EXHIBIT 10.26
Published on March 1, 2007
Exhibit 10.26
AVALONBAY COMMUNITIES, INC.
SUMMARY OF PRINCIPAL TERMS OF OFFICER SEVERANCE PROGRAM
The Company's Officer Severance Program is designed to provide
severance protection to officers whose employment is terminated in connection
with a change in control of the Company and who do not have severance protection
under an employment agreement with the Company. The principal features of the
program are described below. This is just a summary and is qualified in its
entirety by reference to the complete text of the Officer Severance Program,
which is available to all officers.
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AVALONBAY COMMUNITIES, INC.
OFFICER SEVERANCE PLAN
1. PURPOSE. AvalonBay Communities, Inc. (the "COMPANY") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. The Board of Directors of the Company
(the "BOARD") recognizes, however, that, as is the case with many publicly held
corporations, the possibility of a Change in Control (as defined in Section 2
hereof) exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders.
Therefore, the Board has determined that the AvalonBay Communities, Inc. Officer
Severance Plan (the "PLAN") should be adopted to reinforce and encourage the
continued attention and dedication of the Covered Employees (as defined below)
to their assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change in Control.
The term "Covered Employee" means any officer of the Company holding the
position of Vice President or higher (it being noted that any officer receiving
severance payments under any other agreement or arrangement with the Company
shall be subject to the limitation on benefits hereunder set forth in the last
sentence of Section 4 hereof) (each, a "COVERED EMPLOYEE"). Nothing in this Plan
shall be construed as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Covered Employee and the
Company or any of its subsidiaries or affiliates (together with the Company, the
"EMPLOYERS"), the Covered Employee shall not have any right to be retained in
the employ of the Employers.
2. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall mean the occurrence of any one of the following events:
(a) Any individual, entity or group (a "PERSON") within the
meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "ACT") (other than the Company, any corporation, partnership,
trust or other entity controlled by the Company (a "SUBSIDIARY"), or
any trustee, fiduciary or other person or entity holding securities
under any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such Person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act) of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities
having the right to vote generally in an election of the Company's
Board of Directors ("VOTING SECURITIES"), other than as a result of (i)
an acquisition of securities directly from the Company or any
Subsidiary or (ii) an acquisition by any corporation pursuant to a
reorganization, consolidation or merger if, following such
reorganization, consolidation or merger the conditions described in
clauses (i), (ii) and (iii) of subparagraph (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the Effective Date, constitute the
Company's Board of Directors (the "INCUMBENT DIRECTORS") cease for any
reason to constitute at least a majority of the Board, provided,
however, that any individual becoming a director of the Company
subsequent to the date hereof (excluding, for this purpose, (i) any
such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election
of members of the Board of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors, including by reason of agreement intended
to avoid or settle any such actual or threatened contest or
solicitation, and (ii) any individual whose initial assumption of
office is in connection with a reorganization, merger or consolidation,
involving an unrelated entity and occurring after the date hereof),
whose election or nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the persons then
comprising Incumbent Directors shall for purposes of this Plan be
considered an Incumbent Director; or
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(c) Consummation of a reorganization, merger or consolidation
of the Company, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company, a
Subsidiary or the corporation resulting from such reorganization,
merger or consolidation or any subsidiary thereof, and any Person
beneficially owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 30% or more of the
outstanding Voting Securities), beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (iii) at least a majority
of the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation;
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or
(e) The sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale, lease, exchange
or other disposition (i) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners of the outstanding Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (ii) no
Person (excluding the Company and any employee benefit plan (or related
trust) of the Company or a Subsidiary or such corporation or a
subsidiary thereof and any Person beneficially owning, immediately
prior to such sale, lease, exchange or other disposition, directly or
indirectly, 30% or more of the outstanding Voting Securities),
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board of Directors providing for such sale, lease,
exchange or other disposition of assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred for purposes of this Plan solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Voting Securities outstanding, increases the proportionate voting power
represented by the Voting Securities beneficially owned by any Person to 30% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any Person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Stock or
other Voting Securities (other than pursuant to a stock split, stock dividend,
or similar transaction), then a "Change in Control" shall be deemed to have
occurred for purposes of this Plan.
3. TERMINATING EVENT. A "Terminating Event" shall mean the termination
of employment of a Covered Employee in connection with any of the events
provided in this Section 3 occurring within twenty-four (24) months following a
Change in Control. In addition, notwithstanding the foregoing, in the event of
the termination of employment of a Covered Employee in connection with any of
the events provided in this Section 3 within six (6) months prior to the
occurrence of a Change in Control (based on an event, such as a Notice of
Termination, that occurred within such six (6) month period prior to a Change in
Control), such termination shall,
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upon the occurrence of a Change in Control, be deemed a Terminating Event under
this Plan. To give effect to the prior sentence, references in Sections
3(b)(ii), (iii) and (iv) to circumstances existing "immediately prior to a
Change in Control" will be interpreted to mean, in a case where the six month
look-back of the prior sentence is being applied, to circumstances existing
immediately prior to the change in circumstances.
(a) termination by the Employers of the employment of the
Covered Employee with the Employers for any reason other than (i) for
Cause or (ii) as a result of the death or disability (as determined
under the Employers' then existing long-term disability coverage) of
such Covered Employee. "Cause" shall mean, and shall be limited to, the
occurrence of any one or more of the following events:
(i) the Covered Employee is convicted of or enters a
plea of nolo contendere to an act which is defined as a felony
under any federal, state or local law, not based upon a
traffic violation, which conviction or plea has or can be
expected to have, in the good faith opinion of the Board of
Directors or the CEO, a material adverse impact on the
business or reputation of the Company; or
(ii) any one or more acts of theft, larceny,
embezzlement, fraud or material intentional misappropriation
from or with respect to the Company; or
(iii) a breach by the Covered Employee of his
fiduciary duties under Maryland law as an officer, or a
material breach by the Covered Employee of any rule,
regulation, policy or procedure of the Company that is
generally announced or distributed to, and applies to, all
employees of the Company or a subset of employees that
includes the Covered Employee (including, without limitation,
in all events the Company's ethics, sexual harassment and
insider trading policies); or
(iv) the Covered Employee's commission of any one or
more acts of gross negligence or willful misconduct which in
the good faith opinion of the Board of Directors or the CEO
has resulted in material harm to the business or reputation of
the Company; or
(v) the deliberate or willful failure by the Covered
Employee (other than by reason of the Covered Employee's
physical or mental illness, incapacity or disability) to
substantially perform the Covered Employee's duties with the
Employers and the continuation of such failure for a period of
fifteen (15) days after written notice thereof.
A Terminating Event shall not be deemed to have occurred
pursuant to this Section 3(a) solely as a result of the Covered
Employee being an employee of any direct or indirect successor to the
business or assets of any of the Employers, rather than continuing as
an employee of the Employers following a Change in Control. For
purposes of clauses (iv) and (v) of this Section 3(a), no act, or
failure to act, on the Covered Employee's part shall be deemed
"willful" unless done, or omitted to be done, by the Covered Employee
without reasonable belief that the Covered Employee's act, or failure
to act, was in the best interest of the Employers; or
(b) termination by the Covered Employee of the Covered
Employee's employment with the Employers for Good Reason. "Good Reason"
shall mean the occurrence of any of the following events:
(i) a material adverse change in the functions,
duties or responsibilities of the Covered Employee's position
(other than a termination of employment for Cause) which would
reduce the level, importance or scope of such position (a
change in the person and/or department to whom the Covered
Employee is required to report, or a change in the personnel
that report to the Covered Employee, shall not by itself
constitute a material adverse change in the Covered Employee's
position); or
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(ii) the relocation of the office at which the
Covered Employee is principally located immediately prior to
the Change in Control (the "Original Office") to a new
location outside of the metropolitan area of the Original
Office or the failure to locate the Covered Employee's own
office at the Original Office (or at the office to which such
office is relocated which is within the metropolitan area of
the Original Office); or
(iii) either (X) the failure by the Company to
continue in effect any compensation plan or program in which
the Covered Employee participates immediately prior to a
Change in Control which is material to the Covered Employee's
total compensation, unless comparable alternative arrangements
(embodied in ongoing substitute or alternative plans or
programs) have been implemented with respect to such plans or
programs, or (Y) the failure by the Company to continue the
Covered Employee's participation therein following a Change in
Control (or in such substitute or alternative plans or
programs) on a basis not materially less favorable, in terms
of the amount of benefits provided and the level of the
Covered Employee's participation relative to other
participants, as existed during the last completed fiscal year
of the Company prior to the Change in Control (the occurrence
of either failure in clause (X) or (Y), a "CIC COMPENSATION
FAILURE"); PROVIDED, HOWEVER, that in no event shall a CIC
Compensation Failure have occurred if:
(A) the value of the Covered
Employee's total annual compensation
following a Change in Control, including, but
not limited to, cash compensation (including
salary and bonus), stock grants (valued using
stock price less consideration paid), stock
options (valued using the Black-Scholes
method or a variation thereof, as determined
by the Board of Directors or a compensation
consultant engaged by the Board of Directors)
and benefits (valued using an actuarial or
similar valuation method), is at least 90% of
the Covered Employee's total annual
compensation in the last fiscal year prior to
the Change in Control; or
(B) (I) the Covered Employee's
total annual cash compensation
(including salary and bonus) following a
Change in Control is at least 90% of
what it was in the year prior to the
Change in Control, with such reasonable
adjustments thereto as are necessary to
give effect to performance based bonuses
(with respect to which the performance
criteria may reasonably be modified) and
the level of performance achieved with
respect thereto;
(II) the total value of the
Covered Employee's annual stock grants
(valued using stock price less
consideration paid) following a Change
in Control are at least 90% of what they
were in the year prior to the Change in
Control, with such reasonable
adjustments thereto as are necessary to
give effect to (x) performance based
bonuses (with respect to which the
performance criteria may reasonably be
modified) and the level of performance
achieved with respect thereto, and (y)
to changes in the price of the Company's
or the successor's stock due to market
fluctuations;
(III) the Covered Employee's
total annual stock option grants
(measured either by (a) total value, as
determined as described in the preceding
paragraph (A), or (b) total "leverage
potential" (i.e., the number of options
granted multiplied by the exercise
price, after giving effect to changes in
the price of the Company's or the
successor's stock due to market
fluctuations)) are at least 90% of what
they were in the year prior to the
Change in Control, with such reasonable
adjustments thereto as are necessary to
give effect to performance based bonuses
(with respect to
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which the performance criteria may
reasonably be modified) and the level
of performance achieved with respect
thereto; and
(IV) there is not a material
reduction in the Covered Employee's
benefits as compared to the last fiscal
year prior to the Change in Control; or
(iv) the failure by the Employers to obtain an
effective agreement from any successor to assume and agree to
perform this Plan.
4. SPECIAL TERMINATION BENEFITS. In the event a Terminating
Event occurs with respect to a Covered Employee,
(a) the Employers shall pay to the Covered Employee an amount
equal to all accrued but unpaid annual base salary and all earned but
unpaid cash incentive compensation earned through such Covered
Employee's Date of Termination. Said amount shall be paid in one lump
sum payment no later than thirty-one (31) days following the Date of
Termination (as such term is defined in Section 8(b)); and
(b) if and only if such Terminating Event is not described in
Section 3(b)(ii), the Employers shall pay to the Covered Employee an
amount equal to the sum of the following:
(i) one times the amount of the current annual base
salary of the Covered Employee, determined prior to any
reductions for pre-tax contributions to a cash or deferred
arrangement or a cafeteria plan; and
(ii) one times the amount of the average annual cash
bonus earned by the Covered Employee with respect to the two
(2) calendar years immediately prior to the Change in Control
determined prior to any reductions for pre-tax contributions
to a cash or deferred arrangement or a cafeteria plan
(provided, however, that if the Covered Employee's tenure with
the Company is such that prior to the Terminating Event the
Covered Employee has earned an annual bonus only with respect
to the calendar year immediately prior to the Change in
Control, then such annual bonus shall be deemed to have been
earned with respect to the two (2) calendar years immediately
prior to the Change in Control; and, provided further,
however, that if the Covered Employee's tenure with the
Company is such that prior to the Terminating Event the
Covered Employee has not earned an annual bonus, then the
Covered Employee's target annual bonus immediately prior to
the Change in Control shall be deemed to have been earned with
respect to the two (2) calendar years immediately prior to the
Change in Control).
Said amount shall be paid in one lump sum payment no later than
thirty-one (31) days following the Date of Termination; and
(c) if and only if such Terminating Event is described in
Section 3(b)(ii), the Employers shall pay to the Covered Employee an
amount equal to the sum of the following:
(i) one-half times (0.5) the amount of the current
annual base salary of the Covered Employee, determined prior
to any reductions for pre-tax contributions to a cash or
deferred arrangement or a cafeteria plan; and
(ii) one-half times (0.5) times the amount of the
average annual cash bonus earned by the Covered Employee with
respect to the two (2) calendar years immediately prior to the
Change in Control determined prior to any reductions for
pre-tax contributions to a cash or deferred arrangement or a
cafeteria plan, with procedures similar to those described in
Section 4(b)(ii) to determine such average.
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Said amount shall be paid in one lump sum payment no later than
thirty-one (31) days following the Date of Termination (as such term is
defined in Section 8(b)); and
(d) the Employers shall continue to provide health, dental and
life insurance (or contribute a portion of the cost thereof) to the
Covered Employee, on the same terms and conditions as though the
Covered Employee had remained an active employee, for eighteen (18)
months after the Terminating Event or until such earlier date as the
Covered Employee obtains comparable benefits through other employment
or payment to the Covered Employee of a present value equivalent of the
costs of such benefits to the Company (provided, however, that this
clause (d) shall in no event obligate the Company to continue to fund
the premiums on any split dollar life insurance policy pursuant to
arrangements that were in effect while the Covered Employee was
employed); and
(e) the Employers shall take whatever action is necessary (i)
to cause the Covered Employee to become vested as of the Date of
Termination in all stock options, restricted stock grants, and all
other equity-based awards and (ii) to be entitled (A) to exercise and
continue to exercise all stock options and all other equity-based
awards having an exercise schedule and (B) to retain such grants and
awards, but in each case under clauses (A) and (B) such right to
exercise and retain shall last only for so long as, and shall apply
only to the same extent as, if such options, grants and awards had
vested prior to termination of employment and their treatment following
such termination were determined in accordance with the terms of the
applicable stock option agreement, grant agreement or other equity
award agreement and the incentive plans governing such agreements.
Reference in this regard is made to the clarification set forth in
Section 5; and
(f) the Employers shall provide COBRA benefits to the Covered
Employee following the end of the period referred to in Section 4(d)
above, such benefits to be determined as though the Covered Employee's
employment had terminated at the end of such period; and
(g) notwithstanding the foregoing, if the Terminating Event
occurs before the Change in Control, the special termination benefits
required by this Section 4 shall be paid, or commence, as the case may
be, no later than thirty-one (31) days after the consummation of the
Change in Control.
Notwithstanding the foregoing, the special termination benefits
required by Sections 4(b) or 4(c) shall be reduced by any amount paid or payable
to the Covered Employee by the Employers under the terms of any employment
agreement or other plan or arrangement providing for compensation upon such
Covered Employee's termination of employment (other than payment of accrued
vacation benefits and payments under any deferred compensation plan). Other
benefits under this Plan shall also be reduced or eliminated to the extent
provided to the Covered Employee under other agreements or arrangements.
Therefore, a Covered Employee with an employment agreement or arrangement that
provides greater severance benefits than those provided in this Officer
Severance Program will receive no payments or benefits under this Officer
Severance Program.
5. CLARIFICATION REGARDING TREATMENT OF OPTIONS AND RESTRICTED STOCK.
The stock option and restricted stock agreements (the "EQUITY AWARD AGREEMENTS")
that the Covered Employee has or may receive may contain language regarding the
effect of a termination of the Covered Employee's employment under certain
circumstances. Notwithstanding such language in the Equity Award Agreements, for
so long as this Plan is in effect, the Company will be obligated, if the terms
of this Plan are more favorable in this regard than the terms of the Equity
Award Agreements, to take the actions required under Section 4(e) hereof upon
the happening of a Terminating Event. That section provides that the Company
will cause the Covered Employee to become vested as of the Date of Termination
in all equity-based awards, and that such equity-based awards will thereafter be
subject to the provisions of the applicable Equity Award Agreement as it applies
to vested awards upon a termination. For purposes of clarification, although an
option grant may vest under termination circumstances described above, such
option will thereafter be exercisable only for so long as the related option
agreement provides, except that the Compensation Committee of the Board of
Directors may, in its sole discretion, elect to extend the expiration date of
such option. For example, in general the Covered Employees' option agreements
provide that (in the absence of an extension by the Compensation Committee) upon
a termination of employment for any reason other than death,
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disability, retirement or cause, any vested options will only be exercisable for
three months from the date of termination or, if earlier, the expiration date of
the option.
6. ADDITIONAL BENEFITS.
(a) Anything in this Plan to the contrary notwithstanding, in
the event that any compensation, payment or distribution by the
Employers to or for the benefit of a Covered Employee, whether paid or
payable or distributed or distributable pursuant to the terms of this
Plan or otherwise, (the "SEVERANCE PAYMENTS"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "CODE"), the following provisions shall apply to
such Covered Employee:
(i) If the Severance Payments, reduced by the sum of
(1) the Excise Tax and (2) the total of the Federal, state,
and local income and employment taxes payable by the Covered
Employee on the amount of the Severance Payments which are in
excess of the Threshold Amount, are greater than or equal to
the Threshold Amount, the Covered Employee shall be entitled
to the full benefits payable under this Plan.
(ii) If the Threshold Amount is less than (x) the
Severance Payments, but greater than (y) the Severance
Payments reduced by the sum of (1) the Excise Tax and (2) the
total of the Federal, state, and local income and employment
taxes on the amount of the Severance Payments which are in
excess of the Threshold Amount, then the benefits payable
under this Plan shall be reduced (but not below zero) to the
extent necessary so that the maximum Severance Payments shall
not exceed the Threshold Amount. To the extent that there is
more than one method of reducing the payments to bring them
within the Threshold Amount, the Covered Employee shall
determine which method shall be followed; provided that if the
Covered Employee fails to make such determination within 45
days after the Employers have sent the Covered Employee
written notice of the need for such reduction, the Employers
may determine the amount of such reduction in its sole
discretion.
For the purposes of this Section 6, "Threshold Amount" shall mean three
times the Covered Employee's "base amount" within the meaning of
Section 280G(b)(3) of the Code and the regulations promulgated
thereunder less one dollar ($1.00); and "Excise Tax" shall mean the
excise tax imposed by Section 4999 of the Code, or any interest or
penalties incurred by the Covered Employee with respect to such excise
tax.
(b) The determination as to which of the alternative
provisions of Section 6(a) shall apply to the Covered Employee shall be
made by such nationally recognized accounting firm as may at that time
be the Company's independent public accountants immediately prior to
the Change in Control (the "ACCOUNTING FIRM"), which shall provide
detailed supporting calculations both to the Employers and the Covered
Employee within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the
Employers or the Covered Employee. For purposes of determining which of
the alternative provisions of Section 6(a) shall apply, the Covered
Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation applicable to individuals for
the calendar year in which the determination is to be made, and state
and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Covered Employee's residence
on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and
local taxes. Any determination by the Accounting Firm shall be binding
upon the Employers and the Covered Employee.
7. WITHHOLDING. All payments made by the Employers under this Plan
shall be net of any tax or other amounts required to be withheld by the
Employers under applicable law.
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8. NOTICE AND DATE OF TERMINATION; ETC.
(a) NOTICE OF TERMINATION. Any purported termination by the
Employer of a Covered Employee's employment (other than by reason of
death) within 24 months following a Change in Control shall be
communicated by written Notice of Termination from the Employers to the
Covered Employee in accordance with this Section 8. For purposes of
this Plan, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Plan relied upon
and the Date of Termination. Further, a Notice of Termination for Cause
is required to include a written explanation as to the basis for such
termination.
(b) DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of a Covered Employee's employment by the
Employers within twenty-four (24) months after a Change in Control,
shall mean the date specified in the Notice of Termination which, in
the case of a termination by the Employers other than a termination for
Cause (which may be effective immediately), shall not be less than 30
days after the Notice of Termination is given. Notwithstanding Section
3(a) of this Plan, in the event that a Covered Employee gives a Notice
of Termination to the Employers, the Employers may unilaterally
accelerate the date of termination of such Covered Employee and such
acceleration shall not constitute an independent Terminating Event for
purposes of Section 3(a) of this Plan or a violation of the preceding
sentence (I.E., the Covered Employee will be entitled to severance
payments and benefits hereunder only if such Covered Employee's Notice
of Termination was with respect to a termination for Good Reason).
(c) NO MITIGATION. The Covered Employee is not required to
seek other employment or to attempt in any way to reduce any amounts
payable to the Covered Employee by the Employers under this Plan.
Further, the amount of any payment provided for in this Plan shall not
be reduced by any compensation earned by the Covered Employee as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Covered Employee to
the Employers, or otherwise.
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9. OF DISPUTES; PROCEDURES AND SCOPE OF ARBITRATION.
(a) All controversies and claims arising under or in connection with
this Plan or relating to the interpretation, breach or enforcement thereof
and all other disputes between a Covered Employee and the Company, shall be
resolved by expedited, binding arbitration, to be held in California or
Virginia, as selected by the Covered Employee, in accordance with the
applicable rules of the American Arbitration Association governing employment
disputes. In any proceeding relating to the amount owed to a Covered Employee
in connection with his termination of employment, it is the contemplation
under this Plan that the only remedy that the arbitrator may award in such a
proceeding is an amount equal to the termination payments and benefits
required to be provided under the applicable provisions of Section 4 and, if
applicable, Section 6 hereof, to the extent not previously paid, plus the
costs of arbitration and the Covered Employee's reasonable attorneys fees and
expenses as provided below. Any award made by such arbitrator shall be final,
binding and conclusive on the Company and the Covered Employee for all
purposes, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
(b) Except as otherwise provided in this paragraph, each party shall
pay the cost of his or its own legal fees and expenses incurred in connection
with an arbitration proceeding. Provided an award is made in favor of the
Covered Employee in such proceeding, all of his reasonable attorneys fees and
expenses incurred in pursuing or defending such proceeding shall be promptly
reimbursed to the Covered Employee by the Company within five days of the entry
of the award. Any award of reasonable attorneys' fees shall take into account
any offer of the Company, such that an award of attorneys' fees to the Covered
Employee may be limited or eliminated to the extent that the final decision in
favor of the Covered Employee does not represent a material increase in value
over the offer that was made by the Company during the course of such
proceeding. However, any elimination or limitation on attorneys' fees shall only
apply to those attorneys' fees incurred after the offer by the Company.
(c) In any case where the Company or any other person seeks to stay or
enjoin the commencement or continuation of an arbitration proceeding, whether
before or after an award has been made, or where a Covered Employee seeks
recovery of amounts due after an award has been made, or where the Company
brings any proceeding challenging or contesting the award, all of a Covered
Employee's reasonable attorneys fees and expenses incurred in connection
therewith shall be promptly reimbursed by the Company to the Covered Employee,
within five days of presentation of an itemized request for reimbursement,
regardless of whether the Covered Employee prevails and regardless of the forum
in which such proceeding is brought.
10. BENEFITS AND BURDENS. This Plan shall inure to the benefit of and
be binding upon the Employers and the Covered Employees, their respective
successors, executors, administrators, heirs and permitted assigns. In the event
of a Covered Employee's death after a Terminating Event but prior to the
completion by the Employers of all payments due him under this Plan, the
Employers shall continue such payments to the Covered Employee's beneficiary
designated in writing to the Employers prior to his death (or to his estate, if
the Covered Employee fails to make such designation).
11. ENFORCEABILITY. If any portion or provision of this Plan shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Plan, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Plan shall be valid and enforceable to the fullest
extent permitted by law.
12. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Plan, or the waiver by
any party of any breach of this Plan, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
13. NOTICES. Any notices, requests, demands, and other communications
provided for by this Plan shall be sufficient if in writing and delivered in
person or sent by registered or certified mail, postage prepaid, to a
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Covered Employee at the last address the Covered Employee has filed in writing
with the Employers, or to the Employers at their main office, attention of the
Board of Directors.
14. EFFECT ON OTHER PLANS. Nothing in this Plan shall be construed to
limit the rights of the Covered Employees under the Employers' benefit plans,
programs or policies.
15. NATURE OF PAYMENTS; REQUIREMENT FOR RELEASE, CONFIDENTIALITY AND
NON-SOLICITATION AGREEMENT. The amounts due pursuant to this Plan, except for
payment of accrued base salary through the Date of Termination, are in the
nature of severance payments considered to be reasonable by the Company and are
not in the nature of a penalty. The Company may require, as a condition to
making the payments and providing the benefits required hereby, that a Covered
Employee execute and deliver to the Company a Release and a Non-Solicitation
Agreement (as such terms are defined below), and may also require that the
Covered Employee acknowledge in writing that he or she is resigning as an
officer from the Company and as a director and officer of any subsidiary of the
Company for which the Covered Employee serves in such capacity, before any
amounts or benefits under this Plan are paid or provided. A "RELEASE" shall mean
a written release of all employment-related claims by Covered Employee of the
Company in a form and manner reasonably satisfactory to the Company. Such
Release shall in all events preserve Covered Employee's continuing rights under
this Plan except with respect to any amount paid prior to or simultaneously with
the execution of such Release, in which event Covered Employee shall acknowledge
receipt of such amount and (if such is the case) that such amount was properly
calculated and is in full satisfaction of the Company's obligation to pay such
amount. "NON-SOLICITATION AGREEMENT" means an agreement of Covered Employee with
the Company that Covered Employee shall not, without the prior written consent
of the Company for a period of one year following the Covered Employee's date of
termination, solicit or attempt to solicit for employment with or on behalf of
any corporation, partnership, venture or other business entity, any employee of
the Company or any of its affiliates or any person who was formerly employed by
the Company or any of its affiliates within the preceding six months, unless
such person's employment was terminated by the Company or any of such
affiliates.
16. AMENDMENT OR TERMINATION OF PLAN. The Company may, upon one year's
advance written notice to the Covered Employees, amend or terminate this Plan at
any time or from time to time; PROVIDED, HOWEVER, that, with respect to any such
notice given on or prior to March 29, 2002, the amendment or termination set
forth in such notice shall not, without the written consent of a Covered
Employee, in any material adverse way affect the rights of such Covered
Employee; and PROVIDED, FURTHER, that during the 24 months following a Change in
Control no such amendment or termination shall have a material adverse effect on
the rights of a Covered Employee with respect to such Change in Control.
17. GOVERNING LAW. This Plan shall be construed under and be governed
in all respects by the laws of the State of Maryland.
18. OBLIGATIONS OF SUCCESSORS. In addition to any obligations imposed
by law upon any successor to the Employers, the Employers will use their best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Employers to expressly assume and agree to perform this Plan in
the same manner and to the same extent that the Employers would be required to
perform if no such succession had taken place.
Adopted by the Compensation Committee of the Board of Directors: as of
September 9, 1999
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