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EMPLOYMENT AGREEMENT
FOR
XXXXX X. XXXXX
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TABLE OF CONTENTS
PAGE
1. EMPLOYMENT. 2
2. SERVICES. 3
3. COMPENSATION AND BENEFITS. 3
4. TERMINATION OF EMPLOYMENT. 7
5. CONFIDENTIAL INFORMATION AND NON-SOLICITATION. 16
6. RETURN OF DOCUMENTS. 17
7. NONCOMPETE. 18
8. REMEDIES. 19
9. SUCCESSORS AND ASSIGNS. 19
10. TIMING OF AND NO DUPLICATION OF PAYMENTS. 20
11. MODIFICATION OR WAIVER. 21
12. NOTICES. 21
13. EXECUTIVE REPRESENTATION. 21
14. TAX LIABILITY. 22
15. GOVERNING LAW. 22
16. SEVERABILITY. 22
17. COUNTERPARTS. 23
18. HEADINGS. 23
19. ENTIRE AGREEMENT. 23
20. SURVIVAL OF AGREEMENTS. 23
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
September 2, 1997 by and between Xxxxx X. Petra, an individual residing at 0
Xxxxxxxx Xxxxx, Xxxxx Xxxxxxxxxx, Xxx Xxxx 00000 ("Executive"), and Philips
International Realty Corp., a Maryland corporation with offices at c/o Philips
International, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("New Reit").
RECITALS
WHEREAS, as set forth in the Contribution and Exchange Agreement by and
between the Property Partnerships (as defined therein), National Properties
Investment Trust, a Massachusetts business trust ("National"), Philips
International Realty, L.P., a Delaware limited partnership ("PRLP") and New Reit
dated August 11, 1997, the Property Partnerships, National and PRLP have
determined that it is in the best interests of the parties' long term strategic
growth to combine their respective properties and related assets;
WHEREAS, in order to effectuate this combination, the Property
Partnerships and National have agreed to contribute certain properties and other
assets located throughout the States of New York, New Jersey, Connecticut,
Massachusetts and Florida and owned or controlled by the Property Partnerships
or National (the "Property") to New Reit and New Reit has agreed to contribute
such Property to PRLP in exchange for a general partnership interest therein,
all as of the closing (the "Closing");
WHEREAS, it is anticipated that the Closing shall occur and New Reit
shall begin operations in December 1997; and
WHEREAS, it is anticipated that New Reit will raise $100,000,000 in
equity on or before June 1, 1998, through the initial sale to the public of its
Common Stock par value $.01 per share (the "New Reit Common Stock") for cash,
with such level, timing and manner of equity raise collectively considered for
purposes of this Agreement to constitute and hereinafter are referred to as, the
initial public offering (the "IPO"); and
WHEREAS, New Reit desires to employ Executive, and Executive desires to
be employed by New Reit, pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment.
New Reit hereby agrees to employ Executive, and Executive
hereby agrees to be employed by New Reit, on a full-time basis for a term
commencing September 2, 1997 and expiring on December 31, 2002, unless this
Agreement shall be either (i) extended thereafter by mutual agreement of the
parties, or (ii) terminated earlier pursuant to the terms hereof. The term of
this Agreement during which Executive shall be employed on a full-time basis is
referred to herein as the "Employment Period."
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2. Services.
During the Employment Period, Executive shall hold the
position of President and shall serve as a member of the Board of Directors of
New Reit (the "Board"). Executive shall devote his best efforts and
substantially all of his business time, skill and attention to the business of
New Reit, and shall perform such duties as are customarily performed by similar
executive officers and as may be more specifically enumerated from time to time
by the Board or the Executive Committee of the Board, if any; provided, however,
that the foregoing is not intended to preclude Executive from (a) owning and
managing personal investments, including real estate investments, subject to the
restrictions set forth in Paragraph 7 hereof or (b) engaging in charitable
activities and community affairs, provided that the performance of these
activities referred to in clauses (a) and (b) does not prevent Executive from
devoting substantially all of his business time to New Reit.
Executive shall be based in New York, New York, subject to
reasonable travel requirements.
3. Compensation and Benefits.
During the Employment Period, New Reit shall pay Executive the
following annual base salary which shall be payable in accordance with New
Reit's normal payroll practices ("Annual Base Salary): $175,000 beginning
September 2, 1997 through December 31, 2000; $200,000 beginning on January 1,
2001 through December 31, 2001; and $225,000 beginning on January 1, 2002
through December 31, 2002 and thereafter, if applicable, as may be mutually
agreed by the parties.
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Executive shall be eligible to participate in the annual bonus
program for key executives pursuant to which Executive shall receive a bonus
based upon a formula and subject to certain performance goals having been
achieved, with such formula and performance goals to be determined by the Board,
in its sole discretion, by the end of the first quarter of each year. It is
anticipated, but not guaranteed, that the bonus program hurdle will be a fifteen
(15%) percent year-to-year increase in the Funds from Operations of New Reit.
New Reit shall deduct and withhold from compensation payments
all social security and other federal, state and local taxes and charges in the
minimum amounts (or such greater amounts as the Executive may from time to time
request) which currently are or which hereafter may be required by law to be so
deducted and withheld, including withholding pursuant to bonus withholding
rates, as applicable. In addition to the compensation specified above, Executive
shall be entitled to the following benefits:
(a) health and hospitalization (family), life insurance,
disability, business travel accident, paid vacation
and any other compensated absences and any other
plans made generally available to other executive
officers of New Reit; provided, however that during
the months of August, 1997 through February, 1998 (or
such later month during which Executive first becomes
eligible for enrollment in New Reit's health and
hospitalization programs), Executive shall be
reimbursed for the cost of his COBRA premium;
(b) a $500 monthly reimbursement for local travel
expenses; and
(c) reimbursement for substantiated reasonable business
expenses including out-of-town travel expenses
incurred by Executive in furtherance of the interests
of New Reit.
In addition, the Board, in its sole discretion, may (i) grant Executive
restricted share awards and options to purchase shares of New Reit Common Stock,
in addition to the
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Options discussed hereinafter and (ii) offer Executive participation in any
other bonus, stock based compensation or other executive compensation plans or
programs made generally available to executives of New Reit.
As further consideration for Executive agreeing to serve as
President and entering into this Agreement upon the terms set forth herein,
including, without limitation, the terms relating to non-competition set forth
in Paragraph 7 below, New Reit shall:
(a) at the Closing issue to Executive options to
purchase 40,000 shares of Common Stock pursuant to
he New Reit 1997 Stock Option and Long-Term
Incentive Plan (the "Plan") which Plan will be
adopted by New Reit and approved by shareholders
concurrently with the Closing) at an exercise price
equal to the price of Common Stock at the Closing
(the "Options") provided, however, that after
taking into account the Options and any dilution
which may occur as a result of the IPO with respect
to the underlying shares of Common Stock, upon the
consummation of the IPO, Executive shall have an
option to purchase 100,000 shares of New Reit
Common Stock at an exercise price equal to the price
to the public for shares of New Reit Common Stock
sold in the IPO. Executive's Options shall be
evidenced by an option grant agreement dated as of
the date of the Closing which agreement shall
include, but not be limited to, the following
provisions: vesting, subject to Executive's continued
employment with New Reit and the provision of
Paragraphs 4(c), 4(e) and 4(f) below, over a five (5)
year period with 10,000 of the Options vesting on
each of December 31, 1999, December 31, 2000,
December 31, 2001 and December 31, 2002 (unless
vesting is otherwise accelerated pursuant to the
terms and conditions of this Agreement or the
option grant agreement); non-transferability and
anti-dilution provisions; and, provisions relating
to the use of the Options together with the
underlying stock to collateralize any funds
necessary for exercise; and
(b) concurrently with the IPO or as soon as practicable
thereafter, loan on a non-recourse basis to Executive
$1,000,000 (the "Stock Acquisition Loan"), with the
loan proceeds to be used by Executive simultaneously
to purchase as many newly issued shares of New Reit
Common Stock, at the price to the public for shares
of New Reit Common Stock sold in the IPO, as such
Stock Acquisition Loan amount will permit. Interest
shall accrue on the Stock Acquisition Loan at six
(6%) percent per annum and shall be payable, on the
outstanding balance thereof from time to time,
quarterly in arrears. Dividends on the New Reit
Common Stock
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acquired by Executive, subject to reduction for
interest repayment, shall be payable to Executive at
such times and in such amounts as may generally be
declared by the Board with respect to all shares of
New Reit Common Stock then outstanding without regard
to whether the Stock Acquisition Loan has been repaid
or forgiven. The Stock Acquisition Loan is being
granted and secured pursuant to the terms and
conditions of this Agreement, with the New Reit
Common Stock purchased with the proceeds of the Stock
Acquisition Loan and a Secured Non-Recourse
Promissory Note and Stock Pledge Agreement evidencing
and securing such Stock Acquisition Loan as executed
between New Reit and Executive. In the event of a
conflict between the aforementioned documents and
this Agreement, the terms of this Agreement shall
control.
It is the intention of the parties that the dividends
received by Executive on the New Reit Common Stock
purchased with the proceeds of the Stock Acquisition
Loan will equal or exceed the interest payable
thereon. Accordingly, New Reit hereby agrees to
timely pay Executive such additional cash
compensation as may be necessary for Executive to
maintain cash neutrality, giving appropriate
consideration to the taxability of any such
additional cash compensation, should the timing
and/or amount of dividends received by the Executive
be insufficient to fund interest payable on the Stock
Acquisition Loan.
The Stock Acquisition Loan shall be forgiven as
follows: subject to the provisions of either
Paragraph 4(e) or 4(f) below, $500,000 of the
principal shall be forgiven on December 31, 2000
provided Executive is employed by New Reit on the day
immediately preceding that date, and the other
$500,000 of the principal shall be forgiven ratably
pursuant to the provisions of Paragraph 4(c) below,
and subject to the provisions of Paragraph 4(f)
below, with the entire outstanding balance forgiven
as of December 31, 2002 (the "Forgiven Amount")
provided Executive is employed by New Reit on the day
immediately preceding that date.
The Stock Acquisition Loan shall be initially secured
by the shares of New Reit Common Stock purchased by
Executive from New Reit with the proceeds of the
Stock Acquisition Loan. On December 31, 2000, the
outstanding balance of the Stock Acquisition Loan
shall be secured only by shares of New Reit Common
Stock having a Fair Market Value of one hundred
twenty-five (125%) percent of the outstanding
principal amount of the Stock Acquisition Loan. On
December 31, 2000 (the "Determination Date"), New
Reit shall reasonably determine the aggregate Fair
Market Value of the collateral (the "Collateral
Value") being held. If on such Determination Date the
Collateral Value exceeds one hundred
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twenty-five (125%) percent of the outstanding balance
of the Stock Acquisition Loan on such Determination
Date after giving effect to any loan forgiveness, as
applicable (the "Secured Loan Amount"), New Reit
shall automatically release to Executive such portion
of the collateral the aggregate Fair Market Value of
which equals the Collateral Value less the Secured
Loan Amount, free and clear of any and all
encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the
aforementioned Stock Pledge Agreement and Secured
Non-Recourse Promissory Note. New Reit shall then
issue shares of New Reit Common Stock to Executive in
exchange for the Stock Acquisition Loan. New Reit
shall, upon receipt from Executive of the Stock
Pledge Agreement and Secured Non-Recourse Promissory
Note for New Reit Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt
delivery of the certificates evidencing ownership of
the shares of New Reit Common Stock to Executive,
subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law
or regulation requires New Reit to take any action
with respect to such shares prior to the delivery
thereof, then the date of the delivery of the shares
shall be extended for the period necessary to
complete such action. As soon as practicable
following such time as New Reit is eligible to use
Form S-3 (or any successor form thereof) to register
such shares of New Reit Common Stock, New Reit shall
use its reasonable best efforts to register the
resale of such shares through a shelf registration
statement under the Securities Act of 1933, as
amended (the "Act"). The Company agrees that if at
any time after the IPO and prior to such
registration, the Company authorizes the filing of a
registration statement under the Act in connection
with the proposed offer of any of its securities by
the Company or any of its shareholders ("Subsequent
Registration Statement"), New Reit shall use its
reasonable best efforts to register the shares of New
Reit Common Stock purchased by Executive with the
proceeds of the Stock Acquisition Loan via the
Subsequent Registration Statement. Certificates for
shares of New Reit Common Stock, when released to
Executive, shall have restrictive legends applicable
to the Stock Pledge Agreement and any statements of
other applicable restrictions with respect thereto
removed.
4. Termination of Employment.
(a) Either New Reit or Executive may terminate this Agreement
after June 1, 1998 and before September 1, 1998 if the IPO has not occurred,
provided,
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however, that if New Reit is currently marketing a preliminary prospectus or
"red xxxxxxx" with respect to a public offering by June 1, 1998, the June 1,
1998 termination date shall be extended to July 1, 1998 for purposes of this
Paragraph. Regardless of the party electing termination of this Agreement, New
Reit shall pay Executive a single-sum payment on date of termination equal to
the product of $7,500 multiplied by each month which has elapsed from August 1,
1997 through the date of termination, pro-rated for any portion of a month. In
the event of a termination of Executive's employment under this Paragraph,
neither New Reit nor Executive shall have any further obligations under this
Agreement or otherwise.
(b) In the event New Reit terminates Executive's employment
for any reason other than Cause, prior to June 1, 1998 and the IPO occurs prior
to June 1, 1998, in lieu of any payment under Paragraph 4(a) above, New Reit
shall pay Executive a single sum payment of $350,000 on June 1, 1998. In the
event Executive's employment terminates prior to June 1, 1998 for any reason
described in the preceding sentence of this Paragraph 4(b), and the IPO does not
occur prior to June 1, 1998, New Reit shall pay Executive the amount to which
Executive would be entitled had termination occurred pursuant to Paragraph 4(a)
above. In the event of a termination of Executive's employment under this
paragraph, neither New Reit nor Executive shall have any further obligation
under this Agreement or otherwise.
(c) Either New Reit or Executive may terminate this Agreement
effective December 31, 2000 or at any time thereafter. Regardless of the party
electing termination, the balance of the Options issued hereunder shall
immediately vest. In the event this Agreement is terminated at any time after
December 31, 2000 and prior to December 31, 2002, an additional principal amount
of the Stock Acquisition Loan shall
8
be forgiven, which amount will be equal to the outstanding principal balance of
the Stock Acquisition Loan multiplied by a fraction, the numerator of which
shall be the number of days Executive is employed by New Reit after December 31,
2000 and the denominator of which shall be 730. The balance of the Stock
Acquisition Loan shall be accelerated and all amounts outstanding thereunder
(both principal and interest) shall become due and owing on Executive's date of
termination. In the event Executive does not pay the full balance due under the
Stock Acquisition Loan on date of termination of this Agreement, and the
Collateral Value equals or exceeds the unpaid balance due, that portion of the
collateral necessary to repay the Stock Acquisition Loan shall be sold by New
Reit and the proceeds of such sales shall be used to satisfy the balance due
thereon. Any remaining shares of New Reit Common Stock ("the Excess Collateral")
shall be released to Executive as soon as practicable after Executive's date of
termination and such sales. New Reit shall pay Executive any unpaid salary
accrued through and including the date of termination (the "Accrued Amount"). In
addition, Executive shall be entitled (i) to exercise any warrants and options,
including the Options granted hereunder, which have vested and are exercisable
in accordance with the terms of this Agreement, any applicable stock option plan
or agreement, or warrant agreement, and (ii) to retain any shares awarded to
Executive which are fully vested on the date of termination. Except for any
rights Executive may have under this Paragraph 4(c), New Reit shall have no
further obligations hereunder following such termination.
(d) In the event after June 1, 1998 but before December 31,
2000 (i) New Reit terminates Executive's employment for Cause (as hereinafter
defined) or (ii) Executive terminates his employment without Good Reason (as
hereinafter defined), New Reit shall pay Executive the Accrued Amount
immediately upon termination of
9
employment. In addition, in such event, Executive shall be entitled (i) to
exercise any warrants and options, including the Options granted hereunder,
which have vested and are exercisable in accordance with the terms of this
Agreement, any applicable stock option plan or agreement, or warrant agreement,
and (ii) to retain any shares awarded to Executive which are fully vested on the
date of termination. Except as provided in Paragraph 4(f) below, the Stock
Acquisition Loan shall be accelerated and all amounts outstanding thereunder
(both principal and interest) shall become due and owing on Executive's date of
termination. In the event Executive does not pay the full balance due under the
Stock Acquisition Loan on date of termination of this Agreement, and the
Collateral Value equals or exceeds the unpaid balance due, that portion of the
collateral necessary to pay the Stock Acquisition Loan shall be sold by New Reit
and the proceeds of such sales shall be used to satisfy the balance due thereon.
Any Excess Collateral shall be released to Executive as soon as practicable
following the Executive's date of termination and such sales. Except for any
rights which Executive may have under this Paragraph 4(d), New Reit shall have
no further obligations hereunder following such termination.
(e) In the event of termination of Executive's employment
after June 1, 1998 but before December 31, 2000 as a result of either (i)
Executive's death or Disability (as hereinafter defined), (ii) termination by
New Reit for any reason other than Cause or (iii) termination by Executive of
his employment for Good Reason, New Reit shall pay to Executive (A) the Accrued
Amount (B) any unpaid salary, at the rate then in effect without reduction, from
the date of termination through December 31, 2000 (as if no such termination
occurred) and (C) a pro-rata portion, based upon the number of days of
employment in the period beginning with January 1 of the calendar
10
year in which such termination occurred divided by the full calendar year
multiplied by the case bonus payments paid to Executive for the immediately
preceding calendar year (the "Pro-Rata Bonus"). The aforesaid amounts shall be
payable in full immediately upon such termination. In addition, Executive shall
have a fully-vested non-forfeitable right to the Options , and any options or
restricted stock awards previously granted to him as of the date the applicable
event listed in the first sentence of this Paragraph 4(e) occurs. Furthermore,
and except as provided in Paragraph 4(f) below, $500,000 of the principal of the
Stock Acquisition Loan shall be forgiven on the date of termination and all
other amounts outstanding under the Stock Acquisition Loan shall become due and
owing on the date of termination. In the event Executive does not pay the full
balance due under the Stock Acquisition Loan on date of termination of this
Agreement, and the Collateral Value equals or exceeds the unpaid balance due,
that portion of the collateral necessary to repay the Stock Acquisition Loan
shall be sold by New Reit and the proceeds of such sales shall be used to
satisfy the balance due thereon. Any Excess Collateral shall be released to
Executive as soon as practicable following the Executive's date of termination
and such sales. Executive shall be entitled, at the option of Executive, his
estate or his personal representative, within ninety (90) days (one (1) year in
the case of termination as a result of Executive's death or Disability) of the
date of such termination, (i) to exercise any options including the Options
granted herein, to purchase shares of New Reit Common Stock that have vested
(including, without limitation, by acceleration in accordance with the terms of
this Agreement) and are exercisable in accordance with the terms of either this
Agreement, any stock option plan or agreement, and (ii) to retain any shares of
New Reit Common Stock awarded to Executive which are vested on the date of
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termination. Except for any rights which Executive may have under this Paragraph
4(e), New Reit shall have no further obligations hereunder following such
termination.
(f) In the event a Change in Control occurs during the
Employment Period, and the Executive is actively employed on the day immediately
preceding the date of a Change in Control, notwithstanding any other provision
of this Agreement the entire outstanding balance of the Stock Acquisition Loan
shall be forgiven, Executive shall have a fully vested non-forfeitable right
to the Options and any options or restricted stock awards previously granted to
him as of the date of the Change in Control and the Excise Tax Gross-Up, if
applicable, pursuant to the provisions of Paragraph 4(j) below. In addition,
the provisions of Paragraph 7 of this Agreement shall no longer apply to
Executive after the date of the Change in Control. In the event a Change in
Control occurs after June 1, 1998 but before December 31, 2000 and the
Executive's employment is terminated by New Reit or any successor thereto for
any reason on or after the date a Change in Control occurs, Executive shall also
be entitled to receive payment of (i) the Accrued Amount, (ii) any unpaid
salary, at the rate then in effect without reduction, through December 31, 2000,
if applicable (as if no such termination occurred) and (iii) the Pro-Rata
Bonus. The aforesaid amounts shall be payable in full immediately upon such
termination.
(g) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and
continued failure by Executive to
substantially perform his duties hereunder
(other than any such failure resulting from
Executive's incapacity due to physical or
mental illness) for a period of thirty (30)
days after written demand for substantial
performance is delivered by New Reit
specifically identifying the manner in which
New Reit believes Executive has not
substantially performed his duties, or (B)
willful misconduct by Executive which is
materially injurious to New Reit,
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monetarily or otherwise, or (C) the willful
violation by Executive of the provisions of
Paragraph 5 or 7 hereof. For purposes of
this Paragraph 4(e)(i), no act, or failure
to act, on Executive's part shall be
considered "willful" unless done, or omitted
to be done, by him not in good faith and
without reasonable belief that his action or
omission was in furtherance of the interests
of New Reit.
(ii) "Disability" shall mean the determination by
New Reit, upon the advice of an independent
qualified physician, reasonably acceptable
to Executive, that Executive has become
physically or mentally incapable of
performing his duties under this Agreement
and such disability has disabled Executive
for a cumulative period of one hundred
eighty (180) days within a twelve (12) month
period.
(iii) "Fair Market Value" shall mean the closing
price on the New York Stock Exchange of the
New Reit Common Stock (or such other
exchange on which the New Reit Common Stock
is traded) on the trading day immediately
preceding the date for which there is to be
a determination of value under this
Agreement;
(iv) "Good Reason" shall mean (A) any assignment
to Executive of any duties materially
different from those contemplated by
Paragraph 2 hereof, or any limitation on the
powers of Executive in any respect not
contemplated by Paragraph 2 hereof or other
material breach of this Agreement by New
Reit, (B) a reduction in Executive's Annual
Base Salary as in effect at the time in
question, or any other material failure by
New Reit to comply with Paragraph 3 hereof,
provided, however, that in the event
Executive is not awarded a bonus as a result
of the Board not approving a bonus pool for
a particular year or other discretionary
payment or discretionary award described in
Paragraph 3, it shall not be deemed a
failure, or (C) failure of New Reit to
obtain the assumption of the obligation to
perform this Agreement by any successor as
contemplated in Paragraph 9(a) hereof.
(v) "Change in Control" shall mean, exclusive of
the IPO that any of the following events has
occurred: (a) any "person" or "group" of
persons, as such terms are used in Sections
13 and 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other
than any employee benefit plan sponsored by
New Reit, becomes the "beneficial owner", as
such term is used in Section 13 of the
Exchange Act, of thirty (30%) percent or
more of either (i) the New Reit
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Common Stock or (ii) the units of limited
partnership interests in PRLP ("Units")
issued and outstanding immediately prior to
such acquisition; (b) any New Reit Common
Stock is purchased pursuant to a tender or
exchange offer other than an offer by New
Reit; or (c) the dissolution or liquidation
of New Reit or the consummation of any
merger or consolidation of New Reit or any
sale or other disposition of all or
substantially all of its assets, if the
shareholders of New Reit immediately before
such transaction own, immediately after
consummation of such transaction, equity
securities (other than options and other
rights to acquire equity securities)
possessing less than thirty percent (30%) of
the voting power of the surviving or
acquiring company.
(h) In connection with any sale of New Reit Common Stock
necessary to satisfy the Stock Acquisition Loan, in the event the sale price
which New Reit can obtain is less than ninety-five (95%) percent of the average
closing price of the Common Stock for the ten (10) business days immediately
preceding Executive's termination of employment, New Reit shall not cause New
Reit Common Stock which serves as collateral for the Stock Acquisition Loan with
an aggregate market value in excess of $50,000 to be sold on any one (1) day.
(i) Any termination of Executive's employment by New Reit or
any such termination by Executive (other than on account of death) shall be
communicated by written Notice of Termination to the other party hereto. Prior
to the IPO, for purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated. After the IPO, (i) New Reit must
give Executive thirty (30) days advance notice in writing of his termination and
(ii) Executive must give New Reit ninety (90) days advance notice in
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writing of his termination. Upon receipt of notice from Executive under (ii)
above, New Reit, in its sole discretion, may establish an earlier date of
termination which shall not be less than thirty (30) days after the date of
Executive's notice. New Reit must pay Executive for the applicable thirty (30)
day period, but, in its sole discretion, may require that Executive no longer
actively work, provided however, that for purposes of this Agreement the date of
termination under (i) or (ii) above shall be the thirtieth (30th) day
immediately following the date of notice.
(j) Excise Tax Gross Up. In addition, if it is determined by an
independent accountant mutually acceptable to New Reit and Executive that as a
result of any payment in the nature of compensation made by New Reit to (or for
the benefit of) Executive pursuant to this Agreement or otherwise, an excise tax
may be imposed on Executive pursuant to Section 4999 of the Code (or any
successor provisions), New Reit shall pay Executive in cash an amount equal to X
determined under the following formula: (the "Excise Tax Gross Up"):
E x P
X = -----------------------------------
1-[(FI x (1-SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed
under Section 4999 of the Code (or any
successor provisions);
P = the amount with respect to which such excise
tax is assessed, determined without regard
to the Excise Tax Gross Up;
FI = the highest effective marginal rate of
income tax applicable to Executive under the
Code for the taxable year in question
(taking into account any phase-out or loss
of deductions, personal exemptions or other
similar adjustments);
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SLI = the sum of the highest effective marginal
rates of income tax applicable to Executive
under all applicable state and local laws
for the taxable year in question (taking
into account any phase-out or loss of
deductions, personal exemptions and other
similar adjustments); and
M = the highest marginal rate of Medicare tax
applicable to Executive under the Code for
the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement or otherwise and
on which an excise tax under Section 4999 of the Code (or any successor
provisions) may be assessed, the payment determined under this Paragraph 4(j)
shall be paid to Executive at the time of the Change in Control but prior to the
consummation of the transaction with any successor. It is the intention of the
parties that New Reit provide Executive with a full tax gross-up under the
provisions of this Paragraph, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 of the Code
(or any successor provisions) had not been imposed. The Excise Tax Gross Up may
be adjusted if alternative minimum tax rules are applicable to Executive.
5. Confidential Information and Non-Solicitation.
(a) Executive understands and acknowledges that during his
employment with New Reit, he will be exposed to Confidential Information (as
defined below), all of which is proprietary and which will rightfully belong to
New Reit. Executive shall hold in a fiduciary capacity for the benefit of New
Reit such Confidential Information obtained by Executive during his employment
with New Reit and shall not, directly or indirectly, at any time, either during
or after his employment with New Reit, without New Reit's prior written consent,
use any of such Confidential Information or
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disclose any of such Confidential Information to any individual or entity other
than New Reit or its employees, except as required in the performance of his
duties for New Reit or as otherwise required by law. Executive shall take all
reasonable steps to safeguard such Confidential Information and to protect such
Confidential Information against disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any
information not generally known in the relevant trade or industry or otherwise
not generally available to the public, which was obtained from New Reit, the
Partnership Properties, National or PRLP, or which was learned, discovered,
developed, conceived, originated or prepared during or as a result of the
performance of any services by Executive on behalf of New Reit. For purposes of
this Paragraph 5, New Reit shall be deemed to include any entity which is
controlled, directly or indirectly, by New Reit and any entity of which a
majority of the economic interest is owned, directly or indirectly, by New Reit.
(c) The Executives agrees that for a period of two (2) years
following his termination of employment with New Reit, the Executive will not
directly or indirectly, solicit, recruit, hire or cause to be hired for
employment, any individual or individuals who are employed by New Reit or its
subsidiaries/affiliates on or after his date of termination.
6. Return of Documents.
Except for such items which are of a personal nature to
Executive (e.g., daily business planner), all writings, records, and other
documents and things containing any Confidential Information shall be the
exclusive property of New
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Reit, shall not be copied, summarized, extracted from, or removed from the
premises of New Reit, except in pursuit of the business of New Reit or at the
direction of New Reit, and shall be delivered to New Reit, without retaining any
copies, upon the termination of Executive's employment or at any time as
requested by New Reit.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and in the event (i) New Reit
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment hereunder without Good Reason, for a one (1) year period thereafter,
Executive shall not, directly or indirectly, within the States of New York, New
Jersey, Connecticut, Massachusetts or Florida engage in, or own, invest in,
manage, control, derive any compensation, or provide consulting services either
directly or indirectly with respect to any venture or enterprise engaged in any
development, acquisition or management activities with respect to retail
shopping center properties, without regard to whether or not such activities
compete with New Reit. Nothing herein shall prohibit Executive from being a
passive owner of not more than one (1%) percent of the outstanding stock of any
class of securities of a corporation or other entity engaged in such business
which is publicly traded, so long as he has no active participation in the
business of such corporation or other entity.
(b) If, at the time of enforcement of this Paragraph 7, a
court shall hold that the duration, scope, area or other restrictions stated
herein are unreasonable, the parties agree that without further action on their
parts reasonable maximum duration, scope, area or other restrictions shall be
substituted by such court for the stated duration, scope, area or other
restrictions.
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(c) For purposes of this Paragraph 7, New Reit shall be deemed
to include any entity which is controlled, directly or indirectly, by New Reit
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by New Reit.
8. Remedies.
The parties hereto agree that New Reit would suffer
irreparable harm from a breach by Executive of any of the covenants or
agreements contained in Paragraph 5, 6 or 7 of this Agreement. Therefore, in the
event of the actual or threatened breach by Executive of any of the provisions
of Paragraph 5, 6 or 7 of this Agreement, New Reit may, in addition and
supplementary to other rights and remedies existing in its favor, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violation of the
provisions thereof.
9. Successors and Assigns.
(a) Prior to December 31, 2000, New Reit shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of New
Reit, by agreement in form and substance reasonably satisfactory to Executive,
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that New Reit would be required to perform it if no such
succession had taken place. Failure of New Reit to obtain such agreement prior
to the effectiveness of a succession shall be a breach of this Agreement and
shall entitle Executive to compensation from New Reit in the same amount and on
the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing
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the foregoing, the date on which any such succession becomes effective shall be
deemed the date of termination. In the event of such a breach of this Agreement,
the Notice of Termination shall specify such date as the date of termination. As
used in this Paragraph, "New Reit" shall mean New Reit as hereinbefore defined
and any successor to all or substantially all of its business and/or its assets
as aforesaid which executes and delivers the agreement provided for in this
Paragraph 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. Any cash payments owed to Executive pursuant
to this Paragraph 9 shall be paid to Executive in a single sum, without discount
for early payment, immediately prior to the consummation of the transaction
with such successor.
(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, 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.
10. Timing of and No Duplication of Payments.
All payments payable to Executive pursuant to this Agreement
shall be paid as soon as practicable after such amounts have become fully vested
and determinable. In addition, Executive shall not be entitled to receive
duplicate payments under any of the provisions of this Agreement.
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11. Modification or Waiver.
No amendment, modification, waiver, termination or
cancellation of this Agreement shall be binding or effective for any purpose
unless it is made in a writing signed by the party against whom enforcement of
such amendment, modification, waiver, termination or cancellation is sought. No
course of dealing between or among the parties to this Agreement shall be deemed
to affect or to modify, amend or discharge any provision or term of this
Agreement. No delay on the part of New Reit or Executive in the exercise of any
of their respective rights or remedies shall operate as a waiver thereof, and no
single or partial exercise by New Reit or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
12. Notices.
All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to New Reit or Executive, as applicable, at the address
set forth above (or to such other address as shall have been previously provided
in accordance with this Paragraph 12).
13. Executive Representation.
By executing this Agreement, Executive hereby warrants and
represents that he is not bound by any other agreement or subject to any other
restriction which
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would either prevent him from entering into this Agreement or from performing
his duties as contemplated hereunder.
14. Tax Liability.
Each party to this Agreement shall be responsible for their
own tax liability with respect to any payments made, forgiveness of debt or
otherwise pursuant to the terms of this Agreement.
15. Governing Law.
This agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of laws thereunder.
16. Severability.
Whenever possible, each provision and term of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision or term of this Agreement shall be held to
be prohibited by or invalid under such applicable law, then, subject to the
provisions of Paragraph 7(b) above, such provision or term shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provisions or term or
the remaining provisions or terms of this Agreement.
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17. Counterparts.
This Agreement may be executed in separate counterparts, each
of which is deemed to be an original and both of which taken together shall
constitute one and the same agreement.
18. Headings.
The headings of the Paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof and
shall not affect the construction or interpretation of this Agreement.
19. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
20. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6 and 7 each shall
survive the termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
PHILIPS INTERNATIONAL REALTY CORP.
By:
---------------------------------
Name:
Title:
EXECUTIVE
---------------------------------
Xxxxx X. Xxxxx
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