Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of September 10,
2003 (the "Effective Date"), among Medical Properties Trust, Inc. (the "REIT"),
MPT Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership") (the REIT and the Operating Partnership being herein referred to
collectively as the "Company"), and Xxxxxx X. XxXxxx (the "Executive"):
WHEREAS, the REIT is a limited partner and, through its wholly-owned
limited liability company, Medical Properties Trust, LLC (the "LLC"), is the
sole general partner of the Operating Partnership;
WHEREAS, the Executive has experience serving in senior management
positions for healthcare companies and also possesses expertise relating to
investment banking activities;
WHEREAS, the Executive provided services to the LLC pursuant to that
certain Employment Agreement dated June 19, 2003 (the "Original Agreement")
which Original Agreement has been terminated and certain limited obligations
thereunder have been assumed by the Operating Partnership; and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the Company and the Executive, in consideration of the
respective covenants set out below, hereby agree as follows:
1. EMPLOYMENT.
(a) POSITIONS. The Executive shall be employed by the Operating
Partnership as its Executive Vice President, Chief Operating Officer and
Treasurer. The Executive shall also serve as the Executive Vice President, Chief
Operating Officer and Treasurer of the REIT.
(b) DUTIES. The Executive shall report to the Chief Executive
Officer of the Company and his principal employment duties and responsibilities
shall be those duties and responsibilities customary for the positions of
Executive Vice President and Chief Operating Officer, along with such other
executive duties and responsibilities as the Chief Executive Officer and the
Board of Directors of the REIT (the "Board") shall from time to time reasonably
assign to the Executive.
(c) EXTENT OF SERVICES. Except for illnesses and vacation periods,
the Executive shall devote substantially all of his business time and attention
and his good faith reasonable efforts to the performance of his duties and
responsibilities under this Agreement. Notwithstanding the foregoing, the
Executive (i) shall be permitted to continue to manage, operate and devote time
and attention to those companies and
businesses he owned, operated or controlled at the date of this Agreement that
were not transferred to or purchased by the Company or the REIT (collectively
referred to herein as the "Excluded Businesses"), provided that such activities
do not materially detract from Executive's performance of his duties hereunder,
(ii) may make any passive investment where he is not obligated or required to,
and shall not in fact, devote any material managerial efforts, (iii) may
participate in charitable, academic or community activities, and in trade or
professional organizations, and (iv) may hold directorships in other companies
consistent with the Company's conflict of interest policies and corporate
governance guidelines as in effect from time to time.
2. TERM. This Agreement shall be effective as of the Effective Date and
shall continue in full force and effect thereafter for a term of three (3) years
following the Effective Date, and shall be automatically extended for an
additional one (1) year period on each one (1) year anniversary of the Effective
Date, including an anniversary that occurs within the initial three (3) year
term (the last day of each such one (1) year period ending on an anniversary of
the Effective Date is referred to herein as a "Term Date"), unless either party
gives notice of non-renewal not later than sixty (60) days prior to a Term Date
by providing written notice to the other party of such party's intent not to
renew (in which case the Agreement shall not be so automatically extended for
such additional one (1) year period and shall terminate at the conclusion of the
remaining unextended Term), or it is sooner terminated pursuant to Section 7.
For purposes of this Agreement, "Term" shall mean the actual duration of the
Executive's employment hereunder, taking into account any extensions pursuant to
this Section 2 or early termination of employment pursuant to Section 7, but for
purposes of all compensation and benefits payable pursuant to Sections 3 through
6 hereof the Term shall be deemed to commence as of August 1, 2003.
3. BASE SALARY. The Company shall pay the Executive a Base Salary that
shall be payable in periodic installments according to the Company's normal
payroll practices, but no less frequently than monthly. The initial Base Salary
shall be $250,000 per year. The Board or its compensation committee (the
"Compensation Committee") shall review the Base Salary at least once a year to
determine whether and to what extent the Base Salary should be increased,
effective January 1 of any year during the Term; provided, however, that on
January 1, 2005, the Base Salary shall be not less than $262,500 and on each
January 1 thereafter during the Term, the Base Salary shall be increased at a
minimum by a positive amount equal to the Base Salary in effect on January 1 of
the prior year multiplied by the percentage increase in the Consumer Price Index
for such year. The amount of the increase shall be determined before March 31 of
each year and shall be retroactive to January 1 of such year. The Base Salary,
including any increases, shall not be decreased during the Term. For purposes of
this Agreement, the term "Base Salary" shall mean the amount established and
adjusted from time to time pursuant to this Section 3.
4. INCENTIVE AWARDS: ANNUAL INCENTIVE BONUS. The Executive shall be
entitled to receive an annual cash incentive bonus for each fiscal year during
the Term of this Agreement consistent with such bonus policy as may be adopted
by the
2
Board or its Compensation Committee ("Bonus Policy") in an amount of not less
than 40% of the Executive's Base Salary (the "Minimum Bonus") or more than 100%
of the Executive's Base Salary unless in the opinion of the Compensation
Committee, the Executive deserves a higher amount (the "Maximum Bonus"). If the
Executive or the Company, as the case may be, satisfies the performance criteria
contained in such Bonus Policy for a fiscal year, he shall receive an annual
incentive bonus (the "Incentive Bonus"), consistent with the provisions relating
to the Minimum Bonus and the Maximum Bonus, in an amount determined by the
Compensation Committee and subject to ratification by the Board, if required. If
the Executive or the Company, as the case may be, fails to satisfy the
performance criteria contained in such Bonus Policy for a fiscal year, the
Compensation Committee may determine whether any Incentive Bonus shall be
payable to the Executive for that year other than the Minimum Bonus, subject to
ratification by the Board, if required. Beginning January 1, 2004, the Bonus
Policy shall contain both individual and group goals.
5. STOCK BASED AWARDS. The REIT has established the 2004 Equity Incentive
Plan ("Equity Incentive Plan") which provides for the grants of options to
acquire shares of the Company's $.001 par value common stock (the "Common
Shares"), awards of restricted Common Shares and awards of stock appreciation
rights and performance units. Effective upon the consummation of the private
placement offering or initial public offering, whichever occurs first, the
Company has reserved for issuance to the Company's executive officers and other
employees two and six-tenths percent (2.6%) of the outstanding Common Shares on
a fully-diluted basis for awards of restricted Common Shares ("Restricted Share
Grants"). The Executive shall be eligible to receive Restricted Share Grants as
approved by the Compensation Committee, and if the Compensation Committee
approves Restricted Share Grants to executives of the Company, then, as
appropriate in the context, the Executive will receive Restricted Share Grants
consistent with, and appropriate in respect of, his position as Executive Vice
President, Chief Operating Officer and Treasurer. Restricted Share Grants
awarded to the Executive shall be subject to vesting at the rate of 8.33% of the
underlying Common Shares on the last day of each fiscal quarter thereafter until
fully vested; provided, however, that the Executive will be 100% vested and all
restrictions will lapse upon (i) a Change of Control (as defined herein), (ii) a
termination by the Company without Cause (as defined herein), (iii) a
termination by the Executive for Good Reason (as defined herein), (iv) his
death, or (v) his becoming Permanently Disabled (as defined herein). The
Executive will forfeit all unvested Restricted Share Grants if he is terminated
for Cause or he terminates for other than Good Reason. The Common Shares issued
as Restricted Share Grants will have voting and dividend rights, and, following
the restriction period, shall be registered and fully transferable by the
Executive.
6. BENEFITS.
(a) VACATION. The Executive shall be entitled to three (3) weeks of
vacation per full calendar year. Any unused vacation time shall accrue through
the first quarter of the following year.
3
(b) SICK AND PERSONAL DAYS. The Executive shall be entitled to sick
and personal days on an as needed basis.
(c) EMPLOYEE BENEFITS.
(i) PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Executive and
his spouse and eligible dependents, if any, and their respective designated
beneficiaries where applicable, will be eligible for and entitled to
participate, at the Company's expense, in any Company sponsored employee benefit
plans, including but not limited to benefits such as group health, dental,
accident, disability insurance and group life insurance as such benefits may be
offered from time to time, on a basis no less favorable than that applicable to
any other executive of the Company. In addition, Executive shall be entitled to
participate, on the same basis as other Executives of the Company, in any 401(k)
or other retirement plan sponsored by the Company.
(ii) DISABILITY INSURANCE. The Company shall maintain, at its
cost, supplemental renewable long-term disability insurance with such terms as
agreed to by the Company and the Executive.
(d) OTHER BENEFITS.
(i) ANNUAL PHYSICAL. The Company shall provide, at its costs,
a medical examination for the Executive on an annual basis by a licensed
physician selected by the Executive.
(ii) CAR ALLOWANCE. In lieu of mileage reimbursement and
repairs and maintenance expense, the Company shall pay Executive a monthly car
allowance of $750.
(iii) TAX PREPARATION AND FINANCIAL PLANNING. The Company
shall pay or promptly reimburse the Executive for costs incurred by him in
connection with tax preparation and financial planning assistance, to be
furnished by such advisors, including, but not limited to, auditors and
attorneys, as chosen by the Executive, up to a maximum aggregate of $10,000
annually. The amount shall be paid by the Company promptly upon presentation by
the Executive of copies of any bills due to such tax and financial planning
advisors. The amount paid by the Company shall be imputed as income to the
Executive, and the Company will pay to the Executive such additional amount as
necessary to pay any federal, state or local tax liability with respect to such
imputed income and the payment of such additional amount.
(iv) DIRECTORS AND OFFICERS INSURANCE. During the Term and the
Severance Period (as defined herein), the Executive shall be entitled to
director and officer insurance coverage for his acts and omissions while an
officer and director of the Company on a basis no less favorable to him than the
coverage provided to any other then current officers and directors.
4
(v) LIFE INSURANCE. The Company will pay the Executive an
amount of up to $10,000 per year for life insurance policies for his benefit and
beneficiaries of his choosing. Such amount shall increase on January 1st of each
year under the term hereof by multiplying by the percentage increase in the
Consumer Price Index for such year. The amount shall be paid by the Company
promptly upon presentation by the Executive of copies of the premium notices.
The amount paid by the Company shall be imputed as income to the Executive, and
the Company will pay to the Executive such additional amount as necessary to pay
any federal, state or local tax liability with respect to such imputed income
and the payment of such additional amount (the "Executive Life Insurance
Program").
(vi) EXPENSES, OFFICE AND SECRETARIAL SUPPORT. The Executive
shall be entitled to reimbursement of all reasonable expenses, in accordance
with the Company's policy as in effect from time to time and on a basis no less
favorable than that applicable to any other executive of the Company, including,
without limitation, telephone, travel and entertainment expenses incurred by the
Executive in connection with the business of the Company, promptly upon the
presentation by the Executive of appropriate documentation. The Executive shall
also be entitled to appropriate office space, administrative support, and such
other facilities and services as are suitable to the Executive's positions and
adequate for the performance of the Executive's duties.
7. TERMINATION. The employment of the Executive by the Company pursuant to
this Agreement shall terminate upon the occurrence of any of the following:
(a) DEATH OR PERMANENT DISABILITY. Immediately upon death or a
determination of Permanent Disability of the Executive. As used in this
Agreement, "Permanent Disability" shall mean an inability due to a physical or
mental impairment to perform the material services contemplated under this
Agreement for a period of six (6) months, whether or not consecutive, during any
365-day period. A determination of Permanent Disability shall be made by a
physician satisfactory to both the Executive and the Company, provided that if
the Executive and the Company do not agree on a physician, the Executive and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to Permanent Disability shall be binding
on all parties. The appointment of one or more individuals to carry out the
offices or duties of the Executive during a period of the Executive's inability
to perform such duties and pending a determination of Permanent Disability shall
not be considered a breach of this Agreement by the Company.
(b) FOR CAUSE. At the election of the Company and subject to the
provisions of this Section 7(b), immediately upon written notice by the Company
to the Executive of his termination for Cause. For purposes of this Agreement,
"Cause" for termination shall be deemed to exist solely in the event of (i) the
conviction of the Executive of, or the entry of a plea of guilty or nolo
contendere by the Executive to, a felony (exclusive of any felony relating to
negligent operation of a motor vehicle and also exclusive of a conviction, plea
of guilty or nolo contendere arising solely under a statutory provision imposing
criminal liability upon the Executive on a per se basis due to
5
the Company offices held by the Executive, so long as any act or omission of the
Executive with respect to such matter was not taken or omitted in contravention
of any applicable policy or directive of the Board), (ii) a willful breach of
his duty of loyalty which is materially detrimental to the Company, (iii) a
willful failure to perform or adhere to explicitly stated duties that are
consistent with the terms of this Agreement, or the Company's reasonable and
customary guidelines of employment or reasonable and customary corporate
governance guidelines or policies, including, without limitation, any business
code of ethics adopted by the Board, or to follow the lawful directives of the
Board (provided such directives are consistent with the terms of this
Agreement), which, in any such case, continues for thirty (30) days after
written notice from the Board to the Executive, or (iv) gross negligence or
willful misconduct in the performance of the Executive's duties. For purposes of
this Section 7(b), no act, or failure to act, on the Executive's part will be
deemed "gross negligence" or "willful misconduct" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
the Executive's act, or failure to act, was in the best interest of the Company.
(c) WITHOUT CAUSE; WITHOUT GOOD REASON. At the election of the
Company, without Cause, and at the election of the Executive, without Good
Reason, in either case upon thirty (30) days prior written notice to the
Executive or the Company, as the case may be.
(d) FOR GOOD REASON. At the election of the Executive, for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean any of the
following actions or omissions, provided the Executive notifies the Company of
his determination that Good Reason exists within sixty (60) days of the action
or omission on which such determination is based:
(i) failure of this Agreement to be automatically renewed, on
at least comparable terms, as a result of the Company giving notice pursuant to
Section 2,
(ii) the Company's failure to maintain a Bonus Policy in
Section 4 hereof or to continue in effect the Equity Incentive Plan, unless
comparable alternative compensation arrangements (embodied in ongoing substitute
or alternative plans) have been provided to the reasonable satisfaction of the
Executive,
(iii) a reduction or loss of employee benefits or material
fringe benefits, both in terms of the amount of the benefit and the level of the
Executive's participation therein, enjoyed by the Executive under the employee
benefit and welfare plans of the Company, including, without limitation, such
benefits as group health, dental, 401(k), accident, disability insurance, or
group life insurance, that is caused by the Company except as is required by
applicable law, or
(iv) a breach by the Company of any provision of this
Agreement that continues for a period of thirty (30) days after Executive
provides written notice to the Company of such breach.
6
8. EFFECTS OF TERMINATION.
(a) TERMINATION ON PERMANENT DISABILITY; BY THE COMPANY WITHOUT
CAUSE; BY THE EXECUTIVE FOR GOOD REASON. If the employment of the Executive
should terminate by reason of his becoming Permanently Disabled, a termination
by the Company for any reason other than Cause, or by the Executive for Good
Reason, then the Company shall pay all compensation and benefits for the
Executive as follows:
(i) any Base Salary, Incentive Bonus, expense reimbursements
and all other compensation related payments that are payable as of the effective
date of the termination of his employment that are related to the period of his
employment preceding the effective date of the termination of his employment,
including pay in lieu of accrued, but unused, vacation, and
(ii) the prorated amount of the Incentive Bonus for the year
in which the termination of employment occurs, pro rated for the portion of such
year during which the Executive was employed prior to the effective date of the
termination of his employment, and
(iii) an amount equal to the product of (A) the sum of (1) the
Executive's Base Salary as of the effective date of termination of his
employment, and (2) the average cash bonus received by Executive for the past
three (3) fiscal years preceding the effective date of termination (or such
shorter period, if applicable), multiplied by (B) three (3).
The sum of the amount payable under subsections (ii) and (iii)
hereof is referred to herein as his "Severance Payment".
(iv) The Severance Payment shall be made in a single, lump sum
cash payment no later than thirty (30) days after the effective date of the
termination of the Executive's employment. Such Severance Payment shall be
reduced, in the case of a termination due to Permanent Disability, by the
present value of the amount of disability proceeds to be received by Executive
under the long term disability insurance policy carried by the Company.
(v) The Company shall allow the Executive and his spouse and
dependants to continue to participate during the three (3) year period following
the effective date of his termination of employment (the "Severance Period") in
any and all of the employee benefit and welfare plans and programs of the
Company, excluding any 401(k) plan, in which the Executive was entitled to
participate immediately prior to his termination, to the same extent and upon
the same terms as the Executive participated in such plans prior to his
termination, provided that the Executive's continued participation is
permissible or otherwise practicable under the general terms and provisions of
such benefit plans and programs. During the Severance Period, the Company shall
pay for the Executive's and his spouse's and dependants' continued participation
in said employee
7
benefit and welfare plans, including but not limited to premiums for group
health, dental, accident, disability insurance, director's and officers
insurance, group life insurance, and his car allowance, but excluding any 401(k)
plan. To the extent that continued participation is neither permissible nor
practicable, the Company shall take such actions as may be necessary to provide
the Executive, his spouse, and his dependants with substantially comparable
benefits (without additional cost to the Executive, including any additional
taxes) outside the scope of such plans including, without limitation,
reimbursing the Executive for his costs in obtaining such coverage, such as
COBRA premiums paid by the Executive and/or his eligible dependents. If the
Executive engages in regular employment after his termination of employment
(whether as an executive or as a self-employed person, but excluding his
management or operation of the Excluded Businesses), any employee benefit and
welfare benefits received by the Executive in consideration of such employment
which are similar in nature to the employee benefit and welfare benefits
provided by the Company will relieve the Company of its obligation under this
Section 8(a)(v) to provide comparable benefits to the extent of the benefits so
received.
(vi) The Executive's stock options awarded under the Equity
Incentive Plan (or any other or successor plan) shall immediately become 100%
vested and he shall have whatever remaining period under the options following
the effective date of his termination of employment in which to exercise his
vested stock options, including those stock options that vested upon his
termination of employment.
(vii) The Executive's restricted Common Shares awarded under
the Equity Incentive Plan (or any other or successor plan) shall immediately
become 100% vested and all restrictions shall lapse.
(b) TERMINATION ON DEATH. Upon a termination of employment due to
the Executive's death, the Executive shall become 100% vested in his stock
options and restricted Common Shares awarded under the Equity Incentive Plan.
The Executive's personal representative shall have whatever remaining period
under the options following the Executive's death in which to exercise his
vested stock options, including those stock options that vested on death. The
Company shall pay to the Executive's personal representative any Base Salary,
Incentive Bonus, expense reimbursements and all other compensation related
payments that are payable as of his date of death and that are related to his
period of employment preceding his date of death. Within sixty (60) days after
the Executive's death, the Company shall pay to the Executive's personal
representative the prorated amount of the Incentive Bonus for the year in which
the Executive's death occurs, prorated for the portion of the year during which
the Executive was employed prior to his death. The Executive's spouse and each
of his dependants shall be covered under the Company's health insurance program
until the earlier to occur of (i) such spouse or dependant reaching the age of
sixty-five (65) or (ii) such spouse or dependant obtaining full-time employment.
The Company shall pay for such coverage for a period of three (3) years and
after that the Executive's spouse or dependant's shall pay for such coverage.
8
(c) BY THE COMPANY FOR CAUSE OR BY THE EXECUTIVE WITHOUT GOOD
REASON. In the event that the Executive's employment is terminated by the
Company for Cause or by the Executive without Good Reason, the Company shall pay
the Executive his Base Salary, Incentive Bonus, expense reimbursements and all
other compensation related payments that are payable as of his termination of
employment date and that are related to his period of employment preceding his
termination date. The Executive shall be entitled to exercise his vested stock
options, determined as of his termination date, pursuant to the terms of the
option grant. All unvested options and unvested restricted Common Shares shall
be forfeited on his termination date. The Executive shall also be entitled to
all benefits accrued and vested under any employee benefit plan of the Company.
The Executive, the Executive's spouse and each of his dependants shall be
allowed to be covered by the Company's health insurance plan, at the Executive's
costs, for a period of three (3) years or until such time as such spouse or
dependant obtains full-time employment, whichever period is shorter.
(d) TERMINATION OF AUTHORITY. Immediately upon the Executive
terminating or being terminated from his employment with the Company for any
reason, notwithstanding anything else appearing in this Agreement or otherwise,
the Executive will stop serving the functions of his terminated or expired
positions, and shall be without any of the authority or responsibility for such
positions. On request of the Board at any time following his termination of
employment for any reason, the Executive shall resign from the Board if then a
member.
9. CHANGE OF CONTROL.
(a) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" will be deemed to have taken place upon the occurrence of any of the
following events:
(i) any person, entity or affiliated group, excluding the REIT
or any employee benefit plan of the REIT, acquiring more than 50% of the then
outstanding voting shares of the REIT,
(ii) the consummation of any merger or consolidation of the
REIT into another company, such that the holders of the voting shares of the
REIT immediately prior to such merger or consolidation own less than 50% of the
voting power of the securities of the surviving company or the parent of such
surviving company, or
(iii) the complete liquidation of the REIT or the sale or
disposition of all or substantially all of the REIT's assets, such that after
the transaction, the holders of the voting shares of the REIT immediately prior
to the transaction own less than 50% of the voting securities of the acquiror or
the parent of the acquiror.
(b) CERTAIN BENEFITS UPON A CHANGE OF CONTROL. In the event of a
Change of Control, the Executive shall become 100% vested in the stock
9
options and restricted Common Shares awarded under the Equity Incentive Plan (or
any other or successor plan) and, if the Executive voluntarily terminates his
employment without Good Reason after the Change of Control, then the Executive
shall have whatever remaining period under the options following the Change of
Control in which to exercise his vested stock options, including those stock
options that vested upon the Change of Control. In addition, if the Executive's
employment with the Company is terminated by the Company for Cause or by the
Executive without Good Reason in connection with a Change of Control, the
Executive shall receive (in addition to the applicable benefits described in
Section 8 hereof) a lump sum payment equal to the largest cash compensation from
the Company for any twelve (12) month period during the Executive's tenure with
the Company, multiplied by three (3).
(c) EXCISE TAX.
(i) In the event that any payment or benefit received or to be
received by the Executive in connection with a termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in a
change in control or any person affiliated with the Company or such person) (all
such payments and benefits being hereinafter called "Total Payments"), such that
the Executive will be subject (in whole or in part) to the excise tax imposed
under Code Section 4999 ("Excise Tax") on such payments and benefits, then the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of the
Excise Tax and any federal, state and local tax on the Gross-Up Payment, will be
equal to the Total Payments. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on such date, net of the maximum deduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
(ii) The Executive or the Company may request, prior to the
time any payments under this Agreement are made, a determination of whether any
or all of the Total Payments will be subject to the Excise Tax and, if so, the
amount of such Excise Tax and the federal, state and local tax imposed on the
Gross-Up Payment. If such a determination is requested, it shall be made
promptly, at the Company's expense, by tax counsel selected by the Executive and
approved by the Company (with such approval not being unreasonably withheld),
and such determination shall be conclusive and binding on both parties. The
Company agrees to provide any information reasonably requested by such tax
counsel. Tax counsel may engage accountants or other experts, at the Company's
expense, to the extent deemed necessary or advisable for them to reach a
determination. For these purposes, the term "tax counsel" shall mean a law firm
with expertise in federal income tax matters.
10
(iii) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder, the
Executive will repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment, without any interest thereon. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder, the
Company will make an additional Gross-Up Payment in respect of such excess and
in respect of any portion of the Excise Tax with respect to which the Company
had not previously made a Gross-Up Payment (plus any interest, penalties or
additions payable by the Executive with respect to such excess and such portion)
at the time that the amount of such excess is finally determined, without any
interest thereon.
(iv) Each party agrees to notify the other party, in writing,
of any claim that, if successful, would require the payment by the Company of a
Gross-Up Payment or might entitle the Company to a refund of all or part of any
previous Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive or
Company is informed in writing of such claim or otherwise becomes aware of such
claim. If notice of the claim arose as a result of a claim made against the
Executive by a taxing authority, Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he gives
notice to the Company. If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall: (A) give the Company any information reasonably requested by
the Company relating to such claim, (B) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by the Executive and approved by
the Company (with such approval not being unreasonably withheld), (C) cooperate
with the Company in good faith in order to effectively contest such claim, and
(D) permit the Company to reasonably participate in any proceedings relating to
such claim. The Company shall bear and pay directly all costs and expenses
(including legal fees and additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.
(v) Notwithstanding the foregoing, the Company shall control
all audits and proceedings taken in connection with any claim, audit or
proceeding involving Excise Taxes or Gross-Up Payments and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of any such claim, audit or
proceeding and may, at its sole option, either direct the Executive to pay the
tax claimed and xxx for a refund or contest the tax in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such tax and xxx for a refund, the Company
11
shall advance the amount of such payment to the Executive, (including interest
or penalties with respect thereto) and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance. The Company
shall be required to consult with and keep the Executive fully apprised of
developments and actions being considered or taken with respect to such claim,
audit or proceeding. The Company's control of the contest shall be limited to
issues with respect to which such a Gross-Up Payment would be payable or
refundable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue. Each party agrees to keep the other party
fully apprised of developments concerning such claim, audit or proceeding and to
cooperate with the other in good faith in order to effectively resolve such
claim, audit or proceeding.
(vi) For purposes of this Subsection (c), a determination of
whether a payment is subject to Excise Taxes, including but not limited to, a
determination of Change in Control, shall be made pursuant to Code Section 280G.
10. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that certain assets of the Company constitute Confidential Information. The term
"Confidential Information" as used in this Agreement shall mean all information
which is known only to the Executive or the Company, other employees of the
Company, or others in a confidential relationship with the Company, and relating
to the Company's business including, without limitation, information regarding
clients, customers, pricing policies, methods of operation, proprietary Company
programs, sales products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets, as such
information may exist from time to time, which the Executive acquired or
obtained by virtue of work performed for the Company, or which the Executive may
acquire or may have acquired knowledge of during the performance of said work.
The Executive shall not, during Term and for a period of three (3) years
thereafter disclose all or any part of the Confidential Information to any
person, firm, corporation, association, or any other entity for any reason or
purpose whatsoever, directly or indirectly, except as may be required pursuant
to his employment hereunder, or as otherwise required by law, unless and until
such Confidential Information becomes publicly available other than as a
consequence of the breach by the Executive of his confidentiality obligations
hereunder by law or in any judicial or administrative proceeding (in which case,
the Executive shall provide the Company with notice). In the event of the
termination of his employment, whether voluntary or involuntary and whether by
the Company or the Executive, the Executive shall deliver to the Company all
documents and data pertaining to the Confidential Information and shall not
retain any documents or data of any kind or any reproductions (in whole or in
part) or extracts of any items relating to the Confidential Information. The
Company acknowledges that prior to his employment with the Company, the
Executive has lawfully acquired extensive knowledge of the industries and
businesses in which the Company engages in business, and that the provisions of
this Section 10 are not intended to restrict the Executive's use of such
previously acquired knowledge.
12
In the event that the Executive receives a request or is required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Confidential
Information, the Executive agrees to (a) promptly notify the Company in writing
of the existence, terms and circumstances surrounding such request or
requirement, (b) consult with the Company on the advisability of taking legally
available steps to resist or narrow such request or requirement, and (c) assist
the Company in seeking a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof the Executive shall not be
liable for such disclosure unless disclosure to any such tribunal was caused by
or resulted from a previous disclosure by the Executive not permitted by this
Agreement.
11. NON-COMPETITION AND NONSOLICITATION. During the Term and for a period
of eighteen (18) calendar months after the termination of the Executive's
employment (the "Non-Compete Period"), the Executive shall not, directly or
indirectly, either as a principal, agent, employee, employer, stockholder,
partner or in any other capacity whatsoever: (a) engage or assist others
engaged, in whole or in part, in any business which is engaged in a business or
enterprise involving the ownership, leasing or management of healthcare real
estate (it being understood that engaging in the activity of operating a
healthcare operating company which owns its own healthcare real estate is not so
prohibited), or (b) without the prior consent of the Board, solicit the
employment of, or assist others in soliciting the employment of, any individual
employed by the Company (other than the Executive's personal assistant or
Executive's secretary) at any time while the Executive was also so employed;
provided, however, that the provisions of this Section 11 shall not apply in the
event the termination is by the Company without Cause or by the Executive for
Good Reason.
Nothing in this Section 11 shall impede, restrict or otherwise interfere
with Executive's management and operation of the Excluded Businesses. Further,
nothing in this Section 11 shall prohibit Executive from making any passive
investment in a public company, where he is the owner of five percent (5%) or
less of the issued and outstanding voting securities of any entity, provided
such ownership does not result in his being obligated or required to devote any
managerial efforts.
The Executive agrees that the restraints imposed upon him pursuant to this
Section 11 are necessary for the reasonable and proper protection of the Company
and its subsidiaries and affiliates, and that each and every one of the
restraints is reasonable in respect to subject matter, length of time and
geographic area. The parties further agree that, in the event that any provision
of this Section 11 shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its being extended over too great a time, too
large a geographic area or too great a range of activities, such provision shall
be deemed to be modified to permit its enforcement to the maximum extent
permitted by law.
12. INTELLECTUAL PROPERTY. During the Term, the Executive shall promptly
disclose to the Company or any successor or assign, and grant to the Company
13
and its successors and assigns without any separate remuneration or compensation
other than that received by him in the course of his employment, his entire
right, title and interest in and to any and all inventions, developments,
discoveries, models, or any other intellectual property of any type or nature
whatsoever ("Intellectual Property"), whether developed by him during or after
business hours, or alone or in connection with others, that is in any way
related to the business of the Company, its successors or assigns. This
provision shall not apply to books or articles authored by the Executive during
non-work hours, consistent with his obligations under this Agreement, so long as
such books or articles (a) are not funded in whole or in part by the Company,
and (b) do not contain any Confidential Information or Intellectual Property of
the Company. The Executive agrees, at the Company's expense, to take all steps
necessary or proper to vest title to all such Intellectual Property in the
Company, and cooperate fully and assist the Company in any litigation or other
proceedings involving any such Intellectual Property.
13. DISPUTES.
(a) EQUITABLE RELIEF. The Executive acknowledges and agrees that
upon any breach by the Executive of his obligations under Sections 10, 11, or 12
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief.
(b) LEGAL FEES. The Company shall pay or promptly reimburse the
Executive for the reasonable legal fees and expenses incurred by the Executive
in successfully enforcing or defending any right of the Executive pursuant to
this Agreement even if the Executive does not prevail on each issue.
14. INDEMNIFICATION. The Company shall indemnify the Executive, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Executive, including the cost of legal
counsel selected and retained by the Executive in connection with any action,
suit or proceeding to which the Executive may be made a party by reason of the
Executive being or having been an officer, director, or employee of the Company.
15. COOPERATION IN FUTURE MATTERS. The Executive hereby agrees that for a
period of eighteen (18) months following his termination of employment he shall
cooperate with the Company's reasonable requests relating to matters that
pertain to the Executive's employment by the Company, including, without
limitation, providing information or limited consultation as to such matters,
participating in legal proceedings, investigations or audits on behalf of the
Company, or otherwise making himself reasonably available to the Company for
other related purposes. Any such cooperation shall be performed at scheduled
times taking into consideration the Executive's other commitments, and the
Executive shall be compensated at a reasonable hourly or per diem rate to be
agreed upon by the parties to the extent such cooperation is required on more
than an occasional and limited basis. The Executive shall not be required to
perform such cooperation to the extent it conflicts with any requirements of
exclusivity of services for
14
another employer or otherwise, nor in any manner that in the good faith belief
of the Executive would conflict with his rights under or ability to enforce this
Agreement.
16. PAYMENTS UNDER ORIGINAL AGREEMENT. The parties acknowledge that the
Executive is owed One Thousand Eight Hundred Fifty One and 83/100 Dollars
($1,851.83) of the expense reimbursement under the Original Agreement, which
obligation has been assumed by the Operating Partnership. The Company shall pay
said sum to the Executive contemporaneously with the closing of its private
placement offering or initial public offering, whichever occurs first.
17. GENERAL.
(a) NOTICES. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if sent by overnight courier or by
certified mail, return receipt requested, postage prepaid or sent by written
telecommunication or telecopy, to the relevant address set forth below, or to
such other address as the recipient of such notice or communication shall have
specified in writing to the other party hereto, in accordance with this Section
17(a).
If to the Company, to:
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
If to Executive, at his last residence shown on the records of the
Company.
Any such notice shall be effective (i) if delivered personally, when received,
(ii) if sent by overnight courier, when receipted for, (iii) if mailed, five (5)
days after being mailed, and (iv) on confirmed receipt if sent by written
telecommunication or telecopy, provided a copy of such communication is sent by
regular mail, as described above.
(b) SEVERABILITY. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(c) WAIVERS. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(d) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall
15
constitute one and the same instrument. In making proof of this Agreement, it
shall not be necessary to produce or account for more than one such counterpart.
(e) ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of the Company's successors and the Executive's personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. This Agreement shall not be assignable by the Executive, it being
understood and agreed that this is a contract for the Executive's personal
services. This Agreement shall not be assignable by the Company except that the
Company shall assign it in connection with a transaction involving the
succession by a third party to all or substantially all of the Company's
business and/or assets (whether direct or indirect and whether by purchase,
merger, consolidation, liquidation or otherwise). When assigned to a successor,
the assignee shall assume this Agreement and expressly agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of such an assignment. For all purposes
under this Agreement, the term "Company" shall include any successor to the
Company's business and/or assets that executes and delivers the assumption
agreement described in the immediately preceding sentence or that becomes bound
by this Agreement by operation of law.
(f) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter hereof
and may not be amended except by a written instrument hereafter signed by the
Executive and a duly authorized representative of the Company (other than the
Executive).
(g) GOVERNING LAW. This Agreement and the performance hereof shall
be construed and governed in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
(h) CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. The
headings of sections of this Agreement are for convenience of reference only and
shall not affect its meaning or construction. Whenever any word is used herein
in one gender, it shall be construed to include the other gender, and any word
used in the singular shall be construed to include the plural in any case in
which it would apply and vice versa.
(i) PAYMENTS AND EXERCISE OF RIGHTS AFTER DEATH. Any amounts payable
hereunder after the Executive's death shall be paid to the Executive's
designated beneficiary or beneficiaries, whether received as a designated
beneficiary or by will or the laws of descent and distribution. The Executive
may designate a beneficiary or beneficiaries for all purposes of this Agreement,
and may change at any time such designation, by notice to the Company making
specific reference to this Agreement. If no designated beneficiary survives the
Executive or the Executive fails to designate a beneficiary for purposes of this
Agreement prior to his death, all amounts
16
thereafter due hereunder shall be paid, as and when payable, to his spouse, if
she survives the Executive, and otherwise to his estate.
(j) CONSULTATION WITH COUNSEL. The Executive acknowledges that he
has had a full and complete opportunity to consult with counsel or other
advisers of his own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has not made any
representations or warranties to the Executive concerning the terms,
enforceability and implications of this Agreement other than as are reflected in
this Agreement.
(k) WITHHOLDING. Any payments provided for in this Agreement shall
be paid net of any applicable income tax withholding required under federal,
state or local law.
(l) CONSUMER PRICE INDEX. For purposes of this Agreement, the terms
"Consumer Price Index" or "CPI" refers to the Consumer Price Index as published
by the Bureau of Labor Statistics of the United States Department of Labor, U.S.
City Average, All Items for Urban Wage Earners and Clerical Workers
(1982-1984=100). If the CPI is hereafter converted to a different standard
reference base or otherwise revised, the determination of the CPI adjustment
shall be made with the use of such conversion factor, formula or table for
converting the CPI, as may be published by the Bureau of Labor Statistics, or,
if the bureau shall no longer publish the same, then with the use of such
conversion factor, formula or table as may be published by an agency of the
United States, or failing such publication, by a nationally recognized publisher
of similar statistical information.
(m) SURVIVAL. The provisions of Sections 8, 9, 10, 11, 12, 13, 14
and 15 shall survive the termination of this Agreement.
[Signatures to appear on the following page]
17
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date first above
written.
OPERATING PARTNERSHIP: EXECUTIVE:
MPT OPERATING PARTNERSHIP, L.P.
BY: MEDICAL PROPERTIES TRUST, LLC /s/ Xxxxxx X. XxXxxx
ITS: GENERAL PARTNER ---------------------------------------
BY: MEDICAL PROPERTIES TRUST, INC. Xxxxxx X. XxXxxx
ITS: SOLE MEMBER
Dated: March 1, 2004
--------------------------------
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------------
Title: President & CEO
-------------------------------
Dated: March 1, 2004
-------------------------------
REIT:
MEDICAL PROPERTIES TRUST, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------------
Title: President & CEO
-------------------------------
Dated: March 1, 2004
-------------------------------
18
