CHANGE OF CONTROL AGREEMENT
This change of control agreement (the "Agreement") is made effective as of
November 1, 1998 by and between XXXXX FINANCIAL, a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx ("Employee").
WITNESSETH
WHEREAS, if certain corporate transactions were proposed or pending, such
potential transactions could result in distractions to Employee's performance at
a critical period; and
WHEREAS, Employee and Company wish to enter into this Agreement in order to
provide security to Employee as a means of maintaining performance under such
circumstances;
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein, the Company and Employee agree as follows:
1. TERM.
1.1 The term of this Agreement (the "Term") shall commence on November 1,
1998 and shall be for three years, subject to earlier termination in accordance
with the provisions of Section 4 hereinbelow. Beginning on November 1, 1998 and
on each day thereafter, the Term shall automatically be extended for an
additional day, unless the Company notifies Employee in writing that it does not
wish to further extend the Term.
2. POSITION AND TITLE.
2.1 The Company on behalf of itself and its affiliates and subsidiaries
currently employs Employee as Chairman of the Board of Directors, President and
Chief Executive Officer.
2.2 Employee shall devote substantially all of his efforts on a full-time
basis to the business and affairs of the Company and shall not engage in any
business or perform any services in any capacity whatsoever adverse to the
interests of the Company.
2.3 Employee shall at all times faithfully, industriously, and to the best
of his ability, experience, and talents, perform all of the duties of his
position.
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3. COMPENSATION.
3.1 As of the date of this Agreement, Employee's annual base salary is
$360,000. Employee's base salary and performance shall be reviewed periodically
at intervals approved by the Executive Compensation Committee of the Board of
Directors of the Company (the "Committee"), and Employee's base salary may be
increased from time to time based on merit or such other considerations as the
Committee may deem appropriate.
4. TERMINATION OF EMPLOYMENT.
For purposes of this Agreement, a Termination Without Cause shall exist if
Employee is terminated by the Company for any reason except:
(1) Intentional conduct or action by Employee which, in the opinion
of a majority of the Board of Directors (the "Board"), is
materially harmful to the Company;
(2) Willful failure by Employee to follow an order of the Board,
except in a case where the Employee reasonably believes in good
faith that following such order would be materially detrimental
to the interests of the Company; or
(3) Employee's conviction of a felony.
Additionally, if (a) Employee's annual base salary is reduced below the
amount stated in Paragraph 3.1 hereinabove (unless such reduction is part of an
across the board reduction affecting all executive officers of the Company), (b)
Employee is removed from or denied participation in incentive plans, benefit
plans, or perquisites generally provided by the Company to other executive
officers, (c) Employee's target incentive opportunity, benefits or perquisites
are reduced relative to other executive officers, (d) Employee is assigned
duties or obligations inconsistent with his position with the Company, (e)
Employee is required to relocate to an area outside the Metropolitan Los Angeles
area, or (f) there is a material reduction in Employee's position (status,
offices, titles, or reporting requirements), duties or responsibilities or a
significant change in the nature and scope of Employee's authority or his
overall working environment, such event shall be considered a Termination
Without Cause.
5. CHANGE OF CONTROL.
5.1 Employee shall be entitled to the benefits set forth in this Section 5
in the event:
(i) a Change of Control of the Company occurs at any time during the Term
of this Agreement; AND
(ii) Employee is Terminated Without Cause within a period of twenty-four
(24) months following the date of such Change of Control:
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(1) The Company shall pay Employee a lump-sum severance amount within
thirty (30) days following his Termination Without Cause equal to
the sum of (a) three (3) times the higher of the Employee's
annual base salary at the time of Termination Without Cause or
the annual base salary stated in Paragraph 3.1 hereinabove, and
(b) one (1) times the target annual bonus of Employee for the
fiscal year in which such Termination Without Cause occurs.
(2) The Company shall provide for Employee to receive medical,
dental, life, and disability insurance coverage for three (3)
years following his Termination Without Cause at levels and a net
cost to Employee comparable to that provided to Employee
immediately prior to Employee's Termination Without Cause. The
Company shall also provide Employee with the use of the
automobile then provided to him under the same terms as then in
force for three (3) years following his Termination Without
Cause.
(3) The Company shall pay for Employee's use of an executive office
with secretarial support in premises outside of Company
facilities for a period of six (6) months following his
Termination Without Cause.
5.2 All stock options, restricted stock and other stock based awards held by
Employee which are not then fully vested shall become 100% vested upon his
Termination Without Cause if the Termination Without Cause occurs within a
period of twenty-four (24) months following the date of a Change of Control.
5.3 If it is determined that any payment, distribution or benefit made or
provided by the Company to Employee pursuant to this Agreement (determined
without regard to any additional payments required pursuant to this sentence) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by the Employee 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 upon such determination the
Employee shall be entitled to receive with respect to each Payment an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income and employment taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
5.4 As used herein, the term "Change of Control" shall mean any of the
following events:
(W) any date upon which the directors of the Company who were
nominated by the Board for election as directors cease to constitute a
majority of the directors of the Company;
(X) the date of the first public announcement that any person or
entity, together with all Affiliates and Associates (as such
capitalized terms are defined
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in Rule 12b-2 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of such person or entity, shall have
become the Beneficial Owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company
representing 50% or more of the voting power of the Company (a "50%
Stockholder"), provided, however, that the terms "person" and
"entity," as used in this clause (Y), shall not include (1) the
Company or any of its subsidiaries, (2) any employee benefit plan of
the Company or any of its subsidiaries, including the Company s
Employee Stock Ownership Plan, or (3) any entity holding voting
securities of the Company for or pursuant to the terms of any such
plan;
(Y) a reorganization, merger or consolidation of the Company in which
the holders of voting stock of the Company immediately before the
reorganization, merger or consolidation will not own more than fifty
percent (50%) of the outstanding voting shares of the continuing or
surviving entity immediately after such reorganization, merger or
consolidation; or
(Z) a sale of all or substantially all of the assets of the Company
to an entity the voting securities of which are not then owned at
least fifty percent (50%) by the holders of the voting securities of
the Company immediately prior to the closing of the transaction.
5.5 Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts and benefits payable to Employee
under any provisions of this Agreement, and the amounts and benefits payable
under this Agreement shall not be offset by any amounts or benefits which
Employee earns from any other employment or services. Notwithstanding the
foregoing, in the event that Employee actually receives group medical, dental,
disability and/or life insurance benefits from a subsequent employer, the
Company shall not be required to provide such benefits to Employee to the extent
that the benefits which would be provided by the Company would be redundant.
6. COVENANTS.
6.1 Employee agrees that any and all confidential knowledge or
information, including but not limited to customer lists, books, records, data,
formulae, inventions, processes and methods, which have been or may be obtained
or learned by Employee in the course of his employment with the Company, will be
held confidential by Employee, and that Employee shall not disclose the same to
any person outside of the Company either during his employment with the Company
or after his employment by the Company has terminated.
6.2 Employee agrees that, upon termination of his employment with the
Company, he will immediately surrender and turn over to the Company all books,
records, forms, and all other property belonging to the Company.
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7. MISCELLANEOUS PROVISIONS.
7.1 All terms and conditions of this Agreement are set forth herein, and
there are no warranties, agreements or understandings, express or implied,
except those expressly set forth herein.
7.2 Any modifications to this Agreement shall be binding only if evidenced
in writing signed by all parties hereto.
7.3 Any notice or other communication required or permitted to be given
hereunder shall be deemed properly given if personally delivered or deposited in
the United States Mail, registered or certified and postage prepaid, addressed
to the Company at 000 Xxxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 or to
Employee at his most recent home address on file with the Company, or at other
such addresses as may from time to time be designated in writing by the
respective parties.
7.4 The laws of the State of California shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties involved.
7.5 In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable,
the same shall not affect any other provision of this Agreement, but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
7.6 This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of the Company and the personal representatives, heirs
and legatees of Employee.
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7.7 The term "Company" shall include, with respect to employment
hereunder, any subsidiary or affiliate of the Company, as well as any successor
employer following a Change of Control.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
XXXXX FINANCIAL
BY: /s/ Xxxx X. Xxxxxxx
-------------------
Chairman of the Executive Compensation Committee
of the Board of Directors
EMPLOYEE
BY: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
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