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EXHIBIT 10.3
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
This Agreement by and between Hawthorne Financial Corporation (the
"Company"), and XXXXXX XXXXXXXXXXX (the "Executive"), is dated as of July __,
2000.
RECITALS
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company.
The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1) Certain Definitions.
a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section l(b)) on which a Change
of Control (as defined in Section 2) occurs.
If a Change of Control occurs and if the Executive's employment
with the Company is terminated by the Company prior to the date
on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the
date of such termination of employment.
b) The "Change of Control Period" shall mean the period commencing
on the date of this Agreement and ending on the third
anniversary of the date thereafter.
c) "Renewal Date" - Commencing on the first anniversary date of
this Agreement and on each anniversary date thereafter, this
Agreement shall be automatically extended for another three year
Change of Control period. The Company may, however, terminate
the
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automatic extension by providing the Executive with written
notice at least 60 days prior to the Renewal Date that the
Change of Control period shall not be so extended.
d) "Company" shall mean the Company as herein before defined and
any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
e) "Affiliated Companies" shall mean any company controlled by,
controlling or under common control with the Company.
f) "Disability" shall mean the Executive's long-term disability for
purposes of any reasonable occupation as determined under the
Company's disability plan that is applicable to the Executive.
g) "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement
relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined in Section 1(h)) is other than the date of receipt of
such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice).
h) "Date of Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the Executive for
Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if
the Executive's employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
2) Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
a) The acquisition by any individual, entity or group (a "Person")
within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 24.9% of either
(i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities").
For purposes of this subsection (a), a Change of Control may not
occur due to the exercise of warrants. Therefore, the exercise
of outstanding warrants is specifically excluded from the
determination of whether or not a Change of Control has
occurred.
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In addition, the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2;
or
b) Directors who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of this
Agreement whose election, or nomination for election by the
Company's shareholders, 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; or
c) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another corporation (a
"Business Combination").
This Section 2(c) shall not apply if, following such Business
Combination:
(i) 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 50% 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 result
of such transaction owns the Company or all or substantially all
of the Company'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;
(ii) A Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly,
20% 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, so long as such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the corporation
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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; or
d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3) Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period").
4) Terms of Employment.
a) Position and Duties.
i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all
material respects with the most significant of those
held, exercised and assigned to the Executive at any
time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was
employed immediately preceding the Effective Date or any
office or location less than 25 miles from such
location.
ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities.
During the Employment Period, the Executive may not
compete with the Company. The Executive recognizes
his/her continuing fiduciary duty to at all times act in
the Company's best interest. Any outside employment must
be cleared for conflicts and receive the express written
permission of the Board.
During the Employment Period it shall not be a violation
of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal
investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective
Date shall
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not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the
Company.
b) Compensation.
i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at
least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which
has been earned but deferred, to the Executive by the
Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to
the Executive prior to the Effective Date and thereafter
at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase, and
the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
increased.
ii) Incentives. In addition to Annual Base Salary, the
Executive shall be awarded the following bonuses. For
each fiscal year ending during the Employment Period,
the Executive shall be awarded an annual bonus in cash
at least equal to the average of the Executive's bonuses
under the Company's Annual Incentive Program, or any
comparable bonus under any predecessor or successor
plan(s), for the last three full fiscal years prior to
the Effective Date. This bonus shall be known at the
"Annual Bonus."
In the event an Executive has completed at least one
year, but not three full years of employment with the
Company prior to the Effective Date, any bonuses
received under the Company's Annual Incentive Program,
or any comparable bonus under any predecessor or
successor plan(s), will be averaged to constitute the
Annual Bonus.
If an Executive has been employed for less than one year
prior to the Effective Date, the then existing President
and Chief Executive Officer will review the Executive's
performance relative to established performance goals. A
pro rata bonus will then be recommended to the
Compensation Committee of the Board of Directors, which
if approved, will be annualized to constitute the Annual
Bonus.
Each such Annual Bonus shall be paid no later than the
fifteenth day of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus. In addition, during the
Employment Period, the Executive shall be entitled to
participate in all long-term and other incentive plans,
practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the
extent, if any, that such distinction is
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applicable) less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the
Effective Date or if more favorable to the Executive,
those provided generally at any time after the Effective
Date to other peer executives of the Company and its
affiliated companies.
iii) Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies
and programs applicable generally to other peer
executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies
and programs provide the Executive with savings
opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the
Effective Date or if more favorable to the Executive,
those provided generally at any time after the Effective
Date to other peer executives of the Company and its
affiliated companies. Without limiting the generality of
the foregoing, the Company and its affiliated companies
shall continue to honor any individual agreements
between any of them and the Executive regarding the
provision of supplemental retirement benefits such as
(but not limited to) post-retirement income and/or
welfare benefits (each of which is hereafter referred to
as an "Individual SERP").
iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company
and its affiliated companies (including, without
limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other
peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with
benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective
Date to other peer executives of the Company and its
affiliated companies.
v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices
and procedures of the Company and its affiliated
companies in effect for the Executive at any time during
the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated
companies.
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vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits,
including, without limitation, the fringe benefits
identified on Exhibit "A" attached hereto in accordance
with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other
assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and
its affiliated companies at any time during the 120-day
period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and
practices of the Company and its affiliated companies as
in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other
peer executives of the Company and its affiliated
companies.
5) Termination of Employment.
a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that
the Disability of the Executive has occurred during the
Employment Period, it may give to the Executive written notice
in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment.
In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties.
b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board
which specifically identifies the manner in which the
Board believes that the Executive has not substantially
performed the Executive's duties, or
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ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of a
senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the
Company.
The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the
Executive, and the Executive is given an opportunity,
together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
c) Good Reason. The Executive may terminate Executive's employment
during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which
results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose
isolated, insubstantial and inadvertent actionS not
taken in bad faith and which are remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than
isolated, insubstantial and inadvertent failureS not
occurring in bad faith and which are remedied by the
Company promptly after receipt of notice thereof given
by the Executive;
iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the
Executive to travel on Company business to a
substantially greater extent than required immediately
prior to the Effective Date;
iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Agreement; or
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v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), the Executive's cessation of employment shall
not be deemed for "Good Reason" unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive, and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive has Good Reason as described in subparagraph
(i) - (v) above, and specifying the particulars thereof in detail.
d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. The failure by
the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude
the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
6) Obligations of the Company upon Termination.
a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of:
(1) the Executive's Annual Base Salary through
the Date of Termination to the extent not
theretofore paid; plus
(2) the product of:
(x) the higher of (I) the Annual Bonus and (II)
any bonus paid or payable, including any bonus
or portion thereof which has been earned but
deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any and;
(y) a fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365, plus
(3) any accrued vacation pay, in each case to
the extent not theretofore paid (the
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sum of the amounts described in clauses (1), (2)
and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three
years and (2) the sum of (x) the Executive's
Annual Base Salary and (y) the Annual Bonus; and
C. an amount equal to the difference between (1)
the aggregate benefit under any qualified
defined benefit retirement plans of the Company
and its affiliated companies in which the
Executive participates (collectively, the
"Retirement Plan") and any "top hat," excess or
supplemental defined benefit retirement plans of
the Company and its affiliated companies in
which the Executive participates, and any
Individual SERP (collectively, the "SERP') which
the Executive would have accrued (whether or not
vested) if the Executive's employment had
continued for three years after the Date of
Termination and (2) the actual vested benefit,
if any, of the Executive under the Retirement
Plan and the SERP, determined as of the Date of
Termination (with the foregoing amounts to be
computed on an actuarial present value basis,
based on the assumption that the Executive's
compensation during such period of deemed
continued employment after the Date of
Termination was that required by Section 4(b)(i)
and Section 4(b)(ii), and using actuarial
assumptions no less favorable to the Executive
than the most favorable of those in effect for
purposes of computing benefit entitlements under
the Retirement Plan and the SERP at any time
from the day before the Effective Date through
the Date of Termination);
ii) the Company shall continue benefits to the Executive and/or the
Executive's family, for three years after the Executive's Date
of Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies and their families; provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable
period of eligibility; and for purposes of determining the
eligibility of the Executive for retiree benefits pursuant to
such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the end of a
number of years after the Date of Termination equal to the
Multiplier and to have retired on the last day of such period;
iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of
which shall be selected by the Executive in the Executive's sole
discretion; and
iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or
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provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if
any, as in effect with respect to other peer executives and
their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable
to the Executive's estate and/or the Executive's beneficiaries,
as in effect on the date of the Executive's death with respect
to other peer executives of the Company and its affiliated
companies and their beneficiaries.
c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and
its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company
and its affiliated companies and their families.
d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x)
the Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive,
and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued
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Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7) Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor, subject
to Section 12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with
the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as
explicitly modified by this Agreement. Notwithstanding the foregoing,
from and after the Effective Date, the compensation and benefits
provided for pursuant to Sections 5, 8 and 9 hereof shall be in lieu of
any severance or separation pay or benefits to which the Executive might
otherwise be entitled under any plan, program, policy or arrangement of
the Company and its affiliates.
8) Full Settlement; Legal Fees. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. In no event shall
the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and except as specifically
provided in Section 6(a)(ii), such amounts shall not be reduced whether
or not the Executive obtains other employment.
All legal fees and expenses reasonably incurred as a result of any
contest to the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(whether such contest is between the Company and the Executive or
between either of them and any third party, and including as a result of
any contest by the Executive about the amount of any payment pursuant to
this Agreement), shall be awarded to the prevailing party.
In addition, if the Executive prevails with respect to a dispute over
delayed payments, the Executive will be entitled to the delayed payment
plus interest at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
9) Certain Additional Payments by the Company.
a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined
that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or
any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with
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any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that
the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced
Amount") that could be paid to the Executive such that the
receipt of Payments would not give rise to any Excise Tax, then
no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced
Amount.
b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by a nationally recognized
certified public accounting firm designated by the Company (the
"Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's
determination. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the
Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c)
and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
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i) give the Company any information reasonably requested by
the Company relating to such claim,
ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the
Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment
of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and
further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable
year of the Executive with respect to which such
contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing
authority.
d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination,
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then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
10) Confidential Information. As used herein, "Confidential Information"
means all technical and business information of the Company and its
affiliated companies, whether patentable or not, which is of a
confidential, trade secret and/or proprietary character and which is
either developed by the Executive (alone or with others) or to which the
Executive has had access during the Executive's employment. Such
Confidential Information includes, but is not limited to customer lists,
products, procedures, operations, investments, financing, costs,
employees, accounting, marketing, salaries, pricing, profits and plans
for future development, the identity, requirements, preferences,
practices and methods of doing business of specific parties with whom
the Company transacts business, and all other information which is
related to any product or service or business of the Company, other than
information which is generally known in the financial services industry
or is acquired from public sources.
a) The Executive shall use the Executive's best efforts and
diligence both during and after employment by the Company to
protect the confidential, trade secret and/or proprietary
character of all Confidential Information. The Executive shall
not, directly or indirectly, use (for the Executive or another)
or disclose any Confidential Information, for so long as it
shall remain proprietary or protectible as confidential or trade
secret information, except as may be necessary for the
performance of the Executive's duties with the Company.
b) The Executive shall deliver promptly to the Company, at the
termination of the Executive's employment, or at any other time
at the Company's request, without retaining any copies, all
documents and other material in the Executive's possession
relating, directly or indirectly, to any Confidential
Information.
c) Each of the Executive's obligations in this Section 10 shall
also apply to the confidential, trade secret and proprietary
information learned or acquired by the Executive during the
Executive's employment from others with whom the Company or any
affiliated company has a business relationship.
d) The Executive understands that the Executive is not to disclose
to the Company or any affiliated company, or use for its
benefit, any of the confidential, trade secret or proprietary
information of others, including any of the Executive's former
employers.
11) Successors.
a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by
the 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 Executive's legal representatives.
b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
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c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
12) Miscellaneous.
a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
b) All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient,
if not, then on the next business day, (c) three (3) days after
having been sent by first class mail, return receipt requested,
postage prepaid, (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with
written or oral verification of receipt, or (e) upon confirmed
delivery by electronic mail. Until changed upon giving notice as
provided herein, notices shall be sent to:
If to the Company:
Hawthorne Savings, F.S.B.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Chairman of the Board
Fax: (000) 000-0000
If to the Executive:
Xxxxxx Xxxxxxxxxxx
00000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
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c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or other taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure
to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive
by the Company is "at will" and, subject to Section l(a) hereof,
prior to the Effective Date, the Executive's employment and/or
this Agreement may be terminated by either the Executive or the
Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement.
This Agreement shall have no effect on the Executive's rights
under any plan, program, policy or practice provided by the
Company or any of its affiliated companies except as
specifically provided in Section 7 above.
13) Non-Solicitation. During the Employment Period and for a period of one
year thereafter, the Executive shall not 1) induce or attempt to induce
any employee of the Company to leave the employ of the Company or in any
way interfere with the relationship between the Company and its
employees, (2) hire any person who was employed by the Company during
the Employment Period, or (3) induce or attempt to induce any client of
the Company to cease doing business with the Company or in any way
interfere with the relationship between the Company and its clients
14) Waiver & Release. In exchange for the benefits as outlined in this
Agreement, the Executive agrees to waive and release any and all claims,
actions or costs arising out of his employment with the Company. The
Waiver & Release includes all claims whether arising in tort or contract
and whether arising under statute or common law.
Such claims may include, but are not limited to, wrongful termination,
retaliation, harassment, or any statutory claims under Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Fair
Employment and Housing Act, the Americans with Disabilities Act, or
similar Federal or state statutes. The Executive understands and
acknowledges that accepting benefits under this Agreement specifically
constitutes a voluntary waiver of any and all rights and claims against
the Company including, without limitation, rights or claims arising
under the Age Discrimination in Employment Act of 1967, 29 U.S.C.
Section 621, et. seq..
This Waiver & Release applies even to such damages or losses about which
the Executive does not know, or which do not now exist, but which might
arise in the future. The
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Executive waives all rights under California Civil Code Section 1542.
Section 1542 provides as follows:
"A general release does not extend to claims, which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
15) Binding Arbitration. Any controversy or claim arising out of or related
to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association under
its Commercial Arbitration Rules.
The arbitration will be conducted before an arbitrator who is a member
of the National Academy of Arbitrators and selected by the parties from
the American Arbitration Association's Labor Panel. The arbitrator will
have jurisdiction to determine the arbitrability of any claim. The
arbitrator will not have the right to add to, subtract from or modify
any of the terms of this Agreement, nor the power to reverse or modify
any decision reserved to the Company's discretion.
The arbitrator shall have the authority to grant all monetary or
equitable relief (including, without limitation, ancillary costs and
fees) available under state and federal law. Judgment on any award
rendered by the arbitrator may be entered and enforced by any court
having jurisdiction thereof. Discovery shall be in accordance with the
California Arbitration Act. The parties agree that the parties shall
share responsibility for the Arbitrator's fee.
16) Integration Clause. The terms of this Agreement are final. The Executive
and the Company represent that in executing this Agreement, they have
not relied upon any representations other than those specifically stated
in this written Agreement.
The Agreement contains all promises that have been made by either party.
There are no hidden terms, and everything that is important to this
Agreement is specified in writing here. This Agreement shall be
construed as though both parties have participated equally in its
drafting, and it shall be interpreted, wherever possible, to make it
valid and effective.
IN WITNESS WHEREOF, the Executive and, pursuant to the authorization from its
Board of Directors, the Company have executed this Agreement as of the day and
year first above written.
EXECUTIVE HAWTHORNE FINANCIAL CORPORATION
By:
--------------------------------- ---------------------------------
Xxxxxx Xxxxxxxxxxx Xxxxxxx X. Xxxxxxxx, Chairman
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Exhibit "A"
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Membership in Manhattan Country Club
Use of personal trainer
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