Exhibit 10.21

 

DEFERRED COMPENSATION AGREEMENT

 

 

                THIS DEFERRED COMPENSATION AGREEMENT (“Agreement”) is entered
into as of January 20, 2003 between EQUITY RESIDENTIAL, a Maryland real estate
investment trust (“EQR”), and BRUCE W. DUNCAN (the “Executive”).

 

                RECITALS

 

WHEREAS, EQR desires to enter into the Agreement for deferred compensation to
the Executive for services by the Executive as President and Chief Executive
Officer of EQR, and the Executive is willing to enter into this Agreement on the
terms and conditions hereinafter set forth.

 

                NOW, THEREFORE, in consideration of the mutual promises and
considerations contained herein and for other good and valuable consideration,
the payment and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

 

                1.             Term.  For the purposes of this Agreement, the
term of the employment of the Executive shall begin on March 15, 2002 and shall
expire on the Termination Date (as defined below) (the “Term”).

 

                2.             Termination.

 

                (a)           Termination Date.  Unless extended by the mutual
agreement of EQR and the Executive, the Executive’s employment shall end on the
Termination Date. The “Termination Date” shall be the first to occur of: (i) the
date of the Executive’s resignation (whether or not for Good Reason (as defined
below)), (ii) the date of the death or permanent disability or incapacity of the
Executive, or (iii) the date EQR terminates the Executive’s employment (whether
or not for Cause (as defined below)).

 

                (b)           Permanent Disability or Incapacity.  The Executive
shall be considered to be permanently disabled or incapacitated if in the
reasonable commercial judgment of the Board of Trustees of EQR, the Executive
becomes unable to satisfactorily perform his duties and responsibilities in the
manner currently being performed during the Term hereof because of a mental or
physical disability, or both, that continues or is reasonably expected to
continue for a period of in excess of one hundred eighty (180) days.  In the
event the Executive does not agree with the Board of Trustees’ determination of
disability or incapacity, a determination shall be made by a panel of three
doctors.  The first shall be chosen by EQR, the second shall be chosen by the
Executive, and the third shall be chosen by the first two doctors.  Any doctor
selected by a party shall not be affiliated, associated or related to the party
selecting the doctor in any manner whatsoever.  The opinion of a majority of the
panel of doctors shall be binding on the parties hereto.  Each party shall bear
the costs of the doctor chosen by them and 1/2 of the costs of the third
doctor.  The foregoing to the contrary notwithstanding, Executive shall be
considered permanently disabled or incapacitated if his employment terminates
due to his Disability, as provided under Executive’s Employment Agreement with
the Company dated as of January 20, 2003 or, if applicable, under Executive’s
Change In Control Agreement dated March 14, 2002, as either such agreement
hereafter may be amended by the parties (“Employment Agreement” and “Change In
Control Agreement,” respectively).

 

 

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                                                                (c)          
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 of Trustees 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.

 

(d)           Good Reason.  For purposes of this Agreement, “Good Reason” shall
mean the occurrence of any of the events or conditions described in subsections
(i) through (vii) 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  termination of employment; 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 termination of
employment; 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 termination of
employment, 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 thirty (30) 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 in Chicago, Illinois immediately prior to the termination of
employment, except for reasonably required travel on the Company’s business
which is not materially greater than such travel requirements prior to the
termination of employment;

 

                                                                                               
                (iv)          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;

 

 

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                (v)           any material breach by the Company of any
provision of this Agreement;

 

(vi)          any purported termination of the Executive’s employment for Cause
by the Company which does not comply with the terms of Section 2(c);

 

(vii)         the failure of the Company to obtain an agreement, reasonably
satisfactory to Executive, from any successors and assigns to assume and agree
to perform this Agreement as contemplated in Section 7 hereof; or

 

(viii)        in the event of the Executive’s termination of employment
following a “Change in Control,” for “Good Reason” (as such terms are defined in
the Change in Control Agreement previously entered into by EQR and the
Executive).

 

3.             Deferred Compensation.

 

                (a)           Termination without Cause; Resignation for Good
Reason; Resignation on or subsequent to December 31, 2006.  In the event that
(i) the Executive’s employment is terminated by EQR without Cause; (ii) the
Executive resigns for Good Reason; or (iii) the Executive resigns on or
subsequent to December 31, 2006 (whether or not for Good Reason); the Executive
shall be entitled to annual deferred compensation for a ten (10) year period
commencing on the Termination Date (unless the Executive resigns without Good
Reason on or after December 31, 2006 but prior to December 31, 2011, in which
case the ten (10) year period shall commence on the date the Executive reaches
age 62), in an annual amount equal to the product of (x) ten (10) percentage
points (0.10) multiplied by (y) a whole number equal to the lesser of:  (i) ten
(10); or (ii) the whole number equal to the number of calendar years (including
as a whole year any portion of a calendar year in excess of nine (9) months and
including 2002) that the Executive was employed by EQR since March 15, 2002
(which product shall in no event exceed 100%); multiplied by (z) the Annual Base
Compensation (as defined below) for the calendar year in which the Termination
Date occurs.  By way of illustration and not in limitation of the foregoing,
Executive shall be entitled to annual deferred compensation equal to 50% or 100%
of his Annual Base Compensation upon his resignation without Good Reason on
December 31, 2006 or on December 31, 2011, respectively, payable commencing at
age 62.  Such annual compensation shall be payable in equal bi-monthly
installments.  In the event of the Executive’s death during the ten (10) year
period in which he is paid annual deferred compensation, such annual deferred
compensation shall then be paid to the estate or any other designee of the
Executive.

 

                (b)           Death, Permanent Disability or Incapacity.  In the
event that the Executive’s employment is terminated as a result of his death,
permanent disability or incapacity, the Executive (or the estate or any other
designee of the Executive, in the case of death) shall be entitled to annual
deferred compensation for a ten (10) year period commencing on the Termination
Date in an annual amount equal to the product of (x) fifteen percentage points
(0.15) multiplied by (y) a whole number equal to the lesser of:  (i) ten (10);
or (ii) the whole number equal to the number of calendar years (including as a
whole year any portion of a calendar year in excess of nine (9) months and
including 2002) that the Executive was employed by EQR since March 15, 2002
(which product shall in no event exceed 100%) multiplied by (z) the Annual Base
Compensation (as defined below).  Such annual compensation shall be payable in
equal bi-monthly installments.

 

 

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                (c)           Termination with Cause or Resignation Without Good
Reason.  In the event that (i) the Executive’s employment hereunder is
terminated with Cause by EQR, or (ii) the Executive resigns without Good Reason
before December 31, 2006, the Executive shall not be entitled to receive any
deferred compensation hereunder.

 

                (d)           Annual Base Compensation.  For purposes of this
Agreement, “Annual Base Compensation” shall mean an amount equal to Seven
Hundred Fifty Thousand Dollars ($750,000.00) for calendar year 2003, which sum
shall be increased as of January 1, 2004 and as of the first day of January of
each year thereafter throughout the Term to an amount equal to the Annual Base
Compensation in effect for the immediately preceding calendar year increased by
a percentage equal to the percentage increase in the CPI (as defined below)
during the immediately preceding calendar year over the prior calendar year.

 

                (e)           CPI.  The term “CPI” shall mean the Revised
Consumer Price Index for All Urban Consumers published by the Bureau of Labor
Statistics of the United States Department of Labor, for United States City
Average, All Items (1982-84 = 100).  If the manner in which the CPI is
calculated shall be substantially revised EQR and the Executive shall select a
means to adjust such revised Index, which would produce results equivalent, as
practicable, to those, which would have been obtained if the CPI has not been so
revised.  If the 1982-84 average shall no longer be used as an index of 100,
such change shall constitute a substantial revision.  If the CPI shall become
unavailable to the public because publication is discontinued, or otherwise, EQR
and the Executive shall select a comparable substitute index based upon changes
in the cost of living or purchasing power of the consumer dollar published by
any other governmental agency, or, if no such index shall then be available, a
comparable index published by a major bank or other financial institution or by
a university or a recognized financial publication.  In the event that the U.S.
Department of Labor, Bureau of Labor Statistics, changes the publication
frequency of the CPI so that a CPI is not available to make an adjustment for
the period in question, the adjustment shall be based on the percentage increase
in the CPI for the twelve (12) month period beginning with the closest month
preceding the period in question for which a CPI is available.

 

                4.             Arbitration.  Except as otherwise specifically
provided herein, any controversy or claim arising out of, or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in Chicago,
Illinois in accordance with the rules of the American Arbitration Association,
and judgment upon any award so rendered may be entered in any court having
jurisdiction thereof.

 

                5.             Notices.  Any notice or other communication
required or permitted to be transmitted under this Agreement shall be in
writing, and personally delivered or mailed, return receipt requested, postage
prepaid, addressed to the parties hereto at their addresses following their
signatures below, or at such other addresses as may be hereafter designated by a
party by notice delivered in accordance herewith.  Any notice delivered
personally shall be effective on the date of delivery and any notice mailed, as
aforesaid, shall be effective on the second day following posting.

 

                6.             Waiver of Breach.  The waiver by one party of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the one party.

 

 

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                7.             Assignment.  The rights and obligations of EQR
and Executive under this Agreement shall inure to the benefit of, and shall be
binding upon, EQR and its successors and assigns and Executive and his heirs and
personal representatives.  The Company shall require any successors and assigns
(other than by operation of law in connection with a merger or consolidation,
which requirement shall be deemed satisfied upon such merger or consolidation)
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession or assignment had taken place.

 

                8.             Entire Agreement.  This instrument contains the
entire agreement between the parties.  It may not be changed orally but only by
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.  This  Agreement supersedes and any
other written or oral agreement between EQR and the Executive concerning the
subject matter of this Agreement.

 

                9.             Governing Law; Severability.  This Agreement
shall be construed and enforced, and all questions concerning compliance by any
person with its terms shall be determined under the laws of the State of
Illinois.  All provisions of this Agreement are severable and this Agreement
shall be interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein, and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable.

 

                IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.

 

 

EQR:

 

EQUITY RESIDENTIAL, a Maryland real estate investment trust

 

By:

/s/Bruce C. Strohm

 

 

 

Bruce C. Strohm, Executive Vice President
& General Counsel

 

 

 

 

Address:

 

Two North Riverside Plaza
Chicago, Illinois 60606

 

 

 

THE EXECUTIVE

 

/s/ Bruce W. Duncan

 

BRUCE W. DUNCAN

 

 

 

Address:

 

Two North Riverside Plaza
Chicago, Illinois 60606

 

 

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