AMENDMENT NO. 1 TO
EMPLOYMENT AND NONCOMPETITION AGREEMENT
September 1, 1998
Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: Amendment No. 1 to Employment and Noncompetition Agreement dated as
of March 1, 1997, among BRI OP Limited Partnership, Berkshire Realty
Company, Inc. and Xxxxxx Xxxxxx (the "Agreement").
Dear Xx. Xxxxxx:
The Board of Directors of Berkshire Realty Company, Inc. (the
"Company") is pleased to inform you that in consideration of the services that
you have rendered to the Company, the above-captioned Agreement is amended as
set forth below to, among other things, (a) increase your change in control
severance compensation to twenty-four months, and (b) provide for a compulsory
payment to you of a pro rata bonus in the event of termination under certain
circumstances.
The introductory sentence to Section 4 and subsection 4(a) of the
Agreement are amended in their entirety to read as follows:
4. Term of Employment; Termination. The term of Employee's employment
hereunder shall commence on March 1, 1997 ("Commencement Date"), and
shall continue until December 31, 1998 unless terminated prior
thereto by the first to occur of the following (the "Employment
Termination Date"):
a. the delivery by the Company to Employee of written
notice of termination without "cause" (as defined in subsection (b)
below). If a Change in Control of the Company (as hereinafter
defined) occurs and (i) Employee is relocated to an office over fifty
(50) miles from the Company's current office at 0000 Xxxxxxxx
Xxxxxx-Xxxxx 000, Xxxxxxx, Xxxxxxx 00000; or (ii) Employee's duties
and responsibilities are changed so that Employee does not have
duties and responsibilities of a scope substantially equivalent to or
greater than the scope of Employee's duties and responsibilities
immediately prior to such Change in Control, at the election of
Employee within thirty (30) days of such change, such change shall
also be deemed a termination by the Company without cause pursuant to
this Section 4(a) (a "Constructive Termination"). For purposes of
this Agreement, a "Change in Control" of the Company shall mean (i)
the acquisition by any person (other than Employee), corporation,
partnership or other person or entity, including a "person" within
the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
25% or more beneficial ownership (as defined in Rule 13d in effect as
of such date under the Exchange Act) of the outstanding voting stock
of the Company; (ii) the merger or consolidation of the Company and
any other corporation or entity, other than a merger or consolidation
in which holders of the outstanding voting stock of the Company
immediately prior to such merger or consolidation hold greater than
50% of the outstanding voting stock of the surviving entity
immediately after such merger or consolidation; or (iii) the sale of
all or substantially all of the assets of the Company, other than
pursuant to a plan of liquidation adopted in accordance with Section
3 of the Company's Restated Certificate of Incorporation, as amended.
The Company and Employee agree that no Change in Control shall be
deemed to have occurred prior to September 1, 1998;"
Section 5 of the Agreement is amended in its entirety to read as
follows:
5. Base Salary; Bonus; Severance Compensation.
a. From September 1, 1998 through the Employment
Termination Date, the Company shall pay Employee a base salary (the
"Base Salary") at an annual rate of not less than $162,240 payable in
equal bi-weekly payments. During the term hereof the Base Salary may
be increased by the Board of Directors in its sole discretion based
upon its review of the performance of both Employee and the Company.
b. During the term of this Agreement, Employee shall
participate in the Development Group Bonus Pool. Other than the pro
rata bonus described in the following sentence, the terms and
conditions of the Bonus Plan and payments thereunder, if any, are at
the sole discretion of the Board of Directors. In the event of the
termination of Employee's employment pursuant to subsection 4(a),
4(d) or 4(e) hereof, the Company shall pay a bonus to Employee,
within thirty (30) days of the date of termination, on a pro rata
basis (based on a full year bonus in the amount of $77,000 (the
"Target Bonus")) for the period of the calendar year prior to the
Employment Termination Date.
c. If Employee's employment hereunder is terminated
pursuant to subsection 4(a) hereof or if the term hereunder is not
renewed by the Company pursuant to Section 22 hereof, the Company
shall pay Employee severance compensation in nine (9) monthly
payments, each consisting of one-twelfth of the Base Salary in effect
at the Employment Termination Date and one-twelfth of the Employee's
Target Bonus (the "Monthly Severance Payment"); provided, however, if
such termination or nonrenewal by the Company occurs during the
period commencing on the date of a Change in Control and ending four
(4) years following the date of a Change in Control, the Company
shall pay Employee a lump-sum severance compensation payment, within
thirty (30) days of the
-2-
Employment Termination Date, equal to the Monthly Severance Payment
multiplied by twenty-four (24) (the "Change in Control Payment");
provided, further, that if such termination or nonrenewal by the
Company occurs during the six-month period preceding the date of a
Change in Control, the Company shall pay Employee a lump-sum
severance compensation payment, within thirty (30) days following the
date of a Change in Control, equal to (i) the Change in Control
Payment, less (ii) the aggregate Monthly Severance Payments paid to
Employee through the date of payment. In addition, if Employee's
employment hereunder is terminated pursuant to subsection 4(a) hereof
or if the term hereunder is not renewed by the Company pursuant to
Section 22 hereof, the Company shall pay Employee, within thirty (30)
days of the Employment Termination Date, $10,000 for outplacement
costs or financial planning services.
d. Notwithstanding any other provision of this Agreement,
in the event that the Company undergoes a "Change in Ownership or
Control" (as defined below), a portion of any "Contingent
Compensation Payments" (as defined below) that Employee would
otherwise be entitled to receive shall be eliminated to the extent
necessary to eliminate any Contingent Compensation Payments
constituting a "parachute payment" (as defined in Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended (the "Code")) for
Employee. For purposes of this Section 5, the Contingent Compensation
Payments so eliminated shall be referred to as the "Eliminated
Payments" and the aggregate amount (determined in accordance with
Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any
successor provision) of the Contingent Compensation Payments so
eliminated shall be referred to as the "Eliminated Amount."
e. Notwithstanding the provisions of subsection 5(d), no
such reduction in payments or benefits shall be made if (i) the
Eliminated Amount (computed without regard to this sentence) exceeds
(ii) the aggregate present value (determined in accordance with
Proposed Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or
any successor provisions) of the amount of any additional taxes that
would be incurred by Employee if the Eliminated Payments (determined
without regard to this sentence) were paid to him (including, state
and federal income taxes on the Eliminated Payments, the excise tax
imposed by Section 4999 of the Code payable with respect to all of
the Contingent Compensation Payments, and any withholding taxes or
the Eliminated Payments). The override of such reduction in payments
or benefits pursuant to this subsection 5(e) shall be referred to as
a "Subsection 5(e) Override." For purposes of the preceding sentence,
if any federal or state income taxes would be attributable to the
receipt of any Eliminated Payment, the amount of such taxes shall be
computed by multiplying the amount of the Eliminated Payment by the
maximum combined federal and state income tax rate provided by law.
-3-
f. For purposes of this Section 5 the following terms shall
have the following respective meanings:
(i) "Change in Ownership or Control" shall mean a
change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company
determined in accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean
any payment (or benefit) in the nature of compensation that is made
or supplied to a "disqualified individual" (as defined in Section
280G(c) of the Code) and that is contingent (within the meaning of
Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
g. Notwithstanding any other provision of this Agreement,
any payments or other benefits otherwise due to Employee following a
Change in Ownership or Control that could reasonably be characterized
(as determined by the Company) as Contingent Compensation Payments
(the "Potential Payments") shall not be made until the dates provided
for in this subsection 5(g). Within thirty (30) days after the date
of such Change in Ownership or Control, the Company shall determine
and notify Employee (with reasonable detail regarding the basis for
its determinations) (i) which Potential Payments constitute
Contingent Compensation Payments, (ii) the Eliminated Amount and
(iii) whether the Subsection 5(e) Override is applicable. Within
thirty (30) days after delivery of such notice to Employee, Employee
shall deliver a response to the Company (the "Employee Response")
stating either (A) that he agrees with the Company's determination
pursuant to the preceding sentence, in which case he shall indicate,
if applicable, which Contingent Compensation Payments, or portions
thereof (the aggregate amount of which, determined in accordance with
Proposed Treasury Regulation Section 1.280G-1, QA-30 or any successor
provision, shall be equal to the Eliminated Amount), shall be treated
as Eliminated Payments or (B) that he disagrees with such
determination, in which case he shall indicate which Potential
Payments should be characterized as Contingent Compensation Payments,
the Eliminated Amount, whether the Subsection 5(e) Override is
applicable, and, which (if any) Contingent Compensation Payments, or
portions thereof (the aggregate amount of which, determined in
accordance with Proposed Treasury Regulation Section 1.280G-1, QA-30
or any successor provision, shall be equal to the Eliminated Amount,
if any), shall be treated as Eliminated Payments. In the event that
Employee fails to deliver an Employee Response on or before the
required date, the Company's initial determination shall be final and
the Contingent Compensation Payments that shall be treated as
Eliminated Payments shall be determined by the Company in its
absolute discretion. If Employee states in the Employee Response that
he agrees with the Company's determination, the Company shall make
the Potential Payments to Employee within three (3) business days
-4-
following delivery to the Company of the Employee Response (except
for any Potential Payments which are not due to be made until after
such date, which Potential Payments shall be made on the date on
which they are due). If Employee states in the Employee Response that
he disagrees with the Company's determination, then, for a period of
sixty (60) days following delivery of the Employee Response, the
Employee and the Company shall use good faith efforts to resolve such
dispute. If such dispute is not resolved within such 60-day period,
such dispute shall be submitted to arbitration in accordance with the
provisions of Section 23 hereof. The Company shall, within three (3)
business days following delivery to the Company of the Employee
Response, make to Employee those Potential Payments as to which there
is no dispute between the Company and Employee regarding whether they
should be made (except for any such Potential Payments which are not
due to be made until after such date, which Potential Payments shall
be made on the date on which they are due). The balance of the
Potential Payments shall be made within three (3) business days
following the resolution of such dispute. The amount of any payments
to be made to Employee following the resolution of such dispute shall
be increased by the amount of the accrued interest thereon computed
at the prime rate as published from time to time in the Wall Street
Journal, compounded monthly from the date that such payments
originally were due.
h. Employee will be eligible to participate in the
Berkshire Realty Company, Inc. Amended and Restated Stock Option Plan
to the extent determined by the Board of Directors in its discretion.
i. The Company shall deduct from payments of the Base
Salary, bonus and severance amounts sufficient to cover applicable
federal, state and local income tax withholdings, social security and
any other amounts which the Company is required to withhold by
applicable law."
Section 6 of the Agreement is amended in its entirety to read as
follows:
6. Employee Benefits. From the Commencement Date through the
Employment Termination Date, the Company shall provide health and
welfare benefits including group life insurance, group health and
accident insurance, group long-term disability insurance and a
Section 401(k) retirement plan. In addition, in the event of
termination of Employee's employment with the Company pursuant to
Sections 4(a) or 4(e) hereof or if the term hereunder is not renewed
pursuant to Section 22 hereof, Employee shall be entitled to a
continuation of health insurance benefits under the Company's group
health insurance program for so long as is permitted under such
program. Thereafter, Employee shall be eligible for continuation of
health benefits pursuant to applicable federal law commonly known as
"COBRA" and, for a period of twenty-four (24) months in the case of a
termination or nonrenewal by the Company occurring during the period
commencing six (6) months preceding the
-5-
date of a Change in Control and ending four (4) years following the
date of a Change in Control and for a period of nine (9) months in
the case of any other termination pursuant to Section 4(a) or 4(e) or
nonrenewal, the Company shall pay to Employee the difference between
the payments required to be made by Employee under COBRA and any
payments Employee was required to make under the Company's group
health insurance program prior to Employee's eligibility for COBRA
continuation benefits. Employee shall continue to receive continued
health benefits until (i) Employee is no longer eligible for COBRA
continuation benefits or (ii) Employee is eligible to participate in
a group health insurance plan with another employer, whichever comes
first, at which time the Company's obligations under this Section 6
shall terminate."
Subsection 10(a) of the Agreement is amended in its entirety to read
as follows:
10. Noncompetition.
a. Employee agrees that during the term of this Agreement
and for one (1) year after the Employment Termination Date (except
that in the event of termination or nonrenewal by the Company during
the period commencing six (6) months preceding the date of a Change
in Control and ending four (4) years following the date of a Change
in Control, neither clause (i) of this Section 10(a) nor Section
10(b) shall apply to Employee), Employee shall not (i) directly or
indirectly solicit any person (natural or otherwise) to develop,
construct, purchase or sell any multifamily or retail real estate or
a mortgage loan financing such type of real estate if the person
being solicited is or had been a developer or contractor with, or
purchaser from or seller to, the Company of such type of property
during the twelve (12) months prior to the Employment Termination
Date or (ii) recruit or otherwise solicit or induce any person who is
at the time an employee or consultant of the Company to terminate his
employment with, or otherwise cease his relationship with, the
Company, or hire any such employee or consultant who has left the
employ of the Company within one (1) year after termination of such
employee's employment or consultant's relationship with the Company,
provided, however, that Employee may recruit any former employee of
the Company whose employment has been terminated by the Company and,
provided further, that if Employee has terminated his employment of
his own volition, this restriction upon recruiting employees or
consultants shall run for two (2) years after the Employment
Termination Date.
For example, if the term hereunder is not renewed pursuant
to Section 22 hereof, then for a one-year period following the date
of such nonrenewal, Employee shall be subject to this Section 10(a)
and Section 10(b) hereof; provided, however, that if a Change in
Control occurs during the six-month period following the date of such
nonrenewal (and such nonrenewal has been at the election of the
Company), Employee shall not be subject to clause (i) of this Section
10(a) or Section 10(b) hereof from and after the date of such Change
in
-6-
Control. By way of additional example, if a Change in Control occurs
and an Employment Termination Date occurs (other than an Employment
Termination Date occurring as a result of Employee's election not to
renew this Agreement) during the two-year period commencing on the
date of the Change in Control, Employee shall not be subject to
clause (i) of this Section 10(a) or Section 10(b) hereof from and
after the Employment Termination Date."
Section 21 of the Agreement is amended in its entirety to read as
follows:
21. Survival. The provisions of Sections 5, 6 and 7 insofar as they
provide for payments to be made to Employee after termination or
nonrenewal of this Agreement and Sections 8 through 11 hereof shall
survive the termination or nonrenewal of this Agreement by Employee
or the Company, whether voluntary or involuntary, or with or without
cause."
Section 22 of the Agreement is amended in its entirety to read as
follows:
22. Renewal. This Agreement will renew for a period of one year if
Notice of intent to modify or terminate is not given by either party
to the other no later than thirty (30) days prior to December 31,
1998 or any subsequent December 31 thereafter. Such notice shall be
in the form and to the address as prescribed by Section 18 of this
Agreement."
The following is hereby added as Section 23 of the Agreement:
23. Arbitration. If the Employee's employment is terminated or if the
term hereunder is not renewed by the Company pursuant to Section 22
hereof, during the period commencing six (6) months preceding the
date of a Change in Control and ending four (4) years following the
date of a Change in Control, and a dispute arises between the
Employee, on the one hand, and the Company or its
successor-in-interest, on the other hand, with respect to the
Company's obligations under Section 5, Section 6 or Section 10
hereof, either the Employee or the Company may submit any such
disputed matter to arbitration by notifying the other party in
writing. Within ten (10) days after receipt of such notice, the
Employee and the Company shall designate in writing one arbitrator
(the "Arbitrator") to resolve the dispute; provided that if the
parties hereto cannot agree on an arbitrator within such ten-day
period, the Arbitrator shall be selected by the Boston, Massachusetts
office of the American Arbitration Association. The Arbitrator so
designated shall not be an affiliate, employee, consultant, officer,
director or stockholder of the Company or its successor-in-interest.
Within fifteen (15) days after the designation of the Arbitrator, the
Employee, representatives of the Company and the Arbitrator shall
meet at which time the Employee and the Company shall be required to
set forth in writing all disputed issues and a proposed ruling on
each such issue. The Arbitrator shall set a date for hearing, which
shall be no later than thirty (30)
-7-
days after the submission of written proposals pursuant to the
preceding sentence, to discuss each of the issues identified by the
Employee and the Company. Each such party shall have the right to be
represented by counsel. Except as may be specifically set forth
herein, the arbitration shall be governed by the Commercial
Arbitrations Rules of the American Arbitration Association; provided,
however, that the Federal Rules of Evidence shall govern the
admissibility of evidence. The Arbitrator shall use his or her best
efforts to rule on each disputed issue within thirty (30) days after
the completion of such hearings. In the absence of fraud, the
determination of the Arbitrator to the resolution of any dispute
shall be binding and conclusive upon all parties hereto. All rulings
of the arbitrator shall be in writing and shall be delivered to the
parties. If the Employee prevails in the arbitration, the Arbitrator
shall award payment to the Employee of the Employee's costs and
expenses of the arbitration, including attorneys fees. Any
arbitration pursuant hereto shall be conducted in Boston,
Massachusetts. Any arbitration award may be entered in and enforced
by any court having jurisdiction thereover and shall be final and
binding upon the parties. Any references to the "Company" in this
Section 23 shall include its successor-in-interest.
For example, in the event that (i) the term hereunder is
not renewed by the Company pursuant to Section 22 hereof; (ii) a
dispute arises with respect to the Company's obligations under
Section 5, Section 6 or Section 10 hereof; (iii) litigation is
commenced; and (iv) a Change in Control occurs in the six-month
period following the date of such nonrenewal by the Company, if
either Employee or the Company then elects to submit the disputed
matter to arbitration, the litigation previously commenced shall be
stayed and the matter shall be resolved in accordance with this
Section 23."
In all other respects, the Agreement is hereby ratified and
confirmed.
The foregoing amendments shall be effective as of September 1, 1998.
-8-
Please indicate your agreement with this Amendment No. 1 to the
Agreement by signing this amendment and returning it to the Chairman of the
Compensation Committee.
Very truly yours,
BRI OP LIMITED PARTNERSHIP BERKSHIRE REALTY COMPANY, INC.
By: Berkshire Apartments, Inc.
Its General Partner
By:____________________________ By:_________________________________
Its: Chairman of the Its: Chairman of the
Compensation Committee Compensation Committee
EMPLOYEE:
----------------------------------
Xxxxxx Xxxxxx
-9-
