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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 10th day of March 2000, by and among
Prism Financial Corporation, a Delaware corporation (the "Company"), Xxxx X.
Xxxxx (the "Executive"), and Royal Bank of Canada, a bank organized and existing
under the laws of Canada ("Acquiror").
WHEREAS, Acquiror and the Company have determined that it is in
their respective best interests to assure that the Company will have the
continued dedication of the Executive pending the merger (the "Merger") of the
Company and Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and
wholly owned subsidiary of Acquiror ("Acquisition") pursuant to the Merger
Agreement dated as of March 10, 2000 among the Company, Acquiror and Acquisition
(the "Merger Agreement"), and to provide the Company, as the surviving
corporation of the Merger, with continuity of management. Therefore, in order to
accomplish these objectives, the Executive, Acquiror and the Company have
entered into this employment agreement.
WHEREAS, the Executive desires to accept such continued
employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE TIME. The "Effective Time" shall mean the effective
time of the Merger, provided the Executive is employed by the Company at such
time. As of the Effective Time, any and all other employment agreements entered
into between the Company and Executive prior to the Effective Time (including,
without limitation, any employment agreement entered into among the Company,
Executive and Acquiror in connection with or in contemplation of the
transactions contemplated by the Merger Agreement) shall terminate and become
null and void, provided that any option agreements between the Executive and the
Company shall terminate and become null and void only upon the final installment
payment of the special retention bonus contemplated by Section 2.10(b) of the
Merger Agreement and provided further that upon any termination of the
transactions contemplated by the Merger Agreement, this sentence will be
inapplicable.
2. EMPLOYMENT PERIOD. The Company hereby agrees to continue to
employ the Executive, and the Executive hereby agrees to continue in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing as of the Effective Time and ending on December 31, 2003 (the
"Employment Period").
3. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, the Executive
shall serve as Senior Vice President of the Company with the appropriate
authority, duties and
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responsibilities attendant to such position. After the Employment Period,
the Executive may continue to serve the Company under a mutually agreed
upon arrangement.
(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 substantially all of his business
attention and time 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, it shall not be a violation of this Agreement for the
Executive (A) to continue, with respect to current positions and
arrangements disclosed to the Board and, with prior written approval of
the Board of Directors of the Company (the "Board"), with respect to
future positions and arrangements, to, serve on a reasonable number of
corporate, civic or charitable boards or committees (and promptly after
the Effective Time, Executive will submit to the Board a list of all
existing board or committee memberships and submit to the Board for
approval a list of pending or future board or committee memberships,
which approval will not be unreasonably withheld); (B) deliver a
reasonable number of lectures and speeches and (C) manage personal
investments, so long as such activities do not interfere with the proper
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
(b) Compensation.
(i) Annual Base Salary. During the initial twelve
months of the Employment Period, the Executive shall receive an annual
base salary ("Annual Base Salary") of $150,000, payable in accordance
with regular payroll practices of the Company. Thereafter, the Executive
shall receive an annual base salary in an amount determined by the Board,
but not less than his initial Annual Base Salary with any such increased
amount thereafter being the Annual Base Salary. Any increase in Annual
Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The Executive shall not be entitled
to receive any additional consideration for service during the Employment
Period as a member of the Board of Directors of the Company or any of its
subsidiaries.
(ii) Interim Bonus and Annual Bonus. Provided the
Executive's employment has not been terminated for Cause or due to a
voluntary termination by the Executive (other than due to Constructive
Termination, death or Disability) on the respective dates of payment, the
Executive shall be eligible to participate in a bonus pool (the "Interim
Bonus") on December 31, 2000 where the aggregate pool for all
participants shall not be less than $105,000. The Executive shall be
eligible to participate in an annual cash bonus pool for executives
("Annual Bonus") with respect to the first 12 months of this Agreement,
whereby the aggregate pool for all participants shall not be less than
$1,825,000 to be paid no later than 13 months after the date of this
Agreement. The distribution of 50% of the Annual Bonus Pool will be
unconditional and solely at the discretion of Xxxx Xxxxxx (with no
restriction whatsoever) and the remainder at the discretion of the Board.
Thereafter, the Executive shall be
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eligible to receive annual bonuses during the Employment Period in an
amount and in accordance with any plan as may be determined by the Board.
(iii) Stock Options. The Executive shall be eligible
to particpate in the Acquiror's 1999 Stock Option Plan (the "Plan"), with
grants made at the discretion of the Acquiror's Board of Directors. Any
stock options granted to the Executive shall be subject to all of the
terms and conditions of the Plan, including applicable provisions
regarding vesting, and expiration of options upon termination of
employment. Such stock options shall be administered in accordance with
the Plan attached hereto as Appendix A and pursuant to a Stock Option
Agreement reasonably acceptable, including as to vesting, to the
Executive.
(iv) Other Employee Benefit Plans. During the
Employment Period, except as otherwise expressly provided herein, the
Executive shall be entitled to participate in all employee benefit,
welfare and other plans, practices, policies and programs of the Company
(collectively, "Employee Benefit Plans"), subject only to the generally
applicable eligibility provisions of such plans; provided that the
Executive shall at all times during the Employment Period, be entitled to
receive benefits that are comparable to those provided to other employees
in positions of comparable rank with the Acquiror and its wholly owned
subsidiaries.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the
Employment Period and in that case the Date of Termination shall be the date of
death. If the Company determines in good faith that the Executive has become
Disabled during the Employment Period (pursuant to the definition of "Disabled"
or "Disability" set forth below), the Company may terminate Executive's
employment by giving written notice to the Executive in accordance with Section
10(b) of this Agreement of the Company's intention to terminate 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. For purposes of this Agreement,
whether the Executive has become "Disabled" (or incurs a Disability) shall be
determined under the Company's long-term disability plan as in effect for
employees of the Company as of the date of this Agreement. If the
Executive's employment is terminated by reason of disability, the Date of
Termination shall be the Disability Effective Date, or any later date specified
by the Company.
(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 commission by the Executive of an act of
criminal or fraudulent misconduct that results in material economic harm
or acute public embarrassment to the Company, its parent or a subsidiary
of the Company (including, but not limited to, the willful violation of
any material law, rule, regulation, or cease and
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desist order applicable to the Executive) or a deliberate breach of a
fiduciary duty owed by the Executive to the Company, its parent or its
parent's shareholders;
(ii) the Executive's habitual absence from work other
than as a result of illness or Disability, continuous and intentional
failure to perform stated duties, gross negligence, or gross incompetence
in the performance of the Executive's stated duties provided that the
Executive shall be provided notice of any situation set forth herein and
a reasonable opportunity to cure such situation;
(iii) the Executive's chronic alcohol or drug abuse
that results in a material impairment of the Executive's ability to
perform his or her duties as an employee of the Company provided that the
Executive shall be provided a reasonable opportunity to cure if the
Executive demonstrates a willingness to undergo treatment or
rehabilitation;
(iv) the rendering of a verdict of guilty against or
the entering of a nolo contendere plea by the Executive for any felony
offense (other than a law relating to a traffic violation or similar
offense), whether or not in the line of duty to the Company; or
(v) the final determination by a state or federal
banking agency or governmental authority having jurisdiction over the
Company that the Executive is not suitable to act in the capacity in
which he is employed by the Company or a downgrading in ratings by such
authority, as evidenced in the "Management Aspects During the Annual
Review," on the basis of such determination.
(c) Notice of Termination. Termination of employment by
the Company or by the Executive shall be communicated by Notice of Termination
to the other party hereto given in accordance with this Section 10(c). For
purposes of this Agreement, a "Notice of Termination" means a written notice
which indicates the Date of Termination, as specified below. The "Date of
Termination" means:
(i) if the Executive's employment is terminated by
the Company for Cause, the date of receipt of the Notice of Termination
or any later date specified therein within 30 days of such notice, or
(ii) if the Executive's employment is terminated by
the Executive, a date not less than 30 days after the date of the Notice
of Termination, provided, however, that the Company may waive such 30-day
provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, this Agreement shall terminate without further obligations to
the Executive under this Agreement, other than for payment of:
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(i) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded
for the first twelve months of service, in each case to the extent not
theretofore paid;
(iii) a pro rata portion of the annual bonus awarded
for the fiscal year in which the Date of Termination occurs and the
annual bonus awarded for any fiscal year prior thereto, in each case to
the extent earned, accrued or owing to the Executive but not theretofore
paid; and
(iv) any other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive through
the Date of Termination under any plan, program, policy or practice or
contract or agreement of the Company, to the extent not theretofore paid
or provided (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits") through the Date of Termination and
continuation of insurance plans as provided under COBRA.
Any Annual Base Salary, Interim Bonus and Annual Bonus payable pursuant
to this Section 5(a) shall be paid to the Executive as applicable, in a lump sum
in cash within 30 days after the Date of Termination; in the case of a pro-rated
Annual Bonus, as soon as practicable after the date such bonus is determined.
(b) Termination Without Cause. If the Executive's
employment is terminated by the Company without Cause, or if the Executive
terminates as a result of a Constructive Termination (as defined below), this
Agreement shall terminate without further obligations to the Executive under
this Agreement, other than for payment of:
(i) the Executive's Annual Base Salary through the
Employment Period to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded
for the first twelve months of service, in each case to the extent not
theretofore paid;
(iii) a pro rata portion of the annual bonus awarded
for the fiscal year in which the Date of Termination occurs and the
annual bonus for any fiscal year prior thereto, in each case to the
extent earned, accrued or owing to the Executive but not theretofore
paid; and
(iv) Other Benefits through the Date of Termination
and continuation of insurance plans as provided under COBRA.
For purposes of this Agreement, "Constructive Termination" means the
Executive's voluntary termination of employment after any of the following are
undertaken without the Executive's express written consent: (A) the assignment
to the Executive of any duties or responsibilities
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inconsistent with the Executive's title and position, authority, duties or
responsibilities as contemplated by Section 3(a)(i) of this Agreement, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for the purpose of this clause
(A) an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive; (B) a reduction in the Executive's Annual Base Salary or
change in the Annual Bonus pool; (C) a relocation of the Executive to a location
more than ten (10) miles from the location at which the Executive performed his
duties immediately prior to the Effective Time, except for required travel by
the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations prior to the Effective Time or
(D) any breach by the Company or Acquiror of this Agreement.
(c) Termination for Cause; Voluntary Termination. If the
Executive's employment shall be terminated by the Company for Cause or the
Executive terminates his employment prior to the end of the Employment Period on
his own initiative (other than due to Constructive Termination, death or
Disability), this Agreement shall terminate without further obligation to the
Executive other than the obligation to pay to the Executive his Annual Base
Salary through the Date of Termination to the extent theretofore unpaid and the
Other Benefits through the Date of Termination.
6. NO MITIGATION. 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 such amounts shall not be reduced whether or not the Executive obtains other
employment.
7. COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION;
INTELLECTUAL PROPERTY.
(a) During the term of this Agreement, and for a period of
six (6) months after the Date of Termination, the Executive shall not:
(i) directly or indirectly, own, manage, operate,
join, control, or participate in the ownership, management, operation or
control of, or be employed by or perform services for, any Competing
Business, whether for compensation or otherwise, without the prior
written consent of the Company. For the purposes of this Agreement, a
"Competing Business" shall be (A) any business by which the Executive is
employed which is, at the Date of Termination, a significant competitor
of the Company; it being agreed that the term "business" shall refer to
the specific division or subsidiary by which Executive is employed, not
such division's or subsidiary's corporate group; (B) any Company the
primary business of which is the origination of residential mortgage
loans whether or not Executive is employed by such business; or (C) any
affordable or historic tax syndication business; provided, that, the
Executive may own up to five percent (5%) (measured by value) of the
outstanding securities of any public entity, the shares of which are
traded on a national stock exchange or quoted on the Nasdaq National
Market;
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(ii) in any manner, directly or indirectly, Solicit a
Client to transact business with a Competing Business or to reduce or
refrain from doing any business with the Company, or interfere or damage
(or attempt to interfere with or damage) any relationship between the
Company and a Client. For purposes of the Agreement, the term "Solicit"
means any direct or indirect written or oral communication , inviting,
advising, encouraging, inducing or requesting any person or entity, in
any manner, to take or refrain from taking any action. For purposes of
this Agreement, the term "Client" means any client or customer or
prospective client or customer of the Company to whom the Executive
provided services, or for whom the Executive transacted business, or
whose identity became known to the Executive in connection with the
Executive's relationship with or employment by the Company; or
(iii) directly or indirectly (whether on the
Executive's own behalf or on behalf of any other person or entity)
solicit, entice, advise or encourage any officer, employee or consultant
(determined as of the Date of Termination of the Executive) of the
Company or any of its affiliates or subsidiaries to terminate such
person's or entity's employment or consulting relationship or with
respect to any officer or employee of the Company or its subsidiaries,
hiring any such officer or employee.
(b) The Executive hereby acknowledges that, as an employee
of the Company, he will have access to, be making use of, acquiring and adding
to confidential information of a special and unique nature and value relating to
the Company and its strategic plan and financial operations. The Executive
further recognizes and acknowledges that all confidential information is the
exclusive property of the Company, is material and confidential, and is critical
to the successful conduct of the business of the Company. Accordingly, the
Executive hereby covenants and agrees that he will only use confidential
information for the benefit of the Company or any of its affiliates or
subsidiaries and in the course of his employment for the Company and shall not
at any time, directly or indirectly, during the term of this Agreement and
thereafter, divulge, reveal or communicate any confidential information to any
person, firm, corporation or entity whatsoever, or use any confidential
information for his own benefit or for the benefit of others except as provided
herein. All confidential information removed by the Executive shall be returned
to the Company upon termination of his employment and no copies thereof shall be
kept by the Executive.
(c) Any termination of the Executive's employment or of
this Agreement shall have no effect on the continuing operation of this Section
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(d) In addition to the cessation of payments set forth in
Section 7(f), the Executive acknowledges and agrees that the Company will have
no adequate remedy at law, and could be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of this Section 7. The
Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable remedies that the Company may have. The Executive further
agrees that he shall not, in any equity proceeding relating to the enforcement
of the terms of this Section 7, raise the defense that the Company has an
adequate remedy at law.
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(e) The terms and provisions of this Section 7 are intended
to be separate and divisible provisions and if, for any reason, any one or more
of them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected. The parties hereto acknowledge that the potential restrictions on the
Executive's future employment imposed by this Section 7 are reasonable in both
duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
(f) The parties acknowledge that this Agreement would not
have been entered into and the benefits described in Sections 3 or 5 would not
have been promised in the absence of the Executive's promises under this Section
7 and that should the Executive be finally determined by an arbitrator to have
engaged in any activity or conduct proscribed hereunder, all payments under this
Agreement other than Other Benefits to the extent required to be continued by
law or by the terms of the applicable plan shall cease.
(g) The Executive hereby assigns to the Company all of
Executive's right, title and interest in and to, inventions, trade secrets,
works of authorship, ideas, methods, improvements, databases, know-how, data,
developments or discoveries, whether or not patentable or copyrightable (the
"Work Product") which (i) will be, are or have been made, invented, conceived,
reduced to practice, developed or created during the Employment Period or (ii)
using the equipment, supplies, facilities and/or confidential or proprietary
information of the Company. The Executive will take such action as may be
necessary to assist the Company in obtaining statutory or common law protections
for the Work Product.
8. 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. Any
purported or attempted assignment in violation hereof shall be null and void.
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.
(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. As used in this Agreement, "Company" shall mean the Company as
hereinbefore 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.
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9. ARBITRATION. Any and all disputes, claims or controversies,
arising from or regarding the interpretation, performance, enforcement or
termination of this Agreement shall (except as provided herein with respect to
injunctive relief) be resolved by final and binding confidential arbitration, to
be held in Chicago, Illinois, in accordance with the Employment Arbitration
Rules of the American Arbitration Association and this Section 9. Nothing in
this Section is intended to prevent either party from obtaining either
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration or from utilizing any judicial court system to seek
enforcement of an arbitration award.
10. MISCELLANEOUS.
(a) Any capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Merger Agreement.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, 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.
(c) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery or overnight courier to the other
parties or by registered or certified mail, return receipt requested, postage
prepaid, addressed or by facsimile transmitted as follows:
If to the Executive:
Xxxx X. Xxxxx
0000 X. Xxxxxxx Xxxxxx, #0
Xxxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
If to the Company:
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Filler
Telecopier: 000-000-0000
If to the Acquiror:
Royal Bank of Canada
000 Xxx Xxxxxx
00xx Xxxxx, Xxxxx Tower
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Xxxxxxx, Xxxxxxx, Xxxxxx
Attn: Xxxxxx X. Xxxxxx
Telecopier: 000-000-0000
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.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation or may condition any
transfer of property to the Executive on the Executive's satisfaction of such
withholding obligations in a manner satisfactory to the Company.
(f) 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 shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
EXECUTIVE
/s/ XXXX X. XXXXX
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Xxxx X. Xxxxx
COMPANY
PRISM FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ XXXX X. FILLER
---------------------------
Name: Xxxx X. Filler
Title: President and Chief Executive Officer
Acquiror agrees that as of the Effective Time it will honor this
Agreement and treat the Agreement as its own.
ACQUIROR
ROYAL BANK OF CANADA,
a Canadian commercial bank
By: /s/ XXXXXX X. XXXXXX
---------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President, Strategic
Initiatives
By: /s/ XXXXX X. XXXXX
---------------------------
Name: Xxxxx X. Xxxxx
Title: Vice Chairman, Personal and
Commercial Banking
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