EMPLOYMENT AGREEMENT
THIS AGREEMENT (this “Agreement”), dated
August 20, 2009 and effective as of August 20, 2009 (the “Effective Date”), by
and between EDUCATIONAL
INVESTORS, INC., a Delaware corporation (“the Company”), and XXXXXX XXXXXX, an individual
residing at 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (“the Executive”).
1. Term. The Company hereby
employs the Executive, and the Executive hereby accepts employment, for term
commencing on Effective Date hereof and, subject to earlier termination as
provided in Section
5 hereof, continuing through December 31, 2012 (the “Initial Term”); which
Initial Term may be extended by mutual agreement of the Company and the
Executive (such Initial Term, as the same may be so extended, being hereinafter
sometimes called the “Term of
Employment”). The Executive shall perform the services
specified herein, all upon the terms and conditions hereinafter
stated. This Agreement may be extended only upon the written consent
of the parties hereto.
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2.
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Duties
and Responsibilities.
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a. General. The
Executive shall serve as the Chief Executive Officer of the Company, and,
subject to the general direction and control of the Board of Directors of the
Company (the “Board of
Directors”), the Executive shall, together with the President of the
Company, have responsibility for the overall operation of the
Company. In addition, the Executive shall have such other duties as
are normally associated with and inherent in the executive capacity in which the
Executive will be serving. The Executive also agrees to perform,
without additional compensation (other than reimbursement of reasonable travel
expenses), such services for any subsidiary or affiliate corporation of the
Company and any successor-in-interest to the Company (together with the Company,
hereinafter collectively called the “Company Group”), as
the Board of Directors shall from time to time reasonably specify.
b. Time. The Executive
shall devote the substantial portion of his business time, attention and energy
to the Business (as defined herein) of the Company Group as necessary and
appropriate to further the interests of the Company Group.
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3.
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Salary
and Bonus.
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a. During
the period commencing on the Effective Date and ending December 31, 2009, the
Company shall pay to the Executive a salary at an annual rate of Seventy
Thousand ($70,000) Dollars (the “Base
Salary”). Commencing January 1, 2010 or
as soon as practicable thereafter, such Base Salary shall be increased to
an annual amount which shall be commensurate with both (i) the trailing
twelve-month consolidated pro-forma (based on acquisitions or other material
events that may occur) earnings before interest, taxes, depreciation and
amortization of intangible assets of the Company Group for the fiscal year ended
December 31, 2009, and (ii)
the then Business prospects of the Company Group, all as shall be determined by
the independent members of the Board of Directors of the Company in the exercise
of their reasonable discretion. The Base Salary shall be payable in
accordance with the regular payroll policies of the Company with respect to
executive officers, in effect from time to time during the Term of
Employment. If the Executive’s Term of Employment shall be extended
by mutual agreement of the parties beyond the Initial Term, the Base Salary
shall be as mutually agreed between the Executive and the
Company.
b. Notwithstanding
the foregoing, the sum of the (i) initial Base Salary, (ii) the initial “Base
Salary” of Xxxx Xxxxxx (“Xxxxxx”) as defined
in his Employment Agreement with the Company, dated the date hereof, and the
initial base salary of the individual hired to replace Xxxxxxx Paradise shall
not exceed $200,000 per annum without the written consent of the independent
members of the Board of Directors. For the purpose of this Agreement,
the term “independent members” shall mean the members of the Board of Directors
other than the Executive, Xxxxxx, or any other member thereof designated,
directly or indirectly, by Sanjo Squared, LLC (“Sanjo”) pursuant to
the terms of the Stockholders Agreement, dated the date hereof, among the
Company, Sanjo and Kinder Investments, LP, or any other person who is an
employee of the Company.
c. In
addition to the Base Salary, the Executive shall be entitled to receive an
annual bonus (the “Bonus”) in such about
as shall be determined in the sole discretion of the independent members of the
Board of Directors of the Company following the end of each fiscal year of the
Company Group.
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4.
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Incentive
Awards and Fringe Benefits.
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a. Stock Options. In addition to
(and not in lieu of) the Base Salary and Bonus, the Executive shall be granted
options to purchase up to 1,166,666 shares of Common Stock of the Company
pursuant to the Option Agreement, dated the Effective Date, between the
Executive and the Company (the “Option
Agreement”).
b. Benefit Plans. In
addition to the other compensation payable to the Executive hereunder, and
except as otherwise set forth herein, the Executive shall be eligible to
participate in all pension, profit sharing, retirement savings plan, 401K or
other similar benefit, medical, disability and other employee benefit plans and
programs generally provided by the Company to its senior staff from time to time
hereafter (other than those provided pursuant to separately negotiated
individual employment agreements or arrangements), subject to, and to the extent
the Executive is eligible, the respective terms of such benefit plans and
programs.
c. Expenses. During the
Term of Employment, the Company shall pay or reimburse the Executive, upon
submission of appropriate documentation by him, for all out-of-pocket expenses
for entertainment, travel, meals, hotel accommodations, and the like incurred by
him in the interest of the Business.
d. Vacation. The
Executive shall be entitled to three weeks annual paid vacations per calendar
year in accordance with Company policies.
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e. Insurance. During the Term
of Employment, the Executive shall be entitled to participate in any group
insurance plan, including health insurance, term life insurance, and disability
insurance policies (collectively, “Company Plans”) from
time to time maintained by the Company; provided that such insurance can be
obtained on economically reasonable terms. Should the Company not have an
applicable Company Plan, the Executive shall be reimbursed for any economically
reasonable medical insurance premiums paid by the Executive.
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5.
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Termination; Change of
Control.
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a. Death. If the
Executive shall die prior to the expiration of the Term of Employment, the
Company shall have no further obligation hereunder to the Executive or his
estate except to pay to the Executive’s estate the amount of the Executive’s
Base Salary accrued to the date of his death, plus any accrued but unpaid Bonus
for fiscal year(s) preceding the Executive’s death. Such payment shall be made
promptly after the date of death to the Executive’s estate, except for payment
of the current fiscal year Bonus which shall be made at the end of the fiscal
year in which death occurred.
b. Disability. If prior
to the expiration of the Term of Employment, the Executive shall be prevented,
during a continuous period of ninety (90) days (the “Disability Period”),
from performing his duties by reason of “disability,” the Company may terminate
this Agreement, in which event the Executive shall receive: (i) his Base Salary
accrued to the date upon which any determination of disability shall have been
made as hereinafter provided, which Base Salary payment may be reduced by the
amount of any disability income payments the Executive may receive in connection
with such occurrence of disability during the Disability Period under any policy
or plan carried or maintained by or on behalf of the Company and under which the
Executive is a beneficiary or participant, and (ii) any Bonus that would have
been payable at the time of such termination for disability pursuant to Section 3(b). The
Executive shall continue to have the right to receive benefits, if any, under
any Company Plans, but only in accordance with the terms of such plan or policy
as they apply to persons whose employment has been terminated as a result of an
employee’s permanent disability. Such payment shall be made to the
Executive within five days of the end of the Disability Period, except for
payment of the current fiscal year Bonus which shall be made at the end of the
fiscal year in which the Disability Period arose.
For
purposes of this Agreement, the Executive shall be deemed to have become
disabled when the Board of Directors (excluding the Executive or any of his
affiliates), upon the diagnosis of a reputable, licensed physician of the
Company’s choice, in consultation with the Executive’s primary physician, shall
have determined that the Executive shall have become unable to perform his
duties under this Agreement, whether due to physical or mental incapacity or to
infirmity caused by chronic alcoholism or drug use (excluding infrequent and
temporary absences due to ordinary illness); provided that such
incapacity shall have continued uninterrupted for a period of not less than
ninety (90) days.
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c. Cause.
Notwithstanding any other provision of this Agreement, if prior to the
expiration of the Term of Employment, the Company shall have the right to
discharge the Executive “for Cause,” as defined below, then this Agreement shall
terminate effective upon such discharge, and upon such termination, the Company
shall have no further obligation to the Executive or his estate, except that the
Company will pay to the Executive, within thirty (30) days of such termination,
or in the event of his subsequent death, his estate, an amount equal to the
Executive’s Base Salary, as provided in Section 3 hereof,
accrued to the date of termination. In addition, the Executive shall
not, after the date of termination, be entitled to receive benefits, if any,
under any Company Plans. In the event of termination of the Executive’s
employment for Cause, the Company shall not pay, and the Executive shall not be
entitled to receive, any Bonus.
For the
purposes hereof, the term “Cause” shall mean and
be limited to a discharge resulting from any one of the following:
(i) the
Executive’s conviction of a felony or any other crime involving moral
turpitude,
(ii) a
final determination by a court of competent jurisdiction that the Executive has
breached his fiduciary duties to the Company, or
(iii) the
Executive’s breach of any of his material covenants and obligations under this
Agreement or his willful failure or refusal to follow written lawful polices or
directives established by the Board of Directors; provided that the
Board of Directors shall have first given written notice thereof to the
Executive on each occasion describing in reasonable detail the alleged material
breach, failure or refusal, and such breach or willful failure or refusal to
follow written lawful policies or directives shall remain uncured for a period
of twenty (20) days following receipt of each such notice.
d. Other Reasons for
Termination.
(i) By the
Executive.
The Executive may terminate this
Agreement prior to the end of the Term of Employment either (A) upon ten (10)
days written notice with Good Reason (“Termination With Good
Reason”), or (B) for any or no reason by providing three months’ advance
written notice to the Company.
As used
herein, the term “Good
Reason” shall mean: (a) a material reduction in the scope of the
Executive’s title, authority, duties or responsibilities in effect as of the
Effective Date, which reduction has (i) not been approved in good faith and for
proper business purposes by the Board of Directors, and (ii) is not remedied by
the Company within twenty (20) days after notification to the Company containing
a reasonably detailed description of such reduction; (b) a demand by the Company
that the Executive relocate his principal residence, or (c) the Company’s breach
of any material obligation owed to the Executive under this Agreement, including
any salary or Bonus payment obligations; provided that the
Executive has given the Company notice thereof describing in reasonable detail
the alleged breach or failure, and the Company has failed to cure such breach or
failure within a period of twenty (20) days following receipt of such
notice.
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(ii) By the
Company.
The
Company may terminate this Agreement prior to the end of the Term of Employment,
other than as provided in paragraphs (a), (b) and (c) of this Section 5, by
providing three (3) months’ advance written notice to the
Executive.
A
termination initiated by the Company pursuant to paragraph (d)(ii) or the
Executive pursuant to paragraph (d)(i)(B), shall be referred to as a “Termination Without
Cause”.
In the
event of a Termination Without Cause initiated by the Executive, the Company
shall pay to the Executive, or in the event of his death, to his estate, the
amount of the Executive’s Base Salary accrued to the date of
termination. In the event of a Termination Without Cause initiated by
the Company or a Termination With Good Reason initiated by the Executive, the
Company shall additionally pay to the Executive (i) any accrued but unpaid Bonus
for fiscal year(s) preceding the fiscal year of termination, (ii) the Bonus that
would have been paid to the Executive in the fiscal year in which his
termination occurred, prorated as to the number of days the Executive was
employed pursuant to this Agreement in the year of his termination, and (iii) an
additional amount which shall be equal to the greater of (A) one-third (1/3) of
the Base Salary which would have been paid to the Executive for the Term of
Employment remaining uncompleted at the time of such termination, or (B) one
full year’s Base Salary. The amounts set forth in clauses (i) and
(iii) above shall be paid in full within thirty (30) days of the date of
termination, while the amount set froth in clause (ii) above shall be paid at
the end of the fiscal year in which the Termination Without Cause
occurred. In the event of a Termination with Good Reason or a
Termination Without Cause pursuant to Section 5(d)(ii), the
Executive shall continue to have the right to receive benefits, if any, under
any Company Plans, but only in accordance with the terms of such plan or policy
as they apply to persons whose employment has been terminated without
cause.
e. Change of Control. In
the event that at any time there shall occur a “Change of Control”
(as hereinafter defined), all Options which shall not have been previously
exercisable may become immediately exercisable at the time of such Change of
Control and may be exercised at any time thereafter in accordance with the terms
set forth in Section 4(b) of the Option Agreement.
As used
herein, the term “Change of Control”
shall mean the sale of all assets or transfer of all or substantially all of the
assets or securities of the Company or its parent company, directly or
indirectly, to any Person who is not an affiliate of any of the Company or the
parties to the Stockholders Agreement or their respective affiliates (each, an
“Unaffiliated Third
Party”), whether pursuant to a stock sale, sale of membership interests,
asset sale, merger, consolidation or any other similar combination or
transaction, in each case, where the power to elect a majority of the members of
the Board of Directors of the Company shall be vested in such Unaffiliated Third
Party. Notwithstanding the foregoing, no Change of Control shall be
deemed to have occurred as a result of consummation of a “Reverse Merger
Transaction” (as that term is defined in the Stockholders Agreement of the
Company).
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6.
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Confidential
Information.
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a. The
Executive acknowledges that in the course of his employment with the Company he
may receive certain information, knowledge and data concerning the Business of
the Company Group and its affiliates or pertaining to any individual, firm,
corporation, partnership, joint venture, business, organization, entity or other
person which the Company Group may do business with during the Term of
Employment, which is not in the public domain, including but not limited to
trade secrets, employee records, names and lists of suppliers and customers,
programs, statistics, processes, techniques, pricing, marketing, software and
designs, or any other matters, and all other confidential information of the
Company Group and its and affiliates acquired in connection with your employment
(hereinafter referred to collectively as "Confidential
Information”), which the Company Group and its affiliates desire to
protect. The
Executive understands that such Confidential Information is confidential, and he
agrees not to reveal or disclose or otherwise make accessible such Confidential
Information to anyone outside of the Company or any affiliate and their
respective officers, employees, directors, consultants or agents, so long as the
confidential or secret nature of such Confidential Information shall continue,
whether or not he is employed by the Company.
b. The
Executive further agrees that during the Term of Employment and thereafter, he
will not use such information in competing with the Company Group or any
affiliate or for any other personal gain. At such time as the
Executive shall cease to be employed by the Company for whatever reason or at
any other time the Company may reasonably request, he shall promptly deliver and
surrender to the Company all papers, memoranda, notes, records, reports,
sketches, specifications, designs and other documents, writings (and all copies
thereof), and other property produced by him or coming into his possession by or
through his employment hereunder and relating to the Confidential Information
referred to in this Section 6 or
otherwise to the Business, and the Executive agrees that all such materials will
at all times remain the property of the Company.
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7.
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Agreement Not to Compete and
Not to Solicit.
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a. Agreement Not to
Compete. For so long as the Executive shall be employed with the Company
and, subject to the payment of the Non-Compete Consideration, for a period of
two (2) years after any termination of such employment for any reason except
pursuant to Section
5(d)(ii), except as may be specifically permitted by the independent
members of the Board of Directors, the Executive shall not be engaged, directly
or indirectly, whether as an officer, employee, director, stockholder, partner,
joint venturer or other participant, in any other business activity which would
be competitive with the Business or any other business conducted by the Company
Group during the Term of Employment; provided that the
Executive shall be permitted to:
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(i) continue
to own and operate an existing company and business known as “Training Direct”;
provided, however that the express written consent of the independent members of
the Board of Directors shall be required before “Training Direct” acquires a
business, or enters into a line of business, that is in competition with the
Business of the Company or any other business then conducted or proposed to be
conducted by the Company; and
(ii) own
or acquire up to five percent (5%) of the outstanding capital stock or equity of
any publicly traded corporation or other Person that engages in a business in
competition with the Business of the Company.
b. As
used herein, the term “Business” shall mean and include the collective reference
to the ownership and operation of businesses that provide instruction and
academic, financial or vocational educational services to consumers, whether
through lectures, on-line Internet courses or classroom streaming, or
textbooks. The term “Non-Compete Consideration” shall mean the
annualized Base Salary of the Executive immediately preceding termination of
employment.
c. It
is expressly agreed that if any restrictions set forth in Section 7(a) are
found by any court having jurisdiction to be unreasonable because they are too
broad in any respect, then and in each such case, the remaining restrictions
herein contained shall, nevertheless, remain effective, and this Agreement, or
any portion thereof, shall be considered to be amended so as to be considered
reasonable and enforceable by such court, and the court shall specifically have
the right to restrict the business or geographical scope of such restrictions to
any portion of the business or geographic areas described above to the extent
the court deems such restriction to be necessary to cause the covenants to be
enforceable, and in such event, the covenants shall be enforced to the extent so
permitted.
d. Agreement Not to
Solicit. For so long as the Executive shall be employed with
the Company and for a period of three (3) years following the termination of
this Agreement for any reason, the Executive agrees that he will not, either
directly or indirectly, through any person, firm, association, corporation,
partnership, agency or other business entity or person with which he is now or
may hereafter become associated, (i) cause or induce any present or future
employee of the Company Group to leave the employ of the Company or any
affiliate to accept employment with the Executive or with such person, firm,
association or corporation, agency or other business entity or (ii) solicit any
person or entity which is a customer of the Company Group for the purpose of
directly or indirectly furnishing services competitive with the Company
Group.
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8. Specific Performance. The Executive
acknowledges that a remedy at law for any breach or attempted breach of Section 6 or Section 7 of this
Agreement may be inadequate, agrees that the Company shall be entitled to seek
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
9. Severability. In case of any
term, phrase, clause, paragraph, section, restriction, covenant, or agreement
contained in this Agreement shall be held to be invalid or unenforceable, the
same shall be deemed, and it is hereby agreed that the same are meant to be
several, and shall not defeat or impair the remaining provisions
hereof.
10. Waiver. The waiver by the
Company of a breach of any provision of this Agreement by the Executive shall
not operate or be construed as a waiver of any subsequent or continuing breach
of this Agreement by the Executive.
11. Assignment; Binding Affect.
This Agreement may not be assigned under any circumstances by either
party. Neither the Executive nor his estate shall have any right to
commute, encumber or dispose any rights to receive payments hereunder, it being
agreed that such payment and the right thereto are nonassignable and
nontransferable. Subject to the provisions of this Section 11, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
the Executive’s heirs and personal representatives, and the successors and
assigns of the Company.
12. Amendments. This Agreement may
not be changed, amended, terminated or superseded orally, but only by an
agreement in writing, nor may any of the provisions hereof be waived orally, but
only by an instrument in writing, in any such case signed by the party against
whom enforcement of any change, amendment, termination, waiver, modification,
extension or discharge is sought.
13. Entire Agreement;
Amendment; Governing Law. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the matters covered
hereby. Only an instrument in writing executed by the parties hereto
may amend this Agreement.
14. Governing Law; Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be brought by the parties and heard and
determined only in a Federal or state court located in the Borough of Manhattan
in the City and State of New York and the parties hereto consent to jurisdiction
before and waive any objections to the venue of such Federal and New York
courts. The parties hereto agree to accept service of process in
connection with any such action or proceeding in any manner permitted for a
notice hereunder.
15. Attorneys’ Fees. In
the event that any suit or other legal proceeding is brought for the enforcement
of any of the provisions of this Agreement, the parties hereto agree that the
prevailing party or parties shall be entitled to recover from the other party or
parties upon final judgment on the merits reasonable attorneys’ fees, including
attorneys’ fees for any appeal and costs incurred in bringing such suit or
proceeding.
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16. Headings. All
descriptive headings of the several Sections or paragraphs of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
17.
Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and same instrument. Facsimile and pdf signatures hereto shall
have the same validity as original signatures hereto.
18. Representations and
Warranties. (a) Executive represents and warrants to Company that (i)
Executive is under no contractual or other restriction or obligation which is
inconsistent with his execution of this Agreement or performance of his duties
hereunder, (ii) Executive has no physical or mental disability that would hinder
his performance of his duties under this Agreement, and (iii) he has had the
opportunity to consult with an attorney of his choosing in connection with the
negotiation of this Agreement.
19. Notices. Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be sent by certified mail, by personal delivery or by
overnight courier to the Executive at his residence (as set forth in Company’s
corporate records) or to the Company at its principal office and shall be
effective upon receipt, if by personal delivery, three (3) business days after
mailing, if sent by certified mail or one (1) business day after deposit with an
overnight courier.
[SIGNATURE
PAGE FOLLOWS]
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IN WITNESS WHEREOF,
the parties hereto have executed this agreement as of the date and year first
above written.
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EDUCATIONAL
INVESTORS, INC.
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By:
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/s/
Xxxx Xxxxxx
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Name:
Xxxx Xxxxxx
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Title: President
and COO
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EXECUTIVE:
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/s/
Xxxxxx Xxxxxx
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Xxxxxx
Xxxxxx
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