Exhibit 10(q)
FIRST AMENDMENT TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This First Amendment to Employment and Non-Competition Agreement (the
"FIRST AMENDMENT"), made and entered into as of the 5th day of October 1998, is
by and among (i) CRIIMI MAE Management, Inc., a Maryland corporation (the
"COMPANY"), (ii) Xxxxxxx X. Xxxxxx (the "EXECUTIVE") and (iii) CRIIMI MAE Inc.,
a Maryland corporation and the parent of the Company (the "PARENT").
RECITALS
1. On July 1, 1998, the Company and the Executive entered into an
Employment and Non-Competition Agreement (the "EMPLOYMENT AGREEMENT").
2. On October 5, 1998, the Company and the Parent each filed a
voluntary petition seeking relief under the provisions of chapter 11, title 11
of the United States Code ("CHAPTER 11").
3. On February 23, 1999, the court, in the case captioned IN RE CRIIMI
MAE INC., ET AL., Ch. 11 Case No. 9823115 (Jointly Administered) (the
"BANKRUPTCY COURT"), entered an order, attached hereto as EXHIBIT A (the
"ORDER"), approving, among other things, (i) the Company's assumption of the
Employment Agreement and (ii) the implementation of an employee retention
program with respect to certain key employees of the Company, including the
Executive, all as amended by the Order, effective NUNC PRO TUNC to October 5,
1998, upon the execution of this First Amendment by the parties hereto (the
"RETENTION PROGRAM").
4. This First Amendment amends the Employment Agreement in accordance
with the modifications set forth in the Order.
5. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. AMENDATORY PROVISIONS. The Employment Agreement is hereby
amended as follows:
(a) Section 3.3 to the Employment Agreement is hereby deleted in its
entirety and the following shall be substituted in lieu thereof:
3.3 DISCRETIONARY BONUS. Bonuses awarded in the sole
discretion of the Board in 1998 shall be capped at 20% of the
Executive's 1998 base annual salary. No other discretionary bonuses
shall be awarded so long as the Parent remains in Chapter 11 without
(a) written approval of the Official Committee of Unsecured Creditors
of the Parent and the Official Committee of Equity Security Holders of
the Parent or (b) by order of the Bankruptcy Court.
(b) Section 3.5 to the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
3.5 [INTENTIONALLY OMITTED]
(c) The second and third sentences of Section 3.7 to the Employment
Agreement are hereby deleted in their entirety.
(d) Section 3.12 to the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
3.12 EXPENSE ALLOWANCE. The Company shall reimburse the
Executive for all expenses for financial planning, tax return and
financial statement preparation services incurred by the Executive
subsequent to July 1, 1998 up to Two Thousand Five Hundred Dollars
($2500).
(e) Section 3 to the Employment Agreement is hereby amended to add the
following new subsection at the end thereof:
3.14 REORGANIZATION BONUS.
3.14.1 The Company shall pay the Executive a reorganization
bonus equal to two (2) times the Executive's then current Base Salary
(the "REORGANIZATION BONUS"), to be paid in four (4) equal semi-annual
installments beginning April 5, 1999, so long as the Executive remains
employed full-time with the Company; PROVIDED, HOWEVER, that if the
Executive is terminated without Cause, or upon the effective date of a
plan of reorganization of the Parent, the entire unpaid portion of the
Reorganization Bonus shall become immediately due and payable;
3.14.2 Notwithstanding anything to the contrary contained
herein, in the event that the Parent's Chapter 11 case is converted to
a case under chapter 7, title 11 of the United States Code ("CHAPTER
7"), the Executive shall not be entitled to any additional
Reorganization Bonus payments subsequent to such date; PROVIDED,
HOWEVER, that this paragraph shall not impact the Executive's rights to
receive severance payments as set forth in Section 6; and PROVIDED
FURTHER, that, subject to Section 3.14.3, the Executive shall not be
required to refund any Reorganization Bonus payments received by her
prior to the date that the Parent's Chapter 11 case is converted to a
case under Chapter 7; and
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3.14.3 Notwithstanding anything to the contrary contained
herein, the Company is specifically authorized to make semi-annual
Reorganization Bonus payments beginning on April 5, 1999, as set forth
in Section 3.14.1, without further order of the Bankruptcy Court;
PROVIDED, HOWEVER, that the Company shall not pay the fourth and final
installment of the Reorganization Bonus or any accelerated portion of
the Reorganization Bonus, as the case may be, without first (x)
applying to the Bankruptcy Court for final allowance of the
Reorganization Bonus and (y) obtaining Bankruptcy Court approval.
(f) Section 6.3.1 to the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
6.3.1 If the Executive's employment is terminated by the
Company without Cause, the Executive shall be entitled to receive (x)
severance compensation equal to what would have been her Base Salary
under Section 3.1 for twenty-four (24) months from the date of such
termination, payable at such times as her Base Salary would have been
paid if her employment had not been terminated and a pro rata portion
of the bonus applicable to the calendar year in which such termination
occurs; (y) other benefits pursuant to Sections 3.9, 3.10, 3.12, 3.13
and 3.14, payable within ninety (90) days after the date of such
termination accrued by her hereunder up to and including the date of
such termination; PROVIDED, HOWEVER, that the payment of benefits
pursuant to Section 3.14 shall require Bankruptcy Court approval and
(z) benefits, if any, provided by any insurance policies in accordance
with their terms. The vesting schedules for the rights to purchase
Option Shares set forth in the Option Agreement shall not be affected
by any such termination of employment without Cause.
(g) Section 6.3 to the Employment Agreement is hereby amended to add
the following new subsection at the end thereof:
6.3.3 In the event that the Executive is terminated by the
Company without Cause and a Reorganization Bonus payment is owed to the
Executive pursuant to Section 3.14 and/or this Section 6.3, the Company
shall immediately file a motion with the Bankruptcy Court to receive
approval of the payment of such Reorganization Bonus payment to the
Executive or, at the option of the Executive, such motion may be filed
with the Bankruptcy Court directly by the Executive. The Company shall
reimburse the Executive for any and all amounts incurred by the
Executive in filing a motion to receive Reorganization Bonus payments
with the Bankruptcy Court, including filing fees, reasonable attorneys'
fees and all other fees incidental thereto.
(h) The second sentence of Section 6.4.7 to the Employment Agreement is
hereby deleted in its entirety and the following shall be inserted in lieu
thereof:
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"In the event of a termination following a `change in
control,' the Executive shall be entitled to the payment set
forth in Section 6.3.1."
(i) The third and fourth sentences of Section 6.4.7 to the Employment
Agreement are hereby deleted in their entirety.
(j) The fifth sentence of Section 6.4.7 to the Employment Agreement is
hereby deleted in its entirety and the following shall be inserted in lieu
thereof:
"In addition, all Options shall become immediately exercisable
notwithstanding any vesting schedule that would otherwise apply."
(k) Section 7 to the Employment Agreement is hereby amended to add the
following new subsections at the end thereof:
7.5 NON-COMPETITION AGREEMENT. The Executive acknowledges the
Company's and the Parent's reliance on, and expectation of, her
continued commitment to the performance of her duties during the term
of the Retention Program. In light of such reliance and expectation on
the part of the Company and the Parent, during the applicable period
hereafter specified in Section 7.6, the Executive covenants and agrees
that:
7.5.1 The Executive shall not be employed or engaged by, or
otherwise affiliated or associated as an employee, consultant,
independent contractor or otherwise with, any other corporation,
partnership, proprietorship, firm, association, or other business
entity directly or indirectly engaged in a business that (x) competes
with the businesses in which the Company, the Parent and/or CRIIMI MAE
Services L.P. (collectively, the "AFFILIATE ENTITIES") are engaged
during the term of the Retention Program or were engaged during the
two-year period prior to October 5, 1998; or (y) are of a type which
are the same or similar business activities in which any of the
Affiliate Entities are engaged during the term of the Retention Program
or were engaged during the two-year period prior to October 5, 1998.
7.5.2 The following shall not be deemed a violation of the
covenant set forth in Section 7.5.1: (x) the beneficial and/or record
ownership of not more than two and one-half percent (2.5%) of any class
of publicly traded securities of any such entity, or (y) engaging in
business activities unrelated to the Affiliate Entities or their
respective businesses which are a part of, or are reasonably related
to, the other existing business activities of the Executive provided
that such existing business activities of the Executive do not or would
not result in a breach of this Agreement.
7.6 The covenant set forth in Section 7.5 shall be binding
until the first to occur of the following: (i) the consummation of a
plan of reorganization for the Parent; (ii) the termination with or
without cause of the Executive's employment
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by the Company or a successor in interest; (iii) the termination,
expiration or acceleration of the Reorganization Bonus as provided in
Section 3.14; or (iv) October 5, 2000.
7.7 The Executive agrees and understands that the remedy at
law for any breach by her of the covenants set forth in Section 7.5
will be inadequate and that the damages that may arise from such breach
are not readily susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that the Affiliate Entities shall be
entitled to immediate injunctive relief and may obtain a temporary
order restraining any threatened or further breach. Nothing in this
Section 7 shall be deemed to limit the remedies at law or in equity
which may be pursued or availed of by the Affiliate Entities for any
breach by the Executive of the covenant set forth in Section 7.5.
7.8 The Executive has considered the nature and extent of the
restrictions upon the Executive and the rights and remedies conferred
upon the Affiliate Entities in Section 7.5 and has determined that the
same (i) are reasonable with respect to time and scope; (ii) are
designed to eliminate competition which otherwise would be unfair to
the Affiliate Entities; (iii) do not stifle the inherent skill and
experience of the Executive; (iv) would not operate as a bar to the
sole means of support of the Executive; (v) are required to protect the
legitimate interests of the Company, the Parent and the other Affiliate
Entities; and (vi) do not confer a benefit upon the Affiliate Entities
disproportionate to the detriment to the Executive.
(l) Section 8.12 to the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
8.12 INDEMNIFICATION. The Parent shall (x) pay as an
administrative expense all indemnification to the extent provided for
in the Bylaws of the Parent and/or the Company up to and including
amounts totaling a maximum of $250,000 for the Executive and all other
covered persons, constituting the aggregate deductible under applicable
Officer and Director insurance policies, (y) apply any available
portion of proceeds of applicable Officer and Director insurance
policies, up to $20 million in the aggregate for all covered persons,
to indemnification of the Executive; and (z) pay as an administrative
expense all uninsured indemnification arising from the post-petition
actions of the Executive for which they are otherwise entitled to
indemnification under the Bylaws of the Parent and/or the Company.
2. EXISTING AGREEMENT. Except as expressly amended hereby, all of the
terms, covenants and conditions of the Employment Agreement (i) are ratified and
confirmed; (ii) shall remain unamended and not waived; and (iii) shall continue
in full force and effect.
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3. GOVERNING LAW. This First Amendment shall be governed by the
internal laws of the State of Maryland without giving effect to the principles
of conflict of laws thereof.
4. COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, taken
together, shall constitute one and the same instrument.
5. ENFORCEABILITY. If any provision of this First Amendment shall be
held to be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire First Amendment or
the Employment Agreement. Such provision shall be deemed to be modified to the
extent necessary to render it legal, valid and enforceable, and if no such
modification shall render it legal, valid and enforceable, then this First
Amendment and the Employment Agreement shall be construed as if not containing
the provision held to be invalid, and the rights and obligations of the parties
shall be construed and enforced accordingly.
6. CONFLICTS. The Order shall govern in all matters of conflict between
any of the provisions of the Order and this First Amendment.
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IN WITNESS WHEREOF, the Company has caused this First
Amendment to be executed by its duly authorized officer and the Executive has
executed this First Amendment as of the date and year first above written.
CRIIMI MAE MANAGEMENT, INC.,
a Maryland corporation
By: /s/ H. XXXXXXX XXXXXXXXXX
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H. Xxxxxxx Xxxxxxxxxx
President
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
In consideration of the services that the Executive is to perform on
behalf of the Company, the Parent agrees that it will fulfill its obligations
set forth expressly herein.
IN WITNESS WHEREOF, CRIIMI MAE Inc. has executed this First
Amendment as of the date and year first above written.
CRIIMI MAE INC.
By: /s/ XXXXXXX X. XXXXXXX
----------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board
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