EXHIBIT 10.6
▇▇▇▇▇▇▇ PACIFIC PROPERTIES, INC.
EXECUTIVE RETENTION AGREEMENT
AGREEMENT made as of this 9th day of April, 2001 (the "Effective
Date"), by and among ▇▇▇▇▇▇▇ Pacific Properties, Inc., a Maryland corporation
with its principal place of business in San Diego, California (the
"Corporation"), and together with its subsidiaries (the "Employers"), and ▇▇▇▇▇
▇. ▇▇▇▇▇▇ of Berkeley, California (the "Executive"), an individual presently
providing services to the Corporation as its Chief Executive Officer and
President.
WHEREAS the Employers are in the process of selling their assets
pursuant to the Corporation's Plan of Complete Liquidation and Dissolution (the
"Plan of Liquidation") and the Board of Directors of the Corporation believes
that the retention of the Executive is in the best interests of the Corporation
during such process;
WHEREAS the Corporation and the Executive are parties to that certain
Senior Executive Severance Agreement dated as of June 30, 1999, as amended (the
"Severance Agreement");
WHEREAS in order to encourage the Executive to continue his employment
with the Corporation and to exert his best efforts toward the completion of the
liquidation of the Corporation, the Corporation desires to terminate the
Severance Agreement and provide the Executive with benefits described in this
Agreement; and
WHEREAS the Executive has agreed to terminate the Severance Agreement
pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. RETENTION BENEFITS.
(a) The Corporation agrees to loan to the Executive (i)
on April 11, 2001, an amount equal to $800,000 in cash and (ii)
$400,000 in cash on each of September 15, 2001 and December 15, 2001
or, if earlier, upon the Termination Date (collectively, the "Loans"),
provided, however, that the Corporation shall have no obligation to
make any such Loan on any such date if prior thereto (1) the Executive
terminates his employment with the Employers other than (x) for Good
Reason or (y) by reason of death or disability (within the meaning of
the Employers' long-term disability coverage as in existence as of the
Effective Date) ("Disability") or (2) the Executive's employment is
terminated by the Employers for Cause (any such termination described
in (1) and (2), a "Voluntary Termination"). The Loans shall be
evidenced by promissory notes in the form of Promissory Note attached
hereto as EXHIBIT A. The Loans shall be payable in full within five (5)
days after the Executive's employment with the Employers terminates if
it terminates prior to the Termination Date pursuant to a Voluntary
Termination. The
Loans will be automatically forgiven when and if (i) the Executive
remains employed by any of the Employers until the Termination Date,
(ii) the Executive terminates his employment with the Employers for
Good Reason or by reason of death or Disability prior to the
Termination Date or (iii) the Executive's employment is terminated by
the Employers other than for Cause prior to the Termination Date (any
such termination described in (ii) and (iii), an "Involuntary
Termination").
(b) The Employers agree to use their reasonable best
efforts to obtain a ruling or similar advice from the Internal Revenue
Service ("IRS Advice") to the effect that the payments provided for
hereunder would not be deemed to be "parachute payments" within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") or would otherwise not be subject to the excise
tax imposed by Section 4999 of the Code (such excise tax is hereinafter
referred to as the "Excise Tax"). In addition, the Employers and the
Executive agree to use their reasonable best efforts to develop an
alternative by January 15, 2002 which will provide the Employers and
the Executive with substantially the same comfort which would be
provided by IRS Advice. For this purpose, the Employers and the
Executive agree that an opinion of counsel or a determination made by
Deloitte & Touche LLP or other accounting firm will not be deemed to
provide comfort which is substantially equivalent to that which would
be provided by IRS Advice. If neither IRS Advice nor other alternative
providing substantially the same comfort is received by January 15,
2002, and the Executive remains employed by the Employers through the
Termination Date or the Executive's employment with the Employers
terminates prior thereto pursuant to an Involuntary Termination, the
Corporation agrees to pay to the Executive an amount (the "Gross-Up
Payment") determined in accordance with (i) and (ii) below in cash
within twenty business days of the Termination Date, which amount is
currently estimated by Deloitte & Touche LLP to be $794,000 if the
Termination Date were to occur prior to January 1, 2002.
(i) The Gross-Up Payment shall be equal to the amount
which must be paid to the Executive such that the net
amount retained by the Executive pursuant to Section
1(a) of this Agreement and received pursuant to
Section 2(a) of this Agreement, after deduction of
any (A) Excise Tax on any payments by the Employers
to or for the benefit of the Executive pursuant to
the terms of this Agreement (the "Retention
Payments"), and (B) Federal, state, and local income
tax, employment tax and Excise Tax upon the payment
provided by this subsection (b), but not after the
deduction of any other taxes or amounts) shall be
equal to the Retention Payments less the amount of
the Gross-Up Payment. (The Gross-Up Payment is not
intended to compensate the Executive for any income
taxes or employment taxes payable with respect to the
Retention Payments other than those income taxes and
employment taxes payable with respect to the Gross-Up
Payment itself.)
(ii) The amount of the Gross-Up Payment shall be
determined by Deloitte & Touche LLP or any other
nationally recognized accounting firm selected
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by the Employers, which shall provide detailed
supporting calculations both to the Employers and the
Executive within fifteen business days of the
Termination Date, or at such earlier time as is
reasonably requested by the Employers or the
Executive. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed
to pay federal income taxes at the highest marginal
rate of federal income taxation applicable to
individuals for the calendar year in which the
Gross-Up Payment is to be made, and state and local
income taxes at the highest marginal rates of
individual taxation in the state and locality of the
Executive's residence on the Termination Date, net of
the maximum reduction in federal income taxes which
could be obtained from deduction of such state and
local taxes.
(iii) For purposes of this subsection (b), Deloitte &
Touche LLP (or such other accounting firm determining
the amount of the Gross-Up Payment pursuant to (b)(i)
above) shall assume that the Retention Payments are
subject to Excise Tax.
(c) "Termination Date" shall mean the earliest of (i) the
conveyance of the Employers' assets and liabilities into a liquidating
trust, (ii) the sale of all of the Employers' real estate assets or all
of the outstanding securities of the Corporation (whether by merger or
otherwise), or (iii) January 15, 2002.
(d) "Cause" shall mean, and shall be limited to, the
occurrence of any one or more of the following events:
(i) a willful act of dishonesty by the Executive
with respect to any matter involving any of
the Employers; or
(ii) conviction of the Executive of a crime
involving moral turpitude; or
(iii) the deliberate or willful failure by the
Executive (other than by reason of the
Executive's physical or mental illness,
incapacity or Disability) to substantially
perform the Executive's duties with the
Employers and the continuation of such
failure for a period of 30 days after
delivery by the Employers to the Executive
of written notice specifying the scope and
nature of such failure and their intention
to terminate the Executive for Cause.
For purposes of clauses (i) and (iii) of this Section 1(d), no
act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive without
reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Employers;
(e) "Good Reason" shall mean the occurrence of either of
the following events:
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(i) A material adverse change in the nature or scope of
the Executive's duties from the duties exercised by
the Executive upon the Effective Date, provided,
however, that any change in the Executive's duties
resulting from asset sales or other transactions
contemplated by the Plan of Liquidation, or the
liquidation of the Corporation itself shall not be
deemed to be a material adverse change for this
purpose; or
(ii) a reduction in the rate of annual compensation
received by the Executive for his services as
President and Chief Executive Officer of the
Corporation as in effect on the Effective Date or as
the same may be increased from time to time; or
(iii) the termination by the Employers of the employment of
the Executive's administrative assistant without the
consent of the Executive; or
(iv) a change by the Employers in the location of the
Executive's Employer-provided office space without
the consent of the Executive.
(f) For purposes of this Agreement, the Executive shall
be deemed to be employed by the Employers if he is an employee of any
of the Employers or if he is providing services pursuant to that
certain Consultant Leasing Agreement between ▇▇▇▇▇▇▇ Pacific Operating
Partnership, L.P. and ▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇ and any fees paid to the
Executive pursuant thereto shall be deemed to have been paid by the
Employers.
2. SPECIAL TERMINATION PAYMENTS.
(a) In the event the Executive remains employed by the
Employers through the Termination Date or the Executive's employment
with the Employers terminates pursuant to an Involuntary Termination,
the Employers shall reimburse the Executive for the full cost of
continuing the health, dental and/or life insurance coverage in effect
for the Executive immediately prior to the Termination Date or date of
Involuntary Termination, whichever is relevant, to the extent
available, or any similar coverage obtained by the Executive, for up to
thirty-six (36) months after the Termination Date or date of
Involuntary Termination, whichever is relevant.
(b) The Employers shall pay to the Executive all
reasonable legal and mediation fees and expenses incurred by the
Executive in obtaining or enforcing any right or benefit provided by
this Agreement, except in cases involving frivolous or bad faith
litigation initiated by the Executive.
3. TERMINATION OF SEVERANCE AGREEMENT, RELEASE AND LIQUIDATING
TRUST.
(a) In consideration of the execution by the Corporation
of this Agreement, the Executive and the Corporation hereby agree that
the Severance Agreement is terminated in its entirety, shall have no
further force and effect, and none of the parties
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thereto shall have any further rights or obligations thereunder, and
the Executive hereby irrevocably and unconditionally releases and
forever discharges the Employers, their officers, directors,
shareholders, successors and assigns from any and all claims, demands,
actions, controversies and causes of action that he may have relating
to such payments or benefits.
(b) Upon the request of the Corporation, the Executive
agrees to serve at the sole discretion of the Corporation as
liquidating trustee for any liquidation trust formed in connection with
the liquidation of the Corporation and will perform all of the duties
typically performed by such a trustee. The parties hereto shall
negotiate in good faith to enter into a mutually acceptable agreement
with respect to these and other terms concerning the Executive's
serving as liquidating trustee prior to the Executive's serving as
such. The Corporation and the Executive agree that if the Corporation
exercises its option hereunder to have the Executive act as liquidating
trustee, the agreement shall provide, among other things, that the
Executive shall be paid monthly at the rate of $500 per hour spent
performing such duties, plus expenses, provided that the Executive
shall receive no less than $5,000 per month.
4. WITHHOLDING. All payments made by the Employers under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Employers under applicable law.
5. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) NOTICE OF TERMINATION. During the term of this
Agreement, any purported termination of the Executive's services (other
than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with this Section 5. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and the
Date of Termination (as defined below). Further, a Notice of
Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds (2/3)
of the entire membership of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity for the
Executive, accompanied by the Executive's counsel, to be heard before
the Board) finding that, in the good faith opinion of the Board, the
termination met the criteria for Cause set forth in Section 1(d)
hereof.
(b) DATE OF TERMINATION. "Date of Termination," with
respect to any purported termination of the Executive's services during
the term of this Agreement, shall mean the date specified in the Notice
of Termination. In the case of a termination by the Employers other
than a termination for Cause (which may be effective immediately), the
Date of Termination shall not be less than 30 days after the Notice of
Termination is given. In the case of a termination by the Executive,
the Date of Termination shall not be less than 15 days from the date
such Notice of Termination is given. Notwithstanding any other
provision of this Agreement to the contrary, in the
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event that the Executive gives a Notice of Termination to the
Employers, the Employers may unilaterally accelerate the Date of
Termination.
(c) NO MITIGATION. The Employers agree that, if the
Executive's employment by the Employers is terminated during the term
of this Agreement, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to
the Executive by the Employers pursuant to Sections 1 and 2 hereof.
Further, the amount of any payment provided for in this Agreement shall
not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the
Employers, or otherwise.
(d) MEDIATION OF DISPUTES. The parties shall endeavor in
good faith to settle within 90 days any controversy or claim arising
out of or relating to this Agreement or the breach thereof through
mediation with JAMS, Endispute or similar organizations. If the
controversy or claim is not resolved within 90 days, the parties shall
be free to pursue other legal remedies in law or equity.
6. ASSIGNMENT; PRIOR AGREEMENTS. Neither the Employers nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party, and without such consent any attempted transfer shall be null and void
and of no effect. This Agreement shall inure to the benefit of and be binding
upon the Employers and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after becoming entitled to any payments provided for under Sections 1 and
2 of this Agreement but prior to the completion by the Employers of all payments
due him thereunder, the Employers shall continue such payments to the
Executive's beneficiary designated in writing to the Employers prior to his
death (or to his estate, if the Executive fails to make such designation).
7. ENFORCEABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
8. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
9. NO CONTRACT OF EMPLOYMENT. Nothing in this Agreement shall be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in
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writing between the Executive and the Employers, the Executive shall not have
any right to be retained in the service of the Employers.
10. NOTICES. Any notices, requests, demands, and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Employers, or to the Employers at their main office, attention of the
Board of Directors.
11. EFFECT ON OTHER PLANS. Nothing in this Agreement shall be
construed to limit the rights of the Executive under the Employers' benefit
plans, programs or policies.
12. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Employers.
13. GOVERNING LAW. This contract shall be construed under and be
governed in all respects by the laws of the State of California.
14. OBLIGATIONS OF SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Employers, the Employers will use their
best efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Employers to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employers would be
required to perform if no such succession had taken place.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employers by their duly authorized officers and by the
Executive, as of the date first above written.
▇▇▇▇▇▇▇ PACIFIC PROPERTIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman, Compensation Committee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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