Exhibit 10.4
EMPLOYMENT
AGREEMENT
AGREEMENT made as of the 17th day of
December 2004, between People’s Choice Financial Corporation,
a Maryland corporation (the “Company”), and Dwayne
Barfell (the “Executive”).
The Executive is presently employed
as an Executive Vice President and Co – Chief Production
Officer 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shall be superseded in their entirety and rendered null and void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 the date
of the completion of the Company’s private placement of
shares of its common stock pursuant to Rule 144A of the Securities
and Exchange Commission and end on December 31, 2007, unless
further extended or sooner terminated as hereinafter provided.
Commencing on January 1, 2006, and on each January 1 thereafter
(each, an “Anniversary Date”),, the term of the
Executive’s employment shall automatically be extended for
one (1) additional year, unless the Company or the Executive
provides 90 days’ written notice to the other prior to any
such Anniversary Date that it or he does not wish that the Term of
this Agreement to continue to be automatically extended as
described above. In the event either party gives such notice, no
additional automatic extensions shall take effect. For purposes of
this Agreement, “Term” shall mean the actual duration
of Executive’s employment hereunder, taking into account any
extensions or notices not to extend pursuant to this Section 2 or
termination of employment pursuant to Section 7.
3. Position and Duties . The Executive
shall serve as an Executive Vice President and Co – Chief
Production Officer for all Company Sales and Marketing and shall
have responsibility and authority for all production and marketing
channels co-equally with the other Co - Chief Production Officer
and as may from time to time be assigned to the Executive by the
Chief Executive Officer (“CEO”), to whom the Executive
shall report directly, that are consistent with such
responsibilities, duties and authority. 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 CEO.
5. Place of Performance . In connection
with the Executive’s employment by the Company, the
Executive’s home office shall be his principal office, except
for required travel on the Company’s business to the
Company’s principal office and elsewhere 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. During the Term, the
Company’s board of directors (the “Board”) or the
Compensation Committee of the Board (the “Compensation
Committee”) shall review the Base Salary at least once a year
to determine whether the Base Salary should be increased effective
the following January 1; provided, however , that on January
1, 2006 and on each January 1 thereafter, the Base Salary shall be
increased by at least 10 percent. The Base Salary, including any
increases, shall not be decreased during the Term. 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 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 two hundred percent (200%) 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.
Beginning January 1, 2005, the Bonus Plan shall contain both
individual and group goals established by the Compensation
Committee and approved by the CEO and the
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Executive. 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 Equity Incentive Plan
(“Equity Incentive Plan”). Subject to the terms and
conditions of the Equity Incentive Plan, the Executive shall be
eligible to participate in the Equity Incentive Plan, and shall be
eligible to receive annual stock option and/or restricted stock
awards under the Equity Incentive Plan. The Compensation Committee
shall make and approve any such awards to the Executive pursuant to
the Equity Incentive Plan.
(i) 2004 Equity Incentive Plan
Option Grants . Option awards under the Equity Incentive Plan
will have an exercise price per share equal to the closing price of
the Company’s 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 on 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 Equity Incentive Plan
Restricted Stock Awards . The Equity 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
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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 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,
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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 four (4) 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.
(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) Expenses, Office and
Secretarial Support . The Executive shall be entitled to
reimbursement of all reasonable expenses, in accordance with the
Company’s policy as in effect from time to time and on a
basis no less favorable than that applicable to other executives of
the Company, including, without limitation, telephone, reasonable
travel and reasonable entertainment expenses incurred by the
Executive in connection with the business of the Company, promptly
upon the presentation by the Executive of appropriate
documentation. The Company shall also provide Executive with an
automobile allowance of $1,000 per month. The
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Executive shall also be entitled to
appropriate office space, administrative support, and such other
facilities and services as are suitable to the Executive’s
positions and adequate for the performance of the Executive’s
duties.
(vi) Reimbursement of Certain
Professional Fees . The Company shall reimburse, at the request
of the Executive, fees for professional organizations reasonably
related to the mortgage banking and REIT industries.
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 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, which constitutes a crime of moral turpitude
or which is punishable by imprisonment or which is likely to cause
material harm to the Company’s (or any affiliate of the
Company) business, customer or supplier relations, financial
condition or prospects, (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 meet the quarterly
production and net income targets set forth in the Company’s
quarterly operating budget as approved by the Executive, the CEO
and the Board for two consecutive quarters, (vii) fails to follow
any material policy or procedure of the Company, or (viii) breaches
any material provision of this Agreement. Any such termination for
Cause shall be immediately effective upon oral or written
notification to Executive, except that Executive shall have up to
thirty (30) days after notice that termination for Cause pursuant
to any of clauses (iii), (iv), (v), (vii) or (viii) above has been
given to Executive by the Company to cure any such Cause to the
satisfaction of the CEO and the Board as they shall determine in
good faith and in the reasonable exercise of their
discretion.
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(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 (E)
below) which has not been cured within thirty (30) days after
notice of such noncompliance has been given by the Executive to the
Company, (B) the assignment to the Executive of any material duties
inconsistent with the Executive’s position with the Company
or a substantial adverse alteration in the nature or status of the
Executive’s responsibilities, including a change in directly
reporting to the CEO, without the consent of the Executive, (C)
without the consent of the Executive, a material reduction in
employee benefits other than a reduction generally applicable to
similarly situated executives of the Company, (D) without the
consent of the Executive, relocation of the Company’s
principal place of business outside a fifty (50) mile radius of
Irvine, California, or (E) 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 14. For
purposes of this Agreement, a “Notice of Termination”
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the
provision so indicated.
(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 Company following the expiration
of 180 days of the Executive’s disability, (iii) if the
Executive’s employment is terminated pursuant to subsection
(c) 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
During Disability .
(a) Disability . Should
Executive become disabled from performing his duties hereunder as
defined above, Executive acknowledges that his employment may be
terminated anytime thereafter if such disability continues;
provided that during the period of the disability prior
to
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such termination of employment, E
