EXHIBIT 10.5
FORM OF
EMPLOYMENT AGREEMENT
(Xxxxx X. Xxxxxxx)
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this ____ day of ________, 1998 by and between Horizon Group Properties,
Inc., a Maryland corporation ("Employer") and Xxxxx X. Xxxxxxx, an individual
domiciled in the State of Illinois ("Executive").
WITNESSETH
WHEREAS, Employer is engaged primarily in the ownership, development,
construction, acquisition, leasing, marketing and management of factory
outlet centers throughout the United States.
WHEREAS, Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience, and background to its
management and operation.
WHEREAS, Executive wishes to commit himself to serve Employer 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, Employer and Executive hereby agree as follows:
1. DUTIES. During the Employment Term (as defined in Section 2),
Employer agrees to employ Executive, and Executive agrees to be employed by
Employer, as the Chief Financial Officer of Employer on the terms and
conditions provided in this Agreement. Executive shall conduct, operate,
manage and promote the business and business concept of Employer, and
exercise such other 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 Employer ("By-laws"). The Board of Directors of Employer (the
"Board") may from time to time, in its sole discretion, further define and
clarify Executive's duties and services hereunder or under the By-laws 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 Employer under this Agreement.
2. TERM. The initial term of this Agreement (the "Initial Term")
shall commence on _______ __, 1998 (the "Effective Date") and expire on the
third anniversary of the Effective Date (the "Scheduled Termination Date");
provided, however, this Agreement shall automatically extend for one year
terms following the Initial Term (each a "Renewal Term", together with the
Initial Term, the "Employment Term"), unless either party shall give the
other party, prior to 120 days before the end of the respective Renewal Term,
written notice of its intention to terminate this Agreement.
-1-
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Employment Term, Employer agrees to pay to
Executive an annual salary of no less than $140,000 ("Base Salary"), payable
in accordance with the general policies and procedures for payment of
salaries to any other executive personnel of Employer (but no less frequently
than monthly), subject to withholding for applicable federal, state and local
taxes. Executive's Base Salary shall be subject to periodic review by the
Compensation Committee of the Board (the "Committee") based upon periodic
review of Executive's performance conducted on at least an annual basis and
may be periodically increased or decreased as a result thereof.
(b) PERFORMANCE BONUS. In addition to Base Salary, Executive shall
have the right to receive, and Employer agrees to pay to Executive, a
performance bonus ("Performance Bonus") for each calendar year during the
Employment Term, in such amounts as the Committee, in its sole discretion,
may determine. Executive shall only be entitled to receive a Performance
Bonus for a calendar year if Executive has been and continues to be retained
by Employer as an Executive Officer of Employer for the full calendar year or
if Employer 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 required to be paid to Executive for
a calendar year during the Employment Term shall be paid by Employer to
Executive during the pay period of Employer following finalization of the
audit for such calendar year and final review and approval of the bonus
calculation 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.
(c) BENEFITS. During the Employment Term 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, health, dental, vision and other medical insurance
benefit plans or programs that have been or are hereafter adopted or
maintained by Employer (or in which Employer 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 Employer. If the
participation of Executive would adversely affect the qualification of a plan
intended to be qualified under the Internal Revenue Code of 1986, as amended
(the "Code"), Employer shall have the right to exclude Executive from that
plan in return for his participation in (x) a nonqualified deferred
compensation plan or (y) an arrangement providing substantially comparable
benefits under a plan that is either a qualified or nonqualified plan under
the Code at Employer's option.
(d) VACATION AND LEAVES OF ABSENCE. Executive shall be entitled to
four weeks of paid vacation leave during each 12 month period and paid
holidays in accordance with Employer'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 Employer's
receipt of invoices or similar records as Employer may reasonably request in
accordance with its policy and procedures,
-2-
for all reasonable and necessary expenses incurred by Executive in the
performance of his duties hereunder.
(f) LIFE INSURANCE. Employer shall provide $__________ of term life
insurance for the benefit of Executive during the Employment Term.
4. TERMINATION AND TERMINATION BENEFITS.
(a) TERMINATION BY EMPLOYER.
(i) WITHOUT CAUSE. Employer may terminate this Agreement and
Executive's employment at any time for any reason or for no reason at all
upon 30 days' prior written notice to Executive. In connection with the
termination of Executive's services pursuant to this Section 4(a)(i),
Executive 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); (B) a termination
distribution in an amount equal to the sum of (x) the amount of the Base
Salary then applicable, plus (y) the average of the amounts payable to
Executive pursuant to the provisions of Section 3(b) for the two 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 Distribution"), and the Normal Termination
Distribution shall be payable within 30 days of the effective date of
termination; and (C) any vested benefits or amounts pursuant to Sections
3(c), 3(d), 3(e) and 3(f) through the effective date of termination, payable
in accordance with the provisions of any such plan(s). In addition,
Executive and his eligible dependents shall be entitled to receive (x) the
health insurance benefits specified in Section 3(c) for a period of 12 months
following the effective date of termination (the "Company Continuation
Period"), and following such time 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 such health
insurance benefits for himself and his dependents for the maximum period
permitted by law and (y) the life insurance benefits specified in Section
3(f) for a period of 12 months following the effective date of termination.
With respect to clause (x) of the preceding sentence, 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 the Company Continuation Period. In
the event that Executive is terminated without Cause pursuant to this Section
4(a)(i) and within 12 months from the effective date of such termination
there is a Change in Control of Employer (as defined below), then Executive
shall be entitled to receive the benefits set forth in Section 4(e) to the
extent and in the amount that such benefits exceed the amounts paid or
received by Executive pursuant to this Section 4(a)(i).
(ii) WITH CAUSE. Employer 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)(ii),
Executive shall (A) be entitled to 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); (B) forfeit his entitlement
to any bonuses or other payments otherwise payable to him in accordance with
Section 3(b); and (C) be entitled to the vested benefits or amounts pursuant
to Sections 3(c), 3(d), 3(e) and 3(f) through the effective date of
termination, payable as otherwise
-3-
provided in such sections; provided, however, that Executive and his eligible
dependents shall be entitled to receive (x) the health insurance benefits
specified in Section 3(c)(1) for a period of three months (the "Company
Continuation Period") following the effective date of termination, and
following such time period, 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 and (y) the life insurance benefits specified in Section
3(f) for a period of three months following the effective date of
termination. With respect to clause (x) of the preceding sentence, 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 the Company
Continuation Period.
For purposes of this Agreement, "Cause" shall mean a finding by the
Board (A) that Executive has materially harmed Employer 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 failed
to perform in any material respect his duties under this Agreement (other
than a failure due to disability) after written notice specifying the failure
and a reasonable opportunity 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
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 Employer specifying in reasonable detail the
nature of the breach.
(iii) DISABILITY. If due to illness, physical or mental
disability, or other incapacity, Executive shall fail during any four
consecutive months to perform the duties required by this Agreement, Employer
may terminate this Agreement upon 30 days' written notice to Executive. In
such event, Executive shall 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); (B) a termination distribution in an
amount equal to the sum of (x) the amount of the Base Salary then applicable,
plus (y) the average of the amounts payable to Executive pursuant to the
provisions of Section 3(b) hereof for the two 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 Distribution"), and the Normal Termination Distribution shall be
payable within 30 days of the effective date of termination; and (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). In addition, Executive and his eligible
dependents shall be entitled to receive (x) the health insurance benefits
specified in Section 3(c)(1) for a period of 12 months (the "Company
Continuation Period") following the effective date of termination and
following such time period, 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 and (y) the life insurance benefits specified in Section
3(f) for a period of 12 months following the date of termination. With
respect to clause (x) of the preceding sentence, 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 the Company Continuation Period.
This Section 4(a)(iii) shall not limit the entitlement of Executive, his
estate or beneficiaries to any disability
-4-
or other benefits available to Executive under any disability insurance or
other benefits plan or policy that is maintained by Employer for Executive's
benefit.
(b) TERMINATION BY EXECUTIVE.
(i) WITH GOOD REASON. Executive may terminate this Agreement
with Good Reason upon written notice to Employer. In connection with the
termination of this Agreement pursuant to this Section 4(b)(i), Executive
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); (B) any earned and unpaid bonus(es) otherwise
payable to him in accordance with Sections 3(b) and 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. In addition, Executive and his eligible dependents shall be
entitled to receive (x) the health insurance benefits specified in Section
3(c)(1) for a period of 12 months following the effective date of termination
(the "Company Continuation Period") and following such time period, 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 and (y) the life insurance
benefits specified in Section 3(f) above for a period of 12 months following
the date of termination. With respect to clause (x) of the preceding
sentence, 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 the
Company Continuation Period. Further, in connection with the termination of
Executive's services pursuant to this Section 4(b)(i), Executive shall be
entitled to receive a termination distribution in an amount equal to the
amount of the Base Salary, payable within 30 days of the effective date of
termination.
(ii) WITHOUT GOOD REASON. Executive may terminate this Agreement
at any time for any reason or for no reason at all upon 60 days' written
notice to Employer, during which period Executive shall continue to perform
his duties under this Agreement if Employer so elects. In connection with
the termination of Executive's services pursuant to this Section 4(b)(ii),
Executive 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); and (B) the vested benefits and amounts
set forth in Sections 3(c), 3(d), 3(e) and 3(f) through the effective date of
termination, payable in accordance with the provisions of such sections. In
addition, Executive and his eligible dependents shall be entitled to receive
(x) the health insurance benefits specified in Section 3(c)(1) for a period
of six months (the "Company Continuation Period") following the effective
date of termination and following such time period, 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 and (y) the life insurance benefits
specified in Section 3(f) for a period of three months following the date of
termination. With respect to clause (x) of the preceding sentence, 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 the Company
Continuation Period.
(iii) GOOD REASON. For purposes of this Agreement, "Good Reason"
shall mean (A) the material breach by Employer of any of its obligations
hereunder (a bona fide dispute regarding
-5-
the Performance Bonus shall not be a material breach by Employer) and the
failure of Employer to cure such breach within 60 days after receipt by
Employer of a written notice from Executive specifying in reasonable detail
the nature of the breach, unless such breach requires a longer period to
cure; (B) Executive's title or scope of responsibilities and duties are
materially diminished, or Employer fails to provide Executive with adequate
office facilities and support services to perform such responsibilities and
duties, (C) the amounts payable to Executive as provided in this Agreement
are materially reduced, or (D) Employer fails to continue in effect any cash
or stock-based incentive or bonus plan, retirement 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 Executive's Base Salary through the date of Executive's death,
payable in accordance with the provisions of Section 3(a). In addition,
Executive's eligible dependents shall be entitled to receive the health
insurance benefits specified in Section 3(c)(1) above for a period of 12
months (the "Company Continuation Period") 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, Executive's dependents shall be deemed to have elected to
exercise their rights under COBRA as of the first day of the Company
Continuation Period. This Section 4(c) shall not limit the entitlement of
Executive under any insurance or other benefits plan or policy that is
maintained by Employer for Executive's benefit.
(d) PURCHASE OF LIFE INSURANCE. Notwithstanding anything to the
contrary contained herein, in the event that the services of Executive with
Employer terminate for any reason other than death, Executive shall have the
right to acquire any life insurance policies maintained by Employer on the
life of Executive by (i) notifying Employer in writing of his desire to so
purchase such life insurance policy or policies and (ii) tendering to
Employer 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 60 days of
the effective date of such termination.
(e) TERMINATION FOLLOWING A CHANGE OF CONTROL. If, within 24 months
following a Change of Control, Employer terminates this Agreement and
Executive's services other than for Cause or Executive terminates this
Agreement with Good Reason, in either case by giving 30 days' prior written
notice, Executive shall be entitled to receive the following benefits and
payments:
(i) 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);
-6-
(ii) a termination distribution in an amount equal to [$________],
payable within 30 days of the effective date of termination; and
(iii) any vested benefits or amounts pursuant to Sections 3(c),
3(d), 3(e) and 3(f) through the effective date of termination, payable in
accordance with the provisions of any such plan(s). In addition, Executive
and his eligible dependents shall be entitled to receive (x) the health
insurance benefits specified in Section 3(c)(1) for a period of 24 months
following the effective date of termination (the "Company Continuation
Period"), and following such time period, 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 and (y) the life insurance benefits specified in
Section 3(f) for a period of 24 months following the effective date of
termination. With respect to clause (x) of the preceding sentence, 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 the Company
Continuation Period.
(iv) Executive shall be fully vested in all amounts accrued or
accumulated on behalf of Executive under any nonqualified retirement plan
established or maintained by Employer, and Employer 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 Employer's qualified
retirement plan at his employment termination pursuant to this Section,
Employer 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.
(v) All stock awards or grants under the Horizon Group Properties,
Inc. 1998 Long-Term Stock Incentive Plan shall be fully vested and
exercisable as of Executive's employment termination.
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 Employer, a corporation owned directly or indirectly by the stockholders
of Employer in substantially the same proportions as their ownership of stock
of Employer, Executive or Xxxxxxx X. Xxxxxxx, 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 Employer representing 50%
or more of the total voting power represented by Employer'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 Employer's stockholders was approved by a vote of at least two-thirds 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 Employer approve a merger or consolidation of Employer with
any other corporation, other than a merger or consolidation that would result
in the Voting Securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
-7-
converted into Voting Securities of the surviving entity) at least 50% of the
total voting power represented by the Voting Securities of Employer or such
surviving entity outstanding immediately after such merger or consolidation;
(4) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale or disposition by Employer of (in one
transaction or a series of transactions) all or substantially all of
Employer'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 Employer
hereunder.
(b) NON-COMPETITION. In return for the performance of the duties
described in Section 1, during the Employment Term 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)(i), 4(a)(ii), 4(b)(i), 4(b)(ii), or 4(e)
(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
Employer for himself, or any affiliate of himself or for any competitor of
Employer if such competitor engages in the Business within the United States
and any other geographic area or territory wherein Employer 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
Employer or at the time of termination of this Agreement any vendor, customer
or tenant that is actively being pursued by Employer and that Executive knows
is being pursued. Furthermore, during the Restrictive Period, Executive shall
not, directly or indirectly, induce or attempt to persuade any employee or
customer, vendor or tenant of Employer or any such entity being actively
pursued by Employer to terminate its business relationship with Employer 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 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, Employer will
pay Executive an amount equal to [$_________] per calendar month in arrears
for a period of two years beginning with the first calendar month after
termination of this Agreement pursuant to the provisions of Sections 4(a)(i),
4(b)(i), or 4(e). Upon written notice at any time prior to 30 days before
the expiration of the first year after termination, Employer or Executive may
elect to limit the Restrictive Period relating to a termination of this
Agreement pursuant to Sections 4(a)(i), 4(b)(i) or 4(e) to one year;
whereupon, the [$________] monthly payments shall cease at the end of said
first year. If this Agreement is terminated pursuant to the provisions of
Sections 4(a)(ii) or 4(b)(ii), then Executive shall not be entitled to
receive any amounts during the Restrictive Period.
-8-
(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 Employer, any Trade Secret
(as hereinafter defined) of Employer, 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
Employer 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
Employer.
(d) RETURN OF DOCUMENTS. Upon termination of his services with
Employer, Executive shall return all originals and copies of books, records,
documents, customer lists, sales materials, tapes, keys, credit cards and
other tangible property of Employer 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 Employer 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 Employer. Executive further acknowledges that the
scope of the foregoing restrictions has been specifically bargained between
Employer 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
Employer, its other stockholders and the public from the unfair competition
of Executive who, as a result of his performance of services on behalf of
Employer, will have had unlimited access to the most confidential and
important information of Employer, its business and future plans. Executive
further 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 Employer 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 Employer's business or reputation. Executive also shall
indemnify Employer for any and all consequential damages, costs and expenses
resulting from his acts of omission constituting reckless disregard of his
duties to Employer following notice thereof by Employer after Employer
becomes aware of such conduct and Executive's failure to so cure within 30
days.
-9-
6. GROSS UP PAYMENTS. Anything in this Agreement to the contrary
notwithstanding, in the event that any payment by or on behalf of Employer 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 Section
6(b), 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
Employer's auditors (the "Accounting Firm"), which shall provide detailed
supporting calculations both to Employer and Executive within 15 business
days of the receipt of notice from Employer or Executive that there have been
Payments, or such earlier time as is requested by Employer. 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 Employer. Any Gross-Up Payment, as
determined pursuant to this Section, shall be paid by Employer to Executive
within five days after the receipt by Employer 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 Employer and Executive, except as provided in Section 6(b).
(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 Employer 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 Employer to or for the benefit of
Executive. Executive shall notify Employer in writing of any claim by the
Internal Revenue Service or other agency that, if successful, would require
the payment by Employer of the Gross-Up Payment or an Underpayment.
-10-
7. PRIOR AGREEMENT. This Agreement supersedes and is in lieu of any
and all other employment arrangements between Executive and Employer and any
and all such employment 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. Employer may assign all or any of its
rights hereunder provided that substantially all of the assets of Employer
are also transferred to the same party.
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
Employer'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. Employer 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
Employer, 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 Employer would be required to perform it if no such succession or
assignment had taken place. Any failure of Employer 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
------------------------------
------------------------------
(b) if to Employer, to:
Horizon Group Properties, Inc.
Suite 3900
00 Xxxx Xxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
11. AMENDMENT. This Agreement may not be changed, modified or amended
except in writing signed by all of the parties hereto.
-11-
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. Employer 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 panics 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 Employer
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 Employer materially breaches any of its obligations
to Executive under this Agreement and Executive brings any action, claim,
demand, suit or proceeding against Employer to enforce his rights under this
Agreement, Employer agrees that it will pay all reasonable legal fees and
related legal costs (collectively "Legal Fees") incurred by Executive no
later than 30 days following a judgment by a court of competent jurisdiction
that Employer materially breached its obligations to Executive under this
Agreement; provided, however, that if it is determined by a final judgment or
other final adjudication by a court of competent jurisdiction that Employer
did not materially breach any of its obligations to Executive under this
Agreement, Executive will pay Employer within 30 days from such final
judgment or adjudication the aggregate amount of legal fees and expenses
incurred by Employer with respect to such action and the amount of any Legal
Fees that were previously paid to Executive by Employer pursuant to this
Section 15. Employer acknowledges the indemnification obligations of Employer
to Executive and the other officers of Employer 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 24
consecutive months immediately following the termination of this Agreement,
Executive will within 14 days of each instance of new employment notify
Employer in writing of the identity of his new employer and the job title
associated with such employment.
-12-
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
EMPLOYER:
EXECUTIVE: HORIZON GROUP PROPERTIES, INC.
------------------------------- By:
Xxxxx X. Xxxxxxx -------------------------------
Name:
------------------------------
Title:
-----------------------------
-13-
