THIRD AMENDED AND RESTATED
THIS THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT , dated the 22nd day of January 2007 and effective the 1st day of January 2007 (the "Agreement"), is entered into by and between HEALTH CARE REIT, INC., a Delaware corporation, (the "Corporation"), and GEORGE L. CHAPMAN (the "Executive").
WHEREAS , the Corporation and the Executive entered into an Employment Agreement, effective January 1, 1997, which Employment Agreement was amended and restated, effective January 1, 2000, and further amended and restated, effective January 1, 2004;
WHEREAS , the Compensation Committee of the Corporation’s Board of Directors has approved a special retention and incentive award for the Executive and has also approved certain modifications to the terms of such amended and restated employment agreement; and
WHEREAS , the Corporation wishes to assure itself of the services of the Executive for the period provided in this Agreement, including the Executive’s participation in the selection, evaluation and development of a successor to the Executive, and the Executive is willing to serve in the employ of the Corporation for such period upon the terms and conditions set forth in this Agreement.
NOW THEREFORE , in consideration of the mutual covenants herein contained, the parties, intending to be legally bound, hereby agree as follows:
The Corporation hereby agrees to employ the Executive as the Corporation’s Chairman and Chief Executive Officer, upon the terms and conditions herein contained, and the Executive hereby agrees to accept such employment and to serve as the Corporation’s Chairman and Chief Executive Officer, and to perform the duties and functions customarily performed by the Chairman and Chief Executive Officer of a publicly traded corporation (including participating in the selection, evaluation and development of the Executive’s successor).
In such capacities, the Executive shall report only to the Corporation’s Board of Directors, and shall have the powers and responsibilities set forth in Article IV of the Corporation’s By-Laws as well as such additional powers and responsibilities consistent with his position as the Board of Directors may assign to him.
Throughout the Term (defined below) of this Agreement, the Executive shall devote his best efforts and all of his business time and services to the business and affairs of the Corporation.
Page 1 of 13
2. TERM OF AGREEMENT
The term of employment under this Agreement shall expire on January 31, 2010 (the "Three Year Term"). Executive shall have the option to extend this Agreement for an additional year (the "Option") by providing the Corporation with written notice of his intention to extend the Agreement at least six (6) months prior to the expiration of the Three Year Term. The "Three Year Term," as it may be extended by the "Option," is sometimes referred to herein as the "Term."
The Corporation shall be entitled to terminate this Agreement immediately for any reason subject to the continuing obligations of the Corporation under this Agreement.
3. SALARY AND BONUS
The Executive shall receive a base salary during the Term of this Agreement at a rate of not less than $570,000.00 per annum for 2007, and at a rate of not less than $570,000.00 per annum for subsequent years. All amounts shall be payable in substantially equal semi-monthly installments. During the Term, the Compensation Committee of the Board shall consult with the Executive and review the Executive’s base salary at annual intervals, and may adjust the Executive’s annual base salary from time to time as the Committee deems to be appropriate.
The Executive shall also be eligible to receive a bonus from the Corporation each year during the Term of this Agreement, with the actual amount of such bonus to be determined by the Compensation Committee of the Corporation’s Board, using such performance measures as the Committee deems to be appropriate.
4. ADDITIONAL COMPENSATION AND BENEFITS
The Executive shall receive the following additional compensation and welfare and fringe benefits:
(a) Stock Options and Other Long-Term Incentives. The Executive has been granted nonstatutory stock options and shares of restricted stock pursuant to the terms of the Corporation’s 2005 Long-Term Incentive Plan (the "Plan"). During the Term of the Agreement, any additional stock options, restricted stock or other awards under the Plan shall be at the discretion of the Corporation’s Board.
(b) Disability Insurance. During the Term of this Agreement, the Corporation shall maintain a disability insurance policy on the Executive with the maximum aggregate annual benefit commercially available to the Corporation, up to a maximum of sixty percent (60%) of his annual base salary. The Corporation shall provide at its expense all supplemental disability coverage needed to provide this aggregate benefit. The Executive will submit to such medical examination and supply such information as is necessary for the Corporation to obtain such insurance coverage.
Page 2 of 13
(c) Health Insurance. During the Term of this Agreement, the Corporation shall provide the Executive and his dependents with health insurance coverage no less favorable than that from time to time made available to other key employees.
(d) Business Clubs . During the Term of this Agreement, the Corporation shall pay all initiation fees and dues charged by up to two (2) dining clubs, country clubs, athletic clubs, or similar organizations of which the Executive is a member or desires to become a member.
(e) Conferences . During the Term of this Agreement, the Corporation shall pay for the Executive and his wife to attend up to three (3) business-related conferences, conventions or seminars within the continental United States each year during the Term of this Agreement, including registration fees, travel expenses and reasonable hotel and meal allowances.
(f) Vacation . During the Term of this Agreement, the Executive shall be entitled to up to five (5) weeks of vacation during each year during the Term of this Agreement and any extensions thereof, prorated for partial years.
(g) Medical Examinations. During the Term of this Agreement, the Corporation shall pay or reimburse the Executive for the cost of a physical examination by a physician acceptable to the Executive in alternate years.
(h) Business Expenses. During the Term of this Agreement, the Corporation shall reimburse the Executive for all reasonable expenses he incurs in promoting the Corporation’s business, including expenses for travel and similar items, upon presentation by the Executive from time to time of an itemized account of such expenditures.
In addition to the benefits provided pursuant to the preceding paragraphs of this Section 4, the Executive shall be eligible, during the Term, to participate in such other executive compensation and retirement plans of the Corporation as are applicable generally to other officers. The Executive shall be eligible during the Term to participate in the Corporation’s supplemental executive retirement plan, in such other retirement plans of the Corporation as are applicable generally to other officers, and welfare benefit plans, programs, practices and policies of the Corporation as are generally applicable to other key employees, unless such participation would duplicate, directly or indirectly, benefits already accorded to the Executive.
5. SPECIAL RETENTION AND INCENTIVE AWARD
In addition to the salary, bonus, additional compensation, benefits and any other compensation, awards or benefits that have been or may be granted to the Executive, the Executive is eligible for a special retention and incentive award (the "Special Award") of up to 120,000 shares of the Corporation’s common stock, par value $1.00 per share (the "Shares), subject to the terms described below. On the date this Agreement is entered into, 60,000 of the Shares shall be granted to the Executive as restricted shares (the "Restricted Shares") and 60,000 of the Shares shall be granted to the Executive in performance awards (the "Performance Award Shares"), all pursuant to the terms of the Plan (the Restricted Shares and the Performance Award Shares are sometimes referred to collectively herein as the "Shares"). Except as provided in
Page 3 of 13
Section 6 herein, the Shares will vest and have dividend treatment as follows:
(a) The 60,000 Restricted Shares shall vest at the end of the Three Year Term, subject to the Executive’s continued employment for the Three Year Term. The Executive will be entitled to current receipt of dividends on the 60,000 Restricted Shares.
(b) The 60,000 Performance Award Shares shall be paid in shares of common stock at the end of the Three Year Term, subject to the Executive’s continued employment for the Three Year Term, if the Board of Directors has determined that the Corporation’s strategic plan of diversifying into new markets such as senior housing, medical office building, hospital facilities or other areas as specified by the Board has been implemented successfully. The Executive shall be granted dividend equivalent rights ("DERs") on the 60,000 Performance Award Shares. The DER payments on 30,000 of the Performance Award Shares will be paid as dividends are declared on shares of common stock. The DER payments on the remaining 30,000 Performance Award Shares will accrue as dividends are declared on shares of common stock, be deemed reinvested in additional common shares and will be paid in such additional shares if and when the underlying Performance Award Shares are earned.
6. PAYMENTS UPON TERMINATION
(a) Involuntary Termination . If the Executive’s employment is terminated by the Corporation during the Term of this Agreement, the Executive shall be entitled to receive his base salary accrued through the date of termination, any accrued but unpaid vacation pay, plus any bonuses earned but unpaid with respect to fiscal years or other periods preceding the termination date. The Executive shall also receive any nonforfeitable benefits payable to him under the terms of any deferred compensation, incentive or other benefit plans maintained by the Corporation, payable in accordance with the terms of the applicable plan.
If the termination is not a termination for Cause, as described in paragraph (c), a voluntary termination by the Executive as described in paragraph (d), or a result of the Executive’s death or disability, then the Corporation shall also be obligated to make a series of monthly severance payments to the Executive for each month during the remaining Term of this Agreement, but not less than twenty-four (24) months. Each monthly payment shall be equal to one-twelfth (1/12th) of the sum of (i) the Executive’s annual base salary, as in effect on the date of termination, and (ii) the greater of (A) the average of the annual bonuses paid to the Executive for the last two (2) fiscal years preceding the termination date or (B) a minimum bonus equal to one hundred percent (100%) of his annual base salary. If the Executive obtains a replacement position with any new employer (including a position as an officer, employee, consultant, or agent, or self-employment as a partner or sole proprietor), the payments shall be reduced by all amounts the Executive receives as compensation for services performed during such period. The Executive shall be under no duty to mitigate the amounts owed to him under this paragraph (a) by seeking such a replacement position.
In addition, if the termination is not a termination for Cause as described in paragraph (c), a voluntary termination by the Executive as described in paragraph (d), or a result of the Executive’s death or disability, then:
Page 4 of 13
(i) The 60,000 Restricted Shares granted to the Executive pursuant to Section 5(a) shall become vested and 30,000 of the Performance Award Shares granted to the Executive pursuant to Section 5(b) shall become earned and payable. The remaining 30,000 Performance Award Shares granted to the Executive pursuant to Section 5(b) may become earned and payable to the extent the Board determines that the goals specified in Section 5(b) have been attained;
(ii) Any stock options, restricted stock (except for the Shares granted pursuant to the Special Award which Shares are treated in Section 6(a)(i)) or other awards granted to the Executive under any deferred compensation, incentive or other benefit plan maintained by the Corporation shall become fully vested and earned and payable and, in the case of stock options, exercisable in full;
(iii) The Executive shall be provided continued coverage at the Corporation’s expense under any life, health and disability insurance programs maintained by the Corporation in which the Executive participated at the time of his termination for the remaining Term of the Agreement (but not less than twelve (12) months), or until, if earlier, the date the Executive obtains comparable coverage under benefit plans maintained by a new employer; and
(iv) The Executive may elect, by delivering written notice to the Corporation within thirty (30) days following such termination of his employment, to receive from the Corporation a lump sum severance payment in lieu of the monthly severance payments described in Section 6(a) in an amount equal to the present value of such payments. Such present value shall be calculated using a discount rate equal to the interest rate on 90-day Treasury bills, as reported in the Wall Street Journal (or similar publication) for the date the election is received by the Corporation. The Corporation shall deliver the payment to the Executive, in the form of a bank cashier’s check, within ten (10) business days following the date on which the Corporation receives written notice of the Executive’s election.
(b) Disability . The Corporation shall be entitled to terminate this Agreement, if the Board determines that the Executive has been unable to attend to his duties for at least ninety (90) days because of a medically diagnosable physical or mental condition, and has received a written opinion fro