SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 000 Xxxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 (the "Company"), and Xxxxxx Xxxxxxx, an
individual residing at 0000 Xx. Xxxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxxxx 00000 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to two (2) times the Base
Amount (as defined below). For purposes of this Section 3(a), the Base Amount
shall mean the Executive's annual compensation during the calendar year period
preceding the calendar year in which the Change in Control of the Company
occurs. For purposes of determining annual compensation in the preceding
sentence, there shall be included (i) all base salary and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted common shares of beneficial interest of the
Company (the "Shares"), if any, with respect to such preceding calendar year,
which Shares shall be valued based on their date of grant Fair Market Value (as
defined in Section 9.2 of the Company's 1995 Incentive Plan or any other plan or
agreement pursuant to which they are issued), and (iii) the fair market value of
any other property or rights given or awarded to the Executive by the Company
with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Xxxxxx X. Xxxxxxxxx
EXECUTIVE:
/s/ Xxxxxx Xxxxxxx
