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EXHIBIT 10.4
August 23, 1997
Xxxxx X. Xxxxxxx
0000 Xxxxxx Xxxx
Xxx Xxx, XX 00000
Dear Xx. Xxxxxxx:
SUBJECT: EMPLOYMENT AGREEMENT
We wish you to accept employment with ACC Consumer Finance Corporation (the
"Corporation"), a subsidiary of Household International, Inc. ("Household") as
of the closing date ("Closing Date") of the merger of the Corporation and a
subsidiary of Household, and to provide you with fair and equitable treatment
along with a competitive compensation package. Also, we wish to assure your
continued attention to your duties without any possible distraction arising out
of uncertain personal circumstances in a change in control environment. We
recognize that in the event of a change in control of the Corporation or
Household it is likely that your duties and responsibilities would be
substantially altered.
1. a. Beginning with the Closing Date, you will be employed by the
Corporation as President and Chief Executive Officer. In that
capacity you are entitled to the following:
i. A minimum annual salary of $249,000;
ii. An annual bonus having a targeted value equal to seventy
five per cent (75%) and a maximum value of one hundred
twenty five per cent (125%) of your annualized salary as of
the end of the period in which the bonus is earned. The
amount of bonus for any year that you actually receive,if
any, will depend on the achievement of the corporate and
your individual goals established for that year and the
terms of the Household International Corporate Executive
Bonus Plan, and any successor or substitute plan or plans
(the "Bonus Plan"). However, subject only to the following
sentence, your minimum bonus for calendar 1997 and calendar
1998 will be $249,000 or if greater 100% of your annualized
salary as of the end of the year in which the bonus is
earned. Your bonus
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will be prorated based on the number of elapsed months in
the performance period in the case of death, permanent and
total under the Household Retirement Income Plan or any
successor tax qualified defined benefit plan; and
iii. Other compensation, benefits and perquisites as described
in, and in accordance with, Household's compensation,
benefit and perquisite plans (the "Plans") applicable to
senior executives of Household.
b. You will receive, as of the Closing Date, a grant of
an option to purchase 25,000 shares of common stock of
Household. Such option will have a 10-year term, will be
granted with an exercise price equal to the fair market value of
a share of Household common stock on such Closing Date and will
become exercisable at a rate of 25% per annum of the aggregate
number of shares under the option on each of the first, second,
third and fourth anniversaries of the date of the grant. You
will be eligible for future grants of stock options and/or
restricted stock rights under the Household International 1996
Long-Term Executive Incentive Compensation Plan, and any
successor or substitute plan or plans (the "Long-Term Plan").
The amount and frequency of future grants shall be solely
determined by Household's Board of Directors and shall reflect
your level of responsibility with Household or its affiliates.
2. Subject to termination as provided herein, the initial term of this
Agreement shall be for three (3) years from the Closing Date. Thereafter
the term shall be for 18 whole calendar months, and shall be "evergreen";
that is shall continue monthly as an 18 month term, unless the Corporation
gives to you not less that 17 whole calendar months notice that the term
as monthly continued shall not be so continued; provided further, that in
no event shall the term be continued beyond your sixty-fifth birthday.
This Agreement may also be terminated prior to that time by Household or
you, with or without cause, upon ninety (90) days prior written notice and
with the consent of both parties to this Agreement.
3. During your employment with the Corporation or Household (or any
affiliate of Household) you will devote your reasonably full business time
and energies to the faithful and diligent performance of the duties
inherent in, and implied by, your position.
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4. In consideration of your employment with the Corporation or Household (or
any affiliate of Household), it is mutually agreed that:
a. In the event your employment is terminated during the term of this
Agreement by Household or the Corporation or such Household affiliate
for any reason other than:
i. misconduct which is willful and deliberate knowing that it is
detrimental in a significant way to the interests of the
Corporation or Household;
ii. death; or
iii. inability, for reasons of disability, reasonably to perform your
duties for 6 consecutive calendar months;
b. In the event that during the term of this Agreement you resign your
position with the Corporation or Household or such Household affiliate
because, within 6 whole calendar months prior to your resignation, any
successor to Household, by acquisition of stock or substantially all
of the assets, by merger or otherwise, failed to expressly adopt or
otherwise repudiated this Employment Agreement; or
c. In the event that during the term of this Agreement you resign your
position with the Corporation or Household or such Household affiliate
because within 6 whole calendar months prior to your resignation one
or more of the following events occurred:
(i) your annual salary was reduced;
(ii) your annual target bonus or your status or responsibilities were
substantially changed;
(iii) your benefits under the Household Retirement Income Plan or any
successor tax qualified defined benefit plan were reduced for
reasons other than to maintain its tax qualified status and such
reductions were not supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your benefits under HSRIP
were reduced;
(iv) your other benefits or perquisites were reduced and such
reductions were not uniformly applied with respect to all senior
executives of Household;
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(v) you were reassigned to a geographical area outside of the San
Diego, California, metropolitan area, but only if such
reassignment occurred on or prior to the second anniversary of
the Closing Date;
(vi) any successor to the Corporation by acquisition of stock or
substantially all of the assets, by merger or otherwise, failed
to expressly adopt or otherwise repudiated this Employment
Agreement;
(vii) you received written notice that your employment contract was
not renewed; or
(viii) over 50% of the Corporation's stock is not held by Household,
or Household sells substantially all of the assets of,
liquidates, or otherwise disposes of, the Corporation;
Household shall be required, and hereby agrees, to make promptly a lump sum
cash payment to you in an amount equal to 100% of your then annual rate of
salary plus 100% of the average of the last two years' cash bonuses;
provided, however, that if your termination of employment should occur
during the initial three (3) year term of this Agreement, such cash payment
shall equal the greater of (i) the amount set forth above or (ii) the
product of (A) the sum of 100% of your then annual rate of salary plus the
greater of 100% of the average of the last two years' cash bonuses or
$249,000, times (B) the number of whole and partial years remaining in such
initial term; and provided further that if the term of this Agreement is
less than 18 months because you are within 18 months of becoming age 65,
the amount shall be multiplied by a fraction the numerator of which is the
number of months left in the term, and the denominator of which is 18.
This payment shall be in addition to all other compensation and benefits
accrued to the date of termination of employment. Household shall also be
required, and hereby agrees, to make promptly an additional cash payment to
you in an amount equal to the product of (i) 75% of your annual salary,
times (ii) a fraction, the numerator of which equals the number of days you
were employed by the Corporation during the calendar year in which your
termination occurs and the denominator of which equals 365. Payments under
this paragraph 4 are in lieu of any other severance that Household may
provide for its employees.
5. You are not required to mitigate the amount of any payments to be made by
the Corporation, Household or any affiliate thereof pursuant to this
Agreement by seeking
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other employment, or otherwise, nor shall the amount of any payments
provided for in this Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by another employer
after the date of termination of your employment with Household, the
Corporation or any affiliate thereof.
6. Except as provided below, if any amounts payable to you (whether or not
such amounts are payable pursuant to this Agreement) (the "Severance
Payments") are subject to the tax (the "Excise Tax") imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any
similar federal, state or local tax that may hereafter be imposed), then
Household shall pay to you within 30 days after you are terminated an
additional amount (the "Gross-Up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total Payments
(as hereinafter defined) and any federal, state and local income tax and
Excise Tax upon the payment provided for by this paragraph 6, shall be
equal to the Total Payments. For purposes of determining whether any of
the Severance Payments will be subject to the Excise Tax and the amount of
such Excise Tax: (i) any other payments or benefits received or to be
received by you in connection with a change in ownership or effective
control within the meaning of Section 280G of the Code or your termination
of employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with Household or the Corporation,
any person whose actions result in a change in control or any other person
affiliated with Household, the Corporation or such person) (which,
together with the Severance Payments, constitute the "Total Payments")
shall be treated as "Parachute Payments" within the meaning of Section
280G(b)(2) of the Code, and all "Excess Parachute Payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel reasonably selected
by Household such other payments or benefits (in whole or in part) do not
constitute Parachute Payments, or such Excess Parachute Payments (in whole
or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code, or
are otherwise not subject to the Excise Tax; (ii) the amount of the Total
Payments which shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the Total Payments and (B)
the amount of Excess Parachute Payments (after applying this paragraph 6);
and (iii) the value of any non-cash benefits or any deferred payments or
benefit shall be determined by an accounting firm reasonably selected by
Household in accordance with the principles
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of Sections 280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, you shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state
and locality of your residence on the event of termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time of the event of termination, you shall repay to
Household within ten days after the time that the amount of such reduction
in Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment
results in a reduction in Excise Tax and/or federal and state and local
income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder
at the time of the event of termination (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), Household shall make an additional gross-up payment in
respect of such excess within ten days after the time that the amount of
such excess is finally determined.
However, if any part or all of the amounts to be paid to you constitute
"Parachute Payments" within the meaning of section 280G(b)(2)(A) of the
Code, and a reduction of the amount by 10% or less would totally avoid the
imposition of any Excise Tax, such amounts shall be reduced so that the
aggregate present value of the amounts constituting such Parachute Payments
will be equal to 299% of your "annualized includible compensation for the
base period," as such term is defined in section 280G(d)(1) of the Code.
For the purpose of this subparagraph, present value shall be determined in
accordance with section 280G(d)(4) of the Code.
7. If a dispute arises regarding the termination of your employment or the
interpretation or enforcement of this Agreement and you obtain a final
judgment in your favor from a court of competent jurisdiction from which
no appeal may be taken, whether because the time to do so has expired or
otherwise, or your claim is settled by Household, the Corporation or its
successor prior to the rendering of such a judgment, all reasonable legal
and
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other professional fees and expenses incurred by you in contesting or
disputing any such termination or in seeking to obtain or enforce any right
or benefit provided for in this Agreement or in otherwise pursuing your
claim will be promptly paid by Household, the Corporation or its successor
with interest thereon at the highest statutory rate of your state of
domicile for interest on judgments against private parties from the date of
payment thereof by you to the date of reimbursement to you by Household,
the Corporation or its successor.
8. During the course of your performance under this Agreement, you will
receive and be exposed to confidential and proprietary information
relating to Household's and the Corporation's business practices and
strategies (including the business practices and strategies of the
Corporation's predecessor, ACC Consumer Finance Corporation)
("Confidential Information"). Such Confidential Information may include
but shall not be limited to confidential and proprietary information that
is marked "Confidential" or its equivalent and the Corporation's marketing
and customer support strategies, financial information, including sales,
costs, profits and pricing methods, internal organization, employee lists
and customer lists. At all times during the term of employment and
thereafter, you will hold in strictest confidence and will not disclose or
use any Confidential Information, except as such disclosure or use may be
required in connection with your work for the Corporation or Household.
Notwithstanding the foregoing, "Confidential Information" shall not be
deemed to include information which you can demonstrate: (i) is now, or
hereafter becomes, through no act or failure to act on your part,
generally known or publicly available; or (ii) was known by you prior to
July 15, 1993.
9. During the initial three (3) year term of this Agreement you shall not
invest or engage in any business which is principally a sub-prime consumer
auto lender (the "Competitor"), or accept employment with or render
services to any Competitor within the United States or Canada. During the
twenty-four (24) calendar months following the initial three (3) year term
of this Agreement, you shall not invest or engage in any business which is
a Competitor or accept employment with or render services to any
Competitor within the United States or Canada unless that Competitor has
been in existence and operating for more than three (3) years at that
time. For the period ending one (1) year after the termination of this
Agreement or after your termination of employment, whichever is later, you
will not solicit to hire any employee of the Corporation or Household
which would result in a termination of his or her
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employment with the Corporation or Household in order to join any company
or organization in which you have an interest, financially or otherwise.
10. The parties intend that this Agreement shall supersede any employment
agreement entered into by and between you and ACC Consumer Finance and
American Credit Corporation and/or any subsidiary or affiliate thereof,
including the agreement dated November 1, 1995.
11. The provisions of this Agreement shall be construed, to the extent
possible, so as to guarantee their enforceability. In case any one or
more of the provisions contained in this Agreement shall, for any reason,
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
in it.
12. Any successor to the Household or the Corporation, by acquisition of
stock or substantially all of the assets, by merger or otherwise, shall be
required to adopt and abide by the terms of this Agreement. This
Agreement, and any rights to receive payments hereunder, may not be
transferred, assigned or alienated by you.
13. All benefits under this Agreement shall be general obligations of the
Corporation or Household which shall not require the segregation of any
funds or property. Notwithstanding the foregoing, in the discretion of
the Corporation or Household, the Corporation or Household may establish a
grantor trust or other vehicle to assist it in meeting its obligations
hereunder, but any such trust or other vehicle shall not create a funded
account or security interest for you.
14. This Agreement may only be amended or terminated by written agreement,
signed by both of the parties. It is agreed that Household may assign
this Agreement to the Corporation or any of its affiliates, but such
assignment shall not release Household or Corporation from their
obligations hereunder.
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Our signatures below indicate our mutual agreement and acceptance of the
foregoing terms and provisions, all as of the date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Xxxxxxxx X. Xxxxx
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Xxxxxxxx X. Xxxxx
Group Executive
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
