Exhibit 10.8
EMPLOYMENT
AGREEMENT
AGREEMENT made as of the 1st day of
May 2005, between People’s Choice Financial Corporation, a
Maryland corporation (the “Company”), and Irwin Gubman
(the “Executive”).
The Executive is presently employed
as the General Counsel and Secretary of the Company. The Company
recognizes that the Executive’s contribution to the growth
and success of the Company has been substantial. The Company
desires to provide for the continued employment of the Executive
and to make certain changes in the Executive’s employment
arrangements with the Company which the Company has determined will
reinforce and encourage the continued attention and dedication to
the Company of the Executive as a member of the Company’s
management, in the best interest of the Company and its
shareholders. The Executive is willing to commit himself to
continue to serve the Company, on the terms and conditions herein
provided. The Executive’s continued employment with the
Company is contingent on his execution of this Employment
Agreement. Any and all employment contracts, bonus plans and
agreements, and all amendments to such employment contracts, bonus
plans and agreements between Executive and People’s Choice
Home Loan, Inc., a Wyoming corporation, shall be superseded in
their entirety and rendered null and void upon the commencement
date of this Agreement as provided in Section 2
below.
In order to effect the foregoing,
the Company and the Executive wish to enter into an employment
agreement on the terms and conditions set forth below (the
“Agreement”). Accordingly, in consideration of the
premises and the respective covenants and agreements of the parties
herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Employment . The Company
hereby agrees to continue to employ the Executive, and the
Executive hereby agrees to continue to serve the Company, on the
terms and conditions set forth herein.
2. Term . The employment of
the Executive by the Company as provided in Section 1 will
commence on May 1, 2005, and end on April 30, 2008,
unless further extended by mutual agreement of the parties or
sooner terminated as hereinafter provided. For purposes of this
Agreement, “Term” shall mean the actual duration of
Executive’s employment hereunder, taking into account any
extensions pursuant to this Section 2 or termination of
employment pursuant to Section 7.
3. Position and Duties . The
Executive shall serve as the General Counsel and Secretary and
shall have such responsibilities, duties and authority as he may
have as of the date hereof and as may from time to time be assigned
to the Executive. The Executive shall devote substantially all his
working time and efforts to the business and affairs of the
Company; provided, that nothing in this Agreement shall preclude
Executive from serving as a director or trustee in any other firm
or from pursuing personal real estate investments and other
personal investments, as long as such
activities do not interfere with
Executive’s performance of his duties hereunder or violate
Section 9 or 10 of this Agreement.
4. Service on Committees .
During the Term, the Executive agrees to continue to serve on
committees specified by the Chief Executive Officer
(“CEO”).
5. Place of Performance . In
connection with the Executive’s employment by the Company,
the Executive shall initially be based at the principal executive
offices of the Company in Irvine, California, except for required
travel on the Company’s business to an extent substantially
consistent with present business travel obligations.
6. Compensation and Related
Matters .
(a) Base Salary . The Company
shall pay the Executive a base salary annually (the “Base
Salary”), which shall be payable in periodic installments
according to the Company’s normal payroll practices. The
initial Base Salary shall be $225,000. For purposes of this
Agreement, the term “Base Salary” shall mean the amount
established and adjusted from time to time pursuant to this
Section 6(a).
(b) Annual Cash Incentive
Awards . The Executive shall be eligible to participate in the
Company’s annual cash incentive bonus plan adopted by the
Compensation Committee of the Company’s Board of Directors
(the “Compensation Committee” and the
“Board”, respectively) for each fiscal year during the
Term of this Agreement (“Bonus Plan”), subject to the
terms and conditions of the Bonus Plan. If the Executive or the
Company, as the case may be, satisfies the performance criteria
contained in such Bonus Plan for a fiscal year, he shall receive an
annual cash incentive bonus (the “Incentive Bonus”) in
an amount determined by the Compensation Committee, subject to a
maximum Incentive Bonus of fifty percent (50%) of
Executive’s Base Salary for such fiscal year and subject to
ratification by the Board, if required. If the Executive or the
Company, as the case may be, fails to satisfy the performance
criteria contained in such Bonus Plan for a fiscal year, the
Compensation Committee may determine whether any Incentive Bonus
shall be payable to Executive for that year, subject to
ratification by the Board, if required. The annual Incentive Bonus
shall be paid to the Executive no later than thirty (30) days
after the date the Compensation Committee determines whether the
criteria in the Bonus Plan for such fiscal year were satisfied, but
in no event later than April 15 of the following fiscal year.
For purposes of this Agreement, the term “Incentive
Bonus” shall mean the amount established pursuant to this
Section 6(b).
(c) Stock Based Awards . The
Company has established the 2004 Stock Incentive Plan (“Stock
Incentive Plan”). Subject to the terms and conditions of the
Stock Incentive Plan, the Executive shall be eligible to
participate in the Stock Incentive Plan, and shall be eligible to
receive annual stock option and/or restricted stock awards under
the Stock Incentive Plan. The Compensation Committee shall make and
approve any such awards to the Executive pursuant to the Stock
Incentive Plan.
(i) 2004 Stock Incentive Plan
Option Grants . Option awards under the Stock Incentive Plan
will have an exercise price per share equal to the closing price of
the Company’s
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common stock on the trading day
immediately preceding the date of grant, will have a term of ten
(10) years and will vest and become exercisable with respect
to 1/3 of the underlying shares of Company common stock not later
than the first, second and third anniversaries, respectively, of
the date of grant; provided, however, that the Executive
will be 100% vested in all outstanding option awards, including the
unvested portion of such awards, upon (i) a Change in Control
(as defined herein), (ii) a termination by the Company without
Cause (as defined herein), or (iii) a termination by the
Executive for Good Reason (as defined herein), and that the
Executive will forfeit all unvested options if he is terminated for
Cause, Disability (as defined below) or death, or if he terminates
his employment hereunder for other than Good Reason.
(ii) 2004 Stock Incentive Plan
Restricted Stock Awards . The Stock Incentive Plan provides for
the issuance of shares of Company common stock as restricted common
stock (“Restricted Stock Grants”) to the extent that
such shares of common stock are available thereunder. Restricted
Stock Grants awarded to the Executive shall be subject to
forfeiture restrictions that will terminate with respect to 1/3 of
the awarded shares on the first, second and third anniversaries of
the date of the issuance; provided, further , that the
Executive will be 100% vested and all restrictions on each
outstanding Restricted Stock Grant will lapse upon (i) a
Change in Control (as defined herein), (ii) a termination by
the Company without Cause (as defined herein), or (iii) a
termination by the Executive for Good Reason (as defined herein),
and that the Executive will forfeit all shares with respect to
which the forfeiture restrictions have not terminated if he is
terminated for Cause, Disability (as defined below) or death, or if
he terminates his employment hereunder for other than Good Reason.
The common stock issued as Restricted Stock Grants will have voting
and dividend rights.
For purposes of this
Agreement:
“Acquiring Person” means
that a Person, considered alone or as part of a “group”
within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, is or becomes directly or
indirectly the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of securities representing more than thirty-three and
one-third percent (33 1/3%) of the Company’s then outstanding
securities entitled to vote generally in the election of the
Board.
“Continuing Director”
means any member of the Board, while a member of the Board and
(i) who was a member of the Board on the closing date of the
Company’s initial public offering of the Common Stock or
(ii) whose nomination for or election to the Board was
recommended or approved by a majority of the Continuing
Directors.
“Control Change Date”
means the date on which a Change in Control occurs. If a Change in
Control occurs on account of a series of transactions, the
“Control Change Date” is the date of the last of such
transactions.
“Change in Control”
means (i) a Person is or becomes an Acquiring Person;
(ii) holders of the securities of the Company entitled to vote
thereon approve any agreement with a Person (or, if such approval
is not required by applicable law and is not solicited by the
Company, the
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closing of such an agreement) that involves the
transfer of all or substantially all of the Company’s total
assets on a consolidated basis, as reported in the Company’s
consolidated financial statements filed with the Securities and
Exchange Commission; (iii) holders of the securities of the
Company entitled to vote thereon approve a transaction (or, if such
approval is not required by applicable law and is not solicited by
the Company, the closing of such a transaction) pursuant to which
the Company will undergo a merger, consolidation, or statutory
share exchange with a Person, regardless of whether the Company is
intended to be the surviving or resulting entity after the merger,
consolidation, or statutory share exchange, other than a
transaction that results in the voting securities of the Company
carrying the right to vote in elections of persons to the Board
outstanding immediately prior to the closing of the transaction
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 50% (fifty percent) of the Company’s voting securities
carrying the right to vote in elections of persons to the
Company’s Board, or such securities of such surviving entity,
outstanding immediately after the closing of such transaction;
(iv) the Continuing Directors cease for any reason to
constitute a majority of the Board; (v) holders of the
securities of the Company entitled to vote thereon approve a plan
of complete liquidation of the Company or an agreement for the sale
or liquidation by the Company of all or substantially all of the
Company’s assets (or, if such approval is not required by
applicable law and is not solicited by the Company, the
commencement of actions constituting such a plan or the closing of
such an agreement); or (vi) the Board adopts a resolution to
the effect that, in its judgment, as a consequence of any one or
more transactions or events or series of transactions or events, a
Change in Control of the Company has effectively occurred. The
Board shall be entitled to exercise its sole and absolute
discretion in exercising its judgment and in the adoption of such
resolution, whether or not any such transaction(s) or event(s)
might be deemed, individually or collectively, to satisfy any of
the criteria set forth in subparagraphs (i) through
(v) above.
“Person” means any human
being, firm, corporation, partnership, or other entity.
“Person” also includes any human being, firm,
corporation, partnership, or other entity as defined in sections
13(d)(3) and 14(d)(2) of the Exchange Act. The term
“Person” does not include the Company or any Related
Entity, and the term Person does not include any employee-benefit
plan maintained by the Company or any Related Entity, or any person
or entity organized, appointed, or established by the Company or
any Related Entity for or pursuant to the terms of any such
employee-benefit plan, unless the Board determines that such an
employee-benefit plan or such person or entity is a
“Person”.
“Related Entity” means
any entity that is part of a controlled group of corporations or is
under common control with the Company within the meaning of
Sections 1563(a), 414(b) or 414(c) of the Code.
(d) Benefits .
(i) Vacation . The Executive
shall be entitled to three (3) weeks of paid vacation per full
calendar year. The Executive shall not be entitled to cash in lieu
of any unused vacation time. The Executive shall be entitled to
carry over any unused vacation time from year to year pursuant to
the Company’s then current vacation policy.
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(ii) Sick and Personal Days .
The Executive shall be entitled to sick and personal days in
accordance with the policies of the Company.
(iii) Employee Benefits
.
(A) Participation in Employee
Benefit Plans . Subject to the terms of any applicable plans,
policies or programs, the Executive and his spouse and eligible
dependents, if any, and their respective designated beneficiaries
where applicable, shall be entitled to participate in all benefit
plans from time to time in effect for senior executives of the
Company generally and will be eligible for and entitled to
participate in all other Company sponsored employee benefit plans,
including but not limited to benefits such as group health, dental,
accident, disability insurance, group life insurance, and a 401(k)
plan, as such benefits may be offered from time to time, on a basis
no less favorable than that applicable to other executives of the
Company.
(B) Disability Insurance .
The Company will maintain, at its cost, a renewable long-term
Disability plan that, subject to the terms of such plan and any
applicable plans, policies or programs, provides for payment of not
less than 60% of the Executive’s Base Salary for so long as
any long-term Disability of the Executive continues.
(iv) Directors and Officers
Insurance . During the Term and for a period of thirty-six
(36) months thereafter, the Executive shall be entitled to
director and officer insurance coverage for his acts and omissions
while an officer and director of the Company on a basis no less
favorable to him than the coverage provided to current officers and
directors.
(v) Reasonable Business
Expenses. The Executive shall be entitled to reimbursement of
all reasonable, ordinary and necessary business expenses, in
accordance with the Company’s policy as in effect from time
to time.
7. Termination . The
Executive’s employment hereunder may be terminated without
any breach of this Agreement only under the following
circumstances:
(a) Death . The
Executive’s employment hereunder shall terminate upon his
death.
(b) Disability . If, in the
written opinion of a qualified physician reasonably agreed to by
the Company and the Executive, the Executive shall become unable to
perform his duties hereunder due to Disability, the Company may
terminate the Executive’s employment hereunder. As used in
this Agreement, the term “Disability” shall mean
inability of the Executive, due to physical or mental condition, to
perform the essential functions of the Executive’s job, after
consideration of the availability of reasonable accommodations, for
more than 180 total calendar days during any period of 12
consecutive months.
(c) For Cause . The Company
may terminate the Executive’s employment hereunder
immediately for Cause. For purposes of this Agreement, the Company
shall have “Cause” to terminate the Executive’s
employment hereunder if Executive (i) has committed fraud or
misappropriated, stolen or embezzled funds or property from the
Company or an affiliate of the Company or secured or attempted to
secure personally any profit in connection with any
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transaction entered into on behalf of the
Company or any affiliate of the Company, (ii) has been
convicted of, or entered a plea of guilty or “ nolo
contendere ” to, a felony, whether or not involving the
Company, (iii) has willfully failed to perform (other than by
reason of illness or temporary disability ) his material duties
hereunder on an exclusive and full-time basis, or willfully
violated any reasonable directive or decision of the CEO or Board
(iv) has knowingly violated or breached any material law or
regulation to the material detriment of the Company or any
affiliates of the Company or its business, (v) has breached
any non-competition, non-disclosure or non-solicitation agreement
between Executive and the Company, (vi) fails to follow any
policy or procedure of the Company or fails to maintain a license
required to perform the duties contemplated by this Agreement,
(vii) commits acts of personal dishonesty, abusive behavior
toward Company employees, acts incompetently or breaches
Executive’s fiduciary duty, (viii) fails to maintain all
required state mortgage banking and qualification to do business
licenses, or fails to arrange and manage the timely defense of
litigation against the Company and its subsidiaries, or fails to
manage an effective compliance program which avoids high cost or
predatory lending violations, violations of other state and federal
mortgage banking and consumer protection laws and the federal
securities laws, each as determined by the CEO in his sole and
absolute discretion, or (ix) breaches any material provision
of this Agreement. Any such termination for cause shall be
immediately effective upon oral or written notification to
Executive.
(d) Without Cause . The
Company may at any time terminate the Executive’s employment
hereunder without Cause.
(e) Termination by the
Executive .
(i) The Executive may terminate his
employment hereunder (A) for Good Reason, or (B) at any
time after the date hereof by giving sixty (60) days prior
notice of his intention to terminate.
(ii) For purposes of this Agreement,
“Good Reason” shall mean (A) a failure by the
Company to comply with any material provision of this Agreement
(other than the Company’s payment obligations referred to in
clause (B) below) which has not been cured within thirty
(30) days after notice of such noncompliance has been given by
the Executive to the Company, or (B) any failure by the
Company to pay the Executive Base Salary or any Incentive Bonus to
which he is entitled under the Bonus Plan or hereunder which
failure has not been cured within ten (10) days after notice
of such noncompliance has been given by the Executive to the
Company or any failure of the Compensation Committee to approve a
Bonus Plan for any fiscal year.
(f) Any termination of the
Executive’s employment by the Company or by the Executive
(other than termination pursuant to subsection (a) or
(b) of this Section 7) shall be communicated by written
notice of termination to the other party hereto in accordance with
Section 13.
(g) “Date of
Termination” shall mean (i) if the Executive’s
employment is terminated by his death, the date of his death,
(ii) if the Executive’s employment is terminated
pursuant to subsection (b) above, the date as of which the
physician’s written opinion is received by the
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Company following the expiration of 180 days of
the Executive’s disability, (iii) if the
Executive’s employment is terminated pursuant to subsections
(c) or (d) above, the date specified in the notice of
termination, and (iv) if the Executive’s employment is
terminated for any other reason, the date sixty (60) days
following the date on which a notice of termination is
given.
8. Compensation Upon Termination,
Death or Du
