Exhibit 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and effective this 12th day of August, 2002, 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 Xxxxx X.
Xxxxxx, an individual residing at X0000 Xxxxx Xxxx, Xxxxxxxx, XX, 00000 (the
"Employee").
WITNESSETH:
WHEREAS, the Corporation desires to employ the Employee as the Chief
Operating 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 Chief
Operating 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 her capacity as the Chief Operating 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
commensurate with such position as shall be prescribed from time to time by the
President and Chief Executive Officer and/or Board of Directors of the
Corporation. The Employee shall report to, and be subject to the supervision and
control of the President and Chief Executive Officer and/or Board of Directors
of the Corporation. The Employee shall devote her full time to the business of
the Corporation and shall faithfully perform the duties assigned to her to the
best of her 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.
Employee's location of employment shall be at the Company's executive
offices in Dallas, Texas. 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 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 One Hundred Seventy-Five Thousand Dollars
($175,000.00), 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) Signing Bonus. The Corporation shall pay the Employee, as a
signing bonus for fiscal year 2002, twenty-five thousand dollars ($25,000.00)
less applicable taxes and withholding within ten (10) days of the execution of
this Agreement by the parties.
(c) Bonus. The Employee shall be eligible for a bonus calculated
as follows: (i) if Pro Rata Earnings (as defined below) are less than Target
Earnings (as defined below), then there shall not be any bonus; (ii) if Pro Rata
Earnings exceed Target Earnings, but are less than double Target Earnings, then
the bonus shall be in the amount of twenty-five thousand dollars ($25,000); and
(iii) if Pro Rata Earnings are greater than or equal to double Target Earnings,
then the bonus shall be in the amount of twenty-five thousand dollars ($25,000)
for each integral multiple of Target Earnings that is less than Pro Rata
Earnings (for example, if Pro Rata Earnings are 3.5 times greater than Target
Earnings, then the Bonus would be ($25,000*3) = $75,000). For purposes of this
Section 3(c), "Pro Rata Earnings" means the earnings of the Corporation, for the
period from August 1, 2002 through December 31, 2002, before depreciation,
amortization (excluding the pro rata portion of 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 the pro rata portion of the five-hundred thousand dollar
($500,000.00) restructuring charge of the Corporation for the year 2002, and
excluding any one-time gain from the sale of assets and any one-time charge
during such period, and "Target Earnings" means $416,666.67. The bonus shall be
calculated after the Corporation's audit for the year 2002 and paid within a
reasonable amount of time thereafter. The Employee's total compensation for the
years 2003 and 2004 shall be determined by the Board of Directors and
Compensation Committee of the Corporation.
(d) Other Benefits 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 Agreement 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.
(e) 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.
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(f) 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 her 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.
(g) 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 fifty thousand ($50,000.00) dollars, incurred
in connection with the Employee relocating to the Dallas, Texas area.
(h) Apartment. In connection with the Employee relocating to the
Dallas, Texas area, the Corporation shall reimburse the Employee for all rental
and related payments for an apartment in Dallas, Texas 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.
(i) Stock Options. Pursuant to a separate stock option agreement
to be entered into between the Corporation and the Employee, the Employee shall
receive options for the purchase of thirty two thousand five hundred (32,500)
shares of the Corporation's common stock, par value $.0l per share (the "Common
Stock"). The options shall vest over three years at the rate of 29.65328 shares
per calendar day. The exercise price for each share of Common Stock shall be the
lower of (i) $4.85 ($31,500,000 equity valuation divided by 6,500,000 shares
outstanding) or (ii) the average closing price of a share of Common Stock as
quoted on the OTC Bulletin Board, for the thirty (30) trading days commencing on
the later of (x) the next trading day after the day this Agreement is executed
by all parties, and (y) the first day that the Common Stock is publicly traded.
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.
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 her 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
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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 she 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 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 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 her own account; (ii) enter
the employ of or render any services to, any
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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 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.
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(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 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
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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.
(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 her possession or under her
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 she 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 her 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.
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(d) Severance. If, within two years of the date of this Agreement,
the Corporation terminates the Employee's employment without Cause, then the
Corporation shall continue to pay the Employee her 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 she is
not a party to or bound by an agreement which in any way prevents, limits,
impairs or otherwise affects her ability to enter into and/or fully and timely
perform her obligations under this Agreement, other than the terms of a
Separation Agreement between Employee and her current employer, which terms have
been furnished to the Corporation.
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 Texas as applied to
agreements between Texas residents entered and to be performed entirely within
Texas. 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 Dallas, Texas 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 Texas
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 she 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
10 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
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nationally recognized overnight courier, to the Corporation at its principal
place of business, addressed to the attention of the Chief Executive Officer,
and to the Employee at the address specified in the preamble of this Agreement,
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 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 she has
consulted with counsel and is fully aware of her 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.
IN WITNESS WHEREOF, the Corporation and the Employee have duly executed
this Employment Agreement as a sealed instrument as of the day and year first
above written.
CORPORATION:
By: /s/ Xxxxxx Xxxx
----------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
EMPLOYEE:
/s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
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