SEVERANCE AGREEMENT
Exhibit 10.30
THIS SEVERANCE AGREEMENT (“Agreement”) is entered into as of September 10, 2004 by and between Equity Residential, a Maryland real estate investment trust (the “Company”), and Xxxxx Xxxxxxx (the “Executive”).
WITNESSETH
WHEREAS, the Board of Trustees of the Company (the “Board”) recognizes that the possibility of a Change in Control (as hereinafter defined) exists or may exist in the future and that the threat or the occurrence of such an event can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its shareholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control of the Company and to ensure her continued dedication and efforts in such event without undue concern for her personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of either a Change in Control or a termination of her employment by the Company without cause, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event her employment is terminated as a result of such an event.
AGREEMENT
NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein and other good and valuation consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of the date hereof and shall continue in effect until the date the Executive’s employment is terminated.
2. Definitions
2.1 Accrued Compensation. “Accrued Compensation” shall mean an amount which shall include all amounts earned or accrued through the “Termination Date” (as hereinafter defined) but not paid as of the Termination Date for: (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, and (iii) vacation and sick leave pay (to the extent provided by Company policy or applicable law).
2.2 Base Amount. “Base Amount” shall mean the Executive’s annual base salary at the rate in effect on the Termination Date.
2.3 Bonus Amount. “Bonus Amount” shall mean the annual average of the cash amount paid to the Executive under the Company’s annual cash bonus plan for the two years immediately preceding the year in which the Executive’s employment terminates. If the Executive’s employment is terminated prior to payment of the 2005 calendar year bonus,
“Bonus Amount” shall mean 100% of the target bonus that the Executive would have been eligible to receive for such year.
2.4 Cause. A termination of employment is for “Cause” if the Executive has been convicted of a felony involving fraud or dishonesty or the termination is evidenced by a resolution adopted in good faith by at least two-thirds of the Board that the Executive: (i) intentionally and continually failed substantially to perform her reasonably assigned duties with the Company (other than a failure resulting from the Executive’s incapacity due to physical or mental illness or from the Executive’s assignment of duties that would constitute “Good Reason” as hereinafter defined) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Executive specifying the manner in which the Executive has failed substantially to perform or (ii) intentionally engaged in conduct which is demonstrably and materially injurious to the Company; provided, however, that no termination of the Executive’s employment shall be for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Executive a copy of a written notice setting forth that the Executive was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail and (y) the Executive shall have been provided an opportunity to be heard in person by the Board (with the assistance of the Executive’s counsel if the Executive so desires). Neither an act nor a failure to act, on the Executive’s part shall be considered “intentional” unless the Executive has acted or failed to act with a lack of good faith and with a lack of reasonable belief that the Executive’s action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Agreement to the contrary, no failure to perform by the Executive after a Notice of Termination (as defined in Section 2.9) is given by the Executive shall constitute Cause for purposes of this Agreement.
2.5 Change in Control. A “Change in Control” shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 0000 Xxx) of 30% or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (x) the Company or (y) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Subsidiary”), (ii) the Company or any Subsidiary or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined).
(b) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving the Company, unless:
(A) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at
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least seventy percent (70%) of the combined voting power of the outstanding Voting Securities of the corporation or other entity resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization; and
(B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors or similar governing body of the Surviving Corporation or a corporation or other entity beneficially owning, directly or indirectly, a majority of the Voting Securities of the Surviving Corporation;
(ii) A complete liquidation or dissolution of the Company; or
(iii) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than to an entity of which the Company directly or indirectly owns at least 70% of the voting shares).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
(c) The rejection by the voting Beneficial Owners of the outstanding Shares of the entire slate of trustees that the Board proposes at a single election of trustees; or
(d) The rejection by the voting Beneficial Owners of the outstanding Shares of one-half or more of the trustees that the Board proposes over any two or more consecutive elections of trustees.
(e) Notwithstanding anything contained in this Agreement to the contrary, if the Executive’s employment is terminated prior to a Change in Control and the Executive reasonably demonstrates that such termination: (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control (a “Third Party”) or (ii) otherwise occurred in connection with, or in anticipation of, a Change in Control which actually occurs, then for all purposes of this Agreement, the date of a Change in Control with respect to the Executive shall mean the date immediately prior to the date of such termination of the Executive’s employment.
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2.6 Company. The “Company” shall include the Company’s “Successors and Assigns” (as hereinafter defined).
2.7 Disability. “Disability” shall mean a physical or mental infirmity that entitles the Executive to benefits under the Company sponsored long-term disability plan in which he or she participates.
2.8 Good Reason.
(a) “Good Reason” shall mean the occurrence of any of the events or conditions described in subsections (i) through (vii) hereof:
(i) a change in the Executive’s status, position or responsibilities (including reporting responsibilities) which, in the Executive’s reasonable judgment, represents a substantial adverse change from her status, position or responsibilities; or the assignment to the Executive of any duties or responsibilities which, in the Executive’s reasonable judgment, are inconsistent with her status, title, position or responsibilities.
(ii) a reduction in the Executive’s base salary or any failure to pay the Executive any compensation or benefits to which she is entitled within five days of written notice thereof;
(iii) the Company’s requiring the Executive to be based at any place outside a 30-mile radius from the Executive’s principal location of business in Chicago, Illinois, except for reasonably required travel on the Company’s business;
(iv) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days;
(v) any material breach by the Company of any provision of this Agreement;
(vi) any purported termination of the Executive’s employment for Cause by the Company which does not comply with the terms of Section 2.4; or
(vii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof.
(b) Any event or condition described in Section 2.8(a)(i) through (vii) which occurs prior to a Change in Control, but which the Executive reasonably demonstrates arose in connection with, or in anticipation of, a Change in Control, which actually occurs, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to the Change in Control.
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2.9. Notice of Termination. “Notice of Termination” shall mean a written notice of termination from the Company of the Executive’s employment which indicates a specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
2.10. Pro Rata Bonus. “Pro Rata Bonus” shall mean an amount equal to 100% of the target bonus that the Executive would have been eligible to receive for the Company’s fiscal year in which the Executive’s employment terminates, multiplied by a fraction, the numerator of which is the number of days in such fiscal year through the Termination Date and the denominator of which is 365.
2.11. Successors and Assigns. “Successors and Assigns” shall mean a corporation or other entity acquiring all or substantially all the Voting Securities, assets or business of the Company whether by operation of law or otherwise, and any affiliate of such Successors and Assigns.
2.12. Termination Date. “Termination Date” shall mean the first to occur of: (a) in the case of the Executive’s death, her date of death, (b) in the case of Good Reason, the last day of her employment and (c) in all other cases, the date specified in the Notice of Termination or if no Notice of Termination is sent, the last day of her employment; provided, however, that if the Executive’s employment is terminated by the Company due to Disability, the date specified in the Notice of Termination shall be the 30th day after receipt of the Notice of Termination by the Executive, provided that the Executive shall not have returned to the full-time performance of her duties within 30 days after such receipt.
3. Termination of Employment. The Executive shall be entitled to the following compensation and benefits if her employment with the Company is terminated:
(a) If the Executive’s employment with the Company shall be terminated: (i) by the Company for Cause or Disability, (ii) by reason of the Executive’s death or (iii) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation; provided, however, if an employment agreement is in existence between the Company and/or any of its affiliates and the Executive on the Termination Date, the Company and/or its affiliates, as the case may be, shall also pay to the Executive any amounts owed to the Executive pursuant to such employment agreement.
(b) If the Executive’s employment with the Company shall be terminated by the Company other than for Cause, death or Disability or by the Executive for Good Reason, the Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued Compensation, a Pro-Rata Bonus and 100% of any unpaid bonus with respect to the Company’s fiscal year ended prior to the Termination Date.
(ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment an amount in cash equal to one (1) times the sum of (A) the Base Amount and (B) the Bonus Amount; provided, however, if an employment agreement is in existence between the Company and/or any of its affiliates and
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the Executive on the Termination Date, any amount due the Executive under this Section 3(b)(ii) shall be reduced by the amount of Base Amount and Bonus Amount paid as severance pay to Executive pursuant to such employment agreement in lieu of compensation for periods subsequent to the Termination Date.
(iii) for twelve (12) months following the Termination Date, (the “Continuation Period”), the Company shall at its expense continue on behalf of the Executive and her dependents and beneficiaries the same medical, dental, life, disability and hospitalization benefits provided to the Executive immediately prior to the termination of employment. The coverage and benefits (including deductibles and costs) provided in this Section 3(b)(iii) during the Continuation Period shall be no less favorable to the Executive and her or her dependents and beneficiaries than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefits plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive, her dependents or beneficiaries may be otherwise entitled under any of the Company’s employee benefit plans, programs or practices following the Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits;
(iv) all theretofore unvested stock options, restricted options, restricted stock, performance shares, phantom share awards, share appreciation rights, dividend equivalents and any other awards issued to the Executive pursuant to the Company’s Share Incentive Plan, as amended or replaced time to time, shall immediately vest at the maximum possible amount; with the exception of performance shares and other awards which have a variable payout, in which case such performance shares/awards shall immediately vest at the greater of: (i) the 100% target level; or (ii) the number of shares earned calculated using the valuation method as of the date of termination of employment; and
(c) The amounts provided for in Sections 3(b)(i) and (ii) shall be paid in a single lump sum cash payment in immediately available funds within five (5) days following the expiration of any required waiting period under the release agreement referenced in Section 11 hereof (or earlier, if required by applicable law).
(d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3(b)(iii).
(e) The Executive’s entitlement to any other compensation or benefits or any indemnification shall be determined in accordance with the Company’s employee benefit plans
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and other applicable programs, policies and practices or any indemnification agreement in effect.
4. Notice of Termination. Any purported termination of the Executive’s employment by the Company shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination.
5. Successors; Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns, and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, her beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative.
6. Fees and Expenses. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as a result of the Executive obtaining or enforcing any right or benefit provided by this Agreement. Furthermore, any amounts due Executive by the Company that are not paid when due under this Agreement shall bear interest at the Prime Rate (as declared by Bank of America, N.A. from time to time) plus 5% from the time when the payment is due until the date the payment is made.
7. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, by overnight courier or by facsimile, addressed to the respective addresses and facsimile numbers last given by each party to the other, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board with a copy to the Secretary of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt.
8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.
9. No Guaranteed Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and
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may be terminated by either the Executive or the Company at any time, subject, however to the rights of the Executive provided herein in the event of any such termination.
10. Settlement of Claims. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.
11. Full Satisfaction; Waiver and Release; Non-Competition. As a condition to receiving the payments and benefits hereunder, the Executive shall execute a document in customary form, releasing and waiving any and all claims, causes of actions and the like against the Company and its successors, shareholders, officers, trustees, agents and employees, regarding all matters relating to the Executive’s service as an employee of the Company or any affiliates and the termination of such relationship. Said document shall also contain appropriate confidentiality provisions and a one-year non-competition and employee non-solicitation covenant by the Executive. Such claims include, without limitation, any claims arising under Age Discrimination in Employment Act of 1967, as amended (the “ADEA”); Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991, as amended; the Equal Pay Act of 1962; the American Disabilities Act of 1990; the Family Medical Leave Act, as amended; the Employee Retirement Income Security Act of 1976, as amended; or any other federal, state or local statute or ordinance, but exclude any claims that arise out of an asserted breach of the terms of this Agreement or current or future claims related to the matters described in Section 8.
12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provisions of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in Xxxx County in the State of Illinois.
14. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.
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By: |
/s/ Xxxxx X. Xxxxxx |
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Xxxxx X. Xxxxxx |
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President and CEO |
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By: |
/s/ Xxxxx Xxxxxxx |
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Xxxxx Xxxxxxx, Executive |
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