CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT made as of June 18, 1997 by and between Xxxxx Xxxxxxxxxx
Residential, Inc., a Maryland corporation (the "Company"), and Xxxx X. Xxxxxx
(the "Executive").
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control 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 stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his 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 a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control and to
provide the Executive with certain other benefits whether or not the
Executive's employment is terminated.
AGREEMENT
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein and other good and valuable 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 December 31, 1998; PROVIDED, HOWEVER
, that on December 31, 1998 and on each anniversary thereof, the term of this
Agreement shall automatically be extended for one year unless either the
Company or the Executive shall have given written notice to the other prior
thereto that the term of this Agreement shall not be so extended; AND PROVIDED,
FURTHER, HOWEVER, that notwithstanding any such notice by the Company not to
extend, the term of this Agreement shall not expire prior to the expiration of
24 months after the occurrence of a Change in Control.
2. DEFINITIONS.
2.1. ACCRUED COMPENSATION. For purposes of this Agreement, "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 including
(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, (iii) vacation and sick leave pay (to the extent
provided by Company policy or applicable law) and (iv) bonuses and incentive
compensation (other than the "Pro Rata Bonus" (as hereinafter defined)).
2.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount"
shall mean the greater of (a) the Executive's annual base salary, plus any auto
allowance, at the rate in effect immediately prior to the Change in Control and
(b) the Executive's annual base salary, plus any auto allowance, at the rate in
effect on the Termination Date, and shall include all amounts of his base
salary that are deferred under any other agreement or arrangement with the
Company.
2.3. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the Executive's annual bonus for the fiscal year prior to which a
Change in Control has occurred.
2.4. CAUSE.
(a) For purposes of this Agreement, except as set forth in Section
2.4(b) below, a termination of employment is for "Cause" if the Executive has
been convicted of a felony involving moral turpitude or the termination is
evidenced by a resolution adopted in good faith by two-thirds of the Board that
the Executive (i) intentionally and continually failed substantially to perform
his 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 demons trably 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
is given by the Executive shall constitute Cause for purposes of this
Agreement.
(b) In the event an employment agreement is in place between the
Executive and the Company, the definition of "Cause" set forth in such
employment agreement shall apply for purposes of this Agreement.
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2.5. CHANGE IN CONTROL. For purposes of this Agreement, 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
twenty percent (20%) 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 (ii) 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) The individuals who, as of the date hereof, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the Board; PROVIDED, HOWEVER, that if the
election, or nomination for electio n by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds
(2/3) of the then Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the Incumbent
Board; PROVIDED, FURTHER, HOWEVER, that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
0000 Xxx) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(c) 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 least fifty percent
(50%) of the combined voting power of the outstanding
Voting Securities of the corporation
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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;
(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 of the Surviving Corporation or a corporation
beneficially owning, directly or indirectly, a majority of
the Voting Securities of the Surviving Corporation;
(C) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving
Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of fifteen percent
(15%) or more of the then outstanding Voting Securities)
owns, directly or indirectly, fifteen percent (15%) or more
of the combined voting power of the Surviving Corporation's
then outstanding voting securities; and
(D) a transaction described in clauses (A) through (C)
shall herein be referred to as a "Non-Control Transaction;"
(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 a transfer to a Subsidiary).
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.
(d) 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
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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.
2.6. COMPANY. For purposes of this Agreement, the "Company" shall
include the Company's "Successors and Assigns" (as hereinafter defined).
2.7. DISABILITY.
(a) For purposes of this Agreement, except as set forth in Section
2.7(b) below, "Disability" shall mean a physical or mental infirmity which
impairs the Executive's ability to substantially perform his duties with the
Company for a period of one hundred eighty consecutive days and the Executive
has not returned to his full time employment prior to the Termination Date as
stated in the "Notice of Termination" (as hereinafter defined).
(b) In the event an employment agreement is in place between the
Executive and the Company, the definition of "Disability" set forth in such
employment agreement shall apply for purposes of this Agreement.
2.8. GOOD REASON.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (i) through (viii) 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 his status, position or responsibilities as
in effect at any time within ninety (90) days preceding the date
of a Change in Control or at any time thereafter; the assignment
to the Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with his
status, title, position or responsibilities as in effect at any
time within ninety days preceding the date of a Change in
Control or at any time thereafter; or any removal of the
Executive from or failure to reappoint or reelect him to any of
such offices or positions held prior to the Change of Control,
except in connection with the termination of his employment for
Disability, Cause, as a result of his death or by the Executive
other than for Good Reason;
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(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to
which he is entitled within five days of notice thereof;
(iii) the Company's requiring the Executive to be based at
any place outside a 30-mile radius from Scottsdale, Arizona,
except for reasonably required travel on the Company's business
which is not materially greater than such travel requirements
prior to the Change in Control;
(iv) the failure by the Company to provide the Executive
with compensation and benefits, in the aggregate, at least equal
(in terms of benefit levels and/or reward opportunities) to those
provided for under each other employee benefit plan, program and
practice in which the Executive was participating at any time
within ninety (90) days preceding the date of a Change in
Control or at any time thereafter;
(v) 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;
(vi) any material breach by the Company of any provision
of this Agreement;
(vii) 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
(viii) 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 7 hereof.
(b) Any event or condition described in Section 2.8(a)(i)
through (viii) which occurs prior to a Change in Control but which the
Executive reasonably demonstrates (i) was at the request of a Third
Party or (ii) otherwise 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.
(c) The Executive's right to terminate his employment pursuant
to this Section 2.8 shall not be affected by his incapacity due to a
Disability.
2.9. NOTICE OF TERMINATION. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination from the Company of the Executive's employment which
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances
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claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.
2.10. PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction,
the numerator of which is the number of days in the Company's fiscal year in
which the Executive's employment terminates through the Termination Date and
the denominator of which is 365.
2.11. SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all the assets and business of the Company whether by
operation of law or otherwise, and any affiliate of such Successors and
Assigns.
2.12. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his
date of death, (b) in the case of Good Reason, the last day of his employment
and (c) in all other cases, the date specified in the Notice of Termination;
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 his duties within 30 days after such receipt.
3. TERMINATION OF EMPLOYMENT. If, during the term of this Agreement,
the Executive's employment with the Company shall be terminated within twenty-
four months (24) following a Change in Control, the Executive shall be entitled
to the following compensation and benefits:
(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 and, if
such termination is other than by the Company for Cause, the Pro Rata
Bonus; 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 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 for any reason other than as specified in Section 3(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus;
(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
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single payment an amount in cash equal to three
times the sum of (A) the Base Amount and (B) the Bonus Amount;
(iii) for a number of months equal to 24 (the "Continuation
Period"), the Company shall at its expense continue on behalf of the
Executive and his dependents and beneficiaries the medical, dental and
hospitalization benefits provided (A) to the Executive at any time
during the 90-day period prior to the Change in Control or at any
time thereafter or (B) to other similarly situated executives who
continue in the employ of the Company during the Continuation Period.
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 his 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 benefit 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, his dependents or
beneficiaries may be 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 and other awards issued to the Executive
pursuant to the Company's Stock Incentive Plan shall immediately
vest; and
(v) all theretofore unvested employer contributions in the
Executive's account pursuant to the Company's 401(k) plan shall
immediately vest.
(c) The amounts provided for in Sections 3(a) and 3(b)(i) and (ii)
shall be paid in a single lump sum cash payment within five (5) days after
the Executive's Termination Date (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 severance pay and benefits provided for in this Section 3
shall be reduced by the amount of any other severance or termination pay to
which the Executive may be entitled under any agreement with the Company
or any of its affiliates.
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(f) 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 and other applicable programs, policies and
practices or any indemnification agreement then in effect.
4. NOTICE OF TERMINATION. Following a Change in Control, 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. EXCISE TAX GROSS-UP.
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined (pursuant to (b) below) or finally
determined (as defined in (c)(iii) below) that any payment, distribution,
transfer, benefit or other event with respect to the Company or its
predecessors, successors, direct or indirect subsidiaries or affiliates
(or any predecessor, successor of affiliate of any of them, and including
any benefit plan of any of them), to or for the benefit of Executive or
Executive's dependents, heirs or beneficiaries (whether such payment,
distribution, transfer, benefit or other event occurs pursuant to the terms
of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (each a "Payment" and
collectively the "Payments") is or was subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, and any
successor provision or any comparable provision of state or local income
tax law (collectively, "Section 4999"), or any interest, penalty or
addition to tax is or was incurred by Executive with respect to such
excise tax (such excise tax, together with any such interest, penalty or
addition to tax, hereinafter collectively referred to as the "Excise Tax"),
then, within 10 days after such determination or final determination, as
the case may be, the Company shall pay to Executive an additional cash
payment (hereinafter referred to as the "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes, interest, penalties and
additions to tax imposed with respect to the Gross-Up Payment (including,
without limitation, any income and excise taxes imposed upon the Gross-Up
Payment), Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon such Payment or Payments. This provision is
intended to put Executive in the same position as Executive would have been
had no Excise Tax been imposed upon or incurred as a result of any Payment.
(b) Except as provided in subsection (c) below, the determination
that a Payment is subject to an Excise Tax shall be made in writing by a
certified public accounting firm selected by Executive ("Executive's
Accountant"). Such determination shall include the amount of the Gross-Up
Payment and detailed computations thereof, including any assumptions used
in such computations (the written determination of the Executive's
Accountant, hereinafter, the "Executive's Determination"). The
Executive's Determinatio n shall be reviewed on behalf of the Company by a
certified public accounting firm selected by the Company (the "Company's
Accountant").
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The Company shall notify Executive within 10 business days
after receipt of the Executive's Determination of any disagreement or
dispute therewith, and failure to so notify within that period shall be
considered an agreement by the Company with the Executive's Determination,
obligating the Company to make payment as provided in subsection (a) above
within 10 days from the expiration of such 10 business-day period. In the
event of an objection by the Company to the Executive's Determination, any
amount not in dispute shall be paid within 10 days following the 10
business-day period referred to herein, and with respect to the amount in
dispute the Executive's Accountant and the Company's Accountant shall
jointly select a third nationally recognized certified public accounting
firm to resolve the dispute and the decision of such third firm shall be
final, binding and conclusive upon the Executive and the Company. In such
a case, the third accounting firm's findings shall be deemed the binding
determination with respect to the amount in dispute, obligating the Company
to make any payment as a result thereof within 10 days following the
receipt of such third accounting firm's determination. All fees and
expenses of each of the accounting firms referred to in this Section 5
shall be borne solely by the Company.
(c) (i) Executive shall notify the Company in writing of any claim
by the Internal Revenue Service (or any successor thereof) or any state or
local taxing authority (individually or collectively, the "Taxing
Authority") that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 30 days after Executive receives written
notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid; provided,
however, that failure by Executive to give such notice within such 30-day
period shall not result in a waiver or forfeiture of any of Executive's
rights under this Section 5 except to the extent of actual damages suffered
by the Company as a result of such failure. Executive shall not pay such
claim prior to the expiration of the 15-day period following the date on
which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes, interest, penalties or
additions to tax with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such 15-day
period that it desires to contest such claim (and demonstrates to the
reasonable satisfaction of Executive its ability to make the payments
to Executive which may ultimately be required under this section before
assuming responsibility for the claim), Executive shall:
(A) give the Company any information reasonably requested by the
Company relating to such claim;
(B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by the Company that is
reasonably acceptable to Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
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(D) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear
and pay directly all attorneys fees, costs and expenses (including
additional interest, penalties and additions to tax) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for all taxes (including, without
limitation, income and excise taxes), interest, penalties and
additions to tax imposed in relation to such claim and in relation to
the payment of such costs and expenses or indemnification. Without
limitation on the foregoing provisions of this Section 5, and to the
extent its actions do not unreasonably interfere with or prejudice
Executive's disputes with the Taxing Authority as to other issues, the
Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax, interest or penalties claimed
and xxx for a refund or contest the claim in any permissible manner,
and Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance an amount equal
to such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from all
taxes (including, without limitation, income and excise taxes),
interest, penalties and additions to tax imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and, further, provided, that any extension of the statute of
limitations relating to payment of taxes, interest, penalties or
additions to tax for the taxable year of Executive with respect to
which such contested amount is claimed to be due is limited solely
to such contested amount; and, provided, further, that any settlement
of any claim shall be reasonably acceptable to Executive and the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and
Executive shall be entitled to settle or contest, as the case may be,
any other issue.
(ii) If, after receipt by Executive of an amount advanced by the
Company pursuant to Section 5(c)(i), Executive receives any refund with
respect to such claim, Executive shall (subject to the Company's complying
with the requirements of Section 5) promptly pay to the Company an amount
equal to such refund (together with any interest paid or credited thereon
after taxes applicable thereto), net of any taxes (including without
limitation any income or excise taxes), interest, penalties or additions to
tax and any other costs incurred by Executive in connection with such
advance, after giving effect to such repayment. If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section
5(c)(i), it is finally determined that Executive is not entitled to any
refund with respect to such claim, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall be
treated as a Gross-
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Up Payment and shall offset, to the extent thereof, the amount of any
Gross-Up Payment otherwise required to be paid.
(iii) For purposes of this Section 5, whether the Excise Tax is
applicable to a Payment shall be deemed to be "finally determined" upon
the earliest of: (A) the expiration of the 15-day period referred to in
paragraph (c)(i) above if the Company has not notified Executive that it
intends to contest the underlying claim, (B) the expiration of any period
following which no right of appeal exists, (C) the date upon which a
closing agreement or similar agreement with respect to the claim is
executed by Executive and the Taxing Authority (which agreement may be
executed only in compliance with this Section 5), (D) the receipt by
Executive of notice from the Company that it no longer seeks to pursue a
contest (which notice shall be deemed received if the Company does
not, within 15 days following receipt of a written inquiry from Executive,
affirmatively indicate in writing to Executive that the Company intends to
continue to pursue such contest).
(d) As a result of uncertainty in the application of Section 4999
that may exist at the time of any determination that a Gross-Up Payment is
due, it may be possible that in making the calculations required to be
made hereunder, the parties or their accountants shall determine that a
Gross-Up Payment need not be made (or shall make no determination with
respect to a Gross-Up Payment) that properly should be made
("Underpayment"), or that a Gross-Up Payment not properly needed to be
made should be made ("Overpayment"). The determination of any
Underpayment shall be made using the procedures set forth in paragraph
(b) above and shall be paid to Executive as an additional Gross-Up
Payment. The Company shall be entitled to use procedures similar to
those available to Executive in paragraph (b) to determine the amount of
any Overpayment (provided that the Company shall bear all costs of the
accountants as provided paragraph (b)) . In the event of a determination
that an Overpayment was made, any such Overpayment shall be treated for
all purposes as a loan to Executive with interest at the applicable
Federal rate provided for in Section 1274(d) of the Code; provided,
however, that the amount to be repaid by Executive to the Company shall
be subject to reduction to the extent necessary to put Executive in the
same after-tax position as if such Overpayment were never made.
6. 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, his
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.
7. 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 they become
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due as a result of (a) the Executive seeking to obtain or enforce any right
or benefit provided by this Agreement (including, but not limited to, any
such fees and expenses incurred in connection with the Dispute and (b) the
Executive's hearing before the Board as contemplated in Section 2.4 of this
Agreement; PROVIDED, HOWEVER, that the circumstances set forth in clause (a)
(other than as a result of the Executive's termination of employment under
circumstances described in Section 2.5(d)) occurred on or after a Change in
Control.
8. NOTICE. For the purposes of this Agreement, notic es 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 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.
9. 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.
10. 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 may be terminated by either the Executive or the
Company at any time.
11. 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.
12. MUTUAL NON-DISPARAGEMENT. The Company, its affiliates and
subsidiaries agree and the Company shall use its best efforts to cause their
respective executive officers and directors to agree, that they will not make
or publish any statement critical of the Executive, or in any way adversely
affecting or otherwise maligning the Executive's reputation. The Executive
agrees that he will not make or publish any statement critical of the Company,
its affiliates and their respective executive officers and directors, or in any
way adversely affecting or otherwise maligning the business or reputation of
any member of the Company, its affiliates and subsidiaries and their respective
officers, directors and employees.
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13. 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 provision 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.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Arizona 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 Maricopa County in the State of Arizona.
15. 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.
16. 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.
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.
XXXXX XXXXXXXXXX RESIDENTIAL, INC.
By: Xxxxxxx X. Xxxxx
-------------------------------------
Name:
Title:
By: Xxxx X. Xxxxxx
-------------------------------------
Executive
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