Exhibit 10.14
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EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made and entered into as of
this day of January 1, 2001, by and between Xxxxxx X. Xxxxxx ("Executive"), and
Xxxx, Xxxxxx & Associates, Inc., a corporation ("Company"), hereinafter jointly
referred to as the Parties.
WITNESSETH
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WHEREAS, Executive is currently employed by the Company pursuant to an
Employment Agreement executed on or about October 18, 1996; and
WHEREAS, the Company wishes to extend the duration of Executive's services
and further clarify the terms and conditions of her employment by entering into
this Agreement with Executive and Executive is willing to commit her services to
the Company, on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, Executive and the Company hereto agree as follows:
1. Term
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This agreement shall commence on January 1, 2001, and shall continue in
effect for an initial 2-year period, concluding after expiration of the two year
period or upon appointment of another CEO by the Company, whichever occurs first
(the "Initial Term"). Upon completion of the Initial Term, the Parties agree to
employ Executive for a second 3 year period, unless further extended or sooner
terminated as hereinafter provided. Thereafter, the term of this Agreement
shall be automatically extended for an additional 2 years unless either party
shall have served written notice at least 60 days prior to the end of the second
term upon the other that it elects not to extend the term of the Agreement.
2. Employment
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2.1 Engagement. The Company hereby employs Executive and Executive
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hereby agrees to be employed by the Company, subject to the terms and conditions
herein set forth. During the Initial Term, Executive shall be employed as CEO,
Chairman, and President of the Company, and shall be responsible for the duties
normally and customarily attendant to such office. Executive shall render such
other services and duties of an executive nature consistent with the duties of a
senior executive officer of the Company as may from time to time be designated
by the Board of Directors ("Board").
2.2 Change of Title. Upon completion of the Initial Term, Executive
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shall be employed as Chairman of the Board for a second 3-year period, or until
designation of Executive as Chairman Emeritus as set forth below. As Chairman
of the Board, Executive shall be responsible for the duties normally and
customarily attendant to such office. Executive shall render such other
services and duties of an executive nature consistent with the duties of a
senior
executive officer of the Company as may from time to time be designated by the
Board. Thereafter, the Parties agree that Executive shall serve as Chairman
Emeritus as more fully set forth below.
2.3 Office and Support Services. Throughout the term of this
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Agreement, and thereafter as Chairman Emeritus as set forth below, the Company
shall provide Executive with an office, as well as an executive assistant
appropriate for an officer of Executive's stature and reasonably necessary for
the performance of her duties. Executive's services shall be rendered there and
at such other Company locations, if any, except insofar as travel to different
locations may be required to perform her regular duties. Should the Company
relocate its offices during the Initial Term, in excess of twenty-five (25)
miles from its current location, the Company will reimburse Executive for all
costs incurred in relocating her primary residence, including, without
limitation, travel, moving expenses, temporary lodging, realtors' commissions
and closing costs, in an aggregate amount not to exceed ________________.
3. Compensation and General Benefits
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3.1 Base Salary. During the term of this Agreement, the Company
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shall pay Executive a base salary in an annualized amount equal to three hundred
fifty thousand dollars ($350,000) ("base salary") payable pro rata on the
Company's regular payday, and subject to adjustment as hereinafter provided.
3.2 Salary Reviews. Executive's base salary shall be reviewed
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annually by the Board for the purpose of considering increases thereof. In
conducting this review, the Board shall consider appropriate factors, including,
without limitation, Executive's performance, the Company's financial condition
and compensation afforded to senior executives of comparable corporations. The
base salary shall not be decreased without the written consent of Executive.
3.3 Bonus.
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(a) During the Initial Term, in addition to the salary provided by
Section 3.1, Executive will participate in the Company's Bonus Plan (hereinafter
the "Bonus Plan"), pursuant to which Executive shall be eligible to receive
additional incentive compensation, on an annual basis. The Parties agree that
any such bonus shall equal at maximum, 75% of Executive's base salary then in
effect, and shall be adjusted based upon budgets, set targets and Executive's
performance towards achieving those goals and targets as established in the
January budgeting meetings.
(b) Upon termination of the Initial Term, Executive shall be entitled
to a pro rated bonus for the portion of the year in which she has served as
President and Chief Executive Officer of the Company. Should Executive's
employment during the Initial Term (other than for Cause) terminate prior to the
end of the Company's fiscal year, Executive's bonus, if any, for that fiscal
year, shall be prorated based on the portion of the fiscal year prior to the
termination.
3.4 Automobile. Throughout the term of this Agreement and thereafter
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so long as Executive serves as Chairman Emeritus as designated below, Executive
shall be provided with a leased automobile, at a cost to the Company of
approximately what is being paid by the
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Company for the automobile leased for Executive at the time of execution of this
Agreement, for her use without any additional payments from Executive. Executive
shall be reimbursed for all reasonable expenses incurred in the operation of her
automobile for the Company's business purposes.
3.5 Holidays and Sick Leave. Executive shall be entitled to the nine
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(9) holidays recognized by the Company, and such sick leave as may be available
to Company employees of equal stature.
3.6 Club Membership. The Company will reimburse Executive for
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membership and monetary dues during her employment, in the City Club.
Thereafter, the Company shall continue to make such contributions on Executive's
behalf to the City Club or a similarly priced club of Executive's choosing so
long as she is serving as Chairman Emeritus.
3.7 Other Benefits. During her lifetime, so long as Executive is in
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compliance with the provisions of Section 6 below, Executive (and her spouse and
dependents) shall be entitled to participate in the Company's liability
insurance, life insurance, disability insurance, dental insurance,
hospitalization insurance, medical, accident, and other employee benefit plans
from time to time adopted by the Company. The Company shall have the right to
change insurance carriers and benefit plans as may be appropriate in light of
future market conditions and shall have the right to purchase individual
policies covering Executive if necessary. Executive's participation in the
Company's retirement and pension plans shall be fixed at such time as Executive
becomes Chairman Emeritus.
3.8 Stock Options. Executive shall also be eligible to receive
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additional incentive compensation in the form of stock option grants. Review
for any such grant shall be concurrent with Executive's annual salary review and
shall be based upon the same factors used to evaluate Executive's bonus
entitlement as set forth in 3.3 above. Once granted, Executive's entitlement to
such award of options shall vest in accordance with the Company's Stock Option
Plan, unless otherwise specified herein.
4. Reimbursement of Expenses
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The Company will promptly reimburse Executive for all reasonable business
expenses incurred by Executive in pursuing the business of the Company,
including, without limitation, expenditures for entertainment and travel.
5. Confidential Information
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During the term of this Agreement and forever thereafter, Executive agrees
to keep confidential all information provided by the Company, excepting any such
information as is already known to the public, and including any such
information and material relating to any customer, vendor, licensor, licensee,
or other party transacting business with the Company, and not to release, use,
or disclose the same, except with the prior written permission of the Company.
Executive further covenants and agrees that every document, computer disk,
computer software program, notation, record, diary, memorandum, development,
investigation, or the like, and any method or manner of doing business, of the
Company (or containing any
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other secret or confidential information of the Company) made or acquired by
Executive during her employment, is and shall be the sole and exclusive property
of the Company.
6. Non-Compete and Non-Solicitation of Company Employees
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Executive agrees that, for an initial period of three years and continuing
thereafter as a condition to Executive's continuing receipt of benefits under
Section 3.7, she will not, directly or indirectly, solicit for employment, or
advise or recommend to any other person that they solicit for employment, any
employee of the Company. Executive further agrees that for that same period,
she will not directly or indirectly, engage in any business or activity
competitive with the business activities of the Company. The foregoing shall
not apply to passive investments by Executive of up to 5% of the outstanding
stock of any publicly traded company, regardless of whether such Company
competes with the Company.
7. Indemnification
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In the event Executive is made, or threatened to be made, a party to any
legal action or proceeding, by reason of the fact that Executive is or was an
employee, director or officer of the Company or serves or served any other
corporation fifty percent (50%) or more owned or controlled by the Company in
any capacity at the company's request, Executive shall be indemnified by the
Company, and the Company shall pay Executive's related expenses when and as
incurred, including but not limited to attorney fees, all to the fullest extent
permitted by law.
8. Loan to Executive
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Executive currently owes to the Company $2,000,000.00 principal amount
evidenced by a promissory note dated January 25, 1999 and currently due and
payable on January 25, 2002 (the "Note"). Upon execution of this Agreement, the
Note shall be amended to extend the term to January 1, 2005 and to provide that
on January 1, 2001, and each subsequent January 1, thereafter, 20% of the
principal amount plus accrued interest shall be forgiven, such that on January
1, 2005, any amounts owing on the Note shall have been reduced to $0. Executive
acknowledges that forgiveness of the Note will result in the Company reporting
the amount forgiven on Executive's W-2 and that Executive is responsible for any
taxes due as a result of such forgiveness.
9. Termination
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9.1 Termination by the Company of Executive's Employing t The Company
may terminate Executive's employment with the Company under the following
circumstances:
(a) Upon Executive's death;
(b) For Cause. For purposes of this Agreement, the term "Cause"
shall mean (i) conviction of Executive by a court of competent jurisdiction, of
a felony which is materially harmful to the reputation or business of the
Company or (ii) willful and knowing failure by Executive to perform
substantially any material obligation required to be performed by her hereunder.
Executive may not be terminated for Cause unless and until (A) the Company's
Board gives written notice to Executive instructing her to perform such material
obligation and
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(B) Executive fails to perform such material obligation within 30 days after
Executive receives the notice.
9.2 Other Termination.
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(a) If at any time during the term of this Agreement there shall
occur a Change in Control (as defined in Section 9.2(c) below) or Cessation of
Operations (as defined in 9.2(d) below) of the Company, either Executive or the
Company shall have the right to terminate Executive's employment with the
Company at any time within six months following the Change in Control or
Cessation of Operations, and Executive shall have no further obligation under
this Agreement, except as provided in Sections 5 and 6 hereof. The parties
specifically agree that a significant diminution of Executive's' duties or
authority, without the assignment of comparable alternative responsibilities,
shall also trigger this provision.
(b) Termination of Executive's services under this Section 9.2 shall
be deemed to be a termination by the Company other than for Cause.
(c) For purposes of this Agreement, a "Change in Control" of the
Company shall mean (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than any employee benefit plan, sponsored or
maintained by the company or any affiliate, a group of persons which includes
such a plan ("Affiliated Purchaser") is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company representing 51 % or more of the
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors; (ii) the Company is merged or
consolidated with any person other than an Affiliated Purchaser and as a result
of such merger or consolidation less than a majority of the outstanding voting
securities of the surviving or resulting company shall then be owned in the
aggregate by the former shareholders of the Company; (iii) individuals who
constitute the Board of the Company on the date hereof (the "Incumbent Board"),
or individuals who are Affiliated Purchasers cease for any reason to constitute
at least a majority thereof, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election, by the
Company's shareholders was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board shall be, for purposes of this clause
(iv) considered as though that person were a member of the Incumbent Board; or
(v) the Company sells or transfers all or substantially all of its assets to a
person other than an Affiliated Purchaser.
Notwithstanding anything to the contrary contained herein, or
contained in the Company's Stock Option Plan, in the event of a Change of
Control, regardless of whether Executive's employment is terminated, all
unvested options held by Executive on the date of such Change of Control, shall
immediately vest and become exercisable in full and shall remain exercisable for
the period specified in the applicable option agreement.
(d) For purposes of this Agreement, a "Cessation of Operations" of
the Company shall mean the permanent or temporary shut down of the Company, if
the shutdown results in an employment loss at the Company, during any one
hundred eighty (180) day period, of sixty-five percent (65%) or more of the
Company's regular, full time workforce.
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9.3 Notice of Termination. Any termination by Executive or by the
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Company shall be communicated by written notice of termination to the other
party hereto, which notice shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment. Except as provided in Section 9.1(b), any notice of termination
shall be effective upon receipt by the party to whom such notice is delivered.
10. Termination Benefits
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10.1 Executive's Rights Upon Termination for Cause. If Executive's
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employment shall be terminated by the Company for Cause, the Company shall
continue to pay Executive her full base salary, as provided above, through the
date of termination and an amount to compensate Executive for accrued vacation,
in accordance with the Company's then applicable policy, to the date of
termination, and the Company shall have no further obligation to Executive under
this Agreement.
10.2 Executive's Rights Upon Termination Other than For Cause or
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Breach. During the term of this Agreement, if the Company terminates Executive
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other than for Cause, death or Executive terminates her employment hereunder
because the Company shall fail in any material respect to observe or perform any
covenant or agreement in this Agreement to be observed or performed by the
Company, then
(a) Not later than three (3) days after such termination of
employment, the Company shall:
(i) Pay Executive her full base salary through the date of
termination;
(ii) Subject to Executive's continuing compliance with
Section 6 hereof, provide Executive, for the rest of Executive's
life (whether directly or through conversion of applicable
insurance policies to individual policies for which the Company
shall pay the premiums), with disability, accident, health and
life insurance benefits for Executive and her family, which
Executive is receiving immediately prior to the date of
termination.
(iii) Acquire and transfer title to the automobile then
being provided to Executive, without any payment by Executive
therefor; and
(iv) Forgive any remaining outstanding principal and
interest on the Note and release any collateral securing the Note
to Executive.
(b) Not later than sixty (60) days after such termination of
employment, the Company shall remit to Executive a lump sum (the "Severance
Payment") in an amount exactly equal to three times her annual base salary and
bonus paid for the immediately preceding fiscal year of the Company.
10.3 Termination Upon Death. If Executive dies prior to the
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expiration of the Term or a subsequent renewal period, the Company shall pay to
Executive's estate, or other
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designated beneficiary(s) as shown in the records of the Company, any earned but
unpaid base salary, payment of a pro-rata amount of the bonus that Executive
would be eligible to receive under the bonus plan for the year in which
Executive's death occurs, and benefits that Executive is entitled to receive as
of the date of termination other than for Cause. In addition, vesting of any
unvested stock options, including any granted by reason of this Agreement, shall
immediately accelerate and become immediately exercisable in their entirety.
10.4 Chairman Emeritus.
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(a) Upon conclusion of this Agreement, except termination for
Cause or death, the Parties agree that Executive shall assume the position of
Chairman Emeritus. In that capacity, Executive shall have no day to day
operational duties, however, will engage in public speaking and writing as the
retired founder and chairman of the Company and shall make herself reasonably
available for major Company events. In that capacity, Executive shall be
entitled to all of the same benefits and stock option incentives as set forth
above, with the exception that Executive shall not be entitled to receive salary
and bonuses. In addition, for a 24 month period following designation of
Executive as Chairman Emeritus, the Company shall offer Executive the option of
purchasing its' "Empire House" facility in Park City, Utah at its then current
fair market value or 120% of its present fair market value, whichever is lower.
Should this option be exercised, the Parties agree to enter a separate agreement
with respect to that sale and purchase.
(b) Not later than sixty (60) days after termination of
employment pursuant to 10.2 above or designation of Executive as Chairman
Emeritus, the Company shall remit to Executive a lump sum (the "Severance
Payment") in an amount exactly equal to three times her annual base salary and
bonus paid for the immediately preceding fiscal year of the Company.
11. Notices
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All notices required or permitted to be given by either party hereunder
shall be in writing and shall be deemed sufficiently given if mailed by
registered or certified mail, or personally delivered to the party entitled
thereto at the address stated below, or to such changed address as the addressee
may have given by a similar notice:
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To the Company: Xxxx Xxxxxx & Associates, Inc.
China Basin Landing
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Chief Financial Officer
With a Copy to: Xxxxxxxx Xxxxx
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Telecopier: 000-000-0000
To Executive: Xxxxxx X. Xxxxxx
Xxxx Xxxxxx & Associates, Inc.
China Basin Landing
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxxxxxxxx
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Xxxxx, XxXxxxx & XxXxxxx
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00 Xxxxxx Xxxxxx, 21st Floor
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Xxx Xxxxxxxxx, XX 00000
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12. General Provisions
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12.1 Waiver. No waiver by any party hereto of any failure of any
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other party to keep or perform any covenant or condition of this Agreement shall
be deemed to be a waiver of any preceding or succeeding breach of the same, or
any other covenant or condition.
12.2 Amendments. No provision of this Agreement may be amended,
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modified or waived unless such amendment, modification or waiver shall be agreed
to in writing and signed by Executive and a duly authorized officer of the
Company.
12.3 Severability. If any provision of this Agreement shall be
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determined to be invalid or unenforceable by a court of competent jurisdiction,
the remaining provisions of this Agreement shall remain in full force and effect
to the fullest extent permitted by law.
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12.5 Assignment. No right to or interest in any payments shall be
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assignable by either party; provided; however, that this provision shall not
preclude Executive from designating one or more beneficiaries to receive any
amount that may be payable after her death and shall not preclude her executor
or administrator from assigning any right hereunder to the person or persons
entitled hereto. Further, the Company may assign this Agreement: (a) to an
affiliate so long as such affiliate assumes the Company's obligations hereunder,
or (b) in connection with a merger or consolidation involving the Company or a
sale of substantially all its assets or shares to the surviving corporation or
purchaser as the case may be so long as such assignee assumes the Company's
obligations hereunder.
12.6 Successors and Assigns. This Agreement and the obligations of
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the Company and Executive hereunder shall be binding upon and shall be assumed
by their respective successors including, without limitation, any corporation or
corporations acquiring the Company, whether by merger, consolidation, sale or
otherwise.
12.7 Governing Law. The validity, interpretation, performance, and
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enforcement of this Agreement shall be governed by the laws of the State of
California without regard to the principles of conflict of laws thereof.
12.8 Tax Matters. In the event that, as a result of payments in the
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nature of compensation to or for the benefit of Executive under this Agreement
or otherwise in connection with a Change of Control, any state, local or federal
taxing authority imposes any taxes on Executive that would not be imposed but
for the occurrence of a Change of Control, including any excise tax under
Section 4999 of the Internal Revenue Code and any successor or comparable
provision, then, in addition to the benefits provided for above or otherwise,
the Company (including any successor to the Company) shall pay to Executive at
the time any such amounts are paid an amount equal to the amount of any such tax
imposed or to be imposed on Executive (the parachute tax reimbursement). In
addition, the Company (including any successor to the Company) shall "gross up"
such parachute tax reimbursement by paying to Executive at the same time, an
additional amount equal to the aggregate amount of any additional taxes (whether
income taxes, excise taxes, special taxes, employment taxes or otherwise) that
axe or will be payable by Executive as a result of the parachute tax
reimbursement being paid or payable to Executive and/or as a result of the
additional amounts paid or payable to Executive pursuant to this sentence, such
that after payment of such additional taxes, Executive shall have been paid on
an after-tax basis an amount equal to the parachute tax reimbursement.
Executive acknowledges that any income taxes arising out of the payment of
premiums for health and life insurance shall be the responsibility of Executive
and shall not be reimbursed by the Company.
12.9 Attorney's Fees and Costs. If any action at law or in equity is
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necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which that party may be
entitled. This provision shall be construed as applicable to the entire
contract.
12.10 No Representation. No officer, employee or representative of
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the Company has any authority to make any representation or promise in
connection with this
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Agreement or the subject matter hereto which is not contained herein, and
Executive agrees that she has not executed this Agreement in reliance upon any
such representation or promise.
12.11 Headings. The headings of sections and subsections are
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included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
12.12 Entire Agreement. This document constitutes the entire
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understanding and Agreement of the parties with respect to the subject matter of
this Agreement, and any and all prior agreements, understandings and
representations are hereby terminated and cancelled in their entirety and are of
no further force or effect.
12.13 Counterparts. This Agreement may be executed in two or more
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counterparts with the same effect as if the signatures to all such counterparts
was upon the same instrument, and all such counterparts shall constitute but one
instrument.
12.14 No Mitigation of Damages. Executive shall not be required to
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mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Executive as a result of employment by another employer or by retirement
benefits after the Date of Termination, or otherwise. The provisions of this
Agreement, and any payment provided for hereunder, shall not reduce any amounts
otherwise payable, or in any way diminish the Executive's then existing rights,
or rights which would accrue solely as a result of the passage of time, under
any Company benefit plan or other contract, plan or arrangement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
XXXX XXXXXX & ASSOCIATES, INC.
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Xxxxxx X. Xxxxxx
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By:
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