Exhibit 10.2
CHANGE IN CONTROL
AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT
(“Agreement”) is entered into as of March 13, 2009
by and between Equity Residential, a Maryland real estate
investment trust (the “Company”), and Mark J. Parrell
(the “Executive”).
WITNESSETH
WHEREAS, the Board of Trustees of
the Company (the “Board”) recognizes that the
possibility of a Change in Control (as hereinafter defined) exists
or may exist in the future 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 shareholders 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 and/or an
affiliate 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 valuation 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 the date the Executive’s employment
is terminated; provided, however, that if the Executive’s
employment is terminated following, or in anticipation of, a Change
in Control, the term shall continue in effect until all payments
and benefits have been made or provided to the Executive
hereunder.
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), (iv) 100% of any target cash bonus and target long-term
compensation award with respect to the Company’s fiscal year
ended prior to the Termination Date; and (v) any other amounts
or benefits required to be paid by law.
2.2 Base Amount
. For purposes of this Agreement, “Base Amount” shall
mean the greater of (a) the Executive’s annual base
salary, at the rate in effect immediately prior to the Change in
Control and (b) the Executive’s annual base salary, at
the rate in effect on the Termination Date.
2.3 Bonus
Amount . For purposes of this Agreement, “Bonus
Amount” shall mean the average of the annual cash bonuses
paid to the Executive (including amounts that would have been paid
if they had not been deferred) under the Company’s annual
incentive cash bonus plan for the three years immediately preceding
the year in which the Executive’s employment terminates, or
for such shorter period that the Executive has been employed by the
Company. If the Executive’s employment is terminated in the
Executive’s first year of employment, “Bonus
Amount” shall mean 100% of the target bonus that the
Executive would have been eligible to receive for such
year.
2.4 Cause . For
purposes of this Agreement, a termination of employment is for
“Cause” if the Executive has been convicted of a felony
involving fraud or dishonesty or the termination is evidenced by a
resolution adopted in good faith by at least 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 (as defined
in Section 2.9) is given by the Executive shall constitute
Cause for purposes of this Agreement.
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 1934 Act) of 30% 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
(i) 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
2
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) 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 seventy percent
(70%) of the combined voting power of the outstanding Voting
Securities of the corporation or other entity 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; and
(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 or similar governing body of the Surviving
Corporation or a corporation or other entity beneficially owning,
directly or indirectly, a majority of the Voting Securities of the
Surviving Corporation.
(A transaction described in clauses
(A) and (B) 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 to an entity of which the Company
directly or indirectly owns at least 70% of the voting
shares).
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.
(c) The rejection by the voting
Beneficial Owners of the outstanding Shares of the entire slate of
trustees that the Board proposes at a single election of trustees;
or
3
(d) The rejection by the voting
Beneficial Owners of the outstanding Shares of one-half or more of
the trustees that the Board proposes over any two or more
consecutive elections of trustees.
(e) 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 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
. For purposes of this Agreement, “Disability” shall
mean a physical or mental infirmity that entitles the Executive to
benefits under the Company sponsored long-term disability plan in
which he or she participates.
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 180 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 180 days preceding
the date of a Change of 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;
(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 written notice thereof;
(iii) the Company’s requiring
the Executive to be based at any place outside a 30-mile radius
from the Executive’s principal location of business prior to
the Change in Control, 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
4
levels and/or reward opportunities
which opportunities will be evaluated in light of the performance
requirements therefor) to those provided for under each other
employee compensation and benefit plan, program and practice in
which the Executive was participating at any time within 180 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 6 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 a specific termination
provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the
provision so indicated.
2.10. Pro Rata Bonus/LTC
Award . For purposes of this Agreement, “Pro Rata
Bonus/LTC Award” shall mean an amount equal to 100% of the
Executive’s target bonus and target long-term compensation
that the Executive would have been eligible to receive for the
Company’s fiscal year in which the Executive’s
employment terminates, multiplied by a fraction, the numerator of
which is the number of days in such fiscal year 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 Voting
Securities, assets or 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 or
if no Notice of Termination is sent, the last day of his
employment;
5
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 30 th 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
Emp
