EXHIBIT 10.18
BOSTON PROPERTIES, INC.
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 30th day of July, 1998 by and among Boston
Properties, Inc., a Delaware corporation with its principal place of business in
Boston, Massachusetts (the "Company"), Boston Properties Limited Partnership, a
Delaware limited partnership with its principal place of business in Boston,
Massachusetts ("BPLP") (the Company and BPLP shall be hereinafter collectively
referred to as the "Employers") and Xxxxxx X. Xxxxx of Xxxxxx, Massachusetts
(the "Executive"), an individual presently employed as the President and Chief
Executive Officer of the Company.
1. PURPOSE. The Company considers it essential to the best interests of
its stockholders to xxxxxx the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control (as defined in Section 2 hereof) exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. Therefore, the
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Employers'
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control. Nothing in this Agreement shall be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Employers, the
Executive shall not have any right to be retained in the employ of the
Employers.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any one of the following events:
(a) any "PERSON," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Employers, Xxxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxx,
any "AFFILIATE" or "ASSOCIATE" (as such terms are defined in Rule 12b-2
under the Act) of Xxxxxxxx X. Xxxxxxxxx or Xxxxxx X. Xxxxx, or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Employers), together with all "AFFILIATES" and
"ASSOCIATES" (as such terms are defined in Rule 12b-2 under the Act) of
such person, shall become the "BENEFICIAL OWNER" (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing 25 percent or more of the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities") (other
than as a result of an acquisition of securities directly from the
Company); provided that for purposes of determining the "BENEFICIAL
OWNERSHIP" (as such term is defined in Rule 13d-3 under the Act) of any
"GROUP" of
which Xxxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxx or any of their affiliates or
associates is a member (each such entity or individual, a "Related Party"),
there shall not be attributed to the "BENEFICIAL OWNERSHIP" (as such term
is defined in Rule 13d-3 under the Act) of such group any shares
beneficially owned by any Related Party; or
(b) persons who, as of the effective date of the Company's initial
public offering of Stock, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to such date shall
be considered an Incumbent Director if such person's election was approved
by or such person was nominated for election by either (A) a vote of at
least two-thirds of the Incumbent Directors or (B) a vote of at least a
majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; or
(c) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, "BENEFICIALLY OWN" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 60 percent or more of the voting
shares of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any), (B) any sale,
lease, exchange or other transfer to an unrelated party (in one transaction
or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (a) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person (as defined in the
foregoing clause (a)) to 25 percent or more of the combined voting power of all
then outstanding Voting Securities; PROVIDED, HOWEVER, that if such person shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company), then a "CHANGE OF CONTROL" shall be deemed to have occurred for
purposes of the foregoing clause (a).
3. TERMINATING EVENT. A "Terminating Event" shall mean any of the events
provided in this Section 3 occurring within twenty-four (24) months following a
Change in Control:
(a) termination by the Employers of the employment of the Executive
with the Employers for any reason other than for Cause or the death of the
Executive. "Cause" shall mean, and shall be limited to, the occurrence of
any one or more of the following events:
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(i) a willful act of dishonesty by the Executive with respect
to any matter involving any of the Employers; or
(ii) conviction of the Executive of a crime involving moral
turpitude; or
(iii) the deliberate or willful failure by the Executive (other
than by reason of the Executive's physical or mental illness,
incapacity or disability) to substantially perform the Executive's
duties with the Employers and the continuation of such failure for a
period of 30 days after delivery by the Employers to the Executive of
written notice specifying the scope and nature of such failure and
their intention to terminate the Executive for Cause.
A Terminating Event shall not be deemed to have occurred pursuant to
this Section 3(a) solely as a result of the Executive being an employee of
any direct or indirect successor to the business or assets of either of the
Employers, rather than continuing as an employee of the Employers following
a Change in Control. For purposes of clauses (i) and (iii) of this Section
3(a), no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive without
reasonable belief that the Executive's act, or failure to act, was in the
best interest of the Employers; or
(b) termination by the Executive of the Executive's employment with
the Employers for Good Reason. "Good Reason" shall mean the occurrence of
any of the following events:
(i) a substantial adverse change in the nature or scope of the
Executive's responsibilities, authorities, title, powers, functions,
or duties from the responsibilities, authorities, powers, functions,
or duties exercised by the Executive immediately prior to the Change
in Control; or
(ii) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly affecting
all or substantially all management employees; or
(iii) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date of a
Change in Control to a location more than thirty (30) miles from such
offices, or the requirement by the Employers for the Executive to be
based anywhere other than the Employers' offices at such location,
except for required travel on the Employers' business to an extent
substantially consistent with the Executive's business travel
obligations immediately prior to the Change in Control; or
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(iv) the failure by the Employers to pay to the Executive any
portion of his compensation or to pay to the Executive any portion of
an installment of deferred compensation under any deferred
compensation program of the Employers within fifteen (15) days of the
date such compensation is due without prior written consent of the
Executive; or
(v) the failure by the Employers to obtain an effective
agreement from any successor to assume and agree to perform this
Agreement.
4. SPECIAL TERMINATION PAYMENTS. In the event a Terminating Event occurs
within twenty-four (24) months after a Change in Control,
(a) the Employers shall pay to the Executive an amount equal to the
following:
(i) $3,000,000 if the Date of Termination (as such term is
defined in Section 9(b)) is in calendar year 1998; or
(ii) $3,300,000 if the Date of Termination is in calendar year
1999; or
(iii) $3,630,000 if the Date of Termination is in calendar year
2000 or later.
Said amount shall be paid in one lump sum payment no later than thirty-one
(31) days following the Date of Termination; and
(b) the Employers shall continue to provide health, dental and life
insurance to the Executive, on the same terms and conditions as though the
Executive had remained an active employee, for thirty-six (36) months after
the Terminating Event; and
(c) the Employers shall provide COBRA benefits to the Executive
following the end of the period referred to in Section 4(b) above, such
benefits to be determined as though the Executive's employment had
terminated at the end of such period; and
(d) the Employers shall pay to the Executive all reasonable legal and
mediation fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation initiated by the Executive; and
(e) the Employers shall provide to the Executive financial
counseling, tax preparation assistance and outplacement counseling for
thirty-six (36) months after the Terminating Event.
Notwithstanding the foregoing, the special termination benefits required by
Section 4(a) shall be offset by any amount paid or payable to the Executive by
the Employers under the terms of any employment agreement or other plan.
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5. ADDITIONAL BENEFITS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any compensation payment or
distribution by the Employers 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 (the "Severance Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of any Excise Tax on the
Severance Payments, any Federal, state, and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax and not
after the deduction of any other taxes or amounts, shall be equal to the
Severance Payments. (The Gross-Up Payment is not intended to compensate the
Executive for any income taxes payable with respect to the Severance
Payments.)
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment, shall be made
by Coopers & Xxxxxxx, L.L.P. or any other nationally recognized accounting
firm selected by the Employers (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Employers and the Executive
within 15 business days of the Date of Termination, if applicable, or at
such earlier time as is reasonably requested by the Employers or the
Executive. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation applicable to individuals for the
calendar year in which the Gross-Up Payment is to be made, and state and
local income taxes at the highest marginal rates of individual taxation in
the state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. The initial
Gross-Up Payment, if any, as determined pursuant to this Section 5(b),
shall be paid to the Executive within five days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, the Employers shall furnish the
Executive with an opinion of counsel that failure to report the Excise Tax
on the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Employers and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been made by the
Employers should have been made (an "Underpayment"). In the event that the
Employers exhaust their remedies pursuant to Section 5(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall
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determine the amount of the Underpayment that has occurred, consistent with
the calculations required to be made hereunder, and any such Underpayment,
and any interest and penalties imposed on the Underpayment and required to
be paid by the Executive in connection with the proceedings described in
Section 5(c), shall be promptly paid by the Employers to or for the benefit
of the Executive.
(c) The Executive shall notify the Employers in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment by the Employers of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than 10 business days after
the Executive knows of such claim and shall apprise the Employers of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the
Employers (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Employers notify the
Executive in writing prior to the expiration of such period that they
desire to contest such claim, provided that the Employers have set aside
adequate reserves to cover the Underpayment and any interest and penalties
thereon that may accrue, the Executive shall:
(i) give the Employers any information reasonably requested by
the Employers relating to such claim,
(ii) take such action in connection with contesting such claim
as the Employers shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney selected by the Employers,
(iii) cooperate with the Employers in good faith in order
effectively to contest such claim, and
(iv) permit the Employers to participate in any proceedings
relating to such claim; provided, however, that the Employers shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax
basis, for 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 limitation
on the foregoing provisions of this Section 5(c), the Employers shall
control all proceedings taken in connection with such contest and, at
their sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at their sole 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 determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Employers shall determine;
provided, however, that if the Employers direct the Executive to
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pay such claim and xxx for a refund, the Employers shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance
or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Employers'
control of the contest 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
issues raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Employers pursuant to Section 5(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Employers' complying with the requirements of Section 5(c)) promptly
pay to the Employers the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Employers pursuant to
Section 5(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Employers do not
notify the Executive in writing of their intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
6. TERM. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earliest of (a) the termination by the
Employers of the employment of the Executive for Cause; (b) the resignation or
voluntary termination of the Executive for any reason prior to a Change in
Control; or (c) the resignation of the Executive after a Change in Control for
any reason other than the occurrence of any of the events enumerated in Section
3(b)(i)-(v) of this Agreement.
7. WITHHOLDING. All payments made by the Employers under this Agreement
shall be net of any tax or other amounts required to be withheld by the
Employers under applicable law.
8. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) NOTICE OF TERMINATION. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with this Section 8. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and the Date of
Termination. Further, a Notice of Termination for Cause is required to
include a copy of
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a resolution duly adopted by the affirmative vote of not less than
two-thirds (2/3) of the entire membership of the Board at a meeting of the
Board (after reasonable notice to the Executive and an opportunity for the
Executive, accompanied by the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the
termination met the criteria for Cause set forth in Section 3(a) hereof.
(b) DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in
Control and during the term of this Agreement, shall mean the date
specified in the Notice of Termination. In the case of a termination by the
Employers other than a termination for Cause (which may be effective
immediately), the Date of Termination shall not be less than 30 days after
the Notice of Termination is given. In the case of a termination by the
Executive, the Date of Termination shall not be less than 15 days from the
date such Notice of Termination is given. Notwithstanding Section 3(a) of
this Agreement, in the event that the Executive gives a Notice of
Termination to the Employers, the Employers may unilaterally accelerate the
Date of Termination and such acceleration shall not result in a second
Terminating Event for purposes of Section 3(a) of this Agreement.
(c) NO MITIGATION. The Employers agree that, if the Executive's
employment by the Employers is terminated during the term of this
Agreement, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the
Employers pursuant to Sections 4 and 5 hereof. Further, the amount of any
payment provided for in this Agreement shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to
be owed by the Executive to the Employers, or otherwise.
(d) MEDIATION OF DISPUTES. The parties shall endeavor in good faith
to settle within 90 days any controversy or claim arising out of or
relating to this Agreement or the breach thereof through mediation with
JAMS, Endispute or similar organizations. If the controversy or claim is
not resolved within 90 days, the parties shall be free to pursue other
legal remedies in law or equity.
9. ASSIGNMENT; PRIOR AGREEMENTS. Neither the Employers nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Employers and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Employers of
all payments due him under Sections 4 and 5 of this Agreement, the Employers
shall continue such payments to the Executive's beneficiary designated in
writing to the Employers prior to his death (or to his estate, if the Executive
fails to make such designation).
10. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of
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this Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
11. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. NOTICES. Any notices, requests, demands, and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Employers, or to the Employers at their main office, attention of the Board of
Directors.
13. EFFECT ON OTHER PLANS. Nothing in this Agreement shall be construed to
limit the rights of the Executive under the Employers' benefit plans, programs
or policies.
14. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employers.
15. GOVERNING LAW. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.
16. OBLIGATIONS OF SUCCESSORS. In addition to any obligations imposed by
law upon any successor to the Employers, the Employers will use their best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Employers to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employers would be
required to perform if no such succession had taken place.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Employers by their duly authorized officers and by the Executive, as of
the date first above written.
BOSTON PROPERTIES, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
BOSTON PROPERTIES LIMITED PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
/s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
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