200
EMPLOYMENT AGREEMENT
BY AND AMONG CARDINAL REALTY SERVICES, INC.,
LEAF ASSET MANAGEMENT, INC.
AND
▇▇▇▇▇▇ ▇. ▇▇▇
201
TABLE OF CONTENTS
Page
1. Employment..............................................................1
2. Term and Positions......................................................2
3. Compensation............................................................3
4. Insurance and Other Benefits............................................9
5. Payment in the Event of Death or Permanent Disability................. 10
6. Termination and Further Compensation...................................11
7. Reimbursement..........................................................13
8. Covenants and Confidential Information.................................13
9. Withholding Taxes......................................................15
10. No Conflicting Agreement...............................................15
11. Severable Provisions...................................................15
12. Binding Agreement......................................................15
13. Arbitration............................................................16
14. Notices................................................................16
15. Waiver.................................................................16
16. CRSI Guaranty..........................................................16
17. Miscellaneous..........................................................16
18. Governing Law..........................................................16
19. Captions and Section Headings..........................................16
20. Miscellaneous..........................................................17
202
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st
day of June, 1997, by and among LEAF Asset Management, Inc., an Ohio corporation
to be formed ("Employer"), Cardinal Realty Services, Inc., an Ohio corporation
("CRSI"), and ▇▇▇▇▇▇ ▇. ▇▇▇ ("Employee").
WITNESSETH:
WHEREAS, CRSI, Employer and Employee desire to enter into this
Agreement to assure Employer of the services of Employee, and Employee's
employment for the term set forth herein, and to set forth the rights and duties
of the parties hereto.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Employment.
(a) Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions hereinafter set
forth.
(b) During the term of this Agreement, or any renewal or
extension hereof (for purposes hereof, all references herein to the
term of this Agreement shall be deemed to include references to the
period of renewal or extension hereof, if any), Employee shall devote
her full time to her employment and perform with reasonable diligence
such duties as are customarily performed by the Executive Vice
President of Investment Management or similar senior executive officer
charged with primary responsibility for real estate investment
management for a company having the size and structure of CRSI and its
subsidiaries (including Employer), together with such other duties as
may be reasonably requested from time to time by the Board of Directors
of CRSI (the "Board"), the Compensation Committee of the Board (the
"Committee") or CRSI's chief executive officer, which duties: shall be
consistent with the further covenants set forth in Section 2 of this
Agreement, and (ii) shall include the position and responsibilities of
Chief Investment Officer of a legal entity to-be- formed by Employer
which will make investments in various forms of real estate assets
and/or transactions (the "Fund").
(c) Employee shall not, without the prior written consent of
Employer, directly or indirectly, during the term of this Employment
Agreement, other than in the performance of duties naturally inherent
in the businesses of CRSI or any subsidiary of CRSI (including
Employer) and in furtherance thereof, render services of a business,
professional or commercial nature to any other person or firm, for
compensation; provided, however, that so long as it does not interfere
with her full-time employment hereunder, Employee may attend to her
personal outside investments, serve as a director of a corporation
which does not compete with CRSI (as provided in Section 8 hereof), and
serve as director, trustee or officer of or otherwise participate in
educational, welfare, social, religious and civic organizations.
Employee may complete the performance of her professional engagements
which are pending on the date of this Agreement; provided that any such
performance does
1
203
not interfere with the performance of her employment duties hereunder.
For purposes of this Agreement, all references herein to subsidiaries
and affiliates of Employer or CRSI shall be deemed to include
subsidiaries and affiliates now or hereafter existing.
2. Term and Positions.
(a) Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on June 1, 1997 and
shall continue through May 31, 2000 (the "Original Term"). The Original
Term may be extended for additional terms of one year each (each, a
"Renewal Term") upon the mutual agreement of Employer and Employee.
(b) Employee shall, without any compensation in addition to
that which is specifically provided in this Agreement, serve in such
other offices or positions with any subsidiary or affiliate of CRSI as
shall, from time to time, be assigned reasonably by the Board, the
Committee or CRSI's chief executive officer (but such office or
positions shall be consistent with the duties, offices or positions
hereinbefore named as well as the location hereinafter named). It is
agreed that in addition to the provisions of Section 4(c) of this
Agreement and any other obligations due her hereunder, Employee shall
be entitled to the protection of the applicable indemnification
provisions of the Articles of Incorporation and Code of Regulations of
CRSI, the limited liability company organizational documents of
Employer and the corporate or partnership organizational documents of
any such subsidiary or affiliate. Employer will use all commercially
reasonable efforts to maintain its directors and officers liability
insurance for the benefit of, among others, Employee. Employer shall
provide Employee, upon request, evidence that such insurance has been
obtained, and, if not, what steps Employer plans to take to obtain such
coverage. Further, Employer shall continue to employ such efforts until
coverage is so obtained. For purposes of this Agreement, the term: (i)
"affiliate," when used with reference to any Person, means any entity
which, directly or indirectly through one or more intermediaries, is
controlled by, under common control with, or which controls, such
Person; (ii) "control" means (A) the power to direct the management and
policies of the entity in question, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise and
(B) "controlled" and "controlling" have meanings correlative to the
foregoing; and (iii) "subsidiary" means, with reference to any Person,
any corporation, general or limited partnership, limited liability
company, association or other business entity (in each case, a
"Person") (A) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the
ordinary voting power or more than 50% of the general partners' or
similar managing interests are, at the time any determination is being
made, owned, controlled or held, directly or indirectly, by such Person
or (B) that, at the time any determination is being made, is otherwise
controlled, by such Person or one or more subsidiaries of such Person
or by such Person and one or more subsidiaries of such Person.
(c) Employee may maintain her permanent residence in the
metropolitan area of Denver, Colorado at all times during the term of
this Agreement and will not be required to relocate such principal
residence in order to perform her duties hereunder. In addition,
Employer covenants and agrees with Employee that Employer will maintain
an operating
2
204
budget in an amount of not less than $500,000 per year while this
Agreement remains in effect.
3. Compensation.
(a) For all services she may render to Employer (and any
subsidiary or affiliate of CRSI) during the term of this Agreement,
Employer shall pay to Employee base compensation ("Base Compensation")
on the following terms:
(i) In consideration of Employee's execution of this
Employment Agreement, Employer has paid Employee Sixty
Thousand Dollars ($60,000), the receipt of which Employee
hereby acknowledges.
(ii) For the Original Term and any Renewal Term,
Fourteen Thousand Five Hundred Eighty-three and 33/100 Dollars
($14,583.33) per month.
(iii) Base Compensation payable to Employee under
this Section 3(a) shall be payable in bi-weekly installments.
(iv) Commencing January 1, 1998 Base Compensation may
be increased each fiscal year upon appropriate action by the
Board or the Committee. If increased, such increased dollar
amount shall thereafter constitute "Base Compensation" for all
purposes under this Agreement.
(b) Employer shall pay to Employee bonus compensation during
the term of this Agreement as follows:
(i) For Employer's 1997 fiscal year, and for each
fiscal year thereafter during which this Employment Agreement
remains in effect, Employer will pay to Employee a cash bonus
(together with any amounts due under subsections (ii) through
(iv), inclusive, below, the "Cash Bonus") determined on the
basis of CRSI's aggregate return on equity ("CRSI ▇▇▇" as
defined in Exhibit "A-1" attached hereto and incorporated
herein) from investments in real estate (including interests
comprised of receivables) other than through Employer and its
affiliates as follows:
3
205
Cash Bonus Expressed as
Percentage of Base
CRSI ▇▇▇ Compensation
--------------------------------- -------------------------
up to 5% 0
greater than 5% up to 10% ▇▇▇ multiplied by .25;
plus, if applicable
----
greater than 10% up to 15% ▇▇▇ exceeding 10%
multiplied by .375;
plus, if applicable
----
greater than 15% up to 20% ▇▇▇ exceeding 15%
multiplied by .6125;
plus, if applicable
----
greater than 20% to 25% ▇▇▇ exceeding 20%
multiplied by .75;
plus, if applicable
----
greater than 25% ▇▇▇ exceeding 25%
multiplied by 1.0, but not
to exceed a total of
15% of Base Compensation
Employee's Cash Bonus due under this subsection (i)
shall be paid within thirty (30) days after CRSI ▇▇▇ is
calculated from the applicable final audited year end
financial statements of CRSI.
(ii) In addition to the Cash Bonuses described in
subsection (i) above and subsections (iii) and (iv) below,
Employment Agreement remains in effect, Employer will pay to
Employee, within thirty (30) days of the end of the respective
periods set forth below, a Cash Bonus determined on the basis
of the achievement of the following objectives during the
first two years of the Original Term:
(A) For the one-year period from June 1,
1997 through May 31, 1998 (the "Initial Year"),
Employee shall receive a Cash Bonus on account of her
successful efforts in obtaining equity or preferred
equity (i.e., "mezzanine") capital contributions (or
binding commitments) from parties reasonably
acceptable to CRSI and Employer to the Fund (other
than the capital contribution to be provided to the
Fund by Employer or any subsidiary of Employer; such
third party capital contributions (or binding
commitments) being hereinafter referred to as
"Qualifying Capital Contributions"). The Cash Bonus
payable to Employee on account of Qualifying Capital
Contributions shall equal the dollar amount of
Qualifying Capital Contributions multiplied by
three-thirty-seconds of one percent (i.e., 9.375
basis points), provided, however, that the amount of
such Cash Bonus pursuant to this Section 3(b)(ii)(A)
will not exceed $75,000, and provided further, that
Employee shall not be entitled to any Cash Bonus
under this Section 3(b)(ii)(A) unless Qualifying
Capital Contributions obtained during the Initial
Year exceed $30,000,000.
4
206
(B) Employee shall be entitled to a Cash
Bonus on account of the one-year period from June 1,
1998 through May 31, 1999 (the "Second Year") on
account of equity investments made by the Fund in
real property or like assets from its inception
through the end of the Second Year. The amount of
Employee's Cash Bonus will equal three-thirty-seconds
of one percent (i.e., 9.375 basis points) of the
dollar amount of the Fund's total equity investments;
provided, however, that Employee's Cash Bonus
pursuant to this Section 3(b)(ii)(B) shall not exceed
$75,000.
(iii) In addition to the Cash Bonus described in
subsections (i) and (ii) above, and in subsection (iv) below,
for the one-year period from June 1, 1999 through May 31,
2000, Employer will pay to Employee a Cash Bonus determined on
the basis of Employer's aggregate return on equity ("Employer
▇▇▇" as defined in Exhibit "A-2" attached hereto and
incorporated herein) from investments in real estate by
Employer, as follows:
Cash Bonus Expressed
as a Percentage of
Employer ▇▇▇ Base Compensation
-------------------------- -----------------------------------
up to 3% 3.33
greater than 3% up to 6% ▇▇▇ in excess of 5% multiplied
by 5; plus, if applicable
----
greater than 6% ▇▇▇ in excess of 6% multiplied
by 6.67; but not to exceed a
total of 45% of Base Compensation
Notwithstanding the foregoing provisions for Cash
Bonus, in no event will Employee's Cash Bonus under this
Section 3(b)(iii) exceed 45% of Base Compensation. Employee's
Cash Bonus due under this subsection (iii) shall be paid
within thirty days after Employer calculates its Employer ▇▇▇
on account of any applicable one-year period.
(iv) In addition to the Cash Bonus described in
subsections (i) through (iii), inclusive, above, provided that
Employee remains in the employ of Employer, CRSI or a
subsidiary of CRSI, for the one-year period from June 1, 2000
through May 31, 2001; and for each such subsequent one-year
period thereafter during which this Employment Agreement
remains in effect, Employer will pay to Employee a Cash Bonus
determined on the basis of Employer ▇▇▇ as follows, unless
otherwise mutually agreed to by Employee and Employer:
5
207
Cash Bonus Expressed
as a Percentage of
Employer ▇▇▇ Base Compensation
------------------------------ -----------------------------------
up to 7% 0
greater than 7% up to 10% ▇▇▇ in excess of 7%
multiplied by 6;
plus, if applicable
----
greater than 10% ▇▇▇ in excess of 10%
multiplied by 9;
but not to exceed a total
of 45% of Base Compensation
Notwithstanding the foregoing provisions for Cash
Bonus, in no event will Employee's Cash Bonus under this
Section 3(b)(iv) exceed 45% of Base Compensation. Employee's
Cash Bonus due under this subsection (iv) shall be paid within
thirty days after Employer calculates its Employer ▇▇▇ on
account of any applicable one-year period.
(v) The Cash Bonus payable to Employee pursuant to
3(b)(i) above, on account of the 1997 fiscal year will be
prorated as follows:
(A) First, Employer will determine the
amount, if any, of the Cash Bonus otherwise payable
under Section 3(b)(i) on account of the full 1997
fiscal year.
(B) Second, the amount of the Cash Bonus
determined in accordance with paragraph (A) above,
will be multiplied by a fraction, the numerator of
which will be the number of days this Employment
Agreement was in effect during Employer's 1997 fiscal
(calendar) year and the denominator of which will be
365.
(vi) For the Original Term and any Renewal Term,
Employer will pay as commissions, with respect to all property
management fees received by CRSI's wholly-owned subsidiary,
Lexford Properties, Inc., in respect of property management
contracts obtained (A) as a direct result of Employee's
business development efforts from Persons in which the Fund
does not maintain an interest ("Employee Source Fees") or (B)
from the management of real property assets in which the Fund
maintains an equity ownership interest ("Fund Source Fees"),
on a monthly basis, an amount equal to 5% of gross Employee
Source Fees and 1% of gross Fund Source Fees.
(c) Further, CRSI and Employer, respectively, shall, and
hereby do, grant to Employee rights to receive (1) shares of CRSI's
common stock without par value (the "Common Stock") pursuant and
subject to the terms and conditions of those certain Restricted Shares
Agreements (the "Restricted Shares Agreements") to be entered into
between Employer and Employee, in customary forms reasonably acceptable
to Employer and Employee (such Common Stock to be referred to herein as
"Restricted Stock"), as well as (2) a Fund incentive payment, as
follows:
(i) seven thousand five hundred (7,500) shares of
Restricted Stock, one-third of which shall vest on each of the
third, fourth and fifth anniversaries of the Date of Grant (as
defined, and more particularly set forth, in the applicable
Restricted Shares Agreement), which issuance of shares shall
be made to The Provident Bank, a state chartered bank, as
Trustee ("Trustee") under that certain Executive Deferred
Compensation Rabbi Trust Agreement (the "Trust") for
Employee's benefit and shall be made effective on June 1,
1997.
6
208
(ii) nine thousand (9,000) shares of Restricted Stock,
which shall be issued to Trustee for Employee's benefit on
June 1, 1997 and shall vest as follows (and as more
particularly set forth under the applicable Restricted Shares
Agreement):
A. one-third when the internal rate of
return on CRSI's investment in Employer (as
determined in accordance with the methodology set
forth in Exhibit "B"; hereinafter, the "CRSI IRR")
exceeds 12% as of the end of a fiscal year of CRSI;
and
B. one-third when CRSI IRR exceeds 15% as of
the end of a fiscal year of CRSI; and
C. one-third when CRSI IRR exceeds 18% as of
the end of a fiscal year of CRSI.
(iii) Unless Employee shall resign from her employment or
Employee's employment shall have theretofore been terminated
pursuant to Section 6(a)(i) below, or for "cause" (as defined
in Section 6 below), upon the completion of the liquidation,
sale, merger, initial public offering or other transaction in
which CRSI realizes the value of the investments of Employer
(the "Exit"), within 90 days of the Exit, Employee will
receive an amount (the "Fund Incentive Payment") determined on
the basis of all Distributions (as defined in Exhibit A-2
attached hereto) from Employer to CRSI at or prior to the Exit
to the extent exceeding capital invested by CRSI or any
subsidiary of CRSI (other than Employer) in Employer or the
Fund ("CRSI Return"), as follows:
CRSI IRR Fund Incentive Payment
-------- ----------------------
up to 15% 0
greater than 15% up to 17.9% 5% of CRSI Return
greater than 17.9% up to 19.9% 8.5% of CRSI Return
greater than 19.9% up to 24.9% 12% of CRSI Return
greater than 24.9% 15% of CRSI Return
7
209
(iv) Notwithstanding the foregoing, the vesting of all
Restricted Stock and Stock Options (as defined hereinbelow)
granted under this Agreement shall be accelerated in the event
of any of the following:
(A) CRSI shall merge or be merged or
consolidated with, another corporation and as a
result of such merger or consolidation less than
seventy percent (70%) of the outstanding voting
securities of the surviving or resulting corporation
shall be owned in the aggregate by the former
shareholders of CRSI as the same shall have existed
immediately prior to such merger or consolidation;
(B) CRSI shall sell or transfer to one or
more persons, corporations or entities, in a single
transaction or a series of related transactions, more
than one-half of the assets of CRSI unless by an
affirmative vote of two-thirds of the members of the
Board, the transaction or transactions are exempted
from the operation of this provision based on a good
faith finding that the transaction or transactions
are not within the intended scope of this definition
for purposes of this Agreement;
(C) a person, within the meaning of Section
3(a)(9) or Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended and as in effect on
the date hereof (the "Exchange Act"), shall become
the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act and as in effect
on the date hereof) of thirty percent (30%) or more
of the outstanding voting securities of CRSI; or
(D) any shareholder of CRSI shall nominate a
person to the Board, which nominee shall be elected
to the Board without receiving the prior endorsement
of the Board or its Nominating Committee.
(d) CRSI shall grant to Employee options to purchase twelve
thousand five hundred (12,500) shares of Common Stock ("Stock Options")
in accordance with, and subject to, CRSI's 1992 Amended and Restated
Incentive Equity Plan and a Non-Qualified Stock Option Agreement to be
entered into between Employer and Employee, in customary form
reasonably acceptable to CRSI and Employee (the "Option Award
Agreement" and, together with the Restricted Shares Agreements, the
"Award Agreements"). The Stock Options shall have an exercise price
equal to the closing price of CRSI's Common Stock on the NASDAQ
National Market System on June 2, 1997, one-fifth of which shall vest
on the first, second, third, fourth and fifth anniversaries of the date
of such grant, which grant shall be made pursuant to the Option Award
Agreement.
8
210
(e) Employee shall be entitled to participate in any pension
or profit-sharing plan covering highly compensated salaried employees
which CRSI may have in effect or hereafter adopt during the term of
this Employment Agreement.
(f) With respect to the Stock Options, upon each occasion
Employee recognizes compensation income, as a result of the exercise of
the Stock Options, Employee may borrow from Employer an amount equal to
forty-eight percent (48%) (subject to appropriate adjustment if the
combined federal, state and local income tax rate on compensation
income differs in the year(s) in which Employee exercises the Stock
Option from the rate in effect in 1997) of the compensation income so
recognized by Employee, provided that Employee is still employed by
Employer. The loan shall (i) bear interest at a rate per annum equal to
that charged from time to time to CRSI under CRSI's senior secured
credit facility (which credit facility, as of the date of this
Agreement, is provided to CRSI by The Provident Bank) plus two percent
(2%) payable monthly, in arrears, (ii) be secured by a pledge of the
Common Stock which Employee acquired upon exercise of the Stock
Options, (ii) be due and payable upon the earliest of each sale of any
shares of the Common Stock so pledged (to the extent of the net
proceeds of such sale with any balance remaining being thereafter due
as otherwise provided under this Section 3(f)) or, if later, one (1)
year following the date upon which Employee is no longer employed by
Employer, CRSI or any other subsidiary of CRSI, and (iv) be evidenced
by a promissory note and a pledge agreement in customary form
reasonably acceptable to CRSI and Employee.
4. Insurance and Other Benefits.
(a) Employee shall be entitled to such medical,
hospitalization, health, accident, life and disability insurance and
pension plan benefits and such other similar employment privileges and
benefits as are afforded generally from time to time to other executive
officers of CRSI, or subsidiaries of CRSI, and in no event shall
Employee be provided benefits at a level less generous than those
benefits provided to any other officer or employee of CRSI, or any
subsidiary of CRSI. Further, with respect to medical coverage, Employer
shall provide medical coverage for Employee and her dependents at least
equal to the value of coverage afforded Employee on the effective date
of this Agreement if such coverage is available on commercially
reasonable terms.
(b) Employee shall be entitled to periods of vacation and sick
leave allowance each year, which shall be the same as provided under
CRSI's vacation and sick leave policy for executive officers, but in no
event shall Employee be entitled to, with full pay and benefits, less
than four (4) weeks paid vacation and customary holidays.
(c) Employer shall indemnify, to the full extent then
permitted by law, Employee if she was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that she is or was a member of the Board or an
officer or agent of CRSI or any subsidiary of CRSI (including
Employer), or is or was serving at the request of Employer as a
9
211
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Employer shall
pay expenses, including reasonable attorney's fees, incurred by
Employee in defending any such action, suit or proceeding as they are
incurred, in advance of the final disposition thereof, and may pay, in
the same manner and to the full extent then permitted by law, such
expenses incurred by any other person. The indemnification and payment
of expenses provided hereby shall not be exclusive of, and shall be in
addition to, any other rights granted to Employee seeking
indemnification under any law, the Articles of Incorporation of CRSI,
any agreement, vote of shareholders or disinterested members of the
Board, or otherwise, both as to action in official capacities and as to
action in another capacity while she is a member of the Board, officer,
employee or agent of CRSI or any subsidiary of CRSI (including
Employer), and shall continue as to Employee after she has ceased to be
a member of the Board, trustee, officer, employee or agent and shall
inure to the benefit of the heirs, executors, and administrators of
Employee.
(d) Employee shall be reimbursed for the cost of reasonable
legal fees incurred by her in connection with negotiating and drafting
this Agreement and ancillary matters as they relate to this Agreement,
including, without limitation, the issuance of the Restricted Stock and
Stock Options and the negotiation and drafting of the Award Agreements.
5. Payment in the Event of Death or Permanent Disability.
(a) In the event of Employee's death or Permanent Disability
(as defined hereinbelow) during the term of this Agreement, Employee or
her estate, as the case may be, shall be entitled to receive (i) an
amount equal to the lesser of (x) any remaining Base Compensation for
the Original Term or any then current Renewal Term or (y) one year of
Base Compensation reduced by any and all payments made to Employee
pursuant to any disability insurance policy maintained by CRSI or
Employer for Employee's benefit pursuant to Section 4(a) of this
Agreement or otherwise (the "Disability Policy"), (ii) a pro rata
portion of the Cash Bonus, if any, applicable to the fiscal year and/or
the one year period, as appropriate, in which such death or Permanent
Disability occurs, as the Cash Bonus is determined under Section 3(b)
of this Agreement, and (iii) any shares of Restricted Stock and Stock
Options that have vested in accordance with the provisions of the Award
Agreements. Such pro rata portion of the Bonus shall be determined by
multiplying a fraction (the numerator of which shall be the number of
days in the applicable fiscal year or the one-year period, as
appropriate, elapsed prior to the date of death or Permanent
Disability, as the case may be, and the denominator of which shall be
three hundred sixty-five (365)) by the amount of the Bonus that would
have been payable, if any, pursuant to such Section 3(b), if Employee
had remained employed under this Agreement for the entire applicable
fiscal year. Notwithstanding the foregoing, in the event that the
Employee's death or Permanent Disability shall occur on or before
December 31, 1997, then in such event the Cash Bonus, if any, payable
to Employee or her estate on account of Section 3(b)(i) shall be
determined by multiplying a fraction (the numerator of which shall be
the number of days elapsed from the date of this Employment Agreement
until the date of death or Permanent Disability, as the case may be,
10
212
and the denominator of which shall be three hundred sixty five (365))
by the amount, if any, of the Bonus that would have been payable
pursuant to such Section 3(b)(i), if Employee had been employed by
Employer during the entire 1997 fiscal year without giving further
effect to the provisions of Section 3(b)(iv).
(b) Following the death or Permanent Disability of Employee,
the Cash Bonus, if any, shall be paid when and as provided in Section
3(b) of this Agreement. The other compensation to be paid pursuant to
this Section 5 shall be paid, at the election of Employee or Employee's
designated beneficiary (who shall be her husband, unless she gives
Employer written notice of a different designation), either (i) in two
(2) equal annual installments paid within the two (2) year period
beginning on the date of such death or Permanent Disability, as the
case may be, or (ii) in one (1) lump sum paid within ninety (90) days
after the date of such death or Permanent Disability, as the case may
be.
(c) Employee shall be entitled to no further compensation or
other benefits under this Agreement, except as to that portion of any
benefits accrued and earned by her hereunder up to and including the
date of such death or Permanent Disability.
(d) For purposes of this Section 5, Employee's Permanent
Disability shall be deemed to occur on the date after the first to
occur of (i) ninety (90) consecutive days, or (ii) one hundred eighty
(180) days cumulatively in any twelve (12) month period, of Employee's
inability to provide the services required hereunder of her due to
sickness or injury ("Permanent Disability").
6. Termination and Further Compensation.
(a) The employment of Employee under this Agreement, and the
term hereof, subject to Employee's rights set forth elsewhere herein,
may be terminated by Employer:
(i) in the event that the Fund fails to obtain
Qualifying Capital Contributions aggregating at least
$30,000,000 on or before October 31, 1998, or
(ii) on death or Permanent Disability of Employee, or
(iii) for cause at any time by action of the Board or
the Committee. For purposes hereof, the term "cause" shall
mean:
A. an intentional act of fraud,
embezzlement, theft or any other material violation
of law in connection with Employee's duties or in the
course of her employment with Employer;
B. intentional wrongful damage to material
assets of Employer or CRSI;
11
213
C. intentional wrongful disclosure of
material confidential information of Employer or
CRSI;
D. intentional wrongful engagement in any
competitive activity which would constitute a
material breach of the duty of loyalty; or
E. breach of any material term of this
Agreement.
No act, or failure, to act, on the part of Employee shall be
deemed "intentional", or provide the basis for termination for
cause, if it was due primarily to an error in judgment or
negligence without bad faith or reckless disregard, but shall
be deemed "intentional" only if done, or omitted to be done,
by Employee not in good faith and without reasonable belief
that her action or omission was in or not opposed to the best
interest of Employer. Failure to meet performance standards or
objectives of Employer shall not constitute cause for purposes
hereof. Further, in the event Employer terminates Employee for
"cause", Employer shall give Employee written notice as to the
specific circumstances giving rise to its decision to
terminate Employee for cause ("Notice"), and, Employee shall
be given the opportunity to respond, with counsel, to
Employer's decision and Employer's articulated circumstances,
such responses shall be before the Board or the Committee and
shall take place within fourteen (14) days of Employer's
Notice. Any termination by reason of the foregoing shall not
be in limitation of any other right or remedy Employer may
have under this Agreement or otherwise. On any termination of
this Agreement, Employee shall be deemed to have resigned from
all offices and directorships held by Employee in CRSI and any
subsidiaries and affiliates of CRSI (including Employer).
(b) In the event of termination of this Agreement for any of
the reasons set forth in Section 6(a)(iii) hereof, Employee shall be
entitled to no further compensation or other benefits under this
Agreement, except as to (i) that portion of any unpaid Base
Compensation reduced by any and all payments made, or to be made, to
Employee pursuant to the Disability Policy and other benefits accrued
and earned by her hereunder up to and including the effective date of
such termination; and (ii) any of her shares of Restricted Stock and
Stock Options that have vested in accordance with the provisions of
Section 3(c) of this Agreement and the Award Agreements.
(c) In the event that Employee's employment is terminated by
Employer other than pursuant to Section 6(a) of this Employment
Agreement during the Original Term or any Renewal Term of this
Employment Agreement or in the event that the Original Term or any
Renewal Term of this Employment Agreement shall have expired and shall
not have been renewed and Employee thereupon ceases to be employed by
CRSI or any of its subsidiaries, Employee shall be entitled to receive:
(i) an amount equal to her Base Compensation, and any other benefits
due Employee under Section 4 of this Agreement, payable for the then
unexpired portion of the Original Term, if any, plus the immediately
12
214
succeeding nine (9) months; (ii) the Cash Bonus, if any, applicable to
the fiscal year and one-year period, respectively, in which such
cessation of employment occurs, as such Cash Bonus is determined under
Section 3(b) of this Employment Agreement but on a prorated basis
calculated in the manner contemplated by Section 5(a) of this
Employment Agreement; and (iii) all of her shares of Restricted Stock
and the future right to receive the Fund Incentive Payment awarded
pursuant to Section 3(c)(iii) of this Employment Agreement and Stock
Options immediately fully vested, and otherwise free of any forfeiture
provisions or other restrictions imposed under the Award Agreements
except for any restrictions or limitations imposed by applicable state
and federal securities laws and regulations. In the event that
Employee's employment is terminated without cause during a Renewal
Term, Employee will be entitled to receive all of the compensation and
benefits provided for in the immediately preceding sentence; except
that Employee's Base Compensation will continue solely for the nine (9)
month period immediately following such termination, irrespective of
the originally scheduled duration of the then current Renewal Term.
Upon any such termination by Employer, other than for "cause",
Employee's obligations to Employer hereunder shall terminate.
(d) In the event that Employee shall resign from employment
during the Original Term or any Renewal Term of this Employment
Agreement for any reason other than a breach by Employer of the terms
of this Agreement, Employee shall be entitled to receive solely (i)
that portion of any unpaid Base Compensation and other benefits accrued
and earned by her hereunder up to, and including, the effective date of
such Resignation; and (ii) any of her shares of Restricted Stock and
Stock Options that have vested in accordance with the provisions of
Section 3(c) of this Employment Agreement and the Award Agreements.
7. Reimbursement. Employer shall reimburse Employee or provide her with
an expense allowance during the term of this Agreement, for travel,
entertainment and other expenses reasonably and necessarily incurred by Employee
in performing services hereunder or, generally, the promotion of Employer's
business. Employee shall furnish such documentation with respect to
reimbursement to be paid under this Section 7 as Employer shall reasonably
request.
8. Covenants and Confidential Information.
(a) Employee acknowledges Employer's reliance and expectation
of Employee's continued commitment of performance of her duties and
responsibilities during the term of this Agreement. In light of such
reliance and expectation on the part of Employer, Employee agrees that
during the period beginning on the effective date of this Employment
Agreement and ending eighteen (18) months after the termination of
Employee's employment for cause or pursuant to Section 6(a)(i) of this
Employment Agreement or Employee's resignation from employment with
Employer, she shall not, directly or indirectly, do or suffer any of
the following:
(i) own, manage, control or participate in the
ownership, management, or control of, or be employed or
engaged by or otherwise affiliated or associated as a
13
215
consultant, independent contractor or otherwise with, any
other corporation, partnership, proprietorship, firm,
association, or other business entity, or otherwise engage in
any business, which directly of indirectly acquires, or
solicits to develop, rehabilitate or acquire real property,
property management agreements or any other service agreement
directly relating to any property with respect to which CRSI,
Employer or any of CRSI's subsidiaries or affiliates has
contracted to acquire, develop, rehabilitate or provide (or is
actively negotiating to acquire, develop, rehabilitate or
provide) similar services on the date that Employee shall no
longer be employed by Employer, CRSI or any other subsidiary
of CRSI; provided, however, that the ownership of not more
than one percent (1%) of the stock of any publicly-traded
corporation shall not be deemed a violation of this covenant;
(ii) employ, assist in employing, or solicit for
employment any employee or officer of Employer, CRSI or any of
CRSI's affiliates or subsidiaries who was employed or retained
at any time during the one (1) year period preceding the date
on which Employee's employment with Employer is terminated;
(iii) induce any person who is an employee or officer
of Employer, CRSI or any of CRSI's affiliates or subsidiaries
to terminate said relationship in such a manner which is not
in furtherance of Employer's or CRSI's interest; or
(iv) except in performing services hereunder,
disclose, divulge, discuss, copy or otherwise use or suffer to
be used in any manner, in competition with, or contrary to the
interests of, Employer, or any of CRSI's affiliates or
subsidiaries, the proprietary customer lists, limited partner
lists, research or data or other trade secrets of Employer,
CRSI or any of CRSI's affiliates or subsidiaries, it being
acknowledged by Employee that any such proprietary information
regarding the business of Employer, CRSI and CRSI's affiliates
or subsidiaries compiled or obtained by, or furnished to,
Employee while Employee shall have been employed by or
associated with Employer, CRSI or any subsidiary of CRSI, and
which has not been publicly disclosed by Employer or CRSI or
which is otherwise not available in the public domain, is
confidential information and Employer's or CRSI's property.
(b) Employee expressly agrees and understands that the remedy
at law for any breach by her of this Section 8 will be inadequate and
that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged
that upon adequate proof of Employee's violation of any legally
enforceable provision of this Section 8, Employer shall be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in this Section 8
shall be deemed to limit Employer's remedies at law or in equity for
any breach by Employee of any of the provisions of this Section 8 which
may he pursued or availed of by Employer.
14
216
(c) Employee has carefully considered the nature and extent of
the restrictions upon her and the rights and remedies conferred upon
Employer under this Section 8, 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 Employer and
CRSI, do not stifle the inherent skill and experience of Employee,
would not operate as a bar to Employee's sole means of support, are
fully required to protect the legitimate interests of Employer and CRSI
and do not confer a benefit upon Employer and CRSI disproportionate to
the detriment to Employee.
9. Withholding Taxes. All payments to Employee shall be subject to
withholding on account of federal, state and local taxes as required by law. Any
amounts remitted by Employer to the appropriate taxing authorities as taxes
withheld by Employer from Employee on income realized by Employee with respect
to the vesting of her shares of Restricted Stock, any exercise of the Stock
Option or the receipt of the Fund Incentive Payment shall reduce the amounts
payable by Employer to Employee by way of compensation or otherwise. If any
particular payment required hereunder is insufficient to provide the amount of
such taxes required to be withheld, Employer may withhold such taxes from any
other payment due Employee. In the event all cash payments due Employee are
insufficient to provide the required amount of such withholding taxes, Employee,
within thirty (30) days of written notice from Employer, shall pay to Employer
the amount of such withholding taxes in excess of all cash payments due Employee
at the time such withholding is required to be made by Employer, provided,
however, the foregoing shall not be deemed to limit Employee's right to receive
loans from Employer to fund income tax obligations as set forth in Section 3 of
this Agreement.
10. No Conflicting Agreement. The parties hereto represent and warrant
to each other that they are not a party to any agreement, contract or
understanding, whether employment or otherwise, which would restrict or would
prohibit them from undertaking or performing in accordance with the terms and
conditions of this Agreement. Employer and CRSI represent and covenant that
their execution, delivery and performance of this Agreement has been duly
authorized and ratified, and that they have full authority to consummate the
undertakings set forth herein including, without limitation, the grant of the
Restricted Stock, Stock Options and Restricted Interest to Employee.
11. Severable Provisions. The provisions of this Agreement are
severable and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision to the extent enforceable in any jurisdiction
shall, nevertheless, be binding and enforceable.
12. Binding Agreement. The rights and obligations of CRSI and Employer
under this Agreement shall inure to the benefit of, and shall be binding upon,
CRSI, Employer and their respective successors and assigns, and the rights and
obligations (other than obligations to perform services) of Employee under this
Agreement shall inure to the benefit of, and shall be binding upon, Employee and
her heirs, personal representatives and estate. Employee agrees and acknowledges
that the services Employee is providing Employer, CRSI and any other
15
217
subsidiaries of CRSI are personal to Employer and CRSI, and Employee shall not
have the right to assign this Agreement without Employer's written consent.
13. Arbitration. Any controversy or claim arising out of or relating to
this 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 Columbus, 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 Section 13 shall be
construed so as to deny Employer and CRSI the right and power to seek and obtain
injunctive relief in a court of equity for any breach or threatened breach of
Employee of any of her covenants contained in Section 8(a) of this Agreement.
14. Notices. Any notice to be given under this 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 Employer or
CRSI, shall be addressed to CRSI's principal place of business, attention:
General Counsel, and if mailed to Employee, shall be addressed to her at her
home address last known on the records of Employer, or at such other address or
addresses as either Employer or Employee may hereafter designate in writing to
the other.
15. Waiver. The failure of either party to enforce any provision or
provisions of this 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 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.
16. CRSI Guaranty. CRSI covenants and agrees with Employee that in the
event Employer fails to timely satisfy any of its obligations hereunder then
CRSI will pay or perform or cause the payment or performance of such
obligations.
17. Miscellaneous. This 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 it is sought to be
enforced.
18. Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Ohio.
19. Captions and Section Headings. Captions and section headings used
herein are for convenience and are not a part of this Agreement and shall not be
used in construing it.
16
218
20. Miscellaneous. Where necessary or appropriate to the meaning
hereof, the singular and plural shall be deemed to include each other, and the
masculine and neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
on the day and year first set forth above.
"EMPLOYER"
LEAF ASSET MANAGEMENT, INC., an Ohio Limited
Liability Company to be formed
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., President
and Chief Executive Officer
"CRSI"
CARDINAL REALTY SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., President
and Chief Executive Officer
"EMPLOYEE"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇
17
219
EXHIBIT "A-1"
"▇▇▇ FORMULA FOR CRSI PORTFOLIO
Section 3(b)(i) of the Employment Agreement
"CRSI ▇▇▇" means, for any fiscal year, the solution (expressed as a
percentage) of a fraction, (a) the numerator of which equals the Portfolio FMV
as of December 31 of such fiscal year, minus the Portfolio FMV as of December 31
of the immediately preceding fiscal year, plus the amount of Distributions for
such fiscal year, plus or minus the increase or decrease, as the case may be, in
the aggregate working capital of the Portfolio Entities, and (b) the denominator
of which equals the Portfolio FMV as of December 31 of the immediately preceding
fiscal year.
"Portfolio FMV" means the aggregate fair market value of the interests
(both debt and equity) of CRSI and its affiliates in the Portfolio Entities,
determined as to each interest by applying the Applicable Capitalization Rate
against the 12-month trailing net operating income (calculated on a basis
consistent with CRSI's past practices) of the property underlying the subject
interest, less a replacement reserve of $300 per unit and subtracting therefrom
the following: (a) first mortgage debt; (b) subordinated mortgage debt owed to
any party other than CRSI or its affiliates; (c) the excess, if any, of current
liabilities over current assets; (d) the proportionate value of the interests of
limited partners, co-general partners or similarly-situated interestholders; and
(e) deemed costs-of-sale equal to 4% of gross value.
"Applicable Capitalization Rate" means (a) with respect to all
interests comprising the Portfolio as of January 1, 1997, 10.5; and (b) with
respect to all interests placed in the Portfolio after January 1, 1997, the
capitalization rate at which the property underlying the subject interest was
valued at the time it was acquired, as evidenced by the presentation materials
provided to the authorized investment committee at the time of the acquisition.
"Portfolio Entities" means the partnerships, corporations, limited
liability companies or other entities in which CRSI holds, as of January 1,
1997, a whole or partial equity interest, and which entities are primarily
engaged in the ownership of multifamily real estate or interests therein.
"Portfolio" means the real estate owned, directly or indirectly, by the
Portfolio Entities.
"Distributions" means any and all cash distributions to CRSI or its
affiliates from the Portfolio Entities other than fees paid for services
rendered, less the direct expenses and overhead allocation assigned to
"Investment Management", as determined on the same basis utilized for purposes
of the segmented reporting in the Form 10-K of CRSI for the year ended December
31, 1996.
220
EXHIBIT "B"
Terms used but not otherwise defined in this Exhibit B have the
meanings given them in the preceding Employment Agreement and Exhibit A-2.
"CRSI IRR" means, at the time of determination, the discount rate at
which the present value of the Distributions are equivalent to CRSI's aggregate
contributions to the capital of Employer and the Fund (which contributions to
capital shall be deemed to include, without limitation, any direct payments by
CRSI or any of its subsidiaries (other than Employer) of Employer or Fund
operating or other expenses to the extent not deducted from Distributions).
