Exhibit 99.7
EXECUTION
COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this
“Agreement”), dated as of this 20th day of June, 2004, between
Chelsea Property Group, Inc., a Maryland corporation (the “Company”), and
Leslie T. Chao (the “Executive”). This
Agreement shall become effective immediately and will govern the terms of the
Executive’s employment as of the closing date (the “Effective Date”) of the
agreement and plan of merger (the “Merger Agreement”) among Simon Property
Group, Inc. a Delaware corporation (“SPG”), Simon Property Group, L.P., a
Delaware limited partnership (“SPG L.P.”), Simon Acquisition I, LLC, a Maryland
limited liability company, and a wholly owned subsidiary of SPG L.P., Simon
Acquisition II, LLC, a Delaware limited liability company, and an indirect
wholly owned subsidiary of SPG L.P., Company, and CPG Partners, L.P., a
Delaware limited partnership, dated as of June 20, 2004; provided, that
this Agreement shall be null and void ab initio upon any termination of the
Merger Agreement in accordance with its terms.
R E C I T A L S:
WHEREAS, following the
transactions provided for in the Merger Agreement (the “Acquisition”), the
Company will be a wholly owned subsidiary of SPG L.P.; and
WHEREAS, the Company
believes that the future growth, profitability and success of the Company’s
business will be enhanced by its continued employment of the Executive; and
WHEREAS, the Company desires
to employ the Executive and the Executive has indicated his willingness to be
so employed, on the terms and conditions set forth herein.
NOW, THEREFORE, on the basis
of the foregoing premises and in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to continue to
employ the Executive and the Executive hereby accepts continued employment with
the Company, on the terms and subject to the conditions hereinafter set
forth. Subject to the terms and
conditions contained herein, the Executive shall serve as President -
International of the Company and, in such capacity, shall report directly to
the Chief Executive Officer of the Company (the “CEO”) and shall have such
duties as are typically performed by a President of a corporation, together
with such additional duties, commensurate with the Executive’s position as
President - International of the Company, as may be assigned to the Executive
from time to time by the CEO. The
principal location of the Executive’s employment shall be at the Company’s
principal executive offices located in Roseland, New Jersey, although the
Executive understands and agrees that he may be required to travel from time to
time for business reasons.
Section 2. Term. The term of
the Executive’s employment hereunder shall commence on the Effective
Date and shall continue during the period ending on December 31, 2006, unless
sooner terminated pursuant to Section 6 (the “Term”).
Section 3. Compensation. During the Term, the Executive shall be
entitled to the following compensation and benefits:
(a) Salary. The
Company shall pay to the Executive a per annum salary (the “Salary”) as
follows: 2004 - $600,000; 2005 - $625,000; 2006 - $650,000. The Salary shall be payable in accordance
with the payroll practices of the Company as the same shall exist from time to
time.
(b) Bonus Plan.
During the Term, the Executive shall be eligible to receive an annual
cash bonus (the “Bonus”), based upon the satisfaction of the performance goals
tied to the Company’s 5-year performance plan (BOD #43 “base case” for target
bonus and “best case” for maximum bonus).
The Executive’s Bonus opportunity shall equal 70% at target to 100% at
maximum of the Executive’s Salary, and shall be payable in accordance with the
practices of the Company, but in no event later than the 90th day
after the end of the calendar year in which the Bonus was earned.
(c) Benefits.
In addition to the Salary and Bonus, if any, the Executive shall be
entitled to participate in the health, life insurance, pension and other
benefit plans and programs provided to executives of the Company on terms no
less favorable than those available to such executives. The Executive shall also be entitled to 4
weeks of vacation per calendar year during the Term (with the right to
carryover any unused vacation) and the same number of holidays, sick days and
other benefits as are generally allowed to executives of the Company in
accordance with the Company policy in effect from time to time.
Section 4. Exclusivity. During the Term, the Executive shall devote
his full time to the business of the Company, shall faithfully serve the
Company, shall in all respects conform to and comply with the lawful and
reasonable directions and instructions given to him by the CEO in accordance
with the terms of this Agreement, shall use his best efforts to promote and
serve the interests of the Company and shall not engage in any other business
activity, whether or not such activity shall be engaged in for pecuniary
profit, except that the Executive may (i) participate in the activities of
professional trade organizations related to the business of the Company and
(ii) engage in personal investing activities, provided that activities set
forth in these clauses (i) and (ii), either singly or in the aggregate, do not interfere
in any material respect with the services to be provided by the Executive
hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized to incur
reasonable expenses in the discharge of the services to be performed hereunder,
including expenses for travel, entertainment, lodging and similar items, in
accordance with the Company’s expense reimbursement policy, as the same may be
modified by the Company’s Board of Directors (the “Board of Directors”) from
time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
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Section
6. Termination.
(a) Death. The
Executive’s employment shall automatically terminate upon his death and, upon
such event, the Executive’s estate shall be entitled to receive the amounts
specified in first sentence of Section 6(f) below.
(b) Disability.
If the Executive is unable to perform the duties required of him under
this Agreement because of illness, incapacity, or physical or mental
disability, the Term shall continue and the Company shall pay all compensation
required to be paid to the Executive hereunder, unless the Executive is unable
to perform the duties required of him under this Agreement for an aggregate of
120 consecutive days or 180 non-consecutive days during any 12-month
period during the term of this Agreement, in which event the Executive’s
employment shall terminate, and upon such termination the Executive shall be
entitled to receive the amounts specified in the first sentence of Section 6(f)
below.
(c) Cause. The
Company may terminate the Executive’s employment at any time, with or without
Cause. In the event of termination
pursuant to this Section 6(c) for Cause, the Company shall deliver to the
Executive written notice setting forth the basis for such termination, which
notice shall specifically set forth the nature of the action constituting
Cause. Termination of the Executive’s
employment hereunder shall be effective upon delivery of such notice of
termination, and upon such termination the Executive shall be entitled to
receive the amounts specified in the first sentence of Section 6(f) below. For purposes of this Agreement, “Cause”
shall mean: (i) the Executive’s willful
misconduct in the performance of the Executive’s duties for the Company, which
shall not have been corrected by the Executive (if able to be corrected) within
thirty (30) days of receipt by the Executive of written notice from the Company
of such willful misconduct; (ii) a material breach of this Agreement by the
Executive, which shall not have been corrected by the Executive (if able to be
corrected) within thirty (30) days of receipt by the Executive of written
notice from the Company of such breach; (iii) any willful misconduct by the
Executive that has the effect of injuring the reputation or financial condition
of the Company or its affiliates in any material respect; (iv) any knowing
violation of a requirement of the Sarbanes-Oxley Act of 2002 or other material
provisions of the federal securities laws; (v) the Executive’s conviction of,
or plea of nolo contendere to, a misdemeanor involving moral turpitude or the
commission of a felony under the laws of the United States or any state or
political subdivision thereof; or (vi) the commission by the Executive of an
act of fraud or embezzlement against the Company or any of its affiliates.
(d) Good Reason. The Executive may terminate his employment
for “Good Reason,” but only if the Company receives written notice from the
Executive describing in detail the specific nature of the action constituting
Good Reason, and such action is not corrected by the Company within thirty (30)
days of receipt of such notice (the “Cure Period”). Such notice must be given to the Company within ninety (90) days
of the action allegedly constituting Good Reason. For this purpose, “Good Reason” means the occurrence of any of
the following without the express written consent of the Executive: (i) a
reduction in the Executive’s Salary or bonus opportunity; (ii) a material
reduction in the Executive’s duties or responsibilities; (iii) a relocation of
the Executive’s principal work location by more than 20 miles from the
principal work location immediately prior to the Effective Date; (iv) the
closing of the facility or office (as applicable) that was the Executive’s
principal work location at any time on or after the Effective
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Date; or (v) a material
breach of this Agreement by the Company; provided, however, that
“Good Reason” shall not include a termination of the Executive’s employment
hereunder pursuant to Sections 6(b) or (c) hereof. The date of termination of the Executive’s employment under this
Section 6(d) shall be the effective date of any resignation specified in
writing by the Executive, which may not be less than thirty (30) days after
receipt by the Company of written notice of such resignation, provided that
such resignation shall not be effective and the action constituting Good Reason
shall be deemed to have been cured if such action is corrected by the Company
during the Cure Period.
(e) Resignation.
The Executive shall have the right to terminate his employment other
than for Good Reason upon sixty (60) days’ prior written notice to the Company,
and upon such termination the Executive shall be entitled to receive the
amounts specified in the first sentence of Section 6(f) below.
(f) Payments.
In the event that the Executive’s employment terminates for any reason
(including expiration of the Term, the Company shall pay to the Executive (or,
in the event of the Executive’s death, to his estate) all amounts accrued but
unpaid hereunder through the date of termination in respect of Salary, Bonus,
unused vacation or unreimbursed expenses, as soon as practicable following the
Executive’s termination of employment.
Upon the earliest to occur of: (i) the Executive’s termination of
employment by the Company without Cause during the Term, (ii) the Executive’s
termination of employment for Good Reason during the Term, or (iii) the
expiration of the Term, in addition to the amounts specified in the foregoing
sentence, the Executive shall be entitled to (A) severance pay in an amount
equal to the sum of (x) 2 times the Executive’s Average Bonus, and (y) 2 times
the Executive’s Salary, payable either in a lump sum within 30 days following
the effective date of such termination of employment or in monthly installments
(with interest) over a period of 2 years beginning with the effective date of
such termination of employment (as irrevocably elected by the Executive prior
to the effective date of such termination of employment) and (B) the
continuation of health benefits described in Section 3(c) hereof (subject to
the same contribution rates as in effect immediately prior to the Executive’s
termination of employment); provided that such continuation coverage shall
cease two years from the date of such termination, or if earlier, as of the
date the Executive first becomes eligible to participate in the group health
plan of a new employer.
For purposes of this
Agreement, “Average Bonus” shall mean the average of the annual Bonuses earned
by the Executive, if any, with respect to the 2 calendar years prior to the
year in which the Executive’s termination of employment occurs (which may
include annual bonuses paid to the Executive prior to the date of this Agreement);
provided, however, that for purposes of this Agreement, the term “Average
Bonus” shall not include any bonus earned under the Chelsea Property Group,
Inc. 2002-2006 Long-Term Executive Incentive Plan.
(g) No Set-Off; No Mitigation. The Company’s obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off for any claim, right
or action that the Company or any of its affiliated companies may have against
the Executive. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts
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payable to the Executive under this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment.
(h) Survival of Operative Sections. Upon any termination of the Executive’s
employment, the provisions of Sections 6(f) and 7 through 18 of this Agreement
shall survive to the extent necessary to give effect to the provisions thereof.
Section 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. Except in connection with his employment
hereunder, the Executive shall not disclose to any person or entity or use,
either during the Term or at any time thereafter, any information not in the
public domain or generally known in the industry, in any form, acquired by the
Executive while employed by the Company or any predecessor to the Company’s
business or, if acquired following the Term, such information which, to the
Executive’s knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company or any of its
subsidiaries or affiliates, relating to the Company, its subsidiaries or
affiliates, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company’s products or
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists,
correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any subsidiaries or affiliates thereof. The Executive agrees and acknowledges that all such information,
in any form, and copies and extracts thereof, are and shall remain the sole and
exclusive property of the Company, and upon termination of his employment with
the Company, the Executive shall, upon written request of the Company, return
to the Company the originals and all copies of any such information provided to
or acquired by the Executive in connection with the performance of his duties
for the Company, and shall return to the Company all files, correspondence
and/or other communications received, maintained and/or originated by the
Executive during the course of his employment.
(b) No Interference.
For the period commencing on the Effective Date and ending on the second
anniversary of the termination of the Executive’s employment hereunder for any
reason (the “Restricted Period”), the Executive shall not, whether for his own
account or for the account of any other individual, partnership, firm,
corporation or other business organization (other than the Company), directly
or indirectly solicit, endeavor to entice away from the Company or its
subsidiaries, or otherwise directly interfere with the relationship of the
Company or its subsidiaries with any person who, to the knowledge of the
Executive, is employed by or otherwise engaged to perform services for the
Company or its subsidiaries, or who is, or was within the then most recent
twelve-month period, a customer or client, of the Company, its predecessors or
any of its subsidiaries. The placement
of any general classified or “help wanted” advertisements and/or general
solicitations to the public at large shall not constitute a violation of this
Section 7(c) unless the Executive’s name is contained in such advertisements or
solicitations.
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(c) Work Product/Business Opportunities.
(i) The Executive acknowledges that all ideas, discoveries,
programs, systems, methods, interfaces, protocols, databases, creations,
artwork, articles, programming, processes, designs, inventions or improvements,
including without limitation any contribution by the Executive to published
works, whether or not capable of being patented or copyrighted, conceived by
the Executive while employed by the Company, whether or not during regular
working hours, provided that they are either related in some manner to the
business (present and contemplated) of the Company or are conceived or made on
the time of the Company or with the use of the Company’s facilities or
materials (the “Work Product”), was produced or prepared or will be produced or
prepared within the scope of the Executive’s employment by the Company.
(ii) The Executive agrees that all Work Product, all
derivatives thereof, and the Executive’s contributions thereto shall be
considered “works made for hire” as contemplated in the U.S. Copyright Act, as
amended. If any portion of the Work
Product is not ruled to be a “work made for hire,” the Executive hereby assigns
and transfers all right, title and interest in and to such Work Product,
including, without limitation, the right to use same in any and all versions of
the Work Product and in any other works in any media published or licensed by
the Company and the right to recover for past or future infringements thereof,
to the Company and its successors and assigns, absolutely and forever. The
Executive further acknowledges that, unless the Company otherwise agrees in
writing, the Executive shall have no personal interest in or right to use the
Work Product.
(iii) The Executive shall deliver promptly to the Company upon
termination of his employment by the Company or at any other time the Company
may so request, all memoranda, notes, documentation, equipment, files,
flowcharts, program listings, data listings, records, reports and other
tangible manifestations of Work Product (and all copies thereof), that he may
then possess or have under his control.
(iv) During the Term and for the period of 1 year thereafter,
the Executive shall, unless the Company otherwise agrees in writing, and
without additional compensation: (A)
promptly disclose to the Company all Work Product and business opportunities
related to the present or contemplated business of the Company (“Business
Opportunities”); (B) assign to the Company, upon request, the entire rights to
all Work Product and Business Opportunities; (C) give testimony in support of
his inventorship or creation in any appropriate case; and (D) execute such
other documents and take such other action as the Company may request to
protect the rights of the Company in any such Work Product and Business
Opportunities, including without limitation, such patent, trademark and
copyright applications as may be necessary or desirable in the sole discretion
of the Company to obtain, maintain, protect or vest in the Company the entire
right, title and interest in and to the Work Product.
Section 8. Injunctive Relief. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in Section 7 hereof may result in material irreparable
injury to the Company or its subsidiaries or affiliates for which there would
be no adequate remedy at law, that it would not be possible to measure damages
for such injuries precisely and that, in the event of such a breach or threat
thereof, the Company shall be entitled to obtain a temporary restraining order
and/or a
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preliminary or permanent injunction, without the
necessity of proving irreparable harm or injury as a result of such breach or
threatened breach of Section 7 hereof, restraining the Executive from engaging
in activities prohibited by Section 7 hereof and providing other relief as may
be required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Extension of Restricted Period. In addition to the remedies the Company may
seek and obtain pursuant to Section 8 of this Agreement, the Restricted Period
shall be extended by any and all periods during which the Executive shall be
found by a court to have been in violation of any of the covenants contained in
Section 7 hereof.
Section 10. Representations and Warranties
of the Executive and the Company.
The Executive and the Company represent and warrant to the other as
follows:
(a) This Agreement, upon execution and delivery by the
Executive and the Company will be the valid and binding obligation of the
Executive and the Company enforceable by each party against the other in
accordance with its terms.
(b) The Executive hereby elects, pursuant to Section 1.08(c)
of the Merger Agreement, to receive cash at the REIT Effective Time, for each
Company Option (as defined in the Merger Agreement) held by the Executive in an
amount determined pursuant to Section 1.08(c) of the Merger Agreement.
(c) Neither the execution and delivery of this Agreement nor
the performance of this Agreement in accordance with its terms and conditions
by the Executive or the Company will (i) require the approval or consent of any
governmental body or of any other person or (ii) conflict with or result in any
breach or violation of, or constitute (or with notice or lapse of time or both
would constitute) a default under, any agreement, instrument, judgment, decree,
order, statute, rule, permit or governmental regulation applicable to the
Executive or the Company. Without
limiting the generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no-hire or similar agreement that
restricts in any way the Executive’s ability to engage in any business or to
solicit or hire the employees of any person.
The representations and
warranties of the Executive and the Company contained in this Section 10 shall
survive the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
Section 11. Ownership Interest in Company
Affiliates. The Executive currently
holds ownership and voting interests in certain Company affiliates listed on
Exhibit A, attached hereto. The
Executive agrees that in connection with any termination of employment he shall
transfer such interests to such persons or entities as directed by the Company
or SPG without the receipt of any consideration.
Section 12. Successors and Assigns; No
Third-Party Beneficiaries. This
Agreement shall inure to the benefit of, and be binding upon, the successors
and assigns of each of the parties, including, but not limited to, the
Executive’s heirs and the personal representatives of the Executive’s estate; provided,
however, that neither party shall assign or delegate any of the
obligations created under this Agreement without the prior written consent of
the other party. Notwithstanding the
foregoing, the Company shall have the unrestricted right to assign this
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Agreement and to delegate all or any part of its
obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this Agreement shall confer upon
any person or entity not a party to this Agreement, or the legal
representatives of such person or entity, any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement.
Section 13. Waiver and Amendments. Any waiver, alteration, amendment or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however,
that any such waiver, alteration, amendment or modification is consented to on
the Company’s behalf by the Board of Directors. No waiver by either of the parties hereto of its rights hereunder
shall be deemed to constitute a waiver with respect to any subsequent
occurrences or transactions hereunder unless such waiver specifically states
that it is to be construed as a continuing waiver.
Section 14. Severability and Governing Law. The Executive acknowledges and agrees that
the covenants set forth in Section 7 hereof are reasonable and valid in
temporal scope and in all other respects.
If any of such covenants or such other provisions of this Agreement are
found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 15. Notices.
(a) All communications under this Agreement shall be in
writing and shall be delivered by hand, facsimile or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(i) if to the Executive, at 103 Eisenhower Parkway, Roseland,
New Jersey 07068, or at such other address as the Executive may have furnished
the Company in writing,
(ii) if to the Company, at 103 Eisenhower Parkway, Roseland,
New Jersey 07068, marked for the attention of the Board of Directors, or at
such other address as it may have furnished in writing to the Executive.
(b) Any notice so addressed shall be deemed to be given: if delivered by hand or facsimile, on the
date of such delivery; if mailed by courier, on the first business day
following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
Section 16. Section Headings. The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part
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thereof, or affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 17. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement
supersedes all prior negotiations, discussions, correspondence, communications,
understandings and agreements between the parties relating to the subject
matter of this Agreement. Notwithstanding
the foregoing, nothing in this Agreement shall reduce or diminish the
Executive’s rights, if any, under the Chelsea Property Group, Inc. 2002-2006
Long-Term Executive Incentive Plan, any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended) or any stock option or stock purchase plan of the Company.
Section 18. Counterparts. This Agreement may be executed in one or
more counterparts (including by facsimile), each of which shall be deemed an
original and all of which together shall be considered one and the same
instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties
hereto have executed this Agreement as of the date first above written.
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CHELSEA
PROPERTY GROUP, INC.
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By:
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/s/
David C. Bloom
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Name:
David C. Bloom
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Title:
Chief Executive Officer
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/s/
Leslie T. Chao
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Leslie
T. Chao
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EXHIBIT A
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1.
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Chelsea
Interactive, Inc.
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2.
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CPG
Operating Corp.
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3.
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Chelsea
International Operating Corp.
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4.
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CPGOM
Partners de Mexico, S. de R.L. de C.V.
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5.
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Chelsea
Mexico, Inc.
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6.
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Chelsea
CGA Realty LLC
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