Exhibit 10.1
EXECUTION COPY
[PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST
TO
THE SECURITIES AND EXCHANGE COMMISSION FOR CONFIDENTIAL
TREATMENT.
THE INFORMATION HAS BEEN SEPARATELY FILED WITH THE
COMMISSION]
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”) is dated December 21, 2007 (the
“Effective Date”), and is entered into by and between
Ronald J. Nicolas (“Executive”), Fremont General
Corporation (the “Parent”) and Fremont Investment &
Loan (the “Bank”), a wholly-owned subsidiary of Parent.
(The Parent and the Bank will be referred to collectively herein as
the “Company”).
RECITALS
WHEREAS, the Executive serves
as an officer of the Company pursuant to a Management Continuity
Agreement dated as of May 9, 2005 (the “Prior
Agreement”);
WHEREAS, pursuant to a letter
dated April 3, 2007, the Bank offered Executive a
“retention bonus” equal to one year of pay, payable in
three installments as set forth therein, the last of which is to be
paid on December 14, 2007, which letter supersedes an earlier
one that had been issued dated March 20, 2007 (the
“April 2007 Bank Retention Letter”);
WHEREAS, pursuant to a letter
dated August 27, 2007, the Parent offered Executive a
“retention bonus” equal to one year of pay, payable in
four installments as set forth therein, the last three of which are
to be paid on January 1, 2008, April 1, 2008 and
July 1, 2008 (the “August 2007 Parent Retention
Letter” and, along with the April 2007 Bank Retention
Letter, the “Retention Letters”);
WHEREAS, pursuant to
Restricted Stock Agreements dated May 19, 2005, March 8,
2006 and November 15, 2006, the Parent granted the Executive
21,000 shares (one-third of which vests on each anniversary of the
date of grant), 22,772 shares (one-third of which vests on each
anniversary of the date of grant), and 47,000 shares (one-third of
which vests on January 1 of each of 2008, 2009 and 2010),
respectively (collectively, the “Restricted Stock
Agreements”), of common stock of Parent, which shares are
subject to the terms and conditions set forth in such Restricted
Stock Agreements;
WHEREAS, in connection with
the issuance to the Company of Cease and Desist Orders issued by
the Federal Deposit Insurance Corporation (“FDIC”) and
the California Department of Financial Institutions
(“DFI”), a new management team has been appointed at
Parent and it is contemplated that, upon receipt of approval of the
FDIC and the DFI, the same new management team will be appointed to
similar positions at the Bank;
WHEREAS, the Executive has
indicated a willingness to remain in the employ of the Company and
has agreed to relinquish any and all amounts that may be due and
owing under the Prior Agreement and under any other agreements,
programs or plans of the Company that provide Executive with cash
or equity entitlements, except for the Retention Plans, which shall
continue in full force and effect subject to the requirements set
forth in such Retention Plans, and the Restricted Stock Agreements,
which shall continue in full force and effect subject to the
requirements set forth in such Restricted Stock Agreements;
WHEREAS , the Company desires
to be ensured of the Executive’s continued services;
and
WHEREAS , Executive desires
to enter into a new agreement covering employment by the Executive,
upon the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the mutual covenants and promises contained herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
each intending to be legally bound hereby, agree as follows:
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Effective Date of Agreement; Termination of Prior Agreement
and Other Arrangements |
This Agreement shall be executed and
delivered by Executive to the Company and this Agreement shall
become effective as of the Effective Date. The Prior Agreement as
well as any other agreements, programs or plans that provide
Executive with cash or equity entitlements, shall be considered
terminated and shall be of no force or effect, effective as of the
Effective Date, except (i) for the Retention Plans, which
shall continue in full force and effect subject to the requirements
set forth in such Retention Plans and (ii) the Restricted
Stock Agreements, which shall continue in full force and effect
subject to the requirements set forth in such Restricted Stock
Agreements. The Executive has represented and warranted to the
Company that Executive is not entitled to any cash or equity
entitlements under any Company agreements, programs or plans,
except with respect to the Prior Agreement, the Retention Plans and
the Restricted Stock Agreements.
The Executive agrees to be employed
(a) as Executive Vice President and Head of Corporate
Development of Parent, commencing as of the Effective Date, and
(b) as Executive Vice President and Head of Corporate
Development of the Bank. The Executive shall be based at either the
Parent’s headquarters in Santa Monica, California, the
Bank’s headquarters in Brea, California or as otherwise
determined by the parties. Notwithstanding the foregoing, the
Company understands and agrees that Executive may from time to time
physically render services from an alternative location;
provided , however , that the Executive will
generally work out of the Company’s offices.
During his employment with the
Company, Executive will serve the Company and its affiliates
faithfully, diligently and to the best of his ability and will
devote as much of his business
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time,
energy, experience and talents as is necessary to perform his
duties hereunder. During his employment with the Company, Executive
shall perform all duties and accept all responsibilities incident
to his position as Executive Vice President and Head of Corporate
Development of Parent as may be reasonably assigned to him from
time to time by the Chief Executive Officer. Executive shall also
be subject to and shall abide by all policies and procedures of the
Company, except to the extent that such policies and procedures
conflict with the other provisions of this Agreement, in which case
this Agreement shall control.
Executive shall be paid the following
as compensation for all services to be rendered by Executive
pursuant to this Agreement:
(a) Base Salary . During
the Term (as defined in Section 5 hereof), the Company shall
pay Executive a base salary (the “Base Salary”),
payable in equal biweekly installments, according to the
Bank’s normal payroll practices, at an annual rate of Four
Hundred Twenty Five Thousand dollars ($425,000), less all
applicable federal, state and/or local taxes and all other
authorized payroll deductions. Thereafter, Executive’s Base
Salary will be subject to an approximately annual review, and
increases (but not reductions, except for reductions made to the
Company’s executives generally) may be made to
Executive’s Base Salary at any time based upon the review by
Parent’s Board of Directors (“Board”) of
Executive’s performance and the performance of the Company.
For the avoidance of any doubt, no payments made pursuant to the
Retention Plans or the Restricted Stock Agreements shall be
considered to be part of “Base Salary” for any purpose
under this Agreement.
(b) Annual Bonus .
During the Term, the Bank may pay Executive a bonus or bonuses in
such amount as and in such a manner as the Board, in its discretion
determines is appropriate.
(c) New Restricted
Shares . As of the Effective Date, the Parent will grant the
Executive an award of 200,000 restricted shares, pursuant to the
Parent’s 2006 Performance Incentive Plan. The restricted
shares, whether or not vested, will be entitled to dividends if and
when such dividends are declared and paid to shareholders of
Parent. Subject to acceleration of vesting of such restricted
shares as provided in Sections 9 and 10 hereof, one-third of
the restricted shares shall become vested on each of the first
three anniversaries of the Effective Date; provided, that as of
each such vesting date, Executive is employed hereunder and has
neither given nor been given a notice of termination of
Executive’s employment with Parent or the Bank.
Subject to the terms of this
Agreement (including, without limitation, Section 11 hereof),
the term of this Agreement (the “Term”) shall commence
on the Effective Date and unless earlier terminated pursuant to
Sections 8 or 9 shall continue until the third (3 rd ) anniversary
of the Effective Date. Subject to the notice provisions of this
paragraph, on the first annual anniversary of the date first above
written and each annual anniversary thereafter, the Term of this
Agreement may be renewed or extended for one (1) additional
year after review and approval by the Board or a duly authorized
committee thereof. In the event the Company or the Executive gives
written notice to the other party or parties hereto of such
party’s or parties’ election not to extend the Term,
with such
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notice
to be given not less than ninety (90) days prior to any such
anniversary date, then this Agreement shall terminate at the
conclusion of its remaining Term. References herein to the Term of
this Agreement shall refer to both the initial Term and successive
Terms.
During the Term, the Bank shall
reimburse the Executive for his reasonable expenses incurred in the
course of Executive’s duties, in accordance with the
procedures and to the extent allowed under applicable policies of
the Bank. These expenses shall include transportation between the
Executive’s home and the Company’s offices. The Bank
shall also provide (or reimburse) the Executive for temporary
accommodations while he is working at the Company’s
offices.
7.
Benefits
(a) The Executive shall be
eligible to participate in the employee benefit plans and executive
compensation programs maintained by the Bank or Parent of general
applicability to other executives of the Company, including
retirement plans, savings or profit-sharing plans, deferred
compensation plans, supplemental retirement or excess-benefit
plans, stock option, restricted stock programs, incentive or other
bonus plans, life, disability, health, accident and other insurance
programs, paid vacations, and similar plans or programs, if any,
subject in each case to the generally applicable terms and
conditions of the plan or program in question and to the
determination of the Board or any committee administering such plan
or program.
(b) Nothing in this Agreement
shall preclude the Company from amending or terminating any
employee benefit plan or practice.
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Effect of Death or Disability |
(a) In the event of
Executive’s termination of employment by reason of
“disability” (as defined from time to time in any
applicable disability plan or program of the Company) during the
Term, this Agreement shall terminate, subject to any applicable
disability plan or program of the Company or federal or state
disability or leave laws. Executive shall receive such compensation
and benefits (if any) in connection with such termination
consistent with the terms of such plans, programs or applicable
laws.
(b) In the event of the
Executive’s death, the Bank shall pay to the
Executive’s estate an amount, in cash, equal to (a) one
hundred percent (100%) of his annual Base Salary at the rate in
effect at the time of Executive’s death, payable in a lump
sum within thirty (30) days of the Executive’s death,
and (b) one hundred percent (100%) of the average Annual Bonus
paid to the Executive during the last three (3) fiscal years
(or such shorter period if applicable) payable in a lump sum within
thirty (30) days of Executive’s death. The Bank will
cause to be continued for the Executive’s previously covered
dependents’ life, medical and dental coverage that is
substantially equivalent to the coverage maintained by the Bank for
Executive’s dependants prior to the Executive’s death
at no cost to the Executive’s covered dependants. Such
coverage shall cease upon the expiration of the remaining Term of
this Agreement. If this coverage is not available, the Bank will
pay to the Executive’s covered dependants an amount equal to
the remaining premiums paid to
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the
carrier for the coverage that was in force prior to the date of
Executive’s death for the remaining Term of this
Agreement.
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Termination of Employment and Severance |
(a) General
(i) Termination by the Company for
Cause or by Executive other than for Good Reason . At any time
during the Term, the Company may terminate Executive’s
employment under this Agreement for “Cause” (as
hereinafter defined), or Executive may terminate his employment
with the Company other than for “Good Reason” (as
hereinafter defined), after which the Company shall pay to the
Executive the amount of his accrued but unpaid Base Salary and any
unreimbursed reasonable expenses incurred in the performance of
Executive’s duties in accordance with the Company’s
policies, in each case accrued through such termination date
(collectively, the “Accrued Obligations”). Except as
set forth in the preceding sentence, the Company shall have no
further obligation hereunder to Executive.
(ii) Intentionally Left
Bank.
Termination by the Company other than for Death, Disability or
Cause or by the Executive following a Qualifying Sale . If
prior to the first anniversary of the date hereof, the Bank [*] (a
“Qualifying Sale”), then the restricted share award
granted to Executive pursuant to Section 4(c) of this Agreement
shall vest in full upon the consummation of the Qualifying Sale
transaction. If following the consummation of a Qualifying Sale and
prior to the first anniversary of the Effective Date, the
Executive’s employment is terminated by the Company other
than on account of the Executive’s death, disability or for
Cause, or the Executive provides written notice of his intent to
terminate his employment, for any reason, upon ninety
(90) days prior written notice, then in lieu of any other
severance payment provided in this Agreement, or other Company
plan, policy or arrangement, then the Bank shall make the following
payments and benefits available to the Executive following his
termination of employment (less all applicable federal, state
and/or local taxes and all other authorized payroll deductions):
(A) the Accrued Obligations, and (B) subject to the
Executive’s continued compliance with the restrictive
covenants contained in Sections 11 through 15 of this
Agreement, provided, however, that the non-solicitation provisions
of Section 11(a) shall remain in force for twelve (12) months
following Executive’s termination of employment, and further
provided that the Executive signs and returns to the Company the
Release and such Release has become irrevocable by Executive,
severance compensation equal to (I) the remaining portion of
the Base Salary Executive would have received had he worked through
the first anniversary of the Effective Date, or through the first
fifteen (15) months of this Agreement, if the Qualifying Sale
occurs in the 10 th , 11
th or
12 th
month of this Agreement, payable in a lump sum within thirty
(30) days following such termination date, provided, however,
that if the Qualifying Sale does not constitute a change in control
event for purposes of Code Section 409A, then the payment will
be made in equal biweekly installments over a twelve (12)
calendar-month period, in accordance with the Company’s
normal payroll practices; and (II) continued health benefits for
three (3) years following the Executive’s termination of
employment; provided, however, that to the extent the applicable
health plan does not permit Executive to continue to participate in
the plan during all or a part of such period, the Company shall pay
the premiums relating to such continued
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Confidential information has been omitted pursuant to a request
to the Securities and Exchange Commission for confidential
treatment. The information has been separately filed with the
Commission. |
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coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”). Except as set forth in this paragraph, the
Company shall have no further obligation hereunder to
Executive.
(iii) Termination by Executive for
Good Reason or by the Company other than for Death, Disability or
Cause . At any time during the Term, if Executive’s
employment is terminated by Executive for Good Reason, or by the
Company for any reason other than Executive’s death,
disability or for Cause, the Bank (and Parent with respect to
(B)(I) below) shall make the following payments and benefits
available to the Executive (less all applicable federal, state
and/or local taxes and all other authorized payroll deductions):
(A) the Accrued Obligations, and (B) subject to
Executive’s continued compliance with the restrictive
covenants contained in Sections 11 through 15 of this
Agreement and further provided that Executive signs and returns to
the Company the Release and such Release has become irrevocable by
Executive, severance compensation equal to (I) three hundred
percent (300%) of Executive’s annual Base Salary at the rate
in effect at the time of termination, payable in equal biweekly
installments over a twelve (12) calendar-month period, in
accordance with the Company’s normal payroll practices;
(II) three hundred percent (300%) of the average Annual Bonus
paid to the Executive during the last three (3) fiscal years
(or such shorter period if applicable), payable in equal biweekly
installments over a twelve (12) calendar-month period, in
accordance with the Company’s normal payroll practices;
(III) full vesting of the restricted share award granted
pursuant to Section 4(c) of this Agreement; (IV) an amount
equal to three hundred percent (300%) of the Average Annual Equity
Value (defined below) payable in equal biweekly installments over a
twelve (12) calendar-month period, in accordance with the
Company’s normal payroll practices; (V) in addition to
the benefits to which the Executive is entitled under each defined
contribution retirement plan of the Company (a “DC Retirement
Plan”), the Company shall pay the Executive a lump sum
amount, in cash, equal to the sum of (i) the amount that would
have been contributed thereto by the Company on the
Executive’s behalf during the three (3) years
immediately following the date of termination, determined
(x) as if the Executive made the maximum permissible
contributions thereto during such period, (y) as if the
Executive earned compensation during such period at a rate equal to
the Executive’s compensation (as defined in the DC Retirement
Plan) during the twelve (12) months immediately preceding the
Date of Termination or, if higher, during the twelve months
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, and (z) without regard
to any amendment to the DC Retirement Plan made subsequent to a
Change in Control Event and on or prior to the date of termination,
which amendment adversely affects in any manner the computation of
benefits
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thereunder, and
(ii) the excess, if any, of (x) the Executive’s
account balance under the DC Retirement Plan as of the date of
termination over (y) the portion of such account balance that
is nonforfeitable under the terms of the DC Retirement Plan; plus
(VI) continued health benefits for three (3) years
following the Executive’s termination of employment;
provided, however, that to the extent the applicable health plan
does not permit Executive to continue to participate in the plan
during all or a part of such period, the Company shall pay the
premiums relating to such continued coverage under COBRA. For
purposes of this Agreement, “Average Annual Equity
Value” shall mean the sum of (1) and (2), where
(1) equals the average aggregate fair market value (based upon
the closing price of the stock on the date of such award),
determined as of the date of grant, of all stock, phantom stock or
similar awards granted during the three years prior to
Executive’s termination, and (2) equals the average fair
value (determined as of the date of grant) utilizing the same
assumptions as the Parent uses for financial accounting purposes
under FAS 123R, of all stock option or similar awards granted to
Executive during the three years prior to the termination date,
provided , however , that Average Annual Equity Value
shall not include the restricted stock grant provided in Section
4(c) of this Agreement and to restricted stock grants made pursuant
to the Restricted Stock Agreements. Except as set forth in this
paragraph, the Company shall have no further obligation hereunder
to Executive.
(iv) Executive may terminate his
employment with the Company, whether for Good Reason or not, only
by giving the Company thirty (30) days’ advance notice
in writing, in accordance with the notice provisions of this
Agreement.
(b) Definitions . For
purposes of this Agreement, the following definitions shall
apply:
(i) “Cause” shall mean
any of the following: (A) Executive’s engaging in and/or
failure to take all appropriate action in response to any acts of
fraud, dishonesty, theft, embezzlement, or any other acts or
omissions that are harmful or injurious to the Company and/or any
of its affiliates; (B) Executive’s willful refusal to
perform any of the duties or responsibilities: (I) reasonably
assigned to Executive by the Board,
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