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Exhibit (e)(12)
CHANGE IN CONTROL
SEVERANCE AGREEMENT
AGREEMENT between FIRST SIERRA FINANCIAL, INC., a Delaware
corporation (the "Company"), and Xxxxx X. Xx ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee
personnel and, accordingly, the Board of Directors of the Company (the "Board")
has approved the Company entering into a severance agreement with Executive in
order to encourage Executive's continued service to the Company; and
WHEREAS, Executive is prepared to perform such services in return
for specific arrangements with respect to severance compensation and other
benefits;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "BONUS AMOUNT" means the greater of (i) 10% of Executive's
Compensation or (ii) the annual cash bonus payment received by (or payable to)
Executive with respect to the Company's fiscal year that ended immediately prior
to the fiscal year during which a Change in Control occurs.
(b) "CHANGE IN CONTROL" means (i) any merger, consolidation, or
reorganization in which the Company is not the surviving entity (or survives
only as a subsidiary of an entity), (ii) any sale, lease, exchange, or other
transfer of all or substantially all of the assets of the Company to any other
person or entity other than a wholly-owned subsidiary of the Company (in one
transaction or a series of related transactions), (iii) dissolution or
liquidation of the Company, (iv) when any person or entity, including a "group"
as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of the Company's
voting stock (based upon voting power), or (v) during any two-year period, the
persons who were directors of the Company (together with any new directors whose
election by the Board or whose nomination for election by the Company's
shareholders was approved by a vote of at least three quarters of the directors
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) shall
cease for any reason to constitute a majority of the Board; provided, however,
that the term "Change in Control" shall not include any reorganization, merger,
consolidation, or similar transaction or series of transactions
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pursuant to which the record holders of the voting stock of the Company
immediately prior to such transaction or series of transactions continue to hold
immediately following such transaction or series of transactions 50% or more of
the voting securities (based upon voting power) of (1) any entity which owns
(directly or indirectly) the stock of the Company, (2) any entity with which the
Company has merged, or (3) any entity that owns an entity with which the Company
has merged.
(c) "CHANGE IN DUTIES" shall mean the occurrence, on the date upon
which a Change in Control occurs or within two years thereafter, of any one or
more of the following:
(i) A significant reduction in the nature or scope of Executive's
authorities or duties from those applicable to Executive immediately
prior to the date on which a Change in Control occurs;
(ii) A reduction in Executive's annual base salary or target
opportunity under any applicable bonus or incentive compensation plan or
arrangement from that provided to Executive immediately prior to the date
on which a Change in Control occurs;
(iii) A diminution in Executive's eligibility to participate in
bonus, stock option, incentive award and other compensation plans which
provide opportunities to receive compensation which are the greater of
(A) the opportunities provided by the Company (including its
subsidiaries) for executives with comparable duties or (B) the
opportunities under any such plans under which Executive was
participating immediately prior to the date on which a Change in Control
occurs;
(iv) A diminution in employee benefits (including but not limited
to medical, dental, life insurance, and long-term disability plans) and
perquisites applicable to Executive from the greater of (A) the employee
benefits and perquisites provided by the Company (including its
subsidiaries) to executives with comparable duties or (B) the employee
benefits and perquisites to which Executive was entitled immediately
prior to the date on which a Change in Control occurs; or
(v) A change in the location of Executive's principal place of
employment by the Company by more than 50 miles from the location where
Executive was principally employed immediately prior to the date on which
a Change in Control occurs.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "COMPENSATION" shall mean the greater of:
(i) Executive's annual base salary at the rate in effect
immediately prior to the date on which a Change in Control occurs;
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(ii) Executive's annual base salary at the rate in effect sixty
days prior to the date of Executive's Involuntary Termination; or
(iii) Executive's annual base salary at the rate in effect at the
time of Executive's Involuntary Termination.
(f) "INVOLUNTARY TERMINATION" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive (other than a
resignation pursuant to clause (ii) of this subparagraph (f)); or
(ii) results from a resignation by Executive on or before the date
which is sixty days after the date upon which Executive receives notice
of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling Executive to benefits under the Company's long-term
disability plan, or Retirement.
(g) "RETIREMENT" shall mean Executive's resignation on or after
the date Executive reaches age sixty-five.
(h) "SEVERANCE AMOUNT" shall mean an amount equal to 2.0
multiplied by (1) the sum of 120% of Executive's Compensation and (2) the Bonus
Amount.
(i) "TERMINATION FOR CAUSE" shall mean that Executive's employment
with the Company has been terminated by the Company for "cause" (as such term is
defined in an employment agreement between Executive and the Company); provided,
however, that if such an employment agreement does not exist is no longer
effective, or does not define the term "cause," then "Termination for Cause"
shall mean that Executive's employment with the Company has been terminated by
the Company because Executive (i) has engaged in gross negligence or willful
misconduct in the performance of Executive's duties, (ii) has willfully refused
without proper legal reason to perform Executive's duties and responsibilities,
(iii) has materially breached any material provision of any agreement between
the Company and Executive, (iv) has materially breached any material corporate
policy maintained and established by the Company that is of general
applicability to the Company's executive employees, (v) has willfully engaged in
conduct that Executive knows or should know is materially injurious to the
Company or any of its affiliates, or (vi) has engaged in illegal conduct or any
act of serious dishonesty which adversely affects, or reasonably could in the
future adversely affect, the value, reliability, or performance of Executive in
a material manner; provided, further, that in no event shall a termination of
Executive's employment constitute a "Termination for Cause" unless such
termination is approved by at least two-thirds of the members of the Board after
Executive has been given written notice by the Company of the specific reason
for such termination and an opportunity for Executive, together with Executive's
counsel, to be heard before the Board. Members of the Board may
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participate in any hearing that is required pursuant to this subparagraph (i) by
means of conference telephone or similar communications equipment by means of
which all persons participating in the hearing can hear and speak to each other;
provided, however, that at least one-half of the members of the Board shall
attend the hearing in person.
2. SERVICES. Executive agrees that Executive shall (a) render
services to the Company (as well as any subsidiary thereof or successor thereto)
during the period of Executive's employment to the best of Executive's ability
and in a prudent and businesslike manner and (b) devote substantially the same
time, efforts, and dedication to Executive's duties as heretofore devoted.
3. SEVERANCE BENEFIT. If Executive's employment by the Company or
any successor thereto shall be subject to an Involuntary Termination that occurs
on the date upon which a Change in Control occurs or within two years
thereafter, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
a lump sum cash payment in an amount equal to the Severance Amount, which shall
be paid to Executive on or before the fifth day after the last day of
Executive's employment with the Company or any successor. The payment of lump
sum cash to Executive pursuant to this Paragraph 3 shall not relieve the Company
or any successor of its obligation to make all other cash severance payments
payable to Executive from or on behalf of the Company on account of Executive's
Involuntary Termination pursuant to (a) any other agreement between the Company
and Executive or (b) any severance benefit plan maintained by the Company (these
all other cash severance payments "Other Cash Amounts"). The Company or any
successor shall continue to make Other Cash Amounts to Executive according to
the terms of the related agreements until the sum of (i) Severance Amount paid
to Executive and (ii) cumulative Other Cash Amounts paid to Executive exceeds
the greater of (A) Severance Amount or (B) Total Other Cash Amounts due.
4. INTEREST ON LATE BENEFIT PAYMENT. If the payment provided for
in Paragraph 3 hereof is not made when due, then the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the rate of 1% per month (with a partial month counting
as a full month).
5. PARACHUTE PAYMENT. Notwithstanding anything to the contrary in
this Agreement, if Executive is a "disqualified individual" (as defined in
Section 280G(c) of the Code), and the severance benefit provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company and its affiliates, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), the severance benefit
provided hereunder shall be either (a) reduced (but not below zero) so that the
present value of such total amounts received by Executive will be one dollar
($1.00) less than three times Executive's "base amount" (as defined in Section
280G of the Code) and so that no portion of such amounts received by Executive
shall be subject to the excise tax imposed by Section 4999 of the Code or (b)
paid in full, whichever produces the better net after-tax position to Executive
(taking into account any applicable excise tax under Section 4999 of the Code
and any applicable income tax).
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The determination as to whether any such reduction in the amount of the
severance benefit is necessary shall be made initially by the Company in good
faith. If a reduced payment is made and through error or otherwise that payment,
when aggregated with other payments from the Company (or its affiliates) used in
determining if a "parachute payment" exists, exceeds one dollar ($1.00) less
than three times Executive's base amount, then Executive shall immediately repay
such excess to the Company upon notification that an overpayment has been made.
6. GENERAL.
(a) TERM. The effective date of this Agreement is March 8, 2000.
Within sixty days from and after the expiration of two years after said
effective date and within sixty days after each successive two-year period of
time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agreement, and/or offer Executive a
different agreement. The Compensation Committee of the Board (excluding any
member of such committee who is covered by this Agreement or by a similar
agreement with the Company) will vote on whether to so extend, terminate, and/or
offer Executive a different agreement and will notify Executive of such action
within said sixty-day time period mentioned above. This Agreement shall remain
in effect until so terminated and/or modified by the Company. Failure of the
Compensation Committee of the Board to take any action within said sixty days
shall be considered as an extension of this Agreement for an additional two-year
period of time. Notwithstanding anything to the contrary contained in this
"sunset provision," it is agreed that if a Change in Control occurs while this
Agreement is in effect, then this Agreement shall not be subject to termination
or modification under this "sunset provision," and shall remain in force for a
period of two years after such Change in Control, and if within said two years
the contingency factors occur which would entitle Executive to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms. If, within such two years after a Change in Control, the contingency
factors that would entitle Executive to said benefits do not occur, thereupon
this two-year "sunset provision" shall again be applicable with the sixty-day
time period for action by the Compensation Committee of the Board to thereafter
commence at the expiration of said two years after such Change in Control and on
each two-year anniversary date thereafter.
(b) INDEMNIFICATION. If Executive shall obtain any money judgment
or otherwise prevail with respect to any litigation brought by Executive or the
Company to enforce or interpret any provision contained herein, the Company, to
the fullest extent permitted by applicable law, hereby indemnifies Executive for
Executive's reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and disbursements
and (ii) to pay prejudgment interest on any money judgment obtained by Executive
from the earliest date that payment to Executive should have been made under
this Agreement until such judgment shall have been paid in full, which interest
shall be calculated at the rate of 1% per month (with a partial month counting
as a full month).
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(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to pay
(or cause one of its subsidiaries to pay) Executive the amounts and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company (including
its subsidiaries) may have against Executive or anyone else. All amounts payable
by the Company (including its subsidiaries hereunder) shall be paid without
notice or demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make (or cause to be made)
the payments and arrangements required to be made under this Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and Executive's estate. If Executive shall die prior to full payment
of amounts due pursuant to this Agreement, such amounts shall be payable
pursuant to the terms of this Agreement to Executive's estate.
(e) SEVERABILITY. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder, except
by will or the laws of descent and distribution.
(g) NOTICES. Any notices or other communications provided for in
this Agreement shall be sufficient if in writing. In the case of Executive, such
notices or communications shall be effectively delivered if hand delivered to
Executive at Executive's principal place of employment or if sent by registered
or certified mail to Executive at the last address Executive has filed with the
Company. In the case of the Company, such notices or communications shall be
effectively delivered if sent by registered or certified mail to the Company at
its principal executive offices.
(h) CONTROLLING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, excluding any
conflict-of-law rule or principle that might refer the governance of the
construction of this Agreement to the law of another jurisdiction.
(i) FULL SETTLEMENT; WITHHOLDING. If Executive is entitled to and
receives the benefits provided hereunder, performance of the obligations of the
Company hereunder will constitute full settlement of all claims that Executive
might otherwise
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assert against the Company on account of Executive's termination
of employment. Any severance benefits paid pursuant to this Agreement shall be
deemed to be a severance payment and not "Compensation" for purposes of
determining benefits under the Company's qualified plans (unless and to the
extent that any such qualified plan expressly provides otherwise), and shall be
subject to any required tax withholding.
(j) UNFUNDED OBLIGATION. The obligation to pay amounts under this
Agreement is an unfunded obligation of the Company (including its subsidiaries),
and no such obligation shall create a trust or be deemed to be secured by any
pledge or encumbrance on any property of the Company (including its
subsidiaries).
(k) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(l) NUMBER AND GENDER. Wherever appropriate herein, words used in
the singular shall include the plural and the plural shall include the singular.
The masculine gender where appearing herein shall be deemed to include the
feminine gender.
(m) AMENDMENT. No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver is agreed to in
writing and signed by the Company and Executive.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the 8th day of March, 2000.
"EXECUTIVE"
/s/ Xxxxx Xx
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"COMPANY"
FIRST SIERRA FINANCIAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: President
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