SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement (the
"Agreement") is made as of March 26, 1999, by and between LTC Properties, Inc.,
a corporation organized under the laws of the State of Maryland ("LTC" or the
"Company"), and Xxxxx X. Xxxxxxxxxxx ("Executive"), and amends and restates the
Amended and Restated Employment Agreement dated June 30, 1998, by and between
LTC and Executive (the "Prior Employment Agreement"), and is effective as of
March 26, 1999.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Appointment, Title and Duties. LTC hereby employs Executive to
serve as its Chairman of the Board and Chief Executive Officer. In such
capacity, Executive shall report to the Board of Directors of the Company, and
shall have such duties, powers and responsibilities as are customarily assigned
to the Chairman of the Board and Chief Executive Officer of a publicly-held
corporation. In addition, Executive shall have such other duties and
responsibilities as the Board of Directors may assign him, with his consent,
including serving with the consent or at the request of the Company on the board
of directors of affiliated corporations.
2. Term of Agreement. The initial term of this Agreement shall be
for a four (4) year period, ending March 26, 2003. Unless the employment
hereunder shall have been terminated in accordance with the provisions hereof,
the term of this Agreement shall be extended beyond March 26, 2003, such that at
each and every moment of time hereafter the remaining term shall not be less
than four (4) years.
3. Acceptance of Position. Executive accepts the position of
Chairman of the Board and Chief Executive Officer of LTC, and agrees that during
the term of this Agreement he will faithfully perform his duties and, except as
expressly approved by the Board of Directors of LTC, will devote substantially
all of his business time to the business and affairs of LTC, and will not
engage, for his own account or for the account of any other person or entity, in
a business which competes with LTC. It is acknowledged and agreed that Executive
may serve as an officer and/or director of companies in which LTC owns voting or
non-voting stock. In addition, it is acknowledged and agreed that Executive may,
from time to time, serve as a member of the board of directors of other
companies, in which event the Board of Directors of LTC must expressly approve
such service pursuant to a Board resolution maintained in the Company's minute
books. Any compensation or remuneration which Executive receives in
consideration of his service on the board of directors of other companies shall
be the sole and exclusive property of Executive, and LTC shall have no right or
entitlement at any time to any such compensation or remuneration.
4. Salary and Benefits. During the term of this Agreement:
a. LTC shall pay to Executive a base salary at an annual
rate of not less than Four Hundred Thousand Dollars ($400,000) per annum,
paid in approximately equal installments at intervals based on any
reasonable Company policy. LTC agrees from time to time to consider
increases in such base salary in the discretion of the Board of Directors.
Any increase, once granted, shall automatically amend this Agreement to
provide that
thereafter Executive's base salary shall not be less than the annual amount to
which such base salary has been increased.
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b. Executive shall participate in all health, retirement,
Company-paid insurance, sick leave, disability, expense reimbursement and
other benefit programs which LTC makes available to any of its senior
executives, and shall be eligible for bonuses in the discretion of the
Board of Directors.
c. Executive shall be entitled to reasonable vacation time,
not less than four (4) weeks per year, provided that not more than two (2)
weeks of such vacation time may be taken consecutively without prior
notice to and non-objection by the Compensation Committee of the Board of
Directors or, if there is no Compensation Committee, the Board of
Directors.
5. Certain Terms Defined. For purposes of this Agreement:
a. Executive shall be deemed to be "disabled" if a physical
or mental condition shall occur and persist which, in the written opinion
of a licensed physician selected by the Board of Directors in good faith,
has rendered Executive unable to perform the duties of Chairman of the
Board and Chief Executive Officer of LTC for a period of sixty (60) days
or more and, in the written opinion of such physician, the condition will
continue for an indefinite period of time, rendering Executive unable to
return to his duties.
b. A termination of Executive's employment by LTC shall be
deemed for "Cause" if, and only if, it is based upon (i) conviction of a
felony; (ii) material disloyalty to the Company such as embezzlement,
misappropriation of corporate assets or, except as permitted pursuant to
Section 3 of this Agreement, breach of Executive's agreement not to engage
in business for another enterprise of the type engaged in by the Company;
or (iii) the engaging in unethical or illegal behavior which is of a
public nature, brings LTC into disrepute, and results in material damage
to the Company. The Company shall have the right to suspend Executive,
with pay, for a reasonable period to investigate allegations of conduct
which, if proven, would establish a right to terminate this Agreement for
Cause, or to permit a felony charge to be tried. Immediately upon the
conclusion of such temporary period, unless Cause to terminate this
Agreement has been established, Executive shall be restored to all duties
and responsibilities as if such suspension had never occurred.
c. A resignation by Executive shall not be deemed to be
voluntary and shall be deemed to be a resignation with "Good Reason" if it
is based upon (i) a diminution in Executive's title, duties, or salary;
(ii) a reduction in benefits which is not part of an across-the-board
reduction in benefits of all senior executive personnel; (iii) a direction
by the Board of Directors that Executive report to any person or group
other than the Board of Directors, or (iv) a geographic relocation of
Executive's place of work a distance of more than seventy five (75) miles
from LTC's offices located at 000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxxxx. It shall also constitute Good Reason for Executive to resign
his employment if the shareholders of LTC shall fail to elect or reelect
him to the Board of Directors of LTC, unless he declines to be elected to
such Board of Directors.
d. "Affiliate" means with respect to any Person, a Person
who, directly or indirectly, through one or more intermediaries, controls,
is controlled by or is under common control, with the Person specified.
e. "Base Salary" means, as of any date of termination of
employment, the highest base salary of Executive in the then current
fiscal year or in any of the last four fiscal years immediately preceding
such date of termination of employment.
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f. "Beneficial Owner" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act;
g. A "Change in Control" occurs if:
i) any Person or related group of Persons (other than
Executive and his Related Persons, the Company or a Person that directly
or indirectly controls, is controlled by, or is under common control with,
the Company) is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities; or
ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other entity),
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 66-2/3% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no Person acquires more than 30% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in
Control; or
iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets; or
iv) a majority of the members of the Board of Directors
of the Company cease to be Continuing Directors.
h. "Code" means the Internal Revenue Code of 1986, as amended.
i. "Continuing Directors" means, as of any date of
determination, any member of the Board of Directors who (i) was a member
of such Board of Directors on the date of the Agreement or (ii) was
nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of
such Board of Directors at the time of such nomination or election.
j. "Exchange Act" means the Exchange Act of 1934, as amended.
k. "Person" means any individual, corporation, partnership,
limited liability company, trust, association or other entity.
l. "Related Person" means any immediate family member
(spouse, partner, parent, sibling or child whether by birth or adoption)
of the Executive and any trust, estate or foundation, the beneficiary of
which is the Executive and/or an immediate family member of the Executive.
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6. Certain Benefits Upon Termination. Executive's employment shall
be terminated upon the earlier of (i) the voluntary resignation of Executive
with or without Good Reason; (ii) Executive's death or permanent disability, or
(iii) upon the termination of Executive's employment by LTC for any reason at
any time. In the event of such termination, the below provisions of this Section
6 shall apply.
a. If Executive's employment by LTC terminates for any reason
other than as a result of (i) a termination for Cause, or (ii) a voluntary
resignation by Executive without a Good Reason, or (iii) a Change in
Control of the Company, then LTC shall pay Executive a lump sum severance
payment equal to four times his Base Salary; provided that if employment
terminates by reason of Executive's death or disability, then such salary
shall be paid only to the extent the Company has available "key man" life,
disability or similar insurance relating to the death or disability of
Executive.
b. Upon a Change in Control of the Company whether or not
Executive's employment is terminated thereby, in lieu of the severance
payment described in Section 6(a) above, LTC shall pay Executive a lump
sum severance payment in cash equal to $5.0 million;
c. If Executive's employment by LTC terminates for any
reason, except for LTC's termination of Executive's employment for Cause
or a voluntary resignation by Executive without a Good Reason, LTC shall
offer to Executive the opportunity to participate in all Company-provided
medical and dental plans to the extent Executive elects and remains
eligible for coverage under COBRA and for a maximum period of eighteen
(18) months at Company expense; provided, however, in the event
Executive's employment by LTC terminates upon a Change in Control of the
Company, then Executive shall not be given the opportunity to participate
in any of such medical and dental plans except to the extent required by
law.
d. In the event that Executive's employment terminates by
reason of his death, all benefits provided in this Section 6 shall be paid
to his estate or as his executor shall direct, but payment may be deferred
until Executive's executor or personal representative has been appointed
and qualified pursuant to the laws in effect in Executive's jurisdiction
of residence at the time of his death.
e. LTC shall make all payments pursuant to the foregoing
subsections (a) through (d) within seven (7) days following the date of
termination of Executive's employment or consummation of a Change in
Control of the Company, as applicable.
f. LTC shall have no liability under this Section if
Executive's employment pursuant to this Agreement is terminated by LTC for
Cause or by Executive without a Good Reason; provided, however, that if
Executive's employment pursuant to this Agreement is terminated by LTC for
Cause or by Executive without a Good Reason at any time after a Change of
Control which did not result in Executive's employment being terminated,
such post-Change of Control termination by LTC for Cause or by Executive
without a Good Reason shall not affect in any way Executive's entitlement
to the lump sum severance payment described in Section 6(b), above or any
other rights, benefits or entitlements to which Executive may be entitled
as a result of such Change of Control.
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x. Xxxxx-Up.
i) If it shall be determined that any payment,
distribution or benefit received or to be received by Executive from the
Company (whether payable pursuant to the terms of this Agreement or any
other plan, arrangements or agreement with the Company or an Affiliate (as
defined above) ("Payments") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then Executive shall be
entitled to receive an additional payment (the "Excise Tax Gross-Up
Payment) in an amount such that the net amount retained by Executive,
after the calculation and deduction of any Excise Tax on the Payments and
any federal, state and local income taxes and excise tax on the Excise Tax
Gross-Up Payment provided for in this Section 6(g), shall be equal to the
Payments. In determining this amount, the amount of the Excise Tax
Gross-Up Payment attributable to federal income taxes shall be reduced by
the maximum reduction in federal income taxes that could be obtained by
the deduction of the portion of the Excise Tax Gross-Up Payment
attributable to state and local income taxes. Finally, the Excise Tax
Gross-Up Payment shall be reduced by income or excise tax withholding
payments made by the Company or any Affiliate of either to any federal,
state or local taxing authority with respect to the Excise Tax Gross-Up
Payment that was not deducted from compensation payable to Executive.
ii) All determinations required to be made under this
Section 6(g), including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, except as
specified in Section 6(g)(i) above, shall be made by the Company's
independent auditors (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within 15
business days after the Company makes any Payments to Executive. Such
determination of tax liability made by the Accounting Firm shall be
subject to review by Executive's tax advisor and, if Executive's tax
advisor does not agree with such determination reached by the Accounting
Firm, then the Accounting Firm and Executive's tax advisor shall jointly
designate a nationally recognized public accounting firm, which shall make
such determination. All reasonable fees and expenses of the accountants
and tax advisors retained by either Executive or the Company shall be
borne by the Company. Any Excise Tax Gross-Up Payment, as determined
pursuant to this Section 6(g), shall be paid by the Company to Executive
within five days after the receipt of such determination. Any
determination by a jointly designated public accounting firm shall be
binding upon the Company and Executive.
iii) As a result of the uncertainty in the application
of Subsection 4999 of the Code at the time of the initial determination
hereunder, it is possible that Excise Tax Gross-Up Payments will not have
been made by the Company that should have been made consistent with the
calculations required to be made hereunder ("Underpayment"). In the event
that Executive thereafter is required to make a payment of any Excise Tax,
any such Underpayment calculated in accordance with and in the same manner
as the Excise Tax Gross-Up Payment in Section 6(g)(i) above shall be
promptly paid by the Company to or for the benefit of Executive. In the
event that the Excise Tax Gross-Up Payment exceeds the amount subsequently
determined to be due, such excess shall constitute a loan from the Company
to Executive payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
7. Tax Liability Loan. Upon a Change in Control of the Company,
whether or
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not Executive's employment is terminated as a result thereof, the Company shall
offer Executive an unsecured loan in the amount necessary to fund Executive's
tax liability arising from the accelerated vesting of restricted shares held by
Executive, if any. Such loan shall be due, in full, in ten (10) years from the
date made and shall bear interest at the then-current Applicable Federal Rate
(the minimum rate necessary to avoid "unstated interest" under Section 7872 of
the Code) with interest payments to be paid to the Company annually. Such loan
shall be evidenced by a promissory note signed by, and with full recourse to,
Executive.
8. Indemnification. LTC shall indemnify Executive and hold him
harmless from and against all claims, actions, losses, damages, expense or
liabilities (including expenses of defense and settlement) ("Claim") based upon
or in any way arising from or connected with his employment by LTC, to the
maximum extent permitted by law. To the extent permitted by law, LTC shall
advance to Executive any expenses necessary in connection with the defense of
any Claim which is brought if indemnification cannot be determined to be
available prior to the conclusion of, or the investigation of, such Claim. The
parties hereto agree that each understands and has understood, at all times
under all prior employment agreements between LTC and Executive, that
notwithstanding the above-stated provisions, nothing herein shall require LTC to
hold harmless or indemnify Executive with respect to any Claim which is brought
or asserted against Executive by LTC. LTC shall investigate in good faith the
availability and cost of directors' and officers' insurance and shall include
Executive as an insured in any policy of such insurance it maintains.
9. Attorney Fees. In the event that any action or proceeding is
brought to enforce the terms and provisions of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys fees.
10. Notices. All notices and other communications provided to
either party hereto under this Agreement shall be in writing and delivered by
certified or registered mail to such party at its address set forth below its
signature hereto, or at such other address as may be designated by such party in
a notice to the other party. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received.
11. Construction. In construing this Agreement, if any portion of
this Agreement shall be found to be invalid or unenforceable, the remaining
terms and provisions of this Agreement shall be given effect to the maximum
extent permitted without considering the void, invalid or unenforceable
provision. In construing this Agreement, the singular shall include the plural,
the masculine shall include the feminine and neuter genders as appropriate, and
no meaning or effect shall be given to the captions of the sections in this
Agreement, which are inserted for convenience of reference only.
12. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the internal laws of the State of
California as at the time in effect.
14. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other prior agreements (including the Prior
Employment Agreement) and undertakings, both written and oral, among Executive
and the Company, with respect to the subject matter hereof.
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IN WITNESS WHEREOF, this Agreement has been executed on the date set forth
below, to be effective as of the date specified in the first paragraph of this
Agreement.
LTC PROPERTIES, INC.,
a Maryland Corporation
Address: By: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------- -----------------------------------
President and Chief
---------------------------------- Financial Officer
---------------------------------- Date Signed: March 26, 1999
--------------------------
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Chairman of Compensation
Committee
Date Signed: March 26, 1999
--------------------------
Address: /s/ Xxxxx X. Xxxxxxxxxxx
-------------------------- ----------------------------------------
Executive
----------------------------------
Date Signed: March 26, 1999
---------------------------------- --------------------------
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