CHANGE IN CONTROL SEVERANCE AGREEMENT
Exhibit
10.9
THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT (the “Agreement”) is made and entered into
as of this 1st
day of
February, 2006 , by and between ITLA Capital Corporation (the “Company”), and
Xxxxxxx X. Xxxxxxxx (the “Employee”).
WHEREAS,
the Employee is currently serving as Senior Managing Director, Chief of
Lending
Operations of the Company; and
WHEREAS,
the Board of Directors of the Company (the “Board of Directors”) recognizes
that, as is the case with publicly held corporations generally, the possibility
of a change in control of the Company may exist and that such possibility,
and
the uncertainty and questions which it may raise among management, may
result in
the departure or distraction of key management personnel to the detriment
of the
Company and its stockholders;
WHEREAS,
the Board of Directors believes it is in the best interests of the Company
to
enter into this Agreement with the Employee in order to assure continuity
of
management of the Company and to reinforce and encourage the continued
attention
and dedication of the Employee to the Employee’s assigned duties without
distraction in the face of potentially disruptive circumstances arising
from the
possibility of a change in control of the Company, although no such change
is
now contemplated; and
WHEREAS,
the Board of Directors has approved and authorized the execution of this
Agreement with the Employee;
NOW,
THEREFORE, in consideration of the foregoing and of the respective covenants
and
agreements of the parties herein, it is AGREED as follows:
1.
Definitions.
(a)
The
term “Change in Control” means the occurrence of any of the following events
with respect to the Company: (1) any person (as the term is used in section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) is
or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly of securities of the Company representing
33.33% or
more of the Company’s outstanding securities; (2) individuals who are members of
the Board of Directors of the Company on the date hereof (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided
that
any person becoming a director subsequent to the date hereof whose election
was
approved by a vote of at least two thirds of the directors comprising the
Incumbent Board, or whose nomination for election by the Company’s stockholders
was approved by the nominating committee serving under an Incumbent Board,
shall
be considered a member of the Incumbent Board; (3) a reorganization, merger,
consolidation, sale of all or substantially all of the assets of the Company
or
a similar transaction in which the Company is not the resulting entity
(unless
the continuing ownership requirements clause (4) below are met with respect
to
the resulting entity); or (4) a merger or consolidation of the Company
with any
other corporation other than a merger or consolidation in which the voting
securities of the Company outstanding immediately prior thereto represent
at
least 66.67% of the total voting power represented by the voting securities
of
the Company or the surviving entity outstanding immediately after such
merger or
consolidation. The term “Change in Control” shall not include: (1) an
acquisition of securities by an employee benefit plan of the Company; or
(2) any
of the above mentioned events or occurrences which require but do not receive
the requisite government or regulatory approval to bring the event or occurrence
to fruition.
(b)
The
term “Disability” means the Employee’s absence from his or her duties with the
Company on a full time basis for six consecutive months as a result of
his or
her incapacity due to mental or physical illness, unless within 30 days
after
the Company gives the Employee written notice of termination of employment
for
such reason the Employee shall have returned to full time performance of
his or
her duties.
(c)
The
term “Date of Termination” means the date specified in the Notice of
Termination, given pursuant to Section 4 of this Agreement, provided that
if
within 15 days after any Notice of Termination is given or, if later, prior
to
the Date of Termination specified in such Notice, the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the Notice of Termination, then the Date of Termination shall be the date
on
which the dispute is finally determined, whether by mutual written agreement
of
the parties, by a binding arbitration award, or by a final judgment, order
or
decree of a court of competent jurisdiction (which is not appealable or
with
respect to which the time for appeal therefrom has expired and no appeal
has
been perfected); and provided further that the Date of Termination shall
be
extended by a notice of dispute only if such notice is given in good faith
and
sets forth in reasonable detail the facts and circumstances that are the
basis
for the dispute, and the party giving such notice pursues the resolution
of such
dispute with reasonable diligence. For purposes of this Section 1(c), a
“dispute” extending the Date of Termination shall be limited to a dispute as to
whether the termination was a “Termination for Cause” if the Notice of
Termination given by the Company states that the termination was a Termination
for Cause or whether the termination was an Involuntary Termination if
the
Notice of Termination is given by the Employee. Notwithstanding the pendency
of
any such dispute, the Company shall continue to pay the Employee the Employee’s
full base salary at the rate in effect when the Notice of Termination was
given
and continue the Employee as a participant in all benefit plans in which
the
Employee was participating when the Notice of Termination was given ) unless
continued employment is a requirement for participation in any such benefit
plan), until the dispute is finally resolved in accordance with this Section
1(c).
(d)
The
term “Involuntary Termination” means the termination of the employment of the
Employee without the Employee’s express written consent or a material diminution
of or interference with the Employee’s duties, responsibilities and benefits as
these same duties, responsibilities and benefits exist the day prior to
the
Change the Change of Control, including (without limitation) any of the
following actions unless consented to in writing by the Employee: (1) a
requirement that the Employee be based at a place other than the Employee’s work
location immediately prior to the Change of Control or within 35 miles
thereof,
except for reasonable travel on Company business; (2) a material demotion
of the
Employee; (3) a material reduction in the number or seniority of other
Company
personnel reporting to the Employee or a material reduction in the frequency
with which, or in the nature of the matters with respect to which, such
personnel are to report to the Employee, other than as part of a Company-wide
reduction in staff; (4) a material adverse change in the Employee’s salary,
other than as part of an overall program applied uniformly and with equitable
effect to all members of the senior management of the Company; (5) a material
permanent increase in the required hours of work or the workload of the
Employee; (6) a material change in the reporting relationship to which
the
Employee reports prior to the Change of Control; or (7) a material increase
or
decrease in business responsibilities and duties, such that the Employee’s
qualifications as utilized prior to the Change of Control are no longer
consistent with the qualifications needed for the revised position. The
term
“Involuntary Termination” does not include Termination for Cause, termination of
employment due to retirement on or after the Employee attains age 65, death,
or
termination of employment by the Company due to Disability.
(e)
The
term “Notice of Termination” means a notice of termination of the Employee’s
employment pursuant to Section 4 of this Agreement.
(f)
The
terms “Termination for Cause” and “Terminated for Cause” mean termination by the
Company of the employment of the Employee because of (i) willful and continued
failure by the Employee substantially to perform his or her duties (other
than a
failure resulting from physical or mental illness) after a demand for
substantial performance is delivered to the Employee by the Chairman of
the
Board of Directors or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Employee has not substantially
performed his or her duties, (ii) the Employee’s willful dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation
of any
law, rule, regulation, or final cease-and-desist order, relating to the
Employee’s employment with the Company or otherwise interfering with the
Employee’s ability to carry out the duties of the employment, or material breach
of any provision of this Agreement or any employment agreement between
the
Company and the Employee; provided that no act or failure to act shall
be
considered “willful” unless done or omitted to be done by the Employee in bad
faith and without reasonable belief that the act or omission was in or
not
opposed to the beat interests of the Company. Any act or failure to act
based
upon authority pursuant to a resolution duly adopted by the Board of Directors
or upon the advice of counsel for the Company shall be conclusively presumed
to
be done or omitted to be done in good faith and in the beat interacts of
the
Company. The Employee’s attention to matters not directly related to the
business of the Company shall not provide a basis for Termination for Cause
if
the Board of Directors or the Chief Executive Officer of the Company has
approved the Employee’s engaging in such activities. The Employee shall not be
deemed to have been Terminated for Cause unless and until the Company has
delivered to the Employee a notice containing a resolution adopted by not
less
than three-quarters of the entire membership of the Board of Directors
at a
meeting called and held for the purpose, after reasonable notice to the
Employee
and opportunity for him to appear with counsel before the Board of Directors,
finding that in the good faith opinion of the Board of Directors the Employee
has engaged in conduct described in this Section 1(f) and specifying the
particulars in detail.
2.
Term.
The term of this Agreement shall be one year from the date first written
above,
provided that on each anniversary of such date, the term shall be extended
for
an additional year unless at least 90 days prior such anniversary, either
the
Company or the Employee gives notice to the other that the term of this
Agreement shall not be extended further, and provided further that
notwithstanding the delivery of any such notice, the term of this Agreement
shall be extended until the expiration of 24 months following the date
upon
which a Change in Control shall have occurred during the term of the Agreement
including extensions of the term pursuant to the first proviso of this
sentence.
3.
Severance Benefits.
(a)
In
the event of Involuntary Termination in connection with or within 24 months
after a Change in Control which occurs during the term of this Agreement,
the
Company shall, (1) pay to the Employee in a lump sum in cash within 25
business
days after the Date of Termination an amount equal to the sum of (i) the
Employee’s base salary for a period of 18 months at the rate of base salary in
effect on the date of the Change in Control or the Date of Termination,
whichever is greater, and (ii) the amount of the Employee’s prior year’s annual
bonus multiplied by a fraction with a numerator of the number of days which
have
elapsed through the Date of Termination in the fiscal year in which the
Date of
Termination occurs and a denominator of 365; (2) provide to the Employee
for 18
months following the Date of Termination, such health, dental and life
insurance
benefits as the Company maintained for the Employee at the Date of Termination
on terms as favorable to the Employee as applied at the Date of Termination,
or
at the election of the Employee (or, notwithstanding the election of the
Employee at the election of the Company if coverage under the Company’s group
plan is not available to the Employee) cash in an amount equal to the premium
cost being paid by the company with respect to the Employee for such benefits
immediately prior to the Date of Termination); (3) transfer to Employee
title to
the Company owned vehicle currently used by the Employee, if any, with
the
Company paying all coats, licensing fees and taxes (excluding income taxes)
associated with the transfer of title, or in the event the Employee receives
a
monthly cash car allowance in lieu of use of a Company vehicle, the Company
shall pay to the Employee pursuant to this paragraph an additional sum
equal to
18 times the greater of the monthly car allowance in effect on the date
of the
Change of Control or the Date of Termination; (4) and vesting of all of
Employee’s outstanding stock options and/or restricted stock awards with the
Company or its affiliates. The provision of any medical benefits under
this
Section 3(a) shall not extend to the period for the continuation of group
health
benefits under the COBRA health care continuation provisions of Section
601 of
the Employee Retirement Income Security Act of 1974 (“ERISA”( or other
applicable state laws. Nothing herein shall diminish the right of the Employee
to receive any earned and accrued bonus, on a pro rata basis, for the year
in
which Involuntary Termination occurs or to be compensated for accrued but
unused
vacation and sick time.
(b)
Notwithstanding any other provision of this Agreement, if the value and
amounts
of benefits under this Agreement, together with any other amounts and the
value
of benefits received or to be received by the Employee in connection with
a
Change in Control would cause any amount to be nondeductible by the Company
or
any of its subsidiaries for federal income tax purposes pursuant to Section
280G
of the Internal Revenue Code of 1986, as amended (the “Code”), then amounts and
benefits under this Agreement shall be reduced (not less than zero) to
the
extent necessary so as to maximize amounts and the value of benefits to
the
Employee without causing any amount to become nondeductible by the Company
or
its subsidiaries pursuant to or by reason of Section 280G of the Code.
The
Employee shall determine the allocation of such reduction among payments
and
benefits to the Employee.
(c)
Any
payments made to the Employee pursuant to this Agreement are subject to
and
conditioned upon their compliance with 12 U.S.C. §1828(k) and any regulations
promulgated thereunder.
4. Notice
of
Termination. In the event that the Company desires to terminate the employment
of the Employee without his consent during the term of this Agreement in
connection with or after a Change in Control has occurred, the Company
shall
deliver to the Employee a written notice of termination, stating (i) whether
such termination constitutes Termination for Cause, and, if so, setting
forth in
reasonable detail the facts and circumstances that are the basis for the
Termination for Cause, and (ii) specifying the Date of Termination. In
the event
that the Employee determines in good faith that he or she has suffered
Involuntary Termination of his employment, the Employee shall send a written
notice to the Company stating the circumstances that constitute Involuntary
Termination and the Date of Termination. No provision of this Agreement
shall be
construed as providing to the Employee any right to be retained as an employee
of the Company.
5. No
Mitigation. The Employee shall not be required to mitigate the amount of
any
salary or other payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
the
Employee as the result of employment by another employer, by retirement
benefits
after the date of termination or otherwise, except as expressly set forth
herein.
6. Attorneys
and/or Fees. If the Employee is purportedly Terminated for Cause or
Involuntarily Terminated and the Company denies payments and/or benefits
under
Section 3 of this Agreement on the basis that the Employee experienced
Termination for Cause rather than Involuntary Termination, but it is determined
by a court of competent jurisdiction or by an arbitrator pursuant to Section
14
that cause as contemplated by Section 1(f) of this Agreement did not exist
for
termination of the Employee’s employment, or if in any event it is determined by
any such court or arbitrator that the Company has failed to make timely
payment
of any amounts or provision of any benefits owed to the Employee under
this
Agreement, the Employee shall be entitled to reimbursement for all reasonable
costs, including attorneys’ fees, incurred in challenging such termination of
employment or collecting such amounts or benefits. Such reimbursement shall
be
in addition to all rights which the Employee is otherwise entitled under
this
Agreement.
7. No
Assignments.
(a) This
Agreement is personal to each of the parties hereto, and neither party
may
assign or delegate any of its rights or obligations hereunder without first
obtaining the written consent of the other party; provided, however, that
the
Company shall require any successor or assign (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all
of the
business and/or assets of the Company, by an assumption agreement in form
and
substance satisfactory to the Employee, to expressly assume and agree to
perform
this Agreement in the same manner and to the same extent that the Company
would
be required to perform it if no such succession or assignment had taken
place.
Failure of the Company to obtain such an assumption agreement prior to
the
effectiveness of any such succession or assignment shall be a breach of
this
Agreement and shall entitle the Employee to compensation from the Company
in the
same amount and on the same terms as the compensation pursuant to Section
3
hereof. For purposes of implementing the provisions of this Section 7,
the date
on which any such succession becomes effective shall be deemed the Date
of
Termination.
(b)
This
Agreement and all rights of the Employee hereunder shall inure to the benefit
of
and be enforceable by the Employee’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Employee should die while any amounts would still be payable
to
the Employee hereunder if the Employee had continued to live, all such
amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of
this Agreement to the Employee’s devisee, legatee or other designee or if there
is no such designee, to the Employee’s estate.
8. Notice.
For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to
have
been duly given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, to the Company at its home office,
to the
attention of the Board of Directors with a copy to the Secretary of the
Company,
or, it to the Employee, to such home or other address as the Employee has
most
recently provided in writing to the Company.
9. Amendments.
No amendments or additions to this Agreement hall be binding unless in
writing
and signed by both parties, except as herein otherwise provided.
10. Headings.
The headings used in this Agreement are included solely for convenience
and
shall not affect, or be used in connection with, the interpretation of
this
Agreement.
11. Severablility.
The provisions of this Agreement shall be deemed severable and the invalidity
or
unenforceability of any provision shall not affect the validity or enforceablity
of the other provisions hereof.
12. Governing
Law. This Agreement shall be governed by the laws of the United States
to the
extent applicable and otherwise by the laws of the State of
California.
13. Arbitration.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by non-binding arbitration in accordance with
the
rules of the American Arbitration Association then in effect. Judgment
may be
entered on the arbitrator’s award in any court having jurisdiction, and shall
include an award of attorneys’ fees and costs to the prevailing
party.
The
parties have executed this Agreement as of the day and year first above
written.
THIS
AGREEMENT CONTAINS A NON-BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED
BY
THE PARTIES.
ITLA
CAPITAL CORPORATION
/s/
Xxxxxx X. Xxxxxxxxxx
By:
Xxxxxx X. Xxxxxxxxxx
Its:
Chairman, President and Chief Executive Officer
EMPLOYEE
/s/
Xxxxxxx X. Xxxxxxxx
Xxxxxxx
X. Xxxxxxxx
