Exhibit 10 (i)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 8th day of
December, 1998, between UNITED DOMINION REALTY TRUST, INC., a Virginia
corporation (the "Company") and JOHN P. McCANN (the "Executive"), recites and
provides as follows:
R E C I T A L S:
In October of 1982, the Company and the Executive entered into an
employment agreement (the "Employment Agreement"). The Company and the Executive
now wish to terminate the Employment Agreement and replace it with this
Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing, and the
mutual promises and undertakings hereinafter set forth, and the payments to be
made to the Executive hereunder, the parties hereto agree as follows:
1. Position and Duties.
a. The Company hereby agrees to and hereby does continue to
employ the Executive as an executive officer of the Company, subject to the
supervision of the Board of Directors of the Company (the "Board"). Currently,
the Executive is Chairman of the Board and Chief Executive Officer and reports
to the Board. The parties hereby agree that the Employment Agreement is hereby
terminated and this Agreement is replaced in its stead.
The Executive agrees that the description of the executive position above
shall not limit the Company from assigning to the Executive such other duties
and functions in addition to or in substitution of those described above.
b. The Executive agrees to serve the Company as a full time
executive officer with duties and authority as set forth in the Company's
by-laws or as otherwise prescribed by the Board. The Executive shall devote such
time, attention, skill, and efforts to the performance of his duties as a
Company executive as shall be required therefore, all under the supervision and
direction of the Board. The Executive agrees that during the period of his
employment he will not, without the approval of a majority of the independent
directors of the Board, have any other (i) real estate investment trust or
business affiliations, or (ii) corporate affiliations that conflict with the
business of the Company or interfere with the ability of the Executive to
perform his duties for the Company or comply with the covenants under this
Agreement.
2. Term of Agreement.
This Agreement will take effect as of the date of this Agreement and will
end on December 31, 1998. After December 31, 1998, this Agreement will
automatically renew for successive one (1) year periods, ending as of December
31 of each year, unless sooner terminated in accordance with Section 4.
3. Compensation and Benefits.
a. Base Salary. The Executive's pay will not be less than $374,000 per
year, payable in accordance with the Company's regular payroll practices, unless
the Executive consents to a lesser base salary in writing.
b. Annual Incentive Compensation. The Executive's annual compensation shall
also include an annual incentive where the Executive has an opportunity to earn
a bonus of at least fifty percent (50%) of base salary based upon the Executive
and the Company meeting certain performance goals and objectives as determined
by the Board, or the appropriate committee of the Board. The Executive
acknowledges that the Board or the Compensation Committee of the Board (the
"Compensation Committee"), as appropriate, may elect to modify or terminate
annual incentive compensation for all executives at any time.
c. Long Term Incentive Compensation. The Executive's compensation shall
also include participation (i) in the Company's 1982 Stock Option Plan; (ii) in
the Company's 1991 Officers Stock Purchase and Loan Plan; and (iii) any
"shareholder value plan" or other long-term compensation plan for senior
officers of the Company adopted by the Compensation Committee or the Board, on
the same basis as similarly situated executive officers of the Company. The
Executive acknowledges that the Company Board or the Compensation Committee, as
appropriate, may elect to terminate or modify any or all long-term incentive
compensation at any time.
d. Associate Benefit Plans. The Executive will be eligible to participate
in any and all employee benefit plans, medical insurance plans, retirement
plans, and other benefit plans in effect for employees in similar positions at
the Company (the "Company Plans") or any other plans applicable for other
officers or executive officers of the Company. Such participation shall be
subject to the terms of the applicable plan documents and the Company's
generally applied policies. In addition, the Executive acknowledges that the
Company may elect to terminate or modify any or all Company Plans at any time.
e. Travel. It is contemplated that the Executive will be required to incur
travel and entertainment expense in the interests and on behalf of the Company
and in furtherance of its business. The Executive agrees to comply with the
travel and entertainment guidelines of the Company, which may be modified from
time to time (the "T&E Guidelines"). The Company at the end of each month during
the period of this Agreement will, upon submission of appropriate bills or
vouchers, reimburse expenses incurred by the Executive during such month in
compliance with the T&E Guidelines, such The Executive agrees to maintain
adequate records, in such detail as the Company may reasonably request, of all
expenses to be reimbursed by the Company hereunder and to make such records
available for inspection as and when reasonably requested by the Company.
4. Employment Termination Outside of Change of Control.
a. Incapacity; Death. This Agreement may be terminated by the
Company, by delivery of a "Notice of Termination" (defined in Section 8) to the
Executive or his personal representative given at least thirty (30) days prior
to the effective date specified therein, in the event that the Executive shall
be unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity.
This Agreement shall terminate on the death of the Executive.
b. Without Cause. This Agreement may be terminated by the
Company, without cause, by delivery of a "Notice of Termination" (defined in
Section 8) given to the Executive ten (10) days prior to the effective date of
such termination.
c. Severance Compensation. Upon termination of this
Agreement pursuant to Section 4 (a), 4 (b), or 4 (d) the Company shall pay to
the Executive or his legal representative certain compensation (the "Severance
Compensation") as follows:
(i) Base Salary. The Executive shall be paid fifty-two (52) weeks of base
salary, and the Company shall continue in effect for a period of fifty-two (52)
weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the portion of the premium allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of fifty-two (52) weeks after the effective date of termination.
(ii) Incentive Compensation. The Executive shall also be entitled to annual
incentive compensation (i) actually earned by the Executive, if any, pursuant to
Section 3(b) of this Agreement for the Company's current fiscal year prorated
through the effective date of termination, which compensation shall be paid no
later than forty-five (45) days after the end of the Company's fiscal year and
(ii) an amount equal to the sum of the annual incentive compensation earned by
the Executive over the two calendar years prior to the effective date of
termination, divided by two ("Average Annual Incentive Compensation").
Compensation pursuant to paragraph 3(c) (long term incentive compensation) shall
be governed by the terms of the subject plans.
(iii) Severance Compensation Reduction. In the event termination is pursuant to
Section 4 (a) of this Agreement, the portion of Severance Compensation to be
paid pursuant to Section 4(i) and (ii) shall be reduced by the amount of any
life insurance proceeds paid by or through the Company or disability insurance
payments for one (1) year, as appropriate, payable to the Executive or his
personal representative or other beneficiary.
(iv) Timing. The Company, at its option, shall pay to the Executive or his legal
representative the sums payable to such Executive or his legal representative on
account of the portion of Severance Compensation consisting of (y) base salary
either in a lump sum or in monthly increments payable on the first day of each
month over the succeeding twelve (12) month period and (z) the Average Annual
Incentive Compensation within thirty (30) days after the effective date of
termination.
(v) Life Insurance. The Executive shall also be entitled to direct the Company
to change the beneficiary of any non-group life insurance policy to another
person or group.
d. By the Executive. This Agreement may be terminated by the
Executive, upon delivery of a "Notice of Termination" (defined in Section 8)
given at least ninety (90) days before the end of the term or for "Good Reason,"
which, for the purposes of this subsection, shall mean the reasons set forth in
subsections 5(d)(i) to (vi).
e. For Cause. The Company may terminate this Agreement for
cause by providing delivery of a "Notice of Termination" (as defined in Section
8). In such event, the Executive shall not be entitled to any compensation under
this Agreement for the period after the termination date, and any compensation
paid to the Executive shall be net of any sums owed by the Executive to the
Company as a result of the act for which the employment of the Executive was
terminated. The circumstances under which the Company will be deemed to have
cause to terminate this Agreement include, but are not limited to, the
following:
(i) The Executive is convicted of or pleads nolo contendere to any crime, other
than a traffic offense or misdemeanor;
(ii) The Executive shall commit, with respect to the Company, an act of fraud or
embezzlement or shall have been grossly negligent in the performance of his
duties hereunder;
(iii) The Executive engages in gross dereliction of duties, refusal to perform
assigned duties consistent with his position, or repeated violation of the
Company's policies after written warning; or,
(iv) The Executive engages in drug abuse.
f. Consulting Services. Upon termination of this Agreement,
the Executive shall, for a period of up to one year following the effective date
of termination, render such advisory or consulting services to the Company as it
may reasonably request, taking into account the Executive's health, business
commitments, geographical location and other relevant circumstances. The intent
of this paragraph is not to obligate the Executive to perform any day-to-day
duties for the Company following termination of his employment but only to
assist management in effecting a smooth transition of the functions or projects
for which the Executive was responsible while an employee of the Company. Should
the Executive fail to render such advisory or consulting services, after 30
days' prior written notice to the Executive and the Executive's failure to
commence the rendering of such service, the Company's sole remedy shall be to
terminate payment of any remaining severance compensation. If this Agreement is
terminated pursuant to Section 4(e) and no Severance Compensation is paid to the
Executive, the Executive shall be paid on an hourly basis to the extent
requested by the Company to perform advisory or consulting services, based upon
his base salary prior to termination for the actual time spent for advisory or
consulting services for the Company.
g. Return of Company Property. The parties acknowledge and
agree that records, files, reports, manuals, handbooks, computer diskettes,
computer software, customer files and information, documents, equipment and the
like, relating to the Company's business or which are developed for or by the
Company, or which Executive shall develop, create, use, prepare or come into
possession of during his employment with the Company, shall remain the sole
property of the Company and Executive covenants to promptly deliver to the
Company any and all such property and any copies thereof no later than the
termination of Executive's employment with the Company.
h. Covenants. The Executive shall not be entitled to any Severance Compensation
or benefits for any period he is in violation of the Covenants in Section 6.
5. Change of Control.
a. Change of Control. For purposes of this Agreement, "Change
of Control" shall mean (i) the merger or consolidation of the Company with any
other real estate investment trust, corporation or other business entity, in
which the Company is not the survivor (without respect to the legal structure of
the transaction), (ii) the transfer or sale of all or substantially all of the
assets of the Company other than to an affiliate or subsidiary of the Company,
(iii) the liquidation of the Company, or (iv) the acquisition by any person or
by a group of persons acting in concert, of more than fifty percent (50%) of the
outstanding voting securities of the Company, which results in the resignation
or addition of fifty percent (50%) or more members of the Board or the
resignation or addition of fifty percent (50%) or more independent members of
the Board.
b. Compensation Upon Termination. Following a Change in
Control that results in termination of the Executive's employment, the Executive
shall be entitled to the following benefits unless such termination is by the
Executive other than for "Good Reason" (as defined below):
(i) Compensation. The Company shall pay the Executive one hundred fifty six
(156) weeks of base salary at the rate in effect at the time Notice of
Termination is given, and the equivalent of three years of annual incentive
compensation based upon the average annual incentive compensation earned by the
Executive for the two calendar years prior to the effective date of termination,
plus all other amounts to which the Executive is entitled under any compensation
plan of the Company.
(ii) Benefits. The Company shall provide the Executive with life, disability,
accident and health insurance coverage (including any dependent coverage)
substantially similar to the coverage the Executive is receiving immediately
prior to the Notice of Termination, for a thirty six (36) month period after the
Executive's termination. Benefits otherwise receivable by the Executive pursuant
to this subsection (ii) shall be reduced to the extent comparable benefits are
actually received by the Executive during the thirty six (36) month period
following termination, and any such benefits actually received by the Executive
shall be reported to the Company.
(iii) Long-Term Incentive Compensation. All of the Executive's outstanding
options, stock appreciation rights and any other awards in the nature of rights
that may be exercised shall become fully vested and immediately exercisable; all
restrictions on any outstanding other awards held by the Executive (such as
awards of restricted stock) shall lapse; and the Executive's balance in any
deferred compensation plan or shareholder value plan shall become fully vested
and immediately payable; provided, however, that such acceleration will not
occur if, in the opinion of the Company's accountants, such acceleration would
preclude the use of "pooling of interest" accounting treatment for a Change of
Control transaction that (a) would otherwise qualify for such accounting
treatment, and (b) is contingent upon qualifying for such accounting treatment.
(iv) Timing. The Severance Payments shall be made no later than the thirtieth
(30th) business day following the effective date of termination. However, if the
amounts of the Severance Payments cannot be finally determined on or before such
day, the Company shall pay to the Executive on such day an estimate of the
minimum amount of such payments and shall pay the remainder of such payments as
soon as the amount thereof can be determined but in no event later than the
ninetieth (90th) day after the effective Date of Termination.date of
termination.
c. Limitation of Benefits.
(i) Notwithstanding anything in this Agreement to the contrary, in the event it
shall be determined that any benefit, payment or distribution by the Company to
or for the benefit of Executive (whether payable or distributable pursuant to
the terms of this Agreement or otherwise)(such benefits, payments or
distributions are hereinafter referred to as "Payments") would, if paid, be
subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the
Code, then the aggregate present value of the Payments shall be reduced (but not
below zero) to an amount expressed in present value that maximizes the aggregate
present value of the Payments without causing the Payments or any part thereof
to be subject to the Excise Tax and therefore nondeductible by the Company
because of Section 280G of the Code (the "Reduced Amount"). For purposes of this
Section, present value shall be determined in accordance with Section 280G(d)(4)
of the Code.
(ii) All determinations required to be made under this Section, including
whether an Excise Tax would otherwise be imposed, whether the Payments shall be
reduced, the amount of the Reduced Amount, and the assumptions to be utilized in
arriving at such determinations, shall be made by Ernst & Young, LLP or such
other certified public accounting firm acceptable to the Company, in its sole
discretion, (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from Executive that a Payment is due to be made, or
such earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Payments hereunder will have been unnecessarily limited by this Section
("Underpayment"), consistent with the calculations required to be made
hereunder. The Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
d. Good Reason. The Executive shall be entitled to terminate
this Agreement for Good Reason. For purposes of this Section 5, "Good Reason"
shall mean the occurrence, within two (2) years after a Change in Control, of
any of the following circumstances:
(i) the assignment to the Executive of any duties inconsistent with the
Executive's position and status as Chief Executive Officer or a substantial
adverse alteration in the nature or status of the Executive's responsibilities
from those in effect immediately prior to the Change in Control;
(ii) a ten percent (10%) or greater reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary reductions
affecting senior executives of the Company and senior executives of any person
directly or indirectly in control of the Company;
(iii) the Executive's relocation by the Company to a location not within fifty
miles of the Executive's present office or job location;
(iv) the failure by the Company to pay to the Executive any portion of the
Executive's current compensation, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation program of
the Company, within thirty (30) days of the date such compensation is due;
(v) the failure by the Company to continue in effect any annual or long-term
monetary incentive opportunity to which the Executive was entitled, or any
compensation plan in which the Executive participates immediately prior to the
Change in Control which constitutes more than ten percent (10%) of the
Executive's total compensation; provided, however, that the Company may modify
the monetary incentive opportunities so as to provide the Executive with the
same or similar monetary incentive opportunities;
(vi) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement or a similar agreement
satisfactory to the Executive;
(vii) in the event the Executive terminates this Agreement for Good Reason
following a Change in Control as provided by this Section 5, the Executive shall
be entitled to the compensation provided by Section 5(b), reduced by the amount
of compensation received by the Executive following the Change in Control
through the effective date of termination.
e. Potential Change of Control. For purposes of this
Agreement, a "Potential Change in Control" shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control; (iii) any person, who
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more over the percentage so owned by such person on the date
hereof; or (iv) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred. In the
event of a Potential Change in Control the Executive will remain in the employ
of the Company until the earliest of (x) a date which is six (6) months from the
occurrence of such Potential Change in Control, or (y) the occurrence of a
Change in Control.
6. Confidentiality; Non-Competition and Non-Solicitation Covenants.
a. Basis for Covenants. The Executive acknowledges that i) he
will be employed as an executive officer in a managerial capacity; ii) his
employment with the Company gives him access to confidential and proprietary
information concerning the Company; iii) the agreements and covenants contained
in this Section 6 (the "Covenants") are essential to protect the business of the
Company; and iv) the Executive is to receive consideration pursuant to this
Agreement. Executive recognizes and acknowledges that the confidential
information described in Section 6(b) (the "Confidential Information") which he
will acquire in the course of his employment is utilized by the Company in all
geographic areas in which the Company does business. Further, the Confidential
Information will also be utilized in all geographic areas into which the Company
expands its business. Thus, Executive acknowledges that he will be a formidable
competitor in all areas where the Company conducts business. Executive also
acknowledges that the Covenants serve to protect the Company's investment in the
Confidential Information.
b. Confidentiality.
(i) The Executive acknowledges that he will be exposed to and learn a
substantial amount of information which is proprietary and confidential to the
Company, whether or not he develops or creates such information. The Executive
acknowledges that such proprietary and confidential information may include, but
is not limited to, trade secrets; acquisition or merger information; advertising
and promotional programs; resource or developmental projects; plans or
strategies for future business development; financial or statistical data;
customer information, including, but not limited to, customer lists, sales
records, account records, sales and marketing programs, pricing matters, and
strategies and reports; and any Company manuals, forms, techniques, and other
business procedures or methods, devices, computer software or matters of any
kind relating to or with respect to any confidential program or projects of the
Company, or any other information of a similar nature made available to the
Executive and not known in the trade in which the Company is engaged, which, if
misused or disclosed, could adversely affect the business or standing of the
Company. Confidential Information shall not include information that is
generally known or generally available to the public through no fault of the
Executive.
(ii) The Executive agrees that except as required by law, he will not at any
time divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to the Company, including but not limited to the types of
information described in Section 6(b)(i), or use such information to the
competitive disadvantage of the Company. The Executive agrees that his duties
and obligations under this Section 6 will continue for 12 months from the
termination of his employment or as long as the Confidential Information remains
proprietary or confidential to the Company.
c. Non-Competition. During the period of the Executive's
employment, the Executive agrees that he will not, on behalf of anyone other
than the Company, engage in any managerial, executive, sales, or marketing
activities related to any business in which the Company is or becomes engaged
during the Executive's employment without the consent of the Board.
d. Non-Solicitation. The Executive agrees that for a twelve
(12) month period following the termination of his employment with the Company
for any reason (including the Executive's resignation), the Executive shall not,
directly or indirectly, hire or solicit any employee of the Company employed at
the time of his termination, or encourage any such employee to leave such
employment.
e. Scope of Covenants.
(i) Executive acknowledges that the Company intends to extend business
operations throughout the United States of America. Therefore, for a period of
twelve (12) months after termination of Executive's employment for any reason
(including Executive's resignation), Executive agrees that he shall not directly
or indirectly carry on or participate in the ownership or management of
apartment communities of the same class and quality of the communities owned by
the Company that directly competes with the Company anywhere within the United
States of America.
(ii) Independent of the preceding provision, Executive agrees that he shall not,
for a period of twelve (12) months after termination of Executive's employment,
directly or indirectly carry on or participate in the ownership or management of
apartment communities of the same class and quality of the apartment communities
owned by the Company that directly competes with the Company within any county
or city in which the Company conducts business.
(iii) These covenants shall not apply in the event the Executive is terminated
without cause, as a result of a Change of Control, or by the Executive for Good
Reason, which, for the purposes of this subsection, shall mean any of the
reasons set forth in subsections 5(d)(i) to (iv).
f. Reasonableness of Covenants. The Executive agrees that the
Covenants are necessary for the reasonable and proper protection of the Company
and that the Covenants are reasonable in respect of subject matter, length of
time, and geographic scope. The Executive further acknowledges that the
Covenants will not unreasonably restrict him from earning a livelihood following
the termination of his employment with the Company.
g.
Governing Law; Public Policy.
(i) The parties agree that it is not their intention to violate any public
policy or statutory or common law. The parties intend that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
any provision of this Agreement is found by a court to be unenforceable, the
parties authorize the court to amend or modify the provision to make it
enforceable in the most restrictive fashion permitted by law.
(ii) The Executive and the Company are sophisticated parties and fully
understand (i) the ramifications of the non-competition, non-solicitation and
confidentiality restrictions of this Agreement and (ii) that the laws of each
state with respect to the enforceability of such provisions vary. The parties
are specifically selecting the internal laws of the Commonwealth of Virginia to
govern this Agreement in order that it be enforceable against all of them.
h. Separate Agreement Upon Termination. The provisions of
this Section 6 so far as they relate to the period after the end of the term of
this Agreement shall continue to have effect and shall operate as a separate
agreement between the Company and the Executive.
7. Successors and Assigns.
a. The Executive acknowledges and agrees that this Agreement
is a contract for his personal services, he is not entitled to assign,
subcontract, or transfer any of the obligations imposed or benefits provided
under this Agreement.
b. This Agreement shall be binding on and will inure to the
benefit of any successors or assigns of the Company.
8. Definitions. The following terms shall have the following meanings:
a. A "Notice of Termination" shall mean a written notice
which shall indicate the specific termination provision in this Agreement relied
upon and, if appropriate, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provisions so indicated.
b. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
9. Miscellaneous.
a. Integration. This Agreement contains the complete
agreement between the Executive and the Company with respect to its subject
matter. This Agreement supersedes all previous and contemporaneous agreements,
negotiations, commitments, writings, and undertakings.
b. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Virginia,
regardless of choice of law rules. Any dispute arising between the parties
related to or involving this Agreement will be litigated in a court having
jurisdiction in the Commonwealth of Virginia.
c. Modifications. This Agreement may be modified or waived
only by a writing signed by both parties.
d. Waivers. Any waiver of a breach of this Agreement will
not constitute a waiver of any future breach, whether of a similar or dissimilar
nature.
e. Severability. The covenants in the various provisions of
Section 6 are separate and independent contractual provisions. The invalidity or
unenforceability of any particular restrictive covenant or any other provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.,
a Virginia corporation
By: _______________________________
Its: ________________________________
EXECUTIVE
- - -----------------------------------
JOHN P. McCANN