exv10w1



 






Exhibit 10.1




EMPLOYMENT AGREEMENT




     EMPLOYMENT AGREEMENT (this “Agreement”), dated as of November 22, 2005, by and between Trizec
Properties, Inc., a Delaware corporation (the “Company”), and Timothy H. Callahan (the
“Executive”).



     WHEREAS, the Company has determined that it is in the best interests of the Company and its
shareholders to enter into an employment agreement with the Executive and the Executive is willing
to serve as an employee of the Company, subject to the terms and conditions of this Agreement.



     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:



     1. Employment and Duties.



     (a) General. The Executive shall serve as the President and Chief Executive Officer
of the Company, reporting to the Board of Directors (the “Board”) of the Company. The
Executive shall also serve as a director of the Company. The Executive shall have such duties and
responsibilities, commensurate with the Executive’s positions, as may be assigned to the Executive
from time to time by the Board. The Executive will make recommendations to the Compensation
Committee of the Board with regard to compensation levels (including equity awards) for senior
executive officers and may make such recommendations with regard to the compensation levels and
terms for lower level executives. The Executive’s principal place of employment shall be the
principal offices of the Company currently in Chicago; provided, however, that the
Executive understands and agrees that reasonable travel may be required from time to time for
business reasons.



     (b) Exclusive Services. For so long as the Executive is employed by the Company, the
Executive shall devote his full working time to his duties hereunder, shall serve the Company,
shall conform to and comply with the reasonable, lawful and good faith directions and instructions
given to him by the Board and with the written policies of the Company communicated to the
Executive and applicable to all senior executives of the Company, and shall promote and serve the
interests of the Company. Further, the Executive shall not, directly or indirectly, render
services to any other person or organization without the consent of the Board or otherwise engage
in activities that would interfere significantly with the performance of his duties hereunder or
create a conflict of interest. Notwithstanding the foregoing, the Executive may (i) serve on civic
or charitable boards or not-for-profit financial industry related organizations, (ii) engage in
charitable, civic, educational, professional, community and/or financial industry activities
without remuneration therefor and (ii) manage personal and family investments, provided
that such activities do not contravene the previous sentence or the provisions of Sections 6, 7, 8,
9, 11 and 12 hereof. The Executive also may serve on the board of directors or advisory committee
of other for-profit enterprises subject to the consent of the Nominating and Corporate Governance
Committee of the Board, which shall not unreasonably be withheld.



 









 





     2. Term of Employment. The Executive’s employment under this Agreement shall
commence as of November 22, 2005 (the “Effective Date”) and shall terminate on the earlier
of (i) December 31, 2009 and (ii) the termination of the Executive’s employment under this
Agreement; provided, however, that the term of the Executive’s employment shall be
automatically extended without further action of either party for additional one-year periods,
unless written notice of either party’s intention not to extend has been given to the other party
at least 90 days prior to the expiration of the then-effective term. The period from the
Effective Date until the termination of the Executive’s employment under this Agreement is
referred to as the “Term”.



     3. Compensation and Other Benefits. Subject to the provisions of this Agreement, the
Company shall pay and provide the following compensation and other benefits to the Executive
during the Term as compensation for services rendered hereunder:



     (a) Base Salary. The Company shall pay to the Executive an annual salary (the
“Base Salary”) at the rate of $1,050,000, payable in substantially equal installments at
such intervals as may be determined by the Company in accordance with its ordinary payroll
practices as established from time to time. The Base Salary shall be reviewed by the Compensation
Committee of the Board (the “Committee”) in good faith, based upon the Executive’s
performance, not less often than annually, and such Base Salary may be increased (but not decreased
from the then applicable Base Salary) upon the basis of such review during the remainder of the
Term.



     (b) Annual Bonus. For each fiscal year commencing during the Term, the Executive
shall be eligible to receive an incentive bonus of a minimum of 50% and a maximum of 200% of his
Base Salary, subject in each case to satisfaction of the relevant pre-established performance
goals. The target amount of the Executive’s annual incentive bonus (the “Target Annual
Bonus”) shall be at least 100% of his Base Salary and the Executive’s annual bonus shall be
determined in accordance with a Company incentive compensation program as applicable to senior
executives (including bonus ranges) as in effect from time to time. Ninety percent of the Target
Annual Bonus shall be based upon corporate performance goals and 10% shall be based upon individual
performance goals, each as determined by the Board (or the Committee) with meaningful input from
the Executive. The annual bonus shall be paid in a cash lump sum at such time as annual bonuses
are paid to other senior executives of the Company, but no later than end of the following year.



     (c) Annual Long-Term Incentive Compensation. For each fiscal year during the Term,
the Executive shall be eligible to participate in an annual long-term incentive compensation
program and the Executive shall continue to be eligible to receive annual awards thereunder on at
least the same basis as other senior executive officers of the Company. The number (and value) of
the annual equity awards will be at a level (and, except as required by this Agreement, on such
terms (including, without limitation vesting and post termination exercise periods (if any))
determined by the Committee commensurate with the Executive’s position and performance after taking
into account a recommendation by an independent compensation consultant (a “Consultant”)
retained by the Company and/or the Committee. While the common stock of the Company or any
successor is not publicly traded in the United States, upon any termination of employment, the
Executive (or his estate or other beneficiary) will have the right to require the Company to
purchase his vested equity upon such terms as mutually agreed to by the Company and the Executive.



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     (d) Outperformance Compensation Program. The Executive shall be eligible to
participate in any Outperformance Compensation Program (including any similar plan or other
substitute plan) that may be adopted by the Board in its sole discretion on terms that are at least
as favorable to those made available to other senior executives of the Company in accordance with
the terms of the applicable program document. The Committee shall retain a Consultant to advise it
with respect to a replacement for the current Outperformance Compensation Program (which may be a
new Outperformance Compensation Program, a similar plan or other substitute plan), and the
Committee shall establish such program as it deems appropriate effective no later than the first
day of the fiscal year commencing immediately following the “Measurement Date” under the current
program.



     (e) Restricted Stock Units. Effective as of the Effective Date, the Executive shall
be granted an award of restricted stock units (the “RSUs”) relating to the Company’s common
stock, par value $.01 per share (the “Common Stock”), under the Company’s 2002 Long Term
Incentive Plan (the “LTIP”). Such RSUs will have an aggregate fair market value, based on
the closing price of the Common Stock on the New York Stock Exchange on the trading date
immediately preceding the Effective Date, equal to $10 million. One-half of the RSUs will vest in
four equal annual installments on November 23rd of each of 2006, 2007, 2008 and 2009.
The remaining half of the RSUs will vest based on the attainment of performance goals over the four
calendar-year period beginning with 2006 as described on Exhibit A hereto. So long as an RSU has
not been forfeited, dividend equivalents shall be paid with respect to such RSU currently and in
cash without regard to whether such RSU has vested. The Executive’s receipt of payment under the
RSUs shall be deferred in substantially the same manner and on substantially the same terms as the
RSU deferral program in effect on the Effective Date. An award agreement in a mutually acceptable
form memorializing the grant of the RSUs shall be executed by the parties as soon as practicable
after the Effective Date.



     (f) Employee Benefits. The Executive shall be entitled to participate in all employee
welfare, pension and fringe benefit plans, programs and arrangements of the Company in accordance
with their respective terms, as may be amended from time to time, and on a basis no less favorable
than that made available to other senior executives of the Company, including without limitation
the Trizec Properties, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”),
which shall be amended in a timely manner to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and, while the Common Stock or the common stock of any
successor is not publicly traded in the United States, the Deferred Compensation Plan shall
incorporate a manner reasonably acceptable to the Executive in which to value the Executive’s
“Restricted Stock Unit Account” under the Deferred Compensation Plan. In implementing any
compensation/benefits programs or awards (including equity awards), the Company shall consider and
attempt, in good faith, to structure such programs or awards in the most tax efficient manner for
the Executive.



     (g) Expenses. The Company shall reimburse the Executive for reasonable travel and
other business-related expenses incurred by the Executive in the fulfillment of his duties
hereunder upon presentation of written documentation thereof, in accordance with the applicable
expense reimbursement policies and procedures of the Company as in effect from time to time.



     (h) Vacation. The Executive shall be entitled to 6 weeks paid vacation each year
during the Term in accordance with the Company’s policy as in effect from time to time.



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     4. Termination of Employment.



     (a) Termination for Cause; Resignation without Good Reason. (i) If the Executive’s
employment is terminated by the Company for Cause, as defined in Section 4(a)(ii) hereof, or if the
Executive resigns from his employment hereunder other than for Good Reason (which he may do at
anytime subject to the notice requirements provided in Section 4(f) herein), as defined in Section
4(a)(iii) hereof, the Executive shall only be entitled to payment, within 15 business days of such
termination or resignation, of (A) unpaid Base Salary through and including his date of termination
or resignation, (B) earned but unpaid bonus for a previously completed fiscal year of the Company,
(C) reimbursement for any unreimbursed business expenses incurred by the Executive prior to his
date of termination or resignation that are subject to reimbursement pursuant to Section 3(g), (D)
payment for vacation time accrued as of the date of his termination or resignation and (E) any
other amounts or benefits required to be paid or provided by law or under any plan, program, policy
or practice of the Company ((A)-(E) collectively, the “Accrued Amounts”). The Executive
shall have no further right to receive any other compensation or benefits after such termination or
resignation of employment.



     (ii) Termination for “Cause” shall mean termination of the Executive’s employment
because of:




     (A) any willful act or omission that constitutes a material breach by the
Executive of any of his obligations under this Agreement;




     (B) the willful and continued failure or refusal of the Executive to perform the
duties reasonably required of him as an employee of the Company (other than any such
failure resulting from incapacity due to illness or a Disability (as defined));




     (C) the Executive’s conviction of, or plea of nolo contendere to, a felony (other
than traffic related offenses or as a result of vicarious liability);




     (D) the Executive’s engaging in any willful misconduct, act of dishonesty,
violence or threat of violence (including any violation of federal securities laws)
that is materially injurious to the Company or any of its subsidiaries or affiliates;




     (E) the Executive’s willful refusal to follow the reasonable, lawful and good
faith directions of the Board (other than any such refusal resulting from incapacity
due to illness or a Disability); or




     (F) any other gross negligence or willful misconduct by the Executive which is
materially injurious to the financial condition or business reputation of the Company
or any of its subsidiaries or affiliates;


provided, however, that no event or condition described in clauses (A) though (F)
shall constitute Cause unless (x) the Company first gives the Executive written notice of its
intention to terminate his employment for Cause and the grounds for such termination no fewer than
30 days prior to the date of termination; (y) such grounds for termination (if susceptible to
correction) are not corrected by the Executive within 30 days of his receipt of such notice (or, in
the event that such grounds cannot be corrected within such 30-day period, the Executive has not
taken all reasonable steps within such 30-day period to correct such grounds as promptly as
practicable thereafter); and (z) the




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Executive is provided the opportunity to appear before the
Board, with or without legal representation at the Executive’s election to present arguments on his
own behalf. No act or failure to act on the Executive’s part will be considered “willful” unless
done, or omitted to be done, by the Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of the Company.




     (iii) Resignation for “Good Reason” shall mean termination of employment by the
Executive because of the occurrence of any of the following events without the Executive’s prior
written consent:




     (A) any adverse change in any material respect to the responsibilities, duties,
authority or status of the Executive from those set forth in this Agreement or any
adverse change in the positions, titles or reporting responsibility (such that the
Executive reports to a person other than the Board) of the Executive;




     (B) the assignment of duties to the Executive that are inconsistent with the
Executive’s position and status as chief executive officer;




     (C) a relocation of the Executive’s principal business location to an area outside
a 40 mile radius of its current location or moving of the Executive from the Company’s
headquarters;




     (D) a failure of any successor to the Company (whether direct or indirect and
whether by merger, acquisition, consolidation, asset sale or otherwise) to assume in
writing any obligations arising out of this Agreement or any other agreement between
the Company and the Executive;




     (E) a reduction of the annual Base Salary or a failure by the Company to make any
of the awards required under Section 3 above, or pay any of the compensation provided
for under Section 3 above to the Executive in connection with his employment;




     (F) a material breach by the Company of this Agreement or any other material
agreement with the Executive relating to the Executive’s compensation; or




     (G) a termination of the Executive’s employment for any reason concurrently with
or within twelve months following, a Change in Control (as defined);


provided, however, that no event or condition described in clauses (A) through (G)
shall constitute Good Reason unless (x) the Executive gives the Company written notice of his
intention to terminate his employment for Good Reason and the grounds for such termination and (y)
such grounds for termination (if susceptible to correction) are not corrected by the Company within
30 days of its receipt of such notice (or, in the event that such grounds cannot be corrected
within such 30-day period, the Company has not taken all reasonable steps within such 30-day period
to correct such grounds as promptly as practicable thereafter).




     (b) Termination Without Cause; Resignation for Good Reason. (i) Except as set forth
in Section 4(d), if prior to the expiration of the Term, the Executive’s employment is terminated
by the Company without Cause or the Executive resigns from his employment



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hereunder for Good
Reason, the Company shall pay to the Executive, within 15 business days of such termination or
resignation, a lump sum payment equal to the Accrued Amounts and a pro rata (based on the number
of days employed in the year of termination or resignation) bonus for the fiscal year in which
his termination or resignation occurs based on the average of the annual bonuses paid to the
Executive for the two years immediately preceding the date of the Executive’s termination or
resignation (the “Average Bonus”). The Executive shall also receive the following
benefits:





     (A) Three times the sum of (i) his Base Salary (at the rate in effect on the date
of the Executive’s termination or resignation) and (ii) the Average Bonus. The
payments shall be made in a lump sum cash payment within 15 business days after such
termination or resignation;




     (B) Continued participation under the Company’s medical insurance plans and
programs as in effect for senior executive officers from time to time, for a period of
three years following his termination or resignation of employment, or until such date
as Executive becomes eligible to participate in the plans of a subsequent employer; and




     (C) Notwithstanding any provision in the applicable equity award plan or
agreement, all unvested equity awards and deferred compensation held by the Executive
as of his date of termination or resignation shall vest immediately and the date of
such termination or resignation shall be considered the end of the measurement period
and a valuation date under any Outperformance Compensation Program and any awards
thereunder shall be settled in fully vested shares (collectively the “Accelerated
Vesting”). Stock options (and equivalent awards) shall remain exercisable until
the applicable expiration dates provided in the applicable plan and award agreement,
and all other equity awards will settle and be paid as soon as reasonably practicable
following the Executive’s termination or resignation and in any event no later than 15
business days.


The Executive shall have no further rights under this Agreement or otherwise to receive any other
compensation or benefits after such termination or resignation of employment.




     (ii) The Company shall not be required to make the payments and provide the benefits provided
for under Section 4(b) (excluding the Accrued Amounts and pro rata Average Bonus), unless the
Executive executes and delivers to the Company, a waiver and release in the form previously
delivered to the Executive by the Company and such waiver and release becomes effective and
irrevocable.



     (iii) If, following a termination of employment without Cause, the Executive materially
breaches the provisions of Sections 6, 7, 8, 9, 11 and 12 hereof, the Executive shall no longer be
eligible, as of the date of such breach, for the payments and benefits described in Section 4(b),
and any and all obligations and agreements of the Company with respect to such payments shall
thereupon cease.




     (c) Termination Due to Death or Disability. The Executive’s employment with the
Company shall terminate automatically on the Executive’s death. In the event of the Executive’s
disability, as defined below, the Company shall be entitled to terminate his employment



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in
accordance with the terms of this Section 4(c). In the event of termination of the Executive’s
employment by reason of Executive’s death or disability, the Company shall pay to the Executive (or
his estate, as applicable), within 15 business days following such termination, the Executive’s
Base Salary through and including the date of termination, the Accrued Amounts, the Accelerated
Vesting and a pro rata Average Bonus. In addition, the Executive (or his estate, as applicable)
shall also receive a lump sum payment equal to the Executive’s Base Salary and continued
participation in the Company’s medical insurance plans and programs as in effect for senior
executive officers from time to time, for a period of three years following his termination of
employment or until such time as the Executive becomes eligible to participate in the plans of a
subsequent employer; provided, however, that the Company shall not be required to
make the payments and provide the benefits provided for under this Section 4(c) (excluding the
Accrued Amounts and pro rata Average Bonus), unless the Executive (or his estate, as applicable),
executes and delivers to the Company, a waiver and release in the form previously delivered to the
Executive by the Company and such waiver and release becomes effective and irrevocable. For
purposes of this Agreement, a “disability” shall occur, if by reason of a physical or
mental illness or incapacity that makes the Executive eligible for Company long-term disability
benefits, the Executive has been unable to carry out his material duties pursuant to the Agreement
for more than six consecutive months even with a reasonable accommodation.





     (d) Termination Within a Specified Period of a Change in Control/Change in Control
Vesting. (i) If, at anytime (whether during or after the Term) the Executive’s employment is
terminated by the Company without Cause or the Executive resigns his employment for Good Reason, in
either case within six months before, or two years following, a Change in Control (as defined in
Section 4(d)(iii) hereof) that occurs during the Term, the Executive shall receive the payments and
benefits due to the Executive pursuant to Section 4(b)(i).



     (ii) Upon the occurrence of a Change in Control, all equity based compensation held by the
Executive that is not already vested in accordance with its terms shall immediately vest. In
addition, to the extent the outperformance goals under any Outperformance Compensation Program
for periods prior to the Change in Control are achieved at the time of a Change in Control, all
awards that are outstanding and that could be granted during a performance period shall be fully
vested. Notwithstanding the foregoing provisions of this Section 4(d)(ii), but without affecting
the acceleration of vesting hereunder, no accelerated payment of any amount that constitutes
deferred compensation subject to Section 409A of the Code shall be made on account of the
accelerated vesting of such amount due to an event or transaction constituting a Change in
Control hereunder unless such event or transaction also constitutes a “change in the ownership”,
“change in the effective control” or “change in the ownership of a substantial portion of the
assets” of the Company as defined in Section 409A of the Code.



     (iii) Change in Control. For purposes of this Agreement, “Change in
Control” means:




     (A) Any “person” as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company,
any trustee or other fiduciary holding securities under any employee benefit plan of
the Company or any corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportion as their ownership of



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stock of the
Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing 50% or
more of either the then outstanding shares of Common Stock or the combined voting power
of the Company’s then outstanding voting securities;




     (B) During any period of two consecutive years, individuals who at the beginning
of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a
transaction described in clause (A), (C) or (D) hereof) whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of at
least two-thirds of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof, but
excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to the
election or removal of directors or actual threatened solicitation of proxies or
consents by or on behalf of a person other than the Board;




     (C) The stockholders of the Company approve a merger or consolidation of the
Company with any other entity or approve the issuance of voting securities in
connection with a merger or consolidation of the Company (or any direct or indirect
subsidiary thereof) pursuant to applicable exchange requirements, other than (A) a
merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving or parent
entity) at least 50.1% of the combined voting power of the voting securities of the
Company or such surviving or parent entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no “person” (as defined above) is or
becomes the beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of either of the then outstanding shares of Common Stock or
the combined voting power of the Company’s then outstanding voting securities; or




     (D) The stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets (or any transaction or series of transactions
having a similar effect) other than a sale or disposition of all or substantially all
the assets to an entity, at least 50.1% of the combined voting power of the voting
securities of which are owned by persons substantially in the same proportions as their
ownership of the Company’s immediately prior to such sale.


Notwithstanding the foregoing, (1) no Change in Control shall be deemed to have occurred if Peter
Munk has effective control over the Company through the power to elect at least a majority of the
Board; and (2) a Change in Control shall be deemed to occur if Peter Munk no longer has control of
the Company as described in clause (1); provided, however, that in any event a
Change in Control shall be deemed to occur if any “person” (as defined above) becomes a beneficial
owner (as defined




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above) of 50% or more of the Common Stock or of the equity value of any successor
to the Company.




     (e) Non-Renewal. In the event that the Company gives notice of non-renewal under
Section 2 and the Executive’s employment hereunder terminates, the Company shall pay to the
Executive, within 15 business days following such termination, the Accrued Amounts, the Accelerated
Vesting and a pro rata Average Bonus for the fiscal year in which the termination occurs. The
Company also shall pay promptly to Executive a lump sum payment equal to the product of (i) 2 and
(ii) the sum of his Base Salary and Average Bonus; provided, however, that the
Company shall not be required to make the payments and provide the benefits provided for under this
Section 4(e) (excluding the Accrued Amounts), unless the Executive (or his estate, as applicable),
executes and delivers to the Company a waiver and release in the form previously delivered to the
Executive by the Company and such waiver and release becomes effective and irrevocable. The
Executive shall have no further rights under this Agreement or otherwise to receive any other
compensation or benefits after such termination.



     (f) Notice of Termination. Any termination of employment by the Company or the
Executive shall be communicated by a written “Notice of Termination” to the other party
hereto given in accordance with Section 27 of this Agreement which shall state the effective date
of termination; provided that the effective date of termination shall be no earlier than thirty
(30) days following the date of Notice of Termination and no later than sixty (60) days following
the date of the Notice of Termination.



     (g) Resignation from Directorships and Officerships. The termination of the
Executive’s employment for any reason will be deemed to constitute, without any further action
required by any party, the Executive’s resignation from (i) any director, officer or employee
position the Executive has with the Company and its subsidiaries and affiliates and (ii) all
fiduciary positions (including as a trustee) the Executive holds with respect to any employee
benefit plans or trusts established by the Company. The Executive agrees that this Agreement
shall serve as written notice of resignation in this circumstance.



     5. Gross-Up Payment. (i) If, during the term of the Executive’s employment, there
is a change in ownership or control of the Company that causes any payment, distribution or
benefit provided by the Company, any person whose actions result in a change in ownership covered
by Section 280G(b)(2) or any person affiliated with the Company or such person, to or for the
benefit of the Executive (whether provided, to be provided, paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 5) (a “Payment”) to be subject to
the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest or
penalties incurred by the Executive with respect to such excise tax, the “Excise Tax”),
then the Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive will retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments and without duplication, an amount equal to the product of (A) any
deductions disallowed for federal, state or local income tax purposes because of inclusion of the
Gross-Up Payment in Executive’s adjusted gross income and (B) the highest applicable marginal rate
of federal, state or local income



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taxation, respectively, for the calendar year in which the
Gross-Up Payment is made or is to be made. The intent of this Section 5 is that Executive, after
paying his federal, state and local income tax and any payroll taxes, will be in the same position
as if he was not subject to the Excise Tax and did not receive the Gross-Up Payment.




     (ii) Determination of the Gross-Up Payment. Subject to the provisions of Section
5(iii), all determinations required to be made under this Section 5, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a certified public accounting firm
designated by the Company and reasonably acceptable to the Executive (the “Accounting
Firm”). All Payments will be treated as “parachute payments” (within the meaning of Section
280G(b)(2) of the Code) and any Payments in excess of the “base amount” (within the meaning of
Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax unless otherwise
determined by the Accounting Firm. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be
paid by the Company to the Executive the later of (A) the day before the due date for the payment
of any Excise Tax and (B) within five days after the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 5 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
the Executive or for the Executive’s benefit. The previous sentence shall apply mutatis mutandis
to any overpayment of a Gross-Up Payment.



     (iii) Procedures. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20
business days after the Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period following the date
on which he gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such claim, the Executive
shall:




     (A) give the Company any information reasonably requested by the Company relating to
such claim,




     (B) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected by the
Company,



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     (C) cooperate with the Company in good faith in order to effectively contest such
claim, and




     (D) permit the Company to participate in any proceedings relating to such claim;


provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing provisions of
this Section 5, the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, to the extent permitted
by law, the Company shall advance the amount of such payment to the Executive on an interest-free
basis (which shall offset to the extent thereof, the amount of Gross-Up Payment required to be
paid) and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance; and
provided further that any extension of the statute of limitations relating to
payment of taxes for the Executive’s taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control
of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.




     (iv) Refund. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 5, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the Company complying with the requirements
of this Section 5) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the Executive
receives an amount advanced by the Company pursuant to this Section 5, a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.



     6. Confidentiality.



     (a) Confidential Information. (i) The Executive agrees that he will not at any time
(whether during or following the Term), except with the prior written consent of the Company or any
of its subsidiaries (collectively, the “Company Group”) or in the course of performing his
duties hereunder, directly or indirectly, reveal to any person, entity or other organization (other
than



11









 




any member of the Company Group or its respective employees, officers, directors, shareholders
or agents) or use for the Executive’s own benefit any information deemed to be confidential by any
member of the Company Group (“Confidential Information”) relating to the assets,
liabilities, employees, goodwill, business or affairs of any member of the Company Group,
including, without limitation, any information concerning past, present or prospective customers,
marketing data, or other confidential information used by, or useful to, any member of the Company
Group and known to the Executive by reason of the Executive’s employment by, shareholdings in or
other association with any member of the Company Group; provided, however, that the
restrictions imposed under this Section 6 shall not apply to that part of the Confidential
Information that is or becomes generally available to the public or generally known within the
relevant trade or industry other than as a result of an improper disclosure by the Executive or is
available, or becomes available, to the Executive on a non-confidential basis, but only if the
source of such information is not to the Executive’s knowledge prohibited from transmitting the
information to the Executive by a contractual, legal, fiduciary, or other obligation.




     (ii) In the event that the Executive becomes legally compelled to disclose any Confidential
Information, the Executive shall provide the Company with prompt written notice so that the Company
may seek a protective order or other appropriate remedy. In the event that such protective order
or other remedy is not obtained, the Executive shall furnish only that portion of such Confidential
Information or take only such action as is legally required by binding order and shall exercise his
reasonable efforts to obtain reliable assurance that confidential treatment shall be accorded any
such Confidential Information. The Company shall promptly pay (upon receipt of invoices and any
other documentation as may be requested by the Company) all reasonable expenses and fees incurred
by the Executive, including attorneys’ fees, in connection with his compliance with the immediately
preceding sentence. Further, this Section 6 shall not prevent the Executive from disclosing
Confidential Information in connection with any litigation, arbitration or mediation involving this
Agreement, including, but not limited to, enforcing this Agreement, provided that such disclosure
is reasonably necessary for the Executive to assert any claim or defense in such proceeding.



     (b) Exclusive Property. The Executive confirms that all Confidential Information is
and shall remain the exclusive property of the Company Group. All business records, papers and
documents kept or made by the Executive relating to the business of the Company Group shall be and
remain the property of the Company Group. Upon the request and at the expense of the Company
Group, the Executive shall promptly make all disclosures, execute all instruments and papers and
perform all acts reasonably necessary to vest and confirm in the Company Group, fully and
completely, all rights created or contemplated by this Section 6.



     7. Non-Solicitation. The Executive agrees that, during his employment and for a
one-year period ending on the first anniversary of the Executive’s termination of employment for
any reason (the “Non-Solicitation Restricted Period”) the Executive shall not, directly or
indirectly, (a) interfere with or attempt to interfere with the relationship between any person
who is, or was during the then most recent six-month period, an employee, officer, representative
or agent of the Company Group and any member of the Company Group, or solicit, induce or attempt
to solicit or induce any such person to leave the employ of any member of the Company Group or
violate the terms of their respective contracts, or any employment arrangements, with such
entities; or (b) induce or attempt to induce any customer, client, tenant, supplier, licensee or
other business relation of any member of the Company Group to cease doing business with any member
of the



12









 




Company Group, provided, the parties hereto agree that the performance of duties for
another entity that are typically performed by a senior executive officer shall not be considered
to be “solicitation” of customers or clients under this Section 7; provided further, the foregoing
shall not be violated by general advertising not targeted at Company employees nor by serving as a
reference upon request. As used herein, the term “indirectly” shall include, without
limitation, the Executive’s permitting the use of the Executive’s name by any competitor of any
member of the Company Group to induce or interfere with any employee or induce any business
relationship of any member of the Company Group.




     8. Non-Competition. The Executive agrees that, during the Term and for an additional
period commencing on the date of his termination of employment for Cause or resignation of
employment without Good Reason and the date six months following such termination or one year
following such resignation (the “Non-Competition Restricted Period”), the Executive shall
not, without the prior written consent of the Company, directly or indirectly, and whether as
principal or investor or as an employee, officer, director, manager, partner, consultant, agent or
otherwise, alone or in association with any other person, firm, corporation or other business
organization, carry on a Competing Business (as hereinafter defined) in any geographic area in
which the Company Group has engaged, in a Competing Business. For purposes of this Section 8,
carrying on a “Competing Business” means to engage in the management or development of
office real estate properties on behalf of a publicly-traded REIT with a market capitalization of
$1.5 billion or greater (indexed following the Effective Date by the Dow Jones Composite REIT
Index); provided, however, that nothing herein shall limit the Executive’s right
to own not more than 1% of any of the debt or equity securities of any business organization that
is then filing reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d)
of the Exchange Act. The foregoing shall not be violated by the Executive’s working in a
non-competitive portion of a company which is carrying on a Competing Business or, as a result
thereof, owning compensatory equity in that company. Solely for purposes of this Section 8, the
definition of Good Reason shall be deemed to exclude Section 4(a)(iii)(G).



     9. No Conflicting Agreement. The Executive represents and warrants to the Company
that on the Effective Date the Executive is not a party to any agreement, whether written or oral,
that would be breached by or would prevent or interfere with the execution by the Executive of
this Agreement or the fulfillment by the Executive of the Executive’s obligations hereunder.



     10. (a) Certain Remedies. Without intending to limit the remedies available to the
Company Group, including, but not limited to, those set forth in Section 4 hereof, the Executive
agrees that a material breach of any of the covenants contained in Sections 6, 7, 8, 9, 11 and 12
of this Agreement may result in material and irreparable injury to the Company Group for which
there is no adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof, any member of the
Company Group shall be entitled to seek a temporary restraining order or a preliminary or
permanent injunction, or both, without bond or other security, restraining the Executive from
engaging in activities prohibited by the covenants contained in Sections 6, 7, 8, 9, 11 and 12 of
this Agreement or such other relief as may be required specifically to enforce any of the
covenants contained in this Agreement. Such injunctive relief in any court shall be available to
the Company Group in lieu of, or prior to or pending determination in, any arbitration proceeding.



13









 





     (b) Extension of Restricted Periods. In addition to the remedies the Company may
seek and obtain pursuant to Section 4, the Non Solicitation Restricted Period and the
Non-Competition Restricted Period shall be extended by any and all periods during which the
Executive shall be found by a court possessing personal jurisdiction over him to have been in
violation of the covenants contained in Section 7 or 8 of this Agreement, as applicable.



     11. Defense of Claims. The Executive agrees that, during the Term, and for a period
of two years after termination of the Executive’s employment for any reason, upon reasonable
request from the Company, and after Executive’s termination of employment, subject to Executive’s
other business commitments, the Executive will cooperate with the Company in the defense of any
claims or actions that may be made by or against the Company that affect the Executive’s prior
areas of responsibility, except as reasonably determined by the Executive, if the Executive’s
interests are adverse to the Company in such claim or action. The Company agrees to promptly
reimburse the Executive for all of the Executive’s reasonable travel and other direct expenses
incurred, or to be reasonably incurred, to comply with the Executive’s obligations under this
Section 11. The Company agrees that if the Executive is or is made a party, or is threatened to
be made a party, to any action, suit or proceeding (a “Proceeding”), by reason of the fact
that he is or was a director, officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, member, employee or agent of another entity, the
Executive shall be indemnified and held harmless by the Company to the fullest extent permitted by
law against all cost, expense, liability and loss reasonably incurred or suffered by the Executive
in connection therewith, and such indemnification shall continue after termination of the
Executive’s employment with respect to acts or omissions which occurred prior to his termination
of employment and which occur after his termination of employment pursuant to this Section 11, and
shall inure to the benefit of Executive’s heirs, executors and administrators. To the fullest
extent allowed by law, the Company shall advance to the Executive all reasonable costs and
expenses incurred by him in connection with a Proceeding within 20 calendar days after receipt by
the Company of a written request for such advance. Such request shall include an undertaking by
the Executive to repay the amount of such advance if it shall ultimately be determined that he is
not entitled to be indemnified against such costs and expenses.



     12. Nondisparagement. Each party agrees that at no time during the Executive’s
employment by the Company or at any time thereafter shall such party (and in the case of the
Company, the members of the Board of Directors and the Chief Executive Officer) make, or cause or
assist any other person to make, any public statement or other public communication which impugns
or attacks, or is otherwise critical of, the reputation, business or character of the other party,
including in the case of the Company any member of the Company Group or any of its respective
directors, officers or employees. Notwithstanding the foregoing, nothing in this Section shall
prevent the Company, the Executive or any other person from (i) responding to incorrect,
disparaging or derogatory public statements to the extent necessary to correct or refute such
public statements or (ii) making any truthful statement to the extent (y) necessary in connection
with any litigation, arbitration or mediation involving this Agreement, including, but not limited
to, the enforcement of this Agreement or (z) required by law or by any court, arbitrator, mediator
or administrative or legislative body (including any committee thereof) with apparent jurisdiction
or authority to order or require such person to disclose or make accessible such information.



     13. Source of Payments. All payments provided under this Agreement, other than
payments made pursuant to a plan which provides otherwise, shall be paid in cash from the general



14









 




funds of the Company, and no special or separate fund shall be established, and no other
segregation of assets shall be made, to assure payment. The Executive shall have no right, title
or interest whatsoever in or to any investments which the Company may make to aid the Company in
meeting its obligations hereunder. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right shall be no greater than the right of an unsecured
creditor of the Company.




     14. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in Chicago, Illinois
administered by the American Arbitration Association (“AAA”) under its Commercial
Arbitration Rules. The arbitration shall be arbitrated by a single arbitrator mutually selected
by the Executive and the Company, with the AAA to appoint the arbitrator in the event that the
parties are unable to agree on the selection within thirty days following the initiation of the
arbitration. Judgment on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. If the Executive prevails with respect to any material issue in connection
with any dispute arising under this Agreement (including any action brought by the Company for
injunctive relief), the Company shall reimburse the Executive for all of his costs and expenses,
including legal fees, incurred in connection therewith.



     15. Liability Insurance. The Company shall cover the Executive under directors and
officers liability insurance both during and, while potential liability exists, after the Term in
the same amount and to the same extent as the Company covers its other senior executive officers
and directors. This provision shall in all events survive any termination of this Agreement.



     16. No Mitigation/No Offset. The Executive shall have no obligation to mitigate any
payments of, or costs to, the Company under this Agreement, nor shall any payments or benefits
from the Company to the Executive under this Agreement be subject to offset (except as
specifically provided in Section 4(b)(i)(B)).



     17. Nonassignability; Binding Agreement.



     (a) By the Executive. This Agreement and any and all rights, duties, obligations or
interests hereunder shall not be assignable or delegable by the Executive other than as a result
of death of the Executive.



     (b) By the Company. This Agreement and all of the Company’s rights and obligations
hereunder shall not be assignable by the Company except as incident to a reorganization, merger
or consolidation, or transfer of all or substantially all of the Company’s assets.



     (c) Binding Effect. This Agreement shall be binding upon, and inure to the benefit
of, the parties hereto, any successors to or assigns of the Company and the Executive’s heirs and
the personal representatives of the Executive’s estate.



     18. Severability. The parties have carefully reviewed the provisions of this
Agreement and agree that they are fair and equitable. However, in light of the possibility of
differing interpretations of law and changes in circumstances, the parties agree that, if any one
or more of the provisions of this Agreement shall be determined by a court of competent
jurisdiction or arbitrator to be invalid, void or unenforceable, the remainder of the provisions
of this



15









 




Agreement shall, to the extent permitted by law, remain in full force and effect and shall
in no way be affected, impaired or invalidated. Moreover, if any one or more of the provisions
contained in this Agreement are determined by a court of competent jurisdiction or arbitrator to
be excessively broad as to duration, activity, geographic application or subject, such provision
or provisions shall be construed, by limiting or reducing them to the extent legally permitted, so
as to be enforceable to the maximum extent compatible with then applicable law.




     19. Withholding. Any payments made or benefits provided to the Executive under this
Agreement shall be reduced by any applicable withholding taxes or other amounts required to be
withheld by law or contract.



     20. Section 409A.



     (a) Notwithstanding any provision of this Agreement to the contrary, if the Executive is a
“specified employee” as defined in Section 409A of the Code, the Executive shall not be entitled to
any payments upon a termination of his employment until the earlier of (i) the date which is six
months after his termination of employment for any reason other than death or (ii) the date of the
Executive’s death. The provisions of this Section 20(a) shall only apply if required to comply
with Section 409A of the Code.



     (b) If any provision of this Agreement (or of any award of compensation, including equity
compensation or benefits) would cause the Executive to incur any additional tax or interest under
Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, the
Company shall, after consulting with and receiving the approval of the Executive (which shall not
be unreasonably withheld), reform such provision; provided that the Company agrees to maintain, to
the maximum extent practicable, the original intent and economic benefit to the Executive of the
applicable provision without violating the provisions of Section 409A of the Code.



     (c) The Company shall indemnify and hold the Executive harmless, on an after-tax basis, for
any additional tax (including interest and penalties with respect thereto) imposed on the Executive
as a result of Section 409A of the Code.



     21. Amendment; Waiver. This Agreement may not be modified, amended or waived in any
manner, except by an instrument in writing signed by both parties hereto. The waiver by either
party of compliance with any provision of this Agreement by the other party shall not operate or
be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by
such party of a provision of this Agreement.



     22. Governing Law. All matters affecting this Agreement, including the validity
thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the
Illinois applicable to contracts executed in and to be performed in that State.



     23. Survival of Certain Provisions. The rights and obligations set forth in Sections
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 26, 27 and 29 and
all other Sections intended to survive termination of the Executive’s employment shall survive any
termination of employment or expiration of the Term of this Agreement.



16









 





     24. Entire Agreement; Supersedes Previous Agreements. This Agreement contains the
entire agreement and understanding of the parties hereto with respect to the matters covered
herein and supersede all prior or contemporaneous negotiations, commitments, agreements and
writings with respect to the subject matter hereof, all such other negotiations, commitments,
agreements and writings shall have no further force or effect, and the parties to any such other
negotiation, commitment, agreement or writing shall have no further rights or obligations
thereunder, it being understood and agreed that nothing herein shall adversely affect the terms of
any equity-based or other compensation awards outstanding immediately prior to the Effective Date.



     25. Counterparts. This Agreement may be executed by either of the parties hereto in
counterparts, each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.



     26. Headings. The headings of sections herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of this
Agreement.



     27. Notices. All notices or communications hereunder shall be in writing, addressed
as follows:


To the Company:


Trizec Properties, Inc.

10 South Riverside Plaza

Suite 1100

Chicago, IL 60606

ATTN: General Counsel



     To the Executive, at the last address of the Executive on the books of the Company with a copy
to:


Proskauer Rose LLP

1585 Broadway

New York, NY 10036

ATTN: Ira G. Bogner, Esq.


, or such other address of the Executive as may be set forth in a written notice delivered to the
Company in accordance with this Section 27.




     All such notices shall be conclusively deemed to be received and shall be effective (i) if
sent by hand delivery, upon receipt or (ii) if sent by electronic mail or facsimile, upon receipt
by the sender of such transmission.



     28. Legal Fees. The Company shall pay the reasonable legal fees incurred by the
Executive in connection with this Agreement.



     29. Definition of “Company”. For purposes of the payment of sums due to the
Executive under this Agreement, the defined term “Company” shall be deemed to include Trizec
Properties, Inc. and any one or more of its subsidiaries or affiliates, as appropriate.



17









 





     IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer
pursuant to the authority of its Board, and the Executive has executed this Agreement, as of the
day and year first written above.



	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	TRIZEC PROPERTIES, INC.


	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By:
	  /s/ James J. O’Connor

	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Name:
	  James J. O’Connor

	 
	 	 	  Chairman, Compensation
Committee
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 THE EXECUTIVE
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	/s/
Timothy H. Callahan

	 	Timothy H. Callahan	 
	 	 	 
	 	 	 
	 	 	 



 









 






	 	 	 	 	 



EXHIBIT A




Performance Vesting RSUs





     One-half of the RSUs (the “Performance RSUs”) shall vest (subject to (a) and (b)
below), provided that the Executive remains employed by the Company, in equal installments as of
the first through fourth anniversaries of December 31, 2005 (the “Performance Vesting
Dates”) as provided below:



     (a) the applicable installment of Performance RSUs shall vest on the relevant Performance
Vesting Date if the Company achieves, for the fiscal year ending with such Performance Vesting
Date, either:




	 	(i)	 	the per share goal established by the Committee for
funds from operations (“FFO”) for such fiscal year (it being
understood and agreed that the FFO goal for 2006 shall be the goal
approved by the Committee and previously communicated to the Executive);
or
	 
	 	(ii)	 	a total shareholder return placing the Company in
the top third of its peer group (as identified for purposes of the
Outperformance Compensation Program).





     (b) If neither of the performance objectives set forth in (a) above is attained as of a
Performance Vesting Date, the Performance RSUs shall nevertheless vest as of the immediately
succeeding Performance Vesting Date if, as determined as of such succeeding Performance Vesting
Date, the Company attains either (i) actual per share FFO for the fiscal year ending with such
succeeding Performance Vesting Date which exceeds the goal for such fiscal year by at least as
much as the FFO shortfall for the immediately preceding fiscal year or (ii) total shareholder
return for the two-year period placing the Company in the top third of the peer group for such
period. If Performance RSUs scheduled to vest on a Performance Vesting Date have not vested on
such date or on the immediately succeeding Performance Vesting Date (if any), they shall
automatically be forfeited.