CONSULTING AGREEMENT
Exhibit 10.2
THIS CONSULTING AGREEMENT (the
“Agreement”), dated September 12, 2006,
shall become effective upon the consummation of the merger
contemplated by the Agreement and Plan of Merger referenced
below (the “Effective Date”), and is entered
into by and between HEALTH CARE REIT, INC., a Delaware
corporation (the “Corporation”), and
XXXXXXXXX X. XXXXXX (the “Consultant”).
WHEREAS, the Consultant serves as an executive officer of
Windrose Medical Properties Trust (the
“Trust”), which is the sole general partner of
Windrose Medical Properties L.P. (the “LP”);
WHEREAS, the Corporation and certain of its subsidiaries,
simultaneously with the execution of this Agreement, are
entering into an Agreement and Plan of Merger with the Trust and
the LP (“Merger Agreement”) providing for the
merger of the Company into a wholly owned subsidiary of the
Corporation and the merger of a wholly owned subsidiary of the
Corporation into the LP (collectively, the
“Mergers”);
WHEREAS, effective as of the Effective Date, the
Corporation wishes to assure itself of the services of the
Consultant for the period provided in this Agreement, and has
required that the effectiveness and closing of the Mergers are
conditioned upon this Agreement being in effect at the Effective
Date; and
WHEREAS, the Consultant is willing to provide services to
the Corporation for such period upon the terms and conditions
set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties, intending to be legally bound,
agree as follows:
| 1. | CONSULTING SERVICES. |
Effective as of the Effective Date, the Corporation retains the
Consultant as an Executive Vice President of the Corporation and
President of the Medical Properties Division (the
“Division”) of the Corporation, and the
Consultant agrees to perform such services as the parties
mutually agree that are customarily performed by such officer in
a publicly traded corporation, upon the terms and conditions
herein contained. In such capacity, the Consultant shall report
to the Chairman and Chief Executive Officer of the Corporation
and to the President of the Corporation.
Throughout the Term of this Agreement, the Consultant shall
devote his best efforts to the business and affairs of the
Corporation and shall devote such time to the performance of the
duties described herein as the parties mutually agree. The
Corporation acknowledges that the Consultant has an ownership
interest in, and management responsibilities with, Klipsch Group
Inc., and may have other positions, duties and responsibilities
involving the Klipsch Group, Inc. that are permissible in all
respects hereunder.
| 2. | TERM OF AGREEMENT. |
The term of this Agreement (“Term”) shall be
for two years beginning on the Effective Date and expiring on
the day before the second anniversary of the Effective Date.
Notwithstanding the foregoing, the Corporation or the Consultant
shall be entitled to terminate this Agreement before the Term
expires, as described in Section 5, subject to a continuing
obligation to make any payments required under Section 5
below.
| 3. | COMPENSATION. |
(a) Retention Bonus. The
Consultant shall receive a retention bonus on the later of
(x) the Effective Date or (y) January 2, 2007 of
(i) $529,500 plus (ii) shares of the
Corporation’s common stock having a value of $500,000
(“Initial Stock Award”) based on the closing
price of the Corporation’s common stock as of the Effective
Date. All such shares shall be fully vested on the Effective
Date and shall be fully registered under state and federal
securities laws and approved for listing on the New York Stock
Exchange so as to be freely tradable by the Consultant at the
time of receipt; provided, however, that (x) until the
first anniversary of the payment of the retention bonus, no
portion of the stock granted as part of the Initial Stock Award
may be sold and (y) until the second anniversary of the
payment of the retention bonus, no more than one-half of the
stock granted as part of the Initial Stock Award may be sold.
(b) Base Fee. The Consultant shall
receive a base consulting fee (“Base Fee”)
during the Term as follows, payable in equal semi-monthly
installments in a manner consistent with the Corporation’s
customary practice for payroll payments:
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Year
|
Annual Base Fee | |||
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Year 1
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$ | 300,000 | ||
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Year 2
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$ | 300,000 | ||
(c) Performance Bonus. The
Consultant shall also be eligible to receive a bonus
(“Performance Bonus”) from the Corporation each
fiscal year during the Term. The amount of the Performance Bonus
shall be determined by the Compensation Committee of the
Corporation’s Board, using such performance measures as the
Compensation Committee deems to be appropriate; provided,
however, that the target amount of such Performance Bonus for
2007 and 2008 shall be between 30% and 75% of the
Consultant’s Base Fee.
(d) Cash Payment. On the later of
(x) the Effective Date and (y) January 2, 2007,
the Corporation will pay to the Consultant, in cash, the amount
of $1,200,000, which amount shall be in lieu of the cash
payments payable to the Consultant upon a change of control
under (i) the Change of Control Severance Agreement dated
August 1, 2002 between the Consultant and the Trust and the
LP or (ii) the Employment Agreement dated February 21,
2005 between the Consultant and the Trust and the LP (other than
payment of (A) any accrued but unpaid salary through the
Effective Date, (B) any bonus that has been earned but
which remains unpaid as of the Effective Date and
(C) reimbursement of any expenses that the Consultant
incurred on behalf of the Trust or the LP, all of which shall
continue to be payable to the Consultant by the Trust and the
LP).
(e) 2006 Bonus. Notwithstanding
anything herein to the contrary, and in addition to any other
payments described herein, if not paid by the Trust or the LP
prior to the Effective Date, the Corporation shall pay to the
Consultant, no later than the later of the Effective date or
March 15, 2007, the cash amount of $150,000, representing
the full amount of the Consultant’s bonus for 2006 from the
Trust and the LP in accordance with the bonus criteria for the
Consultant in place for the 2006 fiscal year.
(f) Stock Options and Other Long-Term
Incentives. During the Term, any stock
options, restricted stock or other awards under the
Corporation’s 2005 Long-Term Incentive Plan shall be at the
discretion of the Compensation Committee of the
Corporation’s Board; provided, however, that the target
Long-Term Incentive Range shall be between 35% and 75% of the
Consultant’s Base Fee and Performance Bonus. Any awards
given during the Term will vest over two years.
| 4. | BUSINESS EXPENSES. |
The Corporation shall reimburse the Consultant for all
reasonable expenses he incurs in promoting the
Corporation’s business, including expenses for travel
(including first class air travel) and similar items, upon
presentation by the Consultant from time to time of an itemized
account of such expenditures.
| 5. | PAYMENTS UPON TERMINATION. |
(a) Termination. If the
Consultant’s services are terminated by the Corporation or
the Consultant terminates providing services to the Corporation
before the end of the Term, for any reason other than death or
disability, the Consultant shall be entitled to receive his Base
Fee accrued through the date of termination, plus any
Performance Bonuses earned but unpaid with respect to fiscal
years or other periods (including partial fiscal years)
preceding the termination date.
The Corporation shall also be obligated to make a series of
monthly severance payments to the Consultant for each month
during the remainder of the Term. Each monthly payment shall be
equal to the Consultant’s monthly
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Base Fee during the balance of the Term and shall be paid at
such time as the monthly Base Fee would otherwise be payable.
In addition:
(i) if the termination is not a voluntary termination by
Consultant or a termination for Cause (hereinafter defined), at
the time of termination, any stock awards, any stock options,
restricted stock or other awards granted to the Consultant
pursuant to Section 3(f) shall become fully vested and, in
the case of stock options, exercisable in full; and
(ii) the Corporation shall make the eight consecutive
quarterly payments to the Consultant described in
Section 7, with the first such payment commencing on the
date of termination.
As used herein, “Cause” means (i) action by the
Consultant involving willful disloyalty to the Corporation, such
as embezzlement, fraud, misappropriation of corporate assets or
a breach of the covenants set forth in Sections 6 and 7
below; or (ii) the Consultant being convicted of a felony;
or (iii) the Consultant being convicted of any lesser crime
or offense committed in connection with the performance of his
duties hereunder or involving moral turpitude; or (iv) the
intentional and willful failure by the Consultant to
substantially perform his duties hereunder as directed by the
Corporation’s Chairman, Vice Chairman, Chief Executive
Officer or President (other than any such failure resulting from
the Consultant’s incapacity due to physical or mental
disability); or (v) the Consultant’s failure to obtain
minimum performance goals to be determined by the Compensation
Committee of the Corporation’s Board, in its discretion.
Notwithstanding the foregoing, willful disloyalty shall not be
deemed to include the refusal of the Consultant to engage in any
unlawful or unethical conduct or conduct in violation of the
Corporation’s policies.
(b) Disability. The Corporation
shall be entitled to terminate this Agreement, if the Board
determines that the Consultant has been unable to attend to his
duties for at least 90 days because of a medically
diagnosable physical or mental condition, and has received a
written opinion from a physician acceptable to the Board that
such condition prevents the Consultant from resuming full
performance of his duties and is likely to continue for an
indefinite period. Upon such termination, the Consultant shall
be entitled to receive his Base Fee accrued through the date of
termination, plus any Performance Bonuses earned but unpaid with
respect to fiscal years or other periods (including partial
fiscal years) preceding the termination date. In addition, the
Corporation shall make a series of monthly disability payments
to the Consultant, each equal to his monthly Base Fee, during
the balance of the Term (provided that in no event will the
Consultant fail to receive, in each month during the Term, an
amount equal to the monthly Base Fee). Payment of such
disability benefit shall commence with the month following the
date of the termination by reason of permanent disability and
shall continue each month for the remainder of the Term, but
shall terminate at an earlier date if the Consultant returns to
active service as a consultant to the Corporation. Any amounts
payable under this Section 5(b) shall be reduced by any
amounts paid to the Consultant under any long-term disability
plan or other disability program or disability insurance
policies maintained or provided by the Corporation.
(c) Death. If the Consultant dies
during the Term, the Corporation shall pay to the
Consultant’s estate a lump sum payment equal to the sum of
the Consultant’s Base Fee accrued through the date of
death, plus any Performance Bonus earned but unpaid with respect
to fiscal years or other periods (including partial fiscal
years) preceding the date of death. In addition, the Corporation
shall pay to the Consultant’s surviving spouse (or such
other beneficiary as the Consultant may designate in writing) a
lump sum payment equal to the present value of (i) the
monthly Base Fee that would have been paid during the remainder
of the Term plus (ii) the sum of the payments described in
the third paragraph of Section 7 if the Consultant’s
services terminate for a reason other than death. Such present
value shall be calculated using a discount rate equal to the
interest rate on
90-day
Treasury bills, as reported in The Wall Street Journal
(or similar publication) for the date of death. In addition,
stock options, restricted stock or other awards held by the
Consultant under the Corporation’s stock plans shall become
fully vested, and, in the case of stock options, exercisable in
full, in accordance with the terms of the applicable plan or
plans.
(d) Section 409A. This
Section 5(d) applies if any benefit or payment under this
Agreement that is payable on account of termination of the
Consultant’s employment is subject to Section 409A of
the Internal Revenue Code of 1986, as amended (the
“Code”) and the Consultant is a “specified
employee” (as defined in Section 409A of the Code). In
that event, any such benefit or payment that is payable on
account of the Consultant’s termination of
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service shall begin to be paid on the first day of the seventh
month beginning after the Consultant’s termination of
employment. The first payment of such benefit or payment shall
include the amount that would have been paid following the
Consultant’s termination of employment and on or before
such first payment but for the requirement of the preceding
sentence.
| 6. | PROTECTION OF CONFIDENTIAL INFORMATION. |
The Consultant shall keep all confidential and proprietary
information of the Corporation or relating to its business
confidential, and he will not (except with the
Corporation’s prior written consent), while providing
services to the Corporation or thereafter, disclose any such
confidential information to any person, firm, corporation,
association or other entity, other than in furtherance of his
duties hereunder, and then only to those with a “need to
know.” The Consultant shall not make use of any such
confidential information for his own purposes or for the benefit
of any person, firm, corporation, association or other entity
(except the Corporation) under any circumstances during or after
the Term. The foregoing shall not apply to any information which
is already in the public domain, or is generally disclosed by
the Corporation or is otherwise in the public domain at the time
of disclosure.
The Consultant recognizes that because his services to the
Corporation may bring him into contact with confidential and
proprietary information of the Corporation, the restrictions of
this Section 6 are required for the reasonable protection
of the Corporation and its investments and for the
Corporation’s reliance on and confidence in the Consultant.
| 7. | COVENANT NOT TO COMPETE. |
The Corporation and the Consultant acknowledge and agree that as
a former executive officer of the Trust, the Consultant has
knowledge and experience in the business of the Trust and that
the limitations on the Consultant’s activities and the
payments described in this Section 7 are reasonable and
appropriate. The Consultant shall not, either during the Term or
during the period of two years from the time the
Consultant’s services under this Agreement are terminated
for any reason, engage in any business activities on behalf of
any enterprise which competes with the Corporation in the
business of the passive ownership of senior housing or health
care facilities, or passive investing in or lending to senior
housing or health care-related enterprises, including, without
limitation, medical office buildings, hospitals of any kind,
independent living facilities, assisted living facilities,
skilled nursing facilities, inpatient rehabilitation facilities,
ambulatory surgery centers, active adult projects or any similar
types of facilities or projects. The Consultant will be deemed
to be engaged in such competitive business activities if he
participates in such a business enterprise as an employee,
officer, director, trustee, consultant, agent, partner,
proprietor or other participant; provided that the ownership of
no more than 2% of the stock of a publicly traded entity engaged
in a competitive business shall not be deemed to be engaging in
competitive business activities.
The Consultant shall not, for a period of two years from the
time his services under this Agreement cease (for whatever
reason), solicit any employee or full-time consultant of the
Corporation for the purposes of hiring or retaining such
employee or consultant other than Xxxxxx X. Xxxxxx, in his
capacity as an attorney. Notwithstanding the foregoing, the
Consultant may solicit, hire or retain either Xxxxxx X. Xxxxxx
or Xxxxx Xxxxxx at any time after they cease to be employed by
the Corporation.
In consideration for compliance with this covenant, the
Consultant will receive a payment of $37,500 each quarter with
the first quarterly payment commencing on the date the
Consultant’s services are terminated under this Agreement
for any reason, including expiration of the Term or disability
(but not death) and continuing for seven consecutive quarters
thereafter, for a total of eight consecutive quarterly payments.
Notwithstanding the provisions of any other agreement between
the Consultant and the Trust, the LP or any of their affiliates,
including but not limited to Sections 7 and 8 of the
Employment Agreement dated February 21, 2005 between the
Consultant and the Trust and the LP, the parties agree that the
provisions of any such other agreement that purport to restrict
the business, employment or investment activities of the
Consultant or impose confidentiality obligations on the
Consultant shall be null and void and of no further force and
effect as of the Effective Time and thereafter the provisions of
Section 6 and this Section 7 shall be the sole
provisions relating to restriction on the
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business, employment or business, the Trust, the LP activities
or confidentiality obligations binding upon the Consultant or
enforceable by the Corporation or any of their subsidiaries or
affiliates.
| 8. | INJUNCTIVE RELIEF. |
The Consultant acknowledges and agrees that it would be
difficult to fully compensate the Corporation for damages
resulting from the breach or threatened breach of the covenants
set forth in Sections 6 and 7 of this Agreement.
Accordingly, the Corporation shall be entitled to temporary and
injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to enforce
such provisions in any action or proceeding instituted in the
United States District Court for the Northern District of Ohio
or in any court in the State of Ohio having subject matter
jurisdiction. This provision with respect to injunctive relief
shall not, however, diminish the Corporation’s right to
claim and recover damages.
It is expressly understood and agreed that although the parties
consider the restrictions contained in this Agreement to be
reasonable, if a court determines that the time or territory or
any other restriction contained in this Agreement is an
unenforceable restriction on the activities of the Consultant,
no such provision of this Agreement shall be rendered void but
shall be deemed amended to apply as to such maximum time and
territory and to such extent as such court may judicially
determine or indicate to be reasonable.
| 9. | NOTICES. |
All notices or communications hereunder shall be in writing and
sent by certified or registered mail, return receipt requested,
postage prepaid, addressed as follows (or to such other address
as such party may designate in writing from time to time):
If to the Corporation:
Health Care REIT, Inc.
Xxx XxxXxxx, Xxxxx 0000
Xxxxxx, Xxxx 00000
Attention: Chief Executive Officer
Xxx XxxXxxx, Xxxxx 0000
Xxxxxx, Xxxx 00000
Attention: Chief Executive Officer
If to the Consultant:
Xxxxxxxxx X. Xxxxxx
Windrose Medical Properties Trust
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Windrose Medical Properties Trust
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
The actual date of receipt, as shown by the receipt therefor,
shall determine the time at which notice was given.
| 10. | SEPARABILITY. |
If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full force and effect.
| 11. | ASSIGNMENT. |
This Agreement shall be binding upon and inure to the benefit of
the heirs and representatives of the Consultant and the assigns
and successors of the Corporation, but neither this Agreement
nor any rights hereunder shall be assignable or otherwise
subject to hypothecation by the Consultant. The Corporation may
assign this Agreement with prior written notice to the
Consultant, but such assignment shall not release the
Corporation from any liability hereunder.
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| 12. | ENTIRE AGREEMENT. |
This Agreement represents the entire agreement of the parties
and shall supersede any and all previous contracts, arrangements
or understandings between the Corporation, the LP or the Trust
and the Consultant, including the Change of Control Severance
Agreement dated on or about August 16, 2002 and the
Confidentiality Agreement dated on or about August 16, 2002
among the Consultant, the Trust and the LP. This Agreement may
be amended at any time by mutual written agreement of the
parties hereto.
| 13. | GOVERNING LAW. |
This Agreement shall be construed, interpreted and governed in
accordance with the laws of the State of Ohio, other than the
conflict of laws provisions of such laws.
| 14. | SURVIVAL. |
Sections 5, 6, 7, 8, 10, 12, 13 and 15 shall
survive any expiration or termination of this Agreement.
| 15. | EXCISE TAX INDEMNIFICATION. |
The Consultant shall be entitled to a payment or payments under
this Section 15 if any payment or benefit provided under
this Agreement or any other plan, agreement or arrangement with
the Corporation, the Trust, the LP or any of their affiliates
constitutes an “excess parachute payment” (as defined
in Section 280G(b)(1) of the Code, but without regard to
Section 280G(b)(2)(A)(ii) of the Code) and the Consultant
incurs a liability under Section 4999 of the Code. The
amount payable to the Consultant under this Section 15
shall be the amount required to indemnify the Consultant and
hold him harmless from the application of Sections 280G and
4999 of the Code, together with any interest or penalties
related thereto, 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 and penalties attributable to the
indemnification payment. The benefit payable under this
Section 15 shall be calculated and paid not later than the
date (or extended filing date) on which the tax return
reflecting liability for the excise tax under Section 4999
of the Code is required to be filed with the Internal Revenue
Service. To the extent that any other plan, agreement or
arrangement requires that the Consultant be indemnified and held
harmless from the application of Sections 280G and 4999 of
the Code, any such indemnification and the amount required to be
paid to the Executive under this Section 15 shall be
coordinated so that such indemnification is paid only once and
the obligations of the Corporation, the Trust, the LP or any of
their affiliates shall be satisfied to the extent of any such
other payment (and vice versa).
The Consultant and the Corporation agree that the application of
Sections 280G and 4999 of the Code may not be clear in all
cases. The Consultant agrees that the Company may take the
position that all or part of a payment or payments are not
“excess parachute payments” (as defined above) and do
not result in liability under Section 4999 of the Code. The
Consultant agrees that his individual tax returns will be
prepared in a manner that is consistent with the
Corporation’s position on such matters if the
Consultant’s professional tax preparer concludes, in his or
her professional opinion, that the Corporation’s position
is reasonable based on published rulings, regulations and other
authority. If the Consultant’s individual income tax return
is prepared in accordance with the preceding sentence, i.e., in
a manner consistent with the Corporation’s position, then
(in addition to any benefit payable under the preceding
paragraph) the Corporation shall indemnify the Consultant, and
hold him harmless, from any liability for tax, penalty, interest
or otherwise arising from the position stated on the
Consultant’s individual income tax return related to the
application of Section 280G or 4999 of the Code to payments
from the Corporation, the Trust, the LP or any of their
affiliates. If the Consultant’s professional tax preparer
does not agree that the Corporation’s position is
reasonable based on published rulings, regulations and other
authority, then the Consultant’s individual tax return will
reflect any liability under Section 4999 of the Code that
such professional tax preparer determines is appropriate and the
Corporation shall indemnify the Consultant and hold him harmless
in accordance with the preceding paragraph.
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| 16. | INDEMNIFICATION. |
From and after the Effective Date, the Corporation hereby agrees
to indemnify, defend and hold harmless the Consultant from and
against any claim, loss, damage, liability or expense to which
the Consultant shall become subject, under any agreement, common
law or otherwise, arising out of or based upon any guaranty
executed by the Consultant in favor of Xxxxx Fargo, as Trustee,
in connection with the Mount Xxxxxx, Georgia facility.
IN WITNESS WHEREOF, this Agreement is executed by the
Corporation and the Consultant as of the date set forth above
and effective as of the Effective Date.
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Attest:
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HEALTH CARE REIT, INC. | |
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/s/ Xxxx
X. Xxxxx |
By: /s/ Xxxxxx
X.
Chapman Chief
Executive Officer
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|
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Witness:
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CONSULTANT: | |
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/s/ Xxxx
X. Xxxxx |
By: /s/ Xxxxxxxxx
X.
Farrar Frederick
X. Xxxxxx
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