EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made and entered into as of this
date
by and between Perennial Development Corporation, a Colorado corporation
("Corporation"), and Xxxxx X. Xxxx ("Employee").
WHEREAS, Corporation and Employee desire that the term of this Agreement begin
on February 1, 1996 ("Effective Date").
WHEREAS, Corporation desires to employ Employee as President, and Employee is
willing to accept such employment by Corporation, on the terms and subject to
the conditions set forth in this Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Duties. During the term of this Agreement, Employee agrees to
be
employed by and to serve Corporation as President, and Corporation agrees to
employ and retain Employee in such capacities. Employee shall devote a
substantial portion of his business time, energy, and skill to the affairs of
the Corporation as Employee shall report to the Corporation's Board of Direc-
tors, and at all times during the term of this Agreement shall have powers
and duties at least commensurate with his position as President, as such
duties are outlined in Appendix A hereto.
Section 2. Term of Employment.
2.1 Definitions. For the purposes of this Agreement the following terms
shall
have the following meanings:
2.1.1 "Termination For Cause" shall mean termination by Corporation of
Employee's employment by Corporation by reason of Employee's willful
dishonesty
towards, fraud upon, or deliberate injury or attempted injury to, Corporation
or
by reason of Employee's willful material breach of this Agreement which has
resulted in material injury to Corporation, or continuance of failure by the
Employee to perform his duties in compliance with this Agreement after written
notice to the Employee by the Board of Directors specifying such failure,
provided that such cause shall have been found by a majority vote of the
members of the Board of Directors of the Corporation other than Employee.
2.1.2 "Termination Other Than For Cause" shall mean termination by
Corporation of Employee's employment by Corporation (other than in a
Termination
for Cause) and shall include constructive termination of Employee's employment
by reason of material breach of this Agreement by Corporation, such
constructive
termination to be effective upon notice from Employee to Corporation of such
constructive termination.
2.1.3 Voluntary Termination" shall mean termination by Employee of
Employee's employment by Corporation other than (i) constrictive termination
as
described in subsection 2.1(b), (ii) "Termination Upon a Change in Control,"
and
(iii) termination by reason of Employee's death or disability as described in
Sections 2.5 and 2.6.
2.1.4 "Termination Upon a Change in Control" shall mean a termination by
Employee of Employee's employment with Corporation within 120 days following a
"Change in Control."
2.1.5 "Change in Control" shall mean (i) the time that Corporation first
determines that any person and all other persons who constitute a group
(within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 ("Ex-
change Act")) have acquired direct or indirect beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of twenty percent (20%) or
more of Corporation's outstanding securities, unless a majority of the "Con-
tinuing Directors" approves the acquisition not later than ten (10) business
days after Corporation makes that determination, or (ii) the first day on
which a majority of the members of the Corporation's Board of Directors are
not "Continuing Directors."
2.1.6 "Continuing Directors" shall mean, as of any date of
determination,
any member of the Board of Directors of Corporation who (i) was a member of
that
Board of Directors on [DATE], (ii) has been a member of that Board of
Directors
for the two years immediately preceding such date of determination, or (iii)
was
nominated for election or elected to the Board of Directors with the
affirmative
vote of the greater of (x) a majority of the Continuing Directors who were
members of the Board at the time of such nomination or election or (y) at
least
four Continuing Directors.
2.2 Initial Term. The term of employment of Employee by Corporation shall be
for a period of three (3) years beginning with Effective Date ("Initial
Term"),
unless terminated earlier pursuant to this Section. At any time prior to the
expiration of the Initial Term, Corporation and Employee may by mutual written
agreement extend Employee's employment under the terms of this Agreement for
such additional periods as they may agree.
2.3 Termination For Cause. Termination For Cause may be effected by
Corporation at any time during the term of this Agreement and shall be
effected
by written notification to Employee. Upon Termination For Cause, Employee
shall
promptly be paid all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension play or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans,
accrued vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date of
termination, but Employee shall not be paid any other compensation or
reimbursement of any kind, including without limitation, severance
compensation.
2.4 Termination Other Than For Cause. Notwithstanding anything else in this
Agreement, Corporation may effect a Termination Other Than For Cause at any
time
upon giving written notice to Employee of such termination. Upon any
Termination Other Than For Cause, Employee shall promptly be paid all
accrued salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension plan or profit sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of the Corporation in which Employee is a participant to the full ex-
tent of Employee's rights under such plans (including accelerated vesting, if
any, of awards granted to Employee under the Corporation's stock option
plan), accrued vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date of ter-
mination, and all severance compensation provided in Section 4.2, but no
other compensation or reimbursement of any kind.
2.5 Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of
Corporation, has failed to perform his duties under this Agreement on account
of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than twelve (12) consecutive months,
Corporation
shall have the right to terminate Employee's employment hereunder by written
notification to Employee and payment to Employee of all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of the Corporation in
which Employee is a participant to the full extent of Employee's rights under
such plans, accrued vacation pay and any appropriate business expenses
incurred
by Employee in connection with his duties hereunder, all to the date of
termination, with the exception of medical and dental benefits which shall
continue through the expiration of this Agreement, but Employee shall not be
paid any other compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.6 Death. In the event of Employee's death during the term of this
Agreement,
Employee's employment shall be deemed to have terminated as of the last day of
the month during which his death occurs and Corporation shall promptly pay to
his estate or such beneficiaries as Employee may from time to time designate
all
accrued salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension plan or profit sharing plan benefits which
will
be paid in accordance with the applicable plan), any benefits under any plans
of
the Corporation in which Employee is a participant to the full extent of
Employee's rights under such plans, accrued vacation pay and any appropriate
business expenses incurred by Employee in connection with his duties
hereunder,
all to the date of termination. The Employee's estate shall not be paid any
other compensation, including without limitation, severance compensation.
2.7 Voluntary Termination. In the event of a Voluntary Termination,
Corporation shall promptly pay all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination, but no
other compensation or reimbursement of any kind, including without limitation,
severance compensation.
2.8 Termination Upon a Change in Control. In the event of a Termination Upon
a Change in Control, Employee shall immediately be paid all accrued salary,
bonus compensation to the extent earned, vested deferred compensation (other
than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Corporation in which Employee is a participant to the full extent of
Employee's rights under such plans (including accelerated vesting, if any,
of any awards granted to Employee under Corporation's Stock Option Plan),
accrued vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date of
termination, and all severance compensation provided in Section 4.1, but no
other compensation or reimbursement of any kind.
2.9 Notice of Termination. Corporation may effect a termination of this
Agreement pursuant to the provisions of this Section upon giving thirty (30)
days' written notice to Employee of such termination. Employee may effect a
termination of this Agreement pursuant to the provisions of this Section upon
giving thirty (30) days' written notice to Corporation of such termination.
Section 3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be rendered by Employee as
provided in Section 1 and subject to the terms and conditions of Section 2,
Corporation agrees to pay to Employee a "Base Salary" for the twelve (12)
calendar months beginning the Effective Date at the rate of $200,000.00 per
annum payable in twenty-six equal, bi-weekly installments of $7,692.31.
Employee's Base Salary shall be reviewed annually by the Compensation Commit-
tee of the Board of Directors ("Compensation Committee"), and the Base Salary
for each year (or portion thereof) beginning January 1, 1997 shall be deter-
mined by the Compensation Committee which shall authorize an increase in Em-
ployee's Base Salary for such year in an amount which, at a minimum, shall
be equal to the cumulative cost-of-living increment on the Base Salary as
report in the "Consumer Price Index, Seattle, Washington, All Items,"
published by the U.S. Department of Labor (using January 1, 1996 as the base
date for computation).
3.2 Bonuses. Employee shall be eligible to receive a discretionary bonus for
each year (or portion thereof) during the term of this Agreement and any
extensions thereof, with the actual amount of any such bonus to be determined
in
the sole discretion of the Board of Directors based upon its evaluation of
Employee's performance during such year. All such bonuses shall be reviewed
annually by the Compensation Committee.
3.3 Additional Benefits. During the term of this Agreement, Employee shall
be
entitled to the following fringe benefits:
3.3.1 Employee Benefits. Employee shall be eligible to participate in
such of Corporation's benefits and deferred compensation plans as are now
generally available or later made generally available to executive officers of
the Corporation, including, without limitation, Corporation's Stock Option
Plan,
profit sharing plans, annual physical examinations, dental and medical plans,
personal catastrophe and disability insurance, financial planning, retirement
plans and supplementary executive retirement plans, if any. For purposes of
establishing the length of service under any benefit plans or programs of
Corporation, Employee's employment with the Corporation will be deemed to have
commenced on September 30, 1994.
3.3.2 Vacation. Employee shall be entitled to two (2) weeks of vacation
during each year during the term of this Agreement and any extensions thereof,
prorated for partial years.
3.3.3 Life Insurance. For the term of this Agreement and any extensions
thereof, Corporation shall at its expense procure and keep in effect term life
insurance on the life of Employee payable to the Estate of the Employee the
minimum aggregate amount of Two Million ($2,000,000.00) dollars.
3.3.4 Automobile Allowance. For the term of this agreement and any
extensions thereof the corporation shall provide officer with an automobile.
The maximum cost to the Corporation will be $10,000.00 per year.
3.3.5 Reimbursement for Expenses. During the term of this Agreement,
Corporation shall reimburse Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by Employee in
connection with his duties under this Agreement.
Section 4. Severance Compensation.
4.1 Severance Compensation in the Event of a Termination Upon a Change in
Control. In the event Employee's employment is terminated in a Termination
Upon
a Change in Control, Employee shall be paid as severance compensation his Base
Salary (at the rate payable at the time of such termination), for the greater
of
the remaining portion of the Initial Term or twelve (12) months from the date
of
such termination provided, however, that if Employee is employed by a new
employer during such period, the severance compensation payable to Employee
during such period will be reduced by the amount of compensation that Employee
actually receives from the new employer. However, Employee is under no
obligation to mitigate the amount owed Employee pursuant to this Section by
seeking other employment or otherwise. Notwithstanding anything in this
Section
to the contrary, Employee may in Employee's sole discretion, by delivery of a
notice to Corporation within thirty (30) days following a Termination Upon a
Change in Control, elect to receive from Compensation a lump sum severance
payment by bank cashier's check equal to the present value of the flow of cash
payments that would otherwise be paid to Employee pursuant to this Section.
Employee shall also be entitled to an accelerated vesting of any awards
granted
to Employee under the Corporation's Stock Option Plan to the extent provided
in
the stock option agreement entered into at the time of grant. Employee shall
continue to accrue retirement benefits and shall continue to enjoy any
benefits
under any plans of the Corporation in which Employee is a participant to the
full extent of Employee's rights under such plans, including any perquisites
provided under this Agreement, though the remaining term of this Agreement;
provided, however, that the benefits under any such plans of the Corporation
in which Employee is a participant, including any such perquisites, shall
cease upon re-employment by a new employer.
4.1.1 Purchase of Shares Held by Employee and Insurance Coverage. In
the
event Employee's employment is terminated in a Termination Upon a Change in
Control, the Corporation will also be required, at the sole option of the
Employee, to redeem a minimum of fifty percent (50%) of the Corporation stock,
or any stock dividends thereof, owned by the Employee as of the Effective
Date,
that are owned by the employee at the date of severance. The price to be paid
will be the market determined value at the close of business at the date of
severance. If a public market has not been created, or is not in existence at
the time of severance, then the price to be paid shall be the most recent
share
price obtained in any private offering of the Corporation shares of common
stock. In the event Employee's employment is terminated in a Termination
Upon a Change in Control, the Corporation will also provide family medical
insurance consistent with coverages extended to other employees until the
Employee reaches the age of sixty five (65). The requirement that the Cor-
poration purchase family medical insurance shall be excused during any period
of subsequent employment where the new employer provides equal or better
coverage.
4.2 Severance Compensation in the Event of a Termination Other Than for
Cause.
In the event Employee's employment is terminated in a Termination Other Than
for
Cause, Employee shall be paid as severance compensation his Base Salary (at
the
rate payable at the time of such termination), for a period of the greater of
the remaining portion of the Initial Term or twelve (12) months from the
date of such termination, on the dates specified in Section 3.1; provided,
however, that if Employee is employed by a new employer during such period,
the severance compensation payable to Employee during such period will be
reduced by the amount of compensation that Employee is receiving from the
new employer, officer is under no obligation to mitigate the amount owed to
the officer pursuant to this Section by seeking employment or other Employee
shall be entitled to an
accelerated vesting of any awards granted to Employee under Corporation's
Stock
Option Plan to the extent provided in the stock option agreement entered into
at
the time of grant.
4.2.1 Purchase of Shares Held by Employee and Insurance Coverage. In the
event Employee's employment is terminated in a Termination Other Than for
Cause,
the Corporation will also be required, at the sole option of the Employee, to
redeem a minimum of fifty percent (50%) of the Corporation stock, or any stock
dividends thereof, owned by the Employee as of the Effective Date, that are
owned by the employee at the date of severance. The price to be paid will
be the market determined value at the close of business at the date of
severance. If a public market has not been created, or is not in existence
at the time of severance, then the price to be paid shall be the most recent
share price obtained in any private offering of the Corporation shares of
common stock. In the event Employee's employment is terminated in a Ter-
mination Other Than for Cause, the Corporation will also provide family
medical insurance consistent with coverages extended to other employees
until the Employee reaches the age of sixty five (65). The requirement that
the Corporation purchase family medical insurance shall be excused during any
period of subsequent employment where the new employer provides equal or
better coverage.
4.3 No Severance Compensation Upon Other Termination. In the event of a
Voluntary Termination, Termination For Cause, termination by reason of Em-
ployee's disability pursuant to Section 2.6, Employee or his estate shall not
be paid any severance compensation.
Section 5. Outside Activities of Employee. Corporation acknowledges that
Employee has commitments and business activities not related to the
Corporation
and that certain of these commitments and business affairs involve activities
in
the long term care industry. There shall be no restriction on Employee's
ability to fulfill such commitments or engage in such business activities,
provided that during the term of Employee's employment under this Agreement
or for a period of six months after the termination of such employment (other
than a Termination Other Than For Cause or a Termination Upon Change in Con-
trol) Employee shall not divert away from the Corporation, for officers per-
xxxxx benefit, or for the benefit of an organization in which officer has a
material financial interest, any opportunity, arising during such period to
pursue such opportunities personally unless the Board of Directors of the
corporation have determined not to pursue such opportunity.
Section 6. Payment Obligations. Corporation's obligation to pay Employee
the compensation and to make the arrangements provided herein shall be uncon-
ditional, and Employee shall have no obligation whatsoever to mitigate dam-
ages hereunder. If litigation after a Change in Control shall be brought to
enforce or interpret any provision contained herein, Corporation, to the
extent permitted by applicable law and the Corporations' Articles of Incorpor-
ation and Bylaws, hereby indemnifies Employee for Employee's reasonable at-
torneys' fees and disbursements incurred in such litigation.
Section 7. Confidentiality. Employee agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the term of this Agreement,
except as may be permitted in writing by Corporation's Board of Directors or
as such information is within the public domain or comes within the public
domain without any breach of this Agreement.
Section 8. Withholdings. All compensation and benefits to Employee here-
under shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.
Section 9. Indemnification. In addition to any rights to indemnification
to
which Employee is entitled to under the Corporation's Articles of
Incorporation
and Bylaws, Corporation shall indemnify Employee at all times during and after
the term of this Agreement to the maximum extent permitted under Washington
Business Corporation Act or any successor provision thereof and any other
applicable state law, and shall pay Employee's expenses in defending any civil
or criminal action, suit, or proceeding in advance of the final disposition of
such action, suit or proceeding, to the maximum extent permitted under such
applicable state laws.
Section 10. Notices. Any notices permitted or required under this
Agreement
shall be deemed given upon the date of personal delivery or forty-eight (48)
hours after deposit in the United States mail, postage fully prepaid, return
receipt requested, addressed to the Corporation at:
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xx. 00000
addressed to the Employee at:
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xx. 00000
or at any other address as any party may, from time to time, designate by
notice
given in compliance with this Section.
Section 11. Law Governing. This Agreement shall be governed by and con-
strued in accordance with the laws of the Commonwealth of Kentucky.
Section 12. Titles and Captions. All section titles or captions contained
in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
Section 13. Entire Agreement. This Agreement contains the entire under-
standing between and among the parties and supersedes any prior understand-
ings and agreements among them respecting the subject matter of this
Agreement.
Section 14. Agreement Binding. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties
hereto.
Section 15. Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in
any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 16. Computation of Time. In computing any period of time pursuant
to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday,
Sunday,
or a legal holiday, in which event the period shall begin to run on the next
day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
Section 17. Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or
plural as the identity of the person or persons may require.
Section 18. Arbitration. If at any time during the term of this Agreement
any dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered
by
the arbiter may be entered in any court having jurisdiction thereof.
Section 19. Presumption. This Agreement or any section thereof shall not
be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 20. Further Action. The parties hereto shall execute and deliver
all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
Section 21. Parties in Interest. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision
shall be for the benefit of any third party.
Section 22. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 23. Separate Counsel. The parties acknowledge that the Corpora-
tion has been represented in this transaction by the J. Xxxxx Xxxxxx Law
Group, that the Employee has not been represented in this transaction by the
Corporation's attorneys, and the Employee has been advised that it is impor-
tant for the Employee to seek separate legal advise and representation in
this matter.
Date: Perennial Development Corporation, Inc.,
a Colorado Corporation
By:/s/ Xxxxxx X. Xxxxxx
Authorized Director
/s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx, Individually
