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8-K Cover
EXHIBIT 99.2
EMPLOYMENT
AGREEMENT
EMPLOYMENT
AGREEMENT (this “ Agreement ”), dated as of
September __, 2007, by and between Downey Savings and Loan
Association, F.A. (the “ Company ”) and Frederic
R. McGill (“ Executive ”).
RECITALS
WHEREAS,
the Company desires to engage Executive to serve as the
Company’s President, effective as of October 29,
2007;
WHEREAS,
the Company desires to have Executive serve as the President of its
holding company, Downey Financial Corp., effective as of October
29, 2007; and
WHEREAS,
Executive desires to accept such employment.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, the sufficiency of which is hereby acknowledged, the
Company and Executive hereby agree as follows:
1.
Employment.
Subject
to the terms and conditions of this Agreement, the Company hereby
employs Executive and Executive hereby accepts employment by the
Company for the period commencing on October 29, 2007 (the “
Commencement Date ”) and ending on the date such
employment is terminated by either Company or Executive (such
period, the “ Employment Period ”).
Executive’s
employment shall be “at will” and may be terminated at
any time for any reason by either Company or Executive with or
without cause and with or without prior notice.
2. Position,
Duties and Reporting.
From
the Commencement Date and thereafter during the Employment Period,
Executive shall serve as President and/or in such other position(s)
with the Company and its affiliates as the Board of Directors (the
“ Board ”) of the Company may assign Executive
from time to time.
From
the Commencement Date and thereafter during the Employment Period,
Executive shall devote substantially all of his business time and
attention to the services required of him hereunder. Employee shall
report directly to the Chief Executive Officer, the most senior
officer of the Company (and its holding company).
3.
Compensation.
(a)
Base Salary and Annual Bonus . During the Employment Period,
Company shall pay to Executive such base salary (the “
Base Salary ”) and annual bonus (the “
Bonus ”) as are set forth in that certain letter
addressed to Executive and dated as of even date herewith (the
“ Offer Letter” ). Such Base Salary and Bonus
shall be subject to those terms and conditions set forth in the
Offer Letter. Any increases to Executive’s Base Salary and/or
Bonus shall be determined solely by the affirmative vote of a
majority of the directors of the Board of the Company.
(b)
Signing Bonus . As of the Commencement Date, Company shall
pay Executive a lump sum signing bonus of Sixty Thousand and 00/100
Dollars ($60,000.00).
4.
Benefits.
(a) During
the Employment Period, Executive shall be entitled to participate,
to the extent eligible, in all benefit plans and programs sponsored
or maintained by the Company and made available generally to its
employees. Executive may elect to participate in the
Company’s retiree medical plan providing medical coverage for
Executive (and Executive’s spouse) irrespective of the basis
for termination of Executive’s employment. In the event of a
Termination Without Cause, and only in such event, Company shall
reimburse Executive the actual out of pocket costs incurred for
such participation in the retiree medical plan up to a maximum of
$928.00 per month until Executive reaches age 65. Except as
otherwise set forth in the immediately preceding sentence, if
Executive so elects to participate in such retiree medical plan
following the termination of Executive’s employment with the
Company, Executive shall do so at Executive’s sole cost,
without any contribution from the Company. So long as (i) the costs
to Executive do not exceed the costs Executive would be required to
pay under the Company’s retiree medical plan; and (ii) the
benefits are not materially different from the benefits Executive
would receive under the Company’s retiree medical plan, the
Company may elect to change the plan available to Executive from
the retiree medical plan to any other healthcare plan then
available to Company employees.
(b) During
the period beginning on the Commencement Date and ending on the
earlier of (i) ninety (90) days thereafter and (ii) the date
Executive is eligible for health benefit plans and programs
sponsored or maintained by the Company, subject to (A) the timely
election of continuation coverage under the Consolidated Budget
Omnibus Reconciliation Act of 1985, as amended (“
COBRA” ) and (B) Executive’s continued copayment
of premiums at the same level and cost to Executive as if he were
an employee of the Company (excluding, for purposes of calculating
cost, an employee’s ability to pay premiums with pre-tax
dollars), the Company shall reimburse Executive for the economic
equivalent of participation (with the balance of the premium paid
by the Company) in the Company’s health insurance plan (to
the extent permitted under applicable law and the terms of such
plan) in which Executive and his eligible dependents were
participating, provided, however, that such coverage shall be
provided in the form of COBRA coverage and shall run concurrently
with any required COBRA continuation coverage period.
5. Termination
of Employment.
(a)
Definitions . For purposes of this Section 5, the following
terms shall have the meanings ascribed to them below:
“
Earned Compensation” means any Base Salary earned, but
unpaid, for services rendered to the Company on or prior to the
date on which the Employment Period ends, including any deferred
salary and interest accrued thereon.
“
Severance Payment” means an amount equal to two (2)
times the amount of Executive’s annual Base
Salary.
“
Termination for Cause” means a termination of
Executive’s employment by the Company due to (i)
Executive’s gross neglect, willful malfeasance, gross
misconduct, fraud or embezzlement in connection with his employment
hereunder; (ii) any willful refusal by Executive to perform
Executive’s duties, responsibilities or obligations assigned
to Executive in accordance with the terms hereof; (iii) a violation
by Executive of any policy of the Company that is generally
applicable to all employees or all officers of the Companies
including, but not limited to, policies concerning sexual
harassment, or the Company’s code of conduct; (iv) any
willful violation (including assisting any customer or other
employee in the violation) of any applicable state or federal
banking or securities law;(v) any willful violation of the rules or
regulations of the Office of Thrift Supervision
(“OTS”), the Federal Deposit Insurance Corporation
(“FDIC”), or any other regulatory agency or
governmental authority having jurisdiction over the Company; (vi)
Executive’s failure to cooperate, if requested by the Board
of the Company, with any investigation or inquiry into his or the
Company’s business practices, whether internal or external,
including, but not limited to Executive’s refusal to be
deposed or to provide testimony at any trial or inquiry; (vii)
Executive’s
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resignation; (viii) any material
breach by Executive of this Agreement including, without
limitation, any breach of Sections 2(b), 7 and 8(e); or (ix) fraud
or embezzlement by Executive or Executive’s conviction of, or
plea of guilty or nolo contendre to a felony or any crime involving
moral turpitude, or an indictment of Executive that results in
material injury to the Company or any of its subsidiaries or
affiliates or its or their property, operations or
reputation.
“
Termination due to Disability” means a termination of
Executive’s employment by the Company because Executive has
been incapable, after reasonable accommodation, of substantially
fulfilling the positions, duties, responsibilities and obligations
set forth in this Agreement because of physical, mental or
emotional incapacity resulting from injury, sickness or disease for
a period of an aggregate of 30 days (whether or not consecutive) in
any three month period. Any question as to the existence, extent or
potentiality of Executive’s disability shall be determined by
a qualified physician selected by the Company with the consent of
Executive, which consent shall not be unreasonably withheld.
Executive or his legal representatives or any adult member of his
immediate family shall have the right to present to such physician
such information and arguments as to Executive’s disability
as he, she or they deem appropriate, including the opinion of
Executive’s personal physician.
“
Termination Without Cause” means any termination of
Executive’s employment by the Company (which the Company may
do at any time with or without cause or reason) other than (i) a
Termination due to Disability, (ii) Executive’s death or
(iii) a Termination for Cause.
(b)
Termination of the Employment Period . The Employment Period
shall end upon the earliest to occur of (i) Executive’s
death, (ii) a Termination due to Disability, (iii) a Termination
for Cause, or (iv) a Termination Without Cause (such date, the
“ Termination Date” ).
(c)
Benefits Payable Upon Termination .
(i) In
the event of Executive’s death during the Employment Period
or a Termination due to Disability, Executive or his beneficiaries
or legal representatives shall be provided only the Earned
Compensation.
(ii) In
the event of Executive’s Termination for Cause at any time,
Executive shall be provided only the Earned
Compensation.
(iii) In
the event of a Termination Without Cause on or before October 28,
2008, Executive shall be provided the Earned Compensation and the
Severance Payment. In the event of a Termination Without Cause
after October 28, 2008, Executive shall be provided only the Earned
Compensation.
(d)
Earned Compensation . The Earned Compensation shall be paid
in regular installments at the same time it would have been payable
to Executive had he continued in the Company’s
employment.
(e)
Severance Payment . The payment of any Severance Payment
pursuant to this Section 5 shall be conditioned upon
Executive’s execution and delivery to the Company of a
release, in substantially the form attached hereto as Exhibit A
(the “ Release Agreement“ ). The Severance
Payment shall be paid within ten (10) business days of the Release
Agreement becoming effective.
(f)
Full Discharge of Company Obligations . The amounts payable
to Executive pursuant to this Section 5 following termination of
Executive’s employment with the Company shall be in full and
complete satisfaction of Executive’s rights under this
Agreement and any other claims he may have in respect of his
employment by the Company or any of its subsidiaries or affiliates,
and Executive acknowledges that such amounts are fair and
reasonable, and his sole and exclusive remedy, in lieu of all other
remedies at law or in equity, in connection with the termination of
his employment.
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6.
Withholding.
All
payments from the Company to Executive shall be reduced by any
amounts required to be withheld by the Company from time to time
under applicable federal, state or local income or employment tax
laws or similar statutes or other provisions of law then in
effect.
7.
Non-Competition, Non-Solicitation, and
Confidentiality.
(a)
Non-Competition . During the Employment Period, Executive
shall not become associated with any entity, whether as a
principal, partner, employee, director, consultant, joint venturer,
lender, investor, individual proprietor, shareholder or otherwise
(other than as a holder of not in excess of 1% of the outstanding
voting shares of any publicly held company), that is engaged in any
geographic area in any business which is in competition with a
business conducted by the Company or any of its subsidiaries or
affiliates at the time of the alleged competition.
(b)
Confidentiality . Without the prior written consent of the
Company, during the Employment Period and thereafter, except (i) as
reasonably necessary in the course of carrying out his duties
hereunder or (ii) to the extent required by an order of a court
having competent jurisdiction or under subpoena from an appropriate
government agency, Executive shall not directly or indirectly
disclose, communicate or divulge any secret or confidential
information including, without limitation, (a) any trade secrets,
customer lists, customer profiles, prospective customer lists,
mailing lists, receipts, documentation, computer programs,
drawings, designs, information regarding product development,
marketing plans, sales plans, information relating to the
Company’s strategy or plans, manufacturing plans, management
organization information (including data and other information
relating to members of the Board of Directors of the Company and
management), operating policies or manuals, business plans,
financial records or other financial, commercial, business or
technical information relating to the Company or any of its
subsidiaries or affiliates or information designated as
confidential or proprietary that the Company or any of its
subsidiaries or affiliates may receive belonging to suppliers,
customers or others who do business with the Company or any of its
subsidiaries or affiliates; (b) any account number, account line
specification, MICR line specification, or similar form of access
number or access code for a credit card account, deposit account or
transaction account of a Downey customer, or (c) “nonpublic
personal information” of a Downey customer (as defined in
Section 509(4) of the Gramm-Leach-Bliley Financial Services Act
(the “GLB Act”) (15 USC 6809) and its implementing
regulations (12 CFR 573.3(n))(collectively, “ Confidential
Information” ), all of which is the sole property of the
Company, unless such Confidential Information has been previously
disclosed to the public by the Company or has otherwise become
available to the public (other than by reason of Executive’s
breach of this Section 7(b)).
(c)
Company Property . Promptly following Executive’s
termination of employment, Executive shall return to the Company
all property of the Company or any of its subsidiaries or
affiliates including all Confidential Information described in
Section 7(b), and all copies thereof in Executive’s
possession or under his control, except that Executive may retain
his notes, diaries, Rolodexes, calendars, and correspondence and
documents of a personal nature provided that such items do not
contain Confidential Info
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