EXHIBIT 10.1
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (the "AGREEMENT") is made
and entered into this 3rd day of February, 2006, (the "Effective Date") between
WINDROSE MEDICAL PROPERTIES TRUST, a Maryland business trust (the "REIT"),
WINDROSE MEDICAL PROPERTIES L.P., a Virginia limited partnership (the "Company")
and XXXXXX X. XXXXXX (the "Executive"). Certain capitalized terms used in this
Agreement are defined in Section 6.
RECITALS
The REIT, which is the sole General Partner of the Company,
acknowledges that Executive has made and is expected to make significant
contributions to the growth and success of the REIT and the Company. The Company
acknowledges that Executive has made and is expected to make significant
contributions to the growth and success of the Company. The REIT and the Company
also acknowledge that there exists the possibility of a Change in Control of the
REIT. The REIT and the Company recognize that the possibility of a Change in
Control may contribute to uncertainty on the part of senior management and may
result in the departure or distraction of senior management from their operating
responsibilities.
Outstanding management of the Company and the REIT is always essential
to advancing the best interests of the Company and its partners and the REIT and
its shareholders. In the event of a threat or occurrence of a bid to acquire or
change control of the Company or the REIT or to effect a business combination,
it is particularly important that the business of the REIT and the Company be
continued with a minimum of disruption. The REIT and the Company believe that
the objective of securing and retaining outstanding management will be achieved
if the Company's and the REIT's key management employees are given assurances of
employment security so that they will not be distracted by personal
uncertainties and risks created by such circumstances.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
herein and the compensation the REIT and the Company agree, jointly and
severally, herein to pay to Executive, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
REIT, the Company and Executive agree as follows:
1. TERM OF AGREEMENT. The Term of this Agreement begins on the Effective Date
and ends on August 1, 2008. Notwithstanding the preceding sentence, the Term of
this Agreement shall be extended for an additional twelve month period, as of
each anniversary of August 1, 2005, unless the REIT or the Company gives
Executive written notice, at least ninety days prior to the applicable
anniversary of the August 1, 2005, that the Term of this Agreement will not be
extended.
2. RIGHT TO RECEIVE TERMINATION BENEFITS. Executive shall be entitled to receive
the Termination Benefits described in Section 4 if the requirements of any of
the following subsections (a), (b) or (c) are satisfied:
a. Executive shall be entitled to receive the Termination Benefits if (i) a
Control Change Date occurs during the Term of this Agreement and (ii)
within twenty-four
months after the Control Change Date either (x) the REIT terminates
Executive's employment with the REIT without Cause or the Company
terminates Executive's employment with the Company without Cause or (y)
Executive resigns from the employment of the REIT and the Company and
Executive has Good Reason to resign from the REIT or Good Reason to resign
from the Company.
b. Executive shall be entitled to receive the Termination Benefits if (i)
during the Term of this Agreement the REIT terminates Executive's
employment with the REIT without Cause or the Company terminates
Executive's employment with the Company without Cause and (ii) a Control
Change Date occurs within nine months after Executive's termination by
either the REIT or the Company.
c. Executive shall be entitled to receive the Termination Benefits if (i)
during the Term of this Agreement the REIT terminates Executive's
employment with the REIT without Cause or the Company terminates
Executive's employment with the Company without Cause and (ii) on the date
of Executive's termination the REIT or the Company is negotiating with, or
is in discussions with, a Person regarding a transaction that, if
completed, would constitute a Change in Control.
No amounts will be payable under this Agreement unless Executive's employment
with the REIT, the Company or both is terminated as described in one of the
foregoing subsections.
3. TERMINATION BENEFITS. Upon a termination of Executive's employment in
accordance with Section 2, Executive shall be entitled to receive the following
Termination Benefits:
a. Payment of any accrued but unpaid salary from the REIT or the Company
through the date that Executive's employment terminates;
b. Payment of any bonus that has been earned from the REIT or the Company
but which remains unpaid as of Executive's termination of employment;
c. Reimbursement for any expenses that Executive incurred on behalf of the
REIT or the Company prior to termination of employment to the extent that
such expenses are reimbursable under the REIT's or the Company's standard
reimbursement policies; and
d. A payment equal to two times Executive's Current Cash Compensation. The
term "Current Cash Compensation" is the sum of Executive's annual base
salaries from the REIT and the Company as in effect on the date Executive's
employment terminates and the average of the annual bonuses paid to
Executive for the REIT's and the Company's prior two fiscal years of the
REIT and the Company preceding the termination of his employment; provided
that any extraordinary bonuses shall not be considered in determining the
Current Cash Compensation.
The Termination Benefits shall be payable in a single cash sum within fifteen
days of Executive's termination of employment in accordance with Section 3. The
payment of the Termination Benefits shall be reduced by amounts required to be
withheld for applicable income and employment taxes.
In addition to the Termination Benefits described in this Section 4, Executive
also shall be entitled to receive any benefits or payments that Executive is
entitled to receive under any employee benefit plans or other arrangements or
agreements, including by way of example, stock option agreements, that cover
Executive and any such benefits will become vested as a result of a termination
in accordance with Section 2.
4. EXCISE TAX INDEMNIFICATION. Executive shall be entitled to a payment under
this Agreement if any payment or benefit provided under this Agreement or any
other plan or agreement with the Company or the REIT constitutes a "parachute
payment" (as defined in Section 280G(b)(2)(A) of the Internal Revenue Code of
1986 (the "Code"), but without regard to Code Section 280G(b)(2)(A)(ii)) and
Executive incurs a liability under Code Section 4999. The amount payable to
Executive under this Section 5 shall be the amount required to indemnify
Executive and hold him harmless from the application of Code Sections 280G and
4999 with respect to benefits, payments, accelerated exercisability and vesting
and other rights under this Agreement or otherwise, and any income, employment,
hospitalization, excise and other taxes attributable to the indemnification
payment. The benefit payable under this Section 5 shall be calculated and paid
not later than the date (or extended filing date) on which the tax return
reflecting liability for the Code Section 4999 excise tax is required to be
filed with the Internal Revenue Service. To the extent that any other plan or
agreement requires that Executive be indemnified and held harmless from the
application of Code Sections 280G and 4999, any such indemnification and the
amount required to be paid to Executive under this Section 5 shall be
coordinated so that such indemnification is paid only once and the REIT's and
the Company's obligations under this Section 5 shall be satisfied to the extent
of any such other payment (and vice versa). Executive shall be entitled to the
benefit described in Section 5 without regard to whether he becomes entitled to
receive the Termination Benefits described in Section 4.
5. CERTAIN DEFINITIONS. As used in this Agreement, certain terms have the
definitions set forth below.
a. Acquiring Person means that a Person, considered alone or together with
all Control Affiliates and Associates of that Person, is or becomes
directly or indirectly the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of securities representing at least twenty percent (20%)
of the REIT's then outstanding securities entitled to vote generally in the
election of the Board.
b. Associate, with respect to any Person, is defined in Rule 12b-2 under
the Exchange Act; provided, however, that an Associate shall not include
the Company, the REIT or a majority-owned affiliate of the Company or the
REIT.
c. Board means the Board of Trustees of the REIT.
d. Cause means (i) willful, deliberate and continued failure by Executive
(other than for reason of mental or physical illness) to perform his duties
as established by the Board or the General Partner of the Company, or fraud
or dishonesty in connection with such duties, in either case, if such
conduct has a materially detrimental effect on the
business operations of the REIT or the Company; (ii) a material breach by
Executive of his fiduciary duties of loyalty or care to the REIT or the
Company; (iii) conviction of any crime (or upon entering a plea of guilty
or nolo contendere to a charge of any crime) constituting a felony; (iv)
misappropriation of the REIT or the Company's funds or property; or (v)
willful, flagrant, deliberate and repeated infractions of material
published policies and regulations of the Company or the REIT of which
Executive has actual knowledge.
e. Change in Control means (i) a Person is or becomes an Acquiring Person;
(ii) holders of the securities of the REIT entitled to vote thereon approve
any agreement with a Person (or, if such approval is not required by
applicable law and is not solicited by the REIT, the closing of such an
agreement) that involves the transfer of more than fifty percent (50%) of
the REIT's and its affiliates' total assets on a consolidated basis, as
reported in the REIT's consolidated financial statements filed with the
Securities and Exchange Commission; (iii) holders of the securities of the
REIT entitled to vote thereon approve a transaction (or, if such approval
is not required by applicable law and is not solicited by the REIT, the
closing of such a transaction) pursuant to which the REIT will undergo a
merger, consolidation, or statutory share exchange with a company,
regardless of whether the REIT is intended to be the surviving or resulting
entity after the merger, consolidation, or statutory share exchange, other
than a transaction that results in the voting securities of the REIT
carrying the right to vote in elections of persons to the Board outstanding
immediately prior to the closing of the transaction continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
REIT's voting securities carrying the right to vote in elections of persons
to the Board, or such securities of such surviving entity, outstanding
immediately after the closing of such transaction; (iv) the Continuing
Directors cease for any reason to constitute a majority of the Board; (v)
holders of the securities of the REIT entitled to vote thereon approve a
plan of complete liquidation of the REIT agreement for the sale or
liquidation by the REIT or its affiliates of substantially all of the
assets of the REIT and its affiliates (or, if such approval is not required
by applicable law and is not solicited by the REIT, the commencement of
actions constituting such a plan or the closing of such an agreement); or
(vi) the Board adopts a resolution to the effect that, in, its judgment, as
a consequence of any one or more transactions or events or series of
transactions or events, a Change in Control of the Company has effectively
occurred.
f. Continuing Director means any member of the Board, while a member of the
Board and (i) who was a member of the Board on August 1, 2005 or (ii) whose
nomination for or election to the Board was recommended or approved by a
majority of the Continuing Directors.
g. Control Affiliate, with respect to any Person, means an affiliate as
defined in Rule 12b-2 under the Exchange Act.
h. Control Change Date means the date on which a Change in Control occurs.
If a Change in Control occurs on account of a series of transactions or
events, the "Control Change Date" is the date of the last of such
transactions or events in the series.
i. Exchange Act means the Securities Exchange Act of 1934, as amended.
j. Good Reason means the Executive's resignation from the employment of the
REIT or the Company and its affiliates on account of one or more of the
following events:
i. the failure by the Board to reelect Executive to Executive's
current position with the REIT;
ii. a material diminution by the Board of the duties, functions and
responsibilities of Executive as the Executive Vice President of
the REIT without his consent or a material diminution of
Executive's duties, functions and responsibilities with respect
to the Company without Executive's consent.
iii. the failure of the REIT or the Company to permit Executive to
exercise such responsibilities as are consistent with Executive's
positions and are of such a nature as are usually associated with
such offices of a corporation engaged in substantially the same
business as the REIT or the Company;
iv. the REIT's or the Company's causing the Executive to relocate his
employment more than fifty (50) miles from Indianapolis, Indiana,
without the consent of Executive;
v. the Company's or the REIT's failure to make a payment when due to
Executive;
vi. the Company's or the REIT's reduction of Executive's (A) annual
base salary, as such may be increased from time to time after the
date of this Agreement; (B) bonus, such that the aggregate
threshold, target, or maximum bonus projected for Executive for a
fiscal year is lower than the aggregate threshold, target, or
maximum bonus, respectively, projected for Executive for the
immediately preceding fiscal year; or (C) employee welfare,
fringe or pension benefits, other than reductions determined to
be necessary to comply with the Employee Retirement Income
Security Act of 1974, as amended, or to retain the tax-qualified
or taxfavored status of the benefit under the Code, which
determination shall be made by the Board in good faith;
vii. a breach of Section 10 of this Agreement;
viii. the Company or the Board directs Executive to engage in unlawful
or unethical conduct or conduct contrary to the Company's or the
REIT's good business practices.
k. Person means any human being, firm, corporation, partnership, or other
entity. "Person" also includes any human being, firm, corporation,
partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2)
of the Exchange Act. The term "Person" does not include the Company, or any
Related Entity, and the term Person does not include any employee-benefit
plan maintained by the Company or any Related Entity, and any person or
entity organized, appointed, or established by the Company or any Related
Entity for or pursuant to the terms of any such employee-benefit plan,
unless the Board determines that such an employee-benefit plan or such
person or entity is a "Person".
l. Related Entity means any entity that is part of a controlled group of
corporations or is under common control with the REIT within the meaning of
section 1563(a), 414(b) or 414(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
6. ATTORNEYS' FEES. Executive shall be entitled to reimbursement for any
attorneys' fees and any other reasonable expenses that Executive incurs in
enforcing or protecting his rights under this Agreement. Such reimbursement
shall be made within thirty days following final resolution of the dispute or
occurrence giving rise to such fees and expenses, regardless of whether
Executive is deemed the prevailing party in the resolution of the dispute or
occurrence.
7. NO ASSIGNMENT. Except as required by applicable law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process or assignment by operation of law
and any attempt to effect any such action shall be null, void and no effect.
8. GOVERNING Law. This Agreement shall be governed by the laws of the State of
Maryland other than. its choice of law provisions to the extent that they would
require the application of the laws of a State other than the State of Maryland.
9. SUCCESSORS. The REIT and the Company shall require any successor to all or
substantially all of the REIT's or the Company's respective business or assets
(whether direct or indirect, by purchase, merger, consolidation or otherwise),
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the REIT and the Company would be required to perform it
if no such succession had taken place. Failure of the REIT or the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Executive to
resign from the employ of the Company and the REIT and to receive the
Termination Benefits and other benefits under this Agreement in the same amount
and on the same terms as Executive would be entitled to hereunder if he
terminated his employment for Good Reason following a Change in Control.
References in this Agreement to the "Company" include the Company as herein
before defined and any successor to the Company's business, assets or both which
assumes and agrees
to perform this Agreement by operation of law or otherwise. References in this
Agreement to the "REIT" include the REIT as herein before defined and any
successor to the REIT's business, assets or both which assumes and agrees to
perform this Agreement by operation of law or otherwise.
10. BINDING AGREEMENT. This Agreement shall inure to the benefit of and be
enforceable by Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount remains payable to him hereunder, all such
amounts shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there is none, to
Executive's estate.
11. NO EMPLOYMENT RIGHTS. Nothing in this Agreement confers on Executive any
right to continuance of employment by the Company, the REIT or any affiliate.
Nothing in this Agreement interferes with the right of the Company, the REIT or
an affiliate to terminate Executive's employment at any time for any reason
whatsoever, with or without Cause, subject to the requirements of this
Agreement. Nothing in this Agreement restricts the right of Executive to
terminate his employment with the Company, the REIT and affiliates at any time-
for any reason whatsoever, with or without Good Reason.
12. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together constitute
one and the same instrument.
13. ENTIRE AGREEMENT. This Agreement expresses the whole and entire agreement
between the parties with reference to the payment of the Termination Benefits
and supersedes and replaces any prior agreement, understanding or arrangement
(whether oral or written) by or between the REIT, the Company and Executive with
respect to the payment of the Termination Benefits.
14. NOTICES. All notices, requests and other communications to any party under
this Agreement shall be in writing and shall be given to such party at its
address set forth below or such other address as such party may hereafter
specify for the purpose by notice to the other party:
If to Executive: 112880 Xxxxxxxxxx Xxxxxxxx
Xxx 0X
Xxxxxx, Xxxxxxx 00000
If to the REIT: 0000 Xxxxxxxx Xxxxx Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
If to the Company: 0000 Xxxxxxxx Xxxxx Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Each notice, request or other communication shall be effective if (i) given by
mail, seventy-two hours after such communication is deposited in the mails with
first class postage prepaid,
address as aforesaid or (ii) if given by any other means, when delivered at the
address specified in this Section 15.
15. MODIFICATION OF AGREEMENT. No waiver or modification of this Agreement shall
be valid unless in writing and duly executed by the party to be charged
therewith. No evidence of any waiver or modification shall be offered or
received in evidence at any proceeding, arbitration or litigation between the
parties unless such waiver or modification is in writing, duly and executed. The
parties agree that this Section 16 may not be waived except as herein set forth.
16. JOINT AND SEVERAL LIABILITY. The REIT and the Company are jointly and
severally liable to make the payments and provide the benefits provided under
this Agreement including, by way of illustration, the payment of the Termination
Benefits described in Section 4 and the payment of the excise tax
indemnification described in Section 5.
17. RECITALS. The Recitals to this Agreement are incorporated herein and shall
constitute an integral part of this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
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WINDROSE MEDICAL PROPERTIES TRUST
By: /s/ Xxxx Klipsch
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Xxxx Klipsch
Chief Executive Officer
WINDROSE MEDICAL PROPERTIES, L.P.
BY: WINDROSE MEDICAL PROPERTIES
TRUST, ITS GENERAL PARTNER
By: /s/ Xxxxxxxxx X. Xxxxxx
------------------------------------
President
