Employment Agreement
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of June 6, 2002
(the "Effective Date"), 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 Xxxxxxxxx X. Xxxx XX, 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 North America, Puerto Rico and Western Europe;
WHEREAS, the Company believes that it would benefit from the continued
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
position set forth herein on the terms herein provided;
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 Company's Senior Vice President - Operations and Marketing on
the terms and conditions provided in this Agreement. Executive shall serve in
such position and Executive shall exercise such powers and authority as are
customarily inherent in a similar position 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 office 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. Executive will report
directly and exclusively to the Company's Chief Executive Officer ("CEO") and
the Company's President ("President"), and he will perform all of his duties in
accordance with such reasonable directions, requests, rules and regulations as
are specified by the CEO and/or the President in connection with his employment.
Notwithstanding the foregoing, the parties acknowledge that the Company may
alter the reporting relationship of Executive so that he thereafter reports to
the Company's Chairman, President, CEO, or an individual who has been retained
to serve as the Company's Chief Operating Officer, or a similar role, if that
individual reports directly to the CEO; provided further that Executive may
report to any such individual or a combination thereof. During the Term of this
Agreement, it shall not be a violation of this Agreement for Executive to (i)
serve on corporate, industry-related, civic, or charitable boards or committees
or devote time to serving any such entities or organizations, (ii) deliver
lectures, fulfill speaking engagements, or teach at educational institutions, or
(iii) manage personal investments and finances and business and legal affairs,
to the extent that such activities do not violate this Section 1 or Section 5
hereof.
2. Term. The term of this Agreement shall commence as of the Effective Date
and, unless earlier terminated in accordance with the terms of this Agreement,
will extend to the second anniversary of such date ("the Original Term");
provided, however, that if this Agreement is not affirmatively terminated by
either party, or extended or renewed for a specific duration in writing by
agreement of the parties, prior to the last day of the Original Term, this
Agreement will continue on a month-to-month basis thereafter (the "Extended
Term"). The parties agree to cooperate and discuss in good faith their
intentions with regard to this Agreement's extension or renewal six months prior
to the end of the Original Term. Notwithstanding the foregoing, the Company
agrees to provide Executive with a minimum of three months' advance written
notice of its intent to terminate this Agreement during the Original Term or the
Extended Term for any reason other than Cause, in which case the Company shall
comply with the notice requirements of Sections 4(a)(2) and (3) hereof, and
Executive agrees to provide the Company with a minimum of 60 days' advance
written notice of his intent to terminate this Agreement during the Original
Term for any reason other than Good Reason, in which case Executive shall comply
with the notice requirements of Section 4(b)(1)(E) hereof. The Term and any
Extended Term of this Agreement shall end only following termination by written
notice by the Company or Executive in accordance with this Section. For purposes
of this Agreement, the terms "Original Term" and "Extended Term" shall herein be
collectively referred to as the "Term."
3. Compensation and Related Matters.
(a) Base Salary. For the period beginning June 10, 2002 and extending
through the Term of this Agreement, the Operating Partnership agrees to pay to
Executive a base salary in an aggregate amount of $250,000 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. The then applicable amount of yearly
base salary payable to Executive pursuant to the provisions of this Section 3(a)
shall herein be referred to as the "Base Salary." The Base Salary payable to
Executive pursuant to the provisions of this Section 3(a) shall be subject to
periodic review by the Compensation Committee of the Board of Directors of Prime
(the "Committee") based upon periodic review of Executive's performance
conducted on at least an annual basis and may be periodically increased as a
result thereof; provided, however, that the Base Salary payable to Executive
pursuant to the provisions of this Section 3(a) shall in no event be less than
the aggregate amount set forth in the first sentence of this paragraph. In no
event may Executive's Base Salary be reduced during the Term without his express
written consent.
(b) Performance Bonus. In addition to the Base Salary, Executive shall
have the right to receive, and the Company agrees to pay to 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
"Performance Bonus"). If the Board, either directly or through the Committee,
establishes performance measures for senior officers (which term is intended to
include Executive), those established criteria will be used to determine
Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing,
nothing in this Agreement obligates the Board to establish such performance
measures, and the lack of established performance measures will not constitute
a breach of this Agreement in any manner. In lieu of established performance
measures, the Board will determine Executive's Performance Bonus solely in its
discretion. The parties hereto acknowledge that any corporate or individual
performance objectives established pursuant to this Section 3(b) will be
determined prior to, or as soon as possible after, the beginning of each
calendar year and that such objectives may objectively be met by Executive. The
aggregate Performance Bonus for a calendar year payable in accordance with the
provisions of this Section 3(b) is expected to be up to 100% of the Base Salary
for such calendar year. Further, Executive shall only be entitled to receive a
Performance Bonus for a calendar year if Executive has been and continues to be
retained by the Company as an executive officer of the Company for the full
calendar year (or such shorter period if Executive is promoted to an executive
position during the calendar year in question) or if (i) the Company terminates
Executive's employment without Cause (as defined below), (ii) Executive
terminates his employment for Good Reason (as defined below), (iii) Executive
terminates his employment for any reason simultaneously with, or within six
months following, a Change of Control, or (iv) if Executive does not terminate
his employment simultaneously with, or within six months following, a Change of
Control, and Executive's employment ends for any reason within 24 months
following a Change of Control. Any amount of Performance Bonus required to be
paid to Executive for a calendar year during the Term of this Agreement shall be
paid by the Company to Executive on the earlier of (x) the pay period of the
Company following finalization of the audit for such calendar year and final
review and approval of the bonus calculation by the Committee or (y) March 31
(or the next business day) of the year immediately following the end of the
calendar year for which such Performance Bonus is attributable.
(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 life, disability,
health, dental, vision and other 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 (but in any event not less than what is offered to
employees that are not senior executive officers). In addition, Executive shall
be covered by any and all policies of directors and officers insurance coverage
obtained by the Board from time to time for its senior executive officers, the
terms of which shall be established by the Board in its sole discretion.
(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 on an after-tax basis under a plan that is either a qualified or
non-qualified plan under the Code at the Company's option.
(4) Notwithstanding anything to the contrary contained herein, the
Company reserves the right to amend or terminate any plan described in this
Section 3(c) for any reason; provided, however, that (i) no such amendment that
would reduce the benefits of Executive will be adopted unless it affects other
senior executive officers across-the-board, and (ii) if any plan amendment or
termination reduces the benefits of Executive, the Company agrees to adopt or
maintain one or more replacement plans that will provide Executive with
reasonably comparable benefits on an after-tax basis throughout the Term of this
Agreement.
(d) Vacation and Leaves of Absence. Executive shall be entitled to paid
vacation leave and paid holidays in accordance with the Company's established
policies. 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 Executive in the performance of his duties hereunder.
(f) Life Insurance. The Company shall provide $1,000,000 of life
insurance coverage for the benefit of Executive during the Term of this
Agreement.
(g) Stock Options. As additional consideration for Executive's
employment hereunder, as of June 6, 2002 (the "Date of Grant"), Prime granted
Executive an option (the "Option") to purchase 250,000 shares of Prime's common
stock, par value $0.01 per share (the "Common Stock"). The purchase price per
share was $0.11 (the "Exercise Price"). The Option is subject to the terms and
conditions contained in the Stock Award Agreement entered into between Prime and
Executive, which terms include: (i) the Option will have a term of ten years
measured from the date of grant; (ii) the greatest portion of the Option shares
allowable will be issued as incentive stock options (as determined on a prorated
basis for all recipients of option awards on June 6, 2002); (iii) the Option
shares will vest and become exercisable as follows: 1/3 will vest upon the first
anniversary of the Date of Grant, 1/3 will vest upon the second anniversary of
the Date of Grant, and 1/3 will vest upon the third anniversary of the Date
of Grant, assuming Executive's employment with Prime continues through such
dates; (iv) the Option will remain exercisable for 30 days following termination
of Executive for Cause, and in the event of Executive's termination of
employment for any other reason the Option will remain exercisable for 90 days;
and (v) upon Executive's resignation for Good Reason or termination without
Cause (each as herein defined and without regard to whether a Change of Control
has occurred) during the Term of this Agreement, the entire Option, in addition
to all other outstanding options awarded by Prime to Executive, will become
fully vested and exercisable, to the extent not previously exercised. Prime will
take all steps necessary to ensure that all options held by Executive survive
any Change of Control.
4. Termination and Termination Benefits.
(a) Termination by Prime.
(1) Without Cause. Subject to the notice provisions set forth in
Section 2 hereof, the Company may terminate this Agreement and Executive's
services at any time for any reason, and after any required notice is provided
to Executive he shall continue to perform his duties under this Agreement during
the notice period if the Company so elects. In connection with the termination
of Executive's services without Cause during the Term of this Agreement,
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 and vacation
through the effective date of termination, payable upon
termination and in accordance with the provisions of Sections
3(a) and 3(d) above;
(B) if such termination occurs during the Original Term, a
termination payment in an amount equal to the product of (x)
the number of full and partial years remaining in the Original
Term, and (y) the sum of (i) Executive's then current Base
Salary and (ii) a bonus payment equal to 100% of the average
annual bonus paid to Executive for the two most recent calendar
years in which he received a bonus, or if no such bonus
payments were made to Executive, a bonus payment equal to 50%
of his then current Base Salary (the sum of the amounts
determined by adding clauses (i) and (ii) is in the aggregate
hereinafter referred to as the "One-Year Pay Equivalent"), and
the product of (x) and (y) 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(e)
and 3(f) hereof through the effective date of termination,
payable in accordance with the provisions of any such plan(s);
and
(D) if such termination occurs during the Original Term, (i) the
Company-paid health insurance benefits specified in Section
3(c)(1) above for a period of twelve (12) months following the
effective date of termination and (ii) following such period,
Executive shall be entitled to all rights afforded to him under
the federal Consolidated Omnibus Budget Reconciliation Act
("COBRA") to purchase continuation coverage of health insurance
benefits for himself and his dependents for the maximum period
permitted by law. If such termination occurs during the
Extended Term, Executive will be entitled to all rights
afforded to him under COBRA to purchase continuation coverage
of health insurance benefits for himself and his dependents for
the maximum period permitted by law.
In the event that Executive is terminated without Cause pursuant to this
Section 4(a)(1) or resigns for Good Reason and within 12 months from the
effective date of such termination or resignation 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(d) 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 w xxxxxx 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 (C) below) shall
be entitled to:
(A) receive all accrued but unpaid amounts of the Base Salary and
vacation through the effective date of termination, payable
in accordance with the provisions of Sections 3(a) and 3(d)
above;
(B) receive the vested benefits or amounts pursuant to Sections
3(c), 3(e) and 3(f) hereof through the effective date of
termination, payable as otherwise provided in such Sections; and
(C) exercise all rights afforded to him under COBRA to purchase
continuation coverage of health insurance benefits for himself
and his dependents for the maximum period permitted by law.
(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 or physical or mental disability,
Executive shall fail to perform the material duties required by this Agreement
during any four (4) consecutive months during the Term of this Agreement, the
Company may terminate this Agreement, subject to the notice provisions set forth
in Section 2 hereof. In such event, Executive (and Executive's eligible
dependents with respect to paragraph (D) below) shall receive:
(A) all accrued but unpaid amounts of the Base Salary and
vacation through the effective date of termination, payable in
accordance with the provisions of Sections 3(a) and 3(d) above;
(B) if, and only if, the Company has terminated or otherwise
materially reduced Executive's long-term disability coverage that was in
effect on the Effective Date of this Agreement, then Executive shall be
entitled to receive 1.5 times the One-Year Pay Equivalent;
(C) any vested benefits or amounts pursuant to Sections
3(c), 3(e) and 3(f) hereof through the effective date of termination,
payable in accordance with the provisions of any such plan(s); and
(D) the benefits described in Section 4(a)(1)(D).
This Section 4(a) (4) shall not limit the entitlement of
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 for Any Reason.
(1) Subject to the notice requirements set forth in Section 2
hereof, Executive may terminate this Agreement at any time with or without Good
Reason (as defined herein), and after any required notice is provided to the
Company Executive shall continue to perform his duties under this Agreement
during the notice period if the Company so elects. If Executive terminates his
employment for Good Reason, the Company shall pay him the compensation and other
benefits provided above in Section 4(a)(1) as if it had terminated his
employment without Cause after providing the requisite notice pursuant to
Section 2 hereof. In connection with the termination of this Agreement pursuant
to this Section 4(b)(1) other than for Good Reason, 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 and
vacation through the effective date of termination, payable in
accordance with the provisions of Sections 3(a) and 3(d) above;
(B) any earned and unpaid bonus(es) otherwise payable to him
in accordance with Section 3(b);
(C) any vested benefits or amounts pursuant to Sections
3(c), 3(e) and 3(f) hereof through the effective date of termination,
payable as otherwise provided in such Sections; and
(D) all rights afforded to him under COBRA to purchase
continuation coverage of health insurance benefits for himself and his
dependents for the maximum period permitted by law.
(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
(reduced to ten (10) days for failure to pay Base Salary) after receipt
by the Company of a written notice from 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 sixty
(60) days; (B) Executive's title or scope of responsibilities and duties
are materially diminished from the level provided in this Agreement, or
the Company fails to provide Executive with adequate office facilities
and support services to perform such responsibilities and duties; or (C)
the Company changes Executive's principal place of employment to a
location more than 25 miles from the Company's principal Baltimore City
office as of the Effective Date. Executive's delay in providing notice
of his termination for Good Reason shall not be deemed to be a waiver of
any such Good Reason unless and until Executive fails to provide such
notice within six months after the occurrence of the event triggering
such Good Reason, nor does the failure to resign for one Good Reason
prevent any later Good Reason resignation for a similar or different
reason.
(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 Executive's Base Salary, performance bonus and vacation through the date of
Executive's death, payable in accordance with the provisions of Sections 3(a)
and 3(d) above. In addition, Executive's eligible dependents shall be entitled
to receive the benefits specified in Section 4(a)(1)(D) above, to the extent
applicable to dependents. This Section 4(c) shall not limit the entitlement of
Executive under any insurance or other benefits plan or polic y that is
maintained by Prime for Executive's benefit.
(d) Termination Following a Change of Control. If (i) Executive
terminates this Agreement for any reason simultaneously with a Change of Control
(in which event notice under Section 2 above shall not be necessary and the
termination payments to be made under Sections 4(d)(1), 4(d)(2) and 4(d)(3)
shall be paid simultaneously with, and as a part of, the Change of Control),
(ii) within six (6) months following a Change of Control Executive terminates
this Agreement for any reason, subject to the notice provisions of Section 2
hereof, or (iii) within 24 months following a Change of Control, the Company
terminates this Agreement during its Original Term other than for Cause or
Executive terminates this Agreement during its Original Term with Good Reason,
the Company shall pay Executive (and Executive's eligible dependents with
respect to paragraph (D) below) the following benefits and payments:
(1) all accrued but unpaid amounts of Base Salary and vacation
through the effective date of termination, payable in accordance with the
provisions of Sections 3(a) and 3(d) above;
(2) a termination payment in an amount equal to 1.5 times the
One-Year Pay Equivalent, which amount shall be payable within thirty (30) days
of the effective date of termination;
(3) notwithstanding any other terms of any plan, any vested
benefits or amounts pursuant to Section 3(c), 3(e) and 3(f) hereof through the
effective date of termination, payable in accordance with the provisions of any
such plan(s); and
(4) the health insurance benefits described in Section 3(c)(1)
above for the maximum period permitted under COBRA at the Company's sole
expense, together with either (i) additional benefits equivalent to those in
effect at the date of termination, such that Executive will receive Company-paid
coverage for a total of 24 months or (ii) if providing such benefits is not
permitted by the tax laws or applicable benefit plans, the after-tax equivalent
of the premiums paid by the Company for such coverage.
The termination benefits pursuant to subsections (a) to (d) of this Section
4 are mutually exclusive, and Executive shall not be entitled to seek
termination benefits under more than one such subsection (other than as
described in the last paragraph of Section 4(a)(1)).
(e) "Change of Control" Defined. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred if (1) any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, regardless of whether applicable),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of Prime or a corporation owned directly or indirectly by the
stockholders of Prime in substantially the same proportions as their ownership
of stock of Prime 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
individuals who constitute the Board immediately before a proxy contest cease to
constitute at least a majority of the Board (excluding any Board seat that is
vacant or otherwise unoccupied) immediately following the proxy contest; (4) a
merger or consolidation of Prime with or into any other entity, other than
a merger or consolidation (i) that 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) where more than 50% of the Board of
Directors of the surviving entity is composed of members from the Board of
Directors of Prime, with terms ending at least 11 months after the date of the
merger or consolidation; or (5) 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, and such transaction is substantially completed. However,
in no event will a Change of Control be deemed to have occurred, with respect to
Executive, if Executive is part of a purchasing group that consummates the
Change of Control transaction. Executive will be deemed to be "part of the
purchasing group" for purposes of the preceding sentence if Executive is an
equity participant in the purchasing company or group (except for: (i) passive
ownership of less than three percent of the stock of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not significant, as determined prior to the Change of Control by a
majority of the non-employee continuing directors).
(f) The Company may make any payments due Executive under Sections 4
(d) and 6 before the completion of the Change of Control, if, in the reasonable
opinion of the Chairman of the Board's Compensation Committee (the "Chairman"),
all conditions for completion of the Change of Control are substantially likely
to be met. At that time, the Chairman may release the payments or authorize the
option vesting, subject to Executive's agreement to promptly return such
payments and agree to rescission of the vesting if the Change of Control does
not then occur.
(g) Purchase of Life Insurance. Notwithstanding anything to the
contrary contained herein, in the event that the services of Executive with the
Company terminate for any reason other than death, Executive shall have the
right to acquire any life insurance policies maintained by the Company on the
life of 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.
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-Disclosure. Executive shall not disclose or use, except for
or on behalf of the "Group" (consisting of Prime and the Operating Partnership
and any of their direct and indirect subsidiaries), 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 5(b), "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. Executive shall be subject to the restrictions of
this Section 5(b) indefinitely.
(c) Non-Solicitation. During the period of the later of (i)
Executive's employment under this Agreement, or (ii) throughout the Original
Term of this Agreement, but only if Executive resigns other than for Good Reason
or is terminated by the Company with Cause, (the "Restrictive Period") and
within the United States (the "Restrictive Geographic Area"), Executive shall
not hire, cause to be hired, or induce or attempt to induce any officer,
employee, agent, consultant, independent contractor, tenant or customer of the
Company to discontinue such affiliation with the Company or to refrain from
entering into new business relationships with the Company. Notwithstanding the
foregoing, if any officer, employee, agent, consultant, independent contractor,
tenant or customer of the Company is contacted by, or receives a general
communication or solicitation directed to the general public from, an entity
with which Executive has become employed or otherwise affiliated, the parties
hereto agree that such contact or communication shall not violate this provision
unless Executive directly or indirectly initiated it. The time period during
which the prohibitions set forth above apply shall be extended by the length of
time during which it is judicially determined that Executive has violated any
such prohibition in any respect.
(d) Non-Competition. In return for the performance of the management
duties described in Section 1 hereof, Executive agrees that (A) during the
Restrictive Period he will 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, perform or solicit services for any
of the following entities: The Xxxxx Corporation; Tanger Factory Outlet Centers,
Inc.; Chelsea GCA Realty, Inc.; New Plan Excel Realty Trust, Inc.; and Charter
Oak Partners.
(e) 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. Executive shall have the right to retain copies of forms and other
documents used by the Company, redacted to remove the specific references to the
Company.
(f) Equitable Relief. In the event of any breach by Executive of any of the
covenants contained in this Section 5, it is specifically understood and agreed
that Company shall be entitled, in addition to any other remedy that it may
have, to seek equitable relief by way of injunction, an accounting or otherwise.
(g) Acknowledgment. Executive acknowledges that he will be directly
and materially involved as a senior executive in 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 this Section 5 are
fair and reasonable, are 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.
(h) Indemnification. The Company shall, to the maximum extent
permitted by law, and in addition to any such rights granted to or available to
Executive under the Company's Articles and By-Laws, or standing or other
resolutions, defend, indemnify and hold harmless Executive from and against any
and all claims made against Executive concerning or relative to his service,
actions, or omissions on behalf of the Company as an employee, officer or agent
of the Company. The Company shall, upon Executive's request, promptly advance or
pay any amounts for costs, charges, or expenses (including, without limitation,
legal fees and expenses incurred by counsel retained by Executive) in respect of
his right to indemnification hereunder, subject to a later determination as to
Executive's ultimate right to receive such payment. Executive's right to
indemnification shall survive until the expiration of any applicable statute of
limitations, without regard to the earlier termination of Executive's employment
hereunder or of the Term.
6. Golden Parachute Provision.
(a) 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 from the Operating
Partnership (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.
(b) Determination of Gross-Up. Subject to the provisions of
paragraph (c) below, all determinations required to be made under this Section
6, 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 6, 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 (c) below.
(c) 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 Executive based on the Underpayment, and such additional Gross-Up Payment
shall be promptly paid by the Company to or for the benefit of 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.
7. Transfer of Equity Interest to Employer Upon Termination of Employment.
As of the Date of Termination and in consideration for the payment of $100.00
cash, Executive agrees to execute and deliver to Prime or its designee any and
all certificates for shares of capital stock (with appropriate stock powers
attached and properly signed) of Prime's subsidiaries and affiliates (other than
the Operating Partnership), including, but not limited to Prime Retail
E-Commerce, Inc., Prime Retail Stores, Inc., and Prime Retail Furniture, Inc.
(all of which are Maryland corporations) (the "Subsidiary Shares"). Executive
further agrees to execute and deliver such other documentation as Prime
reasonably requests to effect the assignment of the Subsidiary Shares. For the
avoidance of doubt, nothing contained in this Section 7 will be deemed to
require Executive to transfer or carry any of his equity interests in Prime or
the Operating Partnership.
8. 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.
9. 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 fulfill all of the Company's obligations under
this Agreement as provided in Section 10 below.
10. 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.
11. 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:
Xxxxxxxxx X. Xxxx XX
00 Xxxxxx Xxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
(b) if to Prime or to the Operating Partnership, to:
Prime Retail, Inc.
Attn: Board of Directors
000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
with a copy to (which shall not constitute notice):
Winston & Xxxxxx
Attn: Xxxxxx X. Xxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
12. Amendment. This Agreement may not be changed, modified or amended except
in writing signed by all of the parties hereto.
13. 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.
14. 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.
15. 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.
16. Legal Fees. If any dispute or disagreement arising hereunder or related
hereto shall result in legal action between the Company and Executive, Executive
shall be entitled, within 30 days after incurring such fees and disbursements,
to recover from the Company any reasonable expenses for attorney's fees and
disbursements incurred by him in connection with Executive's good faith
maintenance or defense of such action, on an after-tax basis, unless Executive
does not prevail in such action.
17. No Mitigation. The Company waives, releases and remises (x) any
obligation or duty under applicable law or otherwise on the part of Executive to
seek or obtain other engagements or employment or to otherwise mitigate any
payments or damages to which Executive may be entitled to by reason of any
operation or termination of this Agreement; and (y) any right in or claim to any
remuneration or compensation received by Executive pursuant to any engagements
or employment subsequent to the termination of this Agreement.
18. 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.
19. 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.
(signature page follows)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
EXECUTIVE:
-----------------------
Xxxxxxxxx X. Xxxx XX
PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware
corporation limited partnership
By: ______________________ By: Prime Retail, Inc.
Name: ______________________ Its: Sole General Partner
Title: ______________________
By: ___________________
Name: ___________________
Title: ___________________
Exhibit A
Dispute Resolution
Mediation If either party has a dispute or claim relating to
this Agreement or their relationship and except as
set forth in Alternatives, the parties must first
seek to mediate the same before an impartial mediator
the parties mutually designate, at the Company's
expense (other than their respective attorneys'
fees). Subject to the mediator's schedule, the
mediation must occur within 45 days of either party's
written demand. However, in an appropriate
circumstance, a party may seek emergency equitable
relief from a court of competent jurisdiction
notwithstanding this obligation to mediate.
Binding If the mediation reaches no solution or the parties
Arbitration agree to forego mediation, the parties will promptly
submit their disputes to binding arbitration before
one or more arbitrators (collectively or singly, the
"Arbitrator") the parties agree to select (or whom,
absent agreement, a court of competent jurisdiction
selects). The arbitration must follow applicable law
related to arbitration proceedings and, where
appropriate, the Employment Dispute Rules of the
American Arbitration Association.
Arbitration All statutes of limitations and substantive laws
Principles applicable to a court proceeding will apply to this
proceeding. The Arbitrator will have the power to
grant relief in equity as well as at law, to issue
subpoenas duces tecum, to question witnesses, to
consider affidavits (provided there is a fair
opportunity to rebut the affidavits), to require
briefs and written summaries of the material
evidence, and to relax the rules of evidence and
procedure, provided that the Arbitrator must not
admit evidence it does not consider reliable. The
parties agree (and the Arbitrator must agree) that
all proceedings and decisions of the Arbitrator will
be maintained in confidence, to the extent legally
permissible, and not be made public by any party or
the Arbitrator without the prior written consent of
all parties to the arbitration, except as the law may
otherwise require.
Discovery; The parties have selected arbitration to expedite the
Evidence; resolution of disputes and to reduce the costs and
Presumptions burdens associated with litigation. The agree that
the Arbitrator should take these concerns into
account when determining whether to authorize
discovery and, if so, the scope of permissible
discovery and other hearing and pre-hearing
procedures. The Arbitrator may permit reasonable
discovery rights in preparation for the arbitration,
provided that it should accelerate the scheduling of
and responses to such discovery so as not to
unreasonably delay the arbitration. Exhibits must be
marked and left with the Arbitrator until it has
rendered a decision. Either party may elect, at
its expense, to record the proceedings by audiotape
or stenographic recorder (but not by video). The
Arbitrator may conclude that the applicable law of
any foreign jurisdiction would be identical to that
of Maryland on the pertinent issue(s), absent a
party's providing the Arbitrator with relevant
authorities (and copying the opposing party) at least
five business days before the arbitration hearing.
Nature of Award The Arbitrator must render its award, to the extent
feasible, within 30 days after the close of the
hearing. The award must set forth the material
findings of fact and legal conclusions supporting
the award. The parties agree that it will be final,
binding, and enforceable by any court of competent
jurisdiction. Where necessary or appropriate to
effectuate relief, the Arbitrator may issue
equitable orders as part of or ancillary to the
award. The Arbitrator may award reasonable
attorneys' fees to the prevailing party to the extent
a court could have made such an award.
Appeal The parties may appeal the award based on the
grounds allowed by statute, as well as upon the
ground that the award misapplies the law to the
facts, provided that such appeal is filed within the
applicable time limits law allows. If the award
is appealed, the court may consider the ruling,
evidence submitted during the arbitration, briefs,
and arguments but must not try the case de novo. The
parties will bear the costs and fees associated
with the appeal in accordance with the arbitration
award or, in the event of a successful appeal, in
accordance with the court's final judgment.
Alternatives This Dispute Resolution provision does not preclude a
party from seeking equitable relief from a court (i)
to prevent imminent or irreparable injury or (ii)
pending arbitration, to preserve the last peaceable
status quo, nor does it preclude the parties from
agreeing to a less expensive and faster means of
dispute resolution.
