Exhibit 10.1
EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (the “Agreement” or
“Employment Agreement”) dated July 8, 2008
(“Effective Date”) between Kimberly J. McWaters
(“Employee”) and Universal Technical Institute, Inc., a
Delaware corporation (the “Company”) provides:
WHEREAS, the
Company wishes to obtain the future services of Employee and
Employee is willing to continue to provide services to the Company;
and
WHEREAS, the
parties wish to revise and update the existing Employment and
Non-Interference Agreement between them to reflect the current
status of Employee’s employment and to ensure compliance with
applicable laws and regulations; and
WHEREAS,
Employee wishes to have the protection provided for in this
Agreement and, in exchange for such protection, is willing to give
to the Company, under certain circumstances, a covenant not to
compete and a release of all liability.
NOW,
THEREFORE, the parties hereto agree as follows:
1.
Previous Agreement Superseded . The previous
Employment and Non-Interference Agreement between the parties dated
April 1, 2002 (the “Previous Employment
Agreement”) is hereby superseded, replaced in its entirety
and considered null and void.
2.
Definitions .
a. “Board of Directors” means the Board of Directors of
the Company.
b. “Cause” means any one or more of the
following:
(i) Employee’s conviction of, or plea of guilty or
nolo contendere to, any felony or a crime involving
embezzlement, conversion of property or moral turpitude
(ii) A finding by a majority of the Board of Directors of
Employee’s fraud, embezzlement or conversion of the
Company’s property;
(iii) Employee’s conviction of, or plea of guilty or
nolo contendere to, a crime involving the acquisition, use
or expenditure of federal, state or local government funds relating
to the business and affairs of the Company;
(iv) A final, nonappealable administrative or judicial
determination that Employee committed fraud or any other violation
of law involving federal, state or local government funds relating
to the business and affairs of the Company;
(v) A finding by a majority of the Board of Directors of
Employee’s knowing breach of any of Employee’s
fiduciary duties to any company in the Company Group or the
Company’s stockholders or making of an intentional
misrepresentation or omission which breach, misrepresentation or
omission would reasonably be expected to have a material adverse
effect on the business relationship, the business, properties,
assets, operations, condition (financial or other) or prospects of
any company in the Company Group;
(vi) Employee’s alcohol or substance abuse, which
materially interferes with Employee’s ability to discharge
the duties, responsibilities and obligations prescribed by this
Agreement as determined by a majority of the Board of
Directors;
(vii) Employee’s material and knowing failure to observe
or comply with law applicable to the business of the Company as an
officer or employee of the Company which would reasonably be
expected to have a material adverse effect on the business
relationship, the business, properties, assets, operations,
condition (financial or other), or prospects of any company in the
Company Group as determined by a majority of the Board of
Directors;
(viii) Employee’s willful gross misconduct relating to
the business of the Company that results in significant harm to the
Company or its operation, properties, reputation, goodwill or
business relationships as determined by a majority of the Board of
Directors,
provided that
(i) any finding or determination made by the Board of
Directors concerning the existence of Cause must be made in good
faith and not for purposes of evading the Company’s
obligations hereunder; and (ii) a finding or determination of
Cause by the Board of Directors may not be made unless, prior to
determining that Cause exists, the Employee shall be given written
notice stating in reasonable detail the facts and circumstances
deemed by the Company to constitute Cause, and thirty
(30) days from receipt of such notice Employee has failed to
cure the facts and circumstances set forth in such notice.
c. “Change of Control” means: (i) any sale, lease,
exchange, or other transfer (in one transaction or series of
related transactions) of all or substantially all of the
Company’s assets to any person or group of related persons
under Section 13(d) of the Securities and Exchange Act of 1934
(“Group”); (ii) the Company’s shareholders
approve and complete any plan or proposal for the liquidation or
dissolution of the Company; (iii) any person or Group becomes
the beneficial owner, directly or indirectly, of shares
representing more than 50% of the aggregate voting power of the
issued and outstanding stock entitled to vote in the election of
directors of the Company (“Voting Stock”) and such
person or Group has the power and authority to vote such shares;
(iv) any person or Group acquires sufficient shares of Voting
Stock to elect a majority of the members of the Board of Directors;
or (v) the completion of a merger or consolidation of the
Company with another entity in which holders of the Company’s
stock immediately before the completion of the transaction hold,
directly or indirectly, immediately after the transaction, 50% or
less of the common equity interest in the surviving corporation in
the transaction. Notwithstanding the foregoing, in no event will a
Change of Control be deemed to have occurred as a result of an
initial public offering of the Company’s stock.
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Also,
notwithstanding anything to the contrary herein, the fact that a
transaction or event is defined as a Change of Control for purposes
of this Agreement shall not evidence or infer that the transaction
or event constitutes a change of control for purposes of, including
but not limited to, any determination or definition of the
Department of Education, any licensing agency, or for determining
the duties of the Company’s Board of Directors under Delaware
corporate law.
d. “Code” means the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
e. “Company Group” shall mean the entities listed on
Schedule 1.
f. “Compete” shall mean to directly or indirectly own,
operate, manage, join, control, be employed by, be a consultant to,
invest in, or become a director, officer, agent, partner, member,
independent contractor or shareholder of any Competitive Business,
as defined below. As used in this Agreement, “Compete”
does not include purely passive investments in any publicly traded
company so long as Employee does not directly or indirectly own,
acquire or obtain options to acquire, 5% or more of any class of
shares in such company.
g. “Competitive Business” means any post secondary
educational institution or entity which conducts educational
programs in the areas of automotive, motorcycle, marine, diesel or
collision repair and refinishing technologies (or a combination of
these programs).
h. “Confidential Information” means any confidential
information including, without limitation, any study, data,
calculations, software, storage media or other compilation of
information, patent, patent application, copyright,
“know-how”, trade secrets, customer, student or
prospective student lists or information, details of client,
consultant, student, vendor, supplier or manufacturer contracts,
pricing policies, operational methods, marketing plans or
strategies, product development techniques or plans, business
acquisition plans or any portion or phase of any scientific or
technical information, ideas, discoveries, designs, computer
programs (including source or object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual
property of any company in the Company Group, whether or not in
written or tangible form, and whether or not registered, and
including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and
other evidence thereof. Notwithstanding the foregoing, the term
Confidential Information does not include, and there shall be no
obligation hereunder with respect to, information that is or
becomes generally available to the public other than as a result of
a disclosure by the Employee not permissible hereunder.
i. “Disability” means Employee is either:
(i) determined to be totally disabled by the Social Security
Administration; or
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(ii) determined to be disabled pursuant to the Company’s
disability plans for a period of at least three months.
j. “Good Reason,” when used with reference to a
voluntary termination by Employee of Employee’s employment
with the Company, shall mean any of the following conditions,
provided that Employee (i) provides the Company with actual
notice of the condition giving rise to the termination within
ninety (90) days of Employee’s knowledge of the initial
existence of the condition, (ii) provides the Company with the
opportunity to cure within 30 days of the notice, and
(iii) terminates employment within two (2) years of the
initial existence of the condition:
(a) A
material diminution in any of the following:
A.
Employee’s base compensation;
B. Employee’s authority, duties or responsibilities; provided
that, a material diminution of Employee’s authority, duties
or responsibilities shall be deemed to have occurred if Employee
ceases to have such authorities, duties or responsibilities with
respect to the entity which is the ultimate parent entity of the
Company Group following a Change of Control.
(b) A material change in the geographic location at which the
Employee must perform the services; or
(c) Any other action or inaction that constitutes a material
breach by the Company of this Agreement and such breach is not
cured as set forth in 2.j.(ii) above.
k. “Market” means anywhere in the United States or
Puerto Rico. If an arbitrator or arbitration panel finds that this
definition of Market is unreasonable, then the Market will be
considered to mean all states in which the Company has a campus or
other training center and all states that are contiguous to a state
in which the Company has a campus or other training center. If an
arbitrator or arbitration panel finds that definition of Market is
unreasonable, the Market shall mean all states in which the Company
has a campus or other training center.
l.
“Position” means the particular position of President
and Chief Executive Officer.
m. “Regulations” means any laws, ordinances,
regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial
authority, or any public, private or industry regulatory
authority.
n. “Severance Period” means the period of time that the
Company continues to pay Employee as set forth in
Section 9.a.
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o. “Specified Employee” means any Company employee that
the Company determines is a Specified Employee within the meaning
of Section 409A of the Code. The Company shall determine
whether an employee is a Specified Employee by applying reasonable,
objectively determinable identification procedures set forth in a
resolution of the Board of Directors issued before
December 31, 2007.
p. “Term of Employment” means the period commencing on
the Effective Date and terminating three (3) years after the
Effective Date. Employee acknowledges that the Company has no
obligation to continue Employee’s employment or this
Agreement beyond the Term of Employment. The Term of Employment may
also be terminated with or without cause and without notice subject
to the provisions of Section 8.
q. “Termination Date” shall mean the last day of
Employee’s employment with the Company.
3.
Nature of Employment . Subject to the terms of this
Agreement, the Company hereby agrees to continue to employ Employee
in the Position, and Employee hereby agrees to accept the
continuation of such employment in the Position, for the Term of
Employment under this Agreement.
4.
Extent of Employment .
While employed:
a. Employee agrees to perform the duties of the Position faithfully
and to the best of Employee’s ability at the principal
offices of the Company or in locations as may be designated
temporarily from time to time by the Company or as necessary to
fulfill the duties of the Position. Employee shall report to the
Board of Directors, or as otherwise directed by the Board of
Directors.
b. Employee shall abide by the policies, rules, customs, and usages
as established by or existing at the Company.
c. Employee shall devote all of her business time, energy and skill
as may be reasonably necessary for the performance of the duties,
responsibilities, and obligations of the Position.
d. Employee shall not knowingly breach or violate any Regulations
or rules of any governmental or regulatory body in any material
respect and shall not act in any manner which might reasonably be
expected to have a material adverse effect on the ongoing business,
properties, assets, operations, condition (financial or other),
business relationships or prospects of any company in the Company
Group.
e. Employee shall not commit or engage in any conduct, through
action or omission, which would constitute any of the offenses set
forth in the definition of “Cause” under this
Agreement.
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f. Employee
agrees to live in the Phoenix, Arizona metropolitan area.
5.
Compensation . While Employee is employed by the
Company, the Company shall pay Employee as follows:
a. A base salary, paid in twenty six (26) equal installments,
at a rate of Five Hundred Seventy Five Thousand Dollars ($575,000)
per annum. The Board of Directors shall annually, and in its sole
discretion, determine whether the base salary should be increased
and, if so, in what amount.
b. An annual bonus based on Employee’s performance as
determined and approved by the Board of Directors based on
performance parameters set by the Board of Directors. Such bonus
will be determined at the sole discretion of the Board of
Directors, and may not be paid at all. Employee acknowledges that
no bonus will be paid if performance parameters are not met. If the
Board of Directors determines that such bonus shall be paid, such
bonus shall be paid by the fifteenth (15th) day of the third (3rd)
month of the Employee’s taxable year following the year in
which the Employee becomes entitled to such bonus.
6.
Reimbursement of Expenses . While Employee is
employed, the Company shall reimburse Employee for reasonably
documented travel expenses, entertainment and other expenses
reasonably incurred by Employee in connection with the performance
of the duties of the Position and, in each case, according to the
reasonable rules, policies, customs and usage promulgated by the
Company from time to time. All reimbursements shall be made within
thirty (30) days of Employee’s submission of any
reasonably documented expense reimbursement claim. The amount of
expenses eligible for reimbursement provided during one taxable
year shall not affect the amount of expenses eligible for
reimbursement or in-kind benefits provided during any other taxable
year. Employee may not elect to receive cash or any other benefit
in lieu of the reimbursements provided by this Section.
7.
Benefits . While Employee is employed, the Employee
shall be entitled to perquisites and benefits established from time
to time, at the sole discretion of the Board of Directors for the
Position, including without limitation, health, short and long term
disability, pension and life insurance benefits consistent with
past practice, or as increased from time to time; provided that the
perquisites and benefits provided to Employee shall be at least
substantially equal to those provided to any other officer of the
Company.
8.
Termination of Employment for Cause or without Good
Reason . At any time during the Term of Employment, Company
may terminate Employee for Cause effective upon the giving to
Employee a written notice of termination. If Employee’s
employment is terminated for Cause or Employee voluntarily
terminates without Good Reason, Employee shall be entitled
to:
a. Payment of accrued and unpaid base salary and unused vacation
through the Termination Date;
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b. Reimbursement for expenses incurred through the Termination Date
as set forth in Section 6.
9.
Termination of Employment without Cause, for Good Reason,
upon Change of Control, or due to the Death or Disability of
Employee. During the Term of Employment, the Company may
terminate Employee without Cause and without providing notice to
Employee, and Employee may terminate employment with the Company
for Good Reason. Employee’s death or Disability shall cause a
termination of Employee’s employment.
a. During the Term of Employment, if Employee is terminated without
Cause or if Employee terminates for Good Reason, either of which
occurs without a Change of Control, Employee shall be entitled to
the following items so long as Employee has signed the release
described in Section 11 below and not revoked it:
(i) The Company shall provide the items set forth in
Section 8.a. and 8.b. above.
(ii) The Company shall pay to Employee, an amount equal to
Employee’s base salary at the highest rate in effect at any
time during the twelve (12) months immediately preceding the
Termination Date, payable for a period of twenty four (24) months
(the “Severance Period”). Employee will be paid this
amount in equal bi-weekly installments according to the
Company’s regular payroll periods and practices. The first
payment to which Employee is entitled shall be paid on the first
day of the month following the revocation period, if any, as set
forth in Exhibit A . At all times, the right to each
monthly payment made under this Section 9 shall be treated as
the right to a series of separate payments within the meaning of 26
CFR Section 1.409A-2(b) (2) (iii).
(iii) Employee will be eligible for the fiscal year bonus if
such bonus is approved by the Board of Directors based upon
parameters set by the Board of Directors. The amount of any such
bonus will be pro-rated based on the Termination Date and shall be
paid at the time other employees are paid the bonus, but in no
event will such bonus be paid after the fifteenth (15 th ) day of the
third (3 rd ) month of the
Employee’s taxable year following the year in which the
Employee becomes entitled to such bonus.
(iv) Employee’s then current medical and dental benefits
will continue pursuant to Company policy and the provisions of any
applicable benefit plan. Beginning on the first day that active
employee coverage is ineffective, Employee may elect to continue
current medical and dental benefits for up to eighteen
(18) months in accordance with any applicable plan provisions
and the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA). In addition, the Company will continue to pay a monthly
amount equal to the Company paid portion of the insurance premium
for the coverage held by Employee as of the Termination Date, and
any administrative fee, for a period of eighteen (18) months.
In addition, for a period of six (6) months following the
expiration of COBRA coverage the Company shall maintain, at Company
expense, health care insurance benefits comparable to that provided
to Employee under COBRA. Upon Employee’s employment with
another employer, to the extent Employee and her dependants are
eligible for substantially equivalent benefits under the new
employer’s plan, the Company will no longer be obligated to
pay for the continuation coverage.
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(v) All stock Awards (as defined by any applicable Plan),
including stock options and restricted stock, shall be governed by
the terms and provisions of the Plan and the grant Agreement under
which such Award was granted.
(vi) Employee’s participation in and/or coverage under
all other employee benefit plans, programs or arrangements
sponsored or maintained by the Company shall cease to be effective
as of the Termination Date, unless such benefit, program or plan is
inalienable under the law.
(vii) The Company shall pay for twelve (12) months of
outplacement services through a provider selected by the Company
for the twelve (12) month period immediately following the
Termination Date.
(viii) The children of Employee shall be eligible to attend
any Company location or program without paying tuition.
b. During the Term of Employment, if Employee is terminated without
Cause or if Employee terminates for Good Reason, either of which
occurs within 12 months of a Change of Control, Employee shall
be entitled to the following items so long as Employee has signed
the release described in Section 11 below and not revoked
it:
(i) Except for the bonus set forth in Section 9.a.(iii),
all of the payments and benefits as set forth in Section 9.a.
above; and
(ii) The Company shall also pay to Employee Employee’s
maximum targeted bonus for the fiscal year in which the Termination
Date occurs prorated to the Termination Date. Employee will be paid
this bonus amount over the Severance Period in equal bi-weekly
installments according to the Company’s regular payroll
periods and practices.
c. During the Term of Employm
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