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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 25th day of May,
1999, between Developers Diversified Realty Corporation, an Ohio corporation
(the "Company"), and Daniel B. Hurwitz (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive as its Executive
Vice President/Director of Leasing, and the Executive hereby accepts such
employment, on the terms and subject to the conditions hereinafter set forth.
(b) During the term of this Employment Agreement and any renewal
hereof (all references herein to the terms of this Employment Agreement shall
include references to the period of renewal hereof, if any), the Executive shall
be and have the title of Executive Vice President/Director of Leasing and shall
devote all of his business time and all reasonable efforts to his employment and
perform diligently such duties as are customarily performed by Executive Vice
Presidents/Directors of Leasing of companies similar in size to the Company,
together with such other duties as may be reasonably requested from time to time
by the President or the Chief Executive Officer of the Company or the Board of
Directors of the Company (the "Board"), which duties shall be consistent with
his positions as set forth above and as provided in Paragraph 2.
2. TERM AND POSITIONS.
(a) Subject to the provisions for termination hereinafter
provided, the term of this Employment Agreement shall begin on June 14, 1999 and
shall continue for the current "fiscal year" (as hereinafter defined) and for
the immediately succeeding fiscal year. As of December 31, 2000, such term
automatically shall be extended for the fiscal year commencing January 1, 2001
and for each fiscal year thereafter. This Employment Agreement may be terminated
by the Company with "cause" (as defined in Paragraph 5(a)(ii)) at any time, or
without cause upon not less than ninety days prior written notice. The term
"fiscal year" means the period beginning on the day after the Saturday closest
to January 1, in one year, and ending on the Saturday closest to December 31 in
the next year.
(b) The Executive shall be entitled to serve as the Executive
Vice President/Director of Leasing of the Company. For service as an officer and
employee of the Company, the Executive shall be entitled to the full protection
of the applicable indemnification provisions of the articles of incorporation
and code of regulations of the Company, as the same may be amended from time to
time.
(c) If:
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(i) the Company materially changes the Executive's
duties, title, status or responsibilities as set forth in
Paragraphs 1(b) and 2(b) without his consent;
(ii) the Executive's place of employment or the
principal executive offices of the Company are located more than
fifty (50) miles from the geographical center of Cleveland, Ohio;
or
(iii) there occurs a material breach by the
Company of any of its obligations under this Employment
Agreement, which breach has not been cured in all material
respects within thirty (30) days after the Executive gives notice
thereof to the Company;
then in any such event the Executive shall have the right to terminate his
employment with the Company, but such termination shall not be considered a
voluntary resignation or termination of such employment or of this Employment
Agreement by the Executive but rather a discharge of the Executive by the
Company without "cause" (as defined in Paragraph 5(a)(ii)).
(d) The Executive shall be deemed not to have consented to any
written proposal calling for a material change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the Board within fifteen (15) days after receipt of such written proposal. If
the Executive shall not have given such consent, the Company shall have the
opportunity to withdraw such proposed material change by written notice to the
Executive given within ten (10) days after the end of said fifteen (15) day
period.
(e) Notwithstanding anything in this Agreement to the contrary,
if there shall occur (i) a "Change in Control" and a "Triggering Event" or (ii)
a "Spin-Off" (as those terms are defined in the Change of Control Agreement of
even date herewith between the Executive and the Company (the "Change of Control
Agreement")) and Executive is offered, by the new owner of the entity formed by
the Spin-Off, terms of employment comparable to those contained in (1) the
Change of Control Agreement and (2) this Agreement, then the Company and the
Executive shall each have the right to terminate the employment of the Executive
with the Company and, in the event of such termination, the payments to be made
to the Executive in connection therewith shall be governed by the Change of
Control Agreement and the Executive shall be entitled to no further compensation
or other benefits under this Employment Agreement, except as to that portion of
any unpaid salary and other benefits accrued and earned by him hereunder up to
and including the effective date of such termination.
3. COMPENSATION.
During the term of this Employment Agreement, the Company shall
pay or provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 3.
(a) The Company shall pay to the Executive a base salary payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly) of not less than Three Hundred Thousand Dollars
($300,000) per annum.
(b) The Company shall pay to the Executive bonus compensation for
each fiscal year of the Company, not later than 90 days following the end of
each fiscal year or the termination of the employment, as the case may be,
prorated on a per diem basis for partial fiscal years, determined and calculated
in a manner set forth on Exhibit A attached hereto and shall grant to the
Executive the stock options identified on Exhibit A attached hereto.
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(c) The Company shall reimburse the Executive for the cost of
maintaining his current medical insurance coverage (and that of his wife and
children) through COBRA until December 14, 1999. Thereafter, the Company shall
provide to the Executive such medical, hospitalization and dental insurance for
himself, his spouse and eligible family members as may be determined by the
Board to be consistent with industry standards.
(d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall or shall be deemed to in any way effect the
Executive's rights and benefits thereunder except as expressly provided herein).
(e) The Executive shall be entitled to such periods of vacation
and sick leave allowance each year as are determined by the Chief Executive
Officer of the Company in his reasonable and good faith discretion, which in any
event shall be not less than three weeks per year.
(f) The Executive shall be entitled to participate in any equity
or other employee benefit plan that is generally available to senior executive
officers, as distinguished from general management, of the Company. The
Executive's participation in and benefits under any such plan shall be on the
terms and subject to the conditions specified in the governing document of the
particular plan.
(g) The Company shall reimburse the Executive or provide him with
an expense allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by the
Executive in connection with the Company's business. The Executive shall furnish
such documentation with respect to reimbursement to be paid hereunder as the
Company shall reasonably request.
(h) The Company shall reimburse the Executive for lease payments
with respect to a new car (having a cost not to exceed $50,000) of the
Executive's choice for the exclusive use of the Executive, together with
automobile, theft, casualty and liability insurance, and payment or
reimbursement of the Executive for all maintenance, repair and gasoline.
(i) The Company shall reimburse the Executive or provide him with
reasonable moving expenses from Wyomissing, Pennsylvania, to the Greater
Cleveland area, including the reimbursement or provision of expenses relating to
temporary lodging for the Executive and his family, to the earlier of (a) the
date of permanent relocation to the Greater Cleveland area or (b) August 14,
1999, as well as reimbursement of weekend commuting expenses for the Executive
between Wyomissing, Pennsylvania, and the Greater Cleveland area until such
earlier date.
(j) The Company shall name the Executive as a corporate designee
under the Company's membership at Barrington Country Club during the term of
this Employment Agreement, shall bear the cost of regular membership fees,
assessments and dues incurred there during the term of this Employment Agreement
and shall reimburse the Executive for the amount of any charges actually and
reasonably incurred at Barrington Country Club in the conduct of the Company's
business.
4. PAYMENT IN THE EVENT OF DEATH OR PERMANENT DISABILITY.
(a) In the event of the Executive's death or "permanent
disability" (as hereinafter defined) during the term of this Employment
Agreement, the Company shall pay to the Executive (or his successors and assigns
in the event of his death) an amount equal to the sum of two (2) times the
Executive's then effective per annum rate of salary, as determined under
Paragraph 3(a), plus a
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pro rata portion of the bonus applicable to the fiscal year in which such death
or permanent disability occurs, as such bonus is determined pursuant to
paragraph 3(b), and shall continue the benefits described in Paragraph 3(c) for
the Executive (in case of permanent disability) and the Executive's family for a
period of one (1) year.
(b) The pro rata portion of the bonus described in Paragraph 4(a)
shall be paid when and as provided in Paragraph 3(b). The remainder of the
benefit to be paid pursuant to Paragraph 4(a) shall be paid within ninety (90)
days after the date of death or permanent disability, as the case may be.
(c) Except as otherwise provided in Paragraphs 3(d) and 4(a), in
the event of the Executive's death or permanent disability the Executive shall
be entitled to no further compensation or other benefits under this Employment
Agreement, except as to that portion of any unpaid salary and other benefits
accrued and earned by him hereunder up to and including the date of such death
or permanent disability, as the case may be.
(d) For purposes of this Employment Agreement, the Executive's
"permanent disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may, the Executive, by reason of his physical or
mental disability or illness, shall have been unable to discharge his duties
under this Employment Agreement. The date of permanent disability shall be such
one hundred twentieth (120th) or ninetieth (90th) day, as the case may be. In
the event either the Company or the Executive, after receipt of notice of the
Executive's permanent disability from the other, dispute that the Executive's
permanent disability shall have occurred, the Executive shall promptly submit to
a physical examination by the chief of medicine of any major accredited hospital
in the Cleveland, Ohio, area and, unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full time and
energy to discharging his duties within thirty (30) days after the date of such
statement, such permanent disability shall be deemed to have occurred.
5. TERMINATION.
(a) The employment of the Executive under this Employment
Agreement, and the terms hereof, may be terminated by the Company:
(i) on the death or permanent disability (as
previously defined) of the Executive, or
(ii) for cause at any time by action of the Board.
For purposes hereof, the term "cause" shall mean:
(A) The Executive's fraud,
commission of a felony or of an act or series of
acts which result in material injury to the
business reputation of the Company, commission of
an act or series of repeated acts of dishonesty
which are materially inimical to the best
interests of the Company, or the Executive's
willful and repeated failure to perform his duties
under this Employment Agreement, which failure has
not been cured within fifteen (15) days after the
Company gives notice thereof to the Executive; or
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(B) The Executive's material breach
of any material provision of this Employment
Agreement, which breach has not been cured in all
substantial respects within ten (10) days after
the Company gives notice thereof to the Executive.
The exercise by the Company of its rights of termination under
this Paragraph 5 shall be the Company's sole remedy in the
event of the occurrence of the event as a result of which such
right to terminate arises. Upon any termination of this
Employment Agreement, the Executive shall be deemed to have
resigned from all offices and directorships held by the
Executive in the Company.
(b) In the event of a termination claim by the Company to be for
"cause" pursuant to Paragraph 5(a)(ii), the Executive shall have the right to
have the justification for said termination determined by arbitration in
Cleveland, Ohio. In order to exercise such right, the Executive shall serve on
the Company within thirty (30) days after termination a written request for
arbitration. The Company immediately shall request the appointment of an
arbitrator by the American Arbitration Association and thereafter the question
of "cause" shall be determined under the rules of the American Arbitration
Association, and the decision of the arbitrator shall be final and binding upon
both parties. The parties shall use all reasonable efforts to facilitate and
expedite the arbitration and shall act to cause the arbitration to be completed
as promptly as possible. During the pendency of the arbitration, the Executive
shall continue to receive all compensation and benefits to which he is entitled
hereunder, and if at any time during the pendency of such arbitration the
Company fails to pay and provide all compensation and benefits to the Executive
in a timely manner the Company shall be deemed to have automatically waived
whatever rights it then may have had to terminate the Executive's employment for
cause. Expenses of the arbitration shall be borne equally by the parties except
as otherwise determined by the arbitrator.
(c) In the event of termination for any of the reasons set forth
in subparagraph (a) of this Paragraph 5, except as otherwise provided in
Paragraphs 3(d) and 4(a), the Executive shall be entitled to no further
compensation or other benefits under this Employment Agreement, except as to
that portion of any unpaid salary and other benefits accrued and earned by him
hereunder up to and including the effective date of such termination.
(d) In the event of the termination by the Company of the
Executive without "cause" (other than as described in Paragraph 2(e)) or in the
event of a termination by the Executive for reasons set forth in Paragraph 2(c),
the Company shall pay to the Executive an amount equal to the sum of two (2)
times the Executive's then effective per annum rate of salary, as determined
under Paragraph 3(a), plus a bonus applicable to the entire fiscal year in which
such termination without cause occurs, calculated on the basis of the "target"
bonus available to Executive and the assumption that all performance goals
necessary to realize such "target" bonus for such fiscal year have been or will
be achieved by the Company in such fiscal year, and shall continue the benefits
described in Paragraph 3(c) for a period of one (1) year.
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6. COVENANTS AND CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges the Company's reliance and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the term of this Employment Agreement. In light of
such reliance and expectation on the part of the Company, during the term of
this Employment Agreement and for a period of two (2) years thereafter (and, as
to clause (ii) of this subparagraph (a), at any time during and after the term
of this Employment Agreement), the Executive shall not, directly or indirectly,
do or suffer either of the following:
(i) Own, manage, control or participate in the
ownership, management or control, or be employed or engaged by or
otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any other corporation, partnership,
proprietorship, firm, association or other business entity
engaged in the business of, or otherwise engage in the business
of, acquiring, owning, developing or managing commercial shopping
centers; provided, however, that the ownership of not more than
one percent (1%) of any class of publicly traded securities of
any entity shall not be deemed a violation of this covenant; or
(ii) Disclose, divulge, discuss, copy or otherwise
use or suffer to be used in any manner, in competition with, or
contrary to the interests of, the Company, any confidential
information relating to the Company's operations, properties or
otherwise to its particular business or other trade secrets of
the Company, it being acknowledged by the Executive that all such
information regarding the business of the Company compiled or
obtained by, or furnished to, the Executive while the Executive
shall have been employed by or associated with the Company is
confidential information and the Company's exclusive property;
provided, however, that the foregoing restrictions shall not
apply to the extent that such information (A) is clearly
obtainable in the public domain, (B) becomes obtainable in the
public domain, except by reason of the breach by the Executive of
the terms hereof, (C) was not acquired by the Executive in
connection with his employment or affiliation with the Company,
(D) was not acquired by the Executive from the Company or its
representatives or (E) is required to be disclosed by rule of law
or by order of a court or governmental body or agency.
(b) The Executive agrees and understands that the remedy at law
for any breach by him of this Paragraph 6 will be inadequate and that the
damages following from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
the Executive's violation of any legally enforceable provision of this Paragraph
6, the Company shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Paragraph 6 shall be deemed to limit the Company's remedies at law or in equity
for any breach by the Executive of any of the provisions of this Paragraph 6
which may be pursued or availed of by the Company.
(c) The Executive has carefully considered the nature and extent
of the restrictions upon him and the rights and remedies conferred upon the
Company under this Paragraph 6, and hereby acknowledges and agrees that the same
are reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent skill
and experience of the Executive, would not operate as a bar to the Executive's
sole means of support, are fully required to protect the legitimate interests of
the Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.
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7. TAX ADJUSTMENT PAYMENTS. If all or any portion of the amounts
payable to the Executive under this Employment Agreement or the Change of
Control Agreement (together with all other payments of cash or property, whether
pursuant to this Employment Agreement or otherwise, including, without
limitation, the issuance of common stock of the Company, or the granting,
exercise or termination of options therefor) constitutes "excess parachute
payments" within the meaning of Section 280G of the Code that are subject to the
excise tax imposed by Section 4999 of the Code (or any similar tax or
assessment), the amounts payable hereunder shall be increased to the extent
necessary to place the Executive in the same after-tax position as he would have
been in had no such tax assessment been imposed on any such payment paid or
payable to the Executive under this Employment Agreement or any other payment
that the Executive may receive in connection therewith. The determination of the
amount of any such tax or assessment and the incremental payment required hereby
in connection therewith shall be made by the accounting firm employed by the
Executive within thirty (30) calendar days after such payment and said
incremental payment shall be made within five (5) calendar days after
determination has been made. If, after the date upon which the payment required
by this Paragraph 7 has been made, it is determined (pursuant to final
regulations or published rulings of competent jurisdiction, Internal Revenue
Service audit assessment or otherwise) that the amount of excise or other
similar taxes or assessments payable by the Executive is greater than the amount
initially so determined, then the Company shall pay the Executive an amount
equal to the sum of: (i) such additional excise or other taxes, PLUS (ii) any
interest, fines and penalties resulting from such underpayment, PLUS (iii) an
excise or other tax assessment payable by the Executive with respect to the
amounts specified in (i) and (ii) above, and the reimbursement provided by this
clause (iii), in the manner described above in this Paragraph 7. Payment thereof
shall be made within five (5) calendar days after the date upon which such
subsequent determination is made.
8. MISCELLANEOUS.
(a) The Executive represents and warrants that he is not a party
to any agreement, contract or understanding, whether employment or otherwise,
which would restrict or prohibit him from undertaking or performing employment
in accordance with the terms and conditions of this Employment Agreement.
(b) The provisions of this Employment Agreement are severable and
if any one or more provision may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provision and any partially
unenforceable provision to the extent enforceable in any jurisdiction
nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations (other
than obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to this
Employment Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association then
pertaining in the City of Cleveland, Ohio, and judgment upon the award rendered
by the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration; provided, however, that nothing in this Paragraph 8(d) shall be
construed so as to deny the Company the right and power to seek and obtain
injunctive relief in a court of equity for any breach or threatened breach by
the Executive of any of his covenants contained in Paragraph 6 hereof.
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(e) Any notice to be given under this Employment Agreement shall
be personally delivered in writing or shall have been deemed duly given when
received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business, attention: General
Counsel, and if mailed to the Executive, shall be addressed to him at his home
address last known on the records of the Company, or at such other address or
addresses as either the Company or the Executive may hereafter designate in
writing to the other.
(f) The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted the parties herein are
cumulative and the waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to it under the
circumstances.
(g) This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or terminated orally.
No modification, termination or attempted waiver shall be valid unless in
writing and signed by the party against whom the same is sought to be enforced.
(h) This Employment Agreement shall be governed by and construed
according to the laws of the State of Ohio.
(i) Captions and paragraph headings used herein are for
convenience and are not a part of this Employment Agreement and shall not be
used in construing it.
(j) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement on the day and year first set forth herein.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
/s/ Scott A. Wolstein
By: ________________________________
Authorized Officer
/s/ Daniel B. Hurwitz
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Daniel B. Hurwitz
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EXHIBIT A
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I. INCENTIVE OPPORTUNITY
BONUS AS
% OF SALARY
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THRESHOLD TARGET MAXIMUM
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25% 50% 75%
II. OPTIONS
Employee shall be granted incentive stock options to purchase
200,000 common shares of the Company at the closing price of such shares as of
May 25, 1999. Such options shall vest in three equal annual installments,
commencing on June 14, 2000 and continuing on the 14th day of each June
thereafter until vested in full, and shall be issued in accordance with, and
shall be subject to the terms and conditions of, the Company's 1998 Equity-Based
Award Plan.
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