Exhibit 10.6
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT (this "Agreement") is dated as of April 23,
2004, between Pennsylvania Real Estate Investment Trust, a Pennsylvania business
trust ("Company"), and Robert McCadden ("Executive").
BACKGROUND
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Company desires to employ Executive, and Executive desires to enter the
employ of Company, on the terms and conditions contained in this Agreement.
Executive will be substantially involved with Company's operations and
management and will have trade secrets and other confidential information
relating to Company and its business relationships; accordingly, the
noncompetition agreement and other restrictive covenants contained in Section 5
of this Agreement constitute essential elements hereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
1. CAPACITY AND DUTIES
1.1 EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs
Executive and Executive hereby accepts employment by Company for the period and
upon the terms and conditions hereinafter set forth.
1.2 CAPACITY AND DUTIES.
(a) Executive shall serve as Executive Vice President and Chief
Financial Officer of Company and, subject to the supervision and control of the
Chief Executive Officer of Company, shall have the duties and authority
generally consistent with such office. While serving as Executive Vice President
and Chief Financial Officer, Executive shall perform such other duties and shall
have such authority as may from time to time be specified by the Chief Executive
Officer of Company and as shall be consistent with the status and authority of
his current offices.
(b) Except as permitted by subsection (c) below, Executive (i)
shall devote his full working time, energy, skill, and best efforts to the
performance of his duties hereunder, in a manner that will comply with Company's
published rules and policies in effect from time to time, and (ii) shall not be
employed by or participate or engage in or in any manner be a part of the
management or operation of any business enterprise other than Company and its
Affiliates without the prior written consent of Company, which consent may be
granted or withheld in the sole discretion of Company. "Affiliate" as used in
this Agreement means any person or entity controlling, controlled by, or under
common control with, Company. "Control," as used in the definition of Affiliate,
means the power to direct the management and policies of a person or entity,
directly or indirectly, whether through the ownership of voting securities, by
contract, or otherwise; the terms "controlling" and "controlled" shall have
correlative meanings. Further, any person or entity that owns beneficially,
either directly or through one or more intermediaries, more than 20 percent of
the ownership interests in a specified entity shall be presumed to control such
entity for purposes of the definition of Affiliate.
(c) Notwithstanding the provisions of Section 1.2(b) hereof, and
subject to Section 5.2 hereof, Executive shall be permitted to serve on the
boards of directors or similar body of other organizations, including
publicly-owned corporations or other entities, philanthropic organizations and
organizations in which the Executive has made an investment, provided that
Executive's activities with respect to the foregoing do not, individually or in
the aggregate, in any significant way, interfere with, detract from, or affect
the performance of his duties to Company under this Agreement.
2. TERM OF EMPLOYMENT
2.1 TERM. The initial term of Executive's employment hereunder shall
begin on May 17, 2004 (the "Commencement Date") and last until December 31, 2006
(the "Expiration Date"), unless sooner terminated in accordance with the other
provisions hereof. Except as hereinafter provided, on the Expiration Date and on
each subsequent anniversary thereof, the Term (as hereinafter defined) shall be
automatically extended for one year unless either party shall have given to the
other party notice of non-renewal of this Agreement at least 120 days prior to
the expiration of the Term. The initial term of employment hereunder and each
Term as extended is a "Term." If a non-renewal notice is given as provided
above, Executive's employment under this Agreement shall terminate on the last
day of the Term.
3. COMPENSATION
3.1 BASE COMPENSATION. As compensation for Executive's services, Company
shall pay to Executive a salary at the annual rate of $325,000, payable in
periodic installments in accordance with Company's regular payroll practices in
effect from time to time. Executive's salary shall be reviewed annually and may
be increased from time to time pursuant to action taken or authorized by the
Executive Compensation and Human Resources Committee (the "Committee") of the
Board of Trustees of Company. Once increased, Executive's annual salary cannot
be decreased without the written consent of Executive. Executive's annual
salary, as determined in accordance with this Section 3.1, is hereinafter
referred to as the "Base Salary." No fewer than 15 days prior to the end of any
fiscal year during the Term, Company shall provide Executive with written notice
of his Base Salary, bonus plan eligibility and equity incentive awards, if any,
for the following fiscal year. Such notice shall provide sufficient information
regarding Executive's bonus plan eligibility so that Executive's maximum
potential bonus is readily ascertainable. Failure to provide such notice on a
timely basis (such failure, a "Compensation Notice Delinquency") shall not be
deemed a breach by Company; however, if the Compensation Notice Delinquency
occurs during or after the final year of the initial Term, Executive shall then
be permitted to exercise his termination right under Section 4.7 hereof.
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3.2 CASH INCENTIVES. Executive shall be entitled during his employment
hereunder to participate in such of Company's cash incentive plans and programs
as may from time to time be provided by Company for its executive officers, in
each case as determined by the Committee or the Board of Trustees of Company, as
appropriate, subject, however, to the provisions of Schedule 3.2 hereto.
3.3 EMPLOYEE BENEFITS. In addition to the compensation provided for in
Sections 3.1 and 3.2, Executive shall be entitled, during his employment
hereunder, to participate in such of Company's employee benefit plans and
benefit programs, including medical benefit programs, as may from time to time
be provided by Company for its executive officers. Company shall use its
commercially reasonable efforts to provide Executive with health insurance
through a preferred provider, traditional indemnity or equivalent plan.
3.4 VACATION. During the Term, Executive shall be entitled to a paid
vacation of 25 days during each calendar year or such additional number of days
as is provided in the Employee Handbook published from time to time by Company
(the "Company Employee Handbook"). Executive's right to carry forward unused
vacation days for a calendar year to any future calendar year shall be governed
by Company's Employee Handbook as in effect from time to time.
3.5 EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with its regular reimbursement policies as in
effect from time to time and upon receipt of itemized vouchers and such other
supporting information with respect to such expenses as Company may reasonably
require. Company shall pay to maintain Executive's professional license as a
certified public accountant in Florida, New Jersey, and Pennsylvania, and shall
reimburse Executive for all reasonable costs incurred in complying with any
continuing education or other requirements to maintain his licenses in those
states.
3.6 EQUITY PLANS. Executive shall be entitled, during his employment
hereunder, to participate in such of Company's equity incentive plans and
programs ("Equity Plans") as may from time to time be provided by Company for
its executive officers at such level as shall be determined by the Committee or
the Board of Trustees of Company, as appropriate.
3.7 NONQUALIFIED RETIREMENT PLAN. Company shall enter into a
nonqualified supplemental executive retirement plan with Executive whereby
Company shall agree to credit a bookkeeping account maintained by Company for
Executive with a deemed contribution of $25,000 per fiscal year. Such deemed
contribution shall be credited during the Term as of the first day of each
fiscal year of Company beginning with its 2004 fiscal year, and shall earn
interest at the rate of 10% compounded annually. Executive shall at all times be
fully vested in such account, and such account shall be paid to Executive in a
single sum within 60 days after termination of Executive's employment with
Company for any reason.
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3.8 RESTRICTED SHARES. Executive shall be eligible to receive restricted
shares of beneficial interest in the Trust, par value $1.00 per share ("Shares")
in accordance with Schedule 3.8 hereto. Dividends shall be paid to Executive on
a current basis (including, with respect to the signing award described on
Schedule 3.8, an amount equal to any dividends that would have been payable from
and after the Commencement Date and before the date the restricted Shares are
awarded to him) on all vested and unvested restricted Shares. All restrictions
on the restricted Shares (other than pursuant to applicable securities laws)
shall end upon the vesting of such Shares.
4. TERMINATION OF EMPLOYMENT
4.1 DEATH OF EXECUTIVE. If Executive dies during the Term, Company shall
thereafter be obligated to continue to pay the Base Salary to Executive's estate
for the remainder of the Term or, if the remainder of the Term is less than one
year, for a period of 12 months, periodically in accordance with Company's
regular payroll practices and, within 30 days of the death of Executive, shall
pay any other amounts (including salary, bonuses, vacation pay, expense
reimbursement, etc.) that have been fully earned by, but not yet paid to,
Executive under this Agreement as of the date of Executive's death. If, for the
year in which Executive dies, Company achieves the performance goals established
in accordance with any cash incentive plan in which Executive participates,
Company shall pay Executive's estate an amount equal to the bonus that Executive
would have received had he been employed by Company for the full year,
multiplied by a fraction, the numerator of which is the number of calendar days
Executive was employed in such year and the denominator of which is 365. Upon
Executive's death (a) each outstanding option granted to Executive before, on or
after the date hereof shall become vested and shall be immediately exercisable
in accordance with the terms thereof, (b) each outstanding nonqualified stock
option ("NQSO") granted to Executive before, on or after the date hereof shall
be exercisable until the earlier of 180 days after the death of Executive or the
scheduled expiration date of such option, (c) the exercise period of each
incentive stock option ("ISO") granted to Executive before, on or after the date
hereof shall be governed by the terms of the relevant ISO Agreement, (d) the
vesting of all restricted shares granted to Executive shall be governed by the
terms of the plan or other document pursuant to which they were issued, and (e)
Executive's spouse and dependents (if any) shall be entitled for the balance of
the Term or, if the balance of the Term is less than one year, for a period of
12 months, to continue to receive medical benefits insurance coverage at
Company's expense if and to the extent Company was paying for such benefits for
Executive's spouse and dependents at the time of Executive's death. Executive's
spouse and dependents shall be entitled to such rights as they may have to
continue coverage at their sole expense as are then accorded under Part 6 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("COBRA"), for the COBRA coverage period following the expiration of the
period, if any, during which Company paid such expense.
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4.2 DISABILITY OF EXECUTIVE. If Executive is or has been materially
unable for any reason to perform his duties hereunder for 120 days during any
period of 150 consecutive days, Company shall have the right to terminate
Executive's employment upon 30 days' prior written notice to Executive at any
time during the continuation of such inability, in which event Company shall
thereafter be obligated to continue to pay Executive's Base Salary for the
remainder of the Term or, if the remainder of the Term is less than one year,
for a period of 12 months, periodically in accordance with Company's regular
payroll practices and, within 30 days of such notice, shall pay any other
amounts (including salary, bonuses, vacation pay, expense reimbursement, etc.)
that have been fully earned by, but not yet paid to, Executive under this
Agreement as of the date of such termination. The amount of payments to
Executive under disability insurance policies paid for by Company shall be
credited against and shall reduce the Base Salary otherwise payable by Company
following termination of employment. If, for the year in which Executive's
employment is terminated pursuant to this Section, Company achieves the
performance goals established in accordance with any cash incentive plan in
which Executive participates, Company shall pay Executive an amount equal to the
bonus that Executive would have received had he been employed by Company for the
full year, multiplied by a fraction, the numerator of which is the number of
calendar days Executive was employed in such year and the denominator of which
is 365. Upon termination of Executive's employment pursuant to this Section, (a)
each outstanding option granted to Executive before, on or after the date hereof
shall become vested and shall be immediately exercisable in accordance with the
terms thereof, (b) each outstanding NQSO granted to Executive before, on or
after the date hereof shall be exercisable until the earlier of 180 days after
the termination of Executive's employment pursuant to this Section or the
scheduled expiration date of such option, (c) the exercise period of each ISO
granted to Executive before, on or after the date hereof shall be governed by
the terms of the relevant ISO Agreement, (d) the vesting of all restricted
shares granted to Executive shall be governed by the terms of the plan or other
document pursuant to which they were issued, and (e) Executive shall be entitled
for the balance of the scheduled Term or, if the balance of the Term is less
than one year, for a period of 12 months, to continue to receive at Company's
expense medical benefits coverage for Executive and Executive's spouse and
dependents (if any) if and to the extent Company was paying for such benefits to
Executive and Executive's spouse and dependents at the time of such termination.
Executive and his spouse and dependents shall be entitled to such rights as they
may have to continue coverage at his or their sole expense as are then accorded
under COBRA for the COBRA coverage period following the expiration of the
period, if any, during which Company paid such expense.
4.3 TERMINATION FOR CAUSE. Executive's employment hereunder shall
terminate immediately upon notice that Company is terminating Executive for
Cause, in which event Company shall not thereafter be obligated to make any
further payments hereunder other than amounts (including salary, bonus, vacation
pay, expense reimbursement, etc.) that have been fully earned by, but not yet
paid to, Executive under this Agreement as of the date of such termination, and
which shall be paid within 30 days of such termination. Upon termination of
Executive's employment pursuant to this Section 4.3, (a) each outstanding NQSO
granted to Executive before, on, or after the date hereof that is vested and
currently exercisable as of the date Executive's employment is terminated
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pursuant to this Section shall remain exercisable until the earlier of 30 days
following Executive's termination or the scheduled expiration date of such
option, (b) the exercise period of each ISO granted to Executive before, on or
after the date hereof shall be governed by the terms of the relevant ISO
Agreement, (c) all vested restricted shares granted to Executive shall be
delivered to Executive free and clear of any restrictions, other than pursuant
to applicable securities laws, and (d) Executive and his spouse and dependents
shall have such rights (if any) to continue medical benefits coverage at his or
their sole expense following termination for Cause as are then accorded under
COBRA for the COBRA coverage period. "Cause" shall mean the following:
(a) (i) fraud in connection with Executive's employment, (ii)
theft, misappropriation or embezzlement of funds of Company or any of its
Affiliates, or (iii) an act resulting in termination pursuant to the provisions
of the Code (as defined in Section 6.4);
(b) indictment of Executive for a crime involving moral turpitude;
(c) breach of Executive's obligations under Sections 5.1 or 5.2 of
this Agreement;
(d) failure of Executive to perform his duties to Company (other
than on account of illness, accident, vacation or leave of absence) that
persists for more than 30 calendar days after written demand for substantial
performance which specifically identifies the manner in which Executive has
failed to perform; or
(e) Executive's repeated abuse of alcohol or drugs.
4.4 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON.
(a) If at any time during the Term (1) Executive's employment is
terminated by Company for any reason other than Cause or the death or disability
of Executive or (2) Executive's employment is terminated by Executive for Good
Reason (as hereinafter defined):
(i) Company shall, on or before Executive's last day of
full-time employment hereunder, pay Executive all amounts (including salary,
bonuses, vacation pay, expense reimbursement, etc.) that have been fully earned
by, but not yet paid to, Executive under this Agreement as of the date of such
termination plus a lump sum cash payment equal to the greater of (x) Executive's
then current Base Salary through the end of the Term and (y) two times (A)
Executive's then current annual Base Salary plus (B) an amount equal to the
average of the percentages of Base Salary that were paid to Executive as cash
bonuses in each of the last three full calendar years multiplied by Executive's
then current Base Salary (the "Average Bonus"). The portion of the lump sum cash
payment contemplated by the preceding sentence that represents Executive's Base
Salary or a multiple thereof shall be discounted from the dates that the Base
Salary would have been payable in accordance with Company's regular payroll
practices at the time of termination during the relevant period following
termination to present value on the date of payment at a discount rate equal to
200 basis points plus the London Interbank Offered Rate for a one month period
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set forth in The Wall Street Journal (the "WSJ") on the date of termination of
employment or, if the WSJ is not published on such date, the first day following
such termination on which the WSJ is published; provided, however, if the
Executive is entitled to the lump sum payment set forth in the preceding
sentence, by written notice to Company within ten days of such termination,
Executive may elect to receive the Base Salary component of such lump sum
payment in accordance with Company's regular payroll practices during the
relevant period following termination, as applicable, rather than as part of
such lump sum payment, in which event, such periodic payments of Base Salary
shall not be discounted as provided in this sentence;
(ii) Executive shall be entitled to continue, for the balance
of the Term or, if the balance of the Term is less than one year, for a period
of 12 months, to receive at Company's expense medical benefits coverage for
Executive and Executive's spouse and dependents (if any) if and to the extent
Company was paying for such benefits to Executive and Executive's spouse and
dependents at the time of such termination. Executive and his spouse and
dependents shall be entitled to such rights as he or they may have to continue
coverage at his or their sole expense as are then accorded under COBRA for the
COBRA coverage period following the expiration of the period, if any, during
which Company paid such expense; and
(iii) Anything to the contrary in any other existing agreement
or document notwithstanding, each outstanding stock grant and stock option
granted to Executive before, on or after the date hereof shall become
immediately vested and exercisable on the date of such termination, and, with
respect to each outstanding NQSO granted to Executive before, on or after the
date hereof, such NQSO shall remain exercisable until the earlier of 180 days
following such termination or the scheduled expiration date of such option. The
exercise period of each ISO granted to Executive before, on or after the date
hereof shall be governed by the terms of the relevant ISO Agreement.
(b) "Good Reason" shall mean the following:
(i) a material breach of Company's obligations to Executive
hereunder, provided that Executive shall have given written notice thereof to
Company, and Company shall have failed to remedy the breach within 20 calendar
days after such notice;
(ii) the relocation of Executive's principal business office
more than 30 miles from Company's current offices in downtown Philadelphia
without the consent of Executive;
(iii) the receipt by Executive of written notice that Company
elects not to renew this Agreement under Section 2.1 hereof;
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(iv) Company changes the job description, office title and/or
responsibilities provided for in this Agreement, excluding promotions or
increased responsibilities;
(v) Company shall reduce its aggregate directors and
officers insurance coverage in force as of the Commencement Date by more than
20%; or
(vi) Company shall amend, modify or repeal Paragraph 14 of
its Trust Agreement or Article 5 of its By-Laws, each as currently in effect, if
the effect of such amendment, modification or repeal would be to alter, to the
detriment of Executive, the rights of Executive to indemnification or advance of
expenses based on an act or failure to act that took place during Executive's
employment hereunder.
(c) Notwithstanding the foregoing, Company shall not be obligated
to make any payments under this Section 4.4 unless Executive has executed and
delivered to Company a further agreement, to be prepared at the time of
Executive's termination of employment, that shall provide (i) an unconditional
release by Executive of all claims, charges, complaints and grievances, whether
known or unknown to Executive, against Company and any Affiliate (including,
with respect to matters relating to his employment hereunder, any trustee,
officer, employee or agent of Company or any Affiliate) through the date of
Executive's termination of employment; (ii) an undertaking to maintain the
confidentiality of such agreement; and (iii) an undertaking to indemnify Company
if Executive breaches such agreement.
(d) If Executive's employment is terminated by Executive for Good
Reason within six months before or 12 months after a Change of Control of
Company, Section 4.5 hereof shall govern the rights and obligations of the
parties and this Section shall be of no effect.
4.5 CHANGE OF CONTROL.
(a) If, during a Term, there should be a Change of Control (as
defined herein), and within six months before such Change of Control or 12
months thereafter either (1) Executive's employment shall be terminated by
Company for any reason other than for death, disability, or Cause or (2)
Executive's employment is terminated by Executive for Good Reason:
(i) Company shall, on or before Executive's last day of
full-time employment hereunder, pay to Executive all amounts (including salary,
bonuses, vacation pay, expense reimbursement, etc.), that have been fully earned
by, but not yet paid to, Executive under this Agreement as of such termination
plus a lump sum cash payment equal to greater of (x) Executive's then current
Base Salary through the end of the Term and (y) two times (A) Executive's then
current annual Base Salary plus (B) the Average Bonus.
(ii) Executive shall be entitled to continue, for the balance
of the Term or, if the balance of the Term is less than one year, for a period
of 12 months, to receive medical benefits coverage for Executive and Executive's
spouse and dependents (if any), to the extent Executive was so entitled prior to
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such termination, at Company's expense if and to the extent Company was paying
for such benefits to Executive and Executive's spouse and dependents at the time
of such termination. Executive and his spouse and dependents shall be entitled
to such rights as he or they may have to continue coverage at his sole expense
as are then accorded under COBRA for the COBRA coverage period following the
expiration of the period during which Company paid such expense.
(b) Anything to the contrary in any other agreement or document
now or hereafter existing notwithstanding, upon a Change of Control and without
regard to whether Executive's employment is thereafter terminated, Executive
shall become fully vested as of the time immediately before such Change of
Control in all then existing stock grants, each stock option previously issued
to him thereupon shall become immediately vested and exercisable, without regard
to continued employment or performance-based vesting standards, and each NQSO
shall remain exercisable until the earlier of 180 days following such Change of
Control or the scheduled expiration date of such option. The exercise period of
any ISO granted to Executive before, on or after the date hereof shall be
governed by the terms of the relevant ISO Agreement.
(c) In the event Executive is required to pay any excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"IRC"), (the "Excise Tax"), Company shall pay to Executive an additional payment
in an amount equal to one half of the Excise Tax (the "Tax Reimbursement");
provided that the Tax Reimbursement shall not be grossed-up to cover any excise,
income or employment taxes assessed upon it. Notwithstanding anything to the
contrary in this Section 4.5, if the amounts otherwise payable to Executive
would, in the opinion of Company's regularly engaged independent certified
public accountants, constitute "excess parachute payments" within the meaning of
Section 280G of the IRC, and if the net after-tax payment to Executive (after
giving effect to the Excise Tax and Tax Reimbursement) would be increased by
reducing the total compensation payable pursuant to this Section 4.5 to the
maximum amount that may be paid to Executive without such payment constituting
an "excess parachute payment," then the compensation payable under this Section
4.5 shall be so reduced. In the event Company determines such a reduction is
necessary, it shall promptly notify Executive of the amount of the required
reduction. Executive shall have the right to request, in writing, within ten
days after receipt of Company's notice to him, that the reduction be effected
through either a reduction in restricted shares that would otherwise vest and/or
changes in cash payments, or any combination thereof, provided, however, that in
the event Executive does not deliver such request to Company within such ten day
period, then, to the fullest extent possible, such reduction shall first be
effected through a reduction in the number of restricted shares that would
otherwise vest and thereafter by cash payments being reduced to the extent of
the balance.
(d) A "Change of Control" of Company shall mean:
(1) The acquisition by an individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
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ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30 percent or more of the combined voting power of the then outstanding
voting securities of Company entitled to vote generally in the election of
trustees (the "Outstanding Shares"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from Company unless, in connection therewith, a majority of the
individuals who constitute the Board of Trustees of Company as of the date
immediately preceding such transaction cease to constitute at least a majority
of the Board, (ii) any acquisition by Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Company or
any entity controlled by Company, (iv) any acquisition by any individual,
entity, or group in connection with a Business Combination (as defined below)
that fails to qualify as a Change of Control pursuant to paragraphs (3) or (4)
below, or (v) any acquisition by any Person entitled to file Form 13G under the
Exchange Act with respect to such acquisition; or
(2) Individuals who, as of the date hereof, constitute the
Board of Trustees of Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a trustee subsequent to the date hereof whose appointment,
election, or nomination for election by Company's shareholders was approved by a
vote of at least a majority of the trustees then comprising the Incumbent Board
or by a majority of the members of a committee authorized by the Incumbent Board
to approve such appointment, election, or nomination (other than an appointment,
election, or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the trustees of Company) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(3) Approval by the shareholders of Company of a
reorganization, merger, or consolidation, or sale or other disposition of all or
substantially all of the assets of Company (a "Business Combination"), in each
case, if, following such Business Combination all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Shares immediately prior to such Business Combination beneficially own, directly
or indirectly, less than 40 percent of, respectively, the then outstanding
shares of equity securities and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
trustees or directors, as the case may be, of the entity resulting from such
Business Combination (including, without limitation, an entity which, as a
result of such transaction, owns Company or all or substantially all of
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as such beneficial owners held their
ownership, immediately prior to such Business Combination, of the Outstanding
Shares; or
(4) Approval by the shareholders of Company of a Business
Combination, if, following such Business Combination all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Shares immediately prior to such Business Combination beneficially own, directly
or indirectly, 40 percent or more but less than 60 percent of, respectively, the
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then outstanding shares of equity securities and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of trustees or directors, as the case may be, of the entity resulting
from such Business Combination (including, without limitation, an entity which,
as a result of such transaction, owns Company or all or substantially all of
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as such beneficial owners held their
ownership, immediately prior to such Business Combination, of the Outstanding
Shares, and (i) any Person (excluding any employee benefit plan (or related
trust) of Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 30 percent or more of, respectively,
the then outstanding shares of equity securities of the entity resulting from
such Business Combination or the combined voting power of the then outstanding
voting securities of such entity except to the extent that such ownership
existed prior to the Business Combination, or (ii) at least a majority of the
members of the board of trustees or directors of the entity resulting from such
Business Combination were not members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination, or (iii) the Chief Executive Officer of Company at
the time of the execution of the initial agreement providing for such Business
Combination is not appointed or elected to a comparable or higher position with
the entity resulting from such Business Combination, or (iv) the executive
officers of Company holding the title of Executive Vice President or higher at
the time of the execution of the initial agreement for such Business Combination
constitute less than a majority of the executive officers holding comparable or
higher titles of the entity resulting from such Business Combination; or
(5) Approval by the shareholders of Company of a complete
liquidation or dissolution of Company.
Approval by the shareholders of Company of a Business Combination following
which all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Shares immediately prior to such Business
Combination beneficially own, directly or indirectly, 60 percent or more of,
respectively, the then outstanding shares of equity securities and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of trustees or directors, as the case may be, of the
entity resulting from such Business Combination (including, without limitation,
an entity which, as a result of such transaction, owns Company or all or
substantially all of Company's assets either directly or through one or more
subsidiaries) shall not constitute a "Change of Control" unless following such
transaction the provisions of paragraphs (1) or (2) are independently satisfied.
4.6 VOLUNTARY TERMINATION. In the event Executive's employment is
voluntarily terminated by Executive without Good Reason, Company shall not be
obligated to make any further payments to Executive under this Agreement other
than amounts (including salary, bonuses, vacation pay, expense reimbursement,
etc.) that have been fully earned by, but not yet paid to, Executive as of the
date of Executive's termination. Executive shall also have such rights to
continue medical coverage at his sole expense following such voluntary
termination as are then accorded under COBRA.
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4.7 SPECIAL TERMINATION RIGHT. Executive shall have the right to
terminate his employment hereunder upon 90 days prior written notice to Company
at any time within 30 days after (a) the occurrence during or after the final
year of the initial Term of a Compensation Notice Delinquency or (b) the date on
which he is notified pursuant to Section 3.1 hereof of his Base Salary and bonus
plan eligibility with respect to any fiscal year of Company commencing after the
end of the initial Term of this Agreement. Upon termination of Executive's
employment pursuant to this Section, Company shall not be obligated to make any
further payments to Executive under this Agreement other than as provided in
Section 4.6.
5. RESTRICTIVE COVENANTS
5.1 CONFIDENTIALITY. Executive acknowledges a duty of confidentiality
owed to Company and shall comply with the confidentiality section of Company's
Employee Handbook as in effect from time to time.
5.2 NONCOMPETITION. During the term of Executive's employment and for
one year after termination of Executive's employment by Company for Cause or by
Executive for other than either Good Reason or pursuant to his special
termination right under Section 4.7 hereof, Executive shall not directly or
indirectly: (i) engage, anywhere within 25 miles of any property in which
Company or an Affiliate has a direct or indirect ownership interest, in any
activity which competes in whole or in part with the activities of Company or
any Affiliate at the time of such termination (a "Proximate Competitive
Activity") or (ii) be or become a stockholder, partner, owner, officer,
director, employee or agent of, a consultant to, or give financial or other
assistance to, any person or entity considering engaging in any Proximate
Competitive Activity or so engaged; provided, however, that nothing herein shall
prohibit Executive and his affiliates from (A) owning, as passive investors, in
the aggregate not more than two percent of the outstanding publicly traded stock
of any corporation engaged in a Proximate Competitive Activity; or (B)
acquiring, developing, managing, or leasing any properties which do not involve
a Proximate Competitive Activity. The duration of Executive's covenants set
forth in this Section 5.2 shall be extended by a period of time equal to the
number of days, if any, during which Executive is finally determined to be in
violation of the provisions hereof.
5.3 INJUNCTIVE AND OTHER RELIEF.
(a) Executive acknowledges that the covenants contained in
Sections 5.1, 5.2 and 6.3 are fair and reasonable in light of the consideration
paid hereunder, and that damages alone shall not be an adequate remedy for any
breach by Executive of his covenants contained herein. Accordingly, in addition
to any other remedies that Company may have, Company shall be entitled to
injunctive relief in any court of competent jurisdiction for any breach or
threatened breach of any such covenants by Executive. Nothing contained herein
shall prevent or delay Company from seeking, in any court of competent
jurisdiction, specific performance or other equitable remedies in the event of
any breach or intended breach by Executive of any of his obligations hereunder.
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(b) In addition to such equitable relief with respect to Sections
5.1, 5.2 and 6.3, Company shall be entitled to monetary damages for any breach
in an amount deemed reasonable to cover all actual and consequential losses,
plus all monies received by Executive as a result of said breach and all costs
and attorneys' fees incurred by Company in enforcing this Agreement, provided,
however, that Company shall have no right to set off any such monetary damages
against amounts owed by Company to Executive under this Agreement or any other
agreement between the parties. Any action initiated by Company for monetary
damages related to any such breach shall be subject to Section 6.1 hereof.
6. MISCELLANEOUS
6.1 ARBITRATION.
(a) All disputes arising out of or relating to this Agreement that
cannot be settled by the parties shall be settled by arbitration in
Philadelphia, Pennsylvania, pursuant to the rules and regulations then obtaining
of the American Arbitration Association; provided, that nothing herein shall
preclude Company from seeking, in any court of competent jurisdiction, specific
performance or other equitable remedies in the case of any breach or threatened
breach by Executive of Section 5.1, Section 5.2 or Section 6.3. The decision of
the arbitrators shall be final and binding upon the parties, and judgment upon
such decision may be entered in any court of competent jurisdiction.
(b) Discovery shall be allowed pursuant to the intendment of the
United States Federal Rules of Civil Procedure and as the arbitrators determine
appropriate under the circumstances.
(c) The arbitration tribunal shall be formed of three arbitrators,
one to be appointed by each party and the third to be appointed by the first two
arbitrators. Such arbitrators shall be instructed to apply the contractual
provisions hereof in deciding any matter submitted to them.
(d) The cost of any arbitration proceeding hereunder shall be
borne equally by the parties. Each party shall be responsible for his or its own
legal fees and expenses associated with any such arbitration.
6.2 PRIOR EMPLOYMENT. Executive represents and warrants that he is not a
party to any other employment, non-competition, joint venture, partnership, or
other agreement or restriction that could interfere with his employment with
Company in accordance with this Agreement or his or Company's rights and
obligations hereunder; and that his acceptance of continued employment with
Company and the performance of his duties hereunder will not breach the
provisions of any contract, agreement, or understanding to which he is party or
any duty owed by him to any other person. Executive warrants and covenants that,
while an employee of Company, he will not hereafter become a party to or be
bound by any such conflicting agreement.
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6.3 SOLICITATION OF EMPLOYEES. During the term of Executive's employment
and for two years thereafter, Executive shall not directly or indirectly solicit
or contact any person who is employed by Company or any Affiliate with a view to
the engagement or employment of such person by any person or entity or otherwise
interfere with the employment relationship of Company or of any Affiliate with
any of its employees.
6.4 CODE OF BUSINESS CONDUCT. Executive acknowledges that he shall be
subject to the provisions of Company's Code of Business Conduct and Ethics for
Employees and Officers (as modified, amended or supplemented from time to time,
the "Code"), including, without limitation, the enforcement provisions set forth
in the Code. Executive agrees to comply with the provisions of the Code.
6.5 INDEMNIFICATION. Company shall indemnify and defend Executive
against all claims arising out of Executive's activities as an officer or
employee of Company or its Affiliates to the fullest extent permitted by law and
under Company's Trust Agreement. In addition to the foregoing, Executive shall,
upon reasonable notice, furnish such information and proper assistance to
Company as may reasonably be required by Company in connection with any
litigation in which it or its Affiliates are, or may become, parties. After
termination of Executive's employment, Executive shall be fairly compensated for
providing assistance to Company that is more than incidental; provided, however,
that the failure of Company and Executive to agree on such compensation shall
not be the basis on which Executive withholds any information or assistance.
6.6 SEVERABILITY. The invalidity or unenforceability of any particular
provision or part of any provision of this Agreement shall not affect the other
provisions or parts hereof. If any provision hereof is determined to be invalid
or unenforceable by a court of competent jurisdiction by reason of the duration
or geographical scope of the covenants contained therein, such duration or
geographical scope, or both, shall be considered to be reduced to a duration or
geographical scope to the extent necessary to cure such invalidity.
6.7 ASSIGNMENT. This Agreement shall not be assignable by Executive, and
shall be assignable by Company only to an Affiliate or to any person or entity
that becomes a successor in interest (by purchase of assets or shares, or by
merger, or otherwise) to Company in the business or a portion of the business
presently operated by Company. Subject to the foregoing, this Agreement and the
rights and obligations set forth herein shall inure to the benefit of, and be
binding upon, the parties hereto and each of their respective permitted
successors, assigns, heirs, executors and administrators. An assignment by
Company permitted under this Section 6.7 shall not itself constitute a
termination of Executive's employment hereunder.
6.8 NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested, or by telegram or telecopy (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by any party hereto to the
other. Any such notice shall be deemed to have been given as of the date
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received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any action, suit, or proceeding shall be effective against
any party if given as provided in this Agreement; provided that nothing herein
shall be deemed to affect the right of any party to serve process in any other
manner permitted by law.
(a) If to Company:
Pennsylvania Real Estate Investment Trust
200 South Broad Street, Third Floor
Philadelphia, PA 19102
Tel: (215) 875-0700
Fax: (215) 547-7311
Attention: Chairman, Executive Compensation and Human
Resources Committee of the Board of Trustees
With a copy to:
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103
Tel: (215) 988-2794
Fax: (215) 988-2757
Attention: Howard A. Blum, Esquire
(b) If to Executive:
Robert McCadden
1344 Barton Drive
Fort Washington, PA 19034
Tel: (215) 628-4975
With a copy to:
Cozen O'Connor
1900 Market Street
Philadelphia, PA 19103
Tel: (215) 665-4159
Fax: (215) 665-2013
Attn: E. Gerald Riesenbach, Esquire
6.9 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes and replaces all prior agreements and
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understandings with respect thereto. Neither the failure nor any delay on the
part of any party to exercise any right, remedy, power, or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power, or privilege preclude any other or further exercise of
the same or of any other right, remedy, power, or privilege with respect to any
occurrence or be construed as a waiver of any right, remedy, power, or privilege
with respect to any other occurrence.
6.10 GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania (and United States federal law, to the extent applicable),
without giving effect to otherwise applicable principles of conflicts of law.
6.11 HEADINGS; COUNTERPARTS. The headings of Sections and subsections in
this Agreement are for convenience only and shall not affect its interpretation.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which, when taken together, shall be
deemed to constitute but one and the same Agreement.
6.12 DELEGATION. Any action hereunder that may be taken or directed by
the Board or by the Committee may be delegated by (a) the Board to a committee
of the Board or to an individual trustee or officer, or (b) the Committee to one
or more members of the Committee or officers, and the determination of any such
delegee or delegees shall have the same effect hereunder as a determination of
the Board or the Committee, as applicable.
6.13 COMPANY ASSETS. Executive acknowledges that no trustee, officer,
director or shareholder of Company or any Affiliate is liable to Executive in
respect of the payments or other matters set forth herein.
6.14 AMENDMENT. No provision of this Agreement may be amended, modified,
or waived except in a writing signed by Executive and such officer as may be
specifically designated by Company to sign on its behalf.
6.15 NO MITIGATION. In no event shall Executive be required to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under this Agreement, and such amounts shall not be reduced whether
or not Executive obtains other employment after termination of his employment
hereunder.
6.16 LEGAL FEES. Company agrees to pay all reasonable legal fees and
expenses that Executive has incurred in the preparation and negotiation of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written on this 23rd day of April, 2004.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
--------------------------------------
Name: Jonathan B. Weller
Title: President and Chief Operating
Officer
/s/ Robert McCadden
-----------------------------------------
Robert McCadden
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SCHEDULE 3.2
------------
CASH INCENTIVES
---------------
Executive's cash incentive opportunities for fiscal years 2004, 2005 and 2006
shall be based on the following factors:
INCENTIVE RANGE - % OF BASE SALARY
- --------------------------------------------------------------------------------
THRESHOLD TARGET MAXIMUM
35% 50% 70%
PERFORMANCE MEASUREMENT ALLOCATION
- --------------------------------------------------------------------------------
CORPORATE INDIVIDUAL
50% 50%
NOTE: Notwithstanding the foregoing, Executive shall be entitled to receive a
bonus of at least 50% of his annualized Base Salary for fiscal year 2004.
SCHEDULE 3.8
------------
RESTRICTED SHARES
-----------------
SIGNING AWARD
- -------------
Executive shall, upon the Commencement Date, be granted a special signing
award of 25,000 restricted Shares pursuant to Company's 2003 Equity Incentive
Plan, as amended (the "Plan"). Subject to the Plan, Executive shall become
vested in 20% of such restricted Shares on February 15, 2005 (the "Vesting
Date"). He shall become vested in an additional 20% of such restricted Shares on
the trading day coincident with or, if not coincident with, first following each
of the next four anniversaries of the Vesting Date. If Executive elects to be
taxed immediately on the grant of such Shares by filing an election with the
Internal Revenue Service under Section 83(b) of the IRC, Executive shall provide
Company with a copy of such election within 10 days after the filing of such
election.
2004 AWARD
- ----------
Executive shall, upon the Commencement Date, receive an award of
restricted Shares pursuant to the Plan with a market value of $400,000 (based
upon the average closing price of Company's Shares for the 20 trading days
preceding the date of execution of this Agreement). Subject to the terms of the
Plan, 10% of the total number of such Shares shall vest for each of the 12 month
calendar years 2004, 2005, 2006, 2007 and 2008, subject to the achievement of
corporate performance goals for each such annual period established in
connection with the award. The remaining 50% of such Shares shall vest, subject
to the terms of the Plan, in equal annual installments beginning on the Vesting
Date and continuing on the trading day coincident with or first following each
of the next four anniversaries of the Vesting Date.
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