Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of June 1, 2006 (the “Agreement”),
by and between Fog Cutter Capital Group Inc. (the “Company”), with its
principal office at 1410 S.W. Jefferson Street, Portland, Oregon 97201 and
Andrew A. Wiederhorn, residing at 4311 S.W. Greenleaf Drive, Portland, Oregon
97221 (the “Executive”).

WITNESSETH:

WHEREAS, Executive is currently employed as the
Chief Executive Officer of the Company and is also the Chairman of the Board
and a director of the Company; and

WHEREAS, the Company and Executive desire to
amend and restate the terms of Executive’s employment by the Company as set
forth in the Amended and Restated Employment Agreement (the “Prior
Employment Agreement”) dated as of September 4, 1999 as amended and
restated as of October 1, 2000, December 31, 2001 and June 30, 2003, by and
between the Company and the Executive;

NOW, THEREFORE, in consideration of the premises and
mutual covenants contained herein and for other good and valuable consideration,
the parties agree as follows:

1.                                      TERM OF EMPLOYMENT

Except for earlier termination as provided in Section
7 hereof, Executive’s employment under this Agreement shall be for a three (3)
year term (the “Employment Term”) commencing on June 1, 2006 (the “Commencement
Date”).  Subject to Section 7 hereof,
the Employment Term shall be automatically extended for additional terms of
successive two (2) year periods unless the Company or Executive gives written
notice of the termination of Executive’s employment hereunder at least one
hundred eighty (180) days prior to the expiration of the then current
Employment Term.  Executive’s employment
under this Agreement (prior to its amendment and restatement) commenced on
September 4, 1999.

2.                                      POSITIONS

(a)                                  Executive shall serve as Chief Executive
Officer of the Company. Executive shall also serve on the Board of Directors of
the Company (the “Board”) as Chairman without additional
compensation.  During the Employment Term
of this Agreement, the Company shall recommend the Executive for election as a
director and as Chairman.

(b)                                 Executive shall report directly to the
Board or other managing body of the Company and shall have such duties and
authority, consistent with his position as Chief Executive Officer of the Company,
as shall be determined from time to time by the Board, provided that Executive
shall have authority comparable to that of chief executive officers of United
States public companies that are similar in size and business to the Company.

(c)                                  During the Employment Term, Executive
shall devote substantially all of his business time, energy, skill and efforts
to the performance of his duties and responsibilities hereunder; provided,
however, that Executive shall be allowed to (i) serve as a director, employee
or consultant of companies solely owned by the Executive or by Executive’s

 

family; (ii) serve
as a director of other companies; (iii) engage in charitable activities; and
(iv) manage his personal financial and legal affairs.

3.                                      BASE SALARY

Commencing as of June 1, 2006, the Company shall pay
Executive a base salary at the annual rate of not less than $350,000 during the
Employment Term.  Base salary shall be
payable in accordance with the usual payroll practices of the Company
(including withholding).  Executive’s
base salary shall be subject to annual review by the Board in June of each year
and may be increased, but not decreased, from time to time upon recommendation
of the Compensation Committee of the Board (the “Compensation Committee”).  The base salary determined as aforesaid from
time to time shall constitute “Base Salary” for purposes of this
Agreement.

4.                                      INCENTIVE COMPENSATION

(a)                                  Bonus

For
each fiscal year during the Employment Term, the Company agrees to pay a bonus
for such year to Executive in an amount determined by the Compensation
Committee (“Bonus”).  Such annual
Bonus shall be payable not later than January of the year following the year
for which the Bonus was payable or as otherwise may be requested by
Executive.  The Company and Executive
shall consider whether such Bonus shall be considered by shareholders as and to
the extent required by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”).

(b)                                  Options

In addition to the stock options (the “Initial
Options”) previously granted to Executive on shares of the Company’s common
stock (the “Common Stock”) under the Company’s Incentive Stock Plan (the
“Incentive Stock Plan”), the Executive shall continue to be entitled to
participate in the Company’s Incentive Stock Plan and receive nonqualified,
incentive or other options (“Options”) to purchase shares of the Company’s
Common Stock under the Incentive Stock Plan as determined by the Compensation
Committee from time to time provided that the Incentive Stock Plan is approved
by the shareholders of the Company to the extent required by Section 162(m) of
the Code.  To the extent permitted under
applicable law, any Options granted to Executive hereunder (including the
Initial Options) may be assigned and transferred by Executive to entities
created for or on behalf of Executive’s immediate family for tax planning or
other purposes.

(c)                                  Other Compensation

The Company may, upon recommendation of the
Compensation Committee, award to Executive such other bonuses and compensation
as it deems appropriate and reasonable.

5.                                      EMPLOYEE BENEFITS AND VACATION

(a)                                  During the Employment Term, Executive shall be entitled to (i)
participate in all pension, retirement, savings, health, insurance, welfare and
other employee benefit plans and arrangements, including, without limitation,
any nonqualified deferred compensation plans, maintained by the Company from
time to time for the benefit of the senior executives of the Company in
accordance with their respective terms as in effect from

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time to
time, (ii) for the Executive’s convenience, safety, security and efficiency,
the use of private aircraft for personal and/or business-related travel and
(iii) the use of a current model luxury automobile.  To the extent permitted under applicable law,
the Company shall not treat as compensation to Executive fringes and
perquisites provided to Executive or the items under Section 6 below.  The Executive shall reimburse the Company for
personal related travel on private aircraft in the amount of the Fuel Variable
Charge then in effect as determined from time to time in good faith by the
Company and the Executive

(b)                                  Under the Prior Employment Agreement and prior to the enactment of the
Sarbanes-Oxley Act, the Company had loaned specified amounts to Executive (the “Executive
Loans”) for various purposes, including the purchase of shares of the
Company’s Common Stock.  The Executive
Loans will be repaid in accordance with their terms.  The Company and Executive acknowledge that
such loans may not be modified or extended without violating the provisions of
the Sarbanes-Oxley Act.

(c)                                  During the Employment Term, Executive shall be entitled to vacation each
year in accordance with the Company’s policies in effect from time to time, but
in no event less than five (5) weeks paid vacation per calendar year.  Executive shall also be entitled to such
periods of sick leave as is customarily provided by the Company for its senior
executive employees.

6.                                      BUSINESS EXPENSES/TEMPORARY RELOCATION

The Company shall also promptly reimburse Executive
for the travel, entertainment and other business expenses incurred by Executive
in the performance of his duties hereunder, in accordance with the Company’s
policies as in effect from time to time. 
To the extent the Company requires the Executive to relocate his
residence on a temporary basis (for a period not to exceed 24 months), the
Company will pay such temporary housing and all related temporary living
expenses, including utilities, relocation costs, insurance and maintenance.

7.                                      TERMINATION

(a)                                  Termination of an Executive

The employment of Executive under this Agreement shall
terminate upon the occurrence of any of the following events:

(i)                                     the death of Executive;

(ii)                                  the termination of Executive’s employment
by the Company due to Executive’s Disability pursuant to Section 7(b) hereof;

(iii)                               the termination of Executive’s employment
by Executive for Good Reason pursuant to Section 7(c) hereof or non-renewal
or expiration of the Employment Term;

(iv)                              the termination of Executive’s employment
by the Company without Cause;

(v)                                 the termination of employment by
Executive without Good Reason upon sixty (60) days prior written notice;

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(vi)                              the termination of employment by
Executive for any reason during the period commencing on the date of a Change
in Control (as such term is hereinafter defined) and ending on the day
immediately prior to the second anniversary of the Change in Control (such
period being referred to herein as the “Change in Control Protection Period”);

(vii)                           the termination of Executive’s employment
by the Company for Cause pursuant to Section 7(e); or

(viii)                        the retirement of Executive by the
Company at or after his sixty-fifth birthday to the extent such
termination is specifically permitted as a stated exception from applicable
federal and state age discrimination laws based on position and retirement
benefits.

For purposes of this Agreement, the term “Change in
Control” shall mean (i) any “person” as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”),
other than Andrew A. Wiederhorn (or his affiliates), the Company, any trustee
or other fiduciary holding securities under any employee benefit plan of the
Company or any company owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of common
stock of the Company, becoming the “beneficial owner” (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company representing
25 percent or more of the combined voting power of the Company’s then
outstanding securities, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in any of
clauses (i), (iii) or (iv) of this sentence or a director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 promulgated under
the Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than a member of the Board) whose election by
the Board or nomination for election by the Company’s shareholders was approved
by a vote of at least 2/3rds of the directors then still in office who were
either directors at the beginning of such two year period or whose elect or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board, (iii) the 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 50 percent of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation (provided that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no person (other than those covered in the exceptions in
clause (i) of this sentence) acquires more than 25 percent of the combined
voting power of the Company’s then-outstanding securities shall not
constitute a Change in Control) or (iv) approval by the shareholders of the.
Company of a-plan of complete liquidation of the Company or the closing
of the sale or disposition by the Company of all or substantially all of the
Company’s assets other than the sale of all or substantially all of the assets
of the Company to a person or persons who beneficially own, directly or
indirectly, at least 50 percent or more of the combined voting power of the
outstanding voting securities of the Company at the time of such sale.

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(b)                                  Disability

If, by reason of the same or related physical or
mental reasons, Executive is unable to carry out Executive’s material duties
pursuant to this Agreement for more than six (6) months in any twelve (12)
consecutive month period (a “Disability”) as determined and certified in
writing by two (2) licensed physicians, one of which is Executive’s regular
attending physician, the Company may terminate Executive’s employment for
Disability upon thirty (30) days prior written notice, by a notice of
Disability termination, at any time thereafter during such twelve (12) month
period in which Executive is unable to carry out his duties as a result of the
same or related physical or mental illness. Such termination shall not be
effective if Executive returns to the full time performance of his material
duties within such thirty (30) day notice period.

(c)                                  Termination For Good Reason

A Termination for Good Reason means a termination by
Executive by written notice given within sixty (60) days after the occurrence
of the Good Reason event. For purposes of this Agreement, “Good Reason”
shall mean the occurrence or failure to cause the occurrence, as the case may
be, without Executive’s express written consent, of any of the following
circumstances, unless such circumstances are fully corrected prior to the date
of termination specified in the Notice of Termination for Good Reason (as
defined in Section 7(d) hereof): (i) any material diminution of Executive’s
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive’s employment for Cause or
Disability or as a result of Executive’s death, or temporarily as a result of
Executive’s illness or other absence or as a result of non-renewal or
expiration of the Employment Term), or the assignment to Executive of duties or
responsibilities that are inconsistent with Executive’s position as Chief
Executive Officer; (ii) removal of Executive from, or the non re-election of
Executive to, the positions with the Company specified herein; (iii) a
relocation of the Company’s principal United States executive offices to a
location more than fifty (50) miles from Portland, Oregon, or a relocation of
Executive away from such principal United States executive office; (iv) a
failure by the Company (A) to continue any bonus plan, program or arrangement
in which Executive is entitled to participate (the “Bonus Plans”) as of
June 30, 2002, provided that any such Bonus Plans may be modified at the
Company’s discretion from time to time but shall be deemed terminated if (x)
any such plan does not remain substantially in the form (and substance) in
effect prior to such modification and (y) if plans providing Executive with
substantially similar benefits are not substituted therefore (“Substitute
Plans”), or (B) to continue Executive as a participant in the Bonus Plans
and Substitute Plans on at least the same basis (as of June 30, 2003) as to
potential amount of the bonus and substantially the same level of criteria for
achievability thereof as Executive participated in immediately prior to any
change in such plans or awards, in accordance with the Bonus Plans and the
Substitute Plans; (v) any material breach by the Company of any material
provision of this Agreement; (vi) executive’s removal from or failure to be
reelected to the Board or removal or failure to be elected Chairman of the
Board; (vii) a failure of any successor to the Company to assume in a writing
delivered to Executive upon the assignee becoming such the obligations of the
Company hereunder; or (viii) a failure of the Company to deliver an award of
Options awarded by the Compensation Committee to Executive in accordance with
Section 4 hereof, unless the applicable circumstances under (i) through (viii)
are fully corrected prior to the date of termination specified in the notice of
termination for Good Reason.

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(d)                                  Notice of Termination for Good Reason

A notice of termination for Good Reason shall mean a
notice that shall indicate the specific termination provision in Section 7(c)
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination for Good Reason.  The failure by Executive to set forth in the
notice of termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or circumstance in
enforcing his rights hereunder.  The
notice of termination for Good Reason shall provide for a date of termination
not less than fifteen (15) nor more than sixty (60) days after the date such
notice of termination for Good Reason is given.

(e)                                  Cause

Subject to the notification provisions of Section 7(f)
below, Executive’s employment hereunder may be terminated by the Company for
Cause.  For purposes of this Agreement,
the term “Cause” shall be limited to (i) willful misconduct by Executive
with regard to the Company or its business which has a material adverse effect
on the Company; (ii) the refusal of Executive to follow the proper written
direction of the Board of the Company, provided that the foregoing refusal
shall not be “Cause” if Executive in good faith believes that such direction is
illegal, unethical, immoral or detrimental to interests of the Company or could
otherwise result in a breach by Executive of Executive’s fiduciary duty and
promptly so notifies the Board; (iii) Executive being convicted of a felony
(other than a felony involving a traffic offense) involving the Company; (iv)
the breach by Executive of any fiduciary duty owed by Executive to the Company
which has a material adverse effect on the Company; or (v) Executive’s material
fraud with regard to the Company.

(f)                                    Notice of Termination for Cause

A notice of termination for Cause shall mean a notice
that shall indicate the specific termination provision in Section 7(e) relied
upon and shall set forth in reasonable detail the facts and circumstances which
provide a basis for termination for Cause. 
Further, a notice of termination for Cause shall be required to include
a copy of a resolution duly adopted by at least two-thirds (2/3rds) of the
entire Board at a meeting of the Board which was called for the purpose of
considering such termination and at which Executive  and his representatives had the right to
attend and address the Board, finding that, in the good-faith opinion of the
Board, Executive engaged in conduct set forth in the definition of “Cause”
herein and specifying the particulars thereof in reasonable detail.  The date of termination for a termination for
Cause shall be the date indicated in the notice of termination.  Any purported termination for Cause which is
held by a court or arbitrator not to have been based on the grounds set forth
in this Agreement or not to have followed the procedures set forth in this
Agreement shall be deemed a termination by the Company without Cause.

8.                                      CONSEQUENCES OF TERMINATION OF EMPLOYMENT

(a)                                  Death

If
Executive’s employment is terminated during the Employment Term by reason of
Executive’s death, the employment period under this Agreement shall

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terminate
without further obligations to Executive’s legal representatives under this
Agreement except for: (i) any compensation earned but not yet paid, including
without limitation, any unpaid Bonus due, any amount of Base Salary or deferred
compensation accrued or earned but unpaid, any accrued vacation payable
pursuant to the Company’s policies and any unreimbursed business expenses
payable pursuant to Section 6 which amounts shall be promptly paid in a lump
sum to the trustee of the Tiffany and Andrew Wiederhorn Revocable Trust dated
September 22, 1987, as amended; (ii) the product of (x) Executive’s annual
Bonus for the fiscal year prior to Executive’s death, multiplied by (y) a
fraction, the numerator of which is the number of days of the current fiscal
year during which the Executive was employed by the Company, and the
denominator of which is 365, which bonus shall be paid when bonuses for such
period are paid to the other executives; (iii) full accelerated vesting under
all outstanding equity-based and long-term incentive plans (with options
remaining outstanding as provided under the applicable stock option plan and a
pro rata payment under any long term incentive plans based on actual coverage
under such plans at the time payments normally would be made under such plans);
(iv) subject to Section 10 hereof, any other amounts or benefits owing to
Executive under the then applicable employee benefit plans or policies of the
Company, which shall be paid in accordance with such plans or policies; (v)
payment on a monthly basis of six months of Executive’s Base Salary on the date
of death, which shall be paid to the trustee of the Tiffany and Andrew
Wiederhorn Revocable Trust dated September 22, 1987, as amended; (vi) any
outstanding Executive Loans shall become due and payable in accordance with
their terms; and (vii) payment of COBRA coverage premiums for Executive’s
spouse and dependents to the extent, and so long as, they remain eligible for
COBRA coverage, but in no event more than three years.  Section 12 hereof shall also continue to
apply.

(b)                                  Disability

If Executive’s employment is terminated by reason of
Executive’s Disability, Executive shall be entitled to receive (i) the payments
and benefits to which his representatives would be entitled in the event of a
termination of employment by reason of his death and (ii) all disability
benefits provided for under the Company’s employee benefits plans. Section 12
hereof shall also continue to apply.

(c)                                  Termination by Executive for Good Reason or for any
reason during the Change in Control Protection Period or Termination by the
Company without Cause or non-extension of the term by the Company.

If (i) outside of the Change in Control Protection
Period, Executive terminates his employment hereunder for Good Reason during the
Employment Term, (ii) a Change in Control occurs and during the Change in
Control Protection Period Executive terminates his employment for any reason,
(iii) Executive’s employment with the Company is terminated by the Company
without Cause, or (iv) Executive’s employment with the Company terminates as a
result of the Company giving notice of nonextension of the Employment Term
pursuant to Section 1 hereof, Executive shall be entitled to receive (A) in a
lump sum within ten (10) business days after such termination (1) three times
Executive’s Base Salary in effect of the date of termination, (2) three times
the highest

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annual bonus paid or payable to Executive for any of
the previous three completed fiscal years by the Company and its predecessors,
(3) any unreimbursed business expenses payable pursuant to Section 6, and (4)
any Base Salary, Bonus, vacation pay or other deferred compensation accrued or
earned under law or in accordance with the Company’s policies but not yet paid
at the date of termination; (B) accelerated full vesting under all outstanding
equity-based and long-term incentive plans with Options remaining outstanding
as provided under the applicable stock option plan and a pro rata payment under
any long term incentive plans based on actual coverage under such plans payment
being made at the time payments would normally be made under such plans; (C)
subject to Section 10 hereof, any other amounts or benefits due Executive under
the then applicable employee benefit plans of the Company as shall be
determined and paid in accordance with such plans, policies and practices; (D)
three (3) years of additional service and compensation credit (at his then
compensation level) for pension purposes under any defined benefit type
qualified or nonqualified pension plan or arrangement of the Company, measured
from the date of termination of employment and not credited to the extent that
Executive is otherwise entitled to such credit during such three (3) year
period, which payments shall be made through and in accordance with the terms
of the nonqualified defined benefit pension arrangement if any then exists, or,
if not, in an actuarially equivalent lump sum (using the actuarial factors then
applying in the Company’s defined benefit plan covering Executive); (E) three
(3) years of the maximum Company contribution (assuming Executive deferred the
maximum amount and continued to earn his then current salary) measured from the
date of termination under any type of qualified or nonqualified 401(k) plan
(payable at the end of each such year); (F) any outstanding Executive Loans
shall become due and payable in accordance with their terms; and (G) payment by
the Company of the premiums for the Executive (except in the case of death) and
his spouse’s and dependents’ health coverage for three (3) years under the
Company’s health plans which cover the senior executives of the Company or
materially similar benefits.  Payments
under (F) above may, at the discretion of the Company, be made by continuing
participation of Executive in the plan as a terminee, by paying the applicable
COBRA premium for Executive and his spouse and dependents, or by covering
Executive and his spouse and dependents under substitute arrangements, provided
that, to the extent Executive incurs tax that he would not have incurred as an
active employee as a result of the aforementioned coverage or the benefits
provided thereunder, Executive shall receive from the Company an additional
payment in the amount necessary so that he will have no additional cost for
receiving such items or any additional payment. 
In the circumstances described in each of (1) through (4) above, Section
12 hereof shall also continue to apply. 
The Company may in its discretion make the payments under (A)(1) above
subject to the delivery by Executive of a Waiver and General Release of Claims
in the form attached hereto as Exhibit 1 on the date of termination (subject to
any claim or waiver arising between the date hereof and the date of
termination).

(d)                                  Termination for Cause or Voluntary Resignation without
Good Reason or Retirement

If Executive’s employment hereunder is terminated:

(i)                                     by the Company for Cause,

(ii)                                  by Executive without Good Reason, or

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(iii)                               by the Company pursuant to Section
7(a)(viii) hereof, Executive shall be entitled to receive only his Base Salary
through the date of termination and any unreimbursed business expenses payable
pursuant to Section 6.  In addition, any
outstanding Executive Loans shall become due and payable in accordance with
their terms.  All other benefits
(including, without limitation, Options) due Executive following such
termination of employment shall be determined in accordance with the plans,
policies and practices of the Company. 
In the circumstances described in this Section 8(d), Section 12 hereof
shall continue to apply.

(e)                                  Access to Books And Records

Following termination of employment of the Executive,
the Company shall permit such Executive reasonable access to retrieve
personally (or by his designated representatives) any and all personal files,
personal copies of Company files, and property that are stored at the Company.
Additionally, subject to reimbursement of any out-of-pocket costs and expenses,
the Company shall permit such Executive and his designated representatives and
agents reasonable access to all of the Company’s files, books and records,
independent accountants and attorneys, as requested by him, subject to any
confidentiality agreements in effect between the Executive and the Company.

9.                                      LITIGATION; COOPERATION; CONSULTATION

(a)                                  Executive agrees that for the Employment
Term and thereafter, he will reasonably cooperate with the Company and exercise
good faith efforts in the defense of any claim or investigation, civil or
governmental, brought against Company or any of its current, former or future
directors or officers of which Executive has any personal knowledge, and
Company agrees it will reimburse Executive’s reasonable out-of-pocket expenses
(including attorney’s fees and disbursements and costs) in providing such
assistance. In addition, Executive agrees to reasonably provide specific
operations information to the Company as reasonably requested in a reasonable
and timely manner to assist the Company in continuing and completing job tasks,
activities, assignments, and in continuing effective relationships with
business partners by responding to reasonable inquiries as needed by telephone
at no additional cost to the Company beyond what is provided by this Agreement,
including reimbursement of Executive’s reasonable out-of-pocket expenses in
providing such information and other assistance.

(b)                                 The Company agrees that, in addition to
and without limiting the Company’s obligation hereunder and otherwise, for the
Employment Term and thereafter, the Company will reasonably cooperate with
Executive and exercise good faith efforts in the defense of any claim or
investigation, civil or governmental, brought against Executive of which the
Company or its employees, officers or directors have any knowledge.

10.                               NO MITIGATION; NO SET-OFF.

In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other employment and,
except as explicitly set forth herein, there shall be no offset against any
amounts due Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain. Any
amounts due under Section 8 are in the nature of severance payments, or
liquidated damages, or both, and are not in the nature of a penalty. Such
amounts are in lieu of any amounts payable under any other salary 

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continuation or cash severance arrangement of the
Company and to the extent paid or provided under any other such arrangement
shall be offset from the amount due hereunder.

11.                               DETRIMENTAL ACTIVITY

(a)                                  Executive agrees that he will not engage
in Detrimental Activity (other than as required or compelled by statute or
other law or by court order or subpoena or in connection with court testimony
or deposition) during the Employment Term and following the date of Executive’s
termination.  For purposes of this
Agreement, “Detrimental Activity” shall mean: (i) the disclosure to
anyone outside the Company, or the use in any manner other than in the
furtherance of the Company’s business, without written authorization from the
Company, of any confidential information or proprietary information of the
Company (Executive acknowledges and agrees that (i) this is in addition to his
obligations under the confidentiality agreement between Executive and the
Company dated December 15, 1999 and (ii) such agreement remains in full force
and effect); (ii) any attempt, directly or indirectly by Executive of
Solicitation (as defined below) within 6 months of the end of the Employment
Term; (iii) any conduct by Executive which is Self-Dealing and which
would conflict with the Company’s interests; (iv) Executive’s Disparagement (as
defined herein), or inducement of others to do so, of the Company or its past
and present officers, directors, employees or products; or (v) without written
authorization from the Company, during the period ending 3 months after the end
of the Employment Term, the rendering of services for any organization, or
engaging, directly or indirectly, in any business, which is competitive with the
Company; provided, however, that owning a less than 5% interest in a publicly
traded company shall not be viewed as breaching clause (v) of the definition of
“Detrimental Activity”.  For purposes of
this Agreement, “Disparagement” means making comments or statements to
the press, the Company’s employees, consultants or any individual or entity
with whom the Company has a business relationship or otherwise taking any
similar action which could reasonably be expected to adversely affect in any
manner: the conduct of the business of the Company (including, without
limitation, any products or business plans or prospects); or the business
reputation of the Company, or any of its products, or its past or present
officers, directors or employees. For purposes of this Agreement, “Solicitation”
shall mean recruiting, soliciting or inducing of any nonclerical employee or
employees of the Company to terminate his or her employment with, or otherwise
cease his or her relationship with, the Company or hiring or assisting another
person or entity to hire (including, but not limited to identifying a
nonclerical employee to another employer for employment) any nonclerical
employee of the Company or any person who within six (6) months before had been
a nonclerical employee of the Company; or, soliciting or inducing any customer
of the Company to cease his or her relationship with the Company. For purposes
of this Agreement, “Self Dealing” means, whether during or after the
Employment Term, the use of assets, liabilities or resources of the Company
(including assets or liabilities contemplated to be acquired or incurred by the
Company at the time of termination) or confidential or proprietary information
of the Company by Executive for Executive’s personal benefit, including any
such use in the direct or indirect purchase or sale of, or loan or investment
of any type in, any assets of the Company by Executive or for Executive’s
benefit or between Executive and a third
party which is unrelated
to the Company, without the Company’s prior written authorization.

(b)                                 The Company agrees that it shall not, and
that it shall cause its employees, officers and directors to not, make comments
or statements, or induce others to make comments or statements, to the press or
any individual or entity which could reasonably be expected to

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adversely affect in any
manner the business or personal reputation of Executive.  The Company agrees that it shall not issue
any press release in connection with the termination of Executive’s employment
with the Company without Executive’s prior written approval of such press
release (other than as required by law or regulation).

12.                               INDEMNIFICATION

(a)                                  The Company agrees that if Executive is
made a party to or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”),
by reason of the fact that he is or was a director or officer of the Company,
or is or was serving at the request of the Company as a director, officer,
member, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, other enterprise or non-profit
organization, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, he shall be indemnified and held harmless by the Company to the fullest
extent authorized by Delaware law, as the same exists or may hereafter be
amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, member, fiduciary or agent, or
is no longer employed by the Company, and shall inure to the benefit of his
heirs, executors and administrators.

(b)                                 As used in this Agreement, the term “Expenses”
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements and costs, attorneys’ fees,
accountants’ fees, and disbursements and costs of attachment or similar bonds,
investigations and any expenses of establishing a right to indemnification
under this Agreement.

(c)                                  Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive and the giving by Executive of any undertakings required
by applicable law.

(d)                                 Executive shall give the Company notice
of any claim made against him for which indemnity will or could be sought under
this Agreement. In addition, Executive shall give the Company such information
and cooperation as it may reasonably require and as shall be within Executive’s
power and at such times and places as are reasonably convenient for Executive.

(e)                                  With respect to any Proceeding as to
which Executive notifies the Company of the commencement thereof:

(i)                                     The Company will be entitled to
participate therein at its own expense; and

(ii)                                  Except as otherwise provided below, to
the extent that it may wish, the Company jointly with any other indemnifying
party similarly notified will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive. Executive also shall have the
right to employ his own counsel in such action, suit or proceeding and the fees
and expenses of such counsel shall be at the expense of the Company.

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(f)                                    The Company shall not be liable to
indemnify Executive under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent. The Company shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Executive, or which would adversely affect Executive’s reputation
or standing in the business community without Executive’s written consent.
Neither the Company nor Executive will unreasonably withhold or delay their
consent to any proposed settlement.

(g)                                 The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 12 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the certificate of incorporation or by-laws of the Company, agreement,
vote of stockholders or disinterested directors or otherwise.

(h)                                 The Company hereunder agrees to obtain
officer and director liability insurance policies covering Executive and shall
maintain at all times following the Commencement Date and during the Employment
Term coverage under such policies in the aggregate with regard to all officers
and directors, including Executive, of an amount not less than $10 million.

13.                               [INTENTIONALLY LEFT BLANK]

14.                               LEGAL AND OTHER FEES AND EXPENSES.

In addition to any other provision of this Agreement,
in the event that a claim or payment or benefits under this Agreement is
disputed, the Company shall pay all reasonable attorney, accountant and other
professional fees and reasonable expenses incurred by Executive in pursuing
such claim, unless the claim by Executive is found to be frivolous by any court
or arbitrator.

15.                               ARBITRATION

Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Portland in the State of Oregon under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration Rules.
The determination of the arbitrators, which shall be based upon a DE NOVO
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators’ award in any court having jurisdiction. All
costs of arbitration, including the costs of the American Arbitration
Association and the arbitrator, shall be borne by the Company.

16.                               MISCELLANEOUS

(a)                                  Governing Law

This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon without reference to principles
of conflicts of laws.

 12
 

 

 

(b)                                  Entire Agreement/Amendments

This Agreement and the instruments contemplated
herein, contain the entire understanding of the parties with respect to the
employment of Executive by the Company from and after the Commencement Date and
supersedes any prior agreements, whether written or otherwise, between the
Company and Executive. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein and therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.

(c)                                  No Waiver

The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party’s rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any
such waiver must be in writing and signed by Executive or an authorized officer
of the Company, as the case may be.

(d)                                  Assignment

This Agreement shall not be assignable by Executive.
This Agreement shall be assignable, with the consent of Executive, by the
Company only to an acquiror of all or substantially all of the assets of the
Company, provided such acquiror promptly assumes all of the obligations
hereunder of the Company in a writing delivered to Executive and otherwise
complies with the provisions hereof with regard to such assumption.

(e)                                  Successors; Binding Agreement; Third Party
Beneficiaries.

This Agreement shall inure to the benefit of and be
binding upon parties hereto and their personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees legatees
and permitted assignees of the parties hereto. If Executive dies while any
amount would still be payable hereunder if Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of the Agreement to the personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, legatees
and permitted assignees of the parties hereto.

(f)                                    Communications

For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, and (ii)
two business days after being mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the initial page of this Agreement, provided that all
notices to the Company shall be directed to the attention of each of the
President, Chief Financial Officer and the Chairman of the Compensation
Committee of the Company, or to such other address as any party may have
furnished to the other in writing in accordance herewith.  Notice of change of address shall be
effective only upon receipt.

 13
 

 

 

(g)                                 Withholding Taxes

The Company may withhold from any and all amounts
payable under this Agreement such federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.

(h)                                 Survivorship

The respective rights and obligations of the parties
hereunder shall survive any termination of Executive’s employment.

(i)                                    Counterparts

This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

(j)                                    Headings

The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

 14
 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

FOG CUTTER CAPITAL GROUP INC.

	
   

  	
  

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ R. Scott Stevenson

  	
   

  
	
   

  	
  Name: R. Scott Stevenson

  	
   

  
	
   

  	
  Title: Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Andrew A. Wiederhorn

  	
   

  
	
   

  	
  Andrew A. Wiederhorn, in his

  	
   

  
	
   

  	
  individual capacity

  	
   

  

 15
 

 

 

EXHIBIT 1

MUTUAL WAIVER AND GENERAL RELEASE OF CLAIMS

To:          Fog Cutter Capital Group Inc. 
                1410 S.W. Jefferson Street
                Portland, Oregon 97201

1.                                       (a)           In
consideration for the payment and/or other benefits to be provided me pursuant
to my Employment Agreement with the Company dated as of July 1, 2003 (the “Employment
Agreement”), I, for myself and for my heirs, executors, administrators, and
assigns (hereinafter referred to collectively as “Releasors”), forever
release and discharge the Company and any and all of its subsidiaries,
divisions, affiliated entities, employee benefit and/or pension plans or funds,
successors and assigns, and all of its or their past and present officers,
directors, members, shareholders, trustees, agents and employees (hereinafter
referred to as the “Entities and Persons”), from any and all claims,
demands, cause of action, fees and liabilities of any kind whatsoever, whether
known or unknown, which I ever had, or may have, or now have, against the
Entities and Persons by reason of any actual or alleged act, omission,
transaction, practice, conduct, occurrence, or other matter up to and including
the date of this Mutual Waiver and General Release (other than ongoing
obligations of the Company or Executive under the Employment Agreement).

(b)                                 In consideration for the delivery of this
Mutual Waiver and General Release, and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged and agreed,
the Company, for itself and for its successors and assigns, forever releases
and discharges me and my heirs, executors, administrators and assigns, from any
and all claims, demands, causes of action, fees and liabilities of any kind
whatsoever, whether known or unknown, which the Company ever had, or may have,
or now has, against me or my heirs, executors, administrators or assigns by
reason of any actual or alleged act, omission, transaction, practice, conduct,
occurrence, or other matter up to and including the date of this Mutual Waiver
and General Release and with regard to my termination of employment.

2.                                       Without limiting the generality of the
foregoing, this Mutual Waiver and General Release is intended to and shall
release the Entities and Persons from any and all claims, whether known or
unknown, which Releasors ever had, now have, or may have up to and including
the date of this Mutual Waiver and General Release against the Entities and
Persons arising out of my employment with the Company, including, but not
limited to: (i) any claim under Title VII of the Civil Rights Act, as amended;
(ii) any other claim (whether based on federal, state, or local law, statutory
or decisional) relating to or arising out of my employment by the Company, or
the terms and conditions of such employment; (iii) any claim under the Age
Discrimination in Employment Act, as amended; (iv) any claim under applicable
state or local law against discrimination; (v) any claim for attorneys’ fees,
costs, disbursements and/or the like; or (vi) any claim under, with regard to,
or in connection with my Employment Agreement or any agreement or plan with
regard to equity, incentive or deferred compensation (other than ongoing
obligations of the Company or Executive under the Employment Agreement).

3.                                       Notwithstanding the foregoing, the
foregoing release shall not cover rights of indemnification to which I was
entitled immediately prior to my termination date under the Company’s
Certificate of

 16
 

 

Incorporation or
By-laws, or Section 12 of the Employment Agreement or otherwise with regard to
my service as an officer of the Company.

4.                                       (a)           I
agree that I will not, from any source or proceeding, seek or accept any award
or settlement with respect to any claim or right covered by Section 1(a) above.
In addition to the foregoing, except as otherwise prohibited by law, I
represent and warrant that I will not sue or commence any proceeding (judicial
or administrative), or participate in any action, suit or proceeding, against
any of the Entities and Persons, with respect to any act, event, occurrence, or
any alleged failure to act, released hereunder.

(b)                                 The Company hereby agrees that it will
not, from any source or proceeding, seek or accept any award or settlement with
respect to any claim or right covered by Section 1(b) hereof. In addition to
the foregoing, except as otherwise prohibited by law, the Company represents
and warrants that it will not sue or commence any proceeding (judicial or
administrative), or participate in any action, suit or proceeding, against me
or any of my heirs, executors, administrators or assigns with respect to any
act, event or occurrence, or any alleged failure to act, released hereunder.

5.                                       The interpretation of this Mutual Waiver
and General Release will be governed by the law of the State of New York
without reference to principles of conflict of laws. In the event any provision
of this Mutual Waiver and General Release shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision of this Mutual Waiver
and General Release.

6.                                       This Mutual Waiver and General Release is
not intended, and shall not be construed, as an admission that the Entities and
Persons or I have violated any federal, state or local law (statutory or
decisional), ordinance or regulation, breached any contract or committed any
wrong whatsoever.

7.                                       I acknowledge that I have been advised by
the Company to consult an attorney before signing this Mutual Waiver and
General Release and that I have executed this Mutual Waiver and General Release
after having had the opportunity to consult with an attorney of my choice.

8.                                       I further acknowledge that I have read
this Mutual Waiver and General Release in full, have had seven (7) days to
consider the terms of this Mutual Waiver and General Release, that I fully
understand the terms, and that I have knowingly and voluntarily assented to all
the terms and conditions contained herein.

9.                                       I further acknowledge that after
executing this Mutual Waiver and General Release I have seven (7) days to
revoke it by delivery of a Notice of Revocation to the Company prior to the
eighth day after execution and delivery by me of the Mutual Waiver and General
Release. I understand that if so revoked by me, the Company’s obligations under
this Mutual Waiver and General Release are null and void.

10.                                 The parties hereto understand that this
Mutual Waiver and General Release, and the Employment Agreement constitute the
complete understanding between such parties and that no other promises or
agreements shall be binding unless in writing and signed by both such parties.

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  Dated:

  	
  FOG CUTTER CAPITAL GROUP INC.

  
	
   

  	
   

  
	
  Signature:

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANDREW A WIEDERHORN

  

 

 18Exhibit 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT
AGREEMENT, dated as of June 1, 2006 (the “Employment
Agreement”), by and between Fog Cutter Capital Group Inc. (the “Company”),
with its principal office at 1410 S.W. Jefferson Street, Portland, Oregon 97201
and R. Scott Stevenson, residing at 14144 Kimberly Circle, Lake Oswego, Oregon
97035 (the “Executive”).

WITNESSETH:

WHEREAS,
Executive is currently employed as an executive of the Company; and

WHEREAS,
the Company and Executive desire to set forth the terms of Executive’s
employment by the Company in written form;

NOW,
THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

1.                                      TERM OF EMPLOYMENT

Except for earlier
termination as provided in Section 7 hereof, Executive’s employment under this
Employment Agreement shall be for a twenty-four (24) month term (the “Employment
Term”) commencing on June 1, 2006 (the “Commencement Date”) and
ending on June 1, 2008.  Subject to
Section 7 hereof, the Employment Term shall be automatically extended for
additional one year periods unless the Company or Executive gives written
notice of the termination of Executive’s employment hereunder at least sixty
(60) days prior to the expiration of the then current Employment Term.  Executive’s employment with the Company
commenced on October 9, 1999.

2.                                      POSITION

(a)                                  Executive shall serve as the Chief
Financial Officer of the Company.

(b)                                 Executive shall report directly to the
Chief Executive Officer of the Company and shall have such duties and
authority, consistent with his position as shall be determined from time to
time by the Chief Executive Officer.

(c)                                  During the Employment Term, Executive
shall devote substantially all of his business time (“Business Time”),
energy, skill and efforts to the performance of his duties and responsibilities
hereunder.  Executive shall perform his
duties hereunder in the Portland, Oregon area with occasional travel to other
offices as required.

3.                                      BASE SALARY

Commencing June 1, 2006,
the Company shall pay Executive a base salary at the annual rate of not less
than $175,000 (“Base Salary”). Base Salary shall be payable in
accordance with the usual payroll practices of the Company (including withholding).

 

 

4.                                      INCENTIVE COMPENSATION

(a)                                  Bonus

For each fiscal
year during the Employment Term, the Company agrees to pay a bonus for such
year to Executive in an amount determined by the Compensation Committee (“Bonus”).  Such annual Bonus shall be payable not later
than January of the year following the year for which the bonus is
payable.  The Company and Executive shall
consider whether such Bonus shall be considered by shareholders as and to the
extent required by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”).

(b)                                  Options

In addition to the stock
options (the “Initial Options”) previously granted to Executive on
shares of the Company’s common stock (the “Common Stock”) under the
Company’s Incentive Stock Plan (the “Incentive Stock Plan”), the
Executive shall continue to be entitled to participate in the Company’s
Incentive Stock Plan and receive nonqualified, incentive or other options (“Options”)
to purchase shares of the Company’s Common Stock under the Incentive Stock Plan
as determined by the Compensation Committee of the Company’s Board of Directors
(the “Compensation Committee”) from time to time provided that the
Incentive Stock Plan is approved by the shareholders of the Company to the
extent required by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”).  To the
extent permitted under applicable law, any Options granted to Executive
hereunder (including the Initial Options) may be assigned and transferred by
Executive to entities created for or on behalf of Executive’s immediate family
for tax planning or other purposes.

(c)                                  Other Compensation

The Company may, upon
recommendation of the Compensation Committee, award to Executive such other
bonuses and compensation as it deems appropriate and reasonable.

5.                                      EMPLOYEE BENEFITS AND VACATION

(a)                                  During the Employment Term, Executive
shall be entitled to participate in all pension, retirement, savings, welfare
and other employee benefit plans and arrangements, including, without
limitation, any nonqualified deferred compensation plans, maintained by the
Company from time to time for the benefit of the senior executives of the
Company in accordance with their respective terms as in effect from time to
time.  Executive acknowledges that the
aforementioned items may be included as compensation for income tax purposes to
the extent required by applicable law. To the extent permitted under applicable
law, the Company shall not treat as compensation to Executive fringes and
perquisites provided to Executive or the items under Section 6 below.

(b)                                 During the Employment Term, Executive
shall be entitled to vacation each year in accordance with the Company’s
policies in effect from time to time, but in no event less than four (4) weeks
paid vacation per calendar year. Executive shall also be entitled to such
periods of sick leave as is customarily provided by the Company for its senior
executive employees.

 2
 

 

 

6.                                      BUSINESS EXPENSES/TEMPORARY RELOCATION

The Company shall also
reimburse Executive for the travel, entertainment and other business expenses
incurred by Executive in the performance of his duties hereunder in accordance
with the Company’s policies as in effect from time to time.  To the extent the Company requires the
Executive to relocate his residence on a temporary basis (for a period not to
exceed 24 months), the Company will pay such temporary housing and all related
temporary living expenses, including utilities, relocation costs, insurance and
maintenance.

7.                                      TERMINATION

(a)                                  Termination of an Executive

The
employment of Executive under this Employment Agreement shall terminate upon
the occurrence of any of the following events:

(i)                                     the death of Executive;

(ii)                                  the termination of Executive’s employment
by the Company due to Executive’s Disability pursuant to Section 7(b) hereof;

(iii)                               the termination of Executive’s employment
by the Company without Cause;

(iv)                              the Executive’s voluntary resignation;

(v)                                 the termination of Executive’s employment
by the Company for Cause pursuant to Section 7(c); or

(vi)                              the non-renewal or expiration of the
Employment Term.

(b)                                  Disability

If, by reason of the same
or related physical or mental reasons, Executive is unable to carry out
Executive’s material duties pursuant to this Employment Agreement for more than
six (6) months in any twelve (12) consecutive month period (a “Disability”)
as determined and certified in writing by a licensed physician, the Company may
terminate Executive’s employment for Disability upon thirty (30) days prior
written notice, by a notice of Disability termination, at any time thereafter
during such twelve (12) month period in which Executive is unable to carry out
his duties as a result of the same or related physical or mental illness.  Such termination shall not be effective if
Executive returns to the full time performance of his material duties within
such thirty (30) day notice period.

(c)                                  Cause

Executive’s employment
hereunder may be terminated by the Company for Cause.  For purposes of this Employment Agreement,
the term “Cause” shall be limited to (i) willful misconduct by Executive
with regard to the Company or its business which has a material adverse effect
on the Company; (ii) the refusal of Executive to follow the direction of the
CEO, provided that the foregoing refusal shall not be “Cause” if Executive in
good faith believes that such direction is illegal, unethical or immoral and
promptly so notifies the CEO; (iii) Executive being convicted of a felony
(other than a felony involving a traffic offense) involving the Company; (iv)
Executive’s material fraud with regard to the Company; or (v) breach of Section
11 hereof.

 3
 

 

 

8.                                      CONSEQUENCES OF TERMINATION OF EMPLOYMENT

(a)                                  DEATH

If Executive’s employment
is terminated during the Employment Term by reason of Executive’s death, the
employment period under this Employment Agreement shall terminate without
further obligations to Executive’s legal representatives under this Employment
Agreement except for: (i) any compensation earned but not yet paid, including
without limitation, any amount of Base Salary accrued or earned but unpaid, any
accrued vacation payable pursuant to the Company’s policies and any
unreimbursed business expenses payable pursuant to Section 6 which amounts
shall be promptly paid in a lump sum to Executive’s spouse; (ii) full accelerated
vesting under all outstanding equity-based and long-term incentive
plans (with options remaining outstanding as provided under the applicable
stock option plan and a pro rata payment under any long term incentive plans
based on actual coverage under such plans at the time payments normally would
be made under such plans); (iii) subject to Section 10 hereof, any other
amounts or benefits owing to Executive under the then applicable employee
benefit plans or policies of the Company, which shall be paid in accordance
with such plans or policies; and (iv) if Executive’s estate executes the Waiver
and General Release of Claims in the form attached hereto as Exhibit 1, an
additional six months’ Base Salary shall be promptly paid within 90 days of
such termination in a lump sum to the Executive’s estate.  Section 13 hereof shall also continue to
apply.

(b)                                  Disability, Termination Without Cause or
Expiration Of Employment Term

If Executive’s employment
is terminated by reason of Executive’s Disability or by the Company without
Cause (as defined in Section 7(c)), Executive shall be entitled to receive the
following payments and benefits: (i) any amount of Base Salary earned but
unpaid, any accrued vacation payable pursuant to the Company’s policies and any
unreimbursed business expenses payable pursuant to Section 6 which amounts
shall be promptly paid in a lump sum to Executive; (ii) full accelerated
vesting under all outstanding equity-based and long-term incentive
plans (with options remaining outstanding as provided under the applicable
stock option plan and a pro rata payment under any long term incentive plans
based on actual coverage under such plans at the time payments normally would
be made under such plans); (iii) subject to Section 10 hereof, any other
amounts or benefits owing to Executive under the then applicable employee
benefit plans or policies of the Company, which shall be paid in accordance
with such plans or policies; and (iv) if Executive executes the Waiver and
General Release of Claims in the form attached hereto as Exhibit 1, an
additional six months’ Base Salary shall be promptly paid within 90 days of
such termination in a lump sum to Executive. 
Section 13 hereof shall also continue to apply.

(c)                                  Termination For Cause, Voluntary Resignation
or Expiration

If Executive’s employment
hereunder is terminated by the Company for Cause or by Executive voluntarily or
if the Employment Term expires, Executive shall be entitled to receive only his
Base Salary through the date of termination and any unreimbursed business
expenses payable pursuant to Section 6. 
All other benefits (including, without limitation, Options) due
Executive following such termination of employment shall be determined in
accordance with the plans, policies and practices of the Company.

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(d)                                  Return of Files and Equipment

Executive agrees that
immediately following his termination of employment for any reason as provided
in this Section 8, he shall return to the Company all files, electronic or
otherwise, equipment and any other property which is owned by the Company or to
which the Company is legally entitled.

9.                                      SOLICITATION

Executive acknowledges
that the retention of nonclerical employees employed by the Company in which
the Company has invested training and depends on for the operation of its
business is important to the business of the Company, that Executive has
obtained unique information as to such employees as an executive of the Company
and has developed a unique relationship with such persons as a result of being
an executive of the Company and, therefore, it is necessary for the Company to
be protected from Solicitation of such employees, Executive acknowledges that,
by virtue of his employment with the Company, Executive has gained or will gain
knowledge of the identity, characteristics and preferences of its customers,
and such information may be confidential and Executive would inevitably have to
draw on such confidential information if Executive were to solicit or service
the Company’s customers or referral sources on behalf of a competing business
enterprise. Accordingly, Executive agrees that he will not engage in
Solicitation for the fifteen (15) month period following the date of Executive’s
termination.  For purposes of this
Employment Agreement, “Solicitation” shall mean: recruiting, soliciting
or inducing of any nonclerical employee or employees of the Company to
terminate his or her employment with, or otherwise cease his or her
relationship with, the Company or hiring or assisting another person or entity
to hire (including, but not limited to identifying a nonclerical employee to
another employer for employment) any nonclerical employee of the Company or any
person who within six (6) months before had been a nonclerical employee of the
Company; or, soliciting or inducing any customer of the Company to cease his or
her relationship with the Company.

10.                               NO MITIGATION; NO SET-OFF

In the event of any
termination of employment under Section 8, Executive shall be under no
obligation to seek other employment and, except as explicitly set forth herein,
there shall be no offset against any amounts due Executive under this
Employment Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain.  Any amounts due under Section 8 are in the
nature of severance payments, or liquidated damages, or both, and are not in
the nature of a penalty.  Such amounts
are in lieu of any amounts payable under any other salary continuation or cash
severance arrangement of the Company and to the extent paid or provided under
any other such arrangement shall be offset from the amount due hereunder.

11.                               DETRIMENTAL ACTIVITY

Without limitation of
Section 9 hereof, Executive agrees that he will not engage in Detrimental
Activity during the Employment Term and following the date of Executive’s
termination. For purposes of this Employment Agreement, “Detrimental
Activity” shall mean: (i) the disclosure to anyone outside the Company, or
the use in any manner other than in the furtherance of the Company’s business,
without written authorization from the Company, of any confidential information
or proprietary information, relating to the business

 5
 

 

of the Company; (ii) any
attempt, directly or indirectly by Executive of Solicitation (as defined in Section
9 above); (iii) any conduct by Executive which would be considered to be
self-dealing or which would conflict with the Company’s interests, including
the direct or indirect purchase or sale of, or loan or investment of any type
in, any assets of the Company by Executive or for Executive’s benefit or
between Executive and a third party which is unrelated to the Company, without
the Company’s prior written authorization; (iv) Executive’s Disparagement (as
defined herein), or inducement of others to do so, of the Company or its past
and present officers, directors, employees or products; or (v) without written
authorization from the Company, the rendering of services for any organization,
or engaging, directly or indirectly, in any business, which is competitive with
the Company, or the rendering of services to such organization or business if
such organization or business is otherwise prejudicial to or in conflict with
the interests of the Company.  For
purposes of this Employment Agreement, “Disparagement” means making
comments or statements to the press, the Company’s employees, consultants or
any individual or entity with whom the Company has a business relationship or
otherwise taking any action which could reasonably be expected to adversely
affect in any manner: the conduct of the business of the Company (including,
without limitation, any products or business plans or prospects); or the
business reputation of the Company, or any of its products, or its past or
present officers, directors or employees.

12.                               LITIGATION COOPERATION; CONSULTATION

Executive agrees that for
the Employment Term and thereafter, he will reasonably cooperate with the
Company to the best of his ability in the defense of any claim or
investigation, civil or governmental, brought against Company or any of its
current, former or future directors or officers of which Executive has any
personal knowledge, and Company agrees it will reimburse Executive’s reasonable
out-of-pocket expenses in providing such assistance.  In addition, Executive agrees to reasonably
provide specific operations information to the Company as requested in a
reasonable, timely and clear manner to allow the Company to continue and/or
complete job tasks, activities, assignments, to continue effective relationships
with business partners by responding to reasonable inquiries as needed by
telephone at no additional cost to the Company beyond what is provided by this
Employment Agreement.

13.                               INDEMNIFICATION

The Company agrees that
if Executive is made a party to or threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
“Proceeding”), by reason of the fact that he is or was an officer of the
Company, or is or was serving at the request of the Company as an officer,
member, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, other enterprise or non-profit
organization, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as an officer, member, employee, fiduciary or agent while
serving as an officer, member, employee, fiduciary or agent, he shall be
indemnified and held harmless by the Company to the fullest extent authorized
by applicable law, as the same exists or may hereafter be amended, against all
Expenses incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if Executive has ceased to
be an officer, member, fiduciary or agent, or is no longer employed by the
Company, and shall inure to the benefit of his heirs, executors and
administrators.

As used in this
Employment Agreement, the term “Expenses” shall include, without
limitation, damages, losses, judgments, liabilities, fines, penalties, excise
taxes, settlements and costs,

 6
 

 

attorneys’ fees, accountants’ fees, and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of establishing a
right to indemnification under this Employment Agreement.

Expenses incurred by
Executive in connection with any Proceeding shall be paid by the Company in
advance upon request of Executive and the giving by Executive of any
undertakings required by applicable law.

Executive shall give the
Company notice of any claim made against him for which indemnity will or could
be sought under this Employment Agreement. 
In addition, Executive shall give the Company such information and cooperation
as it may reasonably require and as shall be within Executive’s power and at
such times and places as are reasonably convenient for Executive.

With respect to any
Proceeding as to which Executive notifies the Company of the commencement
thereof:

(i)                                     The Company will be entitled to participate
therein at its own expense; and

(ii)                                  Except as otherwise provided below, to
the extent that it may wish, the Company jointly with any other indemnifying
party similarly notified will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive. 
Executive also shall have the right to employ his own counsel in such
action, suit or proceeding and the fees and expenses of such counsel shall be
at the expense of the Company.

(iii)                               The Company shall not be liable to
indemnify Executive under this Employment Agreement for any amounts paid in
settlement of any action or claim effected without its written consent.  The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive
without Executive’s written consent. 
Neither the Company nor Executive will unreasonably withhold or delay
their consent to any proposed settlement.

The right to
indemnification and the payment of expenses incurred in defending a Proceeding
in advance of its final disposition conferred in this Section 13 shall not be
exclusive of any other right which Executive may have or hereafter may acquire
under any statute, provision of the certificate of incorporation or by-laws
of the Company, agreement, vote of stockholders or disinterested directors or
otherwise.

14.                               ARBITRATION

Any dispute or
controversy arising under or in connection with this Employment Agreement shall
be settled exclusively by arbitration conducted in the City of Portland in the
State of Oregon under the Commercial Arbitration Rules then prevailing of the
American Arbitration Association and such submission shall request the American
Arbitration Association to: (i) appoint an arbitrator experienced and
knowledgeable concerning the matter then in dispute; (ii) require the testimony
to be transcribed; (iii) require the award to be accompanied by findings of
fact and the statement for reasons for the decision; and (iv) request the
matter to be handled by and in accordance with the expedited procedures
provided for in the Commercial Arbitration Rules.  The determination of the arbitrators, which
shall be based upon a DE NOVO interpretation of this Employment Agreement,
shall be final and binding and judgment may be entered on the arbitrators’ award
in any court having jurisdiction.  All
costs of arbitration, including the cost of the American Arbitration
Association and the arbitrator, shall be borne by the Company.

 7
 

 

 

15.                               RELEASE OF CLAIMS

In consideration for the
negotiation of the Employment Agreement, Executive, for himself and for his
heirs, executors, administrators, and assigns (hereinafter referred to
collectively as “Releasors”), forever releases and discharges the
Company and any and all of its subsidiaries, divisions, affiliated entities,
employee benefit and/or pension plans or funds, successors and assigns, and all
of its or their past and present officers, directors, members, shareholders,
trustees, agents and employees (hereinafter referred to as the “Entities and
Persons”), from any and all claims, demands, cause of action, fees and
liabilities of any kind whatsoever, whether known or unknown, which Executive
ever had, now has, or may have against the Entities and Persons by reason of
any actual or alleged act, omission, transaction, practice, conduct,
occurrence, or other matter up to and including the date of this Employment
Agreement and with regard to his employment with the Company.

Without limiting the
generality of the foregoing, the provisions of this Section 15 are intended to
and shall release the Entities and Persons from any and all claims, whether
known or unknown, which Releasors ever had, now have, or may have against the
Entities and Persons arising out of Executive’s employment with the Company,
including, but not limited to: (i) any claim under Title VII of the Civil
Rights Act, as amended; (ii) any other claim (whether based on federal, state,
or local law, statutory or decisional) relating to or arising out of Executive’s
employment by the Company and the terms and conditions of such employment;
(iii) any claim under the Age Discrimination in Employment Act, as amended;
(iv) any claim under applicable state or local law against discrimination; (v)
any claim for attorneys’ fees, costs, disbursements and/or the like; or (vi)
any claim under, with regard to, or in connection with this Employment
Agreement or any agreement or plan with regard to equity, incentive or deferred
compensation.

Notwithstanding the
foregoing, the foregoing release shall not cover rights of indemnification to
which Executive is entitled under the Company’s Certificate of Incorporation,
By-laws, or Section 13 hereof or otherwise with regard to his service as
an officer of the Company.

Executive agrees that he
will not, from any source or proceeding, seek or accept any award or settlement
with respect to any claim or right covered by Section 15(a) above. In addition
to the foregoing, except as otherwise prohibited by law, Executive represents
and warrants that he will not sue or commence any proceeding (judicial or
administrative), or participate in any action, suit or proceeding, against any
of the Entities and Persons, with respect to any act, event, occurrence, or any
alleged failure to act, released hereunder.

In the event any portion
of this Section 15 shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision of this Section 15.

The provisions of this
Section 15 are not intended, and shall not be construed, as an admission that
the Entities and Persons have violated any federal, state or local law
(statutory or decisional), ordinance or regulation, breached any contract or
committed any wrong whatsoever against Executive.

Executive acknowledges
that he has been advised by the Company to consult an attorney before signing
this Employment Agreement and that he has executed this Employment Agreement
after having had the opportunity to consult with an attorney of his choice and
has had an opportunity to consider this Employment Agreement for a period of at
least fourteen (14) days.

 8
 

 

 

16.                               MISCELLANEOUS

(a)                                  Governing Law

This Employment Agreement
shall be governed by and construed in accordance with the laws of the State of
Oregon without reference to principles of conflicts of laws.

(b)                                  Entire Agreement/Amendments

This Employment Agreement
and the instruments contemplated herein, contain the entire understanding of
the parties with respect to the employment of Executive by the Company from and
after the Commencement Date and supersedes any prior agreements, whether
written or otherwise, between the Company and Executive.  There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those expressly set forth
herein and therein.  This Employment
Agreement may not be altered, modified, or amended except by written instrument
signed by the parties hereto.

(c)                                  No Waiver

The failure of a party to
insist upon strict adherence to any term of this Employment Agreement on any
occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term
or any other term of this Employment Agreement. 
Any such waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.

(d)                                  Assignment

This Employment Agreement
shall not be assignable by Executive. 
This Employment Agreement shall be assignable by the Company only to an
acquiror of all or substantially all of the assets of the Company, provided
such acquiror promptly assumes all of the obligations hereunder of the Company
in a writing delivered to Executive and otherwise complies with the provisions
hereof with regard to such assumption.

(e)                                  Successors; Binding Agreement; Third
Party Beneficiaries

This Employment Agreement
shall inure to the benefit of and be binding upon parties hereto and their
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees legatees and permitted assignees of the parties
hereto. If Executive dies while any amount would still be payable hereunder if
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Employment Agreement
to the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees and permitted assignees of
the parties hereto.

(f)                                    Communications

For the purpose of this
Employment Agreement, notices and all other communications provided for in this
Employment Agreement shall be in writing and shall be deemed to have been duly
given (i) when faxed or delivered, and (ii) two business days after being
mailed by United States registered or certified mail, return receipt requested,
postage

 9
 

 

prepaid, addressed to the
respective addresses set forth on the initial page of this Employment
Agreement, provided that all notices to the Company shall be directed to the
attention of the Chief Executive Officer of the Company and the Chairman of the
Compensation Committee, or to such other address as any party may have
furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.

(g)                                 Withholding Taxes

The Company may withhold
from any and all amounts payable under this Employment Agreement such federal,
state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.

(h)                                 Survivorship

The respective rights and
obligations of the parties hereunder shall survive any termination of Executive’s
employment.

(i)                                    Counterparts

This Employment Agreement
may be signed in counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.

(j)                                    Headings

The headings of the
sections contained in this Employment Agreement are for convenience only and
shall not be deemed to control or affect the meaning or construction of any
provision of this Employment Agreement.

 10
 

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Employment Agreement as of the day and
year first above written.

FOG CUTTER CAPITAL GROUP INC.

	
   

  	
  

  	
   

  
	
  By:

  	
  /s/ Andrew A. Wiederhorn

  	
   

  
	
   

  	
  Name: Andrew A. Wiederhorn

  	
   

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ R. Scott Stevenson

  	
   

  
	
   

  	
  R. Scott Stevenson

  	
   

  

 

 11
 

 

 

EXHIBIT 1

WAIVER AND GENERAL RELEASE OF CLAIMS

To:          Fog Cutter Capital
Group Inc.
                1410 S.W. Jefferson Street
                Portland, Oregon 97201

1.  In consideration for the payment and/or other
benefits to be provided me pursuant to my Employment Agreement with the Company
dated as of June 30, 2003 (the “Employment Agreement”), I, for myself
and for my heirs, executors, administrators, and assigns (hereinafter referred
to collectively as “Releasors”), forever release and discharge the
Company and any and all of its subsidiaries, divisions, affiliated entities,
employee benefit and/or pension plans or funds, successors and assigns, and all
of its or their past and present officers, directors, members, shareholders,
trustees, agents and employees (hereinafter referred to as the “Entities and
Persons”), from any and all claims, demands, cause of action, fees and
liabilities of any kind whatsoever, whether known or unknown, which I ever had,
or may have, or now have, against the Entities and Persons by reason of any
actual or alleged act, omission, transaction, practice, conduct, occurrence, or
other matter up to and including the date of this Mutual Waiver and General
Release.

2.  Without limiting the generality of the
foregoing, this Waiver and General Release is intended to and shall release the
Entities and Persons from any and all claims, whether known or unknown, which
Releasors ever had, now have, or may have up to and including the date of this
Waiver and General Release against the Entities and Persons arising out of my
employment with the Company, including, but not limited to: (i) any claim under
Title VII of the Civil Rights Act, as amended; (ii) any other claim (whether
based on federal, state, or local law, statutory or decisional) relating to or
arising out of my employment by the Company, or the terms and conditions of
such employment; (iii) any claim under the Age Discrimination in Employment
Act, as amended; (iv) any claim under applicable state or local law against
discrimination; (v) any claim for attorneys’ fees, costs, disbursements and/or
the like; or (vi) any claim under, with regard to, or in connection with my
Employment Agreement or any agreement or plan with regard to equity, incentive
or deferred compensation.

3.  Notwithstanding the foregoing, the foregoing
release shall not cover rights of indemnification to which I was entitled
immediately prior to my termination date under the Company’s Certificate of
Incorporation or By-laws, or Section 13 of the Employment Agreement or
otherwise with regard to my service as an officer of the Company.

4.  I agree that I will not, from any source or
proceeding, seek or accept any award or settlement with respect to any claim or
right covered by Section 1(a) above.  In
addition to the foregoing, except as otherwise prohibited by law, I represent
and warrant that I will not sue or commence any proceeding (judicial or
administrative), or participate in any action, suit or proceeding, against any
of the Entities and Persons, with respect to any act, event, occurrence, or any
alleged failure to act, released hereunder.

5.  The interpretation of this Waiver and General
Release will be governed by the law of the State of New York without reference
to principles of conflict of laws.  In
the event any provision of this Waiver and General Release shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision of this Waiver
and General Release.

 12
 

 

6.  This Waiver and General Release is not
intended, and shall not be construed, as an admission that the Entities and
Persons or I have violated any federal, state or local law (statutory or
decisional), ordinance or regulation, breached any contract or committed any
wrong whatsoever.

7.  I acknowledge that I have been advised by the
Company to consult an attorney before signing this Waiver and General Release
and that I have executed this Waiver and General Release after having had the
opportunity to consult with an attorney of my choice.

8.  I further acknowledge that I have read this
Waiver and General Release in full, have had seven (7) days to consider the
terms of this Waiver and General Release, that I fully understand the terms,
and that I have knowingly and voluntarily assented to all the terms and
conditions contained herein.

9.  I further acknowledge that after executing
this Waiver and General Release I have seven (7) days to revoke it by delivery
of a Notice of Revocation to the Company prior to the eighth day after
execution and delivery by me of the Waiver and General Release.

10.  The parties hereto understand that this
Waiver and General Release and the Employment Agreement constitute the complete
understanding between such parties and that no other promises or agreements
shall be binding unless in writing and signed by both such parties.

	
  Dated:

  	
  FOG CUTTER CAPITAL GROUP INC.

  
	
   

  	
   

  
	
  Signature:

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  R. Scott Stevenson

  

 

 13

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