EXHIBIT (e)(5)
QUEST EDUCATION CORPORATION
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is dated as of June 26, 2000,
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by and between Xxxxxx X. Xxxxxxxx ("Executive") and Quest Education Corporation,
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a Delaware corporation (the "Company").
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Recitals
WHEREAS, the Executive is a principal executive officer of the Company, has
been actively involved in the management of the Company's business for many
years and has acquired considerable experience and skill.
WHEREAS, simultaneous with the execution of this Agreement, Xxxxxx, Inc.
("Parent") and the Company are entering into an Agreement and Plan of Merger
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(the "Merger Agreement"), pursuant to which, among other things, Parent will
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acquire all of the outstanding stock of the Company (the "Acquisition").
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WHEREAS, the Company desires to continue to employ Executive.
WHEREAS, Executive desires to continue employment by the Company.
Agreement
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter contained, it is hereby mutually agreed as follows:
1. Term of Agreement. This Agreement shall commence as of the Effective
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Time of the Merger (each as defined in the Merger Agreement) and shall expire on
December 31, 2004 (the "Original Term"), subject to earlier termination as
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hereinafter provided.
2. Duties.
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(a) Position. Executive shall be employed as Vice President of
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Operations of the Company, and will report to the Company's Chief Executive
Officer.
(b) Obligations to the Company. Executive agrees to the best of his
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ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Executive
pursuant to the express and implicit terms hereof, and to the reasonable
satisfaction of the Company. During the term of Executive's employment
relationship with the Company, Executive further agrees that he will devote all
of his business time and attention to the business of the Company, the Company
will be entitled to all of the benefits and profits arising from or incident to
all such work services and advice, Executive will not render commercial or
professional services of any nature to any person or organization, whether or
not for compensation, without the prior written consent of the Company's Board
of Directors, and Executive will not directly or indirectly engage or
participate in any business that is competitive in any manner with the business
of the Company. Nothing in this Agreement will prevent Executive
from owning no more than 1% of the outstanding equity securities of a
corporation whose stock is listed on a national stock exchange or the Nasdaq
National Market. Executive will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Executive's employment.
3. Compensation. For the duties and services to be performed by Executive
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hereunder, the Company shall pay Executive, and Executive agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 3.
(a) Salary. Executive shall receive an annual salary of $193,200,
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subject to annual review. Executive's salary will be payable pursuant to the
Company's normal payroll practices.
(b) Bonuses. At the end of each fiscal year, Executive will be
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eligible for a cash bonus based on a bonus formula approved by the Board of
Directors of the Company (the "Annual Bonus"); provided, that for Fiscal 2001
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the Annual Bonus shall be determined based on the nine months ended December 31,
2000. In addition to the Annual Bonus, Executive will participate in and, to
the extent earned or otherwise payable thereunder, receive periodic incentive
cash bonuses (the "Incentive Bonus") pursuant to the incentive bonus program as
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described in Exhibit A to this Agreement.
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(c) Stock Options, Restricted Stock and Other Incentive Programs. Upon
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the commencement of Executive's employment (the "Commencement Date"), Executive
shall receive an option to purchase 50,000 shares (post-split) of the Parent's
Common Stock, par value $1.00 per share, with an exercise price equal to the
fair market value on the Commencement Date. These option shares will vest at
the rate of 20% per year for five years (total vesting in 60 months) on each
anniversary of the Commencement Date. The option will be subject to the terms
of the Third Amended and Restated Kaplan Stock Option Plan and the Stock Option
Agreement between Executive and Parent. In addition, Executive shall receive 75
shares of restricted stock of The Washington Post Company (the "Restricted
Stock") in January 2001. These restricted shares will vest pursuant to the terms
of The Washington Post Company's Long-Term Incentive Compensation Plan and the
Restricted Stock Agreement between Executive and The Washington Post Company.
Executive may be eligible to receive additional grants of Restricted Stock in
January 2003, on such terms and subject to such conditions as the Compensation
Committee of the Board of Directors of The Washington Post Company shall
determine as of the date of any such grant.
Notwithstanding the above and subject to the provisions of Section
9 below, in the event that (i) Executive's employment is terminated by the
Company or a successor to the Company other than for Cause (as defined in
Section 5 below), or (ii) Executive's job duties, responsibilities and
requirements are materially reduced or changed such that they are inconsistent
with Executive's prior duties, responsibilities and requirements, in connection
with, or as a result of, a Change of Control (as defined below), the Company
shall make a cash payment to Executive equal to the fair market value on the
date of such termination of the unvested Restricted Stock. For purposes of this
Agreement, "Change of Control" shall mean the occurrence of any of the following
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events: (i) an acquisition of the Company by another entity by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation but excluding any merger effected
exclusively for the purpose of changing the domicile of the
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Company), or (ii) a sale of all or substantially all of the assets of the
Company (collectively, a "Merger"), so long as in either case (x) the Company's
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stockholders of record or their parents and affiliates immediately prior to such
Merger will, immediately after such Merger, hold less than 50% of the voting
power of the surviving or acquiring entity, or (y) the Company's stockholders of
record or their parents and affiliates immediately prior to such Merger will,
immediately after such Merger, hold less than 60% of the voting power of the
surviving or acquiring entity and a majority of the members of the Board of
Directors of the surviving or acquiring entity immediately after such Merger
were not members of the Board of Directors of the Company immediately prior to
such Merger.
(d) Additional Benefits. Executive will be eligible to participate in
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the Executive benefit plans of general application currently maintained by and
paid for by the Company, including without limitation, those plans covering
medical, disability and life insurance in accordance with the rules established
for individual participation in any such plan and under applicable law. To the
extent that Executive currently is the beneficiary of medical, disability, and
life insurance plans ("Current Plans") that differ from the benefits under the
Company's plans of general application prior to the Acquisition, Company will
use reasonable efforts to obtain, maintain, and pay for medical and disability
plans that include the same benefits as the Current Plans. Executive will be
eligible for vacation and sick leave in accordance with the Company's policies
in effect during the term of this Agreement and will receive such other
benefits as the Company generally provides to its other employees of comparable
position and experience.
(e) Reimbursement of Expenses. Executive shall be authorized to incur
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on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses incurred by Executive in furtherance of Executive's
performance of his duties hereunder, provided that such expenses are
substantiated in accordance with Company policies and such substantiation is
adequate in the Company's and Parent's judgment to permit deduction of such
expenses on the income tax returns of the Company and to evidence compliance
with the Foreign Corrupt Practices Act.
(f) Withholding. All amounts paid to Executive hereunder shall be
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subject to withholding as may be required by applicable law.
4. Termination of Employment and Severance Benefits.
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(a) Termination of Employment. This Agreement may be terminated
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during its Original Term upon the occurrence of any of the following events:
(i) The Company's Board of Directors' determination in good
faith that it is terminating Executive for Cause (as defined in Section 5 below)
("Termination for Cause") after giving Executive fifteen (15) days notice and
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the opportunity to be heard;
(ii) The Company's determination that it is terminating Executive
without Cause, which determination may be made by the Company at any time at the
Company's sole discretion, for any or no reason ("Termination Without Cause");
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(iii) A change in Executive's status such that a Constructive
Termination (as defined in Section 4(b)(iii) below) has occurred; or
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(iv) Following Executive's death or Disability (as defined in
Section 6 below).
(b) Severance Benefits. Executive shall be entitled to receive
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severance benefits upon termination of employment only as set forth in this
Section 4(b):
(i) Involuntary Termination. If Executive's employment is
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terminated under Section 4(a)(ii) or 4(a)(iii) above (such termination, an
"Involuntary Termination"), Executive will be entitled to receive payment of
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severance benefits equal to Executive's regular salary for the lesser of (i) 36
months or (ii) the remainder of the Original Term of this Agreement (the
"Severance Period") but in no event less than 12 months. Such payments shall
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be made ratably over the Severance Period according to the Company's standard
payroll schedule. Executive will also be entitled to receive payment on the date
of termination of an Annual Bonus payable under Section 3(b) based on the
average of the Annual Bonus paid for the prior two fiscal years or for the last
fiscal year if the Involuntary Termination occurs before the end of the second
fiscal year. Executive will also be entitled to receive payment on the date of
termination of any Incentive Bonus payable under Section 3(b) to the extent that
the Incentive Bonus has become vested on the date of termination. Health
insurance benefits with the same coverage provided to Executive prior to the
termination (e.g. medical, dental, optical, mental health) and in all other
respects significantly comparable to those in place immediately prior to the
termination will be provided at the Company's cost over the Severance Period.
(ii) Termination for Cause. If Executive's employment is
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terminated for Cause, then Executive shall not be entitled to receive payment of
any severance benefits. Executive will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Executive's termination of employment
and Executive's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(iii) Constructive Termination. "Constructive Termination" shall
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mean any of the events set forth below which are not cured within fifteen (15)
days following written notice thereof by Executive to the Company: (A) a
material reduction in Executive's salary as described in Section 3(a) above,
which is not taken by a majority of the senior executives of the Company; (B) a
material change in Executive's reporting relationships; or (C) a Change in
Control has occurred; provided, that within the 30-day period immediately
following such material change or reduction or Change of Control Executive
elects to terminate his employment voluntarily.
(iv) Termination by Reason of Death or Disability. In the event
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that Executive's employment with the Company terminates as a result of
Executive's death or Disability (as defined in Section 6 below), Executive or
Executive's estate or representative will receive all salary and unpaid vacation
accrued as of the date of Executive's death or Disability and any other benefits
payable under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of death or
Disability and in accordance with applicable law. In addition, Executive's
estate or representative will receive the amount of Executive's Annual Bonus and
Incentive Bonus for the fiscal year in which the death or Disability occurs to
the extent that the bonus has been earned as of the date of Executive's death or
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Disability, as determined by the Board of Directors or its Compensation
Committee based on the specific corporate and individual performance targets
established for such fiscal year.
(c) Executive Resignation. If Executive's resigns other than pursuant
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to Section 4(b)(iii), then Executive shall not be entitled to receive payment of
any severance benefits. Executive will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Executive's termination of employment
and Executive's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
5. Definition of Cause. For purposes of this Agreement, "Cause" for
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Executive's termination will exist at any time after the happening of one or
more of the following events:
(a) Executive's refusal to perform any of the Executive's duties
hereunder (other than a failure to perform resulting from death or Disability);
(b) Executive's breach of this Agreement;
(c) Executive's commission of any act of dishonesty, fraud,
intentional material misrepresentation in connection with this employment,
including, but not limited to, misappropriation or embezzlement of any funds of
the Company or any of its affiliates, or Executive's conviction of a felony or a
crime involving moral turpitude;
(d) Executive's commission of any willful or intentional act having
the effect of injuring the reputation, business or business relationships of the
Company or any of its affiliates;
(e) the entering by the Executive of a plea of guilty or nolo
contendere to, or the conviction of the Executive for, a crime (other than a
routine traffic offense) which carries a potential penalty of imprisonment for
more than ninety (90) days and/or a fine in excess of $10,000;
(f) Executive's habitual abuse of alcohol, prescription drugs or
controlled substances; or
(g) Executive's commission of any act of material misconduct or
insubordination in connection with this employment;
provided, however, that with respect to clauses (a), (b) and (g) above, if such
failure or breach is capable of cure, such failure or breach, as the case may
be, shall not be deemed to constitute Cause unless such failure or breach
remains uncured after the expiration of fifteen (15) days after notice thereof
is received by Executive.
6. Definition of Disability. For purposes of this Agreement, "Disability"
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shall mean that Executive has been unable to perform his duties hereunder as the
result of his incapacity due to physical or mental illness, incapacity or
disability and such inability continues for at least 90 consecutive calendar
days or 120 calendar days during any consecutive twelve-month period; provided,
that any days of disability separated by ten (10) or fewer days shall be
considered continuous. During any period when the Executive implicitly or
explicitly purports to be unable to
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perform the Executive's duties hereunder by reason of physical or mental
illness, incapacity or disability, the Executive, at the request of the
Company, shall submit to one or more examinations by a physician of the
Company's choice acceptable to Executive (with such agreement on acceptability
not to be unreasonably withheld).
7. Confidentiality Agreement.
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(a) The Executive acknowledges that as an officer and an employee of
the Company he has had access, and may have access, to confidential information
which relates to the business of the Company. The Executive shall, during the
Executive's employment with the Company and at all times thereafter, treat all
Confidential Material (as hereinafter defined) of the Company confidentially.
The Executive shall not, without the prior written consent of the Board of
Directors, disclose such confidential material, directly or indirectly, to any
party or remove from the Company's premises any notes or records relating
thereto, copies or facsimiles thereof (whether made by electronic, electrical,
magnetic, optical, laser, acoustic or other means), or any other property of the
Company. The Executive agrees that all Confidential Material, together with all
notes and records of the Executive relating thereto, and all computer disks,
copies or facsimiles thereof in the possession of the Executive (whether made by
the foregoing or other means) are the exclusive property of the Company. The
Executive shall not in any manner use any confidential material of the Company,
or any other property of the Company, in any manner not specifically directed by
the Company or in any way which is detrimental to the Company, as determined by
the Board of Directors in its sole discretion.
(b) For the purposes of this Agreement, the term "Confidential
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Material" shall mean all information in any way concerning the activities,
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business or affairs of the Company or any of the customers and clients of the
Company, including, without limitation, information concerning trade secrets,
together with all software and sales and financial information concerning the
Company and any and all information concerning projects in research and
development or marketing plans for any products or projects of the Company, and
all information concerning the practices, customers and clients of the Company,
and all information in any way concerning the activities, business or affairs of
any of such customers or clients, as such, which is furnished to the Executive
by the Company or any of its agents, customers or clients, as such, or otherwise
acquired by the Executive in the course of the Executive's employment with the
Company.
(c) Upon termination of the Executive's employment or at the request
of the Company before termination, the Executive shall deliver to the Company
all written and tangible material in his possession incorporating Confidential
Material or otherwise relating to the Company.
8. Noncompetition Covenant. Executive hereby agrees that he shall not,
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during the term of his employment pursuant to this Agreement and during the
greater of one year or the Severance Period, do any of the following without the
prior written consent of the Company's Board of Directors:
(a) Compete. Carry on any business or activity (whether directly or
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indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) which is competitive with the business conducted by the
Company (as conducted now or during the term of
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Executive's employment), nor engage in any other activities that conflict with
Executive's obligations to the Company.
(b) Solicit Business. Solicit or influence or attempt to influence
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any client, customer or other person either directly or indirectly, to direct
his or its purchase of the Company's products and/or services to any person,
firm, corporation, institution or other entity in competition with the business
of the Company (as conducted now or during the term of Executive's employment).
(c) Solicit Personnel. Solicit, employ or influence or attempt to
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influence any person employed by the Company to terminate or otherwise cease his
employment with the Company or become an employee of any competitor of the
Company; provided, however, that this provision shall not prohibit Executive
from engaging in general public solicitations not targeted at any specific
officer or employee of the Company. This Section 8(c) is to be read in
conjunction with the Confidentiality Agreement executed by Executive.
9. Limitation on Restricted Stock Acceleration Benefits. In the event
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that any restricted stock acceleration benefits provided for in this Agreement
to Executive together with all other payments received by Executive (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
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Section 9, would be subject to the excise tax imposed by Section 4999 of the
Code, then Executive's acceleration benefits under Section 3(c) shall be payable
either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of such
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by Executive on an after-tax basis, of the greatest amount of
benefits under Section 3(c), notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code. Unless the Company or
Executive otherwise agree in writing, any determination required under this
Section 9 shall be made in writing by independent public accountants appointed
by the Company and reasonably acceptable to Executive (the "Accountants"), whose
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determination shall be conclusive and binding upon Executive and the Company for
all purposes. For purposes of making the calculations required by this Section
9, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company
and Executive shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section 9. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 9.
10. Conflicts. Executive represents that his execution and performance of
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all the terms of this Agreement will not conflict with or breach any other
agreement to which Executive is a party or may be bound. Executive has not, and
will not during the term of this Agreement, enter
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into any oral or written agreement in conflict with any of the provisions of
this Agreement. Executive further represents and warrants that, except for the
Merger Agreement, the Executive is not bound by any oral or written agreements
which prohibit or restrict the Executive from: (a) competing with, or in any
way participating in a business which competes with, any former employer or
business of any former employer; (b) soliciting personnel of the former
employer or business to leave such former employer's employment or to leave
such business; or (c) soliciting customers of the former employer or business
or another business. Executive further represents that he is entering into or
has entered into an employment relationship with the Company of his own free
will and that he has not been solicited as an employee in any way by the
Company.
11. Successors. Any successor to the Company (whether direct or indirect
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and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Executive's rights hereunder
shall inure to the benefit of, and be enforceable by, Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Miscellaneous Provisions.
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(a) Amendments and Waivers. Any term of this Agreement may be amended
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or waived only with the written consent of the parties.
(b) Sole Agreement. This Agreement, including any Exhibits hereto,
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constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(c) Notices. Any notice required or permitted by this Agreement shall
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be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(d) Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflict of laws. Each party to
this Agreement expressly and irrevocably (i) consents that any legal action or
proceeding against him or it under, arising out of or in any manner relating to,
this Agreement may be brought in any court of the State of New York located
within the Southern District of New York or in the United States District Court
for the Southern District of New York, (ii) consents and submits to the personal
jurisdiction of any such courts in any such action or proceeding, (iii) consents
to the service of any complaint, summons, notice or other process relating to
any such action or proceeding by delivery thereof to him or it by hand or by any
other manner provided for in Section 12(c), (iv) waives any claim or defense in
any such action or proceeding based on any alleged lack of personal
jurisdiction, improper venue or forum non conveniens or any similar basis, and
(v) waives all rights, if any, to trial by jury with respect to any
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such action or proceeding. Nothing in this Section shall affect or impair in
any manner or to any extent the right of any party to commence legal
proceedings or otherwise proceed against any other party in any jurisdiction
or to serve process in any manner permitted by law.
(e) Severability. If one or more provisions of this Agreement are
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held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(f) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
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THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
(g) No Third-Party Beneficiaries. Except as expressly set forth in
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Section 11 hereof, this Agreement is for the sole benefit of the parties hereto
and nothing herein expressed or implied shall give or be construed to give to
any person or entity, other than the parties hereto, any legal or equitable
rights hereunder.
(h) Continuation. In the event that this Agreement shall expire and
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Executive shall nevertheless continue to be employed by the Company, the parties
acknowledge that the terms of this Agreement, absent a supplemental written
agreement between the parties to the contrary (and except as provided in Section
12(i) below), shall not be deemed to apply to such post-expiration employment,
any such employment being (and without limiting the foregoing) on an at-will
basis.
(i) Survival. Notwithstanding anything in this Agreement, the
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provisions of Sections 4(b), 4(c), 8, 10 and 12 shall survive the expiration or
termination hereof, regardless of the reason therefor. Obligations of the
parties pursuant to the Merger Agreement which by their nature survive
termination.
(j) Counterparts. This Agreement may be executed (including by
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facsimile transmission) in one or more counterparts each of which shall be
deemed an original for all purposes.
[Signature Page Follows]
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The parties have executed this Agreement the date first written above.
QUEST EDUCATION CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Title: President and Chief Executive Officer
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Address: 0000 Xxxxxxx Xxxx, Xxxxx 000 Xxxxxxx,
Xxxxxxx 00000
XXXXXX X. XXXXXXXX
Signature: /s/ Xxxxxx X. Xxxxxxxx
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Address:
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EXHIBIT A
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INCENTIVE BONUS PLAN
Executive shall be entitled to a cash payment equal to his vested
interest under the Bonus Pool as follows:
. Executive shall have an interest of 11.36% of the Bonus Pool.
. The amount added to the Bonus Pool for any year during the term of the
Program shall equal the amount by which EBITA for such year exceeded the
Base Year EBITA by more than 10%. The term of the Program shall be from
January 1, 2001 to December 31, 2004.
. Base Year EBITA for the initial year (January 1, 2001 to December 31, 2001)
shall be based on the actual EBITA for the twelve-month period ending
December 31, 2000 but shall not be less than $17.7 million.
. Base Year EBITA for subsequent years during the term of the Program shall
equal the greater of (i) the actual EBITA for the prior twelve-month period
or (ii) the Base Year EBITA for the prior year. The calculation of EBITA
for purposes of the incentive bonus program shall be adjusted for (i)
acquisitions and (ii) capital expenditures above ongoing depreciation.
. If the Bonus Pool exceeds $9,000,000 at December 31, 2004, the Bonus Pool
will be increased by an additional $1,000,000.
. Executive's interest in the Bonus Pool for any year shall become 25% vested
at December 31, 2001, and shall become vested an additional 25% at December
31, 2002, December 31, 2003 and December 31, 2004.
. Executive is entitled to receive the vested amount of his interest in the
Bonus Pool in cash at any time. Amounts in the Bonus Pool that are vested
will not continue to appreciate in value.
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