EXHIBIT 10.8
February 26, 2001
Xx. Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
This letter agreement (the "Agreement") confirms the terms of the termination of
Executive's employment with AvalonBay Communities, Inc. (the "Company," a term
which for purposes of this Agreement includes its related or affiliated
entities).
1. MODIFICATION OF EXISTING EMPLOYMENT AGREEMENT. Xxxxxx X. Xxxxxx
("Executive") and the Company acknowledge that they are parties to a
certain written employment agreement dated March 9, 1998, as amended by
them on July 30, 1999 (collectively, "Employment Agreement"). This
letter, when executed by the parties hereto, constitutes an amendment
to the Employment Agreement, in accordance with Section 11 thereof.
2. TERMINATION DATE. It is mutually agreed that the effective date of
termination of Executive's Employment Agreement, except for certain
provisions thereof as provided herein, shall be March 29, 2002 or such
earlier date as the Company and Executive may reasonably agree
("Termination Date"). Notwithstanding anything to the contrary in
Sections 1 or 7(c)(iv) of the Employment Agreement, the Company shall
not be obligated to give to Executive Notice of Nonrenewal pursuant to
Section 1 of the Employment Agreement and Executive waives receipt of
such notice.
3. DEPARTURE DATE. Notwithstanding the provisions of paragraph 2,
Employment Duties, of the Employment Agreement, it is agreed that
Executive shall cease serving as the Executive Vice President of the
Company on April 30, 2001, or such other date as shall be mutually
agreeable to the Company and Executive (the "Departure Date"), and
Executive's current duties and authority shall thereupon cease. Such
cessation of title, duties, and responsibilities shall in no event
constitute a Constructive Termination without Cause. Executive agrees
that as of the Departure Date he shall be deemed to have resigned as an
officer of AvalonBay Communities, Inc. and as a director and/or officer
of all subsidiaries and affiliates thereof, as applicable.
4. CONSULTING DUTIES.
(a) CONSULTING SERVICES. From and after the Departure Date, and until
March 29, 2002 (the "Consulting Period"), Executive will perform
services for the Company as a
consultant. The legal status of Executive's consultancy will be as an
independent contractor. Executive will make himself available to
perform consulting services, including, but not limited to, legal
assistance services, on a part-time basis only, at times and upon
notice reasonably acceptable to Executive. The Company agrees to
utilize the consulting services of Executive at times and places which
do not interfere with Executive's post-departure business or employment
activities. During the Consulting Period, Executive shall be free to
pursue other business opportunities or employment, except to the extent
that such other business opportunities or employment violate Section
13(d) hereof. Executive shall not be required to provide consulting
services in a manner that unreasonably interferes with his ability to
pursue such other business opportunities or employment.
(b) TECHNICAL SUPPORT. During the Consulting Period, and, in any event
until at least March 29, 2002, the Company will maintain for Executive
at its headquarters a direct dial telephone number, voicemail, the
reasonable support of an administrative assistant and, at reasonable
times and upon reasonable notice, information technology support. In
addition to using these resources as a consultant to the Company,
Executive may use these resources for personal use as well.
5. COMPENSATION/BENEFITS UNTIL TERMINATION DATE.
(a) BASE SALARY. From and after the Departure Date and until the
Termination Date, Executive will continue to receive his base salary
(at its rate as adjusted in February 2001 for commencement on March 1,
2001) in accordance with Section 3(a) of the Employment Agreement.
(b) BONUSES. In respect of the bonus provided in Section 3(b) of the
Employment Agreement, the Company agrees to pay the Executive a full
cash bonus for the year 2001 at the time such year 2001 bonuses are
paid to other Company officers, i.e., on or about February 2002. The
cash bonus paid to the Executive for 2001 will be $253,328 (i.e., the
average of Executive's cash bonuses received in respect of 1998
(225,000), 1999 ($214,828) and 2000 ($320,158)). No other bonus or
bonuses pursuant to Section 3(b) of the Employment Agreement will be
paid.
(c) MEDICAL INSURANCE/PHYSICAL. From and after the Departure Date and
until the Termination Date, the Company will continue to provide to
Executive and Executive's immediate family the health insurance which
Executive and Executive's family are receiving pursuant to Section 3(c)
of the Employment Agreement, including one comprehensive physical after
the date hereof (with no reimbursement for travel related to obtaining
such physical).
(d) LIFE INSURANCE/DISABILITY INSURANCE. From and after the Departure
Date and until the Termination Date, the Company will continue to
provide the Executive Life Insurance/Disability Insurance benefits as
currently provided pursuant to Section 3(d) of the Employment
Agreement.
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(e) STOCK GRANTS. Executive shall be eligible for an employee stock
grant for the year 2001 on the same basis as other senior managers of
the Company as if Executive had served as an employee under the
provisions of the Employment Agreement for the full year 2001. The
grant will be made at the same time as grants are made to other senior
managers of the Company for the year 2001. The grant (the "2001 Grant")
will be fully vested and freely tradable when conferred. The grant will
be determined by applying to Executive's target grant level for the
year 2001 (which is the same as Executive's potential target grant
level as for the year 2000) the same percentage realization as is
applied to other senior managers of the Company whose percentage
realization is determined in the same manner. In addition, on or about
February 2002, restricted shares granted in prior years that were
scheduled to vest at that time shall vest in accordance with their
terms (the "2002 Vesting Shares").
(f) STOCK OPTIONS. On or prior to the Departure Date, the Company shall
grant to Executive 46,375 employee stock options, and thereafter
Executive shall not be eligible to receive any other award of stock
options for the year 2001. Such options will expire on February 15,
2007, which will be unaffected by the termination of the Employment
Agreement or the termination of Executive's employment. The Executive
shall enter into the Company's standard form option agreement as
currently in use, and such option award shall be subject to the
provisions of such stock option agreement as modified by the terms of
this Agreement (collectively, the "Stock Option Agreement").
(g) BUSINESS EXPENSES. The Company shall reimburse Executive for
reasonable and customary business expenses incurred by Executive in the
course of performing Executive's consultant duties for the Company
through the Termination Date
6. COMPENSATION/BENEFITS FOLLOWING TERMINATION DATE.
(a) COVERED AVERAGE COMPENSATION. The Company shall provide Executive,
for twelve (12) consecutive months, commencing with April 2002, a gross
monthly payment in the amount of $116,536 (i.e., $1,398,437 in the
aggregate). Executive and Company agree that this amount fulfills
Company's obligations under Section 7(c) of the Employment Agreement.
The Company may elect to make these payments at the times that the
Company's regular payroll checks are issued, such that the gross
aggregate amount of $1,398,437 is paid over a 12 month period by
payment of regular payroll checks or direct deposit.
(b) MEDICAL AND DISABILITY BENEFITS. The Company will continue, without
cost to Executive, benefits comparable to the medical and disability
benefits provided to Executive immediately prior to the Termination
Date under Sections 3(c) and 3(d) of the Employment Agreement for a
period of twenty-four (24) months following the Termination Date or
until such earlier date as Executive may obtain comparable benefits
through other employment (whether self-employment or otherwise). Upon
obtaining medical or disability benefits through other employment
comparable to
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those provided to Executive under Sections 3(c) or 3(d) of the
Employment Agreement, Executive will promptly notify the Company in
writing.
(c) SPLIT-DOLLAR LIFE INSURANCE POLICY. The Company will continue to
pay, for so long as such payments are due, all premiums then due and
payable on, but only to the extent relating to the whole-life portion
of, the split-dollar life insurance policy obtained pursuant to Section
3(d) of the Employment Agreement; provided that the Company's
obligation to pay under this Section 6(c) are conditioned upon
Executive's payment of all premiums payable on, but only to the extent
relating to the term life portion of, said split-dollar life insurance
policy. Executive agrees to cooperate with the Company in verifying
Executive's continuing satisfaction of the foregoing condition. The
Company agrees to promptly notify Executive, and Executive agrees to
promptly notify the Company, of any premium notice or other notice it
or Executive receives from the insurer relating to the policy. In the
event that the Company determines its obligation to make payments under
this Section 6(c) has ceased by reason of Executive's nonpayment of
premiums relating to the life insurance portion of said split-dollar
life insurance policy, the Company shall provide Executive with thirty
(30) days' written notice of its intent to terminate payments
hereunder. Such notice shall identify specifically Executive's
nonpayment of the term life insurance premium as the basis upon which
the Company asserts its right to cease payments and shall provide
Executive with a reasonable opportunity to cure.
(d) STOCK GRANTS. In addition to the 2001 Grant and the 2002 Vesting
Shares referred to in Section 5(e), all other shares of the Company's
stock that Executive was granted as restricted shares shall vest as of
the Termination Date. Upon the occurrence of the Termination Date, the
Company shall (or the Company shall cause the Company's transfer agent
to) (i) promptly deliver to Executive certificates representing such
shares with no restrictive legends, and such shares shall be freely
transferable by Executive subject to applicable securities laws; and
(ii) remove or cause to be removed all restrictive legends on shares
previously issued to Executive. Executive acknowledges that the Company
has advised him to consult an attorney regarding Executive's continuing
obligations under Section 16 of the Securities Exchange Act of 1934, as
amended, Rule 144 promulgated under the Securities Act of 1933, as
amended, as well as other federal and state securities laws, including
xxxxxxx xxxxxxx laws and regulations. For convenience, EXHIBIT A sets
forth a list of all shares of restricted stock Executive was granted
and that (to the extent Executive has not disposed of any prior to such
date) Executive will retain following the Date of Termination.
(e) STOCK OPTIONS.
(A) In accordance with Section 7(c) of the Employment
Agreement, all options to purchase shares of the Company's
common stock that Executive has been or may be granted prior
to the Departure Date will vest as of the Departure Date
(i.e., April 30, 2001). For convenience, EXHIBIT B hereto sets
forth the
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options (with applicable option exercise prices and expiration
dates) which Executive holds as of today.
(B) The Board of Directors, or the compensation
committee of the Board of Directors, of the Company has taken
or will take such action as is necessary so that, with respect
to the options granted with respect to year 2000 (granted in
February 2001) and year 2001 (to be granted prior to the
Departure Date, in accordance with Section 5(f) hereof),
Executive will have until February 13, 2006 (in the case of
the options granted with respect to 2000) and until February
15, 2007 (in the case of the options granted with respect to
2001) to exercise the options (collectively, the "Extended
Options").
(C) In accordance with the terms of the option
agreements and the Company's stock incentive plan, because of
Executive's "other business relationship" as a consultant to
the Company, all options other than the Extended Options shall
continue until the later of (i) their stated expiration date,
(ii) 90 days after the Termination Date (or, in the event
Executive's services under Section 4 terminate earlier than
the Termination Date as determined by mutual agreement between
the Company and Executive or by a final arbitration decision
to such effect, then 90 days from such earlier termination),
or (iii) in the case of Disability or Death (as defined in the
applicable stock option agreements), the date provided in the
stock option agreements for such occurrence. In accordance
with paragraph (B) of this Section 6(e) the Extended Options
shall not expire until their stated expiration date regardless
of earlier death, disability or other occurrence.
(D) The Company will provide reasonable and customary
cooperation in Executive's consummation of a "cashless
exercise" with a broker in which the proceeds of the sale of
shares of the Company common stock are used, directly or
indirectly, to finance Executive's remittance of the exercise
price on the options. Beginning on the third business day
after the public disclosure of the Company's second quarter
2001 earnings, or such earlier time after the Departure Date
as the Company reasonably determines is appropriate, the
Company will in no event assert that Executive is in
possession of information regarding the Company such that
there is a basis for the Company to not provide such
cooperation. The Company has agreed that the payment of the
exercise price for any such option also may be made, in
accordance with the terms of the Stock Option Agreements, by
Executive in the form of shares of Company stock which are
unrestricted and which have been held by Executive for at
least six (6) months. In the event of Executive's death,
Executive's options shall be exercisable by Executive's legal
representative or legatee in accordance with their terms.
(f) EXCISE TAX. The Company has determined in good faith, after
consultation with Xxxxxx Xxxxxxxx LLP, that none of the payments
provided hereunder is subject to an excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended. The provisions of
Section 7(d) of the Employment Agreement shall survive the
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Termination Date. Notwithstanding the provisions of the Employment
Agreement, however, for purposes of application of said Section 7(d) of
the Employment Agreement and for purposes of this Agreement, the term
"Accounting Firm" shall be deemed to refer to Xxxxxx Xxxxxxxx LLP.
(g) OUTPLACEMENT SERVICES. Executive may retain, in his sole
discretion, services of a recognized professional outplacement services
firm, including but not limited to Xxxxx Xxxx of Xxxx and Xxxx
Consultants, to provide such services to Executive as Executive may
require to find employment between the date hereof and the date
Executive accepts full time employment (including self-employment) or
one (1) year following the Departure Date, whichever occurs first. The
Company will reimburse Executive for up to Twenty-Five Thousand Dollars
($25,000) in services rendered by the outplacement services firm in
accordance with the provisions of this Section 6(g). If Executive so
elects, Executive and the Company will select a mutually agreeable
outplacement services firm (which may include Xxxx and Xxxx) to be
retained by the Company to provide the outplacement services described
in this Section 6(g), in which event the Company shall pay the
outplacement services firm directly for services rendered to and on
behalf of Executive.
(h) PROFESSIONAL ADVICE. The Company will reimburse Executive for up to
Fifteen Thousand Dollars ($15,000) in attorneys' fees actually incurred
by Executive in association with his departure from and termination of
employment with the Company, including review of the Employment
Agreement and professional services leading to the execution of this
Agreement. The Company will reimburse Executive for up to Five Thousand
Dollars ($5,000) for tax advice obtained by Executive from a public
accounting firm or other financial advisor associated with and relating
to his departure from and termination of employment with the Company.
(i) DEFERRED COMPENSATION. Executive may elect to defer the payout of
his vested deferred compensation so that it will be paid out over a
term of five (5) years following the Termination Date. To make such an
election, Executive must submit written notice thereof to the Company's
General Counsel not later than ten (10) business days following the
execution of this Agreement.
(j) LITIGATION ASSISTANCE. Executive agrees to provide reasonable
cooperation in connection with any ongoing or future litigation matter
in which his knowledge and experience as to the matter involved makes
his assistance of value to the Company, as determined by the Company in
its reasonable discretion.
7. MATERIAL BREACH.
(A) In the event that Executive willfully and
materially breaches the terms of Sections 8(b), 10 (but only
to the extent that Section 10 incorporates by reference
Sections 6(b) and Annex B of the Employment Agreement), 11,
12, 13(a), 13(c), 13(d) or 13(e) of this Agreement (a
"Material Breach") at any time after the date hereof and
within twenty-four (24) months following the Termination Date
(or,
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with respect to a particular provision, until the expiration
of his obligations with respect to such provision), in
addition to the Company's rights to obtain equitable relief or
damages for such breach, the Company may suspend the full
original or remaining amount of each tranche of Extended
Options (any such suspended options, "Suspended Options"). The
Company shall suspend Executive's right to exercise the
Suspended Options by (i) filing a request for arbitration
within a reasonable time after any senior manager (i.e., any
individual holding the title of Senior Vice President or
higher) learns of the Material Breach, which request
specifically states that the Company is suspending Executive's
right to exercise, or (ii) in the event the Company reasonably
determines that Executive's asserted Material Breach is
curable, by sending Executive a written notice describing the
Material Breach and the steps Executive must take to cure such
Material Breach. In the event that the Company asks Executive
to cure a Material Breach and Executive fails to cure such
breach to the Company's satisfaction within five (5) business
days following delivery to Executive of written notice from
the Company, the Company then may commence an arbitration
proceeding, in which case Executive's right to exercise the
Suspended Options will remain suspended. In the event that an
arbitrator determines that Executive has not committed a
Material Breach, the arbitrator may award Executive damages
directly caused by the suspension of Executive's right to
exercise the Suspended Options. In the event that an
arbitrator determines that Executive has committed a Material
Breach, the exercise period of the Suspended Options shall
terminate immediately without further action or decision by
the arbitrator, without prejudice to the Company's right to
obtain equitable relief or damages for such Material Breach;
provided that an award of additional damages (if any) shall
take into account termination of the Suspended Options.
Nothing contained herein otherwise shall be deemed to limit
the Company's right to obtain equitable relief or damages for
a Material Breach that occurs prior to or within twenty-four
(24) months following the Termination Date.
(B) Because a violation prior to the Termination Date
by Executive of Sections 13(a) or 13(e) of this Agreement may
cause the Company to incur great and irreparable damage,
Executive and Company agree that if Executive willfully and
materially breaches Sections 13(a) or 13(e) of this Agreement
prior to the Termination Date, then, in addition to whatever
other remedies the Company may have, the Company's obligations
to make or continue to make future payments and deliveries
("Payments") under Sections 5(a) (base salary), 5(b) (2001
cash bonus) and 5(e) (2001 Grant and 2002 Vesting Shares)
shall cease (a "termination for Cause"), PROVIDED, HOWEVER,
that any termination for Cause shall be subject to the
following:
(i) Notice of intention to terminate for Cause has
been given to Executive in writing by the Company
within 30 days after the Chief Executive Officer of
the Company learns of the act, failure to act or
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event (or latest in a series of acts, failures to act
or events) constituting Cause;
(ii) Executive has been given written notice of the
particular acts, failures to act or events which
forms the basis for the Company's assertion for a
termination for Cause and has been afforded at least
30 days in which (A) to present his position with
respect to such basis in writing in person with
counsel present at a meeting of the Company's Board
of Directors and, (B) if, in the reasonable judgment
of the Company, such act, failure to act or event is
curable, Executive has been given a reasonable
opportunity to cure the asserted basis for Cause; and
(iii) In the event that two-thirds of the Company's
outside Board of Directors reasonably determines that
Executive's written statement of his position with
respect to the Company's assertion of Cause is not
satisfactory and, if curable, Executive failed to
cure to the Company's reasonable satisfaction, the
Company then may commence an arbitration proceeding
to establish its right to terminate for Cause. In the
event that an arbitrator determines that the Company
does not have a right to terminate for Cause, the
Company's obligation to continue making Payments
under Sections 5(a), 5(b) and 5(e) shall continue.
The arbitration shall take place in accordance with
the procedures described in paragraph 17(e) hereof.
In the event that the date of payment for any Payment
occurs while the process described in subsections (i)
through (iii) hereof is pending, the Company shall
pay that installment of the cash (and deliver the
shares contemplated by Section 5(e)) into an escrow
account in accordance with and subject to the escrow
provisions of Section 17(e) hereof. The arbitrator
shall direct that the amount held in escrow,
including accrued interest (and dividends on shares),
be paid over to the prevailing party. Nothing in this
Section 7(B) shall be deemed to preclude the Company
or Executive from seeking equitable relief in a court
as specified in, and for the limited purposes set
forth in, this Agreement (or the Employment
Agreement, to the extent incorporated herein).
The provisions of this Section 7(B) shall not apply after a
Change in Control (as defined in the Employment Agreement) or after the
Termination Date, and after a Change in Control or after the
Termination Date the Company's remedy for a breach by Executive of
Sections 13(a) or 13(e) shall be to (i) to the extent permitted, take
the actions contemplated by Section 7(A) and/or (ii) seek injunctive
relief and/or (iii) bring an arbitration proceeding for monetary
damages.
8. RELEASE OF CLAIMS.
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(a) Executive, on behalf of himself and his successors, heirs, assigns,
executors, administrators and/or estate, hereby irrevocably and
unconditionally release, acquit and forever discharge the Company, its
subsidiaries, divisions and related or affiliated entities, and each of
their respective predecessors, successors or assigns, and the officers,
directors, partners, shareholders, representatives, employees and
agents of each of the foregoing (the "Releasees"), from any and all
charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses (including
attorneys' fees and costs actually incurred), known or unknown, that
directly or indirectly arise out of, relate to or concern Executive's
employment or termination of employment with the Company ("Claims"),
which Executive has, owns or holds, or at any time heretofore had,
owned or held against the Releasees up to the date on which Executive
executes this Agreement, including without limitation, express or
implied, all Claims for: breach of express or implied contract;
promissory estoppel; fraud, deceit or misrepresentation; intentional,
reckless or negligent infliction of emotional distress; breach of any
express or implied covenant of employment, including the covenant of
good faith and fair dealing; interference with contractual or
advantageous relations; discrimination on any basis under federal,
state or local law, including without limitation, Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act, as amended, The Age Discrimination in Employment Act, as amended,
and the [California Fair Employment and Housing Act, Cal. Gov't. Code
Sections 12940, ET SEQ., as amended;] and all claims for defamation or
damaged reputation.
(b) Executive represents and warrants that he has not filed any
complaints or charges asserting any Claims against the Releasees with
any local, state or federal agency or court. Executive further
represents and warrants that he has not assigned or transferred to any
person or entity any Claims or any part or portion thereof.
(c) Executive agrees that he will not hereafter pursue any Claim
against any Releasee (including without limitation any claim seeking
reinstatement with, or damages of any nature, severance, incentive or
retention pay, attorney's fees, or costs) by filing a lawsuit in any
local, state or federal court for or on account of anything which has
occurred up to the present time as a result of Executive's employment;
PROVIDED, however, that nothing in this Section 8 shall be deemed to
release the Company from any claims that Executive may have (i) under
this Agreement, (ii) for indemnification pursuant to and in accordance
with applicable statutes, the by-laws of the Company and Section 4(b)
of the Employment Agreement, (iii) vested pension or retirement
benefits under the terms of qualified employee pension benefit plans,
(iv) accrued but unpaid wages, or (v) for excise tax payments pursuant
to Section 7(d) of the Employment Agreement.
9. RELEASE BY THE COMPANY.
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(a) The Company, on behalf of itself, its subsidiaries, divisions and
related or affiliated entities and each of their respective
predecessors, successors or assigns hereby irrevocably and
unconditionally releases, acquits and forever discharges Executive,
Executive's successors, heirs, assigns, executors, administrators
and/or estate (the "Xxxxxx Releasees"), from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorney's fees
and costs actually incurred) that directly or indirectly arise out of,
relate to or concern Executive's employment or termination of
employment with the Company (the "Company Claims") which the Company
has, owns or holds, or at any time heretofore had, owned or held
against the Xxxxxx Releasees up to the date on which it executes this
Agreement.
(b) The Company represents and warrants that it has not filed any
complaints or charges asserting any Company Claims against the Xxxxxx
Releasees with any local, state or federal agency or court. The Company
further represents and warrants that it has not assigned or transferred
to any person or entity any Company Claims or any part or portion
thereof.
(c) The Company agrees that it will not hereafter pursue any Company
Claims against any Xxxxxx Releasees by filing a lawsuit in any local,
state or federal court for or on account of anything which has occurred
up to the present time as a result of Executive's employment; PROVIDED,
HOWEVER, that nothing in this Section 9 shall be deemed to release
Executive from any claims the Company may have (i) under this
Agreement, or (ii) for breaches prior to the date hereof of the
nondisclosure provisions of Section 6 of the Employment Agreement or
Annex B to the Employment Agreement.
10. EMPLOYMENT AGREEMENT. Except as set forth in the next sentence or as
expressly provided elsewhere in this Agreement, this Agreement
supersedes all provisions of the Employment Agreement as of the
Termination Date only. Nothing contained herein, however, shall be
deemed to terminate Executive's obligations to the Company or the
Company's obligations to Executive under Sections 4(b)
(Indemnification), 6 (Records/Nondisclosure/Company Policies), 7(d)
(Excise Tax Payment), 8(c) (Specific Enforcement), and 13(a)
(Resolution of Disputes) (as modified by Section 17 hereinbelow) of the
Employment Agreement, Annexes A (Code of Ethics) or B (Nondisclosure
Agreement, provided however that Executive's obligation to return
documents in accordance with Annex B shall be effective as of the
Termination Date and not as of the Departure Date except as the Company
may otherwise request in writing) thereto, or the Company's Stock
Option Plan or the Stock Option Agreements entered into by Executive
from time to time (as modified by Section 6(f) hereinabove).
11. RETURN OF PROPERTY. In accordance with Section 4 of the Nondisclosure
Agreement, dated as of March 9, 1998, by and between Executive and Bay
Apartment
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Communities, Inc. (a predecessor name to the Company), and incorporated
in the Employment Agreement as Annex B ("Nondisclosure Agreement"),
Executive agrees that promptly following the Departure Date he will
return to the Company (a) all records, manuals, correspondence, notes,
financial statements, computer printouts and other documents and
recorded material of every nature (including copies thereof) that may
be in Executive's possession or control dealing with Confidential
Information (as defined in Section 8 of the Nondisclosure Agreement)
and, (b) other property, in each case except to the extent that the
Company agrees Executive may retain such material for purposes of
fulfilling his consulting duties under Section 4. In any event,
Executive may retain his laptop computer until the Termination Date.
For the purpose of avoiding confusion, prior to the Departure Date
Executive shall provide Company with a letter that lists the furniture
and other items which are owned by Executive but which are currently
used in the Company's offices, and in the event that such items remain
(with the Company's consent) in the Company's offices after the
Departure Date, Executive may reclaim such items upon reasonable
notice.
12. ADVERSE ACTIONS. Executive agrees that for forty-eight (48) months
following the date Executive executes this Agreement without the prior
written consent of the Company Executive shall not, directly or
indirectly or in any manner, or solicit, request, advise, assist or
encourage any other person or entity to, (a) undertake any action that
would be reasonably likely to, or is intended to, result in a Change in
Control (as that term is defined in the Employment Agreement) of the
Company, including, for these purposes, without limitation, a valuation
of the Company; (b) seek to change or control in any manner the
management or the Board of Directors of the Company, or the business,
operations or affairs of the Company; or (c) undertake an investment
(other than in respect to the equity rights described in Section 6
above) in the Company.
13. NON-DISPARAGEMENT, NONDISCLOSURE AND NON-SOLICITATION.
(a) NON-DISPARAGEMENT. Executive and Company each agree that, if asked
about the other, he or it will only speak or write positively of the
other. However, for the purpose of avoiding disputes and litigation
arising from a violation of this Section 13(a), Executive and Company
each agree that there will only be a violation of this covenant if a
party willfully disparages the other with the intent of harming the
other. References to the Company in this Section 13(a) mean the
following individuals of the Company: the Company's directors and any
officer of the Company who holds a title equal to or senior to Senior
Vice President. The provisions of this Section 13(a) shall not apply to
any truthful statement required to be made by Executive or any director
or senior officer of the Company, as the case may be, in any legal
proceeding, governmental or regulatory investigation, in any public
filing or disclosure legally required to be filed or made, and also
shall not apply to any confidential discussion or consultation with
professional advisors.
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(b) NON-DISCLOSURE OF TERMS OF AGREEMENT. Executive agrees not to
disclose the terms of this Agreement, except (i) to Executive's
professional advisors, including accountants and attorneys (provided
they agree to keep such information confidential), (ii) to the extent
that, prior to Executive's disclosure, the Company has previously
disclosed such information publicly, whether in its filings with the
Securities & Exchange Commission or otherwise, and (iii) (A) pursuant
to a valid subpoena or (B) as otherwise required by law, but in either
(iii)(A) or (iii)(B) only after providing the Company, to the attention
of its Chief Executive Officer, with prior written notice and
reasonable opportunity to contest such subpoena or other requirement.
In the case of the circumstances contemplated by subsections
13(b)(iii)(A) or (B), written notice shall be provided to the Company
as soon as practicable, but in no event less than five (5) business
days before any such disclosure is compelled, or, if disclosure is
compelled earlier, not later than the next business day following
Executive's receipt of notice compelling such disclosure.
(c) NON-DISCLOSURE. In furtherance of Executive's obligations under
this Agreement, Executive further agrees that he shall not disclose,
provide or reveal, directly or indirectly, any confidential information
concerning the Company, including without implication of limitation,
their respective operations, plans, strategies or administration, to
any other person or entity unless compelled to do so pursuant to (i) a
valid subpoena or (ii) as otherwise required by law, but in either case
only after providing the Company, to the attention of its Chief
Executive Officer, with prior written notice and opportunity to contest
such subpoena or other requirement. Written notice shall be provided to
the Company as soon as practicable, but in no event less than five (5)
business days before any such disclosure is compelled, or, if
disclosure is compelled earlier, not later than the next business day
following Executive's receipt of notice compelling such disclosure.
(d) COMPETITION. Until the Termination Date, Executive will be subject
to and agrees to observe Section 8(a) of the Employment Agreement (as
modified on July 30, 1999). The Company confirms that the Chief
Executive Officer of the Company has been delegated by the Board (by
resolution dated February 14, 2001) authority, without further Board
consent, to provide a waiver to Executive of his obligations under
Section 8(a) of the Employment Agreement. The Company agrees that
nothing in this or any other agreement prohibits Executive, after the
Termination Date, from competing with, or providing services to an
entity that competes with, the Company; that such competition or
services alone would not constitute a violation of this or any other
agreement or law; and that the Company will not assert that such
competition or services alone constitutes a violation of this or any
agreement or law on the theory that it inevitably would result in the
disclosure of confidential information or trade secrets. This
provision, however, shall not relieve Executive of any obligation
Executive may have under the Employment Agreement, Annex B thereto, or
common or statutory law not to actually disclose trade secrets or
confidential information. Nor does this provision relieve Executive of
his obligations under Section 12 or the other paragraphs of Section 13
of this Agreement.
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(e) NON-SOLICITATION. Commencing with the date of execution of this
Agreement and continuing until two (2) years following the Termination
Date, Executive shall not solicit or attempt to solicit for employment
with or on behalf of any corporation, partnership, venture or other
business entity, including any business operated by Executive as a sole
proprietorship or for employment by Executive personally, any employee
of the Company or any person who was formerly employed by the Company
within the preceding six (6) months, unless such person's employment
was terminated by the Company. The provisions of this Section 13(e)
shall not apply to any solicitation by Executive of Xxxxxx Xxxxxx,
provided such solicitation occurs on or after June 30, 2001.
14. EXCLUSIVITY. This Agreement sets forth all the consideration to which
Executive is entitled by reason of the termination of Executive's
employment, and Executive agrees that he shall not be entitled to or
eligible for any payments or benefits under any other Company
severance, bonus, retention or incentive policy, arrangement, plan or
agreement.
15. TAX MATTERS. All payments and other consideration provided to Executive
pursuant to this Agreement shall be subject to any deductions,
withholding or tax reporting that the Company reasonably determines to
be required for tax purposes; provided, that nothing contained in this
Section 15 affects Executive's independent obligation and primary
responsibility, which obligation and responsibility Executive hereby
affirms, to determine and make proper judgments regarding the payment
of taxes under applicable law.
16. REALEUM INVESTMENT.
(a) On or about July 5, 2000, Executive was granted 1,000 LLC shares in
AvalonBay Trillium Employee LLC ("Trillium LLC") under the Company's
Special Technology Equity Grant Plan. Notwithstanding Section 3.1 of
the Vesting Certificate related to such grant, on the Departure Date
such 1,000 LLC shares shall vest. The Company hereby waives its right,
under Section 3.4 of such Vesting Certificate, to exercise its
repurchase right.
(b) On or about July 5, 2000, Employee purchased, pursuant to the
Company's Special Technology Equity Purchase Plan, 81,274 LLC shares in
Trillium LLC for an aggregate purchase price of $26,820.42. Such
purchase was subject to a Vesting Certificate. The Company hereby
waives its right, under Section 3.4 of such Vesting Certificate, to
exercise its repurchase right.
(c) The Company shall provide information regarding Trillium LLC to
Executive to the same extent as the Company provides information
regarding Trillium LLC generally to those members of Trillium LLC who
are employees of the Company, provided that the Company may require a
reasonable confidentiality letter before providing such information.
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17. ARBITRATION.
(a) Any controversy or claim arising out of or relating to this
Agreement or the breach hereof shall be resolved in the manner set
forth in Section 13(a) (Resolution of Disputes) of the Employment
Agreement, as modified by this Section 17.
(b) In the event any legal action or proceeding, including arbitration
or declaratory relief, is commenced by the Company with respect to any
controversy or claim arising out of or relating to this Agreement or
the breach hereof, or otherwise to enforce any rights or obligations
under this Agreement, the arbitrator or, in the case of a claim for
equitable relief, the judge in such proceeding (i) shall have
discretion to award to Executive if Executive is the prevailing party
reasonable attorney's fees and costs, if any, in said action or
proceeding, but (ii) regardless of the outcome in said action or
proceeding, shall not award to the Company any of its attorney's fees
or costs.
(c) In the event any legal action or proceeding, including arbitration
or declaratory relief, is commenced by Executive with respect to any
controversy or claim arising out of or relating to this Agreement or
the breach hereof, or otherwise to enforce any rights or obligations
under this Agreement, the arbitrator or, in the case of a claim for
equitable relief, the judge in such proceeding shall have discretion to
award the prevailing party reasonable attorney's fees and costs, if
any, in said action or proceeding.
(d) An award of attorney's fees and costs pursuant to subsections (b)
or (c) above shall take into account the amount or degree of relief
awarded to the prevailing party relative to that party's demands. An
award of reasonable attorney's fees and costs also shall take into
account any offer of settlement or judgment by the non-prevailing
party. Attorney's fees and costs incurred by the prevailing party from
and after the date of such an offer of settlement or judgment may be
limited or eliminated to the extent that the value of the final
judgment in favor of the prevailing party does not materially exceed
the value of the offer of settlement or judgment.
(e) It is the intention of the Company to fulfill its obligations and
make all payments and deliveries required under this Agreement. A
non-material breach by Executive of this Agreement shall not justify
the Company's failure to pay or deliver, it being the understanding
that in the case of a non-material breach the Company's remedy is to
commence an arbitration proceeding to determine the damages to the
Company, which damages then may be set off against future payments.
However, in the event Executive believes that any payments or
deliveries are owed to Executive by the Company under this Agreement
and have not been paid or delivered when due, Executive may make a
written demand for payment or delivery. In such event, there shall be
deemed to be a "Dispute." In the event of a Dispute, the Company shall
deposit the overdue payment and delivery on which the Dispute is based
to a mutually acceptable escrow agent to be held in an escrow account
pending an arbitration award or satisfactory resolution of the Dispute
by the parties. The escrowed cash payments
14
shall be invested as directed by the Company, but if cumulative
earnings as of the end of any calendar month are less than 18%
(eighteen percent) on an annualized basis compounded monthly the
Company shall pay an amount equal to the shortfall of such cumulative
earnings into the escrow account monthly until the Dispute is resolved
(said fees, deliveries, payments, or other consideration, together with
interest thereon hereinafter referred to as the "Escrow"). Promptly
following the commencement of a Dispute, Executive and the Company
shall commence an arbitration proceeding to determine whether in fact
the Company owes the Escrow to Executive. The arbitrator shall direct
that the Escrow be paid over to the prevailing party. In connection
with such arbitration, the Company shall advance Executive reasonable
attorney's fees, subject to Executive's undertaking to repay such
advanced fees in the event that Executive does not prevail on any
material issue. In the event that the Company prevails in such an
arbitration and the arbitrator finds that Executive's commencement of
the Dispute was (i) not made in good faith or (ii) was reckless, then
Executive shall pay to the Company interest on (i) the deposits made by
the Company into the Escrow from time to time and (ii) the amount of
advances for attorney's fees made from time to time at a rate of 8%
(eight percent) (on an annualized basis compounded monthly).
18. NOTICES, ACKNOWLEDGMENTS AND OTHER TERMS
(a) Executive is advised to consult with an attorney and tax advisor
before signing this Agreement. Executive acknowledges that he has
consulted with an attorney of his choice.
(b) Executive acknowledges and agrees that the Company's promises in
this Agreement include consideration in addition to anything of value
to which Executive is otherwise entitled by reason of the termination
of his employment.
(c) Executive acknowledges that he has been given the opportunity, if
he so desires, to consider this Agreement for twenty-one (21) days
before executing it. If Executive breaches any of the conditions of the
Agreement within the twenty-one (21) day period, the offer of this
Agreement will be withdrawn and Executive's execution of the Agreement
will not be valid. In the event that Executive executes and returns
this Agreement within twenty-one (21) days or less of the date of its
delivery to Executive, Executive acknowledges that such decision was
entirely voluntary and that Executive had the opportunity to consider
this letter agreement for the entire twenty-one (21) day period.
(d) By signing this Agreement, Executive acknowledges that he is doing
so voluntarily and knowingly, fully intending to be bound by this
Agreement. Executive also acknowledges that he is not relying on any
representations by any representative of the Company concerning the
meaning of any aspect of this Agreement. Executive understands that
this Agreement shall not in any way be construed as an admission by the
Company of any liability or any act of wrongdoing whatsoever by the
Company
15
against Executive and that the Company specifically disclaims any
liability or wrongdoing whatsoever against Executive on the part of
itself and its officers, directors, shareholders, employees and agents.
Executive understands that if he does not enter into this Agreement and
bring any claims against the Company, the Company will dispute the
merits of those claims and contend that it acted lawfully and for good
business reasons with respect to Executive.
(e) In the event of any dispute, this Agreement will be construed as a
whole, will be interpreted in accordance with its fair meaning, and
will not be construed strictly for or against either Executive or the
Company. Section headings and parenthetical explanations of section
references are for convenience only and shall not be used to interpret
the meaning of any provision or term of this Agreement.
(f) Any notices required to be given under this Agreement shall be
provided in writing and delivered by hand or certified mail, and shall
be deemed to have been duly given when received at the following
addresses, unless and to the extent that notice of change of address
has been duly given hereunder
If to Executive at:
Mr. Xxxxxx Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
If to the Company, to it at:
AvalonBay Communities, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
AvalonBay Communities, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
16
and a copy to:
Xxxxxx X. Xxxxxx, Esq,
Littler Xxxxxxxxx, PC
000 Xxxxxxxxxx Xx., 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
(g) The law of the State of Virginia will govern any dispute about this
Agreement, including any interpretation or enforcement of this
Agreement.
(h) In the event that any provision or portion of a provision of this
Agreement shall be determined to be illegal, invalid or unenforceable,
the remainder of this Agreement shall be enforced to the fullest extent
possible and the illegal, invalid or unenforceable provision or portion
of a provision will be amended by a court of competent jurisdiction, or
otherwise thereafter shall be interpreted, to reflect as nearly as
possible without being illegal, invalid or unenforceable the parties'
intent if possible. If such amendment or interpretation is not
possible, the illegal, invalid or unenforceable provision or portion of
a provision will be severed from the remainder of this Agreement and
the remainder of this Agreement shall be enforced to the fullest extent
possible as if such illegal, invalid or unenforceable provision or
portion of a provision was not included.
(i) This Agreement may be modified only by a written agreement signed
by Executive and an authorized representative of the Company.
(j) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and, except as expressly
provided herein, supersedes all prior agreements between the parties
with respect to any related subject matter.
(k) This Agreement shall be binding upon each of the parties and upon
their respective heirs, administrators, representatives, executors,
successors and assigns, and shall inure to the benefit of each party
and to their heirs, administrators, representatives, executors,
successors, and assigns.
If Executive agrees to these terms, please sign and date below and
return this Agreement to the Company's Chief Executive Officer by March 1, 2001.
This Agreement may be executed in counterparts and/or by facsimile transmission,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature.
Sincerely,
AvalonBay Communities, Inc.
17
By: \s\ XXXXXXX X. XXXXXXX
--------------------------------
Xxxxxxx X. Xxxxxxx
Its: Executive Chairman
Accepted and Agreed to:
\s\ XXXXXX XXXXXX
--------------------------------
Xxxxxx Xxxxxx
Dated:
--------------------------
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