Employment Agreement - IndyMac Mortgage Holdings Inc. and Carmella Grahn
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") has been executed as of January 1,
1998 by and between IndyMac Mortgage Holdings, Inc. ("Employer") and Carmella
Grahn ("Officer").
WITNESSETH:
WHEREAS, Employer desires to obtain the benefit of continued services of Officer
and Officer desires to continue to render services to Employer and its
affiliates.
WHEREAS, Employer and Officer desire to set forth the terms and conditions of
Officer's employment with Employer and its affiliates under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. TERM. Employer agrees to employ Officer and Officer agrees to serve Employer
and its affiliates, in accordance with the terms hereof, for a term beginning
on the date first written above and ending on December 31, 2000, unless
earlier terminated in accordance with the provisions hereof.
2. POSITION, DUTIES AND RESPONSIBILITIES. Employer and Officer hereby agree
that, subject to the provisions of this Agreement, Employer will employ
Officer and Officer will serve Employer, as a senior manager of either
IndyMac, Inc. ("IndyMac") or Employer, or a similarly structured entity in
which Employer owns the majority of the economic interest, as determined in
the sole discretion of Employer. Officer's role may, from time to time, be
redefined by Employer, except that Officer shall at all times remain a senior
manager. Employer agrees that Officer's duties hereunder shall be the usual
and customary duties of such office and such further duties shall not be
inconsistent with the provisions of applicable law. Officer agrees that
Employer may add to or change Officer's duties as business considerations
dictate, as determined by the President of Employer. Officer shall have such
official power and authority as shall reasonably be required to enable her to
discharge her duties in the offices which she may hold. All compensation
paid to Officer by Employer or any of its affiliates shall be aggregated in
determining whether Officer has received the benefits provided for herein,
but without prejudice to the allocation of costs among the entities to which
Officer renders services hereunder. If Employer requests Officer to relocate
outside of Los Angeles County, Ventura County or Orange County in connection
with the relocation of Employer's headquarters, Officer shall have the option
of agreeing to such relocation and the terms of this contract shall continue
in full force and effect. If Officer declines to relocate, either Officer or
Employer shall provide the other party with a Notice of Termination in
accordance with Section 5(f) and all of the rights and obligations of both
parties under this Agreement shall cease upon such termination and no
provisions shall survive (including, without limitation, Sections 5(d) and
8(k)), except for Section 8(g) and the right to enforce that provision
through injunctive relief pursuant to Section 8(h). If Employer requests
Officer to relocate outside of
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Los Angeles County, Ventura County or Orange County and Employer's
headquarters are not also relocating, Officer shall have the option of
agreeing to such relocation and the terms of this contract shall continue in
full force and effect. If Officer declines to relocate, Employer's request to
relocate shall be deemed a termination other than for Cause pursuant to
Section 5(d).
3. SCOPE OF THIS AGREEMENT AND OUTSIDE AFFILIATIONS. During the term of this
Agreement, Officer shall devote her full business time and energy, except as
expressly provided below, to the business, affairs and interests of Employer
and its affiliates, and matters related thereto, and shall use her best
efforts and abilities to promote their respective interests. Officer agrees
that she will diligently endeavor to promote the business, affairs and
interests of Employer and its affiliates and perform services contemplated
hereby, in accordance with the policies established by the Board of the
applicable entity, which policies shall be consistent with this Agreement.
Officer agrees to serve without additional remuneration as an officer of one
or more (direct or indirect) subsidiaries or affiliates of Employer as
Employer may from time to time request, subject to appropriate authorization
by the affiliate or subsidiary involved and any limitation under applicable
law.
During the course of Officer's employment as a full-time officer hereunder,
Officer shall not, without the consent of Employer, compete, directly or
indirectly, with Employer in the business then conducted by Employer or any
of its affiliates.
Officer may make and manage personal business investments of her choice and
serve in any capacity with any civic, educational or charitable organization,
or any governmental entity or trade association, without seeking or obtaining
approval by the Board, provided such activities and services do not
materially interfere or conflict with the performance of her duties
hereunder.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. Employer shall pay to Officer a base salary in respect of the
fiscal year of Employer (a "Fiscal Year") ending December 31, 1998 at the
annual rate as set forth on Appendix A (the "Annual Rate"). In respect of
the Fiscal Years ending in 1999 and 2000, the Compensation Committee of
the Board (the "Compensation Committee) may, based upon the recommendation
of Michael W. Perry and the performance of Officer and Employer, increase
the Annual Rate. While any such increase shall be at the discretion of the
Compensation Committee, it is anticipated that, for any Fiscal Year, a
performance rating of good would result in an increase in the Annual Rate
of between 5% and 15%. During the term of this Agreement, Employer may not
decrease the Annual Rate below the amount set forth in Appendix A unless
decreased by the same percentage for all officers at Officer's level.
b. INCENTIVE COMPENSATION. Employer shall pay to Officer for each of the
Fiscal Years ending during the term of this Agreement an incentive
compensation award in an amount determined pursuant to the Annual
Incentive Plan attached hereto as Appendix A. The terms of the Annual
Incentive Plan shall be determined in the first quarter of each Fiscal
year during the term of this Contract, as mutually agreed upon by Employer
and Officer. The incentive compensation award payable to
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Officer for any Fiscal Year shall be paid no later than thirty (30) days
after completion and publication of the applicable audited financial
statements for such Fiscal Year.
c. STOCK OPTIONS. Beginning with the 1998 Fiscal Year and in respect of each
of the following Fiscal Years during the term of this Agreement, Employer
may grant to Officer stock options for such number of shares of Employer's
common stock as the Compensation Committee in its sole discretion
determines, taking into account Officer's and Employer's performance and
the competitive practices then prevailing regarding the granting of stock
options. Subject to the foregoing, it is anticipated that the number of
shares in respect of each annual stock option grant shall be in accordance
with the number of shares granted to officers of Employer at a level
similar to Officer's level. The stock options described in this Section
4(c) in respect of a Fiscal Year shall be granted at the same time as
Employer grants stock options to its other officers in respect of such
Fiscal Year.
All stock options granted in accordance with this Section 4(c): (i) shall
be granted pursuant to Employer's current stock option plan, or such other
stock option plan or plans as may be or come into effect during the term of
this Agreement, (ii) shall have a per share exercise price equal to the
fair market value (as defined in the current Plan or such other plan or
plans) of the common stock at the time of grant, (iii) shall become
exercisable in three equal installments on each of the first three
anniversaries of the date of grant, (iv) shall become immediately and fully
exercisable in the event of a Change in Control (as defined in Appendix B)
or in the event that Officer's employment is terminated due to death or
Disability or by Employer other than for Cause (as defined in Section
5(c)), and (v) shall be subject to such other reasonable and consistent
terms and conditions as may be determined by the Compensation Committee and
set forth in the agreement evidencing the award.
d. ADDITIONAL BENEFITS. Officer shall also be entitled to all rights and
benefits for which she is otherwise eligible 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, or other plans or benefits, which Employer or its
subsidiaries may provide for her, or provided she is eligible to
participate therein, for senior officers generally or for employees
generally, during the term of this Agreement (collectively, "Additional
Benefits"). Officer shall also be entitled to three (3) weeks of vacation
each Fiscal Year, subject to all applicable policies of Employer relating
to vacation time. This Agreement shall not affect the provision of any
other compensation, retirement or other benefit program or plan of
Employer. If Officer's employment is terminated hereunder, pursuant to
Section 5(a), 5(b) or 5(d), Employer shall continue for the period
specified in Section 5(a), 5(b) or 5(d) hereof, to provide benefits
substantially equivalent to Additional Benefits (other than qualified
pension or profit sharing plan benefits and option, equity or stock
appreciation or other incentive plan benefits as distinguished from health,
disability and welfare type benefits) on behalf of Officer and her
dependents and beneficiaries which were being provided to them immediately
prior to Officer's Termination Date, but only to the extent that Officer is
not entitled to comparable benefits from other employment.
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5. TERMINATION. The compensation and benefits provided for herein and the
employment of Officer by Employer shall be terminated only as provided for
below in this Section 5:
a. DISABILITY. In the event that Officer shall fail, because of illness,
injury or similar incapacity ("Disability"), to render for four (4)
consecutive calendar months, or for shorter periods aggregating eighty
(80) or more business days in any twelve (12) month period, services
contemplated by this Agreement, Officer's full-time employment hereunder
may be terminated, by written Notice of Termination from Employer to
Officer; and thereafter, Employer shall continue, from the Termination
Date until Officer's death or December 31, 2000, whichever first occurs
(the "Disability Payment Period"), (i) to pay compensation to Officer, in
the same manner as in effect immediately prior to the Termination Date, in
an amount equal to (1) fifty percent (50%) of the then existing base
salary payable immediately prior to the termination, minus (2) the amount
of any cash payments due to her under the terms of Employer's disability
insurance or other disability benefit plans or Employer's tax-qualified
Defined Benefit Pension Plan, and any compensation she may receive
pursuant to any other employment, and (ii) to provide during the
Disability Payment Period the additional benefits specified in the last
sentence of Section 4(d) hereof.
The determination of Disability shall be made only after 30 days' notice
to Officer and only if Officer has not returned to performance of her
duties during such 30-day period. In order to determine Disability, both
Employer and Officer 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 members of Employer's Benefits
Committee.
b. DEATH. In the event that Officer shall die during the term of this
Agreement, Employer shall pay Officer's base salary for a period of twelve
(12) months following the date of Officer's death and in the manner
otherwise payable hereunder, to such person or persons as Officer shall
have directed in writing or, in the absence of a designation, to her
estate (the "Beneficiary"). Employer shall also (1) pay to such
Beneficiary (x) an amount equal to the incentive compensation that would
have been payable to Officer pursuant to Section 4(b) in respect of the
Fiscal Year in which the Officer's death occurs multiplied by a fraction,
the numerator of which is the number of days in such Fiscal Year through
the date of Officer's death and the denominator of which is 365 and (y)
any unpaid incentive compensation payable to Officer pursuant to Section
4(b) in respect of the Fiscal Year immediately preceding the Fiscal Year
in which her death occurs and (2) provide during the twelve-month period
following the date of Officer's death the additional benefits specified in
the last sentence of Section 4(d) hereof. If Officer's death occurs while
she is receiving payments for Disability under Section 5(a) above, such
payments shall cease and the Beneficiary shall be entitled to the payments
and benefits under this Section 5(b), which shall continue for a period of
twelve months thereafter at the full rate of base salary in effect
immediately prior to the Disability. This Agreement in all other respects
will terminate upon the death of Officer; provided, however, that (i) the
termination of the Agreement shall not affect Officer's entitlement to all
other benefits in which she has become vested or which are otherwise
payable in respect of periods ending prior to its termination, and (ii) to
the extent not otherwise vested, all outstanding stock options granted to
Officer pursuant to Section 4(c) will vest upon her death.
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c. CAUSE. Employer may terminate Officer'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 Officer (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 Employer and which is not remedied within a reasonable period
of time after receipt of written notice from Employer specifying such
breach, or (ii) Officer's conviction by a court of competent jurisdiction
of a felony or misdemeanor carrying a jail term, or (ii) entry of an order
duly issued by any federal or state regulatory agency having jurisdiction
in the matter removing Officer from office of Employer or its affiliates or
permanently prohibiting her from participation in the conduct of the
affairs of Employer of any of its affiliates. If Officer shall be
convicted of a felony or misdemeanor carrying a jail term, or shall be
removed from office and/or temporarily prohibited from participating in the
conduct of Employer's or any of its affiliates' affairs by any federal or
state regulatory authority having jurisdiction in the matter, Employer'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 Officer, or if the
conviction is overturned on appeal, then Officer 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 Employer's obligations
under Sections 4(a), 4(b), and 4(c) hereof are suspended, Officer shall
continue to be entitled to receive Additional Benefits under Section 4(d)
until the conviction of the felony, or misdemeanor carrying a jail term,
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 Employer's obligations hereunder shall terminate;
provided, however, that the termination of Officer's employment pursuant to
this Section 5(c) shall not affect Officer's entitlement to all benefits in
which she has become vested or which are otherwise payable in respect of
periods ending prior to her termination of employment.
d. SEVERANCE.
(i) Except as provided in Section 5(d)(ii) below, if during the term of this
Agreement, Officer's employment shall be terminated by Employer other than
for Cause, or by Officer because Employer has committed a "Material Breach"
of this Agreement, then Employer shall (1) pay Officer in a single payment
as soon as practicable after the Termination Date, but in no event later
than thirty (30) days thereafter, (A) an amount in cash equal to six months
of Officer's base salary at the Annual Rate at the Termination Date and (B)
an amount equal to one-half the incentive compensation paid or payable to
Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
preceding the Fiscal Year in which Officer's Termination Date occurs (the
"Bonus Rate"); provided, however, that in the event the first anniversary
of the Termination Date occurs on a date prior to the end of a Fiscal Year,
Employer shall also pay Officer an amount equal to the product of (x) the
Bonus Rate and (y) a fraction, the numerator of which is (I) the number of
days elapsed since the end of the immediately preceding Fiscal Year through
the end of the Severance Period and (II) the denominator of which is 365,
and (2) until the first anniversary of the Termination Date, provide the
benefits specified in the last sentence of Section 4(d) hereof. Employer
shall also pay in a single payment as soon as practicable after the
Termination Date, but in no event later than thirty (30) days thereafter,
any unpaid incentive compensation payable to Officer pursuant to Section
4(b) in respect of the
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Fiscal Year immediately preceding the Fiscal Year in which Officer's
Termination Date occurs, as calculated pursuant to the terms and
conditions of this Agreement, including, but not limited to, the terms of
Appendix A. For the purpose of this provision, the term "Material Breach"
shall mean a material breach of this Agreement by Employer which is
committed in bad faith and which is not remedied within a reasonable
period of time after receipt of written notice from Officer specifying
such breach.
(ii) If within two (2) years after a "Change in Control" (as defined in
Appendix B to this Agreement) and during the term of this Agreement,
Officer's employment shall be terminated by Employer other than for Cause
or by Officer for Good Reason, then (A) Employer shall pay Officer in a
single payment as soon as practicable after the Termination Date, but in
no event later than thirty (30) days thereafter, (x) 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 one-half
times the sum of (1) Officer's base salary at the Annual Rate at the
Termination Date and (2) the incentive compensation paid or payable to
Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
preceding the Fiscal Year in which Officer's Termination Date occurs and
(y) any unpaid incentive compensation payable to Officer pursuant to
Section 4(b) in respect of the Fiscal Year immediately preceding the
Fiscal Year in which Officer's Termination Date occurs, and (B) Employer
shall continue to provide for six months from the Termination Date the
benefits specified in the last sentence of Section 4(d) hereof.
(iii) For purposes of this Agreement, "Good Reason" shall be deemed to occur if
Employer (x) commits a Material Breach of this Agreement (as defined in
Section 5(d)(i)) or (y) takes any other action which results in the
substantial diminution in Officer's status, title, position, authority and
responsibilities.
(iv) Notwithstanding anything in this Agreement to the contrary, in the event
it shall be determined that any payment or distribution by Employer or any
other person or entity to or for the benefit of Officer (within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in
connection with, or arising out of, her employment with Employer or a
change in ownership or effective control of Employer or a substantial
portion of its assets (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), the Payments shall
be reduced (but not below zero) to the extent necessary so that no Excise
Tax would be imposed. If the application of the preceding sentence should
require a reduction in Payments or other "parachute payment" (within the
meaning of Section 280G of the Code), unless Officer shall have designated
otherwise, such reduction shall be implemented, first, by reducing any
non-cash benefits (other than stock options) to the extent necessary,
second, by reducing any cash benefits to the extent necessary and, third,
by reducing any stock options to the extent necessary. In each case, the
reductions shall be made starting with the payment or benefit to be made
on the latest date following the Termination Date and reducing payments or
benefits in reverse chronological order therefrom. All determinations
concerning the application of this paragraph shall be made by a nationally
recognized firm of independent accountants, selected by Officer and
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satisfactory to Employer, whose determination shall be conclusive and
binding on all parties. The fees and expenses of such accountants shall
be borne by Employer.
e. RESIGNATION. If during the term of this Agreement, Officer shall resign
voluntarily, all of her rights to payment or benefits hereunder shall
immediately terminate; provided, however, that the termination of Officer's
employment pursuant to this Section 5(e) shall not affect Officer's
entitlement to all benefits in which she has become vested or which are
otherwise payable in respect of periods ending prior to her termination of
employment, and all obligations of Officer under Sections 8(g) and 8(k)
shall expressly survive such termination.
f. NOTICE OF TERMINATION. Any purported termination by Employer or by Officer
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 Officer's employment under the provision so indicated
(except in the event of Officer's death or physical incapacity, in which
case such written Notice of Termination shall be provided by Officer's
executor or legal representative). For purposes of this Agreement, no such
purported termination shall be effective without such Notice of
Termination. The "Termination Date" shall mean the date specified in the
Notice of Termination, which shall be no less than 30 or more than 60 days
from the date of the Notice of Termination. Notwithstanding any other
provision of this Agreement, in the event of any termination of Officer's
employment hereunder for any reason, Employer shall pay Officer her full
base salary through the Termination Date, plus any Additional Benefits
which have been earned or become payable, but which have not yet been paid,
as of such Termination Date.
6. REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Agreement,
Employer shall reimburse Officer promptly for all business expenditures to
the extent that such expenditures meet the requirements of the Code for
deductibility by Employer for federal income tax purposes or are otherwise in
compliance with the rules and policies of Employer and are substantiated by
Officer as required by the Internal Revenue Service and rules and policies of
Employer.
7. INDEMNITY. To the extent permitted by applicable law, the Certificate of
Incorporation and the By-Laws of Employer (as from time to time in effect)
and any indemnity agreements entered into from time to time between Employer
and Officer, Employer shall defend and indemnify Officer and hold her
harmless for any acts or decisions made by her in good faith while performing
services for Employer (including any subsidiary or affiliate of Employer),
and shall use reasonable efforts to obtain coverage for her under liability
insurance policies now in force or hereafter obtained during the term of this
Agreement covering the other officers or directors of Employer.
8. MISCELLANEOUS.
a. SUCCESSION. This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns, but without the prior
written consent of Officer, this Agreement may not be assigned other than
in connection with a merger or sale of substantially all the assets of
Employer or similar transaction. Notwithstanding the foregoing, Employer
may assign, whether by assignment agreement, merger, operation of law or
otherwise, this Agreement to Employer or
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IndyMac, or to any successor or affiliate of either of them, subject to
such assignee's express assumption of all obligations of Employer
hereunder, and Officer hereby consents to any such assignment. The failure
of any successor to or assignee of the Employer's business and/or assets in
such transaction to expressly assume all obligations of Employer hereunder
shall be deemed a material breach of this Agreement by Employer, triggering
the severance provision of Section 5(d).
The obligations and duties of Officer hereby shall be personal and not
assignable.
b. NOTICES. Any notices provided for in this Agreement shall be sent to
Employer at its corporate headquarters, Attention: Chief Administrative
Officer, with a copy to the Director of Human Resources at the same
address, or to such other address as Employer may from time to time in
writing designate, and to Officer at such address as she may from time to
time in writing designate (or her business address of record in the absence
of such designation). 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. This instrument contains the entire agreement of the
parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said
subject matter. No modifications or amendments of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
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 the 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 reference to its conflicts
of laws principles.
f. ATTORNEYS' FEES IN ACTION ON CONTRACT. If any litigation shall occur
between the Officer and Employer, 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
prevailing party in such litigation, in addition to any other judgment or
award, shall be entitled to receive such sums as the court hearing the
matter shall find to be reasonable as and for the attorneys' fees of the
prevailing party.
g. CONFIDENTIALITY. Officer hereby acknowledges and agrees that Employer and
its affiliates have developed and own valuable information related to their
business, personnel and customers, including, but not limited to, concepts,
ideas, customer lists, business lists, business and strategic plans,
financial data, accounting procedures, secondary marketing and hedging
models, trade secrets, computer programs and plans, and information related
to officers, directors, employees and agents. Officer hereby agrees that
all such information, and all codes, concepts, copies and forms relating to
such information, Employer's plans and intentions with respect thereto, and
any information provided by Employer or its affiliates to Officer with
respect to any of the foregoing, shall be considered "Confidential
Information" for the purpose of this Agreement. Officer acknowledges and
agrees that all such Confidential Information is a valuable asset of
Employer, and
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if developed by Officer, is developed by Officer in the course of Officer's
employment with Employer, and is the sole property of Employer. Officer
agrees that she will not divulge or otherwise disclose, directly or
indirectly, any Confidential Information concerning the business or
policies of Employer or any of its affiliates which she may have learned as
a result of her employment during the term of this Agreement or prior
thereto as an employee, officer or director of or consultant to Employer or
any of its affiliates, except to the extent such use or disclosure is (i)
necessary or appropriate to the performance of this Agreement and in
furtherance of Employer's best interests, (ii) required by applicable law
or in response to a lawful inquiry from a governmental or regulatory
authority, (iii) lawfully obtainable from other sources, or (iv) authorized
by Employer. The provisions of this subsection shall survive the
expiration, suspension or termination, for any reason, of this Agreement.
h. REMEDIES OF EMPLOYER. Officer acknowledges that the services she 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 Employer. 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, Officer agrees and consents that if she
violates any of the material provisions of this Agreement, Employer, 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 to
seek injunctive relief, from a tribunal of competent jurisdiction,
restraining Officer from committing or continuing any violation of this
Agreement. The provisions of this subsection shall survive the
expiration, suspension or termination, for any reason, of this Agreement.
i. 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.
j. NO OBLIGATION TO MITIGATE. Officer 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 5(a)(i)(2)
hereof, no payment hereunder shall be offset or reduced by the amount of
any compensation or benefits provided to Officer in any subsequent
employment.
k. COVENANT NOT TO COMPETE
(i) IN GENERAL. Officer agrees that while she is employed by Employer
during the term of this Agreement and for a period of six months after
the termination of such employment for whatever reason other than (x)
any termination by Employer, either for Cause or other than for Cause
or (y) the expiration of this Agreement according to its terms (the
"Non-Compete Period"), she shall not, unless Officer shall have
received the prior written consent of Employer within North America:
(A) engage in any business, whether as an employee, consultant,
partner, principal, agent, representative or stockholder (other
than as a stockholder of less than a one percent (1%)
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equity interest) or in any other corporate or representative capacity
with any other business whether in corporate, proprietorship, or
partnership form or otherwise, where such business is engaged in any
activity which competes with the business of Employer (or its
subsidiaries or affiliates, excluding Countrywide Credit Industries
and its subsidiaries, other than IndyMac) as conducted on the date
Officer's employment terminated or which will compete with any
proposed business activity of Employer (or its subsidiaries or
affiliates) in the planning stage on such date;
(B) solicit business from, or perform services for, any company or other
business entity which at any time during the two-year period
immediately preceding Officer's termination of employment with
Employer was a client of Employer (or its subsidiaries or affiliates)
(including without limitation any lessee, vendor or supplier);
provided that Officer may solicit business from another company or
business entity during such time as Officer is employed by Employer
(and prior to a Notice of Termination being provided pursuant to
Section 5(f)), so long as such solicitation is solely for the
intended benefit of Employer and carried out in the ordinary course
of the performance of Officer's duties; or
(C) offer, or cause to be offered, employment, either on a full-time,
part-time or consulting basis, to any person who was employed by
Employer (or its subsidiaries or affiliates) on the date Officer's
employment terminated.
(ii) CONSIDERATION. The consideration for the foregoing covenant not to
compete, the sufficiency of which is hereby acknowledged, is
Employer's agreement to continue to employ Officer and provide
compensation and benefits pursuant to this Agreement, including but
not limited to Section 5(d).
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(iii) EQUITABLE RELIEF AND OTHER REMEDIES. Officer acknowledges and agrees
that Employer's remedies at law for a breach or threatened breach of any
of the provisions of this Section would be inadequate and, in
recognition of this fact, Officer agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law,
Employer, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available.
(iv) REFORMATION. If the foregoing covenant not to compete would otherwise be
determined invalid or unenforceable by a court of competent
jurisdiction, such court shall exercise its discretion in reforming the
provisions of this Section to the end that Officer be subject to a
covenant not to compete, reasonable under the circumstances, enforceable
by Employer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYER
By: /s/ Michael W. Perry
---------------------
Name: Michael W. Perry
Title: President and Chief Operating Officer
Officer:
/s/ Carmella L. Grahn
---------------------
in her individual capacity
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APPENDIX A
ANNUAL INCENTIVE PLAN
Annual Base Rate for 1998: $189,750
Target Bonus for 1998: $155,000 Maximum Bonus for 1998: $173,988
Annual Incentive Award:
----------------------
Officer shall be eligible for an Annual Incentive Award which shall be
comprised of the following five components and their corresponding weightings:
1. Specific Objectives (45%)
2. Cost Control Goals (25%)
3. Earnings Per Share Growth (10%)
4. Survey Results of internal customers (10%)
5. Discretionary/Subjective (10%)
These components shall be measured as follows:
1. OBJECTIVES FOR 1998 (45%):
-------------------------
Target Incentive Performance Percentage:
Goal Amount Excellent Good Satisfactory Poor
I. EXTERNAL FINANCIAL REPORTING $27,900 110% 100% 50% 0%
A. Timeliness (33%)
B. Accuracy (33%)
C. No surprises (33%)
II. INTERNAL FINANCIAL REPORTING $10,463 110% 100% 50% 0%
A. Timeliness (25%)
B. Accuracy (25%)
C. Completeness (25%)
D. Senior Mgr Evaluation (25%)
III. FINANCIAL PLANNING $ 6,975 110% 100% 50% 0%
Timeliness (25%)
Accuracy (25%)
Completeness (25%)
Senior Mgr Evaluation (25%)
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Target Incentive Performance Percentage:
Goal Amount Excellent Good Satisfactory Poor
IV. FINANCIAL SYSTEMS $ 6,975 110% 100% 50% 0%
A. Strong Team (50%)
B. Robust Use of PeopleSoft (50%)
V. GENERAL MANAGEMENT & ORGANIZATION $17,437 110% 100% 50% 0%
A. Organization Chart (33%)
B. Competent Leaders (33%)
C. Minimize turnover in 4 and 3 rated
employees, and shall have a minimum of
50% turnover in 2 rated employees, and
100% turnover in 1 rated employees.
Turnover includes an employee leaving
the company or being reclassified due
to either improved or decreased
performance (33%)
Total incentive amount: $69,750
(max. $76,725)
The Incentive Award for Objectives for Officer shall be calculated by (1)
multiplying (x) the Performance Percentage for each Objective times (y) the
-----
Target Incentive Amount for such Objective, and (2) adding all sums determined
pursuant to the preceding clause (1) for each Objective. The Target Incentive
Award for Objectives for Officer for 1998 shall be $69,750 and the Maximum shall
be $76,725.
The Target Incentive Award for Objectives for Officer for 1999 shall be $80,213
and for 2000 shall be $92,245. The Objectives for 1999 and 2000 and the
Incentive Award amount applicable to each goal or objective shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer.
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2. COST CONTROL GOALS (25%):
------------------------
Attached hereto as Exhibit A, is the Financial Plan for 1998 for Officer's areas
of responsibilities. The Financial Plans for 1999 and 2000 shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer. FOR 1998 ONLY, EVALUATION OF COST CONTROL SHALL BE
SUBJECT TO THE DISCRETION OF THE PRESIDENT OF EMPLOYER.
----------------------------------------------------------------------------------------------------------------------
Department Target Incentive Amount Performance Percentage:
125% 110% 100% 90% 80% less than 80%
----------------------------------------------------------------------------------------------------------------------
Cost Control for the Company $29,063 125% 110% 100% 80% 70% 0%
(75%)
----------------------------------------------------------------------------------------------------------------------
Cost Control for Accounting/FPA $ 9,687 125% 110% 100% 80% 70% 0%
(25%)
----------------------------------------------------------------------------------------------------------------------
Total $38,750
(max. $48,438)
----------------------------------------------------------------------------------------------------------------------
The Target Incentive Award for Cost Control Goals for Officer shall be
calculated by (1) multiplying (x) the Performance Percentage for each Department
times (y) the Target Incentive Amount for such Department, and (2) adding all
-----
sums determined pursuant to the preceding clause (1) for each Department. The
Target Incentive Award for Cost Control Goals for Officer for 1998 shall be
$38,750 and the Maximum shall be $48,438. The Performance Percentage for Cost
Control Goals shall be calculated based on controllable variances between budget
and actual as calculated by FPA and President. Variances will be evaluated on a
line item basis and in total for the Department. In instances whereby Officer
is responsible for multiple departments, the Target Incentive Award shall be
prorated based on the relative size of the budget as indicated in Exhibit A.
The Target Incentive Award for Cost Control Goals for Officer for 1999 shall be
$44,563 and for 2000 shall be $51,247. The Cost Control Goals for 1999 and 2000
and the Incentive Award amount applicable to each goal shall be determined by
January 15 of each respective Fiscal Year, as mutually agreed upon by Employer
and Officer.
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3. EARNINGS PER SHARE GROWTH (10%):
-------------------------------
1998 1999 2000
------- ------- -------
-------------------------------------------------------------------------------------------------------
Earnings Per Share Target $ 2.10 TBD TBD
-------------------------------------------------------------------------------------------------------
Target Incentive Award $15,500 $17,825 $20,499
-------------------------------------------------------------------------------------------------------
Maximum Incentive Award $17,825 $20,499 $23,574
-------------------------------------------------------------------------------------------------------
If Earnings Per Share $596 for each $.01 in $TBD for each $.01 in $TBD for each $.01 in
exceed target, incentive excess of target excess of target excess of target
award shall be increased earnings per share, earnings per share, earnings per share,
by: subject to Maximum subject to Maximum subject to Maximum
-------------------------------------------------------------------------------------------------------
If Earnings Per Share do $1,192 for each $.01 $TBD for each $.01 $TBD for each $.01
not meet target, incentive below target earnings below target earnings below target earnings
award shall be decreased per share per share per share
by:
-------------------------------------------------------------------------------------------------------
4. SURVEY RESULTS OF INTERNAL CUSTOMERS (10%):
------------------------------------------
The Human Resources Department will conduct a customer service survey of the
various internal customers of Officer's areas of responsibilities, on or before
November 1st of each year. The Officer's bonus eligibility for this portion of
the Annual Incentive Compensation shall be determined as follows:
--------------------------------------------------------------------
Overall Average Survey Result % of 10% Portion of Target
Bonus Award
--------------------------------------------------------------------
Excellent 100%
--------------------------------------------------------------------
Good 75%
--------------------------------------------------------------------
Satisfactory 50%
--------------------------------------------------------------------
Needs Improvement 0%
--------------------------------------------------------------------
The maximum Survey Incentive Award that Officer shall be eligible for is as
follows:
1998: up to $15,500
1999: up to $17,825
2000: up to $20,499
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5. DISCRETIONARY/SUBJECTIVE (10%):
------------------------------
Officer shall be eligible for an additional Discretionary/Subjective Incentive
Award. Whether a Discretionary/Subjective Incentive Award shall be granted and
the amount of any such award shall be determined by the President of Employer,
in his sole and absolute discretion. Factors which will be included in the
determination of a Discretionary/Subjective Incentive Award shall be Officer's
management skills, ability to be a corporate team player and such other factors
as shall be determined by the President of Employer, in his sole and absolute
discretion. The fact that a Discretionary/Subjective Incentive Award is granted
in any year is no indication whether any such award will be granted in following
years. The maximum Discretionary/Subjective Incentive Award that Officer shall
be eligible for is as follows:
1998: up to $15,500
1999: up to $17,825
2000: up to $20,499
6. COST CONTROL AND EPS DISCOUNT FACTORS
-------------------------------------
% of Cost Control Bonus to be Paid Cost Control Discount Factor
---------------------------------- ----------------------------
greater than 70% 100%
less than 70% 0%
% of EPS Target Met EPS Discount Factor
------------------- -------------------
greater than 90% 100%
80% - 89% 90%
70% - 79% 70%
less than 70% 0%
7. TOTAL ANNUAL INCENTIVE AWARD
----------------------------
The total Annual Incentive Award shall be calculated by multiplying (x) the sum
of the amounts determined pursuant to Paragraphs 1, 2, 3, 4 and 5 above times
(y) the Cost Control Discount Factor determined pursuant to Paragraph 6 above
and if this amount is greater than 0, then multiplying such amount times the EPS
Discount Factor.
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APPENDIX B
A "Change in Control" shall mean the occurrence during the term of the
Agreement, of any one of the following events:
A. An acquisition (other than directly from Employer) of any common stock or
other "Voting Securities" (as hereinafter defined) of Employer 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 Employer's common
stock or the combined voting power of Employer'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 Employer'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) Employer 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 Employer (for purposes of this definition, a "Subsidiary"),
(ii) Employer or any of its Subsidiaries, (iii) any Person in connection
with a "Non-Control Transaction" (as hereinafter defined) or (iv)
Countrywide Credit Industries, Inc. or any of its affiliates or
subsidiaries ("Countrywide Credit").
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 Employer'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 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
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C. The consummation of:
(i) A merger, consolidation or reorganization involving Employer, unless
such merger, consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction shall mean a merger,
consolidation or reorganization of Employer into, with or involving
Countrywide Credit, NDE or where:
a. the stockholders of Employer, 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) Employer, (ii) any Subsidiary, (iii)
any employee benefit plan (or any trust forming a part
thereof) maintained by the Employer, the Surviving
Corporation, or any Subsidiary, (iv) Countrywide Credit, or
(v) any Person who, immediately prior to such merger,
consolidation or reorganization had 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, owns directly or indirectly
more than 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 or Employer; or
(iii) The sale or other disposition of all or substantially all of
the assets of Employer to any Person (other than a transfer to
a Subsidiary of Countrywide Credit).
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Notwithstanding the foregoing, a Change of 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 Employer 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 Person; provided, however, that if a Change of
Control would occur (but for the operation of this sentence) as a result of the
acquisition of common stock or Voting Securities by Employer, and after such
share acquisition by Employer, 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.
19