EXHIBIT 10.3
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of May 17, 2007, among
Wellsford Real Properties, Inc., a Maryland corporation ("WRP"), ▇▇▇▇ Services
LLC, a Maryland limited liability company and a wholly-owned subsidiary of WRP
("LLC," and together with WRP, the "Employers"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Employee").
Recitals
A. The Employers and Employee are party to an Employment Agreement, dated
as of October 11, 2006 (the "Employment Agreement") pursuant to which Employee
is to be employed by the Employers on the Employment Date. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Employment Agreement.
B. The parties hereto desire to amend certain terms and provisions
of the Employment Agreement.
NOW, THEREFORE, the Employers and Employee, in consideration of the
agreements, covenants and conditions contained herein, hereby agree as follows:
1. Duties. The second sentence of Section 1(b) of the Employment
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
"Employee shall (w) have general responsibility for implementation
of the policies of the Employers, as determined by the Board of
Directors of WRP (the "Board"), and for the management of the
business and affairs of the Employers, (x) in general, supervise and
control all of the business and affairs of the Employers, (y) in the
absence of a designation of a chief operating officer by the Board,
be the chief operating officer of the Employers, and (z) perform
those services as set from time to time by the Board or other
governing body of the Employers' or a committee thereof,
commensurate with Employee's positions. In furtherance of the
foregoing, Employee shall have the primary right and responsibility
for providing the Board or other governing body of the Employers
with recommendations as to the Employers' policies and business
strategies and their implementation, including, without limitation,
those relating to WRP's real estate assets."
2. Benefits. The last sentence of Section 2(c) of the Employment
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
"In addition, Employee shall be entitled to six weeks paid vacation
per year, which shall be taken in accordance with the policies of
WRP governing vacation of senior executive employees. Furthermore,
following the termination of Employee's employment with the
Employers, WRP shall maintain in effect a directors' and officers'
liability insurance policy pursuant to which Employee shall be
insured for a period of six years following such date of termination
for all
claims relating to matters occurring on or prior to such date of
termination to the extent Employee was insured by WRP prior to such
termination."
3. Schedule 2(d)(ii). Schedule 2(d)(ii) to the Employment Agreement
is hereby deleted in its entirety and Schedule 2(d)(ii) attached hereto
substituted in lieu thereof.
4. Measuring Periods. Clauses (A), (B) and (C) of Section 2(d)(ii)
of the Employment Agreement are hereby deleted in their entirety and the
following substituted in lieu thereof:
"(A) Tranche 1 shall vest on the first anniversary of
the Employment Date if the growth in EBITDA (as defined on Schedule
2(d)(ii)) for the Tranche 1 Measuring Period (as defined on Schedule
2(d)(ii)) exceeds 10%. If Tranche 1 has not vested on the first
anniversary of the Employment Date, it shall vest on the second
anniversary of the Employment Date if EBITDA for the 2008 calendar
year of LLC exceeds by at least 20% EBITDA for the fiscal year of
▇▇▇▇ ending October 31, 2006. If Tranche 1 has not vested on the
first or second anniversary of the Employment Date, it shall vest on
the third anniversary of the Employment Date if EBITDA for the 2009
calendar year of LLC exceeds by at least 30% EBITDA for the fiscal
year of ▇▇▇▇ ending October 31, 2006.
(B) Tranche 2 shall vest on the second anniversary of
the Employment Date if either (1) the growth in EBITDA for the
Tranche 2 Measuring Period exceeds 10% or (2) EBITDA for the 2008
calendar year of LLC exceeds by at least 20% EBITDA for the fiscal
year of ▇▇▇▇ ending October 31, 2006. If Tranche 2 has not vested on
the second anniversary of the Employment Date, it shall vest on the
third anniversary of the Employment Date if either (x) EBITDA for
the 2009 calendar year of LLC exceeds by at least 20% EBITDA for the
2007 calendar year of LLC or (y) EBITDA for the 2009 calendar year
of LLC exceeds by at least 30% EBITDA for the fiscal year of ▇▇▇▇
ending October 31, 2006.
(C) Tranche 3 shall vest on the third anniversary of the
Employment Date if either (1) the growth in EBITDA for the Tranche 3
Measuring Period exceeds 10% or (2) EBITDA for the 2009 calendar
year of LLC exceeds by at least 30% EBITDA for the fiscal year of
▇▇▇▇ ending October 31, 2006."
5. Disability. Section 3(b) of the Employment Agreement is hereby
deleted in its entirety and the following substituted in lieu thereof:
"(b) Disability. The Employers may terminate the Employment
Period at any time effective upon not less than 10 days prior
written notice to Employee after Employee has been unable to perform
the essential duties of his positions because of "Disability" (as
determined on the basis of medical evidence satisfactory to the
Board, in the Board's sole discretion) for a period of (i) 180
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consecutive days in any 12-month period or (ii) 270 days in any
12-month period, subject to reasonable accommodation provisions of
applicable law."
6. Change of Control. Section 3(d)(ii)(E)(2) of the Employment
Agreement is hereby amended by deleting the phrase "acquiring beneficial
ownership of 30%" therein and substituting "representing 30%" in lieu thereof.
7. Termination Upon Disability. Section 4(b) of the Employment
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
"(b) Termination Pursuant to Section 3(b) (Disability). In the
event that the Employment Period is terminated pursuant to Section
3(b), no further compensation shall be paid to Employee following
the effective date of termination, provided that Employee or his
legal representative, as applicable, shall be paid, in cash (i) the
Accrued Obligations and (ii) the Termination Bonus, which payment
shall be made as soon as practicable following the first date such
payment can be made without incurring additional tax under Section
409A of the Code."
8. Medical, Etc., Coverage. The last sentence of Section 4(f) of
the Employment Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"In addition, the Employers agree to continue, at their own cost and
expense, the medical, hospitalization, dental and life insurance
benefits available to Employee (and any of his dependents who as on
such date of termination were covered thereunder) at the time his
employment is terminated from such date of termination through the
later of (i) the third anniversary of the Employment Date and (ii)
18 months from such date of termination; provided, however, that if
such continued participation would result in additional tax to
Employee under Section 409A of the Code, Employee will be required
to pay his own premiums for such benefits coverage and then, as soon
as practicable following the first date such payment can be made
without incurring additional tax under Section 409A of the Code,
Employee will be paid an amount such that, after payment of income
taxes, Employee is fully reimbursed for the cost of such premiums.
If the terms of the Employers' medical, hospitalization, dental and
life insurance plans do not permit Employee (and any of his
dependents who as on such date of termination were covered
thereunder) to be insured thereunder when he is no longer an
employee, then the Employers will be jointly and severally obligated
to pay to Employee, as soon as practicable, following the first date
such payment can be made without incurring additional tax under
Section 409A of the Code, an amount such that after payment of
income taxes, Employee is fully reimbursed for his cost of providing
such benefits. In addition, to the extent he remains eligible
(provided Employee may at any time supplement any cost necessary to
allow for continued eligibility as provided under the terms of the
applicable policy), Employee may continue participation in the
Employers' long-term disability plan on the same basis as provided
prior to his termination of employment, at his own cost and expense,
through the third anniversary of the Employment Date."
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9. Successors. Section 10 of the Employment Agreement is hereby
amended by adding the following at the end thereto.
"Notwithstanding anything in this Agreement to the contrary but
subject to Paragraph 3(d)(i), upon the occurrence of a Change of
Control: (a) pursuant to Paragraph 3(d)(ii)(B) resulting from a
sale, transfer or disposition of all or substantially all of the
assets of WRP (which assets include WRP's limited liability company
interest in LLC) then WRP shall no longer be deemed an Employer
hereunder and Employee shall not be employed by WRP or any successor
to WRP and Employee shall remain employed by LLC pursuant to the
terms and conditions hereof, (b) pursuant to Paragraph 3(d)(ii)(B)
resulting from a sale, transfer or disposition of all or
substantially all of the assets of LLC (which assets include LLC's
rights under this Agreement), then neither WRP nor LLC shall be
deemed an Employer hereunder and Employee shall not be employed by
either WRP or LLC, and such assignee of LLC's rights under this
Agreement shall be deemed an Employer hereunder and Employee shall
be employed by such assignee pursuant to the terms and conditions
hereof; (c) pursuant to Paragraph 3(d)(ii)(B) resulting from a sale,
transfer or disposition of all or substantially all of the assets of
LLC (which assets do not include LLC's rights under this Agreement),
then each of WRP and LLC shall continue to an Employer hereunder and
Employee shall remain employed by each of WRP and LLC pursuant to
the terms and conditions hereof; and (d) pursuant to Paragraph
3(d)(ii)(E)(1) with respect to a merger, consolidation,
reorganization or transaction of LLC, then WRP shall no longer be
deemed an Employer hereunder and Employee shall not be employed by
WRP or any successor to WRP and Employee shall remain employed by
LLC pursuant to the terms and conditions hereof."
10. Indemnification. Section 13 of the Employment Agreement is
hereby amended by adding a new clause (c) to read as follows:
"(c) Unless the provisions of clause (b) above shall apply,
the Employers shall pay all legal fees and related expenses
(including the cost of experts, evidence and counsel) incurred by
Employee as they become due as a result of (i) the termination of
Employee's employment (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination of
employment), (ii) Employee's seeking to obtain or enforce any right
or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Employers under which Employee is or
may be entitled to receive benefits, or (iii) any action taken by
the Employers against Employee; provided, however, that the
Employers shall reimburse the legal fees and expenses described in
this clause (c) only if and when (A) the dispute is settled by the
parties or resolved pursuant to a binding arbitration award in a
manner that is more favorable to Employee than offered by the
Employers or (B) a final judgment, order or decree of a court of
competent jurisdiction has been rendered in favor of the Employers
and the time for appeal therefrom has expired and no appeal has been
perfected.
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In no event shall Employee be required to reimburse the Employers
for any legal fees or related expenses paid by the Employers
pursuant to this subsection 13(c)."
11. Employment Agreement in Full Force and Effect. Except as expressly
modified hereby, the Employment Agreement shall remain unchanged and in full
force and effect as executed and each of the parties hereto hereby confirms and
reaffirms all of the terms and conditions of the Employment Agreement. Any
reference to the Employment Agreement in any other document shall refer to the
Employment Agreement as amended hereby. This Amendment, together with the
Employment Agreement, sets forth the entire understanding of the parties hereto
with respect to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements (whether oral or written).
12. Governing Law; Counterparts. This Amendment (i) shall be construed and
enforced in accordance with the laws of the State of New York, and (ii) may be
executed in counterparts, each of which shall be deemed an original and together
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first written above.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President and
Chief Financial Officer
▇▇▇▇ SERVICES, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
[Signature Page to First Amendment to Employment Agreement of ▇▇▇▇▇ ▇▇▇▇▇▇▇]
SCHEDULE 2(d)(ii)
EBITDA and Measuring Period
Definition of EBITDA
EBITDA is defined based on amounts included in the financial statements of LLC
for all calendar years within any Measuring Period, commencing with the calendar
year beginning January 1, 2007. With respect to the fiscal year of ▇▇▇▇ ending
October 31, 2006, EBITDA shall be calculated based on the financial statements
of ▇▇▇▇ for that period. Except as otherwise hereinafter set forth, the
financial statements for LLC will be prepared in accordance with United States
generally accepted accounting principles ("GAAP"), applied in a manner
consistent with the manner in which GAAP was applied in determining EBITDA for
▇▇▇▇ for the fiscal year ended October 31, 2006. The parties agree that EBITDA
for ▇▇▇▇ for the fiscal year ended October 31, 2006 is $5,844,000.
EBITDA shall be calculated as: (1) net income plus (2) the sum, without
duplication, of (a) interest expense, (b) provisions for taxes based on income,
(c) total depreciation expense, (d) total amortization expense, (e)
non-recurring losses associated with vacating ▇▇▇▇'▇ former office space, (f)
losses on the impairment or disposal of fixed or intangible assets and (g)
expenses that are paid for directly by the issuance of equity instruments, minus
(3) the sum, without duplication, of (w) benefits from taxes based on income,
(x) revenue, income or gains that represent the receipt of, or the creation of
the right to receive, assets not readily convertible into cash, (y)
non-recurring income unrelated to the customary operations of LLC and (z)
interest and dividend income (other than that paid by entities in which LLC has
an investment accounted for on the equity method). Items listed in (2) and (3)
above shall be added or subtracted, respectively, only to the extent that they
are taken into account in the calculation of net income. In addition, LLC EBITDA
shall be calculated for the calendar years ending December 31, 2007 and December
31, 2008 without including as an expense any "public company expenses" (as
hereinafter defined) of LLC or WRP attributable to LLC. However, in determining
the growth in EBITDA during the Tranche 3 Measuring Period, EBITDA for the year
ending December 31, 2008 shall be calculated including as an expense of LLC the
actual public company expenses of LLC for the year ending December 31, 2009.
EBITDA shall be calculated with respect to the earlier fiscal or calendar year
in any Measuring Period by applying the same GAAP for such year as applied as of
the last day of the second calendar year in any Measuring Period so that the
same GAAP shall be applied for both years in any Measuring Period. In this
regard, adjustments shall be made where (i) LLC changes an accounting policy
from one acceptable method under GAAP to another acceptable method under GAAP,
or (ii) LLC must adopt changes in GAAP as promulgated, or as interpreted by the
SEC.
"Public company expenses" include all internal and out of pocket costs and
expenses (a) resulting from the fact that securities of WRP or LLC are publicly
registered and (b) to the extent attributable to the operations of LLC and its
subsidiaries. The expenses referred to in clause (a) include, without
limitation, (i) all legal expenses, audit expenses and expenses of directors and
officers insurance (to the extent those expenses exceed the costs that would be
applicable if WRP was a private company), (ii) all expenses resulting from
compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
("SOX") including, but not limited to, all costs associated with the required
documentation, testing, evaluation, concluding and remediation for the internal
control requirements of SOX, (iii) costs resulting from compliance with the
listing requirements of the AMEX or NASDAQ and (iv) all costs associated with
the processing, typing, copying, printing, filing and mailing of required forms,
press releases, correspondence and reports with the Securities and Exchange
Commission, stockholders and the investment community. Expenses will be
apportioned by management in good faith in accordance with clause (b) to the
extent necessary to exclude all costs and expenses associated with Company
operations which are not related to operations of LLC. The board of directors of
WRP shall review the management apportionment of expenses at least annually to
assure compliance with this provision. The Employers shall provide Employee,
upon request, with a written detailed statement of each calculation of "public
company expenses" and a written evaluation of the methodology and apportionment
applied. Employers will meet with the Employee and his representatives, upon
request, to review the calculation and answer any questions regarding the
calculation and provide reasonable support therefore.
Definition of Measuring Period, et al.
(a) "Tranche 1 Measuring Period" means the 2006 fiscal year of ▇▇▇▇ ending
October 31, 2006 compared to the 2007 calendar year of LLC.
(b) "Tranche 2 Measuring Period" means the 2007 calendar year of LLC compared to
the 2008 calendar year of LLC.
(c) "Tranche 3 Measuring Period" means the 2008 calendar year of LLC compared to
the 2009 calendar year of LLC.
(d) "Measuring Period" means Tranche 1 Measuring Period, Tranche 2
Measuring Period, or Tranche 3 Measuring Period.
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