EMPLOYMENT AGREEMENT
THIS AGREEMENT between Arcadia Financial Ltd. (the "Company") and
Xxxxxx X. Xxxxxxxx (the "Executive") is dated as of this 20th day of January,
1999.
W I T N E S S E T H :
WHEREAS, the Company and the Executive have agreed to enter into
an agreement providing the Company and the Executive with certain rights to
assure the Company of continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company
and the Executive as follows:
1. EFFECTIVE DATE; TERM. This Agreement shall govern the
terms and conditions of Executive's employment commencing as of February 1,
1999 (the "Effective Date").
2. PRIOR EMPLOYMENT AGREEMENT. Intentionally omitted.
3. RETENTION PERIOD. The Company agrees to continue the
Executive in its employ, and the Executive agrees to remain in the employ of
the Company, for the period (the "Retention Period") commencing on the
Effective Date and ending on the date of any termination of the Executive's
employment in accordance with Section 6 of this Agreement.
4. POSITION AND DUTIES. (a) CHANGE IN POSITION PRIOR TO
CHANGE OF CONTROL. During the Retention Period, prior to a Change of Control
(as hereinafter defined), the Executive's position (including titles),
authority and responsibilities as an officer of the Company shall be at least
commensurate with the highest of those held or exercised by him at any time
during the 90-day period immediately following the Effective Date; provided,
however, that the Chief Executive Officer of the Company may, in his sole
discretion, make changes to the Executive's position (including titles),
authority and responsibilities if he determines in good faith that such
changes are appropriate in light of the Company's business plan including,
without limitation, financial, strategic and operating objectives, and,
provided further, that in the event the Chief Executive Officer elects to
make a reduction in the Executive's position, authority or responsibilities
pursuant hereto, such changes shall not otherwise impact or in any way reduce
the Executive's compensation and benefits under Section 5 or the Company's
obligations under this Agreement including, without limitation, its
obligations under Section 7(d) hereof.
(b) CHANGE IN POSITION AFTER CHANGE OF CONTROL. In the event a
Change of Control (as hereinafter defined) occurs during the Retention Period,
thereafter the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 10-day period immediately preceding
the date of the Change of Control.
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(c) CHANGE OF CONTROL. As used herein the term "Change of
Control" shall mean the closing of any transaction or series of transactions
by which the Company shall merge with (whether or not the Company is the
surviving entity) or consolidate into any other person or lease or sell
substantially all of its and its subsidiaries' assets (other than asset sales
in connection with automobile loan securitization transactions) substantially
as an entirety to any other person or by which any person, entity or group
(within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934)
acquires, directly or indirectly, 51% or more of the Company's outstanding
common stock (calculated on a fully diluted basis).
(d) BUSINESS TIME. During the Retention Period, the Executive
shall devote his full business time during normal business hours to the business
and affairs of the Company and use his best efforts to perform faithfully and
efficiently the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on which
the Executive served prior to the Effective Date, in each case only if and
to the extent not substantially interfering with the performance of such
responsibilities,
(ii) reasonable time spent in managing the Executive's
investment portfolio, but only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(iii) periods of vacation and sick leave to which he is
entitled.
It is expressly understood and agreed that the Executive's continuing to
serve on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company. The Executive shall be entitled to serve on additional outside
boards and committees with the prior written consent by the Chief Executive
Officer of the Company.
(e) PLACE OF PERFORMANCE. During the Retention Period, the
Executive's principal places of performance will be at the Company's offices
in Minneapolis, Minnesota and at his office located in Ambler, Pennsylvania,
with the Executive dividing his time between the two locations on such basis
as shall be mutually agreeable to the Executive and the Company, except for
reasonably required travel on behalf of the Company.
5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the
first year of the Retention Period, the Executive shall receive a base salary
("Base Salary") at a monthly rate of Twelve Thousand Five Hundred and 00/100
Dollars ($12,500.00). The Base Salary shall be reviewed at least once each year
after the Effective Date, and may be increased (but not decreased) at any time
and from time to time by action of the Board or any committee thereof or any
individual having authority to take such action in accordance with the Company's
regular practices. Neither payment of the Base Salary nor payment of any
increased Base Salary after
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the Effective Date shall serve to limit or reduce any other obligation of the
Company hereunder. For purposes of the remaining provisions of this
Agreement, the term "Base Salary" shall mean Base Salary as defined in this
Section 5(a) or, if increased after the Effective Date, the Base Salary as so
increased.
(b) ANNUAL BONUS. In addition to the Base Salary, the
Executive shall be eligible for each fiscal year of the Company during the
Retention Period an annual bonus, with the target amount at least equal to
$150,000, and vesting and payment thereof to be based on reasonable and
customary criteria consistent with the Company's practices for the Chief
Operating Officer of the Company (the "Annual Bonus"), provided however, for
the years 1999 through 2000 eighty percent (80%) of the Executive's Annual
Bonus shall be applied toward participation in the Company's 1998-2000
Restricted Stock Election Plan. If the Executive is employed for less than a
full fiscal year in either the first or final fiscal year of the Retention
Period, the Executive shall be eligible to receive an amount with respect to
such fiscal year at least equal to the amount of the Annual Bonus multiplied
by a fraction, the numerator of which is the number of days in such fiscal
year occurring during the Retention Period and the denominator of which is
365. In the event the Executive has elected to receive his or her Annual
Bonus for such year in the form of restricted shares of the Common Stock of
the Company, upon termination of the Executive's employment for any reason
the Executive shall be deemed to have revoked such election as to any then
unvested shares of such restricted stock and the Executive's pro-rated Annual
Bonus for such year shall be determined based upon the amount of the cash
Annual Bonus the Executive would have received absent such election. Each
amount payable in respect of the Executive's Annual Bonus shall be paid not
later than 90 days after the fiscal year next following the fiscal year for
which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither
the Annual Bonus nor any bonus amount paid in excess thereof after the
Effective Date shall serve to limit or reduce any other obligation of the
Company hereunder.
(c) FRINGE BENEFITS. Subject to the Company's rights under
subsection (vi) of this Section 5(c), during the Retention Period, the
Company shall provide the following fringe benefits to Executive:
(i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to
satisfaction of the eligibility requirements of such plans and the rules
and regulations applicable thereto, Executive and his family members shall
be entitled to be covered by the Company's group health and dental
insurance plans presently in effect or hereafter adopted by the Company
and applicable to employees of the Company generally and Executive shall
be entitled to be covered by the Company's group disability and life
insurance plans presently in effect or hereafter adopted by the Company
and applicable to the employees of the Company in general. The Company
shall pay the premiums associated with such coverage. In the event
Executive makes a claim against any disability policy provided to
Executive by the Company pursuant to this Section 5(c)(i) and such policy
calls for a waiting period which is applicable to Executive's claim, the
Company shall pay to Executive during such waiting period his monthly base
salary due during such period and shall provide the other benefits due him
under this Section 5(c)(i).
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(ii) VACATION. Executive shall be entitled to four weeks of
vacation each year of the Retention Period, without loss of compensation
or other benefits pursuant to such general policies and procedures of the
Company as are from time to time adopted by the Company.
(iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed
by the Company for all reasonable expenses incurred by him in connection
with the conduct of the Company's business for which he furnishes
appropriate documentation.
(iv) AUTOMOBILE. The Company shall at the Company's option
either (A) provide to Executive use of an automobile to be used by
Executive in conducting the Company's business; or (B) pay to Executive a
monthly auto expense in the amount of not less than Four Hundred Dollars
($400) per month. In addition, in the event the Company provides to
Executive an automobile, the Company shall reimburse Executive (1) an
amount equal to the reasonable cost of insuring and maintaining the
automobile used by Executive for the Company's business, and (2) the cost
of maintenance and the cost of gasoline and oil used in the automobile,
and in the event of a loss under the policies insuring said automobile,
the amount of any deductible thereunder applicable to such loss. Such
insurance and the coverage and deductibles thereof shall cover both the
business and personal use of such automobile by Employee, his family and
invitees and shall include such other terms and conditions as are
reasonably acceptable to Executive. Any such reimbursements shall be made
upon the Company's receipt of invoices evidencing incurrence of such
expenses. Executive shall also be paid a monthly amount equal to the
reasonable value of personal use of such automobile, determined in
accordance with applicable federal income tax regulations.
(v) CLUB DUES. The Company shall provide to Executive and
his family a membership at Olympic Hills Golf Club and shall reimburse the
Executive for the reasonable cost of the monthly or annual dues, as the
case may be, paid by Executive to maintain such membership. The Company
shall also reimburse Executive the reasonable cost of the monthly or
annual dues, as the case may be, paid by Executive to maintain his status
as a member of the Flagship Athletic Club or of any other athletic club
having equal or lesser membership costs in lieu of such club.
(vi) REDUCTION IN BENEFITS. At any time, and from time to
time, prior to a Change of Control, the Company shall be entitled to
reduce the benefits provided to the Executive under this Subsection (c)
provided that any such reduction must be made concurrently with an equal
reduction to the fringe benefits granted to all executives holding the
office of Executive Vice President.
6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon his death. The Company may
terminate Executive's employment during the Retention Period, after having
established the Executive's Disability, by giving the Executive written notice
of its intention to terminate his employment, and his employment with the
Company shall terminate effective on the 90th day after receipt of such notice
if, within 90 days after such receipt, the Executive shall fail to return to
full-time performance of his duties.
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For purposes of this Agreement, "Disability" means disability which, after
the expiration of more than 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or his legal representatives (such agreement
to acceptability not to be withheld unreasonably).
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this
Agreement to the contrary, the Executive may, upon not less than 15 days advance
written notice to the Company, voluntarily terminate employment during the
Retention Period for any reason, provided that any termination by the Executive
pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined
therein) shall not be treated as a voluntary termination under this
Section 6(b).
(c) CAUSE. The Company may terminate the Executive's employment
during the Retention Period for Cause. As used in this Agreement, the term
"Cause" shall mean (i) any fraud, misappropriation or embezzlement by the
Executive in connection with the business of the Company or any of its
subsidiaries, (ii) any conviction of a felony or a gross misdemeanor by the
Executive that has or can reasonably be expected to have a detrimental effect on
the Company or any of its subsidiaries, (iii) any gross neglect by the Executive
of the duties assigned to him or her hereunder which continues for a period of
90 days after written notice to the Executive of such neglect, or, (iv) any
material breach by Executive of any provisions of Section 12 of this Agreement.
It is understood and agreed that the Company may not terminate Executive's
employment for Cause in the event Executive is unable to perform his or her
duties due to partial or permanent or temporary or total disability from injury
or sickness.
(d) GOOD REASON. The Executive may terminate his employment
during the Retention Period for Good Reason. For purposes of this Agreement,
"Good Reason" means:
(i) without the Executive's prior written consent, the
Company or any of its officers takes or fails to take any action which
changes the Executive's position (including titles), authority or
responsibilities which is inconsistent with Section 4 of this Agreement or
reduces the Executive's ability to carry out his duties and
responsibilities under Section 4 of this Agreement provided that any
change which is permissible under Section 4(a) of this Agreement shall not
constitute "Good Reason"; or
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive, provided however, a reduction in the
fringe benefits granted to the Executive pursuant to Section 5(c)(v)
hereof which is consistent with reductions thereto made to the fringe
benefits granted to all executives holding the office of Executive Vice
President during the Retention Period shall not constitute "Good Reason";
or
(iii) any failure by the Company to obtain the assumption of
and agreement to perform this Agreement by a successor as contemplated by
Section 13(b) of this Agreement.
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(e) WITHOUT CAUSE. The Company may terminate the Executive's
employment during the Retention Period without Cause. The Company shall give
Executive at least 15 days' advance written notice of any termination of
Executive's employment which is not for Cause and not on account of
Executive's Disability.
(f) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company for Cause or by the Executive for Good Reason
during the Retention Period shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 14(c) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination by the Company for Cause,
within 10 business days of the Company's having actual knowledge of all of
the events giving rise to such termination, and in the case of a termination
by Executive for Good Reason, within 180 days of the Executive's having
actual knowledge of the events giving rise to such termination, and which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other than the
date of receipt of such notice, specifies such termination date (which date
shall be not more than 15 days after the giving of such notice). The failure
by the Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(g) DATE OF TERMINATION. For purposes of this Agreement, the
term "Date of Termination" means (i) in the case of a termination for which a
Notice of Termination is required, the date of receipt of such Notice of
Termination or, if later, the date specified therein and (ii) in all other
cases, the actual date on which the Executive's employment terminates during
the Retention Period.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH.
If the Executive's employment is terminated during the Retention Period by
reason of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
Termination, (ii) the product of the target Annual Bonus for the year in which
the death occurred and a fraction, the numerator of which is the number of days
in the current fiscal year of the Company through the Date of Termination, and
the denominator of which is 365 (the "Pro-rated Bonus Obligation"). For the
purposes of computing the Pro-rated Bonus Obligation, the Executive shall be
deemed to have revoked his election, if any, to receive such bonus in the form
of restricted stock of the Company and to have earned the maximum cash Annual
Bonus which he was eligible to earn for the year in which the termination
occurred, (iii) any compensation previously deferred by the Executive (together
with any accrued earnings thereon) and not yet paid by the Company, (iv) any
other amounts or benefits then owing to the Executive under any of the Company's
incentive compensation plans, stock option plans, restricted stock plans or
other similar plans as determined pursuant to the terms of such plans and this
Agreement and (v) any amounts or benefits owing to the Executive under any of
the Company's employee benefit plans or policies (such amounts specified in
clauses (i), (ii), (iii),
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(iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless
otherwise directed by the Executive prior to his death, all Accrued
Obligations shall be paid to the Executive's estate.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, the Executive shall receive all Accrued
Obligations and, in addition, from the Date of Termination until the date
when the Retention Period would otherwise have terminated, shall continue to
participate in or be covered under the benefit plans and programs referred to
in Section 5(c)(i) of this Agreement or, at the Company's option, to receive
equivalent benefits by alternate means at least equal to those provided in
accordance with Section 5(c)(i) of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be entitled
to receive disability and other benefits at least equal to the most favorable
level of benefits available to disabled employees and/or their families in
accordance with the plans, programs and policies maintained by the Company or
its affiliates relating to disability at any time during the 90-day period
immediately preceding the Effective Date.
(c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention
Period, the Executive's employment shall be terminated for Cause or
voluntarily terminated by the Executive (other than on account of Good
Reason), the Executive shall receive all Accrued Obligations other than the
Pro-rated Bonus Obligation.
(d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY
AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during
the Retention Period, the Company terminates the Executive's employment other
than for Cause or Disability, or the Executive terminates his employment for
Good Reason, the Executive shall receive all Accrued Obligations. In
addition, the Company shall pay to the Executive in a lump sum, a cash amount
equal to two (2) times the sum of the following amounts:
(1) the Executive's annual Base Salary at the rate specified
in Section 5(a) of this Agreement;
(2) an amount equal to the target cash Annual Bonus
determined without proration payable to the Executive in respect to
the calendar year in which the termination event occurred;
(3) an amount equal to the average annual amount paid and/or
reimbursed to the Executive pursuant to Section 5(c)(iv) hereof
during the two calendar years preceding the Date of Termination; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) the annual cost to the Company (based on the
premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section
5(c)(i) of this Agreement;
provided, however, that with respect to the life and medical
insurance coverage referred to in Section 5(c)(i) of this Agreement,
at the Executive's election made
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prior to the Date of Termination, the Company shall use its best
efforts to secure conversion coverage and shall pay the cost of
such coverage in lieu of paying the lump sum amount attributable
to such life or medical insurance coverage.
In consideration of the Company's payment of the amounts payable to the
Executive pursuant to this Subsection 7(d) and the Executive's acceptance
thereof, the Executive and the Company shall enter into a mutual release in a
form acceptable to the Executive and the Company releasing each other and
their respective agents from all claims arising from or in any way related to
the Executive's employment by the Company and the termination of such
employment relationship. The Executive shall not receive any of the amounts
payable pursuant to this Subsection 7(d) until after the Executive has
executed and delivered the release to the Company and all rescission periods
under applicable state and federal laws have expired without rescission of
the release by the Executive. The Company shall make such payment within
fifteen (15) days after the longest applicable rescission period has elapsed
without rescission.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the
Executive may have with respect to awards granted to him prior to or during
the Retention Period under any stock option, restricted stock or other plans
or agreements with the Company or any of its affiliated companies except as
to restrictions on the Executive's rights to any restricted stock received by
the Executive in lieu of a cash Annual Bonus as set forth in Sections 5(b),
7(a) and 7(d) of this Agreement. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan or program of
the Company or any of its affiliated companies shall be payable in accordance
with such plan or program.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment, distribution,
acceleration of vesting or other benefit which the Executive receives or
becomes entitled to receive, whether alone or in combination, and whether
pursuant to the terms of this Agreement or any other agreement, plan or
arrangement with the Company or any of its affiliates or any of their
respective successors or assigns, but determined without regard to any
additional payments required under this Section 9 (collectively, the
"Payments"), would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision), or any interest or penalties are
incurred by the Executive 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 the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of (i) all taxes with respect to the Gross-Up
Payment (including any interest or penalties imposed with respect to such
taxes) including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Payments.
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(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by KPMG Peat Marwick or such other nationally recognized
accounting firm then auditing the accounts of the Company (the "Accounting
Firm") which shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is unwilling
or unable to perform its obligations pursuant to this Section 9, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the potential uncertainty
in the application of Section 4999 of the Code (or any successor provision)
at the time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 20 business days after the
Executive is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which he gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
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(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limiting the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and xxx for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of Section
9(c)) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or otherwise. In no
event shall the Executive be obligated to seek other employment by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and no amount payable under
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this Agreement shall be reduced on account of any compensation received by
the Executive from other employment. In the event that the Executive shall
in good faith give a Notice of Termination for Good Reason and it shall
thereafter be determined by mutual consent of the Executive and the Company
or by a tribunal having jurisdiction over the matter that Good Reason did not
exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at
the date of giving such purported Notice of Termination, by mutual consent of
the Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date otherwise
than under this Agreement.
11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be
settled exclusively and finally by expedited arbitration, conducted before a
single arbitrator in Minneapolis, Minnesota, in accordance with the rules
governing employment disputes then in effect of the American Arbitration
Association. The arbitrator shall be approved by both the Company and the
Executive. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason
of arbitration, settlement or otherwise.
12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The
Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses,
(i) obtained by the Executive during his employment by the Company or any of
its affiliated companies and (ii) not otherwise public knowledge (other than
by reason of an unauthorized act by the Executive). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company, unless compelled pursuant to an order
of a court or other body having jurisdiction over such matter, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(b) It is mutually acknowledged that by virtue of Executive's
positions with the Company and its subsidiaries, he will become possessed of
certain valuable and confidential information concerning the customers,
business methods, procedures and techniques of the Company and its
subsidiaries. It is further understood that Executive will develop contacts
among the customers of the Company and its subsidiaries, and it is mutually
understood and agreed that the customers of the Company and its subsidiaries
and the business methods and procedures and techniques developed by the
Company and its subsidiaries are valuable assets and properties of the
Company and its subsidiaries. Without limitation, it is also specifically
acknowledged that great trust on the part of the Company and its subsidiaries
will reside in Executive, since Executive's duties will include involvement
in the management, promotion and development of the Company's business.
Accordingly, the parties deem it necessary to enter into the protective
covenants set
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forth below, the terms and conditions of which have been negotiated by and
between the parties hereto:
(i) Executive agrees that during the Retention Period and until
the last day of the Non-compete Period (as hereinafter defined), he will not,
directly or indirectly, on his own behalf or on the behalf of any third
party, perform management, accounting, financial, marketing, sales,
administrative or executive duties, in any business conducted within the
Territories (as defined below) whose primary business consists of originating
or purchasing automobile or truck loans or leases from automobile or truck
dealers, packaging such loans or leases, reselling such loans or leases or
servicing such loans or leases (the "Restricted Activities") or for any
subdivision or department of any business whose primary business does not
consist of Restricted Activities, but where the primary business of such
subdivision or department consists of Restricted Activities. As used in this
Addendum, the term "Territories" means any state in which any loans or leases
originated or acquired by the Company are originated (determined by the
location of the dealers from whom the loans or leases were purchased or, in
the case of loans or leases, originated by the Company where the borrower or
lessee resides). As used herein the term "Non-compete Period" shall mean as
follows: (i) in the event the Executive's employment hereunder is terminated
pursuant to Section 6(b) or 6(c), the period commencing on the Termination
Date and continuing until the first anniversary of the Termination Date; and
(ii) in the event of the Executive's employment hereunder is terminated
pursuant to Section 6(a), 6(d) or 6(e), the period commencing on the
Termination Date and continuing until the same day of the sixth consecutive
month thereafter.
(ii) Executive agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, solicit, divert, take away or attempt to solicit, divert, or take
away from the Company, or any subsidiary, any of the dealers and other
sources from which the Company or any subsidiary acquires loans or leases or
from whom the loan or lease packages are received by the Company or any
subsidiary.
(iii) Executive agrees that during the Retention Period and until
the first anniversary of the Date of Termination, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others,
solicit, divert or hire away, or in any manner attempt to solicit, divert or
hire away any person employed by the Company or any subsidiary, whether or
not such employee is a full-time employee or a temporary employee of the
Company or any subsidiary, and whether or not such employment was pursuant to
a written or oral contract of employment and whether or not such employment
was for a determined period or was at will.
(c) Executive acknowledges that the provisions of this Section
12 constitute a material inducement to the Company to enter into the
Agreement. Executive further acknowledges that the Company's remedy at law
for a breach by him of the provisions of this Section 12 will be inadequate.
Accordingly, in the event of a breach or threatened breach by Executive of
any provision of this Section 12, the Company will be entitled to injunctive
relief in addition to any other remedy it may have. If any of the provisions
of, or covenants contained in, this Section 12 are hereafter construed to be
invalid or unenforceable in any jurisdiction, the same will not affect the
remainder of the provisions or the enforceability thereof in any other
jurisdiction, which will be given full effect, without regard to the
invalidity or unenforceability in
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such other jurisdiction. If any of the provisions of, or covenants contained
in, this Section 12 are held to be unenforceable in any jurisdiction because
of the duration or geographical scope thereof, the parties agree that the
court making such determination will have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced form,
such provision or covenant will be enforceable; provided, however, that the
determination of such court will not affect the enforceability of this
Section 12 in any other jurisdiction.
(d) In no event shall an asserted violation of the provisions
of this Section 12 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement or under any
other agreement, plan or arrangement.
13. SUCCESSORS. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor
to all or substantially all of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger, consolidation, acquisition
of stock, or otherwise, by an agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Minnesota, applied without reference to principles of conflict of laws.
(b) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) NOTICES. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Xxxxxx X. Xxxxxxxx
000 Xxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
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If to the Company: Arcadia Financial Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Secretary
(with a copy to the attention of the
General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be
effective when actually received by the addressee.
(d) TAX WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(f) CAPTIONS. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
15. ADDITIONAL CONSIDERATION. As additional consideration for
Executive's agreement to the terms and conditions hereof, the Company shall
(i) grant to Executive a stock option to purchase two hundred thousand
(200,000) shares of the Company's Common Stock at an exercise price equal to
the fair market value of the stock on the grant date; and/or (ii) make a
grant of Restricted Stock to Executive pursuant to the Company's 1998-2000
Restricted Stock Election Plan, as amended.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
ARCADIA FINANCIAL LTD.
By:___________________________
Name:_________________________
Title:________________________
______________________________
Xxxxxx X. Xxxxxxxx
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