Employment Agreement
This Employment Agreement (the "Agreement"), effective as of May 3,
2000 (the "Effective Date"), by and between Prime Retail, Inc., a Maryland
corporation ("Prime") and the sole general partner of Prime Retail, L.P., a
Delaware limited partnership (the "Operating Partnership"), the Operating
Partnership (Prime and the Operating Partnership are sometimes hereinafter
together referred to as the "Company"), and C. Alan Schroeder, an individual
domiciled in the State of Maryland ("Executive").
Witnesseth
Whereas, the Company is engaged primarily in the ownership,
development, construction, acquisition, leasing, marketing and management of
factory outlet centers throughout North America, Puerto Rico and Western Europe;
Whereas, Executive is employed as Prime's Executive Vice President -
General Counsel and Secretary, and in addition thereto Executive holds various
offices with the Company's affiliates and subsidiaries;
Whereas, the Company believes that it would benefit from the continued
application of Executive's particular and unique skill, experience, and
background to the management and operation of the Company;
Whereas, Executive wishes to commit himself to serve the Company in the
positions set forth herein on the terms herein provided;
Whereas, the parties wish by this Agreement to amend and restate in
entirety the terms and conditions of the relationship between the Company and
Executive;
Now, Therefore, in consideration of the foregoing and the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the Company and Executive hereby agree as follows:
1. Duties. During the Term hereof (as defined in Section 2 hereof), the Company
agrees to retain Executive, and Executive agrees to be retained by the Company,
as the Executive Vice President - General Counsel and Secretary of the Company
on the terms and conditions provided in this Agreement. Executive shall serve as
the Executive Vice President - General Counsel and Secretary of the Company and
Executive shall exercise such powers and authority as are customarily inherent
in similar positions in a comparable publicly-held entity or as provided by the
By-laws of Prime ("By-laws") and the Agreement of Limited Partnership of the
Operating Partnership, as amended (the "Partnership Agreement"), including
having primary oversight and responsibility for the legal affairs of the Company
and the authority to hire and fire within the scope of his responsibilities.
Prime, in its capacity as sole general partner of the Operating Partnership,
may, from time to time, in its sole discretion, by action of its Board of
Directors (the "Board") further define and clarify Executive's duties and
services hereunder or under the By-laws or Partnership Agreement in a manner
consistent with the offices for which he has been retained hereunder and the
scope of work set forth herein. Executive agrees to devote his best efforts and
substantially all of his business time, attention, energy, and skill to
performing his duties to the Company under this Agreement. Executive will report
directly and exclusively to the Company's President and Chief Executive Officer
("CEO"), and he will perform all of his duties in accordance with such
reasonable directions, requests, rules and regulations as are specified by the
CEO in connection with his employment. Notwithstanding the foregoing, in the
event the Company retains an individual to serve as its Chief Operating Officer,
or a similar role, and that individual reports directly to the CEO, the parties
acknowledge that the Company may alter the reporting relationship of Executive
so that he thereafter reports to such individual and the CEO. During the Term of
this Agreement, it shall not be a violation of this Agreement for Executive to
(i) serve on corporate, industry-related, civic, or charitable boards or
committees or devote time to serving any such entities or organizations, (ii)
deliver lectures, fulfill speaking engagements, or teach at educational
institutions, or (iii) manage personal investments and finances and business and
legal affairs, to the extent that such activities do not violate this Section 1
or Section 5 hereof.
2. Term. The term of this Agreement shall commence as of the Effective Date and,
unless earlier terminated in accordance with the terms of this Agreement, will
extend to the third anniversary of such date ("the Original Term"); provided,
however, that if this Agreement is not affirmatively terminated by either party,
or extended or renewed for a specific duration in writing by agreement of the
parties, prior to the last day of the Original Term, this Agreement will
continue on a month-to-month basis thereafter (the "Extended Term"). The parties
agree to cooperate and discuss in good faith their intentions with regard to
this Agreement's extension or renewal 12 months prior to the end of the Original
Term. Notwithstanding the foregoing, the Company agrees to provide Executive
with a minimum of six months' advance written notice of its intent to terminate
this Agreement during the Original Term or the Extended Term for any reason
other than Cause, in which case the Company shall comply with the notice
requirements of Sections 4(a)(2) and (3) hereof, and Executive agrees to provide
the Company with a minimum of 60 days' advance written notice of his intent to
terminate this Agreement during the Original Term or the Extended Term for any
reason other than Good Reason, in which case Executive shall comply with the
notice requirements of Section 4(b)(1)(E) hereof. For purposes of this
Agreement, the terms "Original Term" and "Extended Term" shall herein be
collectively referred to as the "Term."
3. Compensation and Related Matters.
(a) Base Salary. During the Term of this Agreement, the Operating Partnership
agrees to pay to Executive a base salary in an aggregate amount of Two Hundred
Thirty Six Thousand Five Hundred Dollars ($236,500) per calendar year, payable
in accordance with the general policies and procedures for payment of salaries
to any other executive personnel of the Company but in all events payable no
less frequently than monthly. The then applicable amount of yearly base salary
payable to Executive pursuant to the provisions of this Section 3(a) shall
herein be referred to as the "Base Salary." The Base Salary payable to Executive
pursuant to the provisions of this Section 3(a) shall be subject to periodic
review by the Compensation Committee of the Board of Directors of Prime (the
"Committee") based upon periodic review of Executive's performance conducted on
at least an annual basis and may be periodically increased as a result thereof;
provided, however, that the Base Salary payable to Executive pursuant to the
provisions of this Section 3(a) shall in no event be less than the aggregate
amount set forth in the first sentence of this paragraph. In no event may
Executive's Base Salary be reduced during the Term without his express written
consent.
(b) Performance Bonus. In addition to the Base Salary, Executive shall have the
right to receive, and the Operating Partnership agrees to pay to Executive, a
performance bonus for each calendar year during the Term of this Agreement, in
such amounts as the Committee, in its sole discretion, may determine (the
"Performance Bonus"). If the Board, either directly or through the Committee,
establishes performance measures for senior officers (which term is intended to
include Executive), those established criteria will be used to determine
Executive's entitlement to a Performance Bonus. Notwithstanding the foregoing,
nothing in this Agreement obligates the Board to establish such performance
measures, and the lack of established performance measures will not constitute a
breach of this Agreement in any manner. In lieu of established performance
measures, the Board will determine Executive's Performance Bonus solely in its
discretion. The parties hereto acknowledge that any corporate or individual
performance objectives established pursuant to this Section 3(b) will be
determined prior to, or as soon as possible after, the beginning of each
calendar year and that such objectives may objectively be met by Executive. The
aggregate Performance Bonus for a calendar year payable in accordance with the
provisions of this Section 3(b) is expected to be up to 100% of the Base Salary
for such calendar year. Further, Executive shall only be entitled to receive a
Performance Bonus for a calendar year if Executive has been and continues to be
retained by the Company as an executive officer of the Company for the full
calendar year or if (i) the Company terminates Executive's employment without
Cause (as defined below), (ii) Executive terminates his employment for Good
Reason (as defined below), or (iii) Executive's employment ends for any reason
within 24 months following a Change of Control. Any amount of Performance Bonus
required to be paid to Executive for a calendar year during the Term of this
Agreement shall be paid by the Company to Executive during the pay period of the
Company following finalization of the audit for such calendar year and final
review and approval of the bonus calculation by the Committee, and, in all
events, on or before March 31 of the year immediately following the end of the
calendar year for which such Performance Bonus is attributable.
(c) Health Insurance and Other Benefits.
(1) During the Term of this Agreement and subject to the limitations and
affirmative rights set forth in this Section 3(c), Executive and his eligible
dependents shall have the right to participate in any life, disability, health,
dental, vision and other benefit plans or programs that have been or are
hereafter adopted or maintained by the Company (or in which the Company
participates) according to the terms of such plan or program with all of the
benefits, rights and privileges as are enjoyed by any other senior executive
officer of the Company. In addition, Executive shall be covered by any and all
policies of directors and officers insurance coverage obtained by the Board from
time to time for its senior executive officers, the terms of which shall be
established by the Board in its sole discretion.
(2) During the Term of this Agreement and subject to the limitations and
affirmative rights set forth in this Section 3(c), Executive and his eligible
dependents shall have the right to participate in any retirement, pension, or
other similar benefit plan or program that has been or is hereafter adopted by
the Company (or in which the Company participates) according to the terms of
such plan or program with all the benefits, rights and privileges as are enjoyed
by any other senior executive officer of the Company.
(3) If the participation of Executive under a plan described in subsection (2)
above would adversely affect the qualification of a plan intended to be
qualified under the Internal Revenue Code of 1986, as amended from time to time
(the "Code"), the Company shall have the right to exclude Executive from that
plan in return for his participation in (x) a non-qualified deferred
compensation plan or (y) an arrangement providing substantially comparable
benefits under a plan that is either a qualified or non-qualified plan under the
Code at the Company's option.
(4) Notwithstanding anything to the contrary contained herein,
the Company reserves the right to amend or terminate any plan described in this
Section 3(c) for any reason; provided, however, that (i) no such amendment that
would reduce the benefits of Executive will be adopted unless it affects other
senior executive officers across-the-board, and (ii) if any plan amendment or
termination reduces the benefits of Executive, the Company agrees to adopt or
maintain one or more replacement plans that will provide Executive with
reasonably comparable benefits throughout the Term of this Agreement.
(d) Vacation and Leaves of Absence. Executive shall be entitled to four (4)
weeks of paid vacation leave during each twelve (12) month calendar period
(considered to be granted for each half-year as of the first day of that
half-year) and paid holidays in accordance with the Company's established
policies. Executive may accrue unused vacation time if not used in any calendar
year or years, however, the maximum cumulative amount of vacation time that
Executive may accrue and carry over to the next year is four weeks. In addition
to the foregoing, Executive may be granted leaves of absence with or without pay
for such other reasons as shall be mutually agreed upon by the Board and
Executive.
(e) Expenses. Executive shall be reimbursed, subject to the Company's receipt of
invoices or similar records as the Company may reasonably request in accordance
with its policy and procedures, for all reasonable and necessary expenses
incurred by Executive in the performance of his duties hereunder. In addition,
the Company agrees to pay, or reimburse Executive for, any legal fees and costs
he incurs in connection with the negotiation and execution of this Agreement, up
to a maximum of $10,000, and for any reasonable legal fees and costs he incurs
in connection with the negotiation and execution of renewals, extensions and
amendments of this Agreement.
(f) Life Insurance. The Company shall provide $2,000,000 of life insurance
coverage for the benefit of Executive during the Term of this Agreement.
(g) Stock Options.
(i) In consideration for Executive's employment hereunder, as of May 11, 2000
(the "Date of Grant"), Prime granted Executive an option (the "Option") to
purchase 200,000 shares of Prime's common stock, par value $0.01 per share (the
"Common Stock"). The purchase price per share was $2.00 (the "Exercise Price").
The Option was granted pursuant to the Prime Retail, Inc. 1998 Long-Term Stock
Incentive Plan (the "LTIP") and is subject to the terms and conditions contained
in the Stock Award Agreement entered into between Prime and Executive, which
terms include: (i) the Option will have a term of ten years measured from the
date of grant; (ii) the greatest portion of the Option shares allowable under
the LTIP will be issued as incentive stock options; (iii) the Option shares will
vest and become exercisable as follows: increments of 8.33% of the total number
of shares will become vested as of the first day of each contract quarter
following the Date of Grant, such that the shares shall be fully vested before
the third anniversary of the Effective Date, assuming Executive's employment
with Prime continues through such dates; (iv) the Option will remain exercisable
for 30 days following termination of Executive for Cause, and in the event of
Executive's termination of employment for any other reason the Option will
remain exercisable for 90 days; and (v) upon Executive's resignation for Good
Reason or termination without Cause (each as herein defined and without regard
to whether a Change of Control has occurred) during the Term of this Agreement,
the entire Option, in addition to all other outstanding options awarded by Prime
to Executive, will become fully vested and exercisable, to the extent not
previously exercised. Prime will take all steps necessary to ensure that all
options held by Executive survive any Change of Control.
4. Termination and Termination Benefits.
(a) Termination by Prime.
(1) Without Cause. Subject to the notice provisions set forth in Section 2
hereof, the Company may terminate this Agreement and Executive's services at any
time for any reason, and after any required notice is provided to Executive he
shall continue to perform his duties under this Agreement during the notice
period if the Company so elects. In connection with the termination of
Executive's services without Cause during the Term of this Agreement, pursuant
to this Section 4(a)(1), Executive (and Executive's eligible dependents with
respect to paragraph (D) below) shall be entitled to receive:
(A) all accrued but unpaid amounts of the Base Salary and vacation through the
effective date of termination, payable in accordance with the provisions of
Sections 3(a) and 3(d) above;
(B) if such termination occurs during the Original Term, a termination payment
in an amount equal to the product of (x) the number of full and partial years
remaining in the Original Term, and (y) the sum of (i) Executive's then current
Base Salary and (ii) a bonus payment equal to 100% of the average annual bonus
paid to Executive for the two most recent calendar years in which he received a
bonus, or if no such bonus payments were made to Executive, a bonus payment
equal to 50% of his then current Base Salary (the sum of the amounts determined
by adding clauses (i) and (ii) is in the aggregate hereinafter referred to as
the "One-Year Pay Equivalent"), and the product of (x) and (y) shall be payable
within thirty (30) days of the effective date of termination;
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(e), 3(f) and
3(g) hereof through the effective date of termination, payable in accordance
with the provisions of any such plan(s); and
(D) if such termination occurs during the Original Term, (i) the Company-paid
health insurance benefits specified in Section 3(c)(1) above for a period of
twelve (12) months following the effective date of termination and (ii)
following such period, Executive shall be entitled to all rights afforded to him
under the federal Consolidated Omnibus Budget Reconciliation Act ("COBRA") to
purchase continuation coverage of health insurance benefits for himself and his
dependents for the maximum period permitted by law. If such termination occurs
during the Extended Term, Executive will be entitled to all rights afforded to
him under COBRA to purchase continuation coverage of health insurance benefits
for himself and his dependents for the maximum period permitted by law.
In the event that Executive is terminated without Cause pursuant to this Section
4(a)(1) or resigns for Good Reason and within 12 months from the effective date
of such termination or resignation there is a "Change in Control" of the Company
(as defined below), then Executive shall be entitled to receive the benefits set
forth in Section 4(d) hereof to the extent and in the amount that such benefits
exceed the amounts paid or received by Executive pursuant to this Section
4(a)(1).
(2) With Cause. The Company may terminate this Agreement with "Cause"
immediately upon written notice to Executive. In connection with the termination
of Executive's services pursuant to this Section 4(a)(2), Executive (and
Executive's eligible dependents with respect to paragraph (C) below) shall be
entitled to:
(A) receive all accrued but unpaid amounts of the Base Salary and vacation
through the effective date of termination, payable in accordance with
the provisions of Sections 3(a) and 3(d) above;
(B) receive the vested benefits or amounts pursuant to Sections 3(c), 3(e),
3(f) and 3(g) hereof through the effective date of termination, payable
as otherwise provided in such Sections; and
(C) exercise all rights afforded to him under COBRA to purchase
continuation coverage of health insurance benefits for himself and his
dependents for the maximum period permitted by law.
(3) "Cause" Defined. For purposes of this Agreement, "Cause" shall mean a
reasonable, good faith finding by a majority of the Board (A) that Executive has
harmed the Company through an act of dishonesty or material conflict of interest
that relates to the performance of Executive's duties hereunder, (B) of
Executive's conviction of a felony involving moral turpitude, fraud or
embezzlement, (C) that Executive's willful failure to perform in any material
respect his duties under this Agreement (other than a failure due to disability)
that results in material harm to the Company, after written notice specifying
the failure and a reasonable opportunity of at least thirty (30) days to cure
(it being understood that if Executive's failure to perform is not of a type
requiring a single action to fully cure, then Executive may commence the cure
promptly after such written notice and thereafter diligently prosecute such cure
to completion) or (D) of a material and willful breach by Executive of any of
his obligations hereunder and the failure of Executive to cure such breach
within thirty (30) days after receipt by Executive of a written notice of the
Company specifying in reasonable detail the nature of the breach. The Company
intends that "Cause" must be based only on meaningful and significant matters
and not on matters of minor importance. For purposes of this Section, an act, or
failure to act, on Executive's part shall be considered "willful" only if done,
or omitted to be done, by him not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
(4) Disability. If due to illness or physical or mental disability, Executive
shall fail to perform the material duties required by this Agreement during any
four (4) consecutive months during the Term of this Agreement, the Company may
terminate this Agreement, subject to the notice provisions set forth in Section
2 hereof. In such event, Executive (and Executive's eligible dependents with
respect to paragraph (D) below) shall receive:
(A) all accrued but unpaid amounts of the Base Salary and vacation through
the effective date of termination, payable in accordance with the
provisions of Sections 3(a) and 3(d) above;
(B) if, and only if, the Company has terminated or otherwise materially
reduced Executive's long-term disability coverage that was in effect on
the Effective Date of this Agreement, then Executive shall be entitled
to receive 1.5 times the One-Year Pay Equivalent;
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(e), 3(f)
and 3(g) hereof through the effective date of termination, payable in
accordance with the provisions of any such plan(s); and
(D) the benefits described in Section 4(a)(1)(D).
This Section 4(a)(4) shall not limit the entitlement of Executive, his estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy that is maintained by
the Company for Executive's benefit.
(b) Termination by Executive for Any Reason.
(1) Subject to the notice requirements set forth in Section 2 hereof, Executive
may terminate this Agreement at any time with or without Good Reason (as defined
herein), and after any required notice is provided to the Company Executive
shall continue to perform his duties under this Agreement during the notice
period if the Company so elects. If Executive terminates his employment for Good
Reason, the Company shall pay him the compensation and other benefits provided
above in Section 4(a)(1) as if it had terminated his employment without Cause
after providing the requisite notice pursuant to Section 2 hereof. In connection
with the termination of this Agreement pursuant to this Section 4(b)(1) other
than for Good Reason, Executive (and Executive's eligible dependents with
respect to paragraph (D) below) shall be entitled to receive:
(A) all accrued but unpaid amounts of the Base Salary and vacation through the
effective date of termination, payable in accordance with the provisions of
Sections 3(a) and 3(d) above;
(B) any earned and unpaid bonus(es) otherwise payable to him in accordance with
Section 3(b);
(C) any vested benefits or amounts pursuant to Sections 3(c), 3(e), 3(f) and
3(g) hereof through the effective date of termination, payable as otherwise
provided in such Sections; and
(D) all rights afforded to him under COBRA to purchase continuation coverage of
health insurance benefits for himself and his dependents for the maximum period
permitted by law.
(E) "Good Reason" Defined. For purposes of this Agreement, "Good Reason" shall
mean (A) the material breach by the Company of any of its obligations hereunder
(a bona fide dispute regarding the Performance Bonus shall not be a material
breach by the Company) and the failure of the Company to cure such breach within
thirty (30) days (reduced to ten (10) days for failure to pay Base Salary) after
receipt by the Company of a written notice from Executive specifying in
reasonable detail the nature of the breach, unless such breach requires a longer
period to cure, then the Company shall have the right to cure such breach within
such additional period of time not to exceed sixty (60) days; (B) Executive's
title or scope of responsibilities and duties are materially diminished from the
level provided in this Agreement, or the Company fails to provide Executive with
adequate office facilities and support services to perform such responsibilities
and duties; or (C) the Company changes Executive's principal place of employment
to a location more than 25 miles from the Company's principal Baltimore City
office as of the Effective Date. Executive's delay in providing notice of his
termination for Good Reason shall not be deemed to be a waiver of any such Good
Reason unless and until Executive fails to provide such notice within six months
after the occurrence of the event triggering such Good Reason, nor does the
failure to resign for one Good Reason prevent any later Good Reason resignation
for a similar or different reason.
(c) Death. Notwithstanding any other provision of this Agreement, this Agreement
shall terminate on the date of Executive's death. In this event, Executive's
estate shall be entitled to receive all accrued but unpaid amounts of
Executive's Base Salary and vacation through the date of Executive's death,
payable in accordance with the provisions of Sections 3(a) and 3(d) above. In
addition, Executive's eligible dependents shall be entitled to receive the
benefits specified in Section 4(a)(1)(D) above, to the extent applicable to
dependents. This Section 4(c) shall not limit the entitlement of Executive under
any insurance or other benefits plan or policy that is maintained by Prime for
Executive's benefit.
(d) Termination Following a Change of Control. If, within twenty-four (24)
months following a Change of Control, the Company terminates this Agreement
during its Original Term other than for Cause or Executive terminates this
Agreement during its Original Term with Good Reason, in either case, subject to
the notice provisions of Section 2 hereof, Executive (and Executive's eligible
dependents with respect to paragraph (D) below) shall be entitled to receive the
following benefits and payments:
(1) all accrued but unpaid amounts of Base Salary and vacation through the
effective date of termination, payable in accordance with the provisions of
Sections 3(a) and 3(d) above;
(2) a termination payment in an amount equal to the product of (x) the number of
full and partial years remaining in the Original Term (or, if greater, 2 years)
and (y) the One-Year Pay Equivalent, which amount shall be payable within thirty
(30) days of the effective date of termination;
(3) any vested benefits or amounts pursuant to Section 3(c), 3(e), 3(f) and 3(g)
hereof through the effective date of termination, payable in accordance with the
provisions of any such plan(s); and
(4) the health insurance benefits described in Section 3(c)(1) above for the
maximum period permitted under COBRA at the Company's sole expense, together
with either (i) additional benefits equivalent to those in effect at the date of
termination, such that Executive will receive Company-paid coverage for a total
of 24 months or (ii) if providing such benefits is not permitted by the tax laws
or applicable benefit plans, the after-tax equivalent of the premiums paid by
the Company for such coverage.
(e) "Change of Control" Defined. For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" or "group" (as
such terms are used for purposes of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, regardless of whether applicable), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of Prime or a corporation owned directly or indirectly by the stockholders of
Prime in substantially the same proportions as their ownership of stock of Prime
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of Prime representing 50% or more of the
total voting power represented by Prime's then outstanding securities that vote
generally in the election of directors (referred to herein as "Voting
Securities"); (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by Prime's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; (3) the individuals who constitute
the Board immediately before a proxy contest cease to constitute at least a
majority of the Board (excluding any Board seat that is vacant or otherwise
unoccupied) immediately following the proxy contest; (4) a merger or
consolidation of Prime with or into any other entity, other than a merger or
consolidation (i) that would result in the Voting Securities of Prime
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 50% of the total voting power represented by the
Voting Securities of Prime or such surviving entity outstanding immediately
after such merger or consolidation or (ii) where more than 50% of the Board of
Directors of the surviving entity is composed of members from the Board of
Directors of Prime, with terms ending at least 11 months after the date of the
merger or consolidation; or (5) the stockholders of Prime approve a plan of
complete liquidation of Prime or an agreement for the sale or disposition by
Prime of (in one transaction or a series of transactions) all or substantially
all of Prime's assets, and such transaction is substantially completed. However,
in no event will a Change of Control be deemed to have occurred, with respect to
Executive, if Executive is part of a purchasing group that consummates the
Change of Control transaction. Executive will be deemed to be "part of the
purchasing group" for purposes of the preceding sentence if Executive is an
equity participant in the purchasing company or group (except for: (i) passive
ownership of less than three percent of the stock of the purchasing company; or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not significant, as determined prior to the Change of Control by a
majority of the non-employee continuing directors).
(f) The Company may make any payments due Executive under Sections 3(g), 4(d),
and 6 before the completion of the Change of Control, if, in the reasonable
opinion of the Chairman of the Board's Compensation Committee (the "Chairman"),
all conditions for completion of the Change of Control are substantially likely
to be met. At that time, the Chairman may release the payments or authorize the
option vesting, subject to Executive's agreement to promptly return such
payments and agree to rescission of the vesting if the Change of Control does
not then occur.
(g) Purchase of Life Insurance. Notwithstanding anything to the contrary
contained herein, in the event that the services of Executive with the Company
terminate for any reason other than death, Executive shall have the right to
acquire any life insurance policies maintained by the Company on the life of
Executive by (i) notifying the Company in writing of his desire to so purchase
such life insurance policy or policies and (ii) tendering to the Company a
cashier's check in an amount equal to the interpolated surrender cash value of
such life insurance policy or policies together with any unearned portion of any
current year premium thereof, both within sixty (60) days of the effective date
of such termination.
5. Covenants of Executive.
(a) No Conflicts. Executive represents and warrants that he is not personally
subject to any agreement, order or decree that restricts his acceptance of this
Agreement and performance of his duties with the Company hereunder.
(b) Non-Disclosure. Executive shall not disclose or use, except for or on behalf
of the "Group" (consisting of Prime and the Operating Partnership and any of
their direct and indirect subsidiaries), any Trade Secret (as hereinafter
defined) of the Group, whether such Trade Secret is in Executive's memory or
embodied in writing or other physical form. For purposes of this Section 5(b),
"Trade Secret" means any information that derives independent economic value,
actual or potential, with respect to the Company from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use and is the subject of
efforts to maintain its secrecy that are reasonable under the circumstances,
including, but not limited to, trade secrets, customer lists, sales records and
other proprietary commercial information. Said term, however, shall not include
general "know-how" information acquired by Executive during the course of his
service. Executive shall be subject to the restrictions of this Section 5(b)
indefinitely.
(c) Non-Solicitation. During the period of the later of (i) Executive's
employment under this Agreement, or (ii) throughout the Original Term of this
Agreement, but only if Executive resigns other than for Good Reason or is
terminated by the Company with Cause, (the "Restrictive Period") and within the
United States (the "Restrictive Geographic Area"), Executive shall not hire,
cause to be hired, or induce or attempt to induce any officer, employee, agent,
consultant, independent contractor, tenant or customer of the Company to
discontinue such affiliation with the Company or to refrain from entering into
new business relationships with the Company. Notwithstanding the foregoing, if
any officer, employee, agent, consultant, independent contractor, tenant or
customer of the Company is contacted by, or receives a general communication or
solicitation directed to the general public from, an entity with which Executive
has become employed or otherwise affiliated, the parties hereto agree that such
contact or communication shall not violate this provision unless Executive
directly or indirectly initiated it. The time period during which the
prohibitions set forth above apply shall be extended by the length of time
during which it is judicially determined that Executive has violated any such
prohibition in any respect.
(d) Non-Competition. In return for the performance of the management duties
described in Section 1 hereof, Executive agrees that (A) during the Restrictive
Period he will not directly or indirectly, in any capacity whatsoever, either on
his own behalf or on behalf of any other person or entity with whom he may be
employed or associated, perform or solicit services for any of the following
entities: The Mills Corporation; Tanger Factory Outlet Centers, Inc.; Chelsea
GCA Realty, Inc.; New Plan Excel Realty Trust, Inc.; and Charter Oak Partners.
Executive agrees and acknowledges that during the Restrictive Period he is
prohibited from providing legal services to any of the named entities in this
Section 5(d); however, Executive is not prohibited from joining or otherwise
associating with a law firm in which other attorneys provide legal services to
any of the named entities.
(e) Return of Documents. Upon termination of his services with the Company,
Executive shall return all originals and copies of books, records, documents,
customer lists, sales materials, tapes, keys, credit cards and other tangible
property of the Company within Executive's possession or under his control.
Executive shall have the right to retain copies of forms and other documents
used by the Company, redacted to remove the specific references to the Company.
(f) Equitable Relief. In the event of any breach by Executive of any of the
covenants contained in this Section 5, it is specifically understood and agreed
that Company shall be entitled, in addition to any other remedy that it may
have, to seek equitable relief by way of injunction, an accounting or otherwise.
(g) Acknowledgment. Executive acknowledges that he will be directly and
materially involved as a senior executive in all important policy and
operational decisions of Company. Executive further acknowledges that the scope
of the foregoing restrictions has been specifically bargained between Company
and Executive, each being fully informed of all relevant facts. Accordingly,
Executive acknowledges that the foregoing restrictions of this Section 5 are
fair and reasonable, are necessary to protect the Company, its other
stockholders and the public from the unfair competition of Executive who, as a
result of his performance of services on behalf of the Company, will have had
unlimited access to the most confidential and important information of the
Company, its business and future plans. Executive furthermore acknowledges that
no unreasonable harm or injury will be suffered by him from enforcement of the
covenants contained herein and that he will be able to earn a reasonable
livelihood following termination of his services notwithstanding enforcement of
the covenants contained herein.
(h) Indemnification. The Company shall, to the maximum extent permitted by law,
and in addition to any such rights granted to or available to Executive under
the Company's Articles and By-Laws, or standing or other resolutions, defend,
indemnify and hold harmless Executive from and against any and all claims made
against Executive concerning or relative to his service, actions, or omissions
on behalf of the Company as an employee, officer, director or agent of the
Company. The Company shall, upon Executive's request, promptly advance or pay
any amounts for costs, charges, or expenses (including, without limitation,
legal fees and expenses incurred by counsel retained by Executive) in respect of
his right to indemnification hereunder, subject to a later determination as to
Executive's ultimate right to receive such payment. Executive's right to
indemnification shall survive until the expiration of any applicable statute of
limitations, without regard to the earlier termination of Executive's employment
hereunder or of the Term.
6. Golden Parachute Provision.
(a) Gross Up Payments. Anything in this Agreement to the contrary
notwithstanding, in the event that any payment by or on behalf of the Company to
or for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section) (the "Payments") is determined to be an "excess parachute payment"
pursuant to Code Section 280G or any successor or substitute provision of the
Code, with the effect that Executive is liable for the payment of the excise tax
described in Code Section 4999 or any successor or substitute provision of the
Code, or any interest or penalties are incurred by Executive with respect to
such Payments (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then Executive
shall be entitled to receive an additional payment from the Operating
Partnership (the "Gross-Up Payment") in an amount such that after payment by
Executive of all taxes imposed upon the Gross-Up Payment, including, without
limitation, federal, state, local or other income taxes, FICA taxes, and
additional Excise Tax (and any interest and penalties imposed with respect to
such taxes), Executive retains a portion of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Determination of Gross-Up. Subject to the provisions of paragraph (c) below,
all determinations required to be made under this Section 6, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that serves as the Company's auditors (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and Executive within 15 business days of the receipt of notice from
the Company or Executive that there have been Payments, or such earlier time as
is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, Executive shall designate another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 6, shall be paid by the Company to
Executive within five days after the receipt by the Company and Executive of the
Accounting firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with a written
opinion that failure to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and Executive, except as provided in paragraph (c) below.
(c) IRS Claims. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that the Internal Revenue Service or other agency will
claim that a greater Excise Tax is due, and thus a greater amount of Gross-Up
Payment should have been made by the Company than that determined pursuant to
paragraph (a) above (an "Underpayment"). In the event that Executive is required
to make a payment of any such Excise Tax, the Accounting Firm shall determine
the amount of the additional Gross-Up Payment due to Executive based on the
Underpayment, and such additional Gross-Up Payment shall be promptly paid by the
Company to or for the benefit of Executive. Executive shall notify the Company
in writing of any claim by the Internal Revenue Service or other agency that, if
successful, would require the payment by the Company of the Gross-Up Payment or
an Underpayment.
7. Transfer of Equity Interest to Employer Upon Termination of Employment. As of
the Date of Termination and in consideration for the payment of $100.00 cash,
Executive agrees to execute and deliver to Prime or its designee any and all
certificates for shares of capital stock (with appropriate stock powers attached
and properly signed) of Prime's subsidiaries and affiliates (other than the
Operating Partnership), including, but not limited to Prime Retail E-Commerce,
Inc., Prime Retail Stores, Inc., and Prime Retail Furniture, Inc. (all of which
are Maryland corporations) (the "Subsidiary Shares"). Executive further agrees
to execute and deliver such other documentation as Prime reasonably requests to
effect the assignment of the Subsidiary Shares. For the avoidance of doubt,
nothing contained in this Section 7 will be deemed to require Executive to
transfer or carry any of his equity interests in Prime or the Operating
Partnership.
8. Prior Agreement. This Agreement supersedes and is in lieu of any and all
other employment or service arrangements between Executive, on the one hand, and
Prime and/or the Operating Partnership or its predecessors or any subsidiaries,
on the other hand, and any and all such employment or service agreements and
arrangements are hereby terminated and deemed of no further force or effect.
9. Assignment. Neither this Agreement nor any rights or duties of Executive
hereunder shall be assignable by Executive and any such purported assignment by
him shall be void. Prime may assign all or any of its right hereunder provided
that substantially all of the assets of the Company are also transferred to the
same party; provided, however, that Prime and the Operating Partnership, jointly
and severally shall remain primarily liable to Executive to fulfill all of the
Company's obligations under this Agreement and that any such assignee also
agrees to be primarily liable to Executive jointly and severally with the
Company to fulfill all of the Company's obligations under this Agreement as
provided in Section 10 below.
10. Successors. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and the Company's
successors and assigns. If Executive should die while any amounts are still
payable to Executive hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there be no such designee,
to Executive's estate. The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, as the case may be,
by agreement in form and substance reasonably satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
11. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if delivered in person or sent by any
national overnight delivery service or by certified mail to the following
addresses (or to any other address that any party may designate by notice to the
other parties hereto):
(a) if to Executive, to:
C. Alan Schroeder
454 Garrison Forest Road
Owings Mills, Maryland 21117
with a copy to (which shall not constitute notice):
John B. Watkins and R. Scott Kilgore
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037
(b) if to Prime or to the Operating Partnership, to:
Prime Retail, Inc.
Attn: Board of Directors
100 East Pratt Street
19th Floor
Baltimore, Maryland 21202
<PAGE>
with a copy to (which shall not constitute notice):
Winston & Strawn
Attn: Steven J. Gavin
35 West Wacker Drive
Chicago, Illinois 60601
12. Amendment. This Agreement may not be changed, modified or amended except in
writing signed by all of the parties hereto.
13. Waiver of Breach. The waiver by any of the parties hereto of the breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any part.
14. Severability. The Company and Executive each expressly agree and contract
that it is not the intention of any of the parties hereto to violate any public
policy, statutory or common law, and that if any sentence, paragraph, clause or
combination of the same of this agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of such paragraph and this Agreement shall remain binding on the parties to make
the covenants of this Agreement binding only to the extent that it may be
lawfully done under existing applicable laws. In the event that any part of any
covenant of this Agreement is determined by a court of competent jurisdiction to
be overly broad thereby making the covenant unenforceable, the parties hereto
agree, and it is their desire that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified the covenant shall
be binding upon the parties as if originally set forth herein.
15. Opportunity to Employ Counsel. Executive acknowledges receipt of a copy of
this Agreement prior to his execution of this Agreement with the Company and
also acknowledges that he has had ample time and opportunity to employ counsel
of his choice to provide advice concerning the terms and conditions of this
Agreement.
16. Legal Fees. If any dispute or disagreement arising hereunder or related
hereto shall result in legal action between the Company and Executive, Executive
shall be entitled, within 30 days after incurring such fees and disbursements,
to recover from the Company any reasonable expenses for attorney's fees and
disbursements incurred by him in connection with Executive's good faith
maintenance or defense of such action, on an after-tax basis, unless Executive
does not prevail in such action.
17. No Mitigation. The Company waives, releases and remises (x) any obligation
or duty under applicable law or otherwise on the part of Executive to seek or
obtain other engagements or employment or to otherwise mitigate any payments or
damages to which Executive may be entitled to by reason of any operation or
termination of this Agreement; and (y) any right in or claim to any remuneration
or compensation received by Executive pursuant to any engagements or employment
subsequent to the termination of this Agreement.
18. Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Maryland,
exclusive of the conflict of laws provisions of the State of Maryland.
19. Binding Effect. This Agreement shall be binding and legally enforceable
against the parties hereto and their respective heirs, personal representatives,
successors and assigns, as the case may be.
(signature page follows)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
EXECUTIVE:
-----------------------
C. Alan Schroeder
PRIME RETAIL, INC., a Maryland corporation PRIME RETAIL, L.P., a Delaware
limited partnership
By: ______________________ By: Prime Retail, Inc.
Name: ______________________ Its: Sole General Partner
Title: ______________________
By: ______________________
Name: ______________________
Title: ______________________
<PAGE>
Exhibit A
Dispute Resolution
Mediation
If either party has a dispute or claim relating to this Agreement or their
relationship and except as set forth in Alternatives, the parties must first
seek to mediate the same before an impartial mediator the parties mutually
designate, at the Company's expense (other than their respective attorneys'
fees). Subject to the mediator's schedule, the mediation must occur within 45
days of either party's written demand. However, in an appropriate circumstance,
a party may seek emergency equitable relief from a court of competent
jurisdiction notwithstanding this obligation to mediate.
Binding
Arbitration
If the mediation reaches no solution or the parties agree to forego mediation,
the parties will promptly submit their disputes to binding arbitration before
one or more arbitrators (collectively or singly, the "Arbitrator") the parties
agree to select (or whom, absent agreement, a court of competent jurisdiction
selects). The arbitration must follow applicable law related to arbitration
proceedings and, where appropriate, the Employment Dispute Rules of the American
Arbitration Association.
Arbitration
Principles
All statutes of limitations and substantive laws applicable to a court
proceeding will apply to this proceeding. The Arbitrator will have the power to
grant relief in equity as well as at law, to issue subpoenas duces tecum, to
question witnesses, to consider affidavits (provided there is a fair opportunity
to rebut the affidavits), to require briefs and written summaries of the
material evidence, and to relax the rules of evidence and procedure, provided
that the Arbitrator must not admit evidence it does not consider reliable. The
parties agree (and the Arbitrator must agree) that all proceedings and decisions
of the Arbitrator will be maintained in confidence, to the extent legally
permissible, and not be made public by any party or the Arbitrator without the
prior written consent of all parties to the arbitration, except as the law may
otherwise require.
Discovery; The parties have selected arbitration to expedite the resolution of
disputes Evidence; and to reduce the costs and burdens associated with
litigation. The Presumptions parties agree that the Arbitrator should take these
concerns into account when determining whether to authorize discovery and, if
so, the scope of permissible discovery and other hearing and pre-hearing
procedures. The Arbitrator may permit reasonable discovery rights in preparation
for the arbitration, provided that it should accelerate the scheduling of and
responses to such discovery so as not to unreasonably delay the arbitration.
Exhibits must be marked and left with the Arbitrator until it has rendered a
decision. Either party may elect, at its expense, to record the proceedings by
audiotape or stenographic recorder (but not by video). The Arbitrator may
conclude that the applicable law of any foreign jurisdiction would be identical
to that of Maryland on the pertinent issue(s), absent a party's providing the
Arbitrator with relevant authorities (and copying the opposing party) at least
five business days before the arbitration hearing.
Nature of Award
The Arbitrator must render its award, to the extent feasible, within 30 days
after the close of the hearing. The award must set forth the material findings
of fact and legal conclusions supporting the award. The parties agree that it
will be final, binding, and enforceable by any court of competent jurisdiction.
Where necessary or appropriate to effectuate relief, the Arbitrator may issue
equitable orders as part of or ancillary to the award. The Arbitrator may award
reasonable attorneys' fees to the prevailing party to the extent a court could
have made such an award.
Appeal
The parties may appeal the award based on the grounds allowed by statute, as
well as upon the ground that the award misapplies the law to the facts, provided
that such appeal is filed within the applicable time limits law allows. If the
award is appealed, the court may consider the ruling, evidence submitted during
the arbitration, briefs, and arguments but must not try the case de novo. The
parties will bear the costs and fees associated with the appeal in accordance
with the arbitration award or, in the event of a successful appeal, in
accordance with the court's final judgment.
Alternatives
This Dispute Resolution provision does not preclude a party from seeking
equitable relief from a court (i) to prevent imminent or irreparable injury or
(ii) pending arbitration, to preserve the last peaceable status quo, nor does it
preclude the parties from agreeing to a less expensive and faster means of
dispute resolution.
