EXHIBIT 10.10
EXECUTION COPY
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT dated as of July 23, 1997 between IMPERIAL BANK,
a California corporation (the "Company"), and XXXXX X. XXXXXXX, residing at 0000
Xxxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive is currently an employee of the Company with
the principal responsibility for The Xxxxx Xxxxxxx Organization, a division of
the Company (the "Division") that is engaged in the business of providing
financing for entertainment projects, including, without limitation, motion
pictures (the "Business"); and
WHEREAS, the Company desires to retain the services of the Executive
as President and Chief Executive Officer of the Division, and the Executive
desires to provide such services in such capacities to the Division, upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Company also desires to retain the services of the
Executive as an employee of the Division following the expiration or early
termination in certain circumstances of the Executive's employment hereunder as
President and Chief Executive Officer of the Division, upon the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, it is anticipated that the Company will assign to a newly
formed wholly owned subsidiary of the Company, Imperial Financial Group, Inc.
(the "Subsidiary"), certain of the Company's assets, and the Subsidiary will
assume certain of the Company's liabilities (the "Assignment and Assumption"),
including all of the assets and liabilities of the Division (which will include
the rights and obligations under this Agreement); and
WHEREAS, upon the effectiveness of the Assignment and Assumption, the
Executive will become an employee of the Subsidiary (as President and Chief
Executive Officer of the Division) and, except as set forth herein, the Company
will no longer be entitled to the rights, or be subject to the obligations,
under this Agreement; and
WHEREAS, it is further anticipated that the Subsidiary will effect a
public offering or private placement of certain of its equity securities (the
"Offering") and, at the time of or at some later time after the Offering, the
Company will distribute all of the outstanding capital stock of the Subsidiary
owned by the Company to Imperial Bancorp (its sole shareholder) and, immediately
thereafter, Imperial Bancorp will distribute such stock to its shareholders
(together, the "Spinoff");
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term. The Company hereby employs the Executive,
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and the Executive hereby accepts employment by the Company, in the capacities
specified in Section 2 hereof and upon the terms and subject to the conditions
set forth in this Agreement, for the period commencing on the date hereof and
ending on December 31, 2001, unless the Executive's employment is terminated
earlier as provided herein (such period of time, collectively, the "Initial Term
of Employment").
2. Duties. During the Initial Term of Employment, the Executive
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shall serve as the Division's President and Chief Executive Officer. In such
capacities, the Executive shall have full responsibility and authority to manage
and direct the Business, subject to the supervision and direction of only the
Chairman of the Board of Directors of the Company and the Board of Directors of
the Company. Such authority of the Executive shall include, without limitation,
the authority (i) to grant to subordinate officers and other subordinate key
personnel of the Division the right to receive annual bonus compensation,
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based upon the Division's pre-tax earnings (calculated and payable in the same
manner applicable to bonus compensation payable to the Executive under Section 4
hereof), and (ii) to cause the issuance of options to purchase shares of Class B
Common Stock (or, in the Company's sole discretion, Class A Common Stock) of the
Subsidiary to those certain subordinate key personnel of the Division previously
agreed to by the Company and the Executive, in each case subject to such
limitations as shall be imposed by the Board of Directors of the Company and the
terms of the stock option or other employee benefit plan governing such options
(the "Plan") and to cause the issuance of common equity interests ("LLC
Interests") in LHO, LLC, a California limited liability company of which the
Company will own a preferred equity interest having a liquidation value equal to
$19.9 million (the "LLC"), to such subordinate key personnel. A description of
the proposed capital stock of the Subsidiary is attached hereto as Annex I. In
addition, the Executive shall have such other or more specific responsibilities
or duties with respect to the Business, consistent with the Executive's
positions as President and Chief Executive Officer of the Division, as may be
determined and assigned to the Executive from time to time by the Board of
Directors of the Company.
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The Executive shall serve the Division faithfully and to the best of
his ability in the capacities described above, devoting substantially all of his
business time, attention, knowledge, energy and skills to such employment,
except for that time and attention that, consistent with the practices of other
senior officers of the Company similarly situated, the Executive may devote to
civic or community affairs or other business matters that do not interfere in
any material respect with the performance by the Executive of services required
to be performed by him hereunder. The Executive shall be provided an office at
the executive offices of the Division in Century City, California and shall
travel as reasonably required, in the Executive's judgment, in connection with
the performance of his duties hereunder. The Executive's wife may accompany the
Executive on business trips and the Company shall reimburse the Executive up to
an aggregate annual amount of $5,000 for the cost of his wife's transportation
and accommodations for such business trips in accordance with the same
guidelines as may be applicable to the Executive from time to time. If such
travel is made on an airplane, the class of travel for the Executive (and his
wife) shall be in accordance with Company policy for its senior officers at the
time of such travel, which, as of the date hereof, requires that a trip
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of less than 2 hours be taken in Coach Class, and provides that trips in excess
of 2 hours may be taken in Business Class, or if Business Class is unavailable,
in First Class.
Prior to the Spinoff (and no later than the effectiveness of the
Assignment and Assumption), the Company agrees to take all action necessary to
cause the Executive to be appointed and elected to the Board of Directors of the
Subsidiary. The Executive shall not be entitled to any compensation for his
services as a director of the Subsidiary. In addition, if elected or appointed,
the Executive also shall serve during any part of the Initial Term of Employment
as any other officer or a director of the Company or any subsidiary corporation
of the Company (which election or appointment shall in no event materially
interfere with the Executive's duties described in this Section 2), without any
compensation therefor other than as specified in this Agreement. The Executive
acknowledges that the Company does not believe that he is as of the date hereof,
and the terms of this Agreement do not cause him to become, an "executive
officer", as such term is defined in Rule 3b-7 of the Securities Exchange Act of
1934, as amended, of the Company or the Subsidiary.
3. Compensation and Benefits. Subject to Section 5 hereof, as full
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and complete compensation to the Executive
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for the execution and delivery of this Agreement and the Executive's performance
of services pursuant to Section 2 hereof, the Company shall pay, grant or
provide to the Executive during the Initial Term of Employment, and the
Executive hereby agrees to accept, the following salary and other compensation
and benefits (any payments to be prorated for the Executive's period of
service):
(a) An annual base salary of $250,000 ("Base Salary"), payable in 24
substantially equal semi-monthly installments per year, and the bonus
compensation determined and payable as provided in Section 4 hereof; provided,
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however, that notwithstanding that (i) the date of this Agreement is July 23,
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1997 and (ii) the Initial Term of Employment commences on the date hereof, the
Executive shall be paid the Base Salary and such bonus compensation as provided
in Section 4 hereof effective as of January 1, 1997 (and in lieu of any other
base salary or bonus compensation payable to the Executive by the Company for
the period from January 1, 1997 to the date hereof);
(b) The right to participate in any medical, dental, disability,
death, insurance, retirement, savings, vacation or other plans or programs
established generally for the benefit of the Company's senior officers;
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(c) Prompt payment of $1,250 per month for automobile costs incurred
by the Executive and prompt reimbursement for all other reasonable out-of-pocket
business-related expenses incurred by the Executive in accordance with the
policies and procedures of the Company as in effect generally with respect to
senior officers of the Company; and
(d) An additional payment without withholding taxes in each of 1997
and in the first month of 1998, 1999, 2000 and 2001 of $20,000, $16,000,
$12,000, $8,000 and $4,000, respectively.
The Company previously has agreed, and does hereby agree, upon the
terms and subject to the conditions below, (i) to cause the Subsidiary to grant
to the Executive as of April 23, 1997 (the "Grant Date") options to purchase
three hundred thousand (300,000) shares of Class B Common Stock (or, in the
Company's sole discretion, Class A Common Stock) of the Subsidiary (the
"Options") that represent the right to purchase, as of the date of such
issuance, in the aggregate 3% of the total outstanding common stock of the
Subsidiary (the "Common Stock") on a fully-diluted basis and (ii) to make
certain capital contributions to the LLC if the Spinoff has not occurred on or
prior to the LLC Contribution
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Date (as defined below) as described in the last two paragraphs of this Section
3.
The Options shall expire 10 years after the Grant Date, shall fully
vest five years after the Grant Date to the extent the Executive is then
employed pursuant to the terms hereof (unless vesting is accelerated as
described in the proviso below), or, if the options to purchase Common Stock
granted to certain members of the board of directors of the Subsidiary as of the
Grant Date vest on a date earlier than five years after the Grant Date due to
the occurrence of an event that affects the Company or a majority of such
members simultaneously (rather than any such director individually), such
earlier date, shall have an exercise price of $10.37 per share of underlying
Common Stock and shall be subject to the other terms and conditions of the Plan
(which shall be consistent with the terms of this Agreement); provided, however,
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that all unvested Options will immediately vest upon the Executive's death,
permanent disability (as defined herein), or termination by the Company with or
without Cause (as defined herein), except in the event of termination with Cause
pursuant to clauses (i) or (iii) of Section 5(c) or pursuant to clause (v) of
Section 5(c) following a willful failure or refusal by the Executive to perform
and discharge his duties,
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responsibilities and obligations under this Agreement, or, prior to the
effectiveness of the Assignment and Assumption, pursuant to clause (iv) of
Section 5(c).
The provisions of the immediately preceding paragraph assume there are
10,000,000 shares of Common Stock outstanding on a fully-diluted basis and are
based on the median implied valuation of the Subsidiary attached hereto as Annex
II (which assumes the transfer of the assets and the assumption of the
liabilities described therein, and the Company hereby agrees that, if the
Spinoff is consummated, it will, on or prior to the consummation thereof, (i)
effect such transfer of assets, (ii) cause such assumption of liabilities and
(iii) cause the Subsidiary's issued and outstanding capitalization to consist of
10,000,000 shares of Common Stock on a fully-diluted basis). The number of
shares of Common Stock underlying the Options and/or the exercise price thereof
will be appropriately adjusted upon certain customary anti-dilution events.
In order to exercise the Options and receive the underlying Common
Stock, the Executive shall deliver a written notice to the Company specifying
that he desires to exercise the Options. The Executive shall only have the
right to exercise the Options, subject to the vesting terms thereof, in the
event the Spinoff has occurred on or prior
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to the LLC Contribution Date and, if the Company transfers the Division to the
LLC on or prior to the LLC Contribution Date, then, upon such transfer, the
Options shall terminate and cease to exist.
Nothing in this Agreement shall prevent the Board of Directors of the
Company from providing additional benefits to the Executive if the Board of
Directors of the Company, in its sole discretion, elects to do so; provided,
however, that, except as expressly set forth elsewhere in this Agreement, the
Executive shall not be entitled to (and shall have no right to require) any
compensation, bonus payments or benefits from the Company or any affiliate
thereof.
If the Spinoff has not occurred on or prior to the LLC Contribution
Date, then on the LLC Contribution Date, (i) the Company shall transfer to or
for the benefit of the LLC all of the assets of the Division, (ii) the LLC shall
assume all of the liabilities of the Division and (iii) the LLC shall issue to
the Company a preferred equity interest in the LLC with a liquidation value of
$19.9 million and a sufficient common equity interest in the LLC such that the
Company will own 71% of the outstanding common equity interests in the LLC.
Prior to consummating the transactions described in the immediately preceding
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sentence, the operating provisions of Limited Liability Company Agreement (or
similar governing document) of the LLC shall be amended on terms reasonably
acceptable to the Company, including the provisions regarding the LLC's
management, in order to properly reflect the Company's controlling equity
interest therein as of the LLC Contribution Date and the treatment of the LLC
after the LLC Contribution Date as an operating subsidiary of the Company. In
addition, certain other rights and obligations of the Executive and the LLC with
respect to the LLC Interests shall be as contemplated by that certain Summary
Term Sheet dated January 14, 1997 between the Company and the Executive,
including the right of the Executive to cause the LLC to repurchase the LLC
Interests under certain circumstances (as though the Executive were the holder
of "shadow stock" as described therein). The parties agree that the
transactions contemplated in this paragraph will be implemented in a manner
designed to minimize any adverse income tax risks to the Executive, provided
that in no event shall the economic benefit be less advantageous to Executive
than as contemplated herein.
The "LLC Contribution Date" shall be December 31, 1997 if the Spinoff
has not occurred by such date, unless prior to December 31, 1997 the Board of
Directors of the
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Company concludes that the Spinoff is likely to be consummated on or prior to
December 31, 1998, in which case the LLC Contribution Date shall be the earlier
of (a) December 31, 1998 if the Spinoff has not occurred by such date or (b) the
date, if any, the Board of Directors of the Company concludes that the Spinoff
will not be consummated.
4. Bonus Compensation. (a) During the Initial Term of Employment,
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the Company shall pay to the Executive an annual bonus of $500,000 in 24
substantially equal semi-monthly installments per year (the "Guaranteed Bonus
Amount").
(b) In addition, during the Initial Term of Employment, the Company
shall pay to the Executive a lump sum additional annual bonus (an "Incentive
Bonus"), determined as follows. For each full calendar year during the Initial
Term of Employment, including 1997, prior to the date on which the Spinoff is
consummated, the Incentive Bonus shall be equal to the excess, if any, of (i)
6.0% of the Division's pre-tax earnings (determined in accordance with Schedule
I hereto) for such calendar year, over (ii) one-half of the Guaranteed Bonus
Amount actually paid to the Executive in respect of such calendar year. For the
calendar year in which the Spinoff occurs, the Incentive Bonus shall be equal to
the excess, if any, of (i) 6% of the
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Division's pre-tax earnings (determined in accordance with Schedule I hereto)
for the period commencing on the first day of such calendar year and ending on
the last day of the fiscal quarter in which the Spinoff is consummated, plus, in
the event the Spinoff is consummated during the first, second or third fiscal
quarter of such calendar year, 7.5% of the Division's Pre-Tax Earnings (as
defined in and determined in accordance with Schedule II hereto) for the period
commencing on the first day of the fiscal quarter immediately following the
fiscal quarter in which the Spinoff is consummated and ending on the last day of
such calendar year, over (ii) one-half of the Guaranteed Bonus Amount actually
paid to the Executive in respect of such calendar year. For each full calendar
year during the Initial Term of Employment following the calendar year in which
the Spinoff is consummated, the Incentive Bonus shall be equal to the excess, if
any, of (i) 7.5% of the Division's Pre-Tax Earnings (as defined in and
determined in accordance with Schedule II hereto) for such calendar year, over
(ii) one-half of the Guaranteed Bonus Amount actually paid to the Executive in
respect of such calendar year. Any Incentive Bonus shall be payable within two
months following the end of the calendar year in respect of which the Bonus is
earned (unless the Executive shall otherwise timely elect
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to defer the receipt of any such Bonus under any deferred compensation plan of
the Company or the Subsidiary then in effect), whether or not the Executive is
then employed by the Company. If the Executive is entitled to an Incentive
Bonus pursuant to the terms of this Agreement following termination of
employment, the calculation of the Incentive Bonus shall be made as of the end
of the immediately preceding or succeeding fiscal quarter following such
termination, whichever is closer in terms of days to the date of such
termination.
5. Termination.
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(a) Disability. In the event of the permanent disability (as
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hereinafter defined) of the Executive during the Initial Term of Employment, the
Company shall have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, effective sixty (60) days following the
giving of such notice (or such later day as shall be specified in such notice),
unless prior to such time the Executive shall have returned to the performance
of his services as required under Section 2 hereof. Upon the effectiveness of
such termination, (i) the Company shall have no further obligations hereunder,
except to (x) pay to the Executive all unpaid amounts of Base Salary, Guaranteed
Bonus Amount and Incentive Bonus, if any, and reimburse all
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reasonable unreimbursed out-of-pocket business-related expenses, in each case
accrued to the effective date of termination, (y) pay to the Executive the
amount obtained by deducting one-half of the aggregate Guaranteed Bonus Amount
paid or accrued prior to such termination from $1,250,000 (such amount, the
"Minimum Amount") and (z) provide the Executive with the medical benefits
described in Section 3(b) hereof for such period as such benefits generally are
provided to the Company's senior officers following termination of employment as
a result of disability and (ii) the Executive shall have no further obligations
hereunder, except those provided in Sections 7 and 8 hereof. All such amounts
of unpaid Base Salary, Guaranteed Bonus Amount, Incentive Bonus and Minimum
Amount and the reimbursement of expenses shall be payable to the Executive
within thirty (30) days following the effective date of termination or the
submission of documented evidence of such unreimbursed expense, as the case may
be. For purposes of this Section 5(a), "permanent disability" means any
physical or mental disability or incapacity which renders the Executive
incapable of performing the material elements of his services under this
Agreement for a period of 90 consecutive days or for shorter periods aggregating
120 days during any 52-week period.
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(b) Death. In the event of the death of the Executive during the
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Initial Term of Employment, this Agreement shall automatically terminate and the
Company shall have no further obligations hereunder, except to (x) pay to the
Executive's estate or appropriate legal representative all unpaid amounts of
Base Salary, Guaranteed Bonus Amount and Incentive Bonus, if any, and reimburse
all reasonable unreimbursed out-of-pocket business-related expenses, in each
case accrued to the date of death, (y) pay to the Executive's estate or
appropriate legal representative the Minimum Amount and (z) provide all other
death benefits described in Section 3(b) hereof for such period as such benefits
generally are provided following the death of a senior officer. All such
amounts of unpaid Base Salary, Guaranteed Bonus Amount, Incentive Bonus and
Minimum Amount and the reimbursement of expenses shall be payable within thirty
(30) days following the date of the Executive's death or the submission of
documented evidence of such unreimbursed expense, as the case may be. The
Executive shall have the right to name, from time to time, any one or more
persons as beneficiaries hereunder.
(c) Cause. The Company shall have the right, upon written notice to
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the Executive, to terminate the Executive's employment during the Initial Term
of Employment
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for Cause, in which case this Agreement shall terminate on the date specified by
the Company in such notice and (i) the Company shall have no further obligations
hereunder, except to (x) pay all unpaid amounts of Base Salary and Guaranteed
Bonus Amount and reimburse all reasonable unreimbursed out-of-pocket business-
related expenses, in each case accrued to the effective date of termination, (y)
pay to the Executive the Minimum Amount and (z) provide all other benefits set
forth in Section 3(b) hereof for such period, if any, as such benefits generally
are provided to the Company's senior officers following termination of
employment for cause and (ii) the Executive shall have no further obligations
here under, except for those provided in Sections 7 and 8 hereof. All such
amounts of unpaid Base Salary, Guaranteed Bonus Amount and Minimum Amount and
the reimbursement of expenses shall be payable to the Executive within thirty
(30) days following the effective date of termination or the submission of
documented evidence of such unreimbursed expense, as the case may be.
For purposes of this Agreement, the term "Cause" shall mean:
(i) fraud, misappropriation or embezzlement by the
Executive; or
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(ii) material breach by the Executive of his obligations
under Section 7 or 8 hereof; or
(iii) conviction of or the entry of a plea of nolo
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contendere or similar plea by the Executive for any felony; or
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(iv) prior to the effectiveness of the Assignment and
Assumption, issuance of an order by a regulatory agency, administrative tribunal
or court concerning the actions of the Executive pursuant to Section 8 of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818), Section 1913.5 of the
California Financial Code or successor statutes; or
(v) a material breach of, or the willful failure or
refusal by the Executive to perform and discharge, the Executive's duties,
responsibilities and obligations under this Agreement; provided, however, that
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the Executive shall have 30 days following written notice from the Company to
cure any such breach, and provided further, that any such breach, failure or
refusal by reason of Early Termination or by reason of the Executive's permanent
disability or death shall not constitute Cause for purposes hereof and any such
breach by the Executive of his obligations under Section 7 or 8 hereof shall be
governed by clause (ii) of this definition.
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(d) Early Termination by the Executive. The Executive shall have the
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right to terminate his employment described under Section 2 of this Agreement
for any reason or no reason ("Early Termination") upon not less than six months'
prior written notice to the Company given no earlier than June 30, 1999 and no
later than June 30, 2001, in which case, except as set forth below, this
Agreement shall terminate on the date that is six months from the day of such
notice (or such later day specified in such notice). If the Executive elects
Early Termination, (i) the Company shall have no further obligations under this
Agreement, except as provided in Section 6 hereof and except to (x) pay all
unpaid amounts of Base Salary, Guaranteed Bonus Amount and Incentive Bonus, if
any, and reimburse all reasonable unreimbursed out-of-pocket business-related
expenses, in each case accrued to the effective date of such Early Termination,
(y) pay to the Executive the Minimum Amount, and (z) provide all other benefits
set forth in Section 3(b) hereof for such period, if any, as such benefits
generally are provided to the Company's senior officers following termination of
employment at their election and (ii) the Executive shall have no further
obligations under this Agreement, except those provided in Sections 6, 7 and 8
hereof. All such amounts of unpaid Base Salary, Guaranteed
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Bonus Amount, Incentive Bonus and Minimum Amount and the reimbursement of
expenses shall be payable to the Executive within thirty (30) days following the
effective date of Early Termination or the submission of documented evidence of
such unreimbursed expense, as the case may be.
6. Secondary Employment Term. (a) Following the earlier of (i) the
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expiration of the Initial Term of Employment on December 31, 2001 or (ii) the
Executive's election of Early Termination, the Company agrees to employ the
Executive, and the Executive agrees to be employed, to perform the services
described below. In the case of clause (i) of the immediately preceding
sentence, the Executive shall perform such services for the Division from
January 1, 2002 until December 31, 2004, and in the case of clause (ii) of the
immediately preceding sentence, the Executive shall perform such services for
the Division from the effective date of such Early Termination until the second
anniversary of such Early Termination. The period during which the Executive
shall so serve is referred to herein as the "Secondary Term of Employment."
During the Secondary Term of Employment, the Executive shall make himself
generally available to provide, and shall faithfully, diligently and to the best
of his ability provide, advice and assistance to the Division and its management
with respect to the market-
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ing, servicing and development of the Business, including, without limitation,
in respect of clients of the Division during the Initial Term of Employment and
Secondary Term of Employment. The Executive shall not be required to devote any
particular number of hours per day or week to provide such services to the
Division, shall be entitled to take vacations and shall not be required to be
present on the Company's premises in performing such services, but he shall
devote such of his time to the Division as shall be reason ably necessary to
carry out such services. Notwithstanding anything in this Agreement to the
contrary, (i) if the Executive's employment is terminated pursuant to Section
5(a) hereof, (ii) if this Agreement is terminated pursuant to Section 5(b)
hereof or (iii) if the Executive suffers a permanent disability prior to the
effective date of his Early Termination pursuant to Section 5(d) hereof, the
Executive shall not be employed for the Secondary Term of Employment and shall
not be entitled to any compensation or other benefits set forth in this Section
6.
(b) Subject to Sections 6(c), (d) and (e) hereof, as full and complete
compensation to the Executive for the Executive's performance of services to the
Division pursuant to Section 6(a) hereof, the Company shall pay or provide to
the Executive during any Secondary Term of Employment, and
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the Executive hereby agrees to accept, the following compensation and benefits
(any payments to be prorated for the Executive's period of service pursuant to
Section 6(a)):
(i) An annual salary of $200,000 (the "Secondary Salary"), payable in
24 substantially equal semi-monthly installments per year; and
(ii) The other benefits specified in Section 3(b) to the extent such
benefits are available for similarly-situated employees.
In addition, the Company shall reimburse the Executive for all
reasonable out-of-pocket business related expenses incurred by the Executive
during any Secondary Term of Employment in the performance of his services under
this Section 6 in accordance with the policies and procedures of the Company as
in effect generally with respect to senior officers of the Company.
(c) In the event of the permanent disability of the Executive during
any Secondary Term of Employment, the Company shall have the right, upon written
notice to the Executive, to terminate the Executive's employment hereunder,
effective sixty (60) days following the giving of such notice (or such later day
as shall be specified in such notice), unless prior to such time the Executive
shall have returned to the performance of his services as required
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under Section 6(a) hereof. Upon the effectiveness of such termination, (i) the
Company shall have no further obligations hereunder, except to (x) pay all
unpaid amounts of the Secondary Salary, if any, and reimburse all reasonable
unreimbursed out-of-pocket business-related expenses, in each case accrued to
the effective date of termination, and (y) provide the Executive with the
medical benefits described in Section 3(b) hereof for such period as such
benefits generally are provided to similarly-situated employees of the Company
following termination of employment as a result of disability and (ii) the
Executive shall have no further obligations hereunder, except those provided in
Sections 7 and 8 hereof. All such amounts of the Secondary Salary and the
reimbursement of expenses shall be payable to the Executive within thirty (30)
days following the effective date of termination of the Executive's employment
or the submission of documented evidence of such unreimbursed expense, as the
case may be.
(d) In the event of the death of the Executive during any Secondary
Term of Employment, this Agreement shall automatically terminate and the Company
shall have no further obligations hereunder, except to (x) pay to the
Executive's estate or appropriate legal representative all unpaid amounts of the
Secondary Salary and reimburse all
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reasonable unreimbursed out-of-pocket business-related expenses, in each case
accrued to the date of death, and (y) provide all other death benefits described
in Section 3(b) hereof for such period, if any, as such benefits generally are
provided following the death of a similarly-situated employee. All such amounts
of the Secondary Salary and the reimbursement of expenses shall be payable
within thirty (30) days following the date of the Executive's death or the
submission of documented evidence of such unreimbursed expense, as the case may
be.
(e) The Company shall have the right, upon written notice to the
Executive, to terminate the Executive's employment under this Section 6 for
Cause, in which case this Agreement shall terminate on the date specified by the
Company in such notice and (i) the Company shall have no further obligations
hereunder, except to pay all unpaid amounts of the Secondary Salary, reimburse
all reasonable unreimbursed out-of-pocket business-related expenses, in each
case accrued to the effective date of termination, and provide all other
benefits set forth in Section 3(b) hereof, for such period, if any, as such
benefits generally are provided to similarly-situated employees of the Company
following termination of employment for cause and (ii) the Executive shall have
no further obligations hereunder,
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except for those provided in Sections 7 and 8 hereof. All such amounts of the
Secondary Salary and the reimbursement of expenses shall be payable to the
Executive within thirty (30) days following the effective date of termination of
the Executive's employment or the submission of documented evidence of such
unreimbursed expense, as the case may be.
7. Confidentiality; Ownership. (a) During the Initial Term of
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Employment or any Secondary Term of Employment and thereafter, the Executive
shall keep secret and retain in strictest confidence and not use or disclose,
furnish or make accessible to anyone outside the Company and any of its
affiliates, directly or indirectly, or use for the benefit of himself or others
except in connection with the Business and the business of the Company or any of
its subsidiaries or affiliates, any Protected Information in any Unauthorized
manner or for any Unauthorized purpose (as such terms are defined below).
(i) The term "Protected Information" shall mean trade secrets,
confidential or proprietary information and all other knowledge, know-how,
information, documents or materials owned, developed or possessed by the Company
or any of its subsidiaries or affiliates, whether in tangible or intangible
form, pertaining to the Business or the business of the Company or any of its
subsidiaries or
26
affiliates, including, without limitation, research and development operations,
systems, data bases, computer programs and software, designs, models, operating
procedures, knowledge of the organization, products (including prices, costs,
sales or content), processes, techniques, machinery, contracts, financial
information or measures, business methods, future business plans, details of
consultant contracts, new personnel acquisition plans, business acquisition
plans, customers (including identities of customers and prospective customers,
identities of individual contacts at business entities which are customers or
prospective customers, preferences, businesses or habits), business
relationships and other information owned, developed or possessed by the Company
or its subsidiaries or affiliates, except as required in the course of the
Executive's performance of his services hereunder; provided, however, that
-------- -------
Protected Information shall not include information that shall become generally
known to the public or the trade without violation of this Section 7.
(ii) The term "Unauthorized" shall mean: (A) in contravention of the
policies or procedures of the Company or any of its subsidiaries or affiliates;
(B) other wise inconsistent with the measures taken by the Company or any of its
subsidiaries or affiliates to protect their
27
interests in any Protected Information; (C) in contravention of any lawful
instruction or directive, either written or oral, of an employee of the Company
or any of its subsidiaries or affiliates empowered to issue such instruction or
directive; or (D) in contravention of any duty existing under law or contract.
Notwithstanding anything to the contrary contained in this Section 7, the
Executive may disclose any Protected Information to the extent required by court
order or decree or by the rules and regulations of a governmental agency or as
otherwise required by law; provided, however, that the Executive shall, to the
-------- -------
extent reasonably feasible, provide the Company with prompt notice of such
required disclosure in advance thereof so that the Company may seek an
appropriate protective order in respect of such required disclosure.
(b) The Executive acknowledges that all developments, including,
without limitation, inventions, patentable or otherwise, discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or planned business of the Company
or any of its subsidiaries or affiliates that, alone or jointly with others,
the Executive may conceive, create, make, develop, reduce
28
to practice or acquire during the Initial Term of Employment or any Secondary
Term of Employment (collectively, the "Developments") are works made for hire
and shall remain the sole and exclusive property of the Company and the
Executive hereby assigns to the Company all of his right, title and interest in
and to all such Developments. The Executive shall promptly and fully disclose
all future material Developments to the Board of Directors of the Company and,
at any time upon request and at the expense of the Company, shall execute,
acknowledge and deliver to the Company all instruments that the Company shall
prepare, give evidence and take all other actions that are necessary or
desirable in the reasonable opinion of the Company to enable the Company to file
and prosecute applications for and to acquire, maintain and enforce all letters
patent, trademark registrations or copyrights covering the Developments in all
countries in which the same are deemed necessary by the Company. All memoranda,
notes, lists, drawings, records, files, computer tapes, programs, software,
source and programming narratives and other documentation (and all copies
thereof) made or compiled by the Executive or made available to the Executive
concerning the Developments or otherwise concerning the Business or planned
business of the Company or any of its subsidiaries or affiliates shall be
29
the property of the Company or such subsidiary or affiliate and shall be
delivered to the Company or such subsidiary or affiliate promptly upon the
expiration or termination of the Initial Term of Employment or any Secondary
Term of Employment (without any required notice from the Company or such
subsidiary or affiliate to make such delivery).
(c) The provisions of this Section 7 shall, with out any limitation as
to time, survive the expiration or termination of the Executive's employment
hereunder, irrespective of the reason for any such termination.
8. Covenant Not to Compete. (a) The Executive shall not, during the
-----------------------
Initial Term of Employment or any Secondary Term of Employment and for two years
thereafter, without the prior written consent of the Company, directly or
indirectly solicit, entice, persuade or induce any employee, consultant, agent
or independent contractor of the Company or of any of its subsidiaries or
affiliates to terminate his or her employment by the Company or such subsidiary
or affiliate to become employed by any person, firm or corporation other than
the Company or such subsidiary or affiliate, or approach any such employee,
consultant, agent or independent contractor for any of the foregoing purposes,
or authorize or assist in the taking of any such actions by any third party (for
purposes of this
30
Section 8(a), the terms "employee," "consultant," "agent" and "independent
contractor" shall include any persons with such status at any time during the
six months preceding any solicitation in question).
(b) The Executive shall not, during the Initial Term of Employment or
any Secondary Term of Employment and for two years thereafter, without the prior
written consent of the Company, directly or indirectly, solicit, entice, raid or
induce any person, firm or corporation who or which on the date hereof or during
the Initial Term of Employment or any Secondary Term of Employment is a customer
or supplier of the Company, to become a customer or supplier of any other
person, firm or corporation for the same or similar products which such customer
or supplier purchased or obtained from, or provided to, the Company, and the
Executive shall not, directly or indirectly, approach any such customer or
supplier for such purpose or authorize or knowingly approve the taking of such
actions by any other person.
(c) The Executive shall not, during the Initial Term of Employment or
any Secondary Term of Employment, directly or indirectly engage, or participate,
or make any financial investment in, or become employed by or render consulting,
advisory or other services to or for any person,
31
firm, corporation or other business enterprise, wherever located, which is
engaged, directly or indirectly, in competition with the Business as conducted
or any business proposed to be conducted by the Division at the time of the
termination of the Executive's employment hereunder; provided, however, that
-------- -------
nothing in this Section 8(c) shall be construed to preclude the Executive from
making any investments in the securities of any business enterprise whether or
not engaged in competition with the Business or any business proposed to be
conducted by the Division at such time, to the extent that such securities are
actively traded on a national securities exchange or in the over-the-counter
market in the United States or on any foreign securities exchange which
represent, at the time of acquisition, less than 5% of the aggregate voting
power of such business enterprise.
9. Specific Performance. The Executive acknowledges that the
--------------------
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the businesses of its subsidiaries and affiliates. By reason of this, the
Executive consents and agrees that if the Executive violates any of the
provisions of
32
Section 7 or 8 hereof, the Company and its subsidiaries and affiliates would
sustain irreparable injury and that money damages will not provide adequate
remedy to the Company and that the Company shall be entitled to have Section 7
or 8 hereof specifically enforced by any court having equity jurisdiction.
Nothing contained herein shall be construed as prohibiting the Company or any of
its subsidiaries or affiliates from pursuing any other remedies available to it
for such breach or threatened breach, including the recovery of damages from the
Executive.
10. Deductions and Withholding. The Executive agrees that the
--------------------------
Company and/or its subsidiaries or affili ates shall withhold from any and all
compensation paid to and required to be paid to the Executive pursuant to this
Agreement all Federal, state, local and/or other taxes which the Company
determines are required to be withheld in accordance with applicable statutes
and/or regulations from time to time in effect and all amounts required to be
deducted in respect of the Executive's coverage under applicable employee
benefit plans. For purposes of this Agreement and calculations hereunder, all
such deductions and withholdings shall be deemed to have been paid to and
received by the Executive.
33
11. Expenses. The Company shall be responsible for and shall pay
--------
all costs and expenses of the parties in connection with the execution and
delivery of this Agreement and any related agreements or other documents,
including, without limitation, reasonable attorneys' fees and disbursements of
the Executive's legal counsel; provided, however, that without the prior written
-------- -------
consent of the Company, the Company shall not be responsible for any attorney's
fees and disbursements of the Executive's counsel in excess of $125,000 in the
aggregate (it being understood that such excess, in the absence of such prior
written consent of the Company, shall be the responsibility of the Executive).
12. Representation. The Executive hereby represents and warrants to
--------------
the Company that he has not been and is not party to, nor is he otherwise bound
by, any agreement, arrangement or understanding of any kind with any per son or
entity and that he has no obligations or commitments to any person or entity
which in any way may limit or restrict his performance of services under this
Agreement or which may otherwise conflict with this Agreement.
13. Bank Activities. The Executive hereby acknowledges that Imperial
---------------
Bank is engaged, through its Entertainment Division, in a business that is in
direct competition with the Business, and the parties hereto agree
34
that nothing in this Agreement is intended to limit or restrict such competitive
activities by Imperial Bank or, subject to Section 8 hereof, limit or restrict
the activities of the Executive vis-a-vis the Entertainment Division of
Imperial Bank.
14. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties with respect to the Executive's employment and the other matters
that are the subject hereof, and supersedes any and all prior agreements, oral
or written, involving the Company or the Subsidiary with respect to the
Executive's employment and such other matters that are the subject hereof,
including without limitation the Summary Term Sheet dated January 14, 1997
between the Company and the Executive (except as set forth in Section 3 hereof
regarding the rights and obligations of the Executive with respect to the LLC
Interests under the Summary Term Sheet). Notwithstanding the foregoing,
simultaneously with the execution and delivery of this Agreement, the Company
and the Executive are entering into a License Agreement with respect to, among
other things, the Company's use of the name "Xxxxx Xxxxxxx" in connection with
the Business. This Agreement may not be changed or terminated orally but only
by an agreement in writing signed by the parties hereto.
35
15. Waiver. The waiver by the Company of a breach of any provision
------
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by him. The waiver by the Executive of a breach of
any provision of this Agreement by the Company shall not operate or be construed
as a waiver of any subsequent breach by the Company.
16. Governing Law. This Agreement shall be subject to, and governed
-------------
by, the laws of the State of California, applicable to agreements made and to be
performed entirely therein, without regard to the principles and policies of
conflicts of laws of such state.
17. Assignability; Successors. (a) The obligations of the Executive
-------------------------
may not be delegated and, except as expressly provided in Section 5(b) hereof
relating to the designation of beneficiaries, the Executive may not, without the
Company's written consent thereto, assign, transfer, convey, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any interest herein. Any
such attempted delegation or disposition shall be null and void and without
effect.
(b) The Company and the Executive agree that this Agreement and each
of the Company's rights and obligations hereunder may be assigned or transferred
by the Company to
36
and shall be assumed by and binding upon any Successor (as defined below) to the
Company. The Company and the Executive further agree that upon the
effectiveness of the Assignment and Assumption, all rights of the Company under
this Agreement shall be assigned to, and all liabilities and obligations of the
Company hereunder shall be assumed by, the Subsidiary and, from and after such
time, the Company shall no longer have any rights, or be subject to any
liabilities or obligations, hereunder; provided, however, that the Company shall
-------- -------
remain (and the Subsidiary shall not be) liable for the payment of any
compensation, reimbursement of expenses or other benefit that may be due and
payable to the Executive at the time of such effectiveness, and provided
--------
further, from and after such effectiveness, all references in this Agreement to
-------
the "Board of Directors of the Company" shall mean the Board of Directors of the
Subsidiary.
(c) The term "Successor" shall mean any corporation or other business
entity which succeeds to the assets or conducts the Business (including the
Subsidiary) or the business of the Company or of any holding company of the
Company, whether directly or indirectly, by purchase, merger, consolidation or
otherwise.
37
(d) Notwithstanding anything to the contrary contained herein, the
Executive acknowledges that the Company and Imperial Bancorp intend to effect
the Spinoff and agrees that the Spinoff shall not be deemed an assignment for
any purposes hereunder.
18. Severability; Blue-Pencilling. If any provision or any part
-----------------------------
thereof of this Agreement, including Sections 7 and 8 hereof, as applied to
either party or to any circumstances, shall be adjudged by a court of competent
jurisdiction to be invalid or unenforceable, the same shall in no way affect any
other provision or remaining part thereof of this Agreement, which shall be
given full effect without regard to the invalid or unenforceable provision or
part thereof, or the validity or enforceability of this Agreement.
If any court construes any of the provisions of Section 7 or 8 hereof,
or any part thereof, to be unreason able because of the duration of such
provision or the geographic scope thereof, such court shall have the power to
reduce the duration or restrict or redefine the geographic scope of such
provision and to enforce such provision as so reduced, restricted or redefined.
19. Notices. All notices to the Company or the Executive permitted
-------
or required hereunder shall be in writ-
38
ing, shall refer to this Agreement and shall be delivered personally or by
courier service providing for next-day delivery or sent by registered or
certified mail, return receipt requested, to the following addresses:
The Company:
Imperial Bank
0000 Xxxxx Xx Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
General Counsel
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Block, Esq.
The Executive:
Xxxxx X. Xxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Law Offices of Xxxxx X. Xxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Any party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if sent by
certified or registered mail, 3 days after deposit (postage prepaid) with the
U.S. mail service; and if sent by courier service
39
providing for next day delivery, the next business day following deposit with
such courier service.
20. Paragraph Headings. The paragraph headings contained in this
------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
22. Arbitration. Resolution of any and all disputes arising under
-----------
this Agreement shall be submitted to arbitration under the terms hereof, which
arbitration shall be final, conclusive and binding upon the parties, their
successors and assigns. The arbitration shall be conducted before the American
Arbitration Association (the "AAA") in Los Angeles, California by three
arbitrators acting by majority vote (the "Panel") appointed pursuant to the
commercial arbitration rules of the AAA, as amended from time to time (the "AAA
Rules"). The arbitration shall be conducted pursuant to the then applicable
commercial arbitration procedures of the California Civil Code with joint rights
of discovery and such other procedures as the parties subject to such
arbitration (each, a "Party") may
40
agree, or, in the absence of or failing such agreement, pursuant to the AAA
Rules. The award shall be in writing and shall specify the factual and legal
basis for the award. The Panel shall apportion all costs and expenses of
arbitration, including the Panel's fees and expenses and fees and expenses of
experts, between the prevailing and non-prevailing Party as the Panel deems fair
and reasonable. Any arbitration award shall be binding and enforceable against
the parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
41
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
IMPERIAL BANK
By /s/ Xxx Xxxxxxxxxxx
______________________________
Name: Xxx Xxxxxxxxxxx
Title: Executive Vice President
/s/ Xxxxx X. Xxxxxxx
________________________________
Xxxxx X. Xxxxxxx
42
SCHEDULE I
PRE-TAX EARNINGS
----------------
Prior to the effectiveness of the Assignment and Assumption, the following
principles are applicable with respect to the determination of pre-tax earnings:
1. Pre-tax earnings shall be calculated in accordance with the Company's unit
profitability system applicable for such calendar year, including allocating
interest and overhead costs in accordance with the Company's customary practice
applicable to all of its operating divisions.
2. The value of balances on deposit with the Company attributable to customers
of the Division will be deemed to be credited to the Division for the purpose of
calculating pre-tax earnings in accordance with the profitability analysis
generally in use by the Company and as agreed between the management of the
Company and the Division.
3. One-half of the Guaranteed Bonus Amount shall be accrued (as a compensation
expense) in monthly installments over the Initial Term of Employment. The
remaining one-half of the Guaranteed Bonus Amount and the Incentive Bonus shall
not be considered expenses of the Division.
43
SCHEDULE II
After the effectiveness of the Assignment and Assumption, "Pre-Tax Earnings"
shall be defined as set forth below and the following principles shall be
applicable thereto.
"PRE-TAX EARNINGS" shall mean, with respect to any period of determination,
actual operating income of Division for such period (exclusive of any and
all extraordinary or non-recurring items of income, expense, gain or loss
(other than equity interests, fees or other profit participations that have
non-recurring features)), net of interest charges, Preferred Investment
Charges (as defined below), depreciation and amortization, but before
income taxes, as determined in accordance with GAAP (as defined below).
The following terms have the following meanings:
"EFFECTIVE DATE" means the date on which the Assignment and Assumption is
effective.
"GAAP" means generally accepted accounting principles, consistently
applied.
"LHO ADVANCES" means the aggregate amount from time to time outstanding of
any contributions of capital to, or investments in, or borrowings on behalf
of, the Division made (actually or notionally) from and after the Effective
Date by the Company to or for the benefit or account of the Division,
including, without limitation, (a) the principal amount of any borrowings
made by the Division (or by the Company for the benefit of the Division)
that are recourse loans of or guaranteed by the Company (to the extent of
such recourse or guarantee) and (b) any amounts obtained by the Company
from a third party to enable the Division to satisfy its obligations to a
third-party lender.
"PREFERRED AMOUNT" means, as of any date or any period of determination,
the sum of (i) the net book value of the Division as of the Effective Date,
less $100,000 and (ii) that amount of LHO Advances made after the Effective
Date and outstanding as of such date or during such period; provided,
--------
however, that the
-------
44
Preferred Amount shall not exceed $19.9 million at any time unless the
Preferred Amount exceeds $19.9 million as a result of a third-party lender
increasing the amount of recourse loans of the Company. The Preferred
Amount shall be deemed to bear dividends as described in the definition of
"Preferred Investment Charges"
"PREFERRED INVESTMENT CHARGES" means, as of any date or period of
determination, except as set forth below in item 5, an amount equal to 12%
per annum of the Preferred Amount as of such date or period, adjusted
quarterly for the period deemed to be included in the Preferred Amount.
Accounting Principles for Determining Pre-Tax Earnings
1. The amount of overhead expense allocable to the Division by the Company
shall be $25,000 per month for calendar year 1997 and shall increase by ten
percent (10%) on the first day of each calendar year thereafter, in each
case unless the Company's independent accountants determine that another
amount is more appropriately allocable to the Division, in which case such
alternate amount of overhead expense shall be used commencing with the
calendar year following such determination.
2. All expenses of administering the Plan shall be expenses of the Division
and shall be taken into account in determining Pre-Tax Earnings. No member
of the committee administering the Plan shall receive any fees for services
as a member of such committee.
3. Amounts paid or accrued under the Plan shall not be charged as compensation
expense.
4. One-half of the Guaranteed Bonus Amount shall be accrued (as a compensation
expense) in monthly installments over the Initial Term of Employment. The
remaining one-half of the Guaranteed Bonus Amount and the Incentive Bonus
shall not be considered expenses of the Division.
5. Except with respect to LHO Advances in excess of $19.9 million as
contemplated in the proviso contained in the definition of "Preferred
Amount", which shall bear Preferred Investment Charges (unless the Company
and the Executive shall agree at a lower rate for the
45
amount of such LHO Advances in excess of $19.9 million following
negotiation with the applicable third-party lender, in which case LHO
Advances in excess of such amount shall bear dividends or interest at such
lower rate), LHO Advances in excess of $19.9 million (if any) shall bear
dividends or interest on such terms as shall be agreed between the Division
and the Company at the time such LHO Advances are made.
6. The determination of the compensation to be paid to the Division, if any,
for balances on deposit with the Bank attributable to customers of the
Division will be the subject of a separate agreement between management of
the Company and the Division.
7. Notwithstanding anything to the contrary herein, no loan, capital
contribution or other item constituting an LHO Advance shall result in both
a "Preferred Investment Charge" and an additional interest charge to the
Division.
46
