EMPLOYMENT AND COMPENSATION AGREEMENT
This EMPLOYMENT AND COMPENSATION AGREEMENT ("Agreement") is made as of the 20th
day of January, 1999, by and between ALLSTATE FINANCIAL CORPORATION, a Virginia
corporation, having its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an
individual having a residence at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Employee"). The Company and the Employee in consideration of the mutual
premises contained herein, mutually agree as follows:
1. Employment. The Company employs the Employee and the Employee agrees to serve
the Company as President and Chief Executive Officer of the Company. It is
intended that the Employee shall serve as a member of the board of directors of
the Company (the "Board"). The Employee shall devote the Employee's full
business time and best efforts to Company business. Employee shall perform such
other duties commensurate with the Employee's position as may be specified from
time to time by the Chairman of the Board or the Board.
2. Term. The initial term of this Agreement shall commence on the date set forth
above, and shall end at the close of business on December 31, 2001, (the
"Term"). Notwithstanding the foregoing, commencing on January 1, 2001, the Term
shall extend one day at the end of every day during its length, and the new
closing date of the term shall be that additional day, unless either party shall
notify the other of its intention to stop such extensions, in which case the
closing date of the Term shall be one year from the date of such notice.
3. Salary. During the Term, the Company shall pay to the Employee a base salary
at a rate of One Hundred Eighty Five Thousand dollars ($185,000) per annum,
which amount may be increased from time to time at the discretion of the Board.
4. Benefits and Other Compensation. The Company shall provide the Employee with
the following additional compensation during the Term:
(a) Subject to meeting eligibility provisions, any and all
existing and future general Employee benefit plans, including
without limitation, medical, health, life and disability
insurance, pension and profit sharing plans, now or hereafter
granted by the Company to the employees of the Company as a
group, or to the executive officers of the Company as a group,
shall be granted to the Employee. If a disability insurance
plan is not provided to all employees, the Company will
provide a reasonable substitute for Employee.
(b) An annual management incentive bonus to be paid to Employee at
the discretion of the Board of Directors of the Company in an
amount up to 100% of Employee's then current base annualized
salary, predicated on the achievement of the company's
business plan. Such bonus shall be paid in a combination of
Company stock and cash, with the cash portion to be at least
50% unless the Employee elects a lesser amount be paid in
cash. Bonus for any calendar year shall be deemed fully
accrued as of December 31 of the applicable year (or, if
later, the date of the Board determines the amount of such
bonus) and shall be paid no later than March 31 of the
following year.
(c) Receipt of an automobile allowance of $500 per month.
(d) Employee shall receive on the date of execution of
this Agreement, options (which shall be incentive stock
options within the meaning of Section 422 of the Internal
Revenue Code of 1966, as amended) under the Allstate
Financial Corporation Stock Option Plan (a copy of which has
been provided to Employee) (the "Plan") to purchase 30,000
shares at a price equal to $6.50 and 30,000 shares at a
price equal to the higher of (i) $4.00, or (ii) the average
trading price of such shares over the five (5) trading days
immediately preceding the date of issuance of such options
(according to the NASDAQ). All 60,000 share options shall be
exercisable upon issuance. Said options will expire on the
earlier of (i) seven years from the date of issuance or (ii)
in connection with any termination of Employee's employment,
the date provided under the terms and provisions of the Plan
or subparagraph 9(c) hereunder.
(e) Interim housing expense reimbursement prior to Employee's
permanent relocation to the Company's headquarters office
location. Such housing expenses shall be limited to $15,000.
(f) Reimbursement for the movement and short term storage (if
necessary) of household goods from Employee's residence to the
Company's headquarters location. Such moving expenses shall be
limited to $10,000.
(g) Housing and moving reimbursements provided for in
subparagraphs 4(e) and 4(f) shall be "gross-up" to provide tax
equalization of any taxable income interpreted by Federal,
State, or local taxing authorities as taxable income.
5. Reimbursement. Bona fide business expenses incurred by the Employee in
connection with the performance of the Employee's duties hereunder shall be
reimbursed by the Company. Such allowances shall, without limitation, include
expenses such as travel, meals, hotels, telephone, telegraph, postage and other
normal and customary business expenses.
6. Commercial Finance Association. During the Term of this Agreement, Company
shall continue to be a member in good standing of the Commercial Finance
Association ("CFA"), the trade association of secured lenders and factors, and
Employee shall serve as the Company's Director Representative to CFA. Employee's
involvement in CFA activities may include serving as an Officer, Director,
Committee Member, Committee Chairman, President and Chairman of CFA. During the
Term, while Employee holds national office as a member of the Management
Committee of CFA, Company shall support and encourage Employee to fulfill the
duties of such CFA offices by providing reimbursement to the Employee for bona
fide travel and entertainment expenses incurred in conjunction with CFA
activities up to $25,000 annually.
7. Vacation. During the term, Employee shall be entitled to four (4) weeks paid
vacation per year. The dates of any vacation periods shall be arranged in order
that such vacation days shall not materially hinder the normal functioning of
the Company's business activities.
8. Trade Secrets; Non-Competition:
(a) In the course of the Employee's employment, the
Employee will have access to confidential records, data,
pricing information, lists of clients and prospective
clients, lists of vendors, books and promotional literature,
leases and agreements, policies and similar material and
information of the Company or used in the course of its
business (hereinafter collectively referred to as
"Confidential Information"). All such Confidential
Information which the Employee shall use or come into
contact with shall remain the sole property of the Company.
The Employee will not, directly or indirectly, disclose or
use any such Confidential Information, except as required in
the course of such employment. The Employee shall not for a
period of one (1) year following the end of the Term,
disclose or use in any fashion any Confidential Information
of the Company or any of its subsidiaries or affiliates,
whether such Confidential Information is in the Employee's
memory or embodied in writing or other physical form,
provided, that the foregoing requirements shall not apply to
any information (i) that (prior to disclosure by the
Employee) has been disclosed by the Company or any third
party or (ii) that Employee discloses (A) to any branch,
agency or regulatory authority of any federal, state or
local government to comply with any statute, regulation,
rule, order or ordinance or (B) to any federal, state or
local court, tribunal or other adjudicatory body in
connection with any suit, claim or question arising before
such court, tribunal or other adjudicatory body or
otherwise.
In the event of a breach or a threatened breach by the
Employee of the provisions of this subparagraph (a), the
Company shall be entitled to an injunction restraining the
Employee from disclosing any of the aforementioned
Confidential Information. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other
remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the
Employee. Subject to subparagraph (c) below, this provision
shall survive the termination of this Agreement.
(b) The Employee further agrees that, during the Term
(or, if the Employee's employment is terminated prior to the
end of the Term (whether by the Company or the Employee),
during the period prior to such termination, and for a
period of one (1) year thereafter, the Employee will not,
except with the prior written consent of the Board of
Directors, (i) be employed as an employee, consultant,
officer or director, by any other commercial finance or
factoring company, (ii) solicit any business from or have
any business dealings with, either directly or indirectly or
through corporate or other entities or associates, any
client of the Company, or (iii) initiate any action, either
directly or indirectly or through corporate or other
entities or associates, that would reasonably be expected to
encourage or to induce any employee of the Company or of any
subsidiary or affiliate of the Company to leave the employ
of the Company or of any such subsidiary or affiliate. The
Employee specifically acknowledges the necessity for this
subparagraph (b), given the nature of the Company's
business. The Employee agrees that the Company shall be
entitled to injunctive relief in the event of a breach of
the provisions of this subparagraph (b), the legal remedies
being inadequate to fully protect the Company. Nothing
contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the
Company for such breach, including the recovery of damages
from the Employee. Subject to subparagraph (c) below, this
provision shall survive the termination of this Agreement.
(c) In the event of a Business Combination or Change of
Control (as defined below) involving the Company (whether or
not the Company's Board of Directors recommends such
Business Combination or Change of Control for approval by
the Company's shareholders), subparagraphs (a) and (b) of
this Paragraph 8 shall, at the time such Business
Combination or Change of Control is consummated, but only in
the event Employee's employment is terminated or the
employee's Salary, Benefits and Other Compensation and/or
duties and responsibilities are substantially reduced and/or
changed in connection therewith under the terms of
subparagraph 9(c) below, be null and void and of no further
force or effect. For purposes of this Agreement, "Business
Combination" shall mean (i) a merger, a consolidation or any
other business combination of the Company with any
non-affiliated party, (ii) the disposition of all or
substantially all of the securities, business or assets of
the Company or (iii) a joint venture, reorganization or
other transaction (or series of transactions) as a result of
which all or substantially all of the business or assets of
the Company are transferred, with or without a Change of
Control, or any other similar corporate combination or
transaction (or series of related transactions). For
purposes of this Agreement, a "Change of Control" shall mean
a transaction (or series of transactions) or other event (or
series of events) that results in the acquisition of a
Controlling Interest in the Company by a person or entity
(or group of persons and/or entities) that did not have a
Controlling Interest in AFC prior to such transaction (or
series of transactions) or event (or series of events). As
used in the preceding sentence, the term "Controlling
Interest" means possession, directly or indirectly, of power
to direct or cause the direction of management or policies
(whether through ownership of voting securities, by contract
or otherwise); provided that, in any event, any person or
entity (or group of persons and/or entities) which
beneficially acquires, directly or indirectly, 25% or more
(in number of votes) of the securities having ordinary
voting power for the election of directors of the Company
shall be conclusively presumed to have a Controlling
Interest in the Company. This provision shall be construed
so that if a Business Combination or Change of Control (as
defined herein) occurs on more than one occasion, the terms
and provisions of this Agreement shall apply to the most
recent Business Combination or Change of Control.
9. Payments Upon Termination. The Company shall pay to the Employee upon
termination of employment during the Term, as follows:
(a) If the Employee's employment is terminated by
death, the Company shall continue to pay and provide to the
estate of the Employee for a period equal to three months,
Employee's then applicable base salary pursuant to the
provisions of Paragraph 3 for such period, in semi-monthly
installments. In addition, the Company, as soon as
reasonably possible, but not past the end of the fiscal year
of the death of the Employee, shall also pay to the estate
of the Employee (on a pro rata basis up to the date of the
Employee's death) the Benefits and Other Compensation
otherwise due and unpaid to the Employee as of the date of,
or in connection with, the Employee's death, pursuant and
subject to the provisions of subparagraphs 4(a), 4(b) and
4(c) herein. In addition, the Board will consider in good
faith the payment of an incentive bonus for the calendar
year in which the termination occurs, taking into account
the portion of the year completed prior to such termination,
the Company's performance for the year, and the Employee's
contributions to that performance.
(b) In the event the Employee's employment is
terminated because of permanent disability (as defined
below), then following such termination the Company shall
continue to pay and provide to the Employee for a period
equal to six months, the Employee's then applicable salary
for such period in semi-monthly installments, pursuant to
the provisions of Paragraph 3 herein, and the Benefits and
Other Compensation for such period as if the Employee were
still employed to be paid not later than the last day of
such period under subparagraphs 4(a), 4(b) and 4(c) herein.
In addition, the Board will consider in good faith the
payment of an incentive bonus for the calendar year in which
the termination occurs, taking into account the portion of
the year completed prior to such termination, the Company's
performance for the year, and the Employee's contributions
to that performance. As used herein, the Employee shall be
deemed to be permanently disabled in the event that the
Employee has not been able (due to mental or physical
illness or incapacity) to render services required by this
Agreement for a period of ninety (90) consecutive days. Any
salary payments to be made by the Company under the
provisions of this subparagraph (b) are to be offset by
payments, if any, made to the Employee under any disability
insurance plan maintained by the Company.
(c) In the event the Employee's employment is terminated (i) by
the company other than for the Cause, or (ii) by the Employee
for Good Reason, as defined in Section 9(d) below, the
Employee shall receive:
(1) a lump sum payment, payable within thirty (30) days
following such termination without discount, equal to
the Employee's then current base salary otherwise
payable through the later of the end of the Term, or
one year;
(2) continuation of the benefits described in Paragraphs
4(a) and 4(c) above for a period of one year
following termination of employment (provided that if
the Company cannot continue the Employee's
participation under the terms of any applicable plan
it shall pay the employee an amount equal to the cost
the Company would have incurred in providing such
participation);
(3) any declared but unpaid bonus for any prior calendar year, and
(4) bonus, for the year in which such termination occurs,
in an amount no less than the bonus declared or paid,
as the case may be, for the prior year, pro-rated to
reflect the number of weeks in which the Employee was
employed in the calendar year of termination, such
bonus to be paid within thirty (30) days following
such termination.
(d) For this purpose Good Reason shall mean:
(i) any material breach of this Agreement by the Company
at any time, including (A) loss of the Employee's
position as President and Chief Executive Officer,
(B) failure to elect, or re-elect the Employee as a
member of the Board, (C) breach of the provisions of
Paragraph 6, or (D) attempted reduction in Employee's
Salary, Benefits and Other Compensation.
(ii) failure of the Company to obtain the agreement of any
successor to perform this agreement at least ten (10)
days prior to a Business Combination or Change in
Control in which the Company will not be the
surviving entity; or
(iii) following a Business Combination or Change in
control, assignment of duties inconsistent with
Employee's position or any reduction in Employee's
authority or direct support.
(e) Notwithstanding anything else contained in
subparagraph (c) above, no compensation shall be payable
under subparagraph (c) above if the Employee's employment
was or is terminated for Cause (as defined below). As used
herein, the term "Cause" shall mean (i) the Employee's
conviction of (or entry of a plea of nolo contendere with
respect to) a felony or other crime involving moral
turpitude or (ii) a willful, substantial and continual
failure by the Employee in breach of this Agreement to
perform the lawful duties, responsibilities or obligations
assigned to the Employee pursuant to the terms hereof and
the failure to cure such breach within fifteen (15) days
following written notice from the Company containing
specific findings by the Board of Directors of the Company
detailing such failures.
10. Validity. In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, the remaining
provisions and portions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
11. Amendment and Waiver. This Agreement constitutes the entire agreement
between the parties as to employment by the Company of the Employee and may not
be changed orally but only by a written document signed by both parties. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other breach by such party at that
time or any other time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
12. Arbitration. Any dispute whatsoever relating to the interpretation,
validity, or performance of this Agreement and any other dispute arising out of
this Agreement which cannot be resolved by the parties to such a dispute shall,
upon thirty (30) days written notice by either party, be settled upon
application of any such party by arbitration in Arlington County, Virginia, in
accordance with the rules then prevailing of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court of competent jurisdiction. The cost of any arbitration
proceedings under this paragraph shall be shared equally by the parties to such
a dispute. Nothing contained in this paragraph shall limit the Company's rights
to obtain injunctive relief to enforce the provisions of paragraphs 8(a) and
8(b) above.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia (without regard to
conflicts of law principles).
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and assigns and shall become effective upon execution by the Company.
15. Notice. All notices and other communications made pursuant to this Agreement
shall be made in writing and shall be deemed to have been given if delivered
personally or mailed, postage prepaid, to the applicable party hereto at the
applicable address first above written, or in either case, to such other address
as the Company or Employee shall have specified by written notice to the other
party.
16. Paragraph Headings. All paragraph headings are included herein for
convenience and are not intended to affect in any way the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
18. Prior Agreements Superseded. In the event that the Employee has heretofore
entered into an employment agreement with the Company, then this Agreement
hereby revokes, replaces and supersedes the prior employment agreement between
the Company and the Employee. IN WITNESS WHEREOF, the parties have executed this
agreement, the Company acting herein by its duly authorized officer, the day and
year first above written.
ALLSTATE FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman of the Board
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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EMPLOYEE: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
