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EXHIBIT 10.8
EXECUTION COPY
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of December 3, 1996, between VINEET PRUTHI, an
individual residing at 1102 Westover Road, Stamford, Connecticut 06902
("Executive"), and CREDENTIAL SERVICES INTERNATIONAL, INC., a Delaware
corporation, having its principal place of business at 333 City Boulevard West,
10th Floor, Orange, California 92868 (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive as Chief Financial
Officer and to be assured of its right to his services, on the terms and
conditions hereinafter set forth, and Executive desires to become so employed
on such terms and conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and conditions herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Employment; Duties. Company hereby employs Executive and
Executive hereby accepts such employment as Chief Financial Officer of the
Company, on the terms and subject to the conditions hereinafter set forth. In
his capacity as Chief Financial Officer of the Company, Executive shall have
responsibility for (i) establishing, updating and implementing accounting and
financial control procedures and policies of the Company, (ii) supervising the
Company's accounting and finance personnel, (iii) supervising the Company's
investor relations, internal audit procedures, tax compliance and lender
relations and compliance, and (iv) such other matters as the Company's Board of
Directors ("Board") or Chief Executive Officer shall determine from time to
time, consistent with Executive's position as Chief Financial Officer of the
Company. Executive shall report and be responsible to the Chief Executive
Officer or such other person as may be designated by the Board. Executive
shall be based and shall perform his duties at the Company's offices located in
Orange, California and shall travel to the extent necessary to perform his
duties hereunder. Executive shall devote his full business time and energies
to the business and affairs of the Company and shall not accept other
employment, perform any services for any other person, firm or corporation or
permit any of his personal business or investment affairs to interfere with the
performance of his duties hereunder. Executive shall, upon reasonable notice,
furnish such information and proper assistance to the Company as reasonably may
be required by the Company in connection with any legal action involving the
Company or any of its affiliates. Executive agrees to use his best efforts,
skills and abilities to promote and protect the interests of the Company and,
faithfully and to the best of his ability, perform his duties hereunder.
Executive agrees to serve as a director or officer of any of the Company's
subsidiaries or controlled affiliates requesting his services and to perform
such services for such subsidiaries or controlled affiliates, consistent with
his office, as its board of directors shall request.
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2. Term; Termination.
(a) Executive's employment pursuant hereto shall
commence on the date of this Agreement (the "Employment Date") and shall remain
in effect, subject to earlier termination pursuant to subparagraph (b) of this
paragraph 2, until December 2, 1999 (the "Expiration Date"). The term of
employment hereunder, commencing with the Employment Date and including any
renewals or extensions hereof, is hereinafter referred to as the "Employment
Term."
(b) In addition to the expiration of the Employment Term
as hereinabove provided, this Agreement and Executive's employment by the
Company shall terminate on the Date of Termination (as hereinafter defined) as
follows:
(i) automatically upon Executive's death;
(ii) at the Company's option if, as a result of
Executive's incapacity due to physical or mental illness, he is unable to
perform the duties of his employment hereunder for a continuous period of sixty
(60) days or an aggregate of ninety (90) days in any one hundred eighty (180)
day period (each such period being hereinafter referred to as a "Disability
Period");
(iii) at the Company's option at any time for
Cause. "Cause" shall be defined to mean (A) the commission by Executive of any
felony, (B) the commission by Executive of any crime involving dishonesty, (C)
the engagement by Executive in any act of fraud, misappropriation or
misfeasance, (D) the engagement by Executive in any activity constituting a
material breach of paragraphs 9, 10 or 11 of this Agreement or other material
breach by Executive of any provision of this Agreement, (E) Executive's failure
to carry out the reasonable written directives of the Board or Chief Operating
Officer (consistent with the provisions of this Agreement) or his repeated
non-attentiveness to or repeated failure to carry out his duties under this
Agreement, (F) the engagement by Executive in any transaction with the Company
involving a conflict of interest or self-dealing, without the prior written
consent of the Board, or (H) [sic] the engagement by Executive in conduct
materially adverse to the interests of the Company or which brings discredit to
the Company and materially adversely affects the Company; and
(iv) the Company's option at any time without
Cause.
(c) Any termination by the Company pursuant to
subparagraph (b) shall be communicated to Executive by a Notice of Termination.
"Notice of Termination" shall mean a written notice indicating the specific
provision of this Agreement upon which such termination is based and, in the
case of a termination pursuant to subparagraph (b)(iii), setting forth in
reasonable detail the facts and circumstances giving rise to such termination.
(d) As appropriate under the circumstances, "Date of
Termination" shall mean, as applicable: (A) the date of Executive's death; (B)
thirty (30) days after a Notice of Termination is given to Executive if
Executive's employment is terminated pursuant to
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subparagraph (b)(ii) above; or (C) the date specified in the Notice of
Termination if Executive's employment is terminated by the Company pursuant to
subparagraph (b)(iii) or (b)(iv) above.
3. Compensation.
(a) The Company shall pay Executive an annual base
salary ("Base Salary") during the Employment Term of $155,000 payable in equal
installments in accordance with the Company's regular payroll practices for
executive level employees, as determined from time to time by the Board, but in
no event less frequently than monthly. The Company shall also pay Executive an
annual bonus in an amount equal to $25,000 (the "Bonus") within thirty (30)
days after the Accountants (as hereinafter defined) issue and deliver their
report with respect to the audited financial statements of the Company for such
year. In addition, the Company shall pay Executive an annual special bonus as
provided in paragraph 3(b) (the "Special Bonus"). The Company and the
Executive have agreed to an equity package for Executive as provided in the
Restated and Amended Agreement of Limited Partnership of CIS Acquisition
Partners dated as of May 9, 1997.
(b) As long as no Adverse Event (as hereinafter defined)
has occurred and is continuing or would occur as a result of the payment of the
Special Bonus to Executive, Executive shall be entitled to payment of a Special
Bonus equal to that percentage of the Bonus Pool (as hereinafter defined) to be
determined by the Board in the Board's sole discretion. The "Bonus Pool" shall
be an amount determined by the Board in the Board's sole discretion based upon
attainment of business goals.
(c) Any amount payable to Executive on account of the
Special Bonus for any year during the Employment Term will be paid to Executive
by the Company within thirty (30) days after the Company's regular independent
accountants (the "Accountants") issue and deliver to the Company their report
with respect to the audited financial statements of the Company for such year.
In the event the Special Bonus is not paid to Executive because an Adverse
Event has occurred or would occur as a result of the payment of the Special
Bonus, the Special Bonus shall be paid to Executive on the earliest date on
which the Adverse Event has been cured and would not occur as a result of the
payment of the Special Bonus.
(d) For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "Adverse Event" shall mean: (x) the failure
of the Company to pay any installment of principal or interest when due under
any Loan Document (as hereinafter defined); or (y) the occurrence of any event
which constitutes, or which, with the giving of notice or the passage of time
will constitute, a default or an event of default under any Loan Document and
with respect to which the lender under such Loan Document has declared an event
of default.
(ii) "Loan Document" shall mean any agreement,
instrument or document executed and delivered by the Company in connection with
its borrowing of funds from, or evidencing the Company's obligation to pay
moneys to, IBJ Schroder Bank & Trust
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Company ("IBJ"), TRW Inc. ("TRW"), or any affiliate of IBJ or TRW (or any
institution which hereafter refinances all or any portion of the Company's
indebtedness to any of such lenders), as any such agreement, instrument or
document may be amended or supplemented from time to time.
4. Compensation Upon Termination and During Disability.
(a) If Executive's employment shall be terminated by his
death, the Company shall pay to his estate Executive's unpaid Base Salary for
the period through the Date of Termination from the Company's regular payroll.
In addition, the Company shall pay to the Executive's estate any Bonus and
Special Bonus earned prior to the Date of Termination to which the Executive is
unconditionally entitled to be paid at the time that any such Bonus and Special
Bonus are required to be paid under the terms of this Agreement, so long as no
Adverse Event has occurred and is continuing or would occur as a result of the
payment thereof.
(b) In the event of the Executive's physical or mental
disability, the Company shall continue to pay the Executive his Base Salary
during the Disability Period. If the Executive is unconditionally entitled to
any Bonus and Special Bonus earned prior to the end of the Disability Period,
the Company shall pay such Bonus and Special Bonus to the Executive at the time
that such Bonus and Special Bonus are required to be paid under the terms of
this Agreement, so long as no Adverse Event has occurred and is continuing or
would occur as a result of the payment thereof. If the Company terminates the
Executive following the Disability Period, the Company shall pay the Executive
his Base Salary for the period from the Company's regular payroll through the
Date of Termination. The Company shall also pay the Executive any Bonus and
Special Bonus earned prior to the Date of Termination to which the Executive is
unconditionally entitled to be paid, at the time that any such Bonus and
Special Bonus are required to be paid under the terms of this Agreement, so
long as no Adverse Event has occurred and is continuing or would occur as a
result of the payment thereof.
(c) If Executive's employment shall be terminated for
Cause, the Company shall continue to pay Executive his Base Salary through the
Date of Termination. The Company shall have no obligation to pay Executive any
Bonus and Special Bonus or any portion of any Bonus and Special Bonus in the
event Executive's employment is terminated for Cause.
(d) If Executive's employment is terminated by the
Company without Cause pursuant to paragraph 2(b)(iv) hereof, the Company shall
continue to pay Executive, at the rate provided in paragraph 3(a) hereof, an
amount equal to his Base Salary for the lesser of twelve (12) months or the
remainder of the Employment Terms. In addition, for the period from the Date
of Termination until the earlier of the Expiration Date or the date twelve (12)
months after the Date of Termination, the Company shall provide Executive, at
the Company's expense, medical insurance coverage for the Executive and
Executive's family substantially equivalent to the medical insurance coverage
provided by the Company to Executive immediately prior to the Date of
Termination. The Company shall also pay the Executive any Bonus and Special
Bonus earned prior to the Date of Termination to which the Executive is
unconditionally entitled to be paid, at the time that any such Bonus and
Special Bonus are
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required to be paid under the terms of this Agreement, so long as no Adverse
Event has occurred and is continuing or would occur as a result of the payment
thereof. In the event of the termination of this Agreement by the Company
without Cause pursuant to paragraph 2(b)(iv) hereof, the amounts to be paid to
Executive pursuant to this paragraph 4(d) shall constitute liquidated damages
and shall be the exclusive remedy of the Executive.
(e) Unless otherwise agreed by the Company and
Executive, all payments made to Executive (or his estate, as applicable)
pursuit to this paragraph 4, whether during the Disability Period or after the
Date of Termination, shall be made in the amounts, at the times and subject to
the terms and conditions otherwise applicable to payments to Executive pursuant
to paragraph 3 hereof, as if such payments were made to Executive during the
Employment Term.
5. Reimbursement of Expenses. In addition to the compensation
and benefits provided to Executive pursuant to other provisions of this
Agreement, the Company will reimburse Executive in a manner consistent with
established policies of the Company for reasonable out-of-pocket expenses
actually incurred or paid by him in the performance of his services hereunder,
subject to presentation of expense statements, receipts, vouchers or other
supporting information as the Company may reasonably require.
6. Other Benefits. In addition to the compensation and
benefits provided to Executive pursuant to other provisions of this Agreement,
during the Employment Term, Executive shall be entitled to the following:
(a) participation in and receipt of benefits under: (i)
any retirement plan or arrangement for the benefit of executive employees of
the Company; and (ii) any health or other insurance plan or arrangement for the
benefit of executive employees of the Company; all on terms no less favorable
than those offered to other executive level employees of the Company, to the
extent that Executive is otherwise eligible to participate in or receive
benefits under any such plan or arrangement; and
(b) a number of paid vacation days, sick days and
personal days which are provided to other executive level employees of the
Company, but in no event shall the number of paid vacation days in any year of
the Employment Term exceed twenty (20).
7. Other Agreements.
(a) Executive represents and warrants to the Company
that he is not a party to any agreement, written or oral, and is not bound by
the terms of any written or oral agreement to which he is not a party which
prohibits him from performing his duties under this agreement or of serving the
Company in any other capacity. Executive agrees to indemnify the Company and
shall hold the Company harmless from and against any liability, loss, cost or
expense, including reasonable attorneys fees and expenses, incurred by the
Company by reason of the inaccuracy of the representations and warranties made
by Executive in this paragraph 7.
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(b) Upon submission of an invoice or invoices with such
supporting information including bills or receipts as the Company may
reasonably require, the Company will reimburse Executive for (i) up to an
aggregate of $50,000 of reasonable expenses incurred or to be incurred by
Executive in connection with the relocation of Executive's primary residence
from Stamford, Connecticut to southern California and (ii) for rental payments
in connection with the rental of a house for Executive and Executive's family
in an amount not exceeding $2,500 per month for up to twelve months following
Executive's relocation to California. In addition, until August 30, 1997
Company shall provide Executive (on a non-exclusive basis subject to
availability) with the use (for Executive only) of the house rented by the
Company in Newport Beach, California.
8. Life Insurance. Executive agrees that, if requested by the
Company, he will cooperate with the Company to obtain a policy or policies of
life insurance on his life in such amount(s) as the Company may determine,
including submitting to any appropriate medical examinations and completing and
executing any appropriate application(s) or similar form(s). Any such policy or
policies shall be for the benefit of the Company and the Company shall pay all
premiums thereunder.
9. Inventions, Etc. Executive agrees to promptly disclose in
writing to the Company all ideas, formulae, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "Discoveries"), whether or not patentable, which he, while
employed hereunder, conceives, makes, develops, acquires or reduces to
practice, whether alone or with others and whether during or after usual
working hours, and which are related to the Company's business or interests, or
are used or usable by the Company, or arise out of or in connection with the
duties performed by Executive hereunder. Executive hereby transfers and
assigns to the Company all right, title and interest in and to all Discoveries,
including any and all domestic and foreign patent rights therein and any
renewals thereof. On request of the Company, Executive shall from time to time
during or after the expiration or termination of his employment by the Company,
execute such reasonable instruments (including, without limitation,
applications for letters patent and assignments thereof) and do all such other
reasonable and legal acts and things as may be deemed necessary or desirable by
the Company to protect and/or enforce its rights in respect of Discoveries.
All expenses of filing or prosecuting any patent application shall be borne by
the Company, but Executive shall cooperate in filing and/or prosecuting any
such application. Executive shall receive no additional compensation for the
performance of his obligations hereunder, except as may be agreed to by the
Company.
10. Covenant Regarding Confidentiality. All information about
the business and affairs of the Company which is not generally available to the
public or disclosed by the Company and any information about the Company which
becomes generally available to the public as a result of a breach by any person
of any confidentiality obligation to the Company (including, without
limitation, its secrets and information about its business, financial condition
and performance, prospects, products, technology, know-how, merchandising and
advertising programs and plans, and the names of its suppliers, customers and
lenders and the nature of its dealings with them) constitute "Company
Confidential Information." Executive acknowledges that he will have access to,
and knowledge of, Company Confidential Information, and that
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improper use or revelation of same by Executive, whether during or after the
termination of his employment by the Company, could cause serious injury to the
business of the Company. Accordingly, Executive agrees that, except as
required to perform his duties under this Agreement, or as required by law, he
will forever keep secret and inviolate all Company Confidential Information
which shall come into his possession, and he will not disclose the same to any
other person or organization for so long as such Company Confidential
Information is not generally by, or accessible to, the public. Executive
further agrees that he will not use any Company Confidential Information for
his own benefit or directly or indirectly for the benefit of any person or
organization other than the Company and its affiliates.
11. Covenant Not To Compete.
(a) During the Employment Term and for a period of two
(2) years thereafter (whether his employment shall have ended by reason of the
expiration of this Agreement or otherwise), Executive will not: (i) directly or
indirectly, as owner, stockholder, investor, partner, director, officer,
employee, consultant, lender, or otherwise, engage or become interested in any
business, trade or occupation in the Restricted Territory (as hereinafter
defined) which sells products or provides services similar to or competitive
with any business of the Company, as conducted at or within one (1) year prior
to the date of termination of his employment; (ii) directly or indirectly hire
or endeavor to recruit or hire for any purpose any person who is (or was during
the six (6) period [sic] immediately preceding such attempted hiring or
recruitment) employed by the Company or otherwise induce or attempt to induce
any then current employee of the Company to terminate such employment; or (iii)
solicit or attempt to solicit for any business any customer of the Company
which conducted business with the Company at any time during the one (1) year
period immediately preceding such solicitation or otherwise induce or attempt
to induce any customer, supplier or lender of the Company to diminish or
terminate such business relationship; provided, however, that the ownership by
Executive of not more than five percent (5%) of any class of outstanding
securities of an issuer listed on a national securities exchange or regularly
traded in the over-the-counter market shall not constitute a violation of this
paragraph 11(a), and further provided, however, in the event this Agreement is
terminated by the Company without Cause the prohibition in subparagraph
11(a)(i) shall not survive beyond the Date of Termination. The "Restricted
Territory" shall mean anywhere in the counties of Orange, California, Dallas,
Texas, Fort Worth, Texas, any other locations in the States of California or
Texas or other location in the United States of America and any other region,
county, city or locality therein where the Company is currently transacting or
during the past five (5) years, has been transacting business. The parties
agree and intend that the covenants contained in this paragraph 11(a) shall be
construed as a series of separate covenants, one for each applicable county,
state or country. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms.
(b) Executive acknowledges that the operation and
conduct of the business of the Company is special and unique and involves the
use of trade secrets and confidential information and that during the period of
his employment hereunder, Executive will acquire special knowledge and/or skill
that he could effectively utilize in competition with the Company. Executive
further acknowledges that the provisions of paragraphs 9, 10 and 11 hereof are
essential to the goodwill and profitability of the Company and have provided
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substantial inducement to the Company's agreement to execute and consummate
this Agreement, and that the application or operation thereof shall not involve
a substantial hardship upon his future business or livelihood. Executive
agrees that remedies at law for any breach by him of the covenants contained in
paragraphs 9, 10 and 11 hereof will be inadequate, and that in the event of a
violation of the covenants thereon, in addition to any and all legal and
equitable remedies which may be available to the Company, the said covenants
may be enforced by an injunction in a suit in equity, without the necessity of
proving actual damage, and that a temporary injunction may be granted
immediately upon the commencement of any such suit and without notice. Should
any court determine that any of the separate covenants of this paragraph 11
shall be unenforceable in respect of geographic area, then such covenant shall
be deemed eliminated for the purpose of those proceedings to the extent
necessary to permit the remaining separate covenant to be enforced. If any
other provision of paragraphs 9, 10 and 11 shall be deemed by an appropriate
court to be unenforceable for any reason, then such court shall be empowered to
substitute, to the extent enforceable, provisions similar thereto or other
provisions so as to provide the Company, to the fullest extent permitted by
applicable law, the benefits intended by paragraphs 9, 10 and 11 hereof.
Executive acknowledges that the covenants contained in this paragraph 11 are
intended by the parties to be in addition to and not in lieu of or in
limitation of any other agreement or covenant between Executive and the
Company. Each of the provisions of paragraphs 9, 10 and 11 hereof shall
survive the termination of this Agreement and the termination of Executive's
employment by the Company.
12. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered if delivered personally or by facsimile (followed by
first class U.S. mail), or three days after mailing if mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice, except that notice of changes of address shall be
effective upon receipt):
If to the Company:
Credentials Services International, Inc.
333 City Boulevard West, 10th Floor
Orange, California 92868
Attention: Chief Executive Officer
Telecopy No.: (714) 704-6503
with a copy to:
Lincolnshire Management, Inc.
780 Third Avenue
New York, New York 10017
Attention: T.J. Maloney
Telecopy No.: (212) 755-5457
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and to:
Maloney, Mehlman & Katz
405 Lexington Avenue
New York, New York 10174
Attn: Barry T. Mehlman, Esq.
Telecopy No.: (212) 972-0220
If to Executive, to him at his address set forth in the introductory
paragraph of this Agreement.
13. General.
(a) This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to contracts made and to be performed entirely within such state (without
regard to principles of conflicts of law of New York or of any other
jurisdictions).
(b) The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(c) This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties.
(d) This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation acquiring all or
substantially all of the assets or stock of the Company or to any corporation
into which the Company may be merged or consolidated.
(e) All references in this Agreement to amounts to be
paid or benefits to be provided to or on behalf of Executive are to the gross
amounts thereof which are due hereunder. Except as otherwise provided herein,
the Company shall have the right to deduct therefrom or collect from Executive
all sums which may be required to be deducted or withheld under any provision
of law, including, but not limited to, social security payments, income tax
withholding, any other deduction required by law and any interest, penalties or
additions to tax imposed with respect thereto.
(f) This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both parties hereto, or in the case of
a waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same. No waiver
by either party of the breach of any term or covenant contained in this
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Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
(g) This Agreement may be executed in counterparts, each
of which shall be an original and all of which taken together shall constitute
one and the same instrument.
(h) Subject to the provisions of paragraph 11 hereof, if
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
* * * * * *
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
CREDENTIALS SERVICES
INTERNATIONAL, INC.
By /s/ Thomas J. Maloney
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Name: Thomas J. Maloney
Title: Chairman
/s/ Vineet Pruthi
---------------------------------
VINEET PRUTHI
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SCHEDULE A
Total
Date New Revenues EBITDA Memberships*
---- ------------ ------ -----------
Total Fiscal Year 1997 $52,695,000 $9,700,000 $1,401,000
Six Months Ended
March 31, 1998 $35,469,000 $7,552,000 1,730,000
Total Fiscal Year 1998 $77,445,000 $19,827,000 2,035,000
__________________________________
* Can include multi-year memberships (not to exceed three (3) years)
provided the percentage of multi-year memberships to total memberships does not
exceed that specified in applicable debt covenants with respect to which the
Company is a party. The Company will not sell lifetime memberships unless
approved by the Board of Directors.