Exhibit 10.8
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
7th day of May, 1997 by and between Brookdale Living Communities, Inc., a
Delaware corporation ("Employer"), and Xxxxxx X. Xxxxxxxx, Xx., an individual
domiciled in the State of New Jersey ("Executive").
W I T N E S S E T H
-------------------
A. Employer is engaged primarily in the ownership, management, leasing,
marketing, acquisition, development and construction of senior and assisted
living facilities throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience, and background to the
management and operation of Employer.
C. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
D. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein set forth, and for other good and valuable consideration, Employer and
Executive hereby agree as follows:
1. Employment and Duties. During the Employment Term (as defined in
Section 2 hereof), Employer agrees to employ Executive, and Executive agrees to
be employed by Employer, as the Executive Vice President of Employer on the
terms and conditions provided in this Agreement. Executive shall conduct,
operate, manage and promote the business and business concept of Employer, and
exercise such other powers and authority as are provided by the By-laws of
Employer ("By-laws"). The Board of Directors of Employer (the "Board") or the
Chief Executive Officer may from time to time further define and clarify
Executive's duties and services hereunder or under the By-laws as Executive Vice
President (provided that in the event Executive receives inconsistent direction
from the Board and the Chief Executive Officer, Executive shall follow the
direction of the Board). Executive agrees to devote his best efforts and
substantially all of his business time, attention, energy and skill to perform
his duties as Executive Vice President of Employer. Further, during the
Employment Term, Employer agrees to recommend Executive to be elected as a
member of the Board. Executive shall not be required to relocate to Chicago,
Illinois, but agrees to travel to Chicago periodically as may be reasonably
necessary in the performance of Executive's duties hereunder.
2. Term. The initial term of this Agreement (the "Initial Term") shall
commence on the date Employer's Registration Statement on Form S-1, as amended
(No. 333-12259; the "Registration Statement") is declared effective (the
"Effective Date") and expire on March 31, 2001 (the "Scheduled Termination
Date"), provided, however, this Agreement shall automatically extend for one
year terms following the Initial Term (each a "Renewal Term", together with the
Initial Term, the "Employment Term"), unless either party shall give the other
party prior to thirty (30) days before the end of the Initial Term or any
Renewal Term, as applicable, written notice of its intention to terminate this
Agreement.
3. Compensation and Related Matters. (a) Base Salary and Signing Bonus. As
compensation for performing the services required by this Agreement during the
Employment Term, Employer shall pay to Executive an annual salary of no less
than Two Hundred Fifty Thousand Dollars ($250,000) ("Base Compensation"),
payable in accordance with the general policies and procedures for payment of
salaries to its executive personnel maintained, from time to time, by Employer
(but no less frequently than monthly), subject to withholding for applicable
federal, state, and local taxes. Increases in Base Compensation, if any, shall
be determined by the Compensation Committee of the Board (the "Committee") based
on periodic reviews of Executive's performance conducted on at least an annual
basis. In addition, upon execution of this Agreement, Employer shall pay to
Employee a signing bonus of $150,000.
(b) Bonus. In addition to Base Compensation, Executive shall have the
right to receive, and Employer agrees to distribute to Executive, a performance
bonus distribution for each calendar year during the Employment Term, commencing
on the date hereof through the end of the 1997 calendar year (the "Initial Bonus
Period") and for each calendar year thereafter, in such amounts as determined by
the three point formula delineated hereinbelow (collectively, a yearly
"Performance Bonus Distribution"); provided, however, that the aggregate
Performance Bonus Distribution for the Initial Bonus Period or for any calendar
year thereafter distributable in accordance with the provisions of this Section
3(b) shall in no event exceed 100% of the Base Compensation for the Initial
Bonus Period or such subsequent calendar year, respectively. The amount of the
Performance Bonus Distribution for the Initial Bonus Period or for each calendar
year thereafter distributable to Executive hereunder shall be determined by the
Committee based upon the achievement of Employer's annual business plan approved
by the Board for the Initial Bonus Period or such subsequent calendar year, as
applicable, as reflected in the audited financial statements of Employer
prepared in accordance with generally accepted accounting principles and
auditing standards and practices, consistently applied ("GAAP"). Prior to
issuance of the final audited financial statements for the Initial Bonus Period
or for each calendar year thereafter, as applicable, Executive shall have the
right to review and approve or challenge any calculation or determination of the
amount of the Performance Bonus Distribution distributable for the Initial Bonus
Period or for such subsequent calendar year, as applicable. Any amount of
Performance Bonus Distribution required to be distributed to Executive for the
Initial Bonus Period or for any calendar year thereafter during the Employment
Term shall be distributed by Employer to Executive during the pay period of
Employer following finalization of the audit for the Initial Bonus Period or for
such calendar year, as applicable, and final review and approval of the bonus
calculation by the Committee, and, in all events, on or before April 15 of the
year immediately following the end
2
of the Initial Bonus Period or the subsequent calendar year for which such
Performance Bonus Distribution is attributable.
The three point formula to determine a Performance Bonus Distribution
for the Initial Bonus Period or for any calendar year thereafter during the
Employment Term shall be as follows:
(i) After-Tax GAAP Earnings Per Share Plus Depreciation and
Amortization. Executive's Performance Bonus Distribution in an amount of up to
sixty percent (60%) of Executive's Base Compensation for the Initial Bonus
Period or for any given subsequent calendar year shall be based on Employer's
after-tax GAAP earnings per share on a fully-diluted basis plus depreciation and
amortization ("Actual EPS") for the Initial Bonus Period or the applicable
subsequent calendar year in relation to the earnings per share plus depreciation
and amortization set forth in Employer's Board approved annual business plan for
the Initial Bonus Period or for such subsequent calendar year ("Plan EPS") as
follows:
(A) If Actual EPS is less than 90% of Plan EPS, Executive shall
not be entitled to any Performance Bonus Distribution under this Section
3(b)(i).
(B) If Actual EPS is 120% or more of Plan EPS, Executive shall be
entitled to a Performance Bonus Distribution under this Section 3(b)(i) equal to
60% of Executive's Base Compensation for the Initial Bonus Period or for such
subsequent calendar year.
(C) If Actual EPS is equal to or greater than 90% of Plan EPS but
than less 120% of Plan EPS, then a pro rata adjustment shall be made to the
Performance Bonus Distribution to which Executive is entitled under this Section
3(b)(i) for the Initial Bonus Period or for such subsequent calendar year.
(ii) Average Common Stock Price.
Executive's Performance Bonus Distribution in an amount of up to
twenty percent (20%) of Executive's Base Compensation for the Initial Bonus
Period or for such subsequent calendar year, as applicable, shall be based on
the percentage increase (the "% Increase in Employer's Stock Price"), if any, in
the per share price of Employer's common stock from December 31 of the calendar
year immediately preceding the calendar year for which the Performance Bonus
Distribution is being calculated (or, for purposes of the Initial Bonus Period,
the increase in the per share price of Employer's common stock from the initial
public offering per share price) to December 31 of the calendar year for which
the Performance Bonus Distribution is being calculated compared to the average
percentage increase, if any, over the same period of the Standard & Poor's 500
Stock Index determined by reference to the Standard & Poor's 500 Stock Index as
set forth in the Wall Street Journal on the applicable dates (the "% Increase in
S&P 500 Stock Index") as follows:
(A) For purposes of this Section 3(b)(ii), (1) the term "Lower
Bound" shall mean the greater of 5% (3.75% for the Initial Bonus Period) or 75%
of the % Increase in the S&P
3
500 Stock Index, and (2) the term "Upper Bound" shall mean the greater of 15%
(11.25% for the Initial Bonus Period) or 125% of the % Increase in the S&P 500
Stock Index.
(B) If the % Increase in Employer's Stock Price is equal to or
less than the Lower Bound, Executive shall not be entitled to any Performance
Bonus Distribution under this Section 3(b)(ii) for the Initial Bonus Period or
for such subsequent calendar year.
(C) If the % Increase in Employer's Stock Price is equal to or
greater than the Upper Bound, Executive shall be entitled to a Performance Bonus
Distribution under this Section 3(b)(ii) equal to 20% of Executive's Base
Compensation for the Initial Bonus Period or for such subsequent calendar year.
(D) If, for the Initial Bonus Period or for such subsequent
calendar years, the % Increase in Employer's Stock Price is greater than the
Lower Bound but less than the Upper Bound, Executive shall be entitled to a
Performance Bonus Distribution under this Section 3(b)(ii) in an amount
calculated in accordance with the following formula:
Performance Bonus Distribution under Section 3(b)(ii) = (20% of
Executive's Base Compensation for the period) x (1 - (Upper Bound -
% Increase in Employer's Stock Price) / (Upper Bound - Lower Bound))
(iii) Discretionary. Executive's Performance Bonus Distribution
in an amount of up to twenty percent (20%) of Executive's Base Compensation for
the Initial Bonus Period or for any given subsequent calendar year shall be
determined at the sole discretion of the Board or the Committee based upon
achievement of such corporate or individual performance goals and objectives as
may be established or determined by the Board or the Committee from time to
time.
(c) Benefits. During the Employment Term and subject to the
limitations and alternative rights set forth in this Section 3(c), Executive and
his eligible dependents shall have the right to participate in any retirement,
pension, insurance, health, dental, life insurance or other benefit plan or
program that has been or is hereafter adopted by Employer (or in which Employer
participates), as such plans and programs may be amended or modified from time
to time by Employer, according to the terms of such plan or program with all the
benefits, rights and privileges as are enjoyed by any other senior executive
officer of Employer. If the participation of Executive would adversely affect
the qualification of a plan intended to be qualified under Section 401(a) of the
Internal Revenue Code as the same may be amended from time to time (the "Code"),
Employer shall have the right to exclude Executive from that plan in return for
his participation in (i) a nonqualified deferred compensation plan or (ii) an
arrangement providing substantially comparable benefits under a plan that is
either a qualified or nonqualified under the Code at Employer's option.
(d) Expenses. Executive shall be reimbursed, subject to Employer's
receipt of invoices or similar records as Employer may reasonably request in
accordance with its policies and
4
procedures, as such policies as and procedures may be amended or modified from
time to time by Employer, for all reasonable and necessary expenses incurred by
Executive in the performance of his duties hereunder. Without limiting the
generality of the forgoing, Employer shall reimburse Employee in accordance with
Employer's customary policies and procedures for costs of travel, lodging and
meals in connection with Employee's travel between Chicago and New York. In
addition, to the extent that Employee, with the mutual agreement of Employer,
elects to relocate to the Chicago area , Employer shall reimburse Employee for
all reasonable moving expenses incurred by Employee.
(e) Vacations. During the Employment Term, Executive shall be entitled
to vacation in accordance with Employer's practices, as such practices may be
amended or modified from time to time by Employer, provided that Executive shall
be entitled to at least three (3) weeks paid vacation in each full calendar
year. Executive may accrue unused vacation time if not used in any calendar year
or years, however, the maximum cumulative amount of vacation time that Executive
may accrue and carry over to the next year is two (2) weeks. Executive shall be
entitled to a payment for any vacation time which has accrued but has not been
used as of the date of the termination of Executive's employment with Employer,
unless Executive's employment is terminated pursuant to Section 5(a)(ii) hereof.
4. Stock Option and Stock Incentive Plan. (a) The parties hereto
acknowledge that, in connection with the execution of this Agreement, The Prime
Group, Inc. ("PGI"), a stockholder of Employer, shall grant, or cause one or
more affiliates of PGI to grant, to Executive an option to purchase 100,000
shares of common stock of Employer held by PGI or such affiliate of PGI (the
"Grant Shares"), for a purchase price of $.01 per share. The certificates
representing the Grant Shares shall be held by Winston & Xxxxxx pursuant to the
terms of a Stock Option and Deposit Agreement in the form attached hereto as
Exhibit A ("Deposit Agreement") until such time as the options for the Grant
Shares become fully vested and are exercised by Executive as provided in the
Deposit Agreement or the earlier termination of the Deposit Agreement.
(b) Employer has established a stock incentive plan (the "Stock
Incentive Plan") that will become effective prior to the completion of the
initial public offering of shares of common stock of Employer (the "Common
Stock") contemplated by the Registration Statement. The Stock Incentive Plan
initially provides, among other things, for the issuance from time to time to
certain officers, directors and other employees of Employer of up to 830,000
stock options ("Options"). On the Effective Date, Employer shall grant to
Executive 250,000 Options that will have such terms and conditions as are set
forth in the Stock Incentive Plan and the Stock Option Agreement to be entered
into between Employer and Executive.
5. Termination and Termination Benefits. (a) Termination by Employer. (i)
Without Cause. Employer may terminate this Agreement and Executive's employment
at any time for any reason or for no reason at all upon thirty (30) days' prior
written notice to Executive following notice of termination. In connection with
the termination of Executive's employment pursuant to this Section 5(a)(i),
Executive shall (A) be paid his Base Compensation and a pro rata portion of any
bonus otherwise payable to him for or with respect to the calendar year in which
such termination
5
occurs (but, to the extent not previously paid, Executive shall be entitled to
any bonuses payable to Executive in accordance with Section 3(b) hereof for or
with respect to any calendar years prior to the calendar year in which such
termination occurs) in accordance with Sections 3(a) and 3(b) hereof,
respectively (provided that, if such termination occurs prior to February 28, no
bonus shall be payable for or with respect to the calendar year in which such
termination occurs), up to the effective date of such termination, (B) be
entitled to the benefits set forth in Sections 3(c), 3(d) and 3(e) hereof up to
the effective date of such termination and (C) receive the Termination
Compensation specified in Section 5(d) hereof. (For purposes of this Agreement,
the "effective date of termination" shall mean the last day on which the
Executive is employed by Employer, which may be later than the date of the
delivery of any applicable notice of termination).
(ii) With Cause. Employer may terminate this Agreement with cause
immediately upon written notice to Executive. Employer may elect to require
Executive to continue to perform his duties under this Agreement for an
additional thirty (30) days following notice of termination. In connection with
the termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid his Base Compensation in accordance with Section
3(a) hereof up to the effective date of such termination, (B) forfeit his
entitlement to any bonus otherwise payable to him in accordance with Section
3(b) hereof for or with respect to the calendar year in which such termination
occurs (but, to the extent not previously paid, Executive shall be entitled to
any bonuses payable to Executive in accordance with Section 3(b) hereof for or
with respect to any calendar years prior to the calendar year in which such
termination occurs) and (C) be entitled to the benefits set forth in Sections
3(c), 3(d) and 3(e) hereof up to the effective date of such termination. For
purposes of this Section 5(a)(ii), "cause" shall mean (A) a finding by the Board
that Executive has materially harmed Employer, its business, assets or employees
through an act of dishonesty, material conflict of interest, gross misconduct or
willful malfeasance, (B) Executive's conviction of (or pleading nolo contendere
to) a felony, (C) Executive's failure to perform (which shall not include
inability to perform due to disability) in any material respects his material
duties under this Agreement after written notice specifying the failure and a
reasonable opportunity to cure (it being understood that if Executive's failure
to perform is not of a type requiring a single action to fully cure, then
Executive may commence the cure promptly after such written notice and
thereafter diligently prosecute such cure to completion), (D) the breach by
Executive of any of his material obligations hereunder (other than those covered
by clause (C) above) and the failure of Executive to cure such breach within
thirty (30) days after receipt by Executive of a written notice of Employer
specifying in reasonable detail the nature of the breach, or (E) Executive's
sanction (including restrictions, prohibitions and limitations agreed to under a
consent decree or agreed order) under, or conviction for violation of, any
federal or state securities law, rule or regulation (provided that in the case
of a sanction, such sanction materially impedes or impairs the ability of
Executive to perform Executive's duties and exercise Executive's
responsibilities hereunder in a satisfactory manner).
(iii) Disability. If due to illness, physical or mental
disability, or other incapacity, Executive shall fail during any four (4)
consecutive months to perform the duties required by this Agreement, Employer
may, upon thirty (30) days' written notice to Executive, either terminate this
Agreement or suspend Executive's right to any Base Compensation or Performance
6
Bonus Distributions without terminating this Agreement. In any such event,
Executive shall (A) be paid his Base Compensation in accordance with Section
3(a) hereof up to the effective date of such termination, (B) be paid a pro rata
portion through the first day of the four (4) month period of any bonus
otherwise payable to him for or with respect to the calendar year in which the
disability occurs (but, to the extent not previously paid, Executive shall be
entitled to any bonuses payable to Executive in accordance with Section 3(b)
hereof for or with respect to any calendar years prior to the calendar year in
which such termination occurs) in accordance with Section 3(b) hereof (provided
that, if such disability occurs prior to February 28, no bonus shall be payable
for or with respect to the calendar year in which such disability occurs) and
(C) be entitled to the benefits set forth in Sections 3(c) hereof (or the after-
tax cash equivalent) up to the effective date of such termination, and be
entitled to the benefits set forth in Sections 3(d) and 3(e) hereof up to the
date of such disability. In the event Employer terminates the Agreement,
Executive shall receive the Termination Compensation specified in Section 5(d)
hereof. In the event Employer elects to suspend Executive's right to Base
Compensation and Performance Bonus Distributions, at such time as Executive is
able to resume the duties required under this Agreement, Executive shall be
entitled to receive Base Compensation and Performance Bonus Distributions from
the date Executive commences the performance of such duties following the
disability in accordance with the terms and provisions of this Agreement. This
Section 5(a)(iii) shall not limit the entitlement of Executive, his estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy which is maintained by
Employer for Executive's benefit. For purposes of this Agreement, the "date of
disability" shall mean the first day of the consecutive period during which
Executive fails to perform the duties required by this Agreement due to illness,
physical or mental disability or other incapacity.
(b) Termination by Executive. (i) After Change of Control. Executive
may terminate this Agreement upon thirty (30) days' written notice to Employer
following any "change of control" of Employer and a resulting "diminution
event", each as defined below, but in no event later than two years after the
change of control event. Executive shall continue to perform, at the election of
Employer, his duties under this Agreement for an additional thirty (30) days
following notice of termination. In such event, Executive shall (A) be paid his
Base Compensation and a pro rata portion of any bonus otherwise payable to him
for or with respect to the calendar year in which such termination occurs (but,
to the extent not previously paid, Executive shall be entitled to any bonuses
payable to Executive in accordance with Section 3(b) hereof for or with respect
to any calendar years prior to the calendar year in which such termination
occurs) in accordance with Sections 3(a) and 3(b) hereof, respectively (provided
that, if such termination occurs prior to February 28, no bonus shall be payable
for or with respect to the calendar year in which such termination occurs), up
to the effective date of such termination, (B) be entitled to the benefits set
forth in Sections 3(c), 3(d) and 3(e) hereof up to the effective date of such
termination and (C) receive the Termination Compensation specified in Section
5(d) hereof. For purposes of this Agreement, in the event Employer defaults in
its obligation under Section 9 hereof and, as a consequence thereof, Executive's
employment with Employer (or Employer's successor or assign) terminates, such
termination shall be deemed to be a termination under this Section 5(b)(i).
7
For purposes of this Section 5(b)(i), (A) a "change of control" of Employer
shall be deemed to have occurred if: (1) any person (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), including a "group" as defined in Section 13(d)(3) of the
Exchange Act (but excluding The Prime Group, Inc. or any of its affiliates or
any group in which The Prime Group, Inc. or any of its affiliates has a
significant interest and excluding a trustee or other fiduciary holding
securities under an employee benefit plan of Employer), becomes the beneficial
owner of shares of common stock of Employer having at least fifty percent (50%)
of the total number of votes that may be cast for the election of directors of
Employer; (2) the merger or other business combination of Employer, sale of all
or substantially all of Employer's assets or combination of the foregoing
transactions (a "Transaction"), other than a Transaction immediately following
which the shareholders of Employer immediately prior to the Transaction continue
to have a majority of the voting power in the resulting entity (excluding for
this purpose any shareholder, other than The Prime Group, Inc. and its
affiliates, owning directly or indirectly more than ten percent (10%) of the
shares of the other company involved in the Transaction); or (3) within any
twenty-four (24) month period beginning on or after the date hereof, the persons
who were directors of Employer immediately before the beginning of such period
(the "Incumbent Directors") shall cease to constitute at least a majority of the
Board or a majority of the board of directors of any successor to Employer,
provided that, any director who was not a director as of the date hereof shall
be deemed to be an Incumbent Director if such director was elected to the Board
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually or by
prior operation of this provision, unless such election, recommendation or
approval was the result of an actual or threatened election contest of the type
contemplated by Regulation 14a-11 promulgated under the Exchange Act or any
successor provision; and (B) a "diminution event" shall mean any material
diminution in (1) the duties and responsibilities of Executive (other than a
mere title change, unless the new title is not Chief Executive Officer, Chief
Operating Officer, Chairman or President) or (2) the compensation package for
Executive.
(ii) Without Good Reason. Executive may terminate this Agreement
and his employment at any time for any reason or for no reason at all upon
thirty (30) days' written notice to Employer, during which period Executive
shall continue to perform his duties under this Agreement if Employer so elects.
In connection with the termination of Executive's employment pursuant to this
Section 5(b)(ii), Executive shall (A) be paid his Base Compensation in
accordance with Section 3(a) hereof up to the effective date of such
termination, (B) forfeit his entitlement to any bonus otherwise payable to him
in accordance with Section 3(b) hereof for or with respect to the calendar year
in which such termination occurs (but, to the extent not previously paid,
Executive shall be entitled to any bonuses payable to Executive in accordance
with Section 3(b) hereof for or with respect to any calendar years prior to the
calendar year in which such termination occurs) and (C) be entitled to the
benefits set forth in Sections 3(c), 3(d) and 3(e) hereof up to the effective
date of such termination.
(c) Death. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate on the date of Executive's death. In such event,
Executive shall (A) be paid his Base Compensation and a pro rata portion of any
bonus otherwise payable to him for or
8
with respect to the calendar year in which such death occurs (but, to the extent
not previously paid, Executive shall be entitled to any bonuses payable to
Executive in accordance with Section 3(b) hereof for or with respect to any
calendar years prior to the calendar year in which such death occurs) in
accordance with Sections 3(a) and 3(b) hereof, respectively (provided that, if
such death occurs prior to February 28, no bonus shall be payable for or with
respect to the calendar year in which such death occurs), up to the date of such
death, and (B) be entitled to the benefits set forth in Sections 3(c) (or the
after-tax cash equivalent), 3(d) and 3(e) hereof up to the date of such death.
This Section 5(c) shall not limit the entitlement of Executive, his estate or
beneficiaries under any insurance or other benefits plan or policy which is
maintained by Employer for Executive's benefit.
(d) Termination Compensation. In the event of a termination of this
Agreement pursuant to Section 5(a)(i), 5(a)(iii) or 5(b)(i) hereof, Employer
shall pay to Executive, within thirty (30) days of termination, an amount in one
lump sum ("Termination Compensation") equal to (i) in the case of a termination
pursuant to Section 5(a)(i) or 5(a)(iii) hereof, Executive's annual Base
Compensation as of the effective date of such termination, or (ii) in the case
of a termination pursuant to Section 5(b)(i) hereof, two times (A) the average
annual Base Compensation paid or payable to Executive for or with respect to the
two full calendar years immediately preceding the calendar year in which the
date of termination occurs, plus (B) the average annual Performance Bonus
Distribution paid or payable to Executive for or with respect to the two full
calendar years immediately preceding the calendar year in which the date of
termination occurs. For purposes of calculating Employee's Termination
Compensation pursuant to clause (ii) above, if the termination takes place prior
to December 31, 1999, the Termination Compensation for any applicable calendar
year in which the termination takes place shall be determined as follows:
(1) if the termination takes place on or prior to December 31,
1997, the full Termination Compensation described in clause (d)(ii) above shall
be deemed to be 350% of Executive's Base Compensation for the Initial Bonus
Period;
(2) if the termination takes place after December 31, 1997 but on
or prior to December 31, 1998, the Performance Bonus Distribution component of
the Termination Compensation calculation described in clause (d)(ii) above shall
be deemed to be two times the average of (A) the amount of the Performance Bonus
Distribution paid to Executive or to which Executive is entitled for the Initial
Bonus Period pursuant to Section 3(b) hereof and (B) the greater of (1) 75% of
Executive's Base Compensation for the 1998 calendar year or (2) 133% the
Performance Bonus Distribution paid to Executive or to which Executive is
entitled for the Initial Bonus Period pursuant to Section 3(b) hereof; or
(3) if the termination takes place after December 31, 1998 but on
or prior to December 31, 1999, the Performance Bonus Distribution component of
the Termination Compensation calculation described in clause (d)(ii) above shall
be deemed to be two times the average of (A) 133% of the Performance Bonus
Distribution paid to Executive or to which Executive is entitled for the Initial
Bonus Period pursuant to Section 3(b) hereof and (B) the Performance Bonus
Distribution paid to Executive or to which Executive is entitled for the 1998
calendar year pursuant to Section 3(b) hereof.
9
6. Covenants of Executive.
(a) No Conflicts. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts his
acceptance of this Agreement and the performance of his duties with Employer
hereunder.
(b) Non-Competition. In return for the performance of the management
duties described in Section 1 hereof, during the Employment Term and for a
period of two years thereafter in the event of the termination of this Agreement
pursuant to the provision of Section 5(b) (ii) hereof or one year thereafter in
the event of the termination of this Agreement pursuant to the provisions of
Sections 5(a)(ii), 5(a)(iii) or 5(b)(i) hereof, Executive shall not, directly or
indirectly, in any capacity whatsoever, either on his own behalf or on behalf of
any other person or entity with whom he may be employed or associated, own any
interest in, participate or engage in the day-to-day supervision, management,
development, marketing or operation of any senior, assisted living or semi-acute
care facilities or such other business as Employer may be engaged in as of the
date of the applicable Section 5 termination event (the "Business") which is
competitive with any of Employer's facilities. For purposes hereof, a facility
will be deemed competitive with one of Employer's facilities if such facility is
located within five (5) miles of a facility owned, operated or managed by
Employer or within five (5) miles of a facility which Employer is developing or
with respect to which Employer has signed a letter of intent or term sheet or
binding contract for the acquisition, development or management thereof dated on
or prior to the date of termination. Furthermore, for a period of two years
after any applicable Section 5 termination event, Executive shall not, directly
or indirectly, solicit, attempt to hire or hire any employee of Employer.
Notwithstanding the foregoing, nothing herein shall prohibit Executive from
owning 5% or less of any securities of a competitor engaged in the same Business
if such securities are listed on a nationally recognized securities exchange or
traded over-the-counter on the National Association of Securities Dealers
Automated Quotation System or otherwise.
(c) Non-Disclosure. During the Employment Term and for a period of two
years after the expiration or termination of this Agreement for any reason,
Executive shall not disclose or use, except in the pursuit of the Business for
or on behalf of Employer, any Trade Secret (as hereinafter defined) of Employer,
whether such Trade Secret is in Executive's memory or embodied in writing or
other physical form. For purposes of this Section 6(c), "Trade Secret" means any
information which derives independent economic value, actual or potential, with
respect to Employer from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use and is the subject of efforts to maintain its secrecy
that are reasonable under the circumstances, including, but not limited to,
trade secrets, customer lists, sales records and other proprietary commercial
information. Said term, however, shall not include general "know-how"
information acquired by Executive during the course of his service which could
have been obtained by him from public sources without the expenditure of
significant time, effort and expense which does not relate to Employer.
(d) Return of Documents. Upon termination of his services with
Employer, Executive shall return all originals and copies of books, records,
documents, customer lists, sales
10
materials, tapes, keys, credit cards and other tangible property of Employer
within Executive's possession or under his control.
(e) Equitable Relief. In the event of any breach by Executive of any
of the covenants contained in this Section 6, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.
(f) Acknowledgment. Executive acknowledges that he will be directly
and materially involved as a senior executive in all important policy and
operational decisions of Employer. Executive further acknowledges that the scope
of the foregoing restrictions has been specifically bargained between Employer
and Executive, each being fully informed of all relevant facts. Accordingly,
Executive acknowledges that the foregoing restrictions of Section 6 are fair and
reasonable, are minimally necessary to protect Employer, its other stockholders
and the public from the unfair competition of Executive who, as a result of his
performance of services on behalf of Employer, will have had unlimited access to
the most confidential and important information of Employer, its business and
future plans. Executive furthermore acknowledges that no unreasonable harm or
injury will be suffered by him from enforcement of the covenants contained
herein and that he will be able to earn a reasonable livelihood following
termination of his services notwithstanding enforcement of the covenants
contained herein.
7. Prior Agreements. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. Assignment. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by him shall be void. Employer may assign all or any of its rights
hereunder provided that substantially all of the assets of Employer are also
transferred to the same party.
9. Successor to Employer. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all the business and/or assets of Employer, as the case may
be, by agreement in form and substance satisfactory to Executive in Executive's
sole discretion, expressly, absolutely and unconditionally to assume and agree
to perform this Agreement in the same manner and to the same extent that
Employer would be required to perform it if no such succession or assignment had
taken place. Any failure of Employer to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to Executive hereunder, all such amounts,
unless otherwise provided herein, shall be
11
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there be no such designee, to Executive's
estate.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if personally delivered, sent by
confirmed facsimile, courier or by certified mail, postage or delivery charges
prepaid, to the following addresses:
(a) if to Executive, to:
Xxxxxx X. Xxxxxxxx, Xx.
00 Xxxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
(b) if to Employer, to:
Brookdale Living Communities, Inc.
Xxxxx 0000
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
Brookdale Living Communities, Inc.
Xxxxx 0000
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile: (000) 000-0000
and to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Facsimile: (000)000-0000
Any notice, claim, demand, request or other communication given as provided in
this Section 10, if delivered personally, shall be effective upon delivery; if
given by facsimile, shall be effective one (1) business day after transmission
has been confirmed (which confirmation may be machine generated); and if given
by courier, shall be effective one (1) business day after deposit with the
12
courier if next day delivery is guaranteed; and if given by certified mail,
shall be effective three (3) business days after deposit in the mail. Either
party may change the address at which it is to be given notice by giving written
notice to the other party as provided in this Section 10.
11. Amendment. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. Waiver of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.
13. Severability. Employer and Executive each expressly agree and contract
that it is not the intention of either party to violate any public policy,
statutory or common law, and that if any covenant, sentence, paragraph, clause
or combination of the same of this Agreement (a "Contractual Provision") is in
violation of the law of any state where applicable, such Contractual Provision
shall be void in the jurisdictions where it is unlawful, and the remainder of
such Contractual Provision, if any, and the remainder of this Agreement shall
remain binding on the parties such that such Contractual Provision shall be
binding only to the extent that such Contractual Provision is lawful or may be
lawfully performed under then applicable laws. In the event that any part of any
Contractual Provision of this Agreement is determined by a court of competent
jurisdiction to be overly broad thereby making the Contractual Provision
unenforceable, the parties hereto agree, and it is their desire, that such court
shall substitute a judicially enforceable limitation in its place, and that the
Contractual Provision, as so modified, shall be binding upon the parties as if
originally set forth herein.
14. Indemnification. Executive shall indemnify Employer for any and all
consequential damages, costs and expenses resulting from any of his acts or
omissions that constitute bad faith, willful or intentional conduct that cause
harm to Employer's business or reputation. Executive also shall indemnify
Employer for any and all consequential damages, costs and expenses resulting
from his acts of omission constituting reckless disregard of his duties to
Employer following notice thereof by Employer after it becomes aware of such
conduct and Executive's failure to so cure within thirty (30) days.
15. Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
[signature page follows]
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
EMPLOYER:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Title: President
---------------------------
/s/ Xxxxxx X. Xxxxxxxx, Xx.
----------------------------------
Xxxxxx X. Xxxxxxxx, Xx.
14
