EXHIBIT 10.5
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
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THIS AMENDMENT NO. 1 ("Amendment") to the Employment Agreement by and
between XXXXXXX X. XXXXX (the "Employee") and EQUITY RESIDENTIAL PROPERTIES
MANAGEMENT LIMITED PARTNERSHIP (the "Employer"), is made and entered into as of
November 14, 1997 (the "Effective Date") by and between the Employee and the
Employer;
W I T N E S S E T H T H A T:
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WHEREAS, the parties entered into an Employment Agreement (the "Agreement")
dated as of August 27, 1997 to specify the terms of the Employee's employment
with the Employer;
WHEREAS, the Employer and Employee desire to amend the Agreement under the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below,
IT IS HEREBY AGREED by the Employee and Employer as follows:
1. Excise Tax Payment. Section 6 of the Agreement shall be amended to
include the following language as a new Section 6(g) and inserted following
Section 6(f) of the Agreement:
(g) (1) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined (pursuant to subsection (2) below)
or finally determined (as defined in subsection (3)(iii) below) that any
payment, distribution, transfer, benefit or other event with respect to the
Employer or its predecessors, successors, direct or indirect subsidiaries
or affiliates (or any predecessor, successor of affiliate of any of them,
and including any benefit plan of any of them), to or for the benefit of
Employee or Employee's dependents, heirs or beneficiaries (whether such
payment, distribution, transfer, benefit or other event occurs pursuant to
the terms of this Agreement, any other agreement between the parties or
otherwise, but determined without regard to any additional payments
required under this Section 6(g)) (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, 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 Employee 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 Employer
shall pay to Employee an additional cash payment (hereinafter referred to
as the "Gross-Up Payment") in an amount such that after payment by Employee
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), Employee 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 Employee in the same
position as Employee would have been had no Excise Tax been imposed upon or
incurred as a result of any Payment.
(2) Except as provided in subsection (3) 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 Employee ("Employee'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 the Employee's
Accountant, hereinafter the "Employee's Determination"). The Employee's
Determination shall be reviewed on behalf of the Employer by a certified
public accounting firm selected by the Employer (the "Employer's
Accountant"). The Employer shall notify Employee within 10 business days
after receipt of the Employee's Determination of any disagreement or
dispute therewith, and failure to so notify within that period shall be
considered an agreement by the Employer with the Employee's Determination,
obligating the Employer to make payment as provided in subsection (1) above
within 10 days from the expiration of such 10 business-day period. In the
event of an objection by the Employer to the Employee's Determination, any
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 the Employee's Accountant and the Employer'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 the Employee and the Employer. 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
Employer to make any payment as a result thereof of 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 this Section
6(g)(2) shall be borne solely by the Employer.
(3) (i) Employee shall notify the Employer 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 Employer
of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 30 days after Employee receives written
notice of such claim and shall apprise the Employer of the nature of such
claim and the date on which such claim is requested to be paid; provided,
however, that failure by Employee to give such notice within such 30-day
period shall not result in a waiver or forfeiture of any of Employee's
rights under this Section 5 except to the extent of actual damages suffered
by the Employer as a result of such failure. Employee shall not pay such
claim prior to the expiration of the 15-day period following the date on
which Employee gives such notice to the Employer (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 Employer
notifies Employee 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 Employee its ability to make the payments to Employee which
may ultimately be required under this section before assuming
responsibility for the claim), Employee shall:
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(A) give the Employer any information reasonably requested by the
Employer relating to such claim;
(B) take such action in connection with contesting such claim as
the Employer 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 Employer that is
reasonably acceptable to Employee;
(C) cooperate with the Employer in good faith in order to
effectively contest such claim; and
(D) permit the Employer to participate in any proceedings
relating to such claim; provided, however, that the Employer 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
Employee harmless, on an after-tax basis, for all 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 6, and to the
extent its actions do no unreasonably interfere with or prejudice
Employee's disputes with the Taxing Authority as to other issues, the
Employer 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 Employee to pay the tax, interest or penalties claimed
and xxx for a refund or contest the claim in any permissible manner,
and Employee 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 Employer shall determine;
provided, however, that if the Employer directs Employee to pay such
claim and xxx for a refund, the Employer shall advance an amount equal
to such payment to Employee, on an interest-free basis, and shall
indemnify and hold Employee harmless, 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; and, further, provided, that any extension of the statute of
limitations relating to payment of taxes, interest, penalties or
additions to tax for the taxable year of Employee 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 Employee and the
Employer's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and
Employee shall be entitled to settle or contest, as the case may be,
any other issue.
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(ii) If, after receipt by Employee of an amount advanced by
the Employer pursuant to Section 6(g)(3)(i), Employee receives
any refund with respect to such claim, Employee shall (subject to
the Employer's complying with the requirements of Section 6)
promptly pay to the Employer 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 Employee in
connection with such advance, after giving effect to such
repayment. If, after the receipt by Employee of an amount
advanced by the Employer pursuant to Section 6(g)(3)(i), it is
finally determined that Employee 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.
(iii) For purposes of this Section 6(g), 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 6(g)(3)(i) above if the
Employer has not notified Employee 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 Employee and the Taxing Authority (which agreement
may be executed only in compliance with this Section 6(g), (D)
the receipt by Employee of notice from the Employer that it no
longer seeks to pursue a contest (which notice shall be deemed
received if the Employer does not, within 15 days following
receipt of a written inquiry from Employee, affirmatively
indicate in writing to Employee that the Employer intends to
continue to pursue such contest).
(4) 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 of their accountants shall determine that a Gross-Up
Payment need not be made (or shall make no determination with respect to
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 paragraph (2) above and shall be paid to
Employee as an additional Gross-Up Payment. The Employer shall be entitled
to use procedures similar to those available to Employee in paragraph (2)
to determine the amount of any Overpayment (provided that the Employer
shall bear all costs of the accountants as provided in paragraph (2)). In
the event of a determination that an Overpayment was made,
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any such Overpayment shall be treated for all purposes as a loan to
Employee with interest at the applicable Federal rate provided for in
section 1247(d) of the Code; provided, however, that the amount to be
repaid by Employee to the Employer shall be subject to reduction to the
extent necessary to put Employee in the same after-tax position as if such
Overpayment were never made.
2. Agreement To Exchange Unvested Restricted Shares Of EWR. The Employer
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acknowledges that all of the Employee's 37,494 outstanding restricted shares of
Xxxxx Xxxxxxxxxx Residential, Inc., a Maryland corporation ("EWR Restricted
Shares") shall not become vested as of the Effective Time. Instead, the
Employer's EWR Restricted Shares shall be exchanged for restricted common shares
of beneficial interest, $.01 par value per share, of the Equity Residential
Properties Trust ("EQR Restricted Shares") as of the Effective Time. The number
of EQR Restricted Shares received will equal the number EWR Restricted Shares
exchanged multiplied by .5. Any bonus payable to the Employee for services
performed for EWR or EQR in 1997 shall be paid in the form of EQR Restricted
Shares. All EQR Restricted Shares will be issued under the Equity Residential
Properties Trust Second Amended and Restated 1993 Share Option and Share Award
Plan. The EQR Restricted Shares will vest on December 31, 2000 provided the
Employee remains employed by the Employer as of the vesting date.
3. Continuation of Employment Agreement. Except as explicitly provided
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in this Amendment, the Agreement shall remain in full force and effect in all
respects.
4. Governing Law. This Amendment shall be governed by, and construed in
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accordance with, the laws of the State of Illinois, without regard to Illinois'
conflicts of law provisions.
Dated as of November 14, 1997.
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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