Amendment No. 1 to Employment Agreement between Malan Realty Investors, Inc. and Jeffrey D. Lewis

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Summary

This amendment updates the employment agreement between Malan Realty Investors, Inc. and Jeffrey D. Lewis, extending his role as CEO through the company's liquidation process. The agreement extends his employment term, increases his base salary, and replaces his stock options with cash bonuses tied to shareholder liquidation distributions. It also provides for a non-renewal payment and allows the agreement to be assigned to a liquidating trust if needed. All other terms of the original agreement remain unchanged.

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EX-10.(Y) 3 k78934exv10wxyy.txt AMENDMENT TO EMPLOYMENT AGREEMENT - JEFFREY LEWIS EXHIBIT 10(y) AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1 dated as of May 13, 2003 amends the Employment Agreement by and between MALAN REALTY INVESTORS, INC., a Michigan corporation (the "Company"), and JEFFREY D. LEWIS ("Executive") dated as of September 26, 2000 (the "Agreement"). RECITALS In August 2002, the Company's shareholders adopted a plan of liquidation (the "Plan of Liquidation"). The Company wishes to retain Executive's services as the Company's chief executive officer through the completion of the liquidation and to make certain amendments to the Agreement in addition to extending the term beyond the initial September 26, 2003 termination date. Accordingly, the parties agree as follows (all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement): 1. EXTENSION OF TERM. Section 2 of the Agreement is hereby amended to read in full as follows: "2. TERM OF EMPLOYMENT. Executive's term of employment under this Agreement shall, subject to the terms hereof, terminate on the earlier of (i) September 30, 2004 (the "Termination Date") or (ii) the termination of Executive's employment pursuant to this Agreement. The period from the date of Amendment No. 1 to this Agreement until the termination of this Agreement shall be the "Term." The Company may extend the Term of this Agreement through December 31, 2004, by giving written notice of extension to Executive no later than July 1, 2004." 2. INCREASE IN BASE SALARY. Effective October 1, 2003, Executive's Base Salary shall be increased to $275,000 per year during the remainder of the Term. 3. PRORATION OF ANNUAL BONUS. The last Bonus payable pursuant to Section 3.2 of the Term shall be prorated if it covers a period less than a year, based on the relative amount of time that has elapsed since the end of the Company's prior fiscal year. 4. NON-RENEWAL PAYMENT. The Company shall pay Executive $50,000 in the event that this Agreement expires pursuant to its terms, without any further extension or renewal or early termination by either party, including expiration following one or more extensions. 5. CASH BONUSES IN LIEU OF OPTIONS. (a) Executive hereby agrees to the cancellation by, and hereby surrenders to, the Company effective as of the date of this Amendment all stock options held by Executive under the Malan Realty Investors, Inc. 1994 Stock Option Plan, all of which are more particularly described on Exhibit A. (b) In consideration of such cancellation and surrender, the Company agrees than when aggregate liquidating distributions per share made to Company shareholders pursuant to the Plan of Liquidation after the date of this Amendment reach the levels set forth below, Executive shall be entitled, subject to the terms and conditions set forth herein, to receive a cash bonus (each, a "Liquidation Bonus") such that aggregate Liquidation Bonuses paid to Executive pursuant to this Section 5 total the amount set opposite the applicable level of per share liquidating distributions (which amounts represent liquidating distributions in excess of the average price of all of Executive's options, regardless of when first exercisable):
AGGREGATE PER SHARE CUMULATIVE AMOUNT OF LIQUIDATING DISTRIBUTIONS LIQUIDATION BONUS $ 4.00 $ 8,000 4.25 25,500 4.50 43,000 4.75 60,500 5.00 78,000 5.25 95,500 5.50 113,000 5.75 130,500 6.00 148,000 6.25 173,000 6.50 198,000 6.75 223,000 7.00 248,000 7.25 294,000 7.50 344,000 7.75 394,000 8.00 444,000 8.25 494,000 8.50 544,000 8.75 594,000 9.00 644,000
For example, when aggregate per share liquidating distributions of $4.00 have been paid, Executive will be entitled to a Liquidation Bonus of $8,000. When aggregate liquidating distributions reach $4.25 per share, Executive will be entitled to receive another Liquidation Bonus of $17,500, resulting in cumulative Liquidating Bonuses of $25,500. (c) Each Liquidation Bonus will be paid as soon as practicable after the applicable liquidating distribution is paid to shareholders, less any federal, state and local taxes required to be withheld thereon. If the Company makes a liquidating distribution in a form other than cash, the Company's board of directors shall in good faith determine 2 the fair market value per share of the liquidating distribution for purposes of determining the amount of any Liquidation Bonus to be paid to Executive hereunder, which in the Company's discretion may be paid in cash or in kind. (d) When the Company makes its final liquidating distribution, if aggregate liquidating distributions exceed $4.00 per share, the Liquidation Bonus relating to the final liquidating distribution shall be prorated based on the amount of the final liquidating distribution to the extent that the final distribution does not reach the next threshold for the payment of the next Liquidation Bonus. For example, if aggregate liquidating distributions of $7.00 per share have been made, Liquidating Bonuses totaling $248,000 have been paid, and the final liquidating distribution is $0.125 per share, Executive would be entitled to a final Liquidation Bonus of $23,000. (e) Anything herein to the contrary notwithstanding, Executive shall not be entitled to a Liquidation Bonus to the extent that such bonus represents cash in excess of the exercise price of an option that, absent this Amendment, would have expired or terminated pursuant to its terms before the record date for the liquidating distribution to which the Liquidation Bonus relates (for example, if Executive ceases to be an employee of the Company within one year after the date of grant of the option for any reason other than death, disability or retirement). 6. ASSIGNMENT TO LIQUIDATING TRUST. The Company may form a liquidating trust in connection with winding down the Company's business (the "Liquidating Trust"). The Company may assign this Agreement to a Liquidating Trust provided that the Liquidating Trust assumes each and every obligation of the Company hereunder, including the obligation to pay Liquidation Bonuses. 7. NO OTHER CHANGES. Except as expressly amended hereby, the provisions of the Agreement shall continue to remain in full force and effect throughout the Term of the Agreement. MALAN REALTY INVESTORS, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- ------------------------------------------- JEFFREY D. LEWIS 3 EXHIBIT A CANCELLED OPTIONS
DATE OF AGREEMENT NUMBER OF SHARES EXERCISE PRICE ----------------- ---------------- -------------- 05/18/2000 1,000 $13.875 09/25/2000 5,000 $13.438 11/02/2001 100,000 $7.04 06/14/2002 20,000 $3.60
MALAN REALTY INVESTORS, INC. By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ------------------------------------------- JEFFREY D. LEWIS MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS) (IN THOUSANDS)
JUNE 30, DECEMBER 31, 2003 2002 ---- ---- (unaudited) ASSETS Real estate held for sale $179,297 $191,802 Cash and cash equivalents 14,760 10,008 Restricted cash - mortgage escrow deposits 2,591 1,753 Accounts receivable 1,635 3,761 Other assets 629 622 -------- -------- Total Assets 198,912 207,946 -------- -------- LIABILITIES Mortgages 82,890 91,330 Convertible debentures 42,593 42,593 Convertible notes 27,000 27,000 Accounts payable and other liabilities 12,196 13,011 Reserve for estimated liquidation costs 5,593 7,582 -------- -------- Total Liabilities 170,272 181,516 -------- -------- NET ASSETS IN LIQUIDATION $ 28,640 $ 26,430 ======== ========
See Notes to Consolidated Financial Statements 3 MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (IN THOUSANDS) (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 2003 2003 ------------ ------------- Net Assets in Liquidation beginning of period $ 27,902 $ 26,430 Operating Income 10 573 Changes in net assets in liquidation: Realized gain on sale of assets 313 313 Decrease in fair value of real estate (665) (665) Decrease in reserve for estimated liquidation costs 1,080 1,989 ------------ ------------- Net Assets in Liquidation as of June 30, 2003 $ 28,640 $ 28,640 ============ =============
See Notes to Consolidated Financial Statements 4