Employment Agreement - Angelo R. Mozilo

 

 

                              EMPLOYMENT AGREEMENT

 

 

        THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is entered into this 2nd day

of September, 2004 by and between Countrywide Financial Corporation, a Delaware

corporation (the "COMPANY"), and Angelo R. Mozilo ("EXECUTIVE").

 

                                   WITNESSETH:

 

        WHEREAS, Executive currently holds the offices of Chairman of the Board

of Directors and Chief Executive Officer of the Company;

 

        WHEREAS, the Company and Executive have set forth the terms and

conditions of Executive's current employment with the Company under an

employment agreement entered into as of March 1, 2001 (the "CURRENT EMPLOYMENT

AGREEMENT");

 

        WHEREAS, under the terms of the Current Employment Agreement,

Executive's employment as an employee and officer of the Company will terminate

on February 28, 2006;

 

        WHEREAS, under the terms of the Current Employment Agreement, on March

1, 2006, Executive will become a consultant to the Company for a period of five

years, in accordance with the terms of the form of Consulting Agreement attached

to the Current Employment Agreement as Appendix B (the "CONSULTING AGREEMENT");

 

        WHEREAS, the Board of Directors of the Company (the "BOARD") has

determined that it is in the Company's best interest and that of its

stockholders to extend Executive's employment as Chief Executive Officer and

Chairman of the Board of Directors of the Company ("CHAIRMAN OF THE BOARD" or

"CHAIR") until December 31, 2006 and thereafter to have Executive serve as

Chairman of the Board until December 31, 2011;

 

        WHEREAS, the Company and Executive desire to waive the provisions of the

Consulting Agreement for so long as Executive continues to serve the Company as

Chairman of the Board as set forth in this Agreement;

 

        WHEREAS, the Company and Executive desire to set forth the continued

terms and conditions of Executive's relationship with the Company for the period

from March 1, 2006 to December 31, 2011 under this Agreement; and

 

        WHEREAS, the Company and Executive have determined that the interests of

the Company and Executive are best advanced by executing this Agreement as of

the date first written above to memorialize their agreement to continue a

relationship to December 31, 2011, while deferring to a later date their

agreement as to the provisions that will govern the terms of any period he

serves as Chairman of the Board while he is an employee of the Company after he

ceases to be the Company's Chief Executive Officer.

 

        NOW, THEREFORE, in consideration of the mutual promises and covenant

herein contained, the parties hereto agree as follows:

 

 

 

                                     - 1 -

<PAGE>

        1. Effective Date. This Agreement shall be binding on the parties

immediately but the provisions hereof shall govern the parties' relationship

beginning effective March 1, 2006 (the "EFFECTIVE DATE") provided that Executive

is employed by the Company under his Current Employment Agreement on February

28, 2006.

 

        2. Term.

 

               (a) The Company agrees to employ Executive and Executive agrees

to serve the Company, in accordance with the terms hereof beginning on March 1,

2006, continuing until December 31, 2006 (the "TRANSITION DATE") and, subject to

mutual agreement of the Compensation Committee of the Board (the "COMMITTEE")

and Executive, continuing until December 31, 2011 (the "EXPIRATION DATE"),

unless earlier terminated in accordance with the provisions hereof (the

"EMPLOYMENT TERMINATION DATE"). From and after the Employment Termination Date,

Executive shall cease to be an employee of the Company and all of its

subsidiaries. In the event that a mutual agreement between the Committee and

Executive is not reached as to Executive's employment as Chairman of the Board

prior to September 30, 2006, as provided in Section 7(a) hereof, Executive shall

cease to be an employee of the Company on December 31, 2006, but may continue as

the non-employee Chair beginning January 1, 2007 as set forth in Section 8

hereof.

 

               (b) The period from March 1, 2006 to December 31, 2006 shall be

referred to herein as the "CEO TERM." Executive shall be named and shall serve

as Chairman of the Board during any period when he is serving as a director

during the term of this Agreement. The parties intend that Executive will

continue to be employed by the Company as Chair after the Transition Date

pursuant to Section 7 hereof for at least one year, subject to reaching

agreement as provided in Section 7(a) hereof. If Executive does continue to be

so employed and is then serving as Chairman of the Board, the term "EMPLOYEE

CHAIR TERM" shall mean the period beginning on January 1, 2007 and ending on the

earliest of (i) the date on which Executive ceases to be an employee of the

Company, (ii) the date on which Executive ceases to serve as the Chairman of the

Board or (iii) the Expiration Date.

 

               (c) The parties intend that Executive shall continue to serve as

Chairman of the Board until December 31, 2011 and that he shall serve as a

non-employee Chair during any period that he is a director and not serving as an

employee Chair. Provided Executive is then serving as Chairman of the Board, the

term "NON-EMPLOYEE CHAIR TERM" shall mean the period beginning on the later of

January 1, 2007 or the date Executive ceases to be an employee of the Company

pursuant to Section 7 hereof and ending on the earlier of the date on which

Executive ceases to serve as the Chairman of the Board or the Expiration Date.

 

        3. The CEO Term: Duties and Responsibilities and Outside Affiliates.

 

               (a) Specific Position; Duties and Responsibilities. The Company

and Executive hereby agree that, subject to the provisions of this Agreement,

the Company will employ Executive and Executive will serve the Company and its

subsidiaries as Chairman of the Board and Chief Executive Officer of the Company

during the CEO Term. The Company agrees that Executive's duties hereunder shall

be the usual and customary duties of the offices of Chairman of the Board and

Chief Executive Officer and such further duties consistent therewith

 

 

 

                                     - 2 -

<PAGE>

as may be designated from time to time by the Board and shall not be

inconsistent with the provisions of the charter documents of the Company or

applicable law. Executive shall have such executive power and authority as shall

reasonably be required to enable him to discharge his duties in the offices that

he may hold. All compensation paid to Executive by the Company or any of its

subsidiaries shall be aggregated in determining whether Executive has received

the benefits provided for herein.

 

               (b) Scope of this Agreement and Outside Affiliations.

 

                      (i) During the CEO Term, Executive shall devote his full

business time and energy, except as expressly provided below, to the business,

affairs and interests of the Company and its subsidiaries, and matters related

thereto. Executive agrees that he will endeavor to promote the business, affairs

and interests of the Company and its subsidiaries and perform services

contemplated hereby in accordance with the policies established by Board, which

policies shall be consistent with this Agreement. Executive agrees to serve in

the capacity of chief executive officer for one or more (direct or indirect)

subsidiaries of the Company as the Board may from time to time request, subject

to appropriate authorization by the subsidiary or subsidiaries involved and any

limitation under applicable law. Executive agrees that the remuneration provided

for in Sections 4 and 5 shall be in full satisfaction of any and all of the

services contemplated to be provided by Executive during the CEO Term including,

without limitation, those described in the preceding sentence. Executive's

failure to discharge an order or perform a function because Executive reasonably

and in good faith believes such would violate a law or regulation or be

dishonest shall not be deemed a breach by him of his obligations or duties

pursuant to any of the provisions of this Agreement, including without

limitation pursuant to Section 6(d) hereof.

 

                      (ii) During the CEO Term, Executive shall not, without the

consent of the Board, compete, directly or indirectly, with the Company in the

businesses then conducted by the Company.

 

                      (iii) Executive may serve as a director or in any other

capacity of any business enterprise, including an enterprise whose activities

may involve or relate to the business of the Company, provided that such service

is expressly approved by the Board. Executive may, without seeking or obtaining

approval by the Board, (i) make and manage personal business investments of his

choice and (ii) serve in any capacity with any civic, educational or charitable

organization, or any governmental entity or trade association.

 

        4. CEO Term: Compensation and Benefits.

 

               (a) Base Salary. During the CEO Term, the Company shall pay to

Executive a base salary at the annual rate of $2,900,000.

 

               (b) Incentive Compensation.

 

                      (i) The Company shall pay to Executive an incentive

compensation award for the CEO Term in an amount that is equal to ten-twelfths

(10/12) of the amount of the incentive compensation award paid to Executive for

the Company's 2005 fiscal year, multiplied by a fraction (the "PERFORMANCE

RATIO"), the numerator of which is the Company's EPS (as

 

 

 

                                     - 3 -

<PAGE>

defined below) for its 2006 fiscal year and the denominator of which is the

Company's EPS for its 2005 fiscal year; provided however, that the Committee may

adjust the amount of any incentive compensation award in the event there is a

substantial distortion in EPS for the 2006 fiscal year resulting from an

acquisition, a divestiture, or a change in accounting standards.

 

                      (ii) No incentive compensation award shall be payable

hereunder for the CEO Term if the Company's EPS for the 2006 fiscal year equals,

or is less than, zero. If no incentive compensation award is payable to

Executive for the Company's 2005 fiscal year under the terms of his Current

Employment Agreement, then, for purposes of calculating Executive's incentive

award for the CEO Term, the Company shall use the incentive compensation award

paid to Executive for the 2004 fiscal year and the Company's EPS for its 2004

fiscal year. If no incentive compensation award is paid to Executive for the

2004 fiscal year, then the Company shall use the incentive award paid to

Executive for the 2003 fiscal year and its EPS for the 2003 fiscal year for

purposes of calculating the incentive compensation award for the CEO Term.

 

                      (iii) The Company shall pay the incentive compensation

award (if any) described above in accordance with Section 4(f) hereof. In the

event that Executive's employment hereunder shall terminate, other than (a)

pursuant to Section 6(d) below or (b) by reason of Executive's resignation

without Good Reason, on or before December 31, 2006, Executive or his estate

shall be entitled to receive an incentive compensation award for such portion of

the CEO Term during which Executive was employed under this Agreement on the

same terms as set forth in the foregoing provisions of this Section 4(b) except

that the amount payable hereunder shall be adjusted by multiplying it by a

fraction, the numerator of which is the number of days during the 2006 fiscal

year after February 28, 2006 that Executive was employed by the Company and the

denominator of which is 306.

 

                      (iv) "EPS" for any fiscal year of the Company for purposes

of the incentive compensation award shall mean the Company's earnings per share

on a diluted basis, as reported in the audited Financial Statements included in

the Company's Annual Report on Form 10-K filed with the Securities and Exchange

Commission for such fiscal year, as adjusted proportionately in the event that

the Company (A) declares a stock dividend on its common stock, (B) subdivides

its outstanding common stock, (C) combines the outstanding shares of its capital

stock into a smaller number of common stocks or (D) issues any shares of its

capital stock in a reclassification of the common stock (including any such

reclassification in connection with a consolidation or merger in which the

Company is the continuing or surviving corporation).

 

               (c) Stock Options or Other Equity Awards. In consideration of

Executive's continuation of employment through December 31, 2006, the Company

shall, effective April 1, 2007, grant to Executive a stock option with respect

to 1,166,667 shares of the Company's common stock (which shall be in addition to

the grant to be made on April 1, 2006 under the Current Employment Agreement).

Such number of shares shall be adjusted in the case of stock splits and stock

splits effected by means of stock dividends to the same extent that the number

of shares available for grant under the Countrywide Financial Corporation 2000

Stock Option Plan (the "2000 PLAN") or such other stock option plan or plans as

may be in effect or come into effect on or prior to April 1, 2007 are adjusted

upon such occurrences. Such stock option shall be granted pursuant to the 2000

Plan, or such other stock option plan or plans as may be in effect or come into

effect prior to April 1, 2007, (i) shall have a per share exercise price equal

to the fair

 

 

 

                                     - 4 -

<PAGE>

market value (as defined in the 2000 Plan or such other plan or plans) of the

common stock at the time of grant, (ii) shall vest as to one-third of the

underlying shares on each anniversary of the date of grant provided Executive is

then (A) employed by the Company, (B) serving the Company as a director or (C)

serving the Company as an advisor or consultant under an agreement to provide up

to five hours per month of service (a "SERVICE AGREEMENT"), (iii) shall become

fully vested in the event of a Change in Control (provided Executive's

employment has not earlier terminated or Executive is then serving the Company

as a director or under a Service Agreement) or a termination pursuant to Section

6(a), 6(b) or 6(e) (an "ACCELERATION EVENT"), (iv) shall have a term of ten (10)

years and be exercisable to the extent vested or thereafter vested for the

remainder of such term following an Acceleration Event or Executive's

termination of employment pursuant to Section 6(c) hereof, and (v) shall be

subject to other provisions as determined by the Compensation Committee that are

not inconsistent with the foregoing or the other provisions of this Agreement.

If, prior to April 1, 2007, there is a merger, consolidation or reorganization

in which the Company is not the surviving corporation or in which it survives as

a subsidiary of another corporation or entity (a "TRANSACTION"), and the shares

of equity securities of the surviving corporation or entity or parent thereof

are publicly traded on a recognized stock exchange or over the counter market,

the stock option to be granted pursuant to this Section 4(c) shall be granted in

accordance herewith with respect to securities of the surviving corporation or

entity or parent thereof, as applicable, with the number of shares subject to

the option to be granted to equal the product of (x) the amount of shares

subject to the option set forth in this Section 4(c) and (y) a fraction the

numerator of which is per share fair market value of the Company's securities

and the denominator of which is the per share fair market value of the

publicly-traded common or ordinary equity securities of the surviving

corporation or entity or parent thereof, as of the date of consummation of the

Transaction, and to give effect to the intent of the parties as set forth in

this Section 4(c). The stock option granted pursuant to this Section 4(c) shall

be an incentive stock option to the extent permitted by law or regulation. In

order to qualify for the grant pursuant to this Section 4(c) on April 1, 2007,

Executive must be employed by the Company on December 31, 2006.

 

               (d) Additional Benefits. Except as provided in Section 5 hereof,

Executive shall also be entitled to all rights and benefits for which he is

otherwise eligible during the CEO Term under any bonus plan, stock purchase

plan, participation or extra compensation plan, executive compensation plan,

pension plan, profit-sharing plan, life and medical insurance policy,

second-to-die life insurance coverage, executive medical examination program,

executive long-term disability policy, financial planning services program or

other plans or benefits, which the Company or its subsidiaries may provide for

him, or provided he is eligible to participate therein, for senior officers

generally or for employees generally during the CEO Term (collectively,

"ADDITIONAL BENEFITS"). Except as provided in Sections 4(f), 4(g) and 5 hereof,

this Agreement shall not affect the provision of any other compensation,

retirement or other benefit program or plan of the Company.

 

               (e) Continuation of Benefits. If Executive's employment is

terminated during the CEO Term pursuant to Section 6(a), 6(b) or 6(e) hereof,

the Company shall continue for the period specified in Section 6(a) or 6(b)

hereof or three years in the case of a termination pursuant to Section 6(e)

hereof (the "CONTINUATION PERIOD"), as the case may be, to provide benefits that

are no less favorable in the aggregate than the Additional Benefits (other than

qualified pension or profit sharing plan benefits and option, equity or stock

appreciation or other incentive plan

 

 

 

                                     - 5 -

<PAGE>

benefits as distinguished from health, disability and welfare benefits) (the

"WELFARE BENEFITS") that were being provided to Executive and his dependents and

beneficiaries immediately prior to Executive's Termination Date (or in the case

of a termination after a Change in Control, those benefits that were being

provided immediately preceding the Change in Control), but only to the extent

that Executive is not entitled to comparable benefits from other employment. If

Executive's employment is terminated during the CEO Term pursuant to Section

6(a), 6(b) or 6(e) hereof or pursuant to Section 6(c), the Company shall from

the Transition Date in the case of a termination pursuant to Section 6(c) or

from the end of the Continuation Period in the case of termination pursuant to

Section 6(a), 6(b) or 6(e) provide to Executive and his spouse (or solely to

Executive's spouse in the case of a termination pursuant to Section 6(b))

Retiree Medical Coverage (as hereinafter defined). For a period of two years

after such Employment Termination Date occurring during the CEO Term or pursuant

to Section 6(c), the Company shall provide Executive with outplacement services

at its cost. As used in this Section 4(e) "RETIREE MEDICAL COVERAGE" shall mean

medical insurance coverage for each of Executive's and his spouse's lifetime (or

solely for his spouse's lifetime in the case of a termination pursuant to

Section 6(b)) that, in conjunction with the coverage available to Executive and

his spouse pursuant to Medicare Part B, if any, is substantially similar in the

aggregate to the coverage provided to Executive and his spouse immediately prior

to the Termination Date. The Company will use its reasonable best efforts to

provide the Retiree Medical Coverage in a manner that results in the exclusion

of such benefits from the income of Executive and his spouse. The Company will

use its reasonable best efforts to provide the Retiree Medical Coverage such

that Section 105(h) will not apply. If such Retiree Medical Coverage is provided

through reimbursement of premiums paid by Executive and/or his spouse (as a

result of agreement of Executive and the Company), Executive and/or his spouse

shall provide to the Company evidence of coverage under any applicable health

insurance policy or Medicare supplemental health policy.

 

               (f) Deferral of Amounts Payable Hereunder. Any base salary in

excess of $1 million (or such other limitation as may be in effect under Section

162(m) of the Internal Revenue Code of 1986 as amended (the "CODE")), all

incentive compensation under Section 4(b) for the CEO Term and any distribution

or payment with respect to any restricted stock units granted during the CEO

Term shall be deferred until the earlier of (i) such time as the limitations of

Section 162(m) on the Company's deduction for amounts paid to Executive no

longer apply or (ii) the later of (A) January 15 of the year following the year

in which the Employment Termination Date occurs or (B) such other date within 12

months following such January 15 if the amounts to be paid to Executive would be

deductible if paid on such other date, provided that the date for payment shall

be postponed to the extent required by applicable law to avoid taxation of the

deferral at the time the deferral is made (such payment date, the "DEFERRAL

PAYMENT DATE"). In the event Executive should desire to defer receipt of any

other cash payments to which he would otherwise be entitled hereunder, he may do

so in accordance with the terms and conditions of the Countrywide Financial

Corporation Amended and Restated Deferred Compensation Plan (the "DEFERRED

COMPENSATION PLAN"), or in the absence of such Deferred Compensation Plan or any

successor plan that is substantially similar to the Deferred Compensation Plan,

he may present such a written request to the Compensation Committee which, in

its sole discretion, may enter into a separate deferred compensation agreement

with Executive. All amounts deferred as set forth in the first sentence of this

Section 4(f) shall be

 

 

 

                                     - 6 -

<PAGE>

deferred in accordance with the terms of the plan described in the immediately

preceding sentence.

 

               (g) Coordination with Current Employment Agreement.

Notwithstanding anything in this Agreement or Executive's Current Employment

Agreement to the contrary, (i) there shall be no duplication of benefits or

payments under this Agreement of any benefits or payments provided under the

Current Employment Agreement, and (ii) Executive shall receive medical coverage

and other Welfare Benefits during his employment as an employee under this

Agreement, with continuation of such Welfare Benefits after termination of

employment, as and to the extent provided in this Agreement and shall not

receive Retiree Medical Coverage until such time as provided in this Agreement.

Nothing contained herein shall affect the timing of the payment of incentive

compensation under Section 4(b) of the Current Employment Agreement.

 

        5. Enhanced SERP. In lieu of Executive's current supplemental retirement

benefit entitlement under the 1998 Amendment and Restatement of the Company's

Supplemental Executive Retirement Plan, as amended by the First Amendment to the

SERP effective January 1, 1999, the Second Amendment to the SERP effective June

30, 1999 and any subsequent amendment thereto (the "PLAN") and incorporating by

reference any Plan Agreement (as defined in the Plan) entered into by Executive

(collectively, the "CURRENT SERP"), the Company shall provide to Executive an

enhanced supplemental retirement benefit under the Plan (the "ENHANCED SERP")

(except as provided in subsection (c) below) as follows:

 

               (a) Full Benefit. If Executive's employment terminates for any

reason other than pursuant to Section 6(d), the Enhanced SERP shall be governed

by the terms of the Plan in all respects except that the Benefit Amount (defined

in Section 1.3 of Plan) shall equal the New Benefit Amount (as hereinafter

defined).

 

               (b) Lump Sum Benefit. Notwithstanding anything to the contrary in

the Plan, in the event that, under the terms of the Plan, the Enhanced SERP

shall be payable in a lump sum, the amount of such lump sum shall be determined

using a discount rate equal to 7%.

 

               (c) Cause. If Executive's employment terminates pursuant to

Section 6(d) hereof, Executive shall not be entitled to the Enhanced SERP and

Executive's supplemental retirement benefit shall be governed by the terms of

the Current SERP; provided, however, that the amount determined under Section

1.3(i) of the Plan shall in no event exceed $3,000,000.

 

               (d) Coordination with Plan. The Enhanced SERP provided by this

Section 5 shall be deemed in all respects to be provided under, and be part of,

the Plan and to the extent the provisions of the Plan are inconsistent with the

provisions of this Section 5, the provisions of this Section 5 shall govern and,

as it affects Executive, the Plan shall be deemed amended accordingly.

 

               (e) Definition of New Benefit Amount. As used in this Section 5,

"NEW BENEFIT AMOUNT" shall mean an amount equal to the Benefit Amount calculated

(A) without regard to Section 1.3(v) of the Plan, (B) using a discount rate

equal to 7% and the 1983 Group Annuity Mortality Table for determining the

actuarial equivalence of the annual amounts in

 

 

 

                                     - 7 -

<PAGE>

Sections 1.3(ii), 1.3(iii) and 1.3(iv) of the Plan, and (C) with Section 1.3(i)

of the Plan being deemed to read in its entirety follows:

 

                             "60% of the average of Participant's three (3)

                             highest fiscal years of combined annual base salary

                             and annual bonus (whether paid currently or

                             deferred) during the ten (10) fiscal years

                             preceding Participant's termination of employment

                             with all Employers; provided that the amount

                             determined pursuant to this clause (i) shall in no

                             event exceed $3,000,000; less."

 

        6. Termination During CEO Term. The compensation and benefits provided

for herein and the employment of Executive by the Company shall be terminated

during or at the end of the CEO Term only as provided for below in this Section

6:

 

               (a) Disability.

 

                      (i) In the event that Executive shall have failed, because

of illness, injury or similar incapacity ("DISABILITY"), to render for four (4)

consecutive calendar months ending during the CEO Term, or for shorter periods

aggregating one hundred eighty (180) or more calendar days in any twelve (12)

month period ending during the CEO Term, services contemplated by this

Agreement, Executive's employment hereunder may be terminated, by written Notice

of Termination from the Company to Executive. If such Notice of Termination is

delivered to Executive prior to December 31, 2006, the Company shall thereafter

continue, from the Termination Date until Executive's death or the fifth

anniversary of such notice, whichever first occurs (the "DISABILITY PAYMENT

PERIOD"), (i) to pay compensation to Executive, in the same manner as in effect

immediately prior to the Termination Date, in an amount equal to (A) fifty

percent (50%) of the Eligible Base Salary (as defined below), minus (B) the

amount of any cash payments to him under the terms of the Company's disability

insurance or other disability benefit plans or the Company's tax-qualified

Defined Benefit Pension Plan, and any compensation he may receive pursuant to

any other employment, and (ii) to provide during the Disability Payment Period

the benefits specified in Section 4(e) hereof.

 

                      (ii) The determination of Disability shall be made only

after 30 days notice to Executive and only if Executive has not returned to

performance of his duties during such 30-day period. In order to determine

Disability, both the Company and Executive shall have the right to provide

medical evidence to support their respective positions, with the ultimate

decision regarding Disability to be made by a majority of the Company's

disinterested directors.

 

                      (iii) The term "ELIGIBLE BASE SALARY" shall mean

Executive's base salary as in effect immediately prior to the Termination Date.

 

               (b) Death. In the event that Executive shall die during the CEO

Term, Executive's employment shall terminate as of the date of death subject to

the provisions of this Section 6(b). In such event, the Company shall pay

Executive's Eligible Base Salary (as defined in Section 6(a) above) for a period

of twelve (12) months following the date of Executive's death in the manner

otherwise payable hereunder, to such person or persons as Executive shall have

directed in writing or, in the absence of a designation, to his estate (the

"BENEFICIARY"). The

 

 

 

                                     - 8 -

<PAGE>

Company shall also provide to the Beneficiary during such twelve-month period

following the date of Executive's death the benefits specified in Section 4(e)

hereof. If Executive's death occurs while he is receiving payments for

Disability under Section 6(a) above, such payments shall cease and the

Beneficiary shall be entitled to the payments and benefits under this subsection

(b), which shall continue for a period of twelve months thereafter at the full

rate of Executive's Eligible Base Salary (as defined in Section 6(a)(iii)).

 

               (c) Expiration of CEO Term. If the Company and Executive do not

agree to continue his employment after the Transition Date as provided under

Section 7(a), Executive's employment hereunder shall terminate on the Transition

Date, and the Non-Employee Chair Term shall commence as set forth in Section 8

if Executive is then serving as Chairman of the Board. In such event, the

Company shall, from the Transition Date, provide to Executive and his spouse the

Retiree Medical Coverage as defined in Section 4(e). Following the expiration of

Executive's employment pursuant to this Section 6(c), all of the Company's other

obligations with respect to his employment shall terminate, provided, however,

that the termination of Executive's employment pursuant to this Section 6(c)

shall not affect Executive's entitlement to benefits in which he has become

vested (including, without limitation, rights of indemnification and amounts (if

any) due under Section 6(h)) or which are otherwise payable in respect of

periods ending prior to his termination of employment, or the equity grants

under Section 4(c) hereof.

 

               (d) Cause. The Company may terminate Executive's employment under

this Agreement for "CAUSE." A termination for Cause is a termination by reason

of (i) a material breach of this Agreement by Executive (other than as a result

of incapacity due to physical or mental illness) which is committed in bad faith

or without reasonable belief that such breach is in the best interests of the

Company and which is not remedied within a reasonable period of time after

receipt of written notice from the Company specifying such breach, or (ii)

Executive's conviction by a court of competent jurisdiction of a felony, or

(iii) entry of an order duly issued by any federal or state regulatory agency

having jurisdiction in the matter removing Executive from office of the Company

or its subsidiaries permanently prohibiting him from participating in the

conduct of the affairs of the Company or any of its subsidiaries, or (iv) any

purported termination by Executive of his employment hereunder other than

pursuant to Section 6(e) hereof. If Executive shall be convicted of a felony or

shall be removed from office and/or temporarily prohibited from participating in

the conduct of the Company's or any of its subsidiaries' affairs by any federal

or state regulatory authority having jurisdiction in the matter, the Company's

obligations under Sections 4(a), 4(b) and 4(c) hereof shall be automatically

suspended; provided, however, that if the charges resulting in such removal or

prohibition are finally dismissed or if a final judgment on the merits of such

charges is issued in favor of Executive, or if the conviction is overturned on

appeal, then Executive shall be reinstated in full with back pay for the removal

period plus accrued interest at the rate then payable on judgments. During the

period that the Company's obligations under Section 4(a), 4(b) and (4) are

suspended, Executive shall continue to be entitled to receive Additional

Benefits under Section 4(d) until the conviction of the felony or removal from

office has become final and non-appealable. When the conviction of the felony or

removal from office has become final and non-appealable, all of the Company's

obligations hereunder shall terminate; provided, however, that the termination

of Executive's employment pursuant to this Section 6(d) shall not affect

Executive's entitlement to all benefits in which he has become vested

(including, without limitation, rights of

 

 

 

                                     - 9 -

<PAGE>

indemnification and amounts due under Section 6(h)) or which are otherwise

payable in respect of periods ending prior to his termination of employment.

 

               (e) Without Cause; Good Reason. Executive may terminate his

employment for Good Reason and the Company may terminate Executive's employment

without Cause. For purposes of this Agreement, and except as provided in the

following sentence, "GOOD REASON" shall be deemed to occur if the Company

notifies Executive of a termination of his employment other than pursuant to

Sections 6(a), 6(c), 6(d) or 6(e) hereof, or if the Company breaches this

Agreement in any material respect, which breach is not remedied within a

reasonable period of time after receipt of written notice from Executive

specifying such breach, or if the Board (i) elects a person other than Executive

to commence service before January 1, 2007, as the Company's Chairman of the

Board or Chief Executive Officer without Executive's consent, (ii) reorganizes

management so as to require him to report to a person or persons other than the

Board, (iii) requires that Executive be based anywhere that is more than fifty

(50) miles from the office where Executive is located as of the Effective Date,

(iv) takes an action that results in Executive not being able to travel

domestically by private aircraft at the Company's expense, or (v) takes any

other action which, in Executive's reasonable judgment, results in the

diminution in Executive's status, title, position and responsibilities other

than an insubstantial action not taken in bad faith and which is remedied by the

Company promptly after receipt of notice from Executive. Executive shall not

have Good Reason to terminate employment with the Company (or otherwise have the

right to claim that he has been constructively terminated from employment) due

solely to (i) the change in his duties hereunder following the Transition Date

pursuant to Section 7(a) or (ii) the fact that the Company shall cease to be a

public company and shall become a subsidiary of another publicly-traded

corporation. Notwithstanding the foregoing, Executive may terminate his

employment for any or no reason within two years following a "CHANGE IN CONTROL"

(as defined in Appendix A to this Agreement), and such termination shall be

considered a termination for Good Reason hereunder. If Executive's employment

shall be terminated by the Company other than for Cause or Disability or by

Executive for Good Reason, then the Company shall pay Executive in a single

payment, as severance pay and in lieu of any further salary and incentive

compensation for periods subsequent to the Termination Date, an amount in cash

equal to the sum of (A) three times the sum of Executive's Eligible Base Salary

(as defined in Section 6(a)(iii) above) and (B) the incentive compensation that

would be payable to him under Section 4(b) above for the CEO Term if his

employment continued to the end of the CEO Term; provided, however, that if the

Termination Date occurs following a Change in Control or during a "PROTECTED

PERIOD" (as defined in Appendix A to this Agreement) with respect to a Change in

Control, then such cash amount shall be equal to three times the sum of (A)

Executive's Eligible Base Salary and (B) the greater of (x) the average of the

aggregate bonus and/or incentive award, if any, paid or payable to Executive for

each of the two (2) fiscal years of the Company preceding the fiscal year in

which Executive's termination of employment occurs and (y) the bonus and/or

incentive award paid for the fiscal year immediately preceding the date of the

Change in Control.

 

               (f) Notice of Termination. Any purported termination by the

Company or Executive shall be communicated by a written Notice of Termination to

the other party hereto which indicates the specific termination provision in

this Agreement, if any, relied upon and which sets forth in reasonable detail

the facts and circumstances, if any, claimed to provide a basis for termination

of Executive's employment under the provision so indicated. For purposes

 

 

 

                                     - 10 -

<PAGE>

of this Agreement, no such purported termination shall be effective without such

Notice of Termination. The "TERMINATION DATE" shall mean the date specified in

the Notice of Termination, which shall be no less than 30 or more than 60 days

following the date of the Notice of Termination. Notwithstanding any other

provision of this Agreement, in the event of any termination of Executive's

employment hereunder for any reason, in addition to any incentive compensation

awards or stock option grants to which Executive may otherwise be entitled

pursuant to the express provisions of this Agreement, the Company shall pay

Executive his full base salary through the Termination Date, plus any Additional

Benefits that have been earned or become payable, but which have not yet been

paid as of such Termination Date.

 

               (g) Payments. Except (i) as otherwise provided herein and (ii) in

the case of the payments pursuant to Section 4(e) hereof, all payments payable

under this Agreement as a result of the termination of Executive's employment

hereunder shall be made within 15 days after the Termination Date or, if any

portion is not then reasonably determinable, within five (5) days after such

portion is so determinable. In the event of a dispute concerning the validity of

a purported termination which is maintained in good faith, the Termination Date

shall mean the date the dispute is finally resolved and the Company will

continue to provide Executive with the compensation and benefits provided for

under this Agreement, until the dispute is finally resolved without any

obligation by Executive to repay any of such amounts to the Company,

notwithstanding the final outcome of the dispute. Payments required to be made

by this Section 6(g) are in addition to all other amounts due under Section 6 of

this Agreement and shall not be offset against or reduce any other amounts due

under Section 6 of this Agreement. The Company may require Executive to perform

his then current duties to, and services for, the Company during the period

following a purported termination but before the dispute concerning such

purported termination is finally resolved, in which event the Company shall

provide Executive with a reasonable opportunity to perform his duties under this

Agreement during such period.

 

               (h) Excise Tax Gross-Up.

 

                      (i) Except as provided in subsection (ii), in the event it

shall be determined that any payment or distribution of any type, including

accelerated vesting, to or for the benefit of Executive, by the Company, any

"affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended)

of the Company, any "person" (as the term "person" is used for purposes of

Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) who

acquires ownership or effective control of the Company or ownership of a

substantial portion of the Company's assets (within the meaning of Section 280G

of the Code), and the regulations thereunder) or any "affiliate" of such

"person," whether paid or payable or distributed or distributable pursuant to

the terms of this Agreement or otherwise (the "PAYMENTS"), is or will be subject

to the excise tax imposed by Section 4999 of the Code or any interest or

penalties with respect to such excise tax (such excise tax, together with any

such interest and penalties, are collectively referred to as the "EXCISE TAX"),

then Executive shall be entitled to receive an additional payment (a "GROSS-UP

PAYMENT") in an amount such that after payment by Executive of all taxes

(including any interest or penalties imposed with respect to such taxes),

including any income tax, employment tax or Excise Tax imposed upon the Gross-Up

Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise

Tax imposed upon the Payments.

 

 

 

                                     - 11 -

<PAGE>

                      (ii) Notwithstanding subsection (i) or any other provision

of this Agreement to the contrary, in the event that the Payments (excluding the

payment provided for in subsection (i)) exceed by less than the greater of 10%

or $100,000, the maximum amount of Payments which if made or provided to

Executive would not be subject to an Excise Tax, Executive will not be entitled

to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to

the extent necessary so that no Payment to be made or benefit to be provided to

Executive shall be subject to the Excise Tax; it being the intent of the parties

that the Payments shall be reduced only if the economic detriment to Executive

(on a pre-tax basis) is less than the greater of $100,000 or 10% of the

Payments. Unless Executive shall have given prior written notice to the Company

specifying a different order to effectuate the foregoing, the Company shall

reduce or eliminate the Payments, first by reducing or eliminating the portion

of the Payments which are payable in cash, second by reducing or eliminating the

portion of the Payments which are not payable in cash (other than Payments as to

which Treasury Regulations Section 1.280G-1 Q/A-24(c) (or any successor

provision thereto) applies ("Q/A-24(c) PAYMENTS")), and third by reducing Q/A

24(c) Payments, in each case in reverse order beginning with payments or

benefits which are to be paid the farthest in time from the "DETERMINATION" (as

defined below). Any notice given by Executive pursuant to the preceding sentence

shall take precedence over the provisions of any other plan, arrangement or

agreement governing Executive's rights and entitlements to any benefits or

compensation.

 

                      (iii) The determination of whether the Payments shall be

reduced pursuant to this Agreement and the amount of such reduction, all

mathematical determinations, and all determinations as to whether any of the

Payments are "parachute payments" (within the meaning of Section 280G of the

Code), that are required to be made under this Section, including determinations

as to whether a Gross-Up Payment is required, the amount of such Gross-Up

Payment and amounts relevant to the last sentence of this subsection (iii),

shall be made by an independent accounting firm selected by Executive from among

the five (5) largest accounting firms in the United States or any nationally

recognized financial planning and benefits consulting company (the "ACCOUNTING

FIRM"), which shall provide its determination (the "DETERMINATION"), together

with detailed supporting calculations regarding the amount of any Gross-Up

Payment and any other relevant matter, both to the Company and Executive by no

later than ten (10) days following the Termination Date, if applicable, or such

earlier time as is requested by the Company or Executive (if Executive

reasonably believes that any of the Payments may be subject to the Excise Tax).

If the Accounting Firm determines that no Excise Tax is payable by Executive, it

shall furnish Executive and the Company with an opinion reasonably acceptable to

Executive and the Company that no Excise Tax is payable (including the reasons

therefor) and that Executive has substantial authority not to report any Excise

Tax on his federal income tax return. If a Gross-Up Payment is determined to be

payable, it shall be paid (including through withholding of taxes) to Executive

no later than the due date for payment of the Excise Tax. Any determination by

the Accounting Firm shall be binding upon the Company and Executive, absent

manifest error. As a result of uncertainty in the application of Section 4999 of

the Code at the time of the initial determination by the Accounting Firm

hereunder, it is possible that Gross-Up Payments not made by the Company should

have been made ("UNDERPAYMENT"), or that Gross-Up Payments will have been made

by the Company which should not have been made ("OVERPAYMENT"). In either such

event, the Accounting Firm shall determine the amount of the Underpayment or

Overpayment that has occurred. In the case of an Underpayment, the amount of

such Underpayment (together with any interest and penalties

 

 

 

                                     - 12 -

<PAGE>

payable by Executive as a result of such Underpayment) shall be promptly paid by

the Company to or for the benefit of Executive. In the case of an Overpayment,

Executive shall, at the direction and expense of the Company, take such steps as

are reasonably necessary (including the filing of returns and claims for

refund), follow reasonable instructions from, and procedures established by, the

Company, and otherwise reasonably cooperate with the Company to correct such

Overpayment, provided, however, that (A) Executive shall not in any event be

obligated to return to the Company an amount greater than the net after-tax

portion of the Overpayment that he has retained or has recovered as a refund

from the applicable taxing authorities and (B) if a Gross-Up Payment is

determined to be payable, this provision shall be interpreted in a manner

consistent with an intent to make Executive whole, on an after-tax basis, from

the application of the Excise Tax, it being understood that the correction of an

Overpayment may result in Executive repaying to the Company an amount which is

less than the Overpayment. The cost of all such determinations made pursuant to

this Section shall be paid by the Company.

 

        7. Employee Chair Term.

 

               (a) Terms and Condition of Employment. The parties intend that

Executive will continue to be its employee Chairman of the Board for at least

one year following the Transition Date. No later than September 30, 2006,

Executive and the Committee shall meet and negotiate the specific terms and

conditions for Executive's continued employment as Chair after the Transition

Date, including without limitation, Executive's duties and responsibilities,

level of time commitment, salary, incentive compensation, equity awards,

consequences of termination employment, etc.

 

               (b) Service as Employee Director. If Executive and the Committee

agree to the terms and conditions of his continued employment after the

Transition Date as provided in Section 7(a), the Company will employ Executive

and Executive will serve the Company and its subsidiaries as an employee. The

parties anticipate that Executive will be nominated as a director of the Company

at such times as are necessary to enable Executive to serve continuously on the

Board and that he will continue to serve as Chairman of the Board through

December 31, 2011. However, both parties recognize that the decision to nominate

Executive as a director must be made in accordance with the governance

procedures of the Company then in effect. Executive agrees to serve on the Board

and as Chair during the Employee Chair Term, if and while elected as both a

director and Chair, except to the extent he determines in good faith that

compelling ethical, liability, health, family or similar circumstances preclude

him from doing so.

 

               (c) Annual Review. On or before September 30 of each year,

continuing through September 30, 2010, the Board and Executive may mutually

agree in writing to extend Executive's employment by an additional year on the

same or such other terms and conditions as to which they mutually agree.

 

        8. Non-Employee Chair Term.

 

               (a) Service as Non-Employee Director. The parties anticipate that

Executive will be nominated as a director of the Company at such times as are

necessary to enable Executive to serve continuously on the Board through

December 31, 2011. The parties agree that he will continue to serve as Chairman

of the Board through December 31, 2011 so long as

 

 

 

                                     - 13 -

<PAGE>

he is a director. The parties further agree that Executive shall serve as a

non-employee Chair during any period while he is a director that he is not

serving as an employee Chair. However, both parties recognize that the decision

to nominate Executive as a director must be made in accordance with the

governance procedures of the Company then in effect. Executive agrees to serve

on the Board and as Chair during the Non-Employee Chair Term, if and while

elected as both a director and Chair, except to the extent he determines in good

faith that compelling ethical, liability, health, family or similar

circumstances preclude him from doing so.

 

               (b) Compensation. During the Non-Employee Chair Term, the Company

agrees to pay to Executive the same compensation, and to provide to Executive

the same benefits, that it pays or provides to the other non-employee members of

the Board. In addition, the Company agrees to pay Executive for each calendar

year during the Non-Employee Chair Term an additional retainer of at least

$200,000 per year (pro rated for any period of time during the Non-Employee

Chair Term that is less than a full calendar year).

 

               (c) Benefits and Perquisites. During the Non-Employee Chair Term,

the Company shall additionally provide Executive with the following benefits and

perquisites:

 

                      (i) On-site office space and secretarial support services;

 

                      (ii) Use of a private jet for purposes that, in the good

               faith judgment of Executive, are Company business purposes;

 

                      (iii) Financial consulting services of AYCO (or another

               comparable financial consulting firm selected by Executive)

               substantially similar to such services made available to senior

               executive Executives of the Company from time to time; and

 

                      (iv) Payment of Executive's annual country club dues at

               Sherwood Country Club in Thousand Oaks, CA, Quarry Country Club

               in La Quinta, CA and Robert Trent Jones Golf Club in Gainesville,

               VA.

 

               (d) Applicability of Director Policies. During the Non-Employee

Chair Term, Executive shall be subject to the same rules applicable to other

directors who are not employees of the Company, including with respect to

fiduciary duties and outside activities; provided that any activity that was

approved during the CEO Term or the Employee Chair Term shall be deemed to be an

approved activity during the Non-Employee Chair Term.

 

               (e) Director Emeritus. Upon the termination of Executive's

service as a director of the Company, Executive shall be eligible for the

Company's Director Emeritus program as then in effect (but in any event, such

program shall result in continuing the vesting of any equity grants he received

in connection with his employment with the Company). To the extent that at any

time (whether or not Executive ever serves as a non-employee Chairman of the

Board) Executive is not then eligible for the Director Emeritus program, he

shall serve as Chairman Emeritus with all the same benefits and conditions that

would apply if he were a Director Emeritus.

 

 

 

                                     - 14 -

<PAGE>

        9. Waiver of Rights and Obligations under Consulting Agreement. The

Company and Executive agree that the Consulting Agreement shall be deemed to be

executed on February 28, 2006 if Executive remains employed by the Company under

the Current Employment Agreement until that date and that the Consulting

Agreement will terminate on February 28, 2011 unless terminated earlier as

provided therein; provided, however, that (i) notwithstanding anything to the

contrary in the Consulting Agreement, the Company and Executive hereby fully

waive all of their rights and claims, and fully waive, release and discharge the

other's obligations, under the Consulting Agreement until the first day after

the date on which Executive ceases to be Chairman of the Board; (ii) the last

sentence of Section 1(b) of the Consulting Agreement is amended to read, "In

addition, Consultant agrees that, if at any time during the Consulting Term

Consultant is a director of the Company and he chooses to serve as such, he

shall serve as a director without remuneration in addition to that provided for

in this Agreement, provided that Consultant may instead elect to be paid as a

director and thereby suspend and cause to be waived (but not beyond the

Consulting Term) the obligations of both parties under the Consulting Agreement

during any period he serves as a director"; and (iii) Section 4(d) of the

Consulting Agreement is hereby amended to read, "(d) at the election of the

Consultant, at any time."

 

        10. Reimbursement of Business Expenses. During the term of this

Agreement, the Company shall reimburse Executive promptly for all expenditures

(including travel, entertainment, parking, business meetings, and the monthly

costs (including dues) of maintaining memberships at appropriate clubs) to the

extent that such expenditures meet the requirements of the Code for

deductibility by the Company for federal income tax purposes or are otherwise in

compliance with the rules and policies of the Company and are substantiated by

Executive as required by the Internal Revenue Service and rules and policies of

the Company.

 

        11. Indemnity; Directors and Officer's Insurance.

 

               (a) To the fullest extent permitted by applicable law, the

Certificate of Incorporation and the By-Laws of the Company (as from time to

time in effect) and any indemnity agreements entered into from time to time

between the Company and Executive, the Company shall indemnify Executive and

hold him harmless for any acts or decisions made by him in good faith while

performing services for the Company, and shall use reasonable efforts to obtain

coverage for him under liability insurance policies now in force or hereafter

obtained during the term of this Agreement covering the other officers or

directors of the Company.

 

               (b) The Company shall, to the extent it is available on

commercially reasonable terms, maintain Director's and Executive's liability

insurance during the term of this Agreement that is substantially similar in the

aggregate to that in effect as of the Effective Date. Any such insurance shall

cover Executive's acts and omissions as an officer and/or director of the

Company, and such coverage at any time shall be no less favorable than the

coverage then provided to any other director or officer of the Company.

 

               (c) The provisions of this Section 11 shall also apply to all of

Executive's prior service with the Company and shall be in addition to, and, to

the extent not duplicative, not in lieu of, any other rights to indemnification

to which Executive is otherwise entitled.

 

 

 

                                     - 15 -

<PAGE>

        12. Miscellaneous.

 

               (a) Succession. This Agreement shall inure to the benefit of and

shall be binding upon the Company, its successors and assigns, but without the

prior written consent of Executive, this Agreement may not be assigned other

than in connection with a merger or sale of substantially all the assets of the

Company or similar transaction. The Company shall not agree to any such

transaction unless the successor to or assignee of the Company's business and/or

assets in such transaction expressly assumes all obligations of the Company

hereunder. The obligations and duties of Executive hereby shall be personal and

not assignable.

 

               (b) Notices. Any notices provided for in this Agreement shall be

sent to the Company at 4500 Park Granada, Calabasas, CA 91302 Attention: General

Counsel/Secretary, with a copy to the Chairman of the Compensation Committee at

the same address, or to such other address as the Company may from time to time

in writing designate, and to Executive at his home address as reflected in the

Company's records or at such other address as he may from time to time in

writing designate. All notices shall be deemed to have been given two (2)

business days after they have been deposited as certified mail, return receipt

requested, postage paid and properly addressed to the designated address of the

party to receive the notices.

 

               (c) Entire Agreement; Modified Applicability of Consulting

Agreement. This instrument (including the Arbitration Agreement described in

Section 12(n) hereof and the Consulting Agreement as modified by Section 9

hereof) contains the entire agreement of the parties relating to the subject

matter hereof, and, on the Effective Date, it replaces and supersedes any prior

agreements between the parties relating to said subject matter, including, but

not limited to, the Current Employment Agreement but only as to the employment

or other service-related provisions for periods on and after the Effective Date

and without effect on non-duplicative provisions of the Current Employment

Agreement (such as Section 4(f) and Section 8) that provide rights that survive

Executive's termination of employment thereunder. No modifications or amendments

of this Agreement shall be valid unless made in writing and signed by the

parties hereto. The Company and Executive acknowledge and agree that the

benefits payable under this Agreement replace and supersede in full any and all

benefits payable under the Current Employment Agreement with regard to the

employment period under this Agreement and any post-employment period to the

extent duplicative, and that the Current Employment Agreement shall be null and

void and of no force or effect on the Effective Date.

 

               (d) Waiver. The waiver of the breach of any term or of any

condition of this Agreement shall not be deemed to constitute the waiver of any

other breach of same or any other term or condition.

 

               (e) California Law. This Agreement shall be construed and

interpreted in accordance with the laws of California without giving effect to

the conflicts of laws principles thereof.

 

               (f) Attorneys' Fees in Action on Contract. If any litigation

shall occur between Executive and the Company, which litigation arises out of or

as a result of this Agreement or the acts of the parties hereto pursuant to this

Agreement, or which seeks an interpretation of this Agreement, the arbitrator

hearing the matter shall, in his sole discretion,

 

 

 

                                     - 16 -

<PAGE>

determine the prevailing party in such litigation and, in addition to any other

judgment or award, may, in his sole discretion, award such prevailing party such

sums as he shall find to be reasonable as and for the prevailing party's

attorneys' fees disbursements.

 

               (g) Non-solicitation. Until the date that is 24 months after the

later of (i) last date of Executive's employment by the Company or (ii) the date

Executive ceases to be a director of the Company, Executive shall not interfere

with the Company's relationship with, or endeavor to entice away from the

Company for competitive purposes, any person who was an employee or customer of

the Company or otherwise had a material business relationship with the Company

within the final 12 months in which Executive was an employee or director of the

Company; provided that after a Change in Control the reference to competitive

purposes shall be limited to the Company's material activities prior to the

Change in Control and further provided that the foregoing shall not be violated

by general advertising not specifically targeted at the above persons and

entities.

 

               (h) Confidentiality. Executive agrees that he will not use or

divulge or otherwise disclose, directly or indirectly, any trade secret or other

confidential information concerning the business or policies of the Company or

any of its subsidiaries which he may have learned as a result of his employment

during the term of this Agreement or prior thereto as an employee, officer or

director of or consultant to the Company or any of its subsidiaries, except to

the extent such use or disclosure is (i) necessary or appropriate (in his good

faith judgment) to the performance of this Agreement and in furtherance of the

Company's best interests, (ii) required by applicable law, (iii) lawfully

obtainable from other sources, or (iv) authorized by the Company. The provisions

of this subsection shall survive the expiration, suspension or termination, for

any reason, of this Agreement.

 

               (i) Non-Disparagement. Executive agrees that while he is employed

by the Company or serving as a director of the Company and thereafter (including

following a termination of employment or service for any reason), he shall not,

with willful intent to damage economically or as to reputation, make any public

false, defamatory or disparaging statement about the Company or any of its

subsidiaries, or, prior to a Change in Control (as defined in Appendix A to this

Agreement), the officers or directors of the Company or its subsidiaries;

provided that the foregoing shall not apply to (A) statements made in compliance

with legal process or governmental inquiry, (B) statements made while employed

or a serving as a director in the course and scope of his duties and (C)

statements made to rebut to the extent necessary any misleading or untrue public

statements. The Company agrees that, while Executive is employed by the Company

or serving as a director of the Company and thereafter, that it shall not, and

it shall use its best efforts to cause its directors, officer and employees to

not, make or cause to be made any public false, defamatory or disparaging

statement about Executive; provided that the foregoing shall not apply to (A)

statements made in compliance with legal process or governmental inquiry or (B)

statements made to rebut to the extent necessary any misleading or untrue public

statements. Notwithstanding the foregoing, should Executive compete with the

Company and such activity is not a breach of Executive's obligations to the

Company, normal and accurate competitive statements he may make about the

Company or any of its subsidiaries shall not be deemed a breach of this Section

12(i). This Section 12(i) shall have no third party beneficiaries.

 

 

 

                                     - 17 -

<PAGE>

               (j) Continued Availability and Cooperation. Executive will

reasonably cooperate with the Company, during the term of his employment, during

his service as a director and thereafter (including following Executive's

termination of employment or service for any reason), by making himself

reasonably available to testify on behalf of the Company or any subsidiary or

affiliate of the Company in any action, suit, or proceeding, whether civil,

criminal, administrative, or investigative, involving any matter of which he had

knowledge as a result of his employment with, or service as a director of, the

Company and to reasonably assist the Company or any such subsidiary or affiliate

in any such action, suit or proceeding by providing information and meeting and

consulting with the Board or its representatives or counsel, or representatives

or counsel to the Company or any such subsidiary or affiliate, as reasonably

requested; provided, however, that the same does not materially interfere with

his then current business activities (or if it involves a matter in which his

relationship is adversarial to the Company). The Company will reimburse

Executive for all expenses reasonably incurred by him in connection with his

provision of testimony or assistance, including reasonable attorneys' fees

incurred by Executive in connection with such testimony. Nothing in this Section

12(k) shall impair Executive's rights under Section 11 of this Agreement.

 

               (k) Remedies of the Company. Executive acknowledges that the

services he is obligated to render under the provisions of this Agreement are of

a special, unique, unusual, extraordinary and intellectual character, which

gives this Agreement peculiar value to the Company. The loss of these services

cannot be reasonably or adequately compensated in damages in an action at law

and it would be difficult (if not impossible) to replace these services. By

reason thereof, Executive agrees and consents that if he violates any of the

material provisions of this Agreement, the Company, in addition to any other

rights and remedies available under this Agreement or under applicable law,

shall be entitled during the remainder of the term of this Agreement to seek

injunctive relief, from a tribunal of competent jurisdiction, restraining

Executive from committing or continuing any violation of this Agreement.

 

               (l) Severability. If any provision of this Agreement is held

invalid or unenforceable, the remainder of this Agreement shall nevertheless

remain in full force and effect, and if any provision is held invalid or

unenforceable with respect to particular circumstances, it shall nevertheless

remain in full force and effect in all other circumstances.

 

               (m) No Obligation to Mitigate; Set-off. Executive shall not be

required to mitigate the amount of any payment provided for in this Agreement by

seeking other employment or otherwise and, except as provided in Section 6(a)

hereof, no payment hereunder shall be offset or reduced by the amount of any

compensation or benefits provided to Executive in any subsequent employment. In

addition, the amount of any payments or any benefits payable or provided

hereunder shall not be affected by any set-off, counterclaim, recoupment,

defense or other right which the Company may have against Executive for any

reason.

 

               (n) Arbitration. The parties acknowledge that they have

previously entered into a Mutual Agreement to Arbitrate Claims (the "ARBITRATION

AGREEMENT"). The parties hereby incorporate herein by reference the terms of the

Arbitration Agreement. Any dispute arising regarding this Agreement and/or any

other matter covered by the Arbitration Agreement shall be subject to binding

arbitration pursuant to the terms of the Arbitration Agreement, except as

expressly provided herein.

 

 

 

                                     - 18 -

<PAGE>

               (o) Representation by Counsel; Interpretation. The Company and

Executive each acknowledge that each party to this Agreement has been

represented by counsel in connection with this Agreement and the matters

contemplated by this Agreement. Accordingly, any rule of law, including but not

limited to Section 1654 of the California Civil Code, or any legal decision that

would require interpretation of any claimed ambiguities in this Agreement

against the party that drafted it has no application and is expressly waived.

The provisions of this Agreement shall be interpreted in a reasonable manner to

effect the intent of the parties.

 

               (p) Counterparts. This Agreement may be executed in two or more

counterparts, each of which shall be deemed to be an original but all of which

together shall constitute one and the same instrument.

 

               (q) Survivorship. The respective rights and duties of the parties

hereunder shall survive any termination of this Agreement or Executive's service

as Chairman of the Board to the extent necessary to the intended preservation of

such rights and obligations.

 

 

 

              [The rest of this page was intentionally left blank]

 

<PAGE>

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date

first above written.

 

                                 COUNTRYWIDE FINANCIAL CORPORATION

 

ATTEST:                          By: /s/ Stanford L. Kurland

                                     -------------------------------------------

/s/ Susan E. Bow                 Title: President and Chief Operating Officer

---------------------------             ----------------------------------------

Secretary

                                 Date: September 2, 2004

                                       -----------------------------------------

 

                                 EXECUTIVE:

 

                                 /s/ Angelo R. Mozilo

                                 -----------------------------------------------

                                 Angelo R. Mozilo, in his individual capacity

 

                                 Date: September 2, 2004

                                       -----------------------------------------

 

 

 

                                     - 19 -

<PAGE>

                                   APPENDIX A

                    TO ANGELO R. MOZILO EMPLOYMENT AGREEMENT

 

               1. A "Change in Control" shall mean the occurrence during the

term of this Agreement, of any one of the following events:

 

               (a)    An acquisition (other than directly from the Company) of

                      any common stock or other "Voting Securities" (as

                      hereinafter defined) of the Company by any "Person" (as

                      the term person is used for purposes of Section 13(d) or

                      14(d) of the Securities Exchange Act of 1934, as amended

                      (the "Exchange Act")), immediately after which such Person

                      has "Beneficial Ownership" (within the meaning of Rule

                      13d-3 promulgated under the Exchange Act) of twenty five

                      percent (25%) or more of the then outstanding shares of

                      the Company's common stock or the combined voting power of

                      the Company's then outstanding Voting Securities;

                      provided, however, in determining whether a Change in

                      Control has occurred, Voting Securities which are acquired

                      in a "Non-Control Acquisition" (as hereinafter defined)

                      shall not constitute an acquisition which would cause a

                      Change in Control. For purposes of this Agreement, (1)

                      "Voting Securities" shall mean the Company's outstanding

                      voting securities entitled to vote generally in the

                      election of directors and (2) a "Non-Control Acquisition"

                      shall mean an acquisition by (i) an employee benefit plan

                      (or a trust forming a part thereof) maintained by (A) the

                      Company or (B) any corporation or other Person of which a

                      majority of its voting power or its voting equity

                      securities or equity interest is owned, directly or

                      indirectly, by the Company (for purposes of this

                      definition, a "Subsidiary"), (ii) the Company or any of

                      its Subsidiaries, or (iii) any Person in connection with a

                      "Non-Control Transaction" (as hereinafter defined);

 

               (b)    The individuals who, as of the date of the Agreement are

                      members of the Board (the "Incumbent Board"), cease for

                      any reason to constitute at least two-thirds of the

                      members of the Board; provided, however, that if the

                      election, or nomination for election by the Company's

                      common stockholders, of any new director was approved by a

                      vote of at least two-thirds of the Incumbent Board, such

                      new director shall, for purposes of this Agreement, be

                      considered as a member of the Incumbent Board; provided

                      further, however, that no individual shall be considered a

                      member of the Incumbent Board if such individual initially

                      assumed office as a result of either an actual or

                      threatened "Election Contest" (as described in Rule 14a-11

                      promulgated under the Exchange Act) or other actual or

                      threatened solicitation of proxies or consents by or on

                      behalf of a Person other than the Board (a "Proxy

                      Contest") including by reason of any agreement intended to

                      avoid or settle any Election Contest or Proxy Contest; or

 

               (c)    The consummation of:

 

 

 

 

                                     - 1 -

<PAGE>

                      (i)    A merger, consolidation or reorganization involving

                             the Company, unless such merger, consolidation or

                             reorganization is a "Non-Control Transaction." A

                             "Non-Control Transaction" shall mean a merger,

                             consolidation or reorganization of the Company

                             where:

 

                             (A)    the stockholders of the Company, immediately

                                    before such merger, consolidation or

                                    reorganization, own directly or indirectly

                                    immediately following such merger,

                                    consolidation or reorganization, at least

                                    seventy percent (70%) of the combined voting

                                    power of the outstanding Voting Securities

                                    of the corporation resulting from such

                                    merger, consolidation or reorganization (the

                                    "Surviving Corporation") in substantially

                                    the same proportion as their ownership of

                                    the Voting Securities immediately before

                                    such merger, consolidation or

                                    reorganization;

 

                             (B)    the individuals who were members of the

                                    Incumbent Board immediately prior to the

                                    execution of the agreement providing for

                                    such merger, consolidation or reorganization

                                    constitute at least two-thirds of the

                                    members of the board of directors of the

                                    Surviving Corporation, or in the event that,

                                    immediately following the consummation of

                                    such transaction, a corporation beneficially

                                    owns, directly or indirectly, a majority of

                                    the Voting Securities of the Surviving

                                    Corporation, the board of directors of such

                                    corporation; and

 

                             (C)    no Person other than (i) the Company, (ii)

                                    any Subsidiary, (iii) any employee benefit

                                    plan (or any trust forming a part thereof)

                                    maintained by the Company, the Surviving

                                    Corporation, or any Subsidiary, or (iv) any

                                    Person who, immediately prior to such

                                    merger, consolidation or reorganization had

                                    Beneficial Ownership of twenty five percent

                                    (25%) or more of the then outstanding Voting

                                    Securities or common stock of the Company,

                                    has Beneficial Ownership of twenty five

                                    percent (25%) or more of the combined voting

                                    power of the Surviving Corporation's then

                                    outstanding Voting Securities or its common

                                    stock;

 

                      (ii)   A complete liquidation or dissolution of the

                             Company; or

 

                      (iii)  The sale or other disposition of all or

                             substantially all of the assets of the Company to

                             any Person (other than a transfer to a Subsidiary).

 

 

 

                                     - 2 -

<PAGE>

        Notwithstanding the foregoing, a Change in Control shall not be deemed

to occur solely because any Person (the "Subject Person") acquired Beneficial

Ownership of more than the permitted amount of the then outstanding common stock

or Voting Securities as a result of the acquisition of common stock or Voting

Securities by the Company which, by reducing the number of shares of common

stock or Voting Securities then outstanding, increases the proportional number

of shares Beneficially Owned by the Subject Persons; provided, however, that if

a Change in Control would occur (but for the operation of this sentence) as a

result of the acquisition of common stock or Voting Securities by the Company,

and after such share acquisition by the Company, the Subject Person becomes the

Beneficial Owner of any additional common stock or Voting Securities which

increases the percentage of the then outstanding common stock or Voting

Securities Beneficially Owned by the Subject Person, then a Change in Control

shall occur.

 

               2. The "Protected Period" corresponding to a Change in Control of

the Company shall be a period of time determined in accordance with the

following:

 

               (a)    If the Change in Control is triggered by a tender offer

                      for shares of the Company's stock or by the offeror's

                      acquisition of shares pursuant to such a tender offer, the

                      Protected Period shall commence on the date of the initial

                      tender offer and shall continue through and including the

                      date of the Change in Control; provided that in no case

                      will the Protected Period commence earlier than the date

                      that is six (6) months prior to the Change in Control.

 

               (b)    If the Change in Control is triggered by a merger,

                      consolidation, or reorganization of the Company with or

                      involving any other corporation, the Protected Period

                      shall commence on the date that serious and substantial

                      discussions first take place to effect the merger,

                      consolidation, or reorganization and shall continue

                      through and including the date of the Change in Control;

                      provided that in no case will the Protected Period

                      commence earlier than the date that is six (6) months

                      prior to the Change in Control.

 

               (c)    In the case of any Change in Control not described in

                      clause (a) or (b) above, the Protected Period shall

                      commence on the date that is six (6) months prior to the

                      Change in Control and shall continue through and including

                      the date of the Change in Control.

 

 

 

                                     - 3 -