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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 10th day of March 2000, by
and among Prism Financial Corporation, a Delaware corporation (the
"Company"), Xxxxx X. Xxxxxx (the "Executive"), and Royal Bank of Canada, a bank
organized and existing under the laws of Canada ("Acquiror").
WHEREAS, Acquiror and the Company have determined that
it is in their respective best interests to assure that the Company will have
the continued dedication of the Executive pending the merger (the "Merger") of
the Company and Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and
wholly owned subsidiary of Acquiror ("Acquisition") pursuant to the Merger
Agreement dated as of March 10, 2000 among the Company, Acquiror and Acquisition
(the "Merger Agreement"), and to provide the Company, as the surviving
corporation of the Merger, with continuity of management. Therefore, in order to
accomplish these objectives, the Executive, Acquiror and the Company have
entered into this employment agreement.
WHEREAS, the Executive desires to accept such continued
employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE TIME. The "Effective Time" shall mean
the effective time of the Merger, provided the Executive is employed
by the Company at such time. As of the Effective Time, any and all other
employment agreements entered into between the Company and Executive prior to
the Effective Time (including, without limitation, any employment agreement
entered into among the Company, Executive and Acquiror in connection with or in
contemplation of the transactions contemplated by the Merger Agreement) shall
terminate and become null and void, provided that any option agreements between
the Executive and the Company shall terminate and become null and void only
upon the final installment payment of the special retention bonus contemplated
by Section 2.10(b) of the Merger Agreement and the payment of the sale bonus
contemplated by the option and provided further that upon any termination of
the transactions contemplated by the Merger Agreement, this sentence will be
inapplicable.
2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue to employ the Executive, and the Executive hereby agrees to
continue in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing as of the Effective Time and ending
on December 31, 2003 (the "Employment Period").
3. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, the
Executive shall serve as Chief Financial Officer and Senior
Vice President of the Company with the
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appropriate authority, duties and responsibilities attendant to
such position. After the Employment Period, the Executive may
continue to serve the Company under a mutually agreed upon
arrangement.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote substantially
all of his business attention and time to the business and affairs
of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period, it
shall not be a violation of this Agreement for the Executive to (A)
continue, with respect to current positions and arrangements
disclosed to the Board and, with prior written approval of the Board
of Directors of the Company (the "Board"), with respect to future
positions and arrangements, to serve on a reasonable number of
corporate, civic or charitable boards or committees, (and promptly
after the Effective Time, Executive will submit to the Board a list
of all existing board or committee memberships and submit to the
Board for approval a list of pending or future board or committee
memberships, which approval will not be unreasonably withheld); (B)
deliver a reasonable number of lectures and speeches and (C) manage
personal investments, so long as such activities do not interfere
with the proper performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement.
(b) Compensation.
(i) Annual Base Salary. During the initial
twelve months of the Employment Period, the Executive shall receive
an annual base salary ("Annual Base Salary") of $150,000, payable in
accordance with regular payroll practices of the Company.
Thereafter, the Executive shall receive an annual base salary in an
amount determined by the Board, but not less than his initial Annual
Base Salary with any such increased amount thereafter being the
Annual Base Salary. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under
this Agreement. The Executive shall not be entitled to receive any
additional consideration for service during the Employment Period as
a member of the Board of Directors of the Company or any of its
subsidiaries.
(ii) Interim Bonus and Annual Bonus. Provided
the Executive's employment has not been terminated for Cause or due
to a voluntary termination by the Executive (other than due to
Constructive Termination, death or Disability) on the respective
dates of payment, the Executive shall be eligible to participate in
a bonus pool (the "Interim Bonus") on December 31, 2000 where the
aggregate maximum of the pool for all participants shall not be less
than $105,000. The Executive shall be eligible to participate in an
annual cash bonus pool for executives ("Annual Bonus") with respect
to the first 12 months of this Agreement, whereby the aggregate pool
for all participants shall not be less than $1,825,000 to be paid no
later than 13 months after the date of this Agreement. The
distribution of 50% of the Annual Bonus Pool will be unconditional
and solely at the discretion of Xxxx Xxxxxx (with no
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restriction whatsoever) and the remainder at the discretion of the
Board. Thereafter, the Executive shall be eligible to receive
annual bonuses during the Employment Period in an amount and in
accordance with any plan as may be determined by the Board.
(iii) Stock Options. The Executive shall be
eligible to participate in the Acquiror's 1999 Stock Option Plan
(the "Plan"), with grants made at the discretion of the Acquiror's
Board of Directors. Any stock options granted to the Executive shall
be subject to all of the terms and conditions of the Plan, including
applicable provisions regarding vesting, and expiration of options
upon termination of employment. Such stock options shall be
administered in accordance with the Plan attached hereto as Appendix
A and pursuant to a Stock Option Agreement reasonably acceptable,
including as to vesting, to the Executive.
(iv) Other Employee Benefit Plans. During
the Employment Period, except as otherwise expressly provided
herein, the Executive shall be entitled to participate in all
employee benefit, welfare and other plans, practices, policies and
programs of the Company (collectively, "Employee Benefit Plans"),
subject only to the generally applicable eligibility provisions of
such plans; provided that the Executive shall at all times during
the Employment Period, be entitled to receive benefits that are
comparable to those provided to other employees in positions of
comparable rank with the Acquiror and its wholly owned subsidiaries.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death
during the Employment Period and in that case the Date of Termination shall be
the date of death. If the Company determines in good faith that the Executive
has become Disabled during the Employment Period (pursuant to the definition of
"Disabled" or "Disability" set forth below), the Company may terminate
Executive's employment by giving written notice to the Executive in accordance
with Section 10(b) of this Agreement of the Company's intention to terminate
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the
30 days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement, whether
the Executive has become "Disabled" (or incurs a Disability) shall be
determined under the Company's long-term disability plan as in effect for
employees of the Company as of the date of this Agreement. If the Executive's
employment is terminated by reason of disability, the Date of Termination shall
be the Disability Effective Date, or any later date specified by the Company.
(b) Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Agreement, "Cause" shall mean:
(i) the commission by the Executive of an
act of criminal or fraudulent misconduct that results in material
economic harm or acute public embarrassment to the Company, its
parent or a subsidiary of the Company (including, but
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not limited to, the willful violation of any material law, rule,
regulation, or cease and desist order applicable to the Executive)
or a deliberate breach of a fiduciary duty owed by the Executive
to the Company, its parent or its parent's shareholders;
(ii) the Executive's habitual absence from
work other than as a result of illness or Disability, continuous and
intentional failure to perform stated duties, gross negligence, or
gross incompetence in the performance of the Executive's stated
duties provided that the Executive shall be provided with notice of
any situation set forth herein and a reasonable opportunity to cure
such situation;
(iii) the Executive's chronic alcohol or drug
abuse that results in a material impairment of the Executive's
ability to perform his or her duties as an employee of the Company
provided that the Executive shall be provided a reasonable
opportunity to cure if the Executive demonstrates a willingness to
undergo treatment or rehabilitation;
(iv) the rendering of a verdict of guilty
against or the entering of a nolo contendere plea by the Executive
for any felony offense (other than a law relating to a traffic
violation or similar offense), whether or not in the line of duty to
the Company; or
(v) the final determination by a
state or federal banking agency or governmental authority having
jurisdiction over the Company that the Executive is not suitable to
act in the capacity in which he is employed by the Company or a
downgrading in ratings by such authority, as evidenced in the
"Management Aspects During the Annual Review," on the basis of such
determination.
(c) Notice of Termination. Termination of
employment by the Company or by the Executive shall be communicated
by Notice of Termination to the other party hereto given in accordance with
this Section 10(c). For purposes of this Agreement, a "Notice of Termination"
means a written notice which indicates the Date of Termination, as specified
below. The "Date of Termination" means:
(i) if the Executive's employment is
terminated by the Company for Cause, the date of receipt of the
Notice of Termination or any later date specified therein within 30
days of such notice, or
(ii) if the Executive's employment is
terminated by the Executive, a date not less than 30 days after the
date of the Notice of Termination, provided, however, that the
Company may waive such 30-day provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's
employment is terminated by reason of the Executive's death or Disability
during the Employment Period, this Agreement
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shall terminate without further obligations to the Executive under this
Agreement, other than for payment of:
(i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus
awarded for the first twelve months of service, in each case to the
extent not theretofore paid;
(iii) a pro rata portion of the annual bonus
awarded for the fiscal year in which the Date of Termination occurs
and the annual bonus awarded for any fiscal year prior thereto, in
each case to the extent earned, accrued or owing to the Executive
but not theretofore paid; and
(iv) any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive
through the Date of Termination under any plan, program, policy or
practice or contract or agreement of the Company, to the extent not
theretofore paid or provided (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits") through the Date
of Termination and continuation of insurance plans as provided under
COBRA.
Any Annual Base Salary, Interim Bonus and Annual Bonus payable
pursuant to this Section 5(a) shall be paid to the Executive as applicable, in a
lump sum in cash within 30 days after the Date of Termination; in the case of a
pro-rated Annual Bonus, as soon as practicable after the date such bonus is
determined.
(b) Termination Without Cause. If the Executive's
employment is terminated by the Company without Cause, or if the Executive
terminates as a result of a Constructive Termination (as defined below), this
Agreement shall terminate without further obligations to the Executive under
this Agreement, other than for payment of:
(i) the Executive's Annual Base Salary through
the Employment Period to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus
awarded for the first twelve months of service, in each case to the
extent not theretofore paid;
(iii) a pro rata portion of the annual bonus
awarded for the fiscal year in which the Date of Termination occurs
and the annual bonus for any fiscal year prior thereto, in each case
to the extent earned, accrued or owing to the Executive but not
theretofore paid; and
(iv) Other Benefits through the Date of
Termination and continuation of insurance plans as provided under
COBRA.
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For purposes of this Agreement, "Constructive Termination" means the
Executive's voluntary termination of employment after any of the following are
undertaken without the Executive's express written consent: (A) the assignment
to the Executive of any duties or responsibilities inconsistent with the
Executive's title and position, authority, duties or responsibilities as
contemplated by Section 3(a)(i) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for the purpose of this clause (A) an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive; (B) a reduction in the Executive's Annual Base Salary or a change in
the Annual Bonus pool; (C) a relocation of the Executive to a location more
than ten (10) miles from the location at which the Executive performed his
duties immediately prior to the Effective Time, except for required travel by
the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations prior to the Effective Time or
(D) any breach by the Company or Acquiror of this Agreement.
(c) Termination for Cause; Voluntary
Termination. If the Executive's employment shall be terminated by the Company
for Cause or the Executive terminates his employment prior to the end of the
Employment Period on his own initiative (other than due to Constructive
Termination, death or Disability), this Agreement shall terminate without
further obligation to the Executive other than the obligation to pay to the
Executive his Annual Base Salary through the Date of Termination to the extent
theretofore unpaid and the Other Benefits through the Date of Termination.
6. NO MITIGATION. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and such amounts shall not be reduced whether or
not the Executive obtains other employment.
7. COVENANT NOT TO COMPETE; CONFIDENTIAL
INFORMATION; INTELLECTUAL PROPERTY.
(a) During the term of this Agreement, and for a
period of six (6) months after the Date of Termination, the Executive shall not:
(i) directly or indirectly, own,
manage, operate, join, control, or participate in the ownership,
management, operation or control of, or be employed by or perform
services for, any Competing Business, whether for compensation or
otherwise, without the prior written consent of the Company. For the
purposes of this Agreement, a "Competing Business" shall be (A) any
business by which the Executive is employed which is, at the Date
of Termination, a significant competitor of the Company; it being
agreed that the term "business" shall refer to the specific
division or subsidiary by which Executive is employed, not such
division's or subsidiary's corporate group; (B) any Company the
primary business of which is the origination of residential
mortgage loans whether or not the Executive is employed by such
business; or (C) any affordable or historic tax syndication
business; provided, that, the Executive may own up to five percent
(5%) (measured by value) of the outstanding securities of any public
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entity, the shares of which are traded on a national stock exchange
or quoted on the Nasdaq National Market;
(ii) in any manner, directly or indirectly,
Solicit a Client to transact business with a Competing Business or
to reduce or refrain from doing any business with the Company, or
interfere or damage (or attempt to interfere with or damage) any
relationship between the Company and a Client. For purposes of the
Agreement, the term "Solicit" means any direct or indirect written
or oral communication , inviting, advising, encouraging, inducing or
requesting any person or entity, in any manner, to take or refrain
from taking any action. For purposes of this Agreement, the term
"Client" means any client or customer or prospective client or
customer of the Company to whom the Executive provided services, or
for whom the Executive transacted business, or whose identity became
known to the Executive in connection with the Executive's
relationship with or employment by the Company; or
(iii) directly or indirectly (whether on the
Executive's own behalf or on behalf of any other person or entity)
solicit, entice, advise or encourage any officer, employee or
consultant (determined as of the Date of Termination of the
Executive) of the Company or any of its affiliates or subsidiaries
to terminate such person's or entity's employment or consulting
relationship or with respect to any officer or employee of the
Company or its subsidiaries, hiring any such officer or employee.
(b) The Executive hereby acknowledges that, as an
employee of the Company, he will have access to, be making use of, acquiring and
adding to confidential information of a special and unique nature and value
relating to the Company and its strategic plan and financial operations. The
Executive further recognizes and acknowledges that all confidential information
is the exclusive property of the Company, is material and confidential, and is
critical to the successful conduct of the business of the Company. Accordingly,
the Executive hereby covenants and agrees that he will only use confidential
information for the benefit of the Company or any of its affiliates or
subsidiaries and in the course of his employment for the Company and shall not
at any time, directly or indirectly, during the term of this Agreement and
thereafter, divulge, reveal or communicate any confidential information to any
person, firm, corporation or entity whatsoever, or use any confidential
information for his own benefit or for the benefit of others except as provided
herein. All confidential information removed by the Executive shall be returned
to the Company upon termination of his employment and no copies thereof shall be
kept by the Executive.
(c) Any termination of the Executive's employment
or of this Agreement shall have no effect on the continuing operation of this
Section 7.
(d) In addition to the cessation of payments set
forth in Section 7(f), the Executive acknowledges and agrees that the Company
will have no adequate remedy at law, and could be irreparably harmed, if the
Executive breaches or threatens to breach any of the provisions of this Section
7. The Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable
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remedies that the Company may have. The Executive further agrees that he shall
not, in any equity proceeding relating to the enforcement of the terms of this
Section 7, raise the defense that the Company has an adequate remedy at law.
(e) The terms and provisions of this Section 7 are
intended to be separate and divisible provisions and if, for any reason, any one
or more of them is held to be invalid or unenforceable, neither the validity nor
the enforceability of any other provision of this Agreement shall thereby be
affected. The parties hereto acknowledge that the potential restrictions on the
Executive's future employment imposed by this Section 7 are reasonable in both
duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
(f) The parties acknowledge that this
Agreement would not have been entered into and the benefits described in
Sections 3 or 5 would not have been promised in the absence of the Executive's
promises under this Section 7 and that should the Executive be finally
determined by an arbitrator to have engaged in any activity or conduct
proscribed hereunder, all payments under this Agreement other than Other
Benefits to the extent required to be continued by law or by the terms of the
applicable plan shall cease.
(g) The Executive hereby assigns to the
Company all of Executive's right, title and interest in and to,
inventions, trade secrets, works of authorship, ideas, methods, improvements,
databases, know-how, data, developments or discoveries, whether or not
patentable or copyrightable (the "Work Product") which (i) will be, are or have
been made, invented, conceived, reduced to practice, developed or created
during the Employment Period or (ii) using the equipment, supplies, facilities
and/or confidential or proprietary information of the Company. The Executive
will take such action as may be necessary to assist the Company in obtaining
statutory or common law protections for the Work Product.
8. 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. Any purported or attempted assignment in violation hereof shall be
null and void. 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 and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
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no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
9. ARBITRATION. Any and all disputes, claims or
controversies, arising from or regarding the interpretation, performance,
enforcement or termination of this Agreement shall (except as provided herein
with respect to injunctive relief) be resolved by final and binding confidential
arbitration, to be held in Chicago, Illinois, in accordance with the Employment
Arbitration Rules of the American Arbitration Association and this Section 9.
Nothing in this is intended to prevent either party from obtaining either
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration or from utilizing any judicial court system to seek
enforcement of an arbitration award.
10. MISCELLANEOUS.
(a) Any capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Merger Agreement.
(b) This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. 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) All notices and other communications
hereunder shall be in writing and shall be given by hand delivery or overnight
courier to the other parties or by registered or certified mail, return receipt
requested, postage prepaid, addressed or by facsimile transmitted as follows:
If to the Executive:
Xxxxx Xxxxxxx
0000 X. Xxxxxxx, Xxx. 0
Xxxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
If to the Company:
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Filler
Telecopier: 000-000-0000
If to the Acquiror:
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Royal Bank of Canada
000 Xxx Xxxxxx
00xx Xxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx, Xxxxxx
Attn: Xxxxxx X. Xxxxxx
Telecopier: 000-000-0000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(e) The Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation or
may condition any transfer of property to the Executive on the Executive's
satisfaction of such withholding obligations in a manner satisfactory to the
Company.
(f) The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
EXECUTIVE
/s/ XXXXX X. XXXXXX
-------------------------
Xxxxx X. Xxxxxx
COMPANY
PRISM FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ XXXX X. FILLER
------------------------------
Name: Xxxx X. Filler
Title: President and Chief Executive Officer
Acquiror agrees that as of the Effective Time it will
honor this Agreement and treat the Agreement as its own.
ACQUIROR
ROYAL BANK OF CANADA,
a Canadian commercial bank
By: /s/ XXXXXX X. XXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President, Strategic
Initiatives
By: /s/ XXXXX X. XXXXX
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice Chairman, Personal and
Commercial Banking
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