EXHIBIT 10.1
EMPLOYMENT AGREEMENT
___________________________________________________
Effective Date: August 1, 2002
Xxxx X. Xxxxxx
____________________________________________________
This Agreement, is made and dated as of the Effective Date indicated above
(the "Effective Date"), by and between UNION ACCEPTANCE CORPORATION, an Indiana
corporation ("Employer"), and Xxxx X. Xxxxxx ("Employee").
W I T N E S S E T H
WHEREAS, Employer desires to engage employee as a senior officer and to
encourage Employee to make valuable contributions to Employer's business
operations and not to seek or accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum compensation
from Employer for his services over a defined term;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual covenants
and undertakings herein contained and the continued employment of Employee by
Employer, Employer and Employee, each intending to be legally bound, covenant
and agree as follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Executive Vice President and
Chief Financial Officer (or a position of substantially equivalent
responsibility and authority) and Employee accepts such employment. Employee
agrees to serve in such capacity and to perform such duties in that office as
may be prescribed by Employer's Bylaws and as may reasonably be assigned to him
by Employer's Chief Executive Officer or President, or its Board of Directors,
and those generally associated with the office held by Employee as determined by
the Chief Executive Officer from time to time. On or before the Effective Date,
Employee shall relocate his principal residence to the Indianapolis, Indiana,
area. Employer shall not, without the written consent of Employee, relocate or
transfer Employee to a location more than thirty (30) miles from his
Indianapolis employment location. While employed by Employer, Employee shall
devote substantially all his business time and efforts to Employer's business
and the business of its subsidiaries.
2. The term of this Agreement shall be for an initial term of two (2) years
commencing on the Effective Date, and terminating on the Anniversary Date in
2004; provided, however, that such term shall be extended automatically for an
additional one year on the Anniversary Date in 2004 and each Anniversary Date
thereafter, unless either party hereto gives written notice to the other party
not to so extend before the date ninety (90) days prior to the next termination
date, in which case no further extension shall occur and the term of this
Agreement shall end on the Anniversary Date next following such notice (such
term, including any extension thereof shall herein be referred to as the
"Term"). "Anniversary Date" means the date and month of the Effective Date
occurring in 2004 or subsequent year, as applicable.
3. Employee shall receive an annual salary of $225,000 ("Base
Compensation"), payable at regular intervals in accordance with Employer's
normal payroll practices now or hereafter in effect. Employer may consider and
declare from time to time increases in the salary it pays Employee and thereby
increase the Base Compensation. In addition, upon the Effective Date, Employer
shall pay Employee bonus compensation of $10,000; and Employer shall grant
Employee 15,000 stock options vesting as of the Effective Date and 10,000 stock
options vesting at the end of the first year of employment, with a strike price
equal to the daily average share price of Union Acceptance Corporation stock on
the Effective Date of this Agreement, and a maturity date five years from the
Effective Date of this Agreement.
4. So long as Employee is employed by Employer pursuant to this Agreement,
he shall be eligible to participate in all present and future employee benefit,
retirement, and compensation plans generally available to employees of Employer,
consistent with his Base Compensation and his position with Employer, including,
without limitation, any 401(k) plan, stock incentive plan, employee stock
purchase plan, executive bonus plan, and group life insurance plans. Without
limiting or duplicating the foregoing,
(a) Employee shall be entitled to reimbursement of relocation expenses, in
accordance with Employer's relocation policy, including (even if not
otherwise provided under such policy) (i) moving company charges, (ii)
real estate agent's sales commission, (iii) closing costs related to
the sale of Employee's current residence and the purchase of a
residence in the Indianapolis area, (iv) the cost of temporary housing
in Indianapolis for up to four months at not more than $2,500 per
month, and (v) estimated income taxes on the foregoing; and
(b) Employer shall provide Employee with an automobile for business use
and pay or reimburse Employee for associated fuel expenses.
5. So long as Employee is employed by Employer pursuant to this Agreement,
Employee shall receive reimbursement from Employer for all reasonable business
expenses incurred in the course of his employment by Employer, upon submission
to Employer of written vouchers and statements for reimbursement. So long as
Employee is employed by Employer pursuant to the terms of this Agreement,
Employee shall be entitled to not less than two weeks of paid vacation during
calendar 2002 and not less than three weeks of paid vacation during each
calendar year thereafter.
6. Employee's employment with Employer may be terminated prior to the
expiration of the Term as follows:
(A) Employer may immediately upon written notice terminate Employee for
Cause. "Cause" means termination of employment for personal
dishonesty, gross incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or
violation of this Agreement, or a final cease-and-desist order,
conviction of a crime involving moral turpitude, unethical business
practices in connection with Employer's business, misappropriation of
Employer's assets (determined on a reasonable basis) or those of its
subsidiaries. Employer shall have no further liability to Employee
under this Agreement for any period subsequent to the termination for
Cause.
(B) Either party may terminate this Agreement during the Term without
Cause, upon sixty (60) days prior written notice to the other party.
Subject to Subsection 6(C), if Employer terminates Employee without
Cause (as defined above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and compensation
plans and other perquisites as provided in Sections 4 and 5
hereof, through the date of termination specified in the notice
of termination; and any benefits payable under insurance, health,
retirement and bonus plans as a result of Employee's
participation in such plans through such date shall be paid when
due under those plans.
(ii) In addition, Employer shall continue to pay Employee, as
severance compensation, Employee's Base Compensation in effect at
the date of termination in accordance with Employee's regular
payroll practices for a period of six (6) months following the
date of termination.
(iii)In addition, for six (6) months following termination, Employer,
at its own expense, will maintain in full force and effect for
the continued benefit of Employee and his dependents each
employee medical and life benefit plan (as such term is defined
in Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in which Employee was entitled to participate
immediately prior to the date of his termination, unless an
essentially equivalent benefit is provided to Employee by another
source. If the terms of any employee medical and life benefit
plan of Employer or applicable laws do not permit continued
participation by Employee, Employer will arrange to provide to
Employee a benefit substantially similar to, and no less
favorable than, the benefit he was entitled to receive under such
plan at the end of the period of coverage. The right of Employee
to continued coverage under the health and medical insurance
plans of Employer pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended (the "Code") shall commence upon
the expiration of such period. Notwithstanding the foregoing,
Employer shall not be obligated to continue life insurance
benefits if the insurer does not consent to such continuation and
no disability insurance benefit shall continue past Employee's
date of termination of employment.
For purposes of this Agreement, "Good Reason" for Employee to
terminate his employment with Employer means: (i) a substantial
reduction in Employee's responsibility and authority over the
management and affairs of Employer without Employee's consent; or (ii)
breach of any material term, condition or covenant of Employer under
this Agreement; or (iii) the requirement that Employee move his
personal residence, or perform his principal executive functions, more
than thirty (30) miles from his primary office as of the later of the
Effective Date and the most recent voluntary relocation by Employee.
(C) Notwithstanding Subsection 6(B), above, if Employer terminates Employee
without Cause (as defined above) In Connection With a Change of Control (as
defined below) then subparagraph 6(B) shall not apply and, instead the
following shall apply:
(i) Compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and compensation
plans and other perquisites as provided in Sections 4 and 5
hereof, through the date of termination specified in the notice
of termination; and any benefits payable under insurance, health,
retirement and bonus plans as a result of Employee's
participation in such plans through such date shall be paid when
due under those plans.
(ii) In addition, Employer shall pay Employee a severance payment
("Severance Payment") in an amount equal to 200% times the sum of
(a) the Employee's Base Compensation for the fiscal year during
which termination occurs plus (b) the total amount of bonus
compensation paid by Employer to Employee during the 12 months
ending on the date of termination. Such Severance Payment shall
be payable in a lump sum on the date fifteen (15) calendar days
following the date on which Employee's employment terminates
under this Subsection 6(C).
(iii)In addition, for 90 days following termination, Employer, at its
own expense, will maintain in full force and effect for the
continued benefit of Employee and his dependents each employee
medical and life benefit plan (as such term is defined in ERISA)
in which Employee was entitled to participate immediately prior
to the date of his termination, unless an essentially equivalent
benefit is provided to Employee by another source. If the terms
of any employee medical and life benefit plan of Employer or
applicable laws do not permit continued participation by
Employee, Employer will arrange to provide to Employee a benefit
substantially similar to, and no less favorable than, the benefit
he was entitled to receive under such plan at the end of the
period of coverage. The right of Employee to continued coverage
under the health and medical insurance plans of Employer pursuant
to Section 4980B of the Code shall commence upon the expiration
of such period. Notwithstanding the foregoing, Employer shall not
be obligated to continue life insurance benefits if the insurer
does not consent to such continuation and no disability insurance
benefit shall continue past Employee's date of termination of
employment.
(iv) "Change of Control" shall mean the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially
all of the assets of the Employer and its Subsidiaries taken as a
whole, outside the ordinary course of business, to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act),
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Employer, (iii) the consummation of any
transaction (including, without limitation, any acquisition of
shares by any person, recapitalization, merger or consolidation
or charter amendment) after which any "person" (as defined above)
becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of shares of Employer representing the power to
exercise more than fifty percent (50%) of the voting power of all
issued and outstanding voting stock of the Employer; or (iv) the
first day on which a majority of the members of the Board of
Directors of the Employer are not Continuing Directors.
(v) "Continuing Directors" shall mean, as of any date of
determination, any member of the Board of Directors of the
Employer who (i) was a member of such Board of Directors on June
1, 2002, or (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time
of such nomination (or a nominating committee consisting of
Continuing Directors at the time of such approval).
(vi) Termination of employment shall be deemed to have occurred "In
Connection With" a Change of Control if termination occurs within
the period commencing 90 days before and ending one year
following a Change of Control.
(D) Employee's employment with Employer shall terminate in the event of
Employee's death or disability. For purposes hereof, "disability"
shall be defined as Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties required by his
employment for any consecutive ninety-one (91) day period, provided
that notice of any termination by Employer because of Employee's
"disability" shall have been given to Employee prior to the full
resumption by him of the performance of such duties.
7. In order to induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) During Employer's employment and following termination of employment
for any reason, (i) unless otherwise required to do so by law,
including the order of a court or governmental agency, Employee shall
not divulge or furnish any trade secrets (as defined in IND. CODEss.
24-2-3-2) of Employer or any confidential information acquired by him
while employed by Employer concerning the policies, plans, procedures
or customers of Employer to any person, firm or corporation, other
than Employer or upon its written request, or use any such trade
secrets or confidential information directly or indirectly for
Employee's own benefit or for the benefit of any person, firm or
corporation other than Employer, because such trade secrets and
confidential information are confidential and shall at all times
remain the property of Employer.
(B) During the Protection Period (defined below) after termination of
Employee's employment with Employer for any reason, Employee shall not
(a) compete, directly or indirectly, with the consumer auto finance
business of Employer as conducted during the term of this Agreement or
have any interest (including any interest or association, including
but not limited to, that of owner, part owner, partner, shareholder,
director, officer, employee, agent, consultant, lender or advisor) in
any person, firm or entity which competes with Employer in the
consumer auto finance business (each such person, firm or entity is
referred to as "Competitor"); (b) solicit or accept business for or on
behalf of any Competitor; or (c) solicit, induce or persuade, or
attempt to solicit, induce or persuade, any person to work for or
provide services to or provide financial assistance to, any
Competitor. Nothing contained in this Section 7(B) shall be deemed to
prevent or limit Employee's right either to be a mere customer of any
Competitor, or to invest in the capital stock or other securities of
any business solely as a passive or minority investor, provided that
his holdings do not exceed five percent (5%) of the issued and
outstanding capital stock of such business. The foregoing covenant
shall not prohibit Employee from engaging in competitive activities or
from investing in, or providing services for a Competitor if such
activities (or the competitive activities of such Competitor) are
conducted solely outside the U.S. or within the U.S. in states other
than Indiana, Ohio, Texas, California and any other state in which
Employer acquired at least $1 million in receivables within the 12
months prior to Employee's termination date. The "Protection Period"
means one (1) year, provided, that if termination occurs under Section
6(B), the "Protection Period" shall be six months.
(C) Employee will turn over immediately thereafter to Employer all
business correspondence, letters, papers, reports, customers' lists,
financial statements, records, drawings, credit reports or other
confidential information or documents of Employer or its affiliates in
the possession or control of Employee, all of which writings are and
will continue to be the sole and exclusive property of Employer or its
affiliates.
(D) Employee acknowledges that the covenants of this Section 7 are
reasonable in scope and duration and reasonably necessary and
appropriate to protect the goodwill and other appropriate interests of
Employer following Employee's termination and that any violation of
such covenants by Employee would result in irreparable harm to
Employer, for which any remedy at law would be inadequate. In addition
to any other remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including injunctive relief and specific
performance, for any violation of this Section 7. Employee agrees that
Employer's efforts, if any, to enforce this Section 7 shall not
constitute an attempt to prevent Employee from obtaining employment or
"blacklisting" and Employee waives any rights under Ind.
Codess.22-5-3-1 and 2, to the extent that enforcement of this Section
7 may be deemed to constitute "blacklisting" or such an attempt.
8. Anything in this Agreement to the contrary notwithstanding, in the event
that Employer's independent public accountants, in a written determination,
conclude that any portion of the Severance Payment would constitute an "excess
parachute payment" under Section 280G of the Code, then the Severance Payment
shall be reduced (but not below zero) to the Reduced Amount. In such event, if
the Severance Payment previously paid to Employee exceeds the Reduced Amount,
Employee agrees to remit such excess to the Employer. The "Reduced Amount" shall
be the amount which maximizes the Severance Payment without causing any portion
of the Severance Payment to be non-deductible by Employer because of Section
280G of the Code.
9. Any termination of Employee's employment with Employer as contemplated
by Section 6 hereof, except in the circumstances of Employee's death, shall be
communicated by written "Notice of Termination" by the terminating party to the
other party hereto. Any "Notice of Termination" pursuant to Section 6 based on
Cause or Good Reason shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. If a dispute
arises regarding the termination of Employee pursuant to Section 6 hereof or as
to the interpretation or enforcement of this Agreement, said dispute shall be
resolved by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration Association.
Notwithstanding the foregoing, Employer shall be entitled to seek any remedy in
a proceeding at law or in equity in any court having jurisdiction for any breach
of Section 7. If said dispute arises, whether instituted by formal legal
proceedings or otherwise, including any action that Employee takes to defend
against any action taken by Employer, Employee shall be reimbursed for all costs
and expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions; provided that Employee obtains either a written
settlement or a final judgment by a court of competent jurisdiction
substantially in his favor. Such reimbursement shall be paid within ten (10)
days of Employee's furnishing to Employer written evidence, which may be in the
form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee.
10. Should Employee die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Employee's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
11. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee: Xxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
If to Employer: Chief Executive Officer
Union Acceptance Corporation
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. The validity, interpretation, and performance of this Agreement shall
be governed by the laws of the State of Indiana, regardless of the principles of
conflict of laws.
13. In addition to the provisions of paragraph 6(c), the Employer shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of Employer, by agreement in form and substance reasonably satisfactory
to Employee to expressly assume and agree to perform this Agreement in the same
manner and same extent that Employer would be required to perform it if no such
succession had taken place. Failure of Employer to obtain such agreement prior
to the effectiveness of any such succession shall be deemed a material breach of
this Agreement. As used in this Agreement, "Employer" shall mean Employer as
hereinbefore defined and any successor to its business or assets as aforesaid.
14. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Employee and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior
subsequent time. No agreements or representation, 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.
15. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect. This is the entire
agreement between Employer and Employee concerning the subject matter hereof and
all prior employment agreements, written or oral, are superseded; provided, that
this agreement does not purport to negate or modify any stock option, stock
appreciation award, split dollar or deferred compensation agreement to which
Employee is a party.
16. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
17. This Agreement is personal in nature and neither party hereto shall,
without written consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder except as provided in Section 10 and Section 13
above. Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in Section 10 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
[signature page follows]
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed as
of the date first written above.
"Employer"
UNION ACCEPTANCE CORPORATION
By: /s/ Xxx Xxxxx
-------------------------------
Its: President
"Employee"
/s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx
