Exhibit 10.13
[EXECUTION COPY]
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of October 9, 1999, 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 00xx Xxxxxx, Xxxxxxxx, Xxxxxx 00000 and Xxxxxx X. Xxxxx, residing at
0000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxx 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently employed as an executive 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.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:
1. TERM OF EMPLOYMENT. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "Employment Term") commencing on October 9, 1999 (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. POSITION. (a) Executive shall serve as an Executive Vice
President of the Company.
(b) Executive shall report directly to the Chief Executive Officer
of the Company and shall have such duties and authority, consistent with his
position as shall be determined from time to time by the Chief Executive
Officer.
(c) During the Employment Term, Executive shall devote substantially
all of his business time, energy, skill and efforts to the performance of his
duties and responsibilities hereunder; provided, however, that Executive shall
be allowed to (i) engage in charitable activities and (ii) manage his personal
financial and legal affairs.
3. SIGNING BONUS AND BASE SALARY. (a) Subject to the execution of a
release and settlement agreement between Wilshire Financial Services Group Inc.
("WFSG") and Executive acceptable to WFSG, the Company will immediately pay to
Executive a signing bonus of $300,000, net of any withholding taxes. In
addition, in the event that the Company, through any material efforts of
Executive, sells, or receives bona fide bids for, the mortgage-backed securities
set forth on Exhibit 1 hereto (the "Mortgage-Backed Securities") by December 31,
1999 for a price which results, or would have resulted, in a net pre-tax profit
of $1.5 million, the Company will pay to Executive an additional signing bonus
of $200,000, net of any withholding taxes, immediately upon completion of such
sales or receipt of such bids (the "Additional Signing Bonus"). In the event
such sales result in (or such bids would have resulted in) a net pre-tax profit
of less than $1.5 million, such additional signing bonus shall be pro-rated
accordingly. The net pre-tax profit referred to above will be calculated using
the following methodology: The net pre-tax profit shall be the sales price (net
of expenses) received by the Company for the Mortgage-Backed Securities (or if
the Company decides not to sell, the sales price it would have received for the
Mortgage-Backed Securities based on the bona fide bids received by the Company)
less the lower of (a) $16 million less (i) any cash received by the Company in
respect of such Mortgage-Backed Securities from the time the Company purchased
the Mortgage-Backed Securities through the date of sale (or if the
Mortgage-Backed Securities are not sold, the date of the receipt of bona fide
bids), plus (ii) an amount equal to an annual accrual rate of 12% on the
purchase price of the Mortgage-Backed Securities from the time the Company
purchased the Mortgage-Backed Securities through the date of sale (or if the
Mortgage-Backed Securities are not sold, the date of the receipt of bona fide
bids) and (b) the actual price paid by the Company for the Mortgage-Backed
Securities less (x) any cash received by the Company in respect of such
Mortgage-Backed Securities from the time the Company purchased the
Mortgage-Backed Securities through the date of sale (or if the Mortgage-Backed
Securities are not sold, the date of the receipt of bona fide bids), plus (y) an
amount equal to an annual accrual rate of 12% on the purchase price of the
Mortgage-Backed Securities from the time the Company purchased the
Mortgage-Backed Securities through the date of sale (or if the Mortgage-Backed
Securities are not sold, the date of the receipt of bona fide bids). To the
extent that the Company does not purchase the Mortgage-Backed Securities, the
Company and Executive agree to negotiate in good faith another set of reasonably
achievable goals for Executive to earn the $200,000 additional signing bonus by
December 31, 1999.
(b) During the Employment Term, the Company shall pay Executive a
base salary at the annual rate of not less than $250,000.00. 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 September 30, 1999 (each, an "Annual Period"), Executive shall be
entitled to
receive an annual bonus (the "Bonus") equal to 15% 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, 20% of Pre-Bonus Earnings, (ii) if Post-Bonus XXX is 5%
or greater but less than 15%, 10% of Pre-Bonus Earnings, or (iii) 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, 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.
"POST-BONUS EARNINGS" means the Company's Pre-Bonus Earnings
after subtracting the after-tax amount of the Bonus Pool payable for
that Annual Period.
"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; provided, however, that
in determining Equity for purposes of this Section 4, Equity shall
be increased by the amount of unrealized losses which are shown on
the Company's balance sheet as of the beginning of the relevant
Annual Period under the heading "other comprehensive income or
loss". For example, if the Company's shareholders' equity as of
September 30, 1999 was $63.831 million and there was $20.658 million
of accumulated other comprehensive loss, then Equity would be
$84.489 million.
"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 Cash Flow Loan and any outstanding Excess
Advance (each 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"). Notwithstanding the foregoing, 3/8ths (or
$112,500) of the signing bonus of $300,000 (excluding the additional signing
bonus referred to above) will be deemed to be a payment by the Company to
Executive of that portion of the annual Bonus attributable to the fourth
calendar quarter of 1999; provided, however that (i) to the extent that
Executive would be entitled to receive less than $112,500 for that portion of
the annual Bonus attributable to the fourth calendar quarter of 1999, the annual
Bonus payable in November 2000 shall be determined as provided above less that
portion of the annual Bonus attributable to the fourth calendar quarter of 1999
(and not $112,500) and (ii) to the extent that Executive would be entitled to
receive more than $112,500 for that portion of the annual Bonus attributable to
the fourth calendar quarter of 1999, the annual Bonus payable in November 2000
shall be determined as provided above less $112,500. In addition, to the extent
that Executive would receive less than $112,500 for that portion of the annual
Bonus attributable to the fourth calendar quarter of 1999 or for the relevant
Annual Period, such $112,500 will be treated as a non-refundable, minimum
payment for such period and for the relevant Annual Period. To the extent that
Executive would receive more than $112,500 for that portion of the annual Bonus
attributable to the fourth calendar quarter of 1999, the Company will pay, and
allow Executive to draw against, any amount in excess of such $112,500 as
provided above.
(b) ADVANCES. Following 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 (i) 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, (ii) any advances available to Executive (whether or not
requested) during any quarterly period shall be applied to repay any outstanding
Cash Flow Loan, and (iii) any such advance shall not exceed $100,000 per
quarter. Any such advances shall be treated as advances of Executive's bonus and
shall not bear interest. 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) 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) CASH FLOW LOAN. To provide Executive with a minimum amount of
cash flow at the end of each Annual Period and to the extent Executive did not
receive an annual Bonus of at least $500,000 for such period, Executive may
borrow (a "Cash Flow Loan") from the Company on the date his annual Bonus is
paid (the "Bonus Payment Date") up to the after-tax equivalent (assuming a tax
rate of 40%) of the difference between (i) $500,000 and (ii) actual annual Bonus
payable for the Annual Period just ending; provided, however that (x) the
proceeds of any new Cash Flow Loan shall be used first to repay any outstanding
Cash Flow Loan and then to any outstanding Excess Advance and (y) the
outstanding amount of any Cash Flow Loan shall not exceed $300,000 at any time.
The Cash Flow Loan shall be considered a draw on Executive's next Bonus. Except
if Executive is terminated, the Cash Flow Loan shall mature on the next Bonus
Payment Date and shall not bear interest. If Executive is terminated, the Cash
Flow Loan shall mature as provided in Section 8 and shall accrue interest on the
then outstanding principal amount of the Cash Flow Loan from the date of
termination until maturity at a rate equal to the prime rate as published in the
Wall Street Journal on the date of termination, payable annually in arrears.
(d) OPTIONS. The Company shall grant to Executive stock options (the
"Initial Options") on 210,000 shares of the Company's common stock (the "Common
Stock") under the Company's Incentive Stock Plan (the "Incentive Stock Plan").
The Initial Options shall 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 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 this
Agreement (which will result in the Initial Options being fully vested on the
fourth anniversary of this Agreement). 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.
(e) 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. Executive acknowledges that the aforementioned items may be included as
compensation for income tax purposes to the extent required by applicable law.
To the extent permitted under applicable law, the Company shall not treat as
compensation to Executive fringes and perquisites provided to Executive or the
items under Section 6 below.
(b) During the Employment Term, the Company agrees 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 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 Loan at the end of such annual
period). The Stock Purchase Loans will be full recourse loans against Executive
and each 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 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 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; (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 (except to the
New York City area); (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) 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 (vii) 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 (vii) 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
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 direction of the Chief Executive Officer, 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 Chief
Executive Officer; (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. 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
Executive's spouse; (ii) the Estimated Annual Bonus for the fiscal year of
Executive's death, pro rated through the end of month in which Executive died,
which bonus shall be paid to Executive's spouse 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 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 Executive's
spouse, or if she shall predecease him, then to Executive's children (or their
guardian if one is appointed) in equal shares; (vi) any outstanding Cash Flow
Loan shall be repaid over five years in five fully amortizing annual
installments, with the first installment becoming due and payable on the first
anniversary of the date of termination; (vii) any outstanding Advance
Reimbursement Loan shall mature as provided in Section 4; (viii) any outstanding
Stock Purchase Loan shall become due and payable six months after the date of
termination, (ix) 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) years, and (x) the payment of the Additional
Signing Bonus if the conditions for payment of the Additional Signing Bonus are
met. 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: (A) in a lump sum within ten (10) business days after such termination
(i) the Estimated Annual Bonus payable to Executive for the Annual Period, pro
rated through the end of month in which Executive is terminated, which bonus
shall be paid within 45 days after such month end, (ii) any unreimbursed
business expenses payable pursuant to Section 6, (iii) 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 (iv) the payment of the Additional Signing Bonus if the
conditions for payment of the Additional Signing Bonus are met; (B) accelerated
full vesting under all outstanding equity-based and long-term incentive plans
with Options remaining outstanding as provided under the applicable stock option
plan and a pro rata payment under any long term incentive plans based on actual
coverage under such plans payment being made at the time payments would normally
be made under such plans; (C) subject to Section 10 hereof, any other amounts or
benefits due Executive under the then applicable employee benefit plans of the
Company as shall be determined and paid in accordance with such plans, policies
and practices; (D) one (1) year of additional service and compensation credit
(at his then compensation level) for pension purposes under any defined benefit
type qualified or nonqualified pension plan or arrangement of the Company,
measured from the date of termination of employment and not credited to the
extent that Executive is otherwise entitled to such credit during such 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);
(E) 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); (F) any
outstanding Cash Flow Loan shall be repaid over five years in five fully
amortizing annual installments, with the first installment becoming due and
payable on the first anniversary of the date of termination; (G) any outstanding
Advance Reimbursement Loan shall mature as provided in Section 4; (H) any
outstanding Stock Purchase Loan shall become due and payable six months after
the date of termination; and (I) 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 (I) 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
Cash Flow Loan shall be repaid over five years in five fully amortizing annual
installments, with the first installment becoming due and payable on the first
anniversary of the date of termination; 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 after 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.
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 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 an officer of the Company, or is or was
serving at the request of the Company as an officer, member, employee, fiduciary
or agent of another corporation or of a partnership, joint venture, trust, other
enterprise or non-profit organization, including, without limitation, service
with respect to employee benefit plans, whether or not the basis of such
Proceeding is alleged action in an official capacity as an officer, member,
employee, fiduciary or agent while serving as an officer, member, employee,
fiduciary or agent, he shall be indemnified and held harmless by the Company to
the fullest extent authorized by 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,
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.
(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 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 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.
14 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 cost of the American Arbitration Association and the
arbitrator, shall be borne by the Company.
15 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.
(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.
(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.
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 as general partner for
WILSHIRE REAL ESTATE PARTNERSHIP L.P.
By: /s/ __________________________________
Name:
Title:
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
