**Exhibit 10.26**

 

# **CHANGE IN CONTROL AGREEMENT**

#  

This CHANGE IN CONTROL AGREEMENT (this “Agreement”) is entered into byand among CRIIMI MAE Inc. (the “Company”), a Maryland corporation, CRIIMI MAEManagement, Inc. (“CM Management”), a Maryland corporation, and Mark R. Jarrell(the “Executive”) and shall be effective as of February 1, 2005 (the “EffectiveDate”).

 

1.                                       Term.  This Agreement shall be effective for theperiod commencing on the Effective Date and ending on the third anniversary ofthe Effective Date, subject to earlier termination in accordance with the termsof this Agreement (the “Term”).  The Termshall be automatically renewed for a three-year period upon the occurrence of aChange in Control (as defined below).

 

2.                                       Change in Control Benefits.

 

(a)                                  If within two years of a Change inControl the Executive’s employment with the Company and/or CM Management isterminated by the Company or CM Management (as applicable) without Cause (asdefined below) or by the Executive for Good Reason (as defined below), theCompany and CM Management shall be relieved of any further salary orcompensation payments to the Executive other than as expressly provided in thisParagraph 2.  Notwithstanding thepreceding sentence, in return for the execution and delivery by the Executiveof a general release and waiver of claims in favor of the Company and itsaffiliates, the Executive shall promptly receive from the Company and/or CMManagement a lump sum severance payment (subject to appropriate payroll and taxwithholding and deductions) equal in amount to $2,500,000.

 

(b)                                 Notwithstanding the preceding paragraph,immediately upon a Change in Control, any equity awards granted to theExecutive that have not yet become vested, exercisable or unrestricted (asapplicable) as of the date of such Change in Control shall become vested,exercisable or unrestricted (as applicable, and subject to appropriatewithholding and deductions).

 

(c)                                  The foregoing severance payment andbenefits shall be in lieu of any other severance payment or severance benefit(other than the payment of accrued but unpaid salary and vacation benefitsthrough the date of termination and a pro rata portion of any accrued butunpaid minimum annual bonus for the year of such termination) under any plan,policy or practice of the Company or under any employment agreement, employmentletter, severance agreement or other understanding between the Company or CMManagement and the Executive (collectively, any “Other Agreement”).  Notwithstanding the preceding sentence,Executive will continue to be entitled to officer indemnification and shall becovered by both the Company’s directors and officers insurance and theindemnification provisions contained in the Certificate of Incorporation and/orBy-laws of the Company irrespective of whether he is employed by the Company orCM Management at the time of the assertion of any liability against him.  Executive will also continue to be entitledonly to such other benefits as are required by law to

 

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survive hisemployment.  If it shall be determinedthat any payment or benefit provided to the Executive would constitute an “excessparachute payment” within the meaning of Section 280G of the InternalRevenue Code of 1986, as amended (the “Code”), and would be subject to the excisetax imposed by Section 4999 of the Code, then the cash payment provided tothe Executive hereunder shall be reduced such that, after the deduction ofappropriate payroll and tax withholding (including any such excise tax) fromall “parachute payments” (as defined in the Code) provided to the Executive,the Executive shall receive aggregate payments and benefits with the greatestnet present value.

 

(d)                                 The termination of the Executive’semployment with the Company or CM Management shall not affect any of theobligations of the Executive, the Company or CM Management that may arise underParagraph 3 below.

 

3.                                       Nonsolicitation, Developments,Nondisparagement and Confidentiality.  Inconsideration for the benefits provided pursuant to this Agreement, the Executiveagrees:

 

(a)                                  During the Term and for a period of twoyears following the termination of the Executive’s employment with the Companyand CM Management, he will not, directly or indirectly, (i) induce or attemptto induce, any employees or agents of the Company and/or any of its affiliatesto do anything from which the Executive is restricted by reason of thisAgreement, or (ii) offer or aid others to offer employment to any employees oragents of the Company and/or its any of its affiliates.

 

(b)                                 The Executive, the Company and CMManagement agree that, during the Term and following the termination of theTerm, no party will disparage the other, including the Company’s affiliates,products, services, customers, clients, counterparties, officers, directors,employees, former employees, representatives and agents, in any way whatsoever.

 

(c)                                  All data, concepts, ideas, designs,findings, discoveries, inventions, improvements, advances, methods, formulas,plans, programs (computer or otherwise), practices, techniques, developmentsand relationships with customers and prospective customers relating in any wayto the present products, services, or business of the Company, CM Managementand their affiliates (collectively “Developments”) that the Executive firstconceived, made, invented or suggested during or as a result of his employmentby the Company or CM Management, whether acting alone or in conjunction withothers, shall be the sole and absolute property of the Company and/or CMManagement (as applicable) free of any rights of any kind on the part of theExecutive.  The Executive shall promptlymake full disclosure of all Developments to the Company.  The Executive agrees to do all acts andthings (including, among others, the execution and delivery of patent andcopyright applications and instruments of assignment) deemed by the Company tobe necessary or desirable at any time in order to effect the full assignment tothe Company of his rights, if any, to such Developments.

 

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(d)                                 The Executive recognizes that, inconnection with his employment by the Company and CM Management, he may learnof, and/or it may be desirable or necessary for the Company and CM Managementto disclose to him oral or written confidential information (“ConfidentialInformation”).  The Executive understandsthat Confidential Information is valuable and proprietary to the Company and CMManagement (or to third parties that have entrusted the ConfidentialInformation to the Company and CM Management). The Executive agrees that, except as required by his employment with theCompany and CM Management or by order of a court of competent jurisdiction, hewill not at any time, directly or indirectly, use, publish, communicate,describe, disseminate, or otherwise disclose Confidential Information to anyperson or entity without the express prior written consent of the Company.  The term Confidential Information shallinclude, but shall not be limited to: (i) customer and client lists, asset lists, lists of potentialcustomers, clients or properties and details of agreements with customers orregarding assets; (ii) acquisition, expansion, marketing, financial and otherbusiness information and plans of the Company and CM Management; (iii) researchand development; (iv) data compiled by the Company and CM Management; (v)computer programs; (vi) sources of supply; (vii) Confidential Informationdeveloped by specialized consultants or contractors for the Company and CMManagement; (viii) purchasing, operating, servicing and other cost data; (ix) specialcustomer needs, cost and pricing data; and (x) employee information (including,but not limited to, personnel, payroll, compensation and benefit data andplans), including all such information recorded in manuals, memoranda,projections, minutes, plans, drawings, designs, formula books, specifications,computer programs and records, whether or not legended or otherwise identifiedby the Company or CM Management as Confidential Information, as well as suchinformation that is the subject of meetings and discussions and notrecorded.  Notwithstanding anything inthis subparagraph 3(d), Confidential Information shall not include the contentsof Executive’s rolodex or his Microsoft contacts file.  Confidential Information also shall notinclude such information that is generally available to the public (other thanas a result of a disclosure by the Executive) or that is disclosed to theExecutive by a third party under no obligation to keep such informationconfidential.

 

(e)                                  Upon the termination of the Executive’semployment with the Company and CM Management or upon the Company’s requestprior to such termination, whichever is sooner, the Executive shall immediatelydeliver to the Company all plans, designs, listings, manuals, records,notebooks, and similar repositories of or containing Confidential Informationor other documents and data relating to the Company’s and CM Management’sproducts, services, or business then in the Executive’s possession or controlor available from other persons receiving such documents from the Executive,whether prepared by the Executive or others. The Executive shall not retain any copies or abstracts of any suchdocuments.  Upon the termination of theExecutive’s employment with the Company and CM Management, the Executive shallimmediately deliver to the Company all the property of the Company and CMManagement in his possession or control including, but not limited to,computer(s) and office equipment.

 

(f)                                    Any substantial or material breach by theExecutive of any of the obligations set forth in this Paragraph 3 shallterminate any further obligations that the

 

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Company or CM Managementmay have relative to providing compensation or benefits to the Executive andshall result in the immediate expiration and voiding of any outstandingoptions, rights and other awards, vested or unvested.

 

4.                                       Definitions.

 

(a)                                  “Cause” shall exist only if, afterreasonable investigation, a majority of the Board of Directors of the Company(the “Board”), after providing the Executive (and his counsel, if he sochooses) a reasonable opportunity to be heard, finds that one or more of thefollowing conditions exists:  (i) an actor acts of personal dishonesty or misrepresentation made by the Executive andintended to result in substantial personal enrichment of the Executive at theexpense of the Company or CM Management; (ii) demonstrably willful anddeliberate violations by the Executive of the Executive’s obligations underthis Agreement; (iii) the Executive’s gross neglect (other than any suchfailure resulting from incapacity due to physical or mental illness) or grossmisconduct in carrying out his duties resulting, in either case, in materialeconomic harm to the Company or CM Management; (iv) the final, non-appealableconviction by a court of law of, or plea of nolo contendere by, the Executiveof a felony.

 

(b)                                 A “Change in Control” shall mean theoccurrence during the Term of any one of the following events:

 

(i)                                     Anacquisition (other than directly from the Company) of any shares of the CommonStock of the Company (“Common Shares”) or other voting securities of theCompany by any “Person” (for purposes of this Section only, as the term “person”is used for purposes of Section 13(d) or 14(d) of the Securities ExchangeAct of 1934 (the “Exchange Act”)), immediately after which such Person has “BeneficialOwnership” (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of fifty percent (50%) or more of either (i) the then outstanding CommonShares or (ii) the combined voting power of the Company’s then outstandingvoting securities entitled to vote for the election of directors, trustees ortheir equivalent (the “Voting Securities”); provided, however, that indetermining whether a Change in Control has occurred, Common Shares or VotingSecurities which are acquired in a “Non-Control Acquisition” (as hereinafterdefined) shall not constitute an acquisition which would cause a Change inControl.  A “Non-Control Acquisition”shall mean an acquisition by (i) an employee benefit plan (or a trust forming apart thereof) maintained by (A) the Company or (B) any corporation or otherPerson of which a majority of its voting power or its voting equity securitiesor equity interest is owned, directly or indirectly, by the Company (for purposesof this definition, a “Related Entity”), (ii) the Company or any RelatedEntity, or (iii) any Person in connection with a “Non-Control Transaction” (ashereinafter defined); or

 

(ii)                                  Theindividuals who, on the Effective Date, are members of the Board (the “IncumbentBoard”), (i) cease for any reason (including, without limitation, any increaseor decrease in the size of the Board) to constitute at least a majority of themembers of the Board, or (ii) following a Merger (as hereinafter defined), donot constitute at least a majority of the Board of Directors or its equivalentof (x) the

 

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Surviving Corporation (ashereinafter defined), if fifty percent (50%) or more of the combined votingpower of the then outstanding voting securities of the Surviving Corporation isnot Beneficially Owned, directly or indirectly by a Parent Corporation, or (y)if there is one or more Parent Corporations, the ultimate Parent Corporation(as hereinafter defined); provided, however, that if the election, ornomination for election by the Company’s common shareholders, of any newdirector was approved by a vote of at least a majority of the Incumbent Board,such new director shall, for purposes of this Plan, be considered as a memberof the Incumbent Board; provided, further, however, that no individual shall beconsidered a member of the Incumbent Board if such individual initially assumedoffice as a result of an actual or threatened solicitation of proxies orconsents by or on behalf of a Person other than the Board of Directors of theCompany (a “Proxy Contest”), including by reason of any agreement intended toavoid or settle any Proxy Contest; or

 

(iii)                               Theconsummation of:

 

(A)                              Amerger, consolidation, reorganization or joint venture with or into the Companyor a direct or indirect subsidiary of the Company or in which securities of theCompany are issued (a “Merger”), unless the Merger is a “Non-ControlTransaction.”  A “Non-Control Transaction”shall mean:

 

(I)                                    theshareholders of the Company immediately before such Merger own directly orindirectly immediately following the Merger, in substantially similarproportion as among such shareholders immediately before the Merger, at leastfifty percent (50%) of the outstanding common shares and the combined votingpower of the outstanding voting securities of (x) the corporation orentity resulting from such Merger (the “Surviving Corporation”), if fiftypercent (50%) or more of the combined voting power of the then outstandingvoting securities of the Surviving Corporation is not Beneficially Owned,directly or indirectly, by another corporation or entity (such othercorporation or entity, or group of corporations or entities, being hereinaftercalled a “Parent Corporation”), or (y) if there is one or more ParentCorporations, the Parent Corporation;

 

(II)                                theindividuals who were members of the Incumbent Board immediately prior to theexecution of the agreement providing for the Merger constitute at least amajority of the members of the Board of (x) the Surviving Corporation, iffifty percent (50%) or more of the combined voting power of the thenoutstanding voting securities of the Surviving Corporation is not BeneficiallyOwned, directly or indirectly, by a Parent Corporation, or (y) if there is oneor more Parent Corporations, the Parent Corporation; and

 

(III)                            noPerson other than (1) the Company or another corporation that is a party to theagreement of Merger, (2) any Related Entity, or (3) any employee benefitplan (or any trust forming a part thereof) that, immediately prior to theMerger, was maintained by the Company or any Related Entity, or (4) any Personwho, immediately prior to the Merger had Beneficial Ownership of fifty percent(50%) or more of the then outstanding Common Shares or Voting Securities, hasBeneficial 

 

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Ownership, directly orindirectly, of fifty percent (50%) or more of the combined voting power of theoutstanding voting securities or common shares of (x) the SurvivingCorporation, if fifty percent (50%) or more of the combined voting power of thethen outstanding voting securities of the Surviving Corporation is notBeneficially Owned, directly or indirectly by a Parent Corporation, or (y) ifthere is one or more Parent Corporations, the Parent Corporation.

 

(B)                                Acomplete liquidation or dissolution of the Company; or

 

(C)                                Thesale or other disposition of all or substantially all the assets of the Companyand its subsidiaries taken as a whole to any Person or group of Persons in asingle transaction or series of transactions (other than a transfer to aRelated Entity or under conditions that would constitute a Non-ControlTransaction with the disposition of assets being regarded as a Merger for thispurpose or the distribution to the Company’s shareholders of the stock of aRelated Entity or any other assets); or

 

(iv)                              Anychange in the constitution, capitalization, terms or conditions of thePreferred Stock of the Company that results in a Change on Control as describedin subparagraphs 4(b)(i), (ii) and (iii) above; or

 

(v)                                 Anytransaction or event that causes or results in the Company becoming anexternally managed real estate investment trust.

 

Notwithstanding theforegoing, a Change in Control shall not be deemed to occur solely because anyPerson (the “Subject Person”) acquired Beneficial Ownership of more than thepermitted amount of the then outstanding Common Shares or Voting Securities asa result of the acquisition of Common Shares or Voting Securities by theCompany which, by reducing the number of Common Shares or Voting Securities thenoutstanding, increases the proportional number of shares Beneficially Owned bythe Subject Persons; provided, that if a Change in Control would occur (but forthe operation of this sentence) as a result of the acquisition of Common Sharesor Voting Securities by the Company, and after such share acquisition by theCompany, the Subject Person becomes the Beneficial Owner of any additionalCommon Shares or Voting Securities which increases the percentage of the thenoutstanding Common Shares or Voting Securities Beneficially Owned by theSubject Person, then a Change in Control shall occur.

 

(c)                                  “GoodReason” will exist only upon (i) any material adverse change in the Executive’stitles, powers, responsibilities, authorities or reporting relationships, (ii)any material breach by the Company of any provision of this Agreement or anyOther Agreement, (iii) any reduction in the Executive’s base compensation(including, without limitation, any guaranteed minimum cash or equity bonusesor awards), or (iv) the relocation of the Executive’s principal place ofperformance from its location on the date hereof in New York, New York (or suchother location within the New York metropolitan area within a reasonablecommuting distance from the Executive’s residence in Huntington, New York), ineach case which occurs without the Executive’s

 

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prior writtenconsent and which is not fully corrected by the Company within 30 days ofwritten notice to the Board.

 

5.                                       Full Settlement. The obligation of the Company and/or CM Management to make the paymentsor grant the benefits provided for in this Agreement and otherwise to performits or their obligations hereunder shall not be affected by any set-off,counterclaim, recoupment, defense or other claim, right or action which the Companyor CM Management may have against the Executive or others, except as otherwiseprovided in this Agreement.  In no eventshall the Executive be obligated to seek other employment or take any otheraction by way of mitigation of the amounts payable or benefits granted to theExecutive under any of the provisions of this Agreement and such amounts orbenefits shall not be reduced because the Executive obtains other employment,except as otherwise provided in this Agreement.

 

6.                                       Applicable Law. Any question as to the scope, interpretation and effect of thisAgreement will be resolved under the substantive and procedural laws of theState of Maryland and the United States.

 

7.                                       Enforceability. All provisions and portions of this Agreement are severable.  If any provision or portion of this Agreementor the application of any provision or portion of the Agreement shall bedetermined to be invalid or unenforceable to any extent or for any reason, allother provisions and portions of this Agreement shall remain in full force andeffect and shall continue to be enforceable to the fullest and greatest extentpermitted by law.

 

8.                                       No Representations. The Executive agrees that no promises, other than the promises in thisAgreement, have been made to him by or on behalf of the Company or CMManagement.  He agrees that in executingthis Agreement he is not relying upon any statement or representation, otherthan those set forth herein, made by or on behalf of the Company or CMManagement concerning his employment by the Company or CM Management.

 

9.                                       Successors.

 

(a)                                  This Agreement is personal to theExecutive and without the prior written consent of the Company shall not beassignable by the Executive.  ThisAgreement shall inure to the benefit of and be enforceable by the Executive’slegal representatives.

 

(b)                                 This Agreement shall inure to the benefitof and be binding upon the Company, CM Management and their successors andassigns.

 

(c)                                  The Companyshall require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all the business and/orassets of the Company to assume expressly and agree to perform this Agreementin the same manner and to the same extent that the Company would be required toperform it if no such succession had taken place.

 

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IN WITNESS WHEREOF, the parties have executive this Agreement effectiveas of the Effective Date.

 

 
|   | CRIIMI MAE INC.             |
|--------|-----------------------------|
|   |                        |
|   |                        |
|   | By:                         | /s/ Mark Libera |   |
|   |                        | Mark Libera |
|   |                        | Vice President and General Counsel |
|   |                        |
|   |                        |
|   | CRIIMI MAE MANAGEMENT, INC. |
|   |                        |
|   |                        |
|   | By:                         | /s/ Mark Libera |   |
|   |                        | Mark Libera |
|   |                        | Vice President and General Counsel |
|   |                        |
|   |                        |
|   | EXECUTIVE                   |
|   |                        |
|   |                        |
|   | /s/ Mark R. Jarrell         |   |
|   | Mark R. Jarrell             |
|        |                             |  |  |  |  |

 

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