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Exhibit 10.10
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into and is effective as of December 5, 1997, by and between ARV
ASSISTED LIVING, INC., a California corporation (the "Company"), and XXXXXX X.
XXXXXXXXX, an individual ("Executive").
R E C I T A L
Whereas, the Company and Executive desire to assure that the Company
retains the services of Executive, whose experience, knowledge and abilities are
extremely valuable to the Company.
NOW, THEREFORE, in consideration of the terms, conditions, covenants,
representations, warranties and promises contained in this Agreement, the
Parties agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive and Executive hereby
accepts employment with the Company on the terms and conditions set forth
herein.
2. DUTIES. At all times while Executive is an employee of the Company,
Executive shall perform the duties and obligations of the Chief Executive
Officer and, upon admittance as a member of the Board of Directors of the
Company, the Chairman of the Board of the Company. Executive shall report to the
Company's Board of Directors (the "Board") and shall at all times perform his
duties and obligations faithfully, diligently, and to the best of his ability,
in accordance with the Company's policies and procedures, and shall instruct and
require all those working with and under him to do the same. Executive's
employment hereunder shall be on a full-time basis, and, except as permitted by
the prior written consent of the Board, Executive shall devote substantially all
of his productive time, ability, and attention to the business of the Company
during the "Term" (as defined in Section 3 below).
3. TERM. The initial term of this Agreement (the "Term") shall commence
upon the date hereof and shall terminate three (3) years thereafter (the
"Termination Date"), unless sooner terminated as provided herein; provided,
however, that if the Company has not given Executive written notice of the
Company's intent to terminate this Agreement at least two (2) years prior to the
Termination Date, the Term shall automatically be extended for a period of one
year (the "Additional Term"), upon all the same terms and conditions.
Thereafter, the Termination Date shall continue to be extended annually unless
and until the Company timely delivers such written notice of termination at
least two (2) years prior to the then effective Termination Date.
4. COMPENSATION.
4.1 ANNUAL BASE SALARY. For Executive's services hereunder, the
Company shall initially pay Executive an annual salary of Two Hundred Fifty
Thousand Dollars ($250,000) (the "Base Salary"). The Base Salary shall be paid
in accordance with the Company's normal procedures for paying salaried
employees, but in no event less frequently than semi-monthly.
4.2 BASE SALARY INCREASES. The Base Salary shall be increased (the
"Base Salary Increase") each January 1st (the "Adjustment Date"), commencing in
1999, as follows: the Base Salary in effect immediately before each Adjustment
Date shall be increased, based on the Executive's and the Company's performance
results and the Annual Performance and Salary Review (as defined in Section
10.1.2 below).
4.3 BONUSES. Commencing on July 1, 1998, and continuing annually
thereafter, the Company shall pay to Executive as a bonus an amount equal to
thirty-seven and one-half percent (37.5%) of the then current Base Salary (the
"Minimum Bonus"). In addition, commencing with the 1998 calendar year,
operational and financial targets for performance for any one calendar year
shall be established by the Board, based on the earnings of the Company and
other criteria as determined by mutual agreement between Executive and the
Compensation Committee of the Board, on or before March 31st of that year. No
later than December 31st of each
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year, the Board shall award to Executive an additional bonus (the "Additional
Bonus"), as determined in the discretion of the Board, based on achieving the
agreed-upon targets. The Additional Bonus, when added to the Minimum Bonus, is
expected to range from fifty percent (50%) to one hundred percent (100%) of
Executive's Base Salary, with a target for planning purposes only established at
seventy-seventy-five percent (75%) of Executive's Base Salary. Executive's
Additional Bonus shall be paid, at Executive's election, in either December or
January.
4.4 TAXES. All amounts paid to Executive hereunder shall be subject
to the applicable withholding of social security, federal, state, and other
taxes and deductions as required by law.
5. BENEFITS. Executive shall be entitled to participate in all benefits
offered to employees or similarly situated officers including, without
limitation, the following:
5.1 GROUP MEDICAL, DISABILITY, AND LIFE INSURANCE BENEFITS. During
the Term and any Additional Term, Executive shall be eligible to participate and
the premiums shall be paid by the Company on behalf Executive, in any group
medical, disability, and life insurance programs as provided generally to
officers of the Company.
5.2 BUSINESS CLUB MEMBERSHIP. Executive shall be entitled to an
annual membership in a local business club of his choosing.
5.3 CELLULAR TELEPHONE. During the Term and any Additional Term,
Executive shall be entitled to the use of a cellular telephone and the monthly
access charge and any business-related charges shall be paid by the Company
subject to Section 5.6 below.
5.4 VACATION. Executive shall be entitled to four (4) weeks annual
vacation during the Term and any Additional Term.
5.5 RETIREMENT PLANS. During the Term and any Additional Term,
Executive shall be included in and able to participate in any retirement,
pension, or other deferred or supplemental compensation plans operated by the
Company including, without limitation, the Company's 401(k) Plan and any
subsequent or additional retirement plans established by the Board.
5.6 EXPENSE REIMBURSEMENT. Upon presentment of verifiable invoices
to the Company's Chief Financial Officer and other documentation as may be
requested by the Company, and subject to the Company's expense reimbursement
policies applicable to similarly situated executives, the Company shall
reimburse Executive for the reasonable costs and expenses which he incurs in
connection with the performance of his duties and obligations under this
Agreement. All expenses shall be reviewed by the both the Company's Chief
Financial Officer and the Company's external auditors.
5.7 RELOCATION ASSISTANCE. In order to facilitate relocation of
Executive's primary residence to Costa Mesa, California or its vicinity, the
Company shall pay to Executive a one-time relocation payment (the "Relocation
Payment") equal to the sum of Fifty Thousand Dollars ($50,000) net to Executive
after applicable withholdings, payable either (i) within one (1) week after
Executive's commencement of employment; or (ii) on the first regular pay period
in January 1998, at the sole election of Executive; provided, however, that in
the event Executive is terminated for "cause" (as that term is defined in
Section 7.3 below) within the first three (3) years of employment with the
Company, the Relocation Payment shall be repaid by Executive to the Company
within thirty (30) days thereafter.
6. STOCK OPTIONS. Concurrently with the execution of this Agreement,
Executive and the Company are executing and delivering a Stock Option Agreement
(the "Option Agreement") which grants to Executive the option to purchase, at a
price equal to the closing stock price on December 4, 1997, one hundred fifty
thousand (150,000) shares of the Common Stock of the Company, upon the terms and
conditions set forth in the Option Agreement. As of January 2, 1998, Executive
and the Company shall execute and deliver a second Stock Option Agreement (the
"Second Option Agreement") which shall grant to Executive the option to
purchase, at a
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price equal to the closing stock price on December 31, 1997, one hundred
thousand (100,000) shares of the Common Stock of the Company, upon the terms and
conditions set forth in the Second Option Agreement. In addition to the options
granted under the Option Agreements, during the Term, Executive shall be
eligible to receive additional stock option awards as part of the annual
executive performance and salary reviews and to participate in any other stock
option plan instituted by the Company.
7. TERMINATION.
7.1 TERMINATION AT WILL.
7.1.1 BY THE COMPANY. Subject to the provisions of Section 7.2
and 7.5 below, the Company may terminate this Agreement at any time, for any
reason, or for no reason, either with or without "cause" (as that term is
defined in Section 7.3 below). In the event that such termination is without
"cause" the Company shall provide Executive with fifteen (15) days' prior
written notice.
7.1.2 BY EXECUTIVE. Subject to the provisions of Section 7.4 and
7.5 below, Executive may terminate this Agreement at any time, for
any reason, or for no reason, either with or without cause, by delivering thirty
(30) days' prior written notice to the Company; provided, however, that the
Company may reduce such thirty (30) day period in its sole discretion.
7.2 TERMINATION BY THE COMPANY WITHOUT "CAUSE." If the Company
terminates Executive other than for "cause" (as that term is defined in Section
7.3 below) or, if the Company willfully breaches a material provision of this
Agreement and fails to cure such breach within thirty (30) days of written
notice from Executive, in addition to payment of Executive's Base Salary,
accrued vacation and reimbursable expenses through the date of termination,
Executive shall be entitled to the following:
7.2.1 SEVERANCE PAY. The Company shall pay Executive upon such
termination a lump-sum amount equal to the greater of: (1) the sum of one (1)
years' current Base Salary plus the Minimum Bonus amount calculated based on
such Base Salary; or (2) the sum of (i) the monthly portion of the current Base
Salary times the number of months (including partial months) remaining until the
Termination Date (as defined in Section 3 herein) plus (ii) the Minimum Bonus
calculated based on the current Base Salary divided by twelve (12) and
multiplied by the number of months (including partial months) remaining until
the Termination Date (the "Severance Pay").
7.2.2 CONTINUATION COVERAGE. The Company shall pay, on behalf of
Executive, for the maximum period for which COBRA coverage is available, the
premiums payable in order to continue the same coverage of Executive and
Executive's family under the Company's health insurance plan which exists as of
the date of termination, unless and until Executive and Executive's family are
otherwise covered by another health insurance plan (the "Continuation
Coverage").
7.2.3 ACCELERATED VESTING. In addition to the Severance Pay and
the Continuation Coverage, in the event of such a termination of Executive's
employment, any options to purchase the common stock of the Company previously
granted to Executive and not otherwise vested shall be fully vested as of the
Termination Date, and all restrictions regarding the Restricted Stock shall be
removed.
7.3 TERMINATION BY THE COMPANY FOR "CAUSE." For purposes of this
Section 7, termination for "cause" shall include termination of Executive by the
Company for the following, as determined by a majority vote of the Board: (a) A
willful breach by Executive of any material provision of this Agreement that
remains uncured by Executive within thirty (30) days of written notice of such
breach from the Board; (b) Executive's habitual neglect of his duties; or (c) If
Executive is convicted of a felony.
7.4 VOLUNTARY TERMINATION BY EXECUTIVE. If Executive voluntarily
terminates Executive's employment with the Company, Executive shall not be
eligible to receive any severance pay as provided in Section
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7.2. herein. Within 72 hours following such termination, Executive shall be paid
Executive's Base Salary and accrued vacation and within ten (10) days following
such termination, Executive shall be paid Executive's reimbursable expenses
payable through the date of the termination of Executive's employment and a
lump-sum amount equal to three (3) months' Base salary. Termination by Executive
shall include the death or "Disability" (as defined herein) of Executive. For
the purposes of this Section 7.4, "Disability" shall mean any physical or mental
disability which causes Executive to be unable to substantially perform
Executive's normal duties as an employee of the Company; provided, however, that
Executive shall not be considered disabled until: (i) Executive has been so
disabled for one hundred eighty (180) days; (ii) Executive's attending physician
shall have furnished to the Company certification that the return of Executive
to his duties as an employee of the company is impossible or improbable; and
(iii) Executive is determined to be totally disabled by the disability insurer
then insuring Executive, if any.
7.5 CHANGE OF CONTROL.
7.5.1 DEFINITIONS. For the purposes of this Agreement, the following
terms shall be defined as follows:
(i) "Change in the Ownership of the Company" shall mean either:
(a) the date that any person, persons, entity or group, (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) ("Person"), acquires the beneficial ownership (with in the
meaning of Rule 13d-3 promulgated under the Exchange Act ("Rule 13d-3")) of
fifty percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors of the Company ("Outstanding Voting Securities"); or (b) the date that
any Person, other than Prometheus Assisted Living LLC, acquires the beneficial
ownership (with in the meaning of Rule 13d-3) of twenty percent (20%) or more of
the combined voting power of the then Outstanding Voting Securities and the
Board determines that a Change in the Ownership of the Company, pursuant to this
Section 7.5, has occurred.
(ii) "Change in Effective Control of the Company" shall mean
that either: (A) any Person acquired (or had acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such Person)
the beneficial ownership of the capital stock of the Company possessing fifty
percent (50%) or more of the total voting power of the capital stock of the
Company; or (B) a majority of the members of the Board were replaced during any
twelve (12) month period by directors whose appointment or election was not
endorsed by a majority of the members of the Board prior to the date of such
appointment or election; and
(iii) "Change in Ownership of a Substantial Portion of the
Company's Asset's shall mean the date on which any Person acquired (or had
acquired during the twelve (12) month period ending on the date of the most
recent acquisition by such person or persons) assets from the Company that have
a total fair market value equal to, or more than, thirty three and one-third
percent (33-1/3%) of the total fair market value of all of the assets of the
Company immediately prior to such acquisitions. All determinations of the
applicability of this Section shall be made consistent with the Proposed
Regulations Section 1.280G-1 promulgated by the Internal Revenue Service, or any
successor regulation.
7.5.2 CHANGE OF CONTROL PAYMENT. Following a Change in the
Ownership, or Effective Control of the Company or in the Ownership of a
Substantial Portion of the Company's Assets (any one of which shall be referred
to herein as a "Change of Control"), in the event Executive's employment is
terminated for any reason, either with or without cause or voluntarily within
nine (9) months of a Change of Control or involuntarily within twelve (12)
months of a Change of Control, in lieu of the payment specified in Section 7.2
hereof, the Company shall immediately pay to Executive the sum of the following
amounts: (i) Executive's accrued Base Salary; (ii) Executive's accrued vacation
pay; (iii) reimbursement for expenses through the date of Change of Control; and
(iv) either three (3) times the sum of Executive's Base Salary, Minimum Bonus,
Additional Bonus, and any other compensation received by Executive during the
immediately preceding calendar year, plus two (2) times the Minimum Bonus, or,
in the event that the Change of Control occurs within the first twelve (12)
months of the Term of this Agreement, three (3) times the Base Salary then in
effect, plus six (6) times the Minimum Bonus (the "Change of Control Payment").
In addition to the foregoing amounts, in the event that any portion of the
Change
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of Control Payment shall be deemed to be an "excess parachute payment" under
Section 28OG of the Internal Revenue Code of 1986, as amended, or any
replacement statute, the amount of the Change of Control Payment shall be
increased to a new amount (the "Modified Change of Control Payment") such that
the Modified Change of Control Payment less the excise tax payable by Executive
on the Modified Change of Control Payment is equal to the Change of Control
Payment.
7.5.3 ACCELERATED VESTING. In addition to the Change of Control
Payment or the Modified Change of Control Payment, in the event Executive's
employment is terminated voluntarily within nine (9) months of a Change of
Control or involuntarily within twelve (12) months of a Change of Control, any
options to purchase the common stock of the Company previously granted to
Executive and not otherwise vested shall be fully vested as of the date of the
Change of Control, and all restrictions regarding the Restricted Stock shall be
removed.
7.5.4 OUTPLACEMENT ASSISTANCE. In order to ease Executive's
transition to new employment, in the event of a voluntary or involuntary
termination of Executive's employment under this Section 7.5, the Company shall
provide Executive with an office, telephone and secretary, similar to those used
by Executive prior to the termination of Executive's employment, for a period of
up to eighteen (18) months. In addition, the Company shall pay the cost of
outplacement services for Executive, up to a maximum of $50,000 from a service
or provider of Executive's choice.
7.5.5 DISPUTED ISSUES. In the event of a dispute between Executive
and the Company arising under or relating to this Section 7.5, such dispute
shall be submitted to binding arbitration pursuant to the provisions of Section
10.12 below, provided however, that if such a dispute is submitted to
arbitration, the Company shall continue to pay Executive his Base Salary until
such time as there is a final resolution and the Company shall pay Executive's
reasonable attorney's fees, costs and expenses incurred in connection with such
proceeding whether or not Executive is the prevailing party.
8. CONFIDENTIALITY. During the Term and any Additional Term, Executive
will have access to and become acquainted with what Executive and the Company
acknowledge are trade secrets and other confidential information (the
"Confidential Information") which are the exclusive property of the Company. In
light of the sensitive and proprietary nature of the Confidential Information,
Executive agrees to execute and be bound by a Confidentiality and Non-Disclosure
Agreement, to be approved by the Board.
9. COVENANT NOT TO COMPETE. During the Term or any Additional Term, and
for a period of one (1) year following expiration of the Term or any Additional
Term, in all counties of California, the other States of the United States and
the other countries of the world where the Company or its affiliates are engaged
in business, Executive shall not, directly or indirectly, whether as an
Executive, employer, consultant, agent, principal, partner, member, stockholder,
corporate officer or director, or in any other individual or representative
capacity, whether or not for compensation, engage in or participate in or render
services to any business or activity which is competitive in any manner
whatsoever with the Company or any of its affiliates in the business of assisted
living or long-term health care. This Section 9 shall not apply in the event of
a Change of Control under Section 7.5. Further, this Section 9 shall not apply
in the event of termination of employment as described in Section 7.2 or Section
7.4; provided, however, that Executive shall first waive in writing all rights
to receive severance pay other than Executive's Base Salary, accrued vacation
and reimbursable expenses payable through the date of the termination of
Executive's employment.
10. MISCELLANEOUS PROVISIONS.
10.1 EXECUTIVE COMPENSATION, BENEFITS AND PERFORMANCE REVIEW.
10.1.1 1998 EXECUTIVE COMPENSATION AND BENEFITS SURVEY. The
Compensation Committee of the Board shall, during 1998, conduct an executive
compensation and benefits survey and shall, as it deems appropriate, make
adjustments to the Company's executive compensation and benefits in order to
compete for, attract and retain competent executives and to emphasize
shareholder value.
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10.1.2 ANNUAL PERFORMANCE AND SALARY REVIEWS. Beginning in 1999,
the Company shall, in accordance with standards and policies to be established
by the Board, conduct annual executive performance and salary reviews (the
"Annual Performance and Salary Review").
10.2 DIRECTORS AND OFFICERS INDEMNITY AGREEMENT. The Company shall
provide Executive with a Directors and Officers Indemnity Agreement to be
mutually agreed upon between Executive and the Board.
10.3 NOTICES. Except as otherwise provided in this Agreement, all
notices, requests, demands, and other communications under this Agreement shall
be given in writing and shall be served either personally, by facsimile or
delivered by first class mail, registered or certified, postage prepaid, and
properly addressed as follows :
If to the Company: ARV Assisted Living, Inc.
000 Xxxxxxx Xxxxxx, Xxxx. X-0
Xxxxx Xxxx, XX 00000-0000
Attention: Board of Directors
Fax No. (000) 000-0000
If to Executive: Xxxxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Notices shall be deemed received at the earliest of actual
receipt, confirmed facsimile or three (3) days following mailing.
10.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter contained
herein and supersedes all prior agreements, representations, and understandings
of the parties.
10.5 ATTORNEY's FEES. Subject to Section 7.5.5 above, in the event
of any proceeding arising out of or related to this Agreement, the prevailing
party shall be entitled to recover all of its costs and expenses incurred in
connection with such proceeding, including, without limitation, court costs and
reasonable attorney's fees, whether or not such proceeding is prosecuted to
judgment.
10.6 AMENDMENTS. This Agreement may not be amended, supplemented,
canceled, or discharged except by written instrument executed by the parties
hereto.
10.7 WAIVERS. All waivers hereunder shall be in writing. No waiver
by any party hereto of any breach or anticipated breach of any provision of this
Agreement by any other party shall be deemed a waiver of any other
contemporaneous, preceding, or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
10.8 SEVERABILITY. In the event that any provision of this Agreement
shall be unenforceable or inoperative as a matter of law, the remaining portions
or provisions shall remain in full force and effect.
10.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
representatives, executors, administrators, successors, and assigns, provided,
however, that Executive may not assign any or all of his rights or duties
hereunder except following the prior written consent of the Company.
10.10 COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute one and the same Agreement.
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10.11 SECTION HEADINGS. The section headings used in this Agreement
are inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
10.12 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the state of California.
10.13 ADVICE OF COUNSEL. Executive acknowledges that he has been
advised to seek independent legal counsel for advice regarding the effect of the
terms and provisions hereof, and has either obtained such advice of independent
legal counsel, or has voluntarily and without compulsion elected to enter into
and be bound by the terms of this Agreement without such advice of independent
legal counsel.
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10.14 ARBITRATION. Subject to Section 7.5.5 above, any dispute
arising out of or relating to this Agreement or Executive's employment by the
Company shall be submitted to arbitration in Orange county, California, before a
sole arbitrator (the "Arbitrator") selected from the American Arbitration
Association ("AAA"), and shall be conducted in accordance with the AAA's Labor
Arbitration Rules (including the Expedited Labor Arbitration Procedures) and the
provisions of California Code of Civil Procedure Section 1280 et seq. as the
exclusive remedy of such dispute; provided, however, that provisional injunctive
relief may, but need not, be sought in a court of law while arbitration
proceedings are pending, and any provisional injunctive relief granted by such
court shall remain effective until the matter is finally determined by the
Arbitrator. Final resolution of any dispute through arbitration may include any
remedy or relief which the Arbitrator deems just and equitable, including
permanent injunctive relief or specific performance or both, and the Arbitrator
is hereby empowered to award such relief. Any award or relief granted by the
Arbitrator hereunder shall be final and binding on the parties hereto and may be
enforced by any court of competent jurisdiction. Executive and the Company
understand and agree that they are hereby waiving any rights to trial by jury in
any action, proceeding or counterclaim brought by either of the parties against
the other in connection with any matter whatsoever arising out of or in any way
connected with this Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of the date first above written.
THE COMPANY
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ARV ASSISTED LIVING, INC.,
a California corporation
By: /s/ Xxxx X. Booty
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Title: Interim President and Chief
Executive Officer
EXECUTIVE
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/s/ Xxxxxx X. Xxxxxxxxx
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Name: XXXXXX X. XXXXXXXXX
