EXHIBIT 10.5
SEVERANCE AGREEMENT
THIS AGREEMENT, dated January 1, 1999, (the "Effective Date")
is made by and between Alexandria Real Estate Equities, Inc., a Maryland
corporation (the "Company"), and Lynn A. Shapiro ("Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including Executive, who
shall serve as General Counsel and Assistant Secretary of the Company.
NOW, THEREFORE, the Company and Executive hereby agree as
follows:
1. TERM OF AGREEMENT.
The term of this Agreement shall commence on the Effective Date
and shall continue in effect through the first anniversary of the Effective
Date (the "Term"); PROVIDED, HOWEVER, that on each anniversary of the
Effective Date during the Term, the Term shall automatically be extended for
one additional year unless, not later than 90 days prior to any such
anniversary, the Company or Executive shall have given written notice not to
extend the Term.
2. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
If Executive's employment shall be terminated for any reason
during the Term, the Company shall pay Executive's full salary to Executive
accrued through the date of Executive's termination of employment (the "Date
of Termination") at the rate in effect immediately prior to the Date of
Termination.
3. SEVERANCE PAYMENTS.
If Executive's employment is terminated by the Company other
than for Cause (as defined below), then the Company shall pay Executive a
severance payment equal to nine (9) months ("Severance Period") of
Executive's annualized base salary ("Severance Payments"), in addition to any
payments to which Executive is entitled under Section 2 hereof. Such
Severance Payments shall be payable in substantially equal semimonthly
installments during the Severance Period in accordance with the standard
policies of the Company in existence from time-to-time; provided, that if
such termination is within six months following a Change in Control (as
defined below), the Company shall pay Executive such Severance Payment in a
lump sum within sixty (60) days following a Change in Control. In addition,
if Executive's employment is terminated by the Company other than for Cause
within six months following a Change in Control, the vesting of any options
held by Executive to purchase shares of stock of the Company shall
immediately accelerate upon such termination following a Change in Control.
Executive shall not be entitled to receive a Severance Payment
hereunder if she voluntarily terminates her employment or is terminated by
reason of death or disability or for Cause.
3.1 CAUSE. For purposes of this Agreement, "Cause" shall mean
the following:
(i) Executive's Material breach, repudiation or failure to
comply with or perform any of the terms of this Agreement,
any of Executive's duties, or any of the Company's policies
or procedures (including without limitation any such
policies or procedures relating to conflicts of interests
or standards of business conduct) or deliberate
interference with the compliance by any other employee of
the Company with any of the foregoing;
(ii) the conviction of Executive for, or pleading by Executive
of no contest (or similar plea) to, fraud, embezzlement,
misappropriation of assets, malicious mischief, or any
felony, other than a crime for which vicarious liability is
imposed upon Executive solely by reason of Executive's
position with the Company and not by reason of Executive's
conduct; or
2
(iii) any other act, omission, event or condition constituting
cause for the discharge of any employee under applicable
law.
Before terminating the Agreement for Cause, the Company first
shall have given Executive written notice specifying the nature of the
breach, repudiation or failure to comply and thirty (30) days thereafter in
which to cure such breach, repudiation or failure to comply, and Executive
shall have failed to cure. For purposes of this Section 3, "Material" shall
mean a breach, repudiation or failure that the Board determines has resulted
or could result in material injury to the Company.
3.2 CHANGE IN CONTROL for purposes of this agreement, a
"Change in Control" shall be deemed to have occurred if:
(i) Any Person, as such term is used in section 3(a)(9)
of the Securities Exchange Act of 1934, as amended from time-to-time (the
"Exchange Act"), as modified and used in sections 13(d) and 14(d) thereof,
(other than (A) the Company or any of its subsidiaries, (B) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any of its affiliates, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities, (D) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, or (E) a person or group as used in Rule 13d-1(b) under the Exchange
Act) is or becomes the Beneficial Owner, as such term is defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its affiliates other
than in connection with the acquisition by the Company or its affiliates of a
business) representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities; or
(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended
3
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of
the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any subsidiary of the Company, at
least seventy-five percent (75%) of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates other than in connection with the
acquisition by the Company or its affiliates of a business) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an entity, at least
seventy-five (75%) of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
4. OFFSET.
Although Executive shall not be required to mitigate damages
under this Agreement by seeking other comparable employment or otherwise, the
amount of any payment or benefit provided for in this Agreement shall be
reduced by any compensation earned by or provided to Executive as the result
of employment by an employer other than the Company prior to the expiration
of the Term.
4
5. NONCOMPETITION.
During the Term, including the period, if any, with respect to
which Executive shall be entitled to Severance Payments, Executive shall not
engage in any activity that is or may be competitive with the business of the
Company, directly or indirectly, whether or not for compensation, including,
but not limited to, providing services similar to those provided by the
Company; offering or soliciting or accepting an offer, to provide such
services or taking any action to form, or become employed by, a firm or
business to provide such services.
6. MISCELLANEOUS.
6.1. CONFIDENTIALITY. Without limiting the scope of the
Agreement Regarding Proprietary Information between the Parties, dated as of
May 13, 1998 (the "Proprietary Information Agreement"), Executive agrees that
all confidential and proprietary information relating to the business of the
Company shall be kept and treated as confidential both during and after the
Term of this Agreement, except as may be permitted in writing by the Board or
as such information is within the public domain or comes within the public
domain without any breach of this Agreement.
6.2. WAIVER. The waiver of the breach of any provision of
this Agreement shall not operate or be construed as a waiver of any
subsequent breach of the same or other provision hereof.
6.3. ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise
provided herein, this Agreement (together with the Proprietary Information
Agreement and any other agreements and plans referred to herein) represents
the entire understanding between Executive and the Company with respect to
the subject matter hereof, and this Agreement supersedes any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including without limitation any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Executive from the
Company. All modifications to this Agreement must be in writing and signed
by the party against whom enforcement of such modification is sought.
6.4. NOTICES. All notices and other communications under
this Agreement shall be in writing and shall be given by facsimile or
first-class mail,
5
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) days after mailing or twenty-four (24) hours
after transmission of a facsimile to the respective persons named below:
If to The Company: Alexandria Real Estate Equities, Inc.
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Phone: (626) 578-0777
Facsimile: (626) 578-0770
Attn: Joel S. Marcus, CEO
If to Executive: Lynn A. Shapiro
22 Bermuda Court
Manhattan Beach, CA 90266
Phone: (310) 546-7920
6.5. HEADINGS. The Paragraph headings herein are intended
for reference only and shall not determine the construction or interpretation
of this Agreement.
6.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without
regard to its principles of conflicts of laws.
6.7. ARBITRATION. Any dispute arising out of or relating to
this Agreement that cannot be settled by good faith negotiation between the
Parties shall be submitted to ENDISPUTE for final and binding arbitration
pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference,
which arbitration shall take place in Los Angeles, California and shall be
the exclusive remedy of the Parties hereto. The resulting arbitration shall
be deemed a final order of a court having jurisdiction over the subject
matter, shall not be appealable, and shall be enforceable in any court of
competent jurisdiction. Submission to arbitration shall not preclude the
right of any party hereto involved in a dispute regarding this Agreement
(each a "Disputing Party" and collectively, the "Disputing Parties") to
institute proceedings at law or in equity for injunctive or other relief
pending the arbitration of a matter subject to arbitration pursuant to this
Agreement. Any documentation and information submitted by any party in the
6
arbitration proceeding shall be kept strictly confidential by the Parties and
the arbitrator.
In addition to any other relief or award granted by the
arbitrator to either Disputing Party, the arbitrator shall determine the
extent to which each Disputing Party has prevailed as to the material issues
raised in the arbitration, and, based upon such determination, shall
apportion to each Disputing Party its ratable share of (i) the Disputing
Parties' reasonable attorneys' fees and other costs reasonably incurred in
the arbitration, (ii) the expense of the arbitrator, and (iii) all other
expenses of the arbitration. The arbitrator shall make such determination and
apportionment whether or not the dispute proceeds to a final award.
6.8. SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other provisions of this Agreement
shall be deemed valid and enforceable to the extent possible.
6.9. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one and the
same Agreement.
7
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement.
The Company:
ALEXANDRIA REAL ESTATE
EQUITIES, INC.
a Maryland corporation
By: /s/ JOEL S. MARCUS
-------------------------------------
Joel S. Marcus
Chief Executive Officer
Date: May [ ], 1998
EXECUTIVE:
/s/ LYNN ANNE SHAPIRO
-------------------------------------
Lynn A. Shapiro
Date: January 1, 1999
8