EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of July
7, 1998 by and between Meditrust Operating Company, a Delaware corporation (the
"Employer"), and Xxxxxxx X. Xxxxxx (the "Employee").
WHEREAS, the Employee has been employed by the Employer as its Chief
Executive Officer through the date hereof; and
WHEREAS, the Employer and the Employee wish to extend such employment
through December 31, 2002, 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 Chief Executive Officer and the
Chairman of its Board of Directors, 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, 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 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 devoted the Employer
and to Meditrust Corporation ("Meditrust") and its predecessor in the two years
prior to the execution hereof, and he shall not assume an executive or
management position in any other business (except for positions currently held
by him and positions with non-public businesses permitted pursuant to Section
5.1(a) hereof) without the express permission of the Board of Directors. 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 Chief Executive Officer and Chairman of the Employer and
Chairman of Meditrust. 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
Chief Executive Officer of the Employer. The parties hereto understand that the
Employee is a resident of Florida and may perform his duties hereunder at a
Florida office to be maintained by the Employer on such terms and conditions as
the Board of Directors of the Employer may approve. Notwithstanding the
foregoing, the Employee shall travel to Needham, Massachusetts and to such other
cities in the United States at such intervals and for such periods as the
Employer shall reasonably request or as may be necessary for the performance of
his duties hereunder.
2. Term of Employment.
2.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Termination For Cause" shall mean termination by
the Employer of the Employee's employment by the Employer 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, or material failure to perform under, this
Agreement or (iii) the conviction of any felony.
(b) [omitted]
(c) Termination Other Than For Cause" shall mean (x)
termination by the Employer of the Employee's employment other than a
Termination For Cause or a Termination Upon Death or Disability or (y)
termination of employment by the Employee after 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.
(d) "Termination Upon a Change in Control" shall mean
termination by the Employee of the Employee's employment with the
Employer within two years following a Change in Control.
(e) "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.
(f) "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 or the sale or other disposition of all or a material portion
of the assets 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
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; or (d)
approval by the stockholders of the Employer of a complete liquidation
or dissolution of the Employer. For purposes of this definition,
"Employer" shall mean either Meditrust Operating Company or Meditrust
Corporation.
2.2 Term. The term of employment of the Employee by the
Employer shall be from the date hereof through December 31, 2002 unless
terminated earlier pursuant to this Section 2.
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 fifteen (15) days prior
written notification to the Employee in the event of a Termination For Cause,
(b) upon at least sixty (60) days prior written notice to the Employee in the
event of a Termination Other Than For Cause, (c) upon written notification to
the Employee if the Employee, in the 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) 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 this Agreement at any time within two years
following a Change in Control by notice to the Employer. A termination Upon a
Change in Control by the Employee shall take effect immediately upon delivery of
a notice of termination to the Employer.
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.
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
$1,000,000 per annum (the "Base Salary"). The Base Salary shall be payable in
equal bi-monthly 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. Subject to the approval of the Employer's
stockholders of the Annual Bonus Plan, the Employee shall be eligible to receive
within 90 days after the end of each fiscal year hereunder a bonus equal to the
Applicable Percentage of Base Salary paid during the previous fiscal year. The
Applicable Percentage shall be (i) 0% if The Meditrust Companies (as hereinafter
defined) did not meet the funds from operations performance plan which plan
shall have been approved in writing by the non-employee members of the Board of
Directors for such fiscal year before the 91st day of such fiscal year (the
"Plan"), (ii) 75% if the Plan is met and (iii) 100% if the Plan is exceeded by
more than 20%. The Applicable Percentage shall be proportionately increased from
75% to 100% if the Plan is exceeded by between 1% and 20%.
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.
3.4 Reimbursement for Expenses. The Employer shall reimburse
the Employee for reasonable and property documented out-of-pocket expenses
incurred by the Employee in connection with his duties under this Agreement,
including the use of aircraft owned by the Employee at rates and other charges
not in excess of those charged for commercial charter of comparable aircraft.
3.5 Insurance. The Employer shall continue to advance premiums
with respect to the split dollar life insurance policy insuring the Employee
currently in effect.
3.6 Performance Shares. In connection with the negotiation and
execution hereof, the Employer shall award the Employee 800,000 performance
shares in accordance with the terms described in Exhibit A hereto and the
Employer's 1995 Share Award Plan (the "Performance Shares").
3.7 Stock Options. In connection with the negotiation and
execution hereof, the Employer has issued to the Employee pursuant to the 1995
Share Award Plan options to purchase 1,600,000 paired shares of the Employer and
Meditrust (collectively, "The Meditrust Companies") at $30.75 'per paired share
(the "Option"). The Option shall vest in 25% increments on each of February 27,
1999, February 27, 2000, February 27, 2001 and February 27, 2002, so that the
Option is fully vested on February 27, 2002. The issuance of options to purchase
1,150,000 of such paired shared were subject to approval by the Employer's
stockholders of an amendment to the 1995 Share Award Plan to permit the award of
options to purchase more than 450,000 paired shares to any one individual in any
year, which approval has been obtained.
3.8 Performance Units. The Employer has issued to the Employee
100,000 units in the Long Term Bonus Program in accordance with Exhibit B and
subject to Section 4.1 hereof. In the event of a Termination Upon a Change in
Control or a Termination Other Than For Cause, Employee shall have the right
(exercisable within 30 days of such termination) to exchange up to 800,000
Performance Shares for an equal number of newly issued units in the Long Term
Bonus Program in accordance with Exhibit B and subject to Section 4.1 hereof.
4. Severance Compensation.
4.1 Severance Compensation in the Event of a Termination Upon
a Change in Control or Termination Other Than For Cause. In the event the
Employee's employment is terminated in a Termination Upon a Change in Control or
in a Termination Other Than For Cause, (i) all unvested Performance Shares shall
become immediately vested in full, (ii) all performance units issued pursuant to
Section 3.8 hereof (including any such units issued in exchange for Performance
Shares) shall become immediately vested in full with the value of each unit to
be $50, (iii) any unvested options to purchase shares of the Employer or the
Meditrust Companies held by the Employee shall become immediately vested and
exercisable in full and (iv) the Employee shall be paid a lump sum within 30
days of such termination equal to three times the sum of his Base Salary and
maximum bonus opportunity for the year of termination. The Employee shall
continue to accrue retirement benefits and shall continue to enjoy the benefits
under Section 3.3 and 3.5 hereof for the balance of the original term hereof.
4.2 [omitted]
4.3 Termination Upon Death or Disability. In the event the
Employee's employment is terminated in a Termination Upon Death or Disability,
the Employee or his estate shall be paid his Base Salary and maximum bonus for
the balance of the original term hereof and, except in the event of the
Employee's death, the Employer shall continue to make the payments described in
Section 3.5 for the balance of the original term hereof.
4.4 Gross Up. The Employee shall be entitled to an additional
payment for taxes imposed under Section 4999 of the Internal Revenue Code in
accordance with the terms of Schedule I attached hereto.
5. Non-Competition and Non-Disclosure.
5.1 Non-Competition.
(a) During the term hereof, 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 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 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
Company's employees to leave the employ of the Employer or employ any
of such Employees. The Employee recognizes and acknowledges that his
obligations under this Section 5.1(a) shall extend to all geographic
areas in which the Employer is doing business during the term of this
Agreement, either directly or indirectly. Notwithstanding the
foregoing, the restrictions in Section 5.1 (a)(i) above shall not
prohibit the Employee from passively owning, passively investing in, or
lending to, (a) subacute health care facilities that (i) the Employee
has presented to the Employer the opportunity to purchase, invest in,
or lend to, and the Employer has determined not to purchase, invest in,
or lend to, such facilities, or (ii) constitute "turn-key" facilities,
which for purposes hereof shall mean facilities that the Employee
constructs for the purpose of selling, upon completion of construction,
to third parties, (b) any other real estate transaction where no more
than 20% of the transaction is related to a competing business or where
the Employee has presented to the Employer the opportunity to purchase,
invest in, or lend to, and the Employer has determined not to purchase,
invest in, or lend to, such real estate or (c) transactions disclosed
in Schedule 2 to this Agreement.
(b) For a period of three (3) years after termination
or expiration of this Agreement, 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 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 health care business which
competes directly and materially with the business of the Employer or
(ii) solicit any of the Company's employees to leave the employ of the
Employer or employ any of such employees. The Employee recognizes and
acknowledges that his obligations under thus Section 5.l(b) shall
extend to all geographic areas in which the Employer is doing business
at the time of the expiration or termination of this Agreement, either
directly or indirectly. Notwithstanding the foregoing, the restrictions
in Section 5.1(b)(i) above shall not prohibit the Employee from
passively
owning, passively investing in, or lending to, (a) subacute health care
facilities that (i) the Employee has presented to the Employer the
opportunity to purchase, invest in, or lend to, and the Employer has
determined not to purchase, invest in, or lend to, such facilities, or
(ii) constitute "turn-key" facilities, which for purposes hereof shall
mean facilities that the Employee constructs for the purpose of
selling, upon completion of construction, to third parties, (b) any
real estate transaction where no more than 20% of the transaction is
related to the health care business or (c) transactions disclosed in
Schedule 2 to this Agreement.
(c) As used in this Section 5.1, the term "Employer"
shall mean either Meditrust Operating Company or Meditrust. The
restrictions on the Employee set forth in this Section 5.1 shall not
apply in the case of a Termination Other Than For Cause or 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 necessary
to procure such insurance.
7. Miscellaneous.
7.1 Authority; No Restriction. The Employee represents and
warrants that the Employee 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 Employee,
enforceable against him in accordance with its terms. No consent, approval or
agreement of any person, party, court, government or entity is required to
be obtained by the Employee in connection with the execution and delivery of
this Agreement. The Employee is not subject to any agreement, restriction, lien,
encumbrance or right, title or interest in anyone limiting in any way the scope
of this Agreement or in any way inconsistent herewith, and the Employee will not
hereafter grant anyone the same.
7.2 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
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
shall continue in effect in accordance with their terms, such Section containing
independent agreements and obligations.
7.3 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; 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.
7.4 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.
7.5 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.
7.6 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:
If to the Employer: Meditrust Operating Company
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
With a copy to: Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
And: Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to the Employee: Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxxx Xxxx
Xxxx Xxxxx, XX 00000
With a copy to: Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
Any party may change such party's address for notices by notice duly given
pursuant to this Section 7.6.
7.7 Headings. The Section headings herein are intended for
reference and shall not by themselves determine the construction or
Interpretation of this Agreement.
7.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
7.9 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.
7.10 Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the executors, administrators, heirs,
successors and assigns of the parties; provided, however, this Agreement shall
not be assignable by either party.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one and the same
Agreement.
7.12 Withholdings. All compensation and benefits to the
Employed 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written,
MEDITRUST OPERATING COMPANY
SEAL By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Secretary
By: /s/ C. Xxxxxx Xxxxxxxxx
-------------------------------------
Name: C. Xxxxxx Xxxxxxxxx
Title: Chairman, Compensation
Committee
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
For value received, the payment obligations of Meditrust Operating
Company under the foregoing Employment Agreement are hereby unconditionally
guaranteed by Meditrust Corporation.
MEDITRUST CORPORATION
SEAL By: Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
corrected page
Exhibit A
The Performance Shares.
One hundred percent (100%) of the Performance Shares described in Section 3.6
shall be issued on or before July 28, 1998 upon payment by the Employee of the
par value thereof to The Meditrust Companies, but for dividend purposes only
shall be deemed issued as of February 27, 1998. Subject to the terms of the
Agreement, the Performance Shares shall vest on the earliest of (a) eight 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. In the event the Agreement expires on
December 31, 2002 and is not extended or renewed and Performance Shares are not
vested, the Employer shall enter into a reasonable and customary consulting
agreement with the Employee until such time as the Performance Shares vest. 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:
FFO Cumulative FFO per
Fiscal Year Per Share 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.
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.
Exhibit B
The Performance Units
Goals: The unit value of each Performance Unit shall depend upon satisfaction of
the Performance Goals set forth below.
FFO for Year Ended 12/31/2001 Cumulative FFO for 4 Years ended 12/31/2001
----------------------------- -------------------------------------------
$3.10 $11.38
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.
Unit Value: If The Meditrust Companies meet both the 2001 Performance Goal and
the Cumulative Performance Goal, each unit shall have a value $25 plus $.74 for
each xxxxx above the Cumulative FFO Goal up to a maximum value of $50 per unit.
Time of Payment: Subject to the terms of the Agreement, payment of the value of
each unit shall be made in cash in April, 2002, provided that the awardee was an
employee of one of The Meditrust Companies on December 31, 2001.
Schedule I
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 Internal Revenue Code of 1986, as amended (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 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 [Name of Accountants] 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 thirty (30) 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. 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.
(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 Employed 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 thirty (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 Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(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 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 thirty (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.
Schedule 2
Transactions Exempt from Section 5.1
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1. The following land development projects:
Abacoa (Jupiter, FL)
Lely Lakes (Naples FL)
University Commons (Sarasota, FL)
Grand Dunes (Myrtle Beach, SC)
Miramar (Ft. Xxxxx, FL)
St. Xxxxx Plantation (Southport, NC)
Xxxxxx Xxxxxxx (Orlando, FL)
2. Investments in of transactions undertaken by or on behalf of,
CareMatrix or PhyMatrix or successors thereto or affiliates thereof
(other than the Employee).
3. Other "turn-key" construction projects for sale to third parties upon
completion and land development projects, provided that, in the case of
any such projects undertaken by the Employee during the term of the
Employment Agreement, the Employee first presents to the Employer the
opportunity to develop or otherwise participate in such projects.
