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EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (“Agreement”) is
made effective as of May 23, 2008 (“Effective
Date”), by and among Meruelo Maddux Properties, Inc., a
Delaware corporation (“Company”), Meruelo Maddux
Properties, L.P. ( “Partnership”) and Andrew Grant
Murray (“Executive”) to affirm the terms and
conditions of employment.
The
parties agree as follows:
1.
Employment . Employer (as defined below) hereby
employs Executive, and Executive hereby accepts such employment,
upon the terms and conditions set forth herein.
2.
Duties .
2.1
Position . Executive is employed on a full-time
basis as Chief Financial Officer, shall report directly to the
President of the Company (the “President”), and shall
have the duties and responsibilities commensurate with such
position as shall be reasonably and in good faith determined from
time to time by the President, including such duties and
responsibilities with respect to the Company, the Partnership
and/or a subsidiary of either (collectively,
“Employer”), including, if and to the extent requested
by the Employer, management of the Employer’s (i) accounting
and financial functions, (ii) capital markets activities, (iii)
investor relations and (iv) sourcing of its borrowings and
maintenance of its borrowing relationships.
2.2
Duties . Executive shall: (i) abide by all
applicable federal, state and local laws, regulations and
ordinances, and (ii) except for vacation and illness periods,
devote substantially all of his business time, energy, skill and
efforts to the performance of his duties hereunder in a manner that
will faithfully and diligently further the business interests of
the Employer; provided, that, notwithstanding the foregoing,
Executive may (x) make and manage personal business investments of
his choice, (y) serve as a director or in any other capacity of any
business enterprise, including an enterprise whose activities may
involve or relate to the business of the Employer, provided that
such service is expressly approved by the Board of Directors of the
Company (“Board of Directors”), and (z) serve in any
capacity with any civic, educational, religious or charitable
organization, or any governmental entity or trade
association.
3.
Term of Employment . The term of
Executive’s employment with Employer under this Agreement
shall commence on the Effective Date and shall continue until and
including the three-year anniversary of the Effective Date, unless
earlier terminated as herein provided (the “Initial
Term”). The Initial Term shall be automatically
renewed for successive one-year periods (each an “Extended
Term”) unless either party gives notice of non-renewal at
least sixty (60) days prior to the end of the Initial Term or any
Extended Term. As used herein, “Term of
Employment” shall include the Initial Term and any Extended
Term, but the Term of Employment shall end upon any termination of
Executive’s employment with Employer as herein
provided.
4.
Compensation .
4.1
Base Salary . As compensation for
Executive’s performance of Executive’s duties as set
forth herein and as assigned by the President from time to time,
Employer shall pay to Executive a base salary of $275,000 per year
(“Base Salary”), payable in accordance with the normal
payroll practices of Employer, less all legally required or
authorized payroll deductions and tax withholdings. Base
Salary shall be reviewed annually, and may be increased (but not
decreased unless agreed to by Executive), at the sole discretion of
the compensation committee of the Board of Directors, in light of
the Executive’s performance and the Employer’s
financial performance and other economic conditions and relevant
factors.
4.2
LTIP Units and Other Equity Awards
.
(a)
In
consideration of services to be performed by Executive for the
Partnership in his capacity as a partner thereof, the Employer
shall cause to be granted to Executive up to an aggregate of
200,000 long-term incentive plan units (“LTIP Units”)
divided into up to five separate tranches, as follows (such LTIP
Units shall be evidenced by, and subject to, the LTIP Unit award
agreement attached to this Agreement as Exhibit A and
the Company’s 2007 Equity Incentive Plan (a copy of which has
been delivered to Executive)):
(i)
A
first tranche of 40,000 LTIP Units if and when at all times during
any period of 20 consecutive trading days the Company’s
common stock (x) is listed on The Nasdaq Global Market or the New
York Stock Exchange or a national securities exchange that is a
successor or affiliate to either of the foregoing and (y) trades at
$10 (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or similar events) or greater, as
reported by the applicable exchange.
(ii)
A
second tranche of 40,000 LTIP Units if and when at all times during
any period of 20 consecutive trading days the Company’s
common stock (x) is listed on The Nasdaq Global Market or the New
York Stock Exchange or a national securities exchange that is a
successor or affiliate to either of the foregoing and (y) trades at
$11 (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or similar events) or greater, as
reported by the applicable exchange.
(iii)
A
third tranche of 40,000 LTIP Units if and when at all times during
any period of 20 consecutive trading days the Company’s
common stock (x) is listed on The Nasdaq Global Market or the New
York Stock Exchange or a national securities exchange that is a
successor or affiliate to either of the foregoing and (y) trades at
$12 (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or similar events) or greater, as
reported by the applicable exchange.
(iv)
A
fourth tranche of 40,000 LTIP Units if and when at all times during
any period of 20 consecutive trading days the Company’s
common stock (x) is listed on The Nasdaq Global Market or the New
York Stock Exchange or a national securities exchange that is a
successor or affiliate to either of the foregoing and (y) trades at
$13 (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or similar events) or greater, as
reported by the applicable exchange.
(v)
A
fifth tranche of 40,000 LTIP Units if and when at all times during
any period of 20 consecutive trading days the Company’s
common stock (x) is listed on The Nasdaq Global Market or the New
York Stock Exchange or a national securities exchange that is a
successor or affiliate to either of the foregoing and (y) trades at
$14 (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or similar events) or greater, as
reported by the applicable exchange.
Each
tranche of LTIP Units will be fully vested when such LTIP
Units are granted pursuant to the achievement of the specified
common stock trading hurdles as described above (subject to
achieving parity with common units of limited partnership in
the Partnership and the two-year prohibition against transfer,
each as provided in the form of LTIP Unit award agreement
attached as Exhibit A
). The parties acknowledge and agree that Employer shall have
no obligation to make any award pursuant to this Section
4.2(a) upon or after the end of the Term of
Employment. The parties further acknowledge and
agree that none of such potential awards shall be deemed
outstanding for purposes of this Agreement unless and until
actually awarded (or required to be awarded), including for
purposes of Sections 7.1, 7.2 or 7.6; provided that for
purposes of Section 7.6 in the event of a Change in Control
(as defined in Section 7.10), the foregoing awards shall be
deemed to be outstanding to the extent that the actual or
implied per-share common stock price realized by the holders
of the Company’s common stock upon the Change in Control
equals or exceeds the applicable common stock trading hurdles
described above.
(b)
In
addition, Employer agrees on each of December 31, 2008, December
31, 2009, December 31, 2010, December 31, 2011, December 31, 2012,
and May 31, 2013, but only if such date occurs during the Term of
Employment, to cause to be issued to Executive 35,000 LTIP Units,
60,000 LTIP Units, 60,000 LTIP Units, 60,000 LTIP Units, 60,000
LTIP Units and 25,000 LTIP Units, respectively (for a potential
aggregate of 300,000 Units), subject to the terms and conditions of
the LTIP Unit award agreement attached to this Agreement as
Exhibit
A and the Company’s 2007 Equity Incentive
Plan. Each award of LTIP Units will be fully vested when
such LTIP Units are granted (subject to achieving parity with
common units of limited partnership in the Partnership and the
two-year prohibition against transfer, each as provided in the form
of LTIP Unit award agreement attached as Exhibit A
). The parties acknowledge and agree that Employer shall
have no obligation to make any award pursuant to this Section
4.2(b) upon or after the end of the Term of
Employment. The parties further acknowledge and agree
that none of such potential awards shall be deemed outstanding for
purposes of this Agreement, including for purposes of Sections 7.1,
7.2 or 7.6; provided that for purposes of Section 7.6 in the event
of a Triggering Change in Control (as defined in Section 7.10), all
LTIP Units that remain to be awarded (if any) pursuant to this
Section 4.2(b) shall be deemed to be outstanding.
(c)
The
award agreements for the LTIP Units awarded or that may be awarded
pursuant to this Section 4.2 shall reference that the LTIP Units
are “Safe Harbor Interests” under Internal Revenue
Service Notice 2005-43, as provided in the agreement of limited
partnership of Meruelo Maddux Properties, L.P. and for which LTIP
Units a Section 83(b) election shall be made timely by Executive
showing a zero liquidation value.
(d)
In
addition, as part of the consideration for employment, Executive
shall be eligible to receive additional awards of LTIP Units and
other equity awards, subject to the terms and conditions of the
Company’s 2007 Equity Incentive Plan (or plan for a
subsequent year) and the applicable award agreement.
(e)
Any
LTIP Units granted to the Executive during the term of this
Agreement shall be deemed to have been granted to the Executive in
consideration of services rendered or to be rendered in
Executive’s capacity as a partner of the
Partnership.
(f)
The
Company and the Partnership shall (and shall cause each subsidiary
that is a component Employer to) allocate the services provided by
Executive to each component Employer and compensate Executive from
the respective component Employer on a basis proportionate to the
services provided by Executive to each component
Employer. The provision of services to one component
Employer shall satisfy any time commitment of the Executive to
Employer for purposes of determining whether Executive has
discharged his obligations to Employer under this or any other
employment agreement with Employer. The parties confirm
that Employer shall (and intends to) require that a sufficient
amount of services be provided hereunder to the Partnership by
Executive in his capacity as a partner of the Partnership to
constitute full and adequate consideration for the issuance of LTIP
Units to Executive as provided in the limited partnership agreement
governing the Partnership, as may be amended from time to
time.
4.3
Bonus.
(a)
Within
two weeks after the Effective Date, Employer shall pay Executive a
one-time cash signing bonus in the amount of $200,000 (the
“Signing Bonus”).
(b)
In
addition, Executive shall be paid by Company on or before
December 31st of each year during the Term of Employment a
minimum cash bonus equal to twenty-five percent (25%) of
Executive’s Base Salary. In addition, at the sole
discretion of the Board’s compensation committee, Executive
may be paid an additional bonus relating to each calendar year
during the Term of Employment, and such additional bonus, if any,
shall be paid on or before March 1st of the following
year.
5.
Customary Fringe Benefits . Executive shall be
eligible for all customary and usual fringe benefits generally
available to full-time employees of Employer, subject to the terms
and conditions of Employer’s policies and benefit plan
documents. Employer reserves the right to change or
eliminate the fringe benefits on a prospective basis, at any time,
effective upon notice to Executive. Notwithstanding the
standard vacation policy provisions on vacation accrual rates,
Executive shall be entitled to earn vacation at the rate of three
weeks per year.
6.
Business Expenses . Executive shall be reimbursed
for all reasonable, out-of-pocket business expenses incurred in the
performance of Executive’s duties on behalf of
Employer. To obtain reimbursement, expenses must be
submitted promptly with appropriate supporting documentation in
accordance with Employer’s policies. All such
expenses shall be reimbursed within thirty (30) days after such
submission.
7.
Termination of Employment. Subject to the terms
and conditions of this Section 7, either Employer or Executive
may terminate Executive’s employment with Employer at any
time, with or without Cause (as defined in Section 7.10), during
the Term of Employment. Any termination of
Executive’s employment during the Term of Employment shall be
communicated by written notice of termination from the terminating
party to the other party (“Notice of
Termination”). The Notice of Termination shall
indicate the specific provision(s) of this Agreement relied upon in
effecting the termination and a written statement of the reason(s)
for the termination. In the case of a Notice of
Termination provided by Executive to Employer, such Notice of
Termination shall not be effective for a period of sixty (60) days
after receipt of such Notice of Termination by
Employer. In the case of a Notice of Termination
provided by Employer to Executive, such Notice of Termination shall
be effective on the date designated by Employer in the Notice of
Termination. In the event Executive’s employment
is terminated by either party, for any reason, during the Term of
Employment, Employer shall pay the prorated Base Salary earned as
of the date of Executive’s termination of employment and the
accrued but unused vacation as of the date of Executive’s
termination of employment to Executive upon Executive’s
termination of employment. Except as otherwise provided
in this Section 7, Employer shall have no further obligation
to make or provide to Executive, and Executive shall have no
further right to receive or obtain from Employer, any payments or
benefits in respect of the termination of Executive’s
employment with Employer during the Term of
Employment.
7.1
Severance Upon Involuntary Termination without Cause
. In the event that Employer causes to occur an
involuntary termination without Cause (as defined in
Section 7.10) of Executive’s employment with Employer
during the Term of Employment and such involuntary termination
qualifies as a “Separation from Service” under Section
409A (as hereinafter defined), Executive shall be entitled to a
“Severance Package” that consists of the following
:(a) a single cash lump-sum “Severance Payment”
equal to two times the sum of (x) Executive's annual rate of
Base Salary in effect immediately prior to Executive’s
termination of employment, and (y) the greater of (i) the
bonus actually paid to Executive for the most recently completed
fiscal year (excluding the Signing Bonus), and (ii) the
minimum bonus that would have been paid to Executive for the entire
fiscal year in which the termination occurs (excluding the Signing
Bonus); (b) Employer’s direct-to-insurer payment of any
group health premiums that Executive would otherwise have been
required to pay for a period of one (1) year (subject to
Executive’s eligibility for, and proper and timely election
of continued group health benefits under the Consolidated Omnibus
Budget and Reconciliation Act (“COBRA”)); and
(c) immediate vesting of all outstanding and unvested (if
applicable) LTIP Units (which shall, in accordance with the
applicable award agreement, remain subject to achieving parity with
common units of limited partnership interest in the Partnership and
shall remain subject to the two-year prohibition against transfer
provided in any such applicable award grant), stock options,
restricted stock, and other equity awards granted to Executive
under any of Employer’s equity incentive plans;
provided
, however, that all of the following conditions are first
satisfied: (a) Executive reaffirms Executive’s
commitment to comply with all surviving provisions of this
Agreement, including Section 9 and Section 10 hereof; and
(b) Executive executes a Separation Agreement that includes a
general release in favor of Employer and its parent, and all
subsidiary and related entities, and their officers, directors,
shareholders, employees and agents to the fullest extent permitted
by law, drafted by and in a form reasonably satisfactory to
Employer, and does not revoke the general release within any
legally required revocation period, if applicable. All
legally required and authorized deductions and tax withholdings
shall be made from the Severance Payment, including for wage
garnishments, if applicable, to the extent required or permitted by
law. Effective immediately upon termination of
employment, Executive shall no longer be eligible to contribute to
or to be an active participant in any retirement or benefit plan
covering employees of Employer. All other Employer
obligations to Executive shall be automatically terminated and
completely extinguished.
7.2
Severance Upon Resignation for Good Reason. In
the event that Executive resigns from employment with Employer for
Good Reason (as defined in Section 7.10) during the Term of
Employment and such resignation qualifies as a “Separation
from Service” under Section 409A, Executive shall be entitled
to a “Severance Package” that consists of the following
: (a) a single cash lump-sum “Severance Payment”
equal to two times the sum of (x) Executive's annual rate of
Base Salary in effect immediately prior to Executive’s
termination of employment, and (y) an amount equal to the bonus
actually paid to Executive for the most recently completed fiscal
year (excluding the Signing Bonus); (b) Employer’s
direct-to-insurer payment of any group health premiums that
Executive would otherwise have been required to pay for a period of
one (1) year (subject to Executive’s eligibility for, and
proper and timely election of continued group health benefits under
COBRA); and (c) immediate vesting of all outstanding and
unvested (if applicable) LTIP Units (which shall, in accordance
with the applicable award agreement, remain subject to achieving
parity with common units of limited partnership interest in the
Partnership and shall remain subject to the two-year prohibition
against transfer provided in any such applicable award grant),
stock options, restricted stock, and other equity awards granted to
Executive under any of Employer’s equity incentive
plans; provided
, however, that all of the following conditions are first
satisfied: (a) Executive reaffirms Executive’s
commitment to comply with all surviving provisions of this
Agreement, including Section 9 and Section 10 hereof; and
(b) Executive executes a Separation Agreement that includes a
general release in favor of Employer and its parent, and all
subsidiary and related entities, and their officers, directors,
shareholders, employees and agents to the fullest extent permitted
by law, drafted by and in a form reasonably satisfactory to
Employer, and does not revoke the general release within any
legally required revocation period, if applicable. All
legally required and authorized deductions and tax withholdings
shall be made from the Severance Payment, including for wage
garnishments, if applicable, to the extent required or permitted by
law. Effective immediately upon termination of
employment, Executive shall no longer be eligible to contribute to
or to be an active participant in any retirement or benefit plan
covering employees of Employer. All other Employer
obligations to Executive shall be automatically terminated and
completely extinguished.
7.3
Beneficial Excise Tax Treatment . In the event
that any payment or benefit received or to be received by Executive
pursuant to this Agreement or otherwise would subject Executive to
any excise tax pursuant to Section 4999 of the Code due to the
characterization of such payment or benefit as an excess parachute
payment under Section 280G of the Code, Executive may elect, in his
sole discretion, to reduce the amounts of any payments or benefits
called for under this Agreement in order to avoid such
characterization. To aid Executive in making any
election called for under this Section 7.3, upon the
occurrence of any event that might reasonably be anticipated to
give rise to the application of this Section 7.3 (an
“
Event ” ), Employer
shall promptly request a determination in writing by independent
public accountants selected by Employer (the “ Accountants
”
). Unless Employer and Executive otherwise agree in
writing, the Accountants, within thirty (30) days after the date of
the Event, shall determine and report to Employer and Executive
whether any reduction in payments or benefits at the election of
Executive would produce a greater after-tax benefit to Executive
and shall provide to Employer and Executive a written report
containing a sufficiently detailed quantitative substantiation of
their analysis and presented in a manner that Executive can readily
understand. For the purposes of such determination, the
Accountants may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the
Code. Empl
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