Exhibit 10.03
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of April 6, 2001, by and between XXXXXXX EDUCATION, INC., a Maryland
corporation (the "Company"), and XXXXXX X. XXXXXXXXX (the "Executive").
WHEREAS, the Company believes that it would benefit from the
application of the Executive's skill, experience and background to the
management and operation of the Company, and that the Executive will make major
contributions to the short- and long-term profitability, growth and financial
strength of the Company; and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to be employed by the Company; and
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and conditions of the Executive's employment with the
Company;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to be employed by the Company upon the terms and
conditions set forth herein.
2. Term. The Executive's employment shall be for a term (the
"Employment Term") commencing on March 16, 2001 (the "Commencement Date") and,
subject to termination under Section 8, expiring on December 31, 2004; provided,
however, that commencing on January 1, 2002 and each January 1 thereafter, the
Employment Term will automatically be extended for an additional year unless,
not later than September 30 of the immediately preceding year, the Company or
the Executive shall have given written notice to the other that it or the
Executive, as the case may be, does not wish to have the Employment Term
extended.
3. Duties of the Executive. The Executive shall serve as the President
and Chief Executive Officer of the Company, and as such shall have primary
responsibility for the oversight, management and general operation of all of the
operations of the Company. The Executive shall report solely to the Company's
Board of Directors (the "Board") and shall be assigned only those executive
policy and management duties that are consistent with the Executive's position
as President and Chief Executive Officer of the Company. The Executive shall
devote substantially all of his working time and his best efforts, full
attention and energies to the business of the Company, the responsibilities
provided for the President and Chief Executive Officer in the Company's Bylaws,
and such other related duties and responsibilities as may from time to time be
reasonably prescribed by the Board; provided, however, that it shall not be a
violation of this Agreement for Executive to (a) devote reasonable periods of
time to
charitable and community activities (other than serving on boards of
directors, trustees or similar governing bodies of not-for-profit entities
("Not-for-Profit Boards")) and, with the prior written approval of the Board,
devote reasonable periods of time to serving on Not-for-Profit Boards and
engaging in industry or professional activities (including membership on the
board of directors or governing body of other corporations or entities and
participation on governmental panels and commissions), and/or (b) manage
personal business interests and investments, in each case so long as such
activities do not interfere with the performance of Executive's responsibilities
under this Agreement. The Company shall include the Executive in the management
slate for election as a director at every stockholders' meeting during the
Employment Term at which his term as a director would otherwise expire.
4. Compensation.
(a) Base Salary. During the Employment Term, the Company shall pay to
the Executive a base salary of not less than $350,000 per annum (the "Base
Salary"). The Board shall review Executive's Base Salary annually (after
approval of the forthcoming year's budget and receipt of the prior year's
financial statements) and increase it by an amount no less than the increase in
the consumer price index for the Washington, D.C. metropolitan area from the
immediately preceding year.
(b) Annual Bonus. In addition to the Base Salary, the Executive shall
be eligible to receive an annual bonus (the "Bonus") for each fiscal year of the
Company that ends during the Employment Term, under a bonus plan for senior
executives to be adopted by the Company (the "Plan"), subject to the approval of
the Company's shareholders as required for purposes of exemption from the
limitations on deductibility imposed by Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and based upon the achievement of
objective performance goals meeting the requirements for such exemption. The
Executive's target Bonus under the Plan shall be at least 75% of the Executive's
Base Salary for the year involved, provided that the Company achieves the
targeted level of performance for the relevant fiscal year. The first Bonus that
the Executive shall be eligible to receive under the Plan shall be for the
Company's 2001 fiscal year, and the targeted level of performance required to
earn the tar-geted Bonus amount shall be as agreed by the Compensation Committee
or the Executive Committee of the Board, on the one hand, and the Executive, on
the other hand.
(c) Stock Options. As of the Commencement Date, the Executive shall be
granted options to purchase 350,000 shares of the Company's Common Stock (the
"Options") under the Company's 1996 Stock Option Plan. The Options shall be
subject to the terms of the Company's 1996 Stock Option Plan and of the stock
option agreement which will accompany the grant and will be entered into between
the Company and the Executive, provided however that the terms contained in such
stock option agreement shall be consistent with the terms of this Agreement.
Except as otherwise provided for in this Agreement, the Options shall vest based
on the continued employment of the Executive as to 116,666 shares on March 16,
2002, as to an additional 116,667 shares on March 16, 2003 and as to the final
116,667 shares on March 16, 2004; provided, that the Options shall vest in full
(to the extent they have not previously vested, terminated or expired) upon the
occurrence of a Change of Control. The per-share exercise price of the Options
shall equal the fair market value of a share of the Company's Common Stock on
April 6, 2001. The Options shall have a seven-year term from the date of grant,
except as
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otherwise provided in this Agreement. The Options shall not be
considered "incentive stock options", as such term is defined in Section 422 of
the Code.
5. Executive Benefits.
(a) General. In addition to the compensation described in Section 4,
during the Employment Term, the Company shall make available to the Executive,
on the most favorable terms and conditions available to executive and management
employees of the Company, (i) all Company-sponsored employee benefit plans or
arrangements and such other usual and customary benefits now or hereafter
generally available to employees of the Company, and (ii) such benefits and
perquisites as may be made available to senior executives of the Company as a
group, including, without limitation, equity and cash incentive programs,
director and officer insurance which includes coverage for service on other
boards of directors at the request of the Company, governmental panels, etc.,
vacations, and retirement, deferred compensation and welfare plans. The
intention of the parties is to coordinate the Executive's coverage under the
Company's medical benefit plans and his current COBRA benefits to ensure that no
gap in coverage occurs because of pre-existing condition limitations or
otherwise.
(b) Relocation.
(i) No later than September 1, 2001, the Executive shall
relocate to a residence within 50 miles of the Company's principal
executive offices, currently located in the Washington, D.C.
metropolitan area.
(ii) The Company shall, on a fully grossed-up basis for tax
purposes, reimburse the Executive for the reasonable and documented
costs and expenses of moving the Executive's principal household to
the Washington, D.C. metropolitan area and temporary housing in the
Washington, D.C. metropolitan area before such relocation for up to
six months from the Executive's first day of work pursuant to this
Agreement.
(c) Attorneys' Fees. The Company shall pay or reimburse the Executive
for reasonable attorneys' fees and disbursements incurred by the Executive in
connection with the negotiation and execution of this Agreement up to $17,000.
6. Expenses. The Company shall also pay or reimburse the Executive for
reasonable and necessary expenses incurred by the Executive in connection with
his duties on behalf of the Company in accordance with the expense policy of the
Company applicable to members of senior management of the Company.
7. Place of Performance. In connection with his employment by the
Company, unless otherwise agreed by the Executive, the Executive shall be based
at the principal executive offices of the Company, except for travel reasonably
required for Company business. It is expected that for at least three years from
the Commencement Date, the principal executive offices of the Company will be in
the Washington, D.C. metropolitan area.
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8. Termination.
(a) Termination By the Company. The Executive's employment hereunder
and the Employment Term may be terminated by the Company for any reason by
written notice as provided in Section 18. For purposes of this Agreement, the
Executive will be treated as having been terminated by the Company if the
Executive terminates his employment with the Company under the following
circumstances: (i) the Company breaches any material provision of Sections 4, 5,
6 or 7 of this Agreement and fails to cure such breach within thirty (30)
calendar days after receiving notice thereof from the Executive; (ii) there
occurs a material reduction in the Executive's authority, functions, duties or
responsibilities as provided in Section 3 and the Company fails to restore to
the Executive such authority, functions, duties or responsibilities within
thirty (30) calendar days after receiving notice thereof from the Executive; or
(iii) the Executive resigns for any reason, or without reason, during the
thirty-day period immediately following the six-month anniversary of the first
occurrence of a "Change in Control" of the Company (as defined in Section 11) (a
"COC Termination"). In the event of such a termination or any other termination
of the Executive's employment by the Company for any reason other than Cause (as
defined herein), the Executive shall be entitled to the payments and benefits
set forth in Section 9(a).
(b) Termination By the Executive. The Executive may voluntarily
terminate his employment and this Agreement at any time by notice to the Company
as provided in Section 18. In the event of a termination of the Executive's
employment by the Executive during the Employment Term other than pursuant to
the second sentence of Section 8(a) or a termination by the Company for Cause
(as defined herein) during the Employment Term the Executive shall be entitled
to the payments and benefits set forth in Section 9(b).
(c) Termination Due to Death or Disability. In the event of a
termination of the Executive's employment during the Employment Term due to
death or Disability (as defined herein), the Executive shall be entitled to the
payments and benefits set forth in Section 9(c).
9. Compensation and Benefits Upon Termination of Employment.
(a) Termination by Company Without Cause. If the Executive's
employment hereunder is terminated by the Company (including within the meaning
of the second sentence of Section 8(a)) for any reason other than for Cause (as
defined herein) during the Employment Term, the Company shall be obligated to
pay to the Executive the following termination payments and make available the
following benefits:
(i) Accrued Rights. The Company shall within ten (10) days
of the date of termination pay the Executive a lump-sum amount equal
to the sum of (A) his earned but unpaid Base Salary through the date
of termination, (B) any earned but unpaid Bonus under Section 4(b)
above, and (C) any business expenses due to the Executive from the
Company as of the date of termination. In addition, the Company shall
provide to the Executive all payments, rights and benefits due as of
the date of termination under the terms of the Company's employee and
fringe benefit plans and programs (other than severance plans or
programs) in which the
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Executive participated during the Employment Term (together with the
lump-sum payment, the "Accrued Rights").
(ii) Severance Payment. The Company shall within thirty (30)
days of the date of termination pay the Executive a lump sum payment
in an amount equal to (A) three times the Base Salary (at the highest
rate in effect for any period prior to the date of termination), plus
(B) in the case of a COC Termination only, three times the latest
previous Bonus actually paid.
(iii) Medical Benefits. For a period of three (3) years
following the date of termination, except as provided in Section 8(f),
the Company will arrange to provide the Executive with medical
benefits substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the date of
termination, provided that if and to the extent that any benefit
described in this paragraph is not or cannot be paid or provided under
any policy, plan, program or arrangement of the Company or any
subsidiary, as the case may be, then the Company will itself pay or
provide for the payment to the Executive, his dependents and
beneficiaries, of such benefits.
(iv) Stock Options. As of the date of the Executive's
termination under this paragraph, any unvested Options then held by
the Executive shall immediately terminate and any vested Options held
by the Executive shall remain exercisable until the six-month
anniversary of the date of termination.
(b) Voluntary Resignation or Termination for Cause. If the Executive's
employment hereunder is terminated during the Employment Term because of his
voluntary resignation other than as described in the second sentence of Section
8(a) or because the Company has terminated the Executive for Cause, (i) the
Company shall have no further obligations to the Executive hereunder, except to
pay or provide to the Executive any and all Accrued Rights, (ii) unvested
Options shall terminate immediately and be of no further force or effect and
(iii) all vested Options shall terminate and be of no further force or effect
(x) immediately, if the termination is for Cause, or (y) 90 days after the
termination, if it is because of voluntary resignation.
(c) Disability; Death. If the Executive's employment hereunder is
terminated during the Employment Term by reason of the Executive Disability (as
defined herein) or death, the Company shall pay and provide the Executive (or
his legal representative or estate) with the following:
(i) Accrued Rights. The Company shall pay and provide to the
Executive (or his legal representative or estate) any and all Accrued
Rights, including all disability or life insurance benefits as
applicable;
(ii) Salary Continuation. The Company shall provide the
Executive (or his legal representative or estate) with continued
payment of the Executive's then-current Base Salary for a period of 12
months; provided, that such payments shall be reduced (but not below
zero) by all amounts payable to the Executive (or
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his legal representative, estate, beneficiaries or dependents) under
any Company-provided life insurance or disability benefit plans.
(iii) Stock Options. As of the date of the Executive's
termination under this paragraph, any unvested Options shall vest and
all Options then held by the Executive shall remain exercisable for
one year, or if less, the remaining term thereof.
(d) Termination for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure by the Executive
substantially to perform his duties hereunder (other than any such
failure resulting from the Executive's Disability), which failure is
not or cannot be cured within ten (10) business days after the Company
has given written notice thereof to the Executive specifying in detail
the particulars of the acts or omissions deemed to constitute such
failure,
(ii) the engaging by the Executive in willful misconduct
which is materially injurious to the Company, monetarily or otherwise,
(iii) the Executive's conviction of, or entry of a plea of
nolo contendre with respect to, any felony, or
(iv) the Executive's breach of any material provision of
this Agreement, if the Executive fails to cure such breach within ten
(10) business days after the Company has given written notice thereof
to the Executive.
For purposes of this definition, no act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that the Executive's action
or omission was in the best interests of the Company. The Executive shall not be
deemed to have been terminated for Cause unless and until the Board finds that
the Executive's termination for Cause is justified and has given the Executive
written notice of termination, specifying in detail the particulars of the
Executive's conduct found by the Board to justify such termination for Cause.
(e) Disability Defined. "Disability" shall mean the Executive's
inability to perform the duties of his position with the Company by reason of a
medically determined physical or mental impairment which has existed for a
continuous period of at least 26 weeks and which, in the judgment of a physician
who certifies to such judgment, is expected to be of indefinite duration or to
result in imminent death.
(f) No Obligation to Mitigate. The Executive is under no obligation to
mitigate damages or the amount of any payment provided for hereunder by seeking
other employment or otherwise; provided, however, that the Executive's coverage
under the Company's medical benefit plans will terminate when the Executive
becomes covered under any employee medical plan made available by another
employer. The Executive shall notify the Company within thirty (30) days after
the commencement of any such benefits.
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10. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 10(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment, but that the
Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount,
then no Gross-Up Payment shall be made to the Executive and the amounts payable
under this Agreement shall be reduced so that the Parachute Value of all
Payments, in the aggregate, equals the Safe Harbor Amount; provided, that if the
reduction of the amount payable under this Agreement would not result in a
reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no
amounts payable under the Agreement shall be reduced pursuant to this Section
10(a), and the Gross-Up Payment shall be made. The reduction of the amounts
payable hereunder, if applicable, shall be made by first reducing the payments
under Section 9(a)(ii), unless an alternative method of reduction is elected by
the Executive, and in any event shall be made in such a manner as to maximize
the Value of all Payments actually made to the Executive. For purposes of
reducing the Payments to the Safe Harbor Amount, only amounts payable under this
Agreement (and no other Payments) shall be reduced.
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by
PriceWaterhouseCoopers, or such other nationally recognized certified public
accounting firm as may be agreed to by the Company and the Executive (the
"Accounting Firm"). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
10(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall
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apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that the Company
desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 10(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the payment of any Gross-Up Payment or the receipt by
the Executive of an amount advanced by the Company pursuant to Section 10(c),
the Executive
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becomes entitled to receive any refund with respect to such Gross-Up Payment or
claim, the Executive shall promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 10(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(e) Notwithstanding any other provision of this Section 10, the
Company may, in its sole discretion, withhold and pay over to the Internal
Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following meanings
for purposes of this Section 10.
(i) "Excise Tax" shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or penalties
imposed with respect to such excise tax.
(ii) "Parachute Value" of a Payment shall mean the present
value as of the date of the change of control for purposes of Section
280G of the Code of the portion of such Payment that constitutes a
"parachute payment" under Section 280G(b)(2), as determined by the
Accounting Firm for purposes of determining whether and to what extent
the Excise Tax will apply to such Payment.
(iii) A "Payment" shall mean any payment or distribution in
the nature of compensation (within the meaning of Section 280G(b)(2)
of the Code) to or for the benefit of the Executive, whether paid or
payable pursuant to this Agreement or otherwise.
(iv) The "Safe Harbor Amount" means 2.99 times the
Executive's "base amount," within the meaning of Section 280G(b)(3) of
the Code.
(v) "Value" of a Payment shall mean the economic present
value of a Payment as of the date of the change of control for
purposes of Section 280G of the Code, as determined by the Accounting
Firm using the discount rate required by Section 280G(d)(4) of the
Code.
11. Change in Control. As used herein, a "Change in Control" of the
Company shall mean the occurrence of any of the following:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 50% of either: (i) the
then-
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outstanding shares of the Company's Common Stock or (ii) the combined
voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors ("Voting
Stock"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change in Control:
(1) any acquisition directly from the Company, (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
subsidiary of the Company, or (4) any acquisition by any Person
pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 11; or
(b) Individuals who constitute the Board of Directors of the
Company as of the date hereof (the "Incumbent Board") cease for any
reason (other than death or disability) to constitute at least a
majority of the Board; provided, however, that (i) any individual
designated as a director by any or all of New Mountain Partners L.P.,
DB Capital Investors, L.P. and any other person to whom New Mountain
Partners L.P. and its affiliates sells or transfers up to 1,346,154
shares of Series A Preferred Stock of the Company (in the aggregate
for all such persons) (including their respective affiliates, the
"Investors") shall be deemed to be a member of the Incumbent Board,
and (ii) any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to
such nomination) shall be considered as though such individual were a
member of the Incumbent Board, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule
14a-11 of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board or any of
the Investors; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company with or to any Person other than a person
under the control of one or more of the Investors (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Common
Stock and Voting Stock of the Company immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then-outstanding shares of common stock
and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Business
Combination, of the Common Stock and Voting Stock of the Company, as
the case may be, (ii) no Person (excluding any entity resulting from
such Business Combination or any employee benefit plan (or related
trust) sponsored or maintained by the Company or such entity resulting
from such Business
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Combination) beneficially owns, directly or indirectly, more than 50%
of, respectively, the then-outstanding shares of common stock of the
entity resulting from such Business Combination, or the combined
voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
12. Confidentiality Agreement.
(a) The Executive acknowledges that, in the course of his employment
by the Company, he will or may have access to and become informed of
confidential or proprietary information which is a competitive asset of the
Company ("Confidential Information"), including, without limitation, (i) the
terms of any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) merchandising and marketing methods, (iv)
product or course development ideas and strategies, (v) university and Company
personnel training and development programs, (vi) financial results, (vii)
strategic plans and demographic analyses, (viii) proprietary computer and
systems software, and (ix) any non-public information concerning the Company,
its employees, suppliers or customers. The Executive agrees that he will keep
all Confidential Information in strict confidence during his employment by the
Company and thereafter, and will never directly or indirectly make known,
divulge, reveal, furnish, make available, or use any Confidential Information
(except in the course of his regular authorized duties on behalf of the
Company). The Executive agrees that the obligations of confidentiality hereunder
shall be in effect at all times during the Employment Term and shall survive
termination of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement, unless and until any such Confidential
Information shall have become, through no fault of the Executive, generally
known to the public or the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement). The Executive's obligations under this Section 12 are in addition
to, and not in limitation of or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under general legal
or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive may not make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company shall at all times be the property of the Company. Upon
termination of the Executive's employment with the Company, the Executive will
return to the Company any such documents or other property of the Company which
are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company, except in the
ordinary course of the Company's business, the Executive shall not at any time
following the date of this
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Agreement use for the benefit or purposes of the Executive or for the benefit or
purposes of any other person, firm, partnership, association, trust, venture,
corporation or business organization, entity or enterprise or disclose in any
manner to any person, firm, partnership, association, trust, venture,
corporation or business organization, entity or enterprise any Confidential
Information.
13. Investment in Company Common Stock. The Executive shall, prior to
December 31, 2001, purchase on the open market or pursuant to the Company's
stock purchase plan an amount of Company Common Stock at a cost not less than
$250,000, and shall hold such Company Common Stock at least until the first to
occur of December 31, 2004 or the termination of his employment with the
Company. During such period (if any) after December 31, 2004 while the
Executive's employment with the Company continues, he shall hold Company Common
Stock having a value at least equal to 70% of the amount of his Base Salary as
in effect from time to time.
14. Covenant Not to Compete.
(a) For three (3) years after the date of termination of employment
(as hereinafter defined), if (i) the Executive has received or is receiving
benefits under Section 9(a), (ii) the Executive terminates his employment before
the end of the Employment Term for any reason other than those specified in
Section 8(a), or (iii) the Company terminates the Executive's employment for
Cause, the Executive shall not, directly or indirectly, individually or on
behalf of any other person or entity, (A) engage or be interested in (whether as
owner, stockholder, partner, lender, consultant, employee, agent or otherwise)
any business, activity or enterprise which is then competitive with the business
of any division or operation of the Company or the Company's subsidiaries
(collectively, the "Company Group") in any region of the United States in which
such business is then being conducted, it being understood that the Company
Group currently is engaged primarily in the business of for-profit
post-secondary education, or (B) hire or employ any person who has been an
employee, representative or agent of any member of the Company Group at any time
during the Executive's employment or solicit, aid or induce such person to leave
his or her employment with any member of the Company Group to accept employment
with any other person or entity. The Executive's ownership of less than 1% of
any class of stock in a publicly-traded corporation or his membership on any
board of directors that the Board has approved in writing shall not be deemed a
breach of this Section 14.
(b) The Executive acknowledges and agrees that a violation of Section
12 and the foregoing provisions of this Section 14 (referred to collectively as
the Confidentiality and Noncompetition Agreement) would cause irreparable harm
to the Company, and that the Company's remedy at law for any such violation
would be inadequate. In recognition of the foregoing, the Executive agrees that,
in addition to any other relief afforded by law or this Agreement, including
damages sustained by a breach of this Agreement and any forfeitures under
Section 9, and without the necessity or proof of actual damages, the Company
shall have the right to enforce this Agreement by specific remedies, which shall
include, among other things, temporary and permanent injunctions, it being the
understanding of the undersigned parties hereto that damages, the forfeitures
described above and injunctions shall all be proper modes of relief and are not
to be considered as alternative remedies.
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15. Agreement. This Agreement supersedes any and all prior and/or
contemporaneous agreements, either oral or in writing, between the parties
hereto, with respect to the subject matter hereof. Each party to this Agreement
acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no prior and/or contemporaneous agreement, statement
or promise pertaining to the subject matter hereof that is not contained in this
Agreement shall be valid or binding on either party.
16. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
17. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 17(a) and 17(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments and benefits
hereunder will not be assignable, transferable or delegable by him, whether by
pledge, creation of a security interest, or otherwise, other than by a transfer
by the Executive's will or by the laws of descent and distribution and, in the
event of any attempted assignment or transfer contrary to this Section 17(c),
the Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
18. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five (5) business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally
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recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as either party may have furnished
to the other in writing and in accordance herewith, except that notices of
changes of address shall be effective only upon receipt.
19. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Maryland, without giving effect to the
principles of conflict of laws of such State.
20. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
21. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9
through 24, inclusive, will survive any termination or expiration of this
Agreement or the termination of the Executive's employment for any reason
whatsoever.
22. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is in writing
and signed by the party against whom such modification, waiver or discharge is
sought to be enforced. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are to
sections of this Agreement. The captions used in this Agreement are designed for
convenient reference only and are not to be used for the purpose of interpreting
any provision of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
24. Board Membership.
(a) The Executive shall recuse himself from all decisions and actions
taken by the Board with respect to this Agreement, including without limitation
decisions whether the Company will give any notice that the Employment Term
shall not be extended pursuant to Section 2 and any decisions concerning the
termination of the Executive's employment by the Company.
(b) Notwithstanding any other provision of this Agreement, upon the
termination of the Executive's employment with the Company for any reason,
unless otherwise requested by the Board he shall immediately resign from the
Board and from all boards of directors of subsidiaries and affiliates of the
Company of which he may be a member. The
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Executive hereby agrees to execute any and all documentation of such
resignations upon request by the Company, but he shall be treated for all
purposes as having so resigned upon termination of his employment, regardless of
when or whether he executes any such documentation.
IN WITNESS WHEREOF, with the Company signatory listed below
having been duly authorized by the Company to enter into this Agreement by the
Company, the parties hereto have executed this Agreement as of the day and year
first written.
XXXXXXX EDUCATION, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxxx
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