EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as of
June 5, 1995 by and between BRE PROPERTIES, INC., a Delaware corporation (the
"COMPANY"), and XXXXX XXXXXXXX (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 June 5, 1995 to June 5,
2000, unless earlier terminated pursuant to Section 7 (the "TERM"). Executive
shall commence the rendering of personal services under this Agreement on June
22, 1995 (the "START DATE").
2. DUTIES. Executive shall be employed by the Company as its President
and Chief Executive Officer. Executive shall be under the direction and
supervision of the Company's Board of Directors (the "BOARD"). Executive shall
devote his full business time and best efforts to the Company, with his powers
and duties to be determined by the Board. Executive shall not, except for
incidental management of his personal financial affairs, engage in any other
business, nor shall he serve in any position with any other corporation or
entity, without the prior written consent of the Board. Effective as of the
Start Date, Executive shall be elected to the Board, and the Company agrees to
nominate Executive for election to the Board as a member of the management slate
at each annual meeting of stockholders during his employment hereunder.
3. COMPENSATION. During the Term, Executive shall be entitled to receive
compensation in accordance with this Section 3.
3.1 BASE SALARY. Commencing on the Start Date, Executive shall
receive an annual base salary ("BASE SALARY") of $300,000. The Board, in its
discretion, may increase the Base Salary based on relevant 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 INCENTIVE BONUS . Executive shall be eligible to receive
an annual incentive bonus (the "ANNUAL BONUS") of up to 100% of Base Salary for
each fiscal year of the Company during the Term (except that the initial Annual
Bonus shall be
computed for the period commencing on the Start Date and ending on July 31, 1996
with reference to the Base Salary paid during that period). The amount of the
Annual Bonus shall be based on the achievement of predefined operating or
performance criteria established by the Board (the "ANNUAL CRITERIA"), with
emphasis on Funds from Operations ("FFO") and other operating measures deemed
appropriate by the Board. 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 50% of Base Salary (in the event of
achievement of the Annual Criteria), to between 50% and 100% 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 ONE-TIME RESTRICTED STOCK AWARD. Pursuant to the Company's 1992
Employee Stock Plan (the "1992 PLAN"), the Company shall, on the date of this
Agreement, award Executive that number of shares of the Company's common stock
(the "COMMON STOCK") having an aggregate Market Value (as defined below) on the
first trading day preceding the date of this Agreement equal to $125,000. All
of such shares shall constitute "Restricted Shares" (as that term is defined in
the 1992 Plan) and shall be pursuant to a customary "Award Agreement" (as
defined under the 1992 Plan) providing for, among other things, restrictions
upon transfer, escrow, events of forfeiture and vesting. All of such shares
shall vest in accordance with the Award Agreement on the third anniversary of
the Start Date. As used herein, the term "MARKET VALUE" means the closing price
per share of the Common Stock on the New York Stock Exchange.
3.4 LONG-TERM INCENTIVE AWARDS. Executive shall also be entitled to
receive long-term incentive awards issued by the Company and approved by the
Board in accordance with the provisions of Section 6.
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 executive employees, including, without
limitation, automobile allowances, and profit sharing and insurance plans.
Executive shall be entitled to two weeks vacation during the 1995 calendar year
and four weeks vacation for each calendar year thereafter.
5. EXPENSES. The Company shall pay or reimburse Executive for all
reasonable travel and other expenses incurred by Executive in performing his
duties under this Agreement in accordance with Company policy. In addition,
Executive shall be reimbursed by the Company (upon presentation of appropriate
documentation) 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 temporary housing for a period of up to six months. In addition, Executive
shall be reimbursed for storage of personal property in Dallas (including
loading
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and unloading dock costs) for up to one year from the date such storage began.
The total reimbursed relocation expenses shall not exceed $50,000.
6. LONG-TERM INCENTIVE AWARDS.
6.1 INITIAL LONG-TERM INCENTIVE AWARDS.
(a) On the date of this Agreement, pursuant to the 1992 Plan,
the Company shall (i) grant Executive an immediately exercisable non-qualified
option to purchase 20,000 shares of Common Stock at an exercise price equal to
the Market Value on the date of this Agreement and (ii) make a full recourse,
five-year loan to Executive in an amount equal to the aggregate exercise price
for such stock option (the "LOAN"). The Loan shall be made pursuant to a loan
agreement between Company and Executive in the form of EXHIBIT A to this
Agreement (the "LOAN AGREEMENT"), 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
Agreement.
(b) On the date of this Agreement, Executive shall also receive
non-qualified stock options to purchase 50,000 shares of Common Stock (the
"OPTIONS") at the Market Value on the date of this Agreement. The Options shall
be evidenced by a stock option agreement containing the terms and provisions of
such Options (including, without limitation, term and termination provisions)
together with such other terms and conditions as the Company may reasonable
require to assure compliance with applicable law and stock exchange
requirements. One third of such Options (i.e., 16,667) shall vest and be fully
exercisable on each of the third, fourth, and fifth anniversaries of the Start
Date. All such unexercised Options shall, however, automatically terminate on
the close of business on the thirtieth day following the fifth anniversary of
the Start Date, provided that the Market Value of the Common Stock has not
exceeded $39.00 for ten consecutive trading days during the five-year period (as
adjusted for any stock split or share dividend). Notwithstanding the foregoing,
the Board, acting in its sole discretion, may modify the terms and conditions of
the Options, but not the economic substance, if necessary or appropriate to
achieve desired accounting treatment.
6.2 FUTURE LONG-TERM INCENTIVE AWARDS. Beginning with the fiscal
year commencing on August 1, 1996, and continuing with each subsequent fiscal
year during the Term, Executive shall be entitled to receive additional long-
term incentive awards under a Management Incentive Compensation Plan ("MICP") to
be approved by the Board. It is contemplated that awards under the MICP 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, or any other form of long-term compensation, as
determined by the Board. However, regardless of form, it is contemplated that
the annual awards to Executive under the MICP will provide Executive with the
opportunity to receive, assuming achievement of all applicable performance
goals, the financial equivalent of (i) a forgivable performance-
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based five-year loan to purchase 5,000 shares of Common Stock (with interest
payable quarterly), and (ii) performance options to purchase 25,000 shares of
Common Stock at Market Value on the date of award.
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 his employment by the Company, then, in
any such event, his employment under this Agreement shall automatically
terminate on the date of death, upon any Disability, or the date of voluntary
termination, as the case may be. As used herein, the term "DISABILITY" shall
mean the inability of Executive to perform his duties because of physical or
mental illness or incapacity as determined by the Board.
7.2 TERMINATION BY THE COMPANY FOR GOOD CAUSE. 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 his duties hereunder, (ii) the failure
or refusal of Executive to perform the duties or to render the services assigned
to him from time to time by 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. 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
(including any benefits under the MICP); except that if termination pursuant to
Section 7.1 is due to death or Disability, Executive or his 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 Annual Criteria for the fiscal year and Executive's
contribution up to the date of death or Disability),
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calculated on a pro-rated basis to the date of termination. In the case of any
termination of employment pursuant to Sections 7.1 or 7.2, the outstanding
balance of the Loan, and all accrued interest, shall be due and payable in full
15 days following the termination date; provided, however, that in the case of
termination based upon death or Disability, the outstanding balance on the Loan
shall be reduced by such amount 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 6.1, 6.2, and 6.3 of the Loan Agreement 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 Loan Agreement do not provide for such pro rata
application.
(b) In the event of termination of Executive's employment
pursuant to Section 7.3 within one year from the date of this Agreement, 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 1.5 times his then Base Salary, (ii) all
restrictions (other than applicable federal and state securities law) on the
shares of Common Stock awarded to Employee under Section 3.3 would be eliminated
and such shares would fully vest in Executive, and (iii) the balance due under
the Loan Agreement shall be reduced to an amount equal to the product of 20,000
(or such number that reflects stock splits or dividends) times the Market Value
on the date of termination, with the balance of the Loan, and all accrued
interest, due and payable immediately.
(c) In the event of termination of Executive's employment
pursuant to Section 7.3 after one year from the date of this Agreement, 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 his then Base Salary plus an amount equal to
the average of his Annual Bonus, if any, over the most recent two years (or the
previous Annual Bonus if only one Annual Bonus period has passed), (ii) all
restrictions (other than applicable federal and state securities laws) on the
shares of Common Stock awarded to Employee under Section 3.3 would be eliminated
and such shares would fully vest in Executive, and (iii) the amount payable
under the Loan Agreement shall be reduced by the Pro Rata Calculation, with the
balance of the Loan, and all accrued interest, due and payable immediately.
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.
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(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), Executive shall be entitled to receive a lump-sum
payment from the Company equal to his then Base Salary plus an amount equal to
the average of his Annual Bonus, if any, over the most recent two years (or
previous Annual Bonus if only one Annual Bonus period has passed). As used
herein, the term "GOOD REASON" means (i) a material change in Executive's
duties, responsibilities, or 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. The outstanding balance of the Loan, and all
accrued interest, shall be due and payable in full on termination.
(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, 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 two
times his then Base Salary plus an amount equal to two times the average of his
Annual Bonus, if any, over the most recent two years (or previous Annual Bonus
if only one Annual Bonus period has passed), (ii) all restrictions (except
applicable federal and state securities law) on the shares of Common Stock
awarded to Employee under Section 3.3 would be eliminated and such shares would
fully vest in Executive, (iii) all 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, and
(iv) the amount payable under the Loan Agreement shall be reduced by the Pro
Rata Calculation, and the balance of the Loan, and all accrued interest, shall
be due and payable immediately. In addition, the Executive shall receive within
90 days after such termination, a lump-sum payment equal to the estimated Annual
Bonus that Executive would have earned for the fiscal year in question (based on
actual performance relative to Annual Criteria for the fiscal year and
Executive's contribution up to the date of termination), calculated on a pro-
rated basis to the date of termination.
(d) As used herein, a "CHANGE IN CONTROL" shall be deemed to
have occurred when any of the following events occur:
(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
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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, 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 property of the Company for its own exclusive
use and benefit, and Executive agrees that he will hold all of the Company's
Proprietary Information in strictest confidence and will not at any time, either
during or after his employment by the Company, use or permit the use of the same
for his 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.
10. ARBITRATION. If a dispute arises between Company and Executive
concerning this Agreement, the disputed matter shall be submitted to
arbitration in the City of San Francisco, California in accordance with the
commercial 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
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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.
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 and the Loan Agreement, and
(ii) entitled to modify this Agreement and the Loan Agreement (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 or Loan Agreement 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 the Loan Agreement 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.
One Xxxxxxxxxx Street, Suite 0000
Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
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WITH COPY TO:
Xxxxxxx, Xxxxx & Xxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
IF TO EXECUTIVE
Xxxxx XxXxxxxx
BRE Properties, Inc.
One Xxxxxxxxxx Street, Suite 2500
Telesis Tower
Xxx Xxxxxxxxx, XX 00000
14.2 This Agreement and the Loan Agreement contain 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 his 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
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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.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
specified in the first paragraph.
COMPANY: BRE PROPERTIES, INC.
By: /s/ L. Xxxxxxx Xxxxx
----------------------------------
L. XXXXXXX XXXXX
Its:
---------------------------------
EXECUTIVE: Xxxxx XxXxxxxx
/s/ Xxxxx X. XxXxxxxx
---------------------------------
XXXXX X. XXXXXXXX
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EXHIBIT A
LOAN AGREEMENT
This Loan and Stock Pledge Agreement (the "LOAN AGREEMENT") is made as of June
5, 1995, by and between BRE PROPERTIES, INC. (the "COMPANY") and XXXXX XXXXXXXX
(the "EXECUTIVE").
BACKGROUND
WHEREAS, Company and Executive have entered into an employment agreement as of
even date as this Loan Agreement (the "EMPLOYMENT AGREEMENT"); and
WHEREAS, in connection with the Employment Agreement, Company and Executive
desire Company to make a personal loan to Executive subject to the terms and
conditions of this Loan Agreement.
NOW, THEREFORE, in consideration of the covenants, duties, terms, and conditions
set forth in this Loan Agreement, the parties agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used but not defined in this Loan
Agreement shall have the meanings given them in the Employment Agreement
2. LOAN. Subject to the terms and conditions stated in this Loan Agreement,
Company hereby makes a Loan to Executive in the amount of $612,500.
3. USE OF PROCEEDS. Executive agrees to use all of the proceeds from the Loan
to exercise his option to purchase, from the Company, 20,000 shares of Common
Stock granted pursuant to Section 6.1(a) of the Employment Agreement (the
"SHARES").
4. INTEREST. The outstanding principal amount of the Loan shall bear interest
at a rate of 8.25% per annum from the date hereof to the date of payment,
compounded annually.
5. PAYMENT. The outstanding principal balance of the Loan, and all interest
accrued thereon (such principal and interest, the "PAYMENT AMOUNT"), shall be
due and payable in full on June 5, 2000 (the "MATURITY DATE"), subject to (i)
acceleration of payment under the circumstances described in the Employment
Agreement, (ii) the reductions provided under
Section 6 of this Loan Agreement and, as applicable, the Employment Agreement,
and (iii) the time periods required for calculating the performance-based
provisions of this Loan Agreement and the Employment Agreement (in the case of
such time periods, interest shall continue to accrue).
6. REDUCTION OF LOAN. Effective on the Maturity Date, the Payment Amount
shall be reduced to the extent provided by the following formulae:
6.1 ASSET GROWTH. Up to 20% of the Payment Amount may be reduced based on
the gross book value of the Company's equity investments in real estate,
investments in limited partnerships, and mortgages (the "ASSETS") as follows:
At the Maturity Date, the Payment Amount shall be reduced by 20% if the Assets
as of April 30, 2000 have a gross book value of $937 million or more. If the
Assets on such date have a gross book value of $791 million or less, there will
be no reduction of Payment Amount under this Subsection 6.1. If the Assets on
such date have a gross book value of between $791 million and $937 million, the
reduction shall be prorated on a scale between 0% and 20%. For example, if the
Assets are $820 million at the Maturity Date, the reduction shall be 4% of the
Payment Amount.
6.2. FUNDS FROM OPERATIONS. Up to 50% of the Payment Amount may be
reduced based on an increase in FFO per share of Common Stock. On the second
anniversary date of the Loan (although such reduction is only effective at the
Maturity Date), the growth in FFO per share of Common Stock between the twelve-
month period ending April 30, 1995 and the twelve-month period ending April 30,
1997 shall be compared against the growth in FFO per share of common stock of
the ten largest publicly-traded multi-family REITs as designated by the Company
based on total assets (the "INDEXED REITS"). Such comparison shall be made to
the extent reasonably practicable based on the most recent financial information
made available to the public by the Indexed REITs. If the increase in FFO per
share of Common Stock is equal to or less than the 50th percentile of the
Indexed REITs, there will be no reduction in Payment Amount (together with a
proportionate amount of accrued interest); if the increase is at or above the
80th percentile of the Indexed REITs, there will be a 20% reduction in Payment
Amount on the Maturity Date; if the increase is between 50% and 80%, the
reduction in Payment Amount shall be computed on a pro-rated basis between 0%
and 20%. For example, if the increase is 62%, the reduction shall be 8% of the
Payment Amount.
On the Maturity Date, the growth in FFO per share of Common Stock over the
three-year period ending April 30, 2000 shall be compared against the growth in
FFO per share of common stock of the ten Indexed REITs designated by the Company
for the most reasonably comparable three-year period (ending no later than April
30, 2000), respectively, of such Indexed REITs. Such comparison shall be made
to the extent reasonably practicable based on the most recent financial
information made available to the public by the Indexed REITs. In this case,
however, up to 30% of Payment Amount may be reduced on the Maturity Date if the
80th percentile performance is met, with the reduction to be pro-rated down to
0% if the performance is at or below the 50th percentile.
6.3 CALENDAR YEAR-END SHARE PRICE MULTIPLE. Up to 30% of the Payment
Amount may be reduced based on the FFO MULTIPLE (as used herein, "FFO MULTIPLE"
shall mean Market Value as of the last trading date of the calendar year divided
by its FFO per share for the preceding twelve-month period). Following the
Maturity Date, the Company shall compute the simple numerical average of the FFO
Multiples as of December 31 of each of the preceding five years (each such
multiple being based on the preceding twelve months' FFO) (the "AVERAGE
MULTIPLE"). The Average Multiple will then be compared against the Average
Multiple of the ten Indexed REITs designated by the Company for such five-year
period. If the Average Multiple for the Company is at or below the 50th
percentile of the Indexed REITs, there will be no reduction in Payment Amount;
if the Average Multiple is at or above the 80th percentile, there will be a 30%
reduction in Payment Amount; if the increase is between 50th and 80th
percentile, the reduction in Payment Amount will be computed on a pro-rated
basis between 0% and 30%. For example, if the increase is at the 72nd
percentile, the reduction shall be 22% of the Payment Amount.
7. PLEDGE OF STOCK.
7.1 PLEDGED SHARES. Executive's obligations under this Loan Agreement are
secured by the Shares, and Executive hereby grants the Company a security
interest in the Shares, and in any other shares of Company's Common Stock (or
any warrants, rights, options or other securities) to which Executive may
hereafter be or become entitled as a result of his ownership of the Shares
(together with the Shares, the "PLEDGED SHARES"). The foregoing security
interest shall constitute a first priority interest to secure the payment of the
Payment Amount as such amount is reduced by Section 6 hereof and, as applicable,
the Employment Agreement. Upon issuance of the Shares, all certificates
representing the Shares shall be fully endorsed in blank by the Executive and
delivered by the Executive to the Company.
7.2 RIGHTS OF COMPANY AS SECURED PARTY. Company shall have all rights and
remedies set forth in this Loan Agreement and all other rights of a secured
party at law or in equity.
7.3 RIGHTS REGARDING PLEDGED SHARES. Company has the right to deliver any
or all of the Pledged Shares to any person, to have any or all of the Pledged
Shares registered in its name or in the name of any other person, and Executive
irrevocably appoints the Company its attorney-in-fact authorized at any time
during the term of this Loan Agreement to take any actions or exercise any
rights available to the Company under this Loan Agreement.
7.4 DIVIDENDS. Unless there is a default under this Loan Agreement, the
Executive shall be entitled to receive and retain dividends and other amounts
payable to the Executive as a result of its record ownership of the Pledged
Shares. Upon a default, the Company is entitled to all dividends and other
amounts that are paid after the default (whether or not declared prior to the
default), which Company shall apply towards the payment of principal and
interest on the Loan.
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7.5 VOTING RIGHTS. Unless there is a default under this Loan Agreement,
Executive shall have the right to vote the Pledged Shares.
7.6 EXECUTIVE'S REPRESENTATIONS REGARDING SHARES. The Executive
represents that, as of the date of this Loan Agreement, the Pledged Shares are
owned by the Executive, and Executive has not taken any action that would result
in the Pledged Shares being subject to any adverse claims, liens, or
encumbrances (other than the pledge under this Loan Agreement), and, to his
knowledge, there are no adverse claims, liens, or encumbrances on the Pledged
Shares as of the date of this Loan Agreement.
7.7 RELEASE OF SECURITY. Upon full payment of the Loan pursuant to the
terms of this Loan Agreement, Company shall deliver the certificates
representing the Pledged Shares to Executive.
7.8 REMEDIES RELATED TO COLLATERAL. Upon an Event of Default, Company
may, in its sole discretion and with or without further notice to Executive (in
addition to all rights or remedies available at law or equity or otherwise):
(i) register the Pledged Shares in the name of the Company or in any such name
as the Company may decide, (ii) exercise the Company's proxy or other voting
rights with respect to the Pledged Shares (and Executive agrees to deliver
promptly further evidence of the grant of such proxy in any form requested), and
(iii) exercise any rights provided to a secured party under the applicable
Commercial Code.
8. RECOURSE LOAN. The parties agree that the Loan is a recourse loan, and
Executive shall be personally liable for all amounts payable to the Company
under this Loan Agreement notwithstanding the Company's security interest in the
Pledged Shares.
9. EVENT OF DEFAULT. It shall be an event of default (an "EVENT OF DEFAULT")
if Executive fails to pay the Company pursuant to Section 5.
10. CERTAIN ACCOUNTING PRINCIPLES. All computations under this Loan Agreement
shall be made in accordance with generally accepted accounting principles as
such principles are applied in the Company's financial statements. With respect
to all computations hereunder based on FFO, the parties acknowledge that the
REIT industry, from time to time, adopts alternative measures designed to
reflect operating performance. The parties agree that, if such measures are
adopted by the Board for the Company's reporting purposes, such new measures
shall be substituted for FFO in this Loan Agreement to the extent practicable.
11. MISCELLANEOUS.
11.1 Any notice or other communication required or permitted hereunder
shall be in writing and be governed by the notice provisions of the Employment
Agreement.
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11.2 This Loan Agreement and the Employment Agreement contain the full and
complete understanding of the parties and supersede all prior representations,
promises, agreements, and warranties, whether oral or written.
11.3 This Loan Agreement shall be governed by and interpreted according to
the laws of the State of California.
11.4 With respect to Company, this Loan Agreement shall inure to the
benefit of and be binding upon any successors or assigns of Company. With
respect to Executive, this Loan Agreement shall not be assignable but shall
inure to the benefit of estate of Executive or his legal successor upon death or
disability.
11.5 The captions of the various sections of this Loan Agreement are
inserted only for convenience and shall not be considered in construing this
Loan Agreement.
11.6 This Loan Agreement can be modified, amended, or any of its terms
waived only by a writing signed by both parties.
11.7 If any provision of this Loan Agreement shall be held invalid,
illegal, or unenforceable, the remaining provisions of the Loan 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.
11.8 This Loan Agreement shall be governed by the arbitration provisions
of the Employment Agreement, including the provision relating to recovery of
reasonable attorneys' fees, costs, and expenses.
11.9 No remedy made available to Company by any of the provisions of this
Loan 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.
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IN WITNESS WHEREOF, this Loan Agreement has been executed as of the date
specified in the first paragraph.
COMPANY: BRE PROPERTIES, INC.
By: /s/ L. Xxxxxxx Xxxxx
---------------------------------
L. XXXXXXX XXXXX
Its:
EXECUTIVE: Xxxxx XxXxxxxx
/s/ Xxxxx X. XxXxxxxx
-----------------------------------
XXXXX X. XXXXXXXX
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EXHIBIT B
PRO RATA CALCULATION EXAMPLE
Termination prior to the five-year term of the Loan where Executive is eligible
for Pro Rata Loan Forgiveness:
Assumptions:
1. Agreement Date: June 15, 1995
2. Termination Date: August 5, 1998 (after 37 full months).
3. Performance:
Gross Book Value of Assets - $617 million (on April 30, 1998, the last
fiscal quarter ended 45 days or more prior to the termination date) or
18% compound annual growth from the $376.776 million starting point on
April 30, 1995 used in establishing the $791 million threshold (16%
compound annual growth), and the $937 million target (20% compound
annual growth).
FFO Growth over the first two years of 22% (between April 30, 1995 and
April 30, 1997), which is equal to the 70th percentile of the Indexed
REITs for a similar period, and of 12% in the third year (between
April 30, 1997 and April 30, 1998, the last fiscal quarter ended 45
days or more prior to the termination date), which is equal to the
90th percentile of the Indexed REITs for a similar period.
FFO Multiples for the prior year ends:
12/31/95 - 11.5 (Market Value/Prl2moFFO)
12/31/96 - 12.7
12/31/97 - 10.8
Average - 11.7 or equal to the 60th percentile of the Indexed
REITs for a similar period.
4. Calculation.
a) Pro Rata means that the executive is eligible for a maximum
forgiveness based on the number of full months worked, in this case 37
months or 61.67% of the five-year term of the Loan.
Calculating the Asset Growth component pursuant to Section 6.1,
which provides the potential for 20% forgiveness if the compound
annual asset growth meets or exceeds 20%, the Executive would be
eligible for a
maximum of 12.33% (61.67% of 20%) forgiveness upon meeting or
exceeding the 20% targeted growth.
Calculating the Funds from Operation component pursuant to
Section 6.2, which provides the potential for 50% forgiveness if
FFO growth meets or exceeds the 80th percentile of the Indexed
REITs, the executive would be eligible for up to 20% forgiveness
for the first two years, and an additional 10.83% maximum
potential forgiveness for the last 13 months (13/36 x 30%).
Calculating the Share Price Multiple pursuant to Section 6.3,
which provides the potential for 30% forgiveness if the average
share price multiple meets or exceeds the 80th percentile of the
Indexed REITs, the Executive would be eligible for a maximum
18.50% forgiveness (61.67% of 30%) if the target is achieved.
b) Asset Growth Calculation: 18% achieved growth represents 50% of
the difference between the 16% threshold and the 20% target.
Consequently, the Executive would earn 6.17% forgiveness (0.50 x
12.33%) for this component.
c) Funds from Operation Growth Calculation: The achieved FFO growth
equal to the 70th percentile of the Indexed REITs during the first two
years represents 66.67% of the difference between the 50th percentile
threshold and the 80th percentile target. Consequently, the Executive
would earn 13.33% forgiveness (0.6667 x 20%) for the first two-year
component.
The achieved FFO growth equal to the 90th percentile in the April 30,
1997 to April 30, 1998 period represents 100% performance since it
exceeds the 80th percentile target. Consequently, the Executive would
earn 10.83% forgiveness (1.0000 x 10.83%) for the first 13 months of
the period from April 30, 1997 to April 30, 2000.
d) FFO Multiple Calculation - The achieved FFO Multiple at the 60th
percentile of the Indexed REITs represents 33.33% of the difference
between the 50th percentile threshold and the 80% target.
Consequently, the Executive would earn 6.17% forgiveness (.3333 x
18.50%) for this component.
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Summary 5-Year Potential Pro Rata Performance Actual
Forgiveness Potential Through Last Forgiveness
Forgiveness Quarter
Asset Growth 20% 12.33% 50.00% 6.17%
FFO Growth
First 2 Years 20% 20.00% 66.67% 13.33%
Last 3 Years 30% 10.83% 100.00% 10.83%
FFO Multiple 30% 18.50% 33.33% 6.17%
Total 100% 61.66% 36.50%
Note that all percentage calculations are calculated to two decimal points
(i.e., 18.50%).
Only the number of full months from the date of the Agreement are considered
(i.e., an exact 37-month period would end on July 14, 1998, and the Executive
would NOT get credit for an additional month until an August 14, 1998
termination date.)
Only data through the last quarter ending 45 days or more prior to the
termination date are considered for evaluating performance. Only Indexed REIT
published data up to and including the last date of data regarding the
Company's performance are utilized. This should permit a timely determination
of forgiveness on or shortly after the end of the five-year period or upon a
termination that qualifies for pro rata loan forgiveness.
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