AMENDED AND RESTATED CONSULTING AGREEMENT
Exhibit 10.5
AMENDED AND RESTATED
CONSULTING AGREEMENT
CONSULTING AGREEMENT
THIS AMENDED AND RESTATED CONSULTING AGREEMENT (the “Agreement”), dated this 29th day
of December, 2008, is entered into by and between HEALTH CARE REIT, INC., a Delaware corporation
(the “Corporation”), and XXXX X. KLIPSCH (the “Consultant”).
WHEREAS, the Corporation and the Consultant entered into a Consulting Agreement, effective as
of December 20, 2006 (the “Effective Date”);
WHEREAS, the Consultant served 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
such Consulting Agreement, entered into an Agreement and Plan of Merger with the Trust and the LP
(“Merger Agreement”) providing for the merger of the Trust 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, the Compensation Committee of the Corporation’s Board of Directors has approved
certain modifications to the terms of such Consulting Agreement solely for purposes of compliance
with the requirements of Section 409A of the Internal Revenue Code, as amended (the
“Code”), and the rules and regulations promulgated thereunder;
WHEREAS, the Corporation wishes to assure itself of the services of the Consultant for the
period provided in this Agreement and the Consultant is willing to provide services to the
Corporation for such period upon the terms and conditions set forth in this Agreement, which is
effective as of January 1, 2009.
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 Vice Chairman 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.
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) $975,500 plus (ii) shares of the Corporation’s
common stock having a value of $930,000 (“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:
| Year | Annual Base Fee | |||||||
| Year 1 | $ | 350,000 | ||||||
| Year 2 | $ | 250,000 | ||||||
(c) Performance Bonus. The Consultant shall also be eligible to receive an annual
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 60% and 120% of the Consultant’s Base Fee. Such bonus, if any, shall be paid to
the Consultant no later than sixty (60) days after the end of the year to which the bonus relates.
(d) Cash Payment. On January 2, 2007, the Corporation will pay to the Consultant, in
cash, the amount of $1,680,000, 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
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(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 on December 19, 2006, the cash amount of
$210,000, 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.
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. Such payments shall be made to the Consultant within sixty (60) days following the date of
termination.
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 Base Fee during the balance of the Term and shall be paid to the
Consultant at such time as the monthly Base Fee would otherwise be payable (beginning with the
month following the month in which the termination occurs).
In addition, 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.
(b) Disability. The Corporation shall be entitled to terminate Consultant’s services
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
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date. Such payments shall be made to the Consultant within sixty (60) days following the date of
termination. 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 month in which the termination occurs 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. Both the lump sum payment to the Consultant’s estate and the
lump sum payment to the Consultant’s surviving spouse (or other designated beneficiary) shall be
paid within sixty (60) days following the date of the Consultant’s 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 is subject to Section 409A of the Code. In the event the terms of this Agreement would
subject the Consultant to taxes or penalties under Section 409A of the Code (“409A
Penalties”), the Corporation and the Consultant shall cooperate diligently to amend the terms
of the Agreement to avoid such 409A Penalties, to the extent possible. To the extent any amounts
under this Agreement are payable by reference to Consultant’s “termination,” “termination of
services,” or similar phrases, such term shall be deemed to refer to the Executive’s “separation
from service” (as defined in Treasury Regulation Section 1.409A-1(h) (without regard to any
permissible alternative definition thereunder) with the Corporation and all entities treated as a
single employer with the Corporation under Sections 414(b) and (c) of the Code but substituting a
50% ownership level for the 80% ownership level set forth therein). Notwithstanding any other
provision in this Agreement, if the Consultant is a “Specified
Employee” (as defined Treasury Regulation Section 1.409A-1(i) on December 31st of the prior calendar year), as of the
date of the Consultant’s separation from service, then to the extent any amount payable under this
Agreement (i) constitutes the payment of nonqualified deferred compensation, within the meaning of
Section 409A of the Code, (ii) is payable upon the Consultant’s separation from service and (iii)
under the terms of this Agreement would be payable prior to the six-month anniversary of the
Consultant’s separation from service, such payment shall be delayed and paid to the Consultant,
together with interest at an annual rate equal to the interest rate specified by
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KeyBank for a six-month certificate of deposit, on the first day of the first calendar month
beginning at least six months following the date of termination, or, if earlier, within ninety (90)
days following the Consultant’s death to the Consultant’s surviving spouse (or such other
beneficiary as the Consultant may designate in writing). Any reimbursement or advancement payable
to the Consultant pursuant to this Agreement shall be conditioned on the submission by the
Consultant of all expense reports reasonably required by the Corporation under any applicable
expense reimbursement policy, and shall be paid to the Consultant within thirty (30) days following
receipt of such expense reports, but in no event later than the last day of the calendar year
following the calendar year in which the Consultant incurred the reimbursable expense. Any amount
of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall
not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided,
during any other calendar year. The right to any reimbursement or in-kind benefit pursuant to this
Agreement shall not be subject to liquidation or exchange for any other benefit.
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
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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
$75,000 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. The quarterly payments (other than the first quarterly
payment) shall be made to the Consultant within sixty (60) days following the end of each quarter.
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 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
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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:
Xxxx X. Klipsch
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.
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
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among the Consultant and 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 Corporation 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
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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. Indemnification payments
required pursuant to the preceding sentence shall be paid by the Corporation (i) by the end of the
year following the year in which the taxes are remitted to the taxing authority, or (ii) in cases
where no tax is remitted, by the end of the year following the year in which the tax audit is
completed or there is a final and nonappealable settlement or other resolution of the tax
litigation. 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.
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.
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IN WITNESS WHEREOF, this Agreement is executed by the Corporation and the Consultant as of the
date set forth above.
| Attest: | HEALTH CARE REIT, INC. | |||||||
/s/ Xxxx X. Xxxxx
|
By: | /s/ Xxxxxxx X. Xxxxxx
|
||||||
Administration and Corporate Secretary
|
President and General Counsel | |||||||
| Witness: | CONSULTANT: | |||||||
/s/
Xxxxxxxxx X. Xxxxxx
|
By: | /s/ Xxxx X. Klipsch
|
||||||
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