Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between
Availent Financial, Inc., a Delaware corporation (herein referred to as the
"Company"), and Xxxxxx X. Xxxx (herein referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company recently acquired substantially all of the assets of
Broyd, Inc., a Texas corporation ("Seller"), pursuant to the terms of that
certain Agreement for Sale and Purchase of Assets (the "Purchase Agreement") by
and among the Company, Seller, Xxxxxxxx X. Xxxxx and Executive; and
WHEREAS, the mortgage finance marketing service business purchased under
the Purchase Agreement is to be operated in the future as a division of the
Company under the name of First Texas Residential (the "First Texas Division");
and
WHEREAS, the Company and Seller have entered into that certain Contingency
Payment Agreement dated as of even date herewith (the "Contingency Payment
Agreement"); and
WHEREAS, the parties hereto desire to have the terms and conditions of such
employment set forth in this Agreement.
NOW THEREFORE, for and in consideration of the mutual advantages and
benefits accruing respectively to the parties hereto, the mutual promises
hereinafter made and the acts to be performed by the respective parties hereto,
the Company and the Executive do hereby contract and agree as follows:
1. Employment. The Company hereby employs the Executive as a Managing
Director of the First Texas Division, and any other operations for
which the Executive assumes, pursuant to a written document executed
by each of the Company and the Executive, operating responsibility in
the future (the First Texas Division and any other operations as
aforesaid are collectively referred to herein as the "Designated
Operations"). The Executive hereby accepts such employment, and agrees
to perform the duties and services as herein set forth. Such
employment shall continue during the term of this Agreement.
2. Term. Except in the case of earlier termination as herein specifically
provided, the term of this Agreement shall be for a five (5) year
period beginning on January 1, 2004, and ending December 31, 2008 (the
"Employment Term").
3. Compensation.
(a) Base Compensation. As base compensation for the services of
Executive during the term hereof, the Company shall pay the
Executive a commission representing seventy percent (70%) of
mortgage loan revenue (origination fees, discount fees, volume
incentives, yield spread premiums as disclosed on disseminated
rate sheets to the Executive by the Company or through the
Company, any overages above the required mortgage fees less any
third party fees uncollected for including but not limited to
credit reports, appraisals, automated underwriting expenses,
courier fees) originated and funded by the Executive. The
Executive's base compensation shall be paid in accordance with
the Company's regular payroll schedule, and may be paid, in whole
or in part, by the Parent Corporation, the Company, or any of the
subsidiaries or divisions of the Company. The Executive may
direct the Company to pay certain portions of the Executive's
commission to other parties.
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(b) Net Profits. The Company shall pay the Executive 10% of the Net
Profits of the Designated Operations for each month on the
fifteenth (15) day of the following month. Net Profits means the
Designated Operations net profits after income taxes (calculated
as if the Designated Operations were a separate taxpaying entity)
computed in accordance with generally accepted accounting
principles consistently applied except as modified as follows:
the Designated Operations Net Profits shall not include (i) any
amortization of goodwill arising from the purchase of assets
which is subject to the Purchase Agreement or any amortization of
goodwill arising out of subsequent acquisitions undertaken
through the Designated Operations; (ii) any expenses incurred in
connection with the purchase of the assets by the Company; (iii)
increased depreciation charges resulting from the step up in
basis of the assets as a result of the acquisition; (iv)
interest, fees and expenses associated with indebtedness related
to the acquisition or associated with any other financings; (v)
any charges for any corporate overhead of the Company (including
but not limited to legal and other general and administrative
expenses and executive compensation) that is not approved in
writing by the Executive; (vi) expenses related to the
appointment of a new executive or employee to the Designated
Operations unless it is approved in writing by the Executive; and
(vii) any costs of insurance in excess of market costs of the
policies without any profit to the Company. The Company shall
determine the Net Profits and Funded Gross Dollar Volume (as
defined below) within five (5) days following the end of each
monthly period. The Company's methodology for determination of
the Net Profits and Funded Gross Dollar Volume and the results
thereof shall be forwarded to Executive. The Company shall
provide Executive with access upon request to the data it used to
determine the Net Profits and Funded Gross Dollar Volume
including all relevant books and records of the business to the
extent required to review the Net Profits and Funded Gross Dollar
Volume computation. The Executive shall review the calculation of
the Net Profits and Funded Gross Dollar Volume within five (5)
days after delivery thereof and notify the Company in writing of
any disagreement with such calculation. If within such five (5)
days following delivery Executive does not object in writing
thereto, then the Company's determination of the Net Profits and
Funded Gross Dollar Volume shall be conclusive. If the Executive
objects in writing to the Company's computation, then the Company
shall pay to the Executive the undisputed amount and the Company
and the Executive shall negotiate in good faith and attempt to
resolve their disagreement with respect to the disputed amount.
Should such negotiation not result in an agreement within ten
(10) days of receipt by the Company of Executive's objection,
then the matter shall be submitted to arbitration by an
independent accounting firm of national reputation mutually
acceptable to the Company and the Executive (the "Neutral
Auditor"). All fees and expenses relating to appointment of a
Neutral Auditor and the work, if any, to be performed by such
Neutral Auditor will be borne by the Company. If the Company and
the Executive are unable to agree on the Neutral Auditor, then
either or both of them shall request the American Arbitration
Association to appoint the Neutral Auditor. The Neutral Auditor
shall deliver to the Company and the Executive a written
determination (such determination to include a worksheet setting
forth all material calculations used in arriving at such
determination and to be based solely on information provided to
Neutral Auditor by the Company and the Executive, or their
respective affiliates) of the disputed items within thirty (30)
days of receipt of the disputed items, which determination shall
be final, binding and conclusive on the parties. The Net Profits
and Funded Gross Dollar Volume shall be payable to the Executive
within three (3) days following agreement on or determination of
the final, binding and conclusive calculation of the Net Profits
and Funded Gross Dollar Volume.
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(c) Funded Gross Dollar Volume. The Company shall pay the Executive 7
1/2 basis points on the gross dollar volume of the Designated
Operations funded each month (the "Funded Gross Dollar Volume").
The consideration shall be paid to the Executive on the fifteenth
(15) day of the following month.
(d) Reimbursement. The Company shall pay or reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by
him in the performance of his duties under this Agreement, upon
presentment of appropriate supporting documentation in accordance
with the Company's normal policies for expense verification and
as necessary to comply with the rules and regulations of the
Internal Revenue Service. In addition, the Executive will not be
reimbursed for expenses if the and to the extent that the nature
and amount of the expenses involved are not in compliance with
the policies of the Company in effect at the time.
(e) Auto Allowance. Executive shall be provided a monthly automobile
allowance of $1,250.00 paid monthly in accordance with the
Company's usual payroll practices and subject to all regular
withholdings.
(f) Vacation. The Executive shall be entitled each calendar year to
three (3) weeks of paid vacation.
(g) Benefits. In addition to the foregoing compensation to be paid to
Executive, the Executive shall be entitled to each of the
following during the term of this Agreement (at the Company's
expense unless otherwise indicated): (a) health insurance
coverage which shall provide for payment of health, dental and
related expenses incurred during the term of this Agreement with
respect to the Executive, the Executive's spouse and the
Executive's children, if any, and which shall contain such
benefits and options as shall be made available to other
Executives of the Company (the parties acknowledge that the
Executive shall be responsible for paying such portion of this
coverage as shall be consistent with the Company's policy for its
executives in general), (b) the right to participate in any other
benefit plans of the Company available to senior management
executives of the Company to the extent that the Board of
Directors of the Company determines that the Executive shall be a
participant in such plan(s), and (c) the right to participate in
any stock option plans of the Company if and to the extent that
the Board of Directors of the Company determines that the
Executive shall be a participant in such plan(s).
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4. Duties and Services. During the term of this Agreement, the Executive
agrees to (a) use commercially reasonable efforts to enhance and develop
the best interests and welfare of the First Texas Division, and the
Company, (b) use commercially reasonable efforts and skill to advancing and
promoting the growth and success of the First Texas Division, and the
Company, and (c) perform such duties or render such services as the Board
of Directors of the Company may, from time to time, reasonably confer upon
the Executive. Notwithstanding anything herein to the contrary, it is
understood that the Executive shall have the right to participate, during
the term of this Agreement, in the establishment, amendment and
implementation of the pricing policies of the First Texas Division.
5. Termination.
a. Termination by the Company for Cause. The Company may terminate the
Executive's employment pursuant to this Agreement at any time for
"cause" as herein defined. The term "cause" shall mean any of the
following events: (i) any act or omission constituting fraud under the
laws of the State of Texas or the United States of America, or (ii) a
finding of probable cause, or a plea of nolo contendere to, a felony
or other crime involving moral turpitude, or (iii) willful misconduct
or gross negligence by the Executive of the responsibilities of his
position, or (iv) the Executive's engagement in any act of dishonesty
or theft within the scope of his employment that, in the good faith
judgment of the Board of Directors of the Parent Corporation, will
materially injure the business, prospects or reputation of the First
Texas Division and/or the Company, or (v) the breach by the Executive
of any of the material terms of this Agreement, or (vi) the failure of
the Designated Operations to meet the performance goals as a whole
established from time-to-time by the Company and Executive, and such
failure is not related to economic factors or conditions which are not
within the control of Executive. The Board of Directors of the Company
shall have the authority, based upon a good faith and reasonable
determination, to determine whether or not Executive has complied with
the matters covered above, and such determination shall be conclusive;
provided, however, it is agreed that the Company will not be entitled
to terminate this Agreement for cause pursuant to (iii), (iv) (v) or
(vi) above unless, prior to such termination, (1) the Executive has
received a written reprimand detailing the acts or omissions
constituting failure to comply with (iii), (iv), (v) or (vi) above,
and (2) the Executive shall have at least thirty (30) days to cure the
acts or omissions which constitute violations of (iii), (iv), (v) or
(vi) above.
b. Termination by the Company Without Cause. The Company may terminate
this Agreement and the Executive's employment at any time, during the
term of this Agreement by giving ninety (90) days written notice to
the Executive, subject to Paragraph 6 of this Agreement.
c. Termination by the Executive Without Cause. The Executive may
terminate his employment with the First Texas Division at any time by
giving ninety (90) days written notice to the Company.
d. Termination by the Executive for Cause. At any time prior to the end
of the Employment Term, the Executive shall have the right, at his
sole option and election, by giving written notice of termination to
the Secretary of the Company within sixty (60) days after the
occurrence of the event that is the basis for the giving of such
notice, to terminate the Agreement effective on the date on which such
notice is given by the Executive, if, at any time: (i) the Executive
shall be removed from (other than by reasons justifying such action by
the Company under Section 5(a) hereof) or by agreement between
Executive and the Company) the office and position as a Managing
Director and not placed by the Company in a lateral or otherwise
equivalent position with the same or reasonably equivalent rights,
privileges, duties and status; (ii) the Executive is required to
relocate to offices outside of Houston, Texas; or (iii) an event of
default occurs under the Promissory Note or the Security Agreement
executed in connection with the Asset Purchase Agreement and this
Agreement is terminated in accordance with Section 10 hereof.
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e. Termination Upon Death. The Executive's employment with the First
Texas Division shall automatically terminate on the date of the
Executive's death if the Executive dies during the term of this
Agreement.
f. Termination Upon Disability. If the Executive is incapacitated by an
accident, sickness or otherwise, so as to render him mentally or
physically incapable of performing the services required of him
pursuant to this Agreement, Executive's employment by the First Texas
Division shall terminate thirty (30) days after the day on which an
independent physician determines that the Executive is so disabled,
and that this Agreement should be terminated by reason of such
disability. Notwithstanding the foregoing, (i) the Executive shall be
notified in writing if the independent physician determines that the
Executive is disabled due to mental or physical health, and (ii) in
such event, the Executive shall have the right to contest any
determination of disability by the independent physician. In the event
that the Executive does contest such determination, such matter shall
be resolved by arbitration pursuant to this Agreement.
6. Severance and Other Payments.
a. If the Executive's employment pursuant to this Agreement is terminated
by the Executive, is terminated for "cause" (as herein defined) or is
terminated due to the death or disability (as determined pursuant to
paragraph 5(f) of this Agreement) of the Executive, the First Texas
Division will pay to Executive all compensation earned by, and all
benefits and reimbursements due to, the Executive through the date of
termination. Except for the preceding sentence, neither the First
Texas Division nor the Company shall be obligated to pay or provide
any severance compensation or benefits to the Executive.
b. If the Executive's employment with the First Texas Division is
terminated at any time pursuant to Paragraph 5(b) or (d) of this
Agreement, the First Texas Division agrees to (i) pay to Executive all
compensation earned by, and all benefits and reimbursements due to,
the Executive through the date of termination, and (ii) pay severance
compensation to the Executive for a period of twelve (12) months from
the date of termination of the Executive's employment with the First
Texas Division. Such severance compensation shall be an amount each
month equal to the average amount of compensation earned by the
Executive, pursuant to the terms of this Agreement during the twelve
(12) months preceding the month in which this Agreement terminates;
provided, that if Executive has been employed by the Company for less
than 12 months after the date of this Agreement, then the amount shall
be an annualized amount based on the Executive's total salary and
bonus for the period of time immediately preceding the termination of
his employment.
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c. If the Executive's employment is terminated during the term of this
Agreement, for any reason other than "cause", the Executive shall be
entitled to receive a pro rata share (based upon the number of months
employed during the calendar year in which employment with the First
Texas Division is terminated) of any unpaid bonus or incentive
compensation which the Executive would otherwise have been entitled to
receive had he remained employed for the entirety of the calendar year
involved.
7. Working Conditions. During the term of this Agreement, the First Texas
Division will provide the Executive with an office and secretarial
services.
8. Restrictive Commitments. During the term of this Agreement, and subsequent
to the termination of this Agreement (for the time periods below
indicated), the Executive shall not, without the prior written consent of
the Company, directly or indirectly, whether as a director, officer,
employee, agent, consultant or otherwise, engage in any of the activities
as below described anywhere in the state of Texas, or within fifty (50)
miles of each city in which there is an office of the Designated Operations
at the date of termination of this Agreement. During the term of this
Agreement and for a one (1) year period of time following the date of
termination of this Agreement, the Executive shall not do any of the
following: (a) engage in any type of business directly competitive with the
Designated Operations in the state of Texas, (b) solicit for employment or
hire any individual who was an employee of the First Texas Division, the
Company, or the Parent Corporation, or any of the affiliates of such
entities, as of the date of termination of such employment or at any time
within the twelve (12) months preceding the date of termination of this
Agreement, or (c) solicit the mortgage finance marketing service business
of any person or entity who is or was a customer, client, agent or
representative of any office or offices of the Designated Operations, at
the date of termination of this Agreement, or at any time during the twelve
(12) months preceding the date of termination of this Agreement. In
addition, the Executive shall never solicit the mortgage finance marketing
service business of any person or entity that is or was a customer, client,
agent or representative of Seller on the date of this Agreement, or at any
time during the twelve (12) months preceding the date of this Agreement.
The Executive acknowledges that, in exchange for the execution of the
non-competition restrictions above set forth, the Executive has received and
will receive substantial and valuable consideration. The Executive agrees that
this consideration constitutes fair and adequate consideration for the execution
of these non-competition restrictions.
The Executive agrees that the non-competition restrictions above set forth
are ancillary to an otherwise enforceable agreement and supported by independent
valuable consideration. The Executive further agrees that the limitations as to
time, geographical area and scope of activity to be restrained by these
restrictions are reasonable and acceptable and do not impose any greater
restraint than is reasonably necessary to protect the goodwill and other
business interests of the First Texas Division and the Company. The Executive
further agrees that if, at some later date, a court of competent jurisdiction
determines that any of the restrictions set forth in this Paragraph 8 are not
reasonable, this Paragraph 8 may be reformed by the court and enforced to the
maximum extent permitted under Texas law.
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If the Executive is found to have violated any of the provisions of this
Paragraph 8, the Executive agrees that the restrictive period of each covenant
so violated shall be extended by a period of time equal to the period of such
violation by him. It is the intent of this Paragraph 8 that the running of the
restrictive period of any covenant shall be tolled during any period of
violation of such covenant so that the Company may obtain the full and
reasonable protection for which it contracted and so that Executive may not
profit by his breach.
Subject to Section 10, the Executive's covenants and obligations under this
Paragraph 8 shall survive the termination of this Agreement.
9. Nondisclosure Agreement. The Executive acknowledges that, during the term
of this Agreement, employment with the Company, the Executive will be
provided with access to confidential and proprietary information of each of
the First Texas Division and the Company, and that such information will
enable the Executive to benefit from the goodwill and know-how of each of
First Texas Division and the Company. The Executive acknowledges and agrees
that it is fair and reasonable for the First Texas Division and the Company
to take steps to protect the First Texas Division and the Company from the
risk of such misappropriation. The Executive acknowledges that he occupies
or will occupy a position of trust and confidence with the Company, and
that the First Texas Division and the Company will be irreparably damaged
if Executive were to breach the covenants set forth in this Paragraph 9.
Accordingly, the Executive agrees that the Executive will not, without the
prior written consent of the Company, at any time during the term of this
Agreement or anytime thereafter, except as may be required by competent
legal authority or except as required by the Company to be disclosed in the
course of performing the Executive's duties under this Agreement, use or
disclose to any person, firm or other legal entity, any confidential
records, secrets or information related to the First Texas Division,
Company, the Parent Corporation, or any parent, subsidiary or affiliated
person or entity (collectively, "Confidential Information"). Confidential
Information shall include, without limitation, information about the
customer lists, product pricing, data, know-how, processes, ideas, product
development, market studies, computer software and programs, database
technologies, strategic planning, and risk management as relates to the
First Texas Division, the Company and their affiliates. The Executive
acknowledges and agrees that all Confidential Information that he may
acquire, will be received in confidence and as a fiduciary of the First
Texas Division and the Company. The Executive will exercise utmost
diligence to protect and guard such Confidential Information. The Executive
agrees that he will not, without the express written consent of the Board
of Directors of the Company, take with him upon the termination of this
Agreement any document or paper, or any photocopy or reproduction or
duplication thereof, relating to any Confidential Information.
Subject to Section 10, the Executive's obligations under this Paragraph 9
shall survive the termination of this Agreement.
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10. Default under the Promissory Note. Notwithstanding anything to the contrary
contained herein, if an event of default occurs under the Promissory Note
or Security Agreement executed in connection with the Asset Purchase
Agreement and the Seller Parties (as defined in the Asset Purchase
Agreement) give notice under Section 6 of the Asset Purchase Agreement to
terminate their relationship with the Company, this Agreement shall
immediately terminate, including but not limited to the requirements set
forth in Sections 8 and 9 (i.e., the restrictive commitments and
nondisclosure obligations shall not apply after a termination of this
Agreement as a result of an event of default under the Promissory Note or
Security Agreement), without any further action by the parties hereto. If
this Agreement terminates pursuant to this Section 10, the Company agrees
to pay to Executive all compensation earned by, and all benefits and
reimbursements due to, the Executive through the date of termination.
Except as otherwise provided in this Agreement, the Company shall have no
further obligations or commitments to the Executive upon termination of
this Agreement pursuant to this Section 10.
11. Notices. All notices or other instruments or communications provided for in
this Agreement shall be in writing and signed by the party giving same and
shall be deemed properly given if delivered in person, including delivery
by overnight courier, or if sent by registered or certified United States
mail, postage pre-paid, addressed to such party at the address listed
below. Each party may, by notice to the other party, specify any other
address for the receipt of such notices, instruments or communications. Any
notice, instrument or communication sent by telegram shall be deemed
properly given only when received by the person to whom it is sent.
12. Miscellaneous.
a. The terms and provisions of this Agreement shall inure to the benefit
of, and shall be binding on, the parties hereto and their respective
heirs, representatives, successors and assigns. It is understood and
agreed that the Company may assign this Agreement (i) to any
subsidiary or affiliate of the Company (provided that the Company
shall remain liable under this Agreement), or (ii) to an unrelated
third party if such third party acquires all or substantially all of
the business operations of the First Texas Division or the Company.
b. This Agreement supersedes all other agreements, either oral or in
writing, between the parties to this Agreement, with respect to the
employment of the Executive by the First Texas Division. This
Agreement contains the entire understanding of the parties and all of
the covenants and agreement between the parties with respect to such
employment. Any such prior agreements are hereby terminated without
obligation for any payments otherwise due thereunder. No waiver or
modification of this Agreement or of any covenant, condition or
limitation herein contained shall be valid, unless in writing and duly
executed by the party to be charged therewith, and no evidence of any
waiver or modification shall be offered or received in evidence of any
proceeding, arbitration, or litigation between the parties hereto
arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid, and the
parties further agree that the provisions of this Paragraph 11(b) may
not be waived except as herein set forth.
c. All agreements and covenants contained herein are severable and in the
event any of them shall be held to be invalid as written, pursuant to
the arbitration or judicial proceedings provided for in this
Agreement, this Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein.
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d. Any controversy between the parties to this Agreement involving the
construction or application of any of the terms, covenants, or
conditions of this Agreement shall be submitted to arbitration in
Xxxxxx County, Texas, if either party to this Agreement shall request
arbitration by notice in writing to the other party. In such event,
the parties to this Agreement shall, within thirty (30) days after
this Paragraph 11(d) is invoked, both appoint one person as an
arbitrator to hear and determine the dispute, then the two arbitrators
so chosen shall, within fifteen (15) days, select a third impartial
arbitrator; the majority decision of the arbitrators shall be final
and conclusive upon the parties to this Agreement. Each party to the
arbitration proceedings shall bear his or its own expenses, except
that the expenses of the arbitrators shall be borne equally by the
Company and the Executive.
e. In the event of any litigation between the parties related to the
compliance with the terms and conditions of this Agreement, the
parties hereto acknowledge and agree that (i) such litigation
proceedings must be held in Xxxxxx County, Texas, and (ii) the
prevailing party in such litigation proceedings shall be entitled to
recover, from the non-prevailing party, reasonable attorneys' fees and
expenses incurred in connection with the dispute involved.
f. This Agreement has been made under and shall be governed by the laws
of the State of Texas.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of December 31, 2003.
COMPANY:
AVAILENT FINANCIAL, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
----------------------------------
Xxxxxxx X. XxXxxxxx, President
Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
EXECUTIVE:
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Xxxxxx X. Xxxx
Address: ______________________
______________________
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