Exhibit 10.4
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 2nd day of November, 1998 by and
among ▇▇▇▇▇▇▇ ▇▇▇▇▇ SCHOOL, INC., a New York corporation with its
principal place of business at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ Circle Mall, Latham, NY 12110 (the "Corporation"), and FAITH
A. TAKES, an individual residing at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Corporation desires to employ Executive and
Executive desires to accept such employment, all on the terms and
conditions as set forth below; and
WHEREAS, the Board of Directors (the "Board") of the
Corporation has caused the Corporation to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements set forth herein, the parties hereto,
intending to be legally bound, agree as follows:
1. Employment and Term. Subject to the terms
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and conditions of this Agreement, the Corporation agrees to employ
Executive, and Executive hereby accepts employment by the
Corporation. The term of this Agreement shall begin as of the date
of Closing of the acquisition of Corporation by Touchstone Applied
Science Associates, Inc. ("TASA") or any Subsidiary thereof (the
"Effective Date") and shall end on the third anniversary of the
Effective Date; provided, however, that commencing on the date one
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year after the Effective Date, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the term of this
Agreement shall be automatically extended so as to terminate three
years from such Renewal Date, unless at least six (6) months prior
to the Renewal Date the Corporation shall give written notice that
the term of the Agreement shall not be so extended (the "Employment
Term").
2. Certain Definitions.
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(a) A reference herein to a section of
the Internal Revenue Code of 1986, as amended (the "Code") or a
subdivision thereof shall be construed to incorporate reference to
any section or subdivision of the Code enacted as a successor
thereto, any applicable proposed, temporary or final regulations
promulgated pursuant to such sections and any applicable
interpretation thereof by the Internal Revenue Service.
(b) A reference herein to a section of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any rule or regulation promulgated thereunder shall be
construed to incorporate reference to any section of the Exchange
Act or any rule or regulation enacted or promulgated as a successor
thereto.
(c) "Subsidiary(ies)" means a company
50% or more of the voting securities of which are owned by a
corporation.
(d) "Executive Benefit Plan" means any
written plan providing benefits for employees of the Corporation or
any Subsidiary.
3. Duties. During the Employment Term,
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Executive shall serve the Corporation as its President and Chief
Executive Officer, or in such other capacity or capacities as may
be determined by the Board (provided that Executive's authority,
duties and responsibilities shall be at least commensurate in all
material respects with her office, status and titles at the time of
such change). Executive shall also serve as Executive Vice
President of TASA Educational Services Corporation, a wholly-owned
Subsidiary of TASA ("TESC"). Executive shall perform such
executive, administrative, development, production, marketing and
other services and duties for the Corporation at the present
location of the Corporation or any other office or location of the
Corporation as requested by the Board. Executive shall report in
all instances to the President of TESC and TASA. Executive agrees
to devote full time, best efforts during the Employment Term hours
to the business and affairs of the Corporation and, to the extent
necessary, to discharge the responsibilities assigned to Executive
hereunder, and to use Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Term it shall not be a violation of this Agreement for
Executive to (A) serve on corporate, civic or charitable boards or
committees, or (B) manage personal investments, so long as
Executive's duties in connection therewith do not unreasonably
interfere with Executive's duties under this Agreement.
4. Compensation.
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(a) BASE SALARY. During the
Employment Term, the Corporation shall pay to Executive, in equal
installments no less frequently than twice per month (or at such
other intervals as are in effect from time to time for other
executive officers of the Corporation), an annual base salary (the
"Base Salary") of $150,000.00 during the term of this Agreement.
Base Salary to be paid by the Corporation to Executive shall be
reviewed by the Board of Directors at least once annually prior to
each anniversary of the Effective Date for the purposes of
determining whether any increases to such salary would be
appropriate. Any increase in Base Salary shall not serve to limit
or reduce any other obligation to Executive under this Agreement.
Base Salary shall not be reduced after any such increase.
(b) BONUS. In addition to Base
Salary, Executive shall be awarded, for each fiscal year of the
Corporation ending during the Employment Term beginning with the
first fiscal year of the Corporation during this Agreement, an
annual bonus ("Annual Bonus") in cash equal to six (6%) percent of
earnings of the Corporation before interest and taxes ("EBIT") in
excess of (10%) percent of the purchase price of the acquisition of
the Corporation (inclusive of all forms of allocation of such
price) by TASA or its Subsidiary. For example, with respect to the
acquisition of ▇▇▇▇▇▇▇ ▇▇▇▇▇ School, Inc. ten (10%) percent would
equal $300,000.00. "Interest" shall include interest related to
the acquisition debt and financing costs allocated to the
Corporation in connection with the acquisition of the Corporation
by TASA or its Subsidiary.
(c) INCENTIVE, SAVINGS, WELFARE
BENEFIT PLANS AND RETIREMENT PLANS. In addition to Base Salary and
Bonus, Executive and/or Executive's family, as the case may be,
shall be eligible to participate in or benefit from, such medical
insurance, life insurance, disability insurance, pension, bonus,
profit-sharing, stock option, stock purchase and any other fringe
benefit plans, practices, programs or policies provided by the
Corporation to executive employees in accordance with the terms of
such plans, practices, programs and policies. Notwithstanding the
prior sentence, it is specifically agreed that either (i) family
medical insurance coverage, or (ii) additional compensation in lieu
of premiums of the Corporation for such coverage, shall be provided
to Executive as the Corporation and Executive shall agree from time
to time.
(d) KEY MAN INSURANCE. Executive
agrees that the Corporation may obtain key man life insurance with
respect to Executive, and in connection therewith, agrees to submit
to all reasonable and customary examinations by the provider of
such life insurance.
(e) EXPENSES. Executive shall be
entitled to reimbursement for all normal and reasonable travel,
entertainment and other expenses necessarily incurred by her in the
performance of her duties hereunder in accordance with the
policies, practices and procedures of the Corporation in effect
with respect to other key employees of the Corporation.
(f) FRINGE BENEFITS. During the
Employment Term, Executive shall be entitled to fringe benefits,
including but not limited to the use of a leased automobile, in
accordance with the plans, practices, policies and programs of the
Corporation and its Subsidiaries in effect with respect to other
key employees of the Corporation.
(g) DISABILITY. Except as hereinafter
provided, the Corporation shall pay Executive for any period, up to
a maximum of three months, during the Employment Term in which she
is unable fully to perform her duties because of physical or mental
disability or incapacity, an amount equal to the Base Salary due
her for such period pursuant to Section 5(a), less the aggregate
amount of all income disability benefits which for such period he
may receive by reason of (i) any group health insurance plan or
disability insurance plan, which is intended to function as a
salary replacement plan, (ii) any applicable compulsory state
disability law, (iii) the Federal Social Security Act, (iv) any
applicable workmen's compensation law or similar law and (v) any
plan towards which the Corporation (including any predecessor of
the Corporation thereof) has contributed or for which it has made
payroll deductions, such as group accident or health policies,
other than those which reimburse for actual medical expenses.
(h) VACATION. During the Employment
Term, Executive shall be entitled to paid vacation in accordance
with the plans, practices, policies and programs of the Corporation
as in effect with respect to other key employees of the
Corporation.
5. Stock Options.
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(a) As part of the consideration to be
paid to Executive for her services hereunder, Executive shall be
eligible to participate in any stock incentive plan adopted by TASA
(the "Plan") for which an executive level employee may participate.
(b) TASA hereby agrees that it shall
cause to be filed with the Securities and Exchange Commission a
registration statement on Form S-8 (or equivalent form as may be in
effect at such time) with respect to all options theretofore
granted to Executive under the Plan. TASA covenants that it will
keep such registration statement current until Executive is no
longer employed by the Corporation; provided, however, that if
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Executive's employment is terminated hereunder other than pursuant
to Sections 6(a), 6(b) or 6(c), then Executive shall have until 90
days following the termination of his employment to exercise any
such vested options which he owned at the time of such termination,
and TASA shall maintain the effectiveness of such registration
statement for such period. TASA also hereby agrees that, for so
long as either it does not have an effective registration statement
on Form S-8 or it has an effective registration statement on Form
S-8 but Executive is restricted in her ability to resell shares
acquired pursuant to the exercise of options because of the
provisions of General Instruction C.2(b) to Form S-8, Executive
shall have "piggyback" registration rights with respect to the
options granted to Executive under the Plan and the shares
underlying such options.
(c) As an incentive to enter into this
Agreement, TASA, as of the Effective Date shall deliver to
Executive a Stock Option Agreement pursuant to its Amended and
Restated 1991 Stock Option Incentive Plan, granting to Executive
options for One Hundred and Fifty Thousand (150,000) shares of the
common stock of the Corporation at fair market value as of the date
granted, which shall vest one year from the date hereof,
exercisable over a five year period.
6. Rights of Termination.
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(a) CAUSE. During the Employment
Term, the Corporation shall have the right, at any time effective
upon notice to Executive, to terminate Executive's employment for
"Cause" (as hereinafter defined). For purposes of this Agreement,
"Cause" shall mean (i) an act or acts of personal dishonesty
engaged in by Executive which does or is intended to result in
personal enrichment of Executive at the expense of the Corporation;
(ii) violations by Executive of Executive's obligations under
Section 3 of this Agreement which are not remedied within thirty
(30) days after receipt of written notice from the Corporation;
(iii) commission by Executive of a felony or any act of
embezzlement or misappropriation of funds, and (iv) willful fraud
or gross negligence in the performance of her duties hereunder.
(b) DISABILITY; DEATH. In the event
that Executive, due to physical or mental disability or incapacity,
is unable to substantially perform her duties hereunder for a
period of two or more successive months, the Corporation or
Executive shall have the right to terminate this Agreement and
Executive's employment hereunder upon 30 days' prior written notice
and termination shall be effective on the 30th day after receipt of
such notice by the Executive (the "Disability effective date").
Determination of disability shall be as set forth in the terms of
any disability policy in effect at such time or barring such
policy, by a physician jointly selected by the Corporation and
Employee. In the event that Executive is able to and recommences
rendering services and performing his duties hereunder within such
30-day notice period, Executive shall be reinstated and such notice
shall be without further force or effect. If Executive dies during
the Term, this Agreement shall terminate immediately upon his
death.
(c) VOLUNTARY TERMINATION. Executive may
terminate this Agreement on six months written notice to the
Corporation at any time.
(d) NOTICE OF TERMINATION. Any termination of
Executive's employment by the Corporation for Cause, or by Executive
for Voluntary Termination, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 16 of this Agreement.
(e) DATE OF TERMINATION. "Date of
Termination" means the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be; provided,
however, that if Executive's employment is terminated by reason of
death or Disability, or voluntary withdrawal, the Date of
Termination shall be the date of death or Executive or the
Disability effective date, or the last date of employment, as the
case may be.
7. Effects of Termination. (a) In the event
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that Executive's employment is terminated pursuant to Section 6
hereof, Executive's employment hereunder shall terminate without
further obligations to Executive, other than those obligations
accrued or earned and vested (if applicable) by Executive through
the Date of Termination, including for this purpose all "Accrued
Obligations", defined as those obligations accrued or earned and
vested (if applicable) by Executive as of the Date of Termination,
including, for this purpose (i) Executive's pro rata Base Salary
accrued but unpaid as of the Date of Termination, (ii) any
compensation previously deferred by Executive (together with any
accrued earning thereon) and not yet paid by the Corporation and
any accrued vacation pay not yet paid by the Company and (iii) if
applicable, all amounts payable to the estate or designated
beneficiaries of Executive under any pension, savings, life
insurance or other plans, practices, policies and programs of the
Corporation, and/or all other amounts payable pursuant to Section
4 hereof. In addition:
(i) the Corporation shall pay to Executive all
Accrued Obligations such that the Accrued Obligations specified in
Section 4 hereof, shall be paid to Executive in a lump sum in cash
within 30 days of the Date of Termination, and the other Accrued
Obligations shall be paid in accordance with Executive's specific
elections pursuant to, and otherwise in accordance with the terms
of, any plan, practice, policy or program providing benefits forming
a part of the Accrued Obligations;
(ii) all then non-exercisable options shall
immediately and automatically terminate; and
(iii) any registration rights theretofore granted
which have not been invoked with respect to shares of Common Stock of
TASA either acquired by Executive pursuant to the exercise of stock
options or underlying vested options shall immediately and automatically
terminate.
(b) If Executive is terminated without cause,
Employee shall be entitled to all Compensation as set forth in
Paragraph 4 for the balance of the Employment Term.
8. Confidentiality.
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(a) Executive understands and acknowledges that as a
result of Executive's employment with the Corporation, she is or shall
necessarily become informed of, and have access to, confidential information
of the Corporation including, without limitation, business plans, trade
secrets, technical information, regulatory information, marketing plans
and information, pricing information, identity of students, teachers,
and prospective students and teachers and business partners, and
identity of suppliers and representatives (the "Confidential
Information"); and that the Confidential Information, even though
it may have been or may be developed or otherwise acquired by
Executive, is the exclusive property of the Corporation to be held
by Executive in trust and solely for the Corporation's benefit.
Executive shall not at any time, either during or subsequent to her
employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or
use, any of the Corporation's Confidential Information, without the
written consent of the Board, except for use on behalf of the
Corporation in connection with the Corporation's business, and
except for such information which legally and legitimately is or
becomes of general public knowledge from authorized sources other
than Executive.
(b) Upon the termination of her employment with the
Corporation for any reason, Executive shall promptly deliver to the
Corporation all drawings, manuals, letters, notes, notebooks, reports,
tapes or discs, and copies thereof and all other materials relating to
the business of the Corporation, including, without limitation, those
considered Confidential Information, which are in Executive's
possession or control.
(c) For purposes of this Section 8, the term "Corporation"
includes the Corporation and any other predecessor corporation, and
affiliates (including, without limitation, TASA its Subsidiaries and
joint ventures).
9. Non-Competition.
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(a) Executive agrees that, for a period
commencing on the date hereof and ending three years after the
termination of her employment with the Corporation for any reason,
she shall not (or for such lesser period as may be determined by a
court of competent jurisdiction to be a reasonable limitation on
the competitive activity of Executive) directly or indirectly:
(i) solicit or attempt to solicit business
of any customers of the Corporation (including prospective
customers solicited by the Corporation during the Employment Term)
for products or services the same or similar to those offered,
sold, produced or under development by the Corporation during the
term of her employment therewith or dealt in by Executive during
her employment with the Corporation;
(ii) solicit or attempt to solicit for
any business endeavor any employee of the Corporation;
(iii) tortiously interfere with any
business relationship between the Corporation and any other person
or entity;
(iv) use the name of the Corporation
or a name similar thereto; or
(v) within a seventy-five (75) mile
radius of the principal location of the Corporation at such time
(i.e., presently Latham, New York) or for such lesser distance as
shall be determined by a court of competent jurisdiction to be a
reasonable limitation on the competitive activity of Employee)
directly or indirectly, render any services as an officer,
director, employee, partner, consultant or otherwise to, or have
any interest as a stockholder, partner, member, lender or otherwise
in, any person or entity which is engaged in post-secondary,
proprietary school activities.
The foregoing shall not prevent Executive from purchasing
or owning up to five percent of the voting securities of any
corporation, the securities of which are publicly-traded.
10. Remedies and Survival. Because the Corporation
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does not have an adequate remedy at law to protect its
interest in its trade secrets, privileged, proprietary or
confidential information and similar commercial assets, or its
business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies
and relief that would, in the event of a breach of the provisions
of Sections 8 or 9, be available to the Corporation. The
provisions of Sections 8 and 9 and this Section 10 shall survive
any termination of Executive's employment with the Corporation for
any reason whatsoever.
11. Set-off. The payments and performance by
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the Corporation as provided for in this Agreement shall be subject
to any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Corporation may have against Executive.
12. Non-exclusivity of Rights. Nothing in this
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Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plans,
practices, policies or programs provided by the Corporation and for
which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any stock
option or other agreements with the Corporation. Amounts which are
vested benefits or which Executive is otherwise entitled to receive
at or subsequent to the Date of Termination shall be payable in
accordance with the plan, practice, policy or program of the
Corporation under which Executive has such entitlement.
13. Entire Agreement. This Agreement sets forth
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the entire understanding of the parties hereto with respect to its
subject matter, merges and supersedes any prior or contemporaneous
agreements or understandings with respect to its subject matter,
and shall not be modified or terminated except by another agreement
in writing executed by the Corporation and Executive. Failure of
a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations
hereof shall not be construed to be a waiver of such provisions by
such party nor to in any way affect the validity of this Agreement
or such party's right thereafter to enforce any provision of this
Agreement.
14. Severability. If any provision of this
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Agreement is held to be invalid or unenforceable by any court or
tribunal of competent jurisdiction, the remainder of this Agreement
shall not be affected by such judgement and such provision shall be
carried out as nearly as possible according to its original terms
and intent to eliminate such invalidity or unenforceability.
15. Successors and Assigns. This Agreement is
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personal to Executive and without the prior written consent of the
Corporation shall not be assignable by Executive otherwise than by
will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the parties' legal
representatives, successors and assigns. As used in the Agreement,
"Corporation" shall mean the Corporation as hereinbefore defined
and any successor to its business and/or assets as aforesaid with
assumes and agrees to perform this Agreement by operation of law or
otherwise.
16. Communications and Notices. All notices and
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other communications under this Agreement shall be in writing and
shall be deemed to have been duly given three (3) business days
after they are mailed in any United States post office enclosed in
a registered or certified postage-paid envelope and addressed as
set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other parties, or
delivered by Federal Express or a similar overnight courier to such
address, with evidence of delivery to such address; provided,
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however, that any notice of change of address shall be effective
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only upon receipt.
17. Construction; Counterparts. The headings
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contained in this Agreement are for convenience only and shall in
no way restrict or otherwise affect the construction of the
provisions hereof. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.
18. Validity. The invalidity or unenforceability
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of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement. A party's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of
such provision. This Agreement contains the entire understanding
of the Corporation and Executive with respect to the subject matter
hereof but does not supersede or override the provisions of any
stock option, employee benefit or other plan, program, policy or
practice in which Executive is a participant or under which
Executive is a beneficiary.
19. Governing Law. This Agreement shall be
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governed by and construed in accordance with the laws of the State
of New York as applicable to contracts entered into and to be
performed wholly within the State. Any action arising out of or
related to this Agreement shall be brought in the state or federal
courts located in Albany County, New York and the parties hereby
submit to the exclusive jurisdiction of and to the laying of venue
in such courts.
IN WITNESS WHEREOF, the undersigned parties have executed
and delivered this Agreement as of the date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇ SCHOOL, INC.
By:/s/FAITH A. TAKES
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Name: Faith A. Takes
Title: President
EXECUTIVE
/S/FAITH A. TAKES
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Faith A. Takes
Accepted and Agreed with
respect to Paragraph 5:
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President