Exhibit 10.24
EMPLOYMENT AGREEMENT
(this “ Agreement
”), dated as of September 30, 2004 (the “ Effective
Date ”), between AMERICAN CAPITAL ACCESS SERVICE
CORPORATION, a Delaware corporation (“ Service
”), ACA CAPITAL HOLDINGS, INC., a Delaware corporation
(“ Holdings ”), ACA FINANCIAL GUARANTY
CORPORATION, a Maryland corporation (“ Financial
,” and, together with Holdings and Service, the “
Company ”) and JOSEPH PIMBLEY (the “
Executive ”).
Pursuant to that certain Management
Service Agreement, dated September 24, 1997, Service provides a
broad range of administrative and business services to
Financial. Financial is in the business of providing
financial guaranty insurance and specialized surety
products.
Service desires to employ the
Executive and Financial and Holdings desire to lease from Service
the Executive’s services as an officer and employee, and the
Executive desires to accept such employment.
Accordingly, in consideration of the
premises and mutual covenants contained herein and for other good
and valuable consideration, the receipt and adequacy of which are
mutually acknowledged, the Company and the Executive agree as
follows:
1.
Definitions . For purposes of this Agreement, the
following terms shall have the following meanings:
(a)
“ Affiliate ” of a Person means a Person that
directly or indirectly through one or more intermediaries controls,
is controlled by or is under common control with, the Person
specified. Unless the context otherwise requires, the term
“control” (including the terms
“controlling,” “controlled by” and
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or
otherwise.
(b)
“ Base Salary ” means the salary provided for in
Section 4 or any increased salary granted to the Executive
pursuant to Section 4 .
(c)
“ Board ” means the Board of Directors of
Holdings, as constituted from time to time.
(d)
“ Cause ” means the Executive:
(i)
is convicted of, or pleads nolo contendere (or similar plea) to, a
felony or a crime involving moral turpitude;
(ii)
performs an action or fails to take an action that constitutes
willful dishonesty, larceny, fraud or gross negligence by the
Executive in the performance of the Executive’s duties to the
Company, or makes a knowing or reckless misrepresentation
(including by omission of any material adverse information) to
shareholders, directors or officers of the
Company, which in the case of gross negligence
only, is material and adverse to the Company or its business or its
reputation;
(iii)
engages in independently verified (determined by a qualified
medical or mental health professional), continuing and unremedied
for a period of at least six (6) months, substance abuse involving
drugs or alcohol;
(iv)
willfully and repeatedly fails, after thirty (30) business days
notice, to materially follow the material written policies of the
Company or lawful instructions of the Board; or
(v)
materially breaches this Agreement or any written policy, rule or
regulation adopted by the Company or any of its Subsidiaries
relating to compliance with securities laws or other laws, rules or
regulations and such breach is not cured by the Executive or waived
in writing by the Company within thirty (30) days after written
notice of such breach to the Executive.
No act, or failure to act, on
Executive’s part shall be considered “willful”
unless done, or omitted to be done, without good faith and without
reasonable belief that the action or omission was in the best
interest of the Company.
(e)
“ Change of Control ” means the occurrence of
any of the following events after the Effective Date:
(i)
any Person (other than any Person that is a stockholder of Holdings
as of the Effective Date, or other than a trustee or
other fiduciary holding securities under an employee benefit plan
of Holdings, or a corporation owned directly or indirectly by the
stockholders of Holdings in substantially the same proportions as
their ownerships of stock of Holdings) becomes the beneficial
owner, directly or indirectly, of securities of Holdings
representing more than fifty percent (50%) of the combined voting
power of Holdings’ then outstanding voting securities;
or
(ii)
during any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board (and any new
director, whose election by Holdings’ stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of
the period or whose election or nomination for election was so
approved), cease for any reason to constitute a majority thereof;
or
(iii)
any Person (other than any Person that is a stockholder of Holdings
as of the Effective Date, or other than a trustee or
other fiduciary holding securities under an employee benefit plan
of Holdings, or a corporation owned directly or indirectly by the
stockholders of Holdings in substantially the same proportions as
their ownerships of stock of Holdings) is or becomes able to elect
a majority of the members of the Board; or
(iv)
a closing or completion, as applicable, of (i) the sale or
disposition of all or substantially all of Holdings’ assets
or (ii) a merger, consolidation, or reorganization of Holdings with
or involving any other corporation, other than a
merger,
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consolidation, or
reorganization that would result in the voting securities of
Holdings outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities
of Holdings (or such surviving entity) outstanding immediately
after such merger, consolidation, or reorganization.
However, in no
event shall a “Change of Control” be deemed to have
occurred, with respect to the Executive, if Executive is part of a
purchasing group that consummates the Change of Control
transaction. Executive shall be deemed “part of a
purchasing group” for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing Person
(except for: (i) passive ownership of less than three percent (3%)
of the stock of the purchasing company; or (ii) ownership of an
equity interest in the purchasing company or group that is
otherwise not significant, as determined prior to the Change of
Control by a majority of the non-employee continuing directors of
Holdings).
(f)
“ Claim ” means any claim, demand, request,
investigation, dispute, controversy, threat, discovery request, or
request for testimony or information.
(g)
“ Common Stock ” means Common Stock, par value
$0.10 per share, of Holdings.
(h)
“ Constructive Termination ” means a termination
by the Executive of his employment with the Company on written notice given to the Company within
thirty (30) days following the date on which he learns of the
occurrence, without his prior written consent, of any of the
following events, if the Company shall have failed to cure such
event within thirty (30) days following receipt of written notice
from the Executive of a request to cure such
event:
(i)
a reduction in his then current Base Salary or in his current bonus
level pursuant to the Company’s bonus plan;
(ii)
a material breach of the Company’s obligations under this
Agreement;
(iii)
the termination of, or a reduction
in, any material employee benefit or perquisite enjoyed by him
(other than as part of an across-the-board reduction applying to
all executive officers of the Company which has been approved by
the Board or the Compensation Committee thereof (the “
Compensation Committee ”));
(iv)
a material change in the Executive’s positions, titles or
responsibilities with the Company (other tha n as a result of a promotion) as set forth in
Section 3 of this Agreement, or any action by the
Company which results in a material diminution in the authority of
Executive, excluding for this purpose, changes to the individuals,
groups, positions, or divisions which report to the Executive or,
if applicable, the Executive’s removal as a member of the
Board or as a member of any board of directors of any Subsidiary of
the Company. For the avoidance of doubt, a change in the
Person to whom the Executive reports shall not be deemed a
Constructive Termination hereunder;
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(v)
the relocation of the Executive’s principal office to a
location outside of Manhattan, New York without his
consent;
(vi)
the failure of the Company to
obtain the assumption in writing of its obligation to fully perform
this Agreement by any successor to all or substantially all of the
assets of the Company within 15 days after a merger, consolidation,
sale, or similar transaction; or
(vii)
a material breach by the Company of any or all of the
representations made by the Company in Section 12(a)
.
(i)
“ Disability ” means the Executive’s
inability, due to physical or mental incapacity, to substantially
perform his duties and responsibilities under this Agreement for a
period of 90 consecutive days or any 180 days out of 365
consecutive days as determined by an approved medical doctor.
For this purpose, an “approved medical doctor” means a
medical doctor mutually selected by the Executive and the
Company. If the Executive and
the Company cannot agree on a medical doctor, each Party shall
select a medical doctor and the two doctors shall select a third
who shall be the approved medical doctor for this
purpose.
(j)
“ Parties ” means the Company and
the Executive.
(k)
“ Person ” means
any individual, corporation, partnership, limited liability
company, joint venture, trust, estate, board, committee, agency,
body, employee benefit plan, association, joint stock company,
unincorporated organization or governmental entity or any
department, agency or political subdivision thereof or other person
or entity.
(l)
“ Proceeding ” means any threatened or actual
action, suit, or proceeding, at law or in equity, whether civil,
criminal, administrative, investigative, appellate, or
other.
(m)
“ Pro-Rata Annual Incentive Award ” means an
amount equal to the product obtained by multiplying (i) the
Executive’s target annual incentive award set forth in
Section 5 for the year during which his employment hereunder
terminates (with such award deemed to be no less than the greater
of (x) the target annual incentive award for such year pursuant to
Section 5 or (y) the actual annual incentive award of the
Executive in the prior year of employment hereunder) times (ii) a
fraction, the numerator of which is the number of days on which the
Executive was employed by the Company during such year and the
denominator of which is 365.
(n)
“ Subsidiary ” means, with respect to any
Person, any corporation, limited liability company, partnership,
association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of
the limited liability company, partnership or other similar
ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof.
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For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other
business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company,
partnership, association or other business entity.
(o)
“ Termination Date ” means the date on which the
Executive’s employment hereunder terminates for any
reason.
(p)
“ Voting Stock ” means issued and outstanding
capital stock or other securities of any class or classes having
general voting power
, under ordinary circumstances in
the absence of contingencies, to elect, in the case of a
corporation, the directors of such corporation and, in the case of
any other entity, the corresponding governing
Person(s).
2.
Term of Employment . The Company agrees to employ the
Executive under this Agreement, and the Executive accepts such
employment, for the Term of Employment. The Term of
Employment shall commence on the Effective Date and shall end on
the third anniversary thereof. On the third
anniversary of the Effective Date, and on every successive one year
anniversary thereafter, the Term of Employment shall automatically
be renewed on the same terms and conditions set forth herein as
modified from time to time by the Parties for additional one-year
periods, unless either
Party gives the other Party written notice of the election not to
renew the Term of Employment at least 60 days’ prior to any
such renewal date, whereupon the Executive’s employment shall
terminate on the anniversary date under the terms of this
Agreement. For the avoidance of doubt, in no event shall such
non-renewal by the Company of the Term of Employment be deemed a
termination by the Company of the Executive’s
e mployment hereunder. Notwithstanding the
foregoing, the Term of Employment may be earlier terminated in
accordance with the provisions set forth in Section 8
.
3.
Positions, Duties, and Responsibilities .
(a) During the
Term of Employment, the Executive shall be employed as the
Executive Vice President —
Institutional Risk Management of
each of Holdings, Service, and Financial, and shall perform such
normal duties, responsibilities, functions and authority and
exercise such powers as are incident to such offices. The Executive, in carrying out
his executive duties under this Agreement, shall report to the
Chief Executive Officer of such companies and shall devote
his best efforts and his full business time and attention (except
for permitted vacation periods and reasonable periods of illness or
other incapacity) to the business and affairs of the Company.
The Executive shall perform his duties and responsibilities to the
Company hereunder to the best of his abilities in a diligent,
trustworthy, professional and efficient manner and shall comply
with the Company’s policies and procedures in all material
respects.
(b)
Notwithstanding anything herein to the contrary, nothing shall
preclude the Executive from (i) serving on the boards of directors
of a reasonable number of other corporations or the boards of a
reasonable number of trade associations and/or charitable
organizations (provided that in each such case the Executive shall
give the Board at least 10
5
business days’
advance written notice of the Executive’s intention to serve
on any such board and, if the Board reasonably objects thereto, the
Executive agrees not to serve on such board), (ii) engaging in
charitable activities and community affairs, including political
activities, and (iii) managing his personal investments and
affairs, provided that such activities do not materially interfere
with the proper performance of his duties and responsibilities as
the Executive Vice President
— Institutional Risk Management of each of Holdings, Service, and
Financial.
4.
Base Salary . Commencing as of the Effective Date, the
Executive shall be paid an annualized Base Salary of
$275 ,000 per annum, or such higher rate as the Compensation
Committee may determine from time to time (as adjusted from time to
time, the “ Base Salary ”) . The Base Salary shall be payable at
intervals in accordance with the regular payroll practices of the
Company applicable to senior executives but no less frequently than
monthly. The Base Salary shall be reviewed no less frequently
than annually during the Term of Employment for increases.
Without the Executive’s written consent, the Base Salary
shall not be decreased at any time, or for any purpose, during the
Term of Employment (including, without limitation, for the purpose
of determining benefits due under Section 9
).
5.
Annual Incentive Awards . The Executive shall be
eligible for an annual incentive bonus award from the Company in
respect of each fiscal year ending during the Term of
Employment. The Executive’s target annual incentive
bonus amount for each such year shall be an amount equal
to one hundred percent (100%) of his annualized
Base Salary for such year, and his actual bonus amount
for each such year shall be
determined based on criteria determined by the Chief Executive
Officer of the Company and approved by the Compensation Committee
in its sole discretion, and communicated to the Executive no later
than 30 days after the beginning of the fiscal year;
provided , however , that the Executive’s
minimum annual incentive bonus award for fiscal year 2004 shall be
no less than $250,000. The Executive shall receive his annual
incentive award payment in respect of any fiscal year no later than
the 60 th day following the end
of the preceding fiscal year.
6.
Other Benefits .
(a)
Employee Benefits . During the Term of Employment, the
Executive shall be entitled to participate in all employee benefit
plans, programs and arrangements made available generally to the
Company’s senior executives or to its employees, including,
without limitation or guarantee, profit-sharing, savings (qualified
and non-qualified) and other defined contribution
retirement plans or programs, medical, dental,
hospitalization, vision, short-term and long-term disability and
life insurance plans or programs, accidental death and
dismemberment protection, travel accident insurance, and any other
employee welfare benefit plans or programs that may be made
available by the Company from time to time, including any plans or
programs that supplement the above-listed types of plans or
programs, whether funded or unfunded; provided ,
however , that nothing in this Agreement shall be construed
to require the Company to establish, maintain or retain any such
plans, programs, or arrangements, except for family medical,
dental, and hospitalization insurance providing coverage, at no
cost to the Executive, which shall be required benefit plans for
the Executive.
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(b)
Perquisites . During the Term of Employment, the
Executive shall be entitled to participate in all fringe benefits
and perquisites made generally available to senior executives of
the Company, in each case, at levels, and on terms and conditions,
that are commensurate with his positions and responsibilities at
the Company. The Executive shall also receive such additional
fringe benefits and perquisites as the Compensation Committee may,
in its discretion, from time to time provide.
(c)
Vacation . During the Term of Employment, the
Executive shall be entitled to vacation in accordance with the
Company’s vacation policies in effect from time to
time.
7.
Reimbursement of Business and Other Expenses .
(a)
The Executive shall be authorized to incur reasonable business
expenses in carrying out his duties and responsibilities under this
Agreement which are consistent with the Company’s policies in
effect from time to time with respect to travel, entertainment and
other business expenses, and the Company shall promptly reimburse
him for all such expenses, subject to his satisfaction of Company
requirements with respect to reporting and documenta
tion of such expenses.
(b)
All amounts payable to the Executive as compensation hereunder
shall be subject to all required and customary withholding by the
Company.
8.
Termination of Employment .
(a)
Termination Due to Death . In the event that
the Executive’s
e mployment hereunder is
terminated due to his death, his estate or his beneficiaries (
as the case may be) shall be
entitled to the following:
(i)
payment of the Base Salary through the date of his death and for an
additional 90 days thereafter;
(ii)
a Pro-Rata Annual Incentive Award
for the year in which his death occurs, payable in a lump sum
promptly after the date of his death in due course with such
payments made to other executives of the Company following the end
of the Company’s fiscal year;
(iii)
a lump-sum payment promptly after his death in respect of all
accrued but unused vacation days at his Base Salary rate in effect
on the Termination Date, payment of any other amounts earned,
accrued and owing to the Executive but not yet paid and receipt of
other vested benefits in accordance with applicable plans and
programs of the Company (the “ Standard Benefit
”); and
(iv)
payment of COBRA premiums for the entire period of eligibility for
the Executive’s eligible dependents and continued
participation for one year for each of the Executive’s
dependents in all other employee welfare benefit plans, programs,
and arrangements in which such dependent was participating as of
the date of the Executive’s death, on terms and conditions no
less favorable than those applying on such date.
7
(b)
Termination Due to Disability . In the event that the
Executive’s employment hereunder is terminated due to
Disability, he shall be entitled to the following:
(i)
continuatio n of Base Salary
until commencement of long-term disability payments;
(ii)
a Pro-Rata Annual Incentive Award for the year in which his
employment terminates, payable in a lump sum in due course with
such payments made to other executives of the Company following the
end of the Company’s fiscal year;
(iii)
the Standard Benefit; and
(iv)
payment of COBRA premiums for the entire period of eligibility for
the Executive and eligible dependents and participation for one
year for the Executive and each of his dependents in all Company
life insurance coverage and in all other Company employee w
elfare benefit plans, programs,
and arrangements.
No termination
of the Executive’s employment for Disability shall be
effective unless the Company first gives 15 days’ written
notice of such termination to the Executive.
(c)
Termination by the Company for Cause .
(i)
No termination of the Executive’s employment hereunder by the
Company for Cause shall be effective unless the provisions of this
Section 8(c)(i) shall have been fully complied with.
Prior to any termination by the Company for Cause, the Executive
shall be given written notice by the Board of the intention to
terminate him, such notice (A) to state in reasonable detail the
circumstances that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given no later than
180 days after the Board first learns of such circumstances.
The Executive shall have 15 days after receiving such notice in
which to cure such grounds, to the extent such cure is
possible.
(ii)
In the event that the Executive’s employment hereunder is
terminated by the Company for Cause in accordance with Section
8(c)(i) , he shall be entitled to the following:
(A)
payment of the Base Salary through the Termination Date;
and
(B)
the Standard Benefit.
(d)
Termination Without Cause; Constructive Termination of the
Executive . In the event that the Executive’s
employment hereunder is terminated by the Company, other than due
to Disability in accordance with Section 8(b) or for Cause
in accordance with Section 8 (c)(i)
, or in the
event of the Executive’s termination of his employment as a
result of a Constructive Termination, the Executive shall be
entitled to:
(i)
payment of the Ba se Salary
through the Termination Date;
8
(ii)
the Standard Benefit; and
(iii)
upon execution and delivery of
the General Release substantially in the form and substance as set
forth in Exhibit A attached hereto (the “ General
Release ”) and such General Release having become
effective:
(1)
a Pro-Rata Annual Incentive Award for the year in which the
Executive was terminated, payable in a lump sum promptly following
the Termination Date;
(2)
payment of severance in an amount equal to one year of the
Executive’s annual Base Salary as of the Termination Date,
which severance payment shall be payable on a “salary
continuation basis” in regular installments in accordance
with the general payroll practices of the Company (in effect from
time to time) or, at the Company’s option, in one lump sum
payment; and
(3)
payment of COBRA premiums for the entire period of eligibility for
the Executive and eligible dependents and continued participation
for the Executive and each of his dependents in all Company life
insurance coverage and all other Company welfare benefit plans,
programs, and arrangements until the earlier of (x) one year from
the Termination Date or (y) the date the Executive receives
equivalent coverage and benefits from a subsequent
employer.
(e)
Voluntary Termination . In the event that the
Executive terminates his employment with the Company
on his own initiative, other than by death, for
Disability or by a Constructive Termination, he shall have the same
entitlements hereunder as provided in Section 8(c)(ii) in
the case of a termination by the Company for Cause. A
voluntary termination under this Section 8(e) shall be
effective upon written notice to the Company and shall not be
deemed a breach of this Agreement.
(f)
Benefit Plans . In the event that the Executive, or
any of his dependents, is precluded from continuing full
participation in any employee benefit plan, program, or arrangement
as provided in Sections 8(a)(iv) , 8(b)(iv) , or
8(d)(iii)(3) , the Executive shall be provided with the
after-tax economic equivalent of any benefit or coverage
foregone. For this purpose, the economic equivalent of any
benefit or coverage foregone shall be deemed to be the total cost
to the Executive or any of his dependents of obtaining such benefit
or coverage by himself on an individual basis. Payment of
such after-tax economic equivalent shall be made quarterly in
advance, without discount.
(g)
No Mitigation; Offset . In the event of any
termination of the Executive’s employment with the Company,
the Executive shall be under no obligation to seek other employment
or otherwise mitigate the obligations of
the Company under this Agreement.&n
