Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of this
1st day of January, 1999 by and between Meditrust Corporation, a Delaware
corporation (the "Employer"), and Xxxxx X. Xxxxxx (the "Employee").
WHEREAS, the Employee is currently employed by the Employer as its
President and Chief Executive Officer; and
WHEREAS, the Employer and the Employee wish to extend such employment for
a four (4) year term on the terms and subject to the conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained, the parties hereto hereby agree as follows:
1. DUTIES. During the term of this Agreement, the Employee agrees to be
employed by and to serve the Employer as its President and Chief Executive
Officer, and the Employer agrees to employ and retain the Employee in such
capacity. The Employee also shall serve the Employer in such capacity or
capacities, and with such other duties consistent with such position, as shall
be designated by the Board of Directors of the Employer from time to time. The
Employee shall devote such of his business time, energy and skill to the affairs
of the Employer as shall be necessary to perform the duties of such position
and, in any event, not less of his business time, energy and skill than he has
previously devoted to the Employer, and he shall not assume an executive,
management or board position in any other business without the express
permission of the Board of Directors; provided that the Employee may serve in
any capacity with charitable or not-for-profit enterprises so long as there is
no material interference with the Employee's duties to the Employer. The
Employee shall report only to the Employer's Board of Directors and at all times
during the term of this Agreement shall have powers and duties commensurate with
his position as President and Chief Executive Officer of the Employer. Without
the Employee's consent, the Employer may not materially reduce the Employee's
duties or responsibilities hereunder or assign duties or responsibilities that
are inconsistent with the Employee's position as President and Chief Executive
Officer of the Employer. Notwithstanding the foregoing, in connection with a
corporate restructuring of the Employer, if the Employee continues to be
President and Chief Executive Officer of the publicly-traded healthcare company
resulting from a Permitted Spin-Off (as defined below), such change, in and of
itself, shall not be deemed to be a material reduction in the Employee's duties
and responsibilities for purposes of the preceding sentence.
2. TERMS OF EMPLOYMENT.
2.1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(1) "Termination For Cause" shall mean termination by the
Employer of the Employee's employment by reason of (i) the Employee's fraud
upon,
deliberate injury or attempted injury to, or dishonesty towards the Employer
that causes material and demonstrable injury to the Employer, (ii) the
Employee's intentional and material breach of the provisions of Section 5 of
this Agreement, (iii) the Employee's intentional and material breach of, or
material failure to perform under, this Agreement (other than the provisions of
Section 5 hereof) that is not cured by the Employee within 30 days after written
notice from the Board of Directors specifying the breach and requesting a cure,
or (iv) the conviction of any felony involving a crime of moral turpitude.
(2) "Termination Other Than For Cause" shall mean
termination by the Employer of the Employee's employment other than a
Termination For Cause, a Termination Upon Death or Disability, or a Termination
Upon a Change in Control.
(3) "Termination for Good Reason" shall mean termination of
employment by the Employee (i) after a material reduction by the Employer,
without the Employee's consent, in the Employee's duties and responsibilities,
(ii) if the Employee is not the President and Chief Executive Officer of
Meditrust Corporation prior to the Permitted Spin-Off and the Spin-Off Entity
after the Permitted Spin-Off, (iii) after any reduction by the Employer of the
Employee's Base Salary and benefits (provided that, in the case of
across-the-board benefit reductions similarly affecting all management
personnel, the Employer will continue to provide Employee with a benefit package
substantially equivalent to the benefits provided at the time of such reduction,
provided that the Employer shall not be required to expend more than 150% of the
Employer's cost therefor in fiscal year 1999), (iv) the relocation of the
Employer's offices at which the Employee is principally employed to a location
which is more than 35 miles from the current location of the Employer's office
or the requirement that the Employee be based (1) anywhere other than the
Employer's principal offices, as the same may be relocated within 35 miles as
provided above or (2) more than 35 miles from the Employer's current offices,
except for required travel on the Employer's business to an extent substantially
consistent with the Employee's present business travel obligations, (v) a
material breach of this Agreement by the Employer that is not rectified within
30 days of notification of the Board of Directors by the Employee of such
breach, (vi) the failure of the Employer to obtain an agreement from any
successor or assign of the Employer, to assume and agree to perform this
Agreement, as contemplated by Section 7.15, or (vii) the Employer's failure to
extend this Agreement pursuant to Section 2.2 hereof on each anniversary date.
Notwithstanding the foregoing, in connection with a Permitted Spin-Off, if the
Employee continues to be President and Chief Executive Officer of the Spin-Off
Entity, such change in title and position shall not be deemed to be a material
reduction in the Employee's duties and responsibilities for purposes of clause
(i) above.
(4) "Termination Upon a Change in Control" shall mean
termination of the Employee's employment with the Employer for any reason or for
no reason within two (2) years following a Change in Control either by the
Employee or by the Employer.
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(5) "Termination Upon Death or Disability" shall mean
termination by the Employer by reason of the Employee's death or disability as
described in Section 2.3 hereof.
(6) "Permitted Spin-Off" shall mean a corporate
restructuring of the Meditrust Companies pursuant to which all of the stock of
any existing or newly-created subsidiary of the Meditrust Companies (or either
of them) which owns (or acquires by purchase, dividend, investment or otherwise)
all of the healthcare assets and investments of the Meditrust Companies (or the
stock of subsidiaries which own such assets and investments) existing
immediately prior thereto is "spun-off" ratably to the shareholders of the
Meditrust Companies at the time of such spin-off.
(7) "Spin-Off Entity" shall mean any Person resulting from a
Permitted Spin-Off.
(8) "Change in Control" shall mean (a) an acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the combined voting power of the then
outstanding voting securities of the Employer entitled to vote generally in the
election of directors of the Employer (the "Outstanding Voting Securities") or
20% or more of the combined market value of the equity securities of the
Employer (the "Equity Value"); PROVIDED, HOWEVER, that any acquisition directly
from or by the Employer or any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Employer or an affiliated company
or any acquisition by a company pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of (c) below shall be excluded from this clause (a);
or (b) individuals who, as of the date hereof, constitute the Board of Directors
(the "Incumbent Board") of the Employer, cease for any reason to constitute at
least 60% of the Board of Directors of the Employer; PROVIDED, HOWEVER, that any
individual becoming a director whose election, or nomination for election by the
Employer's stockholders, was approved by a vote of at least 60% of the directors
then comprising the Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors of the Employer; or
(c) consummation of a reorganization, merger or consolidation of the Employer (a
"Business Combination"), unless, in each case, following such Business
Combination, (i) all or substantially all the individuals and entities who were
the beneficial owners, respectively, of the outstanding Equity Value and
Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the combined market
value of the equity securities and more than 60% of the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such Business
Combination (including, without limitation, a
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corporation which as a result of such transaction owns the Employer or all or
substantially all of the Employer's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Equity Value and
Outstanding Voting Securities, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Employer or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of the
combined voting power of the then outstanding voting securities or 20% or more
of the combined market value of the equity securities of the corporation
resulting from such business combination except to the extent that such
ownership existed prior to the Business Combination and (iii) at least 60% of
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or the action of the Board, providing for
such Business Combination, (d) the sale or other disposition of more than 50% of
the healthcare assets of the Employer, or (e) a complete liquidation or
dissolution of the Employer or approval thereof by the stockholders of the
Employer. For purposes of this definition, "Employer" shall mean either (x)
Meditrust Corporation or Meditrust Operating Company ("Meditrust" and together
with the Employer, "The Meditrust Companies") or (y) any subsidiary of Meditrust
Corporation, the assets of which are substantially all of the healthcare assets
and investments of Meditrust Corporation (or the stock of subsidiaries, the
assets of which are substantially all of the healthcare assets and investments
of Meditrust Corporation). Notwithstanding the foregoing, any corporate
restructuring directly related to a Permitted Spin-Off, including any related
change to the Board of Directors shall not be deemed to be a Change in Control;
provided, however, that this exclusion shall not apply to any simultaneous or
subsequent sale of, or Business Combination, or other events described in
clauses (a) through (e) of this Section 2.1(h) involving such Spin-Off Entity.
2.2 TERM. The term of employment of the Employee by the Employer
shall commence on the date and year first above written (the "Effective Date")
and shall continue through the fourth (4th) anniversary of the Effective Date;
provided, however the term of this Agreement shall automatically be extended for
one additional year on each anniversary date of the Effective Date unless, not
later than 90 days prior to such date, either party shall have given notice to
the other that it or he does not wish to extend this Agreement; provided,
further, that if a Change in Control (as defined in Section 2.1(f)) occurs
during the original or extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than two (2) years
beyond the month in which the Change in Control occurred.
2.3 TERMINATION. Notwithstanding any provision of this Employment
Agreement, the employment of the Employee pursuant to this Agreement may be
terminated by the Employer upon (a) at least 15 days' prior written notification
to the Employee in the event of a Termination For Cause, (b) upon at least 60
days' prior written notice to the Employee in the event of a Termination Other
Than For Cause or a Termination Upon a Change in Control, (c) upon written
notification to the Employee if the Employee, in the
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reasonable judgment of the Board of Directors of the Employer, has failed to
perform his duties under this Agreement because of illness or physical or mental
incapacity, and such illness or incapacity continues for a period of more than
four (4) consecutive months, or (d) in the event of the Employee's death, in
which case the Employee's employment shall be deemed to have terminated as of
the last day of the month during which his death occurs. The Employee may
terminate his employment under this Agreement upon at least 60 days' prior
written notice to the Employer; provided, however, that in the event of a Change
in Control, the notice requirement is shortened to ten (10) days.
2.4 PAYMENTS UPON TERMINATION. Upon any termination of the
Employee's employment by the Employer hereunder, the Employer shall promptly pay
to the Employee, or in the case of his death, to his estate or such
beneficiaries as the Employee may from time to time designate, all accrued
salary, any benefits under any plans of the Employer in which the Employee is a
participant to the full extent of the Employee's rights under such plans,
accrued vacation pay and any appropriate business expense incurred by the
Employee in connection with his duties hereunder, all to the date of
termination. The Employee, or his estate or beneficiaries in the case of his
death, shall not be entitled to any other compensation or reimbursement of any
kind, including, without limitation, severance compensation, except as provided
in Section 4 hereof. Unless otherwise provided in writing or as provided in
Section 4 hereof, upon termination of employment, all options held by the
Employee that are not then currently exercisable and all Performance Units shall
immediately lapse and have no force or effect, and all then non-vested
Performance Shares held by the Employee shall be forfeited and returned to the
Employer.
3. SALARY AND BENEFITS.
3.1 BASE SALARY. As payment for the services to be rendered by the
Employee as provided in Section 1, and subject to the terms and conditions of
Section 2, the Employer agrees to pay to the Employee at the rate of $500,000
per annum (the "Base Salary"). The Base Salary shall be payable in equal
bi-monthly (twice a month) installments. Unless otherwise determined by the
Board of Directors, the Employee shall not be entitled to any compensation in
addition to that set forth in this Section 3 for serving as an officer of the
Employer. All services which the Employee may render to the Employer in any
capacity shall be deemed to be services required by this Agreement and as
consideration for the compensation herein provided.
3.2 BONUS. The Employee's bonus opportunity for each fiscal year
shall be equal to 75% to 100% ("Maximum Bonus") of Base Salary paid during such
fiscal year. The amount of bonus payments shall be determined at the sole
discretion of the Compensation Committee or pursuant to criteria to be
established from time to time.
3.3 EMPLOYEE BENEFITS. The Employee shall be eligible to
participate in such of the Employer's benefits and deferred compensation plans
as are now generally available or later made generally available to executive
officers of the Employer, including,
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but not limited to, the 401(k) plan, non-qualified deferred compensation plan,
if any, medical insurance plan, dental insurance plan, life insurance plan, and
disability insurance plan. The Employee shall also be provided with an
automobile allowance that is not less than the amount currently paid, including
reimbursement for gasoline, insurance, maintenance and repairs.
3.4 REIMBURSEMENT FOR EXPENSES. The Employer shall reimburse the
Employee for reasonable and properly documented out-of-pocket expenses incurred
by the Employee in connection with his duties under this Agreement.
3.5 PERFORMANCE SHARES. The Employer has previously awarded the
Employee 125,000 performance shares in accordance with the terms described in
Exhibit A hereto and the Employer's 1995 Share Award Plan (the "Performance
Shares").
3.6 STOCK OPTIONS. In connection with the negotiation and
execution hereof, on December 10, 1998, the Employer issued to the Employee
pursuant to the 1995 Share Award Plan ("Plan") an option to purchase 250,000
paired shares ("Paired Shares") of The Meditrust Companies, at $13.4375 per
Paired Share (the "Option"). The Option shall vest and become exercisable in
accordance with the Plan in 25% increments on each anniversary date of the date
of grant, so that the Option is fully vested and exercisable on the fourth (4th)
anniversary date of the date of grant. Further, on December 10, 1998, the
Employer issued to the Employee pursuant to the 1995 Share Award Plan an option
to purchase 125,000 Paired Shares, at $13.4375 per Paired Share (the
"Performance Option"). The Performance Option shall vest and become fully
exercisable in accordance with the Plan on December 10, 2004; provided, however,
that if prior to December 10, 2004 the 20-day average trading price of a Paired
Share (the "20-Day Average") attains $23.00, 33 1/3% of the Performance Option
shall vest and become exercisable in accordance with the Plan; and if prior to
December 10, 2004, the 20-Day Average attains $26.00, 66 2/3% of the Performance
Option shall vest and become exercisable in accordance with the Plan, and if
prior to December 10, 2004, the 20-Day Average attains $29.00, the remainder of
the Performance Option shall vest and become fully exercisable in accordance
with the Plan. For this purpose, the price of the Paired Shares shall be
determined by reference to the quoted closing price per Paired Share on the New
York Stock Exchange.
3.7 PERFORMANCE UNITS. The Employer has issued to the Employee
125,000 performance units ("Performance Units") in the Long Term Bonus Program.
Such Performance Units shall become payable only pursuant to the provisions of
Section 4.1, 4.2 or 4.3.
3.8 STOCK OWNERSHIP LEVELS. It is the expectation of the parties
that upon the fourth anniversary of the Effective Date, the Employee shall own
equity in the Employer (which shall include the Performance Shares) with a value
equal to four (4) times his Base Salary. In the event the Employee does not
attain such level of equity ownership by such date, the Employee shall not be
eligible to receive any further equity grants from the Employer until such time
when the Employee attains the desired equity ownership level.
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4. SEVERANCE COMPENSATION.
4.1 SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER
THAN FOR CAUSE OR TERMINATION FOR GOOD REASON. In the event the Employee's
employment is terminated in a Termination Other Than For Cause or in a
Termination for Good Reason, subject to the signing by the Employee of a general
release of employment-related claims (other than continuing rights under this
Agreement) in a form and manner reasonably satisfactory to the Employer, (i) all
unvested Performance Shares held by the Employee shall become immediately vested
in full, (ii) all Performance Units issued to the Employee pursuant to Section
3.7 hereof shall become immediately vested in full with the value of each Unit
deemed to be $25; provided that payment with respect to the Performance Units
shall be made in cash no earlier than January 1, 2002, (iii) any unvested
options to purchase shares of The Meditrust Companies held by the Employee shall
become immediately vested and exercisable in full in accordance with the Plan
and (iv) the Employee shall be paid a lump sum within 30 days of such
termination equal to the sum of his Base Salary and the average of the bonuses
received by the Employee under Section 3.2 for the three (3) immediately
preceding fiscal years (or for such shorter period that the Employee was
eligible for a bonus), multiplied by the greater of (a) three (3) or (b) the
number of full and fractional years remaining in the original term or extended
term of this Agreement (the "Unexpired Term"). The Employee shall continue to
enjoy the benefits under the medical and dental insurance plans and the
non-qualified retirement plan, if any, for the greater of three (3) years or the
Unexpired Term. He shall also be provided with an automobile allowance for the
greater of three (3) years or the Unexpired Term at a level which is not less
than the level provided to the Employee immediately prior to such termination.
Notwithstanding the foregoing, in the event a Change in Control occurs within
nine (9) months after a termination under this Section 4.1, the Employee's
employment shall be deemed to have been terminated in a Termination Upon a
Change in Control and the benefits inuring to the Employee shall be recalculated
and paid or delivered to the Employee as though Section 4.3 applied at the time
of such termination.
4.2 SEVERANCE COMPENSATION UPON DEATH OR DISABILITY. In the event
the Employee's employment is terminated in a Termination Upon Death or
Disability, and in the case of Termination Upon Disability, subject to the
signing by the Employee (in the case of Disability) of a general release of
employment-related claims (other than continuing rights under this Agreement) in
a form and manner reasonably satisfactory to the Employer, (i) all unvested
Performance Shares held by the Employee shall become immediately vested in full,
(ii) all Performance Units issued to the Employee pursuant to Section 3.7 hereof
shall become immediately vested in full with the value of each Unit deemed to be
$25; provided that payment with respect to the Performance Units shall be made
in cash no earlier than April 1, 2002, (iii) any unvested options to purchase
shares of The Meditrust Companies held by the Employee shall become immediately
vested and exercisable in full in accordance with the Plan and (iv) the Employee
or his estate shall be paid a lump sum within 30 days of such termination equal
to the sum of his Base Salary and the average of the bonuses received by the
Employee under Section 3.2 for the three (3) immediately preceding fiscal years
(or for such
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shorter period that the Employee was eligible for a bonus), multiplied by the
greater of three (3) or the Unexpired Term. The Employee (or dependents, in the
case of the Employee's death) shall continue to enjoy the benefits under the
medical and dental insurance plans for the greater of three (3) years or the
Unexpired Term. In the case of disability, the Employee shall also be provided
with an automobile allowance for the greater of three (3) years of the Unexpired
Term at a level which is not less than the level provided to the Employee
immediately prior to such termination.
4.3 SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A
CHANGE IN CONTROL. Upon a Change in Control, (i) all unvested Performance Shares
held by the Employee shall become immediately vested in full, (ii) all
Performance Units issued to the Employee pursuant to Section 3.7 hereof shall
become immediately vested in full with the value of each Unit deemed to be $50,
(iii) any unvested options to purchase shares of The Meditrust Companies held by
the Employee shall become immediately vested and exercisable in accordance with
the Plan in full. In the event the Employee's employment is terminated in a
Termination Upon a Change in Control, subject to the signing by the Employee of
a general release of employment-related claims (other than continuing rights
under this Agreement) in a form and manner reasonably satisfactory to the
Employer, the Employee shall be paid a lump sum in cash within 30 days of such
termination in an amount equal to the full value of his Performance Units and an
amount equal to the greater of three (3) or the Unexpired Term times the sum of
(A) his Base Salary and (B) Maximum Bonus for the year of termination. The
Employee shall continue to enjoy the benefits under the medical and dental
insurance plan and the non-qualified retirement plan, if any, for the greater of
three (3) years or the Unexpired Term and any and all debts of the Employee to
the Employer will be forgiven by the Employer. The Employee shall also be
provided with an automobile allowance for the greater of three (3) years or the
Unexpired Term at a level which is not less than the level provided to the
Employee immediately prior to such termination. In addition, the Employee shall
be entitled to an additional payment for taxes imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), in accordance with the
terms of Schedule 1 attached hereto.
5. NON-COMPETITION AND NON-DISCLOSURE.
5.1 NON-COMPETITION. (a) During the term hereof, without approval
by the Board, the Employee will not, directly or indirectly, (i) engage or
become interested, directly or indirectly, as owner, employee, director,
partner, consultant, through stock ownership (except ownership of not more than
one percent (1%) of any class of securities of a corporation which is publicly
traded), investment of capital, lending of money or property, rendering of
services, or otherwise, either alone or in association with others, in any
business which competes directly or indirectly with the business of the
Employer, (ii) induce or attempt to induce any customer of the Employer to
reduce such customer's business with the Employer, or (iii) solicit any of the
Employer's employees to leave the employ of the Employer or employ any of such
Employees, except for the Employee's administrative assistant.
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(b) For a period of two (2) years after any termination of
employment, the Employee will not, directly or indirectly, (i) engage or become
interested, directly or indirectly, as owner, employee, director, partner,
consultant, through stock ownership (except ownership of not more than five
percent (5%) of any class of securities of a corporation which is publicly
traded), investment of capital, lending of money or property, rendering of
services, or otherwise, either alone or in association with others, in any
healthcare real estate investment trust financing business which competes
directly and materially with the business of the Employer or (ii) solicit any of
the Employer's employees to leave the employ of the Employer or employ any of
such employees, except for the Employee's administrative assistant. The Employee
recognizes and acknowledges that his obligations under this Section 5.1(b) are
limited to the geographic areas in which the Employer is doing business at the
time of the expiration or termination of this Agreement.
(c) As used in Sections 5.1, 5.2, 7.2, and 7.3, the term
"Employer" shall mean Meditrust Corporation or its subsidiaries and affiliates.
The restrictions on the Employee set forth in this Section 5.1 shall not apply
in the case of a Termination Upon a Change in Control.
5.2 NON-DISCLOSURE. The Employee agrees that all confidential and
proprietary information relating to the business of the Employer shall be kept
and treated as confidential both during and after the term of this Agreement,
except as may be permitted in writing by the Employer's Board of Directors or if
such information is within the public domain or comes within the public domain
without any breach of this Agreement.
6. INSURANCE. The Employer may, at its expense, procure and maintain
life insurance on the life of the Employee. The beneficiary of such policy shall
be the Employer. The Employee shall cooperate with the Employer as is reasonably
necessary to procure such insurance.
7. MISCELLANEOUS.
7.1 ARBITRATION; DISPUTE RESOLUTION.
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(1) ARBITRATION PROCEDURE. Any disagreement, dispute,
controversy or claim arising out of or relating to this Agreement or the
interpretation of this Agreement or any arrangements relating to this Agreement
or contemplated in this Agreement or the breach, termination or invalidity
thereof shall be settled by final and binding arbitration in Boston,
Massachusetts in accordance with the Employment Dispute Resolution Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA");
PROVIDED, that nothing contained herein shall be deemed to prohibit either party
to apply to a court of competent jurisdiction for temporary or preliminary
equitable relief. The arbitral tribunal shall consist of one arbitrator. In
making any decision, the arbitrator shall apply and follow the substantive law
of Massachusetts without reference to the conflicts of law provisions thereof.
The parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of the initiation of arbitration. If the parties shall fail to
appoint such arbitrator as provided above, such arbitrator shall be appointed by
the AAA as provided in the Arbitration Rules. The Employee and the Employer
agree that the decision of the arbitrator shall be final, the arbitral award may
be enforced against the parties to the arbitration proceeding or their assets
wherever they may be found and that a judgment upon the arbitral award may be
entered in any court having jurisdiction thereof. The Employer shall pay all
fees and expenses of the Arbitrator regardless of the result and shall provide
all witnesses and evidence reasonably required by the Employee to present his
case. The Employer shall pay to the Employee all reasonable arbitration expenses
and legal fees incurred by the Employee as a result of a termination of the
Employee's employment in seeking to obtain or enforce any right or benefit
provided by this Agreement (whether or not the Employee is successful in
obtaining or enforcing such right or benefit). Such payments shall be made
within five (5) days after the Employee's request for payment accompanied with
such evidence of fees and expenses incurred as the Employer reasonably may
require.
(2) COMPENSATION DURING DISPUTE. The Employee's compensation
during any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the interpretation of this Agreement shall be as
follows:
If there is a termination by the Employer followed by a dispute as
to whether the Employee is entitled to the payments and other benefits provided
under this Agreement, then, during the period of that dispute the Employer shall
pay the Employee 50% of the amount specified in Section 4.1 hereof, and the
Employer shall provide the Employee with the benefits provided in Section 4.1
hereof, if, but only if, the Employee agrees in writing that if the dispute is
resolved against the Employee, the Employee shall promptly refund to the
Employer all payments received under Section 4.1 of this Agreement plus interest
at the rate provided in Section 1274(d) of the Code, compounded quarterly. If
the dispute is resolved in the Employee's favor, promptly after resolution of
the dispute, the Employer shall pay to the Employee the sum that was withheld
during the period of the dispute plus interest at the rate provided in Section
1274(d) of the Code, compounded quarterly.
7.2 LITIGATION AND REGULATORY COOPERATION. During and after the
Employee's employment, the Employee shall reasonably cooperate with the Employer
in the
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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 Employer which relate to
events or occurrences that transpired while the Employee was employed by the
Employer; provided, however, that such cooperation shall not materially and
adversely affect the Employee or expose the Employee to an increased probability
of civil or criminal litigation. The Employee'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 Employer at mutually convenient times. During and after the
Employee's employment, the Employee also shall cooperate fully with the Employer
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 the Employee was employed by the Employer. The
Employer shall also provide the Employee with compensation on an hourly basis
calculated at his final base compensation rate for requested litigation and
regulatory cooperation that occurs after his termination of employment, and
reimburse the Employee for all costs and expenses incurred in connection with
his performance under this Section 7.2, including, but not limited to,
reasonable attorneys' fees and costs.
7.3 NONDISPARAGEMENT. During and after the Employee's employment,
the Employee agrees that he shall not take any action or make any statement,
written or oral, which disparages or criticizes the Employer or The Meditrust
Companies, or their respective officers, directors, agents, or management and
business practices, or which disrupts or impairs the normal operations of the
Employer or The Meditrust Companies. During and after the Employee's employment,
the Employer agrees that it shall not take any action or make any statement,
written or oral, which disparages or criticizes Employee or Employee's
management and business practices and that it shall instruct its officers,
directors and agents not to take any action or make any statement, written or
oral, which disparages or criticizes the Employee or the Employee's management
and business practices.
7.4 NO MITIGATION. The Employer agrees that, if the Employee's
employment by the Employer is terminated during the term of this Agreement, the
Employee is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Employee by the Employer pursuant to Sections
3 and 4 hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Employee as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Employee to the Employer, or
otherwise.
7.5 AUTHORITY; NO RESTRICTIONS. Each party represents and warrants
that it has full power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby and this Agreement is the
legal, valid and binding obligation of the party, enforceable against the party
in accordance with its terms. No consent, approval or agreement of any person,
party, court, government or entity is required to be obtained by either party in
connection with the execution and delivery of this Agreement. Each party is not
subject to any agreement, restriction, lien, encumbrance or right, title or
interest in anyone
11
limiting in any way the scope of this Agreement or in any way inconsistent
herewith, and each party will not hereafter grant anyone the same.
7.6 EFFECT OF EXPIRATION OR TERMINATION. Upon the expiration or
other termination of this Agreement, all obligations of the parties shall
forthwith terminate, except for any obligation to pay any fixed sum of money or
provide any benefits which may have accrued and be due and payable hereunder at
the time of such expiration or other termination and except that the provisions
of Section 5 and Sections 7.1, 7.2 and 7.3 shall continue in effect in
accordance with their terms, such Sections containing independent agreements and
obligations.
7.7 EQUITABLE RELIEF. The obligations of the Employee under
Section 5 hereunder are special, unique and extraordinary, and any breach by the
Employee thereof shall be deemed material and to cause irreparable injury not
properly compensated by damages in an action at law. Notwithstanding Section
7.1, the Employer's rights and remedies hereunder shall therefore be enforceable
both at law and in equity, by injunction and otherwise; and the rights and
remedies of the Employer hereunder with respect thereto shall be cumulative and
not alternative and shall not be exhausted by any one or more uses thereof.
7.8 CONSENT TO JURISDICTION. To the extent that any court action
is permitted consistent with or to enforce Sections 5, 7.1, 7.2 and 7.7 of this
Agreement, the parties hereby consent to the jurisdiction of the Courts of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts. Accordingly, with respect to any such court action,
the Employee (a) submits to the personal jurisdiction and venue of such courts;
(b) consents to service of process; and (c) waives any other requirement
(whether imposed by statute, rule of court or otherwise) with respect to
personal jurisdiction, venue or service of process.
7.9 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of the same or other provision hereof.
7.10 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement represents the entire understanding among the parties
with respect to the subject matter hereof, and this Agreement supersedes any and
all prior understandings, agreements, plans and negotiations, whether written or
oral, with respect to the subject matter hereof. All modifications to the
Agreement must be in writing and signed by the party against whom enforcement of
such modification is sought.
7.11 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed duly given (a) when delivered,
or (b) two (2) days after being mailed by first class mail, certified or
registered with return receipt requested, or (c) one (1) day after being mailed
through an overnight delivery service, or (d) upon confirmation of transmission
via facsimile, to the following addresses:
12
If to the Employer: Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
If to the Employee: Xxxxx X. Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Any party may change such party's address for notices by notice duly given
pursuant to this Section 7.11.
7.12 HEADINGS. The Section headings herein are intended for
reference and shall not by themselves determine the construction or
interpretation of this Agreement.
7.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
applied without regard to conflict of law principles.
7.14 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other provisions of this Agreement
shall be deemed valid and enforceable to the extent possible.
7.15 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by
the Employee without the prior written consent of the Employer, and may be
assigned by the Employer and shall be binding upon, and inure to the benefit of,
the Employer's successors and assigns. The Employer will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Employer to assume
expressly and agree to perform this Agreement in the same manner and to the
extent that the Employer would be required to perform it if no such succession
had taken place. As used in this Agreement, "Employer" shall mean the Employer
as herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
7.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
7.17 WITHHOLDINGS. All compensation and benefits to the Employee
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law. The Employee agrees
to pay all federal, state and local taxes owed by him in connection with this
Agreement.
13
7.18 SUBSTITUTION OF EMPLOYER. Upon a Permitted Spin-Off, the
Spin-Off Entity shall be deemed to be the Employer for all purposes of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
MEDITRUST CORPORATION
SEAL
By
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President and General Counsel
-------------------------------------------------
Xxxxx X. Xxxxxx
14
Exhibit A
THE PERFORMANCE SHARES
100% of the Performance Shares described in Section 3.5 shall be deemed issued
as of February 27, 1998 upon payment by the Employee of the par value thereof to
The Meditrust Companies. Subject to the terms of the Agreement, the Performance
Shares shall vest on the earliest of (a) eight (8) years after the date of
issuance, (b) on March 31 of the year following the first fiscal year after
issuance in which the Performance Goal is achieved or (c) as the Board of
Directors may determine. The Performance Goal for all outstanding grants of
Performance Shares shall be deemed achieved in any fiscal year commencing with
the year 2000 that meets both criteria specified below:
Fiscal FFO Cumulative FFO per Share
Year Per Share Since January 1, 1998
---- --------- ---------------------
2000 $2.92 $ 8.28
2001 3.10 11.38
2002 3.28 14.66
2003 3.48 18.14
2004 3.69 21.83
For purposes of the foregoing calculation, "FFO" shall mean funds from
operations as reported by The Meditrust Companies. The above Performance Goals
may be adjusted by the Board of Directors of the Employer to reflect changes in
accounting rules or changes in corporate structure.
Subject to the terms of the Agreement, upon termination of the Employee's
employment by The Meditrust Companies for any reason, all right, title and
interest in any unvested Performance Shares shall be transferred to The
Meditrust Companies in exchange for the par value of such Performance Shares,
and the Employee shall not receive any unissued Performance Shares.
The Employee shall receive all voting rights and dividends paid with respect to
unvested Performance Shares from the date of issuance so long as the Employee is
an employee of The Meditrust Companies or any subsidiary thereof.
Schedule 1
EXCISE TAX GROSS-UP
The determination of any additional payment payable pursuant to Section
4.3 of the Agreement shall be made in accordance with the following provisions:
(a) Notwithstanding anything in the Agreement to the contrary, in
the event of the determination (as hereinafter provided) that any required
payment by the Employer to or for benefit of the Employee (whether paid or
payable pursuant to the terms of the Agreement or otherwise pursuant to, or by
reason of any other agreement, policy, plan, program or arrangement, including
without limitation any stock option, stock appreciation right, or similar right,
or the lapse or termination of any restriction on the vesting or exercisability
of any of the foregoing including without limitation the acceleration of the
vesting or lapse of deferral periods under any equity or incentive compensation
program (individually and collectively, "Payment")) would be subject to the
excise tax imposed by Section 4999 of the Code or any successor provision
thereto (the "Excise Tax"), the Employee shall be entitled to receive an
additional payment or payments (individually or collectively, "Tax Assistance
Payment"), which shall include an amount such that, after the Employee pays (1)
all Federal, state and local income and employment taxes upon the Tax Assistance
Payment and (2) any Excise Tax imposed upon the Tax Assistance Payment, the
Employee retains so much of the Tax Assistance Payment as is equal to the Excise
Tax imposed on the Payment.
(b) Subject to the provisions hereinafter concerning the provision
of notice of a claim by the Internal Revenue Service, all determinations
required to be made under these provisions, including whether an Excise Tax is
payable by the Employee, the amount of such Excise Tax and whether the Employer
is required to pay the Employee a Tax Assistance Payment and the amount of such
Tax Assistance Payment, if any, shall be made by PriceWaterhouseCoopers or such
other nationally recognized accounting firm retained by the Employer and
reasonably acceptable to the Employee ("Accounting Firm"). The Employer shall
direct the Accounting Firm to submit its determination and detailed supporting
calculations to both the Employee and the Employer within 15 days after the
payment or provision of any benefit that could give rise to an Excise Tax and
any such other time or times as the Employee or the Employer may request. For
purposes of this Paragraph (b), the Employee shall be deemed to pay Federal
income taxes at the highest marginal rate of Federal income taxation applicable
to individuals for the calendar year in which the determination is to be made,
and state and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Employee's residence on the Change in
Control, net of the maximum reduction in Federal income taxes which could be
obtained from deduction of such state and local taxes. If the Accounting Firm
determines that any Excise Tax is payable by the Employee, the Employer shall
pay the required Tax Assistance Payment to the Employee within ten (10) business
days after the Employer receives such determination and calculations with
respect to any Payment to the Employee. Any determination by the Accounting Firm
shall be binding upon the Employer and the Employee.
(c) Any federal tax returns the Employee files shall be prepared
and filed on a basis consistent with the determination of the Accounting Firm
with respect to the Excise Tax payable by the Employee. If the Accounting Firm
determines that the Employee is required to pay no Excise Tax, it shall (at the
same time it makes such determination) furnish the Employee and the Employer an
opinion that the Employee has substantial authority not to report any Excise Tax
on the Employee's federal income tax return. However, in view of the uncertainty
concerning application of Section 4999 of the Code (or any successor provision
thereto) at the time of any determination made hereunder by the Accounting Firm,
it is possible that a Tax Assistance Payment that should have been made by the
Employer will not have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event the Employer exhausts
or fails to pursue its remedies pursuant to the provisions concerning notice of
a claim by the Internal Revenue Service, and the Employee thereafter is required
to make a payment of any Excise Tax, the Employee shall direct the Accounting
Firm to determine the amount of the Underpayment and to submit its determination
and detailed supporting calculations as promptly as possible both to the
Employee and to the Employer, which shall pay the amount of such Underpayment to
the Employee or for the Employee's benefit within ten (10) business days
following the Employer's receipt of such determination and calculations.
(d) Each of the Employee and the Employer shall provide the
Accounting Firm access to and copies of any books, records and documents in the
Employee's or its possession, as the case may be, reasonably requested by the
Accounting Firm, and shall otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination and
calculations required or contemplated hereunder.
(e) The Employer shall bear the fees and expenses of the
Accounting Firm for services hereunder. If, for any reason, the Employee
initially pays such fees and expenses, the Employer shall reimburse the Employee
the full amount of the same within ten (10) business days following receipt from
the Employee of a statement and reasonable evidence of the Employee's payment
thereof.
(f) The Employee shall notify the Employer in writing of any claim
by the Internal Revenue Service that, if successful, would require the Employer
to pay a Tax Assistance Payment. The Employee shall give such notification as
promptly as practicable, but in no event later than the tenth (10th) business
day next following the Employee's receipt of such claim, and the Employee
further shall apprise the Employer of the nature of such claim and the date on
which it is required to be paid (in each case, to the extent known to the
Employee). The Employee shall not pay or otherwise satisfy such claim prior to
the earlier of (a) the expiration of the 30-calendar-day period next following
the date on which the Employee give notice to the Employer or (b) the date any
payment of the amount with respect to such claim is due. If the Employer
notifies the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
2
(i) provide the Employer any written records or documents in the
Employee's possession relating to such claim and reasonably requested by the
Employer;
(ii) take such action in connection with contesting such claim as
the Employer reasonably shall request in writing from time to time, including
without limitation accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and reasonably selected
by the Employer;
(iii) cooperate with the Employer in good faith in order effectively
to contest such claim; and
(iv) permit the Employer to participate in any proceedings relating
to such claim, provided, however, that the Employer directly shall bear and pay
all costs and expenses (including without limitation, interest and penalties)
incurred in connection with such contest and shall indemnify the Employee and
hold the Employee harmless, on an after-tax basis, from and against any and all
Excise Tax or income tax (including without limitation, interest and penalties
with respect thereto), imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing, the Employer shall control
all proceedings taken in connection with the contest of any claim contemplated
by these provisions and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided, however, that the Employee may
participate therein at the Employee's own cost and expense) and may, at its
option, either direct the Employee to pay the tax claimed and xxx for a refund
or contest the claim in any permissible manner, and the Employee 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
Employer shall determine; provided, however, that if the Employer directs the
Employee to pay the tax claimed and to xxx for a refund, the Employer shall
advance the amount of such payment to the Employee, and pay on a current basis
all costs of litigation, including without limitation attorneys' fees, on an
interest-free basis and shall agree to and shall indemnify the Employee and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax,
including without limitation, interest and penalties with respect thereto,
imposed with respect to such advance; and provided further, however, that any
extension of the statute of limitations relating to payment of taxes for the
Employee's taxable year with respect to which the contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Employer's
control of any such contested claim shall be limited to issues with respect to
which a Tax Assistance Payment would be payable hereunder, and the Employee
shall be entitled to settle or to contest, as the case may be, any other
issue(s) raised by the Internal Revenue Service or any other taxing authority.
(e) If, after the Employee receives an amount advanced by the
Employer pursuant to provisions of the last full paragraph, the Employee
receives any refund with respect to such claim, the Employee shall (subject to
the Employer's complying with any applicable provisions of the same paragraph)
promptly pay to the Employer the amount of such
3
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the Employee receives such an amount advanced by
the Employer, a determination is made that the Employee shall not be entitled to
any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest such denial or refund prior to
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 the Tax Assistance
Payment the Employer is required to pay the Employee hereunder.
4
