EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the ____ day of
_______________, 1998, is entered into by and between Xxxxxx X. Xxxxxxx
("Executive") and Transnational Financial Corporation, a California corporation
("Company"), and is effective as of the date hereof.
The Company desires to establish its right to the continued services of the
Executive, in the capacity described below, on the terms and conditions and
subject to the rights of termination hereinafter set forth, and the Executive is
willing to accept such employment on such terms and conditions.
In consideration of the mutual agreements hereinafter set forth, the
Executive and the Company have agreed and do hereby agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company does hereby employ, engage and hire
the Executive as Senior Vice President - Director of Secondary Marketing of the
Company, and the Executive does hereby accept and agree to such hiring,
engagement and employment. The Executive's duties shall be such executive and
managerial duties as the Board of Directors of the Company or its subsidiaries
shall from time to time prescribe and as provided in the ByLaws of the Company.
The terms of this Agreement shall be subject to the personnel policies of the
Company as determined by the Board of Directors from time to time, except to the
extent that any such policy would have a material adverse effect on the rights
of the Executive under the terms of this Agreement. The Executive shall devote
such time, energy and skill to the performance of his duties for the Company and
for the benefit of the Company as may be necessary or required for the effective
conduct and operation of the Company's business. Furthermore, the Executive
shall exercise due diligence and care in the performance of his duties to the
Company under this Agreement.
2. TERM OF AGREEMENT. The term ("Term") of this Agreement shall commence on the
date hereof (the "Effective Date") and shall continue through March 31, 1999;
provided, however, that on each March 31 commencing March 31, 1999 the Term of
the Agreement shall automatically be extended for one additional year unless,
not later than three months prior to any such March 31, either party shall have
given written notice to the other that it does not wish to extend the Term of
the Agreement.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay the Executive, and the
Executive agrees to accept from the Company, in payment for his services to the
Company beginning on the Effective Date, a base salary at the rate to be
determined by the Compensation Committee of the Board of Directors and provided
to the Executive in writing ("Base Salary"), which is subject to change at the
end of the Term or with the express written consent of the Executive and shall
initially be set at $100,000. Base Salary is payable in equal semimonthly
installments or at such other time or times as the Executive and Company agree.
(b) PERFORMANCE BONUS - BOARD OF DIRECTORS DISCRETION. The Executive
shall be paid an incentive performance bonus equal to $50,000 provided that the
Company shall receive trading profits from hedging activities plus additional
profits due to increased margins on the sale of mortgages to investors
aggregating $1,000,000, before taxes. Increased margins on the sale of mortgages
to investors shall mean (i) the average margin of sales of mortgages to
investors, excluding repurchase agreements, commencing with the first day of
employment of the Executive minus the average margin of sales of mortgages for
the ninety day period prior to the date of this agreement multiplied by (ii) the
total volume of mortgages sold to investors by the Company commencing the date
of Executive's employment.
(c) ANNUAL REVIEW. The Compensation Committee of the Company's Board
of Directors shall, at least annually, review the Executive's entire
compensation package to determine whether it continues to meet the Company's
compensation objectives. Such annual review will include a determination of (i)
whether to increase the Base Salary set forth in Section 3(a) and (ii) the
incentive performance bonus to be awarded in accordance with Section 3(b).
(d) SIGNING BONUS. Executive shall be paid, 90 days from the date of
this agreement, a bonus of $5,000.
(e) STOCK OPTIONS. The Company shall grant to Executive options to
acquire 15,000 shares of stock at the Company's initial public offering price
pursuant to the Company's Incentive Stock Option Plan.
4. FRINGE BENEFITS. The Executive shall be entitled to participate in any
benefit programs adopted from time to time by the Company for the benefit of its
executive employees at an appropriate level for the duties of the officer, and
the Executive shall be entitled to receive such other fringe benefits as may be
granted from time to time by the Company's Board of Directors or its
Compensation Committee.
(a) BENEFIT PLANS. The Executive shall be entitled to participate in
any benefit plans relating to stock options, stock purchases, pension, thrift,
profit sharing, life insurance, medical coverage, education or other retirement
or employee benefits available to other executive employees of the Company at an
appropriate level for the duties of the office, subject to any restrictions
(including waiting periods) specified in such plans. The Company shall make
commercially reasonable efforts to obtain medical and disability insurance, and
such other forms of insurance as the Board of Directors shall determine, for its
employees.
(b) VACATION. The Executive shall be entitled to the number of weeks
of paid vacation per calendar year as specified in the Company's employee manual
based on the time served as an employee of the Company, with such vacation to be
scheduled and taken in accordance with the Company's standard vacation policies.
5. BUSINESS EXPENSES. The Company shall reimburse the Executive for any and
all necessary, customary and usual expenses, properly receipted in accordance
with Company policies, incurred by the Executive on behalf of the Company.
6. TERMINATION OF EXECUTIVE'S EMPLOYMENT.
(a) DEATH. If the Executive dies while employed by the Company, his
employment shall be entitled to receive the Executive's Base Salary, fringe
benefits and other earned bonus compensation until the end of the Term of this
Agreement. The Company's obligation to pay the Executive's Base Salary shall
cease as of the date of Executive's death. Thereafter, Executive's beneficiaries
or his estate shall receive benefits in accordance with the Company's
retirement, insurance and other applicable programs and plans then in effect.
(b) DISABILITY.
(i) If, as a result of the Executive's incapacity due to physical
or mental illness ("Disability"), Executive shall have been absent from the
full-time performance of his duties with the Company for six consecutive months,
and, within 30 days after written notice is provided to him by the Company, he
shall not have returned to the full-time performance of his duties, the
Executive shall be entitled to receive the Executive's Base Salary, fringe
benefits and earned bonus compensation until the end of the Term of this
Agreement. During any period prior to such termination during which the
Executive is absent from the full-time performance of his duties with the
Company due to Disability, the Company shall continue to pay the Executive his
Base Salary and fringe benefits. Subsequent to the Term of this Agreement, the
Executive's benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(ii) If, however, as a result of the Executive's partial
incapacity due to physical or mental illness in which Executive shall not have
been absent from his duties for six consecutive months and shall have returned
to work on a full-time basis but is not able to perform at the same level as
when hired and/or is not able to perform the same functions for which originally
hired ("Partial Disability"), the Company shall make reasonable efforts to
accommodate the Executive's Partial Disability by modifying his job description
appropriately, without any adjustment in compensation prior to the end of the
Term of this Agreement.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment under this Agreement for "Cause," at any time prior
to expiration of the Term of the Agreement, only in the event of the Executive's
conviction or entry of a plea of nolo contendre for fraud, misappropriation or
embezzlement. In such a case, the Executive's employment under this Agreement
may be terminated immediately without any advance written notice, and the
Company's obligation to pay the Executive's Base Salary, any bonus and fringe
benefits will cease as of the termination date.
(d) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive shall
have the right to terminate this Agreement for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean the occurrence, without the Executive's
express written consent, of any one or more of the following events:
(i) A reduction in title and/or compensation of the Executive or
the assignment of duties to the Executive not consistent with those of a senior
executive of the Company, except in connection with the Company's termination of
the Executive's employment for Cause pursuant to Section 6(c) or as otherwise
expressly contemplated herein;
(ii) The Company's material breach of any of the provisions of
this Agreement, including, but not limited to, a reduction by the Company in the
Executive's Base Salary in effect as of the Effective Date; or a change in the
conditions of the Executive's employment (e.g., including, without limitation, a
failure by the Company to provide the Executive with incentive compensation and
benefits plans that provide benefits and the opportunity to obtain incentive
compensation, in each case comparable to those available under benefits programs
in effect as of the Effective Date and at an appropriate level for the duties of
the officer, etc.);
(iii) The relocation of the Company's principal executive offices
to a location more than 25 miles from its location as of the Effective Date or
the Company's requiring the Executive to be based anywhere other than the
Company's principal executive offices, except for requiring travel on the
Company's business to an extent substantially consistent with the Executive's
duties hereunder; or
(iv) A change in control as defined in Section 8 below.
The Executive agrees to provide the Company with 30 days' prior written notice
of any termination for Good Reason.
(e) TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive
may at any time during the Term of this Agreement terminate his employment
hereunder for any reason or no reason by giving the Company notice in writing
not less than 120 days in advance of such termination. Except as may be provided
in Section 9, the Executive shall have no further obligations to the Company
after the effective date of termination, as set forth in the notice.
Notwithstanding the foregoing, in the event any "person" (as defined in Section
8 below) begins a tender or exchange offer, circulates a proxy to shareholders
or takes other steps to effect a Change of Control, the Executive agrees that he
will not voluntarily leave the employ of the Company, and will render services
to the Company commensurate with his position, until such "person" has abandoned
or terminated efforts to effect a Change of Control or until a Change of Control
has occurred. In the event of a termination by the Executive under this
paragraph, the Company will pay only the portion of Base Salary or previously
awarded bonus unpaid as of the termination date. Fringe benefits which have
accrued and/or vested on the termination date will continue in effect according
to their terms, but no additional accrual or vesting will take place.
7. COMPENSATION UPON TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE, OR BY THE
EXECUTIVE FOR GOOD REASON. If the Executive's employment shall be terminated (i)
by the Company other than for Cause, or (ii) by the Executive for Good Reason,
the Executive shall be entitled to the following benefits:
(a) PAYMENT OF UNPAID BASE SALARY. The Company shall immediately pay
the Executive any portion of the Executive's Base Salary or previously awarded
Bonus not paid prior to the termination date.
(b) SEVERANCE PAYMENT. The Company shall pay the Executive an amount
(the "Severance Amount") equal to two times the Executive's combined Base Salary
and bonus compensation for the preceding fiscal year. The Severance Amount shall
be payable 50% within five 5 days after the termination date and the remaining
50% shall be payable in twelve equal consecutive monthly installments beginning
on the first day of the month following the termination date.
(c) IMMEDIATE VESTING OF STOCK OPTIONS. The Company shall take all
appropriate action to ensure that all stock options on the Company's stock owned
by the Executive as of the Effective Date and which have not been exercised
prior to the termination date become immediately vested and exercisable by the
Executive, whether or not the right to exercise such stock options would
otherwise then be vested in the Executive. The provisions of this Section 7(c)
shall constitute an amendment to any existing stock option agreements of the
Company as of the Effective Date. All other stock options owned by the Executive
as of the termination date shall be exercisable in accordance with the Company's
stock option plan and the applicable stock option agreements.
(d) CONTINUATION OF FRINGE BENEFITS. From and after termination of the
Executive's employment, the Company shall continue to provide the Executive with
all life insurance and medical coverage fringe benefits set forth in Section 4
as if the Executive's employment under the Agreement had not been terminated
until the earlier to occur of (i) such time as the Executive finds full-time
employment or (ii) the expiration of 12 months. Notwithstanding the immediately
preceding sentence, if, as the result of termination of the Executive's
employment, the Executive and/or his otherwise eligible dependents or
beneficiaries shall become ineligible for benefits under any one of the
Company's benefit plans or the cost of providing such benefits exceeds 200% of
the cost of providing such benefits to other members of senior management, the
Company, at the Company's option, shall (i) continue to provide the Executive
and his eligible dependents or beneficiaries with benefits at a level at least
equivalent to the level of benefits for which the Executive and his dependents
and beneficiaries were eligible under such plans immediately prior to the
termination date or (ii) for any fringe benefit not so provided, the Company
shall pay the Executive 200% of the cost of providing such fringe benefit to
other members of senior management.
(e) EXCISE TAX GROSS-UP. In the event that the Executive becomes
entitled to the benefit payments provided under subparagraphs (a)-(d) of this
Section 7.A ("Benefit Payments"), and if any of the Benefit Payments will be
subject to any excise tax ("Excise Tax") imposed under section 4999 of the
Internal Revenue Code of 1986, as amended from time to time, or successor
sections thereto, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Benefit Payments and any federal, state
and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to
the amount of the Benefit Payments. Upon the Executive's termination date, the
Company shall estimate and pay to the Executive the Gross-Up Payment. In the
event that the Excise Tax is subsequently determined to be less than the amount
estimated at the termination date, the Executive shall repay to the Company, at
the time that the amount of such reduction in Excise Tax is finally determined,
the difference plus interest on the amount of such repayment at 10% per annum.
In the event that the Excise Tax is determined to exceed the amount estimated at
the termination date, the Company shall make an additional Gross-Up Payment in
respect of such excess at the time that the amount of such excess is finally
determined, plus interest at 10% per annum. The Executive and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Benefit Payments.
(f) NO MITIGATION REQUIRED; NO OTHER ENTITLEMENT TO BENEFITS
AGREEMENT. The Executive shall not be required in any way to mitigate the amount
of any payment provided for in this Section 7, including, but not limited to, by
seeking other employment, nor shall the amount of any payment provided for in
this Section 7 be reduced by any compensation earned by the Executive as a
result of employment with another employer after the termination date of
employment, or otherwise. Except as set forth in this Section 7, following a
termination governed by this Section 7, the Executive shall not be entitled to
any other compensation or benefits set forth in this Agreement, except as may be
separately negotiated by the parties and approved by the Board of Directors of
the Company in writing in conjunction with the termination of Executive's
employment under this Section 7.
8. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied.
(a) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (other than the
Company; any trustee or other fiduciary holding securities under an Executive
benefit plan of the Company; or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of the
securities of the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or from a
transferor in a transaction expressly approved or consented to by the Board of
Directors) representing more than 25% of the combined voting power of the
Company's then outstanding securities; or
(b) During any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or (d) of
this section), (i) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved or (ii) whose election is to replace a person who ceases
to be a director due to death, disability or age, cease for any reason to
constitute a majority thereof; or
(c) The shareholders of the Company approve a merger or consolidation
of the Company with other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an Executive benefit plan of the Company, at least 75%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than 50% of
the combined voting power of the Company's then outstanding securities; or
(d) The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
9. DISPUTE RELATING TO EXECUTIVE'S TERMINATION OF EMPLOYMENT FOR REASON. If the
Executive resigns his employment with the Company alleging in-good faith as the
basis for such resignation any of the "Good Reasons" specified in Section 6(d),
and if the Company then disputes the Executive's right to the payment of
benefits under Section 7, the Company shall continue to pay the Executive the
full compensation (including, but not limited to, his Base Salary) in effect at
the date the Executive provided notice of such resignation, and the Company
shall continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was then a participant, until the earlier
of the expiration of the Term of the Agreement or the date the dispute is
finally resolved, either by jurisdiction which is not appealable or with respect
to which the time for appeal has expired and no appeal has been perfected. For
the purposes of this Section, the Company shall bear the burden of proving that
the grounds for the Executive's resignation do not fall within the scope of
Section 6(d), and there shall be a rebuttable presumption that the Executive
alleged such grounds in good faith.
10. NONCOMPETITION PROVISIONS.
(a) NONCOMPETITION. The Executive agrees that during the Term of this
Agreement prior to any termination of his employment hereunder he will not
directly or indirectly, without the prior written consent of the Company,
manage, operate, join, control, participate in, or be connected as a stockholder
(other than as a holder of shares publicly traded on a stock exchange or the
Nasdaq National Market), partner, or other equity holder with, or as an officer,
director or employee of, any other real estate lender whose business strategy is
competitive with that of the Company, as determined by a majority of the
Company's independent directors ("Competing Business"). It is further expressly
agreed that the Company will or would suffer irreparable injury if the Executive
were to compete with the Company or any subsidiary or affiliate of the Company
in violation of this Agreement and that the Company would by reason of such
competition be entitled to injunctive relief in a court of appropriate
jurisdiction, and the Executive further consents and stipulates to the entry of
such injunctive relief in such a court prohibiting the Executive from competing
with the Company or any subsidiary or affiliate of the Company, in the areas of
business set forth above, in violation of this Agreement.
(b) RIGHT TO COMPANY MATERIALS. The Executive agrees that all styles,
designs, lists, materials, books, files, reports, correspondence, records and
other documents ("Company Materials") used, prepared or made available to the
Executive, shall be and shall remain the property of the Company. Upon the
termination of employment or the expiration of this Agreement, all Company
Materials shall be returned immediately to the Company, and the Executive shall
not make or retain any copies thereof.
(c) SOLICITING EXECUTIVES. The Executive promises and agrees that
during the noncompetition period defined in paragraph (a) he will not directly
or indirectly solicit any of the Company executives or employees to work for any
Competing Business.
11. NOTICES. All notices and other communications under this Agreement shall be
in writing and shall be given by fax or first class mail, certified or
registered with return receipt requested, and shall be deemed to have been duly
given three days after mailing or 24 hours after transmission of a fax to the
respective persons named below:
If to Company: Transnational Financial Corporation
Attn.: Board of Directors
000 Xxxxxxxx Xxxx Xxxx.
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Executive: Xxxxxx X. Xxxxxxx
X.X. Xxx 0000
Xxxx, Xxxxxxxxxx 00000
Either party may change such party's address for notices by notice duly given
pursuant hereto.
12. ATTORNEYS' FEES. In the event judicial determination is necessary of any
dispute arising as to the parties' rights and obligations hereunder, each party
shall have the right, in addition to any other relief granted by the court, to
attorneys' fees based on a determination by the court of the extent to which
each party has prevailed as to the material issues raised in determination of
the dispute.
13. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and supersedes
any and all prior agreements and understandings between the parties with respect
to employment or with respect to the compensation of the Executive by the
Company.
14. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided that,
in the event of the merger, consolidation, transfer, or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall, subject to the provisions hereof, be binding
upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.
15. GOVERNING LAW. This Agreement and the legal relations thus created between
the parties hereto shall be governed by and construed under and in accordance
with the laws of the State of California.
16. ENTIRE AGREEMENT; HEADINGS. This Agreement embodies the entire agreement of
the parties respecting the matters within its scope and may be modified only in
writing. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
17. WAIVER; MODIFICATION. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times. This Agreement shall not be modified in any
respect except by a writing executed by each party hereto.
18. SEVERABILITY. In the event that a court of competent jurisdiction determines
that any portion of this Agreement is in violation of any statute or public
policy, only the portions of this Agreement that violate such statute or public
policy shall be stricken. All portions of this Agreement that do not violate any
statute or public policy shall continue in full force and effect. Further, any
court order striking any portion of this Agreement shall modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
19. INDEMNIFICATION. The Company shall indemnify and hold Executive harmless to
the maximum extent permitted by California Law and the Bylaws of the Company.
20. COUNTERPARTS. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Executive has hereunto signed this Agreement,
as of the date first above written.
TRANSNATIONAL FINANCIAL CORPORATION,
a California corporation
By____________________________________
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Xxxxxx X. Xxxxxxx
