Exhibit 10.4
CHANGE IN CONTROL AGREEMENT
This Agreement entered into as of the 18th day of May, 1999, by and between
Security Capital Group Incorporated, a Maryland corporation (the "Company"), and
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WHEREAS, the Company wishes to assure itself of the continuity of the
Executive's services in the event of any actual change in control of the
Company; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 2001; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year unless, not later than
the preceding January 1 either party shall have given notice that such party
does not wish to extend the Term; and provided, further, that if a Change in
Control (as defined in paragraph 3 below) shall have occurred during the
original or any extended Term of this Agreement, the Term of this Agreement
shall continue for a period of twenty-four calendar months beyond the calendar
month in which such Change in Control occurs.
2. Employment After a Change in Control. If the Executive is in the employ
of the Company on the date of a Change in Control, the Company hereby agrees to
continue the Executive in its employ for the period commencing on the date of
the Change in Control and ending on the last day of the Term of this Agreement.
During the period of employment described in the foregoing provisions of this
paragraph 2 (the "Employment Period"), the Executive shall hold such position
with the Company and exercise such authority and perform such executive duties
as are commensurate with the Executive's position, authority and duties
immediately prior to the Change in Control. The Executive agrees that during the
Employment Period the Executive shall devote full business time exclusively to
the executive duties described herein and perform such duties faithfully and
efficiently; provided, however, that nothing in this Agreement shall prevent the
Executive from voluntarily resigning from employment upon 60 days' written
notice to the Company under circumstances which do not constitute a Termination
(as defined below in paragraph 5).
3. Change in Control. For purposes of the Plan, a "Change in Control" means
the happening of any of the following:
a. the stockholders of the Company approve a definitive agreement to merge the
Company into or consolidate the Company with another entity, sell or
otherwise dispose of all or substantially all of its assets or adopt a plan
of liquidation, provided, however, that a Change in Control shall not be
deemed to have occurred by reason of a transaction, or a substantially
concurrent or otherwise related series of transactions, upon the completion
of which 50% or more of the beneficial ownership of the voting power of the
Company, the surviving corporation or corporation directly or indirectly
controlling the Company or the surviving corporation, as the case may be,
is held by the same persons (as defined below) (although not necessarily in
the same proportion) as held the beneficial ownership of the voting power
of the Company immediately prior to the transaction or the substantially
concurrent or otherwise related series of transactions, except that upon
the completion thereof, employees or employee benefit plans of the Company
may be a new holder of such beneficial ownership; provided, further, that a
transaction with an "Affiliate" of the Company (as defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall not
be treated as a Change in Control; or
b. the "beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act) of securities representing 50% or more of the combined voting power of
the Company is acquired, other than from the Company, by any "person" as
defined in Sections 13(d) and 14(d) of the Exchange Act (other than by an
Affiliate or any trustee or other fiduciary holding securities under an
employee benefit or other similar stock plan of the Company); or
c. at any time during any period of two consecutive years, individuals who at
the beginning of such period were members of the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof
(unless the election, or the nomination for election by the Company's
stockholders, of each new Director was approved by a vote of at least
two-thirds of the Directors still in office at the time of such election or
nomination who were Directors at the beginning of such period).
4. Compensation During the Employment Period. During the Employment Period,
the Executive shall be compensated as follows:
a. the Executive shall receive an annual salary which is not less than his
annual salary immediately prior to the Employment Period and shall be
eligible to receive an increase in annual salary which is not materially
less favorable to the Executive than increases in salary granted by the
Company for executives with comparable duties;
b. the Executive shall be eligible to participate in short-term and long-term
cash-based incentive compensation plans which, in the aggregate, provide
bonus opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided by the Company
for executives with comparable duties; and (ii) the opportunities provided
to the Executive under all such plans in which the Executive was
participating prior to the Employment Period;
c. the Executive shall be eligible to participate in stock option, performance
awards, restricted stock and other equity-based incentive compensation
plans on a basis not materially less favorable to the Executive than that
applicable (i) to the Executive immediately prior to the Employment Period
or (ii) to other executives of the Company with comparable duties; and
d. the Executive shall be eligible to receive employee benefits (including,
but not limited to, tax-qualified and nonqualified savings plan benefits,
medical insurance, disability income protection, life insurance coverage
and death benefits) and perquisites which are not materially less favorable
to the Executive than (i) the employee benefits and perquisites provided by
the Company to executives with comparable duties or (ii) the employee
benefits and perquisites to which the Executive would be entitled under the
Company's employee benefit plans and perquisites as in effect immediately
prior to the Employment Period.
5. Termination. For purposes of this Agreement, the term "Termination"
shall mean termination of the employment of the Executive during the Employment
Period (i) by the Company, for any reason other than death, Disability (as
defined below), or Cause (as described below), or (ii) by resignation of the
Executive upon the occurrence of one of the following events:
a. a significant change in the nature or scope of the Executive's authorities
or duties from those described in paragraph 2 above, a breach of any of the
subparagraphs of paragraph 4 above, or the breach by the Company of any
other provision of this Agreement;
b. the relocation of the Executive's office to a location more than fifty
miles from the location of the Executive's office immediately prior to the
Employment Period;
c. a reasonable determination by the Executive that, as a result of a Change
in Control and a change in circumstances thereafter significantly affecting
the nature and scope of Executive's authorities and duties from those
described in paragraph 2 above, the Executive is unable to exercise the
authorities, powers, functions or duties associated with the Executive's
position as contemplated by paragraph 2 above; or
d. the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement as contemplated in
paragraph 18 below.
The date of the Executive's Termination under this paragraph 5 shall be the date
specified by the Executive or the Company, as the case may be, in a written
notice to the other party complying with the requirements of paragraph 14 below.
For purposes of this Agreement, the Executive shall be considered to have a
"Disability" during the period in which the Executive is unable, by reason of a
medically determinable physical or mental impairment, to engage in the material
and substantial duties of his regular occupation, which condition is expected to
be permanent. For purposes of this Agreement, the term "Cause" means, in the
reasonable judgment of the Board of Directors of the Company, (i) the willful
and continued failure by the Executive to substantially perform the Executive's
duties with the Company after written notification by the Company, (ii) the
willful engaging by the Executive in conduct which is demonstrably injurious to
the Company, monetarily or otherwise, or (iii) the engaging by the Executive in
egregious misconduct involving serious moral turpitude. For purposes of this
Agreement, 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 not in good faith
and without reasonable belief that such action was in the best interest of the
Company.
6. Severance Payments. Subject to the provisions of paragraph 10 below, in
the event of a Termination described in paragraph 5 above, in lieu of the amount
otherwise payable under paragraph 4 above, the Executive shall continue to
receive medical insurance, disability income protection, life insurance coverage
and death benefits and perquisites in accordance with subparagraph 4(d) above
for a period of 36 months after the date of Termination, and shall be entitled
to a lump sum payment in cash no later than ten business days after the date of
Termination equal to the sum of:
a. the Executive's unpaid salary, accrued vacation pay and unreimbursed
business expenses through and including the date of Termination;
b. an amount equal to three times the Executive's annual salary rate in effect
immediately prior to the date of Termination;
c. an amount equal to three times the target bonus award for the Executive for
the year of Termination;
d. an amount equal to the assigned target bonus for the Executive for the year
of Termination prorated through the date of Termination.
7. Make-Whole Payments. Subject to the last three sentences of this
paragraph 7, if any payment or benefit to which the Executive is entitled,
whether under this Agreement or otherwise, in connection with a Change in
Control or the Executive's termination of employment (a "Payment") is subject to
any tax under section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any similar federal or state law (an "Excise Tax"), the Company
shall pay to the Executive an additional amount (the "Make Whole-Amount") which
is equal to (i) the amount of the Excise Tax, plus (ii) the aggregate amount of
any interest, penalties, fines or additions to any tax which are imposed in
connection with the imposition of such Excise Tax, plus (iii) all income, excise
and other applicable taxes imposed on the Executive under the laws of any
Federal, state or local government or taxing authority by reason of the payments
required under clause (i) and clause (ii) and this clause (iii). Such Make
Whole-Amount will not be paid to the Executive if the Payment is less than 10
percent above the maximum amount that may be paid without incurring Excise Tax.
In the event that the Payment is greater than the maximum amount that may be
paid without incurring Excise Tax, but less than 10 percent greater than the
maximum amount, then the Payments shall be capped at the maximum amount that may
be paid without incurring Excise Tax. In such event, the cash severance payments
provided in paragraph 6 above and/or the outplacement services provided in
paragraph 8 below, at the Executive's election, shall be reduced to a level that
results in the total Payment being equal to the maximum amount that may be paid
without incurring Excise Tax.
a. For purposes of determining the Make-Whole Amount, the Executive shall be
deemed to be taxed at the highest marginal rate under all applicable local,
state, federal and foreign income tax laws for the year in which the
Make-Whole Amount is paid. The Make-Whole Amount payable with respect to an
Excise Tax shall be paid by the Company coincident with the Payment with
respect to which such Excise Tax relates.
b. All calculations under this paragraph 7 shall be made initially by the
Company and the Company shall provide prompt written notice thereof to the
Executive to enable the Executive to timely file all applicable tax
returns. Upon request of the Executive, the Company shall provide the
Executive with sufficient tax and compensation data to enable the Executive
or his tax advisor to independently make the calculations described in
subparagraph (a) above and the Company shall reimburse the Executive for
reasonable fees and expenses incurred for any such verification.
c. If the Executive gives written notice to the Company of any objection to
the results of the Company's calculations within 60 days of the Executive's
receipt of written notice thereof, the dispute shall be referred for
determination to tax counsel selected by the independent auditors of the
Company ("Tax Counsel"). The Company shall pay all reasonable fees and
expenses of such Tax Counsel. Pending such determination by Tax Counsel,
the Company shall pay the Executive the Make-Whole Amount as determined by
it in good faith. The Company shall pay the Executive any additional amount
determined by Tax Counsel to be due under this paragraph 7 (together with
interest thereon at a rate equal to 120% of the Federal short-term rate
determined under section 1274(d) of the Code) promptly after such
determination.
d. The determination by Tax Counsel shall be conclusive and binding upon all
parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency (a
"Tax Authority") determines that the Executive owes a greater or lesser
amount of Excise Tax with respect to any Payment than the amount determined
by Tax Counsel.
e. If a Taxing Authority makes a claim against the Executive which, if
successful, would require the Company to make a payment under this
paragraph 7, the Executive agrees to contest the claim, with counsel
reasonably satisfactory to the Company, on request of the Company subject
to the following conditions:
(i) The Executive shall notify the Company of any such claim within 10
days of becoming aware thereof. In the event that the Company desires the
claim to be contested, it shall promptly (but in no event more than 30 days
after the notice from the Executive or such shorter time as the Taxing
Authority may specify for responding to such claim) request the Executive
to contest the claim. The Executive shall not make any payment of any tax
which is the subject of the claim before the Executive has given the notice
or during the 30-day period thereafter unless the Executive receives
written instructions from the Company to make such payment together with an
advance of funds sufficient to make the requested payment plus any amounts
payable under this paragraph 7 determined as if such advance were an Excise
Tax, in which case the Executive will act promptly in accordance with such
instructions.
(ii) If the Company so requests, the Executive will contest the claim
by either paying the tax claimed and suing for a refund in the appropriate
court or contesting the claim in the United States Tax Court or other
appropriate court, as directed by the Company; provided, however, that any
request by the Company for the Executive to pay the tax shall be
accompanied by an advance from the Company to the Executive of funds
sufficient to make the requested payment plus any amounts payable under
this paragraph 7 determined as if such advance were an Excise Tax. If
directed by the Company in writing the Executive will take all action
necessary to compromise or settle the claim, but in no event will the
Executive compromise or settle the claim or cease to contest the claim
without the written consent of the Company; provided, however, that the
Executive may take any such action if the Executive waives in writing his
right to a payment under this paragraph 7 for any amounts payable in
connection with such claim. The Executive agrees to cooperate in good faith
with the Company in contesting the claim and to comply with any reasonable
request from the Company concerning the contest of the claim, including the
pursuit of administrative remedies, the appropriate forum for any judicial
proceedings, and the legal basis for contesting the claim. Upon request of
the Company, the Executive shall take appropriate appeals of any judgment
or decision that would require the Company to make a payment under this
paragraph 7. Provided that the Executive is in compliance with the
provisions of this section, the Company shall be liable for and indemnify
the Executive against any loss in connection with, and all costs and
expenses, including attorneys' fees, which may be incurred as a result of,
contesting the claim, and shall provide to the Executive within 30 days
after each written request therefore by the Executive cash advances or
reimbursement for all such costs and expenses actually incurred or
reasonably expected to be incurred by the Executive as a result of
contesting the claim.
f. Should a Tax Authority finally determine that an additional Excise Tax is
owed, then the Company shall pay an additional Make-Up Amount to the
Executive in a manner consistent with this paragraph 7 with respect to any
additional Excise Tax and any assessed interest, fines, or penalties. If
any Excise Tax as calculated by the Company or Tax Counsel, as the case may
be, is finally determined by a Tax Authority to exceed the amount required
to be paid under applicable law, then the Executive shall repay such excess
to the Company within 30 days of such determination; provided that such
repayment shall be reduced by the amount of any taxes paid by the Executive
on such excess which is not offset by the tax benefit attributable to the
repayment.
8. Outplacement Services. If the Executive's Termination occurs during the
Employment Period, at the election of the Executive, the Company shall provide
the Executive with outplacement service of an experienced firm selected by the
Company and acceptable to the Executive located not more than fifty miles from
the location of Executive's office immediately prior to the Employment Period,
provided that the cost of such services shall not exceed $25,000 and such
services shall not extend beyond 36 months from Executive's Termination.
9. Pooling of Interests Accounting Treatment. If the application of any
provision of this Agreement, or of the Agreement in its entirety, would preclude
the use of pooling of interests accounting treatment with respect to a
transaction for which such treatment otherwise is available and to be adopted by
the Company, this Agreement, upon the determination of the Board, shall be
modified as it applies to such transaction, to the minimum extent necessary to
prevent such impact.
10. Withholding. All payments to the Executive under this Agreement will be
subject to all applicable withholding of state and federal taxes.
11. Confidentiality, Non-Solicitation and Non-Competition. The Executive
agrees that:
a. Except as may be required by the lawful order of a court or agency of
competent jurisdiction, or except to the extent that the Executive has
express authorization from the Company, the Executive agrees to keep secret
and confidential indefinitely all non-public information concerning the
Company or any affiliate thereof which was acquired by or disclosed to the
Executive during the course of the Executive's employment with the Company
or any affiliate thereof, and not to disclose the same, either directly or
indirectly, to any other person, firm or business entity or to use it in
any way.
b. While the Executive is employed by the Company or any affiliate and for a
period of one year after the date of the Executive's Termination, the
Executive covenants and agrees that Executive will not, whether for
Executive or for any other person, business, partnership, association,
firm, company or corporation, initiate contact with, solicit, divert or
take away any of the customers (entities or individuals from which the
Company or any of its affiliates receives rents or payment for services) of
the Company or any affiliate thereof or employees of the Company or any
affiliate thereof in existence from time to time during Executive's
employment with the Company or any affiliate thereof and at the time of
such initiation, solicitation or diversion.
c. While the Executive is employed by the Company or any affiliate thereof,
the Executive covenants and agrees that Executive will not, directly or
indirectly, engage in, assist, perform services for, plan for, establish or
open, or have any financial interest (other than (i) ownership of 1% or
less of the outstanding stock of any corporation listed on the New York or
American Stock Exchange or included in the National Association of
Securities Dealers Automated Quotation System or (ii) ownership of
securities in any entity affiliated with the Company) in any person, firm,
corporation, or business entity (whether as an employee, officer, director
or consultant) that engages in an activity which is the same as, similar
to, or competitive with, the Company or any affiliate thereof.
12. Arbitration of All Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in Chicago, Illinois, in accordance with the laws of the State of Illinois, by
three arbitrators appointed by the parties. If the parties cannot agree on the
appointment of the arbitrators, one shall be appointed by the Company and one by
the Executive and the third shall be appointed by the first two arbitrators. If
the first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the Chief Judge of the United
States Court of Appeals for the Seventh Circuit. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this paragraph 12. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with enforcement of his rights under this
Agreement, the Company shall pay (or the Executive shall be entitled to recover
from the Company, as the case may be) his reasonable attorneys' fees and costs
and expenses in connection with enforcement of his rights (including the
enforcement of any arbitration award in court). Payments shall be made to the
Executive at the time such fees, costs and expenses are incurred. If, however,
the arbitrators shall determine that, under the circumstances, payment by the
Company of all or a part of any such fees and costs and expenses would be
unjust, the Executive shall repay such amounts to the Company in accordance with
the order of the arbitrators. Any award of the arbitrators shall include
interest at a rate or rates considered just under the circumstances by the
arbitrators.
13. Mitigation and Set-Off. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise. The Company shall not be entitled to set off against
the amounts payable to the Executive under this Agreement any amounts owed to
the Company by the Executive, any amounts earned by the Executive in other
employment after termination of his employment with the Company, or any amounts
which might have been earned by the Executive in other employment had he sought
such other employment.
14. Notices. Any notice of Termination of the Executive's employment by the
Company or the Executive for any reason shall be upon no less than 15 days' and
no greater than 45 days' advance written notice to the other party. Any notices,
requests, demand and other communications provided for by this Agreement shall
be sufficient if in writing and if sent by registered or certified mail to the
Executive at the last address he has filed in writing with the Company or, in
the case of the Company, to the attention of the Secretary of the Company, at
its principal executive offices.
15. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If the Executive should die while any amount is still
payable to the Executive hereunder had the Executive continued to live, all such
amounts shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or if there is no such
designee, to the Executive's estate.
16. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without application of
conflict of laws provisions thereunder.
17. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
18. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company shall 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 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 succession had taken place.
19. Employment Status. Nothing herein contained shall be deemed to create
an employment agreement between the Company and the Executive, providing for the
employment of the Executive by the Company for any fixed period of time. The
Executive's employment with the Company is terminable at will by the Company or
the Executive and each shall have the right to terminate the Executive's
employment with the Company at any time, with or without Cause, subject to (i)
the notice provisions of paragraphs 2, 5 and 14, and (ii) the Company's
obligation to provide severance payments as required by paragraph 6. Upon a
termination of the Executive's employment prior to the date of a Change in
Control, there shall be no further rights under this Agreement.
20. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
21. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, all as of the day and
year first above written.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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SECURITY CAPITAL GROUP INCORPORATED
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Senior Vice President and Secretary