EXHIBIT 10.28
TRUSTEE COMPENSATION AGREEMENT
THIS TRUSTEE COMPENSATION AGREEMENT ("Agreement") is entered into
effective as of January 1, 2003, by and between Xxxxxx Xxxx ("Chairman") and
Equity Office Properties Trust ("Trust"), a Maryland real estate investment
trust.
RECITALS
WHEREAS, the Chairman has served as Chairman of the Trust's Board of
Trustees since 1996; and
WHEREAS, in recognition of the extraordinary services previously
rendered by Chairman and to incentivize the Chairman to continue rendering such
services, the Trust wishes to enter into this Agreement; and
WHEREAS, the Chairman also wishes to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the payment and
adequacy of which is hereby acknowledged, the parties agree as follows:
I. CHAIRMAN'S COMPENSATION
Chairman's compensation for each full calendar year that this Agreement is in
effect shall be as follows:
A. In or prior to each of the months of March 2004, 2005 and
2006, for services rendered as Chairman and trustee during the
calendar year preceding the date of grant, the Trust shall
grant Chairman share options in the Trust (the "Share Options
Grant") and restricted common shares of beneficial interest in
the Trust (the "Restricted Shares Grant") having a combined
total dollar value of $3,250,000 for each such grant date. The
grants of $3,250,000 shall be allocated between the Share
Options Grant and the Restricted Shares Grant in the same
ratio as approved by the Compensation and Option Committee of
the Trust's Board of Trustees (the "Compensation Committee")
for the annual long-term incentive grants to the Trust's
senior executive officers; provided, however, if the Chief
Executive Officer and the other executive officers do not all
receive the same relative allocation of Share Options Grant
and Restricted Shares Grant, Chairman's relative allocation
shall be the same as that of the Chief Executive Officer.
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B. The number of options in each Share Options Grant will be
determined using the same value per option and same exercise
price that the Compensation Committee uses in determining the
amount of the annual share option grants to the Trust's
employees and the option exercise price for those grants. For
example, if the Compensation Committee values one share option
at $1.90 and if the total value allocated to share options is
25%, or $812,500, Chairman would receive a grant of 427,632
Share Options ($812,500/$1.90). Except as provided below, the
term of each Share Options Grant shall be for a period of ten
(10) years beginning on the grant date and ending on February
28 of the tenth year after the grant date. Each Share Options
Grant will vest over a three year period, with one-third of
each grant vesting on each of the first, second, and third
anniversary dates (which is agreed for these purposes to be
March 1 of the calendar year in which each such anniversary
date occurs) of said grant, subject to Chairman's continuing
service as the Trust's Chairman of the Board of Trustees on
each vesting date, unless such grant is otherwise forfeited or
earlier vested pursuant to the terms and conditions of this
Agreement.
C. The number of restricted shares in each Restricted Shares
Grant will be determined using the same value per share that
the Compensation Committee uses in determining the amount of
the annual restricted share grants to the Trust's employees.
For example, assuming the value of one Trust common share on
the date of grant is $25.00, if the total value allocated to
the Restricted Shares Grant is 75%, or $2,437,500, Chairman
would receive 97,500 Restricted Shares ($2,437,500/$25.00).
Each Restricted Shares Grant will vest over a five year
period, with one-fifth of each grant vesting on each of the
first five anniversary dates (which is agreed for these
purposes to be March 1 of the calendar year in which each such
anniversary date occurs) following said grant, subject to
Chairman's continuing service as the Trust's Chairman of the
Board of Trustees on each vesting date, unless such grant is
otherwise forfeited or earlier vested pursuant to the terms
and conditions of this Agreement or the Plan (hereafter
defined).
D. (i) Each Share Options Grant and Restricted Shares Grant
shall be deemed issued pursuant and subject to the terms and
conditions of the Trust's amended and restated 1997 Share
Option and Share Award Plan, as amended (the "Plan"). If the
Trust is required or chooses to make any grants to Chairman
specified in this Agreement out of a reserve of Trust shares
established pursuant to a plan that is the successor or
similar to the Plan, then for purposes of such grant and this
Agreement "Plan" shall mean such successor or similar plan. If
(1) the Plan pursuant to which Share Options Grants or
Restricted Shares Grants are made to Chairman under this
Agreement limits the number of the Trust's common shares that
may be awarded in any year to eligible participants under such
Plan, and
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(2) the formulas in Section I of this Agreement would result
in Share Options Grants or Restricted Shares Grants in excess
of such limitations, then the Share Options Grant and/or the
Restricted Shares Grant for any year affected by the
limitations will be reduced to satisfy the limitations.
(ii) The Trust agrees that any decisions under the Plan
relating to this Agreement shall be made by the Compensation
Committee and not by the Plan Administrator or the Trust's
Chief Legal Counsel.
(iii) The Trust represents to Chairman that there shall
always be sufficient Shares under the Plan available for
issuance to cover the potential awards to Chairman, and that,
if necessary the Trust shall adopt another or a successor
stock option and share award plan and submit such plan for
shareholder approval to ensure the granting of the awards to
Chairman required under this Agreement. Any such successor
stock option and share award plan shall be, insofar as it
affects Chairman, substantially equivalent to the existing
Plan and not inconsistent with any provision of this
Agreement. The Trust further represents to Chairman that in
the event insufficient Shares are available under the Plan or
a successor plan to satisfy the Trust's obligation to grant
options and restricted shares pursuant to this Agreement, it
shall be required to provide Chairman with substantially
equivalent substitute awards, subject to any requisite
shareholder approval, or the cash equivalent thereof.
E. It is the intent of the parties that Chairman is not and shall
not be deemed to be an employee of the Trust, and that the
Trust will not make any withholdings or deductions from any
taxable income realized in connection with the Share Options
Grants or Restricted Shares Grants and that the Trust will
report such income to Chairman on Form 1099.
F. The parties agree that the payments made or to be made by the
Trust to Chairman pursuant to this Agreement are the sole
compensation the Trust is obligated to pay to Chairman for his
services as Chairman of the Board of Trustees, as a trustee of
the Trust or as a member of any committee of the Board of
Trustees of the Trust.
II. TERM AND COMPENSATION UPON TERMINATION
A. This Agreement shall become effective as of January 1, 2003
and shall continue in effect until the earliest to occur of
(i) the death or Disability (as defined below) of Chairman;
(ii) Chairman's resignation, failure to be re-elected as a
trustee of the Trust or removal as a trustee and as Chairman
of the Board of Trustees of the Trust; or (iii) the issuance
of the Share Options Grant and Restricted Shares Grant in
March 2006. Nothing herein shall require the Board of Trustees
to continue to nominate
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Chairman for re-election as a trustee or as Chairman of the
Board. Nothing herein shall require Chairman to serve if
nominated and elected.
B. Should this Agreement terminate prior to the end of any
calendar year during the term hereof as a result of Chairman's
voluntary resignation as a trustee of the Trust, or Chairman's
involuntary termination as a trustee of the Trust OTHER THAN
for "Cause" (defined below), Chairman shall receive, on the
date such Grant would have normally been made, (x) any
compensation due hereunder for the prior calendar year that
has not then been awarded, and (y) as his sole compensation
for the calendar year in which this Agreement terminates, a
prorated Share Options Grant and a prorated Restricted Shares
Grant, equal to the full dollar amount of each such Grant for
said calendar year, multiplied by a fraction, the numerator of
which is the number of days in said calendar year that this
Agreement was in effect before it terminated, and the
denominator of which is 365.
C. The Restricted Share Grant issued pursuant to Section II.B
above shall not be subject to the vesting restrictions
described in Section I.C. Any prior Restricted Share Grant
that is still unvested as of the date of the termination of
this Agreement for reasons described in Section II.B above,
shall become vested as of the date of termination of this
Agreement.
D. The Share Options Grant issued pursuant to Section II.B above
shall not be subject to the vesting restrictions described in
Section I.B, and shall expire at the original termination date
of such Share Options Grant. Any prior Share Options Grant
that is still unvested as of the date of the termination of
this Agreement for reasons described in Section II.B above,
shall become vested as of the date of termination of this
Agreement, and shall expire on the original termination date
of the Share Options Grant.
E. Should this Agreement terminate prior to the end of any
calendar year during the term hereof as a result Chairman's
involuntary termination as a trustee of the Trust for Cause:
(i) Chairman shall not be entitled to (x) any
compensation that would have otherwise been
due hereunder for the prior calendar year
that had not then been awarded, or (y) any
prorated Share Options Grant or Restricted
Shares Grant for the calendar year during
which this Agreement terminates;
(ii) Any unvested Share Options Grants expire on
the date this Agreement terminates;
(iii) Any vested Share Options Grants remain
exercisable for the shorter of (a) three (3)
months after this Agreement terminates; or
(b) the original termination date of the
Share Options Grant, and thereafter shall
expire; and
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(iv) Any shares subject to unvested Restricted
Shares Grants are forfeited back to the
Trust.
F. For purposes of this Agreement, a termination of services as a
trustee is for "Cause" if Chairman 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 of Trustees that Chairman: (i)
intentionally and continually failed substantially to perform
his reasonably assigned duties with the Trust (other than a
failure resulting from Chairman's incapacity due to physical
or mental illness or from Chairman's assignment of duties that
would constitute "Good Reason") 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
Chairman specifying the manner in which Chairman has failed
substantially to perform or (ii) intentionally engaged in
conduct which is demonstrably and materially injurious to the
Trust; PROVIDED, HOWEVER, that no termination of Chairman's
services as a trustee shall be for Cause as set forth in
clause (ii) above until (x) there shall have been delivered to
Chairman a copy of a written notice setting forth that
Chairman was guilty of the conduct set forth in clause (ii)
and specifying the particulars thereof in detail and (y)
Chairman shall have been provided an opportunity to be heard
in person by the Board (with the assistance of Chairman's
counsel if Chairman so desires). Neither an act nor a failure
to act, on Chairman's part shall be considered "intentional"
unless the Chairman has acted or failed to act with a lack of
good faith and with a lack of reasonable belief that
Chairman's action or failure to act was in the best interest
of the Trust.
G. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the events or conditions described below:
(i) any failure to pay Chairman any compensation or benefits
to which he is entitled within thirty (30) days of written
notice thereof; (ii) the Trust's requiring Chairman to be
based at any location other than Chairman's then principal
location for his other business activities; (iii) the
insolvency or the filing (by any party, including the Trust)
of a petition for bankruptcy of the Trust, which petition is
not dismissed within sixty (60) days; or (iv) any material
breach by the Trust of any provision of this Agreement.
H. For purposes of this Agreement, "Disability" shall mean a
physical or mental condition that would entitle Chairman to
benefits under the Trust-sponsored long-term disability plan
if Chairman was an employee of the Trust and participated in
such disability plan, as determined by the Compensation
Committee.
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III. CHAIRMAN'S DUTIES
Chairman shall perform such duties as are consistent with the office of Chairman
of the Board of Trustees and consistent with the services historically performed
by Chairman.
IV. EXPENSES
Chairman shall be personally responsible for his office rent and office related
expenses and all business related expenses (including, without limitation,
travel expenses) which would otherwise be customarily reimbursed as expenses
incurred in connection with Trust business and/or his responsibilities as
Chairman of the Board of Trustees and will not be reimbursed by the Trust for
any such expenses.
V. ARBITRATION
Any controversy or claim arising out of, or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in Chicago, Illinois in
accordance with the rules of the American Arbitration Association, and judgment
upon any award so rendered may be entered in any court having jurisdiction
thereof.
VI. NOTICE
Any notice or other communication required or permitted to be transmitted under
this Agreement shall be in writing, and personally delivered or mailed, return
receipt requested, postage prepaid, addressed to the parties hereto at their
addresses following their signatures below, or at such other addresses as may be
hereafter designated by a party by notice delivered in accordance herewith. Any
notice delivered personally shall be effective on the date of delivery and any
notice mailed, as aforesaid, shall be effective on the second day following
posting.
VII. WAIVER OF BREACH
The waiver by one party of a breach of any provision of this Agreement by the
other party shall not operate or be construed as a waiver of any subsequent
breach by the one party.
VIII. ASSIGNMENT
The rights and obligations of the Trust and Chairman under this Agreement shall
inure to the benefit of, and shall be binding upon, the Trust and its successors
and assigns and Chairman and his heirs and personal representatives.
IX. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with respect to
the subject matter hereof. It may not be changed orally but only by agreement in
writing
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signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
X. GOVERNING LAW AND SEVERABILITY
This Agreement shall be construed and enforced, and all questions concerning
compliance by any person with its terms shall be determined under the laws of
the State of Illinois. All provisions of this Agreement are severable and this
Agreement shall be interpreted and enforced as if all completely invalid or
unenforceable provisions were not contained herein, and partially valid and
enforceable provisions shall be enforced to the extent valid and enforceable.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EQUITY OFFICE PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President
Address: Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Legal Counsel
CHAIRMAN:
/s/ Xxxxxx Xxxx
--------------------------------------
Xxxxxx Xxxx
Address: Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
MODIFICATION TO TRUSTEE COMPENSATION AGREEMENT
Under Paragraph I.C. of the Trustee Compensation Agreement, restricted
share awards made to Xx. Xxxx are to vest over five years. In February 2004,
Xx. Xxxx was awarded restricted shares by the Compensation Committee vesting
over four years, which is the same vesting period as restricted share awards
made to the Company's executive officers for long-term incentive compensation.
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