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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 13th day of
April, 1998, is entered into by and between Xxxxxx X. Xxxxxx ("Executive") and
RealTrust Asset Corporation, a Maryland corporation ("Company"), and is
effective as of and conditioned upon the completion of the Company's initial
public offering of up to 5,750,000 Units, each Unit consisting of one share of
Common Stock and One Stock Purchase Warrant ("IPO).
WHEREAS, 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.
NOW, THEREFORE, 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 and Chief Financial Officer 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. The Employee agrees, during the
Term of this Agreement and any extension of this Agreement, to devote his entire
business and professional time, attention, and energies exclusively to the
business of the Company as shall be necessary, advisable or required to perform
the duties of the Employee's position, and to conform to the rules, regulations,
instructions, personnel practices and policies of the Company, as existing and
amended from time to time by the Company or its Board. 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 of the closing of the IPO (the "Effective Date") and shall continue through
April 13, 2001; provided, however, that on each April 13 commencing April 13,
2001 the Term of the Agreement shall automatically be extended for one
additional year unless, not later than three months prior to any such April 13,
either party shall have given written notice to the other that it does not wish
to extend the Term of the Agreement.
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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 per annum 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 upon
thirty (30) days' notice and shall initially be set at One Hundred Twenty
Thousand Dollars ($120,000.00) and is subject to Annual Review by the Board of
Directors. Base Salary is payable in equal biweekly installments or at such
other time or times as the Executive and Company agree.
b. Performance Bonus. The Executive shall be entitled to receive an
incentive performance bonus equal to 7% of the Bonus Incentive Compensation Plan
established by the Company ("Bonus"), which, during the initial Term of this
Agreement, shall substantially reflect the provisions set forth in Exhibit A,
provided, however, that such Bonus shall not exceed the Executive's Base Salary
unless the Board otherwise determines. The Executive shall be entitled to
receive the Performance Bonus provided he is employed at the time of its
distribution.
c. Incentive Stock Options. At the Effective Date, the Company shall
grant Executive options to purchase 5,000 shares of the Company's Common Stock
at an exercise price equal to the IPO price. Such options shall vest and become
exercisable only as provided in the Company's 1998 Stock Option Plan, subject to
the completion of the Company's planned IPO.
d. 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 whether to
increase (i) the Base Salary set forth in Section 3(a) and (ii) the incentive
performance bonus to be awarded in accordance with Section 3(b).
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.
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b. Vacation. The Executive shall be entitled to three (3) weeks of paid
vacation per calendar year, 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 immediately terminate. The Executive's compensation and
benefits shall be determined in accordance with Section 8 below.
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 (6) consecutive
months, and, within thirty (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's employment under this Agreement may be terminated by the
Company for Disability. 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 Bonus at the rate in effect at the commencement of such period
of Disability. Subsequent to such termination, the Executive's compensation and
benefits upon termination by Disability shall be determined in accordance with
Section 8 below.
(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, together with a commensurate adjustment in compensation;
provided, however, the Company shall be required to so continue the employment
of the Executive in the event of a Partial Disability of the Executive only if
the Company determines, in its sole discretion, that it can create a position
for which the Executive would be suited and that would be economically
advantageous to the Company.
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 (i) acts or
omissions constituting gross negligence, recklessness or willful misconduct on
the part of the Executive in respect of his fiduciary obligations or otherwise
relating to the business of the Company, (ii) the Executive's material
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breach of this Agreement, or (iii) the Executive's conviction or entry of a plea
of nolo contendere 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 will cease and the Company shall have no obligation to
pay any Bonus or Fringe Benefits which may have accrued or vested as of the
termination date.
d. Termination by the Executive. 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 one hundred
twenty (120) days in advance of such termination. Except as may be provided in
Sections 9 and 10, the Executive shall have no further obligations to the
Company after the effective date of termination, as set forth in the notice. 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 upon Death, Disability or
Without Cause. If the Executive's employment shall be terminated (i) by
Executive's death, (ii) upon Executive's Disability or (iii) without cause, the
Executive shall be entitled to the following benefits:
a. Payment of 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.
x. Xxxxxxxxx Payment. The Company shall pay the Executive an amount (the
"Severance Amount") equal to the one half of the Executive's current year Base
Salary plus any actual Bonus compensation for the preceding fiscal year;
provided, however, the Severance Amount shall not be less than Sixty Thousand
Dollars ($60,000.00) nor more (once the minimum is reached) than one percent
(1.0%) of the book value of the Company (i.e., the amount reported on the
Company's balance sheet prepared in accordance with generally accepted
accounting principles as stockholders' equity). The Severance Amount shall be
payable immediately upon the termination date.
c. Stock Options. 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
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full-time employment or (ii) the expiration of one (1) year. 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 two
hundred percent (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.
8. No Mitigation Required; No other Entitlement to Benefits under Agreement. The
Executive shall not be required in any way to mitigate the amount of any payment
provided for in Section 7, including, but not limited to, by seeking other
employment, nor shall the amount of any payment provided for in 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 Section 7, following a termination governed by 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 Section 7.
9. Proprietary Information.
a. Executive acknowledges that certain technological and other
information may from time to time be disclosed to Executive by Company during
the continuance hereof. Executive hereby acknowledges that all such information
and technology, whether currently existing or hereafter developed by Company
through or involving the services and efforts of Executive hereunder, shall at
all times consist of and be preserved by Executive as valuable trade secrets and
confidential information which is proprietary to and owned exclusively by
Company, and that Executive does not have, and shall not have or hereafter
acquire, any rights in or to any of such information and technology, including
without limitation any patents, inventions, discoveries, know-how, trademarks or
trade names used or adopted by Company in connection with the design,
development, manufacture, or marketing of any financial or mortgage products
which at any time during the continuation hereof may be offered or sold by
Company. Executive further warrants and agrees that he shall not at any time,
whether during the continuance of this Agreement or after its expiration or
earlier termination, whether by Executive or by Company, in any manner or form,
directly or indirectly, use, disclose, duplicate, license, sell, reveal,
divulge, publish or communicate any portion of any such information or
technology, nor use, disclose, duplicate, license, sell, reveal, divulge,
publish or communicate any other confidential information concerning Company, or
any customers or products of Company, to any person, firm or entity.
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b. Executive acknowledges that the Company possesses information
obtained from its customers and clients ("Customer Confidences"). Executive
agrees never to make use of Customer Confidences for any use not expressly
authorized by the Customer whose Customer Confidences are in question.
c. 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.
d. Executive agrees that the terms of this Section 9 will survive the
term of this Agreement and will continue in full force and effect throughout his
tenure with the Company in any capacity, whether as an employee, officer,
director or outside consultant.
10. Competition. During the Term hereof, Executive shall not, without Company's
prior written consent, directly or indirectly engage in any business activity,
or have any interest in any person, firm or other entity engaged in any business
activity, in which Company at the time is engaged or is planning to engage.
During the Term hereof and for a period of two (2) years thereafter, Executive
shall not directly or indirectly: (a) divert or take away or solicit or attempt
to divert or take away any of Company's customers, including without limitation
those customers with whom Executive became acquainted while retained by Company;
(b) employ, or knowingly permit any business entity controlled by Executive to
employ, any person who during the period of twelve (12) months immediately
preceding such time has been employed by Company; (c) solicit or otherwise seek
to induce any employee of Company to leave his or her employment with the
Company; or (d) undertake planning for or organization of any business activity
that will injure Company's business, or conspire with employees of Company for
the purpose of organizing any such injurious business activity. Executive agrees
that the terms of this Section 10 will survive the term of this Agreement and
will continue in full force and effect throughout his tenure with the Company in
any capacity, whether as an employee, officer, director or outside consultant.
However, this Section 10 shall not continue after termination of employment in
the event that the Company terminates Executive without Cause.
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 (3) days after mailing or twenty-four (24) hours after transmission
of a fax to the respective persons named below:
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If to Company: RealTrust Asset Corporation
Attn: Board of Directors
0000 X. Xxxxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Executive: Xxxxxx X. Xxxxxx
0000 Xxxx 000 Xxxxx
Xxxxxx, XX 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 Utah.
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
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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 Maryland Law and the Bylaws of the Company.
20. Counterparts. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
"Company" "Executive"
RealTrust Asset Corporation, Xxxxxx X. Xxxxxx
a Maryland corporation
By: ________________________________ _________________________________
Xxxx X. Xxx Xxxxxx X. Xxxxxx
President and Chief Executive
Officer
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EXHIBIT A
BONUS INCENTIVE COMPENSATION PLAN
The Bonus Incentive Compensation Plan shall be effective commencing upon
closing of the Company's initial public offering ("IPO"). The annual bonus
pursuant to the Bonus Incentive Compensation Plan will be paid one-half in cash
and one-half in shares of Common Stock of the Company, annually, following
receipt of the audit for the related fiscal year. This program will award
bonuses annually to those officers out of a total pool determined by shareholder
return on equity ("XXX") as follows:
XXX/(1)/ in Excess of Base Rate/(2) Bonus as % of Average Net
Worth/(3)/ Outstanding
Zero or less 0%
Greater than 0% but less than 6% 10% * (actual XXX - Base Rate)
Greater than 6% (10% * 6%) + 15% * (Actual
XXX - (Base Rate + 6%))
Of the amount so determined, one-half will be deemed contributed to the
total pool in cash and the other half deemed contributed to the total pool in
the form of shares of Common Stock, with the number of shares to be calculated
based on the average price per share during the preceding year.
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/(1) /"XXX" is determined for the fiscal year by averaging the monthly ratios
calculated each month by dividing the Company's monthly Net Income
(adjusted to an annual rate) by its Average Net Worth for such month. For
such calculations, the "Net Income" of the Company means the net income or
net loss of the Company determined according to GAAP, but after deducting
any dividends paid or payable on preferred stock issued after the IPO and
before giving effect to the bonus incentive compensation or any valuation
allowance adjustment to stockholders' equity. The definition "XXX" is used
only for purposes of calculating the bonus incentive compensation payable
pursuant to the Bonus Incentive Compensation Plan, and is not related to
the actual distributions received by stockholders. The bonus payments will
be made before any income distributions are made to stockholders.
/(2) /"Base Rate" is the average for each month of the Ten-Year U.S. Treasury
Rate, plus 4%.
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/(3) /"Average Net Worth" for any month means the arithmetic average of the sum
of (i) the net proceeds from all offerings of equity securities by the
Company since formation (but excluding any offerings of preferred stock
subsequent to the IPO), after deducting any underwriting discounts and
commissions and other expenses and costs relating to the offerings, plus
(ii) the Company's retained earnings (without taking into account any
losses incurred in prior fiscal years, after deducting any amounts
reflecting taxable income to be distributed as dividends and without giving
effect to any valuation allowance adjustment to stockholders' equity)
computed by taking the daily average of such values during such period.
