<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Fiscal Year Ended: DECEMBER 31, 1999 Commission File Number: 0-23503
EXCEL LEGACY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0781747
- ---------------------------------- ---------------------------------------
(State of incorporation) (IRS Employer Identification Number)
17140 BERNARDO CENTER DRIVE SUITE 300, SAN DIEGO, CALIFORNIA 92128
------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (858) 675-9400
Securities Registered Pursuant To Section 12(b) of the Act:
Common Stock, $0.01 par value per
share 9.0% Convertible Redeemable Subordinated
Secured Debentures due 2004
10.0% Senior Redeemable Secured Notes due 2004
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Registrant's shares of common stock held by
non-affiliates was $90,162,394 as of March 28, 2000 based on the $3.25.
closing price on such date.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 28, 2000
- ----------------------------- -------------------------------------
Common Stock, $.01 par value 36,835,921
Documents incorporated by reference: Portions of the Proxy Statement for the
2000 Annual Meeting of Stockholders of the Registrant to be filed subsequently
with the Commission are incorporated by reference into Part III of this report.
<PAGE> 2
PART I
ITEM 1. BUSINESS
General
Excel Legacy Corporation (the "Company" or "Legacy"), a Delaware corporation,
was formed on November 17, 1997. The Company was originally a wholly-owned
subsidiary of Excel Realty Trust, Inc. ("Excel" or "Legacy"), now known as New
Plan Excel Realty Trust, Inc., a Maryland corporation and a real estate
investment trust ("REIT"). On March 31, 1998, Excel effected a spin-off of the
Company through a special dividend to the holders of common stock of Excel of
all of the outstanding common stock of the Company held by Excel.
In connection with this spin-off, Excel transferred real properties, notes
receivable and related assets and liabilities to Legacy. In addition to
operating, developing or disposing of assets obtained from the spin-off, Legacy
intends to pursue signature real estate projects that have unique locations,
concepts or significant entry barriers associated with them, including:
- developing mixed-use entertainment projects that have the
potential for substantial capital gains but which may take
several years to fully develop,
- investing in properties requiring significant restructuring or
redevelopment to create substantial value, such as changing the
use, tenant mix or focus of a property,
- investing in securities of real estate related operating
companies where significant influence may be exerted to enhance
the value of the companies,
- opportunistic buying and selling of commercial properties or real
estate related and other companies, and
- acquiring and developing hotel and hospitality projects in unique
locations.
The Company's executive offices are located at 17140 Bernardo Center Drive,
Suite 300, San Diego, California 92128 and its telephone number is (858)
675-9400. The Company also has an acquisitions office in West Bountiful, Utah
and property management offices in Fountain Valley, California, San Diego,
California, and Fairfax, Virginia. As of March 28, 2000, the Company and its
subsidiaries had approximately 172 employees.
Price Enterprises, Inc.
In November 1999, the Company completed an exchange offer for the common stock
of Price Enterprises, Inc. ("PEI"), a Maryland corporation which operates as a
REIT. In the exchange offer, the Company acquired approximately 91.3% of the
PEI common stock, which represents approximately 77.5% of PEI's voting power as
outstanding PEI preferred stock also have voting rights. PEI stockholders who
tendered their shares of PEI common stock in the exchange offer received
from the Company a total of $8.50 consisting of $4.25 in cash, $2.75 in
principal amount of the Company's 9.0% Convertible Redeemable Subordinated
Secured Debentures ("Debentures") due 2004 and $1.50 in principal amount of the
Company's 10.0% Senior Redeemable Secured Notes ("Senior Notes") due 2004 for
each share of PEI common stock. After expenses, the Company paid approximately
$61.0 million in cash and issued approximately $33.2 million in principal amount
of the Debentures and approximately $18.1 million in principal amount of the
Senior Notes to acquire the PEI common stock in the exchange offer. Of the cash,
$27.4 million was borrowed from The Sol and Helen Price Trust.
As of the date the exchange offer was completed, the Company began managing the
assets of PEI. The accounts of PEI are not consolidated with the Company's books
however, because, until certain events occur, the holders of PEI preferred
stock, which does not include the Company, have the right to elect a majority of
the PEI board of directors.
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<PAGE> 3
Strategy and Philosophy
The following is a brief discussion of certain investment, financing and other
strategies and policies of the Company. These policies have been determined by
the Company and ratified by the Board of Directors, and generally may be amended
or revised from time to time by the Board of Directors. There can be no
assurance that the Company's strategies will be successful.
Investments
The Company intends to acquire, develop, own and manage, and sell a variety of
real estate related assets. As opportunities emerge and in response to changes
in real estate, market and general economic conditions, the Company may in the
future reexamine its real estate related businesses and activities. The
activities described below often do not generate immediate cash flow, and cash
flow generated may be nonrecurring.
Development - The Company may from time to time undertake, directly or through
joint venture financing, long-term, development projects that have the potential
for substantial gains but which may take three to five years or more to fully
develop, with particular emphasis on mixed-use retail entertainment projects and
hotel and hospitality projects. To the extent the Company provides joint venture
financing, the developer will often bear a portion of the economic risks
associated with the construction, development and initial lease of properties.
Under this financing method, the Company may enter into an equity joint venture
or make a participating subordinated loan to the developer wherein the Company
would receive a stated preferred return together with a share of the development
profits.
Operating Real Estate Companies - The Company may invest in retail, residential,
hotel and other types of operating companies and manage properties owned by such
companies in which it has an equity or debt investment. These investments may be
subject to existing debt financing and any such financing will have a priority
over the equity interests of the Company.
Restructuring and Redevelopment in Order to Create Substantial Value - The
Company may from time to time engage in selective restructuring and development
activities such as changing the use, tenant mix or focus of a property, as
opportunities arise and when justified by expected returns. The Company believes
that appropriate, well-located properties which are currently underperforming
can be acquired on advantageous terms and repositioned through such selective
restructuring and development activities with the expectation of achieving
enhanced returns that are greater than returns which could be achieved by
acquiring a stabilized property.
Investment in Real Estate Mortgages - While the Company will emphasize equity
real estate investment in properties and the restructure and redevelopment of
real estate properties, the Company may invest in mortgages and other types of
real estate interests. The Company may invest in first or junior mortgages that
may or may not be insured by a governmental agency. The Company also may invest
in participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow and/or any appreciation in the value of the property.
Such mortgages may be similar to equity participations. In addition, the Company
may make mortgage loans or participate in such loans.
Securities of/or Interests in Entities Primarily Engaged in Real Estate
Activities
The Company may from time to time acquire real estate related equity securities
or invest in real estate related senior, junior or otherwise subordinated debt
securities, which debt securities may be unsecured or secured by liens on real
estate or the economic benefits thereof. Some of the entities in which the
Company may invest may be start-up companies or companies in need of additional
capital. These investments may contain options to acquire, or be convertible
into the right to acquire, all or a portion of the underlying real estate, or
contain the right to participate in the cash flow and economic return which may
be derived from real estate.
Debt investments may include debt that is acquired at a discount, mezzanine
financing, commercial mortgage-backed securities, secured and unsecured lines of
credit, distressed loans, and loans previously made by foreign and other
financial institutions. In some cases, the Company may only acquire a
participating interest in a debt
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security. The Company also may provide credit enhancement or guarantees of the
obligations of others involved in real estate activities, and may invest in
participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow and/or any appreciation in the value of the property.
Such mortgages may be similar to equity participations. In addition, the Company
may make mortgage loans or participate in such loans and contemporaneously or
otherwise obtain related property purchase options.
Equity investments may include development projects directly or through joint
ventures, as well as the purchase of general or limited partnership interests in
limited partnerships, shares in publicly traded or privately held corporations
or interests in other entities that own real estate, make real estate related
loans, invest in real estate related debt instruments or provide services or
products to the real estate industry. The Company intends to engage in real
estate businesses, which may include land subdivisions, property sales and other
businesses. The Company may also hold real estate or interests therein for
investment. The Company may purchase substantially leased, mostly unleased or
vacant properties of any type or geographic location. The Company also may
purchase leasehold positions and sublease the property.
Proactive Asset Management
The Company's management regularly monitors and evaluates each investment,
including those within the PEI portfolio, to identify properties which can be
sold or exchanged for optimal sales prices (or exchange values) given prevailing
market conditions and the particular characteristics of each property. Through
this strategy, the Company seeks to continually update its core property
portfolio by disposing of properties which have limited appreciation potential
and redeploy capital into newer properties or properties where its aggressive
management techniques may maximize property values. The Company may engage from
time to time in like-kind property exchanges (i.e., Internal Revenue Code
Section 1031 exchanges) which will allow the Company to dispose of properties
and redeploy proceeds in a tax efficient manner. In addition to value
enhancement, the Company also focuses on maintaining strong operational cost
controls.
Financing Policies
The Company seeks to finance its investments through both public and private
secured and unsecured debt financings, as well as public and private placements
of its equity securities. The equity securities include both common and
preferred equity issuances of the Company. The Company does not have a policy
limiting the number or amount of mortgages that may be placed on any particular
property, but mortgage financing instruments usually limit additional
indebtedness on such properties.
The Company may seek variable rate financing from time to time if such financing
appears advantageous in light of then-prevailing market conditions. In such
case, the Company may consider hedging against interest rate risk through
interest rate protection agreements, interest rate swaps or other means.
The Company does not plan to distribute dividends for the foreseeable future,
which will permit it to accumulate for reinvestment cash flow from investments,
disposition of investments and other business activities.
Policies With Respect to Other Activities
The Company does not intend to qualify as a REIT, but it may, from time to time,
invest in REITs and sell properties or entities to REITs for cash and/or
securities. Further, it may spin-off to its common stockholders shares of its
subsidiaries or shares of other entities it has acquired through the sale of its
properties, investments or otherwise. These spin-offs may involve the formation
of new entities and may be taxable or non-taxable, depending upon the facts and
circumstances.
Environmental Conditions
Under various federal, state and local laws, ordinances and regulations, the
Company may be considered an owner or operator of real property or may have
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may become liable for the costs of removal or remediation of certain
hazardous
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substances released on or in its property or disposed of by it, as well as
certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances. The Company
is not presently aware of any material environmental conditions at any of its
properties.
Principal Tenants
As of December 31, 1999, Lowe's Home Centers, Inc. ("Lowe's") was the Company's
largest tenant and accounted for approximately 5% of the Company's total
revenues in 1999. Lowe's is owned by Lowe's Companies, Inc., the nation's second
largest home improvement retailer with over 400 stores. Lowe's Companies, Inc.
is listed on the New York Stock Exchange and, as of December 1999, had credit
ratings of A and A2 from Standard & Poor's and Moody's, respectively. In
February 2000, the two properties leased to Lowes were sold to PEI. The Company
had no other tenants at December 31, 1999 that accounted for a significant
amount of the Company's revenues.
PEI - The eight largest tenants in the PEI portfolio accounted for approximately
46% of its total Gross Leasable Area ("GLA") and approximately 55% of its total
annualized revenues as of December 31, 1999. The table below presents certain
information about these tenants (dollars in thousands):
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF ANNUAL TOTAL ANNUAL
NUMBER AREA UNDER GLA UNDER MINIMUM MINIMUM
TENANT OF LEASES LEASE (SQ. FT) LEASE RENT RENT
- ------ --------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Costco 4 618,192 15.6% $8,396.3 18.2%
The Sports Authority 8 341,217 8.6% 4,365.4 9.4%
The Home Depot 2 214,173 5.4% 2,775.2 6.0%
AT&T Wireless 1 156,576 4.0% 2,327.7 5.0%
Level One Communications 1 140,369 3.5% 2,224.8 4.8%
Kmart 1 110,054 2.8% 2,027.2 4.4%
Marshalls 2 87,968 2.2% 1,889.5 4.1%
PETsMART 6 155,785 3.9% 1,622.4 3.5%
--------- -------------- ---------- ---------- ------------
25 1,824,334 46.0% $25,628.5 55.4%
========= ============== ========== ========== ============
</TABLE>
ITEM 2. PROPERTIES
At December 31, 1999, Legacy's business consisted of the following portfolio of
real properties, notes receivable, and investments in real estate related
ventures:
- five properties located in Arizona including an office building,
restaurant space, a property held for development/sale, and
vacant land in Scottsdale, and a 65% interest in a hotel property
near the Grand Canyon,
- four properties located in California including a development
project in Palm Springs, land held for sale/development in San
Diego and Yosemite, and an office building in San Diego,
- one single tenant retail property located in Indiana which was
leased to Lowe's,
- one property located in Colorado which is vacant land located at
the base of Telluride mountain being considered for condominium
development,
- one single tenant retail property located in Ohio which was
leased to Lowe's,
- a 50% ownership interest in a joint venture which owns property
leased to AMC Multi-Cinema, Inc. and land currently under
development in Colorado,
- five notes receivable relating to real estate projects in
Arizona, California, and Utah with an aggregate outstanding
balance of approximately $28.4 million as of December 31, 1999.
The largest note relates to a project in Scottsdale, Arizona,
- a hospitality property under development in Bermuda scheduled for
completion in 2000.
- ownership interests in a number of real estate related ventures,
including:
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- a 91.3% ownership interest in the PEI common stock (see
additional property information below),
- a 100% ownership interest in Millennia which owns stock in two
publicly traded companies, Mace Security International, Inc. and
U.S. Plastics Lumber Corp. Another party can earn up to a 50%
ownership interest in Millennia if results exceed 35% per annum,
- a 100% ownership in TenantFirst Real Estate Services, Inc., a
fully-integrated real estate development company providing
development, leasing, property management and construction
management services,
- a 65% ownership interest in a joint venture which owns and
operates a hotel, dinner theater and retail shop located near the
Grand Canyon in northern Arizona,
- a 55% ownership interest in a development company which owns
Newport Centre, a retail and office facility located in Winnipeg,
Canada, and
- a 23.7% ownership interest in a development company which owns
land in Indianapolis, Indiana, and
- a 50% ownership in EL Holdings, Inc. and EL Media Holdings
Company which were formed to invest in media towers and similar
businesses.
The following table describes Legacy's portfolio of real estate properties as of
December 31, 1999. Amounts shown for annual rents are based on executed
leases at December 31, 1999. Legacy makes no allowances for contractually-based
delays to the commencement of rental payments. Due to the nature of real estate
investments, Legacy's actual rental income may differ from amounts shown in the
table below.
<TABLE>
<CAPTION>
TENANTS GLA (SQ FT) ANNUAL RENT
(IN THOUSANDS) (IN THOUSANDS)
Arizona
<S> <C> <C> <C>
Scottsdale Galleria.............................. (1) 520.5 (1)
Scottsdale City Centre........................... various 64.9 $718.9
Scottsdale Land.................................. (2) (2) (2)
Brio Land........................................ Roaring Fork Restaurant 3.7 104.3
Grand Hotel...................................... (3) (3) (3)
California
Desert Fashion Plaza (4)......................... Saks Fifth Avenue/various 193.1 476.0
Excel Centre..................................... (5) 82.2 (4)
San Diego........................................ (6) (6) (6)
Yosemite......................................... (6) (6) (6)
Colorado
Telluride........................................ (7) (7) (7)
Westminster (8).................................. AMC 110.0 2,520
Indiana
Indianapolis..................................... (9) (9) (9)
Terre Haute (10)................................. Lowe's 104.2 557.8
Ohio
Middletown (10).................................. Lowe's 126.4 650.0
Bermuda
Daniel's Head Bermuda............................ (11) (11) (11)
Winnipeg, Canada
Newport Centre(12)............................... Bank of Montreal/various 156.7 1,211.1
-------- ---------
Total.......................................... 1,361.7 $6,238.1
======== ========
</TABLE>
(1) Property is currently held for redevelopment or sale.
(2) Property consists of vacant land adjacent to the Scottsdale
Galleria and the Brio Land and is held for redevelopment or sale.
(3) The Company holds a 65% ownership interest in Grand Tusayan LLC
which owns and operates a 120-room hotel and restaurant.
(4) The Company intends to redevelop this property.
(5) Office building completed in December 1999 where corporate
offices are located. No other tenants had occupied the building
at December 31, 1999. Property was sold to PEI in February 2000.
(6) Properties consist of vacant land currently held for development
or sale.
(7) Property consists of vacant land being considered for time share
or condominium development.
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(8) The Company holds a 50% interest in this property which has an
operating AMC theater and a development project.
(9) Property consists of land held for development. The Company holds
a 23.7% ownership interest.
(10) Single tenant properties which were sold to PEI in February 2000.
(11) Property under development.
(12) Property is owned by a Nova Scotia company of which the Company
holds a 55% ownership interest
PEI properties - At December 31, 1999, PEI owned 29 commercial real estate
properties and held one property with a 20-year ground lease, in addition to
land in Tucson, AZ and Temecula, CA held for future development. These
properties encompass approximately 4.3 million square feet of GLA and were 94%
leased. The five largest properties include 1.7 million square feet of GLA that
generate annual minimum rent of $26.2 million, based on leases existing as of
December 31, 1999. Included in the properties PEI owned at December 31, 1999 are
four self storage facilities. Two of these facilities, San Diego, CA and Azusa,
CA are located on the same sites as our commercial properties. The other two
self storage facilities are stand-alone properties. At year end, these
facilities had 0.5 million square feet of GLA and were 96% occupied. PEI also
has a 50% investment in a joint venture which owns a retail center in Fresno,
CA. Below is a summary of the PEI properties, excluding the joint venture
investment:
<TABLE>
<CAPTION>
NUMBER PERCENT PERCENT ANNUAL
COMMERCIAL PROPERTIES OF TENANTS GLA (SQ FT) LEASED BASE RENT (1)
- --------------------- ---------- ----------- ------ -------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Westbury, NY......................................... 8 398.6 100% $7,736.9
Pentagon City, VA.................................... 9 336.8 100 6,627.3
Sacramento/Bradshaw, CA.............................. 2 296.9 100 4,552.4
Wayne, NJ(2)......................................... 5 348.1 89 4,304.5
Philadelphia, PA..................................... 22 308.7 98 2,964.9
Signal Hill, CA...................................... 14 154.8 100 2,327.7
Roseville, CA........................................ 16 188.5 98 2,334.7
San Diego, CA(3)..................................... 3 443.2 100 1,971.5
Fountain Valley, CA.................................. 14 119.0 92 1,691.1
Glen Burnie, MD...................................... 9 130.6 85 1,345.1
Seekonk, MA.......................................... 11 213.6 86 1,723.5
San Diego/Rancho San Diego, CA....................... 16 93.7 95 1,056.0
Moorestown, NJ (4)................................... 2 172.6 36 652.9
San Diego/Carmel Mountain, CA........................ 7 35.0 100 788.3
Inglewood, CA........................................ 1 119.9 100 926.7
Northridge, CA....................................... 2 22.0 100 734.0
New Britain, CT...................................... 1 112.4 100 671.1
San Juan Capistrano, CA.............................. 6 56.4 100 537.1
Azusa, CA(3)......................................... 3 121.4 100 589.0
Smithtown, NY........................................ 1 55.6 100 500.6
Sacramento/Stockton, CA.............................. 2 50.2 100 470.2
Hampton, VA.......................................... 2 45.6 100 445.2
Redwood City, CA..................................... 2 49.4 100 417.5
Tucson, AZ........................................... 9 40.1 100 270.7
Denver/Littleton, CO................................. 1 26.4 100 216.1
Denver/Aurora, CO.................................... 1 7.3 100 164.3
San Diego/Southeast, CA.............................. 2 8.9 100 150.4
Chula Vista/Rancho del Rey, CA....................... 1 6.7 100 75.0
Temecula, CA(5)...................................... 0 0 0 0
------ ---------- ----- ---------
Total Commercial Properties........................ 172 3,962.4 94% $46,244.7
====== ========== ===== =========
</TABLE>
(1) Annual Base Rent does not include percentage rents, expense
reimbursements, revenue from month to month leases, or rents expiring in
2000.
(2) Includes 37,000 sq. ft. of vacant storage space.
(3) Self storage is also located at these properties.
(4) Consists of leased land.
(5) Future shopping center development consisting of 47.5 acres purchased in
July 1999.
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<TABLE>
<CAPTION>
SELF STORAGE PROPERTIES GLA (SQ FT) PERCENT LEASED
(IN THOUSANDS)
<S> <C> <C>
San Diego/Murphy Canyon, CA........................................... 243.2 99%
San Diego, CA......................................................... 89.6(1) 99
Azusa, CA............................................................. 84.3(1) 98
Solana Beach, CA...................................................... 59.4(2) 75
-------- ---
Total Self Storage Properties...................................... 476.5 96%
======== ===
</TABLE>
(1) GLA of facility is also included in GLA for the commercial property
listed above.
(2) Expansion of this facility is currently under development.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings other than various claims and
lawsuits arising in the ordinary course of business which, in the opinion of
Company's management, are not individually or in the aggregate material to its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of the year ended December 31, 1999.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The table below sets forth, for the calendar quarters indicated, the reported
high and low sales prices of the Company's common stock which was quoted on the
OTC Bulletin Board under the symbol "XLCY" from March 30, 1998 to November 16,
1998 and listed on the American Stock Exchange under the symbol "XLG" from
November 17, 1998 to the present. Legacy's Series B preferred stock is not
listed on any securities exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
PERIOD FROM INCEPTION TO JULY 31, 1998
Quarter ended January 1, 1998 $ - $ -
Quarter ended April 30, 1998 6.750 4.875
Quarter ended July 31, 1998 5.344 4.297
FIVE MONTHS ENDED DECEMBER 31, 1998
Quarter ended October 31, 1998 4.688 1.875
Two months ended December 31, 1998 4.000 2.531
YEAR ENDED DECEMBER 31, 1999
Quarter ended March 31, 1999 4.063 3.063
Quarter ended June 30, 1999 5.688 2.875
Quarter ended September 30, 1999 4.750 3.500
Quarter ended December 31, 1999 4.750 3.000
</TABLE>
As of March 28, 2000 there were 36,835,921 shares of the Company's common stock
outstanding held by approximately 1,115 holders of record. The Company has never
paid cash dividends on its common stock. The Company currently anticipates that
it will retain all available funds for use in the operation and expansion of its
business and does not anticipate paying any cash dividends in the foreseeable
future.
The Company's Debentures and Senior Notes are traded on the American Stock
Exchange under the symbols "XLG.A" and "XLG.B", respectively.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM
FIVE INCEPTION
YEAR MONTHS (NOVEMBER
ENDED ENDED 17, 1997) TO
DECEMBER 31, DECEMBER 31, JULY 31,
1999 1998 1998
------------- ------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C>
Total revenue $ 25,917 $ 15,010 $ 8,145
Total operating expenses (25,436) (13,754) (5,267)
Impairment/ write-off of real estate
related costs (6,912) - -
Gain on sales of real estate 5,147 - -
-------- -------- --------
Net (loss) income before income taxes (1,284) 1,256 2,878
Benefit (provision) of income taxes 507 (535) (1,143)
-------- -------- --------
Net (loss) income $ (777) $ 721 $ 1,735
======== ======== ========
Earnings before depreciation,
amortization and deferred
taxes ("EBDADT") 3,674 2,712 2,994
Earnings before income taxes,
depreciation and amortization
("EBITDA") 10,440 5,819 5,453
Net (loss) income per share:
Basic $ (0.02) $ 0.02 $ 0.11
Diluted (0.02) 0.01 0.07
Weighted average number of shares:
Basic 33,985 33,458 15,842
Diluted 33,985 54,768 25,984
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, JULY 31,
1999 1998 1998
------------- ------------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED BALANCE SHEET DATA:
<S> <C> <C> <C>
Net real estate $102,191 $190,878 $175,756
Total assets 328,153 261,296 246,916
Mortgages and notes payable 137,806 90,986 72,714
Stockholders' equity 180,039 166,640 165,919
</TABLE>
Summary Selected Financial Data of PEI - As previously discussed, the Company
acquired approximately 91.3% of the PEI common stock in November 1999. The
Company does not, however, consolidate the accounts of PEI on its financial
statements. The following selected historical financial data of PEI should be
read in conjunction with the PEI Form 10-K separately filed with the Securities
and Exchange Commission.
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED AUGUST 31
----------------------- ----------------- --------------------
1999 1998 1997 1996 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Rental revenues $ 66,667 $ 62,485 $ 18,170 $ 18,941 $ 56,838 $ 56,221 $ 51,897
Operating income 35,143 31,393 9,045 8,178 22,422 5,829 16,635
Income from continuing
operations 32,671 29,429 17,508 7,590 19,085 8,340 13,297
Discontinued operations -- -- -- (3,235) (4,860) (8,250) (12,751)
Net income (loss) 26,602 29,429 17,508 14,225 90 546 (41,479)
Preferred stockholder dividends (33,264) (8,316) -- -- -- -- --
Net (loss) income applicable to
common stockholders (6,662) 21,113 17,508 14,225 90 546 (41,479)
Net (loss) income per common share
from continuing operations--basic (0.05) 0.97 0.74 0.33 0.82 0.36 0.53
Cash dividends per common share-- 1.05 0.35 0.30 1.20 -- 0.08
Cash Dividends per preferred share 1.40 .35 -- -- -- -- --
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF AUGUST 31,
---------------------------------------- ---------------------------------------
1999 1998 1997 1997 1996 1995
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Net real estate $ 550,869 $ 418,507 $ 353,056 $ 337,139 $ 337,098 $ 330,443
Total assets 562,558 457,352 408,478 540,325 555,994 591,511
Mortgages payable -- -- -- -- -- 15,425
Stockholders' equity 461,260 344,811 406,624 396,476 532,899 532,085
</TABLE>
Net income applicable to common stockholders from November 12, 1999 (the date of
the Company's acquisition of the PEI common stock) to December 31, 1999 was $4.7
million of which the Company's equity interest was $163,000 after the accrual of
preferred dividends.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE
TWELVE MONTHS ENDED DECEMBER 31, 1998)
Effective December 11, 1998, the Board of Directors of the Company adopted a
fiscal year-end of December 31, beginning with a short fiscal year ending on
December 31, 1998. The Company's previous fiscal year-end was July 31. As such,
the financial statements present the periods from inception (November 17, 1997)
to July 31, 1998, the five months ended December 31, 1998, and the year ended
December 31, 1999. For comparison purposes, the discussion below compares the
year ended December 31, 1999 to the twelve months ended December 31, 1998. There
were no significant operations from inception to December 31, 1997. The
following discussion should be read in conjunction with the financial statements
and the notes thereto.
Rental revenue was $9.5 million during the year ended December 31, 1999 compared
to $9.9 million in the twelve months ended December 31, 1998 . A property in
Westminster, CO leased to AMC was contributed to a partnership for a 50%
interest effective July 1, 1999. Earnings from this property since this
contribution are now recorded as partnership income. This accounted for a
decrease of $0.7 million in rental revenue. This decrease was offset by
increases of $0.3 million in the Company's remaining properties. Although the
Company sold nine income producing properties in the second half of 1999, the
decrease in revenues related to these sales was offset by 1998 operations which
only had rental revenue after March 31, 1998, the date certain assets were
spun-off from Excel.
Operating income totaled $11.4 million in the year ended December 31, 1999
compared to $9.4 million in the twelve months ended December 31, 1998. Of the
increase of $2.0 million, there was an increase of $4.2 million related to
operations from the Grand Hotel which was not opened until the second half of
1998. This increase was offset by a decrease of $3.5 million related to
operations from Millennia. Millennia only had three months of operational
results in 1999 as effective April 1, 1999, the operations were assigned to a
third party in connection with the sale of Millennia assets. Of the remaining
$1.3 million increase, $0.5 million was related to income from a ground lease
and parking lot related to a venture in Newport, Kentucky which did not have any
income in 1998, $0.5 million related to reversing accrued estimated costs
related to a land sale and $0.3 million related to increased revenues from
TenantFirst Real Estate Services and other various income sources.
Interest income was $3.9 million in the year ended December 31, 1999 compared to
$3.7 million in the twelve months ended December 31, 1998. The increase of $0.2
million is primarily related to notes receivable which were not outstanding in
1998 until the spin-off on March 31, 1998.
Partnership income and other revenues totaled $1.0 million for the year ended
December 31, 1999 and $0.3 million in the twelve months ended December 31, 1998.
This income is primarily related to the Company's interest in a Nova Scotia
limited liability company which owns an office building in Canada.
Interest expense was $8.0 million in the year ended December 31, 1999 and
primarily related to the $137.8
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<PAGE> 11
million of mortgages and notes payable outstanding at December 31, 1999 and
$41.2 million of mortgage debt that was repaid in 1999 related to the sale of
properties. In 1998, interest expense was $4.2 million. The increase in interest
expense in 1999 compared to 1998 primarily relates to an increase in the average
balance outstanding during the period which was influenced in part by additional
debt related to the acquisition of PEI, and 1998 debt which was only outstanding
from April 1, 1998.
Depreciation and amortization expense totaled $3.2 million in the year ended
December 31, 1999 compared to $3.0 million in the twelve months ended December
31, 1998. The increase of $0.2 million primarily relates to depreciation of the
Company's assets which the Company did not own until April 1, 1998. This was
offset in part by the assets sold in 1999.
Property operating expenses were $1.8 million in the year ended December 31,
1999 compared to $2.6 million in the twelve months ended December 31, 1998. The
decrease of $0.8 million relates to certain expenses that were capitalized in
1999 on properties in Scottsdale, Arizona and Palm Springs, California that the
Company intends to demolish and redevelop. In 1998, while these were operating
properties, these costs were expensed. These decreases were offset in part by
expenses in 1998 on properties owned by the Company after March 31, 1998.
Other operating expenses were $6.3 million in the year ended December 31, 1999
compared to $5.8 million in the twelve months ended December 31, 1998. In 1999,
expenses of $4.5 million related to the Grand Hotel compared to $1.0 million in
1998 as the property was under development until the second half of the year.
Millennia had expenses of $1.8 million in the year ended December 31, 1999
compared to $4.8 million in the twelve months ended December 31, 1998.
General and administrative expenses were $6.1 million in the year ended December
31, 1999 compared to $3.5 million in the twelve months ended December 31, 1998.
The increase relates to an increase in personnel in 1999 when compared to 1998,
$0.5 million of bonuses paid upon consummation of the PEI acquisition, and due
to the Company not having any significant expenses until April 1, 1998.
In 1999, the Company sold ten properties for a net gain from real estate sales
of $5.1 million. Also in 1999, the Company recorded a $6.0 million impairment
charge for an investment (impairment in investment) in a minority interest in a
partnership which owns a development project in Indianapolis, Indiana which has
been delayed due to a lack of funding. Finally, the Company wrote-off $0.9
million in costs related to a redevelopment project in Scottsdale, Arizona.
Provision for income taxes was a $0.5 million benefit in the year ended December
31, 1999 generated by the net loss before income taxes of $1.3 million. In the
twelve months ended December 31, 1998, a $1.7 million expense was recorded due
to the net income before income taxes of $4.1 million.
The Company calculates Earnings Before Depreciation, Amortization and Deferred
Taxes ("EBDADT") as net income, plus depreciation and amortization on real
estate and real estate related assets, and deferred income taxes. EBDADT does
not represent cash flows from operations as defined by generally accepted
accounting principles, and may not be comparable to other similarly titled
measures of other companies. The Company believes, however, that to facilitate
a clear understanding of its operating results, EBDADT should be examined in
conjunction with its net income as reductions for certain items are not
meaningful in evaluating income-producing real estate. The following
information is included to show the items included in the Company's EBDADT for
the year ended December 31, 1999 and the twelve months ended December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net (loss) income $ (777) $ 2,456
Depreciation and amortization 3,220 2,975
Proportionate share of depreciation and
amortization from equity investments:
PEI 992 -
Other equity investments 121 -
Less depreciation of non-real estate assets (83) (50)
Deferred tax expense 201 325
------- -------
EBDADT $ 3,674 $ 5,706
======= =======
</TABLE>
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from rental revenues was the primary source of capital to fund the
Company's ongoing operations in 1999. Excess requirements for development
projects were met by borrowings on the Company's credit facility and other debt,
and the sale of $13.5 million of common stock in October 1999.
In November 1999, the Company completed an exchange offer for the common stock
of Price Enterprises, Inc. ("PEI"), a Maryland corporation which is operated as
a REIT. In the exchange offer, the Company acquired approximately 91.3% of the
PEI common stock. PEI stockholders who tendered their shares of PEI common stock
in the exchange offer received from the Company a total of $8.50 consisting of
$4.25 in cash, $2.75 in principal amount of the Company's 9.0% Convertible
Redeemable Subordinated Secured Debentures ("Debentures") due 2004 and $1.50 in
principal amount of the Company's 10.0% Senior Redeemable Secured Notes ("Senior
Notes") due 2004 for each share of PEI common stock. After expenses, the Company
paid approximately $61.0 million in cash and issued approximately $33.2 million
in principal amount of the Debentures and approximately $18.1 million in
principal amount of the Senior Notes to acquire the PEI common stock in the
exchange offer. Of the cash, $27.4 million was borrowed from The Sol and Helen
Price Trust. The remaining $33.6 million was available cash borrowed from other
notes, including the Company's credit facility, and from asset sales. Should the
Company purchase the remaining 8.7% of PEI common stock, the Company anticipates
that the above debt would increase proportionally, and approximately $3.0
million in cash would be required.
In accordance with the stockholders agreement entered into in connection with
the exchange offer, until a certain amount of PEI preferred stock is repurchased
or tendered for, $7.5 million of cash flow, as defined, is required to be
reinvested in PEI before dividends can be paid to its common shareholders. As
such, cash available to service the Company's debt incurred to complete the PEI
tender offer is subject to this restriction. Additionally, the Company had sold
income producing assets in 1999 and 2000 which has decreased the Company's
recurring cash flow. The Company does, however, directly benefit from savings in
general and administrative expenses from managing the combined companies, and
would receive its portion of PEI common stock dividends for cash flows in excess
of the $7.5 million. The Company anticipates that cash flow will be generated
from existing properties and from opportunistic trading of assets. The Company
has several non-income producing assets held for sale which, together with
existing cash flows, should be sufficient to meet the Company's short term
obligations. Although the business of buying and selling assets is part of the
Company's recurring operations, should anticipated asset sales not occur, the
Company anticipates that cash flows from current recurring operations, excluding
PEI's cash flows, would not be sufficient to fund short-term obligations.
The Company anticipates using proceeds from asset sales to repay debt and fund
development projects. In addition, the Company has filed a $300.0 million shelf
registration statement for the purpose of issuing debt securities, preferred
stock, depository shares, common stock, warrants or rights. Currently, there
remains $286.5 million of securities for issuance available under this shelf
subject to market conditions. The Company's $35.0 million credit facility is due
June 30, 2000. The Company anticipates repaying this facility with asset sales
or refinancing it with a new facility.
The Company expects to meet its long-term liquidity requirements, such as
property acquisitions and development, mortgage debt maturities, and other
investment opportunities, through the most advantageous sources of capital
available to the Company at the time, which may include operating cash flows
from existing properties and the completion of current development projects, the
sale of common stock, preferred stock or debt securities through public
offerings or private placements, entering into joint venture arrangements with
financial partners, the incurrence of indebtedness through secured or unsecured
borrowings and the reinvestment of proceeds from the disposition of assets
In October 1999, the Company completed the sale of Millennia's assets to
American Wash Services, Inc. ("AWS"), in exchange for 3,500,000 shares of common
stock of the parent of AWS, Mace Security International, Inc. ("MSI"), a warrant
to acquire an additional 62,500 shares of MSI common stock at an exercise price
of $4.00 per share, and the assumption by AWS of certain liabilities of
Millennia. In conjunction with this transaction, Millennia had assigned the
operations of its assets to AWS effective April 1, 1999, and thus did not
receive cash flow from operations after April 1, 1999. In addition, the Company
acquired 250,000 common shares of MSI through a private placement at $2.00 per
share and 250,000 common shares of US Plastic Lumber Corporation
12
<PAGE> 13
("USPL") at $4.00 per share. The MSI and USPL common shares are subject to
ceratin restrictions are not currently available for sale. In March 2000, MACE
announced an agreement to acquire Wash Depot Holdings, Inc., an operator of 73
car wash locations in 15 states. On an annualized basis, MACE anticipates
revenues of approximately $170 million after this acquisition.
At December 31, 1999, the total mortgage debt of the Company consisted of the
following: (i) $7.4 million in mortgages on two properties leased to Lowe's
which have fixed interest rates of 7.6% and 8.8%. These mortgages are also
self-amortizing over the term of the leases with Lowe's and will be repaid when
the leases expire (2003 and 2014). These loans were assumed by PEI when the
properties were sold in February 2000; (ii) $2.1 million mortgage
collateralized by an office building in Scottsdale, Arizona, of which monthly
payments are approximately $25,000 with a balloon payment in the year 2006; and
(iii) $6.4 million outstanding on a $11.0 million construction loan related to
the construction of an office building. Interest on the construction loan varies
based upon the Eurodollar and was 8.7% at December 31, 1999. This loan was
assumed by PEI when the property was sold in February 2000.
Other debt at December 31, 1999 consisted of the following: (i) $33.2 million in
Debentures due 2004. These Debentures are traded on the American Stock Exchange
and bear interest at 9% payable February 15 and August 15 of each year; (ii)
$32.1 million outstanding on the Company's $35.0 million revolving credit
facility. The facility bears interest at LIBOR plus 3.75% (10.25% at December
31, 1999) and is due June 30, 2000. The remaining $2.9 million was borrowed in
January 2000; (iii) $27.4 million payable to The Sol and Helen Price Trust due
2004. This note bears interest at LIBOR plus 1.50% (8.0% at December 31, 1999)
with interest only due monthly; (iv) $18.1 million in Senior Notes due 2004.
These notes are traded on the American Stock Exchange and bear interest at 10%
payable February 15 and August 15 of each year; (v) $5.0 million secured note
bearing interest at prime plus 2% (10.5% at December 31, 1999) due October 2000;
(vi) $5.0 million unsecured note with a fixed interest rate of 10.5%. This note
was repaid in February 2000; (vii) $1.1 million in various other notes,
primarily related to $0.8 million for certain costs on a project in Anaheim. In
addition, the Company had guaranteed approximately $8.8 million of debt at
December 31, 1999 related to development projects. The total amount of potential
guarantees at December 31, 1999 was approximately $16.2 million. The Company
anticipates that it will make additional guarantees of debt related to
development projects in the future.
At December 31, 1999, the Company had 21,281,000 shares of Series B Preferred
Stock outstanding (the "Preferred B Shares"). Holders of the Preferred B Shares
are entitled to receive, when, as and if declared by the Board of Directors,
cumulative cash dividends payable in an amount per share equal to the cash
dividends, if any, on the shares of common stock into which the Preferred B
Shares are convertible. Holders of the Preferred B Shares are also entitled to a
liquidation preference of $5.00 per share, plus a premium of 7% per annum, in
the event of any liquidation, dissolution or other winding up of the affairs of
the Company.
The Preferred B Shares are convertible into common stock of the Company at the
election of the holders at any time, on a one-for-one basis, subject to
adjustment in certain circumstances. The Preferred B Shares also are convertible
into common stock by the Company at any time and from time to time after the
earlier to occur of (i) the date which is six months following the date on which
the Company's common stock becomes listed or admitted for trading on a national
securities exchange or (ii) March 31, 2000. The Company's common stock became
listed on the American Stock Exchange on November 17, 1998. As a result, the
Preferred B Shares are convertible into common stock at the option of the
Company at any time. The Preferred B Shares were issued in March 1999 in
exchange for all of the issued and outstanding shares of Series A Preferred
Stock of the Company (the "Preferred A Shares"). Following such exchange, all
Preferred A Shares were retired and restored to the status of authorized and
unissued shares of preferred stock, without designation as to series, and may be
reissued as shares of any series of preferred stock of the Company.
YEAR 2000
Some of the Company's information technology ("IT") systems were originally
written using two digits rather than four to define the applicable year. As a
result, those IT systems had time sensitive software that recognizes dates using
"00" as the Year 1900 rather than the Year 2000. The Company had upgraded its
computer software and IT systems and did not incur any Year 2000 issues that had
a material impact on the Company's operations. Additionally, the Company was not
made aware of any significant Year 2000 issues with its contractors, vendors
13
<PAGE> 14
and other third parties that their systems (including building management and
mechanical systems) that effected the Company's operations. The Company expended
less than $60,000 in 1999 in connection with its Year 2000 project.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-K may be deemed to be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which provides a "safe harbor" for these types of statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results of the Company to be materially
different from historical results or from any results expressed or implied by
such forward-looking statements. Such risks, uncertainties and other factors
include, but are not limited to, the following risks:
The Company's limited operating history makes it difficult to evaluate its
business - The Company was incorporated in November 1997 and became an
independent business in March 1998 after Excel completed a spin-off of its
business. Accordingly, the Company has a limited operating history on which to
base an evaluation of its business and prospects. You must consider the
Company's prospects in light of the risks and uncertainties encountered by
companies in the early stages of development, particularly companies in the real
estate industry.
The Company's (including PEI's) tenants may face financial difficulties and be
unable to pay rent which may, in turn, cause financial difficulties - The
Company's financial position may be materially harmed if any of its or PEI's
major tenants, including The Sports Authority, or any other significant tenant
experiences financial difficulties, such as a bankruptcy, insolvency or general
downturn in the business of the tenant. In addition, any failure or delay by any
of the Company or PEI's tenants to make rent payments could impair its financial
condition and materially harm the Company's business. Although failure on the
part of a tenant to materially comply with the terms of a lease, including
failure to pay rent, would give the Company the right to terminate the lease,
repossess the property and enforce the payment obligations under the lease, the
Company would then be required to find another tenant to lease the property. The
Company may not be able to enforce the payment obligations against the
defaulting tenant, find another tenant or, if another tenant were found, that
the Company would be able to enter into a new lease on favorable terms.
The Company may face significant competition from developers, owners and
operators of real estate properties which may inhibit the success of its
business - The Company competes in the acquisition of real estate properties
with over 200 publicly-traded REITs as well as other public and private real
estate investment entities, including financial institutions such as mortgage
banks and pension funds, and other institutional investors, as well as
individuals. Competition from these entities may impair the Company's financial
condition and materially harm its business by reducing the number of suitable
investment opportunities offered to the Company and increasing the bargaining
power of prospective sellers of property, which often increases the price
necessary to purchase a property. Many of the Company's competitors in the real
estate sector are significantly larger than the Company and may have greater
financial resources and more experienced managers than the Company. In addition,
a large portion of the Company's and PEI's developed properties are located in
areas where competitors maintain similar properties. The Company will need to
compete for tenants based on rental rates, attractiveness and location of
properties, as well as quality of maintenance and management services.
Competition from these and other properties may impair the Company's financial
condition and materially harm its business by:
- interfering with the Company's ability to attract and retain
tenants,
- increasing vacancies, which lowers market rental rates and limits
the Company's ability to negotiate favorable rental rates, and
- impairing the Company's ability to minimize operating expenses.
The Company's financial performance depends on regional economic conditions
since many of its properties and investments are located in Arizona and
California - Of the Company's properties and real estate related investments, 9
are located in two states: six in Arizona and three in California. Additionally,
17 of PEI properties
14
<PAGE> 15
are located in California and 1 in Arizona. Concentrating a significant number
of properties and real estate related investments in these states may expose the
Company to greater economic risks than if the properties and real estate related
investments were located in several geographic regions. The Company's revenue
from, and the value of, the properties and investments located in these states
may be affected by a number of factors, including local real estate conditions,
such as an oversupply of or reduced demand for real estate properties, and the
local economic climate. High unemployment, business downsizing, industry
slowdowns, changing demographics, and other factors may adversely impact any of
these local economic climates. A general downturn in the economy or real estate
conditions in Arizona or California could impair the Company's financial
condition and materially harm its business. Further, due to the relatively high
cost of real estate in the southwestern United States, the real estate market in
that region may be more sensitive to fluctuations in interest rates and general
economic conditions than other regions of the United States. The Company does
not have any limitations or targets for the concentration of the geographic
location of its properties and, accordingly, the risks associated with this
geographic concentration will increase if the Company continues to acquire
properties in Arizona and California.
The Company's substantial leverage may be difficult to service and could
adversely affect its business - As of December 31, 1999, the Company had
outstanding borrowings of approximately $32.1 million under its credit facility,
with total borrowing capacity of $35.0 million, and additional mortgage and note
debt of approximately $105.7 million. This debt of $137.8 million represented
approximately 42% of the Company's total assets at December 31, 1999. The
Company is and will continue to be exposed to the risks normally associated with
debt financing which may materially harm its business, including the following:
- the Company's cash flow may be insufficient to meet required
payments of principal and interest and payments of principal and
interest on borrowings may leave the Company with insufficient
cash resources to pay operating expenses.
- the Company may not be able to refinance debt at maturity, and
- if refinanced, the terms of refinancing may not be as favorable
as the original terms of the debt.
The Company has incurred additional debt to facilitate the exchange offer
collateralized by the PEI common stock and a default on that debt could result
in the Company's loss of PEI - To facilitate the exchange offer, The Sol and
Helen Price Trust made a five-year loan to the Company in the principal amount
of $27.4 million. The Company used the proceeds of the loan to satisfy a portion
of its monetary obligations under the exchange offer. In addition, the Company
is permitted to borrow up to an additional $2.6 million from The Sol and Helen
Price Trust to satisfy a portion of its monetary obligations for the tender of
the remaining PEI outstanding common shares. The Company granted to the trust,
as security for the Company's obligations under the loan, a second priority
security interest in the PEI common stock securing the Company's Debentures and
Senior Notes and a first priority security interest in any other shares of the
PEI common stock which the Company owns at any time. The loan is non-recourse so
that the trust may only look to the PEI common stock for repayment of the loan.
In order to satisfy the Company's obligations under the loan, the Company may
seek to refinance the loan or issue equity to raise additional funds, neither of
which alternatives may be available to the Company on favorable terms. To the
extent the Company is unable to meet its obligations under the loan, The Sol and
Helen Price Trust will have the right to take ownership of the PEI common stock
owned by the Company, other than the shares securing the Company Debentures and
the Senior Notes.
The Company may not realize the expected benefits from the exchange offer making
its future financial performance uncertain - The Company entered into the
exchange offer with the expectation that the transaction would result in a
number of benefits, including cost savings, operating efficiencies, revenue
enhancements, tax advantages and other synergies. If these benefits and
synergies are not realized, the Company's financial performance and the
performance of PEI could be adversely impacted.
The Company faces risks associated with its equity investments in and with third
parties because of its lack of control over the underlying real estate assets -
As part of the Company's growth strategy, it may invest in shares of REITs or
other entities that invest in real estate assets. In these cases, the Company
will be relying on the assets, investments and management of the REIT or other
entity in which it is investing. These entities and their properties will be
exposed to the risks normally associated with the ownership and operation of
real estate.
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<PAGE> 16
The Company also may invest in or with other parties through partnerships and
joint ventures. In these cases the Company will not be the only entity making
decisions relating to the property, partnership, joint venture or other entity.
Risks associated with investments in partnerships, joint ventures or other
entities include:
- the possibility that the Company's partners might experience
serious financial difficulties or fail to fund their share of
required investment contributions,
- the partners might have economic or other business interests or
goals which are inconsistent with the Company's business
interests or goals, and
- the partners may take action contrary to the Company's
instructions or requests and adverse to its policies and
objectives.
Any substantial loss or action of this nature could potentially harm the
Company's business. In addition, the Company may in some circumstances be liable
for the actions of its third-party partners or co-venturers.
Rising interest rates may adversely affect the Company's cash flow - As of
December 31, 1999, the Company owed approximately $137.8 million under its
credit facility, mortgage debt, and other notes of which $70.9 million bore
interest at variable rates. Variable rate debt creates higher debt payments if
market interest rates increase. The Company may incur additional debt in the
future that also bears interest at variable rates. Higher debt payments as a
result of an increase in interest rates could adversely affect the Company's
cash flow, cause it to default under some debt obligations or agreements, and
materially harm its business.
Because the Company does not have a policy placing a limit on the amount of debt
that it may incur, the Company's future borrowings could be significant and may
adversely affect its cash flow and results of operations - The Company does not
have a policy limiting the amount of debt that it may incur. Accordingly, the
Company's management and board of directors have discretion to increase the
amount of the Company's outstanding debt at any time. The Company could incur
higher levels of debt, resulting in an increase in its total debt payments,
which could adversely affect its cash flow and materially harm its business. In
addition, if the Company increases the amount of its debt it may increase the
risk of the Company's default on all of its debt, including the Company's
Debentures and Senior Notes.
The Company could incur significant costs and expenses related to environmental
problems Various federal, state and local laws and regulations require property
owners or operators to pay for the costs of removal or remediation of hazardous
or toxic substances located on a property. Although the Company is not aware of
any necessary environmental remediation or other environmental liability on its
portfolio of properties, these laws often impose liability without regard to
whether the owner or operator of the property was responsible for or even knew
of the presence of the hazardous substances. The presence of or failure to
properly remediate hazardous or toxic substances may impair the Company's
ability to rent, sell or borrow against a property. These laws and regulations
also impose liability on persons who arrange for the disposal or treatment of
hazardous or toxic substances at another location for the costs of removal or
remediation of these hazardous substances at the disposal or treatment facility.
Further, these laws often impose liability regardless of whether the entity
arranging for the disposal ever owned or operated the disposal facility. Other
environmental laws and regulations impose liability on owners or operators of
property for injuries relating to the release of asbestos-containing materials
into the air. As an owner and operator of property and as a potential arranger
for hazardous substance disposal, the Company may be liable under the laws and
regulations for removal or remediation costs, governmental penalties, property
damage, personal injuries and related expenses. Payment of these costs and
expenses could impair the Company's financial condition and materially harm its
business.
The Company could face significant costs of compliance if it is considered an
investment company under the Investment Company Act - The Company is not
currently registered as an investment company under the Investment Company Act
of 1940, because its management believes that the Company either is not within
the definition of investment company under the Investment Company Act or,
alternatively, excluded from regulation under the Investment Company Act by an
exemption. If the Company is deemed to be an investment company under the
Investment Company Act and fails to qualify for an exemption, it would be unable
to conduct its business as currently conducted, which could materially harm its
business. In the future,
16
<PAGE> 17
the Company intends to conduct its operations in order to avoid registration
under the Investment Company Act. Therefore, the assets that the Company may
acquire or sell may be limited by the regulations of the Investment Company Act.
The costs of compliance with the Americans With Disabilities Act could adversely
affect the Company's business - Under the Americans with Disabilities Act of
1990, all public accommodations and commercial facilities must meet federal
requirements relating to access and use by disabled persons. Compliance with the
Americans with Disabilities Act requirements could involve removal of structural
barriers from disabled persons' entrances on the Company's (and PEI's)
properties. Other federal, state and local laws may require modifications to or
restrict further renovations of the Company's properties to provide for these
accesses. Although the Company believes that its properties are substantially in
compliance with present requirements, noncompliance with the Americans with
Disabilities Act or related laws or regulations could result in the United
States government imposing fines or private litigants being awarded damages
against the Company. If the Company incurs these costs and expenses, its
financial condition could be impaired.
The Company has implemented anti-takeover provisions that could prevent an
acquisition of its business at a premium price - Some of the provisions of the
Company's certificate of incorporation and bylaws could discourage, delay or
prevent an acquisition of its business at a premium price and could make removal
of its management more difficult. These provisions could reduce the
opportunities for the Company's stockholders to participate in tender offers,
including tender offers that are priced above the then current market price of
its common stock. The Company's certificate of incorporation permits its board
of directors to issue shares of preferred stock in one or more series without
stockholder approval. The preferred stock may be issued quickly with terms that
delay or prevent a change in control of the Company's business. In addition,
Section 203 of the Delaware General Corporation Law imposes restrictions on
mergers and other business combinations between the Company and any holder of
15% or more of its common stock.
Protections for PEI's preferred stockholders limit PEI's common stockholders'
ability to control PEI and receive dividends - The Company has agreed to
protections for the holders of the PEI preferred stock which limit the control
over PEI by its common stockholders and the dividends payable to PEI's common
stockholders. The holders of the PEI preferred stock are entitled to elect a
majority of PEI's board of directors and to have one designee on the Company's
board of directors, until:
- less than 2,000,000 shares of the PEI preferred stock remain
outstanding,
- the Company makes an offer to purchase any and all outstanding
shares of the PEI preferred stock at a cash price of $16.00 per
share, and purchase all shares duly tendered and not withdrawn,
or
- the directors of PEI (1) issue any equity securities without
unanimous approval of PEI's board or (2) fail to pay dividends on
the PEI common stock in an amount equal to 100% of PEI's taxable
income or the amount necessary to maintain PEI's status as a
REIT, or in an amount equal to the excess, if any, of PEI's funds
from operations, less preferred stock dividends, over $7.5
million.
The third point above is intended to protect the interests of the holders of the
PEI preferred stock by creating an annual reserve of $7.5 million at the PEI
level which will not be distributed to the Company or any other holder of PEI
common stock. This reserve will limit the Company's ability and the ability of
all other PEI common stockholders to receive cash distributions from PEI for so
long as the PEI preferred stock is outstanding. The Company has agreed with PEI
that the $7.5 million reserve may be used for the improvement and/or acquisition
of properties, the repurchase of the PEI preferred stock or the reduction of
PEI's debt.
Directors and executive officers own a large percentage of the Company's voting
stock and could exert significant influence over matters requiring stockholder
approval - As of December 31, 1999, the Company's executive officers and
directors and their affiliates beneficially owned approximately 33% of its
outstanding common stock. As a result, these stockholders will continue to
significantly influence the Company's management and affairs and all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions, such as a merger, consolidation or sale
of substantially all of its assets. In addition, this significant ownership
could discourage acquisition of the common stock by some potential investors and
could have an anti-takeover effect.
17
<PAGE> 18
The Board of Directors may make changes to the Company's policies without
stockholder approval - The investment, financing, borrowing and distribution
policies of the Company and its policies with respect to all other activities,
growth, debt, capitalization, and operations, are determined by the Company's
Board of Directors. Although it has no present intention to do so, the Board of
Directors may amend or revise these policies at any time and from time to time
at its discretion without a vote of the stockholders of the Company. A change in
these policies could adversely affect the Company's financial condition and
results of operations.
The loss of key personnel could harm the Company's business - Given the early
stage of development of the Company's business, it depends to a large extent on
the performance of its senior management team and other key employees for
strategic business direction and real estate experience. If the Company lost the
service of any members of its senior management or other key employees, it could
materially harm its business. The Company has not obtained key-man life
insurance for any of its senior management or other key employees.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure affecting its market risk sensitive
financial instruments is interest rate risk. The Company's balance sheet
contains financial instruments in the form of interest-earning notes receivable
and interest-bearing mortgages payable. The Company manages the risk to its cash
flow from changes in interest rates by monitoring its variable rate financial
instruments. Although the fair value of its financial instruments may be
affected by changes in interest rates, the Company typically does not dispose of
them prior to maturity. Thus, the primary effect of changes in interest rates
would occur to the extent that financial instruments mature and are replaced
with others at different interest rates.
At December 31, 1999, the Company had mortgage and other debts totaling $70.9
million in variable interest rates. If interest rates increased 100 basis
points, the annual pre-tax effect of such increase to the Company's cash flows
would be approximately $0.7 million, based on the outstanding balance at
December 31, 1999. The actual fluctuation of interest rates is not determinable;
accordingly, actual results from interest rate fluctuation could differ.
The table below presents (1) the scheduled principal payments on notes
receivable, and (2) the scheduled principal repayments on mortgages and notes
payable: over the next five years and thereafter. The table also includes the
average interest rates of the financial instruments during each respective year
and the fair value of the notes receivable and mortgages payable. The Company
determines the fair value of financial instruments through the use of discounted
cash flow analysis using current interest rates for (1) notes receivable with
terms and credit characteristics similar to its existing portfolio and (2)
borrowings under terms similar to its existing mortgages payable. Accordingly,
the Company has determined that the carrying value of its financial instruments
at December 31, 1999 approximates fair value.
<TABLE>
<CAPTION>
Expected Maturity Date
(dollar amounts in thousands)
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
2000 2001 2002 2003 2004 There- Total Fair
after Value
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes receivable, including
notes from affiliates $ 3,480 - - $ 27,133 $ 5,518 $ 1,051 $ 30,222 $30,200
Average interest rate 12.00% - - 9.99% 11.00% 10.00% 10.19%
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Mortgages and notes payable $ 49,303 $ 1,156 $ 440 $ 476 $ 82,293 $ 4,138 $ 75,217 $75,200
Average interest rate 9.95% 9.44% 8.10% 8.10% 8.75% 7.84% 8.66%
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item appear with Index to Financial
Statements and Schedules, starting on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
<PAGE> 19
PART III
ITEMS 10 THROUGH 13
Incorporated by reference to the Company's Proxy Statement for its 2000 Annual
Meeting of Stockholders to be filed subsequently hereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
<TABLE>
<CAPTION>
Page
----
<S> <C>
(1) Report of Independent Accountants...................................F-1
(2) Financial Statements
(i) Consolidated Balance Sheets December 31, 1999 and 1998.......F-2
(ii) Consolidated Statements of Income Year Ended
December 31, 1999, Five Months Ended December 31,
1998 and the Period from inception (November 17,
1997) to July 31, 1998.......................................F-3
(iii) Consolidated Statements of Changes In Stockholders'
Equity Year Ended December 31, 1999, Five Months
Ended December 31, 1998 and the Period from
inception (November 17, 1997) to July 31, 1998...............F-4
(iv) Consolidated Statements of Cash Flows Year Ended
December 31, 1999, Five Months Ended December 31,
1998 and the Period from inception (November 17,
1997) to July 31, 1998 ......................................F-5
(v) Notes to Consolidated Financial Statements...................F-6
(3) Financial Statement Schedules
(i) Schedule II; Valuation and Qualifying Accounts Year
Ended December 31, 1999, Five Months Ended December
31, 1998 and the Period from inception (November
17, 1997) to July 31, 1998...................................F-19
(ii) Schedule III; Real Estate and Accumulated
Depreciation; December 31, 1999 .............................F-20
</TABLE>
The separate financial statements of the Company's
unconsolidated, significant subsidiary, PEI, are incorporated by
reference to PEI's annual report filed on Form 10-K for the year
ended December 31, 1999 (File No. 0-20449).
(b) Reports on Form 8-K filed during the quarter ended December 31,
1999:
A Current Report on Form 8-K dated November 15, 1999, was filed
with the Commission regarding the sale of substantially all of
the assets of Millennia Car Wash, LLC, to American Wash Services,
Inc. ("AWS") pursuant to a Real Estate and Asset Purchase
Agreement, dated March 23, 1999 (as amended), in consideration
for 3,500,000 shares of common stock of the parent of AWS, Mace
Security International, Inc. ("MACE"), a warrant to acquire an
additional 62,500 shares of MACE common stock at an exercise
price of $4.00 per share, and the assumption by AWS of certain
liabilities of Millennia.
A Current Report on Form 8-K dated November 12, 1999, was filed
with the Commission regarding our exchange offer for the Price
Enterprises, Inc. common stock whereby we acquired 12,154,289
shares, representing approximately 91.3% of the outstanding
shares of the PEI common stock and approximately 77.5% of the PEI
voting power.
19
<PAGE> 20
EXHIBIT INDEX
2.1 (1) Distribution Agreement, dated as of March 31, 1998, by and among
Excel Realty Trust, Inc., Excel Legacy Corporation and ERT Development
Corporation.
3.1 (2) Amended and Restated Certificate of Incorporation of Excel Legacy
Corporation.
3.2 (2) Amended and Restated Bylaws of Excel Legacy Corporation.
4.1 (3) Form of Common Stock Certificate.
4.2 * Certificate of Designations of the Series B Preferred Stock of Excel
Legacy Corporation.
4.3 (1) Warrant to Purchase Shares of Series A Preferred Stock, dated as of
March 31, 1998, issued by Excel Legacy Corporation to BankBoston
Capital Inc.
4.4 (1) Warrant to Purchase Shares of Series A Preferred Stock, dated as of
March 31,1998, issued by Excel Legacy Corporation to Southeastern
Asset Management, Inc.
4.5 (4) Indenture, dated as of November 5, 1999, between the Company and
Norwest Bank Minnesota, National Association, for 9.0% Convertible
Redeemable Subordinated Secured Debentures due 2004, including form of
Debenture and form of Pledge
Agreement.
4.6 (4) Indenture, dated as of November 5, 1999, between the Company and
Norwest Bank Minnesota, National Association, for 10.0% Senior
Redeemable Secured Notes due 2004, including form of Note and form of
Pledge Agreement.
10.1 (3) 1998 Stock Option Plan of Excel Legacy Corporation.
10.2 (1) Administrative Services Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.3 (1) Intercompany Agreement, dated as of March 31, 1998, by and between
Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.4 (1) Tax Sharing Agreement, dated as of March 31, 1998, by and between
Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.5 (1) Transitional Services Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.6 (1) Purchase Agreement, dated as of March 31, 1998, by and among Excel
Legacy Corporation and the purchasers named therein.
10.7 (1) Registration Rights Agreement, dated as of March 31, 1998, by and
among Excel Legacy Corporation and the purchasers named therein.
10.8 (1) Form of Indemnity Agreement between Excel Legacy Corporation and its
directors and executive officers.
10.09 (5) Operating Agreement dated as of October 9, 1998 of Grand Tusayan,
LLC, a Delaware limited liability company, as amended.
10.10 (5) First Amended and Restated Operating Agreement dated as of July 27,
1998 of Millennia Car Wash, LLC, a Delaware limited liability company.
10.11 (5) First Amended and Restated Operating Agreement dated as of July 29,
1998 of Newport on the Levee, LLC, a Delaware limited liability
company.
10.12 (6) Real Estate and Asset Purchase Agreement, dated March 23, 1999, by
and among American Wash Services, Inc., Millennia Car Wash, LLC, Excel
Legacy Corporation and G II Ventures, Inc.
10.13 (6) Amendment No. 1 to Real Estate and Asset Purchase Agreement, dated
March 30, 1999, by and among American Wash Services, Inc., Millennia
Car Wash, LLC, Excel Legacy Corporation and G II Ventures, Inc.
10.14 (7) Agreement, dated May 12, 1999, as amended, between the Company and
the other individuals and entities listed on the signature pages
thereto.
10.15 (7) Agreement, dated June 2, 1999, as amended, between the Company and
Enterprises. 10.16 (9)Letter dated June 2, 1999 from Excel Legacy
Corporation to Price Enterprises, Inc. regarding the status of Price
Enterprises, Inc. as a REIT.
10.16 (8) Letter dated June 2, 1999 from Excel Legacy Corporation to Price
Enterprises, Inc. regarding the status of Price Enterprises, Inc.
as a REIT.
10.17 (4) Note Purchase Agreement, dated as of October 6, 1999, between the
Company and The Sol and Helen Price Trust, including form of Secured
Promissory Note and form of Pledge Agreement.
10.18 (9) Purchase and Sale Agreement and Escrow Instructions, dated as of
August 2, 1999, by and between Excel Legacy Corporation and Wal Mart
Real Estate Business Trust.
10.19 * Employment Contract, dated as of May 1, 1998, by and between Excel
Legacy Corporation and Kelly D. Burt, an individual.
20
<PAGE> 21
10.20 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and Gary B. Sabin, an individual.
10.21 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and Richard B. Muir, an individual.
10.22 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and Graham R. Bullick, an individual.
10.23 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and S. Eric Ottesen, an individual.
10.24 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and John Visconsi, an individual.
10.25 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and James Y. Nakagawa, an individual.
10.26 * Employment Contract, dated as of July 1, 1999, by and between Excel
Legacy Corporation and Mark T. Burton, an individual.
21.1 * Subsidiaries of Excel Legacy Corporation.
23.1 * Consent of PricewaterhouseCoopers, LLP.
23.2 * Consent of Ernst & Young, LLP.
27.1 * Financial Data Schedule.
- -------------------------
* Filed herewith.
(1) Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-23503) filed with the Commission on April 2, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-11 (File No. 333-55715) filed with the Commission on June 1,
1998.
(3) Incorporated by reference to Amendment No. 1 to the Company's Registrant
Statement on Form 10 (File No. 0-23503) filed with the Commission on
February 10, 1998.
(4) Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-23503) filed with the Commission on November 12, 1999.
(5) Incorporated by reference to the Company's Annual Report filed on Form
10-K (File No. 0-23503) filed with the Commission on October 28, 1998.
(6) Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-23503) filed with the Commission on June 16, 1999.
(7) Incorporated by reference to Annexes A and B to the Offer to Exchange/
Prospectus dated October 6, 1999, filed as Exhibit (a) (1) to the
Company's Tender Offer Statement on Schedule 14D-1 as filed with the
Commission on October 6, 1999.
(8) Incorporated by reference to the Company's Registration Statement on
Form S-4 (File no. 333-80339) filed with the Commission on June 9, 1999.
(9) Incorporated by reference to the Company's Current Report on form 8-K
(File No. 0-23503) filed with the Commission on September 1, 1999.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
EXCEL LEGACY CORPORATION
DATE: March 28, 2000 By: /s/ Gary B. Sabin
-----------------------------
GARY B. SABIN
President and Chief Executive Officer
DATE: March 28, 2000 By: /s/ James Y. Nakagawa
-----------------------------
JAMES Y. NAKAGAWA
Chief Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Gary B. Sabin March 28, 2000
- --------------------------------------- -----------------------------
GARY B. SABIN, Director, Date
President, Chief Executive Officer
and Chairman of the Board
/s/ Richard B. Muir March 28, 2000
- --------------------------------------- -----------------------------
RICHARD B. MUIR, Director, Date
Executive Vice President and Secretary
/s/ Kelly D. Burt March 28, 2000
- --------------------------------------- -----------------------------
KELLY D. BURT, Director and Date
Executive Vice President - Development
/s/ Jack McGrory March 28, 2000
- --------------------------------------- -----------------------------
JACK McGRORY, Director Date
/s/ Richard J. Nordlund March 28, 2000
- --------------------------------------- -----------------------------
RICHARD J. NORDLUND, Director Date
/s/ Robert E. Parsons, Jr. March 28, 2000
- --------------------------------------- -----------------------------
ROBERT E. PARSONS, JR., Director Date
/s/ Robert S. Talbott March 28, 2000
- --------------------------------------- -----------------------------
ROBERT S. TALBOTT, Director Date
/s/ John H. Wilmot March 28, 2000
- --------------------------------------- -----------------------------
JOHN H. WILMOT, Director Date
22
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Excel Legacy Corporation
In our opinion, the consolidated financial statements listed in item 14(a) of
this Form 10-K present fairly, in all material respects, the financial position
of Excel Legacy Corporation and its subsidiaries at December 31, 1999 and 1998
and the results of their operations and their cash flows for the year ended
December 31, 1999, the five months ended December 31, 1998 and the period from
inception (November 17, 1997) to July 31, 1998, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedules listed in item 14(a) of this Form 10-K present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedules are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers, LLP
San Diego, California
February 16, 2000
F-1
<PAGE> 24
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
--------- ---------
ASSETS
<S> <C> <C>
Real estate:
Land $ 27,099 $ 54,915
Buildings 75,044 136,118
Leasehold interest 2,351 2,351
Accumulated depreciation (2,303) (2,506)
--------- ---------
Net real estate 102,191 190,878
Cash 1,767 1,387
Accounts receivable, less allowance for bad debts of
$55 and $34 in 1999 and 1998, respectively 739 204
Notes receivable 28,380 23,204
Investment in Price Enterprises, Inc. and Mace Securities, Inc. 134,648 -
Investment in partnerships 18,341 11,423
Other investments 1,922 -
Interest receivable 8,929 5,341
Pre-development costs 16,783 13,569
Other assets 7,938 9,087
Deferred tax asset 6,515 6,203
--------- ---------
$ 328,153 $ 261,296
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 70,661 $ 4,450
Convertible debentures 33,243 -
Senior notes 18,067 -
Mortgages payable 15,835 86,536
Accounts payable and accrued liabilities 9,188 2,604
Other liabilities 151 220
--------- ---------
Total liabilities 147,145 93,810
Commitments and contingencies - -
Minority interests 969 846
Stockholders' equity:
Series B Preferred stock, $.01 par value, 50,000,000 shares
authorized, 21,281,000 shares issued and outstanding 213 213
Common stock, $.01 par value, 150,000,000 shares authorized,
36,835,921 and 33,457,804 shares issued and outstanding
in 1999 and 1998, respectively 368 335
Additional paid-in capital 187,699 174,508
Accumulated other comprehensive income, net of tax 922 -
Retained earnings 1,679 2,456
Notes receivable from affiliates for common shares (10,842) (10,872)
--------- ---------
Total stockholders' equity 180,039 166,640
--------- ---------
$ 328,153 $ 261,298
========= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-2
<PAGE> 25
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999,
THE FIVE MONTHS ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM INCEPTION (NOVEMBER 17, 1997) TO JULY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
DEC. 31 DEC. 31, JULY 31,
1999 1998 1998
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Rental $ 9,548 $ 5,515 $ 4,417
Operating income 11,426 7,670 1,732
Interest income 3,937 1,573 1,996
Partnership and other income 1,006 252 -
-------- -------- --------
Total revenue 25,917 15,010 8,145
-------- -------- --------
Operating expenses:
Interest 7,997 2,645 1,518
Depreciation and amortization 3,220 1,918 1,057
Property operating expenses 1,816 1,646 915
Other operating expenses 6,305 4,904 879
General and administrative 6,098 2,641 898
-------- -------- --------
Total operating expenses 25,436 13,754 5,267
-------- -------- --------
Net operating income 481 1,256 2,878
Net gain from real estate sales 5,147 - -
Impairment in investment (6,012) - -
Write-off of development costs (900) - -
-------- -------- --------
(Loss)income before income taxes (1,284) 1,256 2,878
Benefit (provision) for income taxes 507 (535) (1,143)
-------- -------- --------
Net (loss) income $ (777) $ 721 $ 1,735
======== ======== ========
Basic net (loss) income per common share $ (0.02) $ 0.02 $ 0.11
======== ======== ========
Diluted net (loss) income per common share $ (0.02) $ 0.01 $ 0.07
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-3
<PAGE> 26
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999,
THE FIVE MONTHS ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM INCEPTION (NOVEMBER 17, 1997) TO JULY 31, 1998
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PREFERRED STOCK COMMON STOCK PAID-IN COMPREHENSIVE
NUMBER AMOUNT NUMBER AMOUNT CAPITAL INCOME
---------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception $- - $- $- $-
Issuance of preferred stock 21,281,000 213 - - 106,192 -
Issuance of common stock - - 33,457,804 335 70,831 -
Issuance of notes receivable
from officers for common shares - - - - - -
Issuance costs - - - - (2,515) -
Net income - - - - - -
---------- ---------- ---------- ----------- ---------- ----------
Balance at July 31, 1998 21,281,000 213 33,457,804 335 174,508 -
Net income - - - - - -
---------- ---------- ---------- ----------- ---------- ----------
Balance at December 31, 1998 21,281,000 213 33,457,804 335 174,508 -
Issuance of common stock - - 3,378,117 33 13,479 -
Issuance costs - - - - (288) -
Repayment of loans - - - - - -
Comprehensive income:
Net loss - - - - - -
Unrealized gain on marketable
securities, net of tax - - - - - 922
Total comprehensive income - - - - - -
---------- ---------- ---------- ----------- ---------- ----------
Balance at December 31, 1999 21,281,000 $ 213 36,835,921 $ 368 $ 187,699 $ 922
========== ========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
RETAINED NOTES STOCKHOLDERS'
EARNINGS RECEIVABLE EQUITY
-------- ---------- -------------
<S> <C> <C> <C>
Balance at inception $- $- $-
Issuance of preferred stock - - 106,405
Issuance of common stock - - 71,166
Issuance of notes receivable
from officers for common shares - (10,872) (10,872)
Issuance costs - - (2,515)
Net income 1,735 - 1,735
---------- ---------- ----------
Balance at July 31, 1998 1,735 (10,872) 165,919
Net income 721 - 721
---------- ---------- ----------
Balance at December 31, 1998 2,456 (10,872) 166,640
Issuance of common stock - - 13,512
Issuance costs - - (288)
Repayment of loans - 30 30
Comprehensive income:
Net loss (777) - -
Unrealized gain on marketable
securities, net of tax - - -
Total comprehensive income - - 145
---------- ---------- ----------
Balance at December 31, 1999 $ 1,679 $ (10,842) $ 180,039
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-4
<PAGE> 27
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999,
THE FIVE MONTHS ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM INCEPTION (NOVEMBER 17, 1997) TO JULY 31, 1998
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
DEC. 31, DEC. 31, JULY. 31,
1999 1998 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (777) $ 721 $ 1,735
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 3,220 1,918 1,057
Net gain from real estate sales (5,147) - -
Write-off of real estate related costs 6,912 - -
Provision for bad debts 97 20 16
Change in accounts receivable and other assets (10,472) (2,215) (6,350)
Change in accounts payable and other liabilities 6,246 (4,489) 6,927
--------- --------- ---------
Net cash provided (used) by operating activities 79 (4,045) 3,385
--------- --------- ---------
Cash flows from investing activities:
Proceeds from real estate sales 63,031 - -
Real estate acquired and construction costs paid (21,287) (1,489) (98,951)
Investment in partnerships (10,828) (285) (11,138)
Acquisition of Price Enterprises, Inc., cash portion (33,643) - -
Pre-development costs paid (5,755) (6,907) (6,662)
--------- --------- ---------
Net cash used in investing activities (8,482) (8,681) (116,751)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock - - 106,405
Proceeds from issuance of common stock 13,512 - 11,104
Issuance costs paid (288) - (2,515)
Principal payments of mortgages and notes (43,305) (1,378) (72,504)
Borrowings from issuance of notes 38,864 4,000 82,367
--------- --------- ---------
Net cash provided by financing activities 8,783 2,622 124,857
--------- --------- ---------
Net increase (decrease) in cash 380 (10,104) 11,491
Cash at the beginning of the period 1,387 11,491 -
--------- --------- ---------
Cash at the end of the period $ 1,767 $ 1,387 $ 11,491
========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-5
<PAGE> 28
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Excel Legacy Corporation (the "Company"), a Delaware corporation was formed
on November 17, 1997. The Company was originally a wholly-owned subsidiary
of Excel Realty Trust, Inc. ("Excel"), a Maryland real estate investment
trust ("REIT"), now known as New Plan Excel Realty Trust, Inc. On March 31,
1998, Excel effected a spin-off of the Company through a special dividend
to the holders of common stock of Excel of all of the outstanding common
stock of the Company held by Excel (the "Spin-off").
In connection with the Spin-off, certain real properties, notes receivable
and related assets and liabilities were transferred to the Company from
Excel (Note 2). Upon completion of the Spin-off, the Company ceased to be a
wholly-owned subsidiary of Excel and began operating as an independent
public real estate operating company.
CHANGE IN FISCAL YEAR
As of December 11, 1998, the Board of Directors of the Company adopted a
fiscal year-end of December 31, beginning with a five month transition
period ending on December 31, 1998. The Company's previous fiscal year-end
was July 31.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all affiliates in which the
Company has an ownership interest greater than 50%. The Company uses the
equity method of accounting to account for its investments in which its
ownership interest is 50% or less, but in which it has significant
influence. The Company accounts for its interest in Price Enterprises, Inc.
("PEI")(Note 3) under the equity method of accounting because the holders
of the PEI preferred stock have the right to elect a majority of the PEI
board of directors. All other investments are accounted for using the cost
method of accounting.
REAL ESTATE
Certain real estate assets were transferred to the Company from Excel and
recorded at Excel's cost. Other real estate assets acquired subsequent to
the Spin-off were recorded at the Company's cost. Depreciation is computed
using the straight-line method over estimated useful lives of 40 years for
buildings. Expenditures for maintenance and repairs are charged to expense
as incurred and significant renovations are capitalized.
The Company assesses its properties, including its investments in joint
ventures, individually for impairment whenever events or changes in
circumstances indicate that the carrying amount of the property may not be
recoverable. Recoverability of property to be held and used is measured by
comparing the carrying amount of the property to future undiscounted net
cash flows expected to be generated by the property. If the sum of the
expected undiscounted future cash flows is less than the carrying amount of
the property, the property is considered to be impaired. If the property is
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the property exceeds the fair value of the
property.
F-6
<PAGE> 29
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PRE-DEVELOPMENT COSTS
Pre-development costs that are directly related to specific construction
projects are capitalized as incurred. The Company expenses these costs to
the extent they are unrecoverable or when it is determined that the related
project will not be pursued.
MANAGEMENT CONTRACTS
Management contracts are recorded at cost and amortized over a period of
seven years.
INCOME TAXES
The Company provides for income taxes under the liability method. A current
tax asset or liability is recognized for the estimated taxes refundable or
payable for the current year. A deferred tax asset or liability is
recognized for the estimated future tax effects attributable to
carryforwards and to temporary differences between the tax and financial
reporting basis of assets and liabilities. The measurement of current and
deferred tax assets and liabilities is based on enacted tax laws and rates.
The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence, are not
expected to be realized.
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on
the effective interest method over the terms of the related leases or debt
agreements.
REVENUE RECOGNITION
Base rental revenue is recognized on the straight-line basis, which
averages annual minimum rents over the terms of the leases. Certain of the
leases provide for additional contingent rental revenue based upon the
level of sales achieved by the lessee. Contingent rental revenue is
recognized when earned.
COMPREHENSIVE INCOME
In 1999, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 130 "Reporting Comprehensive Income." This statement requires
that all components of comprehensive income be reported in the financial
statements in the period in which they are recognized. The components of
comprehensive income for the Company include net income and unrealized
gains on investments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
F-7
<PAGE> 30
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements at December 31, 1998 and for the periods ended December 31, 1998
and July 31, 1998, to conform with the current period's presentation.
2. SPIN-OFF:
On March 31, 1998, Excel transferred certain real estate assets to the
Company in exchange for 23,412,580 common shares of the Company, assumption
of mortgage debt by the Company, and issuance of a note payable to Excel
from the Company which was subsequently repaid. The Spin-off took place
through a dividend distribution to Excel's common stockholders of all the
Company's common stock (23,412,580 shares) held by Excel. The distribution
consisted of one share of the Company's common stock for each share of
Excel's common stock held on the record date of March 2, 1998. The fair
value of the distribution was approximately $56.0 million or $2.39 per
share. While the Company recorded the acquisition of assets and
liabilities at fair value for tax purposes, the Company recorded the assets
and liabilities at Excel's historical cost basis for financial reporting
purposes in accordance with accounting standards for distributions of
non-monetary assets to owners in a spin-off. The tax effect of the
difference between the tax and financial reporting basis was $6.5 million
and recorded as a deferred tax asset.
3. PRICE ENTERPRISES, INC.
In November 1999, the Company completed an exchange offer for the common
shares of PEI, a Maryland corporation, which is operated as a real estate
investment trust. The exchange offer consisted of per share consideration
for PEI common stock of $4.25 in cash, $2.75 in principal amount of newly
issued 9% Convertible Redeemable Subordinated Secured Debentures of the
Company due in 2004 (convertible at any time into the Company's common
stock at $5.50 per share) and $1.50 in newly issued 10% Senior Redeemable
Secured Notes of the Company due in 2004 (Note 7). Approximately,
12,154,000 shares of PEI common stock were tendered representing
approximately 91% of the outstanding common stock. The investment of $112.3
million is classified as investment in securities on the consolidated
balance sheet. Legacy's equity in the earnings of PEI ($163,000 after the
accrual of preferred dividends) is included in partnership and other income
in the accompanying Consolidated Statements of Income (Loss). Below is
summarized financial information as of December 31, 1999 and the period
from November 12, 1999 to December 31, 1999 for PEI (in thousands):
BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Real estate, net of
accumulated depreciation $ 550,869
Other assets 11,689
---------
Total assets $ 562,558
=========
Notes and mortgage payable $ 97,241
Accounts payable and other liabilities 4,057
8 3/4% Series A Preferred Stock 353,404
Other stockholders' equity 107,856
---------
Total liabilities and stockholders' equity $ 562,558
=========
</TABLE>
INCOME STATEMENT
<TABLE>
<CAPTION>
<S> <C>
Operating revenue $ 9,274
Operating expenses (2,375)
General and administrative (268)
Interest expense (848)
Depreciation and amortization (1,086)
---------
Net Income 4,697
Preferred dividends -
---------
Net income available for
common shares $ 4,697
=========
</TABLE>
F-8
<PAGE> 31
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
3. PRICE ENTERPRISES, INC., CONTINUED,
The following unaudited pro forma information for the twelve months ended
December 31, 1999 and 1998, has been presented as if Excel Legacy
Corporation acquired approximately 91% of the common shares of PEI on
January 1, 1999 and 1998 respectively. The unaudited pro forma information
makes certain assumptions regarding capital sources and interest rates and
the pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been had the acquisition
actually occurred on January 1, 1999 and 1998, respectively, (in
thousands):
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-------------------------------------------------------------------
1999 (actual) 1999 (pro forma) 1998 (actual) 1998 (pro forma)
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Total revenue $ 25,917 $ 27,767 $ 23,155 $ 24,326
Operating expenses (17,439) (17,439) (14,858) (14,858)
Interest expense (7,997) (14,710) (4,163) (10,876)
Real estate sales/
impairment (1,765) (1,765) - -
Income taxes 507 1,678 (1,678) -
-------- -------- -------- --------
Net (loss) income $ (777) $ (4,469) $ 2,456 $ (1,408)
======== ======== ======== ========
Net (loss) income per share -
Basic $ (0.02) $ (0.13) $ 0.10 $ (0.06)
======== ======== ======== ========
Diluted $ (0.02) $ (0.13) $ 0.06 $ (0.06)
======== ======== ======== ========
</TABLE>
4. MILLENNIA:
The Company has an investment in a joint venture known as Millennia Car
Wash, LLC ("Millennia") which owned interests in 19 car wash properties in
Arizona and Texas. In October 1999, Millennia exchanged its assets in
exchange for approximately 3.5 million shares of common stock and 62,500
common stock purchase warrants of Mace Security International ("MACE"). In
connection with the agreement, Millennia had assigned the operations of its
car wash properties to MACE effective April 1, 1999. As such, the Company
has not reported operations of Millennia since that date. Millennia,
however, had retained ownership of the car wash properties until October
1999. As part of the agreement, the Company acquired 250,000 common shares
of MACE through a private placement at $2 per share and 250,000 common
shares of US Plastic Lumber Corporation ("USPL") at $4 per share. One of
the Company's senior officers is a director on the MACE board of directors.
In conjunction with the sale of assets for MACE common shares, the Company
recognized a $2.1 million gain on the exchange based upon the market value
of the common shares on the date of the exchange, discounted for sale
restrictions. The Company accounts for Millennia's investment in MACE under
the equity method of accounting and owns approximately 19% of MACE at
December 31, 1999. The Company classifies its investment in USPL as
available-for-sale and recognizes changes in the fair value of its
investment in USPL in other comprehensive income.
<TABLE>
<CAPTION>
INVESTMENT IN USPL (IN THOUSANDS): DECEMBER 31, 1999
---------------------------------- -----------------
<S> <C>
Cost $ 1,000
Unrealized gain 922
-------
Fair value $ 1,922
======
</TABLE>
F-9
<PAGE> 32
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
5. REAL ESTATE:
In addition to the Millennia transaction (Note 4) in 1999, the Company sold
a property located in Highlands Ranch, Colorado for approximately $25.4
million, eight properties in various locations leased to Wal-mart for
approximately $34.9 million, and a land parcel in Rancho Bernardo,
California for approximately $2.9 million. The combined book value of these
assets was $66.3 million. Mortgage debt of $41.2 million was retired in
conjunction with the sales. The sales resulted in a net book gain of $3.1
million. The Company also contributed a property located in Westminster,
Colorado to a partnership for a 50% interest. The property had book value
of approximately $24.9 million and mortgage debt of $18.5 million and is
part of a development project.
In the five months ended December 31, 1998, Millennia acquired nine car
wash properties for approximately $15.2 million. The acquisition was made
through the assumption of various notes payable.
In 1999, the Company incurred a charge of $6.0 million related to an
impairment in a minority investment in a development project in
Indianapolis, Indiana which has been delayed due to a lack of funding.
Additionally, the Company wrote-off $0.9 million in non-recurring costs
related to a development project in Scottsdale, Arizona.
In 2000, the Company sold three properties to PEI for approximately $24.4
million. Mortgage debt of approximately $14.3 million was transferred as
part of the sales.
6. NOTES RECEIVABLE:
The Company had $28.4 million in notes receivable outstanding at December
31, 1999 related to various development projects. The notes bear interest
at 10% to 12% and are collateralized by the related projects. The notes
mature on various dates between 2000 and the earlier of the sale of the
related projects or 2003 to 2004.
7. NOTES AND MORTGAGES PAYABLE:
NOTES PAYABLE
The Company had $70.6 million in notes payable outstanding at December 31,
1999. Of this amount, $32.1 million was outstanding on the Company's
revolving credit facility of $35.0 million (the "Credit Facility). The
Credit Facility is collateralized by various properties and carries an
interest rate of LIBOR plus 3.75% (10.25% at December 31, 1999). The Credit
Facility expires in June 2000.
To facilitate the PEI exchange offer (Note 3), The Sol and Helen Price
Trust loaned the Company $27.4 million. This note bears an interest rate of
LIBOR plus 1.50% (8.0% at December 31, 1999) and is due in November 2004.
The note is collateralized by the Company's PEI common shares. An
additional $2.6 million is available under the note to facilitate the
purchase of the additional common shares of PEI not already tendered.
F-10
<PAGE> 33
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
7. NOTES AND MORTGAGES PAYABLE, CONTINUED:
The Company has two $5.0 million notes outstanding at December 31, 1999.
One note bears interest at prime plus 2% (10.5% at December 31, 1999) and
matures October 2000. This note is collateralized by second trust deeds on
two of the Company's investments. The other note is unsecured and bears
interest at 10.50% and was repaid in February 2000 with proceeds from asset
sales and return of capital from a development investment. The Company has
an additional $1.1 million outstanding in various notes payable.
CONVERTIBLE DEBENTURES
In conjunction with the PEI exchange offer, the Company issued $33.4
million in convertible debentures ("Debentures"). The Debentures are traded
on the American Stock Exchange, bear an interest rate of 9% per annum and
are collateralized by a first priority security interest in certain of the
Company's PEI common shares. The holders of the Debentures are entitled at
any time before the day prior to the final maturity date, subject to prior
redemption, to convert any Debentures into the Company's common stock at
the conversion price of $5.50 per share. The Debentures mature in November
2004.
SENIOR NOTES
In conjunction with the PEI exchange offer, the Company issued $18.1
million in senior notes ("Senior Notes"). The Senior Notes are traded on
the American Stock Exchange, bear an interest rate of 10% per annum and,
along with the Debentures, are collateralized by a first priority security
interest in certain of the Company's PEI common shares. The Senior Notes
rank equal to future senior indebtedness of the Company and senior to the
Debentures. The Senior Notes mature in November 2004.
MORTGAGES PAYABLE
The Company had $15.8 million in mortgages payable outstanding at December
31, 1999. Of this amount, $14.3 million was transferred to PEI in
conjunction with property sales in February 2000 (Note 5). The mortgage
debt has an average maturity of 5.48 years expiring at various dates to
2014. The monthly payment of principal and interest approximates $128,000
bearing an average interest rate of 8.2% at December 31, 1999. The mortgage
debt is collateralized by real estate. In addition to the mortgages
payable, the Company had guaranteed approximately $8.8 million of debt at
December 31, 1999 related to development projects. The total amount of
potential guarantees at December 31, 1999 was approximately $16.2 million.
The principal payments required to be made on mortgages and notes payable
over the next five years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
2000 $ 49,303
2001 1,156
2002 440
2003 476
2004 82,293
Thereafter 4,138
---------
$ 137,806
=========
</TABLE>
F-11
<PAGE> 34
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
8. INCOME TAXES:
At December 31, 1999, the Company had a net deferred tax asset of $6.5
million. The deferred tax asset primarily relates to the difference between
the tax basis and cost basis of the real estate assets acquired from Excel
in connection with the Spin-off (Note 2). Additionally, $1.4 million
relates to an impairment in the Company's investment in a development
project (Note 5). The offsetting portion of the deferred asset relates to
timing differences in recognizing revenue and expenses for tax purposes
through operations of the Company. No valuation allowance has been provided
against the deferred tax asset as the Company expects future taxable
income. The provision for income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
FEDERAL STATE
------- -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Current (benefit) payable $ (743) $ 25
Deferred tax expense (benefit) 221 (10)
------ ------
Provision for income taxes $ (522) $ 15
====== ======
FIVE MONTHS ENDED DECEMBER 31, 1998:
Current payable $ 312 $ 107
Deferred tax expense 82 34
------ -------
Provision for income taxes $ 394 $ 141
===== ======
PERIOD FROM INCEPTION TO JULY 31, 1998:
Current payable $ 727 $ 207
Deferred tax expense 163 46
----- ------
Provision for income taxes $ 890 $ 253
===== ====
</TABLE>
The significant components of activities that gave rise to deferred tax
assets and liabilities included on the balance sheet were as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Assets acquired from the Spin-off $ 4,487 $ 6,383
Impairment of investment 2,395 -
Other (367) (180)
------ -------
Net deferred tax assets $6,515 $ 6,203
====== =======
</TABLE>
A reconciliation of the company's effective tax rate to the statutory U.S.
federal tax rate for the year ended December 31, 1999, the five months
ended December 31, 1998 and the period from inception to December 31, 1998
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory rate 34% 34% 34%
State and local 6% 8% 6%
----- ---- -----
Effective rate 40% 42% 40%
==== ==== ====
</TABLE>
F-12
<PAGE> 35
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
9. CAPITAL STOCK:
PRIVATE PLACEMENT
In October 1999, the Company sold 3,378,117 shares of common stock to a
group of investors. Proceeds of approximately $13.5 million were used for
general corporate purposes, to fund certain development costs and to repay
outstanding amounts on the Company's credit facility.
SERIES B PREFERRED SHARES
At December 31, 1999, the Company had 21,281,000 shares of Series B
Preferred Stock outstanding (the "Preferred B Shares"). Holders of the
Preferred B Shares are entitled to receive, when, as and if declared by the
Board of Directors, cumulative cash dividends payable in an amount per
share equal to the cash dividends, if any, on the shares of common stock
into which the Preferred B Shares are convertible. Holders of the Preferred
B Shares are also entitled to a liquidation preference of $5.00 per share,
plus a premium of 7% per annum, in the event of any liquidation,
dissolution or other winding up of the affairs of the Company.
The Preferred B Shares are convertible into common stock of the Company at
the election of the holders at any time, on a one-for-one basis, subject to
adjustment in certain circumstances. The Preferred B Shares also are
convertible into common stock by the Company at any time and from time to
time after the earlier to occur of (i) the date which is six months
following the date on which the Company's common stock becomes listed or
admitted for trading on a national securities exchange or (ii) March 31,
2000. The Company's common stock became listed on the American Stock
Exchange on November 17, 1998. As a result, the Preferred B Shares are
convertible into common stock at the option of the Company at any time.
The Preferred B Shares were issued in March 1999 in exchange for all of the
issued and outstanding shares of Series A Preferred Stock of the Company
(the "Preferred A Shares"). Following such exchange, all Preferred A Shares
were retired and restored to the status of authorized and unissued shares
of preferred stock, without designation as to series, and may be reissued
as shares of any series of preferred stock of the Company.
OPTIONS
The Company adopted the 1998 Stock Option Plan (the "Option Plan") for
directors, executive officers and other key employees of the Company. The
aggregate number of shares issuable upon exercise of options under the
Option Plan may not exceed 5,250,380 shares and are exercisable for 10
years from the date of grant. The exercise price of stock options may not
be less than 100% of the fair market value of the stock on the date of
grant. Stock option and warrant activity are summarized as follows:
F-13
<PAGE> 36
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
9. CAPITAL STOCK:, CONTINUED:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS/ EXERCISE PRICE
WARRANTS PER SHARE
--------- ---------
<S> <C> <C>
Outstanding at inception (November 17, 1997) - $ -
Granted 3,850,000 $7.50
---------
Outstanding at July 31, 1998 3,850,000 $7.50
Granted 40,000 $2.92
---------
Outstanding at December 31, 1998 3,890,000 $7.45
Granted 1,363,000 $5.06
Cancelled (950,000) $7.50
---------
Outstanding December 31, 1999 4,303,000 $6.68
=========
</TABLE>
The 3,850,000 options granted in the period ended July 31, 1998 consisted
of 1,925,000 options at an exercise price of $10.00 and 1,925,000 options
at an exercise price of $5.00. Of these options, 475,000 options at an
exercise price of $10.00 and 475,000 options at an exercise price of $5.00
were cancelled in 1999. The cancelled options related to employees no
longer with the Company. All other options were granted at fair market
value. The options vest over five years and expire at various dates through
December 2009. All of the options were issued to directors, officers or
employees of the Company. At December 31, 1999, options of 947,380 were
available for granting under the Option Plan.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Accordingly, no compensation costs
have been recognized by the Company. Had compensation cost for the
Company's stock option plan been recognized based on the fair value at the
grant date for awards consistent with the provisions of SFAS No. 123, the
Company's net loss in the year ended December 31, 1999 would have been
increased by $3,225,000 from $777,000 ($0.02 per share - basic, and $0.01
per share -diluted) to a net loss of $3,970,000 ($0.12 per share - basic,
and $0.07 per share -diluted). For the five months ended December 31, 1998,
the net income would have been decreased by $50,000 from $721,000 ($0.02
per share - basic, and $0.01 per share -diluted) to $671,000 ($0.02 per
share - basic, and $0.01 per share - diluted). For the period from
inception (November 17, 1997) to July 31, 1998, net income reduced by
$5,705,000 from $1,735,000 ($0.11 per share - basic, and $0.07 per share
diluted) to a net loss of $3,970,000 ($0.25 per share - basic, and $0.15
per share - diluted).
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the year ended December 31, 1999, the five months
ended December 31, 1998, and the period from inception to July 31, 1998,
respectively: expected volatility of 37.02%, 37.02%, and 36.56%; risk-free
interest rate of 5.76%, 5.76% and 5.56%; expected life of 6 years (for all
periods); and dividend yield of 0.00% (for all periods).
F-14
<PAGE> 37
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
9. CAPITAL STOCK, CONTINUED:
EARNINGS PER SHARE (EPS)
A reconciliation of the numerator and denominator of basic and diluted EPS
is provided for the year ended December 31, 1999, the five months ended
December 31, 1998, and the period from inception to July 31, 1998, follows
(in thousands, except per share amounts).
<TABLE>
<CAPTION>
DEC. 31 DEC. 31 JULY 31,
1999 1998 1998
-------- -------- --------
<S> <C> <C> <C>
BASIC EPS
NUMERATOR:
Net income (loss) $ (777) $ 721 $ 1,735
======== ======== ========
DENOMINATOR:
Weighted average of common shares outstanding 33,985 33,458 15,842
======== ======== ========
EARNINGS (LOSS) PER SHARE: $ (0.02) $ 0.02 $ 0.11
======== ======== ========
DILUTED EPS
NUMERATOR:
Net income (loss) $ (777) $ 721 $ 1,735
======== ======== ========
DENOMINATOR:
Weighted average of common shares outstanding 33,985 33,458 15,842
Effect of diluted securities:
Preferred B Shares 21,281 21,281 10,142
Common stock options 4 29 -
Deduct diluted securities for net loss (21,285) - -
======== ======== ========
33,985 54,768 25,984
======== ======== ========
EARNINGS (LOSS) PER SHARE: $ (0.02) $ 0.01 $ 0.07
======== ======== ========
</TABLE>
10. FINANCIAL INSTRUMENTS AND CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of risk consist principally of cash, accounts receivable and
notes receivable. From time to time, the Company's cash balances with any
one institution may exceed Federal Deposit Insurance limits. The following
fair value disclosure was determined by the Company, using available market
information and discounted cash flow analyses as of December 31, 1999 and
1998. However, considerable judgement is necessary to interpret market data
and to develop the related estimates of fair value. Accordingly, the
estimates presented are not necessarily indicative of the amounts that the
Company could realize upon disposition. The use of different estimation
methodologies may have a material effect on the estimated fair value
amounts. The Company believes that the carrying values reflected in the
Consolidated Balance Sheets at December 31, 1999 and 1998 approximates the
fair values for cash, accounts receivable and payable, notes receivable,
mortgage debt and notes payable, and that the market value of its real
estate held for sale exceeds the carrying value.
F-15
<PAGE> 38
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
11. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE:
The amounts paid for interest during the year ended December 31, 1999, the
five months ended December 31, 1998 and the period from inception to July
31, 1998 were $5.6 million, $2.2 million, and $1.6 million, respectively.
In 1999, the Company's subsidiary, Millennia, exchanged $37.4 million of
assets and $15.1 million of debt in exchange for securities (Note 4). Also
in 1999, the Company assumed $78.9 million of debt related to the tender
offer of PEI common shares (Note 3). Additionally, the Company assumed $6.4
million in mortgage debt related to the construction of an office building.
Finally, the Company contributed $24.9 million in real estate with mortgage
debt of $18.5 million to a partnership for development.
In the five months ended December 31, 1998, Millennia assumed $15.2 million
of debt in conjunction with the acquisition of nine car wash properties. In
the period from inception to July 31, 1998, the Spin-off occurred (Note 2)
and common shares were issued to certain officers of the Company in
exchange for cash and $10.9 million in notes receivable. Also, the Company
issued 850,000 shares of common stock in connection with the acquisition of
a real estate management company. The market value of the shares was
approximately $3.4 million. Finally, the Company borrowed $35.5 million in
mortgages payable in connection with the construction of the AMC theaters.
12. SEGMENT REPORTING:
The Company's primary business segment is retail real estate investments.
Other reportable business segments of the Company include hospitality,
operating companies, and office buildings. Below is selected financial
information for each segment (in thousands). The operating companies
segment primarily relates to Millennia in the periods presented. Certain
revenues and expenses such as general and administrative not specifically
incurred by specific segments, and corporate income taxes have been grouped
with "retail & other" for presentation purposes.
<TABLE>
<CAPTION>
RETAIL & OPERATING
OTHER HOSPITALITY COMPANIES OFFICE TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
The year ended December 31, 1999:
Total revenues $ 14,352 $ 5,145 $ 4,317 $ 2,103 $ 25,917
--------- --------- --------- --------- ---------
Interest 7,403 - 419 175 7,997
Depreciation and amortization 2,142 623 327 128 3,220
General and administrative 4,082 - 2,016 - 6,098
Operating expenses 1,421 4,496 1,809 395 8,121
--------- --------- --------- --------- ---------
Total operating expenses 15,048 5,119 4,571 698 25,436
--------- --------- --------- --------- ---------
Net operating income/loss (696) 26 (254) 1,405 481
Real estate sales/other (3,827) - 2,062 - (1,765)
Provision for income taxes 507 - - - 507
--------- --------- --------- --------- ---------
Net (loss) income $ (4,016) $ 26 $ 1,808 $ 1,405 $ (777)
========= ========= ========= ========= =========
Total assets $ 257,161 $ 20,959 $ 24,242 $ 25,791 $ 328,153
========= ========= ========= ========= =========
</TABLE>
F-16
<PAGE> 39
12. SEGMENT REPORTING:, CONTINUED:
<TABLE>
<CAPTION>
RETAIL & OPERATING
OTHER HOSPITALITY COMPANIES OFFICE TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
The five months ended December 31, 1998:
Total revenues $ 6,327 $ 833 $ 6,593 $ 1,257 $ 15,010
--------- --------- --------- --------- ---------
Interest 2,212 - 348 85 2,645
Depreciation and amortization 1,138 260 466 54 1,918
General and administrative 936 - 1,705 - 2,641
Operating expenses 1,641 911 3,998 - 6,550
--------- --------- --------- --------- ---------
Total operating expenses 5,927 1,171 6,517 139 13,754
--------- --------- --------- --------- ---------
Net operating income (loss) 400 (338) 76 1,118 1,256
Provision for income taxes (535) - - - (535)
--------- --------- --------- --------- ---------
Net (loss) income $ (135) $ (338) $ 76 $ 1,118 $ 721
========= ========= ========= ========= =========
Total assets $ 195,174 $ 16,920 $ 35,583 $ 13,619 $ 261,296
========= ========= ========= ========= =========
The period from inception (November 17, 1997) to July 31, 1998:
Total revenues $ 6,339 $ 94 $ 1,178 $ 534 $ 8,145
--------- --------- --------- --------- ---------
Interest 1,449 - - 69 1,518
Depreciation and amortization 891 37 85 44 1,057
General and administrative 610 - 288 - 898
Operating expenses 809 114 747 124 1,794
--------- --------- --------- --------- ---------
Total operating expenses 3,759 151 1,120 237 5,267
--------- --------- --------- --------- ---------
Net operating income (loss) 2,580 (57) 58 297 2,878
Provision for income taxes (1,143) - - - (1,143)
--------- --------- --------- --------- ---------
Net income (loss) $ 1,437 $ (57) $ 58 $ 297 $ 1,735
========= ========= ========= ========= =========
Total assets $ 203,223 $ 15,074 $ 20,220 $ 8,399 $ 246,916
========= ========= ========= ========= =========
</TABLE>
F-17
<PAGE> 40
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
13. RELATED PARTY TRANSACTIONS:
In connection with the sale of common stock to certain affiliates in March
1998, the Company issued $10.9 million of notes receivable of which $10.8
is outstanding at December 31, 1999. The notes bear interest at 7%, are
recourse obligations of the note holders, and are due in March 2003. The
total interest receivable at December 31, 1999 from these notes totaled
$1.4 million. The notes have been offset against stockholders' equity on
the Company's accompanying Consolidated Balance Sheets. In January 2000,
the notes were decreased by $1.1 million for salary and bonuses not paid in
cash to certain senior officers in 1999. This amount was included as a
general and administrative expense in 1999.
14. RETIREMENT PLAN:
The Company has a 401(k) Retirement Plan (the "401(k) Plan") covering most
of the officers and employees of the Company. The 401(k) Plan permits
participants to contribute, until termination of employment with the
Company, up to a maximum of 15% of their compensation to the 401(k) Plan.
In addition, contributions of participants are matched by the Company in an
amount equal to 50% of the participants contribution in Company stock (up
to a maximum of 3% of such person's compensation). For the year ended
December 31, 1999, the five months ended December 31, 1998, and the period
from inception (November 17, 1997) to July 31, 1998, the Company incurred
costs of $87,000, $15,000, and $0, respectively, in connection with the
401(k) Plan.
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data is as follows (in thousands except per
share amounts):
<TABLE>
<CAPTION>
NET INCOME NET INCOME
(LOSS) PER (LOSS) PER
TOTAL NET INCOME SHARE - SHARE -
REVENUES (LOSS) BASIC DILUTED
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1999:
Quarter ended March 31, $ 9,217 $ 174 $0.01 $0.00
Quarter ended June 30, 6,216 512 0.02 0.01
Quarter ended September 30, 5,426 335 0.01 0.01
Quarter ended December 31, 5,058 (1,798) (0.05) (0.05)
For the five months ended
December 31, 1998:
Quarter ended October 31, $ 8,946 $ 585 $0.02 $0.01
Two months ended December 31, 6,064 136 0.00 0.00
For the period from inception
to July 31, 1998:
Quarter ended April 30, $ 1,343 $ 363 $0.03 $0.02
Quarter ended July 31, 6,802 1,372 0.04 0.03
</TABLE>
F-18
<PAGE> 41
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
-------------
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------- ----------
ACCOUNTS
BALANCE AT CHARGED TO RECEIVABLE BALANCE AT
BEGINNING BAD DEBT WRITTEN END OF
DESCRIPTION OF YEAR EXPENSE OFF YEAR
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for bad debts:
Year ended December 31, 1999 $ 34 $97 $ (76) $55
========== ========= ========== ==========
Five months ended December 31, 1998 $ 14 $20 $ - $34
========== ========= ========== ==========
Period from inception (November 17, 1997)
to July 31, 1998 $ - $16 $ 2 $14
========== ========= ========== ==========
</TABLE>
F-19
<PAGE> 42
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(IN THOUSANDS)
----------------
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------------ -------------------- -------------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL(a)
- ----------- ------------ ---- ------------- ---- ------------- ---- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scottsdale
Galleria
Scottsdale, AZ $ (1) $ 1,756 $13,077 $ -- $ 161 $ 1,755 $13,238 $ 14,990
Scottsdale City
Centre
Scottsdale, AZ 2,119 2,760 5,126 -- 24 2,760 5,150 7,910
Scottsdale
Towers Land
Scottsdale, AZ (1) 3,971 -- -- -- 3,971 -- 3,971
Brio Restaurant
Scottsdale, AZ -- 563 1,046 -- -- 563 1,046 1,609
Grand Hotel
Tusayan, AZ (1)(2) -- 11,898 -- -- -- 11,698 11,898
Desert Fashion
Plaza
Palm Springs, CA (1) 3,816 9,772 -- 1,725 3,816 11,497 15,313
4-S Ranch Land
Rancho Bernardo, CA (1) 4,072 -- -- -- 4,072 0 4,072
Excel Centre
Rancho Bernardo,
CA(4) 6,353 1,812 9,307 -- -- 1,812 9,307 11,119
Land
Telluride, CO -- 752 -- -- -- 752 -- 752
Land
Yosemite, CA -- 600 -- -- -- 600 -- 600
Lowes Building
Terre Haute, IN 3,611 1,855 3,037 -- -- 1,855 3,037 4,692
Newport on the
Levee
Newport, KY(4) -- -- 16,225 -- -- -- 16,225 16,225
Lowe's Building
Middletown, OH 3,751 2,187 3,646 -- -- 2,187 3,646 5,633
Land
Farmington, UT(3) -- 2,956 0 -- -- 2,956 0 2,956
------- ------- ------- ---- ------ ------- ------- --------
$15,834 $27,099 $73,134 $ -- $1,910 $27,099 $75,044 $102,143
======= ======= ======= ==== ====== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST INCOME
ACCUMULATED DATE OF DATE STATEMENTS
DEPRECIATION(b) CONSTRUCTION ACQUIRED IS COMPUTED
--------------- ------------ -------- -----------------
<S> <C> <C> <C> <C>
Scottsdale
Galleria
Scottsdale, AZ $ 586 (3) 1998 40 years
Scottsdale City
Centre
Scottsdale, AZ 230 1982 1998 40 years
Scottsdale
Towers Land
Scottsdale, AZ -- -- 1998 --
Brio Restaurant
Scottsdale, AZ 47 1975 1998 40 years
Grand Hotel
Tusayan, AZ 744 1998 1998 40 years
Desert Fashion
Plaza
Palm Springs, CA 397 1967 1998 40 years
4-S Ranch Land
Rancho Bernardo, CA -- (3) 1998 --
Excel Centre
Rancho Bernardo,
CA(4) -- -- 1998 --
Land
Telluride, CO -- -- 1998 --
Land
Yosemite, CA -- -- 1998 --
Lowes Building
Terre Haute, IN 136 1993 1998 40 years
Newport on the
Levee
Newport, KY(4) -- 1993 1998 40 years
Lowe's Building
Middletown, OH 163 1993 1998 40 years
Land
Farmington, UT(3) -- 1993 1998 40 years
------
$2,303
======
</TABLE>
(1) These properties are collateralized by the Company $35 million credit
facility.
(2) This property is on a land lease with a cost of $2,351 which is not
included above.
(3) Property is currently being redeveloped or held for sale.
(4) Property is currently under construction.
F-20
<PAGE> 43
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(IN THOUSANDS)
----------------
[a] Reconciliation of total real estate carrying value is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED INCEPTION TO
DECEMBER 31, 1999 DECEMBER 31, 1998 JULY 31, 1998
----------------- ----------------- -------------
<S> <C> <C> <C>
Balance at the beginning of the period: $ 191,033 $ 174,344 $ -
Acquisitions: 2,956 15,200 173,209
Improvements and other additions: 25,409 1,489 1,135
Cost of property sold/contributed to partnerships: (117,255) - -
--------- --------- ---------
Balance at the end of the period: $ 102,143 $ 191,033 $ 174,344
========= ======== ========
Total cost for federal income tax purposes
at the end of each year $ 114,274 $ 207,421 $ 190,732
========= ========= ========
</TABLE>
[b] Reconciliation of accumulated depreciation is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED INCEPTION TO
DECEMBER 31, 1999 DECEMBER 31, 1998 JULY 31, 1998
----------------- ----------------- -------------
<S> <C> <C> <C>
Balance at the beginning of the period: $ 2,506 $ 939 $ -
Depreciation expense: 2,382 1,567 939
Property sold/contributed to partnerships: (2,585) - -
-------- ------- ------
Balance at the end of the period: $ 2,303 $ 2,506 $ 939
======== ====== ======
</TABLE>
F-21
<PAGE> 1
Exhibit 4.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B LIQUIDATING PREFERENCE CONVERTIBLE
PREFERRED STOCK DUE 2005
OF
EXCEL LEGACY CORPORATION
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
Excel Legacy Corporation, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated March 2. 1999, adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $.01 per share, which series shall be
designated as "Series B Liquidating Preference Convertible Preferred Stock due
2005" (the "Series B Preferred Stock"), shall consist of 25,000,000 shares and
shall have the following voting powers, preferences and relative, participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof as follows:
1. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
BUSINESS DAY. The term "Business Day" shall mean a day other than a
Saturday or Sunday or any federal holiday.
COMMON STOCK. The term "Common Stock" shall mean the common stock, par
value $.01 per share, of the Corporation.
CONVERSION RATE. The term "Conversion Rate" shall initially mean $5.00
and thereafter shall be subject to adjustment from time to time pursuant to the
terms of paragraph 4 below.
<PAGE> 2
DIVIDEND PAYMENT DATE. The term "Dividend Payment Date" shall have the
meaning set forth in subparagraph 2(a) below.
DIVIDEND PERIOD. The term "Dividend Period" shall mean the period from,
and including, the Initial Issue Date to, but not including, the first Dividend
Payment Date and thereafter, each quarterly period from, and including, the
Dividend Payment Date to, but not including the next Dividend Payment Date.
INITIAL ISSUE DATE. The term "Initial Issue Date" shall mean, with
respect to shares of Series B Preferred Stock, the earlier of (a) the date that
such shares were first issued by the Corporation or (b) if such shares were
issued in exchange for shares of Series A Liquidating Preference Convertible
Preferred Stock due 2005 of the Corporation (the "Series A Preferred Stock"),
the date that the exchanged shares of Series A Preferred Stock were first issued
by the Corporation.
JUNIOR STOCK. The term "Junior Stock" shall mean, for purposes of
paragraph 2 below, Common Stock and any class or series of stock of the
Corporation authorized after the Initial Issue Date which is not entitled to
receive any dividends in any Dividend Period unless all dividends required to
have been paid or declared and set apart for payment on the Series B Preferred
Stock shall have been so paid or declared and set apart for payment, and for
purposes of paragraph 3 below, shall mean Common Stock and any class or series
of stock of the Corporation authorized after the Initial Issue Date which is not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of the Corporation until the Series B Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
LIQUIDATION PREFERENCE. With respect to each share of Series B Preferred
Stock, the term "Liquidation Preference" shall mean $5.00 per share, plus a
premium in an amount equal to a seven percent (7%) annual total return on a
share of Series B Preferred Stock from the Initial Issue Date until the date
such Liquidation Preference is paid by the Corporation.
PARITY STOCK. The term "Parity Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive payment of dividends
on a parity with the Series B Preferred Stock, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive assets upon
liquidation, dissolution or winding up of the affairs of the Corporation on a
parity with the Series B Preferred Stock.
QUOTED PRICE. The term "Quoted Price" with respect to either the Common
Stock or Series B Preferred Stock, shall mean the average of the closing bid and
ask prices of the applicable security as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System (Nasdaq), or, if the
applicable security is listed or admitted for trading on a securities exchange,
the average of the closing bid and ask prices of the applicable security on the
principal exchange on which the applicable security is listed or admitted for
trading (which shall be for consolidated trading if applicable to such
exchange), or if neither so reported or listed or admitted for trading, the
average of the closing bid and ask prices of the applicable security in the
over-the-counter market. In the event that the Quoted Price cannot be determined
as aforesaid, the Board of Directors of the Corporation shall determine the
Quoted Price on the basis of such quotations as it in good faith considers
appropriate.
RECORD DATE. The term "Record Date" shall mean the date designated by
the Board of Directors of the Corporation at the time a dividend is declared;
provided, however, that such Record Date shall not be more than thirty (30) days
nor less than ten (10) days prior to the respective Dividend Payment Date or
such other date designated by the Board of Directors for the payment of
dividends.
2
<PAGE> 3
REDEMPTION DATE. The term "Redemption Date" shall have the meaning set
forth in subparagraph 5(a) below.
SENIOR STOCK. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series B Preferred Stock in
respect of the right to receive dividends, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series B Preferred Stock in
respect of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of the Corporation.
STATED VALUE. The term "Stated Value" shall have the meaning set forth
in subparagraph 4(a) below.
TRADING DAY. The term "Trading Day" with respect to either the Common
Stock or Series B Preferred Stock, shall mean any day on which any market in
which the applicable security is then traded and in which a Quoted Price may be
ascertained is open for business.
2. DIVIDENDS.
(a) Holders of shares of Series B Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the payment of dividends, cumulative quarterly cash dividends
equal to the per share Common Stock Dividend Amount, payable in arrears on
January 15, April 15, July 15 and October 15 of each year, commencing on the
first such day after the Initial Issue Date (each a "Dividend Payment Date").
The "Common Stock Dividend Amount" applicable as of any Dividend Payment Date
shall mean the amount which is the product of (i) the dollar amount of the
dividend paid per share of Common Stock on the dividend payment date with
respect to the shares of Common Stock (other than a distribution payable solely
in shares of Common Stock) which occurs on such Dividend Payment Date or, if no
such dividend payment date occurs on such Dividend Payment Date, the dividend
payment date with respect to the shares of Common Stock next preceding such
Dividend Payment Date, and (ii) the number of shares of Common Stock into which
each share of Series B Preferred Stock is entitled to be converted, at the
Conversion Price then in effect and otherwise as set forth in this Certificate
of Designation, as of the Record Date established for such Dividend Payment Date
(determined, for purposes of this computation, to the fourth decimal place). The
dividend payable to a holder of a share of Series B Preferred Stock on the first
Dividend Payment Date after the share is issued will be the accrued dividend
calculated from the day the share is issued to such Dividend Payment Date. If
any Dividend Payment Date is not a Business Day, the dividend due on that
Dividend Payment Date will be paid on the Business Day immediately succeeding
that Dividend Payment Date. Each Dividend Payment Date will be on a date which
is the date fixed for payment of dividends with respect to the shares of Common
Stock or is not more than five Business Days after the date fixed for payment of
dividends with respect to the shares of Common Stock.
(b) Each dividend will be payable to holders of record of the Series B
Preferred Stock on the Record Date selected by the Board of Directors with
respect to the relevant Dividend Payment Date. Dividends shall be paid to the
holders of record of the Series B Preferred Stock as their names shall appear on
the share register of the Corporation on the Record Date for such dividend.
Dividends payable in any Dividend Period which is less than a full Dividend
Period in length will be computed on the basis of a ninety (90) day quarterly
period and actual days elapsed in such Dividend Period. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time to
holders of record on the Record Date therefor.
(c) So long as any shares of Series B Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever,
3
<PAGE> 4
whether in cash, property or otherwise (other than dividends payable in shares
of the class or series upon which such dividends are declared or paid, or
payable in shares of Common Stock with respect to Junior Stock other than Common
Stock, together with cash in lieu of fractional shares), nor shall the
Corporation make any distribution on any Junior Stock, nor shall any Junior
Stock be purchased, redeemed or otherwise acquired by the Corporation or any of
its subsidiaries of which it owns not less than a majority of the outstanding
voting power, nor shall any monies be paid or made available for a sinking fund
for the purchase or redemption of any Junior Stock, unless all dividends to
which the holders of Series B Preferred Stock shall have been entitled for all
previous Dividend Periods shall have been paid or declared and a sum of money
sufficient for the payment thereof has been set apart.
(d) In the event that full dividends are not paid or made available to
the holders of all outstanding shares of Series B Preferred Stock and of any
Parity Stock and funds available for payment of dividends shall be insufficient
to permit payment in full to holders of all such stock of the full preferential
amounts to which they are then entitled, then the entire amount available for
payment of dividends shall be distributed ratably among all such holders of
Series B Preferred Stock and of any Parity Stock in proportion to the full
amount to which they would otherwise be respectively entitled.
(e) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series B Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation if such declaration or payment shall be restricted or prohibited by
law.
(f) Any dividend paid with regard to shares of Series B Preferred Stock
will be paid equally with regard to each outstanding share of Series B Preferred
Stock, except to the extent that shares of Series B Preferred Stock are
outstanding for differing amounts of time during the relevant dividend period.
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, subject to
the prior preferences and other rights of any Senior Stock as to liquidation
preferences, but before any payment or distribution shall be made to the holders
of Junior Stock, the holders of Series B Preferred Stock shall be entitled to be
paid out of the assets of the Corporation in cash or property at its fair market
value as determined by the Board of Directors of the Corporation the Liquidation
Preference per share plus an amount equal to all dividends accrued and unpaid
thereon to the date of such liquidation or dissolution or such other winding up.
Except as provided in this paragraph, holders of Series B Preferred Stock shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(b) If, upon any such liquidation, dissolution or other winding up of
the affairs of the Corporation the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the Series B
Preferred Stock and the full liquidating payments on all Parity Stock, then the
assets of the Corporation remaining after the distributions to holders of any
Senior Stock of the full amounts to which they may be entitled shall be ratably
distributed among the holders of Series B Preferred Stock and of any Parity
Stock in proportion to the full amounts to which they would otherwise be
respectively entitled if all amounts thereon were paid in full.
(c) A sale, conveyance or disposition of all or substantially all of the
assets of the Corporation shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this paragraph 3.
4
<PAGE> 5
4. CONVERSION RIGHTS.
(a) (i) A holder of shares of Series B Preferred Stock may convert such
shares into Common Stock at any time in whole or from time to time in part
before such shares are redeemed by giving notice to such effect (a "Notice of
Election to Convert") to the Corporation. For the purposes of conversion, each
share of Series B Preferred Stock shall be valued at $5.00 per share (the
"Stated Value"), which shall be divided by the Conversion Rate in effect on the
Conversion Date to determine the number of shares issuable upon conversion.
Immediately following such conversion, the rights of the holders of converted
Series B Preferred Stock shall cease and the persons entitled to receive the
Common Stock upon the conversion of Series B Preferred Stock shall be treated
for all purposes as having become the owners of such Common Stock.
(ii) To convert Series B Preferred Stock, a holder must (A) surrender
the certificate or certificates evidencing the shares of Series B Preferred
Stock to be converted, duly endorsed in a form satisfactory to the Corporation,
at the office of the Corporation or transfer agent for the Series B Preferred
Stock, (B) provide a Notice of Election to Convert to the Corporation at such
office and include therein the number of shares such holder wishes to convert,
(C) state in writing the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued, and (D) pay
any transfer or similar tax if required. In the event that a holder fails to
notify the Corporation of the number of shares of Series B Preferred Stock which
such holder wishes to convert in the Notice of Election to Convert delivered to
the Corporation, such holder shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion.
(b) (i) At the option of the Corporation, the Corporation may convert
outstanding shares of Series B Preferred Stock into Common Stock at any time in
whole or from time to time in part after the earlier to occur of the following
dates: (A) the date which is six (6) months following the date on which the
Common Stock becomes listed or admitted for trading on a national securities
exchange (including the New York Stock Exchange, American Stock Exchange or
Nasdaq), or (B) March 31, 2000. The number of shares of Common Stock issuable
upon conversion shall equal the product of (1) the number of shares of Series B
Preferred Stock to be converted, multiplied by (2) the Stated Value divided by
the Conversion Rate then in effect. Immediately following such conversion, the
rights of the holders of converted Series B Preferred Stock shall cease and the
persons entitled to receive the Common Stock upon the conversion of Series B
Preferred Stock shall be treated for all purposes as having become the owners of
such Common Stock.
(ii) In order to elect to effect the mandatory conversion of Series B
Preferred Stock, the Corporation shall issue a notice as to the date of the
intended conversion and number of shares of Series B Preferred Stock which are
to be converted into shares of Common Stock (the "Notice of Mandatory
Conversion") to all holders of outstanding shares of Series B Preferred Stock on
a date (the "Mandatory Conversion Notice Date") at least ten (10) days prior to
the conversion date specified in the Notice of Mandatory Conversion (the
"Mandatory Conversion Date"), which Notice of Mandatory Conversion specifies a
record date (the "Mandatory Conversion Record Date") selected by the Board of
Directors in accordance with applicable law. If the Corporation gives a Notice
of Mandatory Conversion, then, provided that the computation set forth in the
Notice of Mandatory Conversion is not clearly erroneous, the number of the
outstanding shares of Series B Preferred Stock which are the subject of such
Notice of Mandatory Conversion will be automatically converted into shares of
Common Stock at the close of business on the Mandatory Conversion Date
regardless of whether the holders of such shares of Series B
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<PAGE> 6
Preferred Stock actually surrender the certificates representing their shares of
Series B Preferred Stock for conversion. At the close of business on the
Mandatory Conversion Date, (A) the certificates representing the shares of
Series B Preferred Stock will cease to represent anything other than the shares
of Common Stock into which the shares of Series B Preferred Stock were
automatically converted and (B) the Corporation shall, at its option (the
exercise of which will be described in the Notice of Mandatory Conversion),
either (1) deliver certificates representing the shares of Common Stock to which
the holders of the Series B Preferred Stock are entitled without requiring the
surrender of the certificates which formerly represented shares of Series B
Preferred Stock, or (2) deliver certificates representing the shares of Common
Stock to which the holders of Series B Preferred Stock are entitled when the
holder surrenders the certificates representing Series B Preferred Stock issued
before the Mandatory Conversion Date and complies with the other requirements of
subparagraph 4(a)(ii) (excluding the completion of the Notice of Election to
Convert).
(c) The effective time of the conversion under subparagraph 4(a) shall
be immediately prior to the close of business on the day when all the conditions
in subparagraph 4(a)(ii) have been satisfied. The effective time of the
conversion under subparagraph 4(b) shall be the close of business on the
Mandatory Conversion Date. Except as otherwise permitted in clause (ii)(B) of
the last sentence of subparagraph 4(b), as soon as practical after the effective
time for conversion of shares of Series B Preferred Stock, the Corporation shall
deliver through the transfer agent a certificate for the number of full shares
of Common Stock issuable upon the conversion, a check for any fractional share
and a new certificate representing the unconverted portion, if any, of the
shares of Series B Preferred Stock represented by the certificate or
certificates surrendered for conversion. Except in the case of a conversion
pursuant to subparagraph 4(b) above, no payment or adjustment will be made for
accrued and unpaid dividends on converted shares of Series B Preferred Stock or
dividends on any Common Stock issued. However, dividends will be paid on any
Dividend Payment Date with respect to Series B Preferred Stock surrendered for
conversion after a record date for the payment of a dividend to the registered
holder of Series B Preferred Stock on such record date. If a holder of Series B
Preferred Stock converts more than one share at a time the number of full shares
of Common Stock issuable upon conversion shall be based on the total value of
all shares of Series B Preferred Stock converted. If the last day on which
Series B Preferred Stock may be converted is not a Business Day in a place where
the Corporation or the transfer agent is located, Series B Preferred Stock may
be surrendered for conversion on the next succeeding day that is a Business Day.
Each conversion will be deemed to have been effected at the effective time
provided above, and the person in whose name a certificate for shares of Common
Stock is to be issued upon a conversion will be deemed to have become the holder
of record of the shares of Common Stock represented by that certificate at such
effective time.
(d) The Corporation will not issue a fractional share of Common Stock
upon conversion of Series B Preferred Stock. Instead the Corporation will
deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: Multiply
the current market price of a full share by the fraction. Round the result to
the nearest cent. The current market price of a share of Common Stock is the
Quoted Price of the Common Stock on the last Trading Day prior to the date of
conversion.
(e) If a holder converts shares of Series B Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
holder shall pay any such tax which is due because the shares are issued in name
other than the holder's name.
(f) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Series B Preferred
Stock in full. All shares of Common Stock which may be
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<PAGE> 7
issued upon conversion of Series B Preferred Stock shall be fully paid and
nonassessable. The Corporation will use its best efforts to comply with all
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Series B Preferred Stock and will use its best efforts to list
such shares on each national securities exchange on which the Common Stock is
listed.
(g) If the Corporation:
(i) pays a dividend or makes a distribution on any shares of its
capital stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that the holder of Series B Preferred Stock thereafter converted may
receive the number of shares of capital stock of the Corporation which he would
have owned immediately following such action if he had converted Series B
Preferred Stock immediately prior to such action. The adjustment shall become
effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred to
in clauses (i) through (iv) above, a holder of Series B Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
the Corporation, the Corporation shall determine the allocation of the adjusted
Conversion Rate between the classes of capital stock. After such allocation, the
Conversion Rate of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
subparagraph (g).
(h) If the Corporation distributes any rights or warrants to all holders
of its Common Stock entitling them for a period expiring within sixty (60) days
after the record date mentioned below to purchase shares of Common Stock at a
price per share less than the current market price per share on that record
date, the Conversion Rate shall be adjusted in accordance with the following
formula:
N X P
-------
O + M
-------
C'= C x O + N
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
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<PAGE> 8
P = the offering price per share of the additional shares of
Common Stock.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such rights or warrants
are issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants. If at
the end of the period during which such warrants or rights are exercisable, not
all warrants or rights shall have been exercised, the Conversion Rate shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
(i) If the Corporation distributes to all holders of shares of its
Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Stock, (ii) any evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) any other assets of the
Corporation, or (iv) any rights, options or warrants to acquire any of the
foregoing (other than rights, options or warrants referred to in subparagraph
4(h) above), which shares, evidences of indebtedness, other assets or rights,
options or warrants have an aggregate fair market value on the date of such
distribution in excess of the permitted dividend amount (as defined below), the
Conversion Rate shall be adjusted in accordance with the following formula:
M - F
-----
C'= C x M
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
M = the current market price per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the capital
stock, indebtedness, rights, options or warrants
applicable to one share of Common Stock. The Board of
Directors of the Corporation shall determine the fair
market value.
The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. The
permitted dividend amount on any date shall be an amount equal to or less than
(x) five percent (5%) of the product of the current market price of the Common
Stock on the date of declaration by the Board of Directors of the Corporation of
such dividend or distribution times the number of shares of Common Stock
outstanding on such date, minus (y) the aggregate of the value of all dividends
or distributions (other than dividends or distributions referred to in
subparagraphs 4(g) and 4(h) above) paid to holders of Common Stock during the
twelve-month period ending on such date. Notwithstanding the foregoing, the
permitted dividend amount shall be zero with respect to any dividends or
distributions not paid out of consolidated current earnings as shown on the
books of the Corporation.
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<PAGE> 9
(j) If the Corporation issues shares of Common Stock for a consideration
per share less than the current market price per share on the date the
Corporation fixes the offering price of such additional shares, the Conversion
Rate shall be adjusted in accordance with the following formula:
O + P
---
M
-----
C'= C x A
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share on the date of
issuance of such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. This subparagraph
4(j) does not apply to (i) any transaction or issuance described in subparagraph
4(h) or 4(i) above or subparagraph 4(k) below, (ii) the conversion of Series B
Preferred Stock, or the conversion, exchange or exercise of other securities
convertible into or exchangeable or exercisable for Common Stock, (iii) Common
Stock issued to the Corporation's employees under bona fide employee benefit
plans adopted by the Board of Directors of the Corporation and approved by the
holders of Common Stock when required by law, if such Common Stock would
otherwise by covered by this subparagraph 4(j), (iv) Common Stock issued to
acquire, or in the acquisition of, all or any portion of a business as a going
concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, or (v)
Common Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting.
(k) If the Corporation issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (other than
Series B Preferred Stock or securities issued in transactions described in
subparagraph 4(h) or 4(i) above) and for a consideration per share of Common
Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the current market price per share on the date of issuance
of such securities, the Conversion Rate shall be adjusted in accordance with the
following formula:
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<PAGE> 10
O + P
---
M
-----
C'= C x O + D
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the current market price per share on the date of
issuance of such securities.
D = the maximum number of shares deliverable upon conversion
or in exchange for or upon exercise of such securities at
the initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the Common
Stock deliverable upon conversion, exchange or exercise of such securities has
not been issued when such securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the Conversion Rate which would
then be in effect had the adjustment upon the issuance of such securities been
made on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such securities. This subparagraph 4(k) does
not apply to (i) the issuance of any such securities to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's-length transaction between the Corporation and an unaffiliated third
party, whether such acquisition shall be effected by purchase of assets,
exchange of securities, merger, consolidation or otherwise, (ii) the issuance of
any such securities in a bona fide public offering pursuant to a firm commitment
underwriting, or (iii) the issuance of any such securities to the Corporation's
employees under bona fide employee benefit plans adopted by the Board of
Directors of the Corporation and approved by the holders of Common Stock when
required by law, if such securities would otherwise by covered by this
subparagraph 4(k).
(l) In subparagraphs 4(h), 4(i), 4(j) and 4(k) above, the current market
price per share of Common Stock on any date is the average of the Quoted Prices
for thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days
before the date in question.
(m) For purposes of any computation respecting consideration received
pursuant to subparagraphs 4(j) and 4(k) above, the following shall apply:
(i) in case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue
or otherwise in connection therewith;
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<PAGE> 11
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors of the Corporation (irrespective of
the accounting treatment thereof); and
(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares,
the aggregate consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such
options, warrants or other securities plus the additional minimum
consideration, if any, to be received by the Corporation upon the
conversion or exchange or exercise thereof (the consideration in each
case to be determined in the same manner as provided in clauses (i) and
(ii) of this subparagraph 4(m)).
(n) No adjustment in the Conversion Rate need be made unless the
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Rate. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
paragraph 4 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
(o) No adjustment in the Conversion Rate need be made under this
paragraph 4 for (i) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, or (ii) any change in the par
value or no par value of the Common Stock, and in no event shall any adjustment
made under this paragraph 4 reduce the Conversion Rate below the par value of
the Common Stock. If an adjustment is made to the Conversion Rate upon the
establishment of a record date for a distribution subject to subparagraphs 4(h)
or 4(i) above and if such distribution is subsequently canceled, the Conversion
Rate then in effect shall be readjusted, effective as of the date when the Board
of Directors of the Corporation determines to cancel such distribution, to the
Conversion Rate which would have been in effect if such record date had not been
fixed. No adjustment in the Conversion Rate need be made under subparagraphs
4(h) and 4(i) above if the Corporation issues or distributes to each holder of
Series B Preferred Stock the shares of Common Stock, evidences of indebtedness,
assets, rights, options or warrants referred to in those subparagraphs which
each holder would have been entitled to receive had Series B Preferred Stock
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(p) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to holders of Series B Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for Series B Preferred Stock a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 4(u)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(q) The Corporation from time to time may reduce the Conversion Rate by
any amount for any period of time if the period is at least twenty (20) Business
Days and if the reduction is irrevocable during the period, but in no event may
the Conversion Rate be less than the par value of a share of Common Stock.
Whenever the Conversion Rate is reduced, the Corporation shall mail to holders
of Series B Preferred Stock a notice of the reduction. The Corporation shall
mail, first class, postage prepaid, the notice at least 15 days before the date
the reduced conversion price takes effect. The notice shall state the reduced
conversion price and the period it will be in effect. A reduction of the
Conversion Rate does not change or adjust the Conversion Rate otherwise in
effect for purposes of subparagraphs 4(g), 4(h), 4(i), 4(j) and 4(k) above.
(r) If:
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<PAGE> 12
(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate pursuant to subparagraph 4(h) or 4(i)
above, or clause (iv) of subparagraph 4(g) above;
(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the Corporation;
a holder of Series B Preferred Stock may want to convert such stock into
shares of Common Stock prior to the record date for or the effective
date of the transaction so that he may receive the rights, warrants,
securities or assets which a holder of shares of Common Stock on that
date may receive. Therefore, the Corporation shall mail to such holders,
first class, postage prepaid, a notice stating the proposed record or
effective date, as the case may be. The Corporation shall mail the
notice at least ten (10) days before such date. Failure to mail the
notice or any defect in it shall not affect the validity of any
transaction referred to in clause (i), (ii) or (iii) of this
subparagraph 4(r). If a conversion of any shares of Series B Preferred
Stock is to be made in connection with any transaction referred to in
clause (i), (ii) or (iii) of this subparagraph 4(r), such conversion may
at the election of the holder be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to
be effective until immediately prior to the consummation of such
transaction.
(s) If the Corporation is party to a consolidation, merger, transfer or
lease which reclassifies or changes its Common Stock, upon consummation of such
transaction Series B Preferred Stock shall automatically become convertible into
the kind and amount of securities, cash or other assets which the holder of
Series B Preferred Stock would have owned immediately after the consolidation,
merger, transfer or lease if such holder had converted Series B Preferred Stock
immediately before the effective date of the transaction, appropriate adjustment
(as determined by the Board of Directors of the Corporation) shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of Series B Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustment of the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the conversion of
Series B Preferred Stock. If this subparagraph 4(s) applies, subparagraph 4(g)
does not apply.
(t) In any case in which this paragraph 4 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Series B Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Rate in effect immediately
prior to adjustment and (ii) a check for any remaining fractional shares of
Common Stock as provided in subparagraph 4(d) above.
(u) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this paragraph 4 shall be conclusive. Whenever the Corporation or its Board
of Directors shall be required to make a determination under this paragraph 4,
such determination shall be made in good faith and may be challenged in good
faith by a majority of the holders of Series B Preferred Stock, and any dispute
shall be resolved, at the Corporation's expense, by an investment banking firm
of recognized national standing selected by the Corporation and acceptable to
such holders of Series B Preferred Stock.
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<PAGE> 13
(v) All shares of Series B Preferred Stock converted pursuant to this
paragraph 4 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock.
5. REDEMPTION BY THE CORPORATION.
(a) On March 31, 2005 (the "Redemption Date"), the Corporation shall be
required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Series B Preferred Stock at a price in cash equal to the
Stated Value, plus accumulated and unpaid dividends, if any, to the date of
redemption (such amount, the "Redemption Price"). The Series B Preferred Stock
may not be redeemed at the option of the Corporation on or prior to the
Redemption Date. The Corporation shall take all actions required or permitted
under the General Corporation Law of the State of Delaware to permit such
redemption.
(b) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to the Redemption Date, by first class mail, postage prepaid, to all holders of
record of the Series B Preferred Stock at their respective last addresses as
they shall appear on the books of the Corporation; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Series B Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the holder to whom notice was defective.
In addition to any information required by law or by the applicable rules of any
exchange upon which Series B Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) the Redemption Date; (ii) the Redemption
Price; (iii) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; (iv) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date; (v) the
Conversion Rate; (vi) that Series B Preferred Stock called for redemption may be
converted at any time before the close of business on the Redemption Date; and
(vii) that holders of Series B Preferred Stock must satisfy the requirements of
subparagraph 4(a) above if such holders desire to convert such shares.
(c) If notice has been mailed in accordance with subparagraph 5(b) above
and provided that on or before the Redemption Date specified in such notice, all
funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Series B Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Series B Preferred Stock,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the Redemption Price) shall cease.
Upon surrender, in accordance with said notice, of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price.
(d) Any funds deposited with a bank or trust company for the purpose of
redeeming Series B Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such bank
or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series B Preferred Stock entitled
thereto at the expiration of two (2) years from the applicable
Redemption Date shall be repaid, together with any interest or other
earnings
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<PAGE> 14
earned thereon, to the Corporation, and after any such repayment, the
holders of the shares entitled to the funds so repaid to the Corporation
shall look only to the Corporation for payment without interest or other
earnings.
(e) No Series B Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.
(f) All shares of Series B Preferred Stock redeemed pursuant to this
paragraph 5 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
shares of Series B Preferred Stock.
6. VOTING RIGHTS.
(a) The holders of shares of Series B Preferred Stock will have the
right to vote on all matters on which the holders of shares of the Common Stock
are entitled to vote, or give written consent in lieu of a vote, on an "as
converted" basis with holders of shares of the Common Stock, as though part of
the same class as holders of Common Stock. Each person in whose name shares of
Series B Preferred Stock shall be registered on the record date for determining
the holders of the Series B Preferred Stock entitled to vote at any meeting of
stockholders (or adjournment thereof) or to consent to corporate action in
writing without a meeting shall be entitled to, at such meeting or with respect
to such action, one vote for each share of Common Stock of the Corporation into
which each share of Series B Preferred Stock registered in the name of such
person on such record date could be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share) on such record date. The holders of shares of Series B Preferred Stock
shall receive all notices of meetings of the holders of shares of Common Stock,
and all other notices and correspondence to the holders of shares of Common
Stock provided by the Corporation, and shall be entitled to take such actions,
and shall have such rights, as are set forth in this Certificate of Designation
or are otherwise available to the holders of shares of Common Stock in the
Certificate of Incorporation and in the Bylaws of the Corporation as are in
effect on the date hereof, in each case with the same effect as would be taken
by holders of Series B Preferred Stock if deemed to be holders of such number of
shares of Common Stock as determined aforesaid. The foregoing shall apply
whether or not such holder actually converts such securities.
(b) In addition to any vote or consent of stockholders required by law
or the Certificate of Incorporation, the consent of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the shares of Series B Preferred
Stock at the time outstanding, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the provisions
of the Certificate of Incorporation, or of the by-laws of the
Corporation, which affects adversely the voting powers, preferences and
relative, participating, optional and other special rights of the
holders of shares of Series B Preferred Stock; provided, however, that
the amendment of the provisions of the Certificate of Incorporation so
as to authorize or create, or to increase the authorized amount of, or
to issue any class or any security convertible into any shares ranking
on a parity with or junior to the Series B Preferred Stock in the
distribution of assets on any liquidation, dissolution, or winding up of
the Corporation or in the payment of dividends, shall not be deemed to
affect adversely the voting powers, preferences and relative,
participating, optional and other special rights of the holders of
shares of Series B Preferred Stock; or
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<PAGE> 15
(ii) Any authorization or creation of, or increase in the
authorized amount of, or issuance of, any shares of any class or any
security convertible into shares of any class ranking senior to shares
of Series B Preferred Stock in the distribution of assets on any
liquidation, dissolution, or winding up of the Corporation or in the
payment of dividends or otherwise.
7. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series B
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation.
8. HEADINGS OF SUBDIVISIONS.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
9. SEVERABILITY OF PROVISIONS.
If any voting powers, preferences and relative, participating, optional
and other special rights of the Series B Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this resolution (as such
resolution may be amended from time to time) is invalid, unlawful or incapable
of being enforced by reason of any rule of law or public policy, all other
voting powers, preferences and relative, participating, optional and other
special rights of Series B Preferred Stock and qualifications, limitations and
restrictions thereof set forth in this resolution (as so amended) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series B Preferred Stock and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of Series B Preferred Stock and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Series B Preferred Stock and qualifications, limitations and
restrictions thereof unless so expressed herein.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Gary B. Sabin, its President and Chief Executive Officer, and
attested by Richard B. Muir, its Secretary, this 4th day of March, 1999.
EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
--------------------------------------
Gary B. Sabin, President and
Chief Executive Officer
ATTEST:
By: /s/ Richard B. Muir
-----------------------------------
Richard B. Muir, Secretary
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Exhibit 10.19
EMPLOYMENT CONTRACT
EXCEL LEGACY CORPORATION
A Delaware Corporation
THIS EMPLOYMENT CONTRACT, is executed on May 1, 1998, by and between,
EXCEL LEGACY CORPORATION, a Delaware corporation (the "Company"), and KELLY D.
BURT ("Employee").
1. EMPLOYMENT
The Company hereby employs Employee and Employee hereby accepts
employment upon the terms and conditions hereinafter set forth.
2. TERM AND RENEWAL
2.1 Term. The term of this Contract shall be deemed to have commenced on
May 1, 1998 (the "Effective Date"); and shall continue for three (3) years from
the Effective Date on the terms and conditions set forth herein, unless sooner
terminated as hereinafter provided in Article 5 below.
2.2 Automatic Extension. Following the initial 3-year term of
employment, this Contract shall be automatically renewed for an additional
12-month period, effective on the expiration of the initial 3-year term, in
accordance with this section. In the event either the Company or Employee does
not give notice to the other party of its election to terminate this Contract at
least six months prior to the date of termination of the initial 3-year term,
this Contract shall be automatically renewed for an additional 12-month term.
3. COMPENSATION
3.1 Base Compensation. For the services to be rendered by Employee under
this Contract, Employee shall be entitled to receive, commencing as of May 1,
1998, an initial annual base compensation of $150,000, payable monthly. This
base compensation shall be reviewed and adjusted annually as determined by the
compensation committee of the Board of Directors, but in no event will the
annual base compensation be less than the initial amount set forth above.
3.2 Options. The Company shall, as of April 20, 1998, issue to Employee
Incentive Stock Options (the "Executive Options") to purchase 150,000 shares of
the Company's no par value common stock at an exercise price of $5.00 per share
or the closing price of the stock on April 20, 1998, whichever is greater.
Employee shall also be issued an option of 150,000 shares at an exercise price
of $10.00 per share. The options shall vest over five (5) years at twenty
percent (20%) per year. The Executive Options for the purchase of 20% of said
shares shall be exercisable on the first anniversary date of the Effective Date.
The Executive Options shall terminate on the ninth anniversary date of the first
date on which they may first be exercised.
3.3 Automobile. Commencing on May 1, 1998 and continuing during the term
of this Agreement, the Company shall pay Employee an automobile allowance of
$500 per month. Employee may apply such payments in such manner as he, in his
sole discretion, may determine.
3.4 Insurance Benefits.
(a) The Company shall provide to Employee, his wife and children,
at its sole cost, such health, dental and optical insurance as the Company may
from time to time make available to its other executive employees. The Company
shall also continue annual payments on Employee's life insurance up to $4,160
until such time as the life insurance policy self-funds.
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(b) The Company shall provide Employee such disability insurance as
the Company in its sole discretion may from time to time make available to its
other executive employees.
3.5 Bonus Compensation. At least annually, the Company's compensation
committee of the Board of Directors (the "Board") shall review Employee's
performance and may elect, in its sole and absolute discretion, the granting of
a cash bonus which the Board shall reasonably determine as fairly compensating
and awarding Employee for his service to the Company and/or as incentive
compensation for continued service to the Company. The amount of such cash bonus
is dependent on the achievement of certain performance levels of the Company,
including per share growth in funds from operations and cash flow. Additionally,
the Board shall consider the performance of other companies of similar size and
conducting similar businesses to that of the Company, levels of compensation
paid by such similar companies to their employees having comparable duties and
responsibilities to those of Employee and such other factors as the Board may
reasonably determine. The amount of such bonus shall be limited to 100% of
Employees base salary for the year awarded.
3.6 Method of Payment. The monetary compensation payable to Employee
hereunder may be paid in whole or in part, from time to time, by the Company
and/or its subsidiaries and/or its Affiliates, but shall at all times remain the
responsibility of the Company.
3.7 401(k) Plan. Employee shall be entitled to participate in a 401(k)
program. However, at the discretion of the Company, Employee shall be entitled
to continue with TenantFirst's 401(k) plan or participate in the Company's
401(k) Plan in the same manner as the Company's other senior executives.
4. DUTIES
4.1 Service. Employee shall serve as Executive Vice
President/Development of the Company. Employee shall also serve as President and
Chief Executive Officer of TenantFirst Real Estate Services, Inc. Employee shall
have authority, subject to confirmation and approval of the Executive Committee,
to execute contracts or otherwise bind the Company in any transaction, and
authorize, initiate and execute wire transfers of funds to facilitate any and
all acquisitions or dispositions of property or any other activities related
thereto. Employee shall serve as a director to the Company and/or such of its
Subsidiaries. Employee may, at his discretion and upon request of the Company,
serve the Company in other offices and capacities in addition to the foregoing,
but shall not be required to do so. In the event the Company and Employee
voluntarily agree that Employee shall terminate his service in any one or more
of the aforementioned capacities, or Employee's service in one or more of the
aforementioned capacities is terminated, Employee's compensation, as specified
in this Contract, shall not be diminished or reduced in any manner.
Any change of Employee's status as an officer of the Company as herein
provided or any material decrease in Employee's authority or responsibilities
hereunder, without Employee's written consent shall, at Employee's election,
constitute a material breach of this Contract and immediate termination without
cause of Employee's employment hereunder.
4.2 Devotion Of Time and Effort. Employee shall use his good faith best
efforts and judgement in performing his duties as required hereunder and to act
in the best interests of the Company. Employee shall devote such time, attention
and energies to the business of the Company as are reasonably necessary to
satisfy Employee's required responsibilities and duties hereunder.
4.3 Other Activities. Employee may engage in other activities for his
own account during the term of this Contract including charitable activities,
community activities and/or other activities, subject to Section 7, below.
4.4 Vacation. It is understood and agreed that Employee shall be
entitled to three (3) weeks vacation per year. During such vacation periods,
Employee shall not be relieved of his duties under this Contract and there will
be no abatement or reduction of Employee's compensation hereunder.
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4.5 The Company's Obligations. The Company shall provide Employee with
any and all necessary or appropriate current financial information and access to
current information and records regarding all material transactions involving
the Company and/or its Subsidiaries or Affiliates, including but not limited to
acquisition of assets, personnel contracts, dispositions of assets, service
agreements and registration statements or other state or federal filings or
disclosures to carry out his duties and responsibilities hereunder. In addition,
the Company agrees to provide Employee, as a condition to his services
hereunder, such staff, equipment and office space as is reasonably necessary for
Employee to perform his duties hereunder.
5. TERMINATION.
5.1 By Company Without Cause. The Company may terminate this Contract,
without cause provided that the Company first delivers to Employee the Company's
written election to terminate this Contract at least 90 days prior to the
effective date of termination.
5.2 Severance Payment
(a) Amount. In the event the Company terminates Employee's services
hereunder pursuant to Section 5.1, Employee shall continue to render services
pursuant hereto until the date of termination and shall continue to receive
compensation, as provided hereunder, through the termination date. In addition
to other compensation payable to Employee for services through the termination
date, the Company shall pay Employee, as a single severance payment an amount
equal to one and one-half (1 1/2) times Employee's highest compensation paid
hereunder for any Employment Year, or if greater, that remainder which is
payable under Section 2.1. In addition to other compensation payable to Employee
for services, the Company shall pay Employee a car allowance ($500/month) and
medical benefits under Section 3.4 for a period of twelve (12) months following
termination.
(b) Limitation. The foregoing notwithstanding, the total of such
severance payments shall be reduced to the extent the payment of such amount
would cause Employee's total termination benefits (as determined by Employee's
tax advisor) to constitute an "excess" parachute payment under Section 280G of
the Internal Revenue Code of 1986 (the "Code") and by reason of such excess
parachute payment Employee would be subject to an excise tax under Section
4999(a) of the Code, but only if Employee determines that the after-tax value of
the termination benefits calculated with the foregoing restriction exceed those
calculated without the foregoing restriction.
5.3 By The Company For Cause. The Company may terminate Employee for
cause at any time, upon written notice. For the purposes hereof, "cause" shall
mean:
(a) Employee's conviction of a felony; or
(b) Employee's conviction for the crime of theft, embezzlement or
misappropriation against the Company; or
(c) The final determination by a court of competent jurisdiction or
by the board of directors that Employee has materially breached Sections 4, 6 or
7 of this Contract, if such breach is incurable; or, if curable, a determination
that Employee had been given reasonable opportunity to cure and had not done so;
or
(d) Employee's death or permanent disability.
In the event Employee is terminated for cause pursuant to this Section
5.3, Employee shall have the right to receive his compensation as otherwise
provided under this Contract through the effective date of termination. Employee
shall have no further right to receive compensation or other consideration from
the
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the Company, or have any other remedy whatsoever against the Company as a result
of this Contract or the termination thereof.
The foregoing notwithstanding, in the event Employee is terminated by
reason of his permanent disability (but not death) the Company shall immediately
pay Employee a single severance payment equal to one-half (1/2) of the
compensation paid Employee during any Employment Year or, if greater, that which
is payable for the Employment Year in which this Contract is terminated. Said
payment shall be in addition to any disability insurance payments or other
compensation earned hereunder.
5.4 Employee's Termination For Cause. Employee may, at any time upon 10
days' prior written notice to the Company, terminate this Contract if:
(a) The Company is in material breach of its obligations hereunder;
and
(b) Either such breach is incurable or, if curable, has not been
cured within 15 days' prior written notice thereof to the Company by Employee.
In the event Employee terminates this Contract pursuant to this Section
5.4, Employee shall have the same rights and remedies against the Company as he
would have had the Company terminated his employment without cause pursuant to
Section 5.1 hereof (including the right to payment under Section 5.2).
5.5 Employee's Voluntary Termination or Termination for Cause. Employee
may, at any time, terminate this Contract without cause upon written notice
delivered to the Company at least ninety (90) days prior to the effective date
of termination.
In the event of such voluntary termination:
(a) Employee shall have the right to monetary compensation as
provided hereunder through the effective date of termination, but shall have no
further right to compensation thereafter; and
(b) Employee's stock options shall be null and void as of the date
of termination except as provided in Section 5.6 below; and
(c) Employee shall not, for a period of one (1) year following the
date of termination for cause or voluntary termination, provide services
relating to the acquisition, development or management of commercial real estate
to any person who directly competes with the Company in the acquisition,
development and management of commercial real estate. Nothing herein shall
relieve or limit Employee's compliance with Sections 6, 7 and 8 below. The
Company shall not have any further right or remedy in the event Employee
terminates this Contract pursuant to this Section 5.5 except as provided in
Sections 6, 7 and 8 hereof which shall remain in full force and effect.
5.6 Employee's Retention Of Securities. In the event the Company
terminates Employee, whether or not for cause, Employee shall retain all options
and other securities he then owns, of record or otherwise, of the Company or its
Affiliates, subject to the terms, conditions and restrictions contained in the
Employees' Stock Option Agreement.
6. UNFAIR COMPETITION
6.1 Trade Secrets. During the term of employment under this Contract,
Employee will have access to and become acquainted with various information not
generally available to the public consisting of records, documents, drawings,
specifications, customer lists, procedural and operational manuals and
information, and financial records and accounts, projections and budgets, and
similar information, all of which
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are owned by the Company and regularly used in the operation of the Company's
business. Such assets of the Company are secret, not generally available to the
public and give the Company an advantage over competitors who do not know of or
use such information. Employee agrees such information and documents constitute
"trade secrets" of the Company. All such information and documents relating to
the business of the Company, whether they are prepared by Employee or come in to
Employee's possession in any other way, owned by the Company, are and shall
remain the exclusive property of the Company and shall not be removed from the
premises of the Company under any circumstances whatsoever, without prior
written consent of the Company.
6.2 Misuse Of Trade Secrets. Employee covenants that he shall not
misuse, misappropriate, or disclose any of the trade secrets described above,
directly or indirectly, or use them in any way, either during the term of this
Contract or at any time thereafter except as required in the course of his
employment, agreed to in prior writing by the Company, or as may be required by
law.
6.3 Non-Disclosure Of Trade Secrets. Employee acknowledges and agrees
that the sale or unauthorized use or disclosure of any of the Company's trade
secrets, as above described, including information concerning the Company's
current, future and/or proposed work, services or investments, the facts that
any such work, services or investments are planned, under consideration, or
under negotiation, as well as any descriptions thereof, constitute "unfair
competition". Employee promises and agrees not to engage in any unfair
competition with the Company, either during the term of this Contract or at any
time thereafter.
7. NON-COMPETITION DURING EMPLOYMENT
7.1 Competitive Activities. During the term of this Contract, Employee
shall not, without the Company's prior written consent, directly or indirectly,
whether or not for compensation, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or in any
other individual or representative capacity, engage or participate in, or
render, directly or indirectly, any services in connection with any business
that is in competition, in any manner whatsoever, with the business of the
Company.
7.2 Exceptions. The foregoing shall exclude, however, the expenditure of
a reasonable amount of time for educational, charitable or professional
activities, which shall not be deemed a breach of this Contract, if such
activities do not materially interfere with the services required under this
Contract.
7.3 Passive Investments; Private Affairs. Subject to the provisions of
Section 6, this Contract shall not be interpreted to prevent Employee from
making passive, personal investments or conducting private business affairs, if
those activities do not materially interfere with the services required under
this Contract and do not directly compete with the business of the Company.
However, Employee shall not directly or indirectly acquire, hold or retain any
interest in any business competing with or of similar nature to the business of
the Company except as provided in Section 4.3 above.
8. SOLICITATION OF EMPLOYEES, CONTRACTS
8.1 Use of Information. Employee acknowledges and agrees that the names,
addresses and relationships of persons who perform services or provide goods or
materials to or for the Company are unique; and that the nature and substance of
the Company's relationship with such persons constitute the Company's "trade
secrets". Employee acknowledges that the sale or unauthorized use or disclosure
of any of such relationships which Employee learned of during his employment
with the Company would constitute unfair competition. Employee promises and
agrees not to engage in any unfair competition with the Company.
8.2 Non-Disclosure. During the term of his employment by the Company,
and for a period of two years thereafter, Employee shall not, directly or
indirectly, make known to any person, firm or Company the
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substance or content of any relationship of the Company with any employee,
independent contractor or provider of goods or materials to the Company.
Employee agrees that he shall not solicit, take away or induce any such person
to end their relationship with the Company, or to attempt to do any of the
foregoing; or recruit, hire or otherwise induce any such person to perform
services for Employee, or any other person, firm or Company.
9. INDEMNIFICATION
The Company shall indemnify Employee for all losses sustained by
Employee as a direct or indirect consequence of the discharge of his duties on
behalf of the Company to the fullest extent permitted under applicable law so
long as Employee acted or failed to act in good faith and in a manner which he
believed to be in the best interests of the Company with respect to the matter
giving rise to the claim or loss for which Employee seeks indemnification.
10. BUSINESS EXPENSES
The Company shall promptly, but in no event later than ten (10) days
after submission of a claim of expenditure, reimburse Employee for all
reasonable business expenses incurred by him in connection with the business of
the Company and/or its subsidiary Companies, upon presentation to the Company of
written receipts for such expenses.
11. MISCELLANEOUS PROVISIONS
11.1 Binding Effect. This Contract shall be binding upon and inure to
the benefit of any successor or successors of the Company and the personal
representatives of Employee.
11.2 Attorney's Fees. If any legal action, arbitration or other
proceeding, is brought for the enforcement of this Contract, or because of an
alleged dispute, breach or default in connection with any of the provisions of
this Contract, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which that party would be entitled.
11.3 Entire Contract. This Contract constitutes the entire agreement of
the parties, and supersedes all prior agreements, understandings and
negotiations, whether written or oral, between the Company and Employee with
respect to the employment of Employee by the Company, its Subsidiaries and
Affiliates. This Contract may not be changed orally, but only by agreement in
writing, signed by all parties.
11.4 Provisions Severable. In case any one or more provisions of this
Contract shall be invalid, illegal or unenforceable, in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be affected or impaired thereby.
IN WITNESS HEREOF, the parties hereto have executed this Contract in San
Diego County, California.
THE COMPANY: EMPLOYEE:
- ------------ ---------
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ S. Eric Ottesen /s/ Kelly D. Burt
- ----------------------------------- -----------------------------------
KELLY D. BURT
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EXHIBIT 10.20
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and Gary B. Sabin
("Executive").
RECITALS
A. Executive is currently Chairman of the Board and Chief Executive
Officer of the Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Chairman
of the Board and Chief Executive Officer, and Executive hereby accepts such
employment, on the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Chairman of the Board and Chief Executive Officer of the Company.
Executive shall have those powers and duties normally associated with the
positions of Chairman of the Board and Chief Executive Officer and such other
powers and duties as may be prescribed by the Board of Directors of the Company
(the "Board"). Executive shall devote such time, attention and energies to
Company affairs as are necessary to fully perform his duties (other than
absences due to illness or vacation) for the Company. Notwithstanding the above,
Executive shall be permitted, to the extent such activities do not materially
and adversely affect the ability of Executive to fully perform his duties and
responsibilities hereunder, to (i) manage Executive's personal, financial and
legal affairs, and (ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $300,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain
<PAGE> 2
performance levels by the Company, including, without limitation, growth in
earnings, and Executive's performance and contribution to increasing the funds
from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks of
vacation per year provided to the Company's senior executive officers, but in no
event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans. (g)
Automobile Allowance. During the Employment Period, the Company shall provide
Executive with an automobile allowance of at least $6,000 per year. The
automobile allowance shall commence upon the second anniversary of the
Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially perform
his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
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For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within thirty (30) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Chairman of the Board
and Chief Executive Officer of the Company or a material and adverse
alteration in the nature of Executive's duties and/or responsibilities,
reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to the Commencement Date whose election or
nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
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initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by
or on behalf of any person other than the Board shall be an Incumbent
Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b),
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thirty (30) days after Notice of Termination (provided that Executive shall not
have returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for Good
Reason. If Executive's employment is terminated by the Company without Cause or
by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in Sections 10(a) and (b)),
or to make any investment in competition with the Company, and shall
execute all documents necessary or reasonably requested by Executive to
reflect such elimination of restrictions.
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The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
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(e) Failure to Extend. A failure to extend the Agreement pursuant
to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until
the first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
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(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a party
or a threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that Executive is or was a trustee, director or officer of the Company
or any subsidiary of the Company or is or was serving at the request of the
Company or any subsidiary as a trustee, director, officer, member, employee or
agent of another corporation or a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a trustee, director, officer, member, employee or agent
while serving as a trustee, director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by the Company to the fullest
extent authorized by Delaware law, as the same exists or may hereafter be
amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
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Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the payment
of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
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 the Company to expressly 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 had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Executive:
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Gary B. Sabin
c/o Excel Legacy Corporation
17140 Bernardo Center Drive, Suite 300
San Diego, CA 92128
If to the Company:
Excel Legacy Corporation
17140 Bernardo Center Drive, Suite 300
San Diego, CA 92128
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
---------------------------------
Name: John H. Wilmot
-------------------------------
Title: Chairman of the Compensation Committee
------------------------------
Executive:
/s/ Gary B. Sabin
------------------------------------
Gary B. Sabin
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Exhibit 10.21
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and Richard B. Muir
("Executive").
RECITALS
A. Executive is currently Executive Vice President and Chief Operating
Officer of the Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as
Executive Vice President and Chief Operating Officer, and Executive hereby
accepts such employment, on the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Executive Vice President and Chief Operating Officer of the Company.
Executive shall have those powers and duties normally associated with the
positions of Executive Vice President and Chief Operating Officer and such other
powers and duties as may be prescribed by the Board of Directors of the Company
(the "Board"). Executive shall devote such time, attention and energies to
Company affairs as are necessary to fully perform his duties (other than
absences due to illness or vacation) for the Company. Notwithstanding the above,
Executive shall be permitted, to the extent such activities do not materially
and adversely affect the ability of Executive to fully perform his duties and
responsibilities hereunder, to (i) manage Executive's personal, financial and
legal affairs, and (ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $200,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company. The amount of Executive's cash bonus shall be determined in the
reasonable
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discretion of the Compensation Committee and shall be dependent upon, among
other things, the achievement of certain performance levels by the Company,
including, without limitation, growth in earnings, and Executive's performance
and contribution to increasing the funds from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans. (g)
Automobile Allowance. During the Employment Period, the Company shall provide
Executive with an automobile allowance of at least $6,000 per year. The
automobile allowance shall commence upon the second anniversary of the
Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially perform
his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
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For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Executive Vice
President and Chief Operating Officer of the Company or a material and
adverse alteration in the nature of Executive's duties and/or
responsibilities, reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to the Commencement Date whose election or
nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director,
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without objection to such nomination) shall be an Incumbent Director;
provided, however, that no individual initially elected or nominated as
a director of the Company as a result of an actual or threatened
election contest with respect to directors or as a result of any other
actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
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(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in
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Sections 10(a) and (b)), or to make any investment in competition with
the Company, and shall execute all documents necessary or reasonably
requested by Executive to reflect such elimination of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
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(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable
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and enforceable by the court or other body having jurisdiction over the matter;
and Executive agrees that this Section 10(c) as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein
at its own expense; and
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(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
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If to Executive:
Richard B. Muir
c/o Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
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21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ Richard B. Muir
---------------------------------------------
Richard B. Muir
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Exhibit 10.22
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and Graham R. Bullick
("Executive").
RECITALS
A. Executive is currently Senior Vice President/Acquisitions of the
Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Senior
Vice President/Acquisitions and Executive hereby accepts such employment, on the
terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Senior Vice President/Acquisitions Counsel of the Company. Executive
shall have those powers and duties normally associated with the positions of a
Senior Vice President/Acquisitions and such other powers and duties as may be
prescribed by the Board of Directors of the Company (the "Board"). Executive
shall devote such time, attention and energies to Company affairs as are
necessary to fully perform his duties (other than absences due to illness or
vacation) for the Company. Notwithstanding the above, Executive shall be
permitted, to the extent such activities do not materially and adversely affect
the ability of Executive to fully perform his duties and responsibilities
hereunder, to (i) manage Executive's personal, financial and legal affairs, and
(ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $150,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain
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performance levels by the Company, including, without limitation, growth in
earnings, and Executive's performance and contribution to increasing the funds
from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans.
(g) Automobile Allowance. During the Employment Period, the
Company shall provide Executive with an automobile allowance of at least $6,000
per year. The automobile allowance shall commence upon the second anniversary of
the Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere
to, a felony; or
(ii) willful and continued failure to use reasonable
best efforts to substantially perform his duties hereunder
(other than such failure resulting from Executive's incapacity
due to physical or mental illness or subsequent to the issuance
of a Notice of Termination by Executive for Good Reason (as
defined in Section 6(d)) after demand for substantial
performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially
perform his duties; or
(iii) willful misconduct (including, but not limited to,
a willful breach of the provisions of Section 10) that is
materially economically injurious to the Company or to any
entity in control of, controlled by or under common control with
the Company ("Affiliate").
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For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Senior Vice
President/Capital Markets of the Company or a material and adverse
alteration in the nature of Executive's duties and/or responsibilities,
reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to the Commencement Date whose election or
nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest
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with respect to directors or as a result of any other actual or
threatened solicitation of proxies by or on behalf of any person other
than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance
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of his duties on a full-time basis during such thirty (30) day period), and
(iii) if Executive's employment is terminated for any other reason, the date on
which a Notice of Termination is given or any later date (within thirty (30)
days after the giving of such notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in Sections 10(a) and (b)),
or to make any investment in competition with the Company, and shall
execute all documents necessary or reasonably requested by Executive to
reflect such elimination of restrictions.
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The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
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(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
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(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and
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directors of the Company or any subsidiary. Executive also shall have
the right to employ his own counsel in such action, suit or proceeding
if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and Executive, and under such
circumstances the fees and expenses of such counsel shall be at the
expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Executive:
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Graham R. Bullick
c/o Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the
others in writing in accordance herewith. All such notices and other
communications shall be deemed to have been received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of a telecopy, when the
party receiving such telecopy shall have confirmed receipt of the communication,
(c) in the case of delivery by nationally-recognized, overnight courier, on the
business day following dispatch and (d) in the case of mailing, on the third
business day following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H, Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ Graham R. Bullick
---------------------------------------------
Graham R. Bullick
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Exhibit 10.23
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and S. Eric Ottesen
("Executive").
RECITALS
A. Executive is currently Senior Vice President and General Counsel of
the Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Senior
Vice President and General Counsel, and Executive hereby accepts such
employment, on the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Senior Vice President and General Counsel of the Company. Executive
shall have those powers and duties normally associated with the positions of a
Senior Vice President and General Counsel and such other powers and duties as
may be prescribed by the Board of Directors of the Company (the "Board").
Executive shall devote such time, attention and energies to Company affairs as
are necessary to fully perform his duties (other than absences due to illness or
vacation) for the Company. Notwithstanding the above, Executive shall be
permitted, to the extent such activities do not materially and adversely affect
the ability of Executive to fully perform his duties and responsibilities
hereunder, to (i) manage Executive's personal, financial and legal affairs, and
(ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $150,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award
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Executive a cash bonus of up to 100% of his Base Salary which the Compensation
Committee shall reasonably determine as fairly compensating and rewarding
Executive for services rendered to the Company and/or as an incentive for
continued service to the Company. The amount of Executive's cash bonus shall be
determined in the reasonable discretion of the Compensation Committee and shall
be dependent upon, among other things, the achievement of certain performance
levels by the Company, including, without limitation, growth in earnings, and
Executive's performance and contribution to increasing the funds from
operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans.
(g) Automobile Allowance. During the Employment Period, the
Company shall provide Executive with an automobile allowance of at least $6,000
per year. The automobile allowance shall commence upon the second anniversary of
the Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere
to, a felony; or
(ii) willful and continued failure to use reasonable
best efforts to substantially perform his duties hereunder
(other than such failure resulting from Executive's incapacity
due to physical or mental illness or subsequent to the issuance
of a Notice of Termination by Executive for Good Reason (as
defined in Section 6(d)) after demand for substantial
performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially
perform his duties; or
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(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as a Senior Vice
President and General Counsel of the Company or a material and adverse
alteration in the nature of Executive's duties and/or responsibilities,
reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person
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becoming a director subsequent to the Commencement Date whose election
or nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by
or on behalf of any person other than the Board shall be an Incumbent
Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
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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.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
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(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in Sections 10(a) and (b)),
or to make any investment in competition with the Company, and shall
execute all documents necessary or reasonably requested by Executive to
reflect such elimination of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
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(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive
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shall not be prohibited from owning equity securities of, and acting as an
officer and director of, Legacy. If, at any time, the provisions of this Section
10(c) shall be determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section
10(c) shall be considered divisible and shall become and be immediately amended
to only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter; and Executive agrees that this Section 10(c) as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
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(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
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14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Executive:
S. Eric Ottesen
c/o Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of
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incorporation, or any agreement to which it is a party, other than which would
not have a material adverse effect on the Company's ability to enter into or
perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ S. Eric Ottesen
---------------------------------------------
S. Eric Ottesen
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Exhibit 10.24
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and John Visconsi
("Executive").
RECITALS
A. Executive is currently Senior Vice President/Asset Management/Leasing
of the Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Senior
Vice President/Asset Management/Leasing, and Executive hereby accepts such
employment, on the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Senior Vice President/Asset Management/Leasing of the Company.
Executive shall have those powers and duties normally associated with the
positions of Senior Vice President/Asset Management/Leasing and such other
powers and duties as may be prescribed by the Board of Directors of the Company
(the "Board"). Executive shall devote such time, attention and energies to
Company affairs as are necessary to fully perform his duties (other than
absences due to illness or vacation) for the Company. Notwithstanding the above,
Executive shall be permitted, to the extent such activities do not materially
and adversely affect the ability of Executive to fully perform his duties and
responsibilities hereunder, to (i) manage Executive's personal, financial and
legal affairs, and (ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $120,000 ("Base Salary") until January 31,
2000 and, thereafter, an annual base salary of $150,000. Executive's Base Salary
shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
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(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain performance levels by the
Company, including, without limitation, growth in earnings, and Executive's
performance and contribution to increasing the funds from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans.
(g) Automobile Allowance. During the Employment Period, the
Company shall provide Executive with an automobile allowance of at least $6,000
per year. The automobile allowance shall commence upon the second anniversary of
the Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially perform
his duties; or
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(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Senior Vice
President/Asset Management/Leasing of the Company or a material and
adverse alteration in the nature of Executive's duties and/or
responsibilities, reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person
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becoming a director subsequent to the Commencement Date whose election
or nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by
or on behalf of any person other than the Board shall be an Incumbent
Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
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(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in
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Sections 10(a) and (b)), or to make any investment in competition with
the Company, and shall execute all documents necessary or reasonably
requested by Executive to reflect such elimination of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
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(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
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Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
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(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Executive:
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John Visconsi
c/o Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
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17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ John Visconsi
---------------------------------------------
John Visconsi
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Exhibit 10.25
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and James Y. Nakagawa
("Executive").
RECITALS
A. Executive is currently Chief Financial Officer of the Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Chief
Financial Officer, and Executive hereby accepts such employment, on the terms
and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Chief Financial Officer of the Company. Executive shall have those
powers and duties normally associated with the positions of Chief Financial
Officer and such other powers and duties as may be prescribed by the Board of
Directors of the Company (the "Board"). Executive shall devote such time,
attention and energies to Company affairs as are necessary to fully perform his
duties (other than absences due to illness or vacation) for the Company.
Notwithstanding the above, Executive shall be permitted, to the extent such
activities do not materially and adversely affect the ability of Executive to
fully perform his duties and responsibilities hereunder, to (i) manage
Executive's personal, financial and legal affairs, and (ii) serve on civic or
charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $120,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive
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for continued service to the Company. The amount of Executive's cash bonus shall
be determined in the reasonable discretion of the Compensation Committee and
shall be dependent upon, among other things, the achievement of certain
performance levels by the Company, including, without limitation, growth in
earnings, and Executive's performance and contribution to increasing the funds
from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans. (g)
Automobile Allowance. During the Employment Period, the Company shall provide
Executive with an automobile allowance of at least $6,000 per year. The
automobile allowance shall commence upon the second anniversary of the
Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially perform
his duties; or
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(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Chief Financial
Officer of the Company or a material and adverse alteration in the
nature of Executive's duties and/or responsibilities, reporting
obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
or Executive's own office location more than thirty (30) miles from San
Diego, California;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to the Commencement Date whose election or
nomination for election was
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approved by a vote of a majority of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be an Incumbent Director;
provided, however, that no individual initially elected or nominated as
a director of the Company as a result of an actual or threatened
election contest with respect to directors or as a result of any other
actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
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(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
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limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in Sections 10(a) and (b)),
or to make any investment in competition with the Company, and shall
execute all documents necessary or reasonably requested by Executive to
reflect such elimination of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
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(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be
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reasonable and enforceable by the court or other body having jurisdiction over
the matter; and Executive agrees that this Section 10(c) as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
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(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
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If to Executive:
James Y. Nakagawa
c/o Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ James Y. Nakagawa
---------------------------------------------
James Y. Nakagawa
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Exhibit 10.26
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1999, by and between Excel Legacy
Corporation, a Delaware corporation (the "Company"), and Mark T. Burton
("Executive").
RECITALS
A. Executive is currently Senior Vice President/Acquisitions of the
Company.
B. The Company desires to employ Executive, effective as of May 1, 1999
(the "Effective Time"), on the terms and conditions set forth in this Agreement,
and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Senior
Vice President/Acquisitions and Executive hereby accepts such employment, on the
terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
(the "Employment Period") shall commence on the Effective Time (the
"Commencement Date") and shall continue through December 31, 2003; provided,
that, commencing on January 1, 2004, and on each anniversary date thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such automatic extension would be effectuated. The
Employment Period may be sooner terminated by either party in accordance with
Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
serve as Senior Vice President/Acquisitions Counsel of the Company. Executive
shall have those powers and duties normally associated with the positions of a
Senior Vice President/Acquisitions and such other powers and duties as may be
prescribed by the Board of Directors of the Company (the "Board"). Executive
shall devote such time, attention and energies to Company affairs as are
necessary to fully perform his duties (other than absences due to illness or
vacation) for the Company. Notwithstanding the above, Executive shall be
permitted, to the extent such activities do not materially and adversely affect
the ability of Executive to fully perform his duties and responsibilities
hereunder, to (i) manage Executive's personal, financial and legal affairs, and
(ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
shall be at the Company's operating offices either in San Diego County,
California or Davis County, Utah.
5. Compensation and Related Matters.
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $150,000 ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 100% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain performance levels by the
Company, including, without limitation, growth in earnings, and Executive's
performance
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and contribution to increasing the funds from operations.
(c) Stock Options. Executive shall be eligible to participate in
the Company's Stock Option Plan in the same manner as its other executives, as
determined in the discretion of the Company's Compensation Committee.
(d) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(e) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's senior executive officers, but in
no event less than four (4) weeks annually.
(f) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, life insurance, accidental death
and dismemberment and travel accident insurance plans and programs. In addition,
during the Employment Period, Executive shall be eligible to participate in all
pension, retirement, savings and other employee benefit plans and programs
maintained from time to time by the Company for the benefit of its senior
executives, or any annual incentive or long-term performance plans. (g)
Automobile Allowance. During the Employment Period, the Company shall provide
Executive with an automobile allowance of at least $6,000 per year. The
automobile allowance shall commence upon the second anniversary of the
Commencement Date.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes
Executive has not used reasonable best efforts to substantially perform
his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions
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of Section 10) that is materially economically injurious to the Company
or to any entity in control of, controlled by or under common control
with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless committed in bad faith and
without a reasonable belief that the act or omission was in the best interests
of the Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for
"Good Reason" within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company:
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as a Senior Vice
President/Acquisitions of the Company or a material and adverse
alteration in the nature of Executive's duties and/or responsibilities,
reporting obligations, titles or authority;
(ii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iii) the relocation of the Company's San Diego operating office
more than thirty (30) miles from San Diego, California or Executive's
own office location more than thirty (30) miles from West Bountiful,
Utah;
(iv) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c)
(and for purposes of this Agreement, no such purported termination shall
be effective);
(v) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vi) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(vii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
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(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to the Commencement Date whose election or
nomination for election was approved by a vote of a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by
or on behalf of any person other than the Board shall be an Incumbent
Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that
an event described in this paragraph (2) shall not be deemed to be a
Change in Control if any of following becomes such a beneficial owner:
(A) the Company or any majority-owned subsidiary (provided, that this
exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary, (C) any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
or (E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring
the Company's assets in such Business Transaction (the "Surviving
Corporation") is beneficially owned, directly or indirectly, by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), or (C) of paragraph (2) above or any tax-qualified,
broad-based employee benefit plan of the Surviving Corporation or its
Affiliates) beneficially owns, directly or indirectly, 30% or more of
the total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement and the Stock Option Agreements pursuant
to which the Stock Options were granted.
(5) Gary B. Sabin is no longer serving as Chairman of the Board
of Directors by virtue of being asked to resign or by not being placed
on the ballot for the election of directors. Should he not be able to
serve as chairman due to death or disability or should he, of his own
free will and choice, elect to resign or not sit for reelection, then it
shall not be deemed to be an event of Change of Control.
(e) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
7. Termination Procedure.
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(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
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.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal
to two times Executive's current base scheduled annual salary and two
times the average total additional compensation (i.e., bonus, pension,
401(k) Company contributions, medical benefits and car allowance) for
the two (2) preceding fiscal years of the Company ending prior to
termination within seven (7) calendar days following the Date of
Termination; provided, however, if the Executive has previously given a
notice not to extend the Employment Period pursuant to Section 2, the
payment referred to in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, disability and life insurance programs in which
Executive, his spouse and his dependents were participating immediately
prior to the Date of Termination at the level in effect and upon
substantially the same terms and conditions (including without
limitation contributions required by Executive for such benefits) as
existed immediately prior to the Date of Termination; provided, that if
Executive, his spouse or his dependents cannot continue to participate
in the Company programs providing such benefits, the Company shall
arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have
been entitled to receive under such plans and programs ("Continued
Benefits"), provided, that such Continued Benefits shall terminate on
the date or dates Executive receives substantially equivalent coverage
and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company;
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(v) all stock options and other pension or employment benefits
granted to Executive prior to the Date of Termination shall fully vest
as of the Date of Termination (inclusive of any granted to Executive
prior to the Employment Period);
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive, if any, and shall take all
actions and execute all documents necessary to evidence the forgiveness
and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without
limitation, the restrictions set forth in Section 10(c) of this
Agreement but not the restrictions set forth in Sections 10(a) and (b)),
or to make any investment in competition with the Company, and shall
execute all documents necessary or reasonably requested by Executive to
reflect such elimination of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up
to a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may
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be due to Executive in accordance with the terms and provisions of any
agreements, plans or programs of the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(d)
for reasonable expenses incurred, but not paid prior to such termination
of employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation
and benefits as may be due to any such persons or estate in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(e) Failure to Extend. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Additionally, amounts owed to Executive under this
Agreement shall not be offset by any claims the Company may have against
Executive, and the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
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(c) Protection of Business. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause or Executive terminates
employment without Good Reason), the Executive will not (i) engage, anywhere
within the geographical areas in which the Company or any of its Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than three (3%) percent of any publicly
traded corporation, whether or not such corporation is in competition with the
Company, and Executive shall not be prohibited from owning equity securities of,
and acting as an officer and director of, Legacy. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(d) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.
11. Indemnification.
(a) General. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company or any subsidiary of the Company or is or was serving at the request
of the Company or any subsidiary as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint venture, trust
or other enterprise, including, without limitation, service with respect to
employee benefit plans, whether or not the basis of such Proceeding is alleged
action in an official capacity as a trustee, director, officer, member, employee
or agent while serving as a trustee, director, officer, member, employee or
agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or request has been received by the Company, Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim or request and if successful
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in whole or in part, Executive shall be entitled to be paid also the expenses of
prosecuting such suit. All obligations for indemnification hereunder shall be
subject to, and paid in accordance with, applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice
of any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof,
with counsel reasonably satisfactory to Executive, which in the
Company's sole discretion may be regular counsel to the Company and may
be counsel to other officers and directors of the Company or any
subsidiary. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding if he reasonably concludes
that failure to do so would involve a conflict of interest between the
Company and Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent
to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company or any subsidiary, agreement, vote of shareholders or
disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
9
<PAGE> 10
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination 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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
or sent by nationally-recognized, overnight courier or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Executive:
Mark T. Burton
c/o Excel Legacy Corporation
801 North 500 West, #201
West Bountiful, UT 84087
If to the Company:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, CA 92127
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith. All such notices and other communications shall
be deemed to have been received (a) in the case of personal delivery, on the
date of such delivery, (b) in the case of a telecopy, when the party receiving
such telecopy shall have confirmed receipt of the communication, (c) in the case
of delivery by nationally-recognized, overnight courier, on the business day
following dispatch and (d) in the case of mailing, on the third business day
following such mailing.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights
10
<PAGE> 11
and obligations of the parties hereunder of this Agreement shall survive
Executive's termination of employment and the termination of this Agreement to
the extent necessary for the intended preservation of such rights and
obligations. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without
regard to its conflicts of law principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
21. Section Headings. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
Company:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By: /s/ John H. Wilmot
------------------------------------------
Name: John H. Wilmot
----------------------------------------
Title: Chairman of the Compensation Committee
Executive:
/s/ Mark T. Burton
---------------------------------------------
Mark T. Burton
11
<PAGE> 1
Exhibit 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME JURISDICTION
---- ------------
<S> <C>
Excel Pointe Anaheim, LLC Delaware
Excel Telluride, LLC Delaware
FAEX, LLC Delaware
Excel Legacy Corporation - ST Delaware
TenantFirst Real Estate Services, Inc. California
Excel Park Terrace, Inc. Delaware
Millennia Car Wash, LLC Delaware
Newport on the Levee, LLC Delaware
Grand Tusayan, LLC Delaware
Destination Villages, LLC Delaware
Yosemite Village, LLC Delaware
Campers Villages, LLC Hawaii
Destination Villages Daniel's Head
Bermuda Ltd. Bermuda
Destination Villages Kauai, LLC Hawaii
Florida Legacy Lodges LLC Florida
Desert Fashion Plaza, LLC Delaware
Price Enterprises, Inc. Maryland
Price Enterprises TX Delaware
Price Self Storage, Inc. Delaware
</TABLE>
<PAGE> 1
Consent of Independent Accountants Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-80339), S-4 (No. 333-79673) and S-8
(No. 333-68597) of Excel Legacy Corporation of our report dated February 16,
2000 relating to the consolidated financial statements and financial statements
schedules, which appear in this Form 10-K.
/s/ PricewaterhouseCoopers, LLP
San Diego, California
March 28, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-4 No. 333-80339) and related Prospectus of Excel Legacy
Corporation for the registration of certain securities; the Registration
Statement (Form S-3 No. 333-79673) and related Prospectus of
Excel Legacy Corporation for the registration of certain securities; and
the Registration Statement (Form S-8 No. 333-68597)
pertaining to the 1998 Stock Option Plan of Excel Legacy Corporation of our
report dated January 21, 2000 (except for Note 13, as to which the date
is February 29, 2000), with respect to the consolidated financial
statements and schedules of Price Enterprises, Inc. incorporated by
reference in this Annual Report (Form 10-K) for the year ended
December 31, 1999.
/s/ ERNST & YOUNG LLP
San Diego, California
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,767,000
<SECURITIES> 1,922,000
<RECEIVABLES> 794,000
<ALLOWANCES> (55,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 104,494,000
<DEPRECIATION> (2,303,000)
<TOTAL-ASSETS> 328,153,000
<CURRENT-LIABILITIES> 0
<BONDS> 15,835,000
0
213,000
<COMMON> 368,000
<OTHER-SE> 179,458,000
<TOTAL-LIABILITY-AND-EQUITY> 328,153,000
<SALES> 0
<TOTAL-REVENUES> 25,917,000
<CGS> 0
<TOTAL-COSTS> 25,436,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 97,000
<INTEREST-EXPENSE> 7,997,000
<INCOME-PRETAX> (1,284,000)
<INCOME-TAX> (507,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (777,000)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
