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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 9th day of March,
1998 by and between Xxx X. Xxxxxxx ("Employee") and Bay Apartment Communities,
Inc., a Maryland corporation (the "Company").
WHEREAS, Employee and the Company have previously entered into an
Employment Agreement as of November 10, 1995 (the "Prior Agreement"); and
WHEREAS, pursuant to the Agreement and Plan or Merger, by and between
the Company and Avalon Properties, Inc., dated as of March 9, 1998 (the "Merger
Agreement"), Avalon Properties, Inc. will merge into the Company; and
WHEREAS, Employee and the Company desire to enter into a new employment
agreement, effective as of the consummation of the merger contemplated by the
Merger Agreement (the "Effective Date"), to replace the Prior Agreement.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Term. Subject to the consummation of the merger contemplated by the
Merger Agreement, the Company hereby agrees to employ Employee, and Employee
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Agreement for the period commencing on the Effective Date and
terminating on the first anniversary of the Effective Date, unless earlier
terminated as provided in Section 9 below. The term of the Agreement shall not
be extended. The period of Employee's employment under the Agreement is herein
referred to as the "Employment Period."
2. Employment. During the Employment Period, Employee shall be employed
as a senior executive officer of the Company with the title of Senior Vice
President-Merger Integration. Employee acknowledges and consents to his removal
as a member of the Board of Directors of the Company (the "Board of Directors")
on the earlier of the date of Company's 1998 annual meeting or the Effective
Date. In the performance of his duties, Employee shall be subject to the
direction of the Chief Executive Officer, the Senior Vice President-Property
Operations and the Board of Directors. Employee's duties and authority shall be
commensurate with his title and position with the Company. Employee agrees to
his employment as described in this Section 2 and agrees to devote substantially
all of his business time and efforts to the business and affairs of the Company.
Employee agrees to serve the Company faithfully and to the best of his ability,
and to perform such services and duties in connection with the business, affairs
and operations of the Company as may be assigned or delegated to him from time
to time by or under, and in accordance with, the authority and direction of the
Board of Directors, and to use his reasonable best efforts in the promotion and
advancement of the Company and its welfare.
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3. Noncompetition During Employment Period. Because Employee's services
to the Company are essential and because Employee has access to the Company's
confidential information, Employee covenants and agrees that during the
Employment Period, Employee will be a full-time employee of the Company as
provided in Section 2 hereof and Employee will not, without the express prior
written consent of the Board of Directors invest in any property or any business
or venture which competes, directly or indirectly, with the Company in the
development, construction, acquisition, management, leasing or marketing of
multi-family apartment communities or which investment would require Employee's
active involvement in such business or venture or would materially impair
Employee's ability to perform fully his obligations under this Agreement.
Notwithstanding anything contained herein to the contrary, Employee is not
prohibited by this Section 3 from making investments in any entity that owns,
invests in, refurbishes, manages, leases or markets multi-family apartment
communities if the shares of such entity are publicly traded and Employee's
aggregate investment in such entity constitutes less than 1% of the equity
ownership of such entity or from making passive investments in any properties or
other businesses provided that such investments are first offered to the Company
and refused by the Board of Directors.
4. Non-Solicitation. During the Employment Period and for a period of
one year following the date of any termination of employment, Employee shall
not, without the prior written consent of the Company, except in the course of
carrying out his duties hereunder, solicit or attempt to solicit for employment
with or on behalf of any corporation, partnership, venture or other business
entity, any employee of the Company or any of its affiliates or any person who
was formerly employed by the Company or any of its affiliates within the
preceding six months, unless such person's employment was terminated by the
Company or any of such affiliates. The agreement set forth in this Section 4
shall survive the expiration of the Employment Period and any termination of
this Agreement.
5. Base Salary. During the Employment Period, Employee's salary will be
at the rate of $250,000 per year ("Base Salary"). Base Salary shall be payable
in accordance with the Company's normal business practices for senior executive
officers, but no less frequently than monthly.
6. Initial Stock Option Grant. Notwithstanding the consummation of the
Merger, the Company shall grant to Employee on the date hereof a non-qualified
option to purchase 50,000 shares of common stock of the Company, par value $.01
per share ("Common Stock"), which option shall be referred to hereunder as the
"Company Stock Option". The Company Stock Option shall be granted at an exercise
price equal to $37.00. The Company Stock Option shall be granted with a 10-year
term and shall be exercisable as to 100% of the shares covered thereby on the
tenth anniversary of the date hereof so long as Employee remains employed by the
Company or one of its affiliates; provided, that, if the Merger is consummated,
the Company Stock Option shall be exercisable to the extent of 33 1/3% of the
shares covered thereby on each of the first three anniversaries of the Effective
Date, so long as Employee remains employed by the Company or one of its
affiliates.
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7. Incentive Compensation. Employee will be eligible for bonus
compensation in an amount up to 75% of the annual Base Salary with a target of
50% ("Bonus Compensation"), subject to proration for any period less than a full
year. The amount of Bonus Compensation to be paid to the Employee will be
determined by the Compensation Committee of the Board of Directors in its sole
and absolute discretion. In addition to Bonus Compensation, Employee will have
an opportunity to earn as long-term incentive compensation up to 2,000
restricted shares of Common Stock and an option to acquire up to 25,000 shares
of Common Stock. Any such grants shall be determined in the sole and absolute
discretion of the Compensation Committee of the Board of Directors.
8. Automobile and Other Benefits.
(a) Automobile. During the Employment Period, the Company shall
provide Employee with a monthly car allowance of not less than $750 per month.
(b) Other Benefits. During the Employment Period, Employee shall
have the right to participate in the Company's 401(k) Savings Plan, and any
health, dental, retirement, pension or other benefit plans that are made
generally available to all full-time employees of the Company from time to time.
Employee shall be entitled to reasonable paid vacation time in accordance with
the then regular procedures of the Company for senior executive officers.
9. Termination.
(a) At-Will Employment. Employee's employment hereunder is "at
will" and the Employment Period may be terminated by the Company at any
time prior to the expiration of the term of this Agreement in Section 1
for any reason upon ten (10) days' written notice to Employee, subject
only to the severance provisions set forth in Section 9(b) hereof.
(b) Certain Benefits upon Termination by Company without Cause or
by Employee With Good Reason. In the event that (A) Employee is
terminated by the Company without Cause (as defined in Section 9(d)
below) on or before the expiration of the Employment Period in Section
1, including termination of employment upon expiration of the Agreement,
or (B) Employee voluntarily terminates his employment for Good Reason
(as defined in 9(d) below), the Company shall continue to pay Employee's
Base Salary for the twelve (12) months immediately following the date of
termination of the Employment Period, at the rate in effect on the date
of termination and on the same periodic payment dates as payment would
have been made to Employee had the Employment Period not been
terminated. In addition, for the twelve (12) month period referred to in
the previous sentence, Employee will be eligible for Bonus Compensation
pursuant to Section 7 and the Company shall pay, for such twelve (12)
month period, for continuation coverage available to Employee under the
Company's health and dental plans and the car allowance under Section
8(a). Upon
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Employee's termination of employment, all options and restricted stock
awards granted to the Employee prior to March 5, 1998 shall become fully
vested and exercisable on the date of termination under this Section
9(b) and shall continue to be exercisable until the close of business on
the 91st day following said date of termination. With regard to the
Company Stock Option and other stock options and restricted stock grants
awarded under this Agreement, the following shall apply: (i) any stock
option, to the extent vested and exercisable pursuant to the terms of
the original grant agreement, shall continue to be exercisable until the
close of business on the 91st day following the date of termination, and
(ii) any other unvested stock awards, including any unvested restricted
stock or unexercisable stock option (but in no event vested restricted
stock), shall cease vesting and be forfeited on the date of termination.
(c) Termination by the Company for Cause or by Employee Without
Good Reason. In the event that (A) Employee is terminated by the Company
for Cause (as defined in Section 9 (d) below) or (B) Employee
voluntarily terminates his employment without Good Reason (as defined in
Section 9(d) below), then the Employment Period shall terminate as of
the effective date set forth in the written notice of such termination
in (A) or the date of termination in (B) and (i) Employee shall be
entitled to receive only his Base Salary at the rate provided pursuant
to Section 5 which is payable prior to the date of termination, (ii) any
outstanding vested stock options, including the Company Stock Option or
other stock options awarded under this Agreement, to the extent vested,
shall continue to be exercisable until the close of business on the 30th
day following such date of termination and (iii) other unvested stock
awards, including any unvested restricted stock or unexercisable Company
Stock Options (but in no event vested restricted stock), shall cease
vesting and be forfeited on the date of termination.
(d) Definitions. "Cause" shall mean a finding by the Board of
Directors that the Employee has (A) acted with gross negligence or
willful misconduct in connection with the performance of his material
duties hereunder, (B) defaulted in the performance of his material
duties hereunder and has not corrected such action within fifteen (15)
days of receipt of written notice thereof; (C) committed a material act
of common law fraud against the Company or its employees, which act has
had an adverse impact on the financial affairs of the Company; or (D)
been convicted of a felony and such conviction has had an adverse effect
on the interests of the Company. "Good Reason" shall mean (I) a failure
by the Board of Directors to elect Employee to offices with the same or
substantially the same duties and responsibilities as set forth in
Section 2, or (ii) a failure by the Company to comply with the
provisions of Sections 5, 6 or 7, provided that the Employee delivers
written notice of any such failure to the Board of Directors.
10. Remedies For Breach. If Employee breaches the terms of this
Agreement, in addition to any other remedies which it may have, the Company may
terminate Employee's employment and any further participation in any employee
plan in accordance with employment policies of the Company, as in effect from
time to time, and Employee shall
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forfeit any further compensation. In addition, the provisions of this Agreement
may be specifically enforced if not performed according to their terms. Without
limiting the generality of the foregoing, the parties acknowledge that the
Company would be irreparably damaged and there would be no adequate remedy at
law for Employee's breach of Sections 3, 4 and 11 hereof and, accordingly,
Employee hereby consents to the entry of any temporary restraining order or
preliminary or ex parte injunction, in addition to any other remedies available
at law or in equity, to enforce the provisions thereof. This Section 10 and the
agreement hereunder shall survive the termination of this Agreement.
11. Records and Nondisclosure of Confidential Information. All records,
financial statements and similar documents obtained, reviewed or compiled by
Employee in the course of the performance by him of services for the Company,
whether or not confidential information or trade secrets, shall be the exclusive
property of the Company. Employee shall have no rights in such documents upon
any termination of this Agreement. Employee agrees to comply with and be bound
by the Company's Policy on Securities Trading and Disclosure of Confidential
Information previously delivered to Employee and made a part hereof. The
agreement set forth in this Section 11 shall survive the expiration of the
Employment Period and any termination of this Agreement.
12. Waiver. The failure of the Company to require the performance of any
term or obligation provided for herein, or the waiver by the Company of any
breach of this Agreement, shall not prevent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.
13. Conflicting Agreements. Employee hereby represents and warrants that
the execution of this Agreement and the performance of his duties and
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants in favor of any other person
or entity which could affect the performance of his duties hereunder.
14. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. This
Agreement supersedes and replaces any prior agreement or arrangement relative to
Employee's employment by the Company, and all such prior agreements and
arrangements are hereby terminated.
15. Governing Law and Severability. This Agreement shall be governed by
and construed under the laws of the State of California and shall not be
modified or discharged in whole or in part except by an agreement in writing
signed by the parties hereto. In case any one or more of the provisions or parts
of a provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision or part of a provision had been limited or
modified (consistent with its general intent) to the extent necessary so that it
shall be valid, legal and enforceable, or if it shall not be
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possible to so limit or modify such invalid, illegal or unenforceable provision
or part of a provision, this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or part of a provision had never been
contained herein, and the parties will use their best efforts to substitute a
valid, legal and enforceable provision which, insofar as practicable, implements
the purpose and intent of the provision or part of such provision originally
contained herein.
16. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that this Agreement may not be assigned by
Employee without the prior written consent of the Company. The Company shall
require any successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets of the Company, by an agreement in form and
substance satisfactory to Employee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
17. Miscellaneous. This Agreement constitutes the entire agreement
between the parties concerning the subjects hereof and supersedes any and all
prior agreements or understandings, including, without limitation, any plan or
agreement providing benefits in the nature of severance, but excluding benefits
provided under other Company plans or agreements, except to the extent this
Agreement provides greater rights than are provided under such other plans or
agreements. As of the Effective Date, this Agreement supersedes the Prior
Agreement which will have no further force or effect. Employee hereby waives, to
the extent applicable, the effect of the transactions contemplated by the Merger
Agreement (or shareholder approval of such transaction) on any change in control
provisions in any employee benefit plan or agreement of the Company.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
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IN WITNESS WHEREOF, the Agreement is entered into as of the date first
written above.
BAY APARTMENT COMMUNITIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Title: Chairman of the Board and President
/s/ Xxx X. Xxxxxxx
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XXX X. XXXXXXX
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