EMPLOYMENT RETENTION AGREEMENT
THIS AGREEMENT between Arcadia Financial Ltd. (the "Company") and
Xxxxx X. Xxxxxxxx III (the "Executive") is dated as of this 27 day of
January, 1998.
W I T N E S S E T H :
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights to
assure the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company
and the Executive as follows:
1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms
and conditions of Executive's employment commencing as of the date hereof
(the "Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this
Agreement shall supersede the Executive's Employment Agreement with the
Company November 7, 1996, as amended.
3. RETENTION PERIOD. The Company agrees to continue the
Executive in its employ, and the Executive agrees to remain in the employ of
the Company, for the period (the "Retention Period") commencing on the
Effective Date and ending on the date of any termination of the Executive's
employment in accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) CHANGE IN POSITION PRIOR TO
CHANGE OF CONTROL. During the Retention Period, prior to a Change of Control
(as hereinafter defined), the Executive's position (including titles),
authority and responsibilities as an officer of the Company shall be at least
commensurate with the highest of those held or exercised by him at any time
during the 90-day period immediately preceding the Effective Date; provided,
however, that the Chief Executive Officer of the Company may, in his sole
discretion, make changes to the Executive's position (including titles),
authority and responsibilities if he determines in good faith that such
changes are appropriate in light of the Company's business plan including,
without limitation, financial, strategic and operating objectives, and,
provided further, that in the event the Chief Executive Officer elects to
make a reduction in the Executive's position, authority or responsibilities
pursuant hereto, such changes shall not otherwise impact or in any way reduce
the Executive's compensation and benefits under Section 5 or the Company's
obligations under this Agreement including, without limitation, its
obligations under Section 7(d) hereof.
(b) CONSENT / WAIVER. Executive consents to any changes in
Executive's position, authority or responsibilities made by the Company prior
to the date hereof and waives Executive's rights, if any, to (i) terminate
this Agreement for Good Reason (as defined herein) pursuant to Section 6(d)
hereof as a result of, or based upon any such changes in Executive's
position, authority or responsibilities and (ii) to receive sums pursuant to
Section 7(d) hereof as a result of, or based upon any such changes in
Executive's position, authority or responsibilities.
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(c) CHANGE IN POSITION AFTER CHANGE OF CONTROL. In the event a
Change of Control (as hereinafter defined) occurs during the Retention
Period, thereafter the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those
held or exercised by him at any time during the 90-day period immediately
preceding the date of the Change of Control.
(d) CHANGE OF CONTROL. As used herein the term "Change of
Control" shall mean the closing of any transaction or series of transactions
by which the Company shall merge with (whether or not the Company is the
surviving entity) or consolidate into any other person or lease or sell
substantially all of its and its subsidiaries' assets (other than asset sales
in connection with automobile loan securitization transactions) substantially
as an entirety to any other person or by which any person, entity or group
(within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934)
acquires, directly or indirectly, 51% or more of the Company's outstanding
common stock (calculated on a fully diluted basis).
(e) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the
business and affairs of the Company and use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on
which the Executive served prior to the Effective Date, in each case
only if and to the extent not substantially interfering with the
performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is entitled.
It is expressly understood and agreed that the Executive's continuing to
serve on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company. The Executive shall be entitled to serve on additional outside
boards and committees with the prior written consent by the Chief Executive
Officer of the Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the
Retention Period, the Executive shall receive a base salary ("Base Salary")
at a monthly rate at least equal to the monthly salary paid to the Executive
by the Company and any of its affiliated companies immediately prior to the
Effective Date. The Base Salary shall be reviewed at least once each year
after the Effective Date, and may be increased (but not decreased) at any
time and from time to time by action of the Board or any committee thereof or
any individual having authority to take such action in accordance with the
Company's regular practices. Neither payment of the Base Salary nor payment
of any increased Base Salary after the Effective Date shall serve to limit or
reduce any other obligation of the Company hereunder. For purposes of the
remaining provisions of this Agreement, the term "Base Salary" shall mean
Base Salary as defined in this Section 5(a) or, if increased after the
Effective Date, the Base Salary as so increased.
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(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be eligible for each fiscal year of the Company ending during the
Retention Period an annual bonus, with the target amount, vesting and payment
thereof to be based on reasonable and customary criteria consistent with the
Company's practices for all executives holding the same office as the highest
office held by the Executive during the Retention Period (the "Annual
Bonus"). If a fiscal year of the Company begins, but does not end, during the
Retention Period, the Executive shall receive an amount with respect to such
fiscal year at least equal to the amount of the Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in such fiscal year
occurring during the Retention Period and the denominator of which is 365.
In the event the Executive has elected to receive his or her Annual Bonus for
such year in the form of restricted shares of the Common Stock of the
Company, upon termination of the Executive's employment for any reason the
Executive shall be deemed to have revoked such election as to any then
unvested shares of such restricted stock and the Executive's pro-rated Annual
Bonus for such year shall be determined based upon the amount of the cash
Annual Bonus the Executive would have received absent such election. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither
the Annual Bonus nor any bonus amount paid in excess thereof after the
Effective Date shall serve to limit or reduce any other obligation of the
Company hereunder.
(c) FRINGE BENEFITS. Subject to the Company's rights under
subsection (vii) of this Section 5(c), during the Retention Period, the
Company shall provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the
rules and regulations applicable thereto, Executive and his family
members shall be entitled to be covered by the Company's group health
and dental insurance plans presently in effect or hereafter adopted by
the Company and applicable to employees of the Company generally and
Executive shall be entitled to be covered by the Company's group
disability and life insurance plans presently in effect or hereafter
adopted by the Company and applicable to the employees of the Company
in general. The Company shall pay the premiums associated with such
coverage. In the event Executive makes a claim against any disability
policy provided to Executive by the Company pursuant to this Section
5(c)(i) and such policy calls for a waiting period which is applicable
to Executive's claim, the Company shall pay to Executive during such
waiting period his monthly base salary due during such period and
shall provide the other benefits due him under this Section 5(c)(i).
(ii) VACATION. Executive shall be entitled to four weeks of
vacation without loss of compensation or other benefits pursuant to
such general policies and procedures of the Company as are from time
to time adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by
the Company for all reasonable expenses incurred by him in connection
with the conduct of the Company's business for which he furnishes
appropriate documentation.
(iv) AUTOMOBILE. The Company shall at the Company's option
either (A) provide to Executive use of an automobile to be used by
Executive in conducting the
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Company's business; or (B) pay to Executive a monthly auto expense
in the amount of not less than Four Hundred Dollars ($400) per
month. In addition, in the event the Company provides to Executive
an automobile the Company shall reimburse Executive (1) an amount
equal to the reasonable cost of insuring and maintaining the
automobile used by Executive for the Company's business, and (2)
the cost of maintenance and the cost of gasoline and oil used in
the automobile and in the event of a loss under the policies
insuring said automobile, the amount of any deductible thereunder
applicable to such loss. Such insurance and the coverage and
deductibles thereof shall cover both the business and personal use
of such automobile by Employee, his family and invitees and shall
include such other terms and conditions as are reasonably
acceptable to Executive. Any such reimbursements shall be made
upon the Company's receipt of invoices evidencing incurrence of
such expenses. Executive shall also be paid a monthly amount equal
to the reasonable value of personal use of such automobile,
determined in accordance with applicable federal income tax
regulations.
(v) CLUB DUES. The Company shall reimburse Executive the
reasonable cost of the monthly or annual dues, as the case may be,
paid by Executive to maintain his status as a member of the Flagship
Athletic Club or of any other athletic club having equal or lesser
membership costs in lieu of such club. The Company shall also provide
to Executive and his family a membership at Olympic Hills Golf Club
and shall reimburse the Executive for the reasonable cost of the
monthly or annual dues, as the case may be, paid by Executive to
maintain such membership. If either such membership is a corporate
membership, upon termination of Executive's employment other than for
Cause or Death, such membership shall be converted to an individual
membership. The Company shall reimburse Executive for any fees
charged in connection with such conversion.
(vi) OFFICE AND SUPPORT STAFF. In the event a Change of
Control occurs during the Retention Period, the Executive shall
thereafter be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, substantially equal to the most favorable of the foregoing
provided to the Executive at any time during the 90-day period
immediately preceding the date of the Change of Control.
(vii) REDUCTION IN BENEFITS. At any time, and from time to
time, prior to a Change of Control, the Company shall be entitled to
reduce the benefits provided to the Executive under this Subsection
(c) provided that any such reduction must be made concurrently with an
equal reduction to the fringe benefits granted to all executives
holding the same office as the highest office held by the Executive
during the Retention Period.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon his death. The Company may
terminate Executive's employment during the Retention Period, after having
established the Executive's Disability, by giving the Executive written
notice of its intention to terminate his employment, and his employment with
the Company shall terminate effective on the 90th day after receipt of such
notice if, within 90 days after such receipt, the Executive shall fail to
return to full-time performance of his duties. For purposes of this
Agreement, "Disability" means disability which, after the expiration of more
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than 26 weeks after its commencement, is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or his legal representatives (such agreement to acceptability not
to be withheld unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days'
advance written notice to the Company, voluntarily terminate employment
during the Retention Period for any reason, provided that any termination by
the Executive pursuant to Section 6(d) of this Agreement on account of Good
Reason (as defined therein) shall not be treated as a voluntary termination
under this Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. As used in this Agreement, the term
"Cause" shall mean (i) any fraud, misappropriation or embezzlement by the
Executive in connection with the business of the Company or any of its
subsidiaries, (ii) any conviction of a felony or a gross misdemeanor by the
Executive that has or can reasonably be expected to have a detrimental effect
on the Company or any of its subsidiaries, (iii) any gross neglect by the
Executive of the duties assigned to him or her hereunder which continues for
a period of 90 days after written notice to the Executive of such neglect,
or, (iv) any material breach by Executive of any provisions of Section 12 of
this Agreement. It is understood and agreed that the Company may not
terminate Executive's employment for Cause in the event Executive is unable
to perform his or her duties due to partial or permanent or temporary or
total disability from injury or sickness.
(d) GOOD REASON. The Executive may terminate his employment
during the Retention Period for Good Reason. For purposes of this Agreement,
"Good Reason" means
(i) without the Executive's prior written consent, the
Company or any of its officers takes or fails to take any action which
changes the Executive's position (including titles), authority or
responsibilities which is inconsistent with Section 4 of this
Agreement or reduces the Executive's ability to carry out his duties
and responsibilities under Section 4 of this Agreement provided that
any change which is permissible under Section 4(a) of this Agreement
shall not constitute "Good Reason".
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial
or inadvertent failure remedied by the Company promptly after receipt
of notice thereof from the Executive, provided however, a reduction in
the fringe benefits granted to the Executive pursuant to Section
5(c)(vii) hereof which is consistent with reductions thereto made to
the fringe benefits granted to all executives holding the same office
as the highest office held by the Executive during the Retention
Period shall not constitute "Good Reason";
(iii) the Company's requiring the Executive to be employed at
any location more than 35 miles further from his principal residence
than the location at which the Executive was employed immediately
preceding the Effective Date; or
(iv) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated
by Section 13(b) of this Agreement.
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(e) WITHOUT CAUSE. The Company may terminate the Executive's
employment during the Retention Period without Cause. The Company shall give
Executive at least 15 days' advance written notice of any termination of
Executive's employment which is not for Cause and not on account of
Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company for Cause or by the Executive for Good Reason
during the Retention Period shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 14(c) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination by the Company for Cause,
within 10 business days of the Company's having actual knowledge of all of
the events giving rise to such termination, and in the case of a termination
by Executive for Good Reason, within 180 days of the Executive's having
actual knowledge of the events giving rise to such termination, and which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) 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 termination date is other than the
date of receipt of such notice, specifies such termination date (which date
shall be not more than 15 days after the giving of such notice). The failure
by the Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a
Notice of Termination is required, the date of receipt of such Notice of
Termination or, if later, the date specified therein and (ii) in all other
cases, the actual date on which the Executive's employment terminates during
the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH.
If the Executive's employment is terminated during the Retention Period by
reason of the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement other than those obligations accrued hereunder at the date of his
death, including, for this purpose (i) the Executive's full Base Salary
through the Date of Termination, (ii) the product of the target Annual Bonus
for the year in which the death occurred and a fraction, the numerator of
which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"). For the purposes of computing the Pro-rated Bonus
Obligation, the Executive shall be deemed to have revoked his election, if
any, to receive such bonus in the form of restricted stock of the Company and
to have earned the maximum cash Annual Bonus which he was eligible to earn
for the year in which the termination occurred, (iii) any compensation
previously deferred by the Executive (together with any accrued earnings
thereon) and not yet paid by the Company, (iv) any other amounts or benefits
then owing to the Executive under any of the Company's incentive compensation
plans, stock option plans, restricted stock plans or other similar plans as
determined pursuant to the terms of such plans and this Agreement and (v) any
amounts or benefits owing to the Executive under any of the Company's
employee benefit plans or policies (such amounts specified in clauses (i),
(ii), (iii),
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(iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless
otherwise directed by the Executive prior to his death, all Accrued
Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the date
when the Retention Period would otherwise have terminated, shall continue to
participate in or be covered under the benefit plans and programs referred to
in Section 5(c)(i) of this Agreement or, at the Company's option, to receive
equivalent benefits by alternate means at least equal to those provided in
accordance with Section 5(c)(i) of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be entitled
to receive disability and other benefits at least equal to the most favorable
level of benefits available to disabled employees and/or their families in
accordance with the plans, programs and policies maintained by the Company or
its affiliates relating to disability at any time during the 90-day period
immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or
voluntarily terminated by the Executive (other than on account of Good
Reason), the Executive shall receive all Accrued Obligations other than the
Pro-rated Bonus Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND
TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. . If, during
the Retention Period, the Company terminates the Executive's employment other
than for Cause or Disability, or the Executive terminates his employment for
Good Reason, the Executive shall receive all Accrued Obligations. In
addition, the Company shall pay to the Executive in a lump sum, a cash amount
equal to two (2) times the sum of the following amounts:
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
(2) an amount equal to the target cash Annual Bonus determined
without proration payable to the Executive in respect to the calendar
year in which the termination event occurred;
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) and (v)
hereof during the two calendar years preceding the Date of
Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical
insurance coverage referred to in Section 5(c)(i) of this
Agreement, at the Executive's election made prior to the Date of
Termination, the Company shall use its best efforts to secure
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conversion coverage and shall pay the cost of such coverage in lieu
of paying the lump sum amount attributable to such life or medical
insurance coverage.
In consideration of the Company's payment of the amounts payable to the
Executive pursuant to this Subsection 7(d) and the Executive's acceptance
thereof, the Executive and the Company shall enter into a mutual release in a
form acceptable to the Company releasing each other and their respective
agents from all claims arising from or in any way related to the Executive's
employment by the Company and the termination of such employment
relationship. The Executive shall not receive any of the amounts payable
pursuant to this Subsection 7(d) until after the Executive has executed and
delivered the release to the Company and all rescission periods under
applicable state and federal laws have expired without rescission of the
release by the Executive. The Company shall make such payment within fifteen
(15) days after the longest applicable rescission period has elapsed without
rescission.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the
Executive may have with respect to awards granted to him prior to or during
the Retention Period under any stock option, restricted stock or other plans
or agreements with the Company or any of its affiliated companies except as
to restrictions on the Executive's rights to any restricted stock received by
the Executive in lieu of a cash Annual Bonus as set forth in Sections 5(b),
7(a) and 7(d) of this Agreement. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan or program of
the Company or any of its affiliated companies shall be payable in accordance
with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, distribution, acceleration
of vesting or other benefit which the Executive receives or becomes entitled
to receive, whether alone or in combination, and whether pursuant to the
terms of this Agreement or any other agreement, plan or arrangement with the
Company or any of its affiliates or any of their respective successors or
assigns, but determined without regard to any additional payments required
under this Section 9 (collectively, the "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision),
or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with 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
(i) all taxes with respect to the Gross-Up Payment (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 (ii) the Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
(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
8
determination, shall be made by KPMG Peat Marwick or such other nationally
recognized accounting firm then auditing the accounts of 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. In the event that the Accounting Firm is
unwilling or unable to perform its obligations pursuant to this Section 9,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, 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. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty
in the application of Section 4999 of the Code (or any successor provision)
at the time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which 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 20 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 he 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:
(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
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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 limiting 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, 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. FULL SETTLEMENT. 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 circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or otherwise. In no
event shall the Executive be obligated to seek other employment by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and no amount payable under this Agreement
shall be reduced on account of any compensation received by the Executive
from other employment. In the event that the Executive shall in good faith
give a Notice of Termination for Good Reason and it shall thereafter be
determined by mutual consent of the Executive and the Company or by a
tribunal having jurisdiction over the matter that Good Reason did not exist,
the employment of the Executive shall, unless the Company and the Executive
shall otherwise mutually agree, be deemed to have terminated, at the date of
giving such purported Notice of Termination, by mutual consent of the Company
and the Executive
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and, except as provided in the last preceding sentence, the Executive shall
be entitled to receive only those payments and benefits which he would have
been entitled to receive at such date otherwise than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be
settled exclusively and finally by expedited arbitration, conducted before a
single arbitrator in Minneapolis, Minnesota, in accordance with the rules
governing employment disputes then in effect of the American Arbitration
Association. The arbitrator shall be approved by both the Company and the
Executive. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason
of arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the Company or any
of its affiliated companies, and their respective businesses, (i) obtained by
the Executive during his employment by the Company or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior
written consent of the Company, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(b) It is mutually acknowledged that by virtue of Employee's
former positions with the Company and its subsidiaries, he has become
possessed of certain valuable and confidential information concerning the
customers, business methods, procedures and techniques of the Company and its
subsidiaries. It is further understood that Employee has developed contacts
among the customers of the Company and its subsidiaries, and it is mutually
understood and agreed that the customers of the Company and its subsidiaries
and the business methods and procedures and techniques developed by the
Company and its subsidiaries are valuable assets and properties of the
Company and its subsidiaries. Without limitation, it is also specifically
acknowledged that great trust on the part of the Company and its subsidiaries
has resided in Employee, since Employee's former duties have included
involvement in the management, promotion and development of the Company's
business. Accordingly, the parties deem it necessary to enter into the
protective covenants set forth below, the terms and conditions of which have
been negotiated by and between the parties hereto:
(i) Employee agrees that during the Retention Period and until the
first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or on the behalf of any third party, perform
management, accounting, financial, marketing, sales, administrative or executive
duties, in any business conducted within the Territories (as defined below)
whose primary business consists of originating or purchasing automobile or truck
loans or leases from automobile or truck dealers, packaging such loans or
leases, reselling such loans or leases or servicing such loans or leases (the
"Restricted Activities") or for any subdivision or department of
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any business whose primary business does not consist of Restricted
Activities, but where the primary business of such subdivision or department
consists of Restricted Activities. As used in this Addendum, the term
"Territories" means any state in which any loans or leases originated or
acquired by the Company originated (determined by the location of the dealers
from whom the loans or leases were purchased or, in the case of loans or
leases, originated by the Company where the borrower or lessee resides).
(ii) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other
sources from which the Company or any subsidiary acquires loans or leases or
from whom the loan or lease packages are received by the Company or any
subsidiary.
(iii) Employee agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others,
solicit, divert or hire away, or in any manner attempt to solicit, divert or
hire away any person employed by the Company or any subsidiary, whether or
not such employee is a full-time employee or a temporary employee of the
Company or any subsidiary, and whether or not such employment was pursuant to
a written or oral contract of employment and whether or not such employment
was for a determined period or was at will.
(c) Employee acknowledges that the provisions of this Section 12
constitute a material inducement to the Company to enter into the Agreement.
Employee further acknowledges that the Company's remedy at law for a breach
by him of the provisions of this Section 12 will be inadequate. Accordingly,
in the event of a breach or threatened breach by Employee of any provision of
this Section 12, the Company will be entitled to injunctive relief in
addition to any other remedy it may have. If any of the provisions of, or
covenants contained in, this Section 12 are hereafter construed to be invalid
or unenforceable in any jurisdiction, the same will not affect the remainder
of the provisions or the enforceability thereof in any other jurisdiction,
which will be given full effect, without regard to the invalidity or
unenforceability in such other jurisdiction. If any of the provisions of, or
covenants contained in, this Section 12 are held to be unenforceable in any
jurisdiction because of the duration or geographical scope thereof, the
parties agree that the court making such determination will have the power to
reduce the duration or geographical scope of such provision or covenant and,
in its reduced form, such provision or covenant will be enforceable;
provided, however, that the determination of such court will not affect the
enforceability of this Section 12 in any other jurisdiction.
(d) In no event shall an asserted violation of the provisions of
this Section 12 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement or under any other
agreement, plan or arrangement.
13. 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. The Company shall require any successor
to all or substantially all
12
of the business and/or assets of the Company, whether direct or indirect, by
purchase, merger, consolidation, acquisition of stock, or otherwise, by an
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota, applied without reference to principles of conflict of laws.
(b) AMENDMENTS. 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) NOTICES. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Xxxxx X. Xxxxxxxx III
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
If to the Company: Arcadia Financial Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Secretary
(with a copy to the attention of
the General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be
effective when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
15. ADDITIONAL CONSIDERATION. As additional consideration for
Executive's agreement to the terms and conditions hereof, the Company shall
within sixty (60) days of the date hereof (i) grant to Executive a non-statutory
stock option to purchase shares of the
13
Company's Common Stock at an exercise price equal to the fair market value of
the stock on the grant date; (ii) reissue certain stock options held by
Executive on the date hereof at exercise prices equal to the fair market
value of the stock on the reissuance date plus a premium to be determined by
the Board (subject to new vesting periods), and/or (iii) make an additional
grant of Restricted Stock pursuant to the Company's 1998-2000 Restricted
Stock Election Plan, as amended.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
ARCADIA FINANCIAL LTD.
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
----------------------------
Title:
---------------------------
/s/ Xxxxx X. Xxxxxxxx III
---------------------------------
Xxxxx X. Xxxxxxxx III
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