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Exhibit 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of _____________,
1997, is entered into between Tower Realty Trust, Inc., a Maryland corporation
(the "Company"), and Xxxxxxxx X. Xxxxxxx ("Executive").
RECITALS
A. The Company is a corporation intended to be qualified and to
operate as a real estate investment trust under the Internal Revenue Code of
1986, as amended.
B. The Company is the general partner of Tower Realty Operating
Partnership, L.P., a Delaware limited partnership, which has, among other
things, acquired interests in various properties from, among others, the
principals of Tower Equities & Realty Corp. ("Tower Equities"), including
Executive.
C. The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. EMPLOYMENT DUTIES. During the Term (as defined in paragraph 2
below), the Company will employ Executive as its Chairman, Chief Executive
Officer and President. Executive will devote substantially all of his business
time and attention to the performance of his duties under this Agreement.
Executive initially shall have the duties, rights and responsibilities normally
associated with his position with the Company, together with such other
reasonable duties relating to the operation of the business of the Company and
its affiliates as may be assigned to him from time to time by the Board of
Directors of the Company (the "Board") or may otherwise be provided for in the
Company's Bylaws. If the Company shall so request, Executive shall become and
shall, at any time during the term of this Agreement as the Company shall so
request, act as a director of the Company and/or as an officer and/or director
of any of the subsidiaries of the Company as they may now exist or may be
established by the Company in the future without any compensation other than
that provided for in paragraph 3.
2. TERM. The term of Executive's employment under this Agreement (the
"Term") will begin on the date of this Agreement and will continue, subject to
the termination provisions set forth in paragraph 5 below, until the third
anniversary of the date hereof; provided that, commencing on the third
anniversary of the date hereof and on each anniversary thereafter, the Term
shall automatically be extended for one year unless either the Company or
Executive gives written notice of non-extension to the other at least 90 days
prior to the expiration of the Term.
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3. SALARY AND BONUS.
a. Salary. During each year of the Term, Executive will receive a
salary at the annual rate of $175,000, which salary will be subject to increase
as set forth below (as so increased, the "Base Salary"). The Compensation
Committee of the Board (the "Committee") will review Executive's Base Salary on
an annual basis, and the Committee, upon such review and in its sole discretion,
may increase or decrease the Base Salary by an amount which the Committee deems
appropriate in light of the Company's and Executive's performance during the
period covered by such review; provided, however, that the Base Salary will not
be reduced below $175,000 per annum. The Base Salary will be payable to
Executive in accordance with the Company's standard payroll practices.
b. Bonus. In addition to the Base Salary, the Company may pay to
Executive performance-based bonus compensation for each fiscal year of the
Company as determined by the Committee in its sole discretion.
4. FRINGE BENEFITS. In addition to the other compensation payable
pursuant to this Agreement, during the Term:
a. Standard Benefits. Executive will be entitled to receive such
fringe benefits and perquisites, including medical and life insurance, as are
generally made available from time to time to management employees and
Executives of the Company and to participate in any pension, profit-sharing,
stock option or similar plan or program established from time to time by the
Company for the benefit of its employees.
b. Vacation and Sick Leave. Executive will be entitled to such periods
of paid vacation and sick leave allowance each year (not less than three weeks
vacation and seven days of sick leave) that are consistent with the Company's
vacation and sick leave policy for senior management.
c. Business Expenses. The Company will pay or reimburse Executive for
all business-related expenses incurred by Executive in the course of his
performance of duties under this Agreement, subject to the procedures
established by the Company from time to time with respect to incurrence,
substantiation, reasonableness and approval.
d. Stock Options. Executive shall be entitled to participate in
employee stock plans from time to time established for the benefit of employees
of the Company in accordance with the terms and conditions of such plans. Upon
effectiveness of the registration statement relating to the Company's initial
public offering of shares of its Common Stock (the "IPO"), Executive shall
receive a grant of 201,000 stock options pursuant to and subject to the
Company's 1997 Incentive Plan, which options shall vest, subject to Executive's
continuing to be employed by the Company on the applicable dates, in three equal
annual installments beginning on the first
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anniversary of the IPO. The option exercise price with respect to the stock
options granted on the date of the IPO shall be equal to the price per share of
Common Stock in the IPO. Notwithstanding the foregoing, stock options granted to
Executive shall vest in full upon (i) a Change in Control of the Company (as
defined herein), or (ii) Executive's termination of employment as a result of
Executive's death or becoming "permanently disabled" (as defined herein) and
Executive or Executive's estate shall have one (1) year from such termination,
or remaining term of the option, if earlier, to exercise such options. For
purposes of this Agreement, a "Change in Control" is deemed to occur at the time
when either (i) any entity, person or group (other than the Company or an
affiliate of the Company or any savings, pension or other benefit plan for the
benefit of employees of the Company) acquires shares of Common Stock in a
transaction or series of transactions that results in such entity, person or
group directly or indirectly owning fifty (50%) percent or more of the
outstanding Common Stock or (ii) the election or appointment, within a twelve
(12) month period, of persons to the Board who are not Board members at the
beginning of such twelve (12) month period, whose election or appointment was
not approved by a majority of those persons who were Board members at the
beginning of such period, and which newly elected or appointed Board members
shall constitute a majority of the Board.
5. TERMINATION OF EMPLOYMENT.
a. Death and Disability. Executive's employment under this Agreement
will terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may terminate Executive's employment under
this Agreement for "Cause" (as defined below), upon providing Executive 30 days'
prior written notice of termination (subject to extension as described in clause
(i) below), which notice will describe in detail the basis of such termination
and will become effective on the 30th day after Executive's receipt thereof
unless Executive (i) cures the alleged violation or other circumstance which was
the basis of such termination within such 30-day notice period or such longer
period which shall not exceed 90 days in which Executive is diligently pursuing
a cure and such cure requires longer than 30 days to effect or (ii) sends,
within such 30-day notice period, written notice to the Board disputing in good
faith the existence of Cause and requesting arbitration of such dispute pursuant
to paragraph 9 below. During the pendency of the arbitration, Executive will
continue to receive all compensation and benefits to which he is entitled
hereunder. If the Company is not successful in obtaining a determination by the
arbitrators that there was Cause for termination, the Company will pay
Executive's reasonable expenses, including, without limitation, reasonable
attorneys' fees and disbursements, in connection with such dispute resolution.
c. For Good Reason. Executive may terminate his employment under this
Agreement for "Good Reason" (as defined below) upon providing the Company 30
days' prior
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written notice of termination, which notice will detail the basis of such
termination and will become effective on the 30th day after the Company's
receipt thereof unless the Company cures the alleged violation or other
circumstance which was the basis of such termination within such 30-day notice
period.
d. Definitions. For purposes of this Agreement:
(i) Executive will be deemed "permanently disabled" if he
becomes unable to discharge his normal duties as contemplated under
this Agreement for more than six consecutive months as a result of
incapacity due to mental or physical illness as determined by a
physician acceptable to Executive and the Company and paid by the
Company, whose determination will be final and binding. If
Executive and the Company are unable to agree on a physician,
Executive and the Company will each choose one physician who will
mutually choose the third physician, whose determination will be
final and binding.
(ii) "Cause" means either (A) a material breach by Executive
of any material provisions of this Agreement, but only if, after
notice provided in subparagraph (b) above, Executive fails to cure
such breach as described in Section 5b; (B) action by Executive
constituting willful misconduct or gross negligence in connection
with performing his duties hereunder; (C) an act of fraud,
misappropriation of funds or embezzlement or conduct materially
injurious to the interest of the Company by Executive in connection
with his employment hereunder; or (D) Executive is convicted of,
pleads guilty to or confesses to any felony.
(iii) "Good Reason" means the occurrence of any of the
following, without the prior written consent of Executive: (A) any
substantial diminution of duties, responsibilities, authorities,
powers, functions or status which is not withdrawn or corrected
within a 30-day period following notice by Executive to the Company
of such diminution; (B) a breach by the Company of any of its
material obligations under this Agreement, but only if after
expiration of the 30-day notice period provided in subparagraph (c)
above, the Company fails to cure such breach; or (C) a relocation
of the Company's principal executive offices or of Executive's
principal place of employment to a location more than 25 miles from
New York, New York.
6. BENEFITS UPON TERMINATION.
a. Termination with Cause or Resignation. Upon termination of
Executive's employment by the Company pursuant to paragraph 5(b) above or a
voluntary resignation by Executive (other than for Good Reason pursuant to
paragraph 5(c) above), the Company will
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remain obligated to pay Executive only the unpaid portion of his Base Salary,
bonus and benefits (including the value of any untaken vacation time to the
extent Executive has, during the year in which such termination occurs, taken
less vacation time than permitted to him hereunder), to the extent accrued
through the effective date of termination. Any amount due under this
subparagraph will be payable within 30 days after the date of termination. In
addition to whatever other rights or remedies the Company may have at law or in
equity, upon Executive's termination for Cause, all stock options and other
stock-based grants held by Executive, whether vested or unvested as of the date
of termination, shall immediately expire on the date of termination.
b. Termination without Cause or for Good Reason. Upon termination of
Executive's employment (x) by the Company without Cause or (y) by Executive for
Good Reason, Executive will be entitled to the benefits provided below, subject
to signing by Executive of a general release of claims in a form satisfactory to
the Company:
(i) the Company will pay as severance pay to Executive, in
monthly installments over a twelve-month period, an amount (the
"Severance Amount") equal to the greater of (x) the aggregate of
all compensation due to Executive hereunder during the balance of
the Term, assuming that the annual bonuses payable to Executive
during such period will equal the average of the annual bonuses
paid to Executive under this Agreement prior to termination of
employment, or (y) 2.99 (or after the second anniversary of the
date of this Agreement, 1.99 times) times the "base amount" within
the meaning of Sections 280G(b)(3) and 280G(d) of the Internal
Revenue Code of 1986, as amended (the "Code"), and any applicable
temporary or final regulations promulgated thereunder, or its
equivalent as provided in any successor statute or regulation. If
Section 280G of the Code (and any successor provisions thereto) is
repealed, then the Severance Amount will be calculated using the
definition of "base amount" as in effect immediately prior to its
repeal; and
(ii) for the longer of the duration of the Term or 12 months
following Executive's termination of employment, those fringe
benefits specified in paragraph 4(a) above, including coverage
under all insurance programs and plans.
c. Termination Upon Death or Permanent Disability. Upon termination of
Executive's employment upon Executive's death or permanent disability, Executive
or Executive's estate will be entitled to the benefits provided below, subject
to signing by Executive or Executive's estate of a general release of claims in
a form satisfactory to the Company:
(i) the Company will pay as severance pay to Executive or
Executive's estate, in monthly installments over a twelve-month
period, an amount equal to
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the Executive's Base Salary as in effect on the date of termination
of employment; and
(ii) in the case of Executive's permanent disability, for the
one (1) year period following termination of employment, those
fringe benefits specified in paragraph 4(a) above, including
coverage under all insurance programs and plans.
d. No Mitigation. Executive will not be required to mitigate the
amount of any payment provided for in this paragraph 6 by seeking other
employment or otherwise, nor will the amount of any payment or benefit provided
for in this paragraph 6 be reduced by any compensation earned by him as the
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
e. Expiration of this Agreement. In the event the Term of this
Agreement expires without having otherwise been previously terminated pursuant
to paragraph 5 above or by the Company without Cause, Executive will not be
entitled to any severance compensation whatsoever under this paragraph 6.
7. NO SOLICITATION; CONFIDENTIALITY; COMPETITION
a. During the Restricted Period (defined below), neither Executive nor
any Executive-Controlled Person (defined below) will, without the prior written
consent of the Board, directly or indirectly solicit for employment, employ in
any capacity or make an unsolicited recommendation to any other person that it
employ or solicit for employment any person who is or was, at any time during
the Restricted Period, an officer, executive or key employee of the Company or
of any of its affiliates. As used in this Agreement, the term
"Executive-Controlled Person" shall mean any company, partnership, firm or other
entity as to which Executive possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such entity,
whether through the ownership of voting securities, by contract or otherwise.
b. Executive acknowledges that, through his status as Chairman, Chief
Executive Officer and President of the Company, he has, and will have,
possession of important, confidential information and knowledge as to the
business of the Company and its affiliates, including, but not limited to,
knowledge of marketing and operating strategies, acquisition, leasing and other
agreements, financial results and projections, future plans, the provisions of
other important contracts entered into by the Company and its affiliates,
possible acquisitions and similar information. Executive agrees that all such
knowledge and information constitutes a vital part of the business of the
Company and its affiliates and is by its nature trade secrets and confidential
information proprietary to the Company and its affiliates (collectively,
"Confidential Information"). Executive agrees that he shall not, so long as the
Company remains in existence, divulge, communicate, furnish or make accessible
(whether orally or in writing or in books,
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articles or any other medium) to any individual, firm, partnership or
corporation, any knowledge or information with respect to Confidential
Information directly or indirectly useful in any aspect of the business of the
Company or any of its affiliates.
c. All memoranda, notes, lists, notebooks, records and other documents
or papers (and all copies thereof), including such items stored in computer
memories, portable computers and the like, on microfiche, disk or by any other
means, made or compiled by or on behalf of Executive or made available to him
relating to the Company are and shall be the Company's property and shall be
delivered to the Company promptly upon the termination of Executive's employment
with the Company or at any other time on request and such information shall be
held confidential by Executive after the termination of his employment with the
Company.
d. During the Non-Competition Period (defined below), neither
Executive nor any Executive-Controlled Person will (i) render any services,
directly or indirectly, as an employee, officer, consultant or in any other
capacity, to any individual, firm, corporation or partnership engaged in the
acquisition, renovation, management or leasing of any office properties in the
New York, Orlando, and Phoenix/Tucson metropolitan areas, and (ii) engage in any
active or passive investment in or reasonably relating to the acquisition,
renovation, management or leasing of office properties in the New York, Orlando,
and Phoenix/Tucson metropolitan areas (such activities described in clauses (i)
and (ii) being herein called the "Company Business"). During the Non-Competition
Period, Executive shall not, without the prior written consent of the Company,
hold an equity interest in any firm, partnership or corporation which competes
with Company Business, except that beneficial ownership by Executive (including
ownership by any one or more members of his immediate family and any entity
under his direct or indirect control) of (i) any direct or indirect interest in
the retail properties set forth on Exhibit A or (ii) less than five (5%) percent
of the outstanding shares of capital stock of any corporation which may be
engaged in any of the same lines of business as Company Business, if such stock
is listed on a national securities exchange or publicly traded in the
over-the-counter market, shall not constitute a breach of the covenants
contained in this paragraph 7.
e. As used in this Agreement, "Restricted Period" shall mean the
twelve (12) months following Executive's termination of employment for any
reason. As used in this Agreement, "Non-Competition Period" shall mean the
twelve (12) months following Executive's termination of employment, unless the
termination is (i) by the Company without Cause, (ii) by the Executive for Good
Reason, or (iii) at the expiration of the Term.
f. The provisions contained in this paragraph 7 as to the time
periods, scope of activities, persons or entities affected, and territories
restricted shall be deemed divisible so that, if any provision contained in this
paragraph 7 is determined to be invalid or unenforceable, such provisions shall
be deemed modified so as to be valid and enforceable to the full extent lawfully
permitted.
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g. Executive agrees that the provisions of this paragraph 7 are
reasonable and necessary for the protection of the Company and that they may not
be adequately enforced by an action for damages and that, in the event of a
breach thereof by Executive or any Executive- Controlled Person, the Company
shall be entitled to apply for and obtain injunctive relief in any court of
competent jurisdiction to restrain the breach or threatened breach of such
violation or otherwise to enforce specifically such provisions against such
violation, without the necessity of the posting of any bond by the Company.
Executive further covenants and agrees that if he shall violate any of his
covenants under this paragraph 7, the Company shall not be obligated to make any
payments or provide any benefits provided in paragraph 6 and the Company shall
be entitled to recover any amounts previously paid pursuant to paragraph 6. Such
a remedy shall, however, not be exclusive and shall be in addition to any
injunctive relief or other legal or equitable remedy to which the Company is or
may be entitled. Accordingly, Executive agrees that he shall reimburse the
Company for any reasonable attorneys' fees and expenses that the Company might
incur in enforcing this paragraph 7 if it is judicially determined that
Executive has breached this paragraph 7.
8. INDEMNIFICATION. To the full extent permitted by applicable law,
Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and other
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company. Indemnification
under this paragraph 8 shall be in addition to, and not in substitution of, any
other indemnification by the Company of its officers and directors. Expenses
incurred by Executive in defending an action, suit or proceeding for which he
claims the right to be indemnified pursuant to this paragraph 8 shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding upon the Company's receipt of (x) a written affirmation by Executive
of his good faith belief that the standard of conduct necessary for his
indemnification hereunder and under the provisions of Section 2-418(b) of the
Maryland General Corporation Law, as such provision may be amended or superseded
from time to time, has been met and (y) a written undertaking by or on behalf of
Executive to repay the amount advanced if it shall ultimately be determined that
Executive engaged in conduct which precludes indemnification under the
provisions of Section 2-418(b) of the Maryland General Corporation Law, as such
provision may be amended or superseded from time to time. Such written
undertaking in clause (y) shall be accepted by the Company without security
therefor and without reference to the financial ability of Executive to make
repayment thereunder. The Company shall use commercially reasonable efforts to
maintain in effect for the Term of this Agreement a directors' and officers'
liability insurance policy, with a policy limit of at least $10,000,000, subject
to customary exclusions, with respect to claims made against officers and
directors of the Company; provided, however, the Company shall be relieved of
this obligation to maintain directors' and officers' liability insurance if, in
the good faith judgment of the Company, it cannot be obtained at a reasonable
cost.
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9. ARBITRATION. The parties hereto will endeavor to resolve in good
faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other of
the existence of a dispute which it desires to have arbitrated. The arbitration
will be conducted in New York, New York by a panel of three (3) arbitrators and
will be held in accordance with the rules of the American Arbitration
Association. Of the three arbitrators, one will be selected by the Company, one
will be selected by Executive and the third will be selected by the two
arbitrators so selected. Each party will notify the other party of the
arbitrator selected by him or it within fifteen (15) days after the giving of
the written notice referred to in this paragraph 9. The decision and award of
the arbitrators must be in writing and will be final and binding upon the
parties hereto. Judgment upon the award may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. The
expenses of arbitration will be borne in accordance with the determination of
the arbitrators with respect thereto, except as otherwise specified in paragraph
5(b) above. Pending a decision by the arbitrators with respect to the dispute or
difference undergoing arbitration, all other obligations of the parties will
continue as stipulated herein, and all monies not directly involved in such
dispute or difference will be paid when due.
10. MISCELLANEOUS.
a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement
inure to the benefit of, and will be binding on, the Company and its successors
and permitted assigns, and the rights and obligations (other than obligations to
perform services) of Executive under this Agreement will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and permitted assigns; provided, however, Executive shall not be entitled to
assign or delegate any of his rights and obligations under this Agreement
without the prior written consent of the Company; provided, further, that the
Company shall not have the right to assign or delegate any of its rights or
obligations under this Agreement except to a
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corporation, partnership or other business entity that is, directly or
indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
e. The failure of either party to enforce any provision or provisions
of this Agreement will not in any way be construed as a waiver of any such
provision or provisions as to any future violations thereof, nor prevent that
party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience and
are not a part of this Agreement and will not be used in construing it.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
TOWER REALTY TRUST, INC.
By: __________________________________
Name:
Title:
_______________________________________
XXXXXXXX X. XXXXXXX
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EXHIBIT A
[List of up to seven (7) retail properties]
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