EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is dated for reference purposes and
entered into as of December 1, 2005 (the “Effective Date”), by and between Bank
of Internet USA, a federal savings bank (the “Bank”), having a principal place
of business at 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000, and
Xxxxx
X. Xxxxxx (the “Executive”), whose address is 000 Xxxxxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxx 00000. Bank and Executive are sometimes collectively referred to in
this Agreement as the “Parties.” As used in this Agreement, the term “Effective
Date” means the date this Agreement becomes effective.
RECITALS
1.
Bank
desires to employ Executive and avail itself of his skill, knowledge and
experience in the management of Bank's business.
2.
The
Parties desire to set forth in this Agreement the terms of Executive's
employment by Bank.
The
Parties therefore agree as follows:
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A.
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TERM
OF EMPLOYMENT
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Bank
employs Executive to perform the duties described in this Agreement, and
Executive accepts such employment, for a term of one year commencing on the
Effective Date and ending on the day preceding the one year anniversary of
the
Effective Date, except (i) that the Term of this Agreement shall be renewed
without further notice for a one year period commencing on the annual
anniversary date of the Effective Date (the “Anniversary Date”) and on each
subsequent Anniversary Date following any such one year period of employment,
and (ii) this Agreement may be terminated prior to the end of such Term by
Bank
or Employee in accordance with and subject to the terms of Paragraph F.
(Termination) of this Agreement, including, but not limited to, Paragraph F.2.a
providing Executive with Severance Payment (as defined therein) upon termination
of this Agreement by Bank other than for cause. When used in this Agreement,
“Term” shall refer to the entire period of employment of Executive by Bank under
this Agreement.
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B.
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DUTIES
OF EXECUTIVE
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Subject
to the powers and directions of the policies, procedures and directives of
the
board of directors, as adopted and modified from time to time, Executive shall
perform the duties and shall have the titles of “Vice President and Chief Credit
Officer.” During the Term, Executive shall perform exclusively for Bank the
services contemplated in this Agreement to be performed by Executive,
faithfully, diligently and to the best of Executive's ability, consistent with
the highest and best standards of the banking industry and in compliance with
all applicable laws and regulations and the Bank's federal stock charter and
bylaws. Except as permitted by the prior written consent of Bank's board of
directors, Executive shall devote Executive's entire working time, ability
and
attention to the business of Bank during the Term.
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C.
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COMPENSATION
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1. Base
Salary. In
consideration of Executive's services to be performed under this Agreement
and
commencing as of the Effective Date, Bank shall pay or cause to be paid to
Executive a base salary at the rate of $150,000 per annum, payable in equal
installments in conformity with Bank's normal payroll periods. Executive's
salary shall be reviewed by the board of directors from time to time at its
discretion and Executive shall receive such salary increases, if any, as the
board of directors, in its sole discretion, shall determine.
2. Pre-Tax
Net Income Benefit. The
Bank has advised the
Executive that at the time this Agreement is being entered into the Compensation
Committee of the Board of Directors is committed
to
developing a new benefit program for senior executives based on the pre-tax
net
income of the Bank and that the full Board of Directors expects to adopt
such
new program in due course prior
to
the end of the current fiscal year
(the
“New Pre-Tax Net Income Benefit”). The Bank has further advised Executive that
the current benefit for senior executives based on pre-tax net income of
the
Bank will result in no pre-tax net income benefit for such senior executives
for
the Bank’s fiscal year ending June 30, 2006, and that even if the Executive were
to commence participating as of the Effective
Date in
the current program on the same basis as such senior executives, Executive
would
not receive any pre-tax income benefit for the Bank’s fiscal year ending June
30, 2006. Executive understands and agrees that no benefit based on pre-tax
net
income of the Bank for the Bank’s fiscal year ending June 30, 2006 will be paid
under this Agreement. When adopted, Executive shall be entitled to participate
in the New Pre-Tax Net Income Benefit on the same basis generally as the
other
senior executive officers of the Bank and specifically, Executive shall
participate in the New Pre-Tax Net Income Benefit on the same basis as
the Chief
Financial Officer of the Bank. Upon request the Bank shall provide to Executive
copies of the current pre-tax net income benefit available to senior executives
of the Bank and when adopted by the Board of Directors, the Bank shall
deliver
to Executive a true and correct copy of the New Pre-Tax Net Income
Benefit.
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D.
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EXECUTIVE
BENEFITS
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1. Vacation. Executive
shall be
entitled to vacation as prescribed in the Bank's Employee Manual maintained
on
the Bank's Intranet. In the event this Agreement is terminated pursuant to
Paragraph F.2, Bank reserves the right to require Executive to take any unused
vacation time prior to the Date of Termination (as defined in Paragraph
F.2).
2. Directors
and Officers Liability Insurance. Bank shall provide
for Executive,
at Bank's expense, coverage under a directors and officers liability insurance
policy in such amounts and on such terms as may be approved by Bank's board
of
directors and as may be consistent with such coverage provided by Bank for
its
other officers and directors.
3. Group
Insurance Benefits and Death Benefit. Executive shall participate
in
all group insurance plans provided by Bank for all of its senior executive
officers at Bank's expense to the same extent and on the same terms as Bank's
other senior executive officers. Throughout the Term, the Bank shall provide
at
its sole cost a death benefit on the life of Executive in an amount equal to
three times Executive's then-current annual salary, subject to Executive’s
qualification for and the Bank’s purchase of Bank-owned life
insurance.
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4. Stock
Options. As of
the Effective Date, BofI Holding, Inc. a Delaware corporation (“Holding”), the
sole shareholder of Bank, shall grant to Executive stock options pursuant to
the
BofI Holding, Inc. 2004 Stock Incentive Plan (the “Plan”) and as memorialized in
a Stock Option Award Agreement and Notice of Stock Option Award (the “Award
Agreement”), to be dated effective as of the Effective Date (the “Grant”). The
Award Agreement evidencing the Grant shall provide for, among other things,
the
grant to Executive of 20,000 stock options with an exercise price equal to
the
per share fair market value of the common stock of Holding on the date of the
Grant and which shall vest over a four year period commencing on the Effective
Date as described in the Award Agreement. Notwithstanding the terms of the
Plan,
in the event that the Bank terminates Executive under this Agreement for any
reason other than for cause pursuant to Paragraph F.1 or in the event
Executive's death or disability causes the termination of this Agreement, all
of
Executive's stock options issued pursuant to the Grant and any subsequently
issued grant of stock options under the Plan, including all stock options held
by Executive that are not otherwise vested at such time, shall become fully
vested and Executive may exercise such vested stock options, in whole or in
part, at any time within the terms of the Plan. In the event that Executive
terminates this Agreement, Executive shall be entitled to exercise only those
stock options that are vested as of the Date of Termination (as defined in
Paragraph F.2, below), and may be exercised within a three month period in
accordance with the Plan. Neither Bank nor Holding shall enter into any
transaction during or after the Term that would have the effect of canceling
any
of Executive's issued under the Grant.
5. Retirement,
Profit Sharing and Other Plans. Executive shall be
entitled to
participate in any retirement plans, profit-sharing plans, salary deferral
and
other deferred compensation plans, medical expense reimbursement plans and
other
similar plans that Bank may establish with respect to all employees; provided,
however, that nothing herein shall require Bank to establish or maintain any
of
such plans.
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E.
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BUSINESS
EXPENSES AND REIMBURSEMENT
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1. Business
Expenses. In
addition to Bank's payment or reimbursement of costs of the type described
in
Paragraph E.2, Bank shall pay or reimburse Executive for any ordinary and
necessary business expenses incurred by Executive in the performance of his
duties and in acting for or on behalf of Bank during the Term, provided that:
(a) each such expenditure is of a nature qualifying it as a proper deduction
on
the federal and state income tax returns of Bank as a business expense and
not
as deductible compensation to Executive, (b) Executive furnishes to Bank
adequate records and other documentary evidence required by federal and state
statutes and regulations issued by the appropriate taxing authorities for the
substantiation of such expenditures and deductible business expenses of Bank,
and (c) Executive's expense reimbursement reports are submitted for approval
in
accordance with Bank's internal policies.
2. Additional
Expenses. Bank
shall pay or reimburse Executive for the costs and expenses set forth below,
subject to the following requirements: (i) Executive shall comply with the
Bank's expense payment or reimbursement guidelines and procedures as the Bank
may amend such guidelines and procedures or may adopt new guidelines and
procedures from time to time, and (ii) prior to the Bank becoming liable for
any
expenses or reimbursement relating to equipment, publications, education,
training or professional organizations pursuant to subparagraphs a. through
f., below, any such expenses or reimbursement shall be approved by Bank's
board of directors or any committee or person authorized by the board of
directors to grant such approval, in advance of incurring any such expenses.
Subject to such prior approval of incurring expenses or reimbursement and to
compliance with Bank's payment or reimbursement procedures, Bank's obligation
to
make any such payment or reimbursement pursuant to this paragraph shall not
be
contingent on whether or to what extent a particular expense may constitute
a
deductible business expense of Bank or be excludable from Executive's taxable
compensation.
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a. Automobile
Allowance. Standard
business mileage
reimbursement will be provided to Executive.
b. Parking. Bank
shall pay or
reimburse Executive for his reasonable automobile parking expenses during the
Term.
c. Equipment. Bank
shall pay or
reimburse Executive for costs incurred by Executive during the Term for a
digital cellular telephone (including the initial purchase price and connection
charges as well as all business-related air charges), and other equipment as
needed. Such equipment shall be the property of the Bank and upon termination
of
this Agreement for any reason, all of such equipment shall be returned to Bank,
as more particularly provided in Paragraph G.3.
d. Publications. Bank
shall reimburse
Executive for the costs incurred by Executive during the term for subscriptions
to business-related periodical publications that Executive reasonably considers
useful and relevant to the discharge of his duties for Bank.
e. Education
and Training. Bank
shall pay for or
reimburse Executive for costs incurred by Executive during the Term for
attending business-related seminars, training programs, conferences and
conventions that Executive reasonably considers useful and relevant to the
discharge of his duties to Bank.
f. Professional
Organizations. Bank
shall pay for or
reimburse Executive for costs incurred by Executive during the Term for
membership fees and dues of professional organizations that Executive reasonably
considers useful and relevant to the discharge of his duties for
Bank.
g. Relocation
and Transition Costs. The
Bank shall pay the
sum of $20,000 for the cost of moving and home sale expenses pertaining to
relocating Executive and his family to the San Diego area. Such amount shall
be
paid in two installments of $10,000 each: (i) the first installment of $10,000
shall be paid within 30 days of the Effective Date, and (ii) the second
installment of $10,000 shall be paid within 30 days after Executive gives the
Bank notice that Executive’s current residence in White Lake, Michigan has been
sold and that Executive’s immediate family has completed their permanent move to
the San Diego area. In addition, during the time that Executive’s immediate
family remains resident in Michigan, Executive shall be reimbursed for the
actual cost of air fare for up to three round trips between San Diego,
California and Detroit, Michigan at the air fare rate that would be charged
for
such trips at such time by Southwest Airlines.
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F.
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TERMINATION
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1. Termination
for Cause. Bank
may terminate this Agreement for cause at any time without advance notice and
without further obligation or liability to Executive, by action of Bank's board
of directors:
a. If
Executive materially fails to perform his duties in a satisfactory manner or
habitually neglects his duties; provided, however, that before any termination
pursuant to this subparagraph a. shall become effective, (i) Bank shall have
given Executive written notice setting forth the specific grounds for
termination (“Warning Notice”), (ii) Bank shall have met and informed Executive
of the grounds for termination, of the extent and nature of his unsatisfactory
or negligent performance and of what Executive must do to correct such
deficiencies, and (iii) Executive shall have been afforded a reasonable
opportunity over a period of not less than forty-five (45) days from the date
of
the Warning Notice to correct the unsatisfactory or negligent performance
described in the Warning Notice to the satisfaction of the board of directors,
provided, however, that Executive shall be terminated at the end of such period
if Executive fails to correct his deficient performance in the manner prescribed
by and to the reasonable satisfaction of the board of directors;
b. If
Executive is convicted of illegal activity which materially adversely affects
Bank's reputation in the community or which evidences the lack of Executive's
fitness or ability to perform Executive's duties as determined by the board
of
directors, in good faith;
c. If
Executive commits any act which causes termination of coverage under Bank's
Bankers Blanket Bond as to Executive, as distinguished from termination of
coverage as to Bank as a whole;
d. If
Executive dies;
e. If
Executive is found to be physically or mentally incapable of performing
Executive's duties for a consecutive period of 90 days or greater by the board
of directors, reasonably and in good faith. Termination pursuant to this
subparagraph e. shall become effective immediately on written notice of
termination given by Bank to Executive after the expiration of such 90-day
period;
f. If
Bank
is closed or taken over by any of the bank regulatory authorities having
jurisdiction over Bank's activities; or
g. If
any
bank regulatory authority should successfully exercise its cease and desist
powers to remove Executive from office.
The
Parties understand and agree that notwithstanding anything to the contrary
contained in this Agreement: (1) this Agreement is subject to the requirements
and terms set forth in the regulations of the Office of Thrift Supervision
(“OTS”) contained in 12 C.F.R. Section 563.39; (2) specifically, without
limitation, the required provisions set forth in 12 C.F.R. Section 563.39(b)
are
incorporated by reference in this Agreement as if set forth in full; (3) to
the
greatest extent possible, this Agreement shall be interpreted so as to be
consistent with said regulation; and (4) in the event of conflict or
inconsistency between the terms of this Agreement and said regulation, the
required provisions of said OTS regulation shall supersede any inconsistent
or
conflicting provisions of this Agreement. The termination of this Agreement
for
any of the reasons set forth in 12 C.F.R. Section 563.39(b) shall be considered
termination for cause pursuant to this Paragraph F.1.
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2. Termination
at Will. Notwithstanding anything
to the
contrary contained in this Agreement, this Agreement may be terminated by either
party at any time upon 30 days' written notice of termination to the other
Party
(“Notice of Termination”). As used in this Paragraph F.2, “Date of Termination”
means the thirtieth (30th) day following the date on which Notice of Termination
is given.
a. Termination
by Bank. In
the
event Bank elects to terminate this Agreement by giving Notice of Termination
prior to the expiration of the Term, Executive shall be entitled to compensation
from Bank as follows: (i) Bank shall pay Executive his normal compensation
then
in effect through the Date of Termination; and (ii) Bank shall pay to Executive
a severance payment equal to his then-current base monthly salary, multiplied
by
12 (the “Severance Payment”), which amount shall be paid by the Bank in either
of the following two ways, in the sole discretion of the board of directors:
(A)
the Bank may pay the Severance Payment in 12 equal installments during the
succeeding 12 month period beginning on the Date of Termination (the “Severance
Period”) in conformity with Bank's normal payroll periods, or (B) the Bank may
pay the Severance Payment in one lump sum, subject to such withholding and
other
deductions as may be required by applicable law. In addition, Executive shall
be
entitled to the continuation of the group insurance benefits provided under
Xxxxxxxxx X.0, subject to Executive's reasonable cooperation with Bank, until
the first to occur of: (x) the expiration of the Severance Period, or (y)
Executive's commencement of work for a new employer that provides group medical
insurance benefits to Executive. Executive's acceptance of new employment or
earnings from other sources during the Severance Period shall not affect Bank's
obligation to make the Severance Payment as provided above. At any time between
Bank giving Executive Notice of Termination and the Date of Termination, Bank,
in its sole discretion, may direct Executive to cease performing services for
Bank or to absent himself from Bank's premises and operations, provided that
Bank shall nonetheless compensate Executive as provided above.
b. Termination
by Executive. In
the
event Executive elects to terminate this Agreement by giving Notice of
Termination prior to the expiration of the Term, Executive shall be entitled
to
such compensation as may be due and payable to him through and including such
Date of Termination, but Executive shall not be entitled to any other
compensation except as may be required by law or by written agreement, including
this Agreement and the Deferred Comp Plan.
3. Effect
of Termination. In the event of the
termination
of this Agreement prior to the completion of the Term for any of the reasons
specified in Paragraphs F.1 and F.2, Executive shall be entitled to the
compensation earned by Executive prior to the Date of Termination, as provided
in this Agreement, computed pro
rata
up to
and including the Date of Termination, but Executive shall not be entitled
to
any further compensation or other benefits for services rendered after the
Date
of Termination, except as otherwise set forth in this Agreement. As used in
this
Paragraph F.3, “Date of Termination” includes the effective date of any
termination, whether pursuant to Paragraph F.1 or F.2.
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G.
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GENERAL
PROVISIONS
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1. Solicitation
of Customers and Employees. For any period during
which
Executive receives any salary from Bank and for a one year period following
any
termination of Executive from Bank, Executive shall not solicit any customers
or
employees of Bank to move their banking or employment relationships from Bank.
Nothing in this Agreement shall preclude Executive from any mass solicitation
to
groups and individual follow-up solicitations of persons or businesses named
in
any list or data base not specifically related to or previously defined by
the
Bank, even though the names of certain Bank customers may appear in such list
or
data base.
2. Indemnification. Contemporaneous
with the
parties entering into this Agreement, Holding and Executive shall enter into
the
Indemnification Agreement in the form attached to this Agreement as Exhibit
A.
3. Return
of Property. Executive expressly
agrees that
all manuals, documents, files, reports, studies, instruments, equipment and
other materials and property used and/or developed by Bank or Executive (whether
on his personal time or while performing services for the Bank) during the
Term
(“Preparatory Work”) are the sole property of Bank, and that Executive has no
right, title or interest in such property. Executive further agrees that,
subject to the execution of this Agreement, all Preparatory Work is the sole
property of Bank, and that Executive has no right, title or interest, legal
or
beneficial, in such Preparatory Work or in any benefits that may arise from
such
Preparatory Work. Upon termination of this Agreement for any reason, Executive
or Executive's representative shall promptly deliver possession of all of said
property to Bank in original or good, operating condition, normal wear and
tear
excepted.
4. Notices. Any
notice, request,
demand or other communication required or permitted hereunder shall be
considered to be properly given when personally served in writing, when
deposited in the United States mail, postage prepaid, or when delivered to
a
generally recognized overnight courier service (such as, for example, Federal
Express or United Parcel Service) addressed to the Party at such Party's address
appearing at the beginning of this Agreement. Either Party may change its
address by written notice in accordance with this paragraph.
5. Benefit
of Agreement; Assignment. This Agreement shall
inure to the
benefit of and be binding upon the Parties and their respective executors,
administrators, successors and assigns. This Agreement is for the personal
services of Executive and may not be assigned by Executive.
6. Applicable
Law. Except to
the extent governed by the laws of the United States, this Agreement is to
be
governed by and construed under the laws of the State of
California.
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7. Captions
and Paragraphs Headings. Captions and paragraph
headings
used herein are for convenience only and are not a part of this Agreement and
shall not be used in constructing it.
8. Invalid
Provisions. Should any provision
of this
Agreement for any reason be declared invalid, void, or unenforceable by a court
of competent jurisdiction, the validity and binding effect of any remaining
portion shall not be affected, and the remaining portions of this Agreement
shall remain in full force and effect as if this Agreement had been executed
with said provision eliminated.
9. Entire
Agreement. This
Agreement contains the entire agreement of the Parties. It supersedes any and
all other agreements or understandings, whether oral or written, between the
Parties with respect to the employment of Executive by Bank. The terms of this
Agreement in Paragraph D.4 applicable to stock options supersede the terms
of
the Plan or any agreement between the Parties to the extent the terms of the
Plan and any other agreement are inconsistent with the terms of Paragraph D.4.
Each party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, that are not embodied in this Agreement,
and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding. This Agreement may be modified or amended
only in a written document signed by the party against whom enforcement is
sought. The amendment or other modification of the Plan or other any other
agreement generally applicable to the grant of stock options or issuance of
stock options by Holding to employees, including Executive, will not supersede
the terms of this Agreement pertaining to stock options without the express
written approval of the Parties contained in a writing expressly stating its
intent to supersede the specific terms of this Agreement applicable to stock
options. Additionally, terms of this Agreement will prevail in any conflicts
with other agreements.
10. Attorney's
Fees. Each party
shall bear his or its own attorneys' fees and costs incurred in connection
with
the negotiation, preparation and delivery of this Agreement. However, if any
action is instituted to enforce or interpret any of the obligations set forth
in
this Agreement, the prevailing party(ies) shall be entitled to recover its
(their) reasonable attorneys' fees and costs incurred in connection with the
enforcement or interpretive action.
11. Trade
Secrets. To the
extent that during the Term Bank develops any trade secrets, as that term is
defined under California law, the Parties agree that such trade secrets belong
to and are the property of the Bank. Executive agrees that for a period of
one
year after the termination of this Agreement. Executive shall not disclose
any
of Bank's trade secrets, directly or indirectly, or use them in any way in
contravention of the rights of the Bank to such trade secrets.
12. Accounting
Principles. Wherever in this Agreement,
including any exhibit hereto, there is a reference to or need to use or rely
upon accounting principles and procedures, such accounting principles and
procedures shall be those used by the Bank in the preparation and filing of
its
reports of financial condition and operations in the form of Thrift Financial
Reports, as filed with the Office of Thrift Supervision in the ordinary course
(“TFRs”). By way of example, such items as Total Assets and loan loss reserves
shall be computed as they are computed for purposes of reporting such
information in the Bank's TFRs.
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The
Parties execute this Agreement on December 7, 2005, as of the Effective Date
first above written.
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EXECUTIVE:
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BANK
OF INTERNET USA
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a
federal savings bank
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/s/
Xxxxx X. Xxxxxx
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By:
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/s/
Xxxx Xxxxx Xxxxx
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Xxxxx
X. Xxxxxx
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Name:
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Xxxx
Xxxxx Xxxxx
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Title:
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President
& CEO
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CONSENT
OF BOFI HOLDING, INC.
By
execution of this Agreement below, BofI Holding, Inc., a Delaware corporation,
consents to and agrees to perform its obligations under Paragraph
D.4.
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By:
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/s/
Xxxx Xxxxx Xxxxx
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Xxxx
Xxxxx Xxxxx, President & CEO
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