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EXHIBIT 10.23.1
January 22, 1999
Xx. Xxxxxxx X. XxXxxxxxx
0 Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Dear Xxxx:
The Board of Directors of Irvine Apartment Communities, Inc. believes
that in the event of a business combination involving IAC, continuity of
effective management will be critical to the best interests of the Company and
its shareholders. In order to induce you to remain in the Company's employ
throughout any period of uncertainty associated with a proposed business
combination, therefore, the Special Committee of the Board of Directors has
adopted the measures described in this letter agreement. This letter agreement
relates to, among other things, your stock option and restricted stock unit and
performance unit awards granted under the Company's 1993 and 1996 Long-Term
Stock Incentive Plans (collectively, the "PLAN") and supplements the provisions
in the Plan and in the respective Award Agreements. Capitalized terms used in
this letter shall have the same meanings as in the Plan.
Stock Options: In the event of a Transaction, as defined below, all
outstanding Options then held by you shall be canceled as of
the date of such Transaction. For each Share underlying such
Option, you will be entitled to receive the excess, if any,
of (i) the amount or value per share to be received by the
Company's stockholders in connection with such Transaction
(the "TRANSACTION PRICE") over (ii) the exercise price for
such Share under the terms of the relevant Award Agreement.
With respect to Options that were already vested as of the
date of such Transaction, such amounts will be paid to you
in cash as soon as practicable following the Transaction.
With respect to Options that were not vested at the time of
the Transaction, such amounts shall be paid to you in cash
at the time such awards would otherwise have vested pursuant
to the terms of the respective Award Agreements, as long as
you remain continuously employed by the Company until such
payment date, except as described below.
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Restricted Stock In the event of a Transaction, all of your outstanding
Unit and Restricted Stock Units and Performance Awards ("UNITS"),
Performance including Restricted Stock Units scheduled to be granted to
Awards: you pursuant to the terms of your letter agreement with the
Company (the "OFFER LETTER") dated July 14, 1997 ("FUTURE
UNITS"), shall be canceled as of the date of such
Transaction. For each such Unit and Future Unit, you shall
be entitled to receive the Transaction Price, which amount
will be paid at the time such awards would otherwise have
been available for vesting pursuant to the terms of the
respective Award Agreements or the Offer Letter, whether or
not any applicable FAD targets are in fact satisfied, as
long as you remain continuously employed by the Company
until such payment date, except as described below. Such
amounts will bear interest from the date of the Transaction
in the case of Units, and from February 1 of the scheduled
year of grant in the case of Future Units, to the date of
payment, payable on the last day of each calendar quarter,
at the rate of 5% through February 29, 2000, and at 6% from
March 1, 2000 until the date such Unit or Future Unit would
have been available for vesting or if sooner, until payment
for such Units and Future Units is made in accordance with
this letter agreement. Interest will be payable to you in
cash as promptly as practicable following each interest
payment date.
"TRANSACTION" shall mean the occurrence of any of the
following events:
(i) Any "person," as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") (other than the Company, any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities;
(ii) During any period of two consecutive years
commencing on the date hereof, individuals who at the
beginning of such period constitute the Board, and any new
director (other than a director designated by a person (as
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defined above) who has entered into an agreement with the
Company to effect a transaction described in sections (i),
(iii) or (iv) of this definition) whose election by the
Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(iii) The shareholders of the Company have approved a
merger or consolidation of the Company with any other
company and all other required governmental approvals of
such merger or consolidation have been obtained, other than
(A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger
or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no person (as defined above) becomes
the beneficial owner (as defined above) or more than 20% of
the combined voting power of the Company's then outstanding
securities; or
(iv) the shareholders of the Company have approved a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets, and all other
governmental approvals of such transaction have been
obtained.
Acceleration of In the event your employment is terminated involuntarily by
Payment: the Company without Cause, as defined below, or by yourself
for Good Reason, as defined below, prior to the date of
payment of the value of outstanding unvested Options, Units
and Future Units (as provided above), the payment of the
value of such awards as described herein will be made as
promptly as practicable, but in any event
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within 10 days, after the date of your termination of
employment.
"CAUSE" shall mean (i) your willful and continued failure
substantially to perform the duties of your position (other
than as a result of total or partial incapacity due to
physical or mental illness or as a result of a termination
of employment by you for Good Reason), (ii) any willful act
or omission by you constituting dishonesty, fraud or other
malfeasance, which in any such case is demonstrably
injurious to the financial condition or business reputation
of the Company or any of its affiliates, or (iii) your
conviction of, or plea of guilty or nolo contendere to, a
felony under the laws of the United States or any state
thereof or any other jurisdiction in which the Company or
any of its subsidiaries conducts business. For purposes of
this definition, no act or failure to act shall be deemed
"willful" unless effected by you not in good faith and
without a reasonable belief that such action or failure to
act was in or not opposed to the best interests of the
Company.
"GOOD REASON" shall mean:
(i) Removal from, or failure to be reappointed or
reelected to, your position (other than as a result of a
promotion);
(ii) Material diminution in your position or
responsibilities, such as would amount effectively to a
demotion;
(iii) Reduction in your base salary or maximum annual
bonus opportunity, or breach by the Company of any of the
provisions of this letter agreement; or
(iv) Relocation of your principal workplace without
your consent to a location outside the Newport Beach area.
Severance Payment: In the event your employment is terminated involuntarily by
the Company without Cause, or by yourself for Good Reason
within eighteen months following a Transaction, you shall be
entitled to one year's Base Salary at the rate in
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effect at the time of such termination of employment, or if
higher, at the rate in effect at the date of the
Transaction. Such amount shall be paid to you in lump sum,
without reduction for the time value of money, as soon as
practicable, but in any event within 10 days after the date
of your termination of employment.
Certain Tax The Company believes that no amount which you may receive
Matters: hereunder in connection with the proposed acquisition of the
Company by The Irvine Company would be treated as being
contingent on a change in ownership or effective control of
the Company, for purposes of the application of the "golden
parachute" excise tax provisions of the Internal Revenue
Code. The Company agrees to take a position consistent with
such belief in all matters dealing with the Internal Revenue
Service and to refrain from taking any action or position
that would be inconsistent with or otherwise undermine such
position. In the event that it is ultimately determined by
controlling tax authority that amounts received by you
hereunder are contingent on a change in ownership or
effective control of the Company for purposes of Sections
280G and 4999 of the Internal Revenue Code, then,
notwithstanding any other provision of this letter
agreement, you shall not be entitled to receive the excess,
if any, of (i) the total aggregate amount that you received
or are apparently entitled to receive hereunder (but for the
operation of this paragraph) over (ii) the maximum amount
you could have received in connection with such Transaction
without incurring excise tax under Section 4999 of the
Internal Revenue Code. Such excess amount, if paid to you
prior to such determination, shall be then immediately due
and owing to the Company.
Legal Expenses: In the event that it becomes necessary for you to engage
legal counsel to pursue a legal remedy for the Company's
breach of any provision of this letter agreement, the
Company will reimburse you for the fees and expenses of such
counsel, when and as incurred by you, unless your claim is
determined by a court or arbitrator to be without merit.
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Please indicate your acceptance of the provisions of this letter
agreement by signing and returning the duplicate of this letter to Xxxxx Xxxxx.
If you have any questions, please do not hesitate to contact me.
Sincerely,
/s/ Xxxxx X. XxXxx
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Xxxxx X. XxXxx
Director, Member of the Special Committee
I understand and accept the terms set forth in this letter agreement.
Signature: /s/ Xxxxxxx X. XxXxxxxxx Date: January 22, 1999
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Xxxxxxx X. XxXxxxxxx
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