Employment Agreement
Exhibit 10.1
This Employment Agreement (the “Agreement”) is entered into as of January 1, 2007 (the
“Effective Date”) by and between Countrywide Financial Corporation (the “Company”) and Xxxxx Xxxxxx
(“Executive”).
1. Term.
The Company employs Executive and Executive accepts such employment, upon the terms and
conditions in this Agreement, from January 1, 2007 to and including December 31, 2009 (the
“Expiration Date”), unless earlier terminated in accordance with the terms of this Agreement (the
“Term”).
2. Duties.
(a) Title and Duties. Executive shall serve as President and Chief Operating Officer
of the Company and as Chairman and Chief Executive Officer of Countrywide Home Loans, Inc.
Executive’s duties hereunder shall be the usual and customary of such offices. Executive shall
have such other duties and responsibilities, consistent with Executive’s titles, as the Chairman
and Chief Executive Officer of the Company and/or the Board of Directors of the Company (the
“Board”) shall determine from time to time. Executive agrees to devote full business time and
attention to the business of the Company. Executive shall perform his duties to the Company
faithfully and shall abide by the rules, regulations, instructions, personnel practices and
policies of the Company and any changes therein that may be adopted from time to time by the
Company. Executive agrees to serve without additional remuneration in such executive capacities
for one or more direct or indirect subsidiaries of Company as the Board may from time to time
request, subject to appropriate authorization by the subsidiary or subsidiaries involved and any
limitations under applicable law.
(b) Other Positions. Nothing herein shall prevent Executive, upon prior approval of
the Board, from serving as a director or trustee of other corporations or businesses that are not
in competition with the Company or with any of the Company’s affiliates, so long as such activities
are approved in advance by the Board and do not interfere with Executive’s duty to the Company.
Nothing herein shall prevent Executive from becoming a partner or a stockholder in any corporation,
partnership or other venture not in competition with the Company or with any of the Company’s
affiliates, so long as such activities do not interfere with Executive’s duties to the Company.
Executive may make and manage personal investments of his choice and serve in any capacity with any
civic, educational or charitable organization, or any governmental entity or trade association,
without seeking or obtaining approval by the Board, so long as such activities and services do not
interfere with Executive’s duties to the Company.
3. Compensation.
(a) Base Salary. The Company will pay to Executive a base salary at the annual rate
of $1,400,000 for the calendar year 2007. Such salary shall be earned monthly and
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shall be payable in periodic installments no less frequently than monthly in accordance with
the Company’s customary practices. The Company will review Executive’s salary annually and may
make annual adjustments (which may be increases but not decreases) as determined in the sole
discretion of the Compensation Committee of the Board (the “Compensation Committee”).
Notwithstanding the foregoing, all amounts payable under this Section 3(a) that the Company
reasonably determines not to be tax deductible under Section 162(m) of the Internal Revenue Code of
1986, as amended, (the “Code”) shall be automatically deferred under the terms of the Countrywide
Corporation Amended and Restated Deferred Compensation Plan as it may be amended or replaced (the
“Deferred Compensation Plan”) until such time that Executive is no longer employed by the Company
or any of its subsidiaries.
(b) Promotion Bonus. In consideration of Executive’s increased responsibilities and
efforts in 2006 associated with becoming the President and Chief Operating Officer of the Company,
Executive shall receive a cash lump sum bonus of $2,625,000 within thirty (30) days following his
execution of this Agreement.
(c) Annual Bonus.
(i) The Company shall pay to Executive for each calendar year ending during the
Term of this Agreement, an incentive compensation award in an amount determined
pursuant to the terms and conditions of the Amended and Restated Countrywide
Financial Corporation Annual Incentive Plan, or such other annual incentive plan
designated by the Compensation Committee (the “Annual Incentive Plan”) based on the
Company’s Return on Equity and Net Income (as such terms are defined for purposes of
the Company’s Annual Incentive Plan). The incentive compensation award opportunity
for each year described herein shall have a target value of $3,870,000 and a maximum
value of $6,250,000. For each calendar year ending during the Term of this
Agreement, the Compensation Committee has established performance goals such that
the annual incentive opportunity will be equal to the amount of the Net Income
(“NI”) shown in the column of the table shown below with respect to the
corresponding levels of the Company Return on Equity (“XXX”); provided, however
that, in the event that the Company’s Earnings Per Share (“EPS”) in 2007 equals or
exceeds $4.30 per share, then the amount of Executive’s incentive compensation award
for 2007 shall be the greater of (A) $5,250,000 or (B) the amount determined
according to the table shown below; provided further, that the maximum payout value
of Executive’s annual incentive award for 2007 and for any other calendar year
during the Term of this Agreement shall not exceed $6,250,000.
| Company’s Return | Share Rate on Net Income Above Return on | |
| on Equity | Equity Target | |
<10%
|
0.00% of NI | |
10%-12%
|
0.275% of NI over 10% ROE | |
>12%
|
0.275% of NI between 10% and 12% XXX, plus 0.40% of NI over 12% XXX |
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The Company’s total equity value for purposes of Executive’s incentive compensation
award opportunity for each calendar year shall be determined as of December 31 of
the prior calendar year. In the event that an acquisition, reorganization, merger,
consolidation, share repurchase or other similar transaction occurs during the Term,
or in the event of any other material non-recurring or unanticipated event during
the Term, the Committee, after consultation with Executive, shall adjust the Return
on Equity and Net Income targets in the table above to preserve (but not increase)
the potential value of Executive’s incentive compensation award, provided that such
adjustment shall only be made if the Committee, after consultation with Executive,
reasonably determines that the adjustment will not affect the deductibility of the
incentive compensation award under Section 162(m) of the Code.
(ii) Any amount payable under this Section 3(c) that would exceed the
applicable limit for performance-based compensation under the Annual Incentive Plan
or that the Company otherwise reasonably determines, after consultation with
Executive, not to be deductible for federal income tax purposes under Section 162(m)
of the Code shall be deferred as set forth in Section 3(a) hereof.
(iii) In the event that Executive’s employment hereunder shall terminate prior
to December 31, 2009 under Section 4(a) (Disability) or Section 4(b) (death),
Executive or his estate shall be entitled to receive an incentive compensation
payment for such portion of the calendar year in which the Employment Termination
Date occurs on the same terms as set forth in the foregoing provisions of this
Section 3(c) except that the amount payable hereunder shall be adjusted by
multiplying it by a fraction, the numerator of which is the number of days during
such year that Executive was employed by the Company and the denominator of which is
365.
(d) Equity Awards.
(i) Grants of Equity Awards. Effective on April 1 (or the next
business day following April 1, if April 1 is not a business day) of each
calendar year beginning during the Term, Executive shall receive a long-term
incentive compensation award in the form of performance-based restricted
stock units (“RSUs”) and stock appreciation rights (“SARs”). The RSU awards
and SAR awards shall be granted pursuant to the terms of the Countrywide
Financial Corporation 2006 Equity Incentive Plan, or such other equity
incentive plan or plans as may be in effect or come into effect prior to the
end of the Term (the “Equity Plan”). The number of shares of the Company’s
common stock subject to each annual RSU award and SAR award shall be that
number of whole shares that results in a grant date value for each award of
no less than $4,500,000, resulting in an annual aggregate grant date value
for the long-term incentive compensation opportunity of no less than
$9,000,000. The grant date value of an RSU award will be determined by the
Committee based on the
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fair market value (as defined in the Equity Plan) of the Company’s common
stock on the grant date, and the grant date value of an SAR award shall be
determined by the Committee in accordance with the same assumptions and
methodologies used to determine similar awards to the Company’s other senior
officers and used to value such awards in the Company’s financial statements
for the reporting period preceding the grant date.
(ii) Vesting and Payment of RSUs. Not later than 90 days after
January 1 of each calendar year beginning during the Term, the Committee
shall provide that each annual RSU grant shall become earned and vested in
three equal annual installments subject to the service and performance
conditions set forth below. Each annual RSU grant shall be evidenced by an
award agreement that sets forth the vesting terms approved by the Committee
and provides that each annual RSU grant shall be paid out as described
herein:
(A) One-third of the RSUs subject to the award shall become earned and
vested on the date the Committee determines that the Company’s Return on
Equity (as defined for purposes of the Equity Plan) for the calendar year in
which the RSU award is granted equals or exceeds 12%, provided that
Executive remains employed by the Company through December 31 of such year
of grant. Another one-third of the RSUs subject to the award shall become
earned and vested on the date that the Committee determines that the
Company’s Return on Equity for the first calendar year following the year of
grant of the award equals or exceeds 12%, provided that Executive remains
employed by the Company through December 31 of the first year following the
year of grant. The final one-third of the RSUs subject to the award shall
become earned and vested on the date that the Committee determines that the
Company’s Return on Equity for the second calendar year following the year
of grant of the award equals or exceeds 12%, provided that Executive remains
employed by the Company through December 31 of the second year following the
year of grant. Upon the determination by the Committee that the Company’s
Return on Equity for any calendar year during the three-year vesting period
failed to equal at least 12% (and the vesting of the RSU award has not
previously been accelerated pursuant to the provision of Section 3(d)(ii)(B)
below), then the one-third of the RSUs originally subject to the award that
would have otherwise vested shall immediately terminate and be forfeited.
In the event that an acquisition, reorganization, merger, consolidation,
share repurchase or other similar transaction occurs during any calendar
year in the Term, or in the event any other material non-recurring or
unanticipated event occurs during any calendar year in the Term, the
Committee, after consultation with Executive, shall adjust the 12% Return on
Equity vesting target described above for such year and future years, if
applicable, to preserve (but not increase) the intended incentives and
potential value of Executive’s RSU award, provided that
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any such adjustment shall only be made if the Committee reasonably
determines, after consultation with the Executive, that the adjustment will
not affect the deductibility of Executive’s RSU award under Section 162(m)
of the Code.
(B) Upon a Change in Control as defined in the Equity Plan (provided
Executive’s employment has not earlier terminated) or upon Executive’s
termination of employment for any reason other than Cause or voluntary
termination without Good Reason, the unvested portion of an RSU award
granted under this Section 3(d) that has not previously been forfeited shall
immediately become 100% vested.
(C) The RSUs shall be paid in the form of shares of the Company’s
common stock as soon as practicable, and in any event within two (2) months,
following the vesting date, provided that payment shall be delayed as
provided in Section 3(a) to the extent the Company reasonably determines,
after consultation with Executive, that the delivery of such shares would
not be deductible for federal income tax purposes under Section 162(m) of
the Code.
(iii) Vesting and Exercise of SARs.
(A) Each annual SAR grant shall (I) be granted with an exercise price
equal to fair market value (as defined under the Equity Plan) of the
Company’s common stock on the date of grant, (II) have a term of five (5)
years and (III) provide that the value of the SAR award (if any) shall be
settled in shares of the Company’s common stock. Each grant of an SAR award
shall be evidenced by an award agreement that provides that the SAR award
shall become vested and exercisable in three equal annual installments
beginning on the December 31 immediately following the grant date, subject
to Executive’s continued employment through each such vesting date.
(B) The vesting of each SAR award shall be accelerated upon a Change in
Control as defined in the Equity Plan (provided Executive’s employment has
not earlier terminated) or upon Executive’s termination of employment for
any reason other than Cause or voluntary termination without Good Reason.
(iv) Other Terms of Equity Awards. The award agreements for
each annual grant of RSUs and SARs shall also contain such other terms and
provisions as reasonably determined by the Committee that are not
inconsistent with the foregoing or the other provisions of this Agreement.
(e) Savings, Retirement and Welfare Benefit Plans. Executive shall be eligible for
participation in benefit plans, practices, policies and programs provided by the Company
(including, but not limited to, savings, retirement, medical, prescription, dental,
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disability, salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) that are generally applicable to other executive officers of
the Company, and for which he is eligible to participate, as they are in effect from time to time.
(f) Fringe Benefits. Executive shall be entitled to participate in all other benefit
programs, if any, that the Company makes available for participation by its other executive
officers and for which he is eligible to participate.
(g) Other Fringe Benefits. Executive shall be entitled to the following additional
fringe benefits:
(i) Employer Automobile.
During the Term of this Agreement, the Company shall provide Executive with the
use of an automobile reasonably comparable to the automobile that the Company is
providing to Executive as of the Effective Date. The Company shall be responsible
for any initial payment, monthly lease payments, taxes and license fees and property
and casualty liability insurance payments with such coverage limits and deductible
amounts as shall be reasonably acceptable to Executive. Executive shall be
responsible for all maintenance and repairs to the automobile and all other expenses
associated with the automobile. At Executive’s option, the Company shall in lieu of
the foregoing provide an automobile allowance in an amount equal to the total of the
above lease payments, taxes, license fees, property and casualty liability
insurance.
(ii) Country Club Membership.
The Company shall pay or cause to be paid, on Executive’s behalf, the full
amount of membership fees in Sherwood Country Club. In addition, the Company shall
reimburse Executive for all monthly club dues as well as for any Company-related
charges in accordance with the Company’s normal policy regarding expense
reimbursement.
(h) Vacation and Sick Pay. Executive shall be entitled to paid vacation and sick pay
in accordance with the plans, policies, programs and practices as in effect generally with respect
to other executive officers of the Company.
(i) Reimbursement of Business Expenses. During the Term of this Agreement, the
Company shall reimburse Executive promptly for all expenditures (including travel, entertainment,
parking and business meetings to the extent that such expenditures meet the requirements of the
Code for deductibility by the Company for federal income tax purposes or are otherwise in
compliance with the rules and policies of the Company and are substantiated by the Executive as
required by the Internal Revenue Service and rules and policies of the Company.
(j) Business Travel Expenses. During the Term, the Company shall bear the cost of
business-related travel expenses for Executive (and his spouse) on Company owned or
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leased aircraft in accordance with the terms of the Company’s aircraft policy in effect on the
date hereof.
(k) Financial Consulting Services. During the Term, the Company will make available
financial consulting services of AYCO (or another comparable financial consulting firm selected by
Executive) substantially similar to such services made available to senior executives of the
Company from time to time.
4. Termination.
(a) Disability.
(i) In the event that Executive would qualify for permanent disability benefits
under the Employer’s Long Term Disability Plan (the “LTD Plan”), or if Executive
does not participate in the LTD Plan, would have qualified for permanent disability
had Executive been a participant in the LTD Plan, (a “Disability”), Executive’s
full-time employment hereunder may be terminated, by written Notice of Termination
from the Company to Executive.
(ii) The Company shall continue, from the Termination Date (as defined in
Section 4(g) below) until Executive’s death or the fifth anniversary of such notice,
whichever first occurs (the “Disability Payment Period”), (A) to pay compensation to
Executive, in the same manner as in effect immediately prior to the Termination
Date, in an amount equal to (I) fifty percent (50%) of Executive’s base salary in
effect immediately prior to the termination, minus (II) the amount of any cash
payments to him under the terms of the Company’s disability insurance or other
disability benefit plans and under the terms of the Company’s tax-qualified defined
benefit pension plan, and any compensation he may receive pursuant to any other
employment and (B) to provide health and life insurance benefits at least as
favorable as those provided to him immediately prior to his Termination Date;
provided, however, that any life or health insurance benefit shall cease immediately
if Executive becomes entitled to a comparable benefit from other employment. In
addition, in the event that the Executive’s employment is terminated pursuant to
this Section 4(a), all non-vested stock options, SARs, RSUs and other equity
incentive compensation awards held by him on the Termination Date shall become
immediately and fully vested and/or exercisable, as applicable.
(iii) The determination of Disability shall be made only after 30 days notice
to Executive and only if Executive has not returned to performance of his duties
during such 30-day period. In order to determine Disability, both the Company and
Executive shall have the right to provide medical evidence to support their
respective positions, with the ultimate decision regarding Disability to be made by
a majority of the Company’s disinterested directors.
(b) Death. In the event that Executive shall die during the term of this Agreement,
the Company shall pay Executive’s base salary for a period of twelve (12) months
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following the date of his death and in the manner otherwise payable hereunder, to such person
or persons as Executive shall have directed in writing or, in the absence of a designation, to his
estate (the “Beneficiary”). The Company shall also pay the cost of premiums for continuation
health care coverage under Section 4980B of the Code (“COBRA”) (or, if applicable, the continued
health coverage provisions under Section 1366.20 et seq. of the California Health & Safety Code or
Section 10128.50 et seq. of the California Insurance Code (“Cal-COBRA”)) for the Executive’s
dependents who are covered at the time of his death for a period twelve (12) months following
Executive’s death or, if less, the maximum period such coverage is available under COBRA or
Cal-COBRA, as applicable. In addition, in the event Executive’s employment is terminated pursuant
to this Section 4(b), all non-vested stock options and other equity incentive compensation awards
held by Executive on the Termination Date shall become immediately and fully vested and/or
exercisable, as applicable. If Executive’s death occurs while he is receiving payments for
Disability under Section 4(a)(ii) above, such payments shall cease and the Beneficiary shall be
entitled to the payments and benefits under this Subsection (b), which shall continue for a period
of twelve months thereafter at the full rate of compensation in effect immediately prior to the
Disability. This Agreement in all other respects will terminate upon the death of Executive;
provided, however, that the termination of the Agreement shall not affect Executive’s entitlement
to all other benefits to which he has become vested or which are otherwise payable in respect of
periods ending prior to its termination.
(c) Cause. The Company may terminate Executive’s employment under this Agreement for
“Cause.” A termination for Cause is a termination by reason of (i) a material breach of this
Agreement by Executive (other than as a result of incapacity due to physical or mental illness)
which is committed in bad faith or without reasonable belief that such breach is in the best
interests of the Company and which is not remedied within a reasonable period of time after receipt
of written notice from the Company specifying such breach, (ii) Executive’s failure to comply with
directions of the Board or the Chief Executive Officer of the Company that is not remedied within a
reasonable period of time after receipt of written notice from the Board or the Chief Executive
Officer specifying such failure, (iii) any act by Executive of (A) fraud or intentional
misrepresentation or (B) embezzlement, misappropriation or conversion of assets or opportunities of
the Company or any direct or indirect subsidiary or affiliate of the Company, (iv) Executive’s
willful violation of any law, rule or regulation in connection with his duties (other than traffic
violations or similar offenses); (v) Executive’s commission of any act of moral turpitude, (vi)
Executive’s conviction by a court of competent jurisdiction of a felony, or (vii) entry of an order
duly issued by any federal or state regulatory agency having jurisdiction in the matter removing
Executive from office of the Company or its subsidiaries or permanently prohibiting him from
participating in the conduct of the affairs of the Company or any of its subsidiaries. If
Executive shall be convicted of a felony or shall be removed from office and/or temporarily
prohibited from participating in the conduct of the Company’s or any of its subsidiaries’ affairs
by any federal or state regulatory authority having jurisdiction in the matter, the Company’s
obligations under Sections 3(a), 3(b), 3(c) and 3(d) hereof shall be automatically suspended;
provided, however, that if the charges resulting in such removal or prohibition are finally
dismissed or if a final judgment on the merits of such charges is issued in favor of Executive, or
if the conviction is overturned on appeal, then Executive shall be reinstated in full with back pay
for the removal period plus accrued interest at the rate then payable on judgments. During the
period that the Company’s obligations under Sections 3(a), 3(b), 3(c) and 3(d) hereof are
suspended, Executive shall continue to participate in the plans, benefits and programs
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described in Sections 3(e), 3(f) 3(g), 3(h), 3(i), 3(j), and 3(k) until the conviction of the
felony or removal from office has become final and non-appealable. When the conviction of the
felony or removal from office has become final and non-appealable, all of the Company’s obligations
hereunder shall terminate; provided, however, that the termination of Executive’s employment
pursuant to this Section 4(c) shall not affect Executive’s entitlement to all benefits in which he
has become vested (including, without limitation, rights of indemnification and amounts due under
Section 5) or which are otherwise payable in respect of periods of service ending prior to his
termination of employment.
(d) Termination by the Company Other than For Cause; Good Reason. The Company may
terminate Executive’s employment without Cause, and Executive may terminate his employment for Good
Reason.
(i) For purposes of Section 4(d)(iii), “Good Reason” shall be deemed to occur
if the Board (A) requires Executive to report to any person or entity other than
Xxxxxx Xxxxxx or the Board, (B) elects a person other than Executive to succeed or
replace Xxxxxx Xxxxxx as the Company’s Chief Executive Officer without Executive’s
consent, or (C) reorganizes management so as to require Executive to report to a
person or persons other than the current Chief Executive Officer or the Board.
Executive shall not have Good Reason to terminate employment with the Company (or
otherwise have the right to claim that he has been constructively terminated from
employment) due solely to the fact that the Company shall cease to be a public
company and shall become a subsidiary of another publicly-traded corporation.
(ii) Except as provided in Section 4(d)(iv), if Executive’s employment shall be
terminated during the Term by the Company other than for Cause, then (A) for a
period of two years following the Termination Date (the “Severance Period”), the
Company shall (I) continue to pay to Executive his annual base salary at the rate in
effect on the Termination Date and (II) provide life and health insurance benefits
at least as favorable as those provided prior to Executive’s termination of
employment under Section 3(e) hereof, (B) the Company shall pay to Executive, within
ten (10) days after the end of each calendar year ending during the Severance
Period, an amount equal to the average of the annual cash bonus paid or payable to
Executive pursuant to Section 4(b) of his Second Restated Employment Agreement
entered into as of February 28, 2003 (the “Prior Agreement”) and/or Section 3(c) of
this Agreement, as applicable, in respect of the two (2) calendar years immediately
preceding the calendar year in which Executive’s Termination Date occurs (the “Bonus
Rate”), and (C) all stock options, SARs, RSUs and other grants of equity incentive
compensation awards held by Executive on the Termination Date shall become
immediately and fully vested and/or exercisable, as applicable.
(iii) Except as provided in Section 4(d)(iv), if Executive’s employment shall
be terminated during the Term by the Executive for Good Reason, then (A) all stock
options, SARs, RSUs and other grants of equity incentive compensation awards held by
Executive on the Termination Date shall
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be come immediately and fully vested and/or exercisable, as applicable, and (B) the
Company may award Executive such severance as determined by the Company in its sole
discretion.
(iv) If after a “Change in Control” (as defined in the Company’s Change in
Control Severance Plan as amended and restated June 14, 2006) and during the Term of
this Agreement Executive’s employment shall be terminated by the Company other than
for Cause, or if Executive terminates his employment for Good Reason (as defined
below), then (A) the Company shall pay Executive in a single payment as soon as
practicable after the Termination Date, as severance pay and in lieu of any further
salary and incentive compensation for periods subsequent to the Termination Date, an
amount in cash equal to three times the sum of (I) Executive’s annual base salary at
Termination Date and (II) the greater of (x) the Bonus Rate and (y) the bonus and/or
incentive award paid for the fiscal year immediately preceding the date of the
Change in Control, (B) the Company shall continue to provide for three years from
the Termination Date the life and health insurance benefits at least as favorable as
those provided prior to his termination of employment under Section 3(e) hereof,
provided that the life and health insurance coverage and benefits provided during
this period shall be no less favorable to Executive and his dependents than the most
favorable of such coverages and benefits provided Executive and his dependents
during the 90-day period immediately preceding the Change in Control or as of any
date following the Change in Control but preceding the date of Executive’s
termination and (C) all stock options, SARs, RSUs and other grants of equity
incentive compensation awards held by Executive on the Termination Date shall become
immediately and fully vested and/or exercisable, as applicable. For purposes of
this Section 4(d)(iv), “Good Reason” shall be deemed to occur if the Company (w)
requires Executive to report to anyone other than Xxxxxx Xxxxxx or his successor as
Chief Executive Officer of the Company or the Board, (x) breaches this Agreement in
any material respect, (y) requires that Executive be based anywhere more than fifty
(50) miles from the office where Executive is located as of the date hereof, or (z)
a material diminution in Executive’s status, title, position and responsibilities.
Notwithstanding the foregoing, the Executive shall not have Good Reason to terminate
employment with the Company (or otherwise have the right to claim that he has been
constructively terminated from employment) due solely to the fact that the Company
shall cease to be a public company and shall become a subsidiary of another
publicly-traded corporation.
(v) Notwithstanding anything to the contrary in this Section 4(d), any life or
health insurance benefit shall cease immediately if Executive becomes entitled to a
comparable benefit from other employment.
(e) Resignation. If Executive resigns voluntarily without Good Reason as defined in
Section 4(d)(i) or Section 4(d)(iv), whichever is applicable, during the Term of this Agreement,
all of his rights to payment or benefits hereunder shall immediately terminate; provided, however,
that the termination of Executive’s employment pursuant to this Section 4(e)
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shall not affect Executive’s entitlement to all benefits in which he has become vested or
which are otherwise payable in respect of periods of service ending prior to his termination of
employment.
(f) End of Term of Agreement. In the event that, at least ninety (90) days prior to
the Expiration Date, the Company has not offered Executive a new employment agreement containing at
least the same material terms as this Agreement, and Executive ceases to be employed by the Company
at the Expiration Date (a “Qualifying Expiration”), then all non-vested stock options, SARs, RSUs
and other equity incentive compensation awards held by him shall become immediately and fully
vested and/or exercisable, as applicable, and the Company may award such severance as determined by
the Company in its sole discretion. Executive shall also be entitled to those benefits and awards,
including the annual incentive compensation award pursuant to Section 3(c) of this Agreement for
the last year of service, in which he has become vested or which are otherwise payable with respect
to periods of service ending prior to or on the Expiration Date. Executive shall not otherwise be
entitled to any specific severance payment or other benefits as a result of a Qualifying
Expiration.
(g) Notice of Termination. Any purported termination by the Company or by Executive
shall be communicated by a written Notice of termination (the “Notice of Termination”) to the other
party hereto which indicates the specific termination provision in this Agreement, if any, relied
upon and which sets forth in reasonable detail the facts and circumstances, if any, claimed to
provide a basis for termination of Executive’s employment under the provision so indicated. For
purposes of this Agreement, no such purported termination shall be effective without such Notice of
Termination. The “Termination Date” shall mean the date specified in the Notice of Termination,
which shall be no less than 30 or more than 60 days from the date of the Notice of Termination.
Notwithstanding any other provision of this Agreement, in the event of any termination of
Executive’s employment hereunder for any reason, the Company shall pay Executive his full base
salary through the Termination Date, plus any benefits which have been earned or become payable,
but which have not yet been paid as of such Termination Date.
(h) Exclusive Remedy. Executive agrees that the payments contemplated by this
Agreement shall constitute the exclusive and sole remedy for any termination of employment or this
Agreement and Executive covenants not to assert or pursue any other remedies, at law or in equity,
with respect to any termination of employment. Notwithstanding the foregoing, nothing in this
Agreement shall prevent or limit Executive’s receipt of vested benefits to which Executive is
otherwise entitled to receive under any contract or agreement relating to benefit plans
contemplated by Section 3 in effect as of the date of termination, except as explicitly modified by
this Agreement.
(i) Release. The Company may condition its payments of any amounts hereunder
following termination of Executive’s employment for any reason upon delivery to it of a full and
complete release of all claims by Executive, in form and substance satisfactory to the Board but
not containing any additional post-employment restrictions other than those contained herein.
Executive represents and warrants that as of the effective date of this Agreement he is not aware
of, and has no intention to assert, any claims against the Company in connection with matters
arising prior to the date hereof.
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(j) No Limitation. The Company’s exercise of its right to terminate this Agreement
shall be without prejudice to any other right or remedy to which it or any of its affiliates may be
entitled at law, in equity or under this Agreement.
(k) Effect of Termination or Expiration. Notwithstanding any other provision of this
Agreement to the contrary, the termination or expiration of this Agreement or Executive’s
employment shall not affect the provisions of Section 6 and the other provisions of this Agreement
necessary to enforce the same, and all such provisions shall, to the extent set forth in Section 6,
survive any such termination or expiration.
5. Indemnification.
To the fullest extent permitted by applicable law, the Certificate of Incorporation and the
By-Laws of the Company as from time to time in effect, and any indemnity agreements entered into
from time to time between the Company and Executive, the Company shall indemnify Executive and hold
him harmless for any acts or decisions made by him in good faith while performing services for the
Company, and shall use reasonable efforts to obtain coverage for him under liability insurance
policies now in force or hereafter obtained during the Term of this Agreement covering the other
officers or directors of the Company.
6. Covenants by Executive.
(a) Noncompetition. Executive agrees that, during the Term and for twelve (12) months
following the termination of his employment under this Agreement for any reason, Executive will
not, directly or indirectly, without the consent of the Board, compete directly or indirectly with
the Company or any or its subsidiaries in the businesses then conducted by the Company or any of
its subsidiaries.
(b) Antisolicitation of Customers. Executive promises and agrees that during the Term
and for twelve (12) months following the termination of his employment under this Agreement for any
reason, Executive will not influence or attempt to influence customers of the Company or any of its
subsidiaries, either directly or indirectly, to divert their business to any individual,
partnership, firm, corporation or other entity then in competition with the Company or any of its
subsidiaries.
(c) Antisolicitation of Employees and Independent Contractors. Executive promises and
agrees that, during the Term and for twelve (12) months following the termination of his employment
under this Agreement for any reason, Executive will not, directly or indirectly, (i) influence or
advise any other person to employ or solicit for employment any person who, as of the date of the
Executive’s termination of employment with the Company, in the service of the Company, its
subsidiaries or affiliates or (ii) influence or advise any person who is or shall be in the service
of the Company or any of its subsidiaries or affiliates, to leave the service of the Company, its
subsidiaries or affiliates.
(d) Confidential Information. Executive shall hold in a fiduciary capacity for the
benefit of the Company all trade secret and other confidential information, knowledge or data
relating to the Company that shall have been obtained by Executive during employment by the Company
and that shall not be or become public knowledge (other than by acts by Executive
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in violation of this Agreement). During the Term and after termination of Executive’s
employment with the Company, Executive shall not, without the prior written consent of the Company,
or as may otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those designated by it.
Executive agrees that all designs, lists, materials, books, files, reports, correspondence,
records, and other documents used, prepared, or made available to Executive during the Term, shall
be and shall remain the property of the Company. Upon the termination of employment, all such
materials shall be returned immediately to the Company, and Executive shall not make or retain any
copies thereof.
(e) Other Agreements. Executive represents that he is not bound by the terms of any
other agreement that will interfere or conflict with the terms of this Agreement.
(f) Survival. The provisions of this Section 6 should survive the expiration,
suspension or termination, for any reason, of this Agreement.
7. Section 409A.
Notwithstanding any provision of this Agreement to the contrary, but subject to the last
sentence of this Section 7, upon Executive’s termination of employment with the Company for any
reason other than death, Executive shall not be entitled to receive any payments of, or benefits
that constitute, deferred compensation (as defined in Section 409A of the Code (“Section 409A”))
until the earlier of (i) the date which is six (6) months after his termination of employment or
(ii) the date of his death (the “Section 409A Period”), at which time the Company shall pay all
delayed payments to Executive in a lump sum. With respect to any benefit that the Company cannot
provide during the Section 409A Period pursuant to the preceding sentence, Executive shall pay the
cost or premium for such benefit during the Section 409A Period and be reimbursed by the Company
therefor promptly after the end of the Section 409A Period. The Company shall pay Executive
interest on any payments or benefits that are deferred pursuant to this Section 7 at a rate per
annum equal to 110% of the applicable short-term Federal rate under Section 127(d) of the Code in
effect for the month in which Executive’s employment terminates. The provisions of this Section 7
shall apply only if, and only to the extent, required to avoid subjecting Executive to additional
taxes and/or penalties under Section 409A.
8. Other Provisions.
(a) Excise Tax Gross-Up.
(A) Except as provided in subsection (B), in the event it shall be determined that any payment
or distribution of any type, including accelerated vesting, to or for the benefit of Executive, by
the Company, any “affiliate” (as defined in Rule 405 of the Securities Act of 1933, as amended) of
the Company, any “person”, (as the term “person” is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended) who acquires ownership or effective control of the
Company or ownership of a substantial portion of the Company’s assets (within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder) or any “affiliate” of such
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“person”, whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the “Payments”), is or will be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to as the “Excise
Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(B) Notwithstanding subsection (A) or any other provision of this Agreement to the contrary,
in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by
less than 10% or $100,000, the maximum amount of Payments which if made or provided to Executive
would not be subject to an Excise Tax, Executive will not be entitled to a Gross-Up Payment and the
Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be
made or benefit to be provided to Executive shall be subject to the Excise Tax; it being the intent
of the parties that the Payments shall be reduced only if the economic detriment to Executive (on a
pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless Executive shall
have given prior written notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Payments, by first reducing or eliminating the
portion of the Payments which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits which are to be paid
the farthest in time from the “Determination” (as defined below). Any notice given by Executive
pursuant to the preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing Executive’s rights and entitlements to any benefits or
compensation.
(C) The determination of whether the Payments shall be reduced pursuant to this Agreement and
the amount of such reduction, all mathematical determinations, and all determinations as to whether
any of the Payments are “parachute payments” (within the meaning of Section 280G of the Code), that
are required to be made under this Section, including determinations as to whether a Gross-Up
Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence
of this subsection (C), shall be made by an independent accounting firm selected by Executive from
among the five (5) largest accounting firms in the United States or any nationally recognized
financial planning and benefits consulting company (the “Accounting Firm”), which shall provide its
determination (the “Determination”), together with detailed supporting calculations regarding the
amount of any Gross-Up Payment and any other relevant matter, both to the Company and Executive by
no later than ten (10) days following the Termination Date, if applicable, or such earlier time as
is requested by the Company or Executive (if Executive reasonably believes that any of the Payments
may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable
by Executive, it shall furnish Executive and the Company with an opinion reasonably acceptable to
Executive and the Company that no Excise Tax is payable (including the reasons therefor) and that
Executive has substantial authority not to report any Excise Tax on his federal income tax return.
If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding
of taxes) to Executive no later than the due date for payment of the Excise Tax. Any determination
by the Accounting Firm shall be binding upon the
14
Company and Executive, absent manifest error. As a result of uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments not made by the Company should have been made
(“Underpayment”), or that Gross-Up Payments will have been made by the Company which should not
have been made (“Overpayment”). In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the
amount of such Underpayment (together with any interest and penalties payable by Executive as a
result of such Underpayment) shall be promptly paid by the Company to or for the benefit of
Executive. In the case of an Overpayment, Executive shall, at the direction and expense of the
Company, take such steps as are reasonably necessary (including the filing of returns and claims
for refund), follow reasonable instructions from, and procedures established by, the Company, and
otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however,
that (i) Executive shall not in any event be obligated to return to the Company an amount greater
than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund
from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable,
this provision shall be interpreted in a manner consistent with an intent to make Executive whole,
on an after-tax basis, from the application of the Excise Tax, it being understood that the
correction of an Overpayment may result in Executive repaying to the Company an amount which is
less than the Overpayment. The cost of all such determinations made pursuant to this Section shall
be paid by the Company.
(b) Successors. This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, but without the prior written consent of Executive, this
Agreement may not be assigned other than in connection with a merger or sale of substantially all
the assets of the Company or similar transaction. The Company shall not agree to any such
transaction unless the successor to or assignee of the Company’s business and/or assets in such
transaction expressly assumes all obligations of the Company hereunder. The obligations and duties
of Executive hereby shall be personal and not assignable.
(c) Waiver. No delay or omission by the Company or Executive in exercising any right
under this Agreement shall operate as a waiver of that or any other rights. A waiver or consent
given by the Company or Executive on any one occasion shall be effective only in that instance and
shall not be construed as a bar or waiver of any right on any other occasion. No waiver shall be
binding unless in writing, designated as a waiver, and signed by the party waiving the breach.
(d) Modification. This Agreement may not be amended or modified other than by a
written agreement designated as an amendment and executed by Executive and the Company, following
approval of the Board.
(e) Remedies of Employer. Executive acknowledges that the services he is obligated to
render under the provisions of this Agreement are of a special, unique, unusual, extraordinary and
intellectual character, which gives this Agreement peculiar value to the Company. The loss of
these services cannot be reasonably or adequately compensated in damages in an action at law and it
would be difficult (if not impossible) to replace these services. By reason thereof, Executive
agrees and consents that if he violates any of the material provisions of this Agreement, the
Company, in addition to any other rights and remedies
15
available under this Agreement or under applicable law, shall be entitled during the remainder
of the Term to seek injunctive relief, from a tribunal of competent jurisdiction, restraining
Executive from committing or continuing any violation of this Agreement, or from the performance of
services to any other business entity, or both.
(f) Severability. If any provision of this Agreement is held invalid of
unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect,
and if any provision is held invalid or unenforceable with respect to particular circumstances, it
shall nevertheless remain in full force and effect in all other circumstances.
(g) No Obligation to Mitigate. Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or otherwise and, except
as provided in Section 4(a)(iii) and 4(d)(iii) hereof, no payment hereunder shall be offset or
reduced by the amount of any compensation or benefits provided to Executive in any subsequent
employment.
(h) Arbitration. The parties acknowledge that they have previously entered into a
Mutual Agreement to Arbitrate Claims (the “Arbitration Agreement”). The parties hereby incorporate
herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this
Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding
arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided
herein.
(i) Complete Agreement. This instrument, the Arbitration Agreement and the rights,
duties and benefits under Company-sponsored benefit plans contemplated under Section 3, constitute
and contain the entire agreement and understanding concerning Executive’s employment and the other
subject matters addressed herein between the parties, and supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral, concerning the
subject matters hereof (including, but not limited to, the Prior Agreement). This is an integrated
document.
(j) Withholding. All amounts payable under this Agreement are subject to any and all
withholding and other authorized deductions, as required or permitted by applicable law.
(k) Governing Law. This Agreement has been executed and delivered within the State of
California, and the rights and obligations of the parties hereunder shall be construed and enforced
in accordance with, and governed by, by the laws of the such state without regard to principles of
conflict of laws.
(l) Construction. Each party has cooperated in the drafting and preparation of this
Agreement. In any construction to be made of this Agreement, the same shall not be construed
against any party on the basis that the party was the drafter. Without limiting the generality of
the foregoing, each party agrees that the provisions of California Civil Code Section 1654 have no
application and are expressly waived. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
16
(m) Communications. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered, if mailed
by registered, certified or express mail, postage prepaid, or if delivered to a recognized courier
service, addressed if to Executive at Executive’s address on the Company’s payroll records, and
with a copy to XxXxxxxx & English, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx Xxxxxxx,
Esq. 000.000.0000 (tel), 212. 645.0452 (fax) xxxxxxxx@xxxxxxxx.xxx, or if addressed to the Company,
at the Company’s principal executive offices (Attention: Chief Executive Officer). Either party
may change the address at which notice shall be given by written notice given in the above manner.
(n) Attorneys’ Fees in Action on Contract. If any litigation or arbitration shall
occur between the Executive and the Company, which litigation or arbitration arises out of or as a
result of this Agreement or the acts of the parties hereto pursuant to this Agreement, or which
seeks an interpretation of this Agreement, the prevailing party in such litigation or arbitration,
in addition to any other judgment or award, shall be entitled to receive such sums as the court or
arbitrator hearing the matter shall find to be reasonable as and for the attorneys’ fees of the
prevailing party.
(o) Execution. This Agreement is being executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Photographic copies of such signed counterparts may be used in lieu of the originals
for any purpose.
(p) Legal Counsel. In entering this Agreement, the parties represent that they have
relied upon the advice of their attorneys, who are attorneys of their own choice, and that the
terms of this Agreement have been completely read and explained to them by their attorneys, and
that those terms are fully understood and voluntarily accepted by them.
IN WITNESS WHEREOF, the parties entered into this Agreement as of the date first above
written.
| COUNTRYWIDE FINANCIAL CORPORATION | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Title: | Chairman of the Board and CEO | |||||
| Date: | 3/27/07 | |||||
| EXECUTIVE: | ||||||
| /s/ Xxxxx Xxxxxx | ||||||
| Xxxxx Xxxxxx |
||||||
| Date: | 3/27/07 | |||||
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