STRICTLY CONFIDENTIAL
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of July 24, 2000, by and between Prime Retail, Inc., a Maryland corporation
("Prime") and the sole general partner of Prime Retail, L.P., a Delaware limited
partnership (the "Operating Partnership"), the Operating Partnership, (Prime and
the Operating Partnership are sometimes hereinafter together referred to as the
"Company"), and Xxxxx X. Xxxxxxx, an individual domiciled in the State of
Maryland ("Executive").
WITNESSETH
WHEREAS, the Company is engaged primarily in the ownership,
development, construction, acquisition, leasing, marketing and management of
factory outlet centers throughout the United States;
WHEREAS, Prime believes that it would benefit from the application of
Executive's particular and unique skill, experience, and background to the
management and operation of the Company;
WHEREAS, Executive wishes to commit himself to serve the Company in the
positions set forth herein on the terms herein provided;
WHEREAS, the parties wish by this Agreement to amend and restate in
entirety the terms and conditions of the relationship between the Company and
Executive;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the Company and Executive hereby agree as follows:
1. DUTIES. During the Term hereof (as defined in Section 2 hereof), the Company
agrees to retain Executive, and Executive agrees to be retained by the Company,
as the Chief Executive Officer and, at the determination of the Board of
Directors, President and/or Chairman of the Board, on the terms and conditions
provided in this Agreement. Executive shall serve in such positions and his
duties shall include oversight and responsibility for Employer's sales,
marketing, operations, finance and administrative functions. Furthermore,
Executive shall exercise such other powers and authority as are customarily
inherent in a similar positions in a comparable publicly-held entity or as
provided by the By-laws of Prime ("By-laws") and the Agreement of Limited
Partnership of the Operating Partnership, as amended (the "Partnership
Agreement"). Prime, in its capacity as sole general partner of the Operating
Partnership, may, from time to time, in its sole discretion, by action of its
Board of Directors (the "Board") further define and clarify Executive's duties
and services hereunder or under the By-laws or Partnership Agreement in a manner
consistent with the offices for which he has been retained hereunder and the
scope of work set forth herein. Executive agrees to devote his best efforts and
substantially
all of his business time, attention, energy, and skill to performing his duties
to the Company under this Agreement.
2. TERM. Unless earlier terminated in accordance with the terms of this
Agreement, the term of this Agreement shall be a period commending on the date
hereof and ending on the third anniversary of such date. On such third
anniversary and each succeeding anniversary, the Term of this Agreement shall
automatically be extended for an additional one year period unless, not later
than one hundred eighty (180) days prior to any such anniversary, either party
to this Agreement gives notice to the other that the Term of this Agreement
shall not be extended or further extended beyond its then automatically extended
Term.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. For the period of the Term of this Agreement beginning
July 24, 2000, and extending through December 31, 2000, the Operating
Partnership agrees to pay to Executive a base salary in an aggregate amount of
Three Hundred Fifty Thousand Dollars ($350,000) per calendar year, payable in
accordance with the general policies and procedures for payment of salaries to
any other executive personnel of the Company but in all events payable no less
frequently than monthly. During the remainder of the Term of this Agreement, the
Executive's annual base salary will be Four Hundred Thousand Dollars ($400,000).
The yearly base salary payable to Executive pursuant to the provisions of this
Section 3(a) shall be subject to periodic review by the Executive Committee of
the Board of Directors of Prime (the "Committee") based upon periodic review of
the Executive's performance conducted on at least an annual basis and may be
periodically increased or decreased as a result thereof; provided, however, that
the yearly base salary payable to the Executive pursuant to the provisions of
this Section 3(a) shall in no event be less than Three Hundred Fifty Thousand
Dollars ($350,000). The then applicable amount of yearly base salary payable to
the Executive pursuant to the provisions of this Section 3(a) shall herein be
referred to as the "Base Salary."
(b) PERFORMANCE BONUS.
(1) In addition to the Base Salary, the Executive shall have the right to
receive, and the Operating Partnership agrees to pay to the Executive, a
performance bonus for each calendar year during the Term of this Agreement, in
such amounts as the Committee, in its sole discretion, may determine. The
aggregate Performance Bonus for a calendar year payable in accordance with the
provisions of this Section 3(b) shall in no event exceed 100% of the Base Salary
for such calendar year. Further, the Executive shall only be entitled to receive
a Performance Bonus for a calendar year if the Executive has been and continues
to be retained by the Company as an Executive Officer of the Company for the
full calendar year or if the Company terminates Executive's employment without
cause (as defined below) or Executive terminates his employment for good reason
(as defined below). Any amount of Performance Bonus to be paid to the Executive
for a calendar year during the Term of this Agreement shall be paid by the
Company to the Executive during the pay period of the Company following
finalization of the audit for such calendar year and final review and approval
of the bonus by the Committee, and, in all events, on or before March 31 of the
year immediately following the end of the calendar year for which such
Performance Bonus is attributable.
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(2) In the event of a disagreement with regard to the determination of the
Performance Bonus amount, the Committee shall be the final arbiters of such
amount, and their determination shall be final and binding on the Company and
the Executive.
(c) HEALTH INSURANCE AND OTHER BENEFITS.
(1) During the Term of this Agreement and subject to the limitations and
affirmative rights set forth in this Section 3(c), Executive and his eligible
dependents shall have the right to participate in any health, dental, vision and
other medical insurance benefit plans or programs that have been or are
hereafter adopted or maintained by the Company (or in which the Company
participates) according to the terms of such plan or program with all of the
benefits, rights and privileges as are enjoyed by any other senior executive
officer of the Company.
(2) During the Term of this Agreement and subject to the limitations and
affirmative rights set forth in this Section 3(c), Executive and his eligible
dependents shall have the right to participate in any retirement, pension, or
other similar benefit plan or program that has been or is hereafter adopted by
the Company (or in which the Company participates) according to the terms of
such plan or program with all the benefits, rights and privileges as are enjoyed
by any other senior executive officer of the Company.
(3) If the participation of Executive under a plan described in subsection
(2) above would adversely affect the qualification of a plan intended to be
qualified under the Internal Revenue Code of 1986, as amended from time to time
(the "Code"), the Company shall have the right to exclude Executive from that
plan in return for his participation in (x) a non-qualified deferred
compensation plan or (y) an arrangement providing substantially comparable
benefits under a plan that is either a qualified or non-qualified plan under the
Code at the Company's option.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to four (4)
weeks of paid vacation leave during each twelve (12) month calendar period and
paid holidays in accordance with the Company's established policies. Executive
may accrue unused vacation time if not used in any calendar year or years,
however, the maximum cumulative amount of vacation time that Executive may
accrue and carry over to the next year is four weeks. In addition to the
foregoing, Executive may be granted leaves of absence with or without pay for
such other reasons as shall be mutually agreed upon by the Board and Executive.
(e) EXPENSES. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its policy and procedures, for all reasonable and necessary
expenses incurred by the Executive in the performance of his duties hereunder.
(f) LIFE INSURANCE. The Company shall provide $4,000,000 of term life
insurance for the benefit of the Executive during the Term of this Agreement.
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4. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY PRIME.
(1) WITHOUT CAUSE. The Company may terminate this Agreement and Executive's
services at any time for any reason or for no reason at all upon thirty (30)
days' prior written notice to Executive. In connection with the termination of
Executive's services pursuant to this Section 4(a)(1), Executive (and
Executive's eligible dependents with respect to paragraph (D) below) shall be
entitled to receive:
(A) all accrued but unpaid amounts of the Base Salary through the
effective date of termination, payable in accordance with the provisions of
Section 3(a) above;
(B) a termination payment in an amount equal to the sum of (x) one (1)
times the amount of the Base Salary then applicable, plus (y) one (1) times the
average of the amounts payable to the Executive pursuant to the provisions of
Section 3(b) hereof for the two (2) calendar years immediately preceding the
calendar year in which the effective date of the termination of this Agreement
occurs (the sum of the amounts determined by adding subsection (x) and (y) is in
the aggregate hereinafter referred to as the "Normal Termination Payment"), and
the Normal Termination Payment shall be payable within thirty (30) days of the
effective date of termination;
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(d),
3(e) and 3(f) hereof through the effective date of termination, payable in
accordance with the provisions of any such plan(s);
(D) the health insurance benefits specified in Section 3(c)(1) above
for a period of twelve (12) months following the effective date of termination,
and following such time period, the Executive shall be entitled to all rights
afforded to him under the federal Consolidated Omnibus Budget Reconciliation Act
("COBRA") to purchase continuation coverage of such health insurance benefits
for himself and his dependents for the maximum period permitted by law (with
respect to this paragraph (D), to the extent required by applicable law,
Executive shall be deemed to have elected to exercise his rights under COBRA as
of the first day following the effective date of termination); and
(E) the life insurance benefits specified in Section 3(f) above for a
period of twelve (12) months following the effective date of termination.
In the event that Executive is terminated without cause pursuant to
this Section 4(a)(1) and within twelve months from the effective date of such
termination there is a "Change in Control" of the Company (as defined below),
then Executive shall be entitled to receive the benefits set forth in Section
4(e) hereof to the extent and in the amount that such benefits exceed the
amounts paid or received by Executive pursuant to this Section 4(a)(1).
(2) WITH CAUSE. The Company may terminate this Agreement with "cause"
immediately upon written notice to Executive. In connection with the termination
of Executive's services pursuant to this Section 4(a)(2), Executive (and
Executive's eligible dependents with respect to paragraph (D) below) shall be
entitled to:
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(A) receive all accrued but unpaid amounts of the Base Salary through
the effective date of termination, payable in accordance with the provisions of
Section 3(a) above;
(B) forfeit his entitlement to any bonuses or other payments otherwise
payable to him in accordance with Section 3(b) hereof;
(C) receive the vested benefits or amounts pursuant to Sections 3(c),
3(d), 3(e) and 3(f) hereof through the effective date of termination, payable as
otherwise provided in such Sections;
(D) receive the health insurance benefits specified in Section 3(c)(1)
above for a period of three (3) months following the effective date of
termination, and following such time period, the Executive shall be entitled to
all rights afforded to him under COBRA to purchase continuation coverage of such
health insurance benefits for himself and his dependents for the maximum period
permitted by law (with respect to this paragraph (D), to the extent required by
applicable law, Executive shall be deemed to have elected to exercise his rights
under COBRA as of the first day of following the effective date of termination);
and
(E) receive the life insurance benefits specified in Section 3(f)
above for a period of three (3) months following the effective date of
termination.
(3) "CAUSE" DEFINED. For purposes of this Agreement, "Cause" shall mean a
reasonable, good faith finding by a majority of the Board (A) that Executive has
harmed the Company through an act of dishonesty or material conflict of interest
that relates to the performance of Executive's duties hereunder, (B) of
Executive's conviction of a felony involving moral turpitude, fraud or
embezzlement, (C) that Executive's willful failure to perform in any material
respect his duties under this Agreement (other than a failure due to disability)
that results in material harm to the Company, after written notice specifying
the failure and a reasonable opportunity of at least thirty (30) days to cure
(it being understood that if Executive's failure to perform is not of a type
requiring a single action to fully cure, then Executive may commence the cure
promptly after such written notice and thereafter diligently prosecute such cure
to completion) or (D) of a material and willful breach by Executive of any of
his obligations hereunder and the failure of Executive to cure such breach
within thirty (30) days after receipt by Executive of a written notice of the
Company specifying in reasonable detail the nature of the breach. The Company
intends that "Cause" must be based only on meaningful and significant matters
and not on matters of minor importance. For purposes of this Section, an act, or
failure to act, on Executive's part shall be considered "willful" only if done,
or omitted to be done, by him not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
(4) DISABILITY. If due to illness, physical or mental disability, or other
incapacity, Executive shall fail to perform the duties required by this
Agreement during any four (4) consecutive months during the Term of this
Agreement, the Company may terminate this Agreement upon thirty (30) days
written notice to Executive. In such event, Executive (and Executive's eligible
dependents with respect to paragraph (D) below) shall receive:
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(A) all accrued but unpaid amounts of the Base Salary through the
effective date of termination, payable in accordance with the provisions of
Section 3(a) above;
(B) a Normal Termination Payment which shall be payable within thirty
(30) days of the effective date of termination;
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(d),
3(e) and 3(f) hereof through the effective date of termination, payable in
accordance with the provisions of any such plan(s);
(D) the health insurance benefits specified in Section 3(c)(1) above
for a period of twelve (12) months following the effective date of termination,
and following such time period, the Executive shall be entitled to all rights
afforded to him under COBRA to purchase continuation coverage of such health
insurance benefits for himself and his dependents for the maximum period
permitted by law (with respect to this paragraph (D), to the extent required by
applicable law, Executive shall be deemed to have elected to exercise his rights
under COBRA as of the first day following the effective date of termination);
and
(E) the life insurance benefits specified in Section 3(f) above for a
period of twelve (12) months following the date of termination.
This Section 4(a)(iii) shall not limit the entitlement of the
Executive, his estate or beneficiaries to any disability or other benefits
available to Executive under any disability insurance or other benefits plan or
policy that is maintained by the Company for Executive's benefit.
(b) TERMINATION BY EXECUTIVE.
(1) WITH GOOD REASON. Executive may terminate this Agreement with "good
reason" upon written notice to the Company. In connection with the termination
of this Agreement pursuant to this Section 4(b)(1), Executive (and Executive's
eligible dependents with respect to paragraph (E) below) shall be entitled to
receive:
(A) all accrued but unpaid amounts of the Base Salary through the
effective date of termination, payable in accordance with the provisions of
Section 3(a) above;
(B) a termination payment in an amount equal to one (1) times the
amount of the Base Salary, payable within thirty (30) days of the effective date
of termination;
(C) any earned and unpaid bonus(es) otherwise payable to him in
accordance with Sections 3(b);
(D) any vested benefits or amounts pursuant to Sections 3(c), 3(d),
3(e) and 3(f) hereof through the effective date of termination, payable as
otherwise provided in such Sections;
(E) the health insurance benefits specified in Section 3(c)(1) above
for the for a period of twelve (12) months following the effective date of
termination, and following such
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time period, the Executive shall be entitled to all rights afforded to him under
COBRA to purchase continuation coverage of such health insurance benefits for
himself and his dependents for the maximum period permitted by law (with respect
to this paragraph (E), to the extent required by applicable law, Executive shall
be deemed to have elected to exercise his rights under COBRA as of the first day
following the effective date of termination); and
(F) the life insurance benefits specified in Section 3(f) above for a
period of twelve (12) months following the date of termination.
(2) WITHOUT GOOD REASON. Executive may terminate this Agreement at any time
for any reason or for no reason at all upon sixty (60) days' written notice to
Company, during which period Executive shall continue to perform his duties
under this Agreement if Prime so elects. In connection with the termination of
Executive's services pursuant to this Section 4(b)(2), Executive (and
Executive's eligible dependents with respect to paragraph (C) below) shall be
entitled to receive:
(A) all accrued but unpaid amounts of the Base Salary through the
effective date of termination, paid in accordance with the provisions of Section
3(a) above;
(B) the vested benefits and amounts set forth in Sections 3(c), 3(d),
3(e) and 3(f) hereof through the effective date of termination, payable in
accordance with the provisions of such Sections;
(C) the health insurance benefits specified in Section 3(c)(1) above
for a period of six (6) months following the effective date of termination, and
following such time period, the Executive shall be entitled to all rights
afforded to him under COBRA to purchase continuation coverage of such health
insurance benefits for himself and his dependents for the maximum period
permitted by law (with respect to this paragraph (C), to the extent required by
applicable law, Executive shall be deemed to have elected to exercise his rights
under COBRA as of the first day following the effective date of termination);
and
(D) the life insurance benefits specified in Section 3(f) above for a
period of three (3) months following the date of termination.
(E) "GOOD REASON" DEFINED. For purposes of this Agreement, "good
reason" shall mean (A) the material breach by the Company of any of its
obligations hereunder (a bona fide dispute regarding the Performance Bonus shall
not be a material breach by the Company) and the failure of the Company to cure
such breach within thirty (30) days after receipt by the Company of a written
notice from the Executive specifying in reasonable detail the nature of the
breach, unless such breach requires a longer period to cure, then the Company
shall have the right to cure such breach within such additional period of time
not to exceed ninety (90) days, (B) Executive's title or scope of
responsibilities and duties are diminished as they existed and as provided in
this Agreement immediately prior to such event, or the Company fails to provide
Executive with adequate office facilities and support services to perform such
responsibilities and duties, (C) the amounts payable to the Executive as existed
and as provided in this Agreement immediately prior to such event have been
materially reduced in any way, or (D) the Company fails to continue in effect
any cash or stock-based incentive or bonus plan, retirement
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plan, welfare benefit plan, or other benefit plan, program or arrangement,
unless the aggregate value (as computed by an independent employee benefits
consultant) of all such compensation, retirement and benefit plans, programs and
arrangements provided to Executive is not materially less than their aggregate
value as of the date of this Agreement (or as of the Change of Control, if
greater).
(c) DEATH. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate on the date of Executive's death. In this event,
Executive's estate shall be entitled to receive all accrued but unpaid amounts
of the Executive's Base Salary through the date of Executive's death, payable in
accordance with the provisions of Section 3(a) above. In addition, the
Executive's eligible dependents shall be entitled to receive the health
insurance benefits specified in Section 3(c)(1) above for a period of twelve
(12) months following the effective date of termination and following such time
period, such eligible decedents shall be entitled to all rights afforded to them
under COBRA to purchase continuation coverage of such health insurance benefits
for the maximum period permitted by law. With respect to the preceding sentence,
to the extent required by applicable law, the Executive's dependents shall be
deemed to have elected to exercise their rights under COBRA as of the first day
following the effective date of termination. This Section 4(c) shall not limit
the entitlement of Executive under any insurance or other benefits plan or
policy that is maintained by Prime for Executive's benefit.
(d) PURCHASE OF LIFE INSURANCE. Notwithstanding anything to the contrary
contained herein, in the event that the services of the Executive with the
Company terminate for any reason other than death, the Executive shall have the
right to acquire any life insurance policies maintained by the Company on the
life of the Executive by (i) notifying the Company in writing of his desire to
so purchase such life insurance policy or policies and (ii) tendering to the
Company a cashier's check in an amount equal to the interpolated surrender cash
value of such life insurance policy or policies together with any unearned
portion of any current year premium thereof, both within sixty (60) days of the
effective date of such termination.
(e) TERMINATION FOLLOWING A CHANGE OF CONTROL. If, within twenty-four (24)
months following a Change of Control, the Company terminates this Agreement and
Executive's services other than for cause or Executive terminates this Agreement
with good reason, in either case, by giving thirty (30) days' prior written
notice, Executive (and Executive's eligible dependents with respect to paragraph
(D) below) shall be entitled to receive the following benefits and payments:
(A) all accrued but unpaid amounts of the Base Salary through the
effective date of termination, payable in accordance with the provisions of
Section 3(a) above;
(B) a termination payment in an amount equal to $1,600,000, payable
within thirty (30) days of the effective date of termination;
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(d),
3(e) and 3(f) hereof through the effective date of termination, payable in
accordance with the provisions of any such plan(s);
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(D) the health insurance benefits specified in Section 3(c)(1) above
for a period of twenty-four (24) months following the effective date of
termination, and following such time period, the Executive shall be entitled to
all rights afforded to him under COBRA to purchase continuation coverage of such
health insurance benefits for himself and his dependents for the maximum period
permitted by law (with respect to this paragraph (D), to the extent required by
applicable law, Executive shall be deemed to have elected to exercise his rights
under COBRA as of the first day following the effective date of termination);
and
(E) the life insurance benefits specified in Section 3(f) above for a
period of twenty-four (24) months following the effective date of termination.
(F) Executive shall be fully vested in all amounts accrued or
accumulated on behalf of Executive under any non-qualified retirement plan
established or maintained by the Company, and the Company will promptly pay or
distribute all such amounts to Executive in accordance with the terms of such
plan as in effect on the date of this Agreement (or as of Executive's employment
termination, if more favorable to Executive). If Executive is not fully vested
in his accounts or benefits under the Company's qualified retirement plan at his
employment termination pursuant to this Section, the Company will make a cash
payment to Executive, within 30 days of Executive's employment termination,
equal to the amount of such account or benefit that is forfeited.
(G) All stock awards or grants under the Prime Retail, Inc. [1998]
Stock Incentive Plan shall be fully vested any exercisable as of Executive's
employment termination.
(H) "CHANGE OF CONTROL" DEFINED. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred if (1) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Prime, a corporation owned directly or
indirectly by the stockholders of Prime (immediately prior to the initial public
offering of Prime) in substantially the same proportions as their ownership of
stock of Prime (immediately prior to the initial public offering of Prime),
Executive, Xxxxxxx X. Xxxxxxx or Xxxxxxx Xxxxxxxxx or any of their respective
affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of Prime representing 50% or more of
the total voting power represented by Prime's then outstanding securities that
vote generally in the election of directors (referred to herein as "Voting
Securities"); (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Prime's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; (3) the stockholders of Prime
approve a merger or consolidation of Prime with any other corporation, other
than a merger or consolidation that (i) would result in the Voting Securities of
Prime outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 50% of the total voting power represented by the
Voting Securities of Prime or such surviving entity outstanding immediately
after such merger or consolidation or (ii) 50% or more of the Board of Directors
of the surviving entity is composed of members from the
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Board of Directors of Prime; (4) the stockholders of Prime approve a plan of
complete liquidation of Prime or an agreement for the sale or disposition by
Prime of (in one transaction or a series of transactions) all or substantially
all of Prime's assets.
5. COVENANTS OF EXECUTIVE.
(a) NO CONFLICTS. Executive represents and warrants that he is not
personally subject to any agreement, order or decree that restricts his
acceptance of this Agreement and performance of his duties with the Company
hereunder.
(b) NON-COMPETITION. In return for the performance of the management duties
described in Section 1 hereof, during the Term of the Agreement and for a period
of two years thereafter in the event of the termination of this Agreement
pursuant to the provisions of Sections 4(a)(1), 4(a)(2), 4(b)(1), 4(b)(2), or
4(e) hereof (the "Restrictive Period"), Executive shall not, directly or
indirectly, in any capacity whatsoever, either on his own behalf or on behalf of
any other person or entity with whom he may be employed or associated, compete
with the Business (as hereinafter defined) in any of the following described
manners: (i) perform services of the types that Executive performs on behalf of
the Group (as hereinafter defined) for himself, or any affiliate of himself or
for any competitor of the Group if such competitor engages in the Business
within the United States and any other geographic area or territory wherein the
Group is engaged in the Business at the time of Executive's termination of
services hereunder ("Restrictive Geographic Area"); or (ii) solicit or accept
any Business (or help any other person solicit or accept any Business) from any
person or entity that on the date of this Agreement is a vendor, customer or
tenant of the Group or at the time of termination of this Agreement any vendor,
customer or tenant that is actively being pursued by the Group and that
Executive knows is being pursued. For purposes hereof, "Group" shall mean Prime
and the Operating Partnership and any of their respective subsidiaries or
affiliates, and the term "Business" means any interest in any real property
within the retail business that is within the primary business of the Company,
as determined from time to time, by a majority vote of the independent directors
of the Company. Furthermore, during the Restrictive Period, Executive shall not,
directly or indirectly, induce or attempt to persuade any employee or customer,
vendor or tenant of the Group or any such entity being actively pursued by the
Group to terminate its business relationship with the Group or not proceed with
a business relationship with the Group. Notwithstanding the foregoing, nothing
herein shall prohibit Executive from owning 5% or less of any securities of a
competitor engaged in the same Business if such securities are listed on a
nationally recognized securities exchange or traded over-the-counter on the
National Association of Securities Dealers Automated Quotation System or
otherwise. So long as the Executive is in compliance with the provisions of this
Section 6(b), and in addition to the payments required under any other Section
of this Agreement, the Company will pay the Executive an amount equal to
$66,666.66 per calendar month in arrears for a period of two (2) years beginning
with the first calendar month after termination of this Agreement pursuant to
the provisions of Sections 4(a)(1), 4(b)(1), or 4(e) hereof. Upon written notice
at any time prior to thirty (30) days before the expiration of the first year
after termination, the Company or the Executive may elect to limit the
Restrictive Period relating to a termination of this Agreement pursuant to
Sections 4(a)(1), 4(b)(1) or 4(e) to one year; whereupon, the $66,666.66 monthly
payments shall cease at the end of said first year. If this Agreement is
terminated pursuant to the provisions of Sections 4(a)(2) or 4(b)(2) hereof,
then the Executive shall not be entitled to receive any amounts during the
Restrictive Period.
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(c) NON-DISCLOSURE. During the Restrictive Period and in the Restrictive
Geographic Area, Executive shall not disclose or use, except in the pursuit of
the Business for or on behalf of the Group, any Trade Secret (as hereinafter
defined) of the Group, whether such Trade Secret is in Executive's memory or
embodied in writing or other physical form. For purposes of this Section 6(c),
"Trade Secret" means any information that derives independent economic value,
actual or potential, with respect to the Company from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use and is the subject of
efforts to maintain its secrecy that are reasonable under the circumstances,
including, but not limited to, trade secrets, customer lists, sales records and
other proprietary commercial information. Said term, however, shall not include
general "know-how" information acquired by Executive during the course of his
service which could have been obtained by him from public sources without the
expenditure of significant time, effort and expense that does not relate to the
Company.
(d) RETURN OF DOCUMENTS. Upon termination of his services with the Company,
Executive shall return all originals and copies of books, records, documents,
customer lists, sales materials, tapes, keys, credit cards and other tangible
property of the Company within Executive's possession or under his control.
(e) EQUITABLE RELIEF. In the event of any breach by Executive of any of the
covenants contained in this Section 6, it is specifically understood and agreed
that Company shall be entitled, in addition to any other remedy that it may
have, to equitable relief by way of injunction, an accounting or otherwise and
to notify any employer or prospective employer of Executive as to the terms and
conditions hereof.
(f) ACKNOWLEDGMENT. Executive acknowledges that he will be directly and
materially involved as a senior executive in all important policy and
operational decisions of Company. Executive further acknowledges that the scope
of the foregoing restrictions has been specifically bargained between Company
and Executive, each being fully informed of all relevant facts. Accordingly,
Executive acknowledges that the foregoing restrictions of Section 6 are fair and
reasonable, are minimally necessary to protect the Company, its other
stockholders and the public from the unfair competition of Executive who, as a
result of his performance of services on behalf of the Company, will have had
unlimited access to the most confidential and important information of the
Company, its business and future plans. Executive furthermore acknowledges that
no unreasonable harm or injury will be suffered by him from enforcement of the
covenants contained herein and that he will be able to earn a reasonable
livelihood following termination of his services notwithstanding enforcement of
the covenants contained herein.
(g) INDEMNIFICATION. Subject to the provisions of this Agreement, Executive
shall indemnify the Company for any and all consequential damages, costs and
expenses (including legal fees) resulting from any of his acts or omissions that
constitute bad faith, willful or intentional conduct that cause harm to the
Company's business or reputation. Executive also shall indemnify the Company for
any and all consequential damages, costs and expenses resulting from his acts of
omission constituting reckless disregard of his duties to the Company following
notice thereof by either Prime or the Operating Partnership after either becomes
aware of such conduct and Executive's failure to so cure within 30 days.
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6. GROSS UP PAYMENTS. Anything in this Agreement to the contrary
notwithstanding, in the event that any payment by or on behalf of the Company to
or for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section) (the "Payments") is determined to be an "excess parachute payment"
pursuant to Code Section 280G or any successor or substitute provision of the
Code, with the effect that Executive is liable for the payment of the excise tax
described in Code Section 4999 or any successor or substitute provision of the
Code, or any interest or penalties are incurred by Executive with respect to
such Payments (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by Executive of all taxes imposed upon the
Gross-Up Payment, including, without limitation, federal, state, local or other
income taxes, FICA taxes, and additional Excise Tax (and any interest and
penalties imposed with respect to such taxes), Executive retains a portion of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(a) DETERMINATION OF GROSS-UP. Subject to the provisions of paragraph (b)
below, all determinations required to be made under this Section, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the public accounting firm that serves as the Company's
auditors (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and Executive within 15 business days of the
receipt of notice from the Company or Executive that there have been Payments,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, Executive shall designate another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section, shall be paid by the Company to Executive within five days after the
receipt by the Company and Executive of the Accounting firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion that failure to report the Excise
Tax on Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive, except as
provided in paragraph (b) below.
(b) IRS CLAIMS. As a result of the 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 the Internal Revenue Service or
other agency will claim that a greater Excise Tax is due, and thus a greater
amount of Gross-Up Payment should have been made by the Company than that
determined pursuant to paragraph (a) above (an "Underpayment"). In the event
that Executive is required to make a payment of any such Excise Tax, the
Accounting Firm shall determine the amount of the additional Gross-Up Payment
due to the Executive based on the Underpayment, and such additional Gross-Up
Payment shall be promptly paid by the Company to or for the benefit of the
Executive. Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or other agency that, if successful, would require the
payment by the Company of the Gross-Up Payment or an Underpayment.
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7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any and all
other employment or service arrangements between Executive, on the one hand, and
Prime and/or the Operating Partnership or its predecessors or any subsidiaries,
on the other hand, and any and all such employment or service agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. ASSIGNMENT. Neither this Agreement nor any rights or duties of Executive
hereunder shall be assignable by Executive and any such purported assignment by
him shall be void. Prime may assign all or any of its right hereunder provided
that substantially all of the assets of the Company are also transferred to the
same party; provided, however, that Prime and the Operating Partnership, jointly
and severally shall remain primarily liable to Executive to fulfill all of the
Company's obligations under this Agreement and that any such assignee also
agrees to be primarily liable to Executive jointly and severally with the
Company to fulfil all of the Company's obligations under this Agreement as
provided in Section 9 below.
9. SUCCESSORS. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and the Company's
successors and assigns. If Executive should die while any amounts are still
payable to Executive hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there be no such designee,
to Executive's estate. The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, as the case may be,
by agreement in form and substance reasonably satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
10. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if delivered in person or sent by any
national overnight delivery service or by certified mail to the following
addresses (or to any other address that any party may designate by notice to the
other parties hereto):
(a) if to Executive, to:
Xxxxx X. Xxxxxxx
000 Xxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
with a copy to (which will not constitute notice):
Xxxxxxx X. Xxxxxx
Miles & Stockbridge P.C.
00 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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(b) if to Prime or to the Operating Partnership, to:
Prime Retail, Inc.
000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
General Counsel
with a copy to:
Xxxxxx X. Xxxxx
Xxxxxxx & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
11. AMENDMENT. This Agreement may not be changed, modified or amended except in
writing signed by all of the parties hereto.
12. WAIVER OF BREACH. The waiver by any of the parties hereto of the breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any part.
13. SEVERABILITY. The Company and Executive each expressly agree and contract
that it is not the intention of any of the parties hereto to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of such paragraph and this Agreement shall remain binding on the parties to make
the covenants of this Agreement binding only to the extent that it may be
lawfully done under existing applicable laws. In the event that any part of any
covenant of this Agreement is determined by a court of competent jurisdiction to
be overly broad thereby making the covenant unenforceable, the parties hereto
agree, and it is their desire that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.
14. OPPORTUNITY TO EMPLOY COUNSEL. Executive acknowledges receipt of a copy of
this Agreement prior to his execution of this Agreement with the Company and
also acknowledges that he has had ample time and opportunity to employ counsel
of his choice to provide advice concerning the terms and conditions of this
Agreement.
15. LEGAL FEES. If the Company materially breaches any of its obligations to
Executive under this Agreement and the Executive brings any action, claim,
demand, suit or proceeding against the Company to enforce his rights under this
Agreement, the Company agrees that it will pay all reasonable legal fees and
related legal costs (collectively "Legal Fees") incurred by Executive no later
than thirty (30) days following a judgment by a court of competent jurisdiction
that the Company materially breached its obligations to the Executive under this
Agreement; provided,
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however, that if it is determined by a final judgment or other final
adjudication by a court of competent jurisdiction that the Company did not
materially breach any of its obligations to Executive under this Agreement,
Executive will pay to Company within thirty (30) days from such final judgment
or adjudication the aggregate amount of legal fees and expenses incurred by
Company with respect to such action and the amount of any Legal Fees that were
previously paid to Executive by the Company pursuant to this Section 15. The
Company acknowledges the indemnification obligations of Prime to the Executive
and the other officers of Prime as set forth in its By-laws, as they may be
amended from time to time.
16. GOVERNING LAW. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Maryland,
exclusive of the conflict of laws provisions of the State of Maryland.
17. NOTICE OF FUTURE EMPLOYMENT. Executive agrees that during the twenty-four
(24) consecutive months immediately following the termination of this Agreement,
Executive will within fourteen (14) days of each instance of new employment
notify Prime in writing of the identity of his new employer and the job title
associated with such employment.
18. BINDING EFFECT. This Agreement shall be binding and legally enforceable
against the parties hereto and their respective heirs, personal representatives,
successors and assigns, as the case may be.
-15-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
EXECUTIVE:
/s/ Xxxxx X. Xxxxxxx
--------------------------
Xxxxx X. Xxxxxxx
PRIME RETAIL, INC. PRIME RETAIL, L.P.
By: /s/ C. Xxxx Xxxxxxxxx By: Prime Retail, Inc.
--------------------- Its: General Partner
Name: C. Xxxx Xxxxxxxxx
Title: Executive Vice President
General Counsel & Secretary By: /s/ C. Xxxx Xxxxxxxxx
------------------------
Name: C. Xxxx Xxxxxxxxx
Title: Executive Vice President
General Counsel & Secretary
