EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of May 20, 1999, by and between Starwood
Financial Advisors, L.L.C., a Connecticut limited liability company (the
"Company"), and Xxx Xxxxxxxx (the "Executive").
W I T N E S S E T H T H A T
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement. The term of the Executive's employment under this Agreement
shall be deemed to have commenced as of March 18, 1998 and, unless earlier
terminated in accordance with Section 4 hereof, shall continue through March 30,
2001 (such term of employment shall be referred to herein as the initial
"Employment Period"). Upon the expiration of the initial Employment Period and
upon each anniversary of the date of the expiration of the initial Employment
Period, the term of the Executive's employment hereunder shall automatically be
extended and shall continue to be binding upon the Company and the Executive for
an additional employment period of one year, subject to earlier termination in
accordance with Section 4, (collectively, the "Additional Employment Period")
unless either party gives prior written notice to the other party of its
decision not to extend the initial Employment Period or to further extend the
Additional Employment Period at least ninety (90) days prior to the scheduled
expiration of the initial Employment Period or the Additional Employment Period,
as the case may be.
2. POSITION AND DUTIES. a. During the term of his employment
hereunder, the Executive shall serve as Chief Executive Officer of the Company.
Subject to the provisions elsewhere set forth in this Section 2, the Executive
shall have such duties and
responsibilities as are customarily assigned to the chief executive officer of a
company of the size and nature of the Company, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the General Manager of the Company as of the date of this Agreement or
by any successor to such manager as the person or body ultimately responsible
for the business and affairs of the Company (the "Manager"). The Executive shall
be a member of the board of trustees (the "Trust Board") of Starwood Financial
Trust (the "Trust") as of the date of this Agreement, and the Company and the
Manager (so long as the Company or the Manager shall remain controlled, directly
or indirectly, by Xxxxx X. Xxxxxxxxxx and so long as the Company's Advisory
Agreement with the Trust (the "Advisory Agreement") shall not have been
terminated) shall use all reasonable efforts to maintain the Executive as a
member of the Trust Board, and as Chief Executive Officer of the Trust,
throughout the term of his employment hereunder. The Executive agrees that upon
the termination of his employment hereunder for any reason or upon the
termination of his position as the Chief Executive Officer of the Trust, his
membership on the Trust Board shall immediately and automatically terminate. The
Executive has executed and delivered, or upon written request shall execute and
deliver, a letter evidencing his agreement as set forth in the immediately
preceding sentence. The Executive's duties as Chief Executive Officer of the
Company shall include the preparation of an annual calendar year budget (as
modified and/or approved by the Manager, the "Budget") for the Company's
projected revenues and expenses for each calendar year occurring in whole or in
part during the term of the Executive's employment hereunder, which budget will
be submitted for the Manager's review, modification and approval no less than 30
days prior to the commencement of any period to be covered by such budget (with
a Budget that covers the balance of the calendar year 1999 having been
heretofore approved and initialed by Executive and the Manager and with a Budget
covering calender year 1998 being deemed to have been approved and satisfied).
The Budget shall contain such detailed line-item information as the Manager may
from time to time reasonably specify to the Executive. The Executive shall use
his best reasonable efforts to manage the Company in accordance with the Budget.
In the event that the Manager and the Executive shall disagree over a proposed
budget or over any modification to an existing Budget, then (x) to the extent
that the period covered by the proposed budget or modification shall be prior to
the "Cross-Over Date" (which means all periods prior to such date as no less
than 14,000,000 registered Class "A" Shares of the Trust (with appropriate
equitable adjustments upon the occurrence of any of the events specified in
Section 3.4 of the Stock Option Agreement referred to in Section 3(b) below)
shall be issued, outstanding and owned by persons other than "Excluded Parties"
as such term is defined in Section 3(d)(i) below) and during the term of the
Executive's employment hereunder, neither the Manager nor the Executive shall
unreasonably withhold or delay their respective approvals of such proposed
budget or modifications; and (y) to the extent that the period covered by the
proposed budget or modification shall occur on or after
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the Cross-Over Date and during the term of the Executive's employment hereunder,
neither the Manager nor the Executive shall unreasonably withhold or delay their
respective approvals of such proposed budget or modification so long as the
total costs to be incurred by the Company under such proposed budget or under
the existing Budget so modified shall not result in a projected net cash flow
for the Company of less than (i) for the calendar year 1999, that set forth in
the Budget heretofore approved and initialed by the Executive and the Manager,
(ii) for the calendar year 2000, $15 million, and (iii) for the calendar year
2001, $18 million; PROVIDED, HOWEVER, that the foregoing provisions of this
sentence shall not apply during any period after a Change in Control or
following any public announcement by the Trust of an intention to liquidate all
or substantially all of its assets. Except as provided in the preceding
sentence, no proposed Budget or proposed modification to an existing Budget
shall be effective unless and until the same has been approved by the Manager,
acting in its sole, good faith discretion.
b. In his capacity as Chief Executive Officer of the Company,
the Executive shall report directly to the Manager. All other executive officers
of the Company shall report to the Executive.
c. During the term of his employment hereunder, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote substantially all of his business time and attention to
the business and affairs of the Company and shall perform, faithfully and
diligently, his duties and responsibilities hereunder. It shall not be
considered a violation of the foregoing for the Executive to: (i) serve on
corporate, industry, civic, social or charitable boards or committees or engage
in charitable activities and community affairs; (ii) engage in business
activities involving one or more of the Excluded Parties; or (iii) manage his
own personal investments and affairs; PROVIDED that the foregoing activities do
not materially interfere with the performance of the Executive's
responsibilities hereunder.
d. Without limitation on the Manager's legal right to direct
the operations and affairs of the Company from time to time, the Executive shall
not, on or after the date hereof, knowingly take any of the following actions on
behalf of the Company outside the ordinary course of the Company's business
without the prior written approval of the Manager: (i) hiring or firing any
employee other than non-executive level employees terminable "at will" and
compensated solely from salary, discretionary bonuses and/or legally mandated
overtime; (ii) borrowing cash, or incurring material debt, on behalf of the
Company; (iii) entering into, materially modifying or terminating any material
lease or sublease of real estate or acquiring or disposing of any material
direct or indirect real estate interest; (iv) entering into, materially
modifying or terminating any material contracts or agreements binding upon the
Company; (v)
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entering into, materially modifying or terminating any arrangements or
agreements with affiliates or related parties of the Executive; or (vi)
knowingly taking any action or knowingly omitting to take any action that would
place the Company in material breach of the Advisory Agreement; PROVIDED,
HOWEVER, that no act or failure to act shall be considered "knowing" for
purposes of this Agreement unless it is done, or omitted to be done, without
reasonable belief that such action or omission was in, or not opposed to, the
best interests of the Company.
3. COMPENSATION. a. BASE SALARY. The Executive's compensation during
the term of his employment hereunder shall be determined by the Manager, subject
to the next sentence and the other provisions of this Section 3. During the term
of his employment hereunder, the Executive shall receive an annual base salary
("Annual Base Salary") of $225,000 per annum, subject to upward (but not
downward) adjustment by the Manager in its sole discretion. The Annual Base
Salary shall be paid in accordance with the Company's customary payroll
practices for its executives.
b. INCENTIVES. The terms, provisions and conditions relating
to the Executive's interest in the Company are as set forth in (x) Executive's
Exhibit "A" dated as of June 30, 1996 to that certain agreement captioned
"OPERATING AGREEMENT OF STARWOOD CAPITAL GROUP, L.L.C.", dated as of July, 1996,
by and among Xxxxx X. Xxxxxxxxxx, as general manager, and various members of
said Starwood Capital Group, L.L.C., as said Operating Agreement has been
modified by a first amendment thereto (the "First Amendment") dated as of
August, 1998 and as said Exhibit "A" has been modified by that certain
"SUPPLEMENT TO EXHIBIT A TO OPERATING AGREEMENT" for Xxx X. Xxxxxxxx dated as of
March 18, 1998 and (y) that certain letter agreement, dated as of January 1,
1999, by and between the Executive and Xxxxx X. Xxxxxxxxxx (acting as General
Manager of Starwood Capital Group, L.L.C., as President of STW Holdings I, Inc.
and as an authorized signatory for Starwood Financial Advisors II, L.L.C.) (the
"Shareholder Agreement"). The Manager and the Company each represent and warrant
that neither the Company, the Manager nor SCG, to the extent within such
person's direct or indirect control, will at any time hereafter allow (or has at
any time since March 18, 1998 allowed) any transfer of any direct or indirect
interest in the Advisor (including, without limitation, through the grant of any
profit participation pursuant to Section 10A of the Operating Agreement), or any
modification, termination or assignment of the Advisory Agreement, unless such
person reasonably believes (or believed), at the time of such transfer,
modification, termination or assignment (collectively, the "occurrence") and
after reasonable good faith investigation, either (m) that the occurrence does
not (did not) dilute the economic value represented by the Executive's direct
and indirect ownership interests in the Company or (n) that the Executive
received fair value in return for any such dilution. The terms, provisions
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and conditions relating to the initial option granted by the Company to the
Executive to purchase shares of the Trust are as set forth in that certain
agreement captioned "STARWOOD FINANCIAL ADVISORS, L.L.C. NON-QUALIFIED STOCK
OPTION AGREEMENT DATED AS OF MAY 20, 1999" by and between the Company and the
Executive (the "Stock Option Agreement")
c. FRINGE BENEFITS. (i) REIMBURSEMENT OF EXPENSES AND
ADMINISTRATIVE SUPPORT. The Company shall pay or reimburse the Executive, upon
the presentation of appropriate documentation of such expenses, for all
reasonable travel and other expenses incurred by the Executive in the ordinary
course of performing his obligations under this Agreement. The Company further
agrees to furnish the Executive with office space and administrative support,
and any other assistance and accommodations as shall be reasonably required by
the Executive in the performance of his duties hereunder. Without the prior
written approval of the Manager, the Executive shall not incur any material
expense, other than in the ordinary course of performing his duties hereunder,
for which the Executive desires reimbursement from the Company that would not in
turn be a reimbursable expense by the Trust to the Company.
(ii) PARTICIPATION IN BENEFIT PLANS. The Executive shall be
entitled to participate, during the term of his employment hereunder, in the
Company's benefit plans, programs and arrangements, including but not limited to
qualified and non-qualified pension and retirement plans, supplemental pension
and retirement plans, group hospitalization, health, medical, vision, dental
care, death benefit, disability, and post-retirement welfare plans, and other
present and future employee benefit plans, programs and arrangements of the
Company for which key executives are or shall become eligible (collectively, the
"Benefit Plans"), on no less favorable terms than other key executives of the
Company. The Executive shall be credited with four years of deemed service, as
well as with his actual service, for purposes of determining his entitlements
and benefits under any such Benefit Plans. The foregoing shall not be construed
as a guaranty of, or as an obligation on the part of the Company to provide, any
future awards (E.G., stock options, restricted stock or other performance
awards) under any Company incentive plans from time to time in effect for its
executives and other employees.
(iii) LIFE INSURANCE. In addition to and without limiting the
generality of the foregoing, the Company shall obtain and maintain a term life
insurance policy in the amount of $5,000,000, which policy shall be owned by the
Executive, from a nationally-recognized insurance carrier reasonably acceptable
to the Executive. Upon termination of the Executive's
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employment hereunder for any reason, the Company shall have no further
obligation to pay premiums on the policy referred to in this Section 3(c)(iii).
(iv) VACATION. During the term of his employment hereunder,
the Executive shall be entitled to four weeks paid vacation per annum. The
Executive shall not be entitled to any cash payment in respect of any unused
vacation time.
d. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred upon any of the following
events:
(i) any person or entity, or group of persons or entities
acting in concert, (OTHER THAN (x) Xxxxx X. Xxxxxxxxxx, his family members or
trusts for the benefit of same and his heirs and beneficiaries and (y) persons
or entities controlling, controlled by, under common control with or who are
employed directly or indirectly by, Starwood Capital Group, L.L.C., Starwood
Capital Group, L.P. or Xxxxx X. Xxxxxxxxxx (the parties described in (x) and (y)
being herein individually and collectively referred to as the "Excluded
Parties")), shall become the "beneficial owner" (as such term is currently used
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended)
of securities of the Trust representing more than fifty percent (50%) of the
outstanding voting power of the Trust; or
(ii) the aggregate direct and indirect equity ownership
interests in the Company of the Excluded Parties shall be less than forty
percent (40%) of the total equity ownership interests in the Company (measured
either by voting power or by value); or
(iii) the Company shall cease to be controlled, directly or
indirectly, by one or more of the Excluded Parties; or
(iv) all or substantially all of the business or assets of the
Trust or the Company shall be disposed of pursuant to a sale, liquidation,
merger, consolidation, or other transaction or series of transactions, other
than to one or more of the Excluded Parties; or
(v) any merger, consolidation, or like business combination or
reorganization of the Company resulting in the occurrence of any event described
in clause (i), (ii) or (iii) above shall be consummated with any person or
entity or group of persons or entities other than the Excluded Parties.
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Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred for any purpose under this Agreement if, immediately following a
transaction or occurrence that would otherwise be deemed to be a Change in
Control, (x) Excluded Parties "beneficially own" securities of the Trust
representing more than fifty percent (50%) of the outstanding voting power of
the Trust and (y) the Trust owns, directly or indirectly, more than eighty
percent (80%) of the equity ownership interests of the Company, measured both by
value and by voting power.
4. TERMINATION OF EMPLOYMENT. a. DEATH OR DISABILITY. The
Executive's employment hereunder shall terminate automatically upon the
Executive's death. The Manager and the Executive shall each be entitled to
terminate the Executive's employment hereunder because of the Executive's
Disability. "Disability" means that the Executive has been unable, for a period
of not less than (x) 120 consecutive days, or (y) 180 days within any 12 month
period, to perform the Executive's duties under this Agreement, as a result of
physical or mental illness, injury or impairment. A termination of the
Executive's employment by either party for Disability shall be communicated to
the other party by written notice, and shall be effective on the 30th day after
receipt of such notice by the other party (such 30th day being the "Disability
Effective Date"), unless the Executive returns to full-time performance of his
duties hereunder before the Disability Effective Date.
b. BY THE COMPANY. (i) The Manager may, on behalf of the Company,
terminate the Executive's employment hereunder for Cause or Without Cause.
"Cause" means (w) the conviction of the Executive for the commission of (A) any
felony, or (B) a misdemeanor involving moral turpitude, or (x) the Executive
knowingly engages in misconduct that constitutes a willful breach of this
Agreement, or in other willful misconduct, and that misconduct results in
material and demonstrable damage to the business or reputation of the Company or
the Trust, or (y) willful and complete abandonment by the Executive of his
duties hereunder, or (z) without the prior written approval of the Manager, for
any period covered by an applicable Budget, the Executive willfully and
knowingly causes the Company to incur voluntary expenditures that exceed
budgeted amounts by an aggregate amount equal to, or greater than, the greater
of (I) 5% of the total budgeted expenditures for the calendar year within which
such period falls and (II) a non-cumulative $500,000 per calendar year, AND the
Executive fails, on thirty days notice from the Manager, to take actions
(including, without limitation, causing other voluntary expenditures to be
reduced or contributing personal monies for the purpose of funding voluntary
expenditures) whose net effect is to offset the excess of (A) the voluntary
expenditures in excess of budgeted amounts over (B) the greater of the amounts
specified in subclause (I) and subclause (II) of this clause (z).
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(ii) A termination of the Executive's employment hereunder for
Cause may only be effected in accordance with the following procedures. The
Manager shall give the Executive written notice ("Notice of Termination for
Cause") of its intention to terminate the Executive's employment for Cause,
setting forth in reasonable detail the specific circumstances that it considers
to constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Members Meeting for
Cause. "Special Members Meeting for Cause" means a meeting of the Members of the
Company (or, if the Company is no longer a limited liability company, a meeting
of the board of directors, board of trustees, or analogous governing body or
person of the Company), called and held specifically for the purpose of
considering the Executive's termination for Cause, that takes place not less
than ten, and not more than twenty, business days after the Executive receives
the Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special Members Meeting
for Cause. The Executive's termination for Cause shall be effective when and if
a resolution is duly adopted at the Special Members Meeting for Cause
terminating his employment for Cause, subject to DE NOVO review of the question
whether Cause existed through arbitration in accordance with Section 12, below.
(iii) A termination of the Executive's employment hereunder by
the Company "Without Cause" (that is, not for Cause and not for Disability)
shall be effected by the Manager giving the Executive written notice of the
termination and shall not constitute a breach of this Agreement.
c. BY THE EXECUTIVE. (i) The Executive may terminate his
employment hereunder for Good Reason or Without Good Reason. "Good Reason"
means:
A. failure by the Company or the Manager to maintain the
Executive as the Chief Executive Officer of the Company, or failure to maintain
the Executive as a member of the Trust Board and as Chief Executive Officer of
the Trust, or the assignment to the Executive of any duties or responsibilities
inconsistent in any respect with those customarily associated with the positions
to be held by the Executive pursuant to this Agreement, or any diminution in the
Executive's position, authority, duties or responsibilities in a manner
inconsistent with the terms and provisions of this Agreement; PROVIDED, HOWEVER,
that, notwithstanding the foregoing, the Executive shall in no event invoke
"Good Reason" for a termination pursuant to this subsection A unless the
Executive shall have first given written notice to the Manager of the
circumstances purportedly constituting "Good Reason" and the Company shall have
failed to remedy such circumstances within the thirty (30) days thereafter; and
PROVIDED, FURTHER, that the occurrence of any transaction described in the last
sentence of
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Section 3(d) that results in a liquidation of the Company or a termination of
the Company's Advisory Agreement with the Trust shall not, in and of itself,
give rise to "Good Reason" under this Section 4(c)(i)(A) or otherwise so long as
(x) the Trust expressly assumes all of the Company's duties and obligations
under this Agreement as successor to the Company, (y) the Executive remains a
member of the Trust Board and Chief Executive Officer of the Trust and (z) the
Executive is afforded the continuing opportunity to hold, exercise and perform
on behalf of the Trust the duties, authorities, positions and responsibilities
previously performed by the Executive on behalf of the Company under this
Agreement; or
B. any requirement that the Executive's services
hereunder be rendered primarily at a location or locations other than
executive offices of the Company in Manhattan County, N.Y.; or
C. any purported termination of the Executive's
employment hereunder by the Company or the Manager for a reason or in a
manner not expressly permitted by this Agreement; or
D. the failure of any successor to all or
substantially all of the assets or business of the Company to promptly assume
in writing all of the obligations of the Company under this Agreement; or
E. any other material breach of this Agreement by
the Company that is not remedied by the Company within thirty (30) days after
receipt of written notice thereof from the Executive; or
F. any person is appointed to be President of the
Trust or of the Company over the objections of the Executive; or
G. a Change in Control (taking into account the last
sentence of Section 3(d) above) occurs.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by his giving the Manager written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the circumstances that constitute Good Reason and the specific
provision(s) of this Agreement on which the Executive relies and by the
Company's failure to remedy such circumstances within the cure period, if any,
specified above. The termination shall be effective on the fifth business day
following the date as of which
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said Notice of Termination for Good Reason shall have been given and all
applicable cure periods for the Company, if any, shall have expired without full
cure having occurred.
(iii) A termination of the Executive's employment by the
Executive "Without Good Reason" (that is, not for Good Reason, not for
Disability, and not by notice of non-extension pursuant to Section 1) shall be
effected by his giving the Manager written notice of the termination and shall
not constitute a breach of this Agreement.
d. NO WAIVER. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause or a Notice of Termination for
Good Reason shall not constitute a waiver of the right to assert, and shall not
preclude the party giving notice from asserting, such fact or circumstance in an
attempt to enforce any right under, or in connection with, this Agreement.
e. DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
Without Cause or by the Executive for Good Reason is effective, or the date on
which the Executive gives the Manager notice of a termination of employment
Without Good Reason or the date, if different, on which the Executive's
employment hereunder terminates pursuant to the provisions of Section 1.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. a. DEATH. If the
Executive's employment hereunder is terminated by the Executive's death, the
Company shall continue to pay to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's estate or legal
representative), the Annual Base Salary provided for in Section 3(a) as in
effect on the Date of Termination through the end of the month in which the
Executive's death occurs. The Company also shall promptly pay to the Executive's
designated beneficiaries (or, if there is no such beneficiary, to the
Executive's estate or legal representative), in a lump sum in cash within 30
days of the Date of Termination, the sum of the following amounts (the "Accrued
Obligations"): any monetary payment to which Executive was entitled from the
Company on the Date of Termination (PROVIDED, HOWEVER, that, for the avoidance
of doubt, the Accrued Obligations shall not include any amounts to which
Executive is entitled in his capacity as a member of Starwood Capital Group,
L.L.C.). With respect to medical insurance coverage, the Company shall continue
to provide the spouse and dependents of the Executive, at its expense, with the
medical insurance coverage then provided generally to dependents of employees of
the Company, for a period of one year following the termination of the
Executive's employment, which coverage shall be included as part of any required
continuation of coverage
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under Part 6, Subtitle B of Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or any similar state or local law ("COBRA
Coverage"); PROVIDED, HOWEVER, that the COBRA Coverage shall terminate with
respect to such spouse and/or dependents as of the date that the spouse and/or
dependents receive equivalent coverage and benefits under any plans, programs
and/or arrangements of any subsequent employer. Additional rights and benefits
of the beneficiaries, estate or other legal representatives of the Executive
under the benefit plans and programs of the Company and its affiliates shall be
determined in accordance with the provisions of such plans and programs. The
rights and benefits of the beneficiaries, estate or other legal representatives
of the Executive with respect to the items referred to in Section 3(b) above
shall be determined in accordance with the agreements referred to in said
Section 3(b) and the rights and benefits of the beneficiaries, estate or other
legal representatives of the Executive with respect to any subsequently granted
options, restricted stock or other performance awards shall be as set forth in
the provisions of the plans and grant agreements covering such subsequent
awards. Except as otherwise provided in this Agreement, neither the estate or
other legal representative of the Executive nor the Company shall have any
further rights or obligations under this Agreement.
b. DISABILITY. If the Executive's employment hereunder is
terminated by reason of the Executive's Disability, the Company shall continue
to pay to the Executive the Annual Base Salary provided for in Section 3(a), as
in effect on the Date of Termination, through the end of the sixth month after
the month in which the Date of Termination occurs, with a full offset for
payments (if any) received by the Executive during such period under the
long-term disability plans, programs and arrangements of the Company, the Trust,
and their affiliates. The Company also shall pay to the Executive, in a lump sum
in cash within 30 days of the Date of Termination, the Accrued Obligations. The
Company shall continue to provide the Executive and his spouse and eligible
dependents, at its expense, with the medical insurance coverage then provided
generally to employees of the Company and their eligible dependents, for a
period of one year following the termination of the Executive's employment,
which coverage shall be included as part of any required COBRA Coverage;
PROVIDED, HOWEVER, that the COBRA Coverage shall terminate with respect to the
Executive, his spouse and/or his dependents as of the date that such individual
receives equivalent coverage and benefits under any plans, programs and/or
arrangements of a subsequent employer. Additional rights and benefits of the
Executive under the benefit plans and programs (including, without limitation,
the long-term disability plans and programs) of the Company and its affiliates
shall be determined in accordance with the provisions of such plans and
programs. The rights and benefits of the Executive with respect to the items
referred to in Section 3(b) above shall be determined in accordance with the
agreements referred to in said Section 3(b) and the rights and benefits of the
Executive with respect to any
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subsequently granted options, restricted stock or other performance awards shall
be as set forth in the provisions of the plans and grant agreements covering
such subsequent awards. Except as otherwise provided in this Agreement, neither
the Executive nor the Company shall have any further rights or obligations under
this Agreement.
c. WITHOUT CAUSE BY THE COMPANY OR FOR GOOD REASON BY THE
EXECUTIVE. If the Executive's employment hereunder is terminated (x) Without
Cause by the Company or (y) for Good Reason by the Executive, the Company shall
promptly pay the Executive a lump-sum amount equal to the lesser of (m) the
aggregate base salary provided in Section 3(a) that would have been payable to
the Executive, at the rate in effect on the Date of Termination, had the
Executive remained employed hereunder through the end of the initial Employment
Period or the Additional Employment Period, as the case may be, and (n) an
amount equal to two times his Annual Base Salary as in effect on the Date of
Termination; PROVIDED, HOWEVER, that, in the event that such a termination
occurs after a Change in Control, the lump-sum amount shall be equal to two
times his Annual Base Salary as in effect on the Date of Termination. The rights
and benefits of the Executive with respect to the items referred to in Section
3(b) above shall be determined in accordance with the agreements referred to in
said Section 3(b) and the rights and benefits of the Executive with respect to
any subsequently granted options, restricted stock or other performance awards
shall be as set forth in the provisions of the plans and grant agreements
covering such subsequent awards. The Company shall continue to provide the
Executive, his spouse and his eligible dependents, at its expense, with the
medical insurance coverage then provided generally to employees of the Company
and their eligible dependents, for a period of one year following the
termination of the Executive's employment, which coverage shall be included as
part of any required COBRA Coverage; PROVIDED, HOWEVER, that the COBRA Coverage
shall terminate with respect to the Executive, his spouse and/or his dependents
as of the date that such individual receives equivalent coverage and benefits
under any plans, programs and/or arrangements of a subsequent employer.
Additional rights and benefits of the Executive under the benefit plans and
programs of the Company and its affiliates shall be determined in accordance
with the provisions of such plans and programs, if any. Except as otherwise
provided in this Agreement, neither the Executive nor the Company shall have any
further rights or obligations under this Agreement. The payment provided for in
the first sentence of this Section 5(c) is intended to constitute both
liquidated damages and consideration for the general release described in
Section 5(e) below.
d. FOR CAUSE BY THE COMPANY OR WITHOUT GOOD REASON BY THE
EXECUTIVE OR BY EXPIRATION OF THE TERM. If the Executive's employment hereunder
is terminated (x) for Cause by the Company or (y) Without Good Reason by the
Executive or (z) by expiration of the
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initial Employment Period or of the Additional Employment Period (as the case
may be), the Company shall pay to the Executive in a lump sum in cash within 30
days of the Date of Termination any portion of the Executive's Annual Base
Salary through the Date of Termination that has not yet been paid. The rights
and benefits of the Executive under the benefit plans and programs of the
Company and its affiliates shall be determined in accordance with the provisions
of such plans and programs. The rights and benefits of the Executive with
respect to the items referred to in Section 3(b) above shall be determined in
accordance with the agreements referred to in said Section 3(b) and the rights
and benefits of the Executive with respect to any subsequently granted options,
restricted stock or other performance awards shall be as set forth in the
provisions of the plans and grant agreements covering such subsequent awards.
Except as otherwise provided in this Agreement, neither the Executive nor the
Company shall have any further rights or obligations under this Agreement;
PROVIDED, HOWEVER, that nothing in this Section 5(d) shall be construed as a
release or waiver of any claim that the Company or the Executive may have (it
being understood that a termination of his employment hereunder by the Executive
Without Good Reason is not by itself a breach of this Agreement).
e. GENERAL RELEASE. The Company's obligation to make any
payment pursuant to the first sentence of Section 5(c) shall be contingent on
the Executive delivering to the Company, within thirty business days after the
Date of Termination, a general release (the "Release"), in customary form,
releasing the Company, its affiliates, the Excluded Parties and all current and
former members, officers and employees of the Company (collectively, the
"Releasees") from any claims relating to his employment hereunder, other than
claims relating to continuing obligations under (x) this Agreement, (y) any
compensation or benefit plan, program or arrangement in which the Executive was
participating as of the Date of Termination and (z) the agreements referred to
in Section 3(b) above; SUBJECT TO no Releasee initiating or maintaining any
"Proceeding" or "Claim" (as defined in Section 11, below) against the Executive
or any of his heirs, beneficiaries or legal representatives or against his
estate, other than "Proceedings" and "Claims" relating solely to enforcing the
Executive's continuing obligations under this Agreement or under any of the
agreements, plans, programs and arrangements referred to in clauses (x), (y) and
(z) of this sentence.
f. OTHER OBLIGATIONS. The respective obligations of the
Company and the Executive under Sections 5 through 16 shall survive any
termination of Executive's employment.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliates for
which the Executive may qualify,
13
nor, subject to paragraph (g) of Section 16, shall anything in this Agreement
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliates. Vested benefits
and other amounts that the Executive is otherwise entitled to receive under the
plans specified in Section 3 herein or under any other plan, policy, practice or
program of, or any contract or agreement with, the Company or any of its
affiliates on or after the Date of Termination shall be payable in accordance
with the terms of each such plan, policy, practice, program, contract or
agreement, as the case may be.
7. NO OFFSET, ETC. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company or any Releasee may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced, regardless of whether the Executive obtains other
employment or receives benefits or compensation in connection therewith.
8. WITHHOLDING. Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under this Agreement
all federal, state, local and foreign taxes that are required to be withheld by
applicable law or regulation.
9. CONFIDENTIAL INFORMATION. The Executive shall hold all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliates and their respective businesses that the Executive obtains during
his employment hereunder and that is not public knowledge (other than as a
result of the Executive's violation of this Section 9) ("Confidential
Information") in strict confidence. The Executive shall not communicate, divulge
or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except (i) in the course of performing
his duties for the Company, the Trust or their affiliates, (ii) in confidence to
any attorney, accountant or other professional for the purpose of securing
professional advice, (iii) with the prior written consent of the Company or (iv)
as otherwise required by law, regulation or legal process. If the Executive is
requested pursuant to, or required by, applicable law, regulation or legal
process to disclose any Confidential Information, the Executive shall provide
the Company, as promptly as the circumstances reasonably permit, with notice of
such request or requirement and, unless a protective order or other appropriate
relief is previously obtained, the Confidential Information subject to such
request may be disclosed pursuant to and in accordance with the terms of such
request or requirement, PROVIDED THAT the Executive shall use his best
reasonable efforts, at the
14
Company's request and expense, to limit any such disclosure to the precise terms
of such request or requirement.
10. NON-COMPETITION. The Executive acknowledges that the services to
be rendered by him to the Company (which, as used in this Section 10, shall be
deemed to include the Company and each of its subsidiaries) are of a special and
unique character. In consideration of his employment hereunder, the Executive
agrees, for the benefit of the Company, that he will not (other than in
connection with performing his duties for the Company, the Trust or their
affiliates):
a. during the term of his employment hereunder and, except in
the case of a termination Without Cause by the Company or for Good Reason by the
Executive, for twelve months thereafter: (i) engage, directly or indirectly,
whether as principal, agent, representative, consultant, employee, partner,
stockholder, limited partner or other investor (other than an investment of not
more than (x) five percent (5%) of the stock or equity of any corporation the
capital stock of which is publicly traded or (y) five percent (5%) of the
ownership interest of any limited partnership or other entity) or otherwise,
within the United States of America, in any business that competes directly and
materially with the business conducted by the Trust as of the Date of
Termination or (ii) solicit or entice, or attempt to solicit or entice, away
from the Company or the Trust, either for his own account or for any individual,
firm or corporation, any person known by him to have been, at any time during
the twelve months prior to such solicitation, enticement or attempt, a borrower
from, a lender to, or a direct and material participant in a substantial
financial transaction with, the Company or the Trust, or to have been actively
solicited by the Company or the Trust to become a borrower from, a lender to, or
a direct and material participant in a substantial financial transaction with,
the Company or the Trust; PROVIDED, HOWEVER, that the provisions of this Section
10(a)(ii) shall not apply to, and thus shall not be deemed to restrict, any
solicitation, enticement or attempt made on behalf of a venture or business that
does not compete directly and materially with the Trust in investment activities
relating to the real estate industry; or
b. during the term of his employment hereunder and for twelve
months thereafter: (i) solicit or entice, or attempt to solicit or entice, away
from the Company or the Trust or any Excluded Party any individual who is known
by the Executive to then be an officer or employee of the Company, the Trust or
any Excluded Party either for his own account or for any individual, firm or
corporation, whether or not such individual would commit a breach of a contract
of employment by reason of leaving the service of the Company, the Trust or the
Excluded Party, or (ii) employ, directly or indirectly, any person who is known
by the Executive
15
to have been, during the twelve months prior to employment by the Executive, an
officer, employee or sales representative of the Company, the Trust or any
Excluded Party.
11. INDEMNIFICATION. a. The Company shall promptly indemnify and
hold harmless the Executive, to the fullest extent permitted by law and to the
extent that he acted neither in deliberate bad faith nor in a manner that he
believed to be opposed to the interests of both the Company and the Trust,
against all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees reasonably incurred, reasonable costs of
investigation, judgments, fines, penalties, ERISA excise taxes, interest and
amounts paid, or to be paid, in settlement) incurred by the Executive in
connection with any Proceeding or Claim. The indemnification extended by this
Section 11(a) shall not apply to any cost, expense, liability or loss for which
the Trust is obliged to indemnify the Executive.
b. The Company shall advance to the Executive all costs and
expenses (including, without limitation, attorneys fees) reasonably incurred by
him in connection with a Proceeding or Claim within 20 days after receipt by the
Company of a written request for such advance. Such request shall include an
itemized list of the costs and expenses and an undertaking by the Executive to
repay the amount of such advance if it shall ultimately be determined that he is
not entitled to be indemnified against such costs and expenses. Upon a request
under this subsection (b), the Executive shall be deemed to have met any
standard of conduct required for indemnification of such costs and expenses
unless the contrary shall be established by a court of competent jurisdiction or
through arbitration in accordance with Section 12. The right to advancement of
costs and expenses provided by this Section 11(b) shall not apply to any cost or
expense that the Trust is obliged to advance to the Executive.
c. For the purposes of this Agreement, (i) the term
"Proceeding" shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which the Executive is made, or is
threatened to be made, a party or a witness by reason of the fact that he is or
was an officer or employee of the Company or is or was serving as an officer,
director, member, employee, trustee or agent of any other entity (excluding, for
purposes of this Section 11 only, the Trust) at the request of the Company,
whether or not the basis of such Proceeding arises out of or in connection with
the Executive's alleged action or omission in an official capacity, and (ii) the
term "Claim" shall mean any claim, demand, investigation, discovery request, or
request for testimony or information that arises out of or relates to
Executive's service as an officer, employer, agent or representative of the
Company or service at the Company's request as a director, officer, employee,
agent, manager, consultant, advisor, or
16
representative of any other entity (excluding, for purposes of this Section 11
only and only so long as the Company and the Trust are separate entities, the
Trust).
d. The Company shall not settle any Proceeding or Claim in any
manner which would impose on the Executive any penalty or limitation without his
prior written consent. The Executive shall not settle any Proceeding or Claim in
a manner that would impose any indemnification obligation on the Company
pursuant to this Section 11 without the prior written consent of the Company.
Neither the Company nor the Executive shall unreasonably delay or withhold its
or his consent under this subsection (d) to any proposed settlement.
e. The indemnification, and right to advancement of expenses,
provided in this Section 11 shall continue as to the Executive even if he has
ceased to serve in any of the capacities referred to in Section 11(c) and shall
inure to the benefit of the Executive's heirs, executors and administrators.
f. The indemnification provided in this Section 11 shall not
extend to any claims or disputes arising between the Company and the Executive
under, pursuant to, or with respect to, this Agreement or any agreement referred
to in Section 3(b) above. In the event of any such claim or dispute, such
dispute shall be resolved in accordance with Section 12.
g. During the term of the Executive's employment hereunder and
for six years thereafter, the Company shall keep in place, or cause to be kept
in place, a liability insurance policy (or policies) providing coverage to the
Executive that is in no respect less favorable then the coverage provided to any
other present or former officer, director, or trustee of the Company or the
Trust.
12. ARBITRATION. The provisions of this Section 12 shall apply and
control over any conflicting or inconsistent provisions elsewhere set forth in
this Agreement. In the event of any controversy, dispute or claim arising out of
or relating to this Agreement, the agreements referred to in Section 3(b), or
the Executive's employment by the Company or its affiliates, the parties hereto
agree that all such matters shall be resolved pursuant to arbitration in
accordance with the binding arbitration provision set forth in Section 27 of the
Operating Agreement of Starwood Capital Group, L.L.C. (which section was added
to said Operating Agreement pursuant to the First Amendment). For purposes
hereof, all references in said Section 27 to "Member" or "member" shall be
deemed to mean the Executive (or his successors as provided in Section 14 below
or in Section 3.1 of the Stock Option Agreement), all references therein to the
"Company" shall mean, when applicable, the "Company" as defined herein
17
(including, as applicable, its successors as provided in Section 14 below) and
all references therein to the "Agreement" shall mean this Agreement (or, as
applicable, any agreement referenced in Section 3(b) above or any agreement or
arrangement otherwise relating to this Agreement or to the Executive's
employment hereunder).
13. ATTORNEYS' FEES. The Company agrees to pay all legal fees and
expenses incurred by the Executive in connection with the preparation of this
Agreement up to a maximum of $100,000.
14. SUCCESSORS; BENEFICIARIES. a. This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive; PROVIDED, HOWEVER, that any of the Executive's
rights to compensation hereunder may be transferred by will or by the laws of
descent and distribution or as provided in Section 14(d).
b. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
c. No rights of the Company under this Agreement may be
assigned or transferred by the Company, other then to a successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company that promptly and
expressly agrees to assume and perform this Agreement in the same manner and to
the same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the term "Company"
shall mean both the Company as defined in the first sentence of this Agreement
and any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise; the term "Trust" shall mean both the Trust as
defined in the third sentence of Section 2(a) and any successor to all or
substantially all of the business or assets of the Trust; and the term "Trust
Board" shall include both the "Trust Board" as defined in the third sentence of
Section 2(a) and the board of trustees, board of directors, or analogous
governing body of any successor to all or substantially all of the business or
assets of the Trust. Notwithstanding any other provision in this Agreement to
the contrary, (i) neither Section 2(d) above nor any of the provisions in this
Agreement relating to Budgets, budgets, or modifications thereof (including,
without limitation, Section 4(b)(i)(z) and the last four sentences of Section
2(a)), shall apply in the event that a successor that is not a limited liability
company succeeds to all or substantially all of the business or assets of the
Company and (ii) none of the provisions relating to Budgets, budgets or
modifications thereof shall apply in the event that the Trust becomes the owner,
or "beneficial owner" (as such term is used as of May 10, 1999, in Rule 13d-3
promulgated under the Securities Exchange Act of 1934), directly or indirectly,
of more than fifty percent (50%) of (x) the business or assets of the Company
(measured by value) or (y) the outstanding equity securities, or other
18
outstanding membership, ownership or equity interests, of the Company (measured
either by voting power or by value); PROVIDED, HOWEVER, that in the event that
the Trust becomes the owner or "beneficial owner" of more than fifty percent
(50%) of the business, assets or interests described in clause (x) or (y), then
Executive shall use reasonable efforts in the conduct of his duties and
responsibilities to comply with any budget or budget modifications from time to
time in effect as prescribed by the Trust Board or by any duly constituted
committee thereof.
d The Executive shall be entitled, to the extent permitted
under any applicable law, to select and change the beneficiary or beneficiaries
to receive any compensation or benefit payable hereunder following the
Executive's death by giving the Company written notice thereof. In the event of
the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal representative.
15 REPRESENTATIONS. a. The Company and the Manager both represent
and warrant that (i) each is fully authorized, by action of any person or body
whose action is required, to enter into this Agreement and to perform its
obligations under it; (ii) the execution, delivery and performance of this
Agreement by the Company does not violate any applicable law, regulation, order,
judgment or decree or any agreement, plan or corporate governance document of
the Company, the Trust, or the Manager; and (iii) upon the execution and
delivery of this Agreement by the parties, this Agreement shall be the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
b The Executive represents and warrants that, to the best of
his knowledge and belief, (i) delivery and performance of this Agreement by him
does not violate any applicable law, regulation, order, judgment or decree or
any agreement to which the Executive is a party or by which he is bound, and
(ii) upon the execution and delivery of this Agreement by the parties, this
Agreement shall be the valid and binding obligation of the Executive,
enforceable against him in accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
16 MISCELLANEOUS. a. This Agreement shall be governed by, and
construed, performed and enforced in accordance with, the laws of the State of
New York, without reference to principles of conflict of laws. This Agreement
may not be amended or
19
modified except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
b All notices and other communications under this Agreement
shall be in writing and shall be given (i) by hand delivery or (ii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows or (iii) by nationally recognized overnight courier,
addressed as follows:
If to the Executive:
Xxx Xxxxxxxx
c/o Starwood Financial Advisors
1114 Avenue of the Xxxxxxxx, 00xx xxxxx
Xxx Xxxx, XX 00000
If to the Company or the Manager:
Starwood Financial Advisors, L.L.C.
Three Xxxxxxxx Xxxxx,
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx
Madison X. Xxxxx
or to such other address or addresses as either party furnishes to the other in
writing in accordance with this Section 16(b). Notices and communications shall
be effective when actually received by the addressee.
c The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
d The captions and headings in this Agreement are not part of
the provisions hereof and shall have no force or effect.
20
e The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
f No individual who is a direct or indirect officer, employee,
owner, member, director or trustee of the Company or the Trust shall have any
personal liability under this Agreement.
g The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between them concerning the specific
subject matter hereof except to the extent necessary to protect existing rights.
h The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law or as provided in Section 14(a) or 14(d). Any attempt by the
Executive to anticipate, alienate, assign, sell, transfer, pledge, encumber or
charge the same, except as required by law or as provided in Section 14(a) or
14(d), shall be void. Payments hereunder shall not be considered assets of the
Executive in the event of insolvency or bankruptcy.
i This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the
Company and the Manager have caused this Agreement to be executed in their name
and on their behalf, all as of the day and year first above written.
Xxx Xxxxxxxx
STARWOOD FINANCIAL ADVISORS, L.L.C.
By:
--------------------------------
Name:
21
Title:
-----------------------------
STARWOOD CAPITAL GROUP, L.L.C., as
Manager of Starwood Financial Advisors, L.L.C.
22
By:
--------------------------------
Name:
Title:
