EXECUTION COPY
EXHIBIT 10.16
FORM OF
EMPLOYMENT AGREEMENT
FOR EXECUTIVE VICE PRESIDENTS
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between
___________ (the "Executive"), and Collegiate Funding Services, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company").
WHEREAS, Executive is currently employed as an Executive Vice President of the
Company pursuant to an employment agreement dated May 17, 2002, between
Executive and Collegiate Funding Services, L.L.C. ("CFS"), the primary
subsidiary of the Company (the "Prior Agreement"); and
WHEREAS, in recognition of Executive's contributions to the success and
accomplishments of the Company, the Company wishes to continue Executive's
employment and obtain his commitment to serve as Executive Vice President of the
Company under the terms of a new agreement relating to such employment; and
WHEREAS, the Company and Executive agree to enter into such new employment
agreement on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Employment and Term.
(a) Executive hereby agrees to be employed by the Company as Executive Vice
President of the Company, and Company hereby agrees to employ Executive in
such capacity. To the extent required by law, Executive's employment under
this Agreement shall be maintained through CFS, or another wholly owned
subsidiary of the Company used to employ Company executives, and in such
case any reference in this Agreement to employment or termination of
employment with the Company shall be deemed to include employment or
termination of employment with CFS or such other subsidiary.
(b) The period of Executive's employment under this Agreement (the "Term")
shall begin on June 30, 2004 (the "Effective Date") and end on the first
anniversary of the Effective Date, unless sooner terminated in accordance
with Section 12 hereof, or extended pursuant to (c) below.
(c) The Term shall automatically be extended for an additional one-year period
each June 30, beginning June 30, 2005, unless either Executive or the
Company delivers written notice to the other party, not later than 60 days
before the end of the Term (including extensions) of their election that
the Term not be extended.
(d) As of the Effective Date, this Agreement shall supersede and take the
place of any and all other agreements between Executive and the Company or
CFS that govern the terms and conditions of Executive's employment,
including the Prior Agreement.
(e) During the Term, Executive will devote Executive's full business time,
attention, skill and best efforts to the performance of Executive's duties
hereunder and will not engage in any other business, profession or
occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without
the prior written consent of the board of directors of the Company (the
"Board"); provided, that, nothing herein shall preclude Executive, subject
to the prior approval of the Board, from accepting appointment to or
continuing to serve on any board of directors or trustees of any business
corporation or any charitable organization; provided, in each case, and in
the aggregate, that such activities do not conflict or interfere with the
performance of Executive's duties hereunder or conflict with Section 11 of
this Agreement.
2. BASE SALARY.
(a) The Company shall pay Executive an annual salary at the rate of __________
(the "Base Salary"). The Base Salary shall be inclusive of all applicable
income, Social Security and other taxes and charges which are required by
law or requested to be withheld by Executive and which shall be withheld
and paid in accordance with Company's normal payroll practice for its
similarly situated executives as in effect from time to time.
(b) The Compensation and Personnel Committee of the Board (the "Compensation
Committee"), shall review Executive's Base Salary during the Term.
3. STOCK OWNERSHIP. Executive agrees to comply with the Company's stock
ownership guidelines as may be established from time to time by the Board, which
guidelines shall establish (i) the appropriate level of equity ownership
expressed as a multiple of Base Salary and (ii) a target number of years within
which such level of equity ownership is to be attained. In computing whether the
annual and overall guidelines have been met, all shares of Class B common stock
of the Company, or to the extent such class becomes common stock on or after the
date of the closing of the first sale to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933 (an "Initial
Public Offering"), such common stock (in either case, the "Common Stock") held
by Executive and all stock options to purchase Common Stock ("Stock Options")
and restricted shares of Common Stock ("Restricted Shares") granted to Executive
shall be counted.
4. IPO SUCCESS BONUS. If the Company completes an Initial Public Offering, then
the Company shall pay Executive a success bonus of __________. This success
bonus will be treated as income, and the Company shall withhold all such taxes
as required from the success bonus. Notwithstanding the foregoing, the Company
may pay the success bonus in the form of a stock and cash grant to Executive
such that his after-tax position remains the same. Any shares of Common Stock
that are issued to Executive pursuant to this Section 4 may not be sold by
Executive during the one-year period following the completion of the Initial
Public Offering,
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other than with the express written consent of the Board. Executive understands
and agrees that the certificate (or certificates) representing such shares of
Common Stock shall bear a legend noted conspicuously on such certificate in
substantially the following form. "THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE EMPLOYMENT AGREEMENT,
DATED AS OF JUNE 30, 2004, BY AND BETWEEN COLLEGIATE FUNDING SERVICES, INC. (THE
"COMPANY") AND ____________, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE COMPANY AND WHICH, AMONG OTHER MATTERS, PLACES
RESTRICTIONS ON THE SALE OF SUCH SHARES. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
SUCH AGREEMENT."
5. ANNUAL INCENTIVE COMPENSATION.
(a) During the Term, Executive shall have an annual cash incentive opportunity
(the "Incentive"), in an amount not to exceed one hundred-fifty percent
(150%) of Base Salary based upon the achievement of performance criteria
established by the Compensation Committee of at the beginning of each such
fiscal year. The final amount of the Incentive will be determined by the
Compensation Committee in its discretion.
(b) At the discretion of the Compensation Committee, a portion, not to exceed
fifty percent (50%) of the Incentive, may be paid in shares of Common
Stock or in Restricted Shares. To the extent the Incentive is paid in
Restricted Shares, such Restricted Shares shall be issued from shares of
Common Stock reserved under the Company's 2002 Stock Incentive Plan, as
revised. The restrictions with respect to such Restricted Shares shall
lapse ratably over a period of three (3) years from the date of issuance.
To the extent the Incentive is paid in shares of Common Stock, such shares
shall count towards any stock ownership requirement applicable to
Executive under this or any other agreement between Executive and the
Company.
6. STOCK OPTIONS/RESTRICTED SHARES.
(a) If the Company completes an Initial Public Offering, on the date of such
offering, Executive shall be granted Restricted Shares in an amount up to
___% of the fully diluted outstanding shares of Common Stock measured at
the time of the Initial Public Offering (the "IPO Restricted Shares") and
Stock Options to purchase up to ___% of the fully diluted outstanding
shares of Common Stock, measured as of the time of the Initial Public
Offering (the "IPO Options").
(b) Any IPO Options and IPO Restricted Shares shall count towards any stock
ownership requirement applicable to Executive under this or any other
agreement between Executive and the Company.
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(c) The exercise price of the IPO Options will equal the per share offering
price of the shares of Common Stock offered to the public in the Initial
Public Offering. The IPO Options will vest and all restrictions on the IPO
Restricted Shares will lapse with respect to 25% of the shares covered by
the IPO Options and the IPO Restricted Shares on the first anniversary of
the date of grant and on each of the immediately following three
anniversaries. The IPO Options and the IPO Restricted Shares shall be
subject to the terms and conditions of the Company's 2002 Stock Incentive
Plan, as revised, and an individual Award Agreement between Executive and
the Company entered into at the time of grant.
7. EXISTING STOCK OPTIONS. Of the Stock Options granted to Executive in May 2002
under the Company's 2002 Stock Incentive Plan that are not vested or exercisable
as of the Effective Date, fifty percent (50%) of such Stock Options will become
vested and exercisable on the Effective Date, and all remaining Stock Options
shall become fully vested and exercisable on the first anniversary of the
Effective Date. All unvested Stock Options discussed in this Section 7 are
subject to the acceleration provisions contained within this Agreement.
8. PENSION PLANS; SERP.
(a) Executive shall be entitled to participate in any tax-qualified retirement
plans maintained by or contributed to by the Company for the benefit of
its senior executives (Executive Vice President level), (collectively
"Qualified Plans"), including without limitation, the CFS 401K Retirement
Plan (the "401(k) Plan"), in accordance with the terms of the Qualified
Plans as they may be amended from time to time as provided by the
Qualified Plans.
(b) Executive shall also be eligible to participate in the Company's
Supplemental Employee Retirement Plan (the "SERP"). Under the terms of the
SERP, with respect to each calendar year during the Term, Executive may
make a pre-tax deferral contribution to the SERP (provided that Executive
has made the maximum permissible elective contribution to the 401(k) Plan)
in an amount not to exceed $25,000 when added to such maximum permissible
elective contribution to the 401(k) Plan. The Company shall match
contributions made by Executive to the SERP, in cash or Common Stock, in
an amount equal to one hundred percent (100%) of Executive's contribution
to the SERP. The Company's matching contribution shall vest ratably in
equal installments over a three (3) year period.
9. MEDICAL INSURANCE AND OTHER BENEFITS. During the Term, Executive shall be
entitled to the following benefits:
(a) Executive shall be entitled to participate in any medical and dental
insurance plans generally available to the senior management of the
Company, as such plans may be in effect from time to time.
(b) Executive shall be entitled to receive or participate in such further
savings, deferred compensation, life insurance, health or welfare benefit
plans offered to the Company's
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senior management generally, in accordance with the terms of such plans as
they may be amended from time to time in the discretion of the Company.
(c) The Company agrees to reimburse Executive for all reasonable, ordinary and
necessary business expenses incurred by Executive in performing his duties
pursuant to this Agreement, in accordance with Company's reimbursement
policies generally applicable to management personnel.
(d) Executive shall be entitled to receive a five thousand dollar ($5,000)
annual allowance for tax preparation, planning and advice.
(e) Executive shall be entitled to paid time off as provided under the terms
of the Company's paid time off policy.
10. NONDISCLOSURE OF PROPRIETARY AND CONFIDENTIAL INFORMATION.
(a) Executive and Company acknowledge that Executive will, in the course of
his employment, come into possession of confidential, proprietary business
and technical information, and trade secrets of Company and its
Affiliates, as defined in this Section 10(a) (the "Proprietary
Information"). Proprietary Information includes, but is not limited to,
the following:
(i) Business Procedures, Financial Information, Accounting Information,
Credit Information. All information concerning or relating to the
way the Company and its Affiliates conduct their business, which is
not generally known to the public or within the industry or trade in
which the Company or its Affiliates compete (such as Company
contracts, internal business procedures, controls, plans, licensing
techniques and practices, supplier, subcontractor and prime
contractor names and contacts and other vendor information, computer
system passwords and other computer security controls, financial
information, distributor information, and employee data) and the
physical embodiments of such information (such as check lists,
samples, service and operational manuals, contracts, proposals,
printouts, correspondence, forms, listings, ledgers, financial
statements, financial reports, financial and operational analyses,
financial and operational studies, management reports of every kind,
databases, employment or personnel records, and any other written or
machine-readable expression of such information as are filed in any
tangible media).
(ii) Marketing Plans and Customer Lists. All information not generally
known to the public or within the industry or trade in which Company
or its Affiliates compete pertaining to Company's and its
Affiliates' marketing plans and strategies; forecasts and
projections; marketing practices, procedures and policies; goals and
objectives; quoting practices, procedures and policies; and customer
data including the customer list, contracts, representatives,
requirements and needs, specifications, data provided by or about
prospective customers, and the physical embodiments of such
information.
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(iii) Business Ventures. All information not generally known to the public
or within the industry or trade in which the Company or its
Affiliates operate concerning new product development, negotiations
for new business ventures, future business plans, and similar
information and the physical embodiments of such information.
(iv) Software. All information relating to the Company's and its
Affiliates' software or hardware in operation or various stages of
research and development, which are not generally known to the
public or within the industry or trade in which the Company or its
Affiliates compete and the physical embodiments of such information.
(v) Litigation. Information which is not a public record and is not
generally known to the public or within the industry or trade in
which the Company or its Affiliates compete regarding litigation and
potential litigation matters and the physical embodiments of such
information.
(vi) Policy Information. Information not of a public nature regarding the
policies and positions that have been or will be advocated by the
Company and its Affiliates with government officials, the views of
government officials toward such policies and positions, and the
status of any communications that the Company or its Affiliates may
have with any government officials.
(vii) Information Not Generally Known. Any information which (a) is not
generally known to the public or within the industry or trade in
which the Company or its Affiliates compete and (b) (1) gives the
Company or its Affiliates an advantage over its or their competitors
or (2) has significant economic value or potentially significant
economic value to the Company or its Affiliates, including the
physical embodiments of such information.
(b) Executive acknowledges that the Proprietary Information is a valuable and
unique asset of Company and its Affiliates. Executive agrees that he will
not, at any time during his employment or after the termination of his
employment with the Company, without the prior written consent of the
Company or its Affiliates, as applicable, either directly or indirectly
divulge any Proprietary Information for his own benefit or for any purpose
other than the exclusive benefit of the Company and/or its Affiliates.
11. AGREEMENT NOT TO COMPETE.
(a) Executive acknowledges and agrees that the Company is engaged in a highly
competitive business and that by virtue of Executive's position and
responsibilities with the Company and access to the Proprietary
Information, engaging in any business which is competitive with the
Company's Business (as defined below) will cause the Company great and
irreparable harm.
(b) Executive covenants and agrees that at all times during the Term, and
during the period beginning on the date of termination of his employment
(whether such termination is voluntary or involuntary) and ending one (1)
year following his date of termination (the
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"Restricted Period"), he shall not, either directly or indirectly through
one or more intermediaries:
(i) work or serve as a director, officer, employee, consultant, agent,
representative, or in any other capacity, with or without
compensation, on behalf of any Prohibited Entity;
(ii) interfere with the Company's relations with any person or entity who
is a client or customer of the Company;
(iii) solicit any employees, customers, or business partners of the
Company, induce any customer or business partner of the Company to
breach a contract with the Company or any principal for whom the
Company acts as agent to terminate such agency relationship; or
(iv) make statements about the Company or its employees, officers or
directors reasonably determined by the Company to be disparaging.
(c) For purposes of this Agreement:
(i) The term "Entity" shall mean a business entity of any type, whether
or not incorporated.
(ii) A "Prohibited Entity" is any Entity that is primarily engaged in the
Company's Business in the United States, Canada, or any other
country where Company (including any Affiliate) either engages in
the Company's Business at the time of Executive's termination or
where Company, at the time of Executive's termination, has developed
a business plan or taken affirmative steps to engage in the
Company's Business;
(iii) The Company's "Business" shall include any business activity or line
of business similar to the type of education finance business
conducted by Company, CFS, and/or their Affiliates at the time of
Executive's termination of employment or which Company, CFS and/or
their Affiliates at the time of Executive's termination of
employment has developed a business plan or has taken affirmative
steps to engage in such business activity or line of business.
(iv) An Entity is primarily engaged in the Company's Business if more
than fifty (50%) of the revenues generated by the Entity are
generated by such Business. For this purpose, each parent,
subsidiary or other affiliate shall be deemed to be a separate
Entity
(v) The term "Affiliate" shall be deemed to refer to the Company, and
any entity (whether or not existing on the date hereof) controlling,
controlled by or under common control with the Company.
(d) Given his role as Executive Vice President, Executive expressly agrees
that the markets served by the Company, CFS and their Affiliates extend
nationally and to Canada and are
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not dependent on the geographic location of the executive personnel or the
businesses by which they are employed and that the restrictions set forth
in this Section 11 are reasonable and are no greater than are required for
the protection of the Company, CFS, and its Affiliates.
(e) In the event the Company reasonably determines that Executive has violated
any provision of this Section 11, and Executive has not cured such
violation within five (5) days of the date of receipt of written notice
thereof by Executive, then:
(i) Executive shall be terminated for Cause (as defined in Section
12.4);
(ii) Executive will repay to Company any after tax profits realized from
the exercise of Stock Options since the earlier of one year prior to
the date of such violation and the termination of Executive's
employment with the Company (whichever date occurred the longest
period of time before the date of any such option exercise); and
(iii) the Company may discontinue any or all remaining benefits payable to
Executive by virtue of his termination of employment.
Such termination of employment or discontinuance of benefits shall be in
addition to and shall not limit in any way any and all other rights and remedies
that the Company may have against Executive.
12. TERMINATION OF EMPLOYMENT.
(a) In addition to the expiration or nonrenewal of the Term, Executive's
employment hereunder may be terminated during the Term upon the occurrence
of any one of the events described in this Section 12. Except for
termination of the Agreement due to the death of Executive or by Executive
without Good Reason (as defined in Section 12.1 and 12.4), all termination
decisions by the Company shall require Board action. Upon termination,
Executive shall be entitled only to such compensation and benefits as
described in this Section 12.
12.1 DEATH; TOTAL DISABILITY.
(a) Executive's employment shall terminate upon Executive's death. The Company
may terminate Executive's employment upon his becoming "Totally Disabled."
For purposes of this Agreement, Executive shall be "Totally Disabled" if
Executive is physically or mentally incapacitated so as to render
Executive incapable of performing the essential functions of his position
with or without reasonable accommodation, for a period of more than 180
days. Executive's receipt of disability benefits under the Company's
long-term disability benefits plan or receipt of Social Security
disability benefits shall be deemed conclusive evidence that Executive is
Totally Disabled for purpose of this Agreement. In the absence of
Executive's receipt of such long-term disability benefits or Social
Security benefits, the determination of whether Executive is Totally
Disabled will be made by a personal physician selected by Executive (or
his legal representative) and approved by
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the Compensation Committee. The determination of such personal physician
shall be final and binding, unless it is determined to have been arbitrary
and capricious.
(b) Upon termination of the employment of Executive due to death or Total
Disability during the Term, Executive (or Executive's executors, legal
representatives or administrators, as applicable) will be entitled to
receive the following payments and benefits:
(i) Accrued but unpaid Base Salary through the date of termination;
(ii) Reimbursement for any unreimbursed business expenses and such
employee benefits, if any, that Executive may be entitled to under
the employee benefit plans of the Company (excluding any severance
plan), including amounts with respect to any accrued paid time off
that has not been paid;
(iii) Within thirty (30) days of termination of employment, a lump sum
payment in an amount equal to Base Salary (as in effect on the date
of termination); and
(iv) A pro rata portion of the Incentive, if any, that Executive would
have been entitled to receive pursuant to Section 5 hereof in the
year of Executive's death or Total Disability (i) based upon the
percentage of the fiscal year that shall have elapsed through the
date of Executive's termination of employment and (ii) to the extent
payment of the Incentive is based upon individual performance
criteria, based upon the actual performance of Executive during the
portion of such fiscal year that Executive was employed by the
Company prior to such death or Total Disability, payable when such
Incentive would have otherwise been payable had Executive's
employment not terminated.
(c) All Stock Options and/or Restricted Shares held by the Executive shall
fully vest and, as applicable, be exercisable immediately, and all
restrictions on Restricted Shares shall lapse. Unless otherwise provided
by the Company in its sole discretion, Executive (or Executive's
executors, legal representatives or administrators, as applicable) shall
be required to exercise all vested Stock Options held by him as of the
date of termination within one hundred and twenty (120) days of the date
of termination. Any Stock Options not exercised within such 120-day period
shall expire. Notwithstanding the foregoing, in no event shall the Stock
Options be exercised later than the expiration date set forth in the stock
option notice and stock option award agreement.
(d) For a period beginning on the date of termination, and ending twelve (12)
months after such date, Executive, as applicable, and his eligible
dependents shall be entitled to continue to participate in the Company's
group life, medical and dental plans on the same basis as immediately
prior to termination. The Company shall pay the entire cost of such
coverage, including any employee cost-sharing provisions, if any. To the
extent the terms and conditions of the aforesaid plans do not permit
participation by Executive and his eligible dependents, Company shall
arrange to provide Executive, as applicable, and his eligible dependents
with the same level of coverage under individual policies. Executive shall
cease to be covered under the foregoing medical and/or dental insurance
plans if he obtains other coverage under other medical, dental and/or
vision insurance
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plans. After expiration of the twelve-month period, if Executive has not
obtained any other medical, dental and/of vision plans, the Company shall
offer coverage under COBRA to the maximum allowed and Executive shall be
responsible for all costs thereof.
12.2 TERMINATION BY COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR GOOD
REASON.
(a) Termination By Company Without Cause. The Company may terminate
Executive's employment hereunder at any time for any reason other than
Cause (as defined in Section 12.4) or Total Disability upon written notice
to Executive ("Termination Without Cause").
(b) Termination By Executive For Good Reason. Executive may terminate his
employment hereunder at any time for Good Reason upon prior written notice
at any time during the Term. For purposes of this Agreement, "Good Reason"
shall mean:
(i) Subject to the provisions of Section 2(b) of this Agreement, a
reduction by the Company in Executive's Base Salary of more than ten
percent (10%) unless such reduction is part of an overall corporate
restructuring or cost reduction plan; or
(ii) The change of Executive's principal place of employment to a
location more than seventy-five (75) miles from such principal place
of employment.
For purposes of this Agreement, Good Reason shall not include notice to
Executive of the non-renewal of the Term.
(c) In the event of a Termination Without Cause, or a Termination For Good
Reason during the term of this Agreement, Executive shall be entitled to
receive the following payments and benefits:
(i) Accrued but unpaid Base Salary through the date of termination;
(ii) Reimbursement for any unreimbursed business expenses and such
employee benefits, if any, that Executive may be entitled to under
the employee benefit plans of the Company (excluding any severance
plans), including amounts with respect to any accrued paid time off
that has not been paid;
(iii) Within thirty (30) days following the date of termination, a lump
sum payment in an amount equal to the following:
(A) One hundred percent (100%) of Base Salary in effect on the date
of termination; plus
(B) One hundred percent (100%) of Executive's average annual
Incentive (the "Average Incentive"). For purposes of
determining the Average Incentive, the average of the
Incentive earned by Executive with respect to the two (2)
completed years immediately prior to his termination shall be
used. If the number of completed years beginning on and after
the
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Effective Date is less than two (2), the Average Incentive
shall be the Incentive, if any, earned with respect to the
first year of Executive's employment; and
(iv) For a period beginning on the date of termination, and ending twelve
(12) months after such date, Executive and his eligible dependents
shall be entitled to continue to participate in the Company's group
life, medical and dental plans on the same basis as immediately
prior to termination. The Company shall pay the entire cost of such
coverage, including any employee cost-sharing provisions, if any. To
the extent the terms and conditions of the aforesaid plans do not
permit participation by Executive and his eligible dependents,
Company shall arrange to provide Executive and his eligible
dependents with the same level of coverage under individual
policies. Executive shall cease to be covered under the foregoing
medical and/or dental insurance plans if he obtains other coverage
under other medical, dental and/or vision insurance plans. After
expiration of the twelve-month period, if Executive has not obtained
any other medical, dental and/of vision plans, the Company shall
offer coverage under COBRA to the maximum allowed and Executive
shall be responsible for all costs thereof.
(d) The Executive shall not be required to mitigate the amount of any payment
or benefit contemplated by this section, nor shall any such payment or
benefit be reduced by any earnings or benefits that Executive may receive
from any other source.
(e) Executive shall be required to exercise all vested Stock Options held by
him as of the date of termination within one hundred and twenty (120) days
of the date of termination. Any vested Stock Options not exercised within
such 120-day period shall expire. Notwithstanding the foregoing, in no
event shall the Stock Options be exercised later than the expiration date
set forth in the stock option notice and stock option award agreement. All
unvested Stock Options held by Executive as of the date of termination
will expire and be forfeited, and all unvested IPO Restricted Shares shall
be forfeited, as of the date of termination.
(f) In the event of a termination under this Section 12.2 following an Initial
Public Offering, all restrictions on Restricted Shares held by Executive
at such time, other than the IPO Restricted Shares, shall lapse.
12.3 CHANGE IN CONTROL.
(a) For purposes of this Agreement, "Change in Control" shall mean an
occurrence of one or more of the following events:
(i) an acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "person"
or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934) other than an employee benefit
plan of the Company, immediately after which such person or group
has "Beneficial Ownership" (within the meaning of Rule 13d-3 under
the Exchange Act) of more than fifty (50%) percent (or a lesser
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percentage should the acquisition of any percentage of voting stock
of the Company, by any person or group constitute control of or
power to control the management and policies of the Company) of the
combined voting power of combined voting power of the then
outstanding voting securities of CFS or the Company, or
(ii) a sale of all or substantially all of the assets of Company.
(b) In the event that the Company terminates Executives employment hereunder
without Cause or Executive resigns for Good Reason during the term of this
Agreement and within twelve (12) months following a Change in Control,
Executive shall be entitled to receive the following payments and
benefits:
(i) Accrued but unpaid Base Salary through the date of termination;
(ii) Reimbursement for any unreimbursed business expenses and such
employee benefits, if any, that Executive may be entitled to under
the employee benefit plans of the Company (excluding any severance
plans), including amounts with respect to any accrued paid time off
that has not been paid;
(iii) Within thirty (30) days following the date of termination, a lump
sum payment in an amount equal to the following:
(A) One hundred fifty percent (150%) of Base Salary in effect on the
date of termination; plus
(B) One hundred percent (100%) of the Average Incentive; and
(iv) For a period beginning on the date of termination, and ending
eighteen (18) months after such date, Executive and his eligible
dependents shall be entitled to continue to participate in the
Company's group life, medical and dental plans on the same basis as
immediately prior to termination. The Company shall pay the entire
cost of such coverage, including any employee cost-sharing
provisions, if any. To the extent the terms and conditions of the
aforesaid plans do not permit participation by Executive and his
eligible dependents, Company shall arrange to provide Executive and
his eligible dependents with the same level of coverage under
individual policies. Executive shall cease to be covered under the
foregoing medical and/or dental insurance plans if he obtains other
coverage under other medical, dental and/or vision insurance plans.
After expiration of the eighteen-month period, if Executive has not
obtained any other medical, dental and/of vision plans, the Company
shall offer coverage under COBRA to the maximum allowed and
Executive shall be responsible for all costs thereof.
(c) Executive shall not be required to mitigate the amount of any payment or
benefit contemplated by this section, nor shall any such payment or
benefit be reduced by any earnings or benefits that Executive may receive
from any other source.
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(d) All Stock Options and/or Restricted Shares held by Executive shall fully
vest and, as applicable, be exercisable immediately, and all restrictions
on Restricted Shares shall lapse. Unless otherwise provided by the Company
in its sole discretion, Executive (or Executive's executors, legal
representatives or administrators, as applicable) shall be required to
exercise all vested Stock Options held by him as of the date of
termination within one hundred and twenty (120) days of termination. Any
Stock Options not exercised within such 120-day period shall expire.
Notwithstanding the foregoing, in no event shall the Stock Options be
exercised later than the expiration date set forth in the stock option
notice and stock option award agreement.
12.4 TERMINATION FOR CAUSE; TERMINATION BY EXECUTIVE WITHOUT GOOD REASON.
(a) Termination for Cause. The Company may terminate the employment of
Executive for Cause upon prior written notice at any time during the Term.
(i) For purposes of this Agreement, "Cause" shall mean:
(A) Executive's willful and continuing failure, that is not remedied
within twenty days after receipt of written notice of such
failure from the Company, to either (x) perform his
obligations hereunder, or (y) follow the Company's Code of
Business Conduct;
(B) Executive's indictment for embezzlement, fraud or felony under
the laws of the United States or any state thereof;
(C) Executive's breach of fiduciary responsibility;
(D) an act of dishonesty by Executive which is materially injurious
to the Company;
(E) Executive's willful misconduct in connection with his duties;
(F) Executive's breach of the confidentiality, non-competition
and/or non-solicitation provisions of Sections 10 and 11 of
this Agreement; or
(G) any material infraction by Executive of any federal securities
laws or the rules and regulations promulgated by the SEC
thereunder.
(ii) Regardless of whether Executive's employment was initially
considered to be terminated for any reason other than Cause,
Executive's employment will be considered to have been terminated
for Cause for purposes of this Agreement if the Board subsequently
determines that Executive engaged in conduct constituting Cause.
(iii) Any determination of Cause under this Agreement shall be made by
resolution adopted by unanimous vote of the Board at a meeting
called and held for that purpose. Executive shall be provided with
reasonable notice of such meeting and
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shall be given the opportunity to be heard prior to the vote being
taken by the Board.
(b) Termination By Executive Without Good Reason. Executive may terminate his
employment hereunder at any time without Good Reason.
(c) In the event Executive's employment hereunder is terminated by Company for
Cause or by Executive Without Good Reason, Executive shall receive, as his
sole compensation hereunder, all accrued but unpaid Base Salary prorated
for the year through the date of termination, reimbursement for any
unreimbursed business expenses and such employee benefits, if any, that
Executive may be entitled to under the employee benefit plans of the
Company (excluding any severance plans), including amounts with respect to
any accrued paid time off that has not been paid. In addition, Executive
shall be required to exercise all vested Stock Options held by him as of
the date of termination within one hundred and twenty (120) days of the
date of termination. Any vested Stock Options not exercised within such
120-day period shall expire. Notwithstanding the foregoing, in no event
shall the Stock Options be exercised later than the expiration date set
forth in the stock option notice and stock option award agreement. All
unvested Stock Options and unvested IPO Restricted Shares held by
Executive as of the date of termination shall be forfeited.
(d) In the event Executive's employment hereunder is terminated by the Company
for Cause or by Executive Without Good Reason following the IPO, all
Restricted Shares held by Executive at such time shall be forfeited.
12.5 RETIREMENT.
(a) Executive may terminate his employment hereunder by reason of Retirement.
(b) "Retirement" means Executive's retirement from the Company on or after the
first to occur of (1) Executive's attainment of age 60 and completion of 5
years of continuous service with the Company; or (2) Executive's
attainment of age 62.
(c) On the date of Executive's termination of employment by reason of his
Retirement (the "Retirement Date"), Executive will be entitled to receive
the following compensation:
(i) Accrued but unpaid Base Salary through his last day of work;
(ii) Reimbursement for any unreimbursed business expenses and such
employee benefits, if any, that Executive may be entitled to under
the employee benefit plans of the Company (excluding any severance
plans), including amounts with respect to any accrued paid time off
that has not been paid;
(iii) For the period beginning on Executive's Retirement Date and ending
eighteen (18) months after such date, Executive and his eligible
dependents shall be entitled to continue to participate in the
Company's group life, medical and dental plans on the same basis as
immediately prior to Executive's Retirement Date. The Company shall
pay the entire cost of such coverage, including any employee
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cost-sharing provisions, if any. To the extent the terms and
conditions of the aforesaid plans do not permit participation by
Executive and his eligible dependents, Company shall arrange to
provide Executive and his eligible dependents with the same level of
coverage under individual policies. Executive shall cease to be
covered under the foregoing medical and/or dental insurance plans if
he obtains other coverage under other medical, dental and/or vision
insurance plans. After expiration of the eighteen month period, if
Executive has not obtained any other medical, dental and/or vision
plans, the Company shall offer coverage under COBRA to the maximum
allowed and Executive shall be responsible for all costs thereof.
(iv) All Stock Options and/or Restricted Shares held by Executive shall
fully vest and, as applicable, be exercisable immediately, and all
restrictions on Restricted Shares shall lapse. Unless otherwise
provided by the Company in its sole discretion, Executive (or
Executive's executors, legal representatives or administrators, as
applicable) shall be required to exercise all vested Stock Options
held by him as of the date of termination within one hundred and
twenty (120) days of termination. Any Stock Options not exercised
within such 120-day period shall expire. Notwithstanding the
foregoing, in no event shall the Stock Options be exercised later
than the expiration date set forth in the stock option notice and
stock option award agreement.
On the Retirement Date, any SERP benefits Executive would be eligible for
will be fully vested and payable to Executive.
12.6 EXPIRATION OF TERM; NON-RENEWAL.
(a) The Executive's employment hereunder will terminate upon the expiration of
the Term by reason of the non-renewal provisions in Section 1(c).
(b) If Executive's employment hereunder is terminated because Executive
provides notice of his election not to renew the Term in accordance with
Section 1(c), Executive shall receive, as his sole compensation hereunder,
all accrued but unpaid Base Salary, reimbursement for any unreimbursed
business expenses and such employee benefits, if any, that Executive may
be entitled to under the employee benefit plans of the Company (excluding
any severance plans), including amounts with respect to any accrued paid
time off that has not been paid.
(c) Unless the parties otherwise agree in writing, continuation of Executive's
employment with the Company beyond the expiration of the Term shall be
deemed an employment at-will and shall not be deemed to extend any of the
provisions of this Agreement and Executive's employment may thereafter be
terminated at will by either Executive or the Company; provided, that, the
provisions of Section 10 and Section 11 of this Agreement shall survive
any termination of this Agreement or Executive's termination of employment
hereunder. In addition, for purposes of clarification, in the event that
this Agreement expires or is not renewed by Executive or the Company, the
expiration of the
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Term of this Agreement shall not in and of itself result in the forfeiture
of any Options or Restricted Shares held by Executive as of such date, and
the terms of such Options and Restricted Shares shall thereafter be
governed by the award agreements that provide for the grant of such
Options and Restricted Shares.
12.7 TAX GROSS UP.
(a) If, as a result of payments provided for under or pursuant to this
Agreement together with all other payments in the nature of compensation
provided to or for the benefit of Executive under any other agreement in
connection with a Change in Control, Executive becomes subject to taxes of
any state, local or federal taxing authority that would not have been
imposed on such payments but for the occurrence of a Change in Control,
including any excise tax under Section 4999 of the Code an any successor
or comparable provision, then, in addition to any other benefits provided
under or pursuant to this Agreement or otherwise, Company (including any
successor to Company) shall pay to Executive at the time any such payments
are made under or pursuant to this or the other agreements, an amount
equal to the amount of any such taxes imposed or to be imposed on
Executive (the amount of any such payment, the "Parachute Tax
Reimbursement").
(b) In addition, Company (including any successor to 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 are 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 a net after-tax basis an amount equal to the
Parachute Tax Reimbursement.
(c) The amount of any Parachute Tax Reimbursement and of any such gross-up
amounts shall be determined by Company's independent auditing firm, whose
determination, absent manifest error, shall be treated as conclusive and
binding absent a binding determination by a governmental taxing authority
that a greater amount of taxes is payable by Executive.
13. OTHER AGREEMENTS. Executive represents and warrants to the Company that
there are no restrictions, agreements or understandings whatsoever to which
Executive is a party or by which he is bound that would prevent or make unlawful
Executive's execution of this Agreement or Executive's employment hereunder, or
which are or would be inconsistent or in conflict with this Agreement or
Executive's employment hereunder, or which would prevent, limit or impair in any
way the performance by Executive of his obligations hereunder.
14. SURVIVAL OF PROVISIONS. The provisions of this Agreement, including without
limitation those set forth in Sections 10, 11, 14, 15, 16, 17, 18, 19, 20, 21,
22, 23, 24, 25, 26, and 27 hereof, shall survive the termination of Executive's
employment hereunder and the payment of all amounts payable and delivery of all
post-termination compensation and benefits pursuant to this Agreement incident
to any such termination of employment.
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15. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors or permitted assigns and Executive
and his executors, administrators or heirs. The Company shall require any
successor or successors expressly to assume the obligations of the Company under
this Agreement. For purposes of this Agreement, the term "successor" shall
include the ultimate parent corporation of any corporation involved in a merger,
consolidation, or reorganization with or including the Company that results in
the stockholders of the Company immediately before such merger, consolidation or
reorganization owning, directly or indirectly, immediately following such
merger, consolidation or reorganization, securities of another corporation. It
shall also include the Company that results from any Initial Public Offering.
Executive may not assign any obligations or responsibilities under this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the Company, except that any benefit to which Executive
may be entitled under this Agreement may be transferred pursuant to the laws of
descent and distribution without the prior written consent of the Company. At
any time, the Company may provide, without the prior written consent of
Executive, that Executive shall be employed pursuant to this Agreement by any of
its Affiliates instead of or in addition to CFS or Company, and in such case all
references herein to the "Company" shall be deemed to include any such entity,
provided that (i) such action shall not relieve the Company of any of its
obligations under this Agreement, including, without limitation, the Company's
obligation to make or cause an Affiliate to make or provide for any payment to
or on behalf of Executive pursuant to this Agreement, and (ii) Executive's
rights under this Agreement shall not be diminished as a result thereof. Except
for any determination that the Board is required to make pursuant to Section
12.4(a)(iii) hereof, the Board may assign any or all of its responsibilities
hereunder to any committee of the Board, in which case references to the Board
shall be deemed to refer to such committee.
16. EXECUTIVE BENEFITS. This Agreement shall not be construed to be in lieu of
or to the exclusion of any other rights, benefits and privileges to which
Executive may be entitled as an executive of Company under any retirement,
pension, profit-sharing, insurance, hospitalization or other plans or benefits
which may now be in effect or which may hereafter be adopted.
17. LITIGATION. If Executive is named as a defendant or receives a notice of a
deposition or subpoena concerning his prior employer, Executive shall provide
reasonable notice of such events and copy of such legal notices to the General
Counsel of the Company. If Executive is named as a defendant in a suit by a
third party after the termination of Executive's employment relating to issues
that arose during Executive's employment with the Company or by virtue of
Executive having been an employee of the Company, the Company will defend and
indemnify Executive regardless of whether he is still an active employee of the
Company so long as said Executive would have been covered under the insurance or
indemnification policies of the Company if Executive were still employed.
Nothing in this Section 17 shall limit any other right that Executive may have
under applicable law or otherwise to be indemnified and held harmless by the
Company.
18. NOTICES. All notices required to be given to any of the parties of this
Agreement shall be in writing and shall be deemed to have been sufficiently
given, subject to the further provisions of this Section 18, for all purposes
when presented personally to such party, or sent by facsimile transmission, any
national overnight delivery service, or certified or registered mail, to such
party at its address set forth below:
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(a) If to Executive:
(b) If to Company:
Collegiate Funding Services, Inc.
c/o Collegiate Funding Services, L.L.C.
βββ βββββββββ βββββ
ββββββββββββββ, ββ βββββ
Attention:
Fax No. (βββ) βββ-ββββ
Such notice shall be deemed to be received when delivered if delivered
personally, upon electronic or other confirmation of receipt if delivered by
facsimile transmission, the next business day after the date sent if sent by a
national overnight delivery service, or three (3) business days after the date
mailed if mailed by certified or registered mail. Any notice of any change in
such address shall also be given in the manner set forth above. Whenever the
giving of notice is required, the giving of such notice may be waived in writing
by the party entitled to receive such notice.
19. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and any other documents,
instruments or other writings delivered or to be delivered in connection with
this Agreement as specified herein constitute the entire agreement among the
parties with respect to the subject matter of this Agreement and supersede all
prior and contemporaneous agreements, understandings, and negotiations, whether
written or oral, with respect to the terms of Executive's employment by Company.
This Agreement may be amended or modified only by a written instrument signed by
all parties hereto.
20. WAIVER. The waiver of the breach of any term or provision of this Agreement
shall not operate as or be construed to be a waiver of any other or subsequent
breach of this Agreement.
21. GOVERNING LAW. This Agreement shall be governed and construed as to its
validity, interpretation and effect by the laws of the State of New York,
without reference to its conflicts of laws provisions.
22. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such provisions, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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23. SECTION HEADINGS. The section headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its
interpretation.
24. SPECIFIC ENFORCEMENT. Executive acknowledges that the restrictions contained
in Sections 10 and 11 hereof are reasonable and necessary to protect the
legitimate interests of Company and its Affiliates and that Company would not
have entered into this Agreement in the absence of such restrictions. Executive
also acknowledges that any breach by him of Sections 10 or 11 hereof will cause
continuing and irreparable injury to Company for which monetary damages would
not be an adequate remedy. Executive shall not, in any action or proceeding by
Company to enforce Sections 10 or 11 of this Agreement, assert the claim or
defense that an adequate remedy at law exists. In the event of such breach by
Executive, Company shall have the right to enforce the provisions of Sections 10
and 11 of this Agreement by seeking injunctive or other relief in any court, and
this Agreement shall not in any way limit remedies at law or in equity otherwise
available to Company. In the event that the provisions of Sections 10 or 11
hereof should ever be adjudicated to exceed the time, geographic, or other
limitations permitted by applicable law in any applicable jurisdiction, then
such provisions shall be deemed reformed in such jurisdiction to the maximum
time, geographic, or other limitations permitted by applicable law.
25. ARBITRATION. Any dispute or claim, other than those referred to in Section
26 of this Agreement, arising out of or relating to this Agreement or otherwise
relating to the employment relationship between Executive and the Company
(including but not limited to any claims under Title VII of the Civil Rights Act
of 1964, as amended; the Americans with Disabilities Act; the Age Discrimination
in Employment Act; the Family and Medical Leave Act; and the Employee Income
Retirement Security Act) shall be submitted to Arbitration, in New York City,
NY, and except as otherwise provided in this Agreement shall be conducted in
accordance with the rules of, but not under the auspices of, the American
Arbitration Association. The arbitration shall be conducted before an
arbitration tribunal comprised of three individuals, one selected by the
Company, one selected by Executive, and the third selected by the first two. The
parties and the arbitrators selected by them shall use their best efforts to
reach agreement on the identity of the tribunal within ten (10) business days of
either party to this Agreement submitting to the other party a written demand
for arbitration. The proceedings before the tribunal shall take place within
twenty (20) business days of the selection thereof. Executive and the Company
agree that such arbitration will be confidential and no details, descriptions,
settlements or other facts concerning such arbitration shall be disclosed or
released to any third party without the specific written consent of the other
party, unless required by law or court order or in connection with enforcement
of any decision in such arbitration. Any damages awarded in such arbitration
shall be limited to the contract measure of damages, and shall not include
punitive damages. The costs of the arbitrators shall be paid by the Company, and
each party shall bear his or its attorneys' fees and other costs, except that
(1) the arbitrators may specifically direct one party to bear the entire cost of
the arbitration, including all attorneys' fees, if the arbitrators determine
that such party acted in bad faith; or (2) Executive is successful in which case
the Company will pay Executive's attorneys fees and costs.
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26. EQUITY CALL RIGHTS OF THE COMPANY.
(a) In the event Executive's employment hereunder is terminated for any reason
prior to the Initial Public Offering, the Company shall, for a period of
up to six (6) months following the date of termination, have the option to
purchase (the "Call Rights"), and Executive shall be required to sell to
the Company, if the Company exercises the Call Rights, (i) any or all
shares of Common Stock held by Executive ("Shares"), (ii) any or all
Restricted Shares held by Executive and (iii) any or all Shares that are
subject to the vested portion of any Stock Options held by the Executive
(the "Vested Shares"), at a price per share as set forth below.
(i) If Executive's employment is terminated (i) due to Executive's
death, (ii) by the Company because Executive is Totally Disabled,
(iii) by the Company without Cause, or (iv) by Executive for Good
Reason,
(A) the price per share for any Shares and Vested Shares shall be
the Fair Market Value (as defined below); and
(B) any restrictions on Restricted Shares held by Executive shall
lapse, and the price per share of such Restricted Shares shall
be the Fair Market Value (as defined below).
(ii) If Executive resigns without Good Reason,
(A) the price per share for any Shares and Vested Shares shall be
the lower of the cost of such Shares and Vested Shares to
Executive or the Fair Market Value (as defined below); and
(B) any Restricted Shares held by Executive shall be forfeited.
(iii) If Executive's employment is terminated by the Company for Cause,
any Shares, Vested Shares and Restricted Shares shall be forfeited.
(b) For purposes of this Agreement, prior to the Initial Public Offering,
"Fair Market Value" shall mean the fair market value of a share of Common
Stock, as determined in good faith by the Board.
27. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first written above.
Collegiate Funding Services, Inc.
By: ________________________
_________________________________________
Title: Executive Vice President
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