Exhibit 10.6
EMPLOYMENT
AGREEMENT
AGREEMENT made as of the 1st day of
February 2005, between People’s Choice Home Loan, Inc., a
Wyoming corporation (the “Company”), and David Zimmer
(the “Executive”).
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 employ the Executive, and the Executive hereby agrees 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 as of the
date set forth above and end on January 31, 2008, unless further
extended or sooner terminated as hereinafter provided. Commencing
on February 1, 2006, and on each February 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 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 Executive Vice President, Asset Management, 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 by the Chief Executive Officer (“CEO”)
and the Chief Financial Officer (“CFO”) 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 serve on committees specified by the
CEO.
5. Place of Performance . In connection
with the Executive’s employment by the Company, the Executive
shall be based in Princeton, New Jersey, except for required travel
on the Company’s business to the Company’s principal
executive office.
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 $275,000. During the Term, the
Company’s board of directors (the “Board”) or the
Compensation Committee of the board of the parent company,
People’s Choice Financial Corporation (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 February 1. 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, which shall establish performance
criteria that are precisely defined, reasonable and the performance
of which are reasonably within the Executive’s control.
Provided the Executive does not terminate his employment hereunder
for other than Good Reason, Executive is guaranteed a bonus of 200%
of Base Salary for the first year of employment under this
Agreement. In subsequent years, 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. 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. Executive’s initial award, to be
made as of February 1, 2005, shall be a non-qualified stock option
grant of 75,000 shares (“Initial Grant”) of
People’s Choice Financial Corporation (“PCFC”)
common stock, with an exercise price of $10 per share. In each
subsequent year, the Company’s CEO shall recommend to the
Compensation Committee a grant of stock options to the Executive
commensurate with his performance.
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(i) 2004 Equity Incentive Plan
Option Grants . Option awards under the Equity Incentive Plan
subsequent to the Initial Grant described above will have an
exercise price per share equal to the closing price of PCFC’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 PCFC
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 PCFC 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 PCFC’s then outstanding securities
entitled to vote generally in the election of the Board of
PCFC.
“Continuing Director”
means any member of the Board of PCFC, while a member of the Board
and (i) who was a member of the Board on the closing date of
PCFC’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 PCFC 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 PCFC, the closing of
such
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an agreement) that involves the transfer of all
or substantially all of PCFC’s total assets on a consolidated
basis, as reported in PCFC’s consolidated financial
statements filed with the Securities and Exchange Commission; (iii)
holders of the securities of PCFC entitled to vote thereon approve
a transaction (or, if such approval is not required by applicable
law and is not solicited by PCFC, the closing of such a
transaction) pursuant to which PCFC will undergo a merger,
consolidation, or statutory share exchange with a Person,
regardless of whether PCFC 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 PCFC carrying the right to vote in elections
of persons to the Board of PCFC 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
PCFC’s voting securities carrying the right to vote in
elections of persons to PCFC’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 PCFC entitled to vote thereon approve a plan of
complete liquidation of PCFC or an agreement for the sale or
liquidation by PCFC of all or substantially all of PCFC’s
assets (or, if such approval is not required by applicable law and
is not solicited by PCFC, the commencement of actions constituting
such a plan or the closing of such an agreement); or (vi) the Board
of PCFC 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 PCFC has
effectively occurred. The Board of PCFC 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) 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 Executive shall also be entitled to appropriate
office space, administrative support, and such other facilities and
services as are suitable to the Executive’s position 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
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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,
the CFO or the 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
material policy or procedure of the Company, (vii) fails to achieve
the reasonable performance criteria mutually agreed pursuant to
Section 6(b) among the CEO, the CFO and the Executive, or (viii)
breaches any material provision of this Agreement. Cause will not
exist under clauses (iii) – (viii) above unless and until the
Company has provided written notice of the specific facts
supporting its contention that the Executive is in non-compliance,
and the Executive has not cured such non-compliance within 30 days
of receiving such written notice.
(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 without the consent of the
Executive, (C) without the consent of the Executive, a material
reduction in employee benefits other than a reduction
generally
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applicable to similarly situated
executives of the Company, (D) without the consent of the
Executive, relocation of the Executive to any place of business
more than 25 miles from Princeton, New Jersey 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.
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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 such
termination of employment, Executive shall continue to receive all
compensation and benefits as if he were actively employed less any
sums received directly by the Executive, if any, under any policy
or policies of disability income insurance purchased by the
Company. In the event of such termination, Executive shall be
entitled to receive any unpaid Base Salary to the Date of
Termination, the earned but unpaid Incentive Bonus for any
completed fiscal year and any amounts due to Executive pursuant to
Section 6(d) through the Date of Termination. Executive’s
rights to receive any additional salary or payments under this
Agreement shall terminate but Executive shall have the right to
continue to receive any and all payments made by an insurance
company under any and all policies of disability insurance
purchased by the Company. Executive’s rights under any
Company benefit plan will be those rights accorded to any
terminated employee under the plan provisions and applicable law.
Executive will remain entitled to receive any benefits under state
disability or worker’s compensation laws. In addition, all
vested PCFC stock options, Restricted Stock Grants and any other
equity awards granted by PCFC to the Executive shall become fully
exercisable as of the Date of Termination, pursuant to the terms of
the Equity Incentive Plan.
(b) Death . If the
Executive’s employment is terminated by his death, the
Company shall within ten (10) days following the date of the
Executive’s death, pay to the Executive’s designated
beneficiary (ies) any amounts due to the Executive under Section
6(d) through the date of and as a result of his death, an amount
equal to the Executive’s annual Base Salary for the year in
which the termination took place, and an amount equal to either the
Executive’s target Incentive Bonus for the year in which the
termination took place (if termination occurs during the first year
of this Agreement), or an amount equal to the average Incentive
Bonus earned by Executive during the term of this Agreement (if
termination occurs after the first year of this Agreement) together
with any other amounts to which the Executive is entitled pursuant
to death benefit plans, programs and policies. In addition, all
vested PCFC stock options, Restricted Stock Grants and any other
equity awards granted by PCFC to the Executive shall become fully
exercisable as of the Date of Termination, pursuant to the terms of
the Equity Incentive Plan.
(c) Cause or other than Good
Reason . If the Executive’s employment shall be
terminated by the Company for Cause or by the Executive for other
than Good Reason, the Company shall pay the Executive his full Base
Salary through the Date of Terminatio
