EXHIBIT 10.5
Employment Agreement
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This Employment Agreement (the "Agreement") is entered into by and between
Santa Xxxxx Operating Company (the "Company") and Xxxxxxx X. Xxxxx (the
"Executive"), as of the 16th day of August 1996.
1. RECITALS
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WHEREAS, the Executive has served as Chief Executive Officer of Santa Xxxxx
Realty Enterprises, Inc. ("Realty") pursuant to an Employment Agreement executed
by the Executive and Realty as of April 1, 1996 (the "Realty Employment
Agreement"); and
WHEREAS, the Executive and Realty have agreed to terminate the Realty
Employment Agreement, effective as of the close of business on August 16, 1996;
and
WHEREAS, the Company now desires to employ the Executive as its Chief
Executive Officer; and
WHEREAS, the Executive serves on the Company's Board of Directors; and
WHEREAS, the Company desires that the Company's Chief Executive Officer
serve as Chairman of the Company's Board of Directors; and
WHEREAS, the Board of Directors has elected the Executive Chairman of the
Company's Board of Directors.
NOW, THEREFORE, the Company and the Executive desire to set forth in this
Agreement the terms and conditions of the Executive's employment with the
Company.
2. EMPLOYMENT WITH COMPANY AND TERMINATION OF EMPLOYMENT WITH REALTY.
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(a) The Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
from August 16, 1996, to and including March 31, 1998. This Agreement is
subject to renewal as set forth in Section 6 below.
(b) Both parties acknowledge and agree that any and all remuneration,
compensation or benefit provided for in the Realty Employment Agreement has been
satisfied in full, and that the Executive, the Company and Realty have no
remaining obligations, past or future, to any other party under such
Employment Agreement, other than (1) Realty's obligation to make a timely
payment of Accrued Obligations (as such term is defined in Section 5(e)(1) of
this Agreement) and any amounts due pursuant to the terms of any applicable
welfare or pension benefit plans and (2) the Executive's continuing obligation
under Section VIII of the Realty Employment Agreement not to communicate or
divulge any secret or confidential information, knowledge or data relating to
Realty or any of its affiliated companies to anyone other than Realty and those
designated by it, except with the prior written consent of Realty or as may
otherwise be required by law or legal process. Executive agrees that no
benefits are payable pursuant to Section IV-J of the Realty Employment
Agreement. The parties further acknowledge and agree that this Employment
Agreement between the Executive and the Company terminates, replaces and
supersedes the Realty Employment Agreement in its entirety.
3. DUTIES.
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(a) The Executive shall serve during the course of his employment as Chief
Executive Officer of the Company, and shall have such duties and
responsibilities as are customarily required of such officer and as the Board of
Directors of the Company shall determine from time to time. During his tenure
as the Chief Executive Officer, the Company's headquarters shall be in Southern
California and Executive shall discharge his duties through services primarily
performed in the Southern California area.
(b) The Executive agrees to devote substantially all of his time, energy
and ability to the business of the Company. Nothing herein shall prevent the
Executive, upon approval of the Board of Directors of the Company, from serving
as a director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any present
or future affiliate of the Company.
(c) Nothing herein shall prevent the Executive from investing in real
estate for his own account or from becoming a partner or a stockholder in any
corporation, partnership or other venture not in competition with the business
of the Company or in competition with any present or future affiliate of the
Company.
(d) For the term of this Agreement, the Executive shall report to the Board
of Directors of the Company or its designee.
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4. COMPENSATION.
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(a) The Company shall pay the Executive a base salary at the rate of
$300,000 per year. Such salary shall be earned semimonthly and shall be payable
in periodic installments no less frequently than semimonthly in accordance with
the Company's customary practices. Amounts payable shall be reduced by standard
withholding and other authorized deduc tions. The Company will review the
Executive's salary at least annually. The Company may in its discretion
increase the Executive's salary but may not reduce it during the time he serves
as Chief Executive Officer of the Company.
(b) Stock Options. The effectiveness of this Agreement is contingent upon
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the Executive's being granted certain stock options, effective August 18, 1996,
which agreements are attached hereto as Exhibits A, B, C, D, E, and F.
(c) Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
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shall be entitled to participate in all annual bonus, incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company. At the end of each calendar year during the
term of this Agreement, the Executive may, in the Board of Directors' sole
discretion, earn an annual bonus in an amount up to 100% of the Executive's
annual salary for such calendar year. For calendar year 1996, the Executive's
bonus, if any, shall be prorated in proportion to the sum of the Executive's
total period of service with the Company and Realty. In determining bonus and
incentive awards, the Board of Directors will consider the Executive's success
in accomplishing goals with respect to the Company which have been established
by the Compensation Committee in consultation with the Executive.
(d) Vehicle. The Company shall lease a vehicle for the Executive's use.
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In lieu thereof, the Company may pay the Executive a reasonable vehicle
allowance or lease a vehicle from the Executive for his use (subject to any
required withholding) in accordance with the Company's customary practices.
(e) Club Membership Dues. The Company shall reimburse the Executive
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promptly for all reasonable club membership dues incurred by him in support of
his role in promoting the best interests of the Company.
(f) Welfare Benefit Plans. The Executive and/or his family, as the case
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may be, shall be eligible for participa tion in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription,
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dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company.
(g) Expenses. The Executive shall be entitled to receive prompt
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reimbursement for all reasonable employment expenses incurred by him.
(h) Fringe Benefits. The Executive shall be entitled to fringe benefits in
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accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.
(i) Vacation. The Executive shall be entitled to paid
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vacation in accordance with the plans, policies, programs and practices as in
effect generally with respect to other peer executives of the Company.
(j) Supplemental Executive Retirement Benefits. The Executive shall be
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entitled to be paid additional retirement benefits which, when added to his
benefits under the Santa Xxxxx Realty Enterprises, Inc. and Santa Xxxxx
Operating Company Retirement Income Plan (the "Retirement Plan"), will provide
total benefits equal to what he would have received if the Retirement Plan were
changed in the following respects:
(1) All of the Executive's base salary shall be counted, including
base salary in excess of the limits imposed by Section 401(a)(17)
of the Internal Revenue Code of 1986, as amended (the "Code"),
and further including base salary deferred under the Santa Xxxxx
Realty Enterprises, Inc. and Santa Xxxxx Operating Company Thrift
Plan, or any other deferred compensation plan of the Company.
(2) All benefits shall immediately vest if the Executive remains
employed through March 31, 1998.
(3) All benefits shall immediately vest if the Executive's employment
terminates, unless the Executive's employment is terminated by
the Company for Cause or the Executive voluntarily terminates
employment without Good Reason.
For the purpose of this Section 4(j), Executive's employment will be deemed to
have commenced April 1, 1996. All benefits payable pursuant to this Section
4(j) shall be paid to the Executive in the same form and at the same time(s) as
elected under the Retirement Plan. If Executive terminates at a time when he is
entitled to benefits under this subsection but not vested under the Retirement
Plan, benefits shall be paid at termination in the normal form provided under
the Retirement
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Plan (unless, at least one year prior to termination, Executive has elected to
receive the benefits in an alternative form permitted under the Retirement
Plan), and such benefits shall be subject to any applicable actuarial adjustment
provided in the Retirement Plan for early retirement or form of benefit. The
Executive and his spouse, Beneficiaries, heirs and successors under this Section
4(j) shall have solely those rights of an unsecured creditor of the Company.
The Company further agrees that it shall reexamine the issue of supplemental
retirement benefits during calendar year 1997.
5. TERMINATION.
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(a) Death. The Executive's employment shall terminate automatically upon
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the Executive's death.
(b) Disability. If the Company determines in good faith that the
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Disability of the Executive has occurred (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 16 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the day of receipt of such notice by the Executive. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from his duties with the Company for a period of six months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or his legal representative (such agreement as to acceptability
not to be withheld unreasonably). "Incapacity" as used herein shall be limited
only to such Disability which substantially prevents Company from availing
itself of the services of the Executive.
(c) Cause. The Company may terminate the Executive's employment for Cause.
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For purposes of this Agreement, "Cause" shall mean that the Company, acting in
good faith based upon the information then known to the Company, after due
inquiry, determines (1) that the Executive has been convicted of a felony or (2)
that the Executive has acted or failed to act in connection with his employment
in such manner as would constitute gross negligence or willful misconduct.
(d) Other than Death or Disability or Cause. The Company may terminate the
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Executive's employment for reasons other than Death, Disability or Cause upon 60
days written notice. The 60 day notice requirement of this Section 5(d) shall
be deemed satisfied if the Company gives the Executive
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notice of its desire to terminate this Agreement under Section 6 hereof.
(e) Obligations of the Company Upon Termination.
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(1) Death or Disability. If the Executive's employment is terminated
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by reason of the Executive's Death or Disability, this Agreement shall terminate
without further obligations to the Executive or his legal representatives under
this Agreement, other than for (A) payment of the sum of (i) the Executive's
annual base salary through the date of termination to the extent not theretofore
paid and (ii) reasonable employment expenses, vehicle expenses, and club
membership dues as provided herein, through the date of termination to the
extent not theretofore paid (the sum of the amounts described in clauses (i) and
(ii) shall be hereinafter referred to as the "Accrued Obligations"), which
amounts shall be paid to the Executive or his estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the date of termination and
(B) payment to the Executive or his estate or beneficiary, as applicable, of any
amounts due pursuant to the terms of any applicable welfare or pension benefit
plans (including, but not limited to, any amounts due as Supplemental Executive
Retirement Benefits under Section 4(j) of this Agreement).
(2) Cause or Voluntary Termination. If the Executive's employment is
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terminated by the Company for Cause or the Executive voluntarily terminates
employment (except for a "Good Reason" described in Section 5(e)(4) below), this
Agreement shall terminate without further obligations to the Executive other
than for the timely payment of Accrued Obligations and any amounts due pursuant
to the terms of any applicable welfare or pension benefit plans. If it is
subsequently determined that the Company did not have Cause for termination
under this Section 5(e)(2), then the Company's decision to terminate shall be
deemed to have been made under Section 5(e)(3) and the amounts payable
thereunder shall be the only amounts the Executive may receive for his
termination.
(3) Other than Cause or Death or Disability. If the Company
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terminates the Executive's employment during the term of this Agreement
(including renewals) for other than Cause or Death or Disability, this Agreement
shall terminate without further obligations to the Executive other than (A) the
timely payment of Accrued Obligations, (B) payment of any amounts due pursuant
to the terms of any applicable welfare or pension benefit plans and (C) payment
to the Executive of a lump sum equal to the product of 112% times 18 months of
the Executive's base salary, calculated using the base salary rate in effect
under this Agreement on the Executive's date of
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termination. The obligation described in this paragraph shall be reduced,
however, by any cash lump sum severance payment received by the Executive
pursuant to the Severance Agreement between the Executive and the Company dated
August 16, 1996.
(4) Voluntary Termination for Good Reason. If the Executive
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voluntarily terminates his employment with the Company during the term of this
Agreement (including renewals) for Good Reason, this Agreement shall terminate
in the same manner as if the Company terminated the Executive's employment under
Section 5(e)(3) for a reason other than Cause. For purposes of this Section
5(e)(4), "Good Reason" shall mean the occurrence of one of the following events
without the Executive's consent:
(A) Any action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities to
the Company, including for this purpose any material change in the Executive's
employment location, and excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company, as the case may be, promptly after receipt of notice thereof given by
the Executive;
(B) Any reduction in the Executive's base compensation not agreed
to by the Executive, which reduction shall be deemed to occur if there is a
reduction in (i) the Executive's base salary or (ii) the Executive's ability to
participate in employee benefit plans, receive expense reimbursements, receive
other fringe benefits, receive office and support staff, or receive paid
vacation, provided that: (i) an isolated, insubstantial, and inadvertent failure
not occurring in bad faith and which is promptly remedied after notice by the
Executive shall not be deemed a violation of this paragraph and (ii) a reduction
in one element of the Executive's total compensation shall not be deemed a
violation of this paragraph if a counterbalancing increase in another element of
the Executive's total compensation occurs (the determination of whether the
increase is counterbalancing shall be determined by the Executive in good
faith).
(5) No Mitigation. If this Agreement terminates under Section
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5(e)(2), 5(e)(3) or 5(e)(4) hereof, the obligations of the Company to the
Executive under this Agreement will not be mitigated by any other employment
secured by the Executive.
(6) Withholding. Amounts payable under this Section 5(e) shall be
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reduced by any standard withholdings and other authorized deductions.
(f) Exclusive Remedy. By signing the Agreement, the Executive agrees that
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the payments to which the Executive may
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become entitled under this Agreement are in lieu of any other payments to which
the Executive might be entitled and that the Company's discharge of its
obligations under this Agreement shall constitute full satisfaction of any and
all claims of any nature whatsoever that the Executive might otherwise possess
against the Company and its subsidiaries, except (A) such claims as are
specifically provided for in the terms of any generally applicable employee
benefit or executive compensation plans evidenced by written agreements, (B) the
Executive's rights, if any, under his Severance Agreement, or (C) any claims for
personal injuries (other than claims that are based on or relate to a contention
that Company has wrongfully discharged the Executive).
6. RENEWAL.
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Subject to the provisions of Section 5(e)(3), on the last day of March each
calendar year, beginning on March 31, 1998, this Agreement shall be
automatically renewed for one additional 12 month period unless the Executive or
the Company gives notice to the other, in writing, at least 6 months prior to
the expiration of this Agreement, or any renewal or extension thereof, of its
desire to terminate this Agreement or modify its terms. Once this Agreement
expires, this Agreement shall have no application to the terms and conditions of
any employment by Executive subsequent to such expiration or the termination of
such employment.
7. ARBITRATION.
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Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Civil Procedure Code, Title 9, (S)(S) 1280-1298.8. The arbitrator
shall be selected jointly by the parties or by Judicial Arbitration & Mediation
Services, Inc. ("JAMS"). Each party to the arbitration shall bear its own
attorneys' fees and costs relating to such arbitration. In the event that the
Executive disputes the Company's determination that Cause has existed for his
termination of employment, the Company shall only be considered as having
terminated the Executive for Cause if the arbitrator concludes that Cause
existed for Executive's termination and issues specific findings to that effect.
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8. CONFIDENTIAL INFORMATION.
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The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during his employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the Executive's employment
with the Company, he shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.
9. SUCCESSORS.
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(a) This Agreement is personal to the Executive and shall not, without the
prior written consent of the Company, be assignable by the Executive.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
10. WAIVER.
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No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
11. MODIFICATION.
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This Agreement may not be amended or modified other than by a written
agreement executed by the Executive and the Board of Directors of the Company.
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12. SAVINGS CLAUSE.
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If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
13. COMPLETE AGREEMENT.
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This instrument constitutes and contains the entire agreement and
understanding concerning the Executive's employment and the other subject
matters addressed herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof. This is an integrated document.
14. GOVERNING LAW.
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This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
15. CONSTRUCTION.
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Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
16. COMMUNICATIONS.
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All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to the Executive at
0 Xxxxxxxx Xxxx, Xxxxxxx Xxxxx, XX 00000, or addressed to the Company at 000 X.
Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000. Any party may change the address at which
notice shall be given by written notice given in the above manner.
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17. EXECUTION.
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This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
18. LEGAL COUNSEL.
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The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice. The Company shall reimburse the Executive
promptly for all reasonable attorney fees incurred by the Executive in
connection with the negotiation and review of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
SANTA XXXXX OPERATING COMPANY
By: _________________________________________
Xxxxxxx X. XxXxxxx
General Counsel
XXXXXXX X. XXXXX
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