Exhibit 10.12
[EXECUTION COPY]
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of October 9, 1999, by and between
Wilshire Real Estate Investment Inc. and Wilshire Real Estate Partnership L.P.
(together or individually, the "Company"), with its principal office at ▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, residing at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently employed as an executive of the
Company; and
WHEREAS, the Company and Executive desire to enter into this
agreement (the "Agreement") to set forth terms of Executive's employment by the
Company.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:
1. TERM OF EMPLOYMENT. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (the "Employment Term") commencing on October 9, 1999 (the
"Commencement Date"). Subject to Section 7 hereof, the Employment Term shall be
automatically extended for additional terms of successive two (2) year periods
unless the Company or Executive gives written notice of the termination of
Executive's employment hereunder at least ninety (90) days prior to the
expiration of the then current Employment Term.
2. POSITION. (a) Executive shall serve as an Executive Vice
President and Chief Financial Officer of the Company.
(b) Executive shall report directly to the Chief Executive Officer
of the Company and shall have such duties and authority, consistent with his
position as shall be determined from time to time by the Chief Executive
Officer.
(c) During the Employment Term, Executive shall devote substantially
all of his business time, energy, skill and efforts to the performance of his
duties and responsibilities hereunder; provided, however, that Executive shall
be allowed to (i) engage in charitable activities and (ii) manage his personal
financial and legal affairs.
3. SIGNING BONUS AND BASE SALARY. (a) Subject to the execution of a
release and settlement agreement between Wilshire Financial Services Group Inc.
("WFSG") and Executive acceptable to WFSG, the Company will immediately pay to
Executive a signing bonus of $250,000, net of any withholding taxes.
(b) During the Employment Term, the Company shall pay Executive a
base salary at the annual rate of not less than $250,000.00. Base salary shall
be payable in accordance with the usual payroll practices of the Company
(including withholding). Executive's Base Salary shall be subject to annual
review by the Board in October of each year and may be increased, but not
decreased, from time to time upon recommendation of the Compensation Committee
of the Board (the "Committee"). The base salary determined as aforesaid from
time to time shall constitute "Base Salary" for purposes of this Agreement.
4. INCENTIVE COMPENSATION. (a) BONUS. For each 12 month period
commencing on September 30, 1999 (each, an "Annual Period"), Executive shall be
entitled to receive an annual bonus (the "Bonus") as follows: (i) if Post-Bonus
▇▇▇ for such Annual Period is 5% or greater but less than 10%, $162,500, (ii) if
Post-Bonus ▇▇▇ for such Annual Period is 10% or greater but less than 15%,
$212,500, and (iii) if Post-Bonus ▇▇▇ for such Annual Period is 15% or greater,
$312,500 together with any discretionary bonus payable pursuant to Section 4(e)
below. For purposes of this agreement, the following terms shall have the
following meanings:
"POST-BONUS EARNINGS" means the Company's after-tax income (as
determined in accordance with generally accepted accounting
principles and reflected on the Company's financial statements) for
the relevant Annual Period or portion thereof determined after
subtracting the after-tax amount of the Executive Bonus Payments
payable for that Annual Period; provided, however, that in
determining Post-Bonus Earnings for purposes of this Section 4,
Post-Bonus Earnings shall be increased or decreased for the relevant
Annual Period by the amount of unrealized gains or unrealized
losses, as the case may be, which are incurred after the
commencement of the relevant Annual Period and which are reflected
directly in equity as "other comprehensive income or loss" during
such Annual Period.
"EQUITY" means the Company's total shareholders' equity (as
determined in accordance with generally accepted accounting
principles and reflected on the Company's financial statements) at
the beginning of the relevant Annual Period; provided, however, that
in determining Equity for purposes of this Section 4, Equity shall
be increased by the amount of unrealized losses which are shown on
the Company's balance sheet as of the beginning of the relevant
Annual Period under the heading "other comprehensive income or
loss". For example, if the Company's shareholders' equity as of
September 30, 1999 was $63.831 million and there was $20.658 million
of accumulated other comprehensive loss, then Equity would be
$84.489 million.
"POST-BONUS ▇▇▇" means the Company's Post-Bonus Earnings for the
relevant Annual Period divided by its Equity at the beginning of the
relevant Annual Period (expressed in percentage terms).
"EXECUTIVE BONUS PAYMENTS" means, for each Annual Period, the
aggregate amount of annual bonuses (excluding signing bonuses) payable to the
following senior executives of the Company (or their successors): ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇.
To assist the reader in understanding the foregoing provisions, examples of such
Bonus determinations are set forth on Schedule I hereto. Such annual Bonus shall
be payable by November 15th of each year following the Annual Period for which
the Bonus is payable and, if necessary, shall be adjusted for any subsequent
amendments to the Company's financial statements. The Company will apply the
annual Bonus to repay any outstanding Cash Flow Loan and any outstanding Excess
Advance (each as defined below) prior to making any payment to Executive. To the
extent that the Company repurchases any of its outstanding common stock or the
Company's net operating losses under Section 382 of the Code (as defined below)
are disallowed, the parties agree to negotiate in good faith to amend the
incentive compensation provisions of this Section 4 to provide Executive with
comparable goals and returns to those that existed prior to the occurrence of
such events. Following the initial Employment Term, such Bonus shall be subject
to shareholder approval as and to the extent required by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding the
foregoing, $93,750 of the signing bonus of $250,000 will be deemed to be a
payment by the Company to Executive of that portion of the annual Bonus
attributable to the fourth calendar quarter of 1999; provided, however that (i)
to the extent that Executive would be entitled to receive less than $93,750 for
that portion of the annual Bonus attributable to the fourth calendar quarter of
1999, the annual Bonus payable in November 2000 shall be determined as provided
above less that portion of the annual Bonus attributable to the fourth calendar
quarter of 1999 (and not $93,750) and (ii) to the extent that Executive would be
entitled to receive more than $93,750 for that portion of the annual Bonus
attributable to the fourth calendar quarter of 1999, the annual Bonus payable in
November 2000 shall be determined as provided above less $93,750. In addition,
to the extent that Executive would receive less than $93,750 for that portion of
the annual Bonus attributable to the fourth calendar quarter of 1999 or for the
relevant Annual Period, such $93,750 will be treated as a non-refundable,
minimum payment for such period and for the relevant Annual Period. To the
extent that Executive would receive more than $93,750 for that portion of the
annual Bonus attributable to the fourth calendar quarter of 1999, the Company
will pay, and allow Executive to draw against, any amount in excess of such
$93,750 as provided above.
(b) ADVANCES. Following any quarterly period during an Annual
Period, the Company shall, at the request of the Executive, pay an advance on
any such Bonus; provided, however, that (i) any such advance (together with any
prior advances made during the relevant Annual Period) shall not exceed 80% of
the pro rata portion of the Estimated Annual Bonus (as
defined below) attributable to such quarterly period and to any prior quarterly
periods during such Annual Period, (ii) any advances available to Executive
(whether or not requested) during any quarterly period shall be applied to repay
any outstanding Cash Flow Loan, and (iii) any such advance shall not exceed
$60,000 per quarter. Any such advances shall be treated as advances of
Executive's Bonus and shall not bear interest. The Estimated Annual Bonus is
determined by annualizing the Company's Post-Bonus Earnings (based on the
Company's financial statements) for the quarterly period or periods during such
Annual Period (or for purposes of Section 8, monthly periods) and determining
the annual Bonus payable to Executive as described in Section 4(a). In the event
that the aggregate amount of advances outstanding immediately following the end
of any quarterly period during the relevant Annual Period exceeds 80% of the pro
rata portion of the Estimated Annual Bonus ("Permitted Advances") determined
immediately following such quarterly period, the amount in excess of the
Permitted Advances shall be treated as an interest free loan from the Company
("Advance Reimbursement Loan") for the next succeeding quarterly period (the
"Following Quarter") and if at the end of the Following Quarter the aggregate
amount of outstanding advances continues to exceed the Permitted Advances (the
"Excess Advance"), Executive shall repay the Excess Advance to the Company
within 30 days of the end of such Following Quarter.
(c) CASH FLOW LOAN. To provide Executive with a minimum amount of
cash flow at the end of each Annual Period and to the extent Executive did not
receive an annual Bonus of at least $500,000 for such period, Executive may
borrow (a "Cash Flow Loan") from the Company on the date his annual Bonus is
paid (the "Bonus Payment Date") up to the after-tax equivalent (assuming a tax
rate of 40%) of the difference between (i) $312,500 and (ii) actual annual Bonus
payable for the Annual Period just ending; provided, however that (x) the
proceeds of any new Cash Flow Loan shall be used first to repay any outstanding
Cash Flow Loan and then to any outstanding Excess Advance and (y) the
outstanding amount of any Cash Flow Loan shall not exceed $180,000 at any time.
The Cash Flow Loan shall be considered a draw on Executive's next Bonus. Except
if Executive is terminated, the Cash Flow Loan shall mature on the next Bonus
Payment Date and shall not bear interest. If Executive is terminated, the Cash
Flow Loan shall mature as provided in Section 8 and shall accrue interest on the
then outstanding principal amount of the Cash Flow Loan from the date of
termination until maturity at a rate equal to the prime rate as published in the
Wall Street Journal on the date of termination, payable annually in arrears.
(d) OPTIONS. The Company shall grant to Executive stock options (the
"Initial Options") on 120,000 shares of the Company's common stock (the "Common
Stock") under the Company's Incentive Stock Plan (the "Incentive Stock Plan").
The Initial Options shall have an exercise price equal to the Company's book
value per outstanding share as of September 30, 1999, which exercise price is in
excess of the market value per share based on the share price of the Common
Stock as of such date. The Initial Options will be fully exercisable at the time
of vesting and 25% of the Initial Options shall vest on each anniversary of this
Agreement (which will result in the Initial Options being fully vested on the
fourth anniversary of this Agreement).
In addition, the Executive shall be entitled to participate in the Company's
Incentive Stock Plan and receive nonqualified, incentive or other options
("Options") to purchase shares of the Company's Common Stock under the Incentive
Stock Plan as determined by the Committee from time to time provided that the
Incentive Stock Plan is approved by the shareholders of the Company to the
extent required by Section 162(m) of the Code. Notwithstanding the foregoing,
the Company may recommend to the Committee that Executive be granted Options
under a plan other than the Incentive Stock Plan provided that such other plan
contains terms and conditions which are substantially similar to the terms and
conditions of the Incentive Stock Plan, and further provided, that such other
plan is approved by the shareholders of the Company to the extent required by
Section 162(m) of the Code. To the extent permitted under applicable law, any
Options granted to Executive hereunder (including the Initial Options) may be
assigned and transferred by Executive to entities created for or on behalf of
Executive's immediate family for tax planning or other purposes.
(e) OTHER COMPENSATION. The Company may, upon recommendation of the
Committee, award to Executive such other bonuses and compensation as it deems
appropriate and reasonable.
5. EMPLOYEE BENEFITS AND VACATION. (a) During the Employment Term,
Executive shall be entitled to participate in all pension, retirement, savings,
welfare and other employee benefit plans and arrangements, including, without
limitation, any nonqualified deferred compensation plans, maintained by the
Company from time to time for the benefit of the senior executives of the
Company in accordance with their respective terms as in effect from time to
time. Executive acknowledges that the aforementioned items may be included as
compensation for income tax purposes to the extent required by applicable law.
To the extent permitted under applicable law, the Company shall not treat as
compensation to Executive fringes and perquisites provided to Executive or the
items under Section 6 below.
(b) During the Employment Term, the Company agrees to loan to
Executive $50,000 during each year of the Employment Term to purchase shares of
Common Stock of the Company up to a maximum of $250,000. Each annual loan made
pursuant to this Section 5(b) (the "Stock Purchase Loans") shall mature on the
earlier of (i) its fifth anniversary and (ii) six months after Executive is no
longer employed by the Company. The Stock Purchase Loans shall accrue interest
on the then outstanding principal amount of the Stock Purchase Loans from the
date of any Loan is made until maturity at a rate equal to the prime rate as
published in the Wall Street Journal on the date any Stock Purchase Loan is made
pursuant hereto and shall be payable annually in arrears. Interest on the Stock
Purchase Loan will not be paid in cash but shall be payable in kind (i.e. the
amount of interest accrued on the Stock Purchase Loan during each annual period
will be added to the principal amount of the Loan at the end of such annual
period). The Stock Purchase Loans will be full recourse loans against Executive
and each loan will be secured by the shares of Common Stock purchased with each
such Stock Purchase Loan together with other shares of Common Stock pledged by
Executive so that the aggregate value (based on the closing price on the
acquisition date of such shares on the Nasdaq stock market) of
all such shares securing each new Stock Purchase Loan shall be at least equal to
110% of the principal amount of the Stock Purchase Loans.
(c) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than five (5) weeks paid vacation per calendar
year. Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.
6. BUSINESS EXPENSES. The Company shall also reimburse Executive for
the travel, entertainment and other business expenses incurred by Executive in
the performance of his duties hereunder, in accordance with the Company's
policies as in effect from time to time.
7. TERMINATION. (a) The employment of Executive under this Agreement
shall terminate upon the occurrence of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the Company
due to Executive's Disability pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by Executive
for Good Reason pursuant to Section 7(c) hereof;
(iv) the termination of Executive's employment by the Company
without Cause;
(v) the termination of employment by Executive without Good
Reason upon sixty (60) days prior written notice;
(vi) the termination of employment by Executive for any
reason during the period commencing on the date of a Change in
Control and ending on the day immediately prior to the second
anniversary of the Change in Control (the "Change in Control
Protection Period");
(vii) the termination of Executive's employment by the
Company for Cause pursuant to Section 7(e); or
(viii) the retirement of Executive by the Company at or after
his sixty-fifth birthday to the extent such termination is
specifically permitted as a stated exception from applicable
federal and state age discrimination laws based on position and
retirement benefits.
(b) DISABILITY. If, by reason of the same or related physical or
mental reasons, Executive is unable to carry out Executive's material duties
pursuant to this Agreement for more than six (6) months in any twelve (12)
consecutive month period (a "Disability") as determined and certified in writing
by two (2) licensed physicians, one of which is Executive's regular attending
physician, the Company may terminate Executive's employment for Disability upon
thirty (30) days prior written notice, by a notice of Disability termination, at
any time thereafter during such twelve (12) month period in which Executive is
unable to carry out his duties as a result of the same or related physical or
mental illness. Such termination shall not be effective if Executive returns to
the full time performance of his material duties within such thirty (30) day
notice period.
(c) TERMINATION FOR GOOD REASON. A Termination for Good Reason means
a termination by Executive by written notice given within sixty (60) days after
the occurrence of the Good Reason event. For purposes of this Agreement, "Good
Reason" shall mean the occurrence or failure to cause the occurrence, as the
case may be, without Executive's express written consent, of any of the
following circumstances, unless such circumstances are fully corrected prior to
the date of termination specified in the Notice of Termination for Good Reason
(as defined in Section 7(d) hereof): (i) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive's employment for Cause or
Disability or as a result of Executive's death, or temporarily as a result of
Executive's illness or other absence), or the assignment to Executive of duties
or responsibilities that are inconsistent with Executive's position; (ii)
removal of Executive from, or the non reelection of Executive to, the positions
with the Company specified herein; (iii) a relocation of the Company's principal
United States executive offices to a location more than fifty (50) miles from
Portland, Oregon, or a relocation of Executive away from such principal United
States executive office; (iv) a failure by the Company (A) to continue any bonus
plan, program or arrangement in which Executive is entitled to participate (the
"Bonus Plans"), provided that any such Bonus Plans may be modified at the
Company's discretion from time to time but shall be deemed terminated if (x) any
such plan does not remain substantially in the form in effect prior to such
modification and (y) if plans providing Executive with substantially similar
benefits are not substituted therefor ("Substitute Plans"), or (B) to continue
Executive as a participant in the Bonus Plans and Substitute Plans on at least
the same basis as to potential amount of the bonus and substantially the same
level of criteria for achievability thereof as Executive participated in
immediately prior to any change in such plans or awards, in accordance with the
Bonus Plans and the Substitute Plans; (v) any material breach by the Company of
any material provision of this Agreement; (vi) a failure of any successor to the
Company to assume in a writing delivered to Executive upon the assignee becoming
such the obligations of the Company hereunder; or (vii) a failure of the
Committee to grant Executive an award of Options in accordance with Section 4
hereof, unless the applicable circumstances under (i) through (vii) are fully
corrected prior to the date of termination specified in the notice of
termination for Good Reason.
(d) NOTICE OF TERMINATION FOR GOOD REASON. A notice of termination
for Good Reason shall mean a notice that shall indicate the specific termination
provision in Section 7(c)
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination for Good Reason. The failure by
Executive to set forth in the notice of termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason shall not waive any
right of Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The notice of termination for
Good Reason shall provide for a date of termination not less than fifteen (15)
nor more than sixty (60) days after the date such notice of termination for Good
Reason is given.
(e) CAUSE. Subject to the notification provisions of Section 7(f)
below, Executive's employment hereunder may be terminated by the Company for
Cause. For purposes of this Agreement, the term "Cause" shall be limited to (i)
willful misconduct by Executive with regard to the Company or its business which
has a material adverse effect on the Company; (ii) the refusal of Executive to
follow the direction of the Chief Executive Officer, provided that the foregoing
refusal shall not be "Cause" if Executive in good faith believes that such
direction is illegal, unethical or immoral and promptly so notifies the Chief
Executive Officer; (iii) Executive being convicted of a felony (other than a
felony involving a traffic offense); (iv) the breach by Executive of any
fiduciary duty owed by Executive to the Company which has a material adverse
effect on the Company; or (v) Executive's material fraud with regard to the
Company.
(f) NOTICE OF TERMINATION FOR CAUSE. A notice of termination for
Cause shall mean a notice that shall indicate the specific termination provision
in Section 7(e) relied upon and shall set forth in reasonable detail the facts
and circumstances which provide a basis for termination for Cause. The date of
termination for a termination for Cause shall be the date indicated in the
notice of termination. Any purported termination for Cause which is held by a
court or arbitrator not to have been based on the grounds set forth in this
Agreement or not to have followed the procedures set forth in this Agreement
shall be deemed a termination by the Company without Cause.
8. CONSEQUENCES OF TERMINATION OF EMPLOYMENT. (a) DEATH. If
Executive's employment is terminated during the Employment Term by reason of
Executive's death, the employment period under this Agreement shall terminate
without further obligations to Executive's legal representatives under this
Agreement except for: (i) any compensation earned but not yet paid, including
without limitation, any unpaid bonus due, any amount of Base Salary or deferred
compensation accrued or earned but unpaid, any accrued vacation payable pursuant
to the Company's policies and any unreimbursed business expenses payable
pursuant to Section 6 which amounts shall be promptly paid in a lump sum to
Executive's spouse; (ii) the Estimated Annual Bonus for the fiscal year of
Executive's death, pro rated through the end of month in which Executive died,
which bonus shall be paid to Executive's spouse within 60 days after such month
end; (iii) full accelerated vesting under all outstanding equity-based and
long-term incentive plans (with options remaining outstanding as provided under
the applicable stock option plan and a pro rata payment under any long term
incentive plans based on actual coverage under such plans at the time payments
normally would be made under such plans); (iv) subject to
Section 10 hereof, any other amounts or benefits owing to Executive under the
then applicable employee benefit plans or policies of the Company, which shall
be paid in accordance with such plans or policies; (v) payment on a monthly
basis of six (6) months of Executive's Base Salary on the date of death, which
shall be paid to Executive's estate; (vi) any outstanding Cash Flow Loan shall
be repaid over five years in five fully amortizing annual installments, with the
first installment becoming due and payable on the first anniversary of the date
of termination; (vii) any outstanding Advance Reimbursement Loan shall mature as
provided in Section 4; (viii) any outstanding Stock Purchase Loan shall become
due and payable six months after the date of termination, and (ix) payment of
Executive's spouse's and dependents' COBRA coverage premiums to the extent, and
so long as, they remain eligible for COBRA coverage, but in no event more than
one (1) year. Section 12 hereof shall also continue to apply.
(b) DISABILITY. If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive the payments and
benefits to which his representatives would be entitled in the event of a
termination of employment by reason of his death, provided that the payment of
Base Salary shall be reduced by the projected amount Executive would receive
under any long-term disability policy or program maintained by the Company
during the six (6) month period during which Base Salary is being paid. Section
12 hereof shall also continue to apply.
(c) TERMINATION BY EXECUTIVE FOR GOOD REASON OR FOR ANY REASON
DURING THE CHANGE IN CONTROL PROTECTION PERIOD OR TERMINATION BY THE COMPANY
WITHOUT CAUSE OR NONEXTENSION OF THE TERM BY THE COMPANY. If (i) outside of the
Change in Control Protection Period, Executive terminates his employment
hereunder for Good Reason during the Employment Term, (ii) a Change in Control
occurs and during the Change in Control Protection Period Executive terminates
his employment for any reason, (iii) Executive's employment with the Company is
terminated by the Company without Cause, or (iv) Executive's employment with the
Company terminates as a result of the Company giving notice of nonextension of
the Employment Term pursuant to Section 1 hereof, Executive shall be entitled to
receive: (A) in a lump sum within ten (10) business days after such termination
(unless otherwise specified) (i) the Estimated Annual Bonus payable to Executive
for the Annual Period, pro rated through the end of month in which Executive is
terminated, which bonus shall be paid within 45 days after such month end, (ii)
any unreimbursed business expenses payable pursuant to Section 6, and (iii) any
Base Salary, Bonus, vacation pay or other deferred compensation accrued or
earned under law or in accordance with the Company's policies but not yet paid
at the date of termination; (B) accelerated full vesting under all outstanding
equity-based and long-term incentive plans with Options remaining outstanding as
provided under the applicable stock option plan and a pro rata payment under any
long term incentive plans based on actual coverage under such plans payment
being made at the time payments would normally be made under such plans; (C)
subject to Section 10 hereof, any other amounts or benefits due Executive under
the then applicable employee benefit plans of the Company as shall be determined
and paid in accordance with such plans, policies and practices; (D) one (1) year
of additional service and compensation credit (at his then compensation level)
for pension purposes under any defined benefit type qualified or nonqualified
pension plan or arrangement of the Company, measured from the date of
termination of employment and not credited to the extent that Executive is
otherwise entitled to such credit during such one (1) year period, which
payments shall be made through and in accordance with the terms of the
nonqualified defined benefit pension arrangement if any then exists, or, if not,
in an actuarially equivalent lump sum (using the actuarial factors then applying
in the Company's defined benefit plan covering Executive); (E) one (1) year of
the maximum Company contribution (assuming Executive deferred the maximum amount
and continued to earn his then current salary) measured from the date of
termination under any type of qualified or nonqualified 401(k) plan (payable at
the end of each such year); (F) any outstanding Cash Flow Loan shall be repaid
over five years in five fully amortizing annual installments, with the first
installment becoming due and payable on the first anniversary of the date of
termination; (G) any outstanding Advance Reimbursement Loan shall mature as
provided in Section 4; (H) any outstanding Stock Purchase Loan shall become due
and payable six months after the date of termination; and (I) payment by the
Company of the premiums for Executive (except in the case of death) and his
spouse's and dependents' health coverage for one (1) year under the Company's
health plans which cover the senior executives of the Company or materially
similar benefits. Payments under (I) above may, at the discretion of the
Company, be made by continuing participation of Executive in the plan as a
terminee, by paying the applicable COBRA premium for Executive and his spouse
and dependents, or by covering Executive and his spouse and dependents under
substitute arrangements, provided that, to the extent Executive incurs tax that
he would not have incurred as an active employee as a result of the
aforementioned coverage or the benefits provided thereunder, Executive shall
receive from the Company an additional payment in the amount necessary so that
he will have no additional cost for receiving such items or any additional
payment. In the circumstances described in each of (i) through (iv) above,
Section 12 hereof shall also continue to apply.
(d) TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION WITHOUT GOOD
REASON OR RETIREMENT. If Executive's employment hereunder is terminated: (i) by
the Company for Cause, (ii) by Executive without Good Reason outside of the
Change in Control Protection Period, or (iii) by the Company pursuant to Section
7(a)(viii) hereof, Executive shall be entitled to receive his Base Salary
through the date of termination, the Estimated Annual Bonus prorated through the
last day of the month in which Executive is terminated, and any unreimbursed
business expenses payable pursuant to Section 6. In addition, any outstanding
Cash Flow Loan shall be repaid over five years in five fully amortizing annual
installments, with the first installment becoming due and payable on the first
anniversary of the date of termination; any outstanding Advance Reimbursement
Loan shall mature as provided in Section 4; and any outstanding Stock Purchase
Loan shall become due and payable six months after the date of termination. All
other benefits (including, without limitation, Options) due Executive following
such termination of employment shall be determined in accordance with the plans,
policies and practices of the Company.
9 [THIS SECTION IS INTENTIONALLY LEFT BLANK.]
10 NO MITIGATION; NO SET-OFF. In the event of any termination of
employment under Section 8, Executive shall be under no obligation to seek other
employment and, except as explicitly set forth herein, there shall be no offset
against any amounts due Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that Executive may
obtain. Any amounts due under Section 8 are in the nature of severance payments,
or liquidated damages, or both, and are not in the nature of a penalty. Such
amounts are in lieu of any amounts payable under any other salary continuation
or cash severance arrangement of the Company and to the extent paid or provided
under any other such arrangement shall be offset from the amount due hereunder.
11 CHANGE IN CONTROL. For purposes of this Agreement, the term
"Change in Control" shall mean (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than the
Company, any trustee or other fiduciary holding securities under any employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of common stock of the Company), becoming the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities; (ii) during
any period of two (2) consecutive years, individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
or a director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11
promulgated under the Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than a member of the Board) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two (2) year period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority of the Board; (iii) the merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person (other than those covered in the
exceptions in (i) above) acquires more than twenty-five percent (25%) of the
combined voting power of the Company's then outstanding securities shall not
constitute a Change in Control; or (iv) approval by the shareholders of the
Company of a plan of complete liquidation of the Company or the closing of the
sale or disposition by the Company of all or substantially all of the Company's
assets other than the sale of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or indirectly, at
least fifty percent (50%) or more of the combined voting power of
the outstanding voting securities of the Company at the time of the sale.
12 INDEMNIFICATION. (a) The Company agrees that if Executive is made
a party to or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was an officer of the Company, or is or was
serving at the request of the Company as an officer, member, employee, fiduciary
or agent of another corporation or of a partnership, joint venture, trust, other
enterprise or non-profit organization, including, without limitation, service
with respect to employee benefit plans, whether or not the basis of such
Proceeding is alleged action in an official capacity as an officer, member,
employee, fiduciary or agent while serving as an officer, member, employee,
fiduciary or agent, he shall be indemnified and held harmless by the Company to
the fullest extent authorized by Maryland law, as the same exists or may
hereafter be amended, against all Expenses incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
even if Executive has ceased to be an officer, member, fiduciary or agent, or is
no longer employed by the Company, and shall inure to the benefit of his heirs,
executors and administrators.
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and costs, attorneys' fees, accountants' fees, and
disbursements and costs of attachment or similar bonds, investigations, and any
expenses of establishing a right to indemnification under this Agreement.
(c) Expenses incurred by Executive in connection with any Proceeding
shall be paid by the Company in advance upon request of Executive and the giving
by Executive of any undertakings required by applicable law.
(d) Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.
(e) With respect to any Proceeding as to which Executive notifies
the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided below, to the extent that
it may wish, the Company jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive. Executive also
shall have the right to employ his own counsel in such action,
suit or proceeding and the fees and expenses of such counsel shall
be at the expense of the Company.
(f) The Company shall not be liable to indemnify Executive under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive
without Executive's written consent. Neither the Company nor Executive will
unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 12 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company hereunder agrees to obtain officer liability
insurance policies covering Executive and shall maintain at all times following
the Commencement Date and during the Employment Term coverage under such
policies in the aggregate with regard to all officers and directors, including
Executive, of an amount not less than $10 million.
13 LEGAL AND OTHER FEES AND EXPENSES. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by Executive in pursuing such claim, unless the claim by
Executive is found to be frivolous by any court or arbitrator.
14 ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Portland in the State of Oregon under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration Rules.
The determination of the arbitrators, which shall be based upon a DE NOVO
interpretation of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs of
arbitration, including the costs of the American Arbitration Association and the
arbitrator, shall be borne by the Company.
15 MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed
in
accordance with the laws of the State of Oregon without reference to principles
of conflicts of laws.
(b) ENTIRE AGREEMENT/AMENDMENTS. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements, whether written or
otherwise, between the Company and Executive. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.
(c) NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.
(d) ASSIGNMENT. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable, with the consent of Executive, by the
Company only to an acquiror of all or substantially all of the assets of the
Company, provided such acquiror promptly assumes all of the obligations
hereunder of the Company in a writing delivered to Executive and otherwise
complies with the provisions hereof with regard to such assumption.
(e) SUCCESSORS; BINDING AGREEMENT; THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon parties hereto and
their personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees legatees and permitted assignees of the parties
hereto. If Executive dies while any amount would still be payable hereunder if
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of the Agreement to the
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, legatees and permitted assignees of the parties hereto.
(f) COMMUNICATIONS. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, and (ii)
two business days after being mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the initial page of this Agreement, provided that all
notices to the Company shall be directed to the attention of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ of the Company, or to such other address as any party may have
furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.
(g) WITHHOLDING TAXES. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to
be withheld pursuant to any applicable law or regulation.
(h) SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment.
(i) COUNTERPARTS. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(j) HEADINGS. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
WILSHIRE REAL ESTATE INVESTMENT INC.,
on its behalf and as general partner for
WILSHIRE REAL ESTATE PARTNERSHIP L.P.
By: /s/ _________________________________
Name:
Title:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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