Exhibit 10.7
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT (this "Agreement") is effective as of January 1,
2004 (the Effective Date") between Pennsylvania Real Estate Investment Trust, a
Pennsylvania business trust ("Company"), and Douglas S. Grayson ("Executive").
BACKGROUND
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Executive is currently the Executive Vice President-Development of
Company. Company desires to employ Executive, and Executive desires to enter the
employ of Company, on the terms and conditions contained in this Agreement.
Executive has been and will continue to be substantially involved with Company's
operations and management and has and will continue to have trade secrets and
other confidential information relating to Company and its customers;
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 agrees to continue employment by Company for the
period and upon the terms and conditions hereinafter set forth. The Amended and
Restated Employment Agreement between Executive and PREIT Services, LLC, dated
as of March 22, 2002, is hereby terminated and the rights and obligations of
each party shall be governed by this Agreement.
1.2 CAPACITY AND DUTIES.
(a) Executive shall serve as Executive Vice President-Development
of Company and, subject to the supervision and control of the Chief Executive
Officer of the Company, shall have the duties and authority generally consistent
with such office. 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 the Company and as shall be consistent with the status and authority of his
current office.
(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,
Executive may (1) continue his investments in the properties listed on Schedule
1.2(c) hereto and, subject to the provisions of Section 5.2 hereof, subsequent
properties, provided that Executive's activities with respect to such subsequent
properties comply with any procedures adopted by the Board governing Executive's
non-Company related real estate activities, and (2) subject to Section 5.2
hereof, serve on the board of directors or similar body of other organizations,
including philanthropic organizations and organizations in which the Executive
has made an investment, provided that Executive's activities with respect to all
of the foregoing do not, individually or in the aggregate, interfere with,
detract from, or affect the performance of his duties for Company under this
Agreement.
2. TERM OF EMPLOYMENT
2.1 TERM. The initial term of Executive's employment hereunder shall
begin on the Effective 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 $270,000, payable in
periodic installments in accordance with Company's regular payroll practices in
effect from time to time. Executive's salary 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
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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 less
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.
3.2 BONUSES. Executive is eligible for and shall participate in
Company's bonus plans listed on Schedule 3.2 hereto and shall participate in the
other bonus plans of Company in place from time to time for the executive
officers of Company to the extent determined by the Committee.
3.3 EMPLOYEE BENEFITS. In addition to the compensation provided for in
Sections 3.1 and 3.2, Executive shall be entitled, during the Term, 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 to 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 therefor as Company may reasonably require.
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.
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3.7 NONQUALIFIED RETIREMENT PLAN. Company has entered into a
nonqualified supplemental executive retirement plan with Executive whereby
Company has credited a bookkeeping account maintained by it for Executive with a
deemed contribution of $25,000 per fiscal year. Company acknowledges that
Executive is entitled to continue receiving benefits under and in accordance
with the terms of such plan. Each additional 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 the termination of Executive's employment with Company for any
reason.
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 the 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 bonus 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 (i) the later of 180 days after the death of
Executive or the period following the death of Executive that is set forth in
the relevant stock option agreement, or (ii) 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.
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
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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 the 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 the Company shall be
credited against and shall reduce the Base Salary otherwise payable by the
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 bonus 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 (i) the later of
180 days after the termination of Executive's employment pursuant to this
Section or the period following the termination of Executive's employment for
the reason set forth in this Section that is set forth in the relevant stock
option agreement, or (ii) 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 the 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, (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
pursuant to this Section shall remain exercisable until the earlier of (i) the
later of 30 days after the termination of Executive's employment pursuant to
this Section or the period following the termination of Executive's employment
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for the reason set forth in this Section that is set forth in the relevant stock
option agreement, or (ii) 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 its
Affiliates, or (iii) an act resulting in termination pursuant to the provisions
of the Code of Conduct (as defined in Section 6.15);
(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) after
written demand for substantial performance which specifically identifies the
manner in which Executive has failed to perform that persists for more than 30
calendar days after such notice to him; 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) (A)
Executive's then current Base Salary through the end of the Term 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 ("Average Bonus") and further
multiplied by a fraction, the denominator of which is 365 and the numerator of
which is the number of days in the calendar year that expired prior to
termination of employment and (y) two times (A) Executive's then current annual
Base Salary plus (B) an amount equal to the Average Bonus. The portion of the
lump sum cash payment contemplated by the preceding sentence that represents
Executive's Base Salary shall be discounted from the dates that the Base Salary
would have been payable in accordance with Company's regular payroll practices
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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 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 the Company within ten days of such termination, Executive may
elect to receive his Base Salary included in the computation of such lump sum
payment in accordance with the 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 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 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 (i) the
later of 180 days after the termination of Executive's employment pursuant to
this Section or the period following the termination of Executive's employment
for the reason set forth in this Section that is set forth in the relevant stock
option agreement, or (ii) 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. Vesting and
other rights with respect to future stock grants shall be governed by the plans
or terms under which they may be granted.
(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;
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(ii) the relocation of Executive's principal business office
outside the metropolitan Philadelphia area 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; or
(iv) 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, 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 the greater of (x) (A) Executive's Base
Salary through the end of the Term plus (B) an amount equal to the Average Bonus
multiplied by a fraction, the denominator of which is 365 and the numerator of
which is the number of days in the calendar year that expired prior to
termination of employment and (y) two times (A) Executive's then current annual
Base Salary and (B) an amount equal to the Average Bonus; and
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(ii) Executive 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 coverage for Executive and Executive's
spouse and dependents (if any), to the extent Executive was so entitled prior to
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 (i) the later of 180 days after
the Change of Control or the period following a Change of Control that is set
forth in the relevant stock option agreement, or (ii) 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) 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 Internal Revenue
Code of 1986, as amended, and if the net payment to Executive (after giving
effect to the excise tax imposed by Section 4999 of the Internal Revenue Code
and to federal, state and local income and employment taxes payable by Executive
on such amounts) 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" 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
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
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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
then outstanding shares of equity securities and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
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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 of (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 amounts (including
salary, bonuses, vacation pay, expense reimbursement, etc.) that have been fully
earned by, but not yet paid to, Executive as of Executive's termination.
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, Executive shall not directly or indirectly
engage, or assist any other person or entity to engage, in Development
Activities for retail properties which are within 25 miles of any retail
properties in which the Company or an Affiliate has a direct or indirect
ownership interest during the term of employment or at the time of such
termination, as applicable. For the purposes of this section "Development
Activities" shall mean all of the activities taken together that are involved in
preparing a property for its intended use, including without limitation,
planning, design, engineering, financing, leasing, marketing, zoning,
remediation, preparation of market or use studies or other activities
customarily related to the development of property. Retail projects would
include regional enclosed malls, strip shopping centers, or mixed use projects
where the retail portion of the project individually exceeds fifty percent of
the project area. 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 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 any employee of Company or of any
Affiliate.
6.4 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
the 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.
6.5 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.
6.6 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 the
Company permitted under this Section 6.6 shall not itself constitute a
termination of Executive's employment hereunder.
6.7 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
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.
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(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:
Douglas S. Grayson
1044 2nd Avenue
Royersford, PA 19468
With a copy to:
Cozen O'Connor
1900 Market Street
Philadelphia, PA 19103
Tel: (215) 665-4159
Fax: (215) 665-2013
Attention: E. Gerald Riesenbach
6.8 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
understandings with respect thereto, including but not limited to, any currently
existing employment agreement between Executive and the Company and any
Affiliate. 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.
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6.9 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.
6.10 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.
6.11 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.
6.12 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.
6.13 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.
6.14 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.
6.15 CODE OF BUSINESS CONDUCT. Executive acknowledges that he is and
shall be subject to the provisions of the Company's Code of Business Conduct and
Ethics for Employees and Officers (as modified, amended or supplemented from
time to time, the "Code of Conduct"), including, without limitation, the
enforcement provisions set forth in the Code of Conduct. Executive agrees to
comply with the provisions of the Code of Conduct.
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 28th day of July, 2004.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
-------------------------------------
Name: Jonathan B. Weller
Title: Vice Chairman
/s/ Douglas S. Grayson
-----------------------------------------
Douglas S. Grayson
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SCHEDULE 1.2(C)
PERMITTED ACTIVITIES
--------------------
1. TRO Liquidating LLC (TROL)
2. Concord Pike (TROL)
3. Strouse-Greenberg Realty Investments, Inc. (TRO Liquidating LLC) - TROL
4. Metromarket Management LLC (TRO Liquidating LLC)
5. Phonlynx Partnership (TRO Liquidating LLC)
6. Sports World/Stadium Complex (TRO Liquidating LLC)
7. Personal Property (Artwork) (TROL)
8. Cherry Hill (Rubin-Oxford, LP) ROVA
9. Six Penn Center (Broker Associates)
10. Delaware Avenue (Riverboat Associates)
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SCHEDULE 3.2
COMPANY BONUS PLANS
-------------------
Incentive Bonus Opportunity Plan
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