Subject to the Employee's meeting the
eligibility requirements of the provider(s) (including without limitation any
waiting periods), the Employee shall be eligible to participate in any health
care plan, dental care plan, life insurance plan, long-term disability insurance
plan, retirement plan, 401(k) plan and any other employee benefit plan sponsored
or maintained by the Corporation from time to time, on the same basis as other
employees of the Corporation similarly situated. Nothing in this Section 3(c)
shall obligate the Corporation to sponsor, maintain or provide access to any
such plan generally or limit the discretion of the Corporation to terminate or
modify the terms of any such plan or change providers thereof.
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Exhibit 10.19
(d) Vacation. The Employee shall be entitled to four (4) weeks
of vacation per calendar year. Fifty percent (50%) of any unused vacation time
shall expire at the close of business on December 31 of each year. The Employee
shall not be entitled to any payment or other compensation in lieu of unused
vacation time.
(e) Expenses. The Corporation shall reimburse the Employee's
documented, reasonable and necessary out-of-pocket business expenses incurred by
the Employee in the performance and discharge of his duties on behalf of the
Corporation in accordance with and subject to the Corporation's policies and
procedures regarding expense reimbursement in effect from time to time.
(f) Moving Expenses. The Corporation shall pay directly or
reimburse the Employee, at the Employee's option, for all reasonable, itemized
allocable moving expenses, up to one hundred fifty thousand ($150,000.00)
dollars, incurred in connection with the Employee relocating to the Portland,
Oregon area.
(g) Apartment. In connection with the Employee relocating to
the Portland, Oregon area, the Corporation shall reimburse the Employee for all
rental and related payments for an apartment in Portland, Oregon for up to six
months, provided that the cost of the apartment shall not be unreasonable in the
reasonable opinion of the Board of Directors of the Corporation.
(h) Automobile. The Corporation shall reimburse the Employee
for all lease payments and other automobile-related expenses incurred in
connection with the Employee's leasing and use of an automobile during the term
of this Agreement, provided that such lease payments and other
automobile-related costs shall not be unreasonable in the reasonable opinion of
the Board of Directors of the Corporation. At Employee's option, the Corporation
will instead pay Employee an automobile allowance of six hundred dollars
($600.00) per month plus reimburse Employee for gasoline and reasonable
maintenance.
(i) Stock Options. Pursuant to a separate stock option
agreement to be entered into between the Corporation and the Employee, the
Employee shall receive a non-qualified stock option for the purchase of
sixty-five thousand (65,000) shares of the Corporation's common stock, par value
$.01 per share (the "Common Stock"). The option shall vest over three years at
the rate of 59.30657 shares per calendar day. The exercise price for each share
of Common Stock shall be the closing price of the Common Stock on the date of
the grant of the option. The Employee acknowledges that all options shall be
governed by the Corporation's stock option plan, which is currently being
developed, and that any inconsistencies between this section and said stock
option plan shall be controlled by the stock option plan, provided that the
exercise price, number of shares and vesting schedule shall not be adversely
affected thereby.
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Exhibit 10.19
4. "Key Man" Life Insurance. The Corporation, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance on
the life of the Employee in any amount or amounts considered advisable by the
Corporation, and the Employee shall submit to any medical or other examination,
and shall execute and deliver any application or other instrument in writing,
reasonably necessary to effectuate such insurance.
5. Restrictions on the Disclosure of Proprietary Information.
(a) Proprietary Information. For purposes of this Agreement,
the term "Proprietary Information" shall mean all confidential knowledge and
information in any form or medium which the Employee acquires, learns or becomes
aware of as a result of or in connection with his employment with the
Corporation concerning (i) the Corporation's business, financial condition,
operations, strategic planning, research and development activities, current or
proposed products, product designs, trade secrets, competitive business
information, patents, patent rights, inventions, technology, copyrights,
software (including without limitation, source code, object code and firmware),
improvements, applications, processes, services, cost and pricing policies,
client lists, vendor relationships and contact lists, and (ii) information of
the kind, type or nature described in the foregoing clause (i) of or with
respect to each third party with whom the Corporation at any time and from time
to time enters a confidentiality or non-disclosure agreement pursuant to which
the Corporation is obligated to keep such third party's information
confidential. Notwithstanding the foregoing, Proprietary Information does not
include information (1) which is or becomes part of the public domain through no
fault of the Employee, or (2) which the Employee can demonstrate was
independently developed by him without use of or reference to any Proprietary
Information.
(b) Non-disclosure and Non-use Obligations. The Employee
agrees that he will not at any time, without the prior written consent of the
Corporation (which shall be evidenced by a writing signed by a majority of the
Corporation's Board of Directors or by action taken by the Board of Directors at
a meeting), either during or after any termination of this Agreement, divulge or
disclose to anyone outside the Corporation or its professional advisers, or use
or permit any third party to use for its own benefit, any such Proprietary
Information. The Employee will not, during his or her engagement by the
Corporation hereunder or at any time thereafter, use or attempt to use any such
Proprietary Information for any purpose other than the Employee's provision of
services to the Corporation, and in no event in any manner which may injure or
cause loss or may be calculated or reasonably expected to injure or cause loss
to the Corporation. Notwithstanding the provisions of this paragraph, Employee
may divulge or disclose Proprietary Information to Employee's legal advisers,
provided that such advisors agree to keep such Proprietary Information
confidential, or in response to a court or arbitration order.
The Employee further agrees not to make any notes, memoranda, flow
charts, logic diagrams, specifications, reports, compilations, analyses,
sketches, drawings, technical data, source code, object code, models or other
physical manifestations (or copies thereof) relating to
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Exhibit 10.19
any matter within the scope of the Proprietary Information at any time otherwise
than for the benefit of the Corporation, or, either during or after the
termination of this Agreement, to use or permit to be used any such information
(or copies thereof) otherwise than for the benefit of the Corporation. Upon
termination of this Agreement, the Employee shall deliver to the Corporation at
its address set forth above all such notes, memoranda, flow charts, logic
diagrams, specifications, reports, compilations, analyses, sketches, drawings,
technical data, source code, object code, models and other physical
manifestations and any other related information and all copies thereof made
during the term of this Agreement. Notwithstanding the provisions of this
paragraph, Employee may retain, for a reasonable time, such copies as Employee
reasonably believes may be necessary for legal reasons or upon advice of legal
counsel for the purpose of defending Employee in any pending or threatened
litigation.
6. Certain Covenants of the Employee.
(a) Property and Non-Solicitation.
(i) Non-Compete. During the time Employee is employed
under this Agreement (the "Restricted Period"), the
Employee shall not, in the United States of America
or in any foreign country, directly or indirectly,
(i) engage in the Corporation Business for his own
account; (ii) enter the employ of, or render any
services to, any persons engaged in such activities;
or (iii) become interested in any person engaged in
the Corporation Business, directly or indirectly, as
an individual, partner, shareholder, officer,
director, principal, agent, employee, trustee,
consultant or in any other relationship or capacity;
provided, however, that the Employee may own,
directly or indirectly, solely as an investment,
securities of any person which are traded on any
national securities exchange or NASDAQ if the
Employee (a) is not a controlling person of, or a
member of a group which controls such person or (b)
does not, directly or indirectly, own 4% or more of
any class of securities of such person.
(ii) Property of the Corporation. Subject to Section 5(b),
all memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled
by the Employee or made available to the Employee
concerning the business of the Corporation or any of
its affiliates shall be the Corporation's property
and shall be delivered to the Corporation promptly
upon the termination of the Employee's employment
with the Corporation or any of its affiliates or at
any other time on request.
(iii) Employees of the Corporation. During the Restricted
Period and for a period of six months following the
termination (whether for cause of otherwise) of the
Employee's employment with the Corporation or any of
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Exhibit 10.19
its affiliates, the Employee shall not, directly or
indirectly, hire, solicit or encourage to leave the
employment of the Corporation or any of its
affiliates, any employee of the Corporation or its
affiliates or hire any such employee who has left the
employment of the Corporation or any of its
affiliates within six (6) months of the termination
of such employee's employment with the Corporation or
any of its affiliates.
(iv) Consultants and Independent Contractors of the
Corporation. During the Restricted Period and for a
period of six months following the termination
(whether for cause of otherwise) of the Employee's
employment with the Corporation or any of its
affiliates, the Employee shall not, directly or
indirectly, hire, solicit or encourage to cease to
work with the Corporation or any of its affiliates,
any consultant, sales representative or other person
then under contract with the Corporation or any of
its affiliates.
(b) Rights and Remedies Upon Breach. If the Employee breaches,
or threatens to commit a breach of, any of the provisions of Section 6(a) (the
"Restrictive Covenants"), the Corporation shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Corporation under law or in equity.
(i) Specific Performance. The right and remedy to have
the Restrictive Covenants specifically enforced by
any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to
the Corporation and its affiliates and that money
damages will not provide an adequate remedy to the
Corporation.
(ii) Accounting. The right and remedy to require the
Employee to account for and pay over to the
Corporation all compensation, profits, monies,
accruals, increments or other benefits (collectively,
"Benefits") derived or received by the Employee as a
result of any transactions constituting a breach of
any of the Restrictive Covenants, and the Employee
shall account for and pay over such Benefits to the
Corporation.
(c) Severability of Covenants. If any court determines that
any of the Restrictive Covenants, or any parts thereof, are invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
(d) "Blue-Penciling". If any court construes any of the
Restrictive Covenants, or any part thereof, to be unenforceable because of the
duration of such provision or the area
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Exhibit 10.19
covered thereby, such court shall have the power to reduce the duration or area
of such provision and, in its reduced form, such provision shall then be
enforceable and shall be enforced.
(e) Enforceability in Jurisdictions. The parties intend to and
hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts
of any jurisdiction within the geographical scope of such Restrictive Covenants.
If the courts of any one or more of such jurisdictions hold the Restrictive
Covenants wholly unenforceable under the law of that jurisdiction by reason of
the breadth of such scope or otherwise, it is the intention of the parties that
such determination not bar or in any way affect the Corporation's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such Restrictive
Covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
7. Termination.
(a) Term. This Agreement shall commence as of the date first
above written and shall continue in effect for three (3) years unless earlier
terminated in one of the following manners, or upon the occurrence of one of the
following events (with the period from the date hereof until the date of such
expiration or earlier termination being referred to herein as the "Term"):
(i) upon the Employee's death.
(ii) if the Employee becomes "Disabled." As used herein,
the term "Disabled" shall mean the inability of the
Employee to substantially perform the Employee's
duties under this Agreement for a period in excess of
either three (3) consecutive months or a total of one
hundred eighty (180) days in any twelve (12) month
period by reason of any incapacity, physical or
mental, which the Corporation's Board of Directors,
based upon medical advice or an opinion provided by
Employee's treating physician, determines to have
incapacitated the Employee from satisfactorily
performing all of the Employee's usual services for
the Corporation during the foreseeable future. The
Board of Directors may elect to have Employee
examined by a duly licensed independent physician,
and Employee agrees to submit to such examination. In
the event Employee's treating physician and any such
independent physician are unable to agree as to
whether Employee is Disabled, then the two physicians
shall select a third physician and the opinion of any
two of the three physicians shall be determinative.
(iii) by mutual agreement of the Employee and the
Corporation.
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Exhibit 10.19
(iv) by the Corporation for "Cause." As used herein,
"Cause" shall mean the failure by the Employee to
observe any material provision of this Agreement or
any other agreement, or any breach of any of the
Employee's covenants, agreements, representations or
warranties in any agreement between the Corporation
and the Employee which default or breach continues
ten (10) days after Employee receives notice thereof
specifying each claimed breach or default, or any act
committed by the Employee involving fraud, gross
negligence or willful disregard of duty,
insubordination (after written notice of the
particulars and a reasonable -- under the
circumstances -- opportunity to correct the conduct
constituting the basis for such alleged
insubordination), or other willful misconduct, the
Employee's indictment or arraignment on any felony
charges, or any conduct involving moral turpitude.
(b) Termination of Obligations. Upon the termination of the
Employee's employment hereunder, all benefits hereunder shall thereupon
terminate as of the date of termination, and the Employee shall return to the
Corporation all of the Corporation's property in his possession or under his
control, including all files, keys, reports and other tangible and intangible
property of any kind, nature or description. The provisions of Sections 5
through 19 shall survive any expiration or earlier termination of this
Agreement. The Employee shall receive all salary, bonuses and stock options pro
rata to the extent earned as of the date of termination, as well as any other
compensation to which he may be entitled under Section 7(d).
(c) Repayment of Moving Expenses. If, within one year of the
date of this Agreement, (i) the Employee voluntarily (excluding death and
disability) terminates his Employment with the Corporation, or (ii) the
Corporation terminates the Employee's employment for Cause, then the Employee
shall reimburse the Corporation for all moving expenses previously paid to the
Employee or on the Employee's behalf, within thirty (30) days.
(d) Severance. If, within one year of the date of this
Agreement, the Corporation terminates the Employee's employment without Cause,
then the Corporation shall continue to pay the Employee his then current salary,
bonuses and stock options pro rata, and other benefits (to the extent eligible),
as of the date of termination, for six months following the date of the
termination. Upon the termination of Employee's employment hereunder due to
Employee's death or due to Employee becoming Disabled, Employee's salary,
bonuses and stock options pro rata, and other benefits (to the extent eligible)
hereunder shall continue for a period of six months following such termination.
8. Prior Agreements. The Employee represents and warrants that he is
not a party to or bound by an agreement which in any way prevents, limits,
impairs or otherwise affects his ability to enter into and/or fully and timely
perform his obligations under this Agreement, other than the terms of a
Separation Agreement between Employee and his current employer, which terms have
been furnished to the Corporation.
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Exhibit 10.19
9. Waiver. A party's failure to insist on compliance or enforcement of
any provision of this Agreement, shall not affect the validity or enforceability
or constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement by that party or any other party.
10. Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon as applied to
agreements between Oregon residents entered and to be performed entirely within
Oregon. Any dispute between the Employee and the Corporation arising under or
related to this Agreement or otherwise concerning the employment of Employee by
the Corporation or the termination of such employment shall be resolved by
submitting the matter to binding arbitration in accordance with this Section 11.
Arbitration shall be conducted in Portland, Oregon pursuant to the procedural
rules then in effect of the American Arbitration Association and shall be heard
by a single arbitrator, reasonably agreed to by the parties, who shall be an
attorney-at-law licensed to practice and in good standing in the State of Oregon
and knowledgeable in employment matters. The decision of such arbitrator shall
be final and binding on the parties and may be entered for enforcement in any
court or tribunal of competent jurisdiction and authority. The arbitrator shall
award such damages or other relief as he deems appropriate and may, but shall
not be required to, award legal fees and costs to the prevailing party. All
costs of such arbitration (excluding fees, disbursements and expenses of
counsel, advisors, witnesses and experts) shall be borne equally by the parties,
subject to the arbitrator's award of costs and legal fees, if any. This Section
11 shall not prevent the Corporation from seeking or obtaining injunctive relief
where such remedy is the appropriate form of remedy under the circumstances,
including, without limitation, for any breach of Section 6 or 7 above.
11. Severability. The invalidity or unenforceability of any provision
in the Agreement shall not in any way affect the validity or enforceability of
any other provision of this Agreement and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision had never been in the
Agreement.
12. Notice. Any and all notices required or permitted herein shall be
deemed given if hand delivered or if mailed by registered or certified mail,
return receipt requested, or by nationally recognized overnight courier, to the
Corporation at its principal place of business, addressed to the attention of
Xxxxxxx X. Xxxxxxxxxx, with a copy to Xxxxxxx X. Xxxxxx, Xxxxxx & Xxxxxxxxxx
LLP, Xxxxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, and to the Employee at the
address specified in the preamble of this Agreement, with a copy to Xxxxx X.
Xxxxxxxx, 0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxx 00000, or at such other address or
addresses as either party may hereafter designate in writing to the other.
13. Assignment. This Agreement, together with any amendments hereto,
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, assigns, heirs and personal representatives, except
that the rights and benefits of either of the
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Exhibit 10.19
parties under this Agreement may not be assigned without the prior written
consent of the other party.
14. Amendments. This Agreement may be amended at any time, but only by
mutual consent of the parties hereto in writing, signed by the Corporation and
the Employee.
15. Right to Advice of Counsel. The Employee acknowledges that he has
consulted with counsel and is fully aware of his rights and obligations under
this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, none of which need contain the signature of more than one party
hereto, and each of which shall be deemed to be an original, and all of which
together shall constitute a single agreement.
17. Entire Agreement. This Agreement represents the final and entire
agreement between the parties respecting its subject matter, and merges and
supersedes any and all prior and contemporaneous agreements, promises,
commitments, statements and communications, written and oral, between them
relating to such subject matter.
18. Approval of Board of Directors. This Agreement shall be effective
upon execution by both parties.
19. Headings. The various headings in this Agreement are inserted for
convenience only and are not part of this Agreement.
[Remainder of page left blank intentionally; signature page follows]
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Exhibit 10.19
IN WITNESS WHEREOF, the Corporation and the Employee have duly executed
this Employment Agreement as a sealed instrument to be effective on the
Effective Date hereof.
CORPORATION
By: /s/ XXXXXXX XXXXXXXXXX
--------------------------------------
Xxxxxxx Xxxxxxxxxx
Director/Chairman Comp Committee
EMPLOYEE:
/s/ XXXXXX XXXX
------------------------------------------
Xxxxxx Xxxx
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