Exhibit 10.1
EMPLOYMENT AGREEMENT
XXXXXX XXXXXXX
This EMPLOYMENT AGREEMENT ("Agreement"), effective as of June 1, 2005, by
and between Franklin Credit Management Corporation and Xxxxxx Xxxxxxx.
RECITALS
FCMC is a Corporation organized under the laws of the State of Delaware.
FCMC desires to employ Employee, and Employee desires to accept employment
from FCMC.
The parties desire to record the arrangements made for such employment.
AGREEMENT
IT IS, THEREFORE, AGREED:
1. Definitions: For the purposes of this Agreement, the following
capitalized terms shall have the following meanings:
a. FCMC or Company shall mean Franklin Credit Management Corporation
and its current and future subsidiaries.
b. Employee shall mean Xxxxxx Xxxxxxx.
c. Competitor shall mean any person, company, firm or corporation
which: (1) actually competes with the Company, its subsidiaries or affiliates in
the acquisition, origination, servicing and resolution of performing,
sub-performing, and nonperforming residential mortgage loan and residential real
estate; (2) is engaged in a business in which the Company, its subsidiaries or
affiliates are principally engaged; or (3) is engaged in a business which the
Company, its subsidiaries or affiliates have at the date of Employee's
termination of employment reasonably certain plans to principally engage within
twelve months of the Employee's termination (collectively, "Business of the
Company").
d. Executive Bonus Pool shall mean that bonus pool established pursuant
to Company policy, for each fiscal year, equal to ten (10%) percent of the after
tax consolidated net profits of the Company in excess of $500,000, which
percentage may be adjusted in the reasonable discretion of the Company's Board
of Directors.
e. Board of Directors shall mean the Board of Directors of the Company
or any committee of the Board of Directors that is then charged with making
compensation decisions with respect to the Employee.
f. Change in Control shall mean the occurrence of one or more of the
following events:
(1) If (i) any "person"(as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing twenty percent (20%) or
more of the total voting power represented by the Company's then outstanding
voting securities who is not already such as of the date of this Agreement, and
(ii) Xxxxxx X. Xxxx, members of Mr. Axon's family, and entities in which Mr.
Axon has an interest ("TJA") shall have beneficial ownership of less than twenty
percent (20%) or more of the total voting power represented by the Company's
then outstanding voting securities;
(2) The consummation of a tender or exchange offer; one or more
contested elections related to the election of directors of the Company; a
reorganization, merger or consolidation, or the acquisition of assets of another
corporation, or any combination of the foregoing transactions (each, a "Business
Combination"), which results in a change in the composition of the Board, as a
result of which fewer than fifty percent (50%) of the directors are Incumbent
Directors.
(3) Company's shares shall cease to be registered under Section
12(b) or 12(g) under the Securities Exchange Act of 1934, as amended.; or,
(4) A sale or other disposition of all or substantially all of the
assets of the Company.
Notwithstanding the foregoing, the term "Change of Control" shall
not be deemed to have occurred if the Company files for bankruptcy protection,
or if a petition for involuntary relief is filed against the Company.
g. Incumbent Directors shall mean directors who either (A) are
directors of the Company as of the date hereof or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
those directors whose election or nomination was not in connection with any
transaction described in subsection (2) of Section 1(f) or in connection with an
actual or threatened proxy contest relating to the election of directors of the
Company.
2. Employment/Term. Effective June 1, 2005, FCMC hereby employs Employee
as an Executive Vice President of FCMC. The term of employment shall be for the
period commencing June 1, 2005 and ending on the date the term of employment is
terminated pursuant to Section 11 of this Agreement.
3. Place of Employment. During the term of employment, Employee shall be
based at the Company's principal executive offices, which shall be in the New
York City metropolitan area (including the surrounding area of New Jersey),
subject to reasonable travel required in the performance of Employee's duties.
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4. Duties and Authority.
a. The responsibilities of Employee shall initially include management,
control, administration, and operation of the following aspects of the business
and affairs of the Company and its subsidiaries:
(1) managing and supervising the day-to-day management of the loan
servicing operations of the Company,
(2) assisting in the execution of the Company's business plan and
ensuring that all financial and non-financial goals are met,
(3) assisting in the oversight of Tribeca Lending Corporation, the
company's loan origination operation,
(3) all other duties assigned by the Chief Executive Officer or the
Board of Directors.
b. Employee shall report directly to the Chief Executive Officer.
5. Compensation. FCMC shall pay to Employee the following compensation:
a. Salary. Employee shall receive an initial annual salary of $230,000
payable on a semimonthly basis, which annual salary may be adjusted by the Board
of Directors.
b. Bonuses. In addition to the salary set forth above, Employee shall
receive an annual bonus based partially on the net income after taxes of FCMC.
The annual bonus shall be determined as follows:
(1) Employee shall be entitled to participate in the Executive Bonus
Pool under the terms and conditions of such Executive Bonus Pool and subject to
5(b)(2) below.
(2) For the year ending December 31, 2005, the targeted bonus shall
be $150,000 with 80% of the actual bonus based on the financial performance of
the Company and 20% actual bonus based on Employee's personal performance. For
each year subsequent to 2005, the Employee will be advised of his target bonus
amount no later than April 30 of that year.
c. Employee Equity Plans. As additional compensation for services
provided under this Agreement, Employee shall be entitled to participate in any
stock option or purchase plan or other equity compensation arrangement provided
by FCMC to its other executive officers. The forgoing shall not apply to stock
or options granted to an individual, not previously an employee or director of
the company, or following a bonafide period of non-employment, as an inducement
material to entering into employment with the Company.
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6. Certain Benefits.
a. Vacation and other benefits. During each twelve-month period that
Employee is employed by FCMC, Employee shall be entitled to 4 weeks (i.e., 20
days) of paid vacation plus two personal days, five sick days and regular
holidays in accordance with the policies of FCMC. Up to five (5) unused vacation
days can be accrued or aggregated from one twelve-month period to the next. In
addition, Employee shall be entitled to participate in all present and future
benefit plans and/or fringe benefits provided by FCMC to its other executive
officers.
b. Car Allowance. Throughout the term of employment, Employee shall
receive a car allowance of $600 per month and a paid parking space in the
vicinity of the Company's offices.
c. Annuity. Throughout the term of employment, Employee shall receive a
$5,000 per year allowance to cover the cost of a retirement annuity, payable
each year on or before December 31.
c. Expense Reimbursements. Employee is authorized to incur reasonable,
ordinary and necessary expenses in carrying out his duties and responsibilities
under this Agreement, including, without limitation, expenses for travel,
business entertainment and similar items related to such duties and
responsibilities. The Company will reimburse Employee for all such expenses upon
presentation by Employee from time to time of appropriately itemized and
documented accounts of such expenditures, consistent with the Company's policy.
7. Acknowledgments. FCMC conducts its business in both the New York City
metropolitan area and on a national basis. Employee acknowledges that:
a. FCMC's services are highly specialized;
b. FCMC has a proprietary interest in its methods and processes; and,
c. Documents and other information regarding FCMC's methods, pricing
and costs are highly confidential and constitute trade secrets.
8. Trade secrets and confidential information. During the term of this
Agreement, Employee may have access to, and become familiar with, various trade
secrets and confidential information belonging to FCMC, its subsidiaries or
affiliates. Employee acknowledges that such confidential information and trade
secrets are owned and shall continue to be owned solely by FCMC, its
subsidiaries or affiliates. During the term of his employment and for thirty-six
(36) months (or for so long as a trade secret remains a trade secret under
applicable law) after such employment terminates for any reason, regardless of
whether termination is initiated by FCMC or Employee, Employee agrees not to
use, communicate, reveal or otherwise make available such information for any
purpose whatsoever, or to divulge such information to any person, partnership,
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corporation or entity other than Employer or persons expressly designated by
Employer, unless Employee is compelled to disclose it by judicial process.
9. Restrictive covenants.
a. Full-time Employment. During the period of his employment, Employee
shall not, directly or indirectly, alone or as a member of any partnership, or
as an officer, director, shareholder, or employee of any corporation, engage in
or be concerned with any other paid employment, except as otherwise authorized
in writing by the Company. Notwithstanding the foregoing, nothing herein shall
preclude Employee from participating in charitable, educational, religious and
community affairs and organizations, from serving as a member of the board of
directors of a corporation (so long as such corporation does not compete
directly or indirectly with the Company and is not otherwise involved in the
purchase and/or sell of sub-prime loans), from managing personal investments
made by him, and leasing and managing any investment property including his
principal residence.
b. Non-competition. Employee agrees that:
(1) During the period of Employee's employment by the Company and
during the period, if any, Employee is entitled to receive periodic payments
pursuant to Section 12(b)(3) of this Agreement, Employee will not accept
employment with, or act as a consultant, contractor, advisor, or in any other
capacity for, a Competitor, or enter into competition with FCMC, its
subsidiaries or affiliates, with regard to the Business of Company either by
himself or through any entity owned or managed in whole or in part by Employee,
and Employee shall not make any preparations to compete with the Company with
regard to the Business of Company.
(2) During the term of this Agreement and for a period of twelve
(12) months after termination of Employee's employment by the Company for any
reason, regardless of whether the termination is initiated by FCMC or Employee,
Employee shall not solicit or make, or cause to make, any offer of employment to
any employee of the Company, it subsidiaries or affiliates, for the purpose of
inducing such employee to terminate his or her employment with the Company, or
its subsidiaries or affiliates.
(3) For a period of twelve (12) months after termination of
Employee's employment for any reason, regardless of whether the termination is
initiated by the Company or Employee, or for a period of time equal to the
length of Employee's employment with FCMC if such tenure is less than twelve
(12) months, Employee will not, directly or indirectly, solicit for the purchase
or sale of financial assets any person, company, firm, or corporation from whom
the Company purchased financial assets or to whom the Company sold assets
originated by the Company during the last twelve (12) months of Employee's
employment or during the period of Employee's employment with the Company if
such tenure is less than twelve (12) months. Employee agrees not to so solicit
such customers on behalf of himself or any other person, firm, company, or
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corporation, if such solicitation is for the purchase or sale of the same or
similar types of financial assets purchased or sold by the Company.
c. The parties have attempted to limit Employee's right to compete only
to the extent necessary to protect FCMC from unfair competition. The parties
recognize, however, that reasonable people may differ in making such a
determination. Consequently, the parties hereby agree that, if the scope or
enforceability of the restrictive covenant is in any way disputed at any time, a
court or other trier of fact may modify and enforce the covenant to the extent
that it believes the covenant is reasonable under the circumstances existing at
that time.
d. Employee further acknowledges that each of the covenants set forth
in this Section is reasonable and necessary for the protection of the Company's
business interests, that irreparably injury will result to the Company if
Employee breaches any of the terms of said covenants, and that in the event of
Employee's actual or threatened breach of any such covenants, the Company will
have no adequate remedy at law.
10. Remedies. Employee acknowledges that: (1) compliance with Sections 8
and 9 herein is necessary to protect the Company's business and good will; (2) a
breach of those Sections will irreparably and continually damage FCMC; and (3)
an award of money damages will not be adequate to remedy such harm.
Consequently, Employee agrees that, in the event he breaches or threatens to
breach any of these covenants, FCMC shall be entitled to both: (1) a preliminary
or permanent injunction in order to prevent the continuation of such harm; and
(2) money damages, insofar as they can be determined, including, without
limitation, all reasonable costs and attorneys' fees incurred by the FCMC in
enforcing the provisions of this Agreement if FCMC is successful in establishing
Employee's breach of these covenants. Nothing in this Agreement, however, shall
prohibit FCMC from also pursuing any other remedy.
11. Termination.
a. Termination by Either Party. Either party may terminate Employee's
employment "without cause" by giving thirty (30) days prior written notice to
the other.
b. Termination by Company. Employee's employment may be terminated by
the Company "for cause" if he:
(1) fails or refuses to perform one or more of his material assigned
duties to the Company;
(2) fails or refuses to comply with one or more policies of the
Company;
(3) breaches any of the material terms of this Agreement; or,
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(4) commits any criminal, fraudulent or dishonest act related to his
employment (for example, other than an arm's length dispute relating to the
erroneous reporting of an immaterial amount as an expense) relating to the
Company or any of its assets or opportunities;
Notwithstanding the forgoing, the Company shall not be entitled to terminate
Employee for cause under subsections (1), (2) or (3) of this subsection unless:
(i) Employee has been given written notice describing in reasonable detail the
alleged breaches and stating that such breaches are grounds for termination for
cause under this Section, and (ii) Employee fails to cure such breaches within
ten (10) days after receipt of such notice.
In the event that the Company terminates Employee for cause pursuant to the
provisions of this subsection and it is later determined by a court of competent
jurisdiction that such cause did not exist, Employee's termination shall be
deemed to be a termination by the Company without cause. In such event, Employee
shall be entitled to receive Severance pursuant to the terms of this Agreement
as if the termination was made by the Company without cause.
c. Termination by Employee. Following a Change in Control, Employee
shall have the right to terminate his employment for "good reason." For the
purposes of this Agreement, good reason shall be limited to the following:
(1) Employee is asked to resign, in writing, by the Board of
Directors or is terminated by the Company without cause; or
(2) Any material diminution by the Company of Employee's duties or
responsibilities, except in connection with the termination of Employee's
employment for cause, as a result of permanent disability, or as a result of
Employee's death.
d. Termination Due to Incapacity. In the event Employee is unable to
perform his material duties because of illness or disability for a continuous
period of 120 days, the Company may terminate this Agreement without further
notice. For the purposes Section 12 of this Agreement such a termination due to
the illness or disability of Employee shall be deemed at termination by the
Company without cause.
e. Termination Due to Death. This Agreement shall terminate upon the
death of Employee, subject to the rights and obligations of each party contained
herein. For the purposes Section 12 of this Agreement such a termination due to
the death of Employee shall be deemed at termination by the Company without
cause and all amounts otherwise due to Employee pursuant to this Agreement shall
be paid to Employee's estate.
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12. Severance.
a. Conditions under which Severance is Paid.
(1) Termination for Cause. In the event the Company terminates
Employee's employment for cause, Employee shall receive nothing other than the
severance payments provided in Subsections (b)(1) and (b)(3) of this Section.
(2) Termination Without Cause. In the event the Company terminates
Employee's employment without cause, Employee shall receive the severance
payments provided in subsections (b)(1), (b)(2), (b)(3) and (b)(4) of this
Section.
(3) Termination by Employee. In the event Employee terminates his
employment without good reason, Employee shall receive nothing other than the
severance payments provided in Subsections (b)(1) and (b)(3) of this Section.
(4) Termination by Employee for Good Reason. In the event Employee
terminates his employment for good reason following a Change in Control,
Employee shall receive the severance payments provided in subsections (b)(1),
(b)(2), (b)(3) and (b)(4) of this Section. Notwithstanding the forgoing, this
subsection shall not apply to a termination of Employee for cause.
b. Amount of Severance. To the extent provided in subpart (a) of this
Section, Employee shall be entitled to receive the severance payments:
(1) Accrued Vacation. Employee shall be paid by the Company a lump
sum in respect of all accrued and unused vacation within ten days after
termination of employment in an amount based on Employee's current base salary.
(2) Bonus. Employee shall be paid a prorated bonus from the
Executive Bonus Pool based on his then target bonus as described in Section
5(b)(2) within thirty days after termination of employment.
(3) Expenses. Employee shall be reimbursed for expenses already
incurred under Section 6(c) of this Agreement.
(4) Periodic Payments. Employee shall be entitled to receive an
amount based on his current base salary for the periods set forth below after
such termination. In addition, if Employee is enrolled in and covered by a
medical insurance plan offered by the Company on the date of termination of
employment, Employee shall be entitled, at his election, to receive either (x)
continued health benefits for the periods set forth below, or (y) an amount
equal to the medical insurance premiums paid by the Company on behalf of the
Employee for the periods set forth below.
(i) In the event the Termination occurs prior to a Change in
Control: 18 months.
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(ii) In the event the Termination occurs at the time of or
following a Change in Control: 24 months.
Such payments shall be made semimonthly for the periods specified above.
c. Effect of Severance Payments. The severance payments set forth in
this Section are payments made as liquidated damages and not as a penalty. In
the event Employee's employment is terminated and Employee is not entitled to
severance in accordance with subsection (a) of this Section, Employee shall be
entitled to no further compensation or payments from the Company, except as set
forth above.
d. Cooperation. On termination of employment with the Company, Employee
shall provide the Company a written resignation from all positions with the
Company, its subsidiaries and affiliates, and any other documents that the
Company may need to effectuate severance of the relationship
13. Return of the Company Property. On termination of employment, Employee
shall return to the Company all keys, correspondence, contracts, reports, price
lists, manuals, forms, mailing lists, customer lists, advertising materials,
ledgers, supplies, equipment, checks, xxxxx cash and all documents of any form
relating to the Business of the Company or its subsidiaries or affiliates in his
possession or control.
14. Notice. Any notice required to be given hereunder shall be in writing
sent by registered mail, return receipt requested, to FCMC at 0 Xxxxxxxx Xxxxxx,
Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention General Counsel, and to
Employee at the address contained in the personal records of the Company or to
such changed address as a party may designate by like notice to the other party.
The effective date of such notice shall be its mailing date.
15. Entire Agreement. This Agreement supersedes all agreements previously
made by the parties relating to its subject matter. There are no other
understandings or agreements between the parties.
16. No Violation or Default. Employee hereby represents and warrants that
the execution of this Agreement by him will not violate the provisions of or
constitute a default under any other agreement or arrangement to which Employee
is party or otherwise bound.
17. Indemnification. The Company shall indemnify Employee in Employee's
capacity as an officer and director, if and as applicably, under the terms and
conditions of the agreement in place between the Company and its other Officers
and Directors (including but not limited to the Company's Certificate of
Incorporation), which may be revised from time to time.
18. Non-Waiver. No delay or failure by either party to exercise any right
under this Agreement, and no partial or single exercise under it, shall
constitute a waiver of that or any other right.
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19. Headings. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
20. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
22. Binding Effect. The provisions of this Agreement shall be binding upon
and inure to the benefits of each of the parties and their respective successors
and assigns.
23. Survival. All rights of either party hereunder that by their terms are
intended to survive termination of employment, (including without limitation
Employee's rights to severance compensation, continuing benefits,
indemnification, tax gross up, and for reimbursement for expenses validly
incurred prior to termination), shall survive the termination or non-renewal of
Employee's employment hereunder.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement.
effective as of June 1, 2005.
EMPLOYEE:
Date: June 7, 2005 /s/ Xxxxxx Xxxxxxx
--------------- --------------------------------------
Xxxxxx Xxxxxxx
FCMC:
Franklin Credit Management Corporation
Date: June 7, 2005 By: /s/ Xxxxxxx X. Xxxxxxx
---------------- -----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
Date: June 7, 2005 By: /s/ Xxxxxx X. Xxxxxxxxx
---------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman - Compensation Committee
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