EXHIBIT 10.29
TERMINATION PROTECTION AGREEMENT
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AGREEMENT effective January 27, 1999 between Imperial Credit Industries,
Inc., a California Corporation (the "Company") and Xxxxx X. Xxxxxx (the
"Executive").
Executive, who is a senior executive of the Company, is a skilled and
dedicated employee who has important management responsibilities and talents
which benefit the Company and its affiliates. The Company believes that its
best interests will be served if Executive is encouraged to remain with the
Company. The Company has determined that the Company's ability to retain
Executive as an employee will be significantly enhanced if Executive is provided
with fair and reasonable protection from the potential effects of a change in
ownership or control of the Company. Accordingly, the Company and Executive
agree as follows:
1. Defined Terms.
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Unless otherwise indicated, capitalized terms used in this Agreement which are
defined in Schedule A shall have the meanings set forth in Schedule A.
2. Effective Date; Term.
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This Agreement shall commence on the date hereof (the "Effective Date") and
shall continue in effect through December 31, 2000; provided, however, the term
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of this Agreement shall automatically be extended for one additional year beyond
2000 and successive one year periods thereafter, unless, not later than January
30 of each calendar year, commencing in 2000, the Company shall have given
notice that it does not wish to extend this Agreement for an additional year
beyond such calendar year, in which event this Agreement shall continue to be
effective until the end of its then remaining term; provided, further, that,
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notwithstanding any such notice by the Company not to extend, if a Change in
Control shall have occurred during the original or any extended term of this
Agreement, this Agreement shall continue in effect for a period of 36 months
beyond such Change in Control.
3. Change in Control Benefits.
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If Executive's employment with the Company or its affiliates is terminated (a)
at any time within the three years following a Change in Control by the Company
or its affiliates without Cause or by Executive for Good Reason, or (b) by
Executive for any reason during the 30 day period beginning on the first
anniversary of a Change in Control (the effective date of any such termination
hereafter referred to as the "Termination Date"), Executive shall be entitled to
the benefits provided hereafter in this Section 3 and as otherwise set forth in
this Agreement. If Executive's employment is terminated prior to a Change in
Control at the request or suggestion of any individual or entity acquiring
ownership and control of the Company, this Agreement shall become effective upon
the subsequent occurrence of a Change in Control involving such acquirer, and
Executive's Termination Date shall be deemed to have occurred immediately
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following the Change in Control, with the result that Executive shall be
entitled to the benefits provided hereafter in this Section 3 and as otherwise
set forth in this Agreement.
X. Xxxxxxxxx Benefits. Within five business days after the Termination
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Date, the Company shall pay Executive a lump sum amount, in cash, equal to:
(i) three times the sum of:
(a) Executive's Base Salary, and
(b) Executive's highest Bonus earned in respect of any of the
last three Company fiscal years preceding the Change in
Control, and
(ii) Executive's Target Bonus multiplied by a fraction, the numerator
of which shall equal the number of days Executive was employed by the
Company or an affiliate in the calendar year in which the Termination
Date occurs and the denominator of which shall equal 365.
B. Continued Welfare Benefits. Until the third anniversary of the
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Termination Date, the Company shall, at its expense, provide Executive with
medical, dental, life insurance, disability and accidental death and
dismemberment benefits at the highest level provided to Executive during
the period beginning immediately prior to the Change in Control and ending
on the Termination Date; provided, however, that if Executive becomes
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employed by a new employer, the coverages provided by the Company pursuant
to this sentence shall become secondary to those coverages provided by the
new employer.
C. Payment of Accrued But Unpaid Amounts. Within five business days after
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the Termination Date, (i) all deferred compensation (including any
deferrals and matches on those deferrals in the Company's Deferral of
Executive Compensation Plan I or the Company's Deferral of Executive
Compensation Plan II) shall become fully vested and (ii) the Company shall
pay Executive, in cash, (A) any unpaid portion of Executive's Bonus accrued
with respect to the full calendar year ended prior to the Termination Date;
and (B) all unpaid deferred compensation of Executive.
D. Effect on Existing Plans and Employment Agreements. All Change in
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Control provisions applicable to Executive and contained in any plan,
program, agreement or arrangement maintained on the Effective Date (or
thereafter) by the Company or any affiliate (including, but not limited to,
any stock option or pension plan) shall remain in effect through the date
of a Change in Control (as altered by this Agreement), and for such period
thereafter as is necessary to carry out such provisions and provide the
benefits payable thereunder, and may not be altered in a manner which
adversely affects Executive without Executive's prior written approval. No
benefits shall be paid to Executive, however, under any severance plan
maintained generally for the employees of the Company or any affiliate if
Executive is eligible to receive benefits under this Section 3.
Notwithstanding the provisions of Section 4 hereof, any payments or
benefits
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provided under this Agreement shall be reduced by any payments or benefits
Executive receives as a result of his termination of employment under an
employment agreement between the Company or any affiliate and Executive (an
"Employment Agreement"). In addition, any non-competition or non-
solicitation covenant in an Employment Agreement or other agreement between
the Company or any affiliate and Executive shall lapse on the date of a
Change in Control.
E. Outplacement Counseling. For the three year period following the
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Termination Date, the Company shall reimburse all reasonable expenses
incurred by Executive (up to 20% of Base Salary per year) for professional
outplacement services by qualified consultants selected by Executive.
4. Mitigation.
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A. Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, and compensation earned from such employment or otherwise
shall not reduce the amounts otherwise payable under this Agreement. No
amounts payable under this Agreement shall be subject to reduction or
offset in respect of any claims which the Company (or any other person or
entity) may have against Executive.
5. Gross-Up.
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A. In the event that any payment or benefit received or to be received by
Executive pursuant to the terms of this Agreement (the "Contract Payment")
or in connection with Executive's termination of employment or contingent
upon a Change in Control of the Company pursuant to any plan or arrangement
or other agreement with the Company (or any affiliate) ("Other Payments"
and, together with the Contract Payments, the "Payments") would be subject
to the excise tax (the "Excise Tax") imposed by Section 4999 of the Code,
as determined as provided below, the Company shall pay to Executive, at the
time specified in Section 5(B) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by Executive, after deduction
of the Excise Tax on the Payments and any federal, state and local income
or other tax and Excise Tax upon the payment provided for by this Section
5(A), and any interest, penalties or additions to tax payable by Executive
with respect thereto, shall be equal to the total value of the Payments at
the time such Payments are to be made. For purposes of determining whether
any of the Payments will be subject to the Excise Tax and the amounts of
such Excise Tax, (1) the total amount of the Payments shall be treated as
parachute payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of independent tax counsel
selected by the Company's independent auditors and reasonably acceptable to
Executive ("Tax Counsel"), a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code, or such "excess parachute payments" (in whole or in part) are
not subject to the Excise
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Tax, (2) the amount of the Payments that shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the
Payments or (B) the amount of "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code (after applying clause (1)
hereof), and (3) the value of any noncash benefits or any deferred payment
or benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed
to pay federal income tax at the highest marginal rates of federal income
taxation applicable to individuals in the calendar year in which the Gross-
Up Payment is to be made and state and local income taxes at the highest
effective rates of taxation applicable to individuals as are in effect in
the state and locality of Executive's residence or place of employment in
the calendar year in which the Gross-Up Payment is to be made.
B. The Gross-Up Payments provided for in Section 5(A) hereof shall be made
upon the earlier of (i) the payment to Executive of any Payment or (ii) the
imposition upon Executive or payment by Executive of any Excise Tax.
C. The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 10 business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of
the 30 day period following the date on which the Executive gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration or such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company and reasonably satisfactory to the Executive.
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
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and expenses (including, but not limited to, additional interest and
penalties and related legal, consulting or other similar fees) incurred in
connection with such contest and shall
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indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or other tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs
and expenses.
D. The Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearing and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the
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Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis, and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or other tax (including interest
or penalties with respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such advance; and
provided, further, that if the Executive is required to extend the statute
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of limitations to enable the Company to contest such claim, the Executive
may limit this extension solely to such contested amount. The Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority. In
addition, no position may be taken nor any final resolution be agreed to by
the Company without the Executive's consent if such position or resolution
could reasonably be expected to adversely affect the Executive (including
any other tax position of the Executive unrelated to the matters covered
hereby).
E. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of a determination by the Company or the Tax Counsel
hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Company exhausts its remedies, as set forth above, and the Executive
thereafter is required to pay to the Internal Revenue Service an additional
amount, the Company or the Tax Counsel shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall promptly be
paid by the Company to or for the benefit of the Executive.
F. If, after the receipt by Executive of the Gross-Up Payment or an amount
advanced by the Company in connection with the contest of an Excise Tax
claim, the Executive receives any refund with respect to such claim, the
Executive shall promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by
the Company in connection with an Excise Tax claim, a determination is made
that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest the denial of
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such refund prior to the expiration of 30 days after such determination,
such advance shall be forgiven and shall not be required to be repaid.
6. Termination for Cause.
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Nothing in this Agreement shall be construed to prevent the Company or its
affiliates from terminating Executive's employment for Cause. If Executive is
terminated for Cause, the Company shall have no obligation to make any payments
under this Agreement, except for payments that may otherwise be payable under
then existing employee benefit plans, programs and arrangements of the Company
and its affiliates.
7. Indemnification; Director's and Officer's Liability Insurance.
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Executive shall, after the Termination Date, retain all rights to
indemnification under applicable law or under the applicable Company's Articles
of Incorporation or By-Laws, as they may be amended or restated from time to
time. In addition, the Company shall maintain Director's and Officer's
liability insurance on behalf of Executive, at the level in effect immediately
prior to the Termination Date, for the three-year period following the
Termination Date, and throughout the period of any applicable statute of
limitations.
8. Confidential Information.
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Except as required by law or by any court or administrative agency, during the
six-month period following the Termination Date, Executive shall not disclose to
any person, or use to the significant disadvantage of any of the Company or its
affiliates, any Confidential Information; provided that nothing contained in
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this Section 8 shall prevent Executive from being employed by a competitor or
any of the Company or utilizing Executive's general skills, experience, and
knowledge, including those developed while employed by any of the Company or its
affiliates.
9. Disputes.
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Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Los Angeles, California or, at
the option of Executive, in the county where Executive then resides, in
accordance with the Rules of the American Arbitration Association then in
effect, except that Executive may, at Executive's option, bring that action in a
court of competent jurisdiction, even if the Company has earlier instituted an
action hereunder. Judgement may be entered on an arbitrator's award relating to
this Agreement in any court having jurisdiction.
10. Costs of Proceedings.
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The Company shall pay all costs and expenses, including attorneys' fees and
disbursements, at least monthly, of Executive in connection with any legal
proceeding (including arbitration), whether instituted by the Company or
Executive, relating to the interpretation or enforcement of any provision of
this Agreement, except that if Executive instituted the proceeding and the
judge, arbitrator or other individual presiding over the proceeding
affirmatively finds that Executive
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instituted the proceeding in bad faith, Executive shall pay all costs and
expenses, including attorneys' fees and disbursements, of Executive. The Company
shall pay prejudgment interest on any money judgment obtained by Executive as a
result of such a proceeding, calculated at the prime rate of The Chase Manhattan
Bank, as in effect from time to time, from the date that payment should have
been made to Executive under this Agreement.
11. Assignment.
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Except as otherwise provided herein, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the Company and Executive and their
respective heirs, legal representatives, successors and assigns. If the Company
shall be merged into or consolidated with another entity, the provisions of this
Agreement shall be binding upon and inure to the benefit of the entity surviving
such merger or resulting from such consolidation. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
by agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. The provisions of this Section 11 shall continue to apply to
each subsequent employer of Executive hereunder in the event of any subsequent
merger, consolidation or transfer of assets of such subsequent employer.
12. Withholding.
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Notwithstanding the provisions of Sections 4 and 5 hereof, the Company may, to
the extent required by law, withholding applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
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This Agreement shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and to be performed
therein.
14. Entire Agreement.
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This Agreement constitutes the entire agreement between the parties regarding
the subject matter hereof. This Agreement may be changed only by a written
agreement executed by the Company and Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 29th
day of January, 1999.
IMPERIAL CREDIT INDUSTRIES, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ H. Xxxxx Xxxxxxx
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Executive: Xxxxx X. Xxxxxx H. Xxxxx Xxxxxxx
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Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:
"Average Bonus" means the average Bonus earned by Executive in respect of
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the last three full fiscal years of the Company ending prior to the Change in
Control, excluding any Bonus paid in such years in respect of a partial year of
employment.
"Base Salary" means Executive's annual rate of base salary in effect on the
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date of the Change in Control or the Termination Date, whichever is higher.
"Board" means the Company's Board of Directors.
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"Bonus" means the amount payable to Executive under the Company's
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applicable annual bonus plan with respect to a Company fiscal year.
"Cause" means either of the following:
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(i) the willful and continued failure to Executive to perform
substantially his or her duties with the Company or its affiliates (other
than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered
to Executive by the Board or an elected officer of the Company which
specifically identifies the manner in which the Board or the elected
officer believes that Executive has not substantially performed his or her
duties; or
(ii) (A) Executive's conviction of, or plea of guilty or nolo contendere
to, a felony or (B) the willful engaging by Executive in gross misconduct
which is materially and demonstrably injurious to the Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause (except for Cause pursuant to (ii)(A) above) unless and
until there shall have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
outside (i.e., nonemployee) directors at a meeting of the Board called and held
for such purpose (after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, Executive was guilty of
conduct set forth above and specifying the particulars thereof in detail.
"Change in Control" means the first to occur of any of the following dates:
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(i) any person or person acting in concert (excluding Company benefit
plans) becomes the beneficial owner of securities of the Company having at
least 40% of the voting power of the Company's then outstanding securities
(unless the event causing the 40% threshold to be crossed is an acquisition
of voting common securities directly from the Company); or
(ii) any merger or other business combination of the Company, liquidation
of the Company or sale or substantially all of the Company's assets (any of
which is a "Transaction") other than a Transaction immediately following
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which the shareholders of the Company and any trustee or fiduciary of any
Company employee benefit plan immediately prior to the Transaction own at
least 60% of the voting power, directly or indirectly, of the surviving
corporation following the Transaction; or
(iii) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
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shall cease (for any reason other than death) to constitute at least a
majority of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a director at the
beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect a Change in
Control or engage in a proxy or other control contest).
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company" means Imperial Credit Industries, Inc.
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"Confidential Information" means nonpublic information relating to the
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business plans, marketing plans, customers or employees of the Company or its
affiliates other than information the disclosure of which cannot reasonably be
expected to adversely affect the business of the Company or its affiliates.
"Good Reason" means any of the following actions, without Executive's
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express prior written approval, other than due to Executive's Permanent
Disability or death:
(i) Executive's base salary is reduced below the Base Salary;
(ii) Executive's annual Bonus is reduced below the Average Bonus;
(iii) Executive's duties, titles or responsibilities are diminished in
comparison to the duties, titles and responsibilities enjoyed by Executive
immediately prior to the Change in Control;
(iv) the incentive compensation programs, welfare plans and pension plans
offered to Executive are materially diminished in comparison to the
incentive compensation
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programs, welfare plans and pension plans enjoyed by Executive immediately
prior to the Change in Control.
(v) the relocation of Executive's principal place of business to a
location more than 15 miles from where Executive was based immediately
prior to the Change in Control; or
(vi) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 11 of this Agreement.
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstances constituting Good Reason hereunder.
"Permanent Disability" means Executive's inability, by reason of any
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physical or mental impairment, to substantially perform the significant aspects
of his regular duties which inability is reasonably contemplated to continue for
at least one year from its incurrence.
"Target Bonus" means the annual bonus payable to Executive for the year in
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which a Change in Control occurs, calculated on the assumption that Executive
and the Company or those entities or business units within the Company on whose
performance Executive's bonus depends achieve the applicable target performance
goals established under the applicable bonus plan with respect to that year. If
no target performance goals for the year in which the Change in Control occurs
have been set prior to the Change in Control, the Target Bonus shall be
determined by substituting, in the previous sentence, the prior year for the
year in which a Change in Control occurs, or the bonus amount accrued for that
Executive in the Company's approved annual budget applicable to that Executive,
whichever is higher.
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