AMENDMENT NO. 2 TO
EMPLOYMENT AND NONCOMPETITION AGREEMENT
September 1, 1998
Xxxxx Xxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Re: Amendment No. 2 to Employment and Noncompetition Agreement dated
March 1, 1997, as amended on January 2, 1998, among BRI OP Limited
Partnership, Berkshire Realty Company, Inc. and Xxxxx Xxxxx (the
"Agreement").
Dear Xx. Xxxxx:
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 headquarters at 000 Xxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 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;"
The last two (2) lines of subsection 4(e) of the Agreement are
amended in their entirety to read as follows:
"Section 8 hereof with respect to non-disclosure, Section 9 hereof
with respect to the return of Company property, or Section 10 hereof
with respect to noncompetition."
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 $153,000 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 Acquisition/Disposition Bonus Pool. Other than the
pro rata bonus described in the following sentence, the terms and
conditions of the Bonus Pool 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 $84,000 (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
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Employee's target bonus for the year in which the Employment
Termination Date occurs (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 two (2) 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 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
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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.
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
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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 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
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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 date of a Change in Control
and ending two (2) 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 two (2) 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,
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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 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."
The first sentence of Section 11 of the Agreement is amended in its
entirety to read as follows:
"Employee acknowledges that the Company would not have an adequate
remedy at law for money damages if the covenants contained in
Sections 8 (Non-Disclosure), 9 (Return of Company Property) or 10
(Noncompetition) were not complied with in accordance with their
terms, and that any breach or threatened breach thereof would result
in immediate and irreparable injury to the Company."
Section 21 of the Agreement is amended in its entirety to read as
follows:
21. Survival. The provisions of Sections 5, 6 and 25 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."
The following is hereby added as Section 22 of the Agreement:
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 any subsequent December 31 thereafter. Such notice shall be in
the form and to the address as prescribed by Section 24 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 two (2) 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
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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) 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."
The following is hereby added as Section 24 of the Agreement:
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24. Notice. All notices, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered in person, by United States mail, certified or registered,
with return receipt requested, or by telefax, telegram or telex:
a. If to Employee, to:
Xxxxx Xxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telefax number: (000) 000-0000
b. If to the Company, to:
BRI OP Limited Partnership
Berkshire Realty Company, Inc.
Harbor Plaza
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telefax number: (000) 000-0000
With a copy to :
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telefax number: (000) 000-0000
or to such other addresses or telefax numbers as the parties may have
furnished to each other by notice pursuant to the provisions of this
Section 24. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered to the
address to which it is directed."
The following is hereby added as Section 25 of the Agreement:
25. Expense Reimbursement. Employee shall be entitled to
reimbursement from the Company for the reasonable business costs and
expenses which he incurs in connection with the performance of his
duties and obligations under this Agreement provided that the nature
and amount of such expenses are incurred and approved in accordance
with the Company's business expense reimbursement policy in effect
from time to time as approved by the Board of Directors.
Reimbursement shall be conditioned upon presentation of expense
statements or vouchers or such other supporting information as the
Company
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may from time to time require."
In all other respects, the Agreement is hereby ratified and
confirmed.
The foregoing amendments shall be effective as of September 1, 1998.
Please indicate your agreement with this Amendment No. 2 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:
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Xxxxx Xxxxx
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