CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT made as of June 18, 1997 by and between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Residential, Inc., a Maryland corporation (the "Company"), and ▇▇▇▇▇▇ ▇.
▇'▇▇▇▇▇ (the "Executive").
WITNESSETH
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists
and that the threat or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and
to ensure his continued dedication and efforts in such event without undue
concern for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change
in Control, the Company desires to enter into this Agreement with the
Executive to provide the Executive with certain benefits in the event his
employment is terminated as a result of, or in connection with, a Change in
Control and to provide the Executive with certain other benefits whether or
not the Executive's employment is terminated.
AGREEMENT
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of the date
hereof and shall continue in effect until December 31, 1998; PROVIDED,
HOWEVER, that on December 31, 1998 and on each anniversary thereof, the term
of this Agreement shall automatically be extended for one year unless either
the Company or the Executive shall have given written notice to the other
prior thereto that the term of this Agreement shall not be so extended; AND
PROVIDED, FURTHER, HOWEVER, that notwithstanding any such notice by the
Company not to extend, the term of this Agreement shall not expire prior to
the expiration of 24 months after the occurrence of a Change in Control.
2. DEFINITIONS.
2.1. ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date including
(i) base salary, (ii) reimbursement for reasonable and necessary expenses
incurred by the Executive on behalf of the Company during the period ending
on the Termination Date, (iii) vacation and sick leave pay (to the extent
provided by Company policy or applicable law) and (iv) bonuses and incentive
compensation (other than the "Pro Rata Bonus" (as hereinafter defined)).
2.2. BASE AMOUNT. For purposes of this Agreement, "Base Amount"
shall mean the greater of (a) the Executive's annual base salary, plus any
auto allowance, at the rate in effect immediately prior to the Change in
Control and (b) the Executive's annual base salary, plus any auto allowance,
at the rate in effect on the Termination Date, and shall include all amounts
of his base salary that are deferred under any other agreement or arrangement
with the Company.
2.3. BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount"
shall mean the Executive's annual bonus for the fiscal year prior to which a
Change in Control has occurred.
2.4. CAUSE.
(a) For purposes of this Agreement, except as set forth in Section
2.4(b) below, a termination of employment is for "Cause" if the Executive has
been convicted of a felony involving moral turpitude or the termination is
evidenced by a resolution adopted in good faith by two-thirds of the Board
that the Executive (i) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical or mental illness
or from the Executive's assignment of duties that would constitute "Good
Reason" as hereinafter defined) which failure continued for a period of at
least thirty (30) days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the manner in
which the Executive has failed substantially to perform or (ii) intentionally
engaged in conduct which is demonstrably and materially injurious to the
Company; PROVIDED, HOWEVER, that no termination of the Executive's employment
shall be for Cause as set forth in clause (ii) above until (x) there shall
have been delivered to the Executive a copy of a written notice setting forth
that the Executive was guilty of the conduct set forth in clause (ii) and
specifying the particulars thereof in detail and (y) the Executive shall have
been provided an opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires). Neither
an act nor a failure to act, on the Executive's part shall be considered
"intentional" unless the Executive has acted or failed to act with a lack of
good faith and with a lack of reasonable belief that the Executive's action
or failure to act was in the best interest of the Company. Notwithstanding
anything contained in this Agreement to the contrary, no failure to perform
by the Executive after a Notice of Termination is given by the Executive
shall constitute Cause for purposes of this Agreement.
(b) In the event an employment agreement is in place between the
Executive and the Company, the definition of "Cause" set forth in such
employment agreement shall apply for purposes of this Agreement.
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2.5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change
in Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the
▇▇▇▇ ▇▇▇) of twenty percent (20%) or more of the combined voting
power of the Company's then outstanding Voting Securities; PROVIDED,
HOWEVER, that in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (ii) an employee benefit
plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (ii) the
Company or any Subsidiary or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined).
(b) The individuals who, as of the date hereof, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the Board; PROVIDED, HOWEVER, that if the
election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds
(2/3) of the then Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the
Incumbent Board; PROVIDED, FURTHER, HOWEVER, that no individual shall
be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11
promulgated under the ▇▇▇▇ ▇▇▇) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(c) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving
the Company, unless:
(A) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own,
directly or indirectly, immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding
Voting Securities of the corporation
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resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization;
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least a majority of the members of the board
of directors of the Surviving Corporation or a corporation
beneficially owning, directly or indirectly, a majority of
the Voting Securities of the Surviving Corporation;
(C) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming
a part thereof) maintained by the Company, the Surviving
Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of fifteen percent
(15%) or more of the then outstanding Voting Securities)
owns, directly or indirectly, fifteen percent (15%) or more
of the combined voting power of the Surviving Corporation's
then outstanding voting securities; and
(D) a transaction described in clauses (A) through
(C) shall herein be referred to as a "Non-Control
Transaction;"
(ii) A complete liquidation or dissolution of the Company;
or
(iii) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person,
provided that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall
occur.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (i) was at the
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request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (ii) otherwise
occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then for all purposes of this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
2.6. COMPANY. For purposes of this Agreement, the "Company" shall
include the Company's "Successors and Assigns" (as hereinafter defined).
2.7. DISABILITY.
(a) For purposes of this Agreement, except as set forth in Section
2.7(b) below, "Disability" shall mean a physical or mental infirmity which
impairs the Executive's ability to substantially perform his duties with the
Company for a period of one hundred eighty consecutive days and the Executive
has not returned to his full time employment prior to the Termination Date as
stated in the "Notice of Termination" (as hereinafter defined).
(b) In the event an employment agreement is in place between the
Executive and the Company, the definition of "Disability" set forth in such
employment agreement shall apply for purposes of this Agreement.
2.8. GOOD REASON.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (i) through (viii) hereof:
(i) a change in the Executive's status, position or
responsibilities (including reporting responsibilities) which,
in the Executive's reasonable judgment, represents a substantial
adverse change from his status, position or responsibilities as
in effect at any time within ninety (90) days preceding the date
of a Change in Control or at any time thereafter; the assignment
to the Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with his
status, title, position or responsibilities as in effect at any
time within ninety days preceding the date of a Change in
Control or at any time thereafter; or any removal of the
Executive from or failure to reappoint or reelect him to any of
such offices or positions held prior to the Change of Control,
except in connection with the termination of his employment for
Disability, Cause, as a result of his death or by the Executive
other than for Good Reason;
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(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to
which he is entitled within five days of notice thereof;
(iii) the Company's requiring the Executive to be based at
any place outside a 30-mile radius from Scottsdale, Arizona,
except for reasonably required travel on the Company's business
which is not materially greater than such travel requirements
prior to the Change in Control;
(iv) the failure by the Company to provide the Executive
with compensation and benefits, in the aggregate, at least equal
(in terms of benefit levels and/or reward opportunities) to
those provided for under each other employee benefit plan,
program and practice in which the Executive was participating at
any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including
the Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision of
this Agreement;
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with
the terms of Section 2.4; or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in
Section 7 hereof.
(b) Any event or condition described in Section 2.8(a)(i)
through (viii) which occurs prior to a Change in Control but which the
Executive reasonably demonstrates (i) was at the request of a Third
Party or (ii) otherwise arose in connection with, or in anticipation
of, a Change in Control which actually occurs, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
(c) The Executive's right to terminate his employment pursuant
to this Section 2.8 shall not be affected by his incapacity due to a
Disability.
2.9. NOTICE OF TERMINATION. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination from the Company of the Executive's employment which
indicates the specific termination provision in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances
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claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.
2.10. PRO RATA BONUS. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a
fraction, the numerator of which is the number of days in the Company's
fiscal year in which the Executive's employment terminates through the
Termination Date and the denominator of which is 365.
2.11. SUCCESSORS AND ASSIGNS. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company whether by
operation of law or otherwise, and any affiliate of such Successors and
Assigns.
2.12. TERMINATION DATE. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his
date of death, (b) in the case of Good Reason, the last day of his employment
and (c) in all other cases, the date specified in the Notice of Termination;
PROVIDED, HOWEVER, that if the Executive's employment is terminated by the
Company due to Disability, the date specified in the Notice of Termination
shall be the 30th day after receipt of the Notice of Termination by the
Executive, provided that the Executive shall not have returned to the
full-time performance of his duties within 30 days after such receipt.
3. TERMINATION OF EMPLOYMENT. If, during the term of this Agreement,
the Executive's employment with the Company shall be terminated within
twenty-four months (24) following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (i) by the Company for Cause or Disability, (ii) by reason of
the Executive's death or (iii) by the Executive other than for Good
Reason, the Company shall pay to the Executive the Accrued Compensation
and, if such termination is other than by the Company for Cause, the Pro
Rata Bonus; PROVIDED, HOWEVER, if an employment agreement is in existence
between the Company and/or any of its affiliates and the Executive on the
Termination Date, the Company and/or its affiliates, as the case may be,
shall pay to the Executive any amounts owed to the Executive pursuant to
such employment agreement.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus;
(ii) the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to the
Termination Date, in a
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single payment an amount in cash equal to two times the sum of (A) the
Base Amount and (B) the Bonus Amount;
(iii) for a number of months equal to 24 (the "Continuation
Period"), the Company shall at its expense continue on behalf of the
Executive and his dependents and beneficiaries the medical, dental
and hospitalization benefits provided (A) to the Executive at any
time during the 90-day period prior to the Change in Control or at
any time thereafter or (B) to other similarly situated executives who
continue in the employ of the Company during the Continuation Period.
The coverage and benefits (including deductibles and costs) provided
in this Section 3(b)(iii) during the Continuation Period shall be no
less favorable to the Executive and his dependents and beneficiaries,
than the most favorable of such coverages and benefits during any of
the periods referred to in clauses (A) and (B) above. The Company's
obligation hereunder with respect to the foregoing benefits shall be
limited to the extent that the Executive obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is required to
provide the Executive hereunder as long as the aggregate coverages
and benefits of the combined benefit plans is no less favorable to
the Executive than the coverages and benefits required to be provided
hereunder. This subsection (iii) shall not be interpreted so as to
limit any benefits to which the Executive, his dependents or
beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Executive's
termination of employment, including without limitation, retiree
medical and life insurance benefits;
(iv) all theretofore unvested stock options, restricted options,
restricted stock and other awards issued to the Executive pursuant to
the Company's Stock Incentive Plan shall immediately vest; and
(v) all theretofore unvested employer contributions in the
Executive's account pursuant to the Company's 401(k) plan shall
immediately vest.
(c) The amounts provided for in Sections 3(a) and 3(b)(i) and (ii)
shall be paid in a single lump sum cash payment within five (5) days after
the Executive's Termination Date (or earlier, if required by applicable
law).
(d) The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Executive in any subsequent
employment except as provided in Section 3(b)(iii).
(e) The severance pay and benefits provided for in this Section 3
shall be reduced by the amount of any other severance or termination pay
to which the Executive may be entitled under any agreement with the
Company or any of its affiliates.
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(f) The Executive's entitlement to any other compensation or
benefits or any indemnification shall be determined in accordance with the
Company's employee benefit plans and other applicable programs, policies
and practices or any indemnification agreement then in effect.
4. NOTICE OF TERMINATION. Following a Change in Control, any
purported termination of the Executive's employment by the Company shall be
communicated by Notice of Termination to the Executive. For purposes of this
Agreement, no such purported termination shall be effective without such
Notice of Termination.
5. EXCISE TAX GROSS-UP.
(a) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined (pursuant to (b) below) or finally
determined (as defined in (c)(iii) below) that any payment, distribution,
transfer, benefit or other event with respect to the Company or its
predecessors, successors, direct or indirect subsidiaries or affiliates
(or any predecessor, successor of affiliate of any of them, and including
any benefit plan of any of them), to or for the benefit of Executive or
Executive's dependents, heirs or beneficiaries (whether such payment,
distribution, transfer, benefit or other event occurs pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (each a "Payment" and
collectively the "Payments") is or was subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, and any
successor provision or any comparable provision of state or local income
tax law (collectively, "Section 4999"), or any interest, penalty or
addition to tax is or was incurred by Executive with respect to such
excise tax (such excise tax, together with any such interest, penalty or
addition to tax, hereinafter collectively referred to as the
"Excise Tax"), then, within 10 days after such determination or final
determination, as the case may be, the Company shall pay to Executive an
additional cash payment (hereinafter referred to as the "Gross-Up
Payment") in an amount such that after payment by Executive of all taxes,
interest, penalties and additions to tax imposed with respect to the Gross-
Up Payment (including, without limitation, any income and excise taxes
imposed upon the Gross-Up Payment), Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon such Payment or
Payments. This provision is intended to put Executive in the same
position as Executive would have been had no Excise Tax been imposed upon
or incurred as a result of any Payment.
(b) Except as provided in subsection (c) below, the determination
that a Payment is subject to an Excise Tax shall be made in writing by a
certified public accounting firm selected by Executive ("Executive's
Accountant"). Such determination shall include the amount of the Gross-Up
Payment and detailed computations thereof, including any assumptions used
in such computations (the written determination of the Executive's
Accountant, hereinafter, the "Executive's Determination"). The
Executive's Determination shall be reviewed on behalf of the Company by a
certified public accounting firm selected by the Company (the "Company's
Accountant"). The Company
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shall notify Executive within 10 business days after receipt of the
Executive's Determination of any disagreement or dispute therewith, and
failure to so notify within that period shall be considered an agreement by
the Company with the Executive's Determination, obligating the Company to
make payment as provided in subsection (a) above within 10 days from the
expiration of such 10 business-day period. In the event of an objection by
the Company to the Executive's Determination, any amount not in dispute
shall be paid within 10 days following the 10 business-day period referred
to herein, and with respect to the amount in dispute the Executive's
Accountant and the Company's Accountant shall jointly select a third
nationally recognized certified public accounting firm to resolve the
dispute and the decision of such third firm shall be final, binding and
conclusive upon the Executive and the Company. In such a case, the third
accounting firm's findings shall be deemed the binding determination with
respect to the amount in dispute, obligating the Company to make any
payment as a result thereof within 10 days following the receipt of such
third accounting firm's determination. All fees and expenses of each of
the accounting firms referred to in this Section 5 shall be borne solely by
the Company.
(c) (i) Executive shall notify the Company in writing of any claim
by the Internal Revenue Service (or any successor thereof) or any state or
local taxing authority (individually or collectively, the "Taxing
Authority") that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 30 days after Executive receives written
notice 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; provided,
however, that failure by Executive to give such notice within such 30-day
period shall not result in a waiver or forfeiture of any of Executive's
rights under this Section 5 except to the extent of actual damages
suffered by the Company as a result of such failure. Executive shall not
pay such claim prior to the expiration of the 15-day period following the
date on which Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes, interest, penalties
or additions to tax with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such 15-day
period that it desires to contest such claim (and demonstrates to the
reasonable satisfaction of Executive its ability to make the payments to
Executive which may ultimately be required under this section before
assuming responsibility for the claim), Executive shall:
(A) give the Company any information reasonably requested by
the Company relating to such claim;
(B) 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 selected by the Company that is
reasonably acceptable to Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
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(D) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all attorneys fees, costs and expenses
(including additional interest, penalties and additions to tax)
incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for all taxes (including,
without limitation, income and excise taxes), interest, penalties and
additions to tax imposed in relation to such claim and in relation to
the payment of such costs and expenses or indemnification. Without
limitation on the foregoing provisions of this Section 5, and to the
extent its actions do not unreasonably interfere with or prejudice
Executive's disputes with the Taxing Authority as to other issues,
the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego 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 Executive to pay the tax, interest or
penalties claimed and ▇▇▇ for a refund or contest the claim in any
permissible manner, and 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 Company
directs Executive to pay such claim and ▇▇▇ for a refund, the Company
shall advance an amount equal to such payment to Executive, on an
interest-free basis, and shall indemnify and hold Executive harmless,
on an after-tax basis, from all taxes (including, without limitation,
income and excise taxes), interest, penalties and additions to tax
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,
interest, penalties or additions to tax for the taxable year of
Executive with respect to which such contested amount is claimed to
be due is limited solely to such contested amount; and, provided,
further, that any settlement of any claim shall be reasonably
acceptable to Executive and 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 Executive shall be entitled to settle
or contest, as the case may be, any other issue.
(ii) If, after receipt by Executive of an amount advanced by the
Company pursuant to Section 5(c)(i), Executive receives any refund with
respect to such claim, Executive shall (subject to the Company's complying
with the requirements of Section 5) promptly pay to the Company an amount
equal to such refund (together with any interest paid or credited thereon
after taxes applicable thereto), net of any taxes (including without
limitation any income or excise taxes), interest, penalties or additions
to tax and any other costs incurred by Executive in connection with such
advance, after giving effect to such repayment. If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section
5(c)(i), it is finally determined that Executive is not entitled to any
refund with respect to such claim, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall be
treated as a Gross-
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Up Payment and shall offset, to the extent thereof, the amount of any
Gross-Up Payment otherwise required to be paid.
(iii) For purposes of this Section 5, whether the Excise Tax is
applicable to a Payment shall be deemed to be "finally determined" upon
the earliest of: (A) the expiration of the 15-day period referred to in
paragraph (c)(i) above if the Company has not notified Executive that it
intends to contest the underlying claim, (B) the expiration of any period
following which no right of appeal exists, (C) the date upon which a
closing agreement or similar agreement with respect to the claim is
executed by Executive and the Taxing Authority (which agreement may be
executed only in compliance with this Section 5), (D) the receipt by
Executive of notice from the Company that it no longer seeks to pursue a
contest (which notice shall be deemed received if the Company does not,
within 15 days following receipt of a written inquiry from Executive,
affirmatively indicate in writing to Executive that the Company intends to
continue to pursue such contest).
(d) As a result of uncertainty in the application of Section 4999
that may exist at the time of any determination that a Gross-Up Payment is
due, it may be possible that in making the calculations required to be
made hereunder, the parties or their accountants shall determine that a
Gross-Up Payment need not be made (or shall make no determination with
respect to a Gross-Up Payment) that properly should be made
("Underpayment"), or that a Gross-Up Payment not properly needed to be
made should be made ("Overpayment"). The determination of any
Underpayment shall be made using the procedures set forth in paragraph (b)
above and shall be paid to Executive as an additional Gross-Up Payment.
The Company shall be entitled to use procedures similar to those available
to Executive in paragraph (b) to determine the amount of any Overpayment
(provided that the Company shall bear all costs of the accountants as
provided paragraph (b)) . In the event of a determination that an
Overpayment was made, any such Overpayment shall be treated for all
purposes as a loan to Executive with interest at the applicable Federal
rate provided for in Section 1274(d) of the Code; provided, however, that
the amount to be repaid by Executive to the Company shall be subject to
reduction to the extent necessary to put Executive in the same after-tax
position as if such Overpayment were never made.
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the Company, its Successors
and Assigns, and the Company shall require any Successors and Assigns to
expressly assume 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 or assignment had taken place. Neither this Agreement nor
any right or interest hereunder shall be assignable or transferable by the
Executive, his beneficiaries or legal representatives, except by will or by
the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal personal
representative.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become
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due as a result of (a) the Executive seeking to obtain or enforce any right
or benefit provided by this Agreement (including, but not limited to, any
such fees and expenses incurred in connection with the Dispute and (b) the
Executive's hearing before the Board as contemplated in Section 2.4 of this
Agreement; PROVIDED, HOWEVER, that the circumstances set forth in clause (a)
(other than as a result of the Executive's termination of employment under
circumstances described in Section 2.5(d)) occurred on or after a Change in
Control.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, by overnight courier or by facsimile, addressed
to the respective addresses and facsimile numbers last given by each party to
the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All
notices and communications shall be deemed to have been received on the date
of delivery thereof or on the third business day after the mailing thereof,
except that notice of change of address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce
such rights as the Executive may have under any other agreements with the
Company (except for any severance or termination agreement). Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company shall be payable in accordance with
such plan or program, except as explicitly modified by this Agreement.
10. NO GUARANTEED EMPLOYMENT. 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 may be terminated by either the
Executive or the Company at any time.
11. SETTLEMENT OF CLAIMS. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
12. MUTUAL NON-DISPARAGEMENT. The Company, its affiliates and
subsidiaries agree and the Company shall use its best efforts to cause their
respective executive officers and directors to agree, that they will not make
or publish any statement critical of the Executive, or in any way adversely
affecting or otherwise maligning the Executive's reputation. The Executive
agrees that he will not make or publish any statement critical of the
Company, its affiliates and their respective executive officers and
directors, or in any way adversely affecting or otherwise maligning the
business or reputation of any member of the Company, its affiliates and
subsidiaries and their respective officers, directors and employees.
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13. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Arizona without
giving effect to the conflict of laws principles thereof. Any action brought
by any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in Maricopa County in the State of Arizona.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Executive has executed this Agreement
as of the day and year first above written.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ RESIDENTIAL, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CHAIRMAN
By:/s/ S. ▇▇▇▇▇▇ ▇'▇▇▇▇▇
--------------------------------
Executive
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