Ex-10.51
Employment Agreement
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of January 10,
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 Xxxxx X. Xxxxxxxx, 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 application of
Executive's particular and unique skill, experience, and background to the
management and operation of the Company as its Executive Vice President -
Leasing, International and New Business Development;
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 Executive Vice President - Leasing, International and New Business
Development of the Company on the terms and conditions provided in this
Agreement. Executive shall serve as the Executive Vice President - Leasing,
International and New Business Development of the Company 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 to Xxxxxx X. Xxxxxxx, Chief
Financial Officer (the "CFO") with respect to leasing and Leasing Department
matters and to Xxxxx X. Xxxxxxx, President and Chief Executive Officer (the
"CEO") with respect to international and other non-leasing matters and will
perform all of his duties in accordance with such reasonable directions,
requests, rules and regulations as are specified by the CEO and CFO in
connection with his employment. Notwithstanding the foregoing, the Company may
alter the reporting relationship of Executive so that he thereafter, at least in
part, reports to the Company's President, the 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. During the Term of this
Agreement, it shall not be a violation of this Agreement or a material conflict
of interest for purposes of Section 4(a)(3) hereof 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, (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, or (iv)
communicate with potential investors regarding their investment in the Company
or its assets, which investments may include the potential for Executive to have
an ownership interest, provided Executive discloses this involvement to the
Company and the CEO's permission regarding such communications is obtained.
2. Term. The term of this Agreement shall commence as of January 1, 2002 and,
unless earlier terminated in accordance with the terms of this Agreement, will
extend to June 30, 2003 ("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 12 months prior to the end of the Original
Term. Notwithstanding the foregoing, the Company agrees to provide Executive
with a minimum of six 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 or the Extended Term for any
reason other than Good Reason, in which case Executive shall comply with the
notice requirements of Section 4(b)(1)(F) hereof. The Original 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. During the Term of this Agreement, the Operating
Partnership agrees to pay to Executive a base salary in an aggregate amount of
Two Hundred Fifty Thousand Dollars ($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. (1) 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 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 during 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,
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.
(2) The Company agrees to make a payment to Executive in respect of his
previous employment arrangements in the amount of $160,000, which shall be made
within five business days of the execution of this Agreement. In the event the
Company fails to make this payment as described directly above, Executive may,
in his sole discretion, void this Agreement and all obligations hereunder,
including any release of claims. Notwithstanding the foregoing, Executive has no
right to receive and the Company has no obligation to make any bonus payment to
Executive for the 2001 calendar year or any year thereafter, except as otherwise
stated herein.
(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. 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 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 throughout the Term of this Agreement.
(d) Vacation and Leaves of Absence. Executive shall be entitled to five (5)
weeks of paid vacation leave during each twelve (12) month calendar period
(considered to be granted for each half-year as of the first day of that
half-year) and paid holidays in accordance with the Company's established
policies. Executive may accrue unused vacation time if not used in any calendar
year or years, however, the maximum cumulative amount of vacation time that
Executive may accrue and carry over to the next year is four weeks. In addition
to the foregoing, Executive may be granted leaves of absence with or without pay
for such other reasons as shall be mutually agreed upon by the Board and
Executive.
(e) Expenses. Executive shall be reimbursed, subject to the Company's
receipt of invoices or similar records as the Company may reasonably request in
accordance with its policy and procedures, for all reasonable and necessary
expenses incurred by Executive in the performance of his duties hereunder. In
addition, simultaneously with execution of this Agreement, the Company shall pay
directly to Executive's counsel Executive's reasonable legal fees in connection
with the negotiation of this Agreement up to a maximum of $55,000. The Company
also shall reimburse Executive for any reasonable legal fees and costs he incurs
in connection with the negotiation and execution of renewals, extensions and
amendments of this Agreement.
(f) Life Insurance. The Company shall provide $2,000,000 of life insurance
coverage for the benefit of Executive during the Term of this Agreement.
(g) Stock Options. In consideration for Executive's employment hereunder,
the Company agrees to grant Executive options to purchase shares of the
Company's common stock to the same extent and on the same terms as it offers
options to any other senior management level employees of the Company. In the
event the Company offers options to any other management level employees of the
Company, it shall grant the Executive a number of options at least equal to the
number of options granted to the General Counsel or any Senior Vice President.
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 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 prior calendar years, provided that for
purposes of this calculation, Executive's annual bonus shall be deemed to have
been $160,000 both for year 2000 and for year 2001, or, if greater, 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, the Company-paid
life insurance benefits specified in Section 3(f) above and 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. 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 written notice to Executive. In connection with the termination
of Executive's services pursuant to this Section 4(a)(2), Executive (and
Executive's eligible dependents with respect to paragraph (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
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), 3(f) and 3(g) 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 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 policy 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 the product of
(x) the number of full and partial years remaining in the Original Term
(or, if greater, 2 years) and (y) the One-Year Pay Equivalent, which
amount shall be payable within thirty (30) days of the effective date
of termination;
(3) any vested benefits or amounts pursuant to Section 3(c),
3(e), 3(f) and 3(g) hereof throug h the effective date of termination,
payable in accordance with the provisions of any such plan(s);
(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.
(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 3(h),
4(e), 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 cash surrender 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. 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 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.
Executive agrees and acknowledges that during the Restrictive Period he is
prohibited from providing accounting or other financial services to any of the
named entities in this Section 5(d); however, Executive is not prohibited from
joining or otherwise associating with an accounting or consulting firm in which
other professionals provide such services to any of the named entities.
Executive further agrees that in the event Executive terminates this Agreement
for other than Good Reason or the Company terminates this Agreement for Cause,
for a six-month period immediately following the date notice of termination is
provided Executive shall be prohibited from being an employee of, or a
consultant to, any firm or entity (or affiliate thereof) to which consulting
services were provided by Prime while Executive was an employee or with which
specific business opportunities were being explored (e.g., the opportunity fund
in England).
(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) Mutual Release of Claims. Executive, on Executive's behalf as well as
on behalf of Executive's spouse, agents, representatives, heirs, executors,
administrators, successors, assigns and anyone claiming through Executive,
hereby forever irrevocably releases, relinquishes and waives, except as provided
herein, all known and unknown claims that Executive has had or now has against
Prime or the Operating Partnership (including any past, present and future
subsidiaries, affiliated entities, officers, directors, partners, shareholders,
trustees, fiduciaries and agents) in any way related to his prior employment
arrangements with the Company and its affiliates, or the termination thereof,
provided, however, that Executive does not release, relinquish or waive (i) any
known or unknown claim that Executive has had or now has against any party
(including, but not limited to, Prime or the Operating Partnership) under any
pension benefit plan or welfare benefit plan or program sponsored by the Company
or offered by, or on behalf of, the Company to Executive at any time, or (ii)
any right to have the Company indemnify, defend or hold harmless Executive in
connection with his prior employment arrangements with the Company and its
affiliates. Notwithstanding anything to the contrary in this Agreement,
Executive retains and does not release, relinquish, or waive any rights he may
have under any stock award agreement between Executive and the Company,
including any stock option agreement or stock grant agreement. Executive
represents that as of the execution of this Agreement he has vested, accrued
benefits in a Company-sponsored 401(k) plan and that he has claims to those
benefits, which if not paid may give rise to claims against the Company in its
fiduciary capacity. Executive further represents that other than as stated
above, he has no knowledge of any claims that he may bring at this time against
Prime or the Operating Partnership (including any past, present and future
subsidiaries, officers, directors, partners, shareholders, trustees,
fiduciaries, and agents) under the plans described in the preceding sentence.
Prime and the Operating Partnership, on their own behalf as well
as on behalf of each's respective agents, representatives, affiliated
entities, administrators, successors, assigns, and anyone claiming
through each, hereby forever irrevocably releases, relinquishes and
waives, except as otherwise provided herein, (i) all known and unknown
claims that each has had or now has against Executive relating to
Executive's performance or non-performance under prior employment
agreements between Executive and the Company, including any amendment
thereof, and (ii) all other known claims each has against Executive.
The parties hereto understand and agree that the releases set
forth herein do not in any way affect the rights of either party to
take whatever steps may be necessary to enforce the terms of this
Agreement or to obtain appropriate relief in the event of any breach of
the terms of this Agreement.
(g) 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.
(h) Acknowledgment. Executive acknowledges that he will be directly and
materially involved as a senior executive in all important policy and
operational decisions of Company. Executive further acknowledges that the scope
of the foregoing restrictions has been specifically bargained between Company
and Executive, each being fully informed of all relevant facts. Accordingly,
Executive acknowledges that the foregoing restrictions of this Section 5 may be
fair and reasonable, may be 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.
(i) 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, director 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): if to Executive, to:
(a) Xxxxx X. Xxxxxxxx
0000 Xxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
with a copy to (which shall not constitute notice):
Xxxxx & Xxxxxxx L.L.P.
Attn: Xxxxxx X. Xxxx, Xx.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
EXECUTIVE:
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
PRIME RETAIL, INC., a Maryland PRIME RETAIL, L.P., a Delaware
corporation limited partnership
By: /s/ Xxxxx X. Xxxxxxx By: Prime Retail, Inc.
------------------------------------
Name: Xxxxx X. Xxxxxxx Its: Sole General Partner
Title: President, Chief Executive Officer
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President,
Chief Executive Officer
