EXHIBIT 10.8
AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
This Amendment No. 1 is made to that certain Employment
Agreement (the "Agreement"), dated as of __________, 19__, between Great Western
Financial Corporation ("Employer") and Michael M. Pappas ("Officer").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement.
WHEREAS, Employer has determined that it is in its best
interest and that of its stockholders to amend the Agreement as set forth
herein;
NOW THEREFORE, Employer and Officer agree that the Agreement
shall be amended as follows, effective as of December 10, 1996, unless otherwise
provided:
1. The first sentence of the second paragraph of Section 4
of the Agreement is amended (1) by deleting therefrom the phrase "Subject to any
limitations arising elsewhere in this Agreement," and (2) by deleting from
clause (i) the phrase "other than limitations arising under Section 8(c)
hereof".
2. Section 6(c) of the Agreement is amended in its entirety
to read as follows:
(c) for the remaining Term, health and welfare type
Additional Benefits (including without limitation hospital,
surgical, major medical, life and disability insurance),
qualified pension benefits (or, if prohibited under then
applicable tax law, a specially designed non-qualified
supplemental pension to provide Officer with benefits
equivalent to those to which he would have been entitled if
such prohibition did not pertain) and non-qualified
supplemental pension benefits to which Officer may be entitled
pursuant to
Section 4 hereof as the same shall exist immediately prior to
such election (including continued accrual of years of service
and age under (1) Employer's Retirement Plan as in effect
immediately prior to such election (or, if prohibited under
then applicable tax law, a specially designed non-qualified
supplemental pension to provide Officer with benefits
equivalent to those to which he would have been entitled if
such prohibition did not pertain) and (2) the SERP, but
excluding (3) Employer matching contributions under Employer's
401(k) plan or any successor plan thereto), each such benefit
to be continued in a manner no less favorable to Officer than
the benefit to which he was entitled immediately prior to such
election; and
3. Section 6 of the Agreement is amended by deleting the
unnumbered paragraph immediately following Section 6(d) and inserting in lieu
thereof the following:
Employer agrees that, if Officer's employment with
Employer terminates during the Term, Officer is not required
to seek other employment or to attempt in any way to reduce
any amounts payable to Officer by Employer pursuant to Section
6, 7(a) or 8 hereof. Further, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by
any compensation earned by Officer as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by Officer to Employer, or
otherwise; provided, however, that Employer's obligation to
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provide welfare-type Additional Benefits, including without
limitation hospital, surgical, major medical, life and
disability insur-
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ance, shall be reduced to the extent similar benefits are
provided (at no cost to Officer) by a subsequent employer.
4. The first sentence immediately following clause (iv) of
Section 8(a) of the Agreement is renumbered as a new Section 8(d), which Section
8(d) is amended as set forth in paragraph 6 below, and the remainder of Section
8(a) of the Agreement is amended in its entirety to read as follows:
8. Change in Control.
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(a) If there should occur a Change in Control (as
defined below), and if thereafter during the Term, in the
good-faith determination of Officer, Employer materially
breaches this Agreement and Employer fails to cure such breach
within fifteen (15) days after receipt of notice thereof,
then, Officer, without limitation on any other rights he may
have hereunder, may, within one (1) year after he first has
knowledge of such breach, elect to terminate his employment
hereunder and to treat such termination as a termination
pursuant to Section 6 hereof, subject, however, to the
following additional benefits and modifications to Officer's
rights as set forth in said Section 6 (any one or more of
which modifications Officer may elect to waive):
(i) Employer shall not be entitled to reduce Officer's
salary or any Additional Benefits to which Officer shall
thereafter be entitled.
(ii) Officer's pro-rata entitlement to an award under any
then existing long-term incentive performance plan shall be
calculated upon the assumption that the
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performance under such plan is then "on plan."
(iii) In lieu of the severance benefits described in
Sections 6(a) and (b) hereof, within five (5) business days of
the effective date of such termination of employment, Company
shall pay to Officer a cash lump sum in an amount equal to the
product of (A) the sum of (1) Officer's annual base salary in
effect immediately prior to the termination of Officer's
employment (or prior to a reduction in salary giving rise to a
breach of this Agreement), plus (2) the target bonus ("Target
Bonus") under the Employer's Annual Incentive Plan for
Executive Officers or any successor or replacement plan
thereto (the "Annual Incentive Plan") in respect of the year
in which such termination of employment occurs or the year in
which the Change in Control occurs, whichever is greater
(provided, however, that, if the termination of Officer's
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employment occurs under the circumstances entitling him to
benefits under Section 8(e) hereof, the Target Bonus shall be
in respect of the year in which such termination of employment
occurs), and (B) the number three.
(iv) Within five (5) days following such termination of
employment, Employer shall pay to Officer a lump sum cash
amount (the "Pro-Rata Bonus") equal to the product of (A) the
target bonus to which Officer would have been entitled under
the Annual Incentive Plan in respect of the year in which such
termination occurs (assuming for this purpose that performance
under the Annual Incentive Plan is "on plan" for such year)
and (B) a fraction, the numerator of which shall be the number
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of months (including fractions thereof) from the first day of
the fiscal year during which such termination occurs to the
date on which such termination occurs, and the denominator of
which shall be twelve (12); provided, however, that if such
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termination of employment occurs during the same year in which
the Change in Control occurs, the Pro-Rata Bonus shall be
offset by any payments received under the Annual Incentive
Plan in connection with such Change in Control.
(v) The remaining Term shall be deemed to be three (3)
years (but in no event shall the remaining Term be deemed to
extend beyond Officer's sixty-fifth (65th) birthday).
5. Sections 8(b) and 8(c) of the Agreement are amended in
their entirety as follows:
(b) For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have
occurred:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of Employer (not
including in the securities beneficially owned by such Person
any securities acquired directly from Employer or its
affiliates) representing 25% or more of either the then
outstanding shares of common stock of Employer or the combined
voting power of Employer's then outstanding securities,
excluding any Person who becomes such a beneficial owner
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in connection with a transaction described in clause (A) of
paragraph (iii) below; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on December 10, 1996, constitute the Board
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Employer) whose appointment or election by the Board or
nomination for election by Employer'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 on
December 10, 1996, or whose appointment, election or
nomination for election was previously so approved; or
(iii) there is consummated a merger or consolidation of
Employer with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities
of Employer outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 60% of
the combined voting power of the voting securities of Employer
or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a
recapitalization of Employer (or similar transaction) in which
no Person is or becomes the beneficial owner, directly or
indirectly, of securities of Employer (not in-
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cluding in the securities beneficially owned by such Person
any securities acquired directly from Employer or its
subsidiaries) representing 25% or more of either the then
outstanding shares of common stock of Employer or the combined
voting power of Employer's then outstanding securities; or
(iv) the stockholders of Employer approve a plan of
complete liquidation or dissolution of Employer or there is
consummated an agreement for the sale or disposition by
Employer of all or substantially all of Employer's assets.
Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of Employer immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of Employer immediately
following such transaction or series of transactions.
For purposes of this Section 8(b), "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) Employer or any of its
subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of Employer or any
of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv)
a corporation
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owned, directly or indirectly, by the stockholders of Employer
in substantially the same proportions as their ownership of
stock of Employer.
(c) Whether or not Officer becomes entitled to severance
and other benefits under Section 8(a) or 8(e) hereof, if any
of the payments or benefits received or to be received by
Officer in connection with a Change in Control or Officer's
termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement
with Employer, any Person whose actions result in a Change in
Control or any Person affiliated with Employer or such Person)
(such payments or benefits, excluding the Gross-Up Payment,
being hereinafter referred to as the "Total Payments") will be
subject to the excise tax imposed under Section 4999 of the
Code (the "Excise Tax"), Employer shall pay to Officer an
additional amount (the "Gross-Up Payment") such that the net
amount retained by Officer, after deduction of any Excise Tax
on the Total Payments and any federal, state and local income
and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of
determining whether any of the Total Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (A) all
of the Total Payments shall be treated as "parachute payments"
(within the meaning of Section 280G(b)(2) of the Code) unless,
in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to Officer and selected by the accounting firm
which was, immediately prior to the Change in Control,
Employer's independent auditor (the "Auditor"), such payments
or benefits (in
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whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (B)
all "excess parachute payments" within the meaning of Section
280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in excess of the
Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (C) the value of
any noncash benefits or any deferred payment or benefit shall
be determined by the Auditor in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Officer shall
be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state
and locality of Officer's residence on the date of termination
of employment (or if there is no such date of termination,
then the date on which the Gross-Up Payment is calculated for
purposes of this Section 8), net of the maximum reduction in
federal income taxes which could be obtained from deduction of
such state and local taxes. In the event that the Excise Tax
is finally determined to be less than the amount taken into
account hereunder in calculating the Gross-Up Payment, Officer
shall repay to Employer, within five (5) business days
following the time that the amount of such reduction
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in the Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax
and federal, state and local income and employment taxes
imposed on the Gross-Up Payment being repaid by Officer), to
the extent that such repayment results in a reduction in the
Excise Tax and a dollar-for-dollar reduction in Officer's
taxable income and wages for purposes of federal, state and
local income and employment taxes, plus interest on the amount
of such repayment at 120% of the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
in calculating the Gross-Up Payment (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), Employer
shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by
Officer with respect to such excess) within five (5) business
days following the time that the amount of such excess is
finally determined. Officer and Employer 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 Total Payments.
6. New Section 8(d) of the Agreement is amended (1) by
deleting therefrom the phrase "Notwithstanding Officer's entitlements as set
forth in this paragraph" and inserting in lieu thereof the following:
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Notwithstanding Officer's entitlements as set forth in this
Section 8 or any other plan, arrangement or agreement with the
Employer, any Person whose actions result in a Change in
Control or any Person affiliated with the Employer or such
Person
(2) by deleting therefrom the following:
, after giving effect to Employer's right of offset as
provided for in the next succeeding sentence,
and (3) by inserting at the end thereof the following:
All calculations with respect to this Section 8(d) shall be
performed by the Auditor in accordance with the principles set
forth in Section 8(c) hereof.
7. The Agreement is amended by inserting the following as a
new Section 8(e):
(e) For purposes of this Agreement, Officer's employment
shall be deemed to have been terminated following a Change in
Control in accordance with Section 8(a) hereof if, during the
pendency of a Potential Change in Control (as defined below)
or within six (6) months following the date on which such
Potential Change in Control ceases to exist (such periods
being hereinafter referred to collectively as the "Potential
Change in Control Period"), in either case whether or not a
Change in Control subsequently occurs, (i) Officer's
employment is terminated by Employer without Cause or (ii) in
the good-faith determination of Officer, Employer materially
breaches this Agreement and thereafter (whether or not during
the Potential Change in Control Period) fails
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to cure such breach within fifteen (15) days after receipt of
notice thereof and within one (1) year after Officer first has
knowledge of such breach Officer terminates his employment.
A "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(A) Employer enters into an agreement, the consummation
of which would result in the occurrence of a Change in
Control;
(B) Employer or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(C) any Person becomes the beneficial owner, directly or
indirectly, of securities of Employer (not including in the
securities beneficially owned by such Person any securities
acquired directly from Employer or its affiliates)
representing 15% or more of either the then outstanding shares
of common stock of Employer or the combined voting power of
Employer's then outstanding securities;
(D) the filing with the Federal Home Loan Bank Board
and/or the FSLIC or their successor of an application for
Change in Control; or
(E) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control
has occurred.
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(f) Notwithstanding the provisions of Section 11(f)
hereof, Employer also shall pay to Officer all reasonable
legal fees and expenses incurred by Officer in disputing
(through litigation or arbitration) in good faith any issue
hereunder relating to the termination (or deemed termination)
of Officer's employment following a Change in Control or in
connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to
any payment or benefit provided hereunder. Such payments shall
be made within five (5) business days after delivery of
Officer's written requests for payment accompanied with such
evidence of fees and expenses incurred as Employer reasonably
may require.
8. Section 11(b) of the Agreement is amended by changing the
Employer's address for purposes of service of notice to: 9200 Oakdale Avenue,
Chatsworth, California 91311.
The effective date of this Amendment No. 1 shall be December
10, 1996. Except as herein modified, the Agreement shall remain in full force
and effect.
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IN WITNESS WHEREOF, Employer and Officer have executed this
Amendment as of the date first set forth above.
GREAT WESTERN
FINANCIAL CORPORATION
/s/ Michael M. Pappas
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APPROVED:
By:/s/ Willis B. Wood, Jr.
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Chairman, Compensation
Committee of the Board
of Directors
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