Document:

EMPLOYMENT AGREEMENT

 

 

                This Employment Agreement
(“Agreement”) is entered into as of this 20th day of January, 2003
(the “Effective Date”), by and between Equity Residential, a Maryland real
estate investment trust (“Company”), and Bruce W. Duncan (the “Executive”).

 

RECITALS

 

                Company desires to employ the
Executive as President and Chief Executive Officer of Company, and the
Executive desires to accept such employment, on the terms and conditions
hereinafter set forth.

 

                In consideration of the mutual covenants
contained herein, and intending to be legally bound, Company and the Executive
agree as follows:

 

1.                                      Employment and Duties.

 

a.             Employment.  Subject to all of the terms and conditions of this Agreement, the
Company agrees to employ the Executive as its President and Chief Executive
Officer for the Employment Period, and the Executive accepts such employment.

 

b.             Duties. 
On and after the Employment Date, as President and Chief Executive
Officer of the Company, Executive will have overall charge and responsibility
for the business and affairs of the Company in accordance with the by-laws of
the Company and its custom and practice for such officer’s position, and will
perform such other duties as he is reasonably directed to perform by the Board
of Trustees of Equity (the “Board”) not inconsistent with the foregoing.  Executive shall perform such duties at the
Company’s headquarters located in Chicago, Illinois.  During the term of Executive’s employment as Chief Executive
Officer, the Company shall re-nominate Executive for re-election to the Board;
provided, Executive shall promptly submit his resignation from the Board upon a
termination of his employment for any reason.

 

c.             Scope. 
While the Executive is employed by the Company hereunder, Executive will
devote substantially all of his business time, attention, skills and efforts to
the business and affairs of the Company and the performance of his duties under
this Agreement.  The Executive
acknowledges that his duties and responsibilities under this Agreement will
require his full-time business efforts and agrees that he will not engage in
any other business activity or have any business pursuits or interests which
materially interfere or conflict with the performance of the Executive’s duties
under this Agreement.  Notwithstanding
the foregoing, the parties agree that during the Employment Period, Executive
may serve on civic or charitable boards or committees and up to two (2)
corporate boards (in addition to the Board of the Company and Wellsford Real
Properties, Inc.) so long as such activities do not materially interfere with
the performance of the Executive’s duties under this Agreement.

 

2.                                      Definitions.

 

a.             Accrued Compensation.  “Accrued Compensation” shall mean an amount
which shall include all amounts earned or accrued through the “Termination
Date” (as 

 

 

 

defined below) 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) incentive compensation (other than the
“Pro Rata Bonus”; and (v) 100% of any Target Bonus (as defined at Section 4(b))
with respect to the Company’s fiscal year ended prior to the Termination Date.

 

b.             Base Amount. 
“Base Amount” shall mean the Executive’s annual Base Salary at the rate
in effect on the Termination Date.

 

c.             Bonus Amount. 
“Bonus Amount” shall mean the annual average of the cash bonus paid to
the Executive or due to Executive as Accrued Compensation under subsection
2(a)(v) (including in all cases amounts that would have been paid if they had
not been deferred) under the Company’s annual incentive bonus plan for the two
years immediately preceding the year in which the Executive’s employment
terminates.  If the Executive’s
employment is terminated prior to the payment of the 2003 and 2004 calendar year
bonuses, “Bonus Amount” shall mean 100% of the Executive’s Target Bonus for
such year of termination.

 

d.             Cause.  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 is given by the Executive shall constitute Cause for
purposes of this Agreement.

 

e.             Company.  The
“Company” shall include the Company’s “Successors and Assigns”.

 

f.              Disability. 
“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 participates.

 

g.             Good Reason. 
“Good Reason” shall mean the occurrence of any of the events or
conditions described in subsections (i) through (vi) hereof:

 

 

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(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; or 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; but specifically excluding any action in connection with the
termination of Executive’s 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
relocation, except for travel reasonably required in the performance of the
Executive’s responsibilities;

 

(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;

 

(v)           any material breach by the Company of
any provision of this Agreement which is not cured within thirty (30) days of
written notice to the Company of such breach;

 

(vi)          any purported termination of the
Executive’s employment for Cause by the Company which does not comply with the
terms of this Agreement; or

 

(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 8(i) hereof.

 

h.             Notice of Termination. 
“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.

 

i.              Pro Rata Bonus. 
“Pro Rata Bonus” shall mean an amount equal to 100% of the Executive’s
Target Bonus 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.

 

j.              Successors and Assigns. 
“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.

 

 

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k.             Termination Date.  “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; 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 30th 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.             Term.

 

                Subject to earlier termination
in accordance with Section 5 below, Executive’s employment as President and
Chief Executive Officer of the Company pursuant to the terms of this Agreement
will become effective on January 1, 2003 (the “Employment Date”) and will have
a term of four (4) years through December 31, 2006; and provided, however, the
term of employment shall automatically be extended for one additional year as
of January 1, 2007, and shall be renewed annually thereafter (such entire
continuous period of employment being the “Employment Period”), unless, no
later then ninety (90) days prior to the end of the Employment Period, either
party provides to the other party in writing notice not to extend the
Employment Period.

 

4.             Compensation.

 

a.             Base Salary.  During the Employment Period, the Company will pay the Executive
a base salary (the “Base Salary”) at an initial rate of $750,000 per year in
accordance with the Company’s standard payroll practices.  The Base Salary will be reviewed, at the
times and pursuant to the procedures used in connection with considering base
salary adjustments for the Company’s other senior executives as part of the
normal salary administration program by the Compensation Committee of the Board
(the “Committee”), for the purpose of considering increases in the Executive’s
Base Salary in light of the Committee’s executive compensation philosophy
statement then in effect, the performance by the Executive of his duties under
this Agreement, and base salaries of chief executive officers of companies in
the peer group identified by the Committee in its executive compensation
policy.  Base Salary will not be
decreased during the term of Executive’s employment.

 

b.             Annual Cash Bonus.  In addition to other compensation to be paid
under this Section 4, the Executive will be eligible to receive a target annual
cash bonus for each year during the Employment Period, to be administered by
the Board under the Company’s annual incentive bonus plan.  The Executive’s target annual cash bonus,
which will not be decreased during the term of Executive’s employment, will be
$1,080,000 for 2003 and 144% of Base Salary for all years thereafter (the
“Target Bonus”).  The criteria for
achievement of Executive’s target bonus shall be determined using the same
criteria determined by the Committee for achievement of target bonuses for
other senior executives.

 

c.             Long Term Incentive Plans.  In addition to other compensation to be paid
under this Section 4, the Executive will be eligible to receive an annual long
term incentive award of stock options, restricted stock and/or performance
units under the Company’s long term incentive plans.  The Executive’s target long-term incentive award, which will not
be decreased during the term of Executive’s employment, is $4,500,000 for 2003
and 246% of the Executive’s targeted cash compensation (i.e., Base Salary plus
Target Bonus) for each year 

 

 

4

 

thereafter.  The number of stock options, restricted
shares and performance share units, the allocation between stock options,
restricted shares and performance share units, the vesting thereof and the
“target” criteria shall be determined using the same criteria determined by the
Committee in its other senior executive compensation grants for each such year.

 

d.             Other Benefits.  In addition to other compensation to be paid
under this Section 4, the Executive will be entitled to five (5) weeks of paid
vacation each year, a Company paid non-golf club membership, reimbursement for
first class travel, if he uses this option, on business related trips.  Executive shall also be eligible to
participate in all other benefit and perquisite plans, practices and programs
maintained by Company as are made available to its senior executives, as those
plans, practices and programs may be amended, supplemented, replaced or
terminated from time to time.  Any
provision of any plan, program, practice or policy of the Company (other than
Executive’s Deferred Compensation Agreement), or any award or grant of incentive
compensation to Executive, now existing or as hereafter may be adopted, amended
or modified, to the contrary notwithstanding, upon the Executive’s continuous
employment with the Company through December 31, 2006, he will be deemed to
have attained a sufficient age and years of service for retiree eligibility
under all Company incentive and benefit plans, programs and practices
(including, without limitation, (x) continued exercisability of stock options
at the most senior tier upon a termination of employment, but not less than the
lesser of five years or the remaining term of the grant and (y) upon
Executive’s retirement on or after such date, all outstanding performance
shares shall fully vest and shall be immediately payable at the greater of (1) the
100% target level or (2) the number of shares earned as calculated through the
date of retirement), specifically excluding (i) Executive’s Deferred
Compensation Agreement, and (ii) the General Retirement Benefits Agreement,
dated March 14, 2002, between the Executive and the Company (which agreement
shall remain in force hereafter in accordance with its terms).

 

e.             Reimbursement of Business Expenses.  The Company agrees to reimburse the
Executive for all reasonable out-of-pocket business expenses incurred by the
Executive on behalf of the Company in accordance with the standard policies and
procedures of the Company relating to reimbursement of business expenses.

 

f.              Taxes. 
All compensation payable to the Executive pursuant to this Agreement is
stated in gross amount and will be subject to all applicable withholding and
normal payroll taxes.

 

g.             No Trustee Fees. 
The Executive will not receive any additional
compensation for serving as a Trustee of the Company.

 

5.             Termination.

 

a.             Mutual Agreement.  The Executive’s employment hereunder may be
terminated at any time by mutual agreement on terms to be negotiated at the
time of such termination.

 

b.             Death
or Disability.  The
Executive’s employment will terminate automatically upon the Executive’s
death.  If the Company determines in
good faith that the Disability of the Executive has occurred, subject to the
respective continuing obligations of the Company and the Executive under this
Agreement, the Company has the right to terminate the Executive’s employment
under this Agreement by notice pursuant to Section 5(e) below.

 

 

5

 

c.             By
the Company.  Subject to
the respective continuing obligations of the Company and the Executive under
this Agreement, the Company has the right to terminate the Executive’s
employment under this Agreement for Cause, or without Cause, by notice pursuant
to Section 5(e) below.

 

d.             By the Executive.  Subject to the respective continuing
obligations of the Company and the Executive under this Agreement, the
Executive has the right to terminate his employment under this Agreement for
Good Reason, or without Good Reason, by notice pursuant to Section 5(e) below.

 

e.             Notice of Termination.  Any termination of the
Executive’s employment by the Company or by the Executive (other than
termination upon the Executive’s death, which does not require notice) must be
communicated by written Notice of Termination to the other party hereto given
in accordance with the notice provisions of this Agreement.  For purposes of this Agreement, a “Notice of
Termination” means a notice which (i) indicates the specific termination
provision of this Agreement relied upon, (ii) sets 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 and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies
the Termination Date (which date will not be less than thirty (30) days after
the giving of such notice).  The failure
by Company or the Executive to set forth in the Notice of Termination any fact
or circumstance that contributes to a showing of the basis for termination will
not waive any right of such party hereunder or preclude such party from
asserting such fact or circumstance in enforcing his or its rights hereunder.

 

6.             Compensation
Upon Termination.

 

                The Executive shall
be entitled to the following compensation and benefits upon his termination of
employment with the Company:

 

a.             If the Executive’s employment with
the Company shall be terminated: (i) by the Company for Cause or (ii) by the
Executive other than for either Good Reason or Disability, then the Company
shall pay to the Executive the Accrued Compensation and, if such termination is
other than by the Company for Cause, the Pro Rata Bonus.  If the Executive’s employment with the
Company shall be terminated within thirty-six (36) months following a Change In
Control, the Executive shall be entitled to the compensation and benefits
provided him under his Change In Control Agreement with the Company dated March
14, 2002 as hereafter may be amended by the parties (“Change In Control
Agreement”).

 

b.             If the Executive’s
employment with the Company shall be terminated for any reason other than as
specified in Section 3(a), the Executive shall be entitled to the following
compensation and benefits:

 

(i)            the Company shall
pay the Executive all Accrued Compensation and a Pro-Rata Bonus;

 

(ii)           the Company shall pay the Executive
as severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date, in a single payment an amount in cash equal to two and
one half (2.5) times the sum of (A) the 

 

 

6

 

Base
Amount and (B) the Bonus Amount (in each case determined without regard for any
reduction thereof constituting “Good Reason”);

 

(iii)          for thirty (30) months following the
Termination Date, (the “Continuation Period”), the Company shall at its expense
continue on behalf of the Executive and his dependents and beneficiaries the
health insurance benefits provided to similarly situated executives who
continue in the employ of the Company during the Continuation Period.  The Company’s obligation hereunder with respect
to the foregoing benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer’s benefit plans, in
which case the Company may reduce the coverage of any benefits it is required
to provide the Executive hereunder as long as the aggregate coverages and
benefits of the combined benefits plans is no less favorable to the Executive
than the coverages and benefits required to be provided hereunder.  Any COBRA benefit rights (Federal or state)
of Executive, his dependents and beneficiaries shall commence immediately
following the Continuation Period.  This
subsection (iii) shall not be interpreted so as to limit any benefits to which
the Executive, his dependents or beneficiaries may be otherwise entitled under
any of the Company’s employee benefit plans, programs or practices or
applicable law following the Executive’s termination of employment;

 

(iv)          all theretofore
unvested stock options, restricted stock and other awards issued to the
Executive pursuant to the Company’s Share Option and Share Award Plan and/or
Share Incentive Plan, and any other incentive or successor plan in which the
Executive participates, shall immediately vest, with any performance shares
fully vesting and immediately payable at the greater of (x) the 100% target
level or (y) the number of shares earned as calculated through the date of
termination; and the Executive shall have the balance of the ten year option
period to exercise any vested options held by him at the time of his termination;
provided, in the event of Executive’s death, Executive’s stock options shall be
exercisable for the shorter period of (1) three (3) years or (2) the unexpired
stated exercise period under the stock option grant.

 

c.             The amounts provided for in Sections 6(a) and 6(b)(i)
and (ii) shall be paid in a single lump sum cash payment in immediately
available funds within ten (10) business days of the Termination Date.

 

d.             The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 6(b)(iii).

 

e.             The Executive’s entitlement to any
other compensation or benefits or any indemnification shall be determined in
accordance with the Company’s employee benefit plans and other applicable
programs, policies and practices, as provided at Section 4(d) hereof, or any
indemnification agreement in effect on the Effective Date (or as such
indemnification agreement may be amended hereafter, provided that such
amendment is more favorable to Executive). 
Without limiting the foregoing provisions of this Section 6(e), if
Executive’s employment is terminated by the Company or Executive due to
Disability or Executive’s employment terminates due to his death, then
Executive shall not be entitled to any amounts set forth in
Section 6(b)(ii) or, except as required by law, in Section 6(b)(iii).

 

 

7

 

7.             Non-Competition.

 

a.             Non-Compete; Non-solicitation.  Except for a termination of employment in
which compensation and benefits are paid under the Change In Control Agreement,
during the Employment Period and for a period of two and one-half (2.5) years
after termination of the Executive’s employment hereunder, (i) the Executive
will not become a consultant to, or an officer, employee, agent, advisor,
principal, partner, director or substantial stockholder of any company or
entity engaged in the multi-family apartment rental or development business and
(ii) the Executive will not, directly or indirectly, for the benefit of any
company or entity solicit the employment or services of, hire, or assist in the
hiring of any person eligible for the Company’s incentive bonus plan.  For the purpose of this Section 7(a)
Executive shall not be a “substantial stockholder” of any publicly traded company
or entity in which he beneficially owns not more than 5% of the outstanding
common stock (on a fully diluted basis).

 

b.             Acknowledgment.  The Executive has carefully read and
considered the provisions of this Section 7 and agrees that the restrictions
set forth in this Section 7 (including the period of restriction, scope of
activity to be restrained and the geographical scope) are fair and reasonable
and are reasonably required for the protection of the interests of the Company,
its officers, directors, employees, creditors and stockholders.  The Executive understands that the
restrictions contained in this section may limit his ability to engage in a
business similar to that of the Company’s, but acknowledges that he will
receive sufficiently high compensation and other benefits hereunder to justify
such restrictions.

 

c.             No Adequate Remedy.  The Executive understands that if he fails
to fulfill his obligations under this Section 7, the Company will suffer
irreparable injury, and the damages to the Company would be very difficult to
determine.  Therefore, in addition to
any other rights or remedies, the Executive agrees that the Company will be
entitled to a temporary, preliminary, and permanent injunction enjoining or
restraining the Executive from any such violation or threatened violation,
without the necessity of proving the inadequacy of monetary damages or the
posting of any bond or security.  The
Executive hereby consents to specific enforcement of Section 7 of this
Agreement by the Company through an injunction or restraining order issued by any
state or federal court of competent jurisdiction.  The Executive further acknowledges and agrees that due to the
uniqueness of his services and confidential nature of the confidential
information he possesses or will possess during the Employment Period, the
covenants set forth herein are reasonable and necessary for the protection of
the business and the goodwill of the Company.

 

8.             Miscellaneous.

 

a.             Reimbursement of Professional Fees.  Company will pay on the Executive’s behalf
all bills rendered to the Executive by the Executive’s attorneys, accountants
and other advisors in connection with the negotiation and execution of this
Agreement; provided, however, that the amount of professional fees payable
hereunder will not exceed $15,000.

 

b.             No Guaranteed
Employment.  The
Executive and the Company acknowledge that the employment of the Executive by
the Company is “at will” and may be terminated by either the Executive or the
Company at any time, subject, however to the rights of 

 

 

8

 

the Executive provided
herein or in any other agreement entered into by the Executive and the Company
in the event of any such termination.

 

c.             Full Satisfaction;
Waiver and Release.  As a
condition to receiving the payments and benefits hereunder, the Executive shall
execute a document in customary form, releasing and waiving any and all claims,
causes of actions and the like against the Company and its successors,
shareholders, officers, trustees, agents and employees, regarding all matters
relating to the Executive’s service as an employee of the Company or any
affiliates and the termination of such relationship.  Such claims include, without limitation, any claims
arising under Age Discrimination in Employment Act of 1967, as amended (the
“ADEA”); Title VII of the Civil Rights Act of 1964, as amended; the Civil
Rights Act of 1991, as amended; the Equal Pay Act of 1962; the American
Disabilities Act of 1990; the Family Medical Leave Act, as amended; the
Employee Retirement Income Security Act of 1974, as amended; or any other
federal, state or local statute or ordinance, but exclude any claims that
arise out of an asserted breach of the terms of this Agreement and any benefits
payable to Executive under the Company’s benefit plans, practices and programs
in which he participates.

 

d.             Waiver   No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provisions of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.  No
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.

 

e.             Governing Law.  This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Illinois without giving effect to the conflict of laws
principles thereof.  Any action brought
by any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in Cook County in the State of Illinois.

 

f.              Severability. 
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof.

 

g.             Entire Agreement.  This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof, specifically excluding the
Deferred Compensation Agreement between Executive and the Company dated of even
date herewith, the Change in Control Agreement, and the provisions of the March
14, 2002 Employment Agreement dealing with Executive’s 2002 compensation, all
of which shall remain in full force and effect.

 

h.             Notices.  All notices and other communications under
this Agreement must be in writing and must either be delivered personally or
sent by first class mail, certified or registered with return receipt
requested, postage prepaid; if to the Company, to the attention of the General
Counsel at 2 North Riverside Plaza, Suite 400, Chicago, IL 60606; and if to the
Executive, at his address most recently on file with the Company, or such other
address as either party may specify by like notice.

 

 

9

 

i.              Successors;
Binding Agreement.  This
Agreement shall be binding upon and shall inure to the benefit of the Company,
its Successors and Assigns, and 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.  Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representative, except by will or by the laws of descent
and distribution or as otherwise provided herein.  This Agreement shall inure to the benefit of and be enforceable
by the Executive’s legal personal representative.

 

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

 

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EQUITY RESIDENTIAL, a
  Maryland real estate investment trust

  
	
   

  	
  

  

  

  	
   

  	 

	
   

  	
  By:

  	
  /s/Bruce C. Strohm

  	 

	
   

  	
   

  	
  Bruce C. Strohm,
  Executive Vice President 

  and General Counsel

  	 

	
   

  	
  

  

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
  

  

  

  
	
   

  	
  /s/Bruce W. Duncan

  
	
   

  	
  Bruce W. Duncan

  

 

 

 

10Exhibit 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).

 

 

 

                                                                (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;

 

 

2

 

                                                                                                                (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.

 

 

3

 

                (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.

 

 

4

 

                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

  

 

 

5

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