EXHIBIT 10.1.3
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EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the ____ day of
_______________, 1997, is entered into by and between Xxxxxxx X. XxxXxxxxxx
("Executive") and Headlands Mortgage Company, a California corporation
("Company"), and is effective as of and conditioned upon the completion of the
Company's sale of __________________________ (___________) shares of Common
Stock in an initial public offering.
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
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hire the Executive as Executive Vice President, Chief Financial Officer and
Secretary 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
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on the date of the closing of the initial public offering referred to above (the
"Effective Date") and shall continue through December 31, 1999; provided,
however, that on each December 31 commencing December 31, 1998 the Term of the
Agreement shall automatically be extended for one additional year unless, not
later than three months prior to any such December 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
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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"),
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which is subject to change upon thirty (30) days' notice and shall initially be
set at Ninety-Four Thousand Dollars ($94,000.00). 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
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shall be eligible to receive an incentive performance bonus in accordance with
the Bonus Incentive Compensation Plan established by the Company. Except as
provided in Section 7, any such bonus awarded to the Executive shall be payable
in the amount, in the manner and at the time determined by the Compensation
Committee of the Company's Board of Directors in its sole and absolute
discretion.
(c) ANNUAL REVIEW. The Compensation Committee of the Company's Board
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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).
4. FRINGE BENEFITS. The Executive shall be entitled to participate in
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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
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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
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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
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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
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employment shall immediately terminate. 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
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estate shall receive benefits in accordance with the Company's retirement,
insurance and other applicable programs and plans then in effect.
(b) DISABILITY.
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(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 at the rate in effect at the commencement of such period of
Disability. Subsequent to such termination, 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, 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
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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 breach of
this Agreement, or (iii) 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
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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:
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(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
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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 twenty-five (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 thirty (30) days' prior written
notice of any termination for Good Reason.
(e) TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive
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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 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
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BY THE EXECUTIVE FOR GOOD REASON. If the Executive's employment shall be
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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:
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(a) PAYMENT OF UNPAID BASE SALARY. The Company shall immediately pay
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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
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(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 fifty percent (50%) within five (5) days after the termination
date and the remaining fifty percent (50%) shall be payable in twelve (12) 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
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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 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
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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 twelve (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 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.
(e) EXCISE TAX GROSS-UP. In the event that the Executive becomes
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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
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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 UNDER
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AGREEMENT. The Executive shall not be required in any way to mitigate the
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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
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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
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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 GOOD
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REASON. If the Executive resigns his employment with the Company alleging in
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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 al 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.
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(a) NONCOMPETITION. The Executive agrees that during the Term of this
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Agreement prior to any termination of his employment hereunder and for a period
of twelve (12) months following the occurrence of any event entitling the
Executive to Benefit Payments according to the provisions of Section 7 and in
consideration therefor, provided the Company makes all such payments when due,
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
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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,
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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
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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
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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:
If to Company: Headlands Mortgage Company
Attn: Board of Directors
0000 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Executive: Xxxxxxx X. XxxXxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Phone: (000) 000-0000
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
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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.
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13. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
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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
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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
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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
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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
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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
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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
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harmless to the maximum extent permitted by California Law and the Bylaws of the
Company.
20. COUNTERPARTS. This Agreement may be executed in counterparts.
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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.
HEADLANDS MORTGAGE COMPANY,
a California corporation
By____________________________________
______________________________________
XXXXXXX X. XxxXXXXXXX
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