EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is entered into this 2nd day
of September, 2004 by and between Countrywide Financial Corporation, a Delaware
corporation (the "COMPANY"), and Xxxxxx X. Xxxxxx ("EXECUTIVE").
WITNESSETH:
WHEREAS, Executive currently holds the offices of Chairman of the Board
of Directors and Chief Executive Officer of the Company;
WHEREAS, the Company and Executive have set forth the terms and
conditions of Executive's current employment with the Company under an
employment agreement entered into as of March 1, 2001 (the "CURRENT EMPLOYMENT
AGREEMENT");
WHEREAS, under the terms of the Current Employment Agreement,
Executive's employment as an employee and officer of the Company will terminate
on February 28, 2006;
WHEREAS, under the terms of the Current Employment Agreement, on March
1, 2006, Executive will become a consultant to the Company for a period of five
years, in accordance with the terms of the form of Consulting Agreement attached
to the Current Employment Agreement as Appendix B (the "CONSULTING AGREEMENT");
WHEREAS, the Board of Directors of the Company (the "BOARD") has
determined that it is in the Company's best interest and that of its
stockholders to extend Executive's employment as Chief Executive Officer and
Chairman of the Board of Directors of the Company ("CHAIRMAN OF THE BOARD" or
"CHAIR") until December 31, 2006 and thereafter to have Executive serve as
Chairman of the Board until December 31, 2011;
WHEREAS, the Company and Executive desire to waive the provisions of the
Consulting Agreement for so long as Executive continues to serve the Company as
Chairman of the Board as set forth in this Agreement;
WHEREAS, the Company and Executive desire to set forth the continued
terms and conditions of Executive's relationship with the Company for the period
from March 1, 2006 to December 31, 2011 under this Agreement; and
WHEREAS, the Company and Executive have determined that the interests of
the Company and Executive are best advanced by executing this Agreement as of
the date first written above to memorialize their agreement to continue a
relationship to December 31, 2011, while deferring to a later date their
agreement as to the provisions that will govern the terms of any period he
serves as Chairman of the Board while he is an employee of the Company after he
ceases to be the Company's Chief Executive Officer.
NOW, THEREFORE, in consideration of the mutual promises and covenant
herein contained, the parties hereto agree as follows:
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1. Effective Date. This Agreement shall be binding on the parties
immediately but the provisions hereof shall govern the parties' relationship
beginning effective March 1, 2006 (the "EFFECTIVE DATE") provided that Executive
is employed by the Company under his Current Employment Agreement on February
28, 2006.
2. Term.
(a) The Company agrees to employ Executive and Executive agrees
to serve the Company, in accordance with the terms hereof beginning on March 1,
2006, continuing until December 31, 2006 (the "TRANSITION DATE") and, subject to
mutual agreement of the Compensation Committee of the Board (the "COMMITTEE")
and Executive, continuing until December 31, 2011 (the "EXPIRATION DATE"),
unless earlier terminated in accordance with the provisions hereof (the
"EMPLOYMENT TERMINATION DATE"). From and after the Employment Termination Date,
Executive shall cease to be an employee of the Company and all of its
subsidiaries. In the event that a mutual agreement between the Committee and
Executive is not reached as to Executive's employment as Chairman of the Board
prior to September 30, 2006, as provided in Section 7(a) hereof, Executive shall
cease to be an employee of the Company on December 31, 2006, but may continue as
the non-employee Chair beginning January 1, 2007 as set forth in Section 8
hereof.
(b) The period from March 1, 2006 to December 31, 2006 shall be
referred to herein as the "CEO TERM." Executive shall be named and shall serve
as Chairman of the Board during any period when he is serving as a director
during the term of this Agreement. The parties intend that Executive will
continue to be employed by the Company as Chair after the Transition Date
pursuant to Section 7 hereof for at least one year, subject to reaching
agreement as provided in Section 7(a) hereof. If Executive does continue to be
so employed and is then serving as Chairman of the Board, the term "EMPLOYEE
CHAIR TERM" shall mean the period beginning on January 1, 2007 and ending on the
earliest of (i) the date on which Executive ceases to be an employee of the
Company, (ii) the date on which Executive ceases to serve as the Chairman of the
Board or (iii) the Expiration Date.
(c) The parties intend that Executive shall continue to serve as
Chairman of the Board until December 31, 2011 and that he shall serve as a
non-employee Chair during any period that he is a director and not serving as an
employee Chair. Provided Executive is then serving as Chairman of the Board, the
term "NON-EMPLOYEE CHAIR TERM" shall mean the period beginning on the later of
January 1, 2007 or the date Executive ceases to be an employee of the Company
pursuant to Section 7 hereof and ending on the earlier of the date on which
Executive ceases to serve as the Chairman of the Board or the Expiration Date.
3. The CEO Term: Duties and Responsibilities and Outside Affiliates.
(a) Specific Position; Duties and Responsibilities. The Company
and Executive hereby agree that, subject to the provisions of this Agreement,
the Company will employ Executive and Executive will serve the Company and its
subsidiaries as Chairman of the Board and Chief Executive Officer of the Company
during the CEO Term. The Company agrees that Executive's duties hereunder shall
be the usual and customary duties of the offices of Chairman of the Board and
Chief Executive Officer and such further duties consistent therewith
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as may be designated from time to time by the Board and shall not be
inconsistent with the provisions of the charter documents of the Company or
applicable law. Executive shall have such executive power and authority as shall
reasonably be required to enable him to discharge his duties in the offices that
he may hold. All compensation paid to Executive by the Company or any of its
subsidiaries shall be aggregated in determining whether Executive has received
the benefits provided for herein.
(b) Scope of this Agreement and Outside Affiliations.
(i) During the CEO Term, Executive shall devote his full
business time and energy, except as expressly provided below, to the business,
affairs and interests of the Company and its subsidiaries, and matters related
thereto. Executive agrees that he will endeavor to promote the business, affairs
and interests of the Company and its subsidiaries and perform services
contemplated hereby in accordance with the policies established by Board, which
policies shall be consistent with this Agreement. Executive agrees to serve in
the capacity of chief executive officer for one or more (direct or indirect)
subsidiaries of the Company as the Board may from time to time request, subject
to appropriate authorization by the subsidiary or subsidiaries involved and any
limitation under applicable law. Executive agrees that the remuneration provided
for in Sections 4 and 5 shall be in full satisfaction of any and all of the
services contemplated to be provided by Executive during the CEO Term including,
without limitation, those described in the preceding sentence. Executive's
failure to discharge an order or perform a function because Executive reasonably
and in good faith believes such would violate a law or regulation or be
dishonest shall not be deemed a breach by him of his obligations or duties
pursuant to any of the provisions of this Agreement, including without
limitation pursuant to Section 6(d) hereof.
(ii) During the CEO Term, Executive shall not, without the
consent of the Board, compete, directly or indirectly, with the Company in the
businesses then conducted by the Company.
(iii) Executive may serve as a director or in any other
capacity of any business enterprise, including an enterprise whose activities
may involve or relate to the business of the Company, provided that such service
is expressly approved by the Board. Executive may, without seeking or obtaining
approval by the Board, (i) make and manage personal business investments of his
choice and (ii) serve in any capacity with any civic, educational or charitable
organization, or any governmental entity or trade association.
4. CEO Term: Compensation and Benefits.
(a) Base Salary. During the CEO Term, the Company shall pay to
Executive a base salary at the annual rate of $2,900,000.
(b) Incentive Compensation.
(i) The Company shall pay to Executive an incentive
compensation award for the CEO Term in an amount that is equal to ten-twelfths
(10/12) of the amount of the incentive compensation award paid to Executive for
the Company's 2005 fiscal year, multiplied by a fraction (the "PERFORMANCE
RATIO"), the numerator of which is the Company's EPS (as
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defined below) for its 2006 fiscal year and the denominator of which is the
Company's EPS for its 2005 fiscal year; provided however, that the Committee may
adjust the amount of any incentive compensation award in the event there is a
substantial distortion in EPS for the 2006 fiscal year resulting from an
acquisition, a divestiture, or a change in accounting standards.
(ii) No incentive compensation award shall be payable
hereunder for the CEO Term if the Company's EPS for the 2006 fiscal year equals,
or is less than, zero. If no incentive compensation award is payable to
Executive for the Company's 2005 fiscal year under the terms of his Current
Employment Agreement, then, for purposes of calculating Executive's incentive
award for the CEO Term, the Company shall use the incentive compensation award
paid to Executive for the 2004 fiscal year and the Company's EPS for its 2004
fiscal year. If no incentive compensation award is paid to Executive for the
2004 fiscal year, then the Company shall use the incentive award paid to
Executive for the 2003 fiscal year and its EPS for the 2003 fiscal year for
purposes of calculating the incentive compensation award for the CEO Term.
(iii) The Company shall pay the incentive compensation
award (if any) described above in accordance with Section 4(f) hereof. In the
event that Executive's employment hereunder shall terminate, other than (a)
pursuant to Section 6(d) below or (b) by reason of Executive's resignation
without Good Reason, on or before December 31, 2006, Executive or his estate
shall be entitled to receive an incentive compensation award for such portion of
the CEO Term during which Executive was employed under this Agreement on the
same terms as set forth in the foregoing provisions of this Section 4(b) 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 the 2006 fiscal
year after February 28, 2006 that Executive was employed by the Company and the
denominator of which is 306.
(iv) "EPS" for any fiscal year of the Company for purposes
of the incentive compensation award shall mean the Company's earnings per share
on a diluted basis, as reported in the audited Financial Statements included in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for such fiscal year, as adjusted proportionately in the event that
the Company (A) declares a stock dividend on its common stock, (B) subdivides
its outstanding common stock, (C) combines the outstanding shares of its capital
stock into a smaller number of common stocks or (D) issues any shares of its
capital stock in a reclassification of the common stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation).
(c) Stock Options or Other Equity Awards. In consideration of
Executive's continuation of employment through December 31, 2006, the Company
shall, effective April 1, 2007, grant to Executive a stock option with respect
to 1,166,667 shares of the Company's common stock (which shall be in addition to
the grant to be made on April 1, 2006 under the Current Employment Agreement).
Such number of shares shall be adjusted in the case of stock splits and stock
splits effected by means of stock dividends to the same extent that the number
of shares available for grant under the Countrywide Financial Corporation 2000
Stock Option Plan (the "2000 PLAN") or such other stock option plan or plans as
may be in effect or come into effect on or prior to April 1, 2007 are adjusted
upon such occurrences. Such stock option shall be granted pursuant to the 2000
Plan, or such other stock option plan or plans as may be in effect or come into
effect prior to April 1, 2007, (i) shall have a per share exercise price equal
to the fair
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market value (as defined in the 2000 Plan or such other plan or plans) of the
common stock at the time of grant, (ii) shall vest as to one-third of the
underlying shares on each anniversary of the date of grant provided Executive is
then (A) employed by the Company, (B) serving the Company as a director or (C)
serving the Company as an advisor or consultant under an agreement to provide up
to five hours per month of service (a "SERVICE AGREEMENT"), (iii) shall become
fully vested in the event of a Change in Control (provided Executive's
employment has not earlier terminated or Executive is then serving the Company
as a director or under a Service Agreement) or a termination pursuant to Section
6(a), 6(b) or 6(e) (an "ACCELERATION EVENT"), (iv) shall have a term of ten (10)
years and be exercisable to the extent vested or thereafter vested for the
remainder of such term following an Acceleration Event or Executive's
termination of employment pursuant to Section 6(c) hereof, and (v) shall be
subject to other provisions as determined by the Compensation Committee that are
not inconsistent with the foregoing or the other provisions of this Agreement.
If, prior to April 1, 2007, there is a merger, consolidation or reorganization
in which the Company is not the surviving corporation or in which it survives as
a subsidiary of another corporation or entity (a "TRANSACTION"), and the shares
of equity securities of the surviving corporation or entity or parent thereof
are publicly traded on a recognized stock exchange or over the counter market,
the stock option to be granted pursuant to this Section 4(c) shall be granted in
accordance herewith with respect to securities of the surviving corporation or
entity or parent thereof, as applicable, with the number of shares subject to
the option to be granted to equal the product of (x) the amount of shares
subject to the option set forth in this Section 4(c) and (y) a fraction the
numerator of which is per share fair market value of the Company's securities
and the denominator of which is the per share fair market value of the
publicly-traded common or ordinary equity securities of the surviving
corporation or entity or parent thereof, as of the date of consummation of the
Transaction, and to give effect to the intent of the parties as set forth in
this Section 4(c). The stock option granted pursuant to this Section 4(c) shall
be an incentive stock option to the extent permitted by law or regulation. In
order to qualify for the grant pursuant to this Section 4(c) on April 1, 2007,
Executive must be employed by the Company on December 31, 2006.
(d) Additional Benefits. Except as provided in Section 5 hereof,
Executive shall also be entitled to all rights and benefits for which he is
otherwise eligible during the CEO Term under any bonus plan, stock purchase
plan, participation or extra compensation plan, executive compensation plan,
pension plan, profit-sharing plan, life and medical insurance policy,
second-to-die life insurance coverage, executive medical examination program,
executive long-term disability policy, financial planning services program or
other plans or benefits, which the Company or its subsidiaries may provide for
him, or provided he is eligible to participate therein, for senior officers
generally or for employees generally during the CEO Term (collectively,
"ADDITIONAL BENEFITS"). Except as provided in Sections 4(f), 4(g) and 5 hereof,
this Agreement shall not affect the provision of any other compensation,
retirement or other benefit program or plan of the Company.
(e) Continuation of Benefits. If Executive's employment is
terminated during the CEO Term pursuant to Section 6(a), 6(b) or 6(e) hereof,
the Company shall continue for the period specified in Section 6(a) or 6(b)
hereof or three years in the case of a termination pursuant to Section 6(e)
hereof (the "CONTINUATION PERIOD"), as the case may be, to provide benefits that
are no less favorable in the aggregate than the Additional Benefits (other than
qualified pension or profit sharing plan benefits and option, equity or stock
appreciation or other incentive plan
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benefits as distinguished from health, disability and welfare benefits) (the
"WELFARE BENEFITS") that were being provided to Executive and his dependents and
beneficiaries immediately prior to Executive's Termination Date (or in the case
of a termination after a Change in Control, those benefits that were being
provided immediately preceding the Change in Control), but only to the extent
that Executive is not entitled to comparable benefits from other employment. If
Executive's employment is terminated during the CEO Term pursuant to Section
6(a), 6(b) or 6(e) hereof or pursuant to Section 6(c), the Company shall from
the Transition Date in the case of a termination pursuant to Section 6(c) or
from the end of the Continuation Period in the case of termination pursuant to
Section 6(a), 6(b) or 6(e) provide to Executive and his spouse (or solely to
Executive's spouse in the case of a termination pursuant to Section 6(b))
Retiree Medical Coverage (as hereinafter defined). For a period of two years
after such Employment Termination Date occurring during the CEO Term or pursuant
to Section 6(c), the Company shall provide Executive with outplacement services
at its cost. As used in this Section 4(e) "RETIREE MEDICAL COVERAGE" shall mean
medical insurance coverage for each of Executive's and his spouse's lifetime (or
solely for his spouse's lifetime in the case of a termination pursuant to
Section 6(b)) that, in conjunction with the coverage available to Executive and
his spouse pursuant to Medicare Part B, if any, is substantially similar in the
aggregate to the coverage provided to Executive and his spouse immediately prior
to the Termination Date. The Company will use its reasonable best efforts to
provide the Retiree Medical Coverage in a manner that results in the exclusion
of such benefits from the income of Executive and his spouse. The Company will
use its reasonable best efforts to provide the Retiree Medical Coverage such
that Section 105(h) will not apply. If such Retiree Medical Coverage is provided
through reimbursement of premiums paid by Executive and/or his spouse (as a
result of agreement of Executive and the Company), Executive and/or his spouse
shall provide to the Company evidence of coverage under any applicable health
insurance policy or Medicare supplemental health policy.
(f) Deferral of Amounts Payable Hereunder. Any base salary in
excess of $1 million (or such other limitation as may be in effect under Section
162(m) of the Internal Revenue Code of 1986 as amended (the "CODE")), all
incentive compensation under Section 4(b) for the CEO Term and any distribution
or payment with respect to any restricted stock units granted during the CEO
Term shall be deferred until the earlier of (i) such time as the limitations of
Section 162(m) on the Company's deduction for amounts paid to Executive no
longer apply or (ii) the later of (A) January 15 of the year following the year
in which the Employment Termination Date occurs or (B) such other date within 12
months following such January 15 if the amounts to be paid to Executive would be
deductible if paid on such other date, provided that the date for payment shall
be postponed to the extent required by applicable law to avoid taxation of the
deferral at the time the deferral is made (such payment date, the "DEFERRAL
PAYMENT DATE"). In the event Executive should desire to defer receipt of any
other cash payments to which he would otherwise be entitled hereunder, he may do
so in accordance with the terms and conditions of the Countrywide Financial
Corporation Amended and Restated Deferred Compensation Plan (the "DEFERRED
COMPENSATION PLAN"), or in the absence of such Deferred Compensation Plan or any
successor plan that is substantially similar to the Deferred Compensation Plan,
he may present such a written request to the Compensation Committee which, in
its sole discretion, may enter into a separate deferred compensation agreement
with Executive. All amounts deferred as set forth in the first sentence of this
Section 4(f) shall be
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deferred in accordance with the terms of the plan described in the immediately
preceding sentence.
(g) Coordination with Current Employment Agreement.
Notwithstanding anything in this Agreement or Executive's Current Employment
Agreement to the contrary, (i) there shall be no duplication of benefits or
payments under this Agreement of any benefits or payments provided under the
Current Employment Agreement, and (ii) Executive shall receive medical coverage
and other Welfare Benefits during his employment as an employee under this
Agreement, with continuation of such Welfare Benefits after termination of
employment, as and to the extent provided in this Agreement and shall not
receive Retiree Medical Coverage until such time as provided in this Agreement.
Nothing contained herein shall affect the timing of the payment of incentive
compensation under Section 4(b) of the Current Employment Agreement.
5. Enhanced SERP. In lieu of Executive's current supplemental retirement
benefit entitlement under the 1998 Amendment and Restatement of the Company's
Supplemental Executive Retirement Plan, as amended by the First Amendment to the
SERP effective January 1, 1999, the Second Amendment to the SERP effective June
30, 1999 and any subsequent amendment thereto (the "PLAN") and incorporating by
reference any Plan Agreement (as defined in the Plan) entered into by Executive
(collectively, the "CURRENT SERP"), the Company shall provide to Executive an
enhanced supplemental retirement benefit under the Plan (the "ENHANCED SERP")
(except as provided in subsection (c) below) as follows:
(a) Full Benefit. If Executive's employment terminates for any
reason other than pursuant to Section 6(d), the Enhanced SERP shall be governed
by the terms of the Plan in all respects except that the Benefit Amount (defined
in Section 1.3 of Plan) shall equal the New Benefit Amount (as hereinafter
defined).
(b) Lump Sum Benefit. Notwithstanding anything to the contrary in
the Plan, in the event that, under the terms of the Plan, the Enhanced SERP
shall be payable in a lump sum, the amount of such lump sum shall be determined
using a discount rate equal to 7%.
(c) Cause. If Executive's employment terminates pursuant to
Section 6(d) hereof, Executive shall not be entitled to the Enhanced SERP and
Executive's supplemental retirement benefit shall be governed by the terms of
the Current SERP; provided, however, that the amount determined under Section
1.3(i) of the Plan shall in no event exceed $3,000,000.
(d) Coordination with Plan. The Enhanced SERP provided by this
Section 5 shall be deemed in all respects to be provided under, and be part of,
the Plan and to the extent the provisions of the Plan are inconsistent with the
provisions of this Section 5, the provisions of this Section 5 shall govern and,
as it affects Executive, the Plan shall be deemed amended accordingly.
(e) Definition of New Benefit Amount. As used in this Section 5,
"NEW BENEFIT AMOUNT" shall mean an amount equal to the Benefit Amount calculated
(A) without regard to Section 1.3(v) of the Plan, (B) using a discount rate
equal to 7% and the 1983 Group Annuity Mortality Table for determining the
actuarial equivalence of the annual amounts in
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Sections 1.3(ii), 1.3(iii) and 1.3(iv) of the Plan, and (C) with Section 1.3(i)
of the Plan being deemed to read in its entirety follows:
"60% of the average of Participant's three (3)
highest fiscal years of combined annual base salary
and annual bonus (whether paid currently or
deferred) during the ten (10) fiscal years
preceding Participant's termination of employment
with all Employers; provided that the amount
determined pursuant to this clause (i) shall in no
event exceed $3,000,000; less."
6. Termination During CEO Term. The compensation and benefits provided
for herein and the employment of Executive by the Company shall be terminated
during or at the end of the CEO Term only as provided for below in this Section
6:
(a) Disability.
(i) In the event that Executive shall have failed, because
of illness, injury or similar incapacity ("DISABILITY"), to render for four (4)
consecutive calendar months ending during the CEO Term, or for shorter periods
aggregating one hundred eighty (180) or more calendar days in any twelve (12)
month period ending during the CEO Term, services contemplated by this
Agreement, Executive's employment hereunder may be terminated, by written Notice
of Termination from the Company to Executive. If such Notice of Termination is
delivered to Executive prior to December 31, 2006, the Company shall thereafter
continue, from the Termination Date until Executive's death or the fifth
anniversary of such notice, whichever first occurs (the "DISABILITY PAYMENT
PERIOD"), (i) to pay compensation to Executive, in the same manner as in effect
immediately prior to the Termination Date, in an amount equal to (A) fifty
percent (50%) of the Eligible Base Salary (as defined below), minus (B) the
amount of any cash payments to him under the terms of the Company's disability
insurance or other disability benefit plans or the Company's tax-qualified
Defined Benefit Pension Plan, and any compensation he may receive pursuant to
any other employment, and (ii) to provide during the Disability Payment Period
the benefits specified in Section 4(e) hereof.
(ii) 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.
(iii) The term "ELIGIBLE BASE SALARY" shall mean
Executive's base salary as in effect immediately prior to the Termination Date.
(b) Death. In the event that Executive shall die during the CEO
Term, Executive's employment shall terminate as of the date of death subject to
the provisions of this Section 6(b). In such event, the Company shall pay
Executive's Eligible Base Salary (as defined in Section 6(a) above) for a period
of twelve (12) months following the date of Executive's death 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
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Company shall also provide to the Beneficiary during such twelve-month period
following the date of Executive's death the benefits specified in Section 4(e)
hereof. If Executive's death occurs while he is receiving payments for
Disability under Section 6(a) 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 Executive's Eligible Base Salary (as defined in Section 6(a)(iii)).
(c) Expiration of CEO Term. If the Company and Executive do not
agree to continue his employment after the Transition Date as provided under
Section 7(a), Executive's employment hereunder shall terminate on the Transition
Date, and the Non-Employee Chair Term shall commence as set forth in Section 8
if Executive is then serving as Chairman of the Board. In such event, the
Company shall, from the Transition Date, provide to Executive and his spouse the
Retiree Medical Coverage as defined in Section 4(e). Following the expiration of
Executive's employment pursuant to this Section 6(c), all of the Company's other
obligations with respect to his employment shall terminate, provided, however,
that the termination of Executive's employment pursuant to this Section 6(c)
shall not affect Executive's entitlement to benefits in which he has become
vested (including, without limitation, rights of indemnification and amounts (if
any) due under Section 6(h)) or which are otherwise payable in respect of
periods ending prior to his termination of employment, or the equity grants
under Section 4(c) hereof.
(d) 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, or (ii)
Executive's conviction by a court of competent jurisdiction of a felony, or
(iii) 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 permanently prohibiting him from participating in the
conduct of the affairs of the Company or any of its subsidiaries, or (iv) any
purported termination by Executive of his employment hereunder other than
pursuant to Section 6(e) hereof. 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 4(a), 4(b) and 4(c) 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 Section 4(a), 4(b) and (4) are
suspended, Executive shall continue to be entitled to receive Additional
Benefits under Section 4(d) 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 6(d) shall not affect
Executive's entitlement to all benefits in which he has become vested
(including, without limitation, rights of
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indemnification and amounts due under Section 6(h)) or which are otherwise
payable in respect of periods ending prior to his termination of employment.
(e) Without Cause; Good Reason. Executive may terminate his
employment for Good Reason and the Company may terminate Executive's employment
without Cause. For purposes of this Agreement, and except as provided in the
following sentence, "GOOD REASON" shall be deemed to occur if the Company
notifies Executive of a termination of his employment other than pursuant to
Sections 6(a), 6(c), 6(d) or 6(e) hereof, or if the Company breaches this
Agreement in any material respect, which breach is not remedied within a
reasonable period of time after receipt of written notice from Executive
specifying such breach, or if the Board (i) elects a person other than Executive
to commence service before January 1, 2007, as the Company's Chairman of the
Board or Chief Executive Officer without Executive's consent, (ii) reorganizes
management so as to require him to report to a person or persons other than the
Board, (iii) requires that Executive be based anywhere that is more than fifty
(50) miles from the office where Executive is located as of the Effective Date,
(iv) takes an action that results in Executive not being able to travel
domestically by private aircraft at the Company's expense, or (v) takes any
other action which, in Executive's reasonable judgment, results in the
diminution in Executive's status, title, position and responsibilities other
than an insubstantial action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice from Executive. 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 (i) the change in his duties hereunder following the Transition Date
pursuant to Section 7(a) or (ii) the fact that the Company shall cease to be a
public company and shall become a subsidiary of another publicly-traded
corporation. Notwithstanding the foregoing, Executive may terminate his
employment for any or no reason within two years following a "CHANGE IN CONTROL"
(as defined in Appendix A to this Agreement), and such termination shall be
considered a termination for Good Reason hereunder. If Executive's employment
shall be terminated by the Company other than for Cause or Disability or by
Executive for Good Reason, then the Company shall pay Executive in a single
payment, 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 the sum of (A) three times the sum of Executive's Eligible Base Salary
(as defined in Section 6(a)(iii) above) and (B) the incentive compensation that
would be payable to him under Section 4(b) above for the CEO Term if his
employment continued to the end of the CEO Term; provided, however, that if the
Termination Date occurs following a Change in Control or during a "PROTECTED
PERIOD" (as defined in Appendix A to this Agreement) with respect to a Change in
Control, then such cash amount shall be equal to three times the sum of (A)
Executive's Eligible Base Salary and (B) the greater of (x) the average of the
aggregate bonus and/or incentive award, if any, paid or payable to Executive for
each of the two (2) fiscal years of the Company preceding the fiscal year in
which Executive's termination of employment occurs and (y) the bonus and/or
incentive award paid for the fiscal year immediately preceding the date of the
Change in Control.
(f) Notice of Termination. Any purported termination by the
Company or Executive shall be communicated by a written 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
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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
following 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, in addition to any incentive compensation
awards or stock option grants to which Executive may otherwise be entitled
pursuant to the express provisions of this Agreement, the Company shall pay
Executive his full base salary through the Termination Date, plus any Additional
Benefits that have been earned or become payable, but which have not yet been
paid as of such Termination Date.
(g) Payments. Except (i) as otherwise provided herein and (ii) in
the case of the payments pursuant to Section 4(e) hereof, all payments payable
under this Agreement as a result of the termination of Executive's employment
hereunder shall be made within 15 days after the Termination Date or, if any
portion is not then reasonably determinable, within five (5) days after such
portion is so determinable. In the event of a dispute concerning the validity of
a purported termination which is maintained in good faith, the Termination Date
shall mean the date the dispute is finally resolved and the Company will
continue to provide Executive with the compensation and benefits provided for
under this Agreement, until the dispute is finally resolved without any
obligation by Executive to repay any of such amounts to the Company,
notwithstanding the final outcome of the dispute. Payments required to be made
by this Section 6(g) are in addition to all other amounts due under Section 6 of
this Agreement and shall not be offset against or reduce any other amounts due
under Section 6 of this Agreement. The Company may require Executive to perform
his then current duties to, and services for, the Company during the period
following a purported termination but before the dispute concerning such
purported termination is finally resolved, in which event the Company shall
provide Executive with a reasonable opportunity to perform his duties under this
Agreement during such period.
(h) Excise Tax Gross-Up.
(i) Except as provided in subsection (ii), 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 Code), and the regulations thereunder) or any "affiliate" of such
"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.
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(ii) Notwithstanding subsection (i) or any other provision
of this Agreement to the contrary, in the event that the Payments (excluding the
payment provided for in subsection (i)) exceed by less than the greater of 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 to the Company
specifying a different order to effectuate the foregoing, the Company shall
reduce or eliminate the Payments, first by reducing or eliminating the portion
of the Payments which are payable in cash, second by reducing or eliminating the
portion of the Payments which are not payable in cash (other than Payments as to
which Treasury Regulations Section 1.280G-1 Q/A-24(c) (or any successor
provision thereto) applies ("Q/A-24(c) PAYMENTS")), and third by reducing Q/A
24(c) 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.
(iii) 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 (iii),
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 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
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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 (A) 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 (B) 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.
7. Employee Chair Term.
(a) Terms and Condition of Employment. The parties intend that
Executive will continue to be its employee Chairman of the Board for at least
one year following the Transition Date. No later than September 30, 2006,
Executive and the Committee shall meet and negotiate the specific terms and
conditions for Executive's continued employment as Chair after the Transition
Date, including without limitation, Executive's duties and responsibilities,
level of time commitment, salary, incentive compensation, equity awards,
consequences of termination employment, etc.
(b) Service as Employee Director. If Executive and the Committee
agree to the terms and conditions of his continued employment after the
Transition Date as provided in Section 7(a), the Company will employ Executive
and Executive will serve the Company and its subsidiaries as an employee. The
parties anticipate that Executive will be nominated as a director of the Company
at such times as are necessary to enable Executive to serve continuously on the
Board and that he will continue to serve as Chairman of the Board through
December 31, 2011. However, both parties recognize that the decision to nominate
Executive as a director must be made in accordance with the governance
procedures of the Company then in effect. Executive agrees to serve on the Board
and as Chair during the Employee Chair Term, if and while elected as both a
director and Chair, except to the extent he determines in good faith that
compelling ethical, liability, health, family or similar circumstances preclude
him from doing so.
(c) Annual Review. On or before September 30 of each year,
continuing through September 30, 2010, the Board and Executive may mutually
agree in writing to extend Executive's employment by an additional year on the
same or such other terms and conditions as to which they mutually agree.
8. Non-Employee Chair Term.
(a) Service as Non-Employee Director. The parties anticipate that
Executive will be nominated as a director of the Company at such times as are
necessary to enable Executive to serve continuously on the Board through
December 31, 2011. The parties agree that he will continue to serve as Chairman
of the Board through December 31, 2011 so long as
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he is a director. The parties further agree that Executive shall serve as a
non-employee Chair during any period while he is a director that he is not
serving as an employee Chair. However, both parties recognize that the decision
to nominate Executive as a director must be made in accordance with the
governance procedures of the Company then in effect. Executive agrees to serve
on the Board and as Chair during the Non-Employee Chair Term, if and while
elected as both a director and Chair, except to the extent he determines in good
faith that compelling ethical, liability, health, family or similar
circumstances preclude him from doing so.
(b) Compensation. During the Non-Employee Chair Term, the Company
agrees to pay to Executive the same compensation, and to provide to Executive
the same benefits, that it pays or provides to the other non-employee members of
the Board. In addition, the Company agrees to pay Executive for each calendar
year during the Non-Employee Chair Term an additional retainer of at least
$200,000 per year (pro rated for any period of time during the Non-Employee
Chair Term that is less than a full calendar year).
(c) Benefits and Perquisites. During the Non-Employee Chair Term,
the Company shall additionally provide Executive with the following benefits and
perquisites:
(i) On-site office space and secretarial support services;
(ii) Use of a private jet for purposes that, in the good
faith judgment of Executive, are Company business purposes;
(iii) Financial consulting services of AYCO (or another
comparable financial consulting firm selected by Executive)
substantially similar to such services made available to senior
executive Executives of the Company from time to time; and
(iv) Payment of Executive's annual country club dues at
Sherwood Country Club in Thousand Oaks, CA, Quarry Country Club
in La Quinta, CA and Xxxxxx Xxxxx Xxxxx Golf Club in Gainesville,
VA.
(d) Applicability of Director Policies. During the Non-Employee
Chair Term, Executive shall be subject to the same rules applicable to other
directors who are not employees of the Company, including with respect to
fiduciary duties and outside activities; provided that any activity that was
approved during the CEO Term or the Employee Chair Term shall be deemed to be an
approved activity during the Non-Employee Chair Term.
(e) Director Emeritus. Upon the termination of Executive's
service as a director of the Company, Executive shall be eligible for the
Company's Director Emeritus program as then in effect (but in any event, such
program shall result in continuing the vesting of any equity grants he received
in connection with his employment with the Company). To the extent that at any
time (whether or not Executive ever serves as a non-employee Chairman of the
Board) Executive is not then eligible for the Director Emeritus program, he
shall serve as Chairman Emeritus with all the same benefits and conditions that
would apply if he were a Director Emeritus.
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9. Waiver of Rights and Obligations under Consulting Agreement. The
Company and Executive agree that the Consulting Agreement shall be deemed to be
executed on February 28, 2006 if Executive remains employed by the Company under
the Current Employment Agreement until that date and that the Consulting
Agreement will terminate on February 28, 2011 unless terminated earlier as
provided therein; provided, however, that (i) notwithstanding anything to the
contrary in the Consulting Agreement, the Company and Executive hereby fully
waive all of their rights and claims, and fully waive, release and discharge the
other's obligations, under the Consulting Agreement until the first day after
the date on which Executive ceases to be Chairman of the Board; (ii) the last
sentence of Section 1(b) of the Consulting Agreement is amended to read, "In
addition, Consultant agrees that, if at any time during the Consulting Term
Consultant is a director of the Company and he chooses to serve as such, he
shall serve as a director without remuneration in addition to that provided for
in this Agreement, provided that Consultant may instead elect to be paid as a
director and thereby suspend and cause to be waived (but not beyond the
Consulting Term) the obligations of both parties under the Consulting Agreement
during any period he serves as a director"; and (iii) Section 4(d) of the
Consulting Agreement is hereby amended to read, "(d) at the election of the
Consultant, at any time."
10. Reimbursement of Business Expenses. During the term of this
Agreement, the Company shall reimburse Executive promptly for all expenditures
(including travel, entertainment, parking, business meetings, and the monthly
costs (including dues) of maintaining memberships at appropriate clubs) 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
Executive as required by the Internal Revenue Service and rules and policies of
the Company.
11. Indemnity; Directors and Officer's Insurance.
(a) 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.
(b) The Company shall, to the extent it is available on
commercially reasonable terms, maintain Director's and Executive's liability
insurance during the term of this Agreement that is substantially similar in the
aggregate to that in effect as of the Effective Date. Any such insurance shall
cover Executive's acts and omissions as an officer and/or director of the
Company, and such coverage at any time shall be no less favorable than the
coverage then provided to any other director or officer of the Company.
(c) The provisions of this Section 11 shall also apply to all of
Executive's prior service with the Company and shall be in addition to, and, to
the extent not duplicative, not in lieu of, any other rights to indemnification
to which Executive is otherwise entitled.
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12. Miscellaneous.
(a) Succession. This Agreement shall inure to the benefit of and
shall 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.
(b) Notices. Any notices provided for in this Agreement shall be
sent to the Company at 0000 Xxxx Xxxxxxx, Xxxxxxxxx, XX 00000 Attention: General
Counsel/Secretary, with a copy to the Chairman of the Compensation Committee at
the same address, or to such other address as the Company may from time to time
in writing designate, and to Executive at his home address as reflected in the
Company's records or at such other address as he may from time to time in
writing designate. All notices shall be deemed to have been given two (2)
business days after they have been deposited as certified mail, return receipt
requested, postage paid and properly addressed to the designated address of the
party to receive the notices.
(c) Entire Agreement; Modified Applicability of Consulting
Agreement. This instrument (including the Arbitration Agreement described in
Section 12(n) hereof and the Consulting Agreement as modified by Section 9
hereof) contains the entire agreement of the parties relating to the subject
matter hereof, and, on the Effective Date, it replaces and supersedes any prior
agreements between the parties relating to said subject matter, including, but
not limited to, the Current Employment Agreement but only as to the employment
or other service-related provisions for periods on and after the Effective Date
and without effect on non-duplicative provisions of the Current Employment
Agreement (such as Section 4(f) and Section 8) that provide rights that survive
Executive's termination of employment thereunder. No modifications or amendments
of this Agreement shall be valid unless made in writing and signed by the
parties hereto. The Company and Executive acknowledge and agree that the
benefits payable under this Agreement replace and supersede in full any and all
benefits payable under the Current Employment Agreement with regard to the
employment period under this Agreement and any post-employment period to the
extent duplicative, and that the Current Employment Agreement shall be null and
void and of no force or effect on the Effective Date.
(d) Waiver. The waiver of the breach of any term or of any
condition of this Agreement shall not be deemed to constitute the waiver of any
other breach of same or any other term or condition.
(e) California Law. This Agreement shall be construed and
interpreted in accordance with the laws of California without giving effect to
the conflicts of laws principles thereof.
(f) Attorneys' Fees in Action on Contract. If any litigation
shall occur between Executive and the Company, which litigation 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 arbitrator
hearing the matter shall, in his sole discretion,
- 16 -
determine the prevailing party in such litigation and, in addition to any other
judgment or award, may, in his sole discretion, award such prevailing party such
sums as he shall find to be reasonable as and for the prevailing party's
attorneys' fees disbursements.
(g) Non-solicitation. Until the date that is 24 months after the
later of (i) last date of Executive's employment by the Company or (ii) the date
Executive ceases to be a director of the Company, Executive shall not interfere
with the Company's relationship with, or endeavor to entice away from the
Company for competitive purposes, any person who was an employee or customer of
the Company or otherwise had a material business relationship with the Company
within the final 12 months in which Executive was an employee or director of the
Company; provided that after a Change in Control the reference to competitive
purposes shall be limited to the Company's material activities prior to the
Change in Control and further provided that the foregoing shall not be violated
by general advertising not specifically targeted at the above persons and
entities.
(h) Confidentiality. Executive agrees that he will not use or
divulge or otherwise disclose, directly or indirectly, any trade secret or other
confidential information concerning the business or policies of the Company or
any of its subsidiaries which he may have learned as a result of his employment
during the term of this Agreement or prior thereto as an employee, officer or
director of or consultant to the Company or any of its subsidiaries, except to
the extent such use or disclosure is (i) necessary or appropriate (in his good
faith judgment) to the performance of this Agreement and in furtherance of the
Company's best interests, (ii) required by applicable law, (iii) lawfully
obtainable from other sources, or (iv) authorized by the Company. The provisions
of this subsection shall survive the expiration, suspension or termination, for
any reason, of this Agreement.
(i) Non-Disparagement. Executive agrees that while he is employed
by the Company or serving as a director of the Company and thereafter (including
following a termination of employment or service for any reason), he shall not,
with willful intent to damage economically or as to reputation, make any public
false, defamatory or disparaging statement about the Company or any of its
subsidiaries, or, prior to a Change in Control (as defined in Appendix A to this
Agreement), the officers or directors of the Company or its subsidiaries;
provided that the foregoing shall not apply to (A) statements made in compliance
with legal process or governmental inquiry, (B) statements made while employed
or a serving as a director in the course and scope of his duties and (C)
statements made to rebut to the extent necessary any misleading or untrue public
statements. The Company agrees that, while Executive is employed by the Company
or serving as a director of the Company and thereafter, that it shall not, and
it shall use its best efforts to cause its directors, officer and employees to
not, make or cause to be made any public false, defamatory or disparaging
statement about Executive; provided that the foregoing shall not apply to (A)
statements made in compliance with legal process or governmental inquiry or (B)
statements made to rebut to the extent necessary any misleading or untrue public
statements. Notwithstanding the foregoing, should Executive compete with the
Company and such activity is not a breach of Executive's obligations to the
Company, normal and accurate competitive statements he may make about the
Company or any of its subsidiaries shall not be deemed a breach of this Section
12(i). This Section 12(i) shall have no third party beneficiaries.
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(j) Continued Availability and Cooperation. Executive will
reasonably cooperate with the Company, during the term of his employment, during
his service as a director and thereafter (including following Executive's
termination of employment or service for any reason), by making himself
reasonably available to testify on behalf of the Company or any subsidiary or
affiliate of the Company in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, involving any matter of which he had
knowledge as a result of his employment with, or service as a director of, the
Company and to reasonably assist the Company or any such subsidiary or affiliate
in any such action, suit or proceeding by providing information and meeting and
consulting with the Board or its representatives or counsel, or representatives
or counsel to the Company or any such subsidiary or affiliate, as reasonably
requested; provided, however, that the same does not materially interfere with
his then current business activities (or if it involves a matter in which his
relationship is adversarial to the Company). The Company will reimburse
Executive for all expenses reasonably incurred by him in connection with his
provision of testimony or assistance, including reasonable attorneys' fees
incurred by Executive in connection with such testimony. Nothing in this Section
12(k) shall impair Executive's rights under Section 11 of this Agreement.
(k) Remedies of the Company. 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 available under this Agreement or under applicable law,
shall be entitled during the remainder of the term of this Agreement to seek
injunctive relief, from a tribunal of competent jurisdiction, restraining
Executive from committing or continuing any violation of this Agreement.
(l) Severability. If any provision of this Agreement is held
invalid or 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.
(m) No Obligation to Mitigate; Set-off. 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 6(a)
hereof, no payment hereunder shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment. In
addition, the amount of any payments or any benefits payable or provided
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other right which the Company may have against Executive for any
reason.
(n) 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.
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(o) Representation by Counsel; Interpretation. The Company and
Executive each acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the matters
contemplated by this Agreement. Accordingly, any rule of law, including but not
limited to Section 1654 of the California Civil Code, or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.
The provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of the parties.
(p) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(q) Survivorship. The respective rights and duties of the parties
hereunder shall survive any termination of this Agreement or Executive's service
as Chairman of the Board to the extent necessary to the intended preservation of
such rights and obligations.
[The rest of this page was intentionally left blank]
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first above written.
COUNTRYWIDE FINANCIAL CORPORATION
ATTEST: By: /s/ Xxxxxxxx X. Xxxxxxx
-------------------------------------------
/s/ Xxxxx X. Bow Title: President and Chief Operating Officer
--------------------------- ----------------------------------------
Secretary
Date: September 2, 2004
-----------------------------------------
EXECUTIVE:
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx, in his individual capacity
Date: September 2, 2004
-----------------------------------------
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APPENDIX A
TO XXXXXX X. XXXXXX EMPLOYMENT AGREEMENT
1. A "Change in Control" shall mean the occurrence during the
term of this Agreement, of any one of the following events:
(a) An acquisition (other than directly from the Company) of
any common stock or other "Voting Securities" (as
hereinafter defined) of the Company by 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
(the "Exchange Act")), immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of twenty five
percent (25%) or more of the then outstanding shares of
the Company's common stock or the combined voting power of
the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a
Change in Control. For purposes of this Agreement, (1)
"Voting Securities" shall mean the Company's outstanding
voting securities entitled to vote generally in the
election of directors and (2) a "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan
(or a trust forming a part thereof) maintained by (A) the
Company or (B) any corporation or other Person of which a
majority of its voting power or its voting equity
securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (ii) the Company or any of
its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of the Agreement are
members of the Board (the "Incumbent Board"), cease for
any reason to constitute at least two-thirds of the
members of the Board; provided, however, that if the
election, or nomination for election by the Company's
common stockholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board, such
new director shall, for purposes of this Agreement, be
considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
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(i) A merger, consolidation or reorganization involving
the Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger,
consolidation or reorganization of the Company
where:
(A) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own directly or indirectly
immediately following such merger,
consolidation or reorganization, at least
seventy percent (70%) of the combined voting
power of the outstanding Voting Securities
of the corporation resulting from such
merger, consolidation or reorganization (the
"Surviving Corporation") in substantially
the same proportion as their ownership of
the Voting Securities immediately before
such merger, consolidation or
reorganization;
(B) the individuals who were members of the
Incumbent Board immediately prior to the
execution of the agreement providing for
such merger, consolidation or reorganization
constitute at least two-thirds of the
members of the board of directors of the
Surviving Corporation, or in the event that,
immediately following the consummation of
such transaction, a corporation beneficially
owns, directly or indirectly, a majority of
the Voting Securities of the Surviving
Corporation, the board of directors of such
corporation; and
(C) no Person other than (i) the Company, (ii)
any Subsidiary, (iii) any employee benefit
plan (or any trust forming a part thereof)
maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any
Person who, immediately prior to such
merger, consolidation or reorganization had
Beneficial Ownership of twenty five percent
(25%) or more of the then outstanding Voting
Securities or common stock of the Company,
has Beneficial Ownership of twenty five
percent (25%) or more of the combined voting
power of the Surviving Corporation's then
outstanding Voting Securities or its common
stock;
(ii) A complete liquidation or dissolution of the
Company; or
(iii) The sale or other disposition of all or
substantially all of the assets of the Company to
any Person (other than a transfer to a Subsidiary).
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Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding common stock
or Voting Securities as a result of the acquisition of common stock or Voting
Securities by the Company which, by reducing the number of shares of common
stock or Voting Securities then outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Persons; provided, however, that if
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of common stock or Voting Securities by the Company,
and after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional common stock or Voting Securities which
increases the percentage of the then outstanding common stock or Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
2. The "Protected Period" corresponding to a Change in Control of
the Company shall be a period of time determined in accordance with the
following:
(a) If the Change in Control is triggered by a tender offer
for shares of the Company's stock or by the offeror's
acquisition of shares pursuant to such a tender offer, the
Protected Period shall commence on the date of the initial
tender offer and shall continue through and including the
date of the Change in Control; provided that in no case
will the Protected Period commence earlier than the date
that is six (6) months prior to the Change in Control.
(b) If the Change in Control is triggered by a merger,
consolidation, or reorganization of the Company with or
involving any other corporation, the Protected Period
shall commence on the date that serious and substantial
discussions first take place to effect the merger,
consolidation, or reorganization and shall continue
through and including the date of the Change in Control;
provided that in no case will the Protected Period
commence earlier than the date that is six (6) months
prior to the Change in Control.
(c) In the case of any Change in Control not described in
clause (a) or (b) above, the Protected Period shall
commence on the date that is six (6) months prior to the
Change in Control and shall continue through and including
the date of the Change in Control.
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