Exhibit 10.17
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (this
"Agreement"), dated as of May __, 2000, is made and entered by and between Great
Lakes REIT, a Maryland real estate investment trust (the "Company"), and
___________ (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has
made and is expected to continue to make major contributions to the short-term
and long-term profitability, growth and financial strength of the Company; and
WHEREAS, the Company recognizes that, as is the case for most
publicly-held companies, the possibility of a Change in Control (as hereinafter
defined) exists; and
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control; and
WHEREAS, the Company wishes to ensure that its senior executives are
not practically disabled from discharging their duties in respect of a proposed
or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the employ of the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary rate as in
effect from time to time.
(b) "Board" means the Board of Trustees of the Company.
(c) "Cause" means that the Executive shall have (i) willfully and
continually failed to perform his duties with the Company (other than any such
failure that is due to physical or mental incapacity) after a demand for
substantial performance shall have been delivered to the Executive by the Board,
specifically identifying the manner in which the Board believes the Executive
has not substantially performed his duties, or (ii) willfully engaged in
misconduct or illegal conduct that is materially injurious to the Company. For
the purposes of this Section 1(c), no act or failure to act by the Executive
shall be considered "willful", unless done or omitted to be done not in good
faith and without a reasonable belief that the act or omission was in the best
interests of the Company, and the unwillingness of the Executive to accept any
change in the nature, scope or level of his authority, powers, responsibilities,
functions or duties, a reduction in his total compensation (including Base Pay
and Incentive Pay) or Employee Benefits, a relocation of his place of employment
that the Executive deems to be unreasonable in the light of his personal
circumstances, or other action by or at the request of the Company in respect of
his position, authority, powers, responsibilities, functions or duties that the
Executive reasonably deems to be contrary to this Agreement, shall not be
considered by the Board to be a failure to perform on the part of the Executive
or to be misconduct or illegal conduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than 75%
of the members of the Board then in office (excluding for all purposes related
to this determination, each member of the Board who is also then an employee of
the Company) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel (if the Executive shall choose to have
counsel present at such meeting), to be heard before the Board) finding that, in
the good faith opinion of the Board, the Executive shall have been guilty of an
act or omission constituting Cause and specifying the particulars thereof in
detail. Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such finding of the
Board.
(d) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such transaction is held in the
aggregate by the holders of Voting Stock of the Company immediately
prior to such transaction;
(ii) The Company sells, liquidates, dissolves or otherwise
transfers all or substantially all of its assets to one or more persons
or entities in a single transaction or a series of related transactions
other than a transfer or sale to an entity other than an entity with
respect to which a majority of the combined voting power of the
then-outstanding Voting Stock of such entity immediately after such
sale, liquidation, dissolution or transfer is held in the aggregate by
the holders of Voting Stock of the Company immediately prior to such
sale, liquidation, dissolution or transfer;
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(iii) There is a report filed on Schedule 13D or Schedule TO
(or any successor schedule, form or report), as promulgated in each
case pursuant to the Exchange Act, disclosing that any person (as the
term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) (a "Person") has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities
representing 50% or more of the combined voting power of the
then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, during any period of 24 consecutive months,
individuals who at the beginning of any such period constitute the
Trustees of the Company cease for any reason to constitute at least a
majority thereof; PROVIDED, HOWEVER, that for the purposes of this
clause (v) each Trustee who is first elected (or first nominated for
election by the Company's stockholders) by a vote of at least
two-thirds of the Trustees of the Company then still in office who were
Trustees of the Company at the beginning of any such period will be
deemed to have been a Trustee of the Company at the beginning of such
period, but excluding any such Trustee whose initial assumption of
office occurs as a result of an actual or threatened election contest
(within the meaning of Rule 14a-1 of the Exchange Act) with respect to
the election or removal of Trustees or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board.
Notwithstanding the foregoing provisions of Sections 1(d)(iii) and 1(d)(iv),
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for the purposes of
Section 1(d)(iii) or 1(d)(iv) solely because (1) the Company, (2) a Subsidiary
or (3) any Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) under the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock in excess of 50% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will occur in
the future by reason of such beneficial ownership.
(e) "Competitive Activity" means the Executive's participation in the
management of any business enterprise without the written consent of an officer
of the Company, if (i) such enterprise engages in substantial and direct
competition with the Company and such enterprise's revenues attributable to any
operations that are competitive with any revenue generating operations of the
Company amounted to at least 10% of such enterprise's net revenues for its most
recently completed fiscal year and (ii) the Company's net revenues attributable
to such operations amounted to at least 10% of the Company's net revenues for
its most recently completed fiscal year. "Competitive Activity" shall not
include the mere ownership of securities in any such enterprise and
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the exercise of rights appurtenant thereto and shall not include participation
in the management of any such enterprise except in connection with any such
competitive operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income and
welfare benefit plans, policies, programs or arrangements in which the Executive
is entitled to participate, including but not limited to any stock option,
performance share, performance unit, stock purchase, stock appreciation,
savings, pension, supplemental executive retirement, or other retirement income
or welfare benefit, deferred compensation, incentive compensation, group or
other life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company or a Subsidiary), disability,
salary continuation, expense reimbursement and other employee benefit plans,
policies, programs or arrangements that may now exist or any equivalent
successor plans, policies, programs or arrangements that may be adopted
hereafter by the Company or a Subsidiary, providing perquisites, benefits and
service credit for benefits at least as great in the aggregate as are payable
thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Good Reason" means any of the following:
(i) (1) A failure to elect or reelect or otherwise to maintain
the Executive in the office or the position, or a substantially
equivalent office or position, of or with the Company or a Subsidiary
(or any successor thereto by operation of law of or otherwise), as the
case may be, that the Executive held immediately prior to the Change in
Control or (2) the removal of the Executive as a Trustee of the Company
or a Subsidiary (or any successor thereto) if the Executive shall have
been a Trustee of the Company or a Subsidiary immediately prior to the
Change in Control;
(ii) A significant adverse change in the nature, scope or
level of the authority, powers, responsibilities, functions or duties
attached to the position with the Company and any Subsidiary that the
Executive held immediately prior to the Change in Control, or a
reduction in the Executive's aggregate Base Pay and Incentive Pay
received from the Company and any Subsidiary, or the termination or
denial of the Executive's rights to Employee Benefits or a reduction in
the scope or value thereof, any of which shall not have been remedied
by the Company within 30 calendar days after receipt by the Company of
written notice from the Executive of such change, reduction or
termination, as the case may be;
(iii) A good faith determination by the Executive that a
change in circumstances shall have occurred following a Change in
Control, including but not limited to a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which shall have rendered
the Executive substantially unable to carry out, shall have
substantially hindered the Executive's performance of, or shall have
caused the Executive to suffer a substantial reduction in, any of the
authority, powers, responsibilities, functions or duties attached to
the position held by the Executive immediately prior to the Change in
Control and is not remedied within 30
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calendar days after written notice to the Company from the Executive of
such determination. Any such determination by the Executive shall be
presumed to have been made in good faith and shall be final and binding
upon the parties hereto, unless within such thirty-calendar-day period,
there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less then 75% of the
members of the Board then in office (excluding for all purposes related
to this determination, each member of the Board who is also then an
employee of the Company) at a meeting of the Board called and held for
such purpose (after an opportunity for the Executive, together with the
Executive's counsel (if the Executive shall choose to have counsel
present at such meeting), to be heard before the Board) finding that,
in the good faith opinion of the Board, such determination by the
Executive shall not have been made in good faith and specifying in
detail the bases of such finding. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the validity or
propriety of any such finding of the Board;
(iv) A relocation of the Executive's place of employment to a
place that is more than 50 miles farther from the place where he or she
shall be residing immediately prior to the Change in Control than is
the place where he or she shall be employed immediately prior to the
Change in Control or;
(v) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any
successor thereto that is not remedied by the Company (or any such
successor) within 30 calendar days after receipt by the Company (or any
such successor) of written notice from the Executive of such breach.
(i) "Incentive Pay" means an annual bonus, incentive or other payment
of compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any year or other period pursuant to any bonus, incentive,
profit-sharing, performance, discretionary pay or similar agreement, plan,
policy, program or arrangement (whether or not funded) of the Company or a
Subsidiary or any successor thereto.
(j) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit for
benefits at least as great in the aggregate as are payable thereunder prior to a
Change in Control.
(k) "Severance Period" means the period of time commencing on the date
of the first occurrence of a Change in Control and continuing until the first
anniversary of the occurrence of the Change in Control.
(l) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(m) "Term" means the period commencing as of the date hereof and
expiring on the later of (i) the close of business on June 30, 2001, or (ii) the
expiration of the Severance Period; PROVIDED, HOWEVER, that (1) commencing on
July 1, 2000, and on each July 1 thereafter, the term of this Agreement will
automatically be extended for an additional year unless the Company or the
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Executive shall have given not less than 90 days' prior written notice that the
Company or the Executive, as the case may be, does not wish to have the Term so
extended, and (2) subject to Section 9, if the Executive ceases for any reason
to be an officer of the Company and any Subsidiary prior to the occurrence of a
Change in Control, the Term shall thereupon without further action be deemed to
have expired and this Agreement will immediately terminate and be of no further
effect. For the purposes of this Section 1(m), the Executive shall not be deemed
to have ceased to be an employee of the Company and any Subsidiary by reason of
the transfer of Executive's employment among the Company and any Subsidiaries.
(n) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination or such other date that may be specified by the Executive if the
termination is by the Executive for Good Reason pursuant to Section 4(a)).
(o) "Voting Stock" means securities entitled to vote generally in the
election of trustees.
2. OPERATION OF AGREEMENT. (a) This Agreement shall be effective and
binding immediately upon its execution, but notwithstanding any other provision
of this Agreement to the contrary, this Agreement shall not become operative
unless and until a Change in Control shall occur. Upon the occurrence of a
Change in Control at any time during the Term, this Agreement (including but not
limited to Section 9) shall without further action become immediately operative,
regardless of whether the Term may have theretofore expired. Until a Change in
Control shall occur, the Executive's employment with the Company shall continue
to be as an employee at will, and if the Executive's employment with the Company
or a Subsidiary shall terminate for any reason prior to the occurrence of a
Change in Control, neither the Company nor any Subsidiary shall have any
obligation whatsoever to the Executive under this Agreement. This Agreement
shall not confer upon the Executive any right to continue in the employ of the
Company or a Subsidiary, or obligate the Company or any Subsidiary to continue
the Executive in its employ, unless and until a Change in Control shall occur.
(b) Upon the occurrence of a Change in Control, the Company shall
continue to employ the Executive during the Severance Period. During the
Severance Period, the Executive shall exercise such powers and authority, shall
have such responsibilities and shall perform such duties and functions as are
commensurate with the powers and authority exercised by, the responsibilities
of, and the duties and functions performed by, the Executive immediately prior
to the Change in Control, and the Executive shall faithfully and efficiently
devote his full time and attention during normal business hours to such
responsibilities, duties and functions with the Company.
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3. COMPENSATION DURING SEVERANCE PERIOD. During the Severance Period:
(a) The Executive shall receive (i) Base Pay in an amount not less than
the highest rate of Base Pay received by the Executive for any period prior to
the Change in Control and (ii) Incentive Pay in an amount not less than the
largest amount of Incentive Pay received by the Executive in any year prior to
the Change in Control.
(b) The Executive shall be a full participant in, and shall be entitled
to the perquisites, benefits and service credit for benefits provided under, any
and all plans, policies, programs or arrangements in which similarly situated
senior executives of the Company participate providing Employee Benefits;
PROVIDED, HOWEVER, that the Executive's rights thereunder shall be governed by
the terms thereof and shall not be expanded hereunder or otherwise affected
hereby; PROVIDED FURTHER, HOWEVER that, notwithstanding the foregoing, if and to
the extent such Employee Benefits are not payable or provided under any such
plan, policy, program or arrangement, the Company shall pay or provide therefor.
Nothing in this Agreement shall preclude the improvement or enhancement of any
Employee Benefits, provided that no such improvement or enhancement shall in any
way diminish any other obligation of the Company under this Agreement.
4. TERMINATION OF EMPLOYMENT AND RELATED SEVERANCE COMPENSATION
FOLLOWING A CHANGE IN CONTROL. (a) If the Executive's employment shall be
terminated by the Company or a Subsidiary during the Severance Period for any
reason other than Cause or the Executive's death or the Executive's permanent
disability within the meaning of the long-term disability plan in effect for (or
applicable to) the Executive immediately prior to the Change in Control, or if
the Executive's employment shall be terminated by the Executive during the
Severance Period for Good Reason, the Executive shall be entitled to the
severance compensation and benefits described in Annex A to this Agreement.
(b) If the Executive's employment shall be terminated during the
Severance Period because the Executive becomes permanently disabled within the
meaning of the long-term disability plan in effect for (or applicable to) the
Executive immediately prior to the Change in Control, the Executive shall be
entitled to the severance compensation and benefits described in Annex B to this
Agreement.
(c) If the Executive's employment shall terminate during the Severance
Period as a result of the Executive's death, the Executive shall be entitled to
the severance compensation and benefits described in Annex C to this Agreement.
(d) No termination of the Executive's employment pursuant to Section
4(a), 4(b) or 4(c) shall affect any rights that the Executive may have pursuant
to any agreement, plan, policy, program or arrangement of the Company or any
Subsidiary providing Employee Benefits, and the Executive's rights under any
such agreement, plan, policy, program or arrangement shall be governed by the
terms thereof.
(e) Without limiting the rights of the Executive at law or in equity,
if the Company shall fail to make any payment or provide any benefit required to
be made or provided under this Agreement on a timely basis, the Company will pay
interest on the amount or value
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thereof at an annualized rate of interest equal to the so-called composite
"prime rate" as quoted from time to time during the relevant period in THE WALL
STREET JOURNAL, plus 1.0%. Such interest will be payable as it accrues on
demand. Any change in such prime rate will be effective on and as of the date of
such change.
(f) Notwithstanding any other provision of this Agreement to the
contrary, the parties' respective rights and obligations under this Section 4
and under Sections 7, 8 and 9 shall survive any termination or expiration of
this Agreement or the termination of the Executive's employment following a
Change in Control for any reason whatsoever.
(g) Notwithstanding any provision to the contrary in any applicable
plan, program or agreement, (i) upon the termination of the Executive's
employment pursuant to Section 4(a), 4(b) or 4(c), all stock options then held
by the Executive shall become fully vested and exercisable and shall remain so
exercisable for a period of 12 months following the Termination Date, and (ii)
upon the termination of the Executive's employment pursuant to Section 4(a), all
restricted stock awards then held by the Executive shall become fully vested and
nonforfeitable.
(h) Notwithstanding any provision to the contrary in any applicable
agreement, note or other document evidencing any indebtedness of the Executive
to the Company, (i) upon the termination of the Executive's employment pursuant
to Section 4(a) or 4(b), the Executive shall have 36 months from and after the
Termination Date in which to repay such indebtedness, and (ii) upon the
termination of the Executive's employment pursuant to Section 4(c), the
Executive shall have 18 months from and after the Termination Date in which to
repay such indebtedness.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Notwithstanding any
other provision of this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 5) or distribution by the Company or any
of its affiliates to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, plan, policy,
program or arrangement, including but not limited to any stock option,
performance share, performance unit, stock appreciation right or similar right,
or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any successor provision thereto), by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with any such
interest and penalties, being hereafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER, that no
Gross-up Payment shall be made with respect to any Excise Tax attributable to
(i) any "incentive stock option" (as defined by Section 422 of the Code) granted
prior to the execution of this Agreement or (ii) any stock appreciation or
similar right granted in tandem with any incentive stock option. The Gross-Up
Payment shall be in an amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon
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the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether any Excise Tax is
payable by the Executive and the amount of any such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of any such Gross-Up Payment, shall be made by a nationally recognized
accounting firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall deliver
to the Company and the Executive at the same time as it makes such a
determination an opinion that the Executive has substantial authority not to
report any Excise Tax on his federal, state or local income or other tax return.
As a result of the uncertainty in the application of Section 4999 of the Code
(or any successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments that shall
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
5(f) and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of, the Executive within five business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm and shall otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment shall be binding upon the Company
and the Executive.
(d) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to any Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax and, at the request of the Company, shall provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and any relevant corresponding state and
local tax returns as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of the Executive's federal income tax return or any
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relevant corresponding state or local tax return, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, the Executive shall
within five business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section 5(b)
shall be borne by the Company. If such fees and expenses are initially paid by
the Executive, the Company shall reimburse the Executive the full amount of such
fees and expenses within five business days after receipt from the Executive of
a statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty-calendar-day period following the
date on which he gives such notice to the Company and (ii) the date that any
payment of any amount with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including but not limited to accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, from and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 5(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 5(f) 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
(provided that the Executive may participate therein at his own cost and
expense) and may at its option either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a
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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, if the Company directs the Executive to pay the
tax claimed and xxx for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify and hold
harmless the Executive, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed with
respect to such advance; PROVIDED FURTHER, HOWEVER, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), the Executive receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 5(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the Company to
the Executive pursuant to this Section 5.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it
will be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, and no profits,
income, earnings or other benefits from any source whatsoever will create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Paragraph 2 set forth on Annex A.
7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that
the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise, because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare
11
this Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny or recover from the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of
Executive's choice, at the expense of the Company as hereafter provided, to
advise and represent the Executive in connection with any such interpretation,
enforcement or defense, including but not limited to the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Trustee, officer, shareholder or other person affiliated with the Company,
in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails in whole or in part in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and expenses
incurred by the Executive in connection with any of the foregoing up to a
maximum aggregate amount of $100,000 , provided that, in regard to such matters,
the Executive has not acted in bad faith or with no colorable claim of success.
(b) Without limiting the obligations of the Company pursuant to Section
7(a) hereof, in the event that a Change in Control occurs, the performance of
the Company's obligations under this Section 7 shall be secured by amounts,
which shall in the aggregate be not less than $100,000, deposited or to be
deposited in trust pursuant to certain trust agreements to which the Company
shall be a party providing that the fees and expenses of counsel selected from
time to time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in accordance with
the terms of such trust agreements or, if not so provided, upon presentation
from time to time by the Executive to the trustee of a statement or statements
prepared by such counsel in accordance with its customary practices. Any failure
by the Company to satisfy any of its obligations under this Section 7(b) shall
not limit the rights of the Executive hereunder. Subject to the foregoing, the
Executive shall have the status of a general unsecured creditor of the Company
and shall have no right to, or security interest in, any assets of the Company
or any Subsidiary.
8. COMPETITIVE ACTIVITY; CONFIDENTIALITY; NONSOLICITATION. (a) If the
Executive's employment shall be terminated pursuant to Section 4(a) and the
Executive shall have received or shall be receiving benefits pursuant to Section
4(a), the Executive shall not engage in any Competitive Activity for one year
from and after the Termination Date in any geographical market where the Company
shall be operating on the Termination Date.
(b) During the Term, the Company agrees that it will disclose to
Executive its confidential or proprietary information (as defined in this
Section 8(b)) to the extent necessary for Executive to carry out his obligations
to the Company. The Executive hereby covenants and agrees that, without the
prior written consent of the Company, he will not during the Term or thereafter
disclose to any person not employed or otherwise engaged by the Company, or use
in connection with engaging in competition with the Company, any confidential or
proprietary information of the Company. For the purposes of this Agreement, the
term "confidential or proprietary information" will include all information of
any nature and in any form that is owned by the Company and is not publicly
available (other than by Executive's breach of this Section 8(b)) or generally
known to
12
persons engaged in businesses similar or related to those of the Company.
Confidential or proprietary information will include, but will not be limited
to, the Company's financial matters, customers, employees, industry contracts,
strategic business plans, product development (or other proprietary product
data), marketing plans, and all other secrets and all other information of a
confidential or proprietary nature. For the purposes of the two preceding
sentences, the term "Company" will also include any Subsidiary (collectively,
the "Restricted Group"). The foregoing obligations imposed by this Section 8(b)
will not apply (i) in the course of the business of and for the benefit of the
Company during the Term, (ii) if such confidential or proprietary information
shall have become generally known to the public through no fault of the
Executive or (iii) if the Executive is required by law to make disclosure (after
giving the Company notice and an opportunity to contest such requirement).
(c) If the Executive's employment shall be terminated pursuant to
Section 4(a) and the Executive shall have received or shall be receiving
benefits pursuant to Section 4(a), the Executive hereby covenants and agrees
that, for one year from and after the Termination Date, the Executive will not,
without the prior written consent of the Company (which consent shall not
unreasonably be withheld) directly or indirectly on behalf of himself or on
behalf of any other person, firm or company, attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any employee of
the Restricted Group to give up, or to not commence, employment or a business
relationship with the Restricted Group.
9. TERMINATION OF EMPLOYMENT PRIOR TO AND IN ANTICIPATION OF A CHANGE
IN CONTROL. Notwithstanding any other provision of this Agreement to the
contrary, if a Change in Control occurs and not more than 180 days prior to the
date on which the Change in Control occurs, the Executive's employment with the
Company is terminated by the Company or the Executive terminates his employment
for Good Reason, such termination of employment shall be deemed to be a
termination of employment pursuant to Section 4(a) following a Change in Control
and during the Severance Period for the purposes of this Agreement if the
Executive shall have reasonably demonstrated that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change in Control or (ii) otherwise arose in connection
with or in anticipation of a Change in Control.
10. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all such federal, state, local or other taxes as
the Company is required to withhold pursuant to any applicable law, regulation
or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to the
Company, including but not limited to any persons acquiring directly or
indirectly all or substantially all of the business or assets of the Company by
purchase, merger, consolidation, reorganization or otherwise (and such successor
shall thereafter be
13
deemed the "Company" for the purposes of this Agreement) but will not otherwise
be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall assign, transfer or delegate this Agreement or any rights or
obligations hereunder without the consent of the other, except as expressly
provided in Sections 11(a) and 11(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable by pledge, creation of a security
interest or otherwise, except by a transfer by the Executive's will or the laws
of descent and distribution, and in the event of any attempted assignment or
transfer contrary to this Section 11(c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all communications,
including but not limited to notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by registered or certified United States mail (return
receipt requested and postage prepaid), or three business days after having been
sent by a nationally recognized overnight courier service, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive office or to the Executive at his principal residence, as the case may
be, or to such other address as either party shall furnish to the other in
writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Illinois, without giving effect to the
principles of conflict of laws thereof.
14. VALIDITY. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or written or expressed or implied, with respect to the subject matter hereof
have been made by either party that are not set
14
forth expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together will constitute one and the same agreement.
17. PRIOR AGREEMENTS. This Agreement supersedes in its entirety the
Change in Control Agreement dated as of September 20, 1997 and the Change in
Control Agreement dated as of July 17, 1998, each between the Company and the
Executive.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
GREAT LAKES REIT
By:
---------------------------------------
Name
---------------------------------
Title
---------------------------------
--------------------------------------
------------------------
16
ANNEX A
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to two times the sum of (a)
Base Pay (at the highest rate in effect for any period prior to the Termination
Date) and (b) an amount equal to the product of (i) Base Pay (at the highest
rate in effect for any period prior to the Termination Date) multiplied by (ii)
a fraction, the numerator of which shall be the average Incentive Pay received
by the Executive in each of the three most recently completed fiscal years of
the Company (or any successor thereto) immediately preceding the Termination
Date or, if greater, the average Incentive Pay received by the Executive in each
of the three most recently completed fiscal years of the Company (or any
successor thereto) immediately preceding the Change in Control and the
denominator of which shall be the average of Base Pay (as in effect for the
period utilized in calculating the numerator hereof).
(2) For a period of 12 months following the Termination Date (the
"Continuation Period"), the Company will provide the Executive (at no cost to
the Executive) with Employee Benefits that are welfare benefits (including
medical, dental and other group health plan benefits) substantially similar to
those that the Executive was receiving or entitled to receive immediately prior
to the Termination Date or, if greater, immediately prior to the Change in
Control. If and to the extent that any benefit described in this Paragraph 2 is
not or cannot be paid or provided under any plan, policy, program or arrangement
of the Company or any Subsidiary, as the case may be, then the Company will
itself pay or provide for the payment to the Executive, and his dependents and
beneficiaries, of such Employee Benefits (together with, in the case of any
benefit described in this Paragraph 2 that is subject to tax because it is not
or cannot be paid or provided under any such plan, policy, program or
arrangement of the Company or any Subsidiary, an additional amount such that,
after payment by the Executive or his dependents or beneficiaries, as the case
may be, of all taxes so imposed, the recipient retains an amount equal to such
taxes). Notwithstanding the foregoing or any other provision of the Agreement,
for the purpose of determining the period of continuation coverage to which the
Executive or any of his dependents is entitled pursuant to Section 601 et seq.
of the Employee Retirement Income Security Act of 1974, as amended (or any
successor provision thereto), and Section 4980B of the Code (or any successor
provision thereto) under the Company's medical, dental and other group health
plans (or successor plans), the Executive's "qualifying event" shall be the
termination of the Continuation Period and the Executive shall be considered to
have remained actively employed on a full-time basis through that date. Without
otherwise limiting the purposes or effect of Section 6 of the Agreement,
Employee Benefits otherwise receivable by the Executive pursuant to this
Paragraph 2 will be reduced to the extent comparable welfare benefits are
actually received by the Executive from another employer during the Continuation
Period, and any such benefits actually received by the Executive shall be
reported by the Executive to the Company.
(3) In addition to the retirement income, supplemental executive
retirement, and other benefits to which the Executive is entitled under the
Company's Retirement Plans, a lump sum
payment in an amount equal to the actuarial equivalent of the excess of (a) the
retirement pension and the medical, life and other benefits that would be
payable to the Executive under the Retirement Plans if the Executive continued
to be employed through the Continuation Period given the Executive's Base Pay
(as determined in Paragraph 1) (without regard to any amendment to the
Retirement Plans made subsequent to a Change in Control that adversely affects
in any manner the computation of retirement or welfare benefits thereunder),
less (b) the retirement pension and the medical, life and other benefits that
the Executive is entitled to receive (either immediately or on a deferred basis)
under the Retirement Plans. For the purposes of this Paragraph 3, "actuarial
equivalent" shall be determined using the same methods and assumptions utilized
under the Company's qualified retirement plan for salaried employees in effect
immediately prior to the Change in Control.
A-2
ANNEX B
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to the sum of (a) Base Pay
(at the highest rate in effect for any period prior to the Termination Date) and
(b) an amount equal to the product of (i) the target amount of the Executive's
Incentive Pay for the then current fiscal year of the Company (or any successor
thereto), multiplied by (ii) a fraction, the numerator of which shall be the
number of days in the then current fiscal year of the Company (or any successor
thereto) that shall have elapsed up to and including the Termination Date and
the denominator of which shall be 365.
(2) For a period of 12 months following the Termination Date or such
longer period of time as may be required under Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (or any
successor provision thereto), and Section 4980B of the Code (or any successor
provision thereto), the Company will provide the Executive (at the Executive's
expense and in accordance with Section 601 et. seq. of ERISA (or any successor
provision thereto) and Section 4980B of the Code (or any successor provision
thereto)) with Employee Benefits that are welfare benefits (including medical,
dental and other group health plan benefits) substantially similar to those that
the Executive was receiving or entitled to receive immediately prior to the
Termination Date or, if greater, immediately prior to the Change in Control.
ANNEX C
SEVERANCE COMPENSATION
A lump sum payment in an amount equal to the sum of (1) Base Pay (at
the highest rate in effect for any period prior to the Termination Date) and
(2) an amount equal to the product of (a) the target amount of the
Executive's Incentive Pay for the then current fiscal year of the Company (or
any successor thereto), multiplied by (b) a fraction, the numerator of which
shall be the number of days in the then current fiscal year of the Company or
any successor thereto) that shall have elapsed up to and including the
Termination Date and the denominator of which shall be 365.
