Exhibit 10.42
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CHANGE IN CONTROL EMPLOYMENT AGREEMENT
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AGREEMENT by and between CarrAmerica Realty Corporation, a Maryland
corporation (the "Company") and Xxxxxxx X. Xxxxxxx (the "Executive"), effective
as of the 6th day of May 1999.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change in Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change in Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
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(a) The "Effective Date" shall mean the first date during the Change
in Control Period (as defined in Section 1(b)) on which a Change in Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or anticipation of a Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change in Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date three years after the date
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hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless at least 12 months prior to the Renewal Date the Company shall give
notice to the Executive that the Change in Control Period shall not be so
extended, the Change in Control Period shall be automatically extended so as to
terminate one year from such Renewal Date.
2. Change in Control. For the purpose of this Agreement, a "Change
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in Control" shall mean:
(a) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(b) Consummation of a reorganization, merger or consolidation
involving the Company (a "Business Combination") unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") and the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities") immediately prior to such Business Combination
beneficially own, directly or indirectly, at least 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, and (ii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination;
(c) the sale or other disposition of more than 50% of the operating
assets of the Company; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
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Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date (the "Employment Period").
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4. Terms of Employment.
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(a) Position and Duties.
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(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be performed for the senior surviving
company following a Change in Control as described in Section 2(b) of this
Agreement, and such position shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at
any time during the 120-day period immediately preceding the Effective Date
and (B) the Executive's services shall be performed at the location where
the Executive was employed immediately preceding the Effective Date or any
office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and personal leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period, it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as
such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation.
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(i) Base Salary. During the Employment Period, the Executive
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shall receive an annual base salary ("Annual Base Salary"), which shall be
paid at a monthly rate, at least equal to twelve times the highest monthly
base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased. As used in this Agreement,
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the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
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Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least
equal to the greater of (x) Executive's highest actual bonus under the
Company's annual bonus plan, or any comparable bonus under any predecessor
or successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent Annual
Bonus") or (y) the target annual bonus for the fiscal year which includes
the Effective Date. Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
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Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
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Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, vision, disability, employee split dollar life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
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be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the
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Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
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shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
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Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at
any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall
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be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
5. Termination of Employment.
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(a) Death or Disability. The Executive's employment shall terminate
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automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 14(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
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(b) Cause. The Company may terminate the Executive's employment
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during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
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Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
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(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or
the Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
14(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
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or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 14(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
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Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
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(a) Good Reason; Other Than for Cause, Death or Disability. If,
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during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
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A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the greater of (i) the Recent Annual Bonus or (ii) the
target annual bonus for the fiscal year which includes the Date of
Termination and (y) a fraction, the numerator of which is the number
of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the greater of (i) the
Recent Annual Bonus or (ii) the target annual bonus for the fiscal
year which includes the Date of Termination; and
C. the amount equal to the company's contributions to all
incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive as in effect at any
time during the 120-day period immediately preceding the Effective
Date, which would have been made on behalf of the Executive if the
Executive's employment continued for two years after the Date of
Termination assuming for this purpose that all benefits are fully
vested, and, assuming that the Executive's compensation in each of the
two years is that required by Section 4(b)(i) and Section 4 (b)(ii);
(ii) for two years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until two years after the Date of Termination and to have
retired on the last day of such period;
(iii) for a period of six months after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred, provide
the Executive
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with temporary office space or reasonable outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion; and
(iv) for two years after the Executive's Date of Termination, to the
extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement including, without
limitation, any employee split dollar life insurance plan of the Company
and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
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the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
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of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
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shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his
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Annual Base Salary through the Date of Termination, (y) the amount of any
compensation previously deferred by the Executive, and (z) Other Benefits, in
each case to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Effect on Option, Restricted Stock and Restricted Unit Agreements.
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Immediately prior to a Change in Control, all stock options, restricted stock
unit grants or other equity awards made to the Executive by Company or any
affiliate thereof which are outstanding at the time of such event shall be
accelerated and vest. Accordingly, all stock options, restricted stock unit
grants or other equity awards shall be exercisable at such time in accordance
with their terms. This Agreement is intended to amend all stock options,
restricted stock unit grants or other equity awards previously awarded to the
Executive to accelerate vesting as described above to the extent vesting would
not otherwise be accelerated under the terms of such stock options, restricted
stock unit grants or other equity awards. This Agreement is also intended to
expressly exclude application of Section 13 of the CarrAmerica Realty
Corporation 1997 Stock Option and Incentive Plan and any similar provision of
any stock option, restricted stock unit grant or other equity award of the
Company or any affiliate thereof and to amend all stock options, restricted
stock unit grants or other equity awards previously awarded to the Executive to
provide the Executive with certain additional payments in accordance with the
terms of Section 10 of this Agreement to the extent the Executive would not
otherwise receive a Gross-Up Payment (as defined in Section 10 of this
Agreement).
8. Non-Exclusivity of Rights. Nothing in this Agreement shall
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prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
14(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
9. Full Settlement. The Company's obligation to make the payments
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provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by
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the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section 7872(f)
(2) (A) of the Internal Revenue Code of 1986, as amended (the "Code").
10. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 10) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 10(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Executive, after
taking into account the Payments and the Gross-Up Payment, would not receive a
net after-tax benefit of at least $25,000 (taking into account both income taxes
and any Excise Tax) as compared to the net after-tax proceeds to the Executive
resulting from an elimination of the Gross-Up Payment and a reduction of the
Payments, in the aggregate, to an amount (the "Reduced Amount") such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Xxxxxx
Xxxxxxxx LLP or such other certified public accounting firm as may be designated
by the Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any
11
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 10(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable after the Executive is informed in writing 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. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) 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 reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
--------
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo 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 the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the 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
12
Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) 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
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, 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 the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 10(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 10(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
11. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 11 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
12. Pooling of Interests Accounting Treatment. Notwithstanding
-----------------------------------------
anything to the contrary contained herein, to the extent that any payment or
other benefit under this Agreement would prevent a Change in Control transaction
involving the Company which would otherwise qualify for pooling of interests
accounting treatment from so qualifying, then the provision setting forth such
payment or benefit shall be deemed amended or revoked to the extent required to
preserve such pooling of interests treatment. The Board will use good faith
efforts to provide the Executive with a substitute benefit that is as comparable
as possible under the circumstances and which will not limit or otherwise
restrict the use of pooling of interests
13
accounting treatment. The Executive will, upon advice from the Company, take (or
refrain from taking, as appropriate) all actions necessary or desirable to
ensure that pooling of interests accounting is available for such transaction.
13. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly 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
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
14. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the District of Columbia, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
If to the Company:
-----------------
CarrAmerica Realty Corporation
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Managing Director, General Counsel
and Secretary
14
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: J. Xxxxxx Xxxxxxx, Xx.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) 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, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
CARRAMERICA REALTY CORPORATION
By:/s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director, General Counsel,
& Corporate Secretary
16
