EMPLOYMENT AND COMPENSATION AGREEMENT
This EMPLOYMENT AND COMPENSATION AGREEMENT ("Agreement") is made as of
the 1st day of July, 1997, by and between ALLSTATE FINANCIAL CORPORATION, a
Virginia corporation having its principal place of business at 2700 South Quincy
Street, Suite 540, Arlington, Virginia 22206 (the "Company"), and Wade
Hotsenpiller (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 and Chief Operating Officer. The
Employee shall devote the Employee's full business time and best efforts to the
affairs 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 corporation 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 June 30, 1998, unless
further extended or sooner terminated as hereinafter provided (the "Term").
3. SALARY. During the Term, the Company shall pay to the Employee the
Employee's salary at an annual rate of One Hundred Twenty Five Thousand and
00/100 Dollars ($125,000.00), which amount may be increased from time to time at
the discretion of the Board of Directors of the Company.
1
4. OTHER COMPENSATION. The Company shall provide the Employee with the
following additional compensation: (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, now or hereafter granted by the Company to the employees 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 be eligible to participate in any
employee stock option plans and any performance based compensation plans
(whether cash, stock or otherwise) that may be adopted by the Company. (iii)
Yearly bonuses to be paid to Employee at the discretion of the Board of
Directors of the Company. (iv) Use of a Company-owned automobile and coverage
under customary and appropriate Company-paid hazard, liability and other
insurance (or 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,
entertainment, meals, hotels, telephone, telegraph, postage and such other
normal and customary business expenses.
2
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
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.
3
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 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 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 (or any subsidiary
or affiliate of the Company), (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 or
of any subsidiary or affiliate of the Company to leave the employ of the Company
or of any such subsidiary or affiliate or (iv) solicit any business from or have
any business dealings whatsoever with, either directly or indirectly or through
corporate entities or associates, any brokers or referral sources that have
within the preceding year referred
4
transactions to the Company. The Employee specifically acknowledges the
necessity 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(c) 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 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
5
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.
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 daughter (Andrea) and son (Gregory) of
the Employee for a period equal to six months, 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
daughter and son of the Employee (on a pro rata basis up to the date of the
Employee's death) compensation otherwise due and
6
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 six months, 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 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.
Payments of compensation to the Employee as set forth in this
subparagraph (b) shall be made by the Company to the Employee only if the
Employee is not otherwise subject to termination for Cause (defined below).
(c) 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) or
(b) 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 enjoyed by the
Employee immediately prior to such Business Combination or Change of Control
7
at an annual rate of compensation 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 six months. In addition, for six months, 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.
Notwithstanding anything else contained in this subparagraph (c), no
compensation shall be payable under this subparagraph (c) or subparagraph (b) 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 contendre 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 duties,
responsibilities or obligations assigned to the Employee pursuant to the terms
hereof and the failure to cure such breach within 15 days following written
notice from the Company containing specific findings by the Board of Directors
of the Company detailing such failures.
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.
8
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.
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.
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.
9
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
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:
-------------------------------
Craig Fishman, President
EMPLOYEE:
-------------------------------
Wade Hotsenpiller
10