EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
October 25, 2001 (the "Effective Date"), by and between BRE PROPERTIES, INC., a
Delaware corporation (the "Company"), and XXXXXXX X. XXXXXX (the "Executive").
BACKGROUND
----------
WHEREAS, the Company desires to employ Executive, and Executive desires to
be employed by the Company, on the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the covenants, duties, terms, and
conditions set forth in this Agreement, the parties agree as follows:
1. Term. The term of this Agreement is from November 1, 2001 to November
----
1, 2003, unless earlier terminated pursuant to Section 7 (the "Term").
Executive shall commence the rendering of services under this Agreement as of
the Effective Date. This Agreement shall automatically be extended from year to
year for one-year terms beginning on November 1, 2003, provided that (a) the
Company or the Executive does not give notice of termination to the other party,
as described in Section 14.1 below, at least 75 days prior to the end of the
then-current term; (b) the Agreement has not been terminated pursuant to Section
7 below; or (c) the parties have not entered into a new agreement with respect
to the subject matter hereof.
2. Duties. Executive shall be employed by the Company as its Senior Vice-
------
President - Asset Management. Executive shall be under the direction and
supervision of the Company's Chief Operating Officer ("COO") and its Board of
Directors (the "Board"). Executive shall devote her full business time and best
efforts to the Company, with her powers and duties to be determined by the COO.
Executive shall not, except for incidental management of her personal financial
affairs, engage in any other business, nor shall she serve in any position with
any other corporation or entity, without the prior written consent of the COO.
3. Compensation. During the Term, Executive shall be entitled to receive
------------
compensation in accordance with this Section 3.
3.1 Base Salary. Executive shall receive an annual base salary ("Base
-----------
Salary") of $225,000 commencing on her first day of work. The Board, in its
discretion, may review the Base Salary annually beginning with the calendar year
2003 and increase the Base Salary based on relevant
1
circumstances. The Base Salary shall be payable by the Company to the Executive
in equal installments on the dates payments of salary are regularly made by the
Company to its executive employees.
3.2 Annual Performance Bonus. Executive shall be eligible to receive
------------------------
an annual incentive bonus (the "Annual Bonus") targeted at 40% of Base Salary
for each fiscal year of the Company during the Term except that the initial
Annual Bonus shall be computed on a pro rata basis for fiscal year 2001. The
amount of the Annual Bonus shall be based on the achievement of management by
objective criteria established by the Board (the "MBO Criteria"). It is
anticipated that, for any given year, the amount of the Annual Bonus could range
from 0% of Base Salary (in the event of a failure to achieve the Annual
Criteria), to 40% of Base Salary (in the event of achievement of the Annual
Criteria), to between 40% and 80% of Base Salary (in the event the Annual
Criteria are exceeded). Except as otherwise specified in this Agreement,
Executive shall earn the Annual Bonus only at the end of each of the Company's
fiscal years during the Term. The Annual Bonus, if earned, shall be paid within
90 days after the end of each fiscal year.
3.3 Stock Loan. The Company shall also make a full recourse, five-
----------
year loan to Executive in an amount equal to the aggregate price for 5,000
shares of Common Stock at Market Value on the Effective Date of this Agreement
(the "Stock Loan"). The Stock Loan shall be made pursuant to a loan agreement
between Company and Executive in the standard Company form (the "Loan and Stock
Pledge Agreement" in the form of Exhibit A), under which the shares so acquired
(and any securities resulting from ownership of such shares) shall be pledged by
Executive to the Company as collateral for amounts payable under the Loan and
Stock Pledge Agreement.
3.4 Future Long-Term Incentive Awards. Beginning with the year
---------------------------------
commencing on January 1, 2002, and continuing with each subsequent fiscal year
during the Term, Executive shall be eligible to receive additional long-term
incentive awards at the discretion of the Board. It is contemplated that such
awards will take into account financial, operating, and other results achieved
during the preceding fiscal year as well as future long-term performance goals.
Such awards may be in the form of options, restricted shares, SARs, stock sales,
stock grants, forgivable loans, long-term bonus arrangements in the form of
Exhibit B (the "Bonus Arrangement"), or any other form of long-term
compensation, as determined by the Board.
4. Benefits. During the Term, Executive shall be entitled to receive such
--------
other benefits and to participate in such benefit plans as are generally
provided by the Company to its
2
executive employees, including, without limitation, parking and profit sharing
and insurance plans. Executive shall be entitled to four weeks vacation for each
calendar year.
5. Expenses. The Company shall pay or reimburse Executive for all
--------
reasonable travel and other expenses incurred by Executive in performing her
duties under this Agreement in accordance with Company policy. In addition,
Executive shall be reimbursed by the Company (upon presentation of appropriate
documentation) in a maximum aggregate amount of $30,000 for reasonable out-of-
pocket expenses related to relocating to the San Francisco Bay Area for moving
expenses for household goods, travel for Executive and family to the San
Francisco Bay Area, trips for locating housing, and either, at Company's
election, a temporary housing allowance not to exceed $1,500 per month for a
period of up to six months or the right to occupy an apartment reasonably
selected by the Company on a rent-free basis for six months.
6. Transition Assistance. Upon seven (7) business days' notice from
---------------------
Executive that she has completed her relocation, the Company shall provide
Executive with a five year, full recourse loan (the "Transition Assistance
Loan") in an original principal amount of $50,000 at an interest rate equal to
the mid-term federal rate as defined in Section 1274 of the Internal Revenue
Code. The Transition Assistance Loan shall be evidenced by a promissory note in
the form of Exhibit C. Interest shall accrue and shall be payable solely at the
---------
election of Executive.
The Transition Assistance Loan documentation shall contain provisions for
acceleration upon termination of employment by the Company with cause or upon
termination by the Executive without good reason as specified below and for
forgiveness on a pro-rata basis of the principal amount of the loan and all
accrued interest on each anniversary of the Effective Date and full forgiveness
in the event Executive remains continuously employed by the Company for five
years, dies, becomes disabled, is terminated without cause, terminates her
employment with good reason pursuant to Section 8.2(c), or if the Company fails
to renew the Initial Term or any renewal term of this Agreement.
7. Termination of Employment.
-------------------------
7.1 Termination Due to Death or Disability; Voluntary Termination. If
-------------------------------------------------------------
at any time during the Term, Executive shall die, suffer any Disability (as
defined below), or voluntarily terminate her employment by the Company, then, in
any such event, her employment under this Agreement shall automatically
terminate on the date of death, upon any Disability, or the date of
3
voluntary termination, as the case may be. As used herein, the term "Disability"
shall mean the inability of Executive to perform her duties because of physical
or mental illness or incapacity as determined by the Board.
7.2 Termination by the Company for Good Cause. During the term, the
-----------------------------------------
Company may terminate this Agreement and Executive's employment at any time for
Good Cause. In such event, this Agreement shall terminate on such date as shall
be specified in writing by the Company. As used herein, the term "Good Cause"
shall mean (i) any act or omission of gross negligence, willful misconduct,
dishonesty, or fraud by Executive in the performance of her duties hereunder or
in material violation of the Company's employment policies and practices, (ii)
the failure or refusal of Executive to perform the duties or to render the
services assigned to her from time to time by the COO or the Board, (iii) the
charging or indictment of Executive in connection with a felony or any
misdemeanor involving dishonesty or moral turpitude, or (iv) the material breach
by Executive of this Agreement or the breach of Executive's fiduciary duty or
duty of trust to the Company.
7.3 Termination by the Company Other Than for Good Cause. During the
----------------------------------------------------
term, the Company may terminate this Agreement and Executive's employment for
any reason other than for Good Cause. In such event, this Agreement shall
terminate on the 30th day following written notice of such termination by the
Company.
8. Compensation upon Termination.
-----------------------------
8.1 Termination Other Than in Connection With a Change in Control.
-------------------------------------------------------------
(a) In the event of termination of Executive's employment
pursuant to Section 7.1 or 7.2, the Company shall not be obligated, from and
after the date of termination, to provide to Executive, and Executive shall not
be entitled to receive from the Company, any compensation (including any
payments of Base Salary, Annual Bonus, or other awards) or other benefits;
except that if termination pursuant to Section 7.1 is due to death or
Disability, Executive or her estate shall receive, within 90 days after the
close of the fiscal year in which the death or Disability occurred, a lump-sum
payment equal to the estimated Annual Bonus that the Executive would have earned
for the fiscal year in question (based on actual performance relative to MBO
Criteria for the fiscal year and Executive's contribution up to the date of
death or Disability), calculated on a pro-rated basis to the date of
termination. In the case of any termination of
4
employment pursuant to Section 7.1, or upon non-renewal of the Initial Term or
any renewal term, prior to the fifth anniversary of this Agreement, the
outstanding principal balance (but not accrued interest which shall be forgiven)
of the Transition Assistance Loan shall be due and payable in full 180 days
following the termination date; provided, however, that in the case of
termination based upon death or Disability, the outstanding balance on the
Transition Assistance Loan shall be forgiven. In the case of any termination of
employment pursuant to Section 7.2 prior to the fifth anniversary of this
Agreement, the outstanding principal balance (but not accrued interest which
shall be forgiven) of the Transition Assistance Loan shall be due and payable in
full 15 days following the termination date. In the case of any termination of
employment pursuant to Sections 7.1, 7.2, or as a result of non-renewal of the
Initial Term or any renewal term, the outstanding balance under the Loan and
Stock Pledge Agreement, and any other similar agreements Executive and the
Company enter into pursuant to Section 3.4 (collectively the "Stock Loan
Agreements"), and all accrued interest, shall be due and payable in full 15 days
following the termination date. In the case of termination based upon death or
Disability, the amount of any Bonus Arrangement shall be earned in such amount
as determined by the Pro Rata Calculation (in which case, the Company may delay
the due date to complete the Pro Rata Calculation). For the purpose of this
Agreement, "Pro Rata Calculation" shall mean a pro rata application of Sections
2.1, 2.2, and 2.3 of each of the Bonus Arrangements as described in Exhibit B to
---------
this Agreement, taking into consideration the number of full months worked and
the Company's performance data through the last quarter having ended 45 days or
more prior to the termination date, not withstanding the fact that such sections
of the Bonus Arrangements may not provide for such pro rata application.
(b) In the event of termination of Executive's employment pursuant to
Section 7.3, provided that Executive provides to the Company a full and complete
release of all known and unknown claims against the Company and its
representatives, the Company shall provide Executive with the following
compensation within fifteen (15) days after such termination:
(i) Executive shall be entitled to receive a lump-sum payment
from the Company equal to (a) one hundred and forty percent (140%) of her then
Base Salary if termination occurs prior to Executive's first Annual Bonus being
determined pursuant to Section 3.2; (b) her then Base Salary plus the amount of
the Annual Performance Bonus awarded in the immediately preceding year if
termination occurs subsequent to the determination of the Annual Performance
Bonus for her first full year and prior to the determination for the second full
year; or
5
(c) for any subsequent termination, her then Base Salary plus the average of the
Annual Performance Bonus awarded in the prior two years;
(ii) all restrictions (other than applicable federal and state
securities laws) on any shares of Common Stock awarded to Employee under Section
3.4 would be eliminated and such shares would fully vest in Executive;
(iii) the amount payable under the Transition Assistance
Loan shall be forgiven;
(iv) the amount payable under each Loan and Stock Pledge
Agreement shall be due and payable within fifteen (15) days after such
termination; and
(v) Executive shall be entitled to receive payment under the
Bonus Arrangement in such amount as determined by the Pro Rata Calculation.
8.2 Termination Following a Change in Control. The following
-----------------------------------------
provisions shall apply in lieu of Section 8.1 if, and only if, the termination
of Executive's employment occurs within 12 months following a Change in Control
(as defined in Section 8.2(d)):
(a) In the event of termination of Executive's employment
pursuant to Section 7.1 due to death or disability, or pursuant to Section 7.2,
the provisions of Section 8.1(a) apply.
(b) In the event of termination of Executive's employment
pursuant to Section 7.1 due to voluntary termination by Executive without Good
Reason (as defined below) or upon non-renewal of the Initial Term or any renewal
term of this Agreement, the provisions of Section 8.1(a) shall apply except that
the Company shall pay Executive within 15 days after such termination: a lump-
sum payment from the Company equal to: (x) one hundred and forty percent (140%)
of her then Base Salary if termination occurs prior to Executive's first Annual
Bonus being determined pursuant to Section 3.2; (y) her then Base Salary plus
the amount of the Annual Performance Bonus awarded in the immediately preceding
year if termination occurs subsequent to the determination of the Annual
Performance Bonus for her first full year and prior to the determination for the
second full year; or (z) for any subsequent termination, her then Base Salary
plus the average of the Annual Performance Bonus awarded in the prior two years.
As used herein, the term "Good Reason" means (i) a material change in
Executive's duties, responsibilities, or authority, or
6
authority, or (ii) the Company's relocation of the Executive, without the
Executive's consent, to a location outside of the San Francisco metropolitan
area.
(c) In the event of termination of Executive's employment pursuant to
Section 7.1 due to voluntary termination by Executive with Good Reason, or
pursuant to Section 7.3, provided that Executive provides to the Company a full
and complete release of all known and unknown claims against the Company and its
representatives, the Company shall provide Executive with the following
compensation within 15 days after such termination:
(i) Executive shall be entitled to receive a lump-sum payment
from the Company equal to: (x) two hundred and eighty percent (280%) of her then
Base Salary if termination occurs prior to Executive's first Annual Bonus being
determined pursuant to Section 3.2; (y) her then Base Salary plus two times the
amount of the Annual Performance Bonus awarded in the immediately preceding year
if termination occurs subsequent to the determination of the Annual Performance
Bonus for her first full year and prior to the determination for the second full
year; or (z) for any subsequent termination, two times her then Base Salary plus
the sum of the Annual Performance Bonus awarded in the prior two years;
(ii) all restrictions (except applicable federal and state
securities law) on any shares of Common Stock awarded to Employee under Section
3 would be eliminated and such shares would fully vest in Executive;
(iii) any unvested stock options (including the Options) held by
Executive at the date of termination, would vest and become fully exercisable
for a period of three months from the date of termination;
(iv) the amount payable under the Transition Assistance Loan
shall be forgiven;
(v) the amount payable under each Loan and Stock Pledge
Agreement shall be due and payable within fifteen (15) days of termination; and
(vi) Executive shall be entitled to receive payment under the
Bonus Arrangement in such amount as determined by the Pro Rata Calculation.
(d) As used herein, a "Change in Control" shall be deemed to have
occurred when any of the following events occur:
7
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as in effect
on the date hereof, (a "Person")) acquiring "beneficial ownership" (as defined
in Rule 13D-3 under the Exchange Act), of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities; or
(ii) a change in the Board that is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Company and which causes the Continuing
Directors (as defined below) to cease to constitute a majority of the Board;
provided, however, that neither of the events described in (i) or (ii) of this
Section 8.2(d) shall be deemed to be a Change in Control if the event(s) or
election(s) causing such change shall have been approved specifically for
purposes of this Agreement by the affirmative vote of at least a majority of the
members of the Continuing Directors. For these purposes, a "Continuing
Director" shall mean a member of the Board (i) who is a member of the Board on
the date of this Agreement, or (ii) who subsequently becomes a member of the
Board and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in clauses (i) and (ii) (including clause (ii)(y)), as applicable.
(e) Notwithstanding anything to the contrary in this Section 8.2, if
any of the payments or other compensation to be made to Executive pursuant to
this Section 8.2 are determined to be "parachute payments" as defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), then the
amount of such payments or other compensation shall be reduced to the largest
amount which would not constitute "parachute payments" as so defined.
9. Confidentiality. It is specifically understood and agreed that some
---------------
of the Company's business activities are secret in nature and constitute trade
secrets, or are otherwise confidential and/or proprietary in nature, including
but not limited to the Company's "know-how," methods of business and operations,
and property and financial analyses and reports (all such information,
"Proprietary Information"). All of the Company's Proprietary Information is and
shall be the sole property of the Company for its own exclusive use and benefit,
and Executive
8
agrees that upon termination of her employment for any reason whatsoever, she
shall return to the Company all Proprietary Information in her possession or
under her control. Executive further agrees that she shall hold all of the
Company's Proprietary Information in strictest confidence and shall not at any
time, either during or after her employment by the Company, use or disclose, or
permit the use or disclosure of, the same for her own benefit or for the benefit
of others, unless authorized to do so by the Company's written consent or by a
contract or agreement to which the Company is a party or by which it is bound.
The provisions of this Section 9 shall perpetually survive the termination of
the Agreement, and Executive shall likewise be bound by all other agreements
between her and the Company relating in any way to the protection of the
Company's Proprietary Information.
10. Arbitration. If a dispute arises between Company and Executive
-----------
concerning this Agreement, or in any way relating to Executive's employment by
the Company and/or the termination thereof, the disputed matter shall first be
submitted to mandatory mediation, such mediation to be conducted in the City of
San Francisco pursuant to the then-current rules of the Judicial Arbitration and
Mediation Services ("JAMS") by a mediator affiliated with JAMS, or by such other
mediator as is mutually agreeable to the parties. If the mediation does not
successfully resolve such dispute, then the dispute shall be submitted to
mandatory, final, and binding arbitration in the City of San Francisco,
California in accordance with the employment arbitration rules of the American
Arbitration Association ("AAA Rules"). Any judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
arbitrators shall have the authority to grant any equitable and legal remedies
that would be available in any judicial proceeding instituted to resolve the
disputed matter. The arbitrators shall apply the law of the State of California
in making any determination hereunder. Notwithstanding anything to the contrary
which may now or hereafter be contained in the AAA Rules, the parties agree any
such arbitration shall be conducted before a panel of three arbitrators, who
shall be compensated for their services at a rate to be determined by the
American Arbitration Association in the event the parties are not able to agree
upon their rate of compensation. Each party shall have the right to appoint one
arbitrator (to be appointed within twenty days of the notice of a dispute to be
resolved by arbitration hereunder), and the two arbitrators so chosen shall
mutually agree upon the selection of the third, impartial arbitrator. The
majority decision of the arbitrators will be final and conclusive upon the
parties hereto. The parties hereby acknowledge and agree that final and binding
arbitration shall be the sole and exclusive means of resolving any such dispute,
that they waive all rights to a civil court action,
9
and that the dispute shall be fully and finally resolved by the arbitrators and
shall not be resolved by a jury or a court.
11. Taxes; Withholdings. All compensation payable by the Company to the
-------------------
Executive under this Agreement which is or may become subject to withholding
under the Code or other pertinent provisions of laws or regulation shall be
reduced for all applicable income and/or employment taxes required to be
withheld.
12. Administration by the Board. The Board, or its Compensation Committee
---------------------------
as determined by the Board, shall be (i) solely responsible for the
interpretation and administration of this Agreement, the Transition Assistance
Loan, Bonus Arrangements and the Stock Loans, and (ii) entitled to modify this
Agreement and the (including, without limitation, performance criteria and
targets) as necessary or appropriate to achieve the purposes and intents of the
same in light of changing or extenuating circumstances. All such actions,
decisions, and modifications regarding this Agreement, the Transition Assistance
Loan, Bonus Arrangements or the Stock Loans made in good faith by the Board, or
by its Compensation Committee, shall be final and binding on Executive.
13. Upon Termination of this Agreement. The Company shall have the right,
----------------------------------
without any notice to the Executive, to offset any amounts payable to the
Company under any of the Stock Loans or Transition Assistance Loan against any
amount payable to the Executive pursuant to this Agreement.
14. Miscellaneous.
-------------
14.1 Written notices required by this Agreement shall be sent to
Company or Executive by certified mail, with a return receipt requested, to
Company's registered address and to Executive's last shown address on Company's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
If to Company: BRE Properties, Inc.
-------------
Forty Four Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxx Xxxxxxx
With Copy to: Xxxxxxx Xxxxx & Xxxxxx LLP
------------
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
10
If to Executive: Xxxxxxx X. Xxxxxx
---------------
000 X. 00/xx/ Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
14.2 This Agreement contains the full and complete understanding of
the parties and supersede all prior representations, promises, agreements, and
warranties, whether oral or written.
14.3 This Agreement shall be governed by and interpreted according to
the laws of the State of California.
14.4 With respect to the Company, this Agreement shall inure to the
benefit of and be binding upon any successors or assigns of Company. With
respect to Executive, this Agreement shall not be assignable but shall inure to
the benefit of estate of Executive or her legal successor upon death or
disability.
14.5 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
14.6 This Agreement can be modified, amended, or any of its terms
waived only by a writing signed by both parties.
14.7 If any provision of this Agreement shall be held invalid,
illegal, or unenforceable, the remaining provisions of the Agreement shall
remain in full force and effect, and the invalid, illegal, or unenforceable
provision shall be limited or eliminated only to the extent necessary to remove
such invalidity, illegality, or unenforceability in accordance with the
applicable law at that time.
14.8 Without limiting the provisions of Section 10, if either party
institutes arbitration proceedings pursuant to Section 10 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs, and
expenses.
14.9 No remedy made available to Company by any of the provisions of
this Agreement is intended to be exclusive of any other remedy. Each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder as well as those remedies existing at law, in equity, by statute, or
otherwise.
11
14.10 Executive represents that the execution of this Agreement by
Executive will not violate any other agreement to which Executive is a party.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
specified in the first paragraph.
COMPANY: BRE PROPERTIES, INC.
By: /s/ XxXxx X. Carlson___________________
Its: Chief Operating Officer_______________
EXECUTIVE: XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
12
