EXHIBIT 10.12
6/29/96
EMPLOYMENT AGREEMENT
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This Employment Agreement is made the 1st day of July, 1996, by and
between CB Commercial Mortgage Company, Inc., a Delaware corporation (the
"COMPANY") and Xxxxxxxx X. Xxxxxx (the "EXECUTIVE").
RECITALS
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Whereas Executive was a principal owner and an executive officer of
X.X. Melody & Company, a Texas corporation ("LJMCO") and X.X. Xxxxxx of
California, a Texas corporation ("LJMCAL"), each of which has been in the
business of real estate loan originations, real estate loan servicing and
pension advisory/asset management services; and,
Whereas Executive, who is a highly respected and experienced
individual in the mortgage banking area of loan originations, loan servicing and
pension advisory/asset management services, has sold his interests in LJMCo and
LJMCal to the Company (the "ACQUISITION") pursuant to two separate Stock
Purchase Agreements, each dated as of June 27, 1996 (the "STOCK PURCHASE
AGREEMENTS"), subject to the condition that he become an executive of the
Company and, following the merger of the Company with and into LJMCo that he
remain an executive of LJMCo; and,
Whereas CB Commercial Real Estate Group, Inc., a Delaware corporation
("CB COMMERCIAL"), the parent corporation of the Company, has transferred and
contributed, or within thirty (30) days after the date hereof will transfer and
contribute, its real estate loan origination and servicing business to LJMCo for
consolidation with the similar businesses of LJMCo and LJMCal.
AGREEMENT
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Now therefore, the parties hereto hereby agree as follows:
SECTION I. POSITION AND REPORTING RELATIONSHIP
On the terms and conditions set forth herein, the Company agrees to employ
Executive as its President and Chief Executive Officer and Executive agrees to
be so employed on a full-time basis. Executive shall not (a) render services
which are competitive to the real estate loan origination, loan servicing and
pension advisory/asset management services business of the Company to any other
person or entity (other than an Affiliate of the Company) or (b) engage in any
other active business endeavor (as distinguished from investments and other
activities referred to below) that diverts any significant time from the
business of the Company or performance of Executive's duties pursuant to this
Agreement, in either case without the express prior approval of the Company's
Board of Directors or the Chief Executive Officer of CB Commercial. The
foregoing notwithstanding, the Company
understands and agrees that Executive may engage in civic, charitable, religious
or comparable activities and may devote a reasonable amount of time to private
investments that are not competitive with and do not unreasonably interfere or
conflict with Executive's responsibilities to the Company.
Executive shall report to the Board of Directors of the Company and
the Chief Executive Officer of CB Commercial.
SECTION II. EXECUTIVE'S REQUIRED WORK; EXECUTIVE'S JOB DESCRIPTION AND
GOALS
A. REQUIRED WORK. Executive shall work on the business of the Company on
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a "FULL TIME BASIS," which for purposes hereof shall mean such time as Executive
determines, in his own judgment, to be necessary to discharge his duties under
this Agreement. Executive shall perform his responsibilities to the Company in
good faith, without engaging in activities which he knows would be in conflict
or be competitive with the real estate loan origination, loan servicing and
pension advisory and asset management services business of the Company, and will
not render his services to any other person or entity (other than an Affiliate
of the Company) for such person's or entity's business except as approved by the
Company's Board of Directors or the Chief Executive Officer of CB Commercial and
except that Executive may engage in civic, charitable, religious or comparable
activities and may devote a reasonable amount of time to investments that are
not competitive with and do not unreasonably interfere or conflict with
Executive's responsibilities to the Company).
B. EXECUTIVE'S JOB DESCRIPTION AND GOALS. Generally, Executive shall
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fulfill responsibilities with the Company comparable to those which he performed
previously for LJMCo and/or LJMCal, with the objective of sustaining and
increasing the business and profitability of the Company. In discharge of his
responsibilities, Executive shall:
(1) INTEGRATION. Use his best efforts to cause the integration, on a
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cost-effective basis, of the real estate loan origination and real estate loan
servicing businesses of LJMCo, LJMCal and CB Commercial. On a combined basis
for 1995, such companies produced a pre-tax return of approximately 9.3% on $20
million of combined revenues, without adjustment for the excluded costs referred
to below and without taking into account the changes in personnel and offices to
be completed pursuant to the Merger Agreement. One of the goals which Executive
and Company mutually agree that the Company should pursue is to seek to attain,
over time, a pre-tax income for the Company (computed before CB Commercial and
other allocated overhead, loan amortization and Executive's incentive
compensation) of at least 20% of the Company' s revenues.
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(2) NEW LOAN SOURCES. Use his best efforts to develop loan sources
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which (a) will help to permit the establishment of the network described below
in this Section and (b) will help to serve the needs of the clients of the
Investment Properties Division of CB Commercial, with particular emphasis on
loan sources for loans in the $1,000,000 to $5,000,000 range. In working to
develop such loan sources, Executive will use reasonable efforts to work closely
with the head of the Investment Properties Division of CB Commercial.
(3) DIRECTIVES OF BOARD OF DIRECTORS. Use reasonable efforts to carry
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out the lawful directives of the Board of Directors of the Company and the Chief
Executive Officer of CB Commercial from time to time.
(4) ESTABLISHMENT OF ORIGINATION NETWORK. To the extent funds for
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such purposes are provided by the Company, use his best efforts to establish on
or before December 31, 1998, a loan origination network which has offices in
each of the cities set forth on Exhibit A; provided, however, Executive shall
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have no obligation to establish an office in any location which in his
reasonable judgment cannot both access multiple competitive loan sources on a
reasonable basis and employ high quality, experienced loan producers, unless the
cost of such office is borne by someone other than the Company; and provided
further Executive shall have no obligation to establish an office in any
location in which he reasonably concludes an acquisition of an existing mortgage
banking business should be made rather than the Company establishing a "start-
up" office in such city.
(5) BUSINESS DEVELOPMENT/CLIENT RELATIONS. Spend such time and
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energies as Executive considers appropriate in maintaining contact and working
relations with existing clients (borrowers and lenders) of the Company and in
efforts to expand the business of the Company with prospective borrowers or
lenders with which the Company seeks to do business.
SECTION III. EXECUTIVE'S AUTHORITY
Subject to the applicable limitations referred to in Section IV, as the
Chief Executive Officer of the Company, Executive shall have all authority
reasonably appropriate to that position, including the authority to:
A. manage the day-to-day activities of the Company;
B. fulfill his duties under this Agreement including the right to hire
and fire employees and other service providers and, subject to applicable law,
the right to establish compensation levels (hourly wage, salary, commissions and
incentives) and other terms and conditions of engagement for all employees and
service providers of the Company, subject to any compensation decision by
Executive not being contrary to or inconsistent with
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any compensation plan, policy or limitation adopted by the Company's Board of
Directors and communicated to Executive;
C. sign agreements, including real and personal property leases and other
documents on behalf of the Company, in the ordinary course of business; and
D. subject to Section II.B.2. (New Loan Sources), select the lending
sources used by the Company to provide borrowers with funds to acquire, improve
or refinance real property related projects.
SECTION IV. LIMITATIONS ON EXECUTIVE'S AUTHORITY
Executive shall not take any action which is materially contrary to or
inconsistent with any operating or capital budget or other limitation adopted by
the Company's Board of Directors and communicated to Executive. Executive shall
not, in the course of his employment, take any action or omit to take any action
which is contrary to Executive's duties under this Agreement, or any code of
conduct applicable to all senior executive officers in CB Commercial and its
major subsidiaries, as any such code of conduct may be established by the
Company's Board of Directors and communicated to Executive from time to time.
SECTION V. TERM
Unless earlier terminated pursuant to an express provision in this
Agreement, this Agreement shall be in effect from July 1, 1996 through June 30,
2001 (the "Term").
SECTION VI. COMPENSATION, INCENTIVE COMPENSATION AND EMPLOYEE BENEFITS
A. SALARY. During the Term of this Agreement and thereafter while an
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employment relationship (as defined in Section VII.H. hereof) continues to
exist, Employee shall receive a salary of $25,000 per month (payable semimonthly
in accordance with the Company's regular payroll procedures) plus a car
allowance of $1,000 per month (such salary and car allowance are collectively
referred to as the "BASE SALARY"); however, Company shall not be obligated to
continue paying such Base Salary for any period after this Agreement is
terminated for other cause pursuant to Section VII.A.2. hereof. The Board of
Directors of the Company will review Executive's Base Salary at least annually
and may increase or decrease the monthly salary and car allowance of Executive
upon each such annual review for the coming year, but in no event shall the sum
of such items be less than the initial $26,000 monthly Base Salary stated in
this paragraph.
B. INCENTIVE COMPENSATION. Executive shall be entitled to incentive
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compensation ("INCENTIVE COMPENSATION") for each year
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during the Term of this Agreement equal to ten percent (10%) of the Company's
Adjusted Pre-Tax Profits provided he is employed by the Company on December 31
of such year, and in certain cases as herein expressly provided Executive shall
be entitled to receive a pro rated percentage of such incentive compensation for
a partial year. Such incentive compensation for any year shall be paid on or
before March 15 of the next following year. The term "ADJUSTED PRE-TAX PROFIT"
means the annual pre-tax net income of the Company determined under generally
accepted accounting principles, consistently applied throughout the Term,
without deducting any of the items listed in paragraph 1. below but after
deducting all of the items listed in paragraph 2. below:
1. Items Not To Be Deducted In Determining Executive's Incentive
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Compensation. The following items shall not be deducted in calculated
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Adjusted Pre-Tax Profit:
a. Executive's incentive compensation;
b. Payments to and/or accruals of any employee equity
equivalent or other profit sharing arrangement established
as contemplated by Section 9.7 of the Merger Agreement
relating to the Acquisition;
c. Any amortization (or other cost) associated with goodwill
relating to the Acquisition of LJMCo or LJMCal by the
Company;
d. Any interest on any debt associated with or fees paid for
any letter of credit obtained in connection with the
Acquisition of LJMCo and LJMCal by the Company;
e. Any expenses or one time costs related to the Acquisition of
LJMCo or LJMCal by the Company, including, without
limitation, legal fees, accounting fees, travel costs,
filing fees, employee termination costs, office closing or
consolidation costs, and other costs of the Acquisition and
the combination of the Company's and CB Commercial's real
estate loan origination and servicing operations;
f. Except as provided in subparagraph 2.d. below, any
centralized costs or overhead allocations of CB Commercial
or any of its Affiliates otherwise allocated to the Company;
and
g. Any costs of key man or similar life insurance on the life
of Executive purchased by the Company after the date hereof
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(including any policy obtained pursuant to Section 9.12 of
the LJMCO Stock Purchase Agreement).
2. Items To Be Deducted For Determining Executive's Incentive
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Compensation. The following items shall be deducted in calculating
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Adjusted Pre-Tax Profit:
a. The actual cost to CB Commercial of providing employee
benefits to the employees of the Company (other than as
provided in subparagraphs 1.a. and 1.b. above);
b. Interest on working capital provided by CB Commercial which
is reasonably required for the successful operation of the
Company and not available from cash flow from Company
operations, but the rate of such interest shall not exceed
the rate charged to CB Commercial by its principal lender
(currently, The Sumitomo Bank, Ltd.);
c. Interest, goodwill amortization and expenses associated with
any acquisition made by the Company (subject to the
limitations on future acquisitions as provided in Section
9.8 of the LJMCO Stock Purchase Agreement) other than the
Acquisition of LJMCo and LJMCal;
d. 1.5% of the Company's revenues in excess of $20.5 Million,
as the only allocation of overhead and central costs of CB
Commercial and any of its Affiliates; and
e. The actual cost to CB Commercial of providing the Company
with liability, errors and omissions and other insurance,
the actual cost of providing the Company with accounting
services and the actual cost of any other goods or services
provided to the Company by CB Commercial at the Company's
express request and with the approval of Executive.
With respect to 1996 only, in computing the Adjusted Pre-Tax Profits,
loan origination fees attributable to CB Commercial producers with respect to
loans which were committed or under application on or before June 30, 1996 and
which close on or before July 31, 1996, shall be excluded from revenue, but all
other loan origination fees attributable to CB Commercial producers shall be
included in revenue in computing Adjusted Pre-Tax Profits.
C. EMPLOYEE BENEFITS. In addition to his participation in the Company's
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benefit and other plans available to selected
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officers in the Company (such as the employee equity equivalent plan), Executive
shall be entitled to participate in each employee pension, welfare, fringe
benefit and deferred compensation plan (but not any bonus or incentive
compensation plans) (such pension, welfare, fringe benefit and deferred
compensation plans being herein referred to as the "EMPLOYEE BENEFIT PLANS")
available to Senior Executive Vice Presidents of CB Commercial, but subject to
the terms and conditions of each such plan and applicable legal requirements.
D. MEMORIAL CITY SHOPPING CENTER FEE. Within ten (10) days after all or
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any part of a fee is collected by X.X. Xxxxxx & Company or Company with respect
to Memorial City Shopping Center, the Company or X.X. Melody & Company shall pay
to Executive thirty-five percent (35%) of such fee so collected, whether or not
Executive is then employed by the Company or X.X. Xxxxxx & Company and
regardless of the cause for termination of such employment. The fee payable
under this paragraph is separate and distinct from Base Salary and incentive
compensation provided for herein and shall not be taken into account for
purposes of any severance benefits payable under Section VIII hereof.
SECTION VII. TERMINATION
A. COMPANY'S RIGHT WITH CAUSE.
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1. Material Cause. The Company may terminate Executive's employment
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and his employment relationship hereunder at any time, upon notice to
Executive (and after an opportunity to cure as provided in Section VII.I.
hereof) provided it has Material Cause (as defined in Section IX.A.) for
such termination. In the event of termination by the Company for Material
Cause, Executive's sole rights for Claims (as herein defined) under this
Agreement as a result of such termination of employment shall be as set
forth in Section VIII.A. (Accrued Salary and Benefits).
2. Other Cause. If no Material Cause for termination of the
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employment relationship exists, Company may nevertheless terminate
Executive's employment by the Company at any time, upon notice (and after
opportunity to cure as provided in Section VII.I. hereof), if in Company's
good faith judgment Executive has failed to comply with his duty of loyalty
to the Company or has failed to use his best or reasonable efforts (as
specified in Section II hereof) to discharge the duties and
responsibilities and/or reach the goals set under Section II.B.
(Executive's Job Description and Goals) or Executive exceeds his authority
under Article III (Executive's Authority). Without limiting the generality
of the foregoing, Company may terminate Executive's employment pursuant to
this Agreement (without terminating his employment relationship) if
Executive commits any material breach of his obligations under Section I.
(Position and Reporting Relationship),
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Section II.B.(3) (Directives of Board of Directors), Section IV.
(Limitations on Executive's Authority) or Section X. (Proprietary
Information) of this Agreement or if Executive repetitively and willfully
breaches any such obligations whether or not each such breach is material.
A failure to achieve any of the goals described in subparagraphs (1), (2)
or (4), Section II.B. (Executive's Job Description and Goals) shall not
constitute a breach of this Agreement by Executive, and Executive's failure
to perform any of his duties under Section II to the satisfaction of the
Board of Directors of the Company shall not constitute Material Cause.
B. COMPANY'S RIGHT WITHOUT CAUSE. The Company may terminate Executive's
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employment hereunder, without impact on the continued existence of Executive's
employment relationship hereunder, without Material Cause or without other cause
as provided above in Section VII A.2. (Other Cause) upon notice to Executive;
however such termination shall be deemed a breach by Company hereof and require
the payment of severance benefits pursuant to Section VIII. A. and C
(Termination Without Terminating Employment Relationship).
C. EXECUTIVE'S RIGHT WITH GOOD REASON. Executive may terminate his
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employment hereunder at any time upon notice to the Company (and after an
opportunity to cure as provided in Section VII.I. below) with Good Reason (as
defined in Section IX. B.) upon notice to the Company. In such event Executive
shall be entitled to severance benefits pursuant to Section VIII. A. and C.
D. EXECUTIVE'S RIGHT WITHOUT GOOD REASON. Executive may terminate his
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employment hereunder without Good Reason at any time upon notice to the Company,
but in such event he shall be deemed to be in breach of this Agreement and in
such case Company's sole obligation shall be to make the payments accrued under
Section VIII.A. hereof and Company shall not be obligated to pay and Executive
shall not be entitled to receive any then unpaid incentive compensation for the
year in which such termination occurs.
E. DEATH. Executive's employment hereunder shall automatically terminate
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in the event of his death. In such event Executive shall be entitled to
severance benefits as provided in Section VIII. A. and B, with incentive
compensation for the year in which death occurs prorated to the date of death.
F. DISABILITY. The Company may terminate Executive's employment pursuant
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to this Agreement at any time upon 30 days' written notice to Executive if as a
result of a physical or mental condition, Executive has been unable, with
reasonable accommodation provided by the Company, for a period of three
consecutive months and will continue to be unable for an additional period
exceeding six consecutive months to
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substantially perform his duties and obligations under Section II. A. (Required
Work) of this Agreement. In such event, Executive shall be entitled to
severance benefits as provided in Section VIII. A. and B, with incentive
compensation for the year in which termination occurs prorated to the date of
termination under this provision.
G. GENERAL. Regardless of whether or not expressly so stated in this
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Agreement, in the event of any termination of Executive's employment or
termination of this Agreement, Sections VIII., IX., X., XI., XII., and XIII.
shall survive such termination for the full Term of this Agreement.
H. EMPLOYMENT RELATIONSHIP. For all purposes of this Agreement,
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Executive shall have and be deemed to have an "EMPLOYMENT RELATIONSHIP" with the
Company as of the date of execution and delivery of this Agreement, and such
relationship shall continue or be deemed to continue, even after termination of
Executive's employment, unless this Agreement is terminated by Company for
Material Cause or by Executive pursuant to Section VII.D. without Good Reason.
I. OPPORTUNITY TO CURE. For purposes of Section VII.A.1, VII.A.2 and
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VII.C., Executive or the Company (a) shall have the right to cure if within a
period not to exceed 60 days he or it is reasonably likely to be able to restore
the other party to substantially the same position it would have been in but for
the act or omission which established, as applicable, Material Cause, other
cause or Good Reason and (b) shall be considered to have cured only if in fact
within such 60 day period the other party is restored to substantially the same
position it would have been in but for such act or omission.
SECTION VIII. REMEDIES; SEVERANCE BENEFITS
In the event of any termination of Executive's employment by the
Company or Executive pursuant to any provision of this Agreement, Executive's
sole remedies for termination of his employment shall be as set forth in this
Section VIII, subject to the Company's performance of its obligations under this
Agreement, including making all payments and providing all benefits required
pursuant to this Section VIII. Such payments shall be in full satisfaction of
any claims, liabilities, demands or causes of action directly or indirectly
arising out of Executive's employment by the Company (whether based upon legal
theories of contract, tort or otherwise), other than claims which had no
material relationship to the Company's decision to terminate Executive's
employment pursuant to Section VII.A. or B. or Executive's decision to terminate
employment pursuant to Section VII.C. (such claims relating to termination of
Executive's employment are collectively referred to herein as "CLAIMS") that
Executive may have against the Company, or any Affiliate of the Company or any
director, officer, employee or agent of the Company or any Affiliate of the
Company, for
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termination of Executive's employment. In such event, Executive shall be deemed
to have waived any other rights or remedies which he might otherwise have with
respect to such Claims; however, Executive's waiver of Claims shall not alter
Executive's rights or relieve Company and its Affiliates of their duties,
obligations and liabilities under the Stock Purchase Agreement and the Notes
given to consummate the Acquisition.
A. ACCRUED SALARY AND BENEFITS. If Executive's employment is terminated
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pursuant to any provision of this Agreement, Executive shall be paid any Base
Salary earned to the date of the termination and shall be entitled to receive
any benefits payable under the terms of the Company's Employee Benefit Plans
which are payable as a result of his employment termination or for reasons
unrelated to his termination. Executive's waivers herein shall not constitute a
waiver of benefits and rights generally available under applicable law upon
termination of employment (e.g., COBRA rights and similar benefits).
B. DEATH OR DISABILITY. If Executive's employment is terminated pursuant
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to Section VII.E. (Death) or VII.F. (Disability), then in addition to the
amounts due under Section VIII.A. above, Executive (or his heirs or
representative) shall be paid incentive compensation pursuant to Section VI.B.
which is payable with respect to the year in which the termination occurs on a
pro rated basis (which shall mean the amount computed as incentive compensation
for the whole year, as though Executive's employment had not been terminated,
multiplied by a fraction representing the portion of the year to the date of
termination of Executive's employment).
C. TERMINATION WITHOUT TERMINATING EMPLOYMENT RELATIONSHIP. If
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Executive's employment hereunder is terminated pursuant to Section VII. B.
(Company's Right Without Cause) or C. (Executive's Right With Good Reason), then
in addition to the amounts due under Section VIII.A. above, Executive shall be
entitled to a lump sum cash severance payment equal to:
1. If the termination occurs prior to July 1, 1997, $43,750
multiplied by the difference between (a) the number of calendar months
elapsed from July 1, 1996 to the date of the termination and (b) thirty-
six;
2. If the termination occurs on or after July 1, 1997, but prior to
July 1, 2000, an amount equal to $25,000 multiplied by the number of months
from the date of termination to June 30, 2001, but not more than $600,000,
plus the greater of (a) twice his incentive compensation pursuant to
Section VI. B. (Incentive Compensation) for the calendar year preceding the
year of termination and (b) twice the incentive compensation he would have
received pursuant to Section VI. B. (Incentive Compensation) for the year
of the termination if the termination had not occurred; or
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3. If the termination occurs on or after July 1, 2000, the sum of:
(a) $25,000 multiplied by the number of months (and prorated for
any partial months) between the date of such termination and July
1, 2001;
(b) a fraction, with numerator equal to the number of months
elapsed from July 1, 2000 to the date of such termination and a
denominator of 12, multiplied by the greater of (i) his incentive
compensation pursuant to Section VI.B. (Incentive Compensation)
for the calendar year preceding the year of termination and (ii)
the incentive compensation he would have received pursuant to
Section VI.B. (Incentive Compensation) for the year of the
termination if the termination had not occurred.
Each amount payable pursuant to any provision of this Section VIII. C. shall be
paid within 15 business days after such amount can reasonably be determined (and
in the case of 2 and 3 above, the minimum known at time of termination shall be
so paid, with subsequent adjustment if a greater amount is due under such
provisions) unless a dispute exists with respect to such amount and an
arbitration proceeding has been commenced pursuant to Section XII. with respect
to such dispute; however, in lieu of such cash payment promptly following
determination, Company may pay such sums at the times payments would have been
payable under this Agreement if it had not been terminated if the full amount of
such payment obligation is secured by an irrevocable letter of credit in form
and substance and issued by a bank satisfactory to Executive in his sole
discretion (and in such case, Executive may draft on such letter of credit if
Company fails to make a subsequent payment when due or fails to renew such
letter of credit at least 15 business days prior to expiration).
D. TERMINATION BY COMPANY FOR MATERIAL CAUSE OR BY EXECUTIVE WITHOUT GOOD
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REASON. If Executive's employment and employment relationship are terminated by
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the Company pursuant to Section VII.A.1. (Material Cause) or Executive pursuant
to Section VII.D. (without Good Reason), then Executive shall be entitled to
receive the accrued payments under Paragraph A above, but shall not receive any
unpaid incentive compensation for the year in which termination occurs or
receive any severance payment under Section VIII.C. above.
E. TERMINATION FOR OTHER CAUSE. If Executive's employment is terminated
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by the Company pursuant to Section VII.A.2. (Other Cause), then Executive shall
be entitled to receive the accrued payments under Paragraph A above, but shall
not be entitled to any unpaid incentive compensation for the year in which
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termination occurs and shall not receive any severance payment under Section
VIII.C. above.
F. COMPANY'S REMEDIES. In the event of any failure of Executive to
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perform under this Agreement or any termination of Executive's employment by
Company or Executive pursuant to this Agreement, Company's sole remedies (in
addition to termination of Executive's employment) shall be to obtain specific
performance or injunctive relief for any violation of the terms of Section X
hereof and, solely in the event of termination for Material Cause, to cancel
certain contingent notes issued by the Company in connection with the
Acquisition of LJMCo stock pursuant to the LJMCO Stock Purchase Agreement.
SECTION IX. DEFINITIONS
A. MATERIAL CAUSE. The Company shall have "MATERIAL CAUSE" pursuant to
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Section VII.A.1. hereof to terminate both Executive's employment hereunder and
Executive's employment relationship if:
1. Executive commits a material breach of his obligation to work for
the Company in good faith on a full time basis, as provided in Section
II.A.1.;
2. Executive commits a material breach of the Covenant Not To
Compete attached hereto as Exhibit B;
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3. Subject to the limitations and exceptions (for up to $100,000 of
liabilities) contained in Section 11.2 of the LJMCO Stock Purchase
Agreement, Executive commits a material breach of the LJMCO Stock Purchase
Agreement (such a breach shall be deemed cured if Executive pays to the
Company the damages which the Company has suffered as a result of the
breach); or
4. Executive is convicted (a plea of nolo contendere shall be deemed
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to be a conviction) of fraud, violation of state or federal securities law
or violation of any other law where such conviction would or would be
reasonably likely to materially and adversely affect the Company's
relationship with its clientele if Executive's employment were to continue;
and
any of the foregoing events shall continue after Executive's right to cure
period pursuant to Section VII.I. hereof.
The existence of Material Cause must be confirmed by a written notice
provided to Executive and signed by a majority of the members of the Board of
Directors, setting forth the act, or acts, upon the basis of which the majority
of the Board of Directors has confirmed the existence of Material Cause.
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B. GOOD REASON. Executive shall have "GOOD REASON" to terminate his
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employment under this Agreement if:
1. The Company (a) commits any material breach of any of its
material obligations under this Agreement or (b) repetitively breaches such
obligations whether or not each breach is material.
2. The Company or any of its Affiliates commits a material breach of
any of its obligations to Executive under the Stock Purchase Agreements
relating to the Acquisition of LJMCo or LJMCal, including any breach of any
promissory note, guaranty or other agreement which is an exhibit to or is
referred to in such Stock Purchase Agreements.
3. The Company, CB Commercial or CB Commercial Holdings, Inc.
voluntarily files a bankruptcy or insolvency proceeding or is adjudicated
bankrupt or insolvent in an involuntary proceeding.
4. Executive is removed as or is not elected a director of the
Company.
5. Without Executive's express consent, the location of the
Company's principal place of business is changed from the greater Houston,
Texas area.
6. Executive's title (President and Chief Executive Officer) is
changed.
7. Executive's job responsibilities are changed in a material way
unless such change is reasonably attributable to Executive's material lack
of performance hereunder whether or not such lack of performance
constitutes other cause for termination pursuant to Section VII.A.2.
SECTION X. PROPRIETARY INFORMATION
A. "PROPRIETARY INFORMATION" includes all information and any idea in
whatever form, tangible or intangible, pertaining in any manner to the business
of the Company, CB Commercial or any person directly or indirectly controlled
by, in control of or under common control with the Company or CB Commercial
(collectively, the "CBC GROUP"), unless (1) the information is or becomes
publicly known through lawful means, (2) the information was rightfully in
Executive's possession or part of his general knowledge prior to his employment
by the Company and did not come into his possession or knowledge as a result of
his position as a shareholder or executive of LJMCo or LJMCal or (3) the
information is subsequently disclosed to Executive by a third party without
Executive's knowledge of a breach of any agreement and without restriction of
its use. Executive acknowledges and agrees that he has acquired, and is likely
to continue to acquire by virtue of his employment with the Company and his
previous
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positions with LJMCo and LJMCal, extensive Proprietary Information regarding the
CBC Group's products, costs, finances, operations, business plans and
strategies, marketing strategies and methods, customer base and prospective
customers, customer preferences and contact persons, and the identities and
roles of the key employees of the CBC Group.
Executive agrees to hold all Proprietary Information in confidence and
not to directly or indirectly disclose, use, copy, publish, summarize or remove
from the CBC Group's premises any Proprietary Information, except (1) during the
term of this Agreement to any extent necessary to carry out Executive's
responsibilities under this Agreement, including the use of Proprietary
Information at Executive's home or while traveling, and (2) after the
termination of this Agreement as specifically authorized in writing by the
President or Chief Executive Officer of CB Commercial. In the event of any
termination of Executive's employment by the Company, or at any time upon the
Company's request, Executive shall return immediately to the Company all
Proprietary Information held by Executive wherever it may be located.
B. NON-SOLICITATION. In consideration of the engagement of his services
----------------
and the compensation and benefits accorded him as described in this Agreement,
and acknowledging and agreeing that he could not undertake the following
activities without necessarily benefiting from and making use of Proprietary
Information, Executive covenants and agrees that, during his employment
hereunder and during the Restricted Period after his employment terminates for
any reason, he shall not, for himself or any third party, directly or indirectly
(1) solicit the real estate loan or mortgage servicing business of, or otherwise
interfere with the Company's relationship with, any person who at any time
during the eighteen (18) months preceding the date of the termination was a
lender or a borrower in a transaction in which the Company received 50% or more
of the fees or for whom the Company was servicing one or more loans on the date
of termination or (2) employ or solicit for employment any person currently
employed by the CBC Group or within the last year preceding any such action has
been employed by the CBC Group who has (or during such preceding year had) an
active role with respect to the real estate loan or mortgage servicing business
of the Company on the date Executive's employment hereunder terminates.
The term "RESTRICTED PERIOD" means the period determined from the
following chart:
Reason for Termination Restricted Period
---------------------- -----------------
Any termination by Executive for None
Good Reason or by the Company
without Cause
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Any termination by Executive other Until the later to
than for Good Reason or by the occur of the 3rd
Company with Cause Other than Anniversary of the
Material Cause or by the Company Date of this Agreement
for Disability or 24 months from the
date of termination,
but not later than the
5th Anniversary of the
Date of this Agreement
Any termination by the Company for The balance of the
Material Cause Term
Nothing in this Agreement, however, is intended to limit any remedy of
the Company or CB Commercial under the California Uniform Trade Secrets Act
(California Civil Code Section 3426) or Texas law relating to the misuse of
trade secret or proprietary information, or which is otherwise available under
law.
SECTION XI. INDEMNIFICATION
The Company and CB Commercial, jointly and severally, agree to the
maximum extent permitted under Delaware law to indemnify Executive against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any action, suit or proceeding which
arises by reason of the fact that, subsequent to the Acquisition, Executive is
or was an officer or employee or a director of the Company excluding (a)
actions, suits or proceedings which relate to this Agreement and which are
brought by or on behalf of Executive and (b) counter or cross claims by
Executive against the Company or CB Commercial or their respective employees,
officers or directors and which relate to this Agreement. Furthermore, at all
times that insurance is provided for any officers and/or directors of CB
Commercial, the Company or CB Commercial will maintain in force and effect
officers' and directors' liability insurance, providing coverage to Executive on
the same terms and conditions for the same maximum amount provided to any
officer or director of CB Commercial.
SECTION XII. ARBITRATION
A. All disputes or controversies arising under or in connection with this
Agreement shall be settled exclusively by final and binding arbitration in
accordance with Section 14.11 of the LJMCO Stock Purchase Agreement, dated as of
June 27, 1996, between Executive, Xxxx X. Xxxxxxx, and the Company relating to
the merger and the LJMCal Stock Purchase Agreement dated June 27, relating to
the purchase of all of the outstanding stock of LJMCal.
B. Section XII.A. to the contrary notwithstanding, the Company may seek
interim relief (temporary restraining order,
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preliminary injunction, etc.) in any court of competent jurisdiction with
respect to any violation of Section X. by Executive.
SECTION XIII. MISCELLANEOUS
A. NOTICE. All notices, requests, demands and other communication called
------
for or contemplated hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally or three days after the date mailed by
United States certified or registered mail, postage prepaid, addressed to the
parties or their successors in interest at the following addresses or such other
addresses as the parties may designate by notice in the manner aforesaid:
If to Company: CB Commercial Mortgage, Inc.
c/o CB Commercial Real Estate Group, Inc.
000 X. Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn.: Chief Executive Officer
With Copy to: CB Commercial Real Estate Group, Inc.
000 X. Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn.: General Counsel
If to Executive: Xxxxxxxx X. Xxxxxx
000 Xxxxxxxxxx
Xxxxxxx, Xxxxx 00000
With Copy to: Xxxxx & Xxxxx, L.L.P.
3000 One Shell Plaza
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attn.: Xxxx X. Xxxxxx
B. LAW GOVERNING. This Agreement and the resolution of any disputes
-------------
hereunder shall be governed by and construed in accordance with the laws of the
State of Texas.
C. ENTIRE AGREEMENT. The terms of this Agreement are intended by the
----------------
parties to be the final expression of their agreement with respect to
Executive's employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreements, course of dealing or any former
employment agreements. The parties further intend that the Agreement shall
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
D. VALIDITY. If any provision of this Agreement, or the application
--------
thereof to any person, place or circumstance, shall be held by an arbitrator or
court of competent jurisdiction to be
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invalid, unenforceable or void, the remainder of this Agreement and such
provision as applied to other persons, places and circumstances shall remain in
full force and effect.
E. AMENDMENT. This Agreement may not be modified or amended except by an
---------
instrument in writing signed by the Executive, the President or Chief Executive
Officer of CB Commercial and an officer of the Company other than the Executive.
F. EFFECT ON SUCCESSORS IN INTEREST; ASSIGNMENT. This Agreement shall
--------------------------------------------
inure to the benefit of and be binding upon the heirs, administrators, executors
and successors of each of the parties hereto. Without limiting the foregoing,
upon the merger of CB Commercial Mortgage, Inc. with and into LJMCo, LJMCo as
the surviving corporation shall be the successor to (and thereafter constitute)
the "Company" under this Agreement. The obligations and duties of Executive
under this Agreement are personal to and may not be assigned by Executive.
In WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
CB COMMERCIAL MORTGAGE COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CB COMMERCIAL REAL ESTATE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Executive Vice
President and General Counsel
EXECUTIVE
/s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxxx X. Melody
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