EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the 8th day of
August, 1996, by and among DOLLAR FINANCIAL GROUP, a NewYork
corporation ( DFG or SUBSIDIARY ), DOLLAR FINANCIAL GROUP HOLDINGS,
INC., a Delaware corporation ( HOLDINGS or PARENT ) (collectively
referred to as the EMPLOYER ) and DONALD F. GAYHARDT, JR., a resident
of the Commonwealth of Pennsylvania (the EXECUTIVE ).
W I T N E S S E T H :
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WHEREAS, Employer and Executive are parties to a certain
Employment Agreement, dated as of June 1, 1994 (the Prior
Agreement );
WHEREAS, certain subsequent events, including a change of name by
Employer, make an amendment of the Prior Agreement appropriate; and
WHEREAS, Employer desires to continue to employ Executive and
Executive desires to accept employment by Employer upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound
hereby, it is hereby agreed as follows:
1. Termination of Prior Agreement. The Prior Agreement is
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hereby terminated, and superceded by this Agreement. The Executive
shall be entitled to his accrued salary and bonus under the Prior
Agreement, prorated to the date hereof.
2. Employment; Term. Employer agrees to employ Executive, and
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Executive agrees to be so employed, in the capacity of Executive Vice
President and Chief Financial Officer of Parent and Subsidiary, for a
term commencing on the date hereof and ending on the later to occur on
the third anniversary of the date hereof and the first anniversary of
the date on which Employer gives written notice of termination of
employment to Executive.
3. Time and Efforts; Place of Performance. Executive shall
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diligently and conscientiously devote substantially his full business
time and attention and best efforts to the business of Employer and
the discharge of his duties hereunder. It is understood that
Executive may serve as an outside director of one or more not for
profit corporations, without violating the terms
hereof, provide that such entities are not principally engaged in
business directly competitive with Employer.
Executive s employment hereunder shall be principally based in
the Philadelphia, Pennsylvania metropolitan area.
4. Base Salary. In partial consideration of the services of
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the Executive, Employer shall pay or cause one or more of its
subsidiary or affiliated corporations to pay to Executive a salary at
an annual rate of $160,000 (the Base Salary), in equal installments in
accordance with the past payroll practices of Employer, but in no
event less frequently than monthly. The Base Salary may be adjusted
upward annually in the discretion of the board of directors of Parent,
or the authorized committee thereof.
5. Incentive Compensation. A. As further compensation for the
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services of Executive, Employer shall pay Executive annual cash
bonuses determined as follows and payable within sixty (60) days of
December 31 of the relevant calendar year:
(i) Subject to subparagraph (iv), Executive shall be eligible to
receive with respect to each calendar year during the term hereof a
cash bonus in an amount equal to 60% of the Base Salary paid to
Executive during the relevant calendar year pursuant to the terms of
this Agreement (the Target Bonus Amount ).
(ii) The actual bonus due hereunder for a particular calendar
year shall be determined based upon the achievement by the Employer of
annual EBITDA (income before income taxes, depreciation, amortization,
interest expense, management fees and incentive compensation payments)
and other operating and financial target results for such calendar
year. EBITDA for a year shall be computed from the audited annual
financial statements of Holdings and its subsidiaries for such year.
EBITDA and other targeted operating and financial results for the 1996
calendar year and future calendar years shall be determined in good
faith by the compensation committee of the Board of Directors of the
Employer in consultation with Executive. The parties will use their
best efforts to establish EBITDA targets within 30 days after the date
thereof.
(iii) For so long as Steven N. Hutchinson and/or Wesley W.
Lang, Jr. are active members of Employer s board of directors, in
calculating annual bonus amounts, a weight of 66.6% shall be assigned
to achievement of targeted EBITDA results, on the one hand, and a
weight of 33.4% shall be assigned to achievement of other targeted
results, on the other hand, and the bonus shall be
determined on the basis of the percentage of achievement of the
blended results. Thereafter, a weight of 100$\% shall be assigned to
achievement of targeted EBITDA results, and other targeted results
have no bearing on the calculation of Executive s cash bonus.
(iv) (a) In the event the Employer achieves 100% of targeted
results, the bonus payable shall be equal to the Target Bonus Amount
for such calendar year.
(b) In the event the Employer achieves results in excess of
targeted results, the bonus payable shall be in an amount equal to the
Target Bonus Amount for such calendar year plus an amount (the
Incremental Bonus Amount ) equal to two (2%) percent of the Target
Bonus Amount for each one (1%) percent by which actual results
exceeded targeted results. In no event shall the Incremental Bonus
Amount be in an amount in excess of 40% of Executive s Base Salary for
the relevant calendar year.
(c) In the event that actual results amounting to between
80% and 100% of targeted results are achieved, the bonus payable shall
be equal to the Target Bonus Amount for such calendar year less an
amount equal to two (2%) percent of the Target Bonus Amount for each
one (1%) percent by which actual results were less than targeted
results.
(d) In the event that actual results amount to less than
80% of targeted results, no cash bonus shall be payable.
(v) In connection with the calculation of the bonus payable to
Executive for a given year, the EBITDA of entities acquired during the
relevant calendar year shall be included in the relevant calendar year
shall be included in the relevant calculations from the date of
acquisition, net of an appropriate capital charge for additional
equity capital employed.
(vi) In the event Executive s employment is terminated by reason
of Cause (as herein defined), or the Executive s resignation (other
than a resignation pursuant to Section 9(e)), no bonus for the year in
which termination or resignation occurs shall be payable. If
Executive s employment terminates for any other reason, Executive s
bonus for the year in which termination occurs shall be calculated on
the basis of the Employer s results for the full fiscal year in which
termination occurs, but his bonus shall be prorated based upon the
number of days in such year in which he was employed by Employer.
6. Stock Options. A. Executive is hereby granted non-
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qualified options to acquire up to 875 shares of the common stock of
Parent at a price of $1,000 per share (the Options). Common stock of
Parent is referred to herein as Shares. The Options will be exercisable
by payment of the exercise price in cash or Shares owned by the Executive
(at fair market value). The Options shall have the following terms
and provisions:
(a) Term of ten (10) years from the date hereof; provided,
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however, that in the event of termination of employment of the
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Employee for any reason whatsoever, the Options will terminate unless
exercised within 60 days following the date on which termination
occurs.
(b) Vesting in equal monthly increments over three (3)
years, commencing with the month of July, 1994. All Options shall
become immediately vested upon the occurrence of any of the following:
termination of Executive s employment without Cause; Change of control
(as herein defined) of Parent; sale of equity securities of Parent in
a public offering; sale by Parent of substantially all the assets or
stock of Subsidiary; or death of Executive during his employment
hereunder or disability of Executive resulting in termination of his
employment with Employer.
On June 30, 1994, Parent and its stockholders have executed a
Shareholders Agreement (the Shareholders Agreement ). All Shares
issuable upon the exercise of the Options shall be subject to the
terms of the Shareholders Agreement. The Options are personal to the
Employee and are non-transferable, except that upon the Employee s
death, the Options shall be transferable to his personal
representative.
Upon a cash exercise of the Options (in full or in part),
Employer will lend to Executive (the Option Loan ) an amount equal to
the exercise price of the Options (or the portion thereof actually
exercised). Such Option Loan shall be repayable upon the he third
anniversary of the date of advance. Interest on the unpaid principal
balance thereof shall accrue at a fixed rate equal to the Prime Rate
charged by PNC at the time of exercise of the Option plus two (2%),
payable upon maturity. Such Option Loan will be collateralized by a
pledge of the Shares acquired pursuant to the subject exercise of the
Options. The recourse of the Employer to collect the Option Loan, and
any interest accrued thereon, shall be limited to such pledged Shares
and Employer shall have no further recourse against Executive in order
to collect any such amounts. In the event that Employer forecloses
upon the collateral, Executive shall retain the benefit of the
amount by which the value of the collateral exceeds the principal and
interest due on the Option Loan. If after exercise of the Options
Parent shall exercise a right, or have an obligation, under the
Shareholders Agreement, to purchase the Shares which were subject to
the Option, the principal amount of the Option Loan, and all accrued
interest thereon, shall be offset against the purchase price of said
Shares, with such offset being applied against installments on account
of the purchase price coming due under the Shareholders Agreement in
the order of maturity.
B. In addition to the Option, Executive is hereby granted
additional options (the Additional Options ) to acquire up to 375
shares of the common stock of Parent at an exercise price as described
below. The term of the Additional Options shall be ten (10) years
from June 30, 1994; provided, however, that if a Liquidity Event (as
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herein defined) shall not theretofore have occurred, the term of the
Additional Options shall automatically be extended for an additional
ten years. The Additional Options are personal to the Employee and
are non-transferable, except that upon the Employee s death, the
Additional Options shall be transferable to his personal
representative.
The initial exercise price of the Additional Options was $1,000
per share. On each of June 30, 1995 and June 30, 1996 the exercise
price increased by 40%. On each of June 30, 1997 and June 30, 1998,
the exercise price shall increase by 40% over the exercise price
applicable for the prior year. From and after the fifth anniversary
date, the exercise price shall be $5,000 per share. The Additional
Options will be exercisable by payment of the exercise price in cash
or common stock of Parent (at fair market value).
The Additional Options are immediately vested. However, the
Additional Options are exercisable only (i) in the event of a Change
of control or Holdings shall make an initial public offering of its
shares of common stock (each, a Liquidity Event ), and (ii) if, at
the time of occurrence of such Liquidity Event, the Executive s
employment with the Employer shall not have ben terminated by reason
of his resignation (other than a resignation pursuant to Section 9(e))
or discharge for Cause. The Shares subject to the Additional Options
shall not be subject to the Shareholders Agreement.
C. In addition to the Option and the Additional Shares,
Executive is hereby granted supplemental options (the Supplemental
Options ) to acquire up to 840 shares of the common stock of the
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Parent at an exercise price of $1,600 per share. Further, the
Supplemental Options shall be exercisable only in the
event that at the time of exercise, Weiss, Peck and Green realized an
internal rate of return of 35% or greater on its equity investment in
Imployer. The Supplemental Options shall otherwise be subject to the
terms and conditions of the Options as set forth in this paragraph 6.
D. During the three year period commencing on June 30, 1994,
with the concurrence of the Employee and Jeffrey Weiss (which shall
not unreasonably be withheld), Holdings may grant options to acquire
up to 1,200 Shares to persons who, at the time of grant, are employees
of the Employer or one of its subsidiaries (the Employee Options ).
The Employee Options shall be in substantially the same form and shall
contain substantially the same terms as the Options and the Additional
Options, and shall be issued in the same proportion to each such
employee as the Options and Additional Options are granted hereunder
to the Executive. Each grant of an Employee Option shall result in a
reduction of the number of Shares subject to the Option and the
Additional Option in an amount equal to 17.5% and 7.5%, respectively,
of the number of Shares subject to such Employee Option. In addition,
to the extend fewer than Employee Options covering fewer than 1,200
Shares have been issued on or prior to the third anniversary of June
30, 1994, the number of Shares subject to the Option and the
Additional Option shall, effective as of the day following the third
anniversary of the date hereof, be further reduced by the Reduction
Amount (as herein defined). The Reduction Amount shall be an amount
determined by subtracting from 1,200 the number of Shares subject to
Employee Options actually granted, and multiplying the resulting
number by 12.5%. The Reduction Amount shall be allocated 70% to the
Options and 30% to the Additional Options. It is understood that,
pursuant to as Subscription Agreement of June 30, 1994, Holdings has
granted to W.G. Corporate Development Associates IV (Overseas), Ltd.
options to purchase Shares in an amount equal, in the aggregate, to
50% of the Reduction Amount. For the purposes of this paragraph D,
Employee Options which are granted but subsequently forfeited
(regardless of when forfeited) shall be deemed not to have been
granted.
E. Holdings agrees that it will not claim a deduction for
federal income tax purposes resulting from the grant (but not the
exercise) of the Options and the Additional Options to the Executive.
F. The exercise price, and the number of shares subject to the
Options and the Additional Options, are subject to equitable
adjustment to take into account stock dividends, stock splits,
recapitalizations and other dilutive events, all as reasonably
determined in good faith by the Company s board of directors.
7. Benefits. Executive shall be eligible to participate in all
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fringe benefit programs of Employer offered from time to time to its
senior management employees (including, without limitation, auto
allowance, life insurance, disability insurance, dental and medical
coverage, profit sharing, pension, 401(k), and vacation), but in no
event shall the total package of benefits be less than that accruing
to Executive as of the date hereof pursuant to the Prior Agreement.
8. Expenses. Employer will reimburse Executive for all
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reasonable, ordinary and necessary expenses (including travel)
incurred by him in carrying out his duties under this Agreement.
Employer acknowledges the business value to the Employer of such
expenditures. Executive shall present Employer from time to time with
an itemized statement of such expenses in such form as the Employer
may request.
9. Termination.
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(a) Executive s employment under this Agreement may be
terminated without further liability by Employer at any time for Cause
(defined, for purposes of this Agreement, as (I) Executive
s willful refusal, after written notice by Employer, to inure within a
period of 30 days any continuing material breach hereof or (ii) a
final non-appealable adjudication in a criminal or civil proceeding
that Executive has committed a fraud or felony relating to or
adversely affecting this employment.)
(b) Employer may terminate Executive s employment hereunder
at anytime, including upon the occurrence of the disability of
Executive, upon 90 days written notice to Executive, upon payment of
a severance benefit (the Severance Benefit ) equal to the sum of (I)
one year of Base Salary at the current rate and (ii) the cash bonus
received by Executive for the most recently completed calendar year,
payable in 12 equal consecutive monthly installments on the first day
of each month, commencing with the month after the month in which
termination occurs. Payment of the Severance Benefit shall be
Executive s sole remedy in the event of the Employer s termination of
this Agreement for any reason. Executive will cooperate in order to
allow Employer to purchase disability insurance regarding Executive in
order to fund its obligation hereunder.
(c) If there is a Change of Control, Executive may elect to
terminate his employment hereunder within 90 days of such change, in
which case he shall be entitled to receive from Employer a cash
payment equal to the Severance Benefit.
(d) In the event Executive shall be indicted for a crime
not involving the Employer or any of its subsidiaries, subject to
giving the Executive a full opportunity to make a presentation to the
Board of Directors, the Employer shall have the right to terminate the
employment of the Executive pursuant to this paragraph (d). If it
does so, it shall continue to pay the Executive's Base Salary until
the first to occur of (I) conviction of the felony or a lesser
included offense or a plea of nolo contendere by the Executive, or
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(ii) the Executive's acquittal. In the event of the Executive's acquittal,
Executive shall be entitled to his Severance Benefit, commencing as of
the date of such acquittal, but the amount paid to him pursuant to
this paragraph (d) shall be credited toward the Severance Benefit. In
the event of a conviction or plea of nolo contendere, Executive shall
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immediately repay to the mount paid pursuant to this paragraph (d),
and, if not immediately repaid and without limiting Employer's other
remedies, Employer shall have the right to offset said sum against
monies due to the Executive by reason of the purchase of shares or
options of Holdings formerly owned by Executive and purchased by
Holdings.
(e) For purposes of this Agreement, a Change of Control
shall be deemed to have occurred if and when :
(1) W.G. Corporate Development Associates IV, L.P. and W.G.
Corporate Development Associates IV (Overseas), Ltd.,
collectively, shall cease to own equity securities
having at least 51% of the voting power of Holdings
other than by reason of, or as a result of, a public
offering of Holdings shares; provided, however, that
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shares of Holdings held by (I) any liquidating trust
for either of said parties, (ii) the partners or
stockholders of either of said parties, (ii) the
partners or stockholders of either of said parties in
the event of the liquidation of such parties, or (iii)
any venture capital or management buy out fund
sponsored by Weiss, Peck & Greer shall not be deemed to
constitute a Change of Control for the purposes of this
subparagraph (1);
(2) the Company becomes a subsidiary of another
unaffiliated corporation or shall be merged or
consolidated into another unaffiliated corporation; or
(3) all or substantially all of the Company s assets shall
have been sold to an unaffiliated party or parties.
(f) Executive shall not be required to seek
alternative employment following the payment to him of any Severance
Benefit hereunder and in no event shall any compensation earned or
amounts paid to Executive in any such alternate employment serve to
mitigate Employer's severance obligations to Executive hereunder.
10. Restrictive Covenant. In consideration of Employer's grant
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of options to Executive, and its covenant to pay a Severance Benefit,
each as contained herein, without prior written consent of the Board
of Directors of Employer, Executive agrees that he will not for a
period of one (1) year following the termination of Executives
employment with Employer for any reason whatsoever, (or to such lesser
extent and for such lesser period as may be deemed enforceable by a
court of competent jurisdiction, it being the intention of the parties
that this Section 10 shall be so enforced): (a) directly or
indirectly engage in the same state or territory of the United States
in any business in direct competition with the primary business
conducted by Employer at the time of termination, either as employee,
independent contractor, 5% or greater owner, partner, lender or
stockholder; and further provided, that the foregoing shall not be
construed to prohibit ownership of less than 2% of the outstanding
shares of any public corporation); (b) solicit, canvass, or accept
any business for any other company, or business similar to any
business of Employer, from any past, present or future (as defined
below) customer of Employer; (c) directly or indirectly induce or
attempt to influence any employee or Employer to terminate his
employment; or (d) directly or indirectly request any present or
future ( future , as used herein, shall mean at or prior to the time
of termination of employment) entities with who Employer has
significant business relationships to curtail or cancel their business
with Employer. In addition and without limiting the foregoing, upon
the termination of the Executive s employment by the Employer for any
reason, whether before or after the expiration of the term of his
employment, Executive shall not at any time directly or indirectly
disclose to any person, firm or corporation any trade, technical or
technological secrets, any details of organization or business
affairs, or any names of past or present customers of Employer. For
the purposes of this Section 10, the term Employer shall be deemed
to include Employer and all of its subsidiaries.
11. Inventions. All inventions, discoveries, improvements,
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processes, formulae and data relating to Employer s business that
Executive may make, conceive or learn during the term of his
employment by the Employer (whether before, during or after the term
of this Agreement, whether during working hours or otherwise, or
within six months following the termination of his employment for any
reason) shall be the exclusive property of Employer. Executive agrees
to make prompt disclosure to the board of directors of Employer of all
such inventions, etc., and to do at Employer s expense all lawful
things necessary or useful to assist Employer in securing their full
enjoyment and protection. IN the event of any breach or threatened
breach of the provisions of this Section 11 or the preceding Section
10, Employer may apply to any court of competent jurisdiction to
enjoin such breach. Any such remedy shall be in addition to
Employer s remedies at law under such circumstances.
12. Notices. Any notice given hereunder shall be in writing and
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delivered or mailed by certified mail or overnight courier service
(with proof of delivery) and addressed to the appropriate party at the
address set forth below or at such other address as the party shall
designate from time to time in a notice; and if to Employer, with a
copy to Altheimer & Gray, 10 S. Wacker Drive, Chicago, IL 60606,
Attention: David W. Schoenberg, Esquire
Donald F. Gayhardt, Jr. Dollar Financial Group.
350 Ardmore Avenue 1436 Lancaster Avenue, Suite 210
Ardmore, PA 19003 Berwyn, PA 19312
Attention: President
13. Binding Effect. This Agreement shall inure to the benefit
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of and be binding upon Employer, its successors and assigns. Executive
acknowledges that these services are unique and personal.
Accordingly, Executive may not assign any of his rights or delegate
any of his duties or obligations under this Agreement.
14. Waiver. Failure to insist in any one or more instances on
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strict compliance with the terms of this Agreement shall not be deemed
a waiver. Waiver of a breach of any provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
15. Governing Law; Disputes. This Agreement is made and
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delivered in, and shall be construed in accordance with the
substantive laws of, the Commonwealth of Pennsylvania and the United
States of America without regard to conflict of law principles. Any
claims, controversies, demands, disputes or
differences between or among the parties hereto arising out of, or by
virtue of, or in connection with, or otherwise relating to this
Agreement shall be submitted to and settled by arbitration conducted
in Philadelphia, Pennsylvania before one or three arbitrators, each of
whom shall be knowledgeable in the field of employment law. Such
arbitration shall otherwise be conducted in accordance with the rules
then obtaining of the American Arbitration Association. The parties
hereto agree to share equally the responsibility for all fees of the
arbitrators, abide by any decision rendered as final and binding, and
waive the right to appeal the decision or otherwise submit the dispute
to a court of law for a jury or non-jury trial. The parties hereto
specifically agree that neither party may appeal or subject the award
or decision of any such arbitrator to appeal or review in any court of
law or in equity or by any other tribunal, arbitration system or
otherwise. Judgment upon any award granted by such an arbitrator may
be enforced in any court having jurisdiction thereof.
16. Severability. In the event that any provision of this
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Agreement shall be determined to be invalid by a court of competent
jurisdiction, such determination shall in no way affect the validity
or enforceability of any other provisions hereof.
17. Entire Agreement; Miscellaneous. The parties acknowledge
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and agree that they are not relying on any representations, oral ro
written, other than those expressly contained herein. This Agreement
supersedes all proposals, oral or written, all negotiations,
conversations or discussions between the parties and all course of
dealing. All prior understandings and agreements between the parties
regarding employment matters are hereby merged in this Agreement,
which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this
Agreement shall be valid unless the same shall be in writing and
signed by the party sought to be charged therewith. Time is of the
essence in this Agreement and each and every provision hereof. This
is a personal services agreement; no agency, partnership, joint
venture or other joint relationship is created hereby. The parties
acknowledge that they each participated in drafting this Agreement,
and there shall be no presumption against any party on the ground that
such party was responsible for preparing this Agreement or any part
hereof. Paragraph headings are for convenience of reference only and
are not intended to create substantive rights or obligations.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
MONETARY MANAGEMENT MONETARY MANAGEMENT
HOLDINGS, INC. CORPORATION
By:/s/ Jeffrey Weiss By:/s/ Jeffrey Weiss
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( Employer ) ( Employer )
/s/Donald F. Gayhardt, Jr.
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Donald F. Gayhardt, Jr.
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