EXHIBIT 10.3
CONSULTING AGREEMENT
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THIS CONSULTING AGREEMENT (this "Agreement") is dated August 27, 1997 by
and between EQUITY RESIDENTIAL PROPERTIES MANAGEMENT LIMITED PARTNERSHIP, an
Illinois limited partnership ("ERPM"), and XXXXXXX X. XXXXX ("Consultant").
R E C I T A L S:
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A. Consultant is currently an employee and owner of a direct and indirect
equity interest in Xxxxx Xxxxxxxxxx Residential, Inc., a Maryland corporation
("EWR"), or Xxxxx Xxxxxxxxxx Residential, L.P. ("EWR Partnership").
B. Concurrently with the execution and delivery of this Agreement, EWR
and Equity Residential Property Trust, a Maryland real estate investment trust
("EQR") and an affiliate of ERPM, are entering into an Agreement and Plan of
Merger ("Merger Agreement"), pursuant to which EWR shall merge with and into EQR
(the "Merger").
C. As a result of Consultant's equity interest in EWR and EWR
Partnership, Consultant will realize certain benefits as a result of the Merger.
D. As an inducement for EQR to enter into the Merger Agreement,
Consultant agrees to terminate certain agreements previously entered into with
EWR and/or its affiliates, all on the terms and conditions set forth in this
Agreement.
E. ERPM desires to retain the services of Consultant, effective as of the
time the Merger is consummated (the "Effective Time"), all on the terms and
conditions set forth in this Agreement, and Consultant desires to provide such
services.
F. As an inducement for Consultant to terminate the Change In Control
Agreement (as hereinafter defined), ERPM desires to provide certain benefits to
Consultant pursuant to this Agreement.
Agreements
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In consideration of the covenants and mutual agreements set forth below and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Effective Time. This Agreement shall not become effective unless and
until the Effective Time occurs.
2. Consulting Services. Effective as of the Effective Time, ERPM agrees
to retain Consultant to provide consultative services, and Consultant agrees to
be so retained by ERPM, all on the terms and conditions hereinafter set forth.
3. Term. Subject to the early termination provisions contained in
Sections 9, 10 and 11 hereof, the term of this Agreement shall be for a period
commencing on the date the Effective Time occurs and ending on December 31,
1999. The period during which this Agreement is in effect is referred to herein
as the "Term".
4. Duties. During the Term, Consultant shall serve as Executive Vice
President-Strategic Investments of EQR. During the Term, Consultant shall
provide consulting services to the President and other senior executive officers
of EQR with respect to the strategic investments of EQR and its subsidiaries.
During the Term, Consultant shall devote such time as is reasonably necessary to
perform the services required of him hereunder.
5. Base Compensation. ERPM shall pay Consultant for all services
rendered by him under this Agreement during the Term, a fee at the rate of
$225,000 per annum, payable not less frequently than monthly. Such fee shall
not be subject to review or increase during the Term.
6. Benefits. In addition to the fee provided for in Section 5 hereof,
Consultant shall be entitled to the following additional benefits during the
Term:
(a) Effective as of the Effective Time, Consultant shall be awarded
an option to purchase 115,500 common shares of beneficial
interest of EQR ("EQR Common Shares"), subject to the terms and
conditions of EQR's Second Amended and Restated 1993 Share Option
and Share Award Plan, which options shall vest in three equal
installments on the first, second and third anniversaries of the
date of grant and shall have an exercise price equal to the
closing price of an EQR Common Share on the date the Effective
Time occurs.
(b) Commencing February, 1998, Consultant shall be eligible for
consideration for an award of an option to purchase EQR Common
Shares under EQR's Second Amended and Restated 1993 Share Option
and Share Award Plan.
(c) ERPM shall pay to Consultant a bonus equal to the bonus he would
have received for calendar year 1997 under the Employment
Agreement dated August 17, 1994 between Consultant, EWR and Xxxxx
Xxxxxxxxxx Management, Inc., as amended by Amendment No. 1
thereto dated as of July 1, 1997 (the "Old Employment
Agreement"), payable in that number of EQR Common Shares equal to
the number of shares of EWR which would have been issued in
payment of such bonus but for this Agreement
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and the occurrence of the Merger multiplied by the Exchange Ratio
(as defined in the Merger Agreement). Such bonus shall be
payable by ERPM at the same time as such bonus would have been
payable under the Old Employment Agreement but for this Agreement
and the occurrence of the Merger.
(d) Effective for the year beginning January 1, 1998, Consultant
shall be eligible for a bonus award for services rendered during
the Term of up to 50% of his base compensation pursuant to EQR's
Incentive Compensation Plan, such bonus to be 37-1/2% of such
base compensation if the annual target is achieved. Fifty percent
of any such bonus shall be paid to Consultant in cash and the
balance shall be paid in EQR Common Shares which shall be subject
to forfeiture if Consultant is not employed by ERPM or an
affiliate of ERPM on the second anniversary of the date of the
award (the "Bonus Restricted Shares").
(e) Consultant shall be entitled to participate in any additional
employee benefit plans of ERPM for persons in comparable
positions for which Consultant is eligible (treating Consultant
as an employee for purposes of determining such eligibility) and
in accordance with and subject to the terms of such plans,
including deferred compensation plans, stock option plans, group
health insurance and retirement plans but excluding any severance
plans or policies (it being understood that Consultant is
entitled to severance as provided in Section 10(c) of this
Agreement).
(f) Consultant shall not be required to perform services hereunder
for five weeks in each period ending on an anniversary of the
date of this Agreement. ERPM shall continue to pay the base fee
to Consultant during the period of such vacation.
With respect to each employee benefit plan of EQR and its affiliates,
Consultant's services with EWR or any EWR Subsidiary (as defined in the Merger
Agreement) shall be included for purposes of determining eligibility to
participate, vesting (if applicable) and entitlement to benefits.
7. Expense Reimbursement. ERPM shall reimburse Consultant for all
reasonable and customary travel and other business expenses incurred by
Consultant in carrying out his duties under this Agreement promptly following
ERPM's receipt of the documentation then required under ERPM's expense
reimbursement policy.
8. No Withholding. Unless otherwise required by law, no compensation
payable to Consultant shall be reduced by Social Security or income taxes.
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9. Termination Due to Death or Disability.
(a) This Agreement shall terminate in the event of Consultant's death.
In such event, ERPM shall pay to Consultant's legal representative Consultant's
fees earned but unpaid through the date of Consultant's death and all other
benefits that were earned by Consultant and which had vested at the time of
Consultant's death, payable in accordance with the terms of the plans under
which such benefits accrued. In addition, Consultant shall be entitled to the
Pro Rata Bonus (as hereinafter defined), payable at the same time as the annual
bonus for the year in which this Agreement is terminated would have been paid to
Consultant had this Agreement remained in force and effect. As used herein,
"Pro Rata Bonus" means the annual bonus which would have been payable to
Consultant had this Agreement remained in effect for the calendar year in which
this Agreement is terminated multiplied by a fraction, of which the numerator is
the number of days in such calendar year prior to the date this Agreement was
terminated and the denominator is 365.
(b) ERPM may terminate this Agreement if Consultant shall be prevented
from properly performing his duties hereunder, or is reasonably expected to be
prevented from properly performing his duties hereunder, by reason of any
physical or mental incapacity for a period of 120 consecutive working days or
for periods aggregating 180 working days within a one year period. ERPM shall
give Consultant 30 days' advance notice of termination if the termination occurs
as a result of an illness, injury or infirmity which is reasonably expected to
render Consultant unable to perform his duties hereunder for the period provided
above.
If ERPM and Consultant do not agree that Consultant is suffering from an
illness, injury or infirmity which is reasonably expected to prevent Consultant
from properly performing his duties hereunder for the aforesaid period, then
ERPM and Consultant (or Consultant's representative if Consultant is unable to
act) shall together select a licensed physician who shall, within thirty (30)
days from the date upon which he or she is selected, make a conclusive
determination as to whether or not Consultant is suffering from a permanent
disability. In the event that the parties are unable to agree upon the
selection of a physician, Consultant (or Consultant's representative if
Consultant is unable to act) and ERPM shall each separately select, within
fifteen (15) days from the date such disagreement arises, a licensed physician.
Together, the physicians so selected shall designate a third licensed physician
who shall, within fifteen (15) days from the date of his selection, make the
conclusive determination as to whether or not Consultant is suffering from a
permanent disability.
In the event of a termination due to disability, Consultant shall receive
such disability benefits as are paid generally to employees of ERPM at his
position under the policies of ERPM in effect at the time of the termination of
this Agreement. In addition, Consultant shall be entitled to Pro Rata Bonus,
payable at the same time the annual bonus for the year in which this Agreement
is terminated would have been paid to Consultant had this Agreement remained in
force and effect.
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10. Other Termination by ERPM.
(a) In addition to the termination of this Agreement pursuant to
Section 9, ERPM shall have the right to terminate this Agreement effective upon
delivery to Consultant of written notice of termination stating the basis for
such termination as being either:
(i) for "Cause", which shall be defined as any of the following:
(A) Consultant wilfully and continually fails to
substantially perform his duties under this Agreement
(other than due to his death or incapacity due to
accident or physical or mental illness);
(B) Consultant breaches any of his covenants in Sections
12, 13 or 14 or his representations in Section 15;
(C) Consultant engages in an act of dishonesty constituting
a felony and which results or is intended to result
directly or indirectly in his gain or personal
enrichment at the expense of ERPM;
(D) Consultant is convicted of a felony or of any crime
involving moral turpitude, fraud, theft or conversion;
(E) Consultant fails or refuses to submit to a medical
examination for the sole purpose of determining whether
Consultant is disabled pursuant to Section 9 within ten
(10) days after ERPM delivered a written request for
such examination to Consultant; or
(ii) without "Cause".
(b) Upon a termination of this Agreement by ERPM for Cause, ERPM shall
have no further obligation to Consultant under this Agreement, except to pay his
base fee through the date of termination of this Agreement and any other
benefits that have fully accrued and vested but have not been paid as of the
date of such termination, which shall be payable in accordance with the terms of
the plans under which such benefits accrued.
(c) Upon a termination of this Agreement by ERPM without Cause or by
Consultant for Good Reason (as defined in Section 11(a) hereof), ERPM shall have
no further obligation to Consultant under this Agreement, except (A) to pay an
amount equal to the base
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fee which would otherwise have been payable to Consultant for the balance of the
Term, payable in the same manner as such fee would have been paid to Consultant
had this Agreement not been terminated, (B) to pay the bonus which Consultant
would have received for the balance of the Term had this Agreement remained in
force and effect, assuming for this purpose that each annual bonus were the same
amount as the annual bonus for the year in which this Agreement terminated, (C)
to provide continuing participation in all group medical, dental and
hospitalization insurance plans in which Consultant participated at the time of
termination of this Agreement, (D) all Bonus Restricted Shares shall vest
immediately, and (E) any other benefits that have fully accrued and vested but
have not been paid as of the date of termination of this Agreement, shall be
payable in accordance with the terms of the plans under which such benefits
accrued.
11. Termination by Consultant. Consultant may terminate this Agreement by
providing ERPM with a written notice of termination at least one hundred twenty
(120) days prior to the effective date of such termination in the case of a
termination other than for Good Reason (as defined below) or sixty (60) days
prior to the effective date of such termination in the case of a termination for
Good Reason. As used herein, "Good Reason" shall mean (a) a substantial adverse
alteration in Consultant's status, position or responsibilities, (b) a reduction
in Consultant's base fee or any failure to pay Consultant any fees or benefits
to which he is entitled within five days after notice of such failure is given
to ERPM by Consultant, (c) the material breach by ERPM of any of its agreements
set forth in Sections 2, 5 and 6 hereof which continues unremedied for a period
of thirty (30) days after receipt by the general partner of ERPM of a written
demand for performance by Consultant, which written demand specifically
identifies in reasonable detail the manner in which Consultant believes that
ERPM has not performed its obligations, (d) ERPM requires Consultant to be based
at any place outside a 30-mile radius from Scottsdale, Arizona, except for
reasonably required travel on business of ERPM and its affiliates. If Consultant
terminates this Agreement for Good Reason, Consultant shall be entitled to the
payments and benefits provided for in Section 10(c). If Consultant terminates
this Agreement without Good Reason, ERPM shall have no further obligation to
Consultant except to pay (i) Consultant's fees earned but unpaid through the
date of termination of this Agreement, and (ii) all other benefits that were
earned by Consultant and had vested at the time of such termination, payable in
accordance with the terms of the plans under which such benefits accrued.
12. Competition.
(a) At all times during the Term (the "Non-Compete Period"),
Consultant shall be prohibited from engaging in Competition (as defined in
subsection 12(b) below) with ERPM or its affiliates. As used in this Agreement,
an "affiliate" of ERPM means any corporation or other entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with ERPM.
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(b) The term "Competition" for purposes of this Agreement shall mean
Consultant's taking any of the following actions: engaging in or carrying on,
directly or indirectly whether as advisor, agent, principal, partner, officer,
director, employee or stockholder, associate or consultant of or to any person,
partnership, corporation or any other business entity which is engaged in the
development, construction, acquisition or management of multifamily apartment
properties in North America (i.e., the United States, Canada or Mexico).
Notwithstanding the foregoing, the term "Competition" shall exclude (a)
Consultant's ownership interest as of the date of this Agreement in those
multifamily apartment properties which were not contributed to EWR at the time
of EWR's initial public offering of common shares to the public pursuant to a
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, and (b) ownership of not
more than 2% of the outstanding shares of an entity which is traded on a
national stock exchange or in the over-the-counter market.
(c) Consultant acknowledges that, as a senior consultant to ERPM,
Consultant will be involved, on a high level, in the development, implementation
and management of ERPM's national business strategies and plans, including those
which involve ERPM's finances, research, marketing, planning, operations and
property acquisitions. By virtue of the Consultant's unique and sensitive
position and special background, employment of the Consultant by a competitor of
ERPM represents a serious competitive danger to ERPM, and the use of
Consultant's talent and knowledge and information about ERPM's business
strategies can and would constitute a valuable competitive advantage over ERPM.
(d) Consultant acknowledges that he has carefully read and considered
all of the terms of this Agreement, including particularly the terms of this
Section 12 and of Sections 13 and 14 hereof, that ERPM and its affiliates have
made a substantial investment in their business and that the restrictions
provided in this Section 12 and the following Sections 13 and 14 hereof are
reasonable and necessary for ERPM's protection. Consultant further acknowledges
that damages at law will not be a measurable or adequate remedy for breach of
the covenants contained in this Section 12 or in Sections 13 and 14 hereof and,
accordingly Consultant consents to the entry by any court of competent
jurisdiction of any order enjoining him from violating any such covenants,
without bond but upon due notice. The parties hereto further agree that if, in
any judicial proceeding, a court should refuse to enforce any covenants set
forth in this Section 12 or in Sections 13 and 14 hereof because of their term
or geographical scope, then such covenants shall be deemed to be modified to
permit their enforcement to the maximum extent permitted by law.
13. Confidentiality. Consultant acknowledges that during the course of
this Agreement, he will obtain knowledge of and access to confidential
proprietary information of ERPM and its affiliates (hereinafter referred to as
the "Confidential Information"). Such Confidential Information includes
confidential records, data, formulae, sales strategy, and other confidential and
proprietary information of ERPM and its affiliates. Consultant acknowledges
that the disclosure of any Confidential Information in contravention of this
Section 13 would do irreparable damage to ERPM and its affiliates. Consultant
accordingly agrees that, unless
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otherwise authorized by written instrument signed by an officer of ERPM, he will
not at any time, in any manner whatsoever, except in the regular course of
performing his duties as a consultant to ERPM, use for himself or others, or
disclose, reveal or divulge to anyone, any of the Confidential Information.
"Confidential Information" shall not include any information which now or
hereafter (a) is or becomes generally known to the public other than as a result
of breach of this Section 13 or other similar confidentiality covenant, or (b)
is or becomes readily available from or actually acquired from third parties who
are not employees of ERPM or an affiliate of ERPM and who did not acquire such
information as a result of a breach of this Section 13 or other similar
confidentiality covenant.
14. Covenant Restricting Solicitation. Consultant shall not, directly or
indirectly, solicit, attempt to solicit for employment or employ any employee of
ERPM or any affiliate of ERPM at any time during the Term and the one year
period ending on the first anniversary of the date of the expiration or
termination of the Term.
15. Certain Representations. Each party represents and warrants to the
other party that (i) such party is free to enter into this Agreement, and (ii)
this Agreement does not violate the terms of any agreement, instrument,
covenant, order or decree to which such party is bound.
16. Certain Provisions to Survive. The provisions of Sections 9(b), 10,
11, 12, 13, 14 and 16 shall survive the expiration or termination of this
Agreement as to obligations which accrued prior to such expiration or
termination.
17. Waiver. Failure by either party to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
18. Other Agreements. ERPM and Consultant do hereby acknowledge that:
(a) The Change in Control Agreement dated June 18, 1997 by and between
Consultant and EWR (the "Change in Control Agreement") shall terminate as of the
Effective Time. Consultant hereby waives any rights he may have under the
Change in Control Agreement as a result of such termination.
(b) Except as otherwise provided in Section 6(c) of this Agreement,
the Old Employment Agreement shall terminate effective as of the Effective Time.
Consultant hereby waives any rights he may have under Section 7 of the Old
Employment Agreement as a result of such termination.
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19. Severability. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable. If for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by a court, agency or tribunal with competent
jurisdiction in a proceeding to which ERPM is a party, that ruling shall not
impair the operation of, or have any other effect upon, any other portions of
this Agreement, which shall continue to be given full force and effect. If any
provisions hereof shall be adjudicated to be invalid or unenforceable in whole
or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be made enforceable by limitations
thereon, the parties agree that the same shall be enforceable to the fullest
extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereby authorize
any court of competent jurisdiction to modify the restrictive covenants to the
extent necessary to make the same enforceable.
20. Assignability; Benefit. This Agreement shall inure to the benefit of
and be binding upon ERPM and its successors and assigns. The rights and
benefits of Consultant under this Agreement are personal to him, and are not
subject to voluntary or involuntary alienation, assignment or transfer by him.
21. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
22. Notices. Any and all notices required or permitted to be given
hereunder must be in writing and shall be deemed to have been properly served if
given by personal delivery, or if transmitted by telecopy, or if delivered to
Federal Express or other reputable overnight carrier for next business day
delivery, charges billed to and prepaid by shipper, or if deposited in the
United States mail, registered or certified with return receipt requested,
proper postage prepaid, addressed as follows:
To Consultant: Xxxxxxx X. Xxxxx
0000 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxx 00000
To ERPM: Equity Residential Property Management Limited
Partnership
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Each notice shall be effective upon personal delivery, or upon
confirmation of receipt of the applicable telecopy, or one (1) business day
after delivery to a reputable overnight carrier
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in accordance with the foregoing, or upon receipt with respect to notices
deposited in the United States registered or certified mail in accordance with
the foregoing. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall not adversely
impact the effectiveness of any such notice.
Any addressee may change its address for notices hereunder by giving
written notice in accordance with this Section 22.
23. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Illinois, without regard to its conflict of laws provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
EQUITY RESIDENTIAL PROPERTIES MANAGEMENT LIMITED
PARTNERSHIP
By: ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership, its general partner
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By: /s/Xxxxx X. Xxxxxx
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Title: Executive Vice President
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/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
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