EXHIBIT 10.12
AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
This Amendment No. 1 is made to that certain Employment Agreement (the
"Agreement"), dated as of March 1, 1988, between Great Western Financial
Corporation ("Employer") and J. Lance Erikson ("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 provide
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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 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
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termination of Officer's 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 termination of employment occurs
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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/ J. Lance Erikson
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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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