Exhibit 10.11
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(this “Agreement”) is made and entered into as of
April 24, 2008 by and between HCP, Inc. (formerly known
as Health Care Property Investors, Inc.), a Maryland
corporation (together with its successors and assigns,
“Corporation”), and JAMES F. FLAHERTY III
(“Officer”).
RECITALS
WHEREAS, Corporation and Officer entered into
that certain Employment Agreement dated as of October 26, 2005
(the “Prior Employment Agreement”);
WHEREAS, Corporation and Officer desire
to amend and restate the Prior Employment Agreement upon the terms
set forth in this Agreement; and
WHEREAS, Corporation desires to continue to
employ Officer as its Chief Executive Officer and President, and
Officer is willing to accept such employment by Corporation, on the
terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
AGREEMENT
THE
PARTIES AGREE AS FOLLOWS:
1.
Duties
. During the
Employment Period (as defined below), Officer agrees to be employed
by and to serve Corporation as its Chief Executive Officer and
President. Corporation agrees to employ and retain Officer in
such capacities. Officer shall report to Corporation’s
Board of Directors (the “Board”) and at all times
during the Employment Period shall have powers and duties
commensurate with the positions of Chief Executive Officer and
President of a company the size and nature of the
Corporation. Officer shall devote substantially all of
Officer’s business time, energy, and skill to the performance
of Officer’s duties for Corporation and shall hold no other
employment. Nothing herein shall preclude Officer from
serving on (and receiving compensation for) boards of directors of
other for-profit business entities as the Board approves in
writing, which approval shall not be unreasonably withheld or
engaging in a reasonable level of charitable activities and
community affairs, including serving on charitable, community or
educational boards or from managing his personal and family
investments provided that such activities do not materially
interfere with the effective discharge of his duties and
responsibilities to Corporation. For purposes of clarity, on
May 4, 2007, the Board approved Officer’s service on the
University of Notre Dame Board of Trustees.
2.
Term of
Employment .
(a)
Definitions
. For purposes of
this Agreement the following terms shall have the following
meanings:
(i)
“ Termination For
Cause ” shall mean termination by the Board of
Officer’s employment with Corporation by reason of
Officer’s: (A) willful and continued failure to
substantially perform his duties with Corporation after a written
demand for substantial performance is delivered to Officer by the
Board, which demand, based on a good faith determination of the
Board after reasonable inquiry, specifically identifies the manner
in which the Board believes that Officer has not substantially
performed his duties (except for any such failure resulting from
his incapacity due to physical or mental illness or any such actual
or anticipated failure after Officer’s issuance of a Notice
of Termination (as defined in Section 2(a)(viii)) either
(1) for Good Reason (as defined in Section 2(a)(iii), or
(2) in connection with a Covered Resignation (as defined in
Section 2(a)(iv)), (B) willful and continued failure to
substantially follow and comply with the specific and lawful
directives of the Board, as reasonably determined by the Board
after a written demand for substantial performance is delivered to
Officer by the Board, which demand, based on a good faith
determination of the Board after reasonable inquiry, specifically
identifies the manner in which the Board believes that Officer has
not substantially performed his duties (except for any such failure
resulting from Officer’s incapacity due to physical or mental
illness or any such actual or anticipated failure after his
issuance of a Notice of Termination for Good Reason or in
connection with a Covered Resignation), (C) willful commission
of an act of fraud or dishonesty resulting in material economic or
financial injury to Corporation, or (D) willful engagement in
illegal conduct or gross misconduct, in each case which is
materially and demonstrably injurious to Corporation; provided,
however, that Officer’s employment shall not be deemed to
have been terminated in a Termination For Cause if such termination
took place as a result of any act or omission believed by Officer
in good faith to have been in the best interests of
Corporation. Notwithstanding the foregoing, Officer shall not
be deemed to have been terminated in a Termination for Cause unless
and until there shall have been delivered to Officer a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to Officer and an
opportunity for Officer, together with Officer’s counsel, to
be heard before the Board, and after the reasonable opportunity to
cure contemplated by clause (A) or (B) above in the case
of a termination pursuant to either such clause), finding that in
the Board’s good faith opinion Officer had engaged in conduct
set forth above in this Section 2(a)(i) and specifying
the particulars thereof in reasonable detail.
(ii)
“ Termination
Other Than For Cause ” shall mean termination by
Corporation of Officer’s employment hereunder other than
(A) a Termination For Cause, (B) a termination due to
Officer’s Disability, or (C) in circumstances where a
Termination Upon a Change in Control is applicable.
(iii)
“ Termination For
Good Reason ” shall mean termination by Officer of his
employment hereunder for Good Reason, other than in circumstances
where a Termination Upon a Change in Control is applicable.
“ Good Reason ” shall mean, without
Officer’s express written consent (except in the case of
Section 2(a)(iii)(G)), the occurrence of any of the following
circumstances unless, in the case of Sections 2(a)(iii)(A), (B),
(D), (E), (F), (G), (H) or (I), such circumstances are fully
corrected (provided such circumstances are capable of correction)
within 30 days after a written demand for substantial performance
is delivered to Corporation by Officer:
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(A)
the assignment to Officer
of any duties inconsistent with Officer’s duties pursuant to
Section 1, the failure to elect or reelect Officer as Chief
Executive Officer and President of Corporation and as a member of
the Board, or the removal by Corporation or the Board of Officer
from any such position, or any other action by Corporation that
results in a material diminution in Officer’s position,
authority, duties or responsibilities as Chief Executive Officer
and President of Corporation;
(B)
a change in the reporting
structure such that Officer reports to someone other than the
Board;
(C)
Corporation’s
reduction of Officer’s rate of Base Salary or Target Bonus as
in effect on the Effective Date or as the same may be increased
from time to time;
(D)
the relocation of
Corporation’s offices at which Officer is principally
employed as of the Effective Date (“Officer’s Principal
Location”) to a location more than thirty (30) miles from
such location, or Corporation’s requiring Officer to be based
anywhere other than Officer’s Principal Location, except for
required travel on Corporation’s business to an extent
substantially consistent with Officer’s business travel
obligations prior to the Effective Date;
(E)
Corporation’s
failure to pay to Officer any portion of Officer’s current
compensation or to pay to Officer any portion of an installment of
deferred compensation due under any deferred compensation program
of Corporation, including any deferred performance award, within
seven (7) days of the date such compensation is
due;
(F)
a material reduction in
Officer’s level of participation in any of
Corporation’s short and/or long-term incentive compensation
plans, employee benefit or retirement plans, or policies, practices
or arrangements in which Officer participated in during the
Employment Period; provided, however, except as set forth in clause
(C) above, that reductions in the levels of participation in
any such plan, policy, practice or arrangement shall not be deemed
to be “Good Reason” if Officer’s reduced level of
participation in each such plan, policy, practice or arrangement
remains substantially consistent (both in terms of the amount of
benefits provided and the level of Officer’s participation
relative to other participants as existed prior to the reduction)
with the level of participation of Corporation’s other senior
executive officers in each such plan, policy, practice or
arrangement;
(G)
Corporation’s
failure to obtain the assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all
of the business assets of Corporation within 15 days after a
merger, consolidation, sale or similar transaction (without regard
to whether or not Officer consented to such transaction);
or
(H)
any purported termination
of Officer’s employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of
Section 2(a)(viii) hereof (and, if applicable, the
requirements of Section 2(a)(i) hereof), which purported
termination shall not be effective for purposes of this
Agreement.
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Officer’s right to terminate
Officer’s employment pursuant to this
Section 2(a)(iii) shall not be affected by
Officer’s incapacity due to physical or mental illness.
Officer’s continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. After a Change in
Control, any good faith determination by Officer that Good Reason
exists as to circumstances arising upon, after or in connection
with such Change in Control shall be presumed correct and shall be
binding upon Corporation.
(iv)
“ Covered
Resignation ” shall mean a termination by Officer of
Officer’s employment with Corporation by Officer providing a
Notice of Termination within the thirty (30) day period following
the first anniversary of the occurrence of a Change in
Control.
(v)
“ Voluntary
Termination ” shall mean termination by Officer of
Officer’s employment by Corporation other than (i) a
Termination For Good Reason, (ii) a termination pursuant to a
Covered Resignation, or (iii) a termination by reason of
Officer’s death or Disability.
(vi)
“ Termination
Upon a Change in Control ” shall mean (A) a
termination by Officer of Officer’s employment with
Corporation (1) pursuant to a Covered Resignation, or
(2) for Good Reason at any time by delivering upon or within
the two-year period following a Change in Control a Notice of
Termination to Corporation, or (B) a termination by
Corporation of Officer’s employment, other than a Termination
For Cause or upon Disability, at any time by delivering upon or
within the two-year period following a Change in Control a Notice
of Termination to Officer; in each case other than a termination by
reason of Officer’s death.
(vii)
“ Change in
Control ” shall be deemed to occur if:
(A)
any Person (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “ Exchange Act ”)) is
or becomes the Beneficial Owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
Corporation representing 25% or more of the combined voting power
of Corporation’s then outstanding securities entitled to vote
generally in the election of directors (“ Outstanding
Corporation Voting Securities ”); provided, however, that
for purposes of this subsection (A), the following shall not
constitute a Change in Control: (1) any acquisition by
Corporation or any corporation controlled by Corporation,
(2) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Corporation or any corporation
controlled by Corporation, or (3) any acquisition by a Person
of 25% of the Outstanding Corporation Voting Securities as a result
of an acquisition of common stock of Corporation by Corporation
which, by reducing the number of shares of common stock of
Corporation outstanding, increases the proportionate number of
shares beneficially owned by such Person to 25% or more of the
Outstanding Corporation Voting Securities; provided, however, that
if a Person shall become the beneficial owner of 25% or more of the
Outstanding Corporation Voting Securities by reason of a share
acquisition by Corporation as described above and shall, after such
share acquisition by Corporation, become the beneficial owner of
any additional shares of common stock of Corporation, then such
acquisition of additional shares shall constitute a Change in
Control;
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(B)
during any period of not
more than two consecutive years commencing after the Effective
Date, individuals who at the beginning of such period constitute
the Board, together with any new director(s) whose election by
the Board or nomination for election by Corporation’s
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved in the manner set forth in this
clause (B) (which shall not include any director designated by
a person who has entered into an agreement with Corporation to
effect a transaction described in Sections 2(a)(vii)(A),
(C) or (D)), cease for any reason to constitute at least a
majority of the Board;
(C)
the consummation by
Corporation of a merger or consolidation, or a sale or other
disposition of all or substantially all of the assets of
Corporation (“ Business Combination ”), except
for a merger or consolidation which would result in the beneficial
owners of the Outstanding Corporation Voting Securities immediately
prior thereto continuing to beneficially own (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 then-outstanding voting securities of the corporation resulting
from such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns Corporation
or all or substantially all of Corporation’s assets either
directly or through one or more subsidiaries) in substantially the
same proportion as their ownership immediately prior to such
Business Combination; provided, however, that a merger or
consolidation effected to implement a recapitalization of
Corporation (or similar transaction) in which no Person acquires
beneficial ownership of more than 25% of the Outstanding
Corporation Voting Securities shall not constitute a Change in
Control except as otherwise provided above in clause (A);
or
(D)
the stockholders of
Corporation approve a plan of complete liquidation of Corporation
or an agreement for the sale or disposition by Corporation of all
or substantially all of Corporation’s business
assets.
(viii)
“ Notice of
Termination ” shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Officer’s employment
under the provision so indicated. The Notice of Termination
shall also set forth the applicable Date of Termination (which date
shall be consistent with
Section 2(ix) hereof).
(ix)
“ Date of
Termination ” shall mean (A) if Officer’s
employment is terminated due to Officer’s death, the date of
Officer’s death; (B) if Officer’s employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Officer shall not have returned
to the full-time performance of Officer’s duties during such
thirty (30)-day period), and (C) if Officer’s employment
is terminated pursuant to Section 2(a)(i),
Section 2(a)(ii), Section 2(a)(iii) or
Section 2(a)(iv) or for any other reason (other than
death or Disability (as defined in Section 2(c)), the date
specified in the Notice of Termination (which shall not be less
than thirty (30) days from the date such Notice of Termination is
given, except that in the case of a Termination for Cause the Date
of Termination
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may
be as early as the date such Notice of Termination is given, and in
the case of a termination for Good Reason or in connection with a
Covered Resignation the Date of Termination shall not be less than
sixty (60) days from the date such Notice of Termination is given,
and in all cases the Date of Termination shall not be more than
ninety (90) days from the date such Notice of Termination is
given).
(x)
“ Accrued and
Other Obligations ” shall mean:
(A)
any Base Salary that had
accrued, but had not been paid (including accrued and unpaid
vacation time), as of the Date of Termination, which will be paid
not later than the next regularly scheduled payroll date following
the Date of Termination; and
(B)
any bonus payable pursuant
to Section 3(b) with respect to any fiscal year (if
Officer was employed by Corporation on the last day of that fiscal
year) that had not previously been paid, which will be paid in
accordance with Section 3(b) or if the Date of
Termination is later than such date, within sixty (60) days
following the Date of Termination with such payment date within
such time period within Corporation’s sole discretion;
and
(C)
any reimbursement due to
Officer pursuant to the terms of Section 3(c)(iv) for
expenses incurred under that subsection by Officer prior to the
Date of Termination, which will be paid upon or promptly following
the Date of Termination or, if later, promptly following
Officer’s request for reimbursement of such expenses and
submission of receipts and other appropriate documentation thereof
in accordance with Corporation’s usual policies subject to
the time limitations of Section 3(c)(iv); and
(D)
any vested deferred
compensation, including, without limitation, any deferred and
vested performance award, any stock units or other equity-based
awards that were vested and subject to a deferral election by
Officer as of the Date of Termination, and any pension plan, profit
sharing plan, and supplemental retirement plan benefits of Officer
that were accrued and vested as of the Date of Termination; which,
in each case, will be paid in accordance with the terms and
conditions of the applicable plan, program, award or agreement;
and
(E)
any rights, payments or
benefits under any other applicable plans, programs, policies or
arrangements of Corporation in which Officer participated as of the
Date of Termination (or if the basis for Good Reason is pursuant to
Section 2(a)(iii)(F), the plan, program, policy or arrangement
in which Officer participated in immediately prior to the action
giving rise to Good Reason), including, without limitation, any
equity or long-term incentive plan or pursuant to any
then-outstanding equity awards granted by Corporation to Officer,
to the full extent of Officer’s rights under any such plans,
policies, arrangements or agreements.
(xi)
“Effective
Date” shall mean October 26, 2005, the date that
Corporation and Officer entered in to the Prior Employment
Agreement.
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(xii)
“Code” shall
mean the Internal Revenue Code of 1986, as the same may be amended
from time to time.
(b)
Basic Term
. The term of
employment hereunder shall commence on the Effective Date and
continue for a continuous period of three (3) years, subject
to earlier termination as provided in this Section 2 (the
“Employment Period”). Thereafter, unless either
party provides written notice to the other of its intent not to
extend the Employment Period at least sixty (60) days prior to each
anniversary of the Effective Date, the Employment Period shall be
extended for an additional year, so that at all times the
Employment Period shall be for a period of at least three
(3) years, unless earlier terminated as provided in this
Agreement; provided, further, that if a Change in Control occurs
during the Employment Period, the term of this Agreement shall
continue in effect for a period of not less than thirty-six (36)
months beyond the month in which such Change in Control
occurred. A determination by either party not to renew the
Employment Period in accordance herewith and delivery of a notice
of such non-renewal shall not be deemed a breach of this
Agreement. The Employment Period shall terminate at
Corporation’s regular close of business on the Date of
Termination (or, if the Date of Termination is not a regular
business day, at 6:00 p.m. Pacific Time on the Date of
Termination).
(c)
Termination by
Corporation . Corporation may terminate
Officer’s employment hereunder (i) for Cause (but only
in accordance with Section 2(a)(i) and only after the
requisite Board vote has been obtained), or (ii) without
Cause, or (iii) in the event of Officer’s
Disability. For purposes of this Agreement, the term
“Disability” shall mean a physical or mental impairment
which renders Officer unable to perform the essential functions of
his position, even with reasonable accommodation which does not
impose an undue hardship on Corporation, for a period of at least
six (6) months. Except as provided below, the
determination of whether a Disability exists shall be made by a
medical doctor selected by Corporation and Officer. If the
parties cannot agree on a medical doctor, each party shall select a
medical doctor and the two doctors shall select a third medical
doctor who shall be the approved medical doctor for this
purpose.
(d)
Termination by
Officer .
Officer may terminate his employment hereunder at any time
(i) for Good Reason (subject to Corporation’s
opportunity to cure, if applicable, the circumstance(s) giving
rise to Good Reason in the time period set forth in
Section 2(a)(iii)), or (ii) pursuant to a Covered
Resignation, or (iii) pursuant to a Voluntary Termination or
upon thirty (30) days’ written Notice of Termination to
Corporation, in the event of Officer’s Disability.
(e)
Termination by
Death .
Officer’s employment hereunder shall terminate upon
Officer’s death.
(f)
Terminations in
General .
Any termination of Officer’s employment pursuant to
Section 2(c), 2(d) or 2(e) shall not be deemed to be
a breach of this Agreement. Any termination of
Officer’s employment pursuant to Section 2(c),
2(d) or due to Officer’s Disability shall be
communicated by the terminating party by a Notice of
Termination.
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3.
Salary, Benefits and
Bonus Compensation .
(a)
Base Salary
. During the
Employment Period, Corporation agrees to pay to Officer a base
salary at an annualized rate of $575,000.00 from the Effective Date
through January 25, 2007, and a base salary at an annualized
rate of $600,000.00 from January 26, 2007 through the end of
the Employment Period (“Base Salary”), payable in
accordance with Corporation’s regular payroll practices in
effect from time to time, but not less frequently than monthly
installments. Officer’s Base Salary and other
incentives shall be reviewed annually by the Compensation Committee
of the Board (the “Compensation Committee”), which may
increase (but not decrease) Officer’s Base Salary and grant
such other incentives as it, in its sole discretion, determines
appropriate. After any such increase in Base Salary, the term
“Base Salary” shall refer to the increased
amount.
(b)
Bonuses
. Officer shall be
eligible to receive a bonus for each year (or portion thereof)
during the Employment Period and any extensions thereof, provided
that, except as otherwise provided herein, Officer has remained
employed by Corporation for the entire year. Officer’s
target bonus opportunity for any particular year (“Target
Bonus”) shall equal two hundred percent (200%) of
Officer’s Base Salary in effect for that year. The
amount of bonus payable to Officer for any particular year will be
determined by the Compensation Committee, in its sole discretion,
taking into account the performance of the Corporation and Officer
for that particular year. All such bonuses shall be payable
within 45 days after the end of the year to which such bonus
relates.
(c)
Additional
Benefits . During the Employment Period, Officer
shall be entitled to the following employee and fringe
benefits:
(i)
Officer
Benefits . Officer shall be eligible to
participate in such of Corporation’s benefits and deferred
compensation plans as are now generally available or later made
generally available to executive officers of Corporation on a basis
no less favorable than provided to such other executive officers,
including, without limitation, profit sharing plans, annual
physical examination, dental and medical plans, personal
catastrophe and disability insurance, and retirement plans.
Officer shall be eligible to participate in Corporation’s
2000 Stock Incentive Plan, 2006 Performance Incentive Plan and any
successor plan or any other equity or long-term incentive plan of
Corporation. Notwithstanding anything else contained herein
to the contrary, during the Employment Period in no event shall
Officer be eligible to participate in or receive benefits under any
severance plan, program, policy, arrangement or agreement of
Corporation other than this Agreement.
Section 4(b)(viii) of this Agreement shall apply in the
event that any payment, entitlement, benefit or distribution to
Officer or for Officer’s benefit during the Employment Period
(whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise and whether pursuant to
or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option,
restricted stock, restricted stock unit, stock appreciation right
or similar right, or the lapse or termination of any restriction on
or the vesting or exercisability of any of the foregoing) would be
subject to the excise tax imposed by Section 4999 of the Code
or to any similar tax imposed by federal, state or local law or any
interest or penalties imposed with respect to such excise or other
similar tax. The provision of the annual physical exam to or
for Officer pursuant to this Section 3(c)(i) in one
taxable year shall not affect the provision of such
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annual physical exam to or for Officer in any
other taxable year. Any reimbursement to Officer of the cost
of any annual physical exam under this
Section 3(c)(i) shall be paid to Officer on or before the
last day of Officer’s taxable year following the taxable year
in which the expense was incurred. The right to the annual
physical exams under this Section 3(c)(i) may not be
liquidated or exchanged for any other benefit.
(ii)
Vacation
. Officer shall be
entitled to five (5) weeks of vacation during each year during
the Employment Period, prorated for partial years. Upon
Officer’s completion of fifteen (15) years of service to
Corporation, Officer’s vacation accrual rate shall increase
to six (6) weeks per year effective on and after such
date.
(iii)
Life
Insurance . During the Employment Period,
Corporation shall at its expense procure and keep in effect term
life insurance on the life of Officer, payable to such
beneficiaries as Officer may from time to time designate, in the
aggregate amount of $2,000,000. Such policy shall be owned by
Officer or by a member of his immediate family.
(iv)
Reimbursement for
Expenses . During the Employment Period,
Corporation shall reimburse Officer for reasonable and properly
documented (in accordance with the Corporation’s policies as
in effect from time to time) out-of-pocket business and/or
entertainment expenses incurred by Officer in connection with his
duties under this Agreement. In addition, Corporation shall
promptly pay Officer’s legal fees and other expenses incurred
in the negotiation and preparation of this Agreement (including any
amendments or modifications thereto) and the Indemnification
Agreement entered into by and between Corporation and Officer on or
about the Effective Date, including any amendments or modifications
thereto (the “ Indemnification Agreement ”)
promptly upon receiving copies of the invoices for such fees and
expenses. The payment of the legal fees and other expenses
provided to or for Officer pursuant to this
Section 3(c)(iv) in one taxable year shall not affect the
amount of the payment of such legal fees and other expenses
provided to or for Officer in any other taxable year. Any
reimbursement to Officer of legal fees or expenses under this
Section 3(c)(iv) shall be paid to Officer on or before
the last day of Officer’s taxable year following the taxable
year in which the expense was incurred. The right to payment
of legal fees and expenses under this
Section 3(c)(iv) may not be liquidated or exchanged for
any other benefit.
4.
Severance
Compensation . If Officer’s employment by
Corporation is terminated during the Employment Period for any
reason by Corporation or Officer, or upon or following the
Employment Period in the absence of a successor employment
agreement by and between Officer and Corporation to the contrary,
Corporation shall have no further obligation to provide to Officer,
and Officer shall have no further right to receive or obtain from
Corporation, any severance payments or benefits except:
(a)
Accrued and Other
Obligations . Corporation shall pay Officer (or, in
the event of his death, Officer’s estate) the Accrued and
Other Obligations, subject to tax withholding and other authorized
deductions. Officer shall also be entitled to any amounts or
advances required by Section 6(h)(iii) or pursuant to the
Indemnification Agreement or any similar successor indemnification
agreement by and between Officer and Corporation. If
Officer’s employment by Corporation terminates after (but not
during) the Employment Period,
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Officer shall be eligible for participation in
any severance program, plan or policy then in effect on the same
terms and conditions generally applicable to Corporation’s
senior executives (other than as provided in individual employment
agreements) or, if the program, plan or policy is of general
applicability, to Corporation’s employees generally.
For purposes of clarity, this Section 4(a) does not
require a duplication of any Accrued or Other Obligation,
reimbursement or other payment or benefit, otherwise payable in the
circumstances pursuant to any other applicable plan, program,
policy, arrangement or award.
(b)
Termination Upon a
Change in Control . If, during the Employment Period (but
not following the expiration of the Employment Period),
Officer’s employment is terminated in a Termination Upon a
Change in Control, Corporation shall pay or provide Officer (in
addition to the payments and entitlements in Section 4(a)) the
following benefits, subject to tax withholding and other authorized
deductions:
(i)
Corporation shall pay
Officer, at the time specified in Section 4(e), a lump sum
cash amount equal to Officer’s Target Bonus for the year in
which the Date of Termination occurs, pro-rated based on the number
of days in such year that had elapsed as of the Date of
Termination.
(ii)
Corporation shall pay to
Officer, at the time specified in Section 4(e), a lump sum
cash severance payment equal to the sum of (x) three
(3) times Officer’s Base Salary (at the greater of the
highest annualized rate in effect in the year preceding the Date of
Termination or the year in which the Date of Termination occurs),
plus (y) three (3) times the greater of Officer’s
Target Bonus for the year in which the Date of Termination occurs
or the highest annual bonus received by Officer in the three
(3) years immediately prior to the Change in Control (for
purposes of the foregoing clause, Corporation and Officer hereby
agree that Officer’s annual bonus for the year 2004 was $1
million).
(iii)
For a period of three
(3) years following the Date of Termination, Corporation shall
continue to provide Officer and Officer’s eligible family
members, based on the cost sharing arrangement between Officer and
Corporation on the date of the Change in Control, with medical and
dental health benefits at least equal in the aggregate to those
which would have been provided to Officer and Officer’s
eligible family members if Officer’s employment had not been
terminated or, if more favorable to Officer, as in effect generally
at any time thereafter; provided, however, that if Officer becomes
re-employed with another employer and he and his dependents are
eligible to receive medical and dental health benefits under
another employer’s plans, Corporation’s obligations
under this Section 4(b)(iii) shall be reduced to the
extent comparable benefits with respect to Officer and his
dependents are actually received by Officer following
Officer’s termination, and any such benefits actually
received by Officer shall be reported by Officer to
Corporation. In the event Officer and his dependents are or
become ineligible under the terms of such benefit plans or programs
to continue to be so covered through the end of the three-year
period following the Date of Termination, in such event,
Corporation shall provide Officer and his dependents with
substantially equivalent coverage through other sources or shall
provide Officer with a lump sum payment in such amount that, after
all taxes on that amount, shall be equal to the cost to Officer of
providing Officer such benefit coverage until the end of such
period. The lump sum payment shall be determined on a present
value basis using the interest rate provided in
Section
10
1274(b)(2)(B) of the Internal Revenue Code
of 1986, as amended (the “Code”) on the Date of
Termination (the “Interest Rate”). In addition,
during the three-year period following the Date of Termination,
Corporation shall continue to pay the premiums for the term life
insurance policy described in
Section 3(c)(iii) above. At the end of the
three-year period following the Date of Termination, Officer,
Officer’s spouse and Officer’s dependents shall be
entitled to continuation coverage pursuant to Section 4980B of
the Code, Sections 601-608 of the Employee Retirement Income
Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if Officer had then
terminated employment with Corporation. To the extent that the
foregoing medical and dental benefits are taxable to Officer, any
medical or dental reimbursement payments shall be paid to Officer
on or before the last day of Officer’s taxable year following
the taxable year in which the expense was incurred and the payment
of any tax-gross up payments shall be paid to Officer on or before
the last day of the end of Officer’s taxable year following
the taxable year in which Officer (or the Corporation) pays or
remits the related taxes. The medical and dental benefits and
payment of term life insurance premiums described herein are not
subject to liquidat
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