EMPLOYMENT AND COMPENSATION AGREEMENT
This EMPLOYMENT AND COMPENSATION AGREEMENT ("Agreement") is made as of
the 5th day of May, 1997, by and between ALLSTATE FACTORS, a division of
ALLSTATE FINANCIAL CORPORATION, a Virginia corporation having its principal
place of business at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx
00000 (the "Company"), and Xxxxxxx Xxxxxx of Garden City, New York (the
"Employee"). The Company and the Employee in consideration of the mutual
premises contained herein, mutually agree as follows:
1. Employment. The Company employs the Employee and the Employee agrees
to serve the Company as Senior Vice President of the Company and its Allstate
Factors division. The Employee shall devote the Employee's full business time
and best efforts to the establishment, supervision and operation of the Allstate
Factors division of the Company, except as may otherwise be consented to by the
Board of Directors. Employee shall perform such other duties commensurate with
the Employee's position as may be specified from time to time by the President
of the Company or the Board of Directors.
2. Term. The term of this Agreement shall commence on the date set
forth above, and shall end at the close of business on May 4, 2000, unless
further extended or sooner terminated as hereinafter provided (the "Term").
Without limiting any other rights of the Company hereunder, Employee
acknowledges and agrees that at any time on or after February 4, 1998 and on or
prior to
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May 4, 1998, the Company may, with or without cause, upon written notice to
Employee, terminate the Term of this Agreement (such a termination being a
"Contemplated Early Termination").
3. Salary. During the Term, the Company shall pay to the Employee the
Employee's salary at an annual rate of One Hundred Thirty Five Thousand and
00/100 Dollars ($135,000.00), which amount may be increased from time to time at
the discretion of the Board of Directors of the Company. In addition, Employee
shall receive on the date of execution of this Agreement by Employee (i) a
payment of $7,500.00 and (ii) options under the Allstate Financial Corporation
Stock Option Plan (a copy of which has been provided to Employee) (the "Plan")
to purchase 10,000 shares of the Company's stock at a price equal to 100% of the
market price of such shares on the date of issuance of such options exercisable
immediately and expiring on the earlier of (i) May 4, 2002 and (ii) in
connection with any termination of Employee's employment, the date provided
under the terms and provisions of the Plan.
4. Other Compensation. The Company shall provide the
Employee with the following additional compensation during the
Term:
(i) Subject to meeting eligibility provisions, any and all general Employee
benefit plans, including without limitation medical, health, life and disability
insurance, pension and profit sharing plans (other than any cash incentive
plans), now or hereafter granted by
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the Company to the employees of the Company as a group, or to the executive
officers of the Company as a group, shall be granted to the Employee. If a
disability insurance plan is not provided to all employees, the Company will
provide a reasonable substitute for Employee. (ii) Employee shall receive (a)
except as provided in clause (b) below, monthly commissions equal to three
percent (3%) of the Company's gross factoring commissions, gross earned
discounts and gross interest income (collectively, the "Gross Earnings"), in
each case, on accounts purchased from clients of the Company's Allstate Factors
division or from clients otherwise introduced to the Company by the Employee
(less amounts paid as commissions with respect to such clients to any other
employee of the Company or the Allstate Factors division) and (b) in the event
that (X) the volume of receivables factored by the Company's Allstate Factors
division equals or exceeds (i) $50,000,000.00 in 1997, (ii) $140,000,000.00 in
1998, (iii) $250,000,000.00 in 1999, or (iv) $140,000,000.00 from January 1 to
May 4, 2000 and (Y) the average factoring commission earned by the Allstate
Factors division in such period exceeds 1.25% of the total volume of receivables
factored by Allstate Factors in such period, commissions for such period equal
to
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twenty percent (20%) of the amount by which the average factoring commission
earned by Allstate Factors in such period exceeds 1.25% of the total volume of
receivables factored by Allstate Factors in such period. The commissions
contemplated herein are earned by the Employee and will be payable by the
Company only when the receivable with respect to which a commission is due is
fully collected by the Company or its Allstate Factors division. Commissions
described in clause (a) of the first sentence hereof shall be paid in the month
following the month during which such collection is received. Commissions
described in clause (b) of the first sentence hereof shall be paid within ninety
(90) days following the last day of the last month of the period for which such
commission is calculated; provided, that in the event the Employee's employment
is terminated prior to the end of the Term (other than for Cause), the
Employee's commission (if any) under clause (b) of the first sentence hereof
shall be calculated solely on the basis of transactions between the Allstate
Factors division of the Company and clients that entered into factoring
agreements with the Allstate Factors division of the Company prior to the date
of such termination. The Employee shall not be entitled to any commission as a
result of payment received from any obligor (including, without
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limitation, the Company's factor) or client after such client is in default with
the Company. Any collections effectuated from any obligor (including, without
limitation, the Company's factor) or client after default shall be applicable to
the Company's shortfall and expenses, including reasonable attorney's and other
professional fees incurred in connection with effectuating collection of said
shortfall. After any such shortfall and expenses are fully recovered, if the
Company should realize any earnings thereafter of the type subject to
commissions, Employee shall be entitled to commissions on such earnings.
Employee shall not be entitled to any commissions as a result of the "payment"
of any account by the client either by replacement invoice or other non-cash
repurchase of any invoice pursuant to client's recourse obligations. (iii)
Yearly bonuses to be paid to Employee at the discretion of the Board of
Directors of the Company. (iv) Receipt of an automobile allowance of $500.00 per
month.
5. Reimbursement. Usual and normal monetary allowances for bona fide
business expenses incurred by the Employee in connection with the performance of
the Employee's duties hereunder shall be reimbursed by the Company. Such
allowances shall, without limitation, include expenses such as travel, meals,
hotels, telephone, telegraph, postage and such other
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normal and customary business expenses. In addition the Company will reimburse
Employee for (i) up to $2,000.00 per year of membership dues otherwise payable
by Employee to permit Employee to maintain his membership with the New York
Athletic Club, (ii) up to $2,000.00 per year for membership dues otherwise
payable by Employee to permit Employee to maintain his membership with the
Hempstead Country Club, (iii) up to $4,000.00 per year for membership dues
otherwise payable by Employee for membership in professional organizations and
associations authorized by the President and (iv) reasonable and necessary
travel and other out of pocket costs of attendance (x) by Employee and his
spouse at the annual convention of the National Association of Credit Managers
and the mid-year convention of the Commercial Finance Association and (y) by
Employee at the annual business meeting of the Commercial Finance Association.
6. Vacation. The Employee shall be entitled to four (4) weeks paid
vacation per year during the Term of employment hereunder. The dates of any
vacation periods shall be arranged in order that such vacation days shall not
materially hinder the normal functioning of the Company's business activities.
7. Trade Secrets; Non-competition.
(a) In the course of the Employee's employment, the Employee will have
access to confidential records, data, pricing information, lists of customers
and prospective customers, lists of vendors, books and promotional literature,
leases and agreements, policies and similar material and information of the
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Company or used in the course of its business (hereinafter collectively referred
to as "confidential information"). All such confidential information which the
Employee shall use or come into contact with shall remain the sole property of
the Company. The Employee will not, directly or indirectly, disclose or use any
such confidential information, except as required in the course of such
employment. The Employee shall not for a period of one (1) year following the
end of the Term, disclose or use in any fashion any confidential information of
the Company or any of its subsidiaries or affiliates, whether such confidential
information is in the Employee's memory or embodied in writing or other physical
form, provided, that the foregoing requirements shall not apply to any
information (i) that (prior to disclosure by the Employee) has been disclosed by
the Company or any third party or (ii) that Employee discloses (A) to any
branch, agency or regulatory authority of any federal, state or local government
to comply with any statute, regulation, rule, order or ordinance or (B) to any
federal, state or local court, tribunal or other adjudicatory body in connection
with any suit, claim or question arising before such court, tribunal or other
adjudicatory body or otherwise.
In the event of a breach or a threatened breach by the Employee of the
provisions of this subparagraph (a), the Company shall be entitled to an
injunction restraining the Employee from disclosing any of the aforementioned
confidential information. Nothing contained herein shall be construed as
prohibiting the
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Company from pursuing any other remedies available to the Company for such
breach or threatened breach, including the recovery of damages from the
Employee.
Subject to subparagraph (c) below, this provision shall survive the
termination of this Agreement.
(b) The Employee further agrees that, during the Term (or, if the
Employee's employment is terminated prior to the end of the Term (whether by the
Company or the Employee), during the period prior to such termination) and for a
period of one (1) year (six (6) months in the event of a Contemplated Early
Termination) thereafter, the Employee will not, except with the prior written
consent of the Board of Directors, (i) be employed either as an employee,
consultant, officer or director, by any other non-bank-owned commercial finance
company, (ii) solicit any business from or have any business dealings with,
either directly or indirectly or through corporate or other entities or
associates, any customer or client of the Company (including, without
limitation, the Allstate Factors division of the Company) (or any subsidiary or
affiliate of the Company) or (iii) initiate any action, either directly or
indirectly or through corporate or other entities or associates, that would
reasonably be expected to encourage or to induce any employee of the Company
(including, without limitation, any employee of the Allstate Factors division of
the Company) or of any subsidiary or affiliate of the Company to leave the
employ of the Company or of any such subsidiary or affiliate. The Employee
specifically acknowledges the necessity
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for this subparagraph (b), given the nature of the Company's business. The
Employee agrees that the Company shall be entitled to injunctive relief in the
event of a breach of the provisions of this subparagraph (b), the legal remedies
being inadequate to fully protect the Company. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to the Company for such breach, including the recovery of damages from the
Employee.
Subject to subparagraph (c) below, this provision shall survive the
termination of this Agreement.
(c) In the event of a Business Combination or Change of Control (as
defined below) involving the Company (whether or not the Company's Board of
Directors recommends such Business Combination or Change of Control for approval
by the Company's shareholders), subparagraphs (a) and (b) of this Paragraph 7
shall, at the time such Business Combination or Change of Control is
consummated, but only in the event Employee's employment is terminated in
connection therewith under the terms of subparagraph 8(d) below, be null and
void and of no further force or effect. For purposes of this Agreement,
"Business Combination" shall mean (i) a merger, consolidation or any other
business combination of the Company with any non-affiliated party, (ii) the
disposition of all or substantially all of the securities, business or assets of
the Company or (iii) a joint venture, reorganization or other transaction (or
series of transactions) as a result of which all or substantially all of
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the business or assets of the Company are transferred, with or without a Change
of Control, or any other similar corporate combination or transaction (or series
of related transactions). For purposes of this Agreement, a "Change of Control"
shall mean a transaction (or series of transactions) or other event (or series
of events) that results in the acquisition of a controlling interest in the
Company by a person or entity (or group of persons and/or entities) that did not
have a controlling interest in AFC prior to such transaction (or series of
transactions) or event (or series of events). As used in the preceding sentence,
the term "controlling interest" means possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided
that, in any event, any person or entity (or group of persons and/or entities)
which beneficially acquires, directly or indirectly, 25% or more (in number of
votes) of the securities having ordinary voting power for the election of
directors of the Company shall be conclusively presumed to have a controlling
interest in the Company. This provision shall be construed so that if a Business
Combination or Change of Control (as defined herein) occurs on more than one
occasion, the terms and provisions of this Agreement shall apply to the most
recent Business Combination or Change in Control.
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8. Payments Upon Termination. The Company shall pay to the Employee
upon termination of employment during the Term, as follows:
(a) If the Employee's employment is terminated by death, the Company
shall continue to pay and provide to the estate of the Employee for a period
equal to one year, Employee's then applicable base salary pursuant to the
provisions of Paragraph 3 for such period, in bi-monthly installments.
In addition, the Company, as soon as reasonably possible, but not past
the end of the fiscal year of the death of the Employee, shall also pay to the
estate of the Employee (on a pro rata basis up to the date of the Employee's
death) compensation otherwise due and unpaid to the Employee as of the date of,
or in connection with, the Employee's death, pursuant and subject to the
provisions of subparagraphs 4(i), 4(ii) and 4(iii) herein.
(b) In the event the Employee's employment is terminated because of
permanent disability (as defined below), for a period equal to one year, the
Company shall continue to pay and provide to the Employee the Employee's then
applicable salary for such period in bi-monthly installments, pursuant to the
provisions of Paragraph 3 herein, and benefits for such period as if the
Employee were still employed to be paid not later than the last day of such
period under subparagraphs 4(i), 4(ii) and 4(iii) herein. As used herein, the
Employee shall be deemed to be permanently disabled in the event that the
Employee has not been able (due to mental or physical illness or incapacity) to
render
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services required by this Agreement for a period of ninety (90) consecutive
days.
Any salary payments to be made by the Company under the provisions of
this subparagraph (b) are to be offset by payments, if any, made to the Employee
under any disability insurance plan maintained by the Company.
(c) In the event the Employee's employment is terminated by the Company
prior to February 4, 1998, the Company shall pay to the Employee in addition to
any other amounts otherwise payable to the Employee as of the date of, or in
connection with, such termination, on the date of such termination a lump sum
payment equal to (i) the Employee's annual base salary as of such date
multiplied by 1.25, minus (ii) the total base salary previously paid to the
Employee as of such date.
(d) In the event of a Contemplated Early Termination by the Company,
the Company shall pay to the Employee in addition to any other amounts otherwise
payable to the Employee as of the date of, or in connection with, such
termination, on the date of such termination a lump sum payment equal to
one-half of the Employee's annual base salary as of such date.
(e) In the event that (i) the employment of the Employee is terminated
by the Company other than under the provisions as set forth in Paragraph 8(a),
(b), (c) or (d) herein or (ii) following a Business Combination or Change of
Control, (A) the Employee is not offered a position with the Company that
involves duties, responsibilities, powers and functions comparable to those
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enjoyed by the Employee immediately prior to such Business Combination or Change
of Control at an annual rate of compensation (including commission rate) at
least equal to that annual rate paid to the Employee immediately prior to such
Business Combination or Change of Control and (B) the Employee's employment is
terminated prior to the end of the Term (whether by the Employee or the
Company), then the Company shall pay to the Employee in addition to any other
amounts otherwise payable to the Employee as of the date of, or in connection
with, such termination, on the date of such termination a lump sum payment equal
to the Employee's base salary (on a pro rata basis) for one year. In addition,
for one year, the Company shall provide to the Employee benefits for such period
as if the Employee were still employed to be paid not later than the last day of
such period under subparagraphs 4(i), 4(ii) and 4(iii) hereof.
(f) Notwithstanding anything else contained in subparagraphs (b), (c),
(d) or (e) above, no compensation shall be payable under subparagraphs (b), (c),
(d) or (e) above if the Employee's employment was or is terminated for Cause (as
defined below). As used herein, the term "Cause" shall mean (i) the Employee's
conviction of (or entry of a plea of nolo contendere with respect to) a felony
or other crime involving moral turpitude or (ii) a willful, substantial and
continual failure by the Employee in breach of this Agreement to perform the
lawful duties, responsibilities or obligations assigned to the Employee pursuant
to the terms hereof and the failure to cure such breach
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within 15 days following written notice from the Company containing specific
findings by the Board of Directors of the Company detailing such failures.
(g) Except as specifically set forth above, and except any amounts that
may otherwise be payable to the Employee as of the date of, or in connection
with, any termination, the Company shall have no obligation to make any payments
to Employee in the event the Employee's employment is terminated prior to the
end of the Term.
9. Validity. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions and portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
10. Amendment and Waiver. This Agreement constitutes the entire
agreement between the parties as to employment by the Company of the Employee
and may not be changed orally but only by a written document signed by both
parties.
No waiver by either party hereto at any time of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of any other breach by such party at
that time or any other time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
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11. Arbitration. Any dispute whatsoever relating to the interpretation,
validity, or performance of this Agreement and any other dispute arising out of
this Agreement which cannot be resolved by the parties to such a dispute shall,
upon thirty (30) days written notice by either party, be settled upon
application of any such party by arbitration in Arlington County, Virginia, in
accordance with the rules then prevailing of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court of competent jurisdiction. The cost of any arbitration
proceedings under this paragraph shall be shared equally by the parties to such
a dispute. Nothing contained in this paragraph shall limit the Company's rights
to obtain injunctive relief to enforce the provisions of paragraphs 7(a) and
7(b) above.
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia (without regard to
conflicts of law principles).
13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns and shall become effective upon
execution by the Company.
14. Notice. All notices, and other communications made pursuant to
this Agreement shall be made in writing and shall be deemed to have been given
if delivered personally or mailed, postage prepaid, to the applicable party
hereto at the applicable address first above written, or in either case, to such
other
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address as the Company or Employee shall have specified by written notice to the
other party.
15. Paragraph Headings. All paragraph headings are included herein for
convenience and are not intended to affect in any way the meaning or
interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Prior Agreements Superseded. In the event that the Employee has
heretofore entered into an employment agreement with the Company, then this
Agreement hereby revokes, replaces and supersedes the prior employment agreement
between the Company and the Employee.
IN WITNESS WHEREOF, the parties have executed this agreement, the
Company acting herein by its duly authorized officer, the day and year first
above written.
COMPANY:
ALLSTATE FINANCIAL CORPORATION
By:
Xxxxx Xxxxxxx, President
EMPLOYEE:
Xxxxxxx Xxxxxx
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