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Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 28, 2000, effective as of
January 1, 2000, by and among LPA HOLDING CORP., a Delaware corporation ("LPA
Holdings"), LA PETITE ACADEMY, INC., a Delaware corporation (the "Company") and
XXXXXX X. XXXXXX ("Executive").
RECITALS
In order to induce Executive to agree to serve as Chief Executive
Officer and President of the Company, LPA Holdings and the Company desire to
provide Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
Executive is willing to enter into such employment and perform services
for the Company on the terms and conditions set forth in this Agreement.
It is therefore hereby agreed by and among the parties as follows:
1. Employment.
(a) Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the term hereof as Chief
Executive Officer and President. In her capacity as Chief Executive
Officer and President of the Company, Executive shall have all of the
customary powers, responsibilities and authorities of presidents and
chief executive officers of corporations of the size, type and nature
of the Company.
(b) Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as Chief Executive Officer and
President of the Company and agrees to devote her full working time and
efforts, to the best of her ability, experience and talent, to the
performance of services, duties and responsibilities in connection
therewith. Nothing in this Agreement shall preclude Executive from
engaging, consistent with her duties and responsibilities hereunder, in
charitable and community affairs, from managing her personal
investments or, except as otherwise provided in Section 12 hereof, from
serving as a member of boards of directors or as a trustee of other
companies, associations or entities.
(c) The Company will use commercially reasonable efforts to cause
the Executive to be elected to its Board of Directors.
2. Term of Employment. Subject to the valid execution of a Stockholders
Written Consent approving the terms of this Agreement and electing that payments
under this Agreement be exempt from treatment as "parachute payments" under
Section 280G of the Internal Revenue Code of 1986, as amended, the Executive's
term of employment under this Agreement shall be deemed to have commenced on
January 1, 2000 (the "Commencement Date") and, subject to the terms hereof,
shall terminate on the third anniversary of the Commencement Date (the
"Termination Date"); provided, however, that on such anniversary date and on
each subsequent
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fiscal year end, the Termination Date shall automatically be extended for a
period of one year, unless either party shall have given written notice to the
other party not less than ninety days prior to the Termination Date that the
Termination Date shall not be so extended.
3. Compensation.
(a) Initial Base Salary. The Company shall pay Executive a base
salary ("Base Salary") at the annual rate of $350,000. The Base Salary
shall be payable in accordance with the ordinary payroll practices of
the Company and shall be subject to increase as determined by the Board
or its compensation committee.
(b) Interim Bonus. In addition to her Base Salary, Executive shall
be entitled to receive a cash bonus with respect to the Company's
fiscal year ending in July 2000 equal to $87,500.
(c) Annual Bonus. In addition to her Base Salary, Executive shall
be entitled to receive a cash bonus (the "Bonus") with respect to each
fiscal year; provided that the Executive is employed by the Company on
the last day of such fiscal year. The Bonus shall be paid as follows:
(i) Prior to the end of each fiscal year, the Board, in good
faith consultation with the Executive, shall determine the target
EBITDA for the immediately succeeding fiscal year (the "Plan
EBITDA") for use in determining the Company's bonus payable to
participants in the Company's bonus pool. For purposes hereof,
EBITDA shall be as defined in the Indenture dated as of May 11,
1998, among the Company, PNC Bank, as Trustee, and the other
parties thereto.
(ii) The Executive shall be entitled to a Bonus based upon
the attainment of a specified percentage of the actual EBITDA in
relation to Plan EBITDA. No Bonus will be payable in the event
that actual EBITDA is less than 90% of Plan EBITDA and the maximum
bonus of 150% of Base Salary is payable only when actual EBITDA is
more than 110% of Plan EBITDA. If actual EBITDA as a percentage of
Plan EBITDA falls within one of the gradations specified below,
the percentage of Base Salary specified below will be earned in
even increments within the relevant gradation.
Range of EBITDA Percentage of Base Salary
--------------- -------------------------
90% or less of Plan EBITDA 0%
More than 90% but less than or equal to 50%
100% of Plan EBITDA
More than 100% but less than or equal to 100%
110% of Plan EBITDA
More than 110% of Plan EBITDA 150%
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(d) Signing Incentive. Subject to Section 6, if the Executive is
employed by the Company on the earlier of the fourth anniversary of the
Commencement Date and the date that a Change-in-Control (as defined in
the Company's 1998 Stock Option Plan) is consummated, the Executive
shall be entitled to receive a cash bonus equal to $1.5 million (the
"Signing Incentive Bonus"). The right to receive the Signing Incentive
Bonus shall vest such that the Executive shall be entitled to receive
on the fourth anniversary of the Commencement Date 25% of the amount of
the Signing Incentive Bonus for each 365 day period after the
Commencement Date that the Executive is employed by the Company.
(e) Options. The Company agrees to cause to be granted to the
Executive options to purchase 49,810 shares of common stock of the
Company at an exercise price of $66.92 per share. One half of these
options will vest and become exercisable monthly over four years and
the other half of these options will vest and become exercisable at
such time as the Fair Market Value (as defined in the Company's 1998
Stock Option Plan) of a share of the Company's common stock equals or
exceeds $267.68. Such vesting will be accelerated upon the earlier of
the consummation of a Change-in-Control (as defined in the Company's
1998 Stock Option Plan) or the consummation of an underwritten
registered public offering of Common Stock of the Company. Such options
and the underlying shares will be issued pursuant to an agreement that
contains repurchase rights, tag-along rights, drag along rights and
other provisions substantially equivalent to those set forth in the
Company's 1998 Stock Option Plan.
(f) Compensation Plans and Programs. Executive shall participate
in any compensation plan or program, annual or long-term, maintained by
the Company on terms no less favorable than those applicable to other
senior management personnel of the Company.
4. Employee Benefits.
(a) Employee Benefit Programs, Plans and Practices. During the
term of her employment hereunder, the Company shall provide to
Executive coverage under any employee benefit programs, plans and
practices (commensurate with her positions in the Company and to the
extent possible under any employee benefit plan), in accordance with
the terms hereof, which the Company makes available to its senior
executive officers, including but not limited to (i) retirement,
pension and profit-sharing, and (ii) medical, dental, hospitalization,
life insurance, short and long-term disability, accidental death and
dismemberment and travel accident coverage.
(b) Vacation and Fringe Benefits. Executive shall be entitled to a
paid vacation each fiscal year of no less than four weeks (consisting
of seven calendar days each). The Company may, in its sole discretion,
grant additional vacation time to Executive.
5. Expenses. Executive is authorized to incur reasonable expenses in
carrying out her duties and responsibilities under this Agreement, including
without limitation, expenses for travel and similar items related to such duties
and responsibilities. The Company will reimburse
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Executive for all such expenses upon presentation by Executive from time to time
of an itemized account of such expenditures.
6. Termination of Employment.
(a) Termination Not for Cause or Termination for Good Reason.
(i) (A) The Company may terminate Executive's employment at
any time, and Executive may terminate her employment at any time.
If Executive's employment is terminated by the Company other than
for Cause (as defined in Section 6(b)(ii) hereof) or due to
Executive's death or disability or Executive terminates her
employment for Good Reason (as defined in Section 6(a)(ii)
hereof), Executive shall be entitled to receive from the Company,
in lieu of any other cash compensation provided for herein but
not in substitution for compensation already paid or earned,
payable in accordance with the Company's customary payroll
practices, for a period of 12 months following the date of
termination an amount equal to the sum of (i) the Executive's
Base Salary at its then current annual rate plus (ii) the
quotient obtained by dividing the Termination Bonus by the number
of payroll periods in the Company's fiscal year.
(B) In addition, if Executive's employment is terminated by
the Company other than for Cause (as defined in Section 6(b)(ii)
hereof) or due to Executive's death or Disability or Executive
terminates her employment for Good Reason (as defined in Section
6(a)(ii) hereof), Executive shall (1) be entitled to receive,
within a reasonable period of time after the date of termination,
a cash lump sum equal to (w) any compensation payments deferred
by Executive, together with any applicable interest or other
accruals thereon; (x) any unpaid amounts, as of the date of such
termination, in respect of the Bonus for the fiscal year ending
before the fiscal year in which such termination occurs; (y) the
Signing Incentive Bonus (to the extent not already paid) and (z)
the Pro Rata Bonus; (2) for the period from the date of
termination of Executive's employment until the one year
anniversary of the Termination Date (as then in effect), continue
to be covered under and participate in the Company's employee
benefit programs, plans and practices described in Section 4(a)
hereof or under such other plans of the Company which provide for
equivalent coverage to the extent and on the terms in effect on
Executive's date of termination (other than any disability plan
for which coverage cannot be maintained after such termination);
and (3) have such rights to payments under applicable plans or
programs, including but not limited to those described in Section
3(d) hereof, as may be determined pursuant to the terms of such
plans or programs. This Section 6(a)(i) shall survive the
termination or expiration of this Agreement.
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(ii) For purposes of this Agreement, "Good Reason" shall
mean the occurrence of any of the following events without
Executive's express prior written consent and which event shall
not have been cured within a reasonable period after notice from
the Executive:
(A) the assignment to Executive by the Company of
duties substantially inconsistent with Executive's
positions, duties, responsibilities, authorities, titles
and offices as set forth in Section 1 hereof, or any
material reduction by the Company of Executive's duties or
responsibilities or any removal of Executive as the Chief
Executive Officer or President of the Company, except in
connection with the termination of Executive's employment
for any other reason;
(B) a reduction by the Company in Executive's Base
Salary or Bonus (other than by reason of the terms of
Section 3(c) hereof) as in effect at the commencement of
employment hereunder or as the same may be increased from
time to time during the terms of this Agreement;
(C) any material breach by the Company of any material
provision of this Agreement; or
(D) a Change of Control shall have been consummated.
(iii) For purposes of this Agreement, "Termination Bonus"
shall mean a cash bonus in an amount equal to the Bonus that would
be paid in respect of the current fiscal year based on annualizing
the actual EBITDA from the commencement of the fiscal year in
which a termination occurs to the date of termination.
(iv) For purposes of this Agreement, "Pro Rata Bonus" shall
mean a cash bonus in an amount equal to the product of (A) the
Bonus that would be paid in respect of the current fiscal year
based on annualizing the actual EBITDA from the commencement of
the fiscal year in which a termination occurs to the date of
termination multiplied by (B) a fraction, the numerator of which
is the number of days elapsed from the last day of the immediately
preceding fiscal year to the date of such termination and the
denominator of which is 365.
(v) For purposes of this Agreement, "Disability" means
Executive's failure to render the services provided for under this
Agreement due to the illness, physical or mental disability or
other incapacity of the Executive for a period of 90 consecutive
days or for at least 45 days in any 180 day period.
(b) Voluntary Termination by Executive: Discharge for Cause.
(i) In the event that Executive's employment is terminated
by the Company for Cause, as hereinafter defined, or by Executive
other than for Good Reason, prior to the Termination Date,
Executive shall be entitled to receive (x) if such termination is
prior to the consummation of a Change-in-Control and prior to
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the fourth anniversary of the Commencement Date, 25% of the amount
of the Signing Incentive Bonus for each 365 day period after the
Commencement Date that the Executive has been employed by the
Company, such amount to be paid on the fourth anniversary of the
Commencement Date plus (y) all salary and benefits to which
Executive is entitled up to and including the date of Executive's
termination of employment hereunder, including, without
limitation, compensation payments deferred by Executive and any
accrued and unpaid amounts in respect of the Bonus for the fiscal
year ending before the fiscal year in which such termination
occurs. The obligations of the Company under this Agreement to
make any further payments, or provide any benefits specified
herein, to Executive shall cease and terminate on the date on
which Executive's employment is terminated by the Company for
Cause or by Executive other than for Good Reason. Termination of
Executive in accordance with this Section 6(b) shall be
communicated to Executive pursuant to a notice of a resolution of
a majority of the Board determining that Executive is subject to
Discharge for Cause as defined herein.
(ii) As used herein, the term "Cause" shall be limited to (A)
action by Executive involving willful malfeasance in connection with
her employment having a material adverse effect on the Company, (B)
material breach by Executive of this Agreement or any other agreement
entered into between Executive and the Company after a written notice
of such breach shall have been delivered to the Executive and, if such
breach can be cured, such breach shall not have been cured prior to the
tenth day after delivery of such notice, (C) continuing refusal by
Executive in willful breach of this Agreement to perform the duties
ordinarily performed by a chief executive officer (other than any such
failure resulting from her reasonably documented incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to her by the Board which demand specifically
identifies the manner in which the Board believes that he has not
substantially performed her duties or (D) Executive being convicted of
any felony (or any misdemeanor involving the property or assets of the
Company) under the laws of the United States or any State.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to her a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire Board at a meeting of
the Board (after reasonable notice to Executive and opportunity for
her, together with counsel, to be heard before the Board), finding that
the Executive was guilty of conduct set forth above in this subsection.
(c) DEFRA.
(i) Notwithstanding anything in this Agreement to the contrary, in
the event that the provisions of the Deficit Reduction Act of 1984
("DEFRA"), and Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") relating to "excess parachute payments" (as
defined in the Code) shall be applicable to any payment or benefit
received or to be received by Executive, then the total amount of
payments or benefits payable to Executive shall be the greater
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of (x) the largest amount such that the provisions of DEFRA and Section
280G of the Code relating to "excess parachute payments" shall no
longer be applicable and (y) 80% of the amount of the payments to be
received by the Executive. Notwithstanding the foregoing, such amount
(y) shall be deemed to be less than the amount determined pursuant to
clause (x) in the immediately preceding sentence unless it exceeds the
amount determined pursuant to clause (x) by at least $50,000. Should
such a reduction be required, the Executive shall determine, in the
exercise of her sole discretion, which payment or benefit to reduce or
eliminate. Pending such determination, the Company shall continue to
make all other required payments to Executive at the time and in the
manner provided herein and shall pay the largest portion of any
parachute payments such that the provisions of DEFRA relating to
"excess parachute payments" shall no longer be applicable.
(ii) Due to the complexity in the application of Section 280(G) of
the Code, it is possible that payments made or benefits received
hereunder should not have been made under Section 6(c) (an
"Overpayment"). In the event that it is determined in writing by the
Company's outside auditors in their reasonable good faith judgment or
by any court of competent jurisdiction that an Overpayment has been
made resulting in an "Excess Parachute Payment" as defined in Section
280G(b)(1) of the Code), then any such Overpayment shall be treated for
all purposes as an unsecured, long-term loan from the Company to the
Executive, her personal representative, her successors or assigns, as
the case may be, that is payable, together with accrued interest from
the date of the making of the Overpayment at the rate of 8% per annum
on the later to occur of the third anniversary of the payment of such
Overpayment, or 6 months following the date upon which it is determined
an Overpayment was made. Should it be determined that such an
Overpayment has been made, the Executive shall determine, in the
exercise of her sole discretion, which payments or benefits shall be
deemed to constitute the Overpayment.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company and LPA Holdings
La Petite Academy, Inc.
14 Corporate Xxxxx
0000 X. 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
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with a copy to:
LPA Investment LLC
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, N.Y. 10017
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
To Executive:
Xxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxxx
Xx Xxxxxx Xxxxxxxxxx, XX 00000
with a copy to:
Xxxxxx & Golden LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Any such notice or communication shall be sent certified or registered mail,
return receipt requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered as described
above), and the actual date of mailing shall constitute the time at which notice
was given.
8. Separability; Legal Fees; Arbitration. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full-force and effect. Any controversy or claim
arising out of or relating to this Agreement or the breach of this Agreement
(other than Section 12 hereof) that cannot be resolved by Executive on the one
hand and the Company on the other, including any dispute as to the calculation
of Executive's benefits or any payments hereunder, shall be submitted to
arbitration in New York, New York in accordance with Delaware law and the
procedures of the American Arbitration Association. The determination of the
arbitrators shall be conclusive and binding on the Company and Executive, and
judgment may be entered on the arbitrators' award in any court having
jurisdiction.
9. No Obligation to Mitigate Damages. Executive shall not be required
to mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise. Without limiting the
Company's rights under Section 12, no payment under this Agreement shall be
reduced by any compensation that Executive may earn from a third party after any
termination of employment.
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10. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of LPA Holdings and the Company, but neither this nor any rights
hereunder shall be assignable or otherwise subject to hypothecation by Executive
(except by will or by operation of the laws of intestate succession) or by LPA
Holdings or by the Company, except that LPA Holdings and the Company may assign
this Agreement to any successor (whether by merger, purchase or otherwise) to
all or substantially all of the stock, assets or businesses of LPA Holdings or
the Company.
11. Amendment. This Agreement may only be amended by written agreement
of the parties hereto.
12. Nondisclosure of Confidential Information; Non-Competition.
(a) Executive shall not, without the prior written consent of the
Company, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential
Information pertaining to the business of the Company, except (i) while
employed by the Company, in the business of and for the benefit of the
Company, or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority
over the business of the Company, or by any administrative body or
legislative body (including a committee thereof) with purported or
apparent jurisdiction to order Executive to divulge, disclose or make
accessible such information. For purposes of this Section 12(a),
"Confidential Information" shall mean non-public information concerning
the Company's financial data, strategic business plans, product
development (or other proprietary product data), customer lists,
marketing plans and other non-public, proprietary and confidential
information of the Company that is not otherwise available to the
public.
(b) For a period of one year commencing on Executive's date of
termination for any reason, Executive agrees that, without the prior
written consent of the Company, she shall not, directly or indirectly,
(i) either as principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee or in any other
capacity, carry on, be engaged in or have any financial interest in,
any business which is in material competition with the business of the
Company and/or its affiliates or (ii) solicit any employees of the
Company and/or its affiliates.
(c) For purposes of Section 12(b) hereof, a business shall be
deemed to be in competition with the Company if it is significantly
involved in the rendering of any service significantly purchased, sold,
dealt in or rendered by the Company and/or its affiliates. As used in
the preceding sentence, the term "significantly" shall be deemed to
refer to activities generating gross annual sales of at least $25
million. Nothing in this Section 12 shall be construed so as to
preclude Executive from investing in any publicly held company provided
Executive's beneficial ownership of any class of such company's
securities does not exceed 5% of the outstanding securities of such
class.
(d) Executive and the Company agree that the foregoing covenant
not to compete is a reasonable covenant under the circumstances, and
further agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any
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respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of such covenant as to the court
shall appear not reasonable and to enforce the remainder of the
covenant as so amended. Executive agrees that any breach of the
covenants contained in this Section 12 would irreparably injure the
Company. Accordingly, the Company may, in addition to pursuing any
other remedies they may have in law or in equity, obtain an injunction
against Executive from any court having jurisdiction over the matter,
restraining any further violation of this Section 12 by Executive.
13. Beneficiaries; References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of her incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to her beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
14. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 14 are in addition to the survivorship provisions of
any other section of this Agreement.
15. Governing Law. This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of Delaware, without reference
to rules relating to conflict of laws.
16. Withholding. The Company shall be entitled to withhold from any
payment hereunder any amount required by law to be withheld.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.
18. Entire Agreement. This Agreement reflects the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and replaces and supercedes any prior employment agreements.
* * * * *
LA PETITE ACADEMY, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Financial Officer
LPA HOLDING CORP.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Financial Officer
/s/ Xxxxxx X. Xxxxxx
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Executive
