EX-10.1






MANAGEMENT CONTINUITY AGREEMENT




This Management Continuity Agreement (the “Agreement”) is made and entered into effective as
of May 9, 2005 (the “Effective Date”), by and among Ronald J. Nicolas, Jr. (the “Executive”),
Fremont General Corporation (“Fremont”), and Fremont Investment & Loan, a wholly-owned subsidiary
of Fremont (“FIL” and collectively with Fremont the “Company”).



R E C I T A L S




A. It is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other significant Company event. The Board of Directors of the
Company (the “Board”) recognizes that such consideration can be a distraction to the Executive and
can cause the Executive to consider alternative employment opportunities. The Board is determined
that it is in the best interests of the Company and its stockholders to assure that the Company
will have the continued dedication and objectivity of the Executive, notwithstanding the
possibility, threat or occurrence of a Company Event (as defined below).



B. The Board believes that it is in the best interests of the Company and its stockholders to
provide the Executive with an incentive to continue his employment and to motivate the Executive to
maximize the value of the Company upon a Company Event for the benefit of its stockholders.



C. The Board believes that it is imperative to provide the Executive with certain benefits
upon a Company Event and, under certain circumstances, upon termination of the Executive’s
employment in connection with a Company Event, which benefits are intended to provide the Executive
with financial security and provide sufficient incentive and encouragement to the Executive to
remain with the Company notwithstanding the possibility of a Company Event.



D. To accomplish the foregoing objectives, the Board has directed the Company, upon execution
of this Agreement by the Executive, to agree to the terms provided herein.



E. Certain capitalized terms used in the Agreement are defined in Section 8 below.



In consideration of the mutual covenants herein contained, and in consideration of the
continuing employment of Executive by the Company, the parties agree as follows:



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	 	1.	 	Duties and Scope of Employment.





(a) Position. The Company shall employ the Executive in the position of Executive
Vice President and Chief Financial Officer of FIL, with such duties, responsibilities and
compensation as in effect as of the Effective Date; provided, however, that the Board shall have
the right, at any time prior to the occurrence of a Company Event, to revise such responsibilities
and compensation from time to time as the Board, it its discretion, may deem necessary or
appropriate.



(b) Obligations. The Executive shall continue to devote his full business efforts and
time to the Company and its subsidiaries. The Executive shall comply with and be bound by the
Company’s operating policies, procedures and practices from time to time in effect during his
employment. During the term of the Executive’s employment with the Company, the Executive shall
devote his full time, skill and attention to his duties and responsibilities, and shall perform
them faithfully, diligently and competently, and the Executive shall use his best efforts to
further the business of the Company and its affiliated entities. The foregoing, however, shall not
preclude the Executive from engaging in such activities and services as do not interfere or
conflict with his responsibilities to the Company.



2. At-Will Employment. The Company and the Executive acknowledge that the Executive’s
employment is and shall continue to be at-will, as defined under applicable law. If the
Executive’s employment terminates for any reason, the Executive shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as
may otherwise be available in accordance with the Company’s established employee plans and
practices or other agreements with the Company at the time of termination.



3. Term of Agreement. The terms of this Agreement shall terminate upon the earliest
of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) in the
absence of a Company Event (as defined in Section 8 (b)) prior to the third anniversary of the
Effective Date, the third anniversary of the Effective Date; or (iii) in the event of a Company
Event on or prior to the third anniversary of the Effective Date, the third anniversary of such
Company Event. Notwithstanding the foregoing, this Agreement may be extended for an additional
period or periods (the “Extension Period”) by mutual written agreement of the Company and the
Executive. A termination of the terms of this Agreement pursuant to this Section 3 shall be
effective for all purposes, except that such termination shall not affect the payment or provision
of compensation or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.



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4. Compensation and Benefits.



(a) Base Compensation. The Company shall pay the Executive as compensation for
services a base salary at the annualized rate of $350,000. Such salary shall be reviewed at least
annually and may be increased from time to time. At any time prior to a Company Event, such salary
may be decreased, subject to the provisions of subsection 8(d)(ii) of this Agreement. Such salary
shall be paid periodically in accordance with normal Company payroll. The annual compensation
specified in this Section 4(a), as adjusted from time to time, is referred to in this Agreement as
“Base Compensation”.



(b) Bonus. Beginning with the Company’s current fiscal year and for each fiscal year
thereafter during the term of this Agreement, the Executive shall be eligible to participate in any
bonus plan or arrangement maintained by the Company of general applicability to other key
executives of the Company.



(c) Executive Benefits. The Executive shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by the Company of general
applicability to other key executives of the Company, including (without limitation) 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, 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.



5. Benefits Upon a Company Event. In the event of a Company Event that occurs while
the Executive is employed by the Company, the unvested portion of any stock option or restricted
stock held by the Executive shall automatically be accelerated in full so as to become completely
vested.



6. Severance Benefits.



(a) Severance Benefits. If the Executive’s employment with the Company terminates
within the thirty-six (36) month period following a Company Event, then the Executive shall be
entitled to receive severance benefits as follows:



(i) Involuntary Termination; Death; Disability. If the Executive’s employment
terminates as a result of Involuntary Termination other than for Cause or if the Executive’s
employment terminates as the result of the Executive’s Death or Disability, then the Company shall
pay the Executive (or the Executive’s beneficiary or representative, as applicable) within ten (10)
business days after the Termination Date, a lump sum amount equal to thirty six (36) months’ Base
Compensation of the Executive at the time of such Termination (without giving effect to any
reduction in Base Compensation that resulted in such Involuntary Termination). In addition, the
Executive shall be entitled to a payment of the “Target Bonus Amount” (as such term is defined and
applied by the Company) for the then current bonus period(s) under any bonus plan(s) maintained by
the Company in which the Executive is participating on the Termination Date. Such payment shall be
paid in a lump sum within ten (10) business days after the Termination Date.



(ii) Voluntary Resignation; Termination for Cause. If the Executive’s employment
terminates by reason of the Executive’s voluntary resignation, (and is not an Involuntary
Termination), or if the Executive is terminated for Cause, then the Executive shall not be entitled
to receive severance or other benefits except for those (if any) as may then be established (and
applicable) under the Company’s then-existing severance and benefits plans and policies at the time
of such termination.



(b) Benefits; Miscellaneous. In the event the Executive is entitled to severance
benefits pursuant to subsection 6 (a)(i) (other than as a result of the Executive’s death), then in
addition to such benefits, the Company shall continue to provide the Executive, for thirty-six (36)
months after the Termination Date, welfare benefits or such comparable alternative welfare benefits
as the Company may, in its discretion, determine to be sufficient to satisfy its obligations to the
Executive under this Agreement (including, without limitation, medical, prescription, dental,
disability, individual life, group life, accidental death and travel accident plans and programs)
which are at least as favorable as the most favorable plans of the Company applicable to other peer
executives and their families as of the Termination Date. Notwithstanding the foregoing, if the
Executive is covered under any medical, life, or disability insurance plan(s) provided by a
subsequent employer, then the amount of coverage required to be provided by the Company hereunder
shall be reduced by the amount of coverage provided by the subsequent employer’s medical, life or
disability insurance plan(s). The Executive’s rights under this Section 6(b) shall be in addition
to, and not in lieu of, any post-termination continuation coverage or conversion rights the
Executive may have pursuant to applicable law, including without limitation, continuation coverage
required by Section 4980B of the Internal Revenue Code.



(c) In addition, (i) the Company shall pay the Executive any unpaid base salary due for
periods prior to the Termination Date; (ii) the Company shall pay the Executive all of the
Executive’s accrued and unused vacation through the Termination Date; and (iii) following
submission of proper expense reports by the Executive, the Company shall reimburse the Executive
for all expenses reasonably and necessarily incurred by the Executive in connection with the
business of the Company prior to termination. These payments shall be made promptly upon
termination and within the period of time mandated by law.



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7. Limitation on Payments. Notwithstanding anything to the contrary contained herein,
in the event it shall be determined that any payment by the Company to or for the benefit of the
Executive, whether paid or payable but determined without regard to any additional payments
required under this Section 7 (a “Payment), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any comparable federal,
state, or local excise tax (such excise tax, together with any interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”, then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in such an amount that after the payment of
all taxes (including, without limitation, any interest and penalties on such taxes and the Excise
Tax) on the payment and on the Gross-Up Payment, the Executive shall retain an amount equal to the
Payment minus all applicable taxes on the Payment. The intent of the parties is that the Company
shall be solely responsible for, and shall pay, any Excise Tax on the Payment and Gross-Up Payment
and any income and employment taxes (including, without limitation, penalties and interest) imposed
on any Gross-Up Payment, as well as any loss of tax deduction caused by the Gross-Up Payment. All
determinations required to be made under this Section, including without limitation, whether and
when a Gross-Up Payment is required in the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determinations, shall be made by a nationally recognized accounting
firm that is the Company’s outside auditor at the time of such determinations, which firm must be
reasonably acceptable to the Executive (the “Accounting Firm”). All fees and expenses of the
Accounting Firm shall be borne solely by the Company.



8. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:



(a) Cause. “Cause” shall mean (i) a willful act of personal dishonesty knowingly
taken by the Executive in connection with his responsibilities as an employee and intended to
result in his substantial personal enrichment, (ii) a willful and knowing act by the Executive
which constitutes gross misconduct, or any refusal by the Executive to comply with a reasonable
directive of the Board, (iii) a willful breach by the Executive of a material provision of this
Agreement, or (iv) a material and willful violation of a federal or state law or regulation
applicable to the business of the Company. No act, or failure to act, by the Executive shall be
considered “willful” unless (1) committed without good faith and without a reasonable belief that
the act or omission was in the Company’s best interests; and (2) the Executive has been given
notice of the offending conduct and has been given a reasonable opportunity to cure, if possible.
Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all
of the members of the Board (excluding the Executive, if applicable), at a meeting called and held
for that purpose (after reasonable notice to the Executive and his counsel and after allowing the
Executive and his counsel to be heard before the Board), a resolution is adopted finding that in
the good faith opinion of such Board members the Executive was guilty of conduct set forth in (i),
(ii), (iii), or (iv) and specifying the particulars thereof.



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(b) Company Event. “Company Event” shall mean the occurrence of any of the following
events:



(i) The stockholders of the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or the stockholders of
the Company approve a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company’s assets (other than to a
subsidiary or subsidiaries); or



(ii) Any “person” or “group” other than Fremont or any affiliate of Fremont (or any employee
benefit plan or trust of either), directly or indirectly acquires or controls, after the date
hereof, more than fifty percent (50%) of the voting securities or assets of FIL in a transaction or
series of transactions.



(c) Disability. “Disability” shall mean that the Executive has been or will be unable
to perform his duties under this Agreement for a period of six or more months due to illness,
accident or other physical or mental incapacity.




(d) Involuntary Termination. “Involuntary Termination” shall mean:



(i) The continued assignment to Executive of any duties or the continued significant change in
the Executive’s duties, either of which is substantially inconsistent with the Executive’s duties
immediately prior to such assignment or change for a period of 30 days after notice thereof from
Executive to the Chief Executive Officer of the Company or the Board setting forth in reasonable
detail the respects in which Executive believes such assignments or duties are significantly
inconsistent with the Executive’s prior duties;




(ii) a reduction in Executive’s Base Compensation, other than any such reduction which is
part of, and generally consistent with, a general reduction of officer salaries, except that in no
event shall the Executive’s Base Compensation be reduced below the rate set forth in Section 4(a)
above as of the Effective Date;




(iii) a material reduction by the Company in the kind or level of employee benefits (other
than salary and bonus) to which Executive is entitled immediately prior to such reduction with the
result that Executive’s overall benefits package (other than salary and bonus) is substantially
reduced (other than any such reduction applicable to officers of the Company generally);



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(iv) the relocation of Executive’s principal place for the rendering of the services to be
provided by him hereunder to a location more than fifty (50) miles from the present location of
the principal executive office of the Company;




(v) any purported termination of the Executive’s employment by the Company other than for
Cause;




(vi) the failure of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 9 below; or




(vii) any material breach by the Company of any material provision of this Agreement which
continues uncured for 30 days following notice thereof; provided that none of the foregoing shall
constitute Involuntary Termination to the extent Executive has agreed thereto



(e) Termination Date. “Termination Date: shall mean (i) if the Executive’s employment
is terminated by the Company for Disability, thirty (30) days after notice of termination is given
to the Executive (provided that the Executive shall not have returned to the performance of the
Executive’s duties on a full-time basis during such thirty (30) day period), (ii) if the
Executive’s employment is terminated by the Company for any other reason, the date on which a
notice of termination is given, or (iii) if the Agreement is terminated by the Executive, the date
on which the Executive delivers the notice of termination to the Company.



9. Successors.



(a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “Company” shall include any
successor to the Company’s business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.



(b) Executive’s Successors. The terms of this Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees.



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	 	10.	 	Notice.





(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the
case of the Executive, mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company, mailed notices shall
be addressed to its corporate headquarters, and all notices shall be directed to the attention of
its Secretary.



(b) Notice of Termination. Any termination by the Company for Cause or by the
Executive as a result of a voluntary resignation or an Involuntary Termination shall be
communicated by a notice or termination to the other party hereto given in accordance with Section
10 of this Agreement. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 30 days after the giving of such notice). The failure by the
Executive to include in the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights hereunder.



11. Arbitration. At the option of either party, any and all disputes or controversies
whether of law or fact and of any nature whatsoever arising from or respecting this Agreement shall
be decided by arbitration by the American Arbitration Association in accordance with the rules and
regulations of that Association.



The arbitrator shall be selected as follows: In the event the Company and the Executive agree
on one arbitrator, the arbitration shall be conducted by such arbitrator. In the event the Company
and the Executive do not agree, the Company and the Executive shall each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the third arbitrator. The
Company reserves the right to object to any individual arbitrator who shall be employed by or
affiliated with a competing organization.



Arbitration shall take place in Los Angeles, California, or any other location mutually
agreeable to the parties. At the request of either party, arbitration proceedings will be
conducted in the utmost secrecy; in such case all documents, testimony and records shall be
received, heard and maintained by the arbitrators in secrecy under seal, available for the
inspection only of the Company or the Executive and their respective attorneys and their respective
experts who shall agree in advance and in writing to receive all such information confidentially
and to maintain such information in secrecy until such information shall become generally known.
The arbitrator, who shall act by majority vote, shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary restraining order, a
temporary and/or a permanent injunction, and shall also be able to award damages, with or without
an accounting and costs, provided that punitive damages shall not be awarded. The decree of
judgment of an award rendered by the arbitrators may be entered in any court having jurisdiction
thereof.



Reasonable notice of the time and place of arbitration shall be given to all persons, other
than the parties, as shall be required by law, in which case such persons or those authorized
representatives shall have the right to attend and/or participate in all the arbitration hearings
in such manner as the law shall require.




	 	12.	 	Miscellaneous Provisions.





(a) No Duty to Mitigate. The Executive shall not be required to mitigate the amount
of any payment contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Executive may receive from any other source.



(b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Executive
and by an authorized officer of the Company (other than the Executive). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.



(c) Whole Agreement. No agreements, representations or understandings (whether oral
or written and whether express or implied) which are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof.



(d) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.



(e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.



(f) No Assignment of Benefits. The rights of any person to payments or benefits under
this Agreement shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor’s process, and any action in violation of this subsection
(f) shall be void.



(g) Employment Taxes. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.



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(h) Assignment by Company. The Company may assign its rights under this Agreement to
an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of
the Company or to the Company; provided, however, that no assignment shall be made if the net worth
of the assignee is less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term “Company” when used in a section of this Agreement shall mean the
corporation that actually employs the Executive.



IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year first above written.



FREMONT FREMONT GENERAL CORPORATION



     



By: Louis J. Rampino

Title: President and Chief Executive Officer




FIL FREMONT INVESTMENT & LOAN



     



By: Murray Zoota

Title: President and Chief Executive Officer




EXECUTIVE RONALD J. NICOLAS, JR.



     



Ronald J. Nicolas, Jr.




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