Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") dated as of March 22, 2000, is
entered between Meditrust Corporation (the "COMPANY") and Xxxxxxx X. Xxxx (the
"EXECUTIVE").
WHEREAS, the Company and the Executive wish to enter into an employment
agreement whereby the Executive will be employed by the Company in accordance
with the terms and conditions stated below;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Executive shall serve as the President and Chief
Executive Officer of the Company. The Company will also use its best efforts to
assure the Executive's election to the Board of Directors of the Company. The
Executive hereby accepts such employment. The Executive agrees to devote
substantially all of his time and efforts to promoting the interests of the
Company.
1.2 DUTIES AND RESPONSIBILITIES. Subject to the supervision of and
direction by the Board of Directors of the Company, the Executive shall (a)
perform such duties as are customarily associated with the position of President
and Chief Executive Officer, and (b) be responsible, together with other senior
executives of the Company, for the implementation of the operating plan and
budget of the Company. The Executive shall also have oversight of the lodging
properties of Meditrust Operating Company and is expected to oversee the
disposition of the Company's healthcare assets and the eventual transition of
the Company into a lodging company.
1.3 BASE OF OPERATION. The Executive's principal base of operation for the
performance of his duties and responsibilities under this Agreement shall be the
offices of the Company in Dallas, Texas.
ARTICLE II
TERM
2.1 TERM. The term of this Agreement (the "TERM") shall commence on or
before May 22, 2000, and shall continue for a period of THREE YEARS from the
commencement date hereof. The Term and this Agreement will be renewed
automatically thereafter for successive one-year terms unless 6 months notice of
non-renewal is given by either party to the other. Regardless of the term
remaining on this Agreement determined as provided above, upon the occurrence of
a Change of Control of the Company, the Term of this Agreement shall not expire
until the later of the end of the
remaining term then in effect or two years from the date of such Change of
Control. The Executive shall use his best efforts to commence his employment by
April 17, 2000 consistent with any other employment obligations that he may
have.
ARTICLE III
COMPENSATION AND EXPENSES
3.1 SALARY AND BENEFITS. As compensation and consideration for the
performance by the Executive of his obligations under this Agreement, the
Executive shall be entitled to the following (subject, in each case, to the
provisions of Article V hereof):
(a) The Company shall pay the Executive a base salary, payable in
accordance with the ordinary payment procedures of the Company and subject to
such withholdings and other ordinary employee deductions as may be required by
law. The total base salary paid to the Executive for the first year of this
Agreement shall be $800,000. The base salary to be paid the Executive during the
Term for subsequent years shall be reviewed by the Company on an annual basis,
but in no event shall such base salary be less than $800,000 per annum.
(b) The Executive shall participate during the Term in the annual
cash bonus plan maintained by the Company, subject to the goals and criteria
established by the Compensation Committee of the Company from time to time. For
the year 2000, the Company shall pay the Executive an end-of-year bonus of no
less than the pro rata amount of $800,000, based on the number of days worked in
2000, payable in accordance with the ordinary payment procedures of the Company
and subject to such withholdings and other ordinary employee deductions as may
be required by law. Executive's base target bonus opportunity for each fiscal
year for satisfaction of goals for such fiscal year shall be 100 percent of
Executive's base salary ("Base Target"). In the event Executive significantly
exceeds annual goals for any fiscal year, he may receive cash bonus up to 200
percent of Executive's base salary.
(c) During the Term the Company shall pay Executive $25,000 per annum
in lieu of furnishing him coverage under life insurance and long-term disability
plans. If the Executive so elects by written notice provided to the Company, the
obligations of the Company set forth in the first sentence of this clause (c)
shall terminate as of 30 days after the date of the notice and from that date,
during the Term, the Executive shall participate in such life insurance and
long-term disability plans as may be maintained from time to time during the
Term by the Company for the benefit of the employees of the Company, to the
extent and in such manner available to other executive officers of the Company
and subject to the terms and provisions of such plans and programs.
(d) The Executive shall participate during the Term in such
retirement, pension, health, and medical insurance plans, and in such other
employee benefit plans and programs (other than the Company's life insurance and
long-term disability plans, described in paragraph (c) above), as may be
maintained from time to time during the Term by the Company for the benefit of
the
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employees of the Company, in each case to the extent and in such manner
available to other executive officers of the Company and subject to the terms
and provisions of such plans or programs.
(e) The Executive shall be entitled to an annual paid vacation period
(but not necessarily consecutive vacation weeks) during the Term, in accordance
with the Company's employee benefit policies, but in no event less than four
weeks per year.
3.2 SIGN UP BONUS. Upon execution of this agreement the Company shall pay
Executive $600,000 subject to such withholdings and other ordinary employee
deductions as may be required by law.
3.3 EXPENSES. The Company will reimburse the Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder during the Term subject, however, to the Company's policies
relating to business-related expenses as in effect from time to time during the
Term. The Company will reimburse the Executive, in accordance with the Company's
relocation policy, for all reasonable and normal costs related to relocating his
permanent residence from Hilliard, Ohio to Dallas, Texas, "grossed up" to the
greater amount so that the net benefit to Executive after taxes equals his
actual costs relating to such relocation.
3.4 STOCK COMPENSATION. As compensation and consideration for the
performance by the Executive of his obligations under this Agreement, the
Executive shall be entitled to the following (subject, in each case, to the
provisions of Article V hereof):
(a) PERFORMANCE SHARES. The Company shall award to the Executive
500,000 shares of the common stock of the Company and shares of the common stock
of The Meditrust Operating Company which are paired for trading purposes
("Paired Shares") in accordance with the terms described below and the Company's
1995 Share Award Plan (the "Award" of the "Performance Shares" under the
"Plan"):
(i) the Performance Shares shall be deemed issued as of the
first day of the Term upon payment of the par value thereof to the
Company. Subject to the terms of an agreement to be entered into
between the Executive and the Company related to the Award (the
"Award Agreement"), the Performance Shares shall vest on the third
anniversary of the grant date or, if sooner, the first business day
after 30 consecutive days on which the closing price (the "30-Day
Closing Price") of a Paired Share equals or exceeds three times the
closing price for a Paired Share on March 22, 2000 (the "Benchmark
Share Price").
(ii) the Executive shall receive all voting rights and
dividends paid with respect to unvested Performance Shares from the
date of issuance so long as the Executive is an employee of the
Company and the Executive shall have no obligation to return any
funds or other property received as dividends or otherwise with
respect to the Performance Shares, regardless of whether such shares
are vested.
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(iii) upon the consummation of a Change in Control, as defined
herein,
(1) (A) if the Company is the surviving entity and
remains a public company, the Performance Shares shall remain
in effect; and (B) if the Company is not the surviving entity
and the common stock of the surviving entity is publicly
traded, all unvested Performance Shares shall be converted into
shares of common stock of the surviving entity worth, as of the
date of the Change in Control, the amount that Executive's
unvested Performance Shares were worth immediately prior to the
Change in Control (based on the public market price paid by the
acquiring company per share). The replacement unvested
Performance Shares shall continue to vest at least as soon as
they would have vested had there been no Change in Control;
(2) if the Performance Shares do not remain in effect
after a Change in Control or the successor entity does not
provide substitute Performance Shares as provided above, all
unvested Performance Shares shall become fully vested.
(b) STOCK OPTIONS. On the first day of the Term, the Company shall
award to the Executive options to purchase 2,400,000 Paired Shares (the
"Options") subject to the Award Agreement which shall include the following
provisions:
(i) The Option exercise price with respect to 600,000 Paired
Shares (Option A) shall be equal to one and one-half times the
Benchmark Share Price. Option A shall become exercisable in 25%
increments on each anniversary of the grant date (an "A-Annual
Tranche") so that Option A is fully exercisable on the fourth
anniversary of the grant; provided, however, at the first such time
as the 30- Day Closing Price exceeds the exercise price for Option A,
the Paired Shares subject to Option A shall accelerate and become
exercisable as to 20% of the original number of Paired Shares in any
A-Annual Tranche not yet fully exercisable; furthermore, at the first
such time as the 30-Day Closing Price equals or exceeds three times
the Benchmark Share Price, the Paired Shares subject to Option A
shall accelerate and become exercisable as to an additional 20% of
the original number of Paired Shares in any A-Annual Tranche not yet
fully exercisable.
(ii) The Option exercise price with respect to 600,000 Paired
Shares (Option B) shall be equal to two times the Benchmark Share
Price. Option B shall become exercisable in 25% increments on each
anniversary of the grant date (a "B-Annual Tranche") so that Option B
is fully exercisable on the fourth anniversary of the grant;
provided, however, at the first such time as the 30-Day Closing Price
exceeds the exercise price for Option B, the Paired Shares subject to
Option B shall accelerate and become exercisable as to 20% of the
original number of Paired Shares in any B-Annual Tranche not yet
fully exercisable; furthermore, at the first such time
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as the 30-Day Closing Price equals or exceeds three times the
Benchmark Share Price, the Paired Shares subject to Option B shall
accelerate and become exercisable as to an additional 20% of the
original number of Paired Shares in any B-Annual Tranche not yet
fully exercisable.
(iii) The Option exercise price with respect to 1,200,000
Paired Shares (Option C) shall be equal to two and one-half times the
Benchmark Share Price. Option C shall become exercisable in 25%
increments on each anniversary of the grant date (the "Annual
Tranche") so that Option C is fully exercisable on the fourth
anniversary of the grant; provided, however, at the first such time
as the 30-Day Closing Price exceeds the exercise price for Option C,
the Paired Shares subject to Option C shall accelerate and become
exercisable as to 20% of the original number of Paired Shares in any
C-Annual Tranche not yet fully exercisable; furthermore, at the first
such time as the 30-Day Closing Price equals or exceeds three times
the Benchmark Share Price, the Paired Shares subject to Option C
shall accelerate and become exercisable as to an additional 20% of
the original number of Paired Shares in any C-Annual Tranche not yet
fully exercisable.
(iv) Upon the consummation of a Change in Control, as defined
herein:
(1) (A) if the Company is the surviving entity and
remains a public company, the Options shall remain in effect;
and (B) if the Company is not the surviving entity and the
common stock of the surviving entity is publicly traded, the
surviving entity shall issue to the Executive replacement
options for at least the number of shares of common stock of
the surviving entity worth, as of the date of the Change of
Control, the amount that Executive's unexercised Paired Shares
subject to each Option were worth immediately prior to the
Change of Control (based on the public market price paid by the
acquiring company per share), which replacement options shall
vest proportionally at least as soon as the unvested portion of
each of Option A, B and C would have vested had there been no
Change in Control. The exercise price of the replacement
options shall be determined by multiplying the exercise price
of each Option by the ratio of the number of unexercised Paired
Shares subject to each Option divided by the number of shares
subject to the replacement options issued to the Executive by
the surviving company in respect of each Option. In either
event, 20% of the original number of Paired Shares subject to
each Option in any Annual Tranche which had not become fully
exercisable as of the date of the Change in Control shall
accelerate and become exercisable and the consideration
realized by the shareholders of the Company for each Paired
Share shall be deemed to be the 30-Day Closing Price for
purposes of this Section 3.4;
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(2) if the Options do not continue after a Change in
Control or the successor entity does not provide substitute
options as provided above, then the portion of each of Option
A, B and C that is not then exercisable shall become fully
vested and exercisable immediately prior to the consummation of
the Change in Control.
(v) The Options shall have a term of 10 years.
ARTICLE IV
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. The Executive agrees to perform his duties,
responsibilities and obligations hereunder efficiently and to the best of his
ability. The Executive agrees that he will devote substantially all of his
working time, care and attention and best efforts to such duties,
responsibilities and obligations throughout the Term. The foregoing shall not be
interpreted to prohibit the Executive from serving as director or trustee of one
or more corporations or foundations (either for-profit or not-for-profit) other
than the Company. The Executive also agrees that he will not engage in any other
business activities, pursued for gain, profit or other pecuniary advantage, that
are competitive with the activities of the Company.
4.2 OTHER BUSINESS VENTURES. The Executive agrees that, so long as he is
employed by the Company, he will not own, directly or indirectly, any
controlling or substantial stock or other beneficial interest in any business
enterprise which is engaged in, or competitive with, any business engaged in by
the Company. Notwithstanding the foregoing, the Executive may own, directly or
indirectly, up to 5% of the outstanding capital stock or any business having a
class of capital stock which is traded on any national stock exchange or in the
over-the-counter market.
4.3 CONFIDENTIALITY. The Executive agrees that he will not, at any time
during or after the Term, make use of or divulge to any other person, firm or
corporation any trade or business secret, process, method or means, or any
other confidential information concerning the business or policies of the
Company, which he may have learned in connection with his employment
hereunder. For purposes of this Agreement, a "TRADE OR BUSINESS SECRET,
PROCESS, METHOD OR MEANS, OR ANY OTHER CONFIDENTIAL INFORMATION" shall mean
and include written information treated as confidential or as a trade secret
by the Company. The Executive's obligation under this Section 4.3 shall not
apply to any information which (a) is known publicly; (b) is in the public
domain or hereafter enters the public domain without the fault of the
Executive; (c) is known to the Executive prior to his receipt of such
information from the Company, as evidenced by written records of the
Executive; or (d) is hereafter disclosed to the Executive by a third party
not under an obligation of confidence to the Company. The Executive agrees
not to remove from the premises of the Company, except as an employee of the
Company in pursuit of the business of the Company or except as specifically
permitted in writing by the Company, any document or other object containing
or reflecting any such confidential information. The Executive recognizes
that all such documents and objects, whether
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developed by him or by someone else, will be the sole and exclusive property
of the Company. Upon termination of his employment hereunder, the Executive
shall forthwith deliver to the Company all such confidential information,
including without limitation all lists of lessees, customers, correspondence,
accounts, records and any other documents or property made or held by him or
under his control in relation to the business or affairs of the Company, and
no copy of any such confidential information shall be retained by him. The
provisions of this Section 4.3 shall survive any termination of this
Agreement.
4.4 NONCOMPETITION. During the period commencing on the date hereof and
ending on the first anniversary of the date on which the Executive's employment
is terminated, whether before or after the Term the Executive shall not,
directly or indirectly, whether as an employee, consultant, independent
contractor, partner, joint venturer or otherwise, (A) solicit or induce, or in
any manner attempt to solicit or induce, any person employed by, or as agent of,
the Company to terminate such person's employment or agency, as the case may be,
with the Company or (B) divert, or attempt to divert, any person, concern, or
entity from doing business with the Company (including entering into a lease),
nor will he attempt to induce any such person, concern or entity to cease being
a lessee, customer or supplier of the Company. If Executive is terminated by the
Company for other than Cause or by the Executive for Good Reason, or after a
Change of Control and Executive Termination Event, the provisions of this
Section 4.4 shall not be binding on Executive.
ARTICLE V
TERMINATION
5.1 TERMINATION BY THE COMPANY.
(a) The Company shall have the right to terminate the Executive's
employment at any time with or without "Cause". For purposes of this Agreement,
"CAUSE" shall mean that, prior to any termination the Executive shall have
committed: (i) an act of fraud, embezzlement, theft, or any other act
constituting a felony, involving moral turpitude or causing material harm,
financial or otherwise, to the Company; (ii) a demonstrably intentional and
deliberate act or failure to act (other than as a result of incapacity due to
physical or mental illness) which is committed in bad faith by the Executive,
which causes or can be expected to cause material financial injury to the
Company; or (iii) an intentional and material breach of this Agreement that is
not cured by the Executive within 30 days after written notice from the Board of
Directors specifying the breach and requesting a cure. For purposes of this
Agreement, no act, or failure to act, on the part of the Executive shall be
deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that his
action or omission was in, or not opposed to, the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for "Cause" hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Board then in office at
a meeting of the Board of Directors called and held for such purpose (after
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reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive had committed an act set forth
above and specifying the particulars thereof in detail. Nothing herein shall
limit the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(b) The end of the Term, due to the exercise by the Company of its
non-renewal right under Section 2.1, shall also constitute termination by the
Company of Executive's employment.
5.2 DEATH. In the event the Executive dies during the Term, this Agreement
shall automatically terminate, such termination to be effective on the date of
the Executive's death.
5.3 DISABILITY. In the event that the Executive shall suffer a disability
which shall have prevented him from performing satisfactorily his obligations
hereunder for a period of at least 120 consecutive days, the Company shall have
the right to terminate this Agreement, such termination to be effective upon the
giving of notice thereof to the Executive in accordance with this Agreement.
5.4 TERMINATION BY THE EXECUTIVE IF ENJOINED OR FOR GOOD REASON.
(a) If the Executive's performance of services to the Company
pursuant to this Agreement should be enjoined beyond August 18, 2000 by action
of a court of final jurisdiction which judgment is not subject to further
appeals under applicable legal proceedings, the Company may request the
Executive to resign immediately from the Company and in that event neither the
Executive nor the Company shall have any further obligations pursuant to this
Agreement. A termination pursuant to this clause shall be considered a voluntary
termination by the Executive without Good Reason.
(b) The Executive's employment may be terminated during the Term by
the Executive for Good Reason, by giving to the Company 30 days advance written
notice specifying the event or circumstance which the Executive alleges
constitutes Good Reason. Such notice of resignation will take effect, if not
revoked by the Executive, at the conclusion of such thirty-day period. For
purposes of this Agreement, the following circumstances shall constitute "GOOD
REASON" if not cured prior to the expiration of such thirty-day period:
(i) the assignment to the Executive of duties that are
materially inconsistent with the Executive's position or with his
authority, duties or responsibilities as contemplated by Sections 1.1
and 1.2 of this Agreement, or any other action by the Company or its
successor which results in a material diminution or material adverse
change in such position, authority, duties or responsibilities;
(ii) any material breach by the Company or its successor of the
provisions of this Agreement; or
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(iii) a relocation of the Executive's principal base of
operation to any location which requires Executive to increase his
daily inbound commute by more than 45 miles.
5.5 EFFECT OF TERMINATION.
(a) In the event of termination of the Executive's employment for any
reason or by reason of the Executive's death or disability, the Company shall
pay to the Executive (or his beneficiary in the event of his death) any base
salary, bonus or other compensation earned but not paid to the Executive prior
to the effective date of such termination and, other than the circumstances of
termination by the Company for Cause or by the Executive voluntarily without
Good Reason, the pro rata amount of the annual cash bonus payable under the plan
based on the Base Target bonus for the year during which such termination
occurs, based on the number of days worked during such year.
(b) In the event of termination of the Executive's employment (other
than a termination following a Change of Control as hereafter defined and
provided for) (i) by the Company other than for Cause or (ii) by the Executive
for Good Reason, the Company shall pay to the Executive, in addition to the
amounts described in Section 5.5(a) hereof, a lump sum equal to two times the
sum of Executive's base salary and Base Target bonus. Further, 20% of the
original number of Performance Shares and the Options covering 20% of the
original number of Paired Shares in each Option shall accelerate and become
vested and exercisable.
(c) In the event of the termination of the executive's employment
(other than a termination following a Change in Control as hereafter defined and
provided for) (i) by the Company other than for Cause, (ii) by the Executive for
Good Reason or (iii) on account of the Executive's death or disability, for 24
months (or, if later, the date the Executive becomes eligible for Medicare if
his employment terminates on account of disability) following the Termination
Date, the Company shall arrange to provide the Executive with health benefits
(medical and dental) substantially similar to those which the Executive was
receiving or entitled to receive immediately prior to the Termination Date. If
and to the extent that such benefits shall not or cannot be paid or provided
under any policy, plan, program or arrangement of the Company solely due to the
fact that the Executive is no longer an officer or employee of the Company, then
the Company shall pay to the Executive, his dependents and beneficiaries, the
amount of premiums that would have been incurred by the Company were the Company
able to provide such coverage through its plan, program or arrangement. Such
health benefits shall be discontinued prior to the end of the specified
continuation period if the Executive receives comparable coverage from a
subsequent employer or becomes entitled to Medicare.
5.6 TERMINATION FOLLOWING A CHANGE OF CONTROL.
(a) DEFINITIONS. As used herein, the following terms shall have the
following meanings:
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(i) Change in Control. "Change in Control" shall mean
(1) any transaction, or series of transactions,
including, but not limited to any merger, consolidation, or
reorganization, which results when any "person" as defined in
Section 3(a)(9) of the Exchange Act and as used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act, but excluding the Company,
any subsidiary of the Company, and any employee benefit plan
sponsored or maintained by the Company or any subsidiary of the
Company, directly or indirectly, becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities
of the Company representing more than 50% of the combined
voting power of the Company's then outstanding securities;
(2) when, during any period of 24 consecutive months the
individuals who, at the beginning of such period, constitute
the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority of the
Board; provided, however, that a director who was not a
director at the beginning of such period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected 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 (because they were directors at the beginning
of such 24-month period) or by prior operation of this
Section; or
(3) when the stockholders of the Company approve a plan
of complete liquidation of the Company; or an agreement for the
sale or disposition of substantially all the Company's assets
other than a sale of the Company's health care assets; or a
merger, consolidation, or reorganization of the Company in
which stockholders of the Company immediately prior to the
transaction own less than 50% of the combined voting power of
the surviving entity.
(ii) "Termination Date" shall mean the date on which
Executive's employment with the Company is terminated.
(b) TERMINATION BY COMPANY. Following a Change in Control, the
Executive's employment may be terminated by Company ("Company Termination
Event") and the Executive shall not be entitled to the severance benefits
provided under Section 5.7, provided that Executive's termination occurs as a
result of one or more of the following events:
(i) The Executive's death;
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(ii) The Executive's disability, provided Executive actually
begins to receive disability benefits pursuant to the long-term
disability plan in effect for senior executives of the Company
immediately prior to the Change in Control; or
(c) EXECUTIVE TERMINATION EVENT. If at any time during the two year
period commencing on the date of a Change in Control, the Company or Executive
terminates his employment following the occurrence of one or more of the
following events ("Executive Termination Event"), Executive shall be entitled to
the severance benefits provided in Section 5.7 below:
(i) Any termination by the Company of Executive's employment
during such two year period for any reason, other than for Cause, as
a result of Executive's death, or by reason of the Executive's
disability and the actual receipt of disability benefits in
accordance with Section 3.1(c) hereof; or
(ii) Termination by the Executive of his employment with the
Company at any time within two years after the Change in Control upon
the occurrence of any of the following events:
(1) The Company's failure to elect, re-elect or otherwise
maintain the Executive in the office or position in the Company
which the Executive held immediately prior to a Change in
Control, or the removal of the Executive as a Director of the
Company (or any successor thereto) if the Executive was a
Director of the Company immediately prior to the Change in
Control other than a change to Co-Chief Executive Officer or
Vice-Chief Executive Officer;
(2) A significant, adverse change (increase or decrease)
in the nature or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with the
Company which the Executive held immediately prior to the
Change in Control, or a reduction in the aggregate of the
Executive's base pay or annual incentive bonus opportunity (and
relative level of goal achievement) in which the Executive
participated immediately prior to the Change in Control, or the
termination of the Executive's rights to any employee benefits
to which he was entitled immediately prior to the Change in
Control, or a reduction in scope or value of such benefits,
without prior written consent of the Executive, any of which is
not remedied within 10 calendar days after receipt by the
Company of a written notice from the Executive of such change,
reduction, or termination, as the case may be;
(3) The Company or its successor becomes a subsidiary of
another company and the Executive is neither the President and
Chief Executive
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Officer, the Co-Chief Executive Officer or Vice-Chief
Executive Officer of the ultimate parent company;
(4) The Company shall relocate its principal executive
offices, or require the Executive to have his principal
location of work changed, to any location which is in excess of
45 miles from the location thereof immediately prior to the
Change in Control; or
(5) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company
or any successor thereto.
5.7 SEVERANCE BENEFITS. In the event Executive's employment is terminated
within two years of the date of a Change in Control as a result of an Executive
Termination Event, Executive shall be entitled to the benefits set forth below.
All amounts payable under this Section 5.7(a) (b) and (c) shall be paid to
Executive in one lump sum within 45 days after his termination of employment.
(a) The Company shall pay to Executive an amount equal to three times
the average of his annual base salary for the three fiscal years (or such fewer
fiscal years that Executive is actually employed by the Company) preceding the
Change in Control and three times the average of his cash bonuses paid with
respect to the last two fiscal years (or such fewer fiscal years that Executive
is actually employed by the Company) preceding the Change in Control.
(b) The Company shall pay Executive his full base salary through
Executive's Termination Date. The Company shall also pay Executive an amount
equal to the pro rata amount of the maximum Base Target bonus award available to
the Executive under the bonus plan during the year of termination, based on the
number of days of the year elapsed prior to the Termination Date.
(c) All unvested equity, including Performance Shares and the
Options, shall become fully vested and exercisable.
(d) The Company will provide outplacement assistance from a service
selected by the Executive for a period of one year from the Termination Date.
All associated costs will be paid by the Company, up to a maximum of $50,000.
(e) The Executive may elect, within 120 calendar days following the
Termination Date, to have the Company purchase the Executive's house at its then
current market value (which shall be established by taking the average of three
appraisals from real estate firms, one selected by the Executive, one selected
by the Company, and one selected by the two selected firms, with the Company
paying the costs of the appraisals). Such purchase shall occur on a date
specified by the Executive but in any event within six months following the
Executive's election to have the house purchased by the Company.
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(f) For the balance of the Term, the Company shall arrange to provide
the Executive with health benefits (medical and dental) substantially similar to
those which the Executive was receiving or entitled to receive immediately prior
to the Termination Date. If and to the extent that such benefits shall not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company solely due to the fact that the Executive is no longer an officer or
employee of the Company, then the Company shall pay to the Executive, his
dependents and beneficiaries, the amount of premiums that would have been
incurred by the Company were the Company able to provide such coverage through
its plan, program or arrangement. Such health benefits shall be discontinued
prior to the end of the specified continuation period if the Executive receives
comparable coverage from a subsequent employer or becomes entitled to Medicare.
5.8 OTHER RIGHTS. A termination of the Executive's employment by the
Company pursuant to this Agreement or by the Executive shall not affect
adversely any rights which the Executive may have pursuant to any agreement,
employment contract, policy, plan, program or arrangement of the Company
providing employee benefits, which rights shall be governed by the terms of such
employee benefit plan.
ARTICLE VI
INDEMNIFICATION
The Company will indemnify the Executive to the fullest extent that would
be permitted by law (including a payment of expenses in advance of final
disposition of a proceeding) as in effect at the time of the subject act or
omission, or by the charter or by-laws of the Company as in effect at such time,
or by the terms of any indemnification agreement between the Company and the
Executive, whichever affords greatest protection to the Executive, and the
Executive shall be entitled to the protection of any insurance policies the
Company may elect to maintain generally for the benefit of its officers or,
during the Executive's service in such capacity, directors (and to the extent
the Company maintains such an insurance policy or policies, in accordance with
its or their terms to the maximum extent of the coverage available for any
company officer or director); against all costs, charges and expenses whatsoever
incurred or sustained by the Executive (including but not limited to any
judgment entered by a court of law) at the time such costs, charges and expenses
are incurred or sustained, in connection with any action, suit or proceeding to
which the Executive may be made a party by reason of his being or having been an
officer or employee of the Company, or serving as a director, officer or
employee of an affiliate of the Company, at the request of the Company, other
than any action, suit or proceeding brought against the Executive by or on
account of his breach of the provisions of an employment agreement with a third
party that has not been disclosed by the Executive to the Company. The Executive
has disclosed to the Company that he is a party to the following agreements: (a)
an Employment Agreement dated as of September 8, 1999 with Mariner Post-Acute
Network, Inc., (b) an amended and restated Agreement dated as of August 17, 1999
with Red Roof Inns, Inc., (c) an Agreement dated January 30, 1997 with Red Roof
Inns, Inc., and (d) an Employment Agreement dated as of June 26, 1995 with Red
Roof Inns, Inc. (collectively, the "Prior Employment Agreements"). The
Executive's rights under this Section shall
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continue without time limit for so long as he may be subject to any such
liability, whether or not his term of employment may have ended.
ARTICLE VII
TAXES AND MISCELLANEOUS OTHER PROVISIONS
7.1 TAX CONSIDERATIONS. Notwithstanding anything herein to the contrary, in
the event any payments to Executive hereunder are determined by the Company to
be subject to the tax imposed by Section 4999 of the Code or any similar federal
or state excise tax, FICA tax, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties are hereinafter collectively referred to as the
"Excise Tax"), Company shall pay to Executive at the time specified in Section
4(a) above, an additional amount (the "Gross-Up Payment") such that after the
payment by Executive of all federal, state, or local income taxes, Excise Taxes,
FICA tax, or other taxes (including any interest or penalties imposed with
respect thereto) imposed upon the receipt of the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the
severance payments provided herein.
(a) For purposes of determining whether any payments to Executive
hereunder will be subject to the Excise Tax and the amount of such Excise Tax:
(i) any other payments or benefits received or to be received
by Executive in connection with a Change in Control or the
termination of employment (whether pursuant to the terms of this
Agreement or of any other plan, arrangement or agreement with
Company) shall be treated as "parachute payments" within the meaning
of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel
selected by Company and acceptable to Executive, other payments or
benefits (in whole or in part) do not constitute parachute payments
under Section 280G of the Code, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the
Code;
(ii) the amount of the severance payments which shall be
treated as subject to the Excise Tax shall be equal to the amount of
excess parachute payments within the meaning of Sections 280G(b)(1)
and (4) (after applying clause (a), above); and
(iii) the parachute value of any noncash benefits or any
deferred payment or benefit shall be determined by Company in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
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(b) If the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of employment,
Executive shall repay to Company, at the time the reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction. If the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of termination of employment, Company shall make
an additional Gross-Up Payment to Executive in respect of such excess at the
time the amount of such excess is finally determined. The Executive shall notify
the Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later that ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30 calendar day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). 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:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) 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 reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including legal and accounting 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, FICA tax or
income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this section, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim 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 claim and xxx for a refund, the
Company shall advance the amount of such
15
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from 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; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
If any such claim referred to in this Section is made by the Internal
Revenue Service and the Company does not request the Executive to contest the
claim within the 30 calendar day period following notice of the claim, the
Company shall pay to the Executive the amount of any Gross-Up Payment owed to
the Executive, but not previously paid pursuant to Section 7.1(b), immediately
upon the expiration of such 30 calendar day period. If any such claim is made by
the Internal Revenue Service and the Company requests the Executive to contest
such claim, but does not advance the amount of such claim to the Executive for
purposes of such contest, the Company shall pay to the Executive the amount of
any Gross-Up Payment owed to the Executive, but not previously paid under the
provisions of Section 7.1(b), within 5 business days of a Final Determination of
the liability of the Executive for such Excise Tax. For purposes of this
Agreement, a "Final Determination" shall be deemed to occur with respect to a
claim when (i) there is a decision, judgment, decree or other order by any court
of competent jurisdiction, which decision, judgment, decree or other order has
become final, i.e., all allowable appeals pursuant to this section have been
exhausted by either party to the action, (ii) there is a closing agreement made
under Section 7121 of the Code, or (iii) the time for instituting a claim for
refund has expired, or if a claim was filed, the time for instituting suit with
respect thereto has expired.
If, after the receipt by the Executive of an amount advanced by the Company
pursuant to this section, the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of this section) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to this section, a determination is made by the
Internal Revenue Service that the Executive is not entitled to any refund with
respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior to the expiration of 30
calendar days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.2 NO SET-OFF. There shall be no set-off or counterclaim against, or delay
in, any payment of severance benefits by the Company to Executive provided for
in this Agreement with respect to any claim against or debt or obligation of
Executive, whether arising hereunder or otherwise except for health benefits as
provided in Sections 5.5(b) or 5.7(c).
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7.3 NO MITIGATION OBLIGATION. Executive's benefits hereunder shall be
payable to him as severance pay in consideration of his services under this
Agreement. The Company hereby acknowledges that it will be difficult, and may be
impossible, for the Executive to find reasonably comparable employment following
the Termination Date. Accordingly, the parties hereto expressly agree that the
payment of the severance benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
7.4 ENFORCEMENT COSTS. Company is aware that, upon the occurrence of a
Change in Control, the Board of Directors or a shareholder of the Company, or
the Company's successor in interest, may then cause or attempt to cause Company
to refuse to comply with its obligations under this Agreement, or may cause or
attempt to cause Company to institute, or may institute litigation seeking to
have this Agreement declared unenforceable, or may take, or attempt to take,
other action to deny Executive the benefits intended under this Agreement. In
these circumstances, the purpose of this Agreement could be frustrated. It is
the intent of Company that Executive not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by litigation
or other legal action, nor be bound to negotiate any settlement of his rights
hereunder under threat of incurring such expenses because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
Executive hereunder. Accordingly, if following a Change in Control Executive
should conclude in good faith that Company has failed to comply with any of its
obligations under this Agreement or in the event that Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from Executive the benefits intended to be provided to Executive
hereunder, Company irrevocably authorizes Executive from time to time to retain
legal counsel of his choice at the expense of Company to represent Executive in
connection with the initiation or defense of any litigation or other legal
action, whether by or against Company or any director, officer, stockholder or
other person affiliated with Company. The reasonable fees and expenses of
counsel selected from time to time by Executive as provided herein shall be paid
or reimbursed to Executive by Company on a regular, periodic basis upon
presentation by Executive of a statement or statements prepared by his counsel
in accordance with its customary practices. In any action involving this
Agreement, Executive shall be entitled to prejudgment interest on any amounts
found to be due him as of the date such amounts would have been payable to
Executive pursuant to this Agreement at an annual rate of interest of 10%.
7.5 ARBITRATION. The Company and Executive hereby agree that certain issues
and/or disagreements arising in connection with this Agreement shall be settled
by arbitration. Accordingly, in the event the Company or Executive believes that
the other party has violated any provision of this Agreement, including but not
limited to any action by the Company which Executive believes would entitle
Executive to terminate his employment with severance benefits in accordance with
Section 3(b) hereof, the party alleging such violation shall notify the other
party in writing of such alleged
17
violation. In the event the party receiving such violation notice disagrees with
the position taken by the other party in such written notice, the recipient of
the violation notice may, within 20 days of receipt of such written notice,
notify the other party, in writing, that it has elected to submit such
disagreement to arbitration. Arbitration of such dispute shall be settled in
Dallas, Texas, in accordance with the then applicable rules of the American
Arbitration Association. The Company shall bear all costs associated with such
arbitration. In the event the party receiving a violation notice does not elect
to submit any issue or disagreement to arbitration within 10 days of its receipt
of the written violation notice, such party will be deemed to have accepted the
position taken in such written notice. Notwithstanding anything herein to the
contrary, neither the Company nor the Executive shall be required to arbitrate
the basis of any involuntary termination of Executive's employment with the
Company by the Company or its successor.
7.6 EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement shall
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company prior to any Change in
Control, provided, however, that any event which would constitute an Executive
Termination Event had a Change in Control occurred following the commencement of
active negotiations with a third party (which negotiations are evidenced by the
delivery of evaluation material) that ultimately results in a Change in Control
shall be deemed to be a termination or removal of the Executive by the Company
other than for Cause after a Change in Control for purposes of this Agreement.
7.7 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns, including, without limitation, any corporation or person which may
acquire all or substantially all of the Company's assets or business, or with or
into which the Company may be consolidated or merged. This Agreement shall also
inure to the benefit of, and be enforceable by, the Executive and his personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to the Executive hereunder if he had continued to
live, all such amounts shall be paid in accordance with the terms of this
Agreement to the Executive's beneficiary, devisee, legatee or other designee, or
if there is no such designee, to the Executive's estate.
7.8 NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be sufficiently given if personally delivered or if sent by telegram
or telex or by registered or certified mail, postage prepaid, with return
receipt requested, addressed:
(a) in the case of the Company, Meditrust Corporation, 000 Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000, Attention: General Counsel; and
(b) in the case of the Executive, to Xxxxxxx X. Xxxx, 360 Devil's
Bight, Xxxxxx, Xxxxxxx 00000.
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7.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement of the parties hereto with respect to the terms and conditions of the
Executive's employment during the Term and supersedes any and all prior
agreements and understandings, whether written or oral, between the parties
hereto with respect to compensation due for services rendered hereunder. This
Agreement may not be changed or modified except by an instrument in writing
signed by both of the parties hereto.
7.10 WAIVER. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof.
7.11 HEADINGS. The article and section headings herein are for convenience
of reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
7.12 GOVERNING LAW. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of Texas without
reference to the principles of conflict of laws.
7.13 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
7.14 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of the rights and obligations under this
Agreement.
7.15 SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
7.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
7.17 CORPORATE AUTHORIZATION. The Company hereby represents that the
execution, delivery and performance by the Company of this Agreement are within
the corporate powers of the Company, and that the Chairman of its Board of
Directors has the requisite authority to bind the Company hereby.
7.18 THIRD PARTY AGREEMENTS AND RIGHTS. The Executive represents to the
Company that the Executive's execution of this Agreement, the Executive's
employment with the Company and the
19
performance of Executive's proposed duties for the Company will not violate any
obligations the Executive may have to any employer, former employer or other
party (other than those obligations in the Prior Employment Agreements
previously disclosed to the Company), and Executive does not possess tangible
embodiments of non-public information belonging to or obtained from any such
previous employment or other party. Further, the Executive represents and
acknowledges that to the extent that he is under any continuing obligation under
any agreement with any employer, former employer or other party with regard to
non-solicitation, non-inducement and confidentiality, he shall not violate any
such obligation.
7.19 LITIGATION AND REGULATORY COOPERATION. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis (to be derived from
his base compensation) for requested litigation and regulatory cooperation that
occurs after his termination of employment, and reimburse Executive for all
costs and expenses incurred in connection with his performance under this
Section 7.19, including, but not limited to, reasonable attorneys' fees and
costs.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
MEDITRUST CORPORATION
By:
---------------------
Chairman of the Board
EXECUTIVE
------------------------
Xxxxxxx X. Xxxx
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