EXHIBIT 10.18
CONSULTING AND NON-COMPETITION AGREEMENT
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CONSULTING AND NON-COMPETITION AGREEMENT, dated as of May 15,
1996, between Southern Pacific Funding Corporation, a California corporation
(the "Company") and The Xxxxx Consulting Group (the "Consultant").
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WHEREAS, the Company recognizes that the Consultant possesses an
intimate knowledge of the business conducted by the Company and considerable
expertise, knowledge and contacts in the subprime mortgage finance industry, the
Company wishes to be assured that it will have the benefit of the consulting
services of the Consultant and the Consultant's agreement to maintain the
confidentiality of certain information and not to compete with the Company as
set forth herein;
WHEREAS, the Consultant is willing to consult for the Company
and is also willing to maintain information as confidential and to agree not to
compete on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
agreements and provisions hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto intending to be legally bound hereby agree as follows:
1. Consulting Services to be Provided. (a) The Company has
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retained the Consultant to assist the Company in developing, implementing and
administering its Financing Program for its acquired subprime mortgage loan
product.
The "Financing Program" consists of the following:
(i) a warehousing and securitization program for
the acquired subprime mortgage loan product;
(ii) a financing program for residual interests
pledged to the Company which result from the
securitization program; and
(iii) the issuance of corporate (i.e., non-asset-
backed) debt and equity by participants in the
Financing Program.
(b) The services to be provided by the Consultant in
connection with the Financing Program (the "Services") consist of:
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(i) the solicitation of participants in the
Financing Program;
(ii) assistance in the negotiation of all
documentation with such participants in the
Financing Program;
(iii) development of software programs and systems
related to the Financing Program;
(iv) assistance with the preparation of policies and
procedures manuals for origination and
financing of the subprime mortgage loan
product;
(v) participation in meetings, conference calls,
presentations, etc., with investment bankers,
attorneys, servicers, accountants, sureties,
rating agencies, and other members of the
working groups associated with the financings;
and
(vi) consulting with the Company's management team
and advisors with respect to the Financing
Program.
2. Compensation. The Consultant shall receive, as
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compensation for its services rendered in connection with each the Financing
Program:
(a) Closing Fees on Whole Loan Purchases. The Company shall
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pay Consultant a fee of [ * ] times the par amount of loans purchased
by the Company from an originator introduced to the Company by the Consultant at
the time of such purchase or otherwise as agreed by the parties. The Company
shall pay Consultant a fee of [ * ] times the par amount of any other
loans purchased by the Company in the Financing Program from originators
procured by the Company at the time of such purchase or otherwise as agreed by
the parties. A list of originators procured by the Company and of originators
procured by the Consultant as of the date hereof is set forth on Exhibit 1.
(b) Participation in Gain on Sale or Other Disposition. The
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Company shall grant Consultant a participation in the residual certificate from
any securitization equal to [ * ] of its recognized securitization net
gain on sale in the event of securitization of loans purchased by the Company
from an originator introduced to the Company by the Consultant at the time of
such securitization or otherwise as agreed by the parties. The Company shall
grant Consultant a participation in the residual certificate from any
securitization equal to [ * ] of its recognized securitization net gain
on sale in the event of securitization of loans sold by originators procured by
the Company into the Financing Program. By way of example of this paragraph, if
(i) the Company's basis in a pool of loans from a participant procured by the
Consultant is 105% of par, (ii) such loans' securitization value (as reasonably
established by the Company) is 108% of par and (iii) such loans constitute 10%
of a securitization pool then Consultant would be entitled to receive a
participation in the Residual Certificate with respect to such pool equal to
[ * ] of the Residual Certificate for the whole securitization.
The Company shall pay Consultant a [ * ] of any release fees or
other compensation in the event of other disposition of loans purchased by the
Company from an originator introduced to the Company by the Consultant at the
time of such sale or other disposition or otherwise as agreed by the parties.
The Company shall pay Consultant a fee equal to [ * ] of any release
fees or other compensation in the event of other disposition of any other
loans sold by the Company in the Financing Program.
(c) Participation in Residual Interest, I/O Strips and Other Fees.
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The Company shall grant Consultant a [ * ] interest in any Residual
Interest, I/O Strip or Other Fee charged to a
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* This information has been omitted and filed separately with the Securities and
Exchange Commission and is subject to a confidential treatment request with
respect thereto.
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participant who elects to participate in the Company's securitization program on
a "piggyback" basis in the case of an originator introduced to the Company by
the Consultant at the time of such securitization or otherwise as agreed by the
parties. The Company shall grant Consultant a [ * ] interest in any
Residual Interest, I/O Strip or Other Fee charged to a participant who elects to
participate in the Company's securitization program on a "piggyback" basis in
the case of an originator procured by the Company at the time of such
securitization or otherwise as agreed by the parties, except in the case of
Oceanmark, Consultant's [ * ] fee shall be paid only and to the extent
purchases from Oceanmark exceed Ten Million Dollars ($10,000,000.00) in any
month. By way of example of this paragraph, if the total I/O charged to
a participant who has elected to participate in the Company's securitization
program on a "piggyback" basis is [ * ] of the pool balance of the
loans securitized, then Consultant would be entitled to an I/O strip equal to
[ * ] of the pool balance of the loans securitized in the case of a
Consultant generated participant and [ * ] of the pool balance of the
loans securitized in the case of a Company generated participant.
(d) Warrant Participation. The Company shall assign
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Consultant [ * ] of any warrants granted to the Company by introduced
to the Company by the Consultant at the time such warrants are granted to the
Company. The Company shall assign Consultant [ * ] of any other
warrants granted to it by a participant procured by the Company at the time such
warrants are granted to the Company. By way of example of this paragraph, if the
Company is granted warrants evidencing [ * ] ownership of a
participant, Consultant would be entitled to receive, if such participant were
introduced to the Company by the Consultant, [ * ] of the Company's
[ * ] share of the participant or a [ * ] ownership of such
participant.
(e) Acquisition. The subprime mortgage loan product of any
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participant acquired by the Company shall be considered purchased by the Company
as of each date such product is included in the Company's securitizations for
purposes of paragraphs 2(a), 2(b) and 2(c) hereof, and the Company shall pay
compensation in respect of such subprime mortgage loan product in the amounts
and at such other times set forth in paragraphs 2(a), 2(b) and 2(c) hereof until
the earlier of three years following each such acquisition or the production of
$300 million in loans by the acquired unit. In the alternative, Consultant may
elect to receive a fee of [ * ] of the market value (as reasonably
determined by the Company) of the acquisition.
(f) Cumulation. Compensation payable pursuant to paragraph
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2(a) hereof shall be cumulative of that payable pursuant to paragraph 2(b)
hereof and the total compensation payable pursuant to such paragraphs shall be
cumulative of compensation payable pursuant to Section 2(c) and the total
compensation payable pursuant to such paragraphs shall be cumulative of
compensation payable pursuant to Section 2(d) or Section 2(e) hereof, as
appropriate.
(g) Payment Upon Termination. Upon termination of this
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agreement for any reason, including, without limitation, for cause as defined in
paragraph 5 hereof, Consultant shall be entitled to continue receiving
compensation as set forth above for the term of any participant financing
agreement then in effect even if the term of such participant financing
agreement extends beyond the term of this agreement (including any extensions
agreed to by the parties). Termination shall only prevent Consultant from
procuring additional originators for the Financing
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* This information has been omitted and filed separately with the Securities and
Exchange Commission and is subject to a confidential treatment request with
respect thereto.
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Program which have not executed Financing Program documents with the Company
prior to the Termination Date.
3. Duties; Place of Performance.
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(a) The Consultant shall furnish the Company with such
consulting services as may be reasonably requested or reasonably required from
time to time by the Company in connection with the business and affairs of the
Company.
(b) The Consultant shall perform the services so requested
or required at such time and places as may be mutually convenient to the Company
and the Consultant, but in any event shall discharge his responsibilities in a
timely, diligent, conscientious and faithful manner, consistent with sound
business practice.
(c) The Consultant shall not be required to perform any
substantial part of his services hereunder outside the County of Orange,
California, at the offices of the Company, or if the Consultant so elects, at
the Consultant's then place of domicile.
4. Other Compensation and Expenses.
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(a) Benefits. During the Term the Company shall provide the
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Consultant with access to medical, disability and death benefits that are not
less beneficial to the Consultant than such comparable benefits provided to the
executive officers of the Company at Consultant's cost.
(b) Taxes. No income, unemployment, social security or other
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taxes and no fees, impositions, duties or other charges of any kind shall be
deducted or withheld from amounts payable hereunder, unless otherwise required
by law. The Consultant hereby agrees to reimburse the Company for the payment of
any U.S. Federal tax of a kind referred to in the preceding sentence which the
Company was required to, but failed to, withhold from amounts payable hereunder.
5. Termination for Cause. The Company may terminate the
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Consultant's services hereunder for Cause. For the purposes of this Agreement,
the Company shall have "Cause" to terminate the Consultant's services hereunder
upon (A) the willful and continued failure by the Consultant to substantially
perform his duties to the Company (other than any such failure resulting from
his incapacity due to physical or mental illness), after a demand for such
substantial performance is delivered to the Consultant by the Board of Directors
of the Company (the "Board") which specifically identifies the manner in which
the Board believes that the Consultant has not substantially performed his
duties, and the Consultant has not commenced to perform such duties with the
Company within ten (10) business days after such written demand has been given,
or (B) the willful engaging by the Consultant in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on the Consultant's part shall be considered "willful" unless
done, or omitted to be done, by the Consultant not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Consultant shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the
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Consultant 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 the purpose (after reasonable notice to the
Consultant and an opportunity for the Consultant, together with his counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
the Consultant was guilty of conduct set forth above in clause (A) or (B) of the
second sentence of this Section 4 and specifying the particulars thereof in
detail.
6. Termination other than for Cause.
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(a) Death. If the Consultant dies, the Consultant's estate
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shall be entitled to receive a lump-sum payment (within thirty (30) days after
his death) equal Sections 2 and 4 hereof.
(b) Termination by Either Party. This Agreement may be
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terminated by either party at any time upon six (6) months' written notice to
the other party.
(c) Passage of Time. This agreement shall terminate on the date
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that is five years from its date unless previously extended by the parties.
7. Competitive Activity. The Consultant agrees that, during
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the five-year period commencing on the date hereof, he will not, without the
prior written consent of the Company, (i) engage in any business or perform any
service in competition with the products and services of the Company and its
subsidiaries as such products and services exist at the date hereof, or (ii)
have any interest, whether as a proprietor, partner, employee, stockholder,
principal, agent, consultant, director, officer, or in any other capacity or
manner whatsoever, in any enterprise in competition with the one to four family
residential mortgage products and services of the Company and its subsidiaries
as such products and services exist at the date hereof. Notwithstanding the
foregoing, the Consultant shall not be deemed to be in competition hereunder due
to ownership by the Consultant of less than ten percent (10%) of the issued and
outstanding capital stock of a publicly-traded company.
8. Confidentiality. The Consultant agrees that he will not,
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without the written consent of the Board, (A) use for his benefit or disclose to
any person at any time during his consultancy hereunder, or at any time
thereafter for a period of one year, except to an employee of the Company (or
any affiliated companies) during his consultancy hereunder to the extent
required in the performance by the Consultant of his duties hereunder, any
confidential information obtained or developed by him during his consultancy
hereunder, including, without limitation, information relating to any customers,
suppliers, employees, products, services, technology, know-how, trade secrets or
the like, financial information or plans, or (B) take with him, upon termination
of his consultancy hereunder, any document or paper relating to any of the
foregoing. The provisions of this Section 8 shall not apply to any information
that, at the time of use or disclosure, is publicly known or is recognized as
standard practice, except by fault of the Consultant.
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9. Remedies. The Consultant acknowledges that a violation
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on his part of any of the covenants set forth in Section 7 or 8 hereof would
cause immeasurable and irreparable damage to the Company. The Consultant
accordingly agrees that, in addition to any other remedies available to the
Company at law or in equity, the Company shall be entitled to specific
performance of the provisions thereof and to injunctive or mandatory relief.
10. Successors; Assignments. This Agreement shall be binding
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upon and shall inure to the benefit of the Consultant's personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and the Company's successors. This Agreement is personal in nature and
neither this Agreement nor any right hereunder shall be assignable by the
Consultant or the Company.
11. Notice. Any notice or other communication hereunder to
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either party shall be in writing and shall be either delivered personally or
mailed by registered mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Consultant:
Xxxx X. Xxxxx
The Xxxxx Consulting Group
00 Xxxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile No. (000) 000-0000
If to the Company:
Attention:Xxxxxx X. Xxxxxx, President
Southern Pacific Funding Corporation
Xxx Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Facsimile No. (000) 000-0000
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt. Any notice or other communication hereunder
shall be deemed to have been given (A) if delivered by hand as provided above,
on the day delivered, if such day is a business day, or on the first business
day following delivery if such day is not a business day, or (B) if mailed as
provided above, on the tenth (10th) business day following the date on which it
was mailed.
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12. Miscellaneous. No provisions of this Agreement may be
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modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, and is signed by the Consultant and the Company. No waiver
by any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
the other party hereto shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by any party hereto which
are not set forth expressly in this Agreement. This Agreement supersedes all
prior agreements of the parties hereto with respect to the subject matter
hereof. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Oregon without giving
effect to the conflicts or choice of law thereof.
13. Severability. The invalidity or unenforceability of any
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provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall remain in
full force and effect. In such event, however, the parties shall negotiate a new
provision that will, as nearly as is valid, lawful and enforceable, have the
same economic effect and accomplish the same objectives as the provisions (or
part of a provision) of this Agreement that was declared invalid, illegal or
unenforceable.
14. Counterparts. This Agreement may be executed in
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counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
15. Headings. The headings contained herein are for
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reference purposes only and shall not in any way effect the meaning or
interpretation of this Agreement.
16. Survival of Covenants. The covenants contained in
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Sections 2(g), 4(c), 5, 7 (except as provided in Section 6 hereof), 8, 17 and 18
hereof shall survive the termination of this Agreement.
17. Legal Fees. The Company shall pay all legal fees and
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expenses incurred by the Consultant as a result of any termination of the
Consultant's consultancy under this Agreement (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination) or
as a result of seeking to obtain or enforce any right or benefit provided by, or
to enforce any provision of, this Agreement, provided that the Consultant
prevails (by judgment, settlement or otherwise) in such contest, dispute or
enforcement proceeding. In no event shall the Consultant be required to
reimburse the Company for any legal fees or expenses relating to this Agreement.
18. Arbitration. Should any dispute arise under this
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Agreement, the parties shall meet and confer in an effort to resolve such
dispute.
If the parties are unable to resolve their differences as a
result of the foregoing, then with respect to any dispute between the parties,
the parties then shall in good faith mediate
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such dispute and use their best efforts to reach agreement on the matters in
dispute. Within five (5) days of the request of any party, the requesting party
shall attempt to employ the services of a third person mutually acceptable to
the parties to conduct such mediation within five (5) days of his appointment.
If they do not reach such solution within thirty (30) days of appointment of a
mediator, then upon notice by either party to the other disputes, claims,
questions or disagreements shall be finally settled by binding arbitration in
accordance with the Expedited Procedures of the Commercial Rules of the American
Arbitration Association. Any demand for arbitration and conduct thereof shall
require payment of all arbitration fees equally by Company and Consultant, which
may be reimbursed pursuant to the Award of the Arbitrators.
Within fifteen (15) days after the notice of arbitration by
either party described above, each party shall select one person to act as
arbitrator, and the two selected shall select a third arbitrator within ten (10)
days of their appointment. If the arbitrators selected by the parties are unable
or fail to agree upon the third arbitrator, the parties or their attorneys may
request the American Arbitration Association to appoint the third neutral
arbitrator. Prior to the commencement of hearings, each of the arbitrations
appointed shall take an oath of impartiality. The arbitrators must be members of
the California State Bar actively engaged in the practice of law with expertise
in the process of deciding disputes and interpreting contracts in mortgage
banking. The arbitrators shall award to the prevailing party, if any, as
determined by the arbitrators, all of its costs and fees. "Costs and Fees" means
all reasonable pre-award expenses of the arbitration, including the arbitrators'
fees, administrative fees, travel expenses, out-of-pocket expenses such as
copying and telephone, court costs and witness fees but shall exclude attorney's
fees except as allowable pursuant to paragraph 17, above. Upon the request of a
party the arbitrators award shall include findings of fact and conclusions of
law. The arbitrators shall provide copies of such award to the parties.
Any and/or all proceedings shall be conducted in Orange County,
California.
19. Mitigation and Offset. No amount received by the
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Consultant hereunder shall be subject to mitigation, due to the acceptance or
availability of other employment or otherwise. The Company shall have no right
to set-off or counterclaim in respect of any claim, debt or obligation against
any payments provided for in this Agreement.
20. Nature of Relationship. Nothing herein shall be
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construed to constitute the Company or the Consultant the agent, employee,
partner or joint venturer of the other.
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SOUTHERN PACIFIC FUNDING CORPORATION
By: /s/ XXXXXX X. XXXXXX
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Name: Xxxxxx X. Xxxxxx
Title: President
SOUTHERN PACIFIC FUNDING CORPORATION
By: /s/ XXXXXXX XXX
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Name: Xxxxxxx Xxx
Title: Executive Vice-President
B MORTGAGE ACCEPTANCE CORP. dba THE XXXXX
CONSULTING GROUP
By:_________________
Name: Xxxx X. Xxxxx
Title: President
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EXHIBIT 1
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ORIGINATORS PRODUCED BY COMPANY
AS OF AUGUST __, 1996
[ * ]
ORIGINALS PROCURED BY CONSULTANT
AS OF AUGUST __, 1996
[ * ]
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* This information has been omitted and filed separately with the Securities and
Exchange Commission and is subject to a confidential treatment request with
respect thereto.
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