1
EXHIBIT 10.F.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 16th day of March, 1996,
between. THE FINOVA GROUP INC., a Delaware corporation (the "Company"), and
XXXXXX X. XXXXXXXXXXX (the "Executive").
W I T N E S S E T H :
WHEREAS, Executive is and since March 16, 1992, has been the Chairman
of the Board and Chief Executive Officer, and as of August 12, 1993, the
Chairman of the Board, President and Chief Executive Officer (Executive's
"Current Position"), of the Company; and
WHEREAS, Executive has agreed to continue to render services to the
Company pursuant to the terms of this Agreement; and
WHEREAS, the purpose of this Agreement is to provide a statement in
writing of the respective responsibilities and agreements of the Company and
Executive with respect to Executive's employment as Chairman of the Board and
Chief Executive Officer of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, the Company and Executive agree as follows:
1. Employment and Term.
Executive shall serve as Chairman of the Board and Chief
Executive Officer of Company (and until the Board otherwise determines, as
President) at Phoenix, Arizona, or such other location as is agreeable to
Executive. The term of Executive's employment shall commence on March 16, 1996
and continue through March 15, 1999 (the "Term") and thereafter shall continue
from year to year (the "Extended Term") unless written notice of termination
shall be given by the Executive Compensation Committee of the Board (at the
direction of the Board) or Executive, effective at the end of the initial three
(3) year period or at the end of any successive one (1) year term thereafter,
not less than six (6) months prior to March 16, 1999 or six (6) months prior to
March 16 of any year thereafter, as the case may be.
2. Duties.
As Chairman of the Board and Chief Executive Officer of the
Company, Executive shall devote substantially all of his business time to such
responsibilities and shall have full authority for management of the Company and
all its operations, financial affairs, facilities and investments. Executive
shall serve as a member of the Board, if so elected, shall act as a duly
authorized representative of the Board, and shall be a member or an ex officio
member of all committees of the Board, except the Executive Compensation
Committee. Except as provided in paragraph 6 hereof, Executive shall not engage
in any other employment or consulting activities during the Term or any Extended
Term of this Agreement and shall exercise the highest degree of loyalty and the
highest standards of conduct in the performance of his duties.
3. Compensation, Benefits and Business Expenses.
The Company shall pay and provide to Executive as compensation
for his services:
(a) A base compensation ("Base Compensation") of $543,650 per
year. Base Compensation shall be subject to annual merit increases and periodic
adjustment resulting from market evaluations as determined by the Executive
Compensation Committee of the Board. Executive's Base Compensation shall be
reviewed each year, commencing August 1996, for the express purpose of
2
considering increases. Base Compensation shall be payable in such installments
as are fixed for salaried employees of the Company generally.
(b) Incentive awards, options and incentive plans
participation in accordance with terms and provisions of such plans as shall be
adopted from time to time by the Executive Compensation Committee of the Board,
the Board or the stockholders of the Company including, without limitation,
participation in the Company's Management Incentive Plan ("MIP") and the
Company's Performance Share Incentive Plan ("PSIP"). Participation in the
Company's MIP shall be at a target percentage of not less than 55%, with awards
approved by the Executive Compensation Committee of the Board. Participation in
the Company's PSIP shall be at a target percentage of not less than 60% with
awards approved by the Executive Compensation Committee of the Board.
Participation in the Company's 1992 Stock Incentive Plan (restricted stock and
stock option grants) shall be at the sole discretion of the Executive
Compensation Committee.
(c) (i) Pension benefits, supplemental executive retirement
benefits, life insurance, accidental death and dismemberment benefits, vacation
time in his discretion, reimbursement of club membership expenses, perquisites
and other fringe benefits, in each case in accordance with the policies of the
Company but in any event no less favorable to Executive than those currently
provided to Executive in his Current Position; and (ii) health insurance plans,
executive medical benefits and fitness programs in accordance with the policies
of the Company but in any event in the aggregate no less favorable to Executive,
his spouse and his eligible dependents than those currently provided in
Executive's Current Position.
(d) Prompt reimbursement of Executive's, and when he deems
necessary or appropriate his spouse's, reasonable travel and business expenses
incurred in connection with Executive's employment hereunder.
(e) Adequate and appropriate liability insurance and
indemnification by the Company to fully protect Executive against any financial
loss and expense arising out of his employment as a director and officer of the
Company or any of its subsidiaries or affiliates.
(f) By reason of Sections 3(b) and (c) above, the Company
shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4. CEO Value Sharing Plan.
Executive shall participate in a CEO Value Sharing Plan as
follows:
(a) PURPOSE. The purpose of the CEO Value Sharing Plan is to
act as a retention device by providing significant rewards for equally
significant shareholder value creation, this being accomplished by sharing a
portion of created value in the form of cash payments to Executive.
(b) PERFORMANCE OBJECTIVES. Stock price hurdles have been
established since August 10, 1995 at $55, $70 and $85 per share or their
equivalent, the first hurdle ($55) being $15 per share greater than the base
price of $40 per share, or its equivalent, with the hurdles translating into
cumulative percentage increases in the stock price of 37.5%, 75.0% and 112.5%,
respectively.
(c) MEASURING ACHIEVEMENT. A hurdle shall be considered
achieved when the average closing price of Company common stock on the New York
Stock Exchange is equal to, or greater than, the hurdle price during any 20
consecutive trading days.
(d) PAYMENT AMOUNTS. When a hurdle is achieved, Executive will
receive a cash payment according to the attached Schedule 4 (CEO Value Sharing
Plan: Stock Price Hurdles and
2
3
Payments) under the column "Payment at Each Hurdle". As appropriate,
calculations of amounts due or available for distribution under this CEO Value
Sharing Plan shall be adjusted for all recapitalizations of the Company's common
stock. Amounts paid with respect to the CEO Value Sharing Plan pursuant to this
Agreement shall be deducted from any payments made to Executive under the
Company's Change in Control Chief Executive Officer Value Sharing Plan.
(e) EXCISE TAXES. Company shall gross-up any applicable excise
taxes resulting from payments under this plan.
5. Special Retirement Benefits.
In addition to the pension and retirement benefits described
in paragraph 3 above and to accomplish Executive's objective to be entitled to a
retirement package at age sixty-five (65) with the maximum years of service
while accomplishing the Company's objective to discourage early retirement by
Executive, the Company shall provide Executive the following special retirement
benefits.
(a) Executive has been credited with an additional five (5)
years of service to the Company pursuant to the terms of his initial Employment
Agreement with the Company dated as of March 16, 1992.
(b) During the Term of Executive's employment by the Company
hereunder and under his initial Employment Agreement with the Company, on each
March 16 Executive shall be credited with two years of additional service for
the service rendered to Company during the preceding year, for a total of three
(3) years of credited service each year.
(c) Executive's retirement benefits shall be subject to
actuarial reduction in accordance with the Company's customary practices and
policies at the time of Executive's retirement if Executive elects to retire
before age sixty five (65).
(d) Retirement benefits in excess of benefits provided by or
allowable under the Company's Pension Plan shall be payable under the Company's
Supplemental Pension Plan, and credited service in excess of service provided by
or allowable under the Company's Pension Plan shall be funded through a
so-called Rabbi Trust.
6. Community Service.
Executive shall be free to serve as a director or officer or
both of such not-for-profit corporations and private business corporations as he
may desire, to join and participate in such committees for community or national
affairs as he may select, and to join and serve on public business corporation
boards of directors.
7. Coordination of Agreements.
In the event of a change of control of the Company, Executive
shall participate in the Company's severance and other benefit plans providing
rights and benefits to executives upon a change of control, and, any exercise of
rights by the Executive under any such plans shall not constitute a breach or
default of this Agreement; provided, however, the exercise by Executive of any
rights to payment pursuant to any severance plan shall constitute notice of
resignation hereunder by Executive, effective upon receipt of payment to
Executive under any severance plan.
8. Default by the Company.
In the event the Company commits a breach or default under
this Agreement or does not elect Executive to the positions specified herein or
does not permit him to exercise the authority and
3
4
responsibility specified herein or requests and obtains his resignation or
otherwise terminates this agreement or fails to extend or renew this Agreement,
in each case other than for Cause (as defined in paragraph 10 hereof),
retirement or Change of Control (as referred to in paragraph 7 hereof), the
Company shall, and Executive shall accept, in lieu of any other severance
payment by Company, a lump sum payment equal to the Base Compensation and the
value of all other benefits and perquisites listed on Schedule 8 attached
hereto, as such Schedule may be amended from time to time, due hereunder during
the remainder of the Term or Extended Term, but not less than an amount equal to
a payment for one year of service, plus an amount equal to the sum of the
highest MIP, PSIP, stock and other performance awards paid to Executive in
either of the preceding two (2) years. Upon retirement or Change of Control,
Executive shall be entitled only to the benefits payable to Executive under the
Company's plans in which Executive then participates, and no other severance
payment shall be payable to Executive under this Agreement.
9. Resignation.
In the event Executive wishes to resign as Chairman of the
Board and Chief Executive Officer of the Company, he may do so by providing the
Board with at least one hundred eighty (180) days' written notice of his
decision to resign, and this Agreement shall terminate as of the date specified
in the notice. In the event that such notice is given by the Executive he shall,
if requested by the Board, participate during the remainder of his employment in
the recruitment of a successor and in an orderly transition of administration of
the new Chairman of the Board and Chief Executive Officer of the Company.
10. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the Board from
terminating the Executive's employment under this Agreement for "Cause".
"Cause" shall be determined by the Board in the exercise of good faith
and reasonable judgment and shall be defined as the conviction of the Executive
for the commission of an act of fraud, embezzlement, theft, or other criminal
act constituting a felony under U.S. or state laws involving moral turpitude; or
a determination that Executive has engaged in gross misconduct or the gross
negligence of the Executive in the performance of any and all material covenants
under this Agreement, for reasons other than the Executive's death, disability,
or retirement. The Board, by majority vote, shall make the determination of
whether Cause exists, after providing the Executive with notice of the reasons
the Board believes Cause may exist, and after giving the Executive the
opportunity to respond to the allegation that Cause exists. Conviction of
Executive for any act described above shall occur upon entry of a final judgment
without further right of appeal, and the right of the Company to terminate this
Agreement shall be exercisable only within ninety (90) days thereafter by notice
in writing that his termination has been approved by at least a majority of the
full Board of the Company.
11. Effect of Termination for Cause, Death, Disability or
Voluntary Termination.
Upon termination of Executive's employment (a) by the Company
for Cause, (b) as a result of the death or disability of Executive or (c)
voluntarily by Executive, the Company shall pay Executive, or his estate, his
then current Base Compensation, pro rata to the date of termination. In
addition, upon termination of Executive's employment as a result of the death or
disability of Executive, the Company shall pay to Executive's estate a pro rata
portion (calculated by taking the award for any completed full years and
prorating the award for any partial years based on the number of days in such
year preceding the date of termination in either event based on actual
performance to the date of such event) of his MIP and PUIP award, which shall be
paid at the time that MIP and PUIP awards are ordinarily paid by the Company to
participants in the MIP and PUIP generally.
4
5
12. Confidentiality and Noncompetition.
(a) Executive acknowledges that the name, trade or service
marks, records and plans and other business information with respect to Company,
together with its list of customers, constitute valuable proprietary assets of
Company. Accordingly, at no time either during or after the Term or Extended
Term of this Agreement, shall Executive use the Company's name or trade or
service marks or use or disclose to others for any purpose whatsoever any of the
Company's records or plans or other business information or its list of
customers.
(b) Executive shall, at all times either during or after the
Term or Extended Term of this Agreement, unless otherwise required by law,
refrain from making any written or oral communication damaging to the Company.
(c) Without the prior written consent of the Company, during
the term of this Agreement, and for twenty-four (24) months following the
expiration or termination (other than as a result of a default by the Company
hereunder) of this Agreement, the Executive shall not, as an employee or an
officer, engage directly or indirectly in any business or enterprise which is
"in competition" with the Company or its successors or assigns. For purposes of
this Agreement, a business or enterprise will be deemed to be "in competition"
if it is engaged in any significant business activity of the Company or its
subsidiaries within the continental United States.
However, the Executive shall be allowed to purchase and hold
for investment less than five percent (5%) of the shares of any such corporation
whose shares are regularly traded on a national securities exchange or in the
over-the-counter market.
(d) During the term of this Agreement, and for a period of
twenty-four (24) months following the expiration of this Agreement, the
Executive agrees not to attempt to induce any employee of the Company to
terminate his or her employment with the Company, accept employment with any
competitor of the Company, or to interfere in a similar manner with the business
of the Company.
(e) If at any time after expiration or termination of this
Agreement other than as a result of a default by the Company hereunder, (i)
during the term of any stock option held by Executive or (ii) within two (2)
years after Executive exercises any portion of any stock option granted by the
Company, Executive engages in any activity in competition with any activity of
the Company, or inimical, contrary or harmful to the interests of the Company,
including, but not limited to: (1) conduct which would constitute a basis for
termination for cause under this Agreement, (2) accepting employment with or
serving as a consultant, advisor or in any other capacity to any person or
employer acting against the interests of the Company, or (3) participating for
the purpose of effecting or encouraging a hostile takeover attempt with respect
to the Company then (x) all options to purchase stock of the Company awarded to
Executive shall terminate effective the date on which Executive enters into such
activity, unless terminated earlier by operation of any term or condition of the
option agreement or the plan pursuant to which the option was granted and (y)
any option gain realized by Executive from exercising all or a portion of any
option shall be paid by Executive to the Company.
13. Litigation or Arbitration.
(a) The Executive shall have the right and option to elect to
have any good faith dispute or controversy arising under or in connection with
this Agreement settled by litigation or by arbitration.
If arbitration is selected, such proceeding shall be conducted
before a panel of three (3) arbitrators sitting in a location selected by the
Executive within fifty (50) miles from the location of his principal place of
employment, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the award of the arbitrators in any
court having competent jurisdiction.
5
6
(b) If litigation or arbitration is brought by Executive to
enforce or interpret any provision contained herein, and if Executive prevails
as the successful party in such litigation or arbitration, or if the court or
arbitrator finds that Executive had a good faith and reasonable belief that
Executive's position was meritorious, the Company, to the extent permitted by
applicable law and the Company's Articles of Incorporation, shall indemnify
Executive for his reasonable attorneys' fees and disbursements incurred in such
litigation, and hereby agrees to pay interest on any money judgment obtained by
Executive from time to time from the date that payment(s) to him should have
been made under this Agreement until the date the payment(s) is made.
14. No Mitigation.
In the event that Executive's employment hereunder is
terminated in violation of the provisions of this Agreement, Executive shall not
be obligated to seek other employment in mitigation of amounts payable to him
under this Agreement, and the obtaining of such other employment shall in no
event affect the Company's obligations to make such payments to Executive
pursuant to this Agreement.
15. Entire Agreement.
This Agreement constitutes the entire agreement and
understanding with respect to the employment of Executive by the Company and
supersedes any and all prior agreements and understandings, whether oral or
written, relating thereto. This Agreement may be modified or amended only by
written agreement signed by Executive and by a representative of the Company
pursuant to a duly adopted resolution of its Board of Directors approving such
modification or amendment.
16. Partial Invalidity.
The invalidity, by statute, court decision or otherwise, of
any term or provision of this Agreement shall not affect the validity or
enforceability of any other term or provision hereof.
17. Governing Law.
This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Arizona.
18. Authority.
Any act to be taken or authorized hereunder by the Company, or
the Company's Board of Directors, unless otherwise expressly provided in this
Agreement, may be so taken or authorized by the Company's Board of Directors or
its Executive Compensation Committee.
19. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may
be assigned or pledged by Executive, or by the Company without consent of
Executive.
6
7
IN WITNESS WHEREOF, the parties have caused this Employment Agreement
to be executed as of the day and year first above written.
A T T E S T : THE FINOVA GROUP INC.
By: /s/ X.X. Xxxxxxxx By: /s/ X.X. Xxxxx
------------------ ---------------
Secretary Senior Vice President-Human Resources
/s/ X. Xxxxxxxxxxx
---------------------
Xxxxxx X. Xxxxxxxxxxx
7
