This Engagement Agreement involves
Title: ENGAGEMENT AGREEMENT
Governing Law: New York Date: 5/31/2013
Industry: Misc. Financial Services Law Firm: Munger Tolles;Willkie Farr Sector: Financial
This ENGAGEMENT AGREEMENT (this “ Agreement ”) is made as of the 22 nd day of April, 2013 by and between Trinity Place Holdings Inc., a Delaware corporation (the “ Company ”) and Mark D. Ettenger (“ Ettenger ”).
WHEREAS, the Company desires to engage Ettenger as Chief Executive Officer of the Company; and
WHEREAS, Ettenger desires to serve in that role as an officer of the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements hereinafter set forth, the Company and Ettenger agree as follows:
ENGAGEMENT AND SERVICES
1.1 Engagement . The Company hereby engages Ettenger as a consultant to serve as the Chief Executive Officer of the Company.
1.2 Duties . Ettenger shall (i) devote sufficient professional time and attention to the duties required of him as the Chief Executive Officer of the Company; (ii) use his reasonable efforts to promote the interests of the Company and its stockholders, while acknowledging the rights of creditors under the final bankruptcy plan of reorganization; (iii) comply with all applicable laws, rules and regulations and with the Company’s bylaws and all of the Company’s written policies, rules and/or regulations generally applicable to employees of the Company; and (iv) discharge his responsibilities in a diligent manner and in accordance with the lawful directives of the Company’s Board of Directors. Ettenger’s duties shall be those which are usual and customary for a chief executive officer. Ettenger shall be the highest executive officer and no other officer shall be of equal or greater rank. Ettenger shall report directly and solely to the Board of Directors, and all other officers and employees shall report directly to Ettenger and, when required, to the Board of Directors; provided the Board of Directors may pass resolutions defining the duties and authority of any officer or employee.
2.1 Term . The engagement hereunder shall be for a period of one year ending on the first anniversary of the date hereof, unless the engagement is terminated at an earlier date in accordance with ARTICLE IV (the “ Initial Term ”). The Term shall automatically renew for a single one year period (collectively with the Initial Term, the “ Term ”) unless either the Company or Ettenger gives written notice of non-extension to the other no later than thirty days prior to the expiration of the Initial Term (which notice and non-extension if given by the Company shall be treated as a termination other than for Cause for purposes of ARTICLE IV). Those obligations which by their terms survive the expiration or termination of this Agreement (including, without limitation, the indemnification provisions set forth in ARTICLE VI and payments due Ettenger under ARTICLE IV) shall not be extinguished by the expiration of the Term or the termination of this Agreement.
3.1 Base Pay and Other Fees .
(a) Base Pay . As partial compensation for services to be rendered pursuant to this Agreement, the Company hereby agrees to pay Ettenger during the Term base pay at the rate of $400,000 per year in cash (the “ Base Pay ”). The Base Pay shall be payable in arrears in equal bi-weekly installments, and shall be payable effective as of March 11, 2013.
(b) Incentive Fee . Ettenger shall also be paid an “ Incentive Fee ” on each sale, joint venture formation, financing, long-term ground lease (but not any space lease) or any other monetization event (including, any capital transaction entered into by the Company or any of its affiliates to raise debt, equity, debt-equity combo, or other hybrid security (but excluding any privately placed transaction solely with the Company’s shareholders the purpose of which is to fund operating expenses of the Company that would have otherwise fallen within the category of “operating reserves” as defined under the final bankruptcy plan of reorganization)) (each, or collectively, a “ Monetization ”) with respect to each Company property equal to, in the case of a sale, 1.25% of the lesser of the property’s Net Sales Price (as defined below) or the “Threshold” for that property listed in the resolutions of the Company’s Board of Directors adopted on the date hereof (a property’s “ Threshold ”), and in the case of another form of Monetization, a fee equal to 1.25% of the Threshold for that property; provided, however, that if the Monetization is an entity-level Monetization(not executed on a property-level basis), the Incentive Fee shall be 1.25% of the Net Proceeds (as defined below) up to the aggregate Thresholds (pro-rated if the Monetization is for more than 30% of the ownership interests of the Company (determined by vote or value)) of all then remaining unsold Company properties.
(c) Performance Fee . To the extent a sale or other Monetization is completed at a Net Sales Price or with Net Proceeds, as the case may be, in excess of the Threshold for that property, the Company shall pay Ettenger a “ Performance Fee ” equal to 7.0% of such excess; provided, however, that if the Monetization is an entity-level Monetization (not executed on a property-level basis), the Performance Fee shall be 7.0% of such excess over the aggregate Thresholds (pro-rated if the Monetization is for more than 30% of the ownership interests of the Company (determined by vote or value)) of all then remaining unsold Company properties.
(d) Timing of Payment . The Company shall pay Ettenger the Incentive Fee and Performance Fee, if any, upon the closing (or funding) of each applicable property sale or Monetization, including any subsequent or simultaneous sales or Monetizations of the same property, unless otherwise agreed by Ettenger and the Company. To the extent a sale or other Monetization occurs after or simultaneously with another Monetization with respect to the same property upon which an Incentive Fee and/or Performance Fee was previously paid or is simultaneously being paid to Ettenger by the Company, the additional Incentive Fee and/or Performance Fee to be paid to Ettenger shall be determined on a cumulative basis as if a single transaction and to avoid duplication by (i) totaling the cumulative Net Sales Price and/or Net Proceeds, as the case may be, derived from any Monetization with respect to such property and calculating the amounts of the Incentive Fee and the Performance Fee due on such cumulative amount and (ii) in determining the amount to be paid to Ettenger, crediting any such calculated fees for any such fees previously or simultaneously being paid. For purposes of the preceding sentence, in determining the cumulative Net Sales Price and/or Net Proceeds, as the case may be, with respect to a property held in a joint venture with another party, only the Company’s pro rata share of such amounts shall be taken into account. Additional transactions may include sales or other Monetizations, including sales of condominium interests or other fractional or partial interests, in which the Company receives additional consideration on account of its interest in the property. To the extent that a Monetization is an entity-level Monetization, the Net Proceeds shall be allocated among the then remaining unsold Company properties on a pro-rata basis based on such properties’ Thresholds. If an entity-level Monetization is for less than 30% of the ownership interests of the Company (determined by vote or value), no Performance Fee shall be due in connection with such Monetization and instead any Performance Fee shall accrue and be paid (i) on a pro rata basis in connection with any subsequent property-level Monetization (with the pro rata portion determined by reference to the applicable property Threshold relative to the aggregate Thresholds for all unsold properties) or (ii) on any subsequent entity-level Monetization that results in cumulative entity-level Monetizations being for more than 30% of the ownership interests of the Company (determined by vote or value).
(e) Definitions . “ Net Sales Price ” shall mean the gross sales price of the property (or, for purposes of any long-term ground lease, the net rent to be paid in the first twenty years of the lease) less any third party brokerage commissions payable with respect to such transaction and after deducting any indebtedness encumbering the property upon which a fee to Ettenger has already been paid hereunder, whether that indebtedness was assumed by the purchaser or repaid upon closing, but without any further offsets or adjustments. “ Net Proceeds ” shall mean the amount funded by a third party less any third party brokerage commissions payable with respect to such transaction and, in the case of a property-level Monetization, after deducting any indebtedness encumbering the property upon which a fee to Ettenger has already been paid hereunder, but without any further offsets or adjustments. In the event of an entity-level Monetization that is an equity or hybrid equity transaction entered into by the Company or any of its affiliates, the amount of such equity shall be grossed-up by a pro-rata allocation of the Company’s book value of debt (including, but not limited to, claims of creditors (but excluding current payables of less than thirty days) arising of out the bankruptcy or otherwise) immediately preceding such transaction. The amount of the gross up or imputation of debt shall be determined by reference to the percentage of equity acquired in the Company as stated in the transaction, or if not stated, by an equitable allocation of the Company’s debt taking into account all of the substantive economic terms of the transaction, as agreed to by Ettenger and the Company. Additional consideration paid or released after any closing will be included in Net Sales and Net Proceeds, in which case the Incentive Fee and the Performance Fee will be recalculated taking into account such additional amounts. Any consideration in the form of securities or other non-cash property will be included in Net Sales and Net Proceeds at the fair market value agreed by Ettenger and the Company.
(f) Form of Payment . All Incentive Fees and Performance Fees shall be paid in cash.
(g) Post-Termination . Except in the event of a termination for cause under Section 4.3 below, the Incentive Fees and/or Performance Fees shall remain payable to Ettenger after the termination or expiration of this Agreement with respect to (i) any sale or other Monetization that closed prior to the termination or expiration of this Agreement, (ii) any sale or other Monetization that was under contract prior to the termination or expiration of this Agreement, regardless of when it closes and (iii) any sale or other Monetization closing within six (6) months after the termination or expiration of this Agreement.
3.2 Payment of Taxes . Ettenger shall be treated as an independent contractor and shall be solely responsible for any income or self-employment taxes required by applicable law and regulations applicable to the fees paid or payable by the Company in connection with Ettenger’s engagement.
3.3 Benefits . Ettenger shall be entitled to receive health insurance benefits covering himself and his family that are customary for a similarly situated executive in the New York metropolitan area, or reimbursement for the actual premiums therefor (which are currently $2,031 per month). Otherwise, except as set forth in Section 3.4 below, Ettenger shall not be entitled to receive any other benefits (including, withou