EXHIBIT 10.19
EMPLOYMENT AGREEMENT
JAMES K. MITCHELL
APRIL 1, 1993
AS REINSTATED AND AMENDED
JANUARY 1, 1998
This employment agreement (the "Agreement") is between JMC Group, Inc.
("Employer") and James K. Mitchell ("Executive").
RECITALS
1. On July 18, 1988, Executive sold his ownership in James Mitchell &
Co. ("JMC") to Employer. Employer purchased JMC for, among other reasons,
its clients, its unique sales and business systems, its unique method of
selling insurance through bank trust departments, and the outstanding and
special skills and abilities of Executive and other key employees;
2. Executive is and has been employed as President of JMC and as
President and CEO of Employer since January 1, 1993. Through such
experience, he has acquired outstanding and special skills and abilities and
an extensive background in and knowledge of Employer's business and the
industry in which it is engaged;
3. Employer desires assurance of the continued association and
services of Executive in order to retain his experience, skills, abilities,
background and knowledge and is therefore willing to engage his services on
the terms and conditions set forth below;
4. Executive desires to continue in the employ of Employer and is
willing to do so on these terms and conditions;
5. In his capacity as an executive of Employer, Executive has access
to highly valuable and confidential trade secret information of Employer,
including but not limited to information regarding the identity of key
contact personnel and the contract terms with major clients and suppliers to
Employer; the identity and personnel information with regard to Employer's
personnel; and the terms, documents, methods and systems through which
Employer engages in business; and
6. The execution of this Agreement has been authorized by Employer's
Board of Directors (the "Board").
NOW THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
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1. POSITION.
Employer shall employ Executive as President and Chief Executive Officer
of Employer with such executive capacity or capacities as the Board may from
time to time prescribe.
2. SOLE EMPLOYMENT
During his employment, Executive shall devote his full energies,
interest, abilities and productive time to the performance of this Agreement
and shall not, without express written Board approval, render to others
services of any kind for compensation, or engage in other business activity
that would materially interfere with the performance of his duties under
this Agreement.
3. TERM OF EMPLOYMENT
a. This Agreement takes effect on January 1, 1998 and shall have an
initial term of three years.
b. Notwithstanding the foregoing, if the Board of Directors of the
Company should determine to liquidate the Company, other than as part of a
business combination, the term of the Agreement shall end six months after
such action by the Board.
4. SALARY
Employer shall pay a base salary to Executive at the rate of two hundred
and twenty five thousand dollars ($225,000) per annum ("Base Salary"),
payable in equal semi-monthly installments.
This Base Salary shall be automatically increased on the anniversary
dates of this Agreement based upon the most recent Consumer Price Index of
the Bureau of Labor Statistics of the Department of Labor for All Urban
Consumers (1982-84=100), "All Items," for Los Angeles-Long Beach-Anaheim,
California (hereinafter the "CPI"). The "Base CPI" shall be the CPI for
August 1998. CPI Adjustments shall be calculated as follows: the Base
Salary shall be multiplied by a fraction the numerator of which shall be the
CPI of the December immediately prior to the calculation date (i.e., December
1998 for the January 1, 1999 calculation) and the denominator of which shall
be the Base CPI. The sum so calculated shall constitute the Executive's
salary until the next adjustment; provided, however that in no event shall
the Executive's salary be reduced as a result of any such adjustment. If the
compilation and/or publication of the CPI shall be in some manner changed or
discontinued, then Executive agrees that Employer may use an alternate index
which it reasonably believes reflects changes in the cost of living.
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5. INCENTIVE COMPENSATION
In addition to the base salary provided for above, Employer shall, as
an incentive compensation payment plan, pay Executive a sum equal to three
percent (3.0%) of Employer's consolidated pre-tax operating profits
("Profits"), as verified on the Employer's year-end audited statement of
income, subject to a maximum of Executive's then current annualized salary.
Profits are as determined before any deduction for executive incentive
compensation or other Employer management bonuses. Such amounts are paid no
later than the completion of the year-end audit, and may be paid earlier in
the Board's discretion. Notwithstanding the above, the Board may in its
discretion adjust the pre-tax Profit results to take into account
non-operating or unusual and extraordinary items that could either decrease
or increase the applicable profit results. The Board may, in its discretion
also increase or remove the above described cap on Executive's incentive
compensation.
Should Executive for any reason cease his employment prior to the end of any
fiscal year, his incentive compensation for that year shall be determined
pursuant to the Section titled "Termination" below. Should such section
require that incentive compensation be "pro-rated" this means:
a. The incentive compensation shall still be based on pre-tax profits as
above calculated for the entire year;
b. The percentage to be applied to the pre-tax profits shall be pro-rated
according to the length of Executive's employment during the year;
c. The date of payment will be the same date as if Executive remained
employed by Employer.
6. BENEFITS
Executive shall be entitled to receive all other benefits of employment
generally available to Employer's employees, including reimbursement for
reasonable out-of-pocket expenses incurred in connection with Employer's
business, subject to such policies as Employer may from time to time
reasonably establish for its employees.
7. TERMINATION
In the absence of any other written agreement, should Employer continue
to employ Executive after the initial term of this Agreement, such employment
will continue at will and may be terminated for any reason, with or without
cause, on the effective date of any written termination notice delivered by
either party to the other. Executive's salary, incentive compensation and
benefits will continue as stated herein, with salary compensation continuing
to be increased annually as herein described.
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Notwithstanding the stated term hereof, this Agreement may be
terminated at any time on written notice by Executive or by Employer with or
without cause. In such event, Employer's obligations to pay salary, benefits
and incentive compensation hereunder will vary depending upon the reason for
termination, as described below:
a. RESIGNATION BY EXECUTIVE.
Except as provided in Section 7d hereof, if Executive voluntarily
terminates employment, then Employer shall pay salary, benefits and
incentive compensation pro-rated to the effective date of resignation.
b. TERMINATION BY EMPLOYER WITHOUT CAUSE.
If Employer terminates Executive without cause, or because of
incapacity from illness, accident or death, then Executive shall
receive salary and incentive compensation in the manner, timeframe and
amount to which he would have been entitled should employment have
continued through the stated term of this Agreement. Benefits shall
also be continued through the same term, to the extent the Company
reasonably believes continuation is permitted by law and the Company's
insurance carriers, so long as Executive is not eligible to receive
comparable benefits from another employer.
c. TERMINATION BY EMPLOYER FOR CAUSE.
If Employer terminates Executive for cause then Executive shall
receive salary and incentive compensation pro-rated to the date three
months following termination. Benefits shall also be continued
through the same three month period, to the extent permitted by law
and the Company's insurance carriers. "Termination for cause" shall be
termination by reason of malfeasance or misconduct which the Board of
Directors reasonably believes violates legal or ethical
responsibilities of the Executive, or by reason of gross negligence in
the conduct of the Employer's business.
d. TERMINATION BY EMPLOYEE FOR GOOD CAUSE.
The Employee shall be entitled to terminate the Agreement "for good
cause" with the same effect as a termination by the Employer without
cause, as set forth in Section 7(b) hereof. "Good cause" shall
include the following events:
1) Employer's breach of any material term of this Agreement,
including, but not limited to, the Company's failure, within fifteen
(15) days after written demand, to provide or pay Executive any Salary
or Benefits under this Agreement.
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2) The relocation of Executive's full-time office to a location more
than fifty (50) miles from Employer's present office at 9710 Scranton
Rd. Ste. 100, San Diego, California 92121;
3) A material reduction in Executive's duties, responsibilities or
title except for such a reduction arising from a change in the status
of the Employer or the nature of the Employer's business; or
4) A "Change in Control," defined as:
a) The acquisition by any individual, entity, or group (within
the meaning of Section 13 (d) (3) or 14 (d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of thirty percent (30%)
or more of either (A) the then outstanding shares of common stock
of Employer (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities
of Employer entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); or
b) Individuals who, as of the date hereof, constitute the Board
of Directors (the "Incumbent Board") cease for any reason to
constitute at least two thirds of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by Employer's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors; or
c) Consummation of a reorganization, merger or consolidation,
or sale or other disposition of all or substantially all of the
assets of Employer (a "Business Combination") unless, following
such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than sixty percent (60%) of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
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result of such transaction owns Employer or all substantially
all of Employer's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be (with respect to this subsection
(A), such calculation shall be made with respect to all
considerations received in exchange for, or as a consequence of,
a Business Combination); or (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of Employer or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, thirty percent
(30%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination; and (C) at least two-thirds of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
d) Approval by the stockholders of Employer of a complete
liquidation or dissolution of Employer; or
e) Occurrence of any of the events listed in 7d(4)(a) through
7d(4)(d) above in respect of any subsidiary (meaning any entity
over which Employer has voting control) of Employer that,
immediately prior to the relevant event, constituted at least
twenty percent (20%) of Employer's consolidated assets or, for
the fiscal year prior to the event, contributed at least twenty
percent (20%) or more of Employer's consolidated revenues.
f) Notwithstanding the foregoing, for purposes of the foregoing
provisions, a Change of Control shall not include any transaction
described above which has been previously approved by the
Incumbent Board.
8. PAYMENT LIMITATIONS
All payments to Executive hereunder shall be reduced by applicable
local, state and federal withholding requirements. Should any payments
hereunder be determined by Employer's independent public accounting firm to
be in excess of federal or state Golden Parachute limitations (currently
Internal Revenue Code Section 280G), then Executive and Employer hereby agree
that such payments shall be modified so as to be one dollar less than such
Golden Parachute limitations. If the determination is made after the
payment(s) have been made by Employer, then Executive shall promptly refund
the overpayment to Employer.
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Employer shall not be obligated to reimburse Executive for his expenses
(such as COBRA payments) in maintaining benefits that Employer has
discontinued hereunder.
Employer shall have the right to offset any debts or damages owed by
Executive to Employer against salary or other payment owed to Executive.
9. SURVIVAL OF THIS AGREEMENT
Employer shall not engage in any voluntary or involuntary dissolution or
any merger in which Employer is not the surviving or resulting corporation,
or any transfer of all or substantially all of Employer's assets, or any
similar change in ownership or control, unless the provisions of this
Agreement shall be binding on and inure to the benefit of the surviving
business entity to which ownership or control has passed, or to which such
assets were transferred.
10. PROTECTION OF TRADE SECRETS; CONFIDENTIAL INFORMATION & EMPLOYEE
RELATIONSHIPS.
Because of his employment by Employer, Executive has access to trade
secrets and confidential information of Employer, including but not limited
to knowledge of and contact with key employees; financial records; contract
terms; business plans, policies and procedures; cost information; customer
lists and client or acquisition opportunities; business and computer systems;
management information and methods which are unique to Employer's methods of
business; and customer servicing techniques (all of the above trade secrets
and confidential information hereinafter referred to as "Confidential
Information"). In consideration hereof and in recognition of the fact that
the Confidential Information constitutes a valuable trade secret or otherwise
valuable asset of Employer, Executive will not appropriate to his own use or
benefit in anyway whatsoever, or disclose to any third parties, any
Confidential Information during or after this Agreement.
Executive agrees that solicitation of Employer's customers and personnel
would constitute a misappropriation of Employer's Confidential Information.
In recognition thereof, Executive will not during his employment, and for one
year thereafter, solicit, hire, contract with or otherwise take away any
customer or employee of Employer or participate in any such solicitation,
hiring, contracting or otherwise taking away. In addition, all information
about such customers and employees which becomes known to Executive during
the course of this Agreement and which is not otherwise known to the public
is a trade secret of the Employer and shall not be used in soliciting or
taking away customers or employees of the Employer at any time.
Executive acknowledges that any breach of this Section will result in
irreparable damage to the Employer, for which Executive further acknowledges
that Employer shall be entitled to injunctive relief hereunder. The parties
hereby consent to an injunction in favor of Employer, without bond, enjoining
any breach of this Agreement by any court of competent jurisdiction, without
prejudice to any other right or remedy to which Employer may be entitled.
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Executive's obligations hereunder shall survive the termination of this
Agreement.
11. ENTIRE AGREEMENT
Except for an indemnification agreement between Employer and Executive,
this Agreement contains the entire agreement between the parties and
supersedes all prior oral and written agreements, understandings,
commitments, and practices between the parties. No waiver or modification to
this Agreement may be made except by a writing signed by the party against
whom it is enforced.
12. CHOICE OF LAW; INTERPRETATION OF AGREEMENT
The formation, construction, and performance of this Agreement shall be
construed in accordance with the laws of the State of California. This
Agreement shall not be interpreted for or against either party on the ground
that such party or its representative drafted the agreement or any portion
thereof.
13. ARBITRATION
Any claim for monetary damages hereunder shall be subject to binding
arbitration by the National Association of Securities Dealers or other
mutually agreeable arbitration or alternative dispute resolution forum.
14. NOTICES
Any notice required or permitted under this Agreement shall be given in
writing, either by personal delivery or by registered, overnight or certified
mail, postage prepaid, to the following addresses: Executive - then current
home address as shown on Employer's files; Employer - the CEO at the
company's then current place of business.
15. SEVERABILITY
If any portion of this Agreement is held invalid or unenforceable, the
remainder of this Agreement shall nevertheless remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full force and
effect in all other circumstances.
16. ACKNOWLEDGMENT
Executive acknowledges that he has had the opportunity to consult with
independent counsel of his own choice concerning this Agreement and has been
advised to do so by Employer, and Executive has read and understands this
Agreement, and is fully aware of its legal effect, and has entered into it
freely based on Executive's own judgment.
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17. HEADINGS
Section headings in this Agreement have been inserted for convenience
and reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
Executed by the parties as of the day and year first above written.
AGREED AND ACCEPTED:
JMC Group, Inc.
By: /s/ ROBERT G. SHARP
------------------------------------
Robert G. Sharp, Chairman of the
Compensation Committee of the Board
of Directors of JMC Group, Inc.
AGREED AND ACCEPTED:
By: /s/ James K. Mitchell
------------------------------------
James K. Mitchell
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