EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of September 4, 1999 (the "Original
Agreement Date"), and amended and restated as of October 1, 2000, by and between
Wilshire Real Estate Investment Inc. and Wilshire Real Estate Partnership L.P.
(collectively and individually, the "Company"), with its principal office at
0000 XX Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000 and Xxxxxx X. Xxxxxxxxxx,
residing at 0000 XX Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxx 00000 (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
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 enter into this
agreement (the "Agreement") to set forth terms of Executive's employment by the
Company, as such terms are amended as of the amendment and restatement date set
forth above.
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. Executive's employment under this
Agreement (prior to its amendment and restatement) commenced on September 4,
1999. Except for earlier termination as provided in Section 7 hereof,
Executive's employment under this Agreement (as amended and restated) shall be
for a three (3) year term (the "Employment Term") commencing on October 1, 2000
(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 ninety (90) days prior to the
expiration of the then current Employment Term.
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 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. During the Employment Term, the Company shall
pay Executive a base salary at the annual rate of not less than $750,000. 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 October of each year and may be increased, but not
decreased, from time to time upon recommendation of the Compensation Committee
of the Board (the "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 12 month period
commencing on October 1, 2000 (each, an "Annual Period"), Executive shall be
entitled to receive an annual bonus (the "Bonus") equal to 45% of the Bonus Pool
for such Annual Period. For each Annual Period, the Bonus Pool shall be (i) if
Post-Bonus XXX is 15% or greater, 25% of Pre-Bonus Earnings, (ii) if Post-Bonus
XXX is 10% or greater but less than 15%, 20% of Pre-Bonus Earnings, (iii) if
Post-Bonus XXX is 5% or greater but less than 10%, 10% of Pre-Bonus Earnings, or
(iv) if Post-Bonus XXX is less than 5%, zero. For purposes of this agreement,
the following terms shall have the following meanings:
"PRE-BONUS EARNINGS" means the Company's after-tax income (as
determined in accordance with generally accepted accounting principles
and reflected on the Company's financial statements) for the relevant
Annual Period or portion thereof determined prior to subtracting the
amount of the Bonus Pool payable for that Annual Period; provided,
however, that in determining Pre-Bonus Earnings for purposes of this
Section 4, (i) Pre- Bonus Earnings shall be increased or decreased for
the relevant Annual Period by the amount of unrealized gains or
unrealized losses, as the case may be, which are incurred after the
commencement of the relevant Annual Period and which are reflected
directly in equity as "other comprehensive income or loss" during such
Annual Period and (ii) increased by the amount of any cash bonus paid
to the senior executives of the Company (the "Specified Senior
Executives") listed on Exhibit 1 hereto (as the same may be amended
from time to time with the consent of the parties hereto).
"POST-BONUS EARNINGS" means the Company's Pre-Bonus Earnings
after subtracting (i) 75% of the after-tax amount of the Bonus Pool
payable for that Annual Period and (ii) the after tax amount of any
cash bonus paid to the Specified Senior Executives.
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"EQUITY" means the Company's total shareholders' equity (as
determined in accordance with generally accepted accounting principles
and reflected on the Company's financial statements) at the beginning
of the relevant Annual Period.
"POST-BONUS XXX" means the Company's Post-Bonus Earnings for
the relevant Annual Period divided by its Equity at the beginning of
the relevant Annual Period (expressed in percentage terms).
To assist the reader in understanding the foregoing provisions, examples of such
Bonus determinations are set forth on Schedule I hereto. Such annual Bonus shall
be payable by November 15th of each year following the Annual Period for which
the Bonus is payable and, if necessary, shall be adjusted for any subsequent
amendments to the Company's financial statements. The Company will apply the
annual Bonus to repay any outstanding Excess Advance (as defined below) prior to
making any payment to Executive. To the extent that the Company repurchases any
of its outstanding common stock or the Company's net operating losses under
Section 382 of the Code (as defined below) are disallowed, the parties agree to
negotiate in good faith to amend the incentive compensation provisions of this
Section 4 to provide Executive with comparable goals and returns to those that
existed prior to the occurrence of such events. Following the initial Employment
Term, such Bonus shall be subject to shareholder approval as and to the extent
required by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) ADVANCES. During any quarterly period during an Annual
Period, the Company shall, at the request of the Executive, pay an advance on
any such Bonus; provided, however, that any such advance (together with any
prior advances made during the relevant Annual Period) shall not exceed 80% of
the pro rata portion of the Estimated Annual Bonus (as defined below)
attributable to such quarterly period and to any prior quarterly periods during
such Annual Period. The Estimated Annual Bonus is determined by annualizing the
Company's Pre-Bonus Earnings and Post-Bonus Earnings (based on the Company's
financial statements or projections) for the quarterly period or periods during
such Annual Period (or for purposes of Section 8, monthly periods) and
determining the annual Bonus payable to Executive as described in Section 4(a).
In the event that the aggregate amount of advances outstanding immediately
following the end of any quarterly period during the relevant Annual Period
exceeds 80% of the pro rata portion of the Estimated Annual Bonus ("Permitted
Advances") determined immediately following such quarterly period, the amount in
excess of the Permitted Advances shall be treated as an interest free loan from
the Company ("Advance Reimbursement Loan") for the next succeeding quarterly
period (the "Following Quarter") and if at the end of the Following Quarter the
aggregate amount of outstanding advances continues to exceed the Permitted
Advances (the "Excess Advance"), Executive shall repay the Excess Advance to the
Company within 30 days of the end of such Following Quarter.
(c) OPTIONS. As of the Original Agreement Date, the Company
granted to Executive stock options (the "Initial Options") on 630,000 shares of
the Company's common stock (the "Common Stock") under the Company's Incentive
Stock Plan (the "Incentive Stock Plan"). The Initial Options have an exercise
price equal to the Company's book value per outstanding share as of September
30, 1999, which exercise price is in excess of the market value per share based
on the
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share price of the Common Stock as of such date. The Initial Options will be
fully exercisable at the time of vesting and 25% of the Initial Options shall
vest on each anniversary of the Original Agreement Date (which will result in
the Initial Options being fully vested on the fourth anniversary of the Original
Agreement Date). In addition, the Executive shall 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 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. Notwithstanding the
foregoing, the Company may recommend to the Committee that Executive be granted
Options under a plan other than the Incentive Stock Plan provided that such
other plan contains terms and conditions which are substantially similar to the
terms and conditions of the Incentive Stock Plan, and further provided, that
such other 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.
(d) OTHER COMPENSATION. The Company may, upon recommendation
of the 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. 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) As of the Original Agreement Date, the Company agreed to
loan to Executive $50,000 during each year of the Employment Term to purchase
shares of Common Stock of the Company up to a maximum of $250,000. Each annual
loan made pursuant to this Section 5(b) (the "Stock Purchase Loans") shall
mature on the earlier of (i) its fifth anniversary and (ii) six months after
Executive is no longer employed by the Company. The Stock Purchase Loans shall
accrue interest on the then-outstanding principal amount of the Stock Purchase
Loans from the date of any Stock Purchase Loan is made until maturity at a rate
equal to the prime rate as published in the Wall Street Journal on the date any
Stock Purchase Loan is made pursuant hereto and shall be payable annually in
arrears. Interest on the Stock Purchase Loan will not be paid in cash but shall
be payable in kind (i.e. the amount of interest accrued on the Stock Purchase
Loan during each annual period will be added to the principal amount of the
Stock Purchase Loan at the end of such annual period). The Stock Purchase Loans
will be full recourse loans against Executive, and each Stock Purchase Loan will
be secured by the shares of Common Stock purchased with each such Stock Purchase
Loan together with other shares of Common Stock pledged by Executive so that the
aggregate value (based on the closing price on the acquisition date of such
shares on the Nasdaq
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stock market) of all such shares securing each new Stock Purchase Loan shall be
at least equal to 110% of the principal amount of the Stock Purchase Loans.
(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. 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.
7. TERMINATION. (a) 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;
(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;
(vi) the termination of employment by Executive for
any reason during the period commencing on the date of a
Change in Control and ending on the day immediately prior to
the second anniversary of the Change in Control (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.
(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
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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 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 reelection 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"), 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 in effect prior to such modification and (y) if plans
providing Executive with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue Executive as a participant in
the Bonus Plans and Substitute Plans on at least the same basis 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 Committee to grant Executive an
award of Options 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.
(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
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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, 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
Board; (iii) Executive being convicted of a felony (other than a felony
involving a traffic offense); (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 of the entire membership of
the Board at a meeting of the Board which was called for the purpose of
considering such termination and which Executive and his representative 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 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 Xxxxxxx and Xxxxxx Xxxxxxxxxx Revocable Trust dated September 22,
1987, as amended; (ii) the Estimated Annual Bonus for the Annual Period in which
Executive died, pro rated through the end of the month in which Executive died,
which amount shall be paid to the trustee of the Xxxxxxx and Xxxxxx Xxxxxxxxxx
Revocable Trust dated September 22, 1987, as amended, within 60 days after such
month end; (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
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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 (6) months of Executive's Base Salary on the date of death, which
shall be paid to the trustee of the Xxxxxxx and Xxxxxx Xxxxxxxxxx Revocable
Trust dated September 22, 1987, as amended; (vi) any outstanding Advance
Reimbursement Loan shall mature as provided in Section 4; (vii) any outstanding
Stock Purchase Loan shall become due and payable six months following the date
of termination, and (viii) payment of Executive's spouse's and dependents' COBRA
coverage premiums to the extent, and so long as, they remain eligible for COBRA
coverage, but in no event more than one (1) year. 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 the
payments and benefits to which his representatives would be entitled in the
event of a termination of employment by reason of his death, provided that the
payment of Base Salary shall be reduced by the projected amount Executive would
receive under any long-term disability policy or program maintained by the
Company during the six (6) month period during which Base Salary is being paid.
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 NONEXTENSION 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 (1) in a lump sum within ten (10) business days after such termination,
(a) any unreimbursed business expenses payable pursuant to Section 6, (b) 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, and (c) an amount equal to one year's Base Salary in
effect on the date of termination; (2) the Estimated Annual Bonus payable to
Executive for the Annual Period, prorated through the end of the month in which
the Executive is terminated, which amount shall be paid within 45 days after
such month's end; (3) 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; (4)
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; (5) one (1) year
of additional service and compensation credit (at his then compensation level)
for pension purposes under any defined benefit type qualified or
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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 one (1) 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); (6) one (1) year 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); (7) any outstanding Advance Reimbursement Loan shall
mature as provided in Section 4; (8) any outstanding Stock Purchase Loan shall
become due and payable six months following the date of termination; and (9)
payment by the Company of the premiums for Executive (except in the case of
death) and his spouse's and dependents' health coverage for one (1) year under
the Company's health plans which cover the senior executives of the Company or
materially similar benefits. Payments under (9) 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 (i) through (iv) above,
Section 12 hereof shall also continue to apply.
(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 outside of
the Change in Control Protection Period, or (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, the Estimated Annual Bonus prorated
through the last day of the month in which Executive is terminated, and any
unreimbursed business expenses payable pursuant to Section 6. In addition, any
outstanding Advance Reimbursement Loan shall mature as provided in Section 4 and
any outstanding Stock Purchase Loan shall become due and payable six months
following the date of termination. 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.
(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.
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9. [THIS SECTION IS INTENTIONALLY LEFT BLANK.]
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 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. CHANGE IN CONTROL. 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 ("Act") (other
than 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 Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two (2) 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 clause (i), (iii), or (iv)
of this paragraph 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 two-thirds of the
directors then still in office who either were directors at the beginning of the
two (2) year period or whose election 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 fifty percent (50%) of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
provided, however, 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 (i) above) acquires more than
twenty- five percent (25%) 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
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fifty percent (50%) or more of the combined voting power of the outstanding
voting securities of the Company at the time of the sale.
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 Maryland 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
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. SPECIAL TAX PROVISION. (a) Anything in this Agreement to
the contrary notwithstanding, in the event that any amount or benefit paid,
payable, or to be paid, or distributed, distributable, or to be distributed to
or with respect to Executive by the Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change of ownership or effective control
covered by Code Section 280G(b)(2) or any person affiliated with the Company or
such person) as a result of a change in ownership or effective control of the
Company or a direct or indirect parent thereof (or the assets of any of the
foregoing) covered by Code Section 280G(b)(2) (collectively, the "Covered
Payments") is or becomes subject to the excise tax imposed by or under Section
4999 of the Code (or any similar federal or state tax that may hereafter be
imposed), and/or any interest, penalties or additions to tax, with respect to
such excise tax (such excise tax, together with such interest penalties and
additions to tax, is hereinafter collectively referred to as the "Excise Tax"),
the Company shall pay to Executive an additional amount (the "Tax Reimbursement
Payment") such that after payment by Executive of all taxes (including, without
limitation, any interest or penalties and any Excise Tax imposed on or
attributable to the Tax Reimbursement Payment itself), Executive retains an
amount of the Tax Reimbursement Payment equal to the sum of (i) the amount of
the Excise Tax imposed upon the Covered Payments, and (ii) without duplication,
an amount equal to the product of (A) any deductions disallowed for federal,
state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in Executive's adjusted gross income, and (B) the highest
applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 13 is that (a) Executive,
after paying his federal, state and local income tax and payroll taxes, will be
in the same position as if he was not subject to the Excise Tax under Section
4999 of the Code (or any similar federal or state tax that may be imposed ) and
did not receive the extra payments pursuant to this Section 13 and this Section
13 shall be interpreted accordingly.
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(b) Except as otherwise provided in Section 13(a), for
purposes of determining whether any of the Covered Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) such Covered Payments will
be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of
the Code) and such payments in excess of the Code Section 280G(b)(3) "base
amount" shall be treated as subject to the Excise Tax, unless, and except to the
extent that, the Company's independent certified public accountants appointed
prior to the change in ownership covered by Code Section 280G(b)(2) or legal
counsel (reasonably acceptable to Executive) appointed by such public
accountants (or, if the public accountants decline such appointment and decline
appointing such legal counsel, such independent certified public accountants as
promptly mutually agreed on in good faith by the Company and Executive) (the
"Accountant"), deliver a written opinion to Executive, reasonably satisfactory
to Executive's legal counsel, that Executive has a reasonable basis to claim
that the Covered Payments (in whole or in part) (A) do not constitute "parachute
payments", (B) represent reasonable compensation for services actually rendered
(within the meaning of Section 280G(b)(4) of the Code) in excess of the "base
amount" allocable to such reasonable compensation, or (C) such "parachute
payments" are otherwise not subject to such Excise Tax (with appropriate legal
authority, detailed analysis and explanation provided therein by the
Accountants); and (ii) the value of any Covered Payments which are non-cash
benefits or deferred payments or benefits shall be determined by the Accountant
in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, Executive shall be deemed: (i) to pay federal, state
and/or local income taxes at the highest applicable marginal rate of income
taxation for the calendar year in which the Tax Reimbursement Payment is made or
is to be made, and (ii) to have otherwise allowable deductions for federal,
state and local income tax purposes at least equal to those disallowed due to
the inclusion of the Tax Reimbursement Payment in Executive's adjusted gross
income.
(d) (i) (A) In the event that prior to the time Executive has
filed any of his tax returns for the calendar year in which the change in
ownership event covered by Code Section 280G(b)(2) occurred, the Accountant
determines, for any reason whatever, the correct amount of the Tax Reimbursement
Payment to be less than the amount determined at the time the Tax Reimbursement
Payment was made, Executive shall repay to the Company, at the time that the
amount of such reduction in Tax Reimbursement Payment is determined by the
Accountant, the portion of the prior Tax Reimbursement Payment attributable to
such reduction (including the portion of the Tax Reimbursement Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the portion of the Tax Reimbursement Payment being repaid by Executive, using
the assumptions and methodology utilized to calculate the Tax Reimbursement
Payment (unless manifestly erroneous)), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in
(A) above is made by the Accountant after the filing by Executive of any of his
tax returns for the calendar year in which the change in ownership event covered
by Code Section 280G(b)(2) occurred but prior to one (1) year after the
occurrence of such change in ownership, Executive shall file at the request of
13
the Company an amended tax return in accordance with the Accountant's
determination, but no portion of the Tax Reimbursement Payment shall be required
to be refunded to the Company until actual refund or credit of such portion has
been made to Executive, and interest payable to the Company shall not exceed the
interest received or credited to Executive by such tax authority for the period
it held such portion (less any tax Executive must pay on such interest and which
he is unable to deduct as a result of payment of the refund).
(C) In the event Executive receives a refund pursuant
to (B) above and repays such amount to the Company, Executive shall thereafter
file for refunds or credits by reason of the repayments to the Company.
Executive and the Company shall mutually agree upon the course of action, if
any, to be pursued (which shall be at the expense of the Company) if Executive's
claim for such refund or credit is denied.
(D) Executive and the Company shall mutually agree
upon the course of action, if any, to be pursued (which shall be at the expense
of the Company) if Executive's claim for refund or credit is denied.
(ii) In the event that the Excise Tax is later determined
by the Accountants or the Internal Revenue Service to exceed the amount taken
into account hereunder at the time the Tax Reimbursement Payment is made
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the Company shall make
an additional Tax Reimbursement Payment in respect of such excess (plus any
interest, penalties or additions to tax payable with respect to such excess)
once the amount of such excess is finally determined.
(iii) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) under this Section 13, subject to
subpart (i)(D) above, Executive shall permit the Company to control issues
related to this Section 13 (at its expense), provided that such issues do not
potentially materially adversely affect Executive, but Executive shall control
any other issues. In the event the issues are interrelated, Executive and the
Company shall in good faith cooperate so as not to jeopardize resolution of
either issue, but if the parties cannot agree Executive shall make the final
determination with regard to the issues. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany him and Executive
and his representative shall cooperate with the Company and its representative.
(iv) With regard to any initial filing for a refund or any
other action required pursuant to this Section 13 (other than by mutual
agreement) or, if not required, agreed to by the Company and Executive,
Executive shall cooperate fully with the Company, provided that the foregoing
shall not apply to actions that are provided herein to be at the sole discretion
of Executive.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth day following the
determination by the Accountant,
14
and any payment made after such fifth day shall bear interest at the rate
provided in Code Section 1274(b)(2)(B). The Company shall use its best efforts
to cause the Accountant to promptly deliver the initial determination required
hereunder and, if not delivered, within ninety (90) days after the change in
ownership event covered by Section 280G(b)(2) of the Code, the Company shall pay
Executive the Tax Reimbursement Payment set forth in an opinion from counsel
recognized as knowledgeable in the relevant areas selected by Executive, and
reasonably acceptable to the Company, within five (5) days after delivery of
such opinion. In accordance with Section 16(Guaranty), the Company may withhold
from the Tax Reimbursement Payment and deposit into applicable taxing
authorities such amounts as are required to be withheld by applicable law. To
the extent that Executive is required to pay estimated or other taxes on amounts
received by Executive beyond any withheld amounts, Executive shall promptly make
such payments. The amount of such payment shall be subject to later adjustment
in accordance with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by Executive's counsel.
(g) The Company and Executive shall mutually agree on and
promulgate further guidelines in accordance with this Section 13 to the extent,
if any, necessary to effect the reversal of excessive or shortfall Tax
Reimbursement Payments. The foregoing shall not in any way be inconsistent with
Section 13(d)(i)(D) hereof.
14. LEGAL AND OTHER FEES AND EXPENSES. In the event that a
claim for 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.
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(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 Xxxxxxxx
X. Xxxxxxxxxx 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.
(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.
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(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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
WILSHIRE REAL ESTATE INVESTMENT INC.,
on its behalf and on behalf of WILSHIRE REAL
ESTATE PARTNERSHIP L.P.
By:
-----------------------------------------
Name:
Title:
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Xxxxxx X. Xxxxxxxxxx
18
EXHIBIT 1
SPECIFIED SENIOR EXECUTIVES
Xxxxxx X. Xxxxx
