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EXHIBIT 10.39
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT made as of March 16, 1998 by and between PACIFIC GULF
PROPERTIES INC., a Maryland corporation (the "COMPANY"), and ______ (the
"EXECUTIVE").
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "BOARD") recognizes
that the possibility of a Change of Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change of Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of Executive
in the event of a threat or occurrence of a Change of Control and to ensure
Executive's continued dedication and efforts in such event without undue concern
for personal financial and employment security; and
WHEREAS, in order to induce Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change of
Control, the Company desires to enter into this Agreement with Executive to
provide Executive with certain benefits in the event Executive's employment is
terminated as a result of, or in connection with, a Change of Control and to
provide Executive with certain other benefits whether or not Executive's
employment is terminated.
AGREEMENT
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of the date hereof
and shall continue in effect until December 31, 2000; provided, however, that on
December 31, 2000 and on each anniversary thereof, the term of this Agreement
shall automatically be extended for one year unless either the Company or
Executive shall have given written notice to the other prior thereto that the
term of this Agreement shall not be so extended; provided, further, however,
that notwithstanding any such notice by the Company not to extend, the term of
this Agreement shall not expire prior to the expiration of 24 months after the
occurrence of a Change of Control.
2. DEFINITIONS.
2.1. "ACCRUED COMPENSATION" shall mean an amount that shall include
all amounts earned or accrued through the "Termination Date" (as hereinafter
defined) but not paid as of the Termination Date including (i) base salary, (ii)
reimbursement for reasonable and necessary expenses incurred by Executive on
behalf of the Company during the period ending on the Termination Date, (iii)
vacation and sick leave pay (to the extent provided by Company policy or
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applicable law) and (iv) bonuses and incentive compensation (other than the "Pro
Rata Bonus" (as hereinafter defined)).
2.2. "BASE AMOUNT" shall mean the greater of (a) Executive's annual
base salary, plus any auto allowance, at the rate in effect immediately prior to
the Change of Control and (b) Executive's annual base salary, plus any auto
allowance, at the rate in effect on the Termination Date, and shall include all
amounts of Executive's base salary that are deferred under any other agreement
or arrangement with the Company.
2.3. "BONUS AMOUNT" shall mean Executive's annual bonus for the
fiscal year immediately preceding the fiscal year in which a Change of Control
has occurred.
2.4. "CAUSE"
(a) For purposes of this Agreement, except as set forth in
Section 2.4(b) below, a termination of employment is for "CAUSE" if
Executive has been convicted of a felony involving moral turpitude
or the termination is evidenced by a resolution adopted in good
faith by two-thirds of the Board that Executive (i) intentionally
and continually failed substantially to perform his reasonably
assigned duties with the Company (other than a failure resulting
from Executive's death or incapacity due to physical or mental
illness or from Executive's assignment of duties that would
constitute "Good Reason" as hereinafter defined) which failure
continued for a period of at least thirty (30) days after a written
notice of demand for substantial performance has been delivered to
Executive specifying the manner in which Executive has failed
substantially to perform; or (ii) intentionally engaged in conduct
that is demonstrably and materially injurious to the Company;
provided, however, that no termination of Executive's employment
shall be for Cause as set forth in clause (ii) above until (x) there
shall have been delivered to Executive written notice setting forth
that Executive was guilty of the conduct set forth in clause (ii)
and specifying the particulars thereof in detail and (y) Executive
shall have been provided an opportunity to be heard in person by the
Board (with the assistance of Executive's counsel if Executive so
desires). Neither an act nor a failure to act, on Executive's part,
shall be considered "intentional" unless Executive has acted or
failed to act with a lack of good faith and with a lack of
reasonable belief that Executive's action or failure to act was in
the best interest of the Company. Notwithstanding anything contained
in this Agreement to the contrary, no failure to perform by
Executive after a Notice of Termination is given by Executive shall
constitute Cause for purposes of this Agreement.
(b) In the event a written employment agreement is in place
between Executive and the Company, the definition of "Cause" set
forth in such employment agreement shall apply for all purposes of
this Agreement in lieu of the provisions of Section 2.4(a).
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2.5. "CHANGE OF CONTROL" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of
any voting securities (the "VOTING SECURITIES") of the Company by
any "PERSON" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "1934 ACT")), immediately after which such Person has
"BENEFICIAL OWNERSHIP" (within the meaning of Rule 13d-3 promulgated
under the 0000 Xxx) of twenty percent (20%) or more of the combined
voting power of the Company's then outstanding Voting Securities;
provided, however, that in determining whether a Change of Control
has occurred, Voting Securities that are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an
acquisition that would cause a Change of Control. A "NON-CONTROL
ACQUISITION" shall mean an acquisition of Voting Securities of the
Company by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (x) the Company or (y) any corporation or
other Person of which a majority of its voting power or its equity
securities or equity interests is owned directly or indirectly by
the Company (a "SUBSIDIARY"), (ii) the Company or any Subsidiary or
(iii) any Person as a result of a "Non-Control Transaction" (as
hereinafter defined).
(b) The individuals who, as of the date hereof, are members of
the Board (the "INCUMBENT BOARD"), cease for any reason to
constitute at least a majority of the Board; provided, however, that
if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least
two-thirds (2/3) of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board; provided, further,
however, that no individual shall be considered a member of the
Incumbent Board if such individual initially became a director on
the Board as a result of either an actual or threatened "ELECTION
CONTEST" (as described in Rule 14a-11 promulgated under the 0000
Xxx) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "PROXY
CONTEST") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving
the Company, unless, after giving effect to such merger,
consolidation or reorganization, all of the following criteria
are met:
(A) the stockholders of the Company, as
constituted immediately prior to such merger,
consolidation or reorganization, own, directly or
indirectly, immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the
"SURVIVING CORPORATION") in substantially the same
proportion as their ownership of the Voting Securities
of the
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Company immediately prior to such merger, consolidation
or reorganization;
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for such merger, consolidation
or reorganization constitute at least a majority of the
members of the board of directors of the entity whose
Voting Securities are held directly by the former
stockholders of the Company in satisfaction of the
criterion set forth in Section 2(c)(i)(A) above; and
(C) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the
Surviving Corporation or any Subsidiary, or any Person
who, immediately prior to such merger, consolidation or
reorganization, had Beneficial Ownership of fifteen
percent (15%) or more of the then outstanding Voting
Securities of the Company) owns, directly or indirectly,
fifteen percent (15%) or more of the combined voting
power of the Surviving Corporation's then outstanding
Voting Securities.
A merger, consolidation or reorganization meeting all of
the criteria set forth in clauses (A) through (C) of
this Section 2.5(c)(i) is herein referred to as a
"NON-CONTROL TRANSACTION;"
(ii) A complete liquidation or dissolution of the
Company; or
(iii) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because any Person (the "SUBJECT PERSON")
acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of
by the Company of its own Voting Securities which, by reducing the
number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person; provided,
however, that if a Change of Control would occur (but for the
operation of this sentence) as a result of the acquisition by the
Company of its own Voting Securities, and after such share
acquisition by the Company the Subject Person becomes the Beneficial
Owner of any additional Voting Securities of the Company that
increases the percentage of the then outstanding Voting Securities
of the Company Beneficially Owned by the Subject Person, then a
Change of Control shall be deemed to have occurred.
(d) Notwithstanding anything contained in this Agreement to
the contrary, if Executive's employment is terminated prior to a
Change of Control and Executive reasonably demonstrates that such
termination (i) was at the request of a
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third party who has indicated an intention or taken steps reasonably
calculated to effect a Change of Control and who effectuates a Change
of Control (a "THIRD PARTY") or (ii) otherwise occurred in connection
with, or in anticipation of, a Change of Control that actually
occurs, then for all purposes of this Agreement, the date of a Change
of Control with respect to Executive shall mean the date immediately
prior to the date of such termination of Executive's employment.
2.6. "COMPANY" shall mean Pacific Gulf Properties Inc., a Maryland
corporation, and shall also include the Company's "Successors and Assigns" (as
hereinafter defined).
2.7. "DISABILITY"
(a) Except as set forth in Section 2.7(b) below, "DISABILITY"
shall mean a physical or mental infirmity that impairs Executive's
ability to substantially perform his duties with the Company for a
period of 180 consecutive days and Executive has not returned to his
full time employment prior to the Termination Date as stated in the
"Notice of Termination" (as hereinafter defined).
(b) In the event a written employment agreement is in place
between Executive and the Company, the definition of "Disability"
set forth in such employment agreement shall apply for all purposes
of this Agreement in lieu of the provisions of Section 2.7(a).
2.8. "GOOD REASON"
(a) Subject to Section 2.8(b), "GOOD REASON" shall mean the
occurrence after a Change of Control of any of the events or
conditions described in subsections (i) through (viii) hereof:
(i) a change in Executive's status, position or
responsibilities (including reporting responsibilities) that,
in Executive's reasonable judgment, represents a substantial
adverse change from his status, position or responsibilities
as in effect at any time within 90 days preceding the date of
a Change of Control or at any time thereafter; the assignment
to Executive of any duties or responsibilities that, in
Executive's reasonable judgment, are inconsistent with his
status, title, position or responsibilities as in effect at
any time within 90 days preceding the date of a Change of
Control or at any time thereafter; or any removal of Executive
from or failure to reappoint or reelect Executive to any of
such offices or positions held prior to the Change of Control,
except in connection with the termination of Executive's
employment for Disability, Cause, as a result of his death or
by Executive other than for Good Reason;
(ii) a reduction in Executive's base salary or any
failure to pay Executive any compensation or benefits to which
Executive is entitled within five days of notice from
Executive of such non-payment;
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(iii) the Company's requiring Executive to be based at
any place outside a 00-xxxx xxxxxx xxxx Xxxxxxx Xxxxx,
Xxxxxxxxxx, except for reasonably required travel on the
Company's business that is not materially greater than such
travel requirements prior to the Change of Control;
(iv) the failure by the Company to provide Executive
with compensation and benefits, in the aggregate, at least
equal (in terms of benefit levels and/or reward opportunities)
to those provided for under each other employee benefit plan,
program and practice in which Executive was participating at
any time within ninety (90) days preceding the date of a
Change of Control or at any time thereafter;
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the
Company, which petition is not dismissed within sixty (60)
days;
(vi) any material breach by the Company of any provision
of this Agreement;
(vii) any purported termination of Executive's
employment for Cause by the Company which does not comply with
the terms of Section 2.4; or
(viii) the failure of the Company to obtain an
agreement, satisfactory to Executive, from any Successors and
Assigns to assume and agree to perform this Agreement, as
contemplated in Section 7 hereof.
(b) Any event or condition described in Section 2.8(a) that
occurs prior to a Change of Control but that Executive reasonably
demonstrates (i) was at the request of a Third Party, or (ii)
otherwise arose in connection with, or in anticipation of, a Change
of Control that actually occurs, shall constitute Good Reason for
purposes of this Agreement notwithstanding that it occurred prior to
the Change of Control.
(c) Executive's right to terminate his employment pursuant to
this Section 2.8 shall not be affected by his incapacity due to a
Disability.
2.9. "NOTICE OF TERMINATION" shall mean a written notice of
termination, following a Change of Control, from the Company of Executive's
employment, which notice indicates the specific termination provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
2.10. "PRO RATA BONUS" shall mean an amount equal to the Bonus
Amount multiplied by a fraction, the numerator of which is the number of days in
the Company's fiscal year in which Executive's employment terminates through the
Termination Date and the denominator of which is 365.
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2.11. "SUCCESSORS AND ASSIGNS" shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the
Company, whether by operation of law or otherwise, and any affiliate of such
Successors and Assigns.
2.12. "TERMINATION DATE" shall mean (a) in the case of Executive's
death, his date of death, (b) in the case of Good Reason, the last day of his
employment and (c) in all other cases, the date specified in the Notice of
Termination; provided, however, that if Executive's employment is terminated by
the Company due to Disability, the date specified in the Notice of Termination
shall be the 30th day after receipt of the Notice of Termination by Executive,
provided that Executive shall not have returned to the full-time performance of
his duties within 30 days after such receipt.
2.13 "THIRD PARTY" shall have the meaning set forth in Section
2.5(d).
3. TERMINATION OF EMPLOYMENT. If, during the term of this Agreement,
Executive's employment with the Company shall be terminated within twenty-four
months (24) following a Change of Control, Executive shall be entitled to the
following compensation and benefits:
(a) If Executive's employment with the Company shall be terminated
(i) by the Company for Cause or Disability, (ii) by reason of Executive's
death or (iii) by Executive other than for Good Reason, the Company shall
pay to Executive the Accrued Compensation and, if such termination is
other than by the Company for Cause, the Pro Rata Bonus; provided,
however, if an employment agreement is in existence between the Company
and/or any of its affiliates and Executive on the Termination Date, the
Company and/or its affiliates, as the case may be, shall pay to Executive
any amounts owed to Executive pursuant to such employment agreement. Any
such termination of Executive's employment contemplated under this Section
3(a) shall be without prejudice to any and all retirement benefits of
Executive vested as of the Termination Date under all retirement plans of
the Company, and the Company shall honor and pay all such vested benefits
in accordance with the terms of such retirement plans.
(b) If Executive's employment with the Company shall be terminated
for any reason other than as specified in Section 3(a), Executive shall be
entitled to the following:
(i) the Company shall pay Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay Executive as severance pay in a
single payment an amount in cash equal to the product of two
multiplied by the sum of (A) the Base Amount plus (B) the Bonus
Amount;
(iii) for a number of months equal to 24 (the "CONTINUATION
PERIOD"), the Company shall at its expense continue on behalf of
Executive and Executive's dependents and beneficiaries the medical,
dental and hospitalization benefits provided (A) to Executive at any
time during the 90-day period prior to the Change of Control or at
any time thereafter or (B) to other similarly situated executives
who continue in the employ of the Company during the Continuation
Period. The
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coverage and benefits (including deductibles and costs) provided in
this Section 3(b)(iii) during the Continuation Period shall be no
less favorable to Executive and Executive's dependents and
beneficiaries than the most favorable of such coverages and benefits
during any of the periods referred to in clauses (A) and (B) above.
The Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that Executive obtains any
such benefits pursuant to a subsequent employer's benefit plans, in
which case the Company may reduce the coverage of any benefits it is
required to provide Executive hereunder as long as the aggregate
coverages and benefits of the combined benefit plans is no less
favorable to Executive than the coverages and benefits required to be
provided hereunder. This Section 3(b)(iii) shall not be interpreted
so as to limit any benefits to which Executive, Executive's
dependents or beneficiaries may be entitled under any of the
Company's employee benefit plans, programs or practices following
Executive's termination of employment, including without limitation,
retiree medical and life insurance benefits;
(iv) all theretofore unvested stock options, restricted
options, restricted stock and other awards issued to Executive
pursuant to the Company's share option plan and any and all other
stock option or incentive plans shall immediately vest;
(v) all theretofore unvested employer contributions in
Executive's account pursuant to the Company's plan maintained under
Section 401(k) of the Code shall immediately vest, or the Company
shall pay to Executive in cash the financial equivalent thereof on
an after-tax basis; and
(vi) the Company shall honor and pay any and all retirement
benefits of Executive vested as of the Termination Date under all
retirement plans of the Company in accordance with the terms of such
retirement plans.
(c) The amounts provided for in Sections 3(a) and 3(b)(i) and (ii)
shall be paid in a single lump sum cash payment within five (5) days after
Executive's Termination Date (or earlier, if required by applicable law).
(d) Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to Executive in any subsequent
employment except as provided in Section 3(b)(iii).
(e) The severance pay and benefits provided for in this Section 3
shall be reduced by the amount of any other severance or termination pay
to which Executive may be entitled under any agreement with the Company or
any of its affiliates.
(f) Executive's entitlement to any other compensation or benefits or
any indemnification shall be determined in accordance with the Company's
employee benefit plans and other applicable programs, policies and
practices or any indemnification agreement then in effect.
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4. NOTICE OF TERMINATION. Following a Change of Control, any purported
termination of Executive's employment by the Company shall be communicated by
Notice of Termination to Executive. For purposes of this Agreement, no such
purported termination shall be effective without such Notice of Termination.
5. EXCISE TAX GROSS-UP.
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined (pursuant to Section 5(b) below)
or finally determined (as defined in Section 5(c)(iii) below) that any
payment, distribution, transfer, benefit or other event with respect to
the Company or its predecessors, successors, direct or indirect
subsidiaries or affiliates (or any predecessor, successor or affiliate of
any of them, and including any benefit plan of any of them), to or for the
benefit of Executive or Executive's dependents, heirs or beneficiaries
(whether such payment, distribution, transfer, benefit or other event
occurs pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 5) (each a "PAYMENT" and collectively the "PAYMENTS") is or was
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "CODE"), and any successor provision or any
comparable provision of state or local income tax law (collectively,
"SECTION 4999"), or any interest, penalty or addition to tax is or was
incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest, penalty or addition to tax, hereinafter
collectively referred to as the "EXCISE TAX"), then, within 10 days after
such determination or final determination, as the case may be, the Company
shall pay to Executive an additional cash payment (hereinafter referred to
as the "GROSS-UP PAYMENT") in an amount such that after payment by
Executive of all taxes, interest, penalties and additions to tax imposed
with respect to the Gross-Up Payment (including, without limitation, any
income and excise taxes imposed upon the Gross-Up Payment), Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon such Payment or Payments. This provision is intended to put Executive
in the same position as Executive would have been had no Excise Tax been
imposed upon or incurred as a result of any Payment.
(b) Except as provided in Section 5(c) below, the determination that
a Payment is subject to an Excise Tax shall be made in writing by a
certified public accounting firm selected by Executive ("EXECUTIVE'S
ACCOUNTANT"). Such determination shall include the amount of the Gross-Up
Payment and detailed computations thereof, including any assumptions used
in such computations (the written determination of Executive's Accountant,
hereinafter, the "EXECUTIVE'S DETERMINATION"). Executive's Determination
shall be reviewed on behalf of the Company by a certified public
accounting firm selected by the Company (the "COMPANY'S ACCOUNTANT"). The
Company shall notify Executive within 10 business days after receipt of
Executive's Determination of any disagreement or dispute therewith, and
failure to so notify within that period shall be considered an agreement
by the Company with Executive's Determination, and any agreement by the
Company with Executive's Determination shall obligate the Company to make
payment as provided in Section 5(a) above within 10 days from the
expiration of such 10 business-day period. In the event of an objection by
the Company to Executive's Determination, any
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amount not in dispute shall be paid within 10 days following the 10
business-day period referred to herein, and with respect to the amount in
dispute Executive's Accountant and the Company's Accountant shall jointly
select a third nationally recognized certified public accounting firm to
resolve the dispute and the decision of such third firm shall be final,
binding and conclusive upon Executive and the Company. In such a case, the
third accounting firm's findings shall be deemed the binding determination
with respect to the amount in dispute, obligating the Company to make any
payment as a result thereof within 10 days following the receipt of such
third accounting firm's determination. All fees and expenses of each of
the accounting firms referred to in this Section 5 shall be borne solely
by the Company.
(c) (i) Executive shall notify the Company in writing of any claim
by the Internal Revenue Service (or any successor thereof) or any state or
local taxing authority (individually or collectively, the "TAXING
AUTHORITY") that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 30 days after Executive receives written
notice 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; provided,
however, that failure by Executive to give such notice within such 30-day
period shall not result in a waiver or forfeiture of any of Executive's
rights under this Section 5 except to the extent of actual damages
suffered by the Company as a result of such failure. Executive shall not
pay such claim prior to the expiration of the 15-day period following the
date on which Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes, interest, penalties
or additions to tax with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such 15-day
period that it desires to contest such claim (and demonstrates to the
reasonable satisfaction of Executive its ability to make the payments to
Executive that may ultimately be required under this section before
assuming responsibility for the claim), 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
selected by the Company that is reasonably acceptable to
Executive;
(C) cooperate with the Company in good faith in order
effectively to 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 attorneys fees, costs and
expenses (including additional interest, penalties and
additions to tax) incurred in connection with such contest and
shall indemnify and hold harmless Executive, on an after-tax
basis, for all
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taxes (including, without limitation, income and excise
taxes), interest, penalties and additions to tax imposed in
relation to such claim and in relation to the payment of such
costs and expenses or indemnification. Without limitation on
the foregoing provisions of this Section 5, and to the extent
its actions do not unreasonably interfere with or prejudice
Executive's disputes with the Taxing Authority as to other
issues, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego 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 Executive to pay the tax, interest or
penalties claimed and xxx for a refund or contest the claim in
any permissible manner, and 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 Executive to pay such
claim and xxx for a refund, the Company shall advance an
amount equal to such payment to Executive, on an interest-free
basis, and shall indemnify and hold harmless Executive, on an
after-tax basis, from all taxes (including, without
limitation, income and excise taxes), interest, penalties and
additions to tax 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, interest, penalties
or additions to tax for the taxable year of Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount; and, provided,
further, that any settlement of any claim shall be reasonably
acceptable to Executive and 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 Executive
shall be entitled to settle or contest, as the case may be,
any other issue.
(ii) If, after receipt by Executive of an amount advanced by
the Company pursuant to Section 5(c)(i), Executive receives any
refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section 5) promptly pay
to the Company an amount equal to such refund (together with any
interest paid or credited thereon after taxes applicable thereto),
net of any taxes (including without limitation any income or excise
taxes), interest, penalties or additions to tax and any other costs
incurred by Executive in connection with such advance, after giving
effect to such repayment. If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 5(c)(i), it is
finally determined that Executive is not entitled to any refund with
respect to such claim, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall be
treated as a Gross-Up Payment and shall offset, to the extent
thereof, the amount of any Gross-Up Payment otherwise required to be
paid.
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(iii) For purposes of this Section 5, whether the Excise Tax
is applicable to a Payment shall be deemed to be "finally
determined" upon the earliest of: (A) the expiration of the 15-day
period referred to in Section 5(c)(i) above if the Company has not
notified Executive that it intends to contest the underlying claim,
(B) the expiration of any period following which no right of appeal
exists, (C) the date upon which a closing agreement or similar
agreement with respect to the claim is executed by Executive and the
Taxing Authority (which agreement may be executed only in compliance
with this Section 5), (D) the receipt by Executive of notice from
the Company that it no longer seeks to pursue a contest (which
notice shall be deemed received if the Company does not, within 15
days following receipt of a written inquiry from Executive,
affirmatively indicate in writing to Executive that the Company
intends to continue to pursue such contest).
(d) As a result of uncertainty in the application of Section 4999
that may exist at the time of any determination that a Gross-Up Payment is
due, it may be possible that in making the calculations required to be
made hereunder, the parties or their accountants shall determine that a
Gross-Up Payment need not be made (or shall make no determination with
respect to a Gross-Up Payment) that properly should be made
("UNDERPAYMENT"), or that a Gross-Up Payment not properly needed to be
made should be made ("OVERPAYMENT"). The determination of any Underpayment
shall be made using the procedures set forth in Section 5(b) above and
shall be paid to Executive as an additional Gross-Up Payment. The Company
shall be entitled to use procedures similar to those available to
Executive in Section 5(b) to determine the amount of any Overpayment
(provided that the Company shall bear all costs of the accountants as
provided in Section 5(b)). In the event of a determination that an
Overpayment was made, any such Overpayment shall be treated for all
purposes as a loan to Executive with interest at the applicable Federal
rate provided for in Section 1274(d) of the Code; provided, however, that
the amount to be repaid by Executive to the Company shall be subject to
reduction to the extent necessary to put Executive in the same after-tax
position as if such Overpayment were never made.
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the Company, its Successors and Assigns, and the
Company shall require any Successors and Assigns to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's legal
personal representative.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
Executive as they become due as a result of (a) Executive seeking to obtain or
enforce any right or benefit provided by this Agreement (including, but not
limited to, any such fees and expenses incurred in connection with a dispute
hereunder) and (b) Executive's hearing before the Board as contemplated in
Section 2.4 of this Agreement; provided, however, that the circumstances set
forth in clause (a) (other than as a
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result of Executive's termination of employment under circumstances described in
Section 2.5(d)) occurred on or after a Change of Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, by overnight courier or by facsimile, addressed to the
respective addresses and facsimile numbers last given by each party to the
other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
Executive may qualify, nor shall anything herein limit or reduce such rights as
Executive may have under any other agreements with the Company (except for any
severance or termination agreement). Amounts that are vested benefits or that
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
10. NO GUARANTEED EMPLOYMENT. Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
Executive and the Company, the employment of Executive by the Company is "at
will" and may be terminated by either Executive or the Company at any time.
11. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right that
the Company may have against Executive or others.
12. MUTUAL NON-DISPARAGEMENT. The Company, its affiliates and subsidiaries
agree and the Company shall use its best efforts to cause their respective
executive officers and directors to agree, that they will not make or publish
any statement critical of Executive, or in any way adversely affecting or
otherwise maligning Executive's reputation. Executive agrees that Executive will
not make or publish any statement critical of the Company, its affiliates and
their respective executive officers and directors, or in any way adversely
affecting or otherwise maligning the business or reputation of any member of the
Company, its affiliates and subsidiaries and their respective officers,
directors and employees.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or
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otherwise, express or implied, with respect to the subject matter hereof have
been made by either party that are not expressly set forth in this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Orange County in the State of California.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. ENTIRE AGREEMENT; CONSTRUCTION. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof. Neither party hereto nor its
respective counsel shall be deemed the drafter of this Agreement, and this
Agreement shall be construed in accordance with its fair meaning and not
strictly for or against either party.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and Executive has executed this Agreement as of
the day and year first above written.
THE COMPANY
PACIFIC GULF PROPERTIES INC.
By:
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Xxxxx X. Xxxxxxxxx
Chief Executive Officer
EXECUTIVE
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