EXHIBIT 10.12
EXPLOYMENT AND INCENTIVE AGREEMENT
THIS AGREEMENT is made and entered into as of September 30, 1992 between
XXXXX COMPANY, a California corporation ("Xxxxx"), XXXXX XX, a California
corporation ("Xxxxx XX"), and WARNER DEVELOPMENT COMPANY OF TEXAS, a Texas
corporation ("WDC") (collectively, Xxxxx, Xxxxx XX and WDC shall be referred to
hereinafter as the "Companies"), and XXXXXXX X. XXXXXXXXX ("Executive").
RECITALS
A. Executive is presently employed by Companies, pursuant to an
employment agreement entitled "Amended and Restated Employment and Incentive
Bonus Agreement", dated March 1, 1989. The parties desire to cancel said
agreement and by this Agreement establish a new employment contract between
Companies and Executive.
B. Executive's employment with Companies started in January, 1988. In
his capacity as Chief Operating Officer of Companies he has contributed
substantially to the success and growth of Companies. As Companies are family
owned, the incentive of stock options is not considered to be feasible, yet it
is the desire of Companies that recognition of Executive's services be afforded
him through the participation program hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
1. EMPLOYMENT
Companies hereby employ Executive and Executive hereby accepts
employment under the terms and conditions hereinafter set forth.
2. DUTIES
Subject to the authority of the Board of Directors of Xxxxx and Xxxxxx
X. Xxxxx, or his successor, who is Chairman of the Board and Chief Executive
Officer of Companies, Executive, as the President and Chief Operating Officer of
Companies, shall have direct and general supervision, direction and control of
the management, other officers, business and affairs of Companies, including the
power and authority to make decisions of policy which relate to Companies' goals
and plans or which have a substantial effect on the operation of Companies, its
financial position or results, or its relations with governmental bodies,
consumers or the public generally. Executive, as President and Chief Operating
Officer, shall also be responsible for Companies' marketing, operations,
financial performance and compliance with all applicable laws or regulations.
3. SERVICES
For the term of his employment, Executive shall perform his duties
hereunder in a diligent manner; shall devote his entire business time, attention
and effort to the affairs of Companies within the scope of his employment as is
reasonably necessary for the proper rendition of said services; shall use his
best efforts to promote the interests of Companies; and shall be just and
faithful in carrying out his duties. Subject to the provisions set forth in
Section 2. Executive's services shall be rendered when and as required by
Companies' Boards of Directors and in accordance with their instructions,
directions and control. Companies understand and agree that, notwithstanding
the foregoing, Executive may serve during the term of this Agreement as a
director on the boards of directors of businesses, civic or community
corporations or entities other than Companies, if he shall obtain the prior
approval of Companies' Executive Committee of the Board of Directors, which may
be withheld if any Executive Committee member reasonably determines that
Executive's so serving as a director for any such corporation or entity would
interfere with the performance of Executive's duties hereunder or would conflict
with the best interests of any of the Companies.
4. TERM
The term of this Agreement shall begin on the date of this Agreement
and will continue to December 31, 1992, at which date and on each December 31
thereafter, this Agreement will automatically renew for another one (1) year
term, unless this Agreement is earlier terminated as hereinafter provided in
Paragraph 6.
5. COMPENSATION
A. BASE SALARY. For the remainder of 1992 and for the year 1992,
Companies shall pay Executive a base salary of $200,000 per year, payable
semi-monthly, less income tax withholdings and other normal employee
deductions. The base salary will be subject to review for each successive
year after December 31, 1992 by the Executive Committee of the Board of
Directors during the preceding month of December of each such year.
B. GUARANTEED BONUS. In addition to the base salary, Companies
shall pay to Executive for the employment year of 1992 a guaranteed bonus of
$100,000. The guaranteed bonus will be subject to review for each succeeding
year after December 31, 1992 by the Executive Committee of the Board of
Directors, during the preceding month of December of each such year.
C. OTHER BENEFITS. Executive shall be entitled to the following
benefits in addition to his salary:
(a) Paid vacation and sick leave as made generally available to
the senior executives of Xxxxx;
(b) Participation in Henry's medical and dental plans and
long-term
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disability and life insurance programs, as made generally available to the
senior executives of Xxxxx, at no charge to Executive. Family coverage under
Henry's medical and dental plans shall be made available to Executive at a
nominal charge;
(c) An automobile allowance or the use of an automobile, in
accordance with the general practice of Xxxxx for its senior executives; and
(d) Reimbursement for periodic dues for the World Presidents
Organization, the Annandale Country Club and the California Club.
D. EXECUTIVE LOANS. As further compensation for the services of
Executive, Xxxxx has loaned Executive a total of $175,000 during his employment.
Such loans (the "Executive Loans") shall bear no interest. The Executive Loans
shall be repaid in the following manner:
(a) If Executive becomes entitled to receive any of the Participation
and Termination Awards provided in the following subparagraph E and paragraph
6C, then the Executive Loans shall be repaid first by application of the
Reduction Amount [defined in paragraph 5E (d)(2)] which application will reduce
the amount of Participation Award otherwise payable; and then
(b) If a balance remains outstanding with respect to Executive Loans
after Executive's employment hereunder is terminated, Executive shall repay the
balance of such loans in four equal annual installments, the first of such
installments to be paid within ninety (90) days after termination of employment.
Each of the next installments shall be made on the three succeeding anniversary
dates of the first installment; the unpaid balance of the Executive loans shall
bear no interest.
E. PARTICIPATION AWARD.
(a) In the event there is a distribution of money or assets made
to the shareholders of Companies either of profits or from the sale of assets or
of stock, or as a return of capital, Executive shall be entitled to participate
in any such distribution (a "Participation Award").
(b) The Participation Award shall be calculated as follows:
In the event any distribution is made as described in
Paragraph E (a) above, if Executive is employed by Companies at the time of such
occurrence and has been employed for less than five employment years, Companies
shall pay to Executive a Participation Award mutually agreed upon between
Companies and Executive, but in no event shall the Participation Award be less
than ten percent (10%) of the distribution being made to the shareholders. If
Executive's employment is more than five years, the Participation Bonus shall
not be less than Twenty Percent (20%) of the distribution being made.
(c) In the event a distribution is made to the shareholders of
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Companies, which is a consequence of the sale of Xxxxx, in determining the
Participation Award to Executive, only that portion of the money received that
exceeds $5,895,559.00 shall be subject to the distribution Participation Award
formula set forth in Paragraph E (b) above.
(d) Provisions applicable to the Participation Award:
(1) Any stock sale must be to a party that is not one of
the shareholders of any of the Companies. For the purpose of this Agreement,
the term "shareholder" shall mean any of the following who are owners of common
stock, namely, Warner X. Xxxxx, his spouse, his lineal descendants or any trust
established for the benefit of any of them.
(2) Any Participation Award that is payable shall be
reduced by $200,000 plus the outstanding balance of the Executive Loan (the
"Reduction Amount"). If more than one Participation Award is made, the
Reduction Amount to be applied shall be the balance of any then outstanding
loan, plus any portion remaining of the $200,000 deduction that was not utilized
with reference to any previous Participation Awards that were made.
(3) In computing sale proceeds, proceeds shall be reduced
by all expenses incurred by such shareholders or any of the Companies in
effecting such sale or transfer, including but not limited to the fees and
expenses incurred in employing brokers, investment bankers, appraisers,
attorneys and accountants. If sale proceeds consist of non-cash consideration
(for example notes or stock), the value of such non-cash consideration shall be
agreed to by the Companies and Executive and, if the Companies and Executive
cannot agree as to such value, the value of the non-cash consideration shall be
determined by appraisal, as hereinafter provided.
6. TERMINATION
A. EVENTS AND CONSEQUENCES OF TERMINATION. The employment of
Executive hereunder shall cease and terminate upon the occurrence of any one of
the following events:
(a) By Executive, upon ninety (90) days' advance written notice
to Companies;
(b) Upon the death of Executive;
(c) Upon the permanent disability of Executive upon thirty (30)
days' notice by Companies. For the purposes of this Agreement, Executive shall
be deemed permanently disabled if the Board of Directors of Xxxxx shall
determine in good faith that any ailment, illness or other incapacity prevents
Executive from engaging in his regular occupation and employment as contemplated
by this Agreement for a period of three (3) consecutive months;
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(d) Immediately after Companies gives Executive written notice
of termination for cause. For purposes of this Agreement, "cause" shall be
defined and limited to mean: (i) Executive's conviction of or plea of guilty to
a felony or a crime involving moral turpitude, (ii) Executive's material breach
of any provision of this Agreement, or (iii) Executive's willful breach or
habitual neglect of his duty in the course of his employment.
(e) Thirty (30) days after Executive gives Companies written
notice that Companies has materially breached any provision of this Agreement,
if Companies has materially breached this Agreement and such breach continues
unremedied for 30 days after Executive gives such written notice.
B. If Executive's employment hereunder is terminated for cause
pursuant to subparagraph (d) above, Executive shall be entitled to receive no
compensation after the date of termination of Executive's employment
hereunder other than the portion of his salary and bonus provided for in
Sections 5A and 5B accrued prior to the effective date of termination of
Executive's employment hereunder. If Executive's employment hereunder is
terminated pursuant to subparagraphs (a), (b), (c), or (e) above,
Executive shall be entitled to receive (i) the portion of his salary and
bonus provided for in Section 5A and 5B accrued prior to the effective date
of termination; (ii) such salary and bonus as is provided for in Sections 5A
and 5B for a twelve month period determined as though Executive had continued
to be employed during the twelve-month period commencing on such effective
date of termination and (iii) any Additional Termination Award to which the
Executive is entitled as hereinafter provided.
Notwithstanding anything to the contrary herein, Section 9
herein shall survive the termination of Executive's employment hereunder
regardless of the reason for termination of Executive's employment hereunder.
Further Companies may, at their option, after giving Executive notice of
termination for cause, or after receipt of notice of termination given by
Executive, remove or suspend Executive from performance of any or all of his
offices or duties under this Agreement.
C. ADDITIONAL TERMINATION AWARD. Upon the termination of
Executive's employment, if the termination is for any reason other than for
cause, as described in paragraph 6A (d), in addition to the payments provided
for in paragraph 6B, the Companies shall collectively pay to Executive a
Termination Award, in the aggregate, calculated as follows:
(a) First, a "termination percentage" is to be determined
using the following table:
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NUMBER OF YEARS TERMINATION PERCENTAGE
--------------- ----------------------
OF EMPLOYMENT (NOT TO EXCEED 20%)
------------- -------------------
4 but less than 5 8%
5 but less than 6 10%
6 but less than 7 12%
7 but less than 8 14%
8 but less than 9 16%
9 but less than 10 18%
10 or more 20%
(b) Second, determine the "termination value" of each of the
Companies: (a) termination value as to Xxxxx is the amount by which the fair
market value of Henry's outstanding shares of common stock exceeds $5,895,595,
(b) termination value as to Xxxxx XX and WDC is the fair market value of the
outstanding common stock of each Company. If the fair market value cannot be
agreed upon by Executive and Companies, such value will be determined by
appraisal, as hereinafter provided.
(c) Then, multiply the applicable termination percentage (First
above), by the termination value (Second above). From the product so
determined, subtract the then outstanding balance in the Reduction Amount, if
any. The Termination Award as calculated above is termed the Employment Year
Calculation.
(d) Should the termination of Executive be the consequence of
his death or permanent disability [Paragraph 6A (b) or (c)] in determining the
Termination Award, rather than using the table above set forth for determination
of the termination percentage, if Executive has been employed by Xxxxx less than
5 years, the Termination Award shall be computed using a termination percentage
of 10% and if Executive has been employed more than 5 years, the termination
percentage figure shall be 20%. The Termination Award calculated by this
paragraph is termed the "Alternative Calculation".
(e) Companies have acquired life insurance on the life of
Executive in the amount of $2,000,000.00, to assist in funding the obligations
under Paragraphs 6A (b) and 6A (c).
(f) In the event Executive's employment has terminated because
of permanent disability [Paragraph 6A (c)] and he dies before reaching age 65,
Executive shall be
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entitled to receive the Additional Termination Awards, as provided in
Paragraph 6C.
D. PAYMENT OF TERMINATION AWARD
A Termination Award payable under Section 6C shall be paid in
four equal annual installments, the first of such installments to be paid within
thirty (30) days after final determination of the Termination Value under
Section 6C. Each of the next installments shall be made on the three succeeding
anniversary dates of the first installment; the unpaid balance of the award
shall bear interest at the prime rate of Bank of America existing on the due
date of the first installment. Notwithstanding any other provision of this
Section 6, any Termination Award payable under Section 6 initially totaling less
than Two Hundred Thousand Dollars ($200,000) shall be paid in one lump sum,
such payment to be made within thirty (30) days after final determination of the
amount.
E. EXCLUSIVITY OF TERMINATION PROVISIONS. In the event that
Companies shall terminate Executive's employment hereunder whether or not in
accordance with this Article 6, Executive's sole remedy for such termination
shall be to receive the compensation to which he would have been entitled had
Companies terminated this Agreement in accordance with the provisions of this
Article 6, such compensation being in lieu of any other damages, compensatory or
punitive, or other relief to which Executive might otherwise have been
entitled,.
7. APPRAISAL
A. In the event Participation or Termination values as referenced
above cannot be mutually agreed upon, the valuation shall be determined by an
appraiser acceptable to both parties, and such appraiser shall appraise the
shares as of the date of the event causing the valuation. If the parties are
unable to agree on an appraiser within 60 days following the event causing
valuation, each party shall name his own appraiser. If the lower of the two
resulting evaluations is less than 85% percent of the higher evaluation, the
original appraisers shall appoint a third, whose determination of the valuation
shall be final. Otherwise, the valuation shall be the average between the two
valuations originally determined. The parties shall share equally the fees and
expenses of any appraiser named jointly and each party shall bear the fees and
costs of any appraiser named solely by such party. Each party shall bear his
own expenses in presenting evidence to the two appraisers.
B. In determining this valuation, the appraisers appointed under
this Agreement shall consider all opinions and relevant evidence submitted to
them by the parties, or otherwise obtained by them, and shall set forth their
determination in writing together with their opinions and the considerations on
which the opinions are based, with a signed counterpart to be delivered to each
party, within 90 days of commencing appraisal.
C. Each of the Companies and Executive agree to cooperate fully with
the appraiser(s) determining Termination Values and further agree to provide
such financial information, background data and documentation which is
reasonably requested by such appraiser(s).
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8. EXPENSES
The Companies during the term shall reimburse Executive for
reasonable and necessary business expenses incurred by Executive in the
course of his employment, upon presentation by Executive to the Companies of
reasonably detailed statements of expenses for which reimbursement is claimed.
9. EMPLOYMENT COVENANTS AND AGREEMENTS
A. EMPLOYEE'S KNOWLEDGE. Executive agrees that he will not,
during the term hereof or hereafter, make use of, divulge or otherwise
disclose, directly or indirectly, any trade or business secret (including,
without limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or policies
of the Companies which he may have learned as a result of his employment
during the term, except to the extent such use or disclosure is necessary to
the performance of this Agreement. The provisions of this Section 9.A shall
survive the expiration or termination, for any reason, of this Agreement. In
addition, Executive shall not during the term hereof make use of, develop or
otherwise disclose, directly or indirectly, any confidential information
concerning the business or policies of the Companies which he may have
learned while an employee, officer or director of the Companies.
B. EXCLUSIVITY OF EMPLOYMENT. During the period of Executive's
employment under this Agreement, Executive's services shall be exclusive to
the Companies during ordinary working hours or at such other times as may be
required by the Companies and Executive shall not directly or indirectly
render services of a business, professional or commercial nature to any other
person or firm, whether for compensation or otherwise (except to the extent
set forth in the final sentence of Section 3 of this Agreement), or engage in
any activity competitive with or adverse to the Companies' business or
welfare.
10. NOTICES
All notices required or desired to be given hereunder shall be in
writing and shall be delivered in person or by registered or certified mail,
telex, telecopier, telegraph or cable, first-class postage or toll prepaid,
return receipt requested and addressed to the parties at their respective
addresses set forth below, unless by such notice a different address shall
have been designated:
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To any of the Companies: Xxxxx Company
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxx, XX 00000
Attention: Warner X. Xxxxx
To Executive: Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
All notices properly sent by mail, stamped and addressed as
aforesaid, shall be deemed given five days after being deposited in the mail.
All other notices shall be deemed given on the date of service, if served
personally on the party to whom notice is to be given, or the date of
transmission, if sent by telex, telecopier or telegraph.
11. MISCELLANEOUS
A. TERMINATION OF FORMER EMPLOYMENT AGREEMENT. By the execution of
this Agreement, the parties hereto mutually agree that the "Amended and Restated
Employment and Incentive Bonus Agreement" dated March 1, 1989 is terminated and
of no further force or effect.
B. HEADINGS. The headings and titles to the articles, sections and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed a part of or affect the construction or interpretation of any provision
hereof.
C. MODIFICATIONS AND WAIVER. No cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless specifically set forth in a writing signed by
the party to be bound thereby. No waiver of any right or remedy in respect of
any occurrence or event on one occasion shall be deemed a waiver of such right
or remedy in respect of such occurrence or event on any other occasion.
D. ENTIRE AGREEMENT. This Agreement supersedes all other
agreements, oral or written, heretofore made with respect to the subject hereof
and the transactions contemplated hereby, and contains the entire agreement of
the parties with respect to the subject matter hereof. Executive acknowledges
that this Agreement only provides for compensation for employment and neither
confers upon Executive any rights as a shareholder of any of the Companies nor
gives Executive any rights to acquire any shares in any of the Companies.
E. SEVERABILITY. Any provision hereof prohibited by or unlawful or
unenforceable under any applicable law of any jurisdiction shall as to such
jurisdiction be ineffective without affecting any other provision of this
Agreement. To the full extent, however, that the provisions of such applicable
law may be waived, they are hereby waived, to the end that
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this Agreement be deemed to be a valid and binding agreement enforceable in
accordance with its terms.
F. CONTROLLING LAW. All questions concerning the validity and
operation of this Agreement and the performance of the obligations imposed upon
the parties hereunder shall be governed by the laws of the State of California.
G. ASSIGNMENTS. Xxxxx shall have the right to assign this Agreement
and to delegate all rights, duties and obligations hereunder, either in whole or
in part, to any affiliate, successor or other subsidiary of Xxxxx. Executive
agrees that this Agreement is personal to him and his rights and interests
hereunder may not be assigned, nor may his obligations and duties hereunder be
delegated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXX COMPANY
By /s/ Warner X. Xxxxx /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------- ----------------------------
Warner X. Xxxxx XXXXXXX X. XXXXXXXXX
Chairman of the Board
XXXXX XX
By /s/ Warner X. Xxxxx
-------------------------------
Warner X. Xxxxx
Chairman of the Board
WARNER DEVELOPMENT COMPANY OF TEXAS
By /s/ Warner X. Xxxxx
-------------------------------
Warner X. Xxxxx
Chairman of the Board
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