Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of September 4, 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. Xxxxxxxxxx, residing
at 0000 XX Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxx 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently employed as the Chief Executive
Officer of the Company and is also the Chairman of the Board and a director of
the Company; and
WHEREAS, the Company and Executive desire to enter into this
agreement (the "Agreement") to set forth terms of Executive's employment by the
Company.
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 and 26 days term (the "Employment Term") commencing on September
4, 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. POSITIONS. (a) Executive shall serve as Chief Executive Officer
of the Company. It is the intention of the parties that during the Employment
Term, Executive shall also serve on the Board of Directors of the Company (the
"Board") as Chairman without additional compensation. During the term of this
Agreement, the Company shall recommend the Executive for election as a director.
(b) Executive shall report directly to the Board or other managing
body of the Company and shall have such duties and authority, consistent with
his position as Chief Executive Officer of the Company, as shall be determined
from time to time by the Board, provided that Executive shall have authority
comparable to that of chief executive officers of United States public companies
that are similar in size and business to the Company.
(c) During the Employment Term, Executive shall devote substantially
all of his business time, energy, skill and efforts to the performance of his
duties and responsibilities hereunder; provided, however, that Executive shall
be allowed to (i) serve as a director, employee or consultant of companies
solely owned by the Executive or by Executive's family; (ii) serve as a director
of other companies; (iii) engage in charitable activities; and (iv) manage his
personal financial and legal affairs.
3. BASE SALARY. During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of not less than $300,000.00. 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
during the Employment Term commencing on September 30, 1999 (each, an "Annual
Period"), Executive shall be entitled to receive an annual bonus (the "Bonus")
equal to 45% of the Bonus Pool for such Annual Period. For each Annual Period,
the Bonus Pool shall be (i) if Post-Bonus XXX is 15% or greater, 20% of
Pre-Bonus Earnings, (ii) if Post-Bonus XXX is 5% or greater but less than 15%,
10% of PreBonus 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 Excess Advance (as defined below) prior to
making any payment to Executive. To the extent that the Company repurchases any
of its outstanding common stock or the Company's net operating losses under
Section 382 of the Code (as defined below) are disallowed, the parties agree to
negotiate in good faith to amend the incentive compensation provisions of this
Section 4 to provide Executive with comparable goals and returns to those that
existed prior to the occurrence of such events. Following the initial Employment
Term, such Bonus shall be subject to shareholder approval as and to the extent
required by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) ADVANCES. 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 and (ii) any such advance shall not exceed $300,000 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) OPTIONS. The Company shall grant to Executive stock options (the
"Initial Options") on 630,000 shares of the Company's common stock (the "Common
Stock") under the
Company's Incentive Stock Plan (the "Incentive Stock Plan"). The Initial Options
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.
(d) OTHER COMPENSATION. The Company may, upon recommendation of the
Committee, award to Executive such other bonuses and compensation as it deems
appropriate and reasonable.
5. EMPLOYEE BENEFITS AND VACATION. (a) During the Employment Term,
Executive shall be entitled to participate in all pension, retirement, savings,
welfare and other employee benefit plans and arrangements, including, without
limitation, any nonqualified deferred compensation plans, maintained by the
Company from time to time for the benefit of the senior executives of the
Company in accordance with their respective terms as in effect from time to
time. To the extent permitted under applicable law, the Company shall not treat
as compensation to Executive fringes and perquisites provided to Executive or
the items under Section 6 below.
(b) 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
physicians, the Company may terminate Executive's employment for Disability upon
thirty (30) days prior written notice, by a notice of Disability termination, at
any time thereafter during such twelve (12) month period in which Executive is
unable to carry out his duties as a result of the same or related physical or
mental illness. Such termination shall not be effective if Executive returns to
the full time performance of his material duties within such thirty (30) day
notice period.
(c) TERMINATION FOR GOOD REASON. A Termination for Good Reason means
a termination by Executive by written notice given within sixty (60) days after
the occurrence of the Good Reason event. For purposes of this Agreement, "Good
Reason" shall mean the occurrence or failure to cause the occurrence, as the
case may be, without Executive's express written consent, of any of the
following circumstances, unless such circumstances are fully corrected prior to
the date of termination specified in the Notice of Termination for Good Reason
(as defined in Section 7(d) hereof): (i) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive's employment for Cause or
Disability or as a result of Executive's death, or temporarily as a result of
Executive's illness or other absence), or the assignment to Executive of duties
or responsibilities that are inconsistent with Executive's position as Chief
Executive Officer; (ii) removal of Executive from, or the non reelection of
Executive to, the positions with the Company specified herein; (iii) a
relocation of the Company's principal United States executive offices to a
location more than fifty (50) miles from Portland, Oregon, or a relocation of
Executive away from such principal United States executive office; (iv) a
failure by the Company (A) to continue any bonus plan, program or arrangement in
which Executive is entitled to participate (the "Bonus Plans"), provided that
any such Bonus Plans may be modified at the Company's discretion from time to
time but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification and (y) if plans
providing Executive with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue Executive as a participant in
the Bonus Plans and Substitute Plans on at least the same basis as to potential
amount of the bonus and substantially the same level of criteria for
achievability thereof as Executive participated in immediately prior to any
change in such plans or awards, in accordance with the Bonus Plans and the
Substitute Plans; (v) any material breach by the Company of any material
provision of this Agreement; (vi) executive's removal from or failure to be
reelected to the Board; (vii) a failure of any successor to the Company to
assume in a writing delivered to Executive upon the assignee becoming such the
obligations of the
Company hereunder; or (viii) a failure of the Committee to grant Executive an
award of Options in accordance with Section 4 hereof, unless the applicable
circumstances under (i) through (viii) are fully corrected prior to the date of
termination specified in the notice of termination for Good Reason.
(d) NOTICE OF TERMINATION FOR GOOD REASON. A notice of termination
for Good Reason shall mean a notice that shall indicate the specific termination
provision in Section 7(c) relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination for Good
Reason. The failure by Executive to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any right of Executive hereunder or preclude Executive
from asserting such fact or circumstance in enforcing his rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than fifteen (15) nor more than sixty (60) days after the date such
notice of termination for Good Reason is given.
(e) CAUSE. Subject to the notification provisions of Section 7(f)
below, Executive's employment hereunder may be terminated by the Company for
Cause. For purposes of this Agreement, the term "Cause" shall be limited to (i)
willful misconduct by Executive with regard to the Company or its business which
has a material adverse effect on the Company; (ii) the refusal of Executive to
follow the proper written direction of the Board, provided that the foregoing
refusal shall not be "Cause" if Executive in good faith believes that such
direction is illegal, unethical or immoral and promptly so notifies the Board;
(iii) Executive being convicted of a felony (other than a felony involving a
traffic offense); (iv) the breach by Executive of any fiduciary duty owed by
Executive to the Company which has a material adverse effect on the Company; or
(v) Executive's material fraud with regard to the Company.
(f) NOTICE OF TERMINATION FOR CAUSE. A notice of termination for
Cause shall mean a notice that shall indicate the specific termination provision
in Section 7(e) relied upon and shall set forth in reasonable detail the facts
and circumstances which provide a basis for termination for Cause. Further, a
notice of termination for Cause shall be required to include a copy of a
resolution duly adopted by at least two-thirds of the entire membership of the
Board at a meeting of the Board which was called for the purpose of considering
such termination and which Executive and his representative had the right to
attend and address the Board, finding that, in the good faith opinion of the
Board, Executive engaged in conduct set forth in the definition of Cause herein
and specifying the particulars thereof in reasonable detail. The date of
termination for a termination for Cause shall be the date indicated in the
notice of termination. Any purported termination for Cause which is held by a
court or arbitrator not to have been based on the grounds set forth in this
Agreement or not to have followed the procedures set forth in this Agreement
shall be deemed a termination by the Company without Cause.
8. CONSEQUENCES OF TERMINATION OF EMPLOYMENT. (a) DEATH. If
Executive's employment is terminated during the Employment Term by reason of
Executive's death, the employment period under this Agreement shall terminate
without further obligations to
Executive's legal representatives under this Agreement except for: (i) any
compensation earned but not yet paid, including without limitation, any unpaid
bonus due, any amount of Base Salary or deferred compensation accrued or earned
but unpaid, any accrued vacation payable pursuant to the Company's policies and
any unreimbursed business expenses payable pursuant to Section 6 which amounts
shall be promptly paid in a lump sum to the trustee of the Xxxxxxx and Xxxxxx
Xxxxxxxxxx Revocable Trust dated September 22, 1987, as amended; (ii) the
Estimated Annual Bonus for the fiscal year of Executive's death, pro rated
through the end of month in which Executive died, which bonus shall be paid to
the trustee of the Xxxxxxx and Xxxxxx Xxxxxxxxxx Revocable Trust dated
September 22, 1987, as amended, within 60 days after such month end; (iii)
full accelerated vesting under all outstanding equity-based and long-term
incentive plans (with options remaining outstanding as provided under the
applicable stock option plan and a pro rata payment under any long term
incentive plans based on actual coverage under such plans at the time
payments normally would be made under such plans); (iv) subject to Section 10
hereof, any other amounts or benefits owing to Executive under the then
applicable employee benefit plans or policies of the Company, which shall be
paid in accordance with such plans or policies; (v) payment on a monthly
basis of six (6) months of Executive's Base Salary on the date of death,
which shall be paid to the trustee of the Xxxxxxx and Xxxxxx Xxxxxxxxxx
Revocable Trust dated September 22, 1987, as amended; (vi) any outstanding
Advance Reimbursement Loan shall mature as provided in Section 4; (vii) any
outstanding Stock Purchase Loan shall become due and payable six months
following the date of termination, and (viii) payment of Executive's spouse's
and dependents' COBRA coverage premiums to the extent, and so long as, they
remain eligible for COBRA coverage, but in no event more than one (1) year.
Section 12 hereof shall also continue to apply.
(b) DISABILITY. If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive the payments and
benefits to which his representatives would be entitled in the event of a
termination of employment by reason of his death, provided that the payment of
Base Salary shall be reduced by the projected amount Executive would receive
under any long-term disability policy or program maintained by the Company
during the six (6) month period during which Base Salary is being paid. Section
12 hereof shall also continue to apply.
(c) TERMINATION BY EXECUTIVE FOR GOOD REASON OR FOR ANY REASON
DURING THE CHANGE IN CONTROL PROTECTION PERIOD OR TERMINATION BY THE COMPANY
WITHOUT CAUSE OR NONEXTENSION OF THE TERM BY THE COMPANY. If (i) outside of the
Change in Control Protection Period, Executive terminates his employment
hereunder for Good Reason during the Employment Term, (ii) a Change in Control
occurs and during the Change in Control Protection Period Executive terminates
his employment for any reason, (iii) Executive's employment with the Company is
terminated by the Company without Cause, or (iv) Executive's employment with the
Company terminates as a result of the Company giving notice of nonextension of
the Employment Term pursuant to Section 1 hereof, Executive shall be entitled to
receive: (A) in a lump sum within ten (10) business days after such termination
(i) one year's Base Salary in effect on the date of termination, (ii) 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, (iii) any
unreimbursed business expenses payable pursuant to Section 6, and (iv) 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; (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 Advance Reimbursement Loan shall
mature as provided in Section 4; (Guaranty) any outstanding Stock Purchase Loan
shall become due and payable six months following the date of termination; and
(H) 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 (H) above may, at the discretion of
the Company, be made by continuing participation of Executive in the plan as a
terminee, by paying the applicable COBRA premium for Executive and his spouse
and dependents, or by covering Executive and his spouse and dependents under
substitute arrangements, provided that, to the extent Executive incurs tax that
he would not have incurred as an active employee as a result of the
aforementioned coverage or the benefits provided thereunder, Executive shall
receive from the Company an additional payment in the amount necessary so that
he will have no additional cost for receiving such items or any additional
payment. In the circumstances described in each of (i) through (iv) above,
Section 12 hereof shall also continue to apply.
(d) TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION WITHOUT GOOD
REASON OR RETIREMENT. If Executive's employment hereunder is terminated: (i) by
the Company for Cause, (ii) by Executive without Good Reason outside of the
Change in Control Protection Period, or (iii) by the Company pursuant to Section
7(a)(viii) hereof, Executive shall be entitled to receive only his Base Salary
through the date of termination, the Estimated Annual Bonus prorated through the
last day of the month in which Executive is terminated, and any unreimbursed
business expenses payable pursuant to Section 6. In addition, any outstanding
Advance
Reimbursement Loan shall mature as provided in Section 4 and any outstanding
Stock Purchase Loan shall become due and payable six months following the date
of termination. All other benefits (including, without limitation, Options) due
Executive following such termination of employment shall be determined in
accordance with the plans, policies and practices of the Company.
(e) ACCESS TO BOOKS AND RECORDS. Following termination of employment
of the Executive, the Company shall permit such Executive reasonable access to
retrieve personally (or by his designated representatives) any and all personal
files and property that are stored at the Company. Additionally, subject to
reimbursement of any out-of-pocket costs and expenses, the Company shall permit
such Executive and his designated representatives and agents reasonable access
to the Company's books and records, independent accountants and attorneys, as
requested by him, as related to the personal taxation of the Executive until the
expiration of the appropriate statute of limitations with respect to such tax
matters, and as related to his role as a director or officer, subject to any
confidentiality agreements in effect between the Executive and 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 a director or officer of the Company, or is
or was serving at the request of the Company as a director, officer, member,
employee, fiduciary or agent of another corporation or of a partnership, joint
venture, trust, other enterprise or non-profit organization, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a
director, officer, member, employee, fiduciary or agent while serving as a
director, officer, member, employee, fiduciary or agent, he shall be indemnified
and held harmless by the Company to the fullest extent authorized by Maryland
law, as the same exists or may hereafter be amended, against all Expenses
incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if Executive has ceased to
be an officer, director, member, fiduciary or agent, or is no longer employed by
the company, and shall inure to the benefit of his heirs, executors and
administrators.
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and costs, attorneys' fees, accountants' fees, and
disbursements and costs of attachment or similar bonds, investigations, and any
expenses of establishing a right to indemnification under this Agreement.
(c) Expenses incurred by Executive in connection with any Proceeding
shall
be paid by the Company in advance upon request of Executive and the giving by
Executive of any undertakings required by applicable law.
(d) Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.
(e) With respect to any Proceeding as to which Executive notifies
the Company of the commencement thereof:
(i) The Company will be entitled to participate therein
at its own expense; and
(ii) Except as otherwise provided below, to the extent
that it may wish, the Company jointly with any other indemnifying
party similarly notified will be entitled to assume the defense
thereof, with counsel reasonably satisfactory to Executive.
Executive also shall have the right to employ his own counsel in
such action, suit or proceeding and the fees and expenses of such
counsel shall be at the expense of the Company.
(f) The Company shall not be liable to indemnify Executive under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive
without Executive's written consent. Neither the Company nor Executive will
unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 12 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company hereunder agrees to obtain officer and director
liability insurance policies covering Executive and shall maintain at all times
following the Commencement Date and during the Employment Term coverage under
such policies in the aggregate with regard to all officers and directors,
including Executive, of an amount not less than $10 million.
13 SPECIAL TAX PROVISION. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or
distributed, distributable, or to be distributed to or with respect to
Executive by the Company (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control covered by Code
Section 280G(b)(2) or any person affiliated with the Company or such person)
as a result of a change in ownership or effective control of the Company or a
direct or indirect parent thereof (or the assets of any of the foregoing)
covered by Code Section 280G(b)(2) (collectively, the "Covered Payments") is
or becomes subject to the excise tax imposed by or under Section 4999 of the
Code (or any similar federal or state tax that may hereafter be imposed),
and/or any interest, penalties or additions to tax, with respect to such
excise tax (such excise tax, together with such interest penalties and
additions to tax, is hereinafter collectively referred to as the "Excise
Tax"), the Company shall pay to Executive an additional amount (the "Tax
Reimbursement Payment") such that after payment by Executive of all taxes
(including, without limitation, any interest or penalties and any Excise Tax
imposed on or attributable to the Tax Reimbursement Payment itself),
Executive retains an amount of the Tax Reimbursement Payment equal to the sum
of (i) the amount of the Excise Tax imposed upon the Covered Payments, and
(ii) without duplication, an amount equal to the product of (A) any
deductions disallowed for federal, state or local income tax purposes because
of the inclusion of the Tax Reimbursement Payment in Executive's adjusted
gross income, and (B) the highest applicable marginal rate of federal, state
or local income taxation, respectively, for the calendar year in which the
Tax Reimbursement Payment is made or is to be made. The intent of this
Section 13 is that (a) Executive, after paying his federal, state and local
income tax and payroll taxes, will be in the same position as if he was not
subject to the Excise Tax under Section 4999 of the Code (or any similar
federal or state tax that may be imposed ) and did not receive the extra
payments pursuant to this Section 13 and this Section 13 shall be interpreted
accordingly.
(b) Except as otherwise provided in Section 13(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to Executive) appointed by such public accountants (or,
if the public accountants decline such appointment and decline appointing such
legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by the Company and Executive) (the
"Accountant"), deliver a written opinion to Executive, reasonably satisfactory
to Executive's legal counsel, that Executive has a reasonable basis to claim
that the Covered Payments (in whole or in part) (A) do not constitute "parachute
payments", (B) represent reasonable compensation for services actually rendered
(within the meaning of Section 280G(b)(4) of the Code) in excess of the "base
amount" allocable to such reasonable compensation, or (C) such "parachute
payments" are otherwise not subject to such Excise Tax (with appropriate legal
authority, detailed analysis and explanation provided therein by the
Accountants); and (ii) the value of any Covered Payments which are non-cash
benefits or deferred payments or benefits
shall be determined by the Accountant in accordance with the principles of
Section 280G of the Code.
(c) For purposes of determining the amount of the Tax Reimbursement
Payment, Executive shall be deemed: (i) to pay federal, state and/or local
income taxes at the highest applicable marginal rate of income taxation for the
calendar year in which the Tax Reimbursement Payment is made or is to be made,
and (ii) to have otherwise allowable deductions for federal, state and local
income tax purposes at least equal to those disallowed due to the inclusion of
the Tax Reimbursement Payment in Executive's adjusted gross income.
(d) (i) (A) In the event that prior to the time Executive has filed
any of his tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatever, the correct amount of the Tax Reimbursement Payment to
be less than the amount determined at the time the Tax Reimbursement Payment was
made, Executive shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by Executive, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by Executive of any of his tax returns
for the calendar year in which the change in ownership event covered by Code
Section 280G(b)(2) occurred but prior to one (1) year after the occurrence of
such change in ownership, Executive shall file at the request of the Company an
amended tax return in accordance with the Accountant's determination, but no
portion of the Tax Reimbursement Payment shall be required to be refunded to the
Company until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company shall not exceed the interest
received or credited to Executive by such tax authority for the period it held
such portion (less any tax Executive must pay on such interest and which he is
unable to deduct as a result of payment of the refund).
(C) In the event Executive receives a refund pursuant to (B) above
and repays such amount to the Company, Executive shall thereafter file for
refunds or credits by reason of the repayments to the Company. Executive and the
Company shall mutually agree upon the course of action, if any, to be pursued
(which shall be at the expense of the Company) if Executive's claim for such
refund or credit is denied.
(D) Executive and the Company shall mutually agree upon the course
of action, if any, to be pursued (which shall be at the expense of the Company)
if Executive's claim for refund or credit is denied.
(ii) In the event that the Excise Tax is later determined by the
Accountants or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such excess (plus any
interest, penalties or additions to tax payable with respect to such excess)
once the amount of such excess is finally determined.
(iii) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) under this Section 13, subject to subpart
(i)(D) above, Executive shall permit the Company to control issues related to
this Section 13 (at its expense), provided that such issues do not potentially
materially adversely affect Executive, but Executive shall control any other
issues. In the event the issues are interrelated, Executive and the Company
shall in good faith cooperate so as not to jeopardize resolution of either
issue, but if the parties cannot agree Executive shall make the final
determination with regard to the issues. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes, Executive
shall permit the representative of the Company to accompany him and Executive
and his representative shall cooperate with the Company and its representative.
(iv) With regard to any initial filing for a refund or any other
action required pursuant to this Section 13 (other than by mutual agreement) or,
if not required, agreed to by the Company and Executive, Executive shall
cooperate fully with the Company, provided that the foregoing shall not apply to
actions that are provided herein to be at the sole discretion of Executive.
(e) The Tax Reimbursement Payment, or any portion thereof, payable
by the Company shall be paid not later than the fifth day following the
determination by the Accountant, and any payment made after such fifth day shall
bear interest at the rate provided in Code Section 1274(b)(2)(B). The Company
shall use its best efforts to cause the Accountant to promptly deliver the
initial determination required hereunder and, if not delivered, within ninety
(90) days after the change in ownership event covered by Section 280G(b)(2) of
the Code, the Company shall pay Executive the Tax Reimbursement Payment set
forth in an opinion from counsel recognized as knowledgeable in the relevant
areas selected by Executive, and reasonably acceptable to the Company, within
five (5) days after delivery of such opinion. In accordance with Section
16(Guaranty), the Company may withhold from the Tax Reimbursement Payment and
deposit into applicable taxing authorities such amounts as are required to be
withheld by applicable law. To the extent that Executive is required to pay
estimated or other taxes on amounts received by Executive beyond any withheld
amounts, Executive shall promptly make such payments. The amount of such payment
shall be subject to later adjustment in accordance with the determination of the
Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if
(e) is applicable the reasonable charges for the opinion given by Executive's
counsel.
(g) The Company and Executive shall mutually agree on and promulgate
further guidelines in accordance with this Section 13 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
13(d)(i)(D) hereof.
14 LEGAL AND OTHER FEES AND EXPENSES. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by Executive in pursuing such claim, unless the claim by
Executive is found to be frivolous by any court or arbitrator.
15 ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Portland in the State of Oregon under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration Rules.
The determination of the arbitrators, which shall be based upon a DE NOVO
interpretation of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs of
arbitration, including the costs of the American Arbitration Association and the
arbitrator, shall be borne by the Company.
16 MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon without reference to
principles of conflicts of laws.
(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. Xxxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxxx
