-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WVarcowk/Qt0bBa69dZwcpo8UdY4iHnryBIfBafeozV7xdKhwE/4rVKg2F9oyJbr rfwDXWoXRJL9FC5P2NashA== 0000912057-01-511668.txt : 20010501 0000912057-01-511668.hdr.sgml : 20010501 ACCESSION NUMBER: 0000912057-01-511668 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CORP CENTRAL INDEX KEY: 0000314661 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 953520818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-08131 FILM NUMBER: 1617081 BUSINESS ADDRESS: STREET 1: 909 HIDDEN RIDGE SUITE 600 CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 7814336000 MAIL ADDRESS: STREET 1: 909 HIDDEN RIDGE SUITE 600 CITY: IRVING STATE: TX ZIP: 75038 FORMER COMPANY: FORMER CONFORMED NAME: SANTA ANITA REALTY ENTERPRISES INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST OPERATING CO CENTRAL INDEX KEY: 0000313749 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953419438 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-08132 FILM NUMBER: 1617082 BUSINESS ADDRESS: STREET 1: 197 FIRST AVE STREET 2: STE 100 CITY: NEEDHAM STATE: MA ZIP: 02494 BUSINESS PHONE: 7814336000 MAIL ADDRESS: STREET 1: MEDITRUST OPERATING CO STREET 2: 197 FIRST AVENUE SUITE 100 CITY: NEEDHAM STATE: MA ZIP: 02494 FORMER COMPANY: FORMER CONFORMED NAME: SANTA ANITA OPERATING CO DATE OF NAME CHANGE: 19920703 10-K/A 1 a2047171z10-ka.txt 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM 10-K/A [X] AMENDMENT NO. 2 TO JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ___________.
Commission file number 0-9109 Commission file number 0-9110 MEDITRUST CORPORATION MEDITRUST OPERATING COMPANY (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter) Delaware Delaware (State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or organization) organization) 95-3520818 95-3419438 (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) 909 HIDDEN RIDGE, SUITE 600 909 HIDDEN RIDGE, SUITE 600 IRVING, TEXAS IRVING, TEXAS 75038 75038 (Address of principal executive offices, including zip (Address of principal executive offices, including zip code) code) (214) 492-6600 (214) 492-6600 (Registrant's telephone number, including area code) (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class and Name of Each Exchange on Which Title of Each Class and Name of Each Exchange on Which Registered Registered - ------------------------------------------------------------ ------------------------------------------------------------
1 Common Stock $0.10 Par Value, Common Stock $0.10 Par Value, New York Stock Exchange New York Stock Exchange 9% Convertible Debentures due 2002, New York Stock Exchange 7.5% Convertible Debentures due 2001, New York Stock Exchange 7.6% Notes due 2001, New York Stock Exchange Cumulative Redeemable Preferred Stock represented by depository shares representing 1/10th of a share of Series A Preferred Stock, New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None None ------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No _X_ Aggregate market value of the paired voting stock of Meditrust Corporation and of Meditrust Operating Company held by non-affiliates as of March 28, 2001 was $414,918,242 based upon the closing price of $3.59 on the New York Stock Exchange Composite Tape (for this computation, the registrants have excluded the market value of all the shares of common stock reported as beneficially owned by executive officers and directors of the registrants). The number of shares of common stock, par value $0.10 per share, outstanding as of April 27, 2001 for Meditrust Corporation was 144,341,666 and Meditrust Operating Company was 143,036,289. The following documents are incorporated by reference into the indicated Part of this Joint Annual Report on Form 10-K/A: DOCUMENT PART None For the purpose of this Joint Annual Report on Form 10-K/A, Meditrust Corporation and Meditrust Operating Company are referred to as "Meditrust" and "Operating," respectively, and "The Meditrust Companies," collectively. Meditrust also refers, as the context may require, to Meditrust, the Massachusetts Business Trust ("Meditrust's Predecessor"). As used in this Part III, the term "Shares" and "Paired Common Stock" are defined as shares of paired common stock of Meditrust and Operating. Items 10, 11, 12 and 13 of this Joint Annual Report on Form 10-K are hereby amended and restated in full by adding those Items as follows: Part III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS Directors of The Meditrust Companies The respective Boards of Directors of each of Meditrust and Operating are divided into three classes. Each class has a term of three years and the terms are staggered so that in each year only one class of Directors for each of Meditrust and Operating is elected. 3 Current Directors of The Meditrust Companies
DIRECTOR OF DIRECTOR OF MEDITRUST OPERATING NAME AND PRINCIPAL AND ITS AND ITS TERMS OCCUPATION OR EMPLOYMENT AGE PREDECESSOR SINCE PREDECESSOR SINCE EXPIRE - ------------------------ --- ----------------- ----------------- ------ William C. Baker 68 2000 1991 2003 Former Chairman Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company Clive D. Bode 57 1999 1999 2002 Chairman of the Board Director, Kelley, Hart & Hallman William G. Byrnes 50 2000 1998 2001 Financial Consultant, Private Investor and Director JDN Realty Corporation Francis W. Cash 59 2000 2000 2001 Chief Executive Officer and President of Meditrust Chief Executive Officer and President of Operating James P. Conn 63 1995 2000 2002 Former Managing Director and Chief Investment Officer of Financial Security Assurance, Inc. John C. Cushman, III 60 1996 2000 2003 President and Chief Executive Officer of Cushman Realty Corporation Stephen E. Merrill 54 1998 1998 2002 President, Bingham Consulting Group, LLC
William C. Baker has been a Director of Operating since October 1991 and was appointed a Director of Meditrust in April 2000. Mr. Baker served as President and Treasurer of Operating from August 1998 through April 2000. Mr. Baker was Chief Executive Officer of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company from April 1996 to December 1998. Mr. Baker was the President of Red Robin International, Inc. from 1993 to 1995, a private investor from 1988 to 1992 and Chairman of the Board and Chief Executive Officer of Del Taco, Inc. from 1976 to 1988. He served as Chairman of the Board of Coast Newport Properties from 1991 to 1999. Mr. Baker is a director of Callaway Golf Company and Public Storage, Inc. Clive D. Bode has been Chairman of the Boards of Directors of Meditrust and Operating since October 1999. Mr. Bode has been a special advisor to certain members of the Bass Family of Fort Worth, Texas for the past 10 years. Mr. Bode is also a director of Kelly, Hart & Hallman, a Fort Worth based law firm. 4 William G. Byrnes has been a Director of Operating since 1998 and was appointed a Director of Meditrust in April 2000. Mr. Byrnes served as Chief Executive Officer of Meditrust from January 2000 through Mr. Cash's appointment in April 2000. He was previously a Distinguished Professor of Finance at Georgetown University from August 1988 to May 1999 and was associated with Alex. Brown and Sons, investment bankers, from 1981 through 1998. Mr. Byrnes is a Financial Consultant and Private Investor and is a Director of JDN Realty Corporation, a real estate development and asset management company traded on the New York Stock Exchange, a director of Security Capital Preferred Growth Incorporated and non-executive Chairman of Pulpfree, Inc. Francis W. Cash has been President and Chief Executive Officer of Meditrust and President and Chief Executive Officer of Operating since April 17, 2000. Mr. Cash was also the Treasurer of Operating from April 17, 2000 until June 2000, at which time David L. Rea joined The Meditrust Companies and became Treasurer of Operating. Mr. Cash was the Chairman of the Board, Chief Executive Officer, President and a director of Mariner Healthcare Group, Inc. from September 8, 1999 until March 2000. From July 1995 to August 1999, Mr. Cash served as President and Chief Executive Officer of Red Roof Inns, Inc. ("Red Roof Inns"). He also served as Chairman of the Board of Red Roof Inns from June 1996 to August 1999. Prior to his service at Red Roof Inns, Mr. Cash served as President and Chief Operating Officer of NovaCare, Inc. from October 1992 to June 1995. Prior to that, Mr. Cash served in a number of senior executive positions for 18 years at Marriott Corporation, most recently as President, Marriott Service Group. James P. Conn has been a Director of Meditrust since 1995 and was appointed a Director of Operating in April 2000. Mr. Conn was the Managing Director and Chief Investment Officer of Financial Security Assurance, Inc. from 1992 through 1998. He was also the President and Chief Executive Officer of Bay Meadows Operating Company from 1988 to 1992. Mr. Conn is a trustee of Gabelli Equity Trust, Gabelli Global Multimedia Trust, Gabelli Utility Trust and a member of the Board of Directors of First Republic Bank. Mr. Conn is also a trustee of Gabelli Asset Fund, Gabelli Growth Fund and Gabelli Westwood Funds. John C. Cushman, III has been a Director of Meditrust since 1996 and was appointed a Director of Operating in April 2000. Mr. Cushman has been the President and Chief Executive Officer of Cushman Realty Corporation since 1978. He is a director of National Golf Properties, Inc., Los Angeles Turf Club, Incorporated, Digital Gene Technologies, Inc., Cushman Realty Corporation, Cushman Winery Corporation and Inglewood Park Cemetery. Stephen E. Merrill has been a Director of The Meditrust Companies since May 1998. Mr. Merrill is the President of Bingham Consulting Group, LLC and was Of Counsel to the law firm Choate, Hall & Stewart from March 1997 to February 1999. Previously, Mr. Merrill served as Governor of the State of New Hampshire from 1993 through 1997. He was senior partner in the law firm Merrill & Broderick from 1989 through 1993 and served as Attorney General for the State of New Hampshire from 1985 through 1989. Mr. Merrill also served as legal counsel and Chief of Staff to the Governor of New Hampshire from 1982 through 1985. Executive Officers of The Meditrust Companies Incorporated by reference to Item 4a of The Meditrust Companies' Joint Annual Report on Form 10-K filed for the fiscal year ended December 31, 2000 under the caption "Executive Officers of the Registrants." 5 Family Relationships There are no family relationships among any of the Directors or executive officers of The Meditrust Companies. Section 16 (a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the executive officers and directors of The Meditrust Companies, and persons who own more than 10% of a registered class of The Meditrust Companies' equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than 10% beneficial owners are required by SEC regulation to furnish The Meditrust Companies with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of Forms 3 and 4 and amendments thereto furnished to The Meditrust Companies during its most recent fiscal year, Forms 5 and amendments thereto furnished to The Meditrust Companies with respect to its most recent fiscal year and written representations furnished to The Meditrust Companies, no officer, Director or 10% beneficial owner of The Meditrust Companies failed to timely file a required report, except the David L. Rea filed a timely Form 3 listing him incorrectly as an executive officer of Meditrust instead of Operating. Mr. Rea subsequently filed a corrected Form 3, but such corrected filing was inadvertently filed after the deadline. 6 ITEM 11. EXECUTIVE COMPENSATION Executive Compensation -- Meditrust The following table provides information with respect to the compensation that Meditrust paid in 1998, 1999, and 2000 to those individuals who served as Meditrust's Chief Executive Officer, the four most highly compensated executive officers other than the Chief Executive Officer, and two former executive officers who are no longer with Meditrust or its subsidiaries whose base salary and bonus exceeded $100,000 for the fiscal year ended December 31, 2000. MEDITRUST SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards ------------------------ Securities All other Annual Compensation Restricted Under-Lying Compen- Name and Principal ------------------- Stock Options/ sation Position Year Salary($) Bonus($) Awards($) SARS(#) ($) - -------------------------- ---- --------- -------- --------- ---------- --------- Francis W. Cash(1) 2000 -- -- -- -- -- Chief Executive Officer and 1999 -- -- -- -- -- President 1998 -- -- -- -- -- Michael F. Bushee 2000 392,900 425,000(2) 178,200(3) -0- 23,682(6) Chief Operating Officer 1999 300,000 221,607(2) 95,600(4) -0- 6,627 1998 300,000 194,718(2) 1,125,000(5) 150,000 6,627 David L. Rea(7) 2000 -- -- -- -- -- Chief Financial Officer and 1999 -- -- -- -- -- Treasurer 1998 -- -- -- -- -- John F. Schmutz(7) 2000 -- -- -- -- -- Senior Vice President and 1999 -- -- -- -- -- General Counsel 1998 -- -- -- -- -- Debora A. Pfaff 2000 169,121 280,000(8) 118,800(9) -0- 20,310(10) Vice President of Operations 1999 124,100 60,000(8) -0- -0- 17,481 1998 101,323 60,000(8) -0- 25,458 31,138 Michael S. Benjamin 2000 351,018 215,000(11) 178,200(12) -0- 82,409(15) Former Senior Vice President 1999 300,000 221,607(11) 95,600(13) -0- 6,786 and Secretary 1998 300,000 194,718(11) 1,125,000(14) 150,000 6,786 Laurie T. Gerber 2000 300,000 215,000(16) 178,200(17) -0- 22,970(20) Former Chief Financial 1999 275,000 215,000(16) 95,600(18) -0- 6,157 Officer 1998 250,000 150,000(16) 1,125,000(19) 150,000 6,157 David F. Benson(21) 2000 37,781 -0- -0- -0- -0-(25) Former Chief Executive 1999 500,000 10,096(22) 95,600(23) -0- 6,860 Officer and President 1998 500,000 319,912(22) 2,812,500(24) 375,000 6,860 William G. Byrnes(26) 2000 -0- -0- 82,750(27) 75,000 100,000(28) Former Chief Executive 1999 -0- -0- -0- -0- -0- Officer and President 1998 -0- -0- -0- -0- -0-
7 - ------------------------ (1) Mr. Cash became Chief Executive Officer and President of Meditrust and Operating on April 17, 2000. Mr. Cash was paid by Operating for his services as an officer of both Meditrust and Operating. See "Operating Summary Compensation Table" INFRA. (2) Mr. Bushee received his bonus for 2000 in cash. Mr. Bushee received his bonuses for 1999 and 1998 in cash and Shares. For 1999, $215,000 was cash and $6,607 was Shares (428 Shares at $15.44 per Share on January 4, 2000). For 1998, $150,000 was cash and $44,718 was Shares (1,646 Shares in four installments at $36.38, $30.94, $26.81 and $16.00 per Share in January, April, July and October, 1998). All issuance prices were the closing prices for Shares on the New York Stock Exchange on the respective dates of issuance. (3) Mr. Bushee received an award of 30,000 shares of restricted stock on January 3, 2000 and the fair market value of a Share on the date of grant was $5.94. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $76,800 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (4) Mr. Bushee received an award of 10,000 shares of restricted stock on August 5, 1999 and the fair market value of a Share on the date of grant was $9.56. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $25,600 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (5) Mr. Bushee received an award of 50,000 shares of restricted stock on July 31, 1998 and the fair market value of a Share on the date of grant was $22.50. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $128,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (6) Includes $14,233 in health insurance premiums paid by Meditrust, $2,422 in disability insurance premiums paid by Meditrust, $1,627 in life insurance premiums paid by Meditrust and a $5,400 car allowance. (7) Messrs. Rea and Schmutz were paid by Operating for their services as officers of both Meditrust and Operating. See "Operating Summary Compensation Table" INFRA. (8) Ms. Pfaff received her bonuses for 2000, 1999 and 1998 in cash. (9) Ms. Pfaff received an award of 20,000 shares of restricted stock on January 3, 2000 and the fair market value of a Share on the date of grant was $5.94. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $51,200 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (10) Includes $14,233 in health insurance premiums paid by Meditrust, $1,254 in disability insurance premiums paid by Meditrust, $1,627 in life insurance premiums paid by Meditrust and a stock grant of $3,196. 8 (11) Mr. Benjamin received his bonus for 2000 in cash. Mr. Benjamin received his bonuses for 1999 and 1998 in cash and Shares. For 1999, $215,000 was cash and $6,607 was Shares (428 Shares at $15.44 per Share on January 4, 2000). For 1998, $150,000 was cash and $44,718 was Shares (1,646 Shares in four installments at $36.38, $30.94, $26.81 and $16.00 per Share in January, April, July and October, 1998). All issuance prices were the closing prices for Shares on the New York Stock Exchange on the respective dates of issuance. (12) Mr. Benjamin received an award of 30,000 shares of restricted stock on January 3, 2000 and the fair market value of a Share on the date of grant was $5.94. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $76,800 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (13) Mr. Benjamin received an award of 10,000 shares of restricted stock on August 5, 1999 and the fair market value of a Share on the date of grant was $9.56. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $25,600 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (14) Mr. Benjamin received an award of 50,000 shares of restricted stock on July 31, 1998 and the fair market value of a Share on the date of grant was $22.50. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $128,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (15) Includes $14,233 in health insurance premiums paid by Meditrust, $1,995 in disability insurance premiums paid by Meditrust, $1,627 in life insurance premiums paid by Meditrust, a $4,554 car allowance and forgiveness of $60,000 of debt. Excludes the Severance Payment of $4,745,421 received by Mr. Benjamin upon his termination of employment with Meditrust on December 29, 2000. See explanation of Mr. Benjamin's severance provision at "Employment Arrangements" INFRA. (16) Ms. Gerber received her bonuses for 2000, 1999 and 1998 in cash. (17) Ms. Gerber received an award of 30,000 shares of restricted stock on January 3, 2000 and the fair market value of a Share on the date of grant was $5.94. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $76,800 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (18) Ms. Gerber received an award of 10,000 shares of restricted stock on August 5, 1999 and the fair market value of a Share n the date of grant was $9.56. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $25,600 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (19) Ms. Gerber received an award of 50,000 shares of restricted stock on July 31, 1998 and the fair market value of a Share on the date of grant was $22.50. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $128,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. 9 (20) Includes $14,233 in health insurance premiums paid by Meditrust, $1,710 in disability insurance premiums paid by Meditrust, $1,627 in life insurance premiums paid by Meditrust and a $5,400 car allowance. Excludes the Severance Payment of $4,357,835 received by Ms. Gerber upon her termination of employment with Meditrust on December 29, 2000. See explanation of Ms. Gerber's severance provision at "Employment Arrangements" INFRA. (21) Mr. Benson ceased to serve as Meditrust's Chief Executive Officer and President on February 1, 2000. (22) Mr. Benson received his bonus for 1999 in Shares and 1998 in cash and Shares. For 1999, Mr. Benson received $10,096 in Shares (654 Shares at $15.44 per Share on January 4, 2000). For 1998, $250,000 was cash and $69,912 was Shares (2,558 Shares in four installments at $36.38, $30.94, $26.81 and $16.00 per Share in January, April, July and October, 1998). All issuance prices were the closing prices for Shares on the New York Stock Exchange on the respective dates of issuance. (23) Mr. Benson received an award of 10,000 shares of restricted stock on August 5, 1999 and the fair market value of a Share on the date of grant was $9.56. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $25,600 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (24) Mr. Benson received an award of 125,000 shares of restricted stock on July 31, 1998 and the fair market value of a Share on the date of grant was $22.50. The restricted stock vests on the earlier of the 8th year or upon achievement the following performance criteria: achievement of Funds from Operations of $2.92 in 2000, $3.10 in 2001, $3.28 in 2002, $3.48 in 2003, $3.69 in 2004. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $320,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (25) Excludes the Severance Payment received by Mr. Benson upon his termination of employment with Meditrust on February 1, 2000. See explanation of Mr. Benson's severance provision at "Employment Arrangements" INFRA. (26) Mr. Byrnes ceased to serve as Meditrust's Chief Executive Officer and President in April 2000. (27) Mr. Byrnes received an award of 25,000 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. One third of the restricted stock vests for each year of service on the Board of Directors of Meditrust after September 7, 2000 and dividends, if and when declared, are payable on the restricted stock . All of the restricted stock immediately vests upon a change of control of Meditrust. The value of the restricted stock as of December 29, 2000 was $64,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (28) As compensation for his service as Chief Executive Officer and President of Meditrust, Mr. Byrnes was issued 50,000 Shares with an approximate value, at the time of the grant, of $100,000. 10 The following table provides information with respect to stock options granted by Meditrust in recognition of services rendered in the fiscal year ended December 31, 2000 to the Meditrust named executive officers. All stock options are granted at an exercise price equal to the fair market value on the date of grant. OPTION GRANTS IN LAST FISCAL YEAR FOR MEDITRUST
Number of Securities Percent of Total Underlying Options Granted Exercise or Grant Options to Employees Base Price Expiration Date Present Granted(#) in 2000 ($/Share) Date Value($) ---------- ------------- --------- ---------- ------------ Francis W. Cash -0- -- -- -- -- Michael F. Bushee -0- -- -- -- -- David L. Rea -0- -- -- -- -- John F. Schmutz -0- -- -- -- -- Debora A. Pfaff -0- -- -- -- -- Michael S. Benjamin -0- -- -- -- -- Laurie T. Gerber -0- -- -- -- -- David F. Benson -0- -- -- -- -- William G. Byrnes -0- -- -- -- --
The following table provides information with respect to the aggregated number of options to purchase Shares exercised by the Meditrust named executive officers as of December 31, 2000. The value of unexercised in-the-money options is based on the closing price of a Share, as reported on the New York Stock Exchange, on December 29, 2000 of $2.56, minus the exercise price, multiplied by the number of Shares underlying the options. An option is "in-the-money" if the fair market value of the Shares underlying the option exceeds the exercise price. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES FOR MEDITRUST
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options at Options at Year-End (#) Year-End ($) NAME Exercisable/Unexercisable Exercisable/Unexercisable - ---- -------------------------- ------------------------- Francis W. Cash -- -- Michael F. Bushee 298,330/244,193 -0-/-0- David L. Rea -- -- John F. Schmutz -- -- Debora A. Pfaff 37,825/40,000 -0-/-0- Michael S. Benjamin 298,330/244,193 -0-/-0- Laurie T. Gerber 122,095/148,065 -0-/-0- David F. Benson -0-/-0- -0-/-0- William G. Byrnes -0-/75,000 -0-/-0-
11 Executive Compensation -- Operating The following table provides information with respect to the compensation that Operating paid in 1998, 1999, and 2000 to those individuals who served as Operating's Chief Executive Officer, the four most highly compensated executive officers other than the Chief Executive Officer, and two former executive officers who are no longer with Operating or its subsidiaries whose base salary and bonus exceeded $100,000 for the fiscal year ended December 31, 2000. OPERATING SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards ------------------------ Securities All other Annual Compensation Restricted Under-Lying Compen- Name and Principal ------------------- Stock Options/ sation Position Year Salary($) Bonus($) Awards($)(a) SARS(#)(a) ($) - -------------------------- ---- --------- -------- --------- ---------- --------- Francis W. Cash(1) 2000 553,846 -0- 965,000(2) 2,400,000 797,543(3) Chief Executive Officer and 1999 -- -- -- -- -- President 1998 -- -- -- -- -- David L. Rea(4) 2000 194,712 -0- 522,000(5) 900,000 184,183(6) Chief Financial Officer and 1999 -- -- -- -- -- Treasurer 1998 -- -- -- -- -- John F. Schmutz 2000 226,000 40,000 129,585(7) 83,333 587,862(8) Senior Vice President and 1999 196,539 38,675 -0- 130,000 51,891 General Counsel 1998 169,539 34,000 -0- -0- 15,978(9) Vito J. Stellato 2000 175,154 35,000 93,300(10) -0- 39,361(11) Senior Vice President 1999 161,827 -0- -0- -0- 48,478 Human Resources 1998 -- -- -- -- -- Stephen Parker 2000 190,385 -0- 155,500(12) 100,000 18,400(13) Senior Vice President 1999 -- -- -- -- -- Sales & Marketing 1998 -- -- -- -- -- Bobby G. Moore, III(14) 2000 199,231 17,500 103,665(15) 66,667 418,171(16) Former Senior Vice President 1999 138,792 -0- -- -- 110,630 and Chief Information Officer 1998 -- -- -- -- 6,536 William F. McCalmont(17) 2000 222,739 -0- -0- -0- -0-(19) Former Interim President 1999 259,615 150,000 -0- -0- 864,055 La Quinta Inns, Inc. 1998 249,999 100,000 697,000(18) -0- 16,298(20) William C. Baker(21) 2000 -0- -0- 82,750(22) 75,000 100,000(23) Former Chief Executive 1999 -0- -0- -0- -0- -0- Officer, President and 1998 -0- 45,844 -0-(24) -0- -0-(25) Treasurer
12 - ------------------------ (a) The restricted stock grant to Mr. Schmutz and option grants to Mr. Cash and Mr. Schmutz, while listed on this table for simplicity, were actually granted by Meditrust. (1) Mr. Cash became Chief Executive Officer and President of Operating on April 17, 2000. Accordingly, no compensation information is presented for Mr. Cash for the years 1999 and 1998. (2) Mr. Cash received an award of 500,000 shares of restricted stock on April 17, 2000 and the fair market value of a Share on the date of grant was $2.13. Mr. Cash received such grant of restricted stock in his capacity as an executive officer of Operating and the restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $1,280,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (3) Including primarily a $600,000 sign-on bonus, $169,659 in moving expenses and other expenses. (4) Mr. Rea became Chief Financial Officer and Treasurer of Operating in June 2000. Accordingly, no compensation information is presented for Mr. Rea for the years 1999 and 1998. (5) Mr. Rea received an award of 300,000 shares of restricted stock on June 12, 2000 and the fair market value of a Share on the date of grant was $1.94. The restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $768,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (6) Including primarily a $150,000 sign-on bonus, a $4,362 car allowance and certain other moving and other expenses. (7) Mr. Schmutz received an award of 41,667 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. The restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $106,668 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (8) Including primarily a special bonus (in lieu of severance) of $532,000, the payout of a deferred SERP valued at $30,760, a car allowance of $13,150, a contribution on his behalf in the amount of $7,500 to the Executive Savings Plan and $1,368 in life insurance premiums paid by Operating. (9) A portion of this other compensation was paid by La Quinta Inns, Inc. during the portion of 1998 prior to the July 18, 19998 merger of La Quinta Inns, Inc. with and into Meditrust. (10) Mr. Stellato received an award of 30,000 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. The restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $76,800 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (11) Including primarily a payout of a deferred SERP valued at $17,999, a $13,290 car allowance and $1,188 in life insurance premiums paid by Operating. 13 (12) Mr. Parker received an award of 50,000 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. The restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $128,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (13) Includes primarily a $8,377 car allowance, $6,095 in moving expenses and $1,440 in life insurance premiums paid by Operating. (14) Mr. Moore ceased to serve as Senior Vice President and Chief Information Officer of Operating in January 2001. (15) Mr. Moore received an award of 33,333 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. The restricted stock vests three years from the date of grant. All of the restricted stock immediately vests upon a change of control of Meditrust and dividends, if and when declared, are payable on the restricted stock. The value of the restricted stock as of December 29, 2000 was $85,332 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (16) Including primarily a $398,462 Severance Payment, a $13,154 car allowance and $1,332 in life insurance premiums paid by Operating. (17) Mr. McCalmont ceased to serve as Interim President of La Quinta Inns, Inc. in April 2000. (18) Mr. McCalmont received an award of 50,000 shares of restricted stock on December 10, 1998 and the fair market value of a Share on the date of grant was $13.94, which shares were forfeited after Mr. McCalmont's termination from Operating. (19) Excludes a $1,773,871 Severance Payment pursuant to the terms of his severance agreement. (20) A portion of this other compensation was paid by La Quinta Inns, Inc. during the portion of 1998 prior to the July 18, 19998 merger of La Quinta Inns, Inc. with and into Meditrust. (21) Mr. Baker ceased to serve as Operating's Chief Executive Officer, President and Treasurer in April 2000. (22) Mr. Baker received an award of 25,000 shares of restricted stock on September 7, 2000 and the fair market value of a Share on the date of grant was $3.31. One third of the restricted stock vests for each year of service on the Board of Directors of Meditrust after September 7, 2000 and dividends, if and when declared, are payable on the restricted stock . All of the restricted stock immediately vests upon a change of control of Meditrust. The value of the restricted stock as of December 29, 2000 was $64,000 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $2.56. (23) As compensation for his service as Chief Executive Officer, President and Treasurer of Operating, Mr. Baker was issued 50,000 Shares with an approximate value, at the time of the grant, of $100,000. (24) On July 31, 1998, Operating issued 75,000 Shares of restricted stock at $22.50 per Share to Mr. Baker, which as of the grant date had a value of $1,687,500. As of December 31, 1998 the restricted stock had a value of $1,125,000. This grant was forfeited on January 4, 1999. Dividends were paid in August, September and November of 1998. (25) Excludes severance payments of $1,723,800 paid to Mr. Baker. 14 The following table provides information with respect to stock options granted by Operating in recognition of services rendered in the fiscal year ended December 31, 2000 to the Operating named executive officers. All stock options were granted at an exercise price equal to the fair market value on the date of grant and will vest 25% per year over four years from the date of grant. OPTION GRANTS IN LAST FISCAL YEAR FOR OPERATING
Number of Securities Percent of Total Underlying Options Granted Exercise on Grant Options to Employees Base Price Expiration Date Present Granted(#) in 2000 ($/Share) Date Value($) ---------- ------------------ --------- -------------- ------------ Francis W. Cash 600,000 11.475 4.0312 4/17/2010 335,340 600,000 11.475 5.3750 4/17/2010 241,740 1,200,000 22.95 6.7188 4/17/2010 361,080 John F. Schmutz 83,333 1.6 3.3125 9/7/2010 124,800 Bobby G. Moore, III 66,667 1.3 3.3125 9/7/2010 99,840 Vito J. Stellato 60,000 1.1 3.3125 9/7/2010 89,856 David L. Rea 450,000 8.6 1.9375 6/12/2010 398,610 450,000 8.6 2.9063 6/12/2010 288,990 Stephen Parker 100,000 1.9 3.3125 9/7/2010 149,760 William L. McCalmont -0- -0- -- -- -- William C. Baker 75,000 1.4 3.3125 9/7/2006 112,320
The following table provides information with respect to the aggregated number of options to purchase Shares exercised by the Operating named executive officers as of December 31, 2000. The value of unexercised in-the-money options is based on the closing price of a Share, as reported on the New York Stock Exchange, on December 29, 2000 of $2.56, minus the exercise price, multiplied by the number of Shares underlying the options. An option is "in-the-money" if the fair market value of the Shares underlying the option exceeds the exercise price. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES FOR OPERATING
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options at Options at Year-End (#) Year-End ($) Name Exercisable/Unexercisable Exercisable/Unexercisable(2) - ---- -------------------------- ----------------------------- Francis W. Cash -0-/2,400,000 -0-/-0- John F. Schmutz 65,000/148,333 -0-/-0- Bobby G. Moore, III(1) 12,500/137,500 -0-/-0- 15 Vito J. Stellato 60,000/120,000 -0-/-0- David L. Rea 0/900,000 -0-/279,000 Stephen Parker 0/100,000 -0-/-0- William L. McCalmont 0/0 -0-/-0- William C. Baker -0-/75,000 -0-/-0-
- -------------------- (1) Mr. Moore's options were forfeited after Mr. Moore terminated employment with Operating. Compensation of Directors The Meditrust Companies pay each Director who is not otherwise an employee of The Meditrust Companies a fee of $30,000 per year for services as a Director plus $1,000 per day for attendance at each meeting of the full Board of Directors. In addition, the Chairman and each member of a committee of the Board of Directors are paid $1,250 and $1,000, respectively, for attendance at a committee meeting. The Meditrust Companies reimburse the Directors for travel expenses incurred in connection with their duties as Directors of The Meditrust Companies. In addition, The Meditrust Companies from time to time pays Directors additional fees in connection with various special projects. Employment Arrangements EMPLOYMENT ARRANGEMENT WITH CHIEF EXECUTIVE OFFICER AND PRESIDENT FRANCIS W. CASH. Effective April 17, 2000, Francis W. Cash ("Mr. Cash") entered into an Employment Agreement with Meditrust. Mr. Cash's Employment Agreement provides that he will serve as President and Chief Executive Officer of Meditrust until the third anniversary of the effective date of the Employment Agreement, at which time the Employment Agreement will be renewed automatically thereafter for successive one-year terms unless six (6) months notice of non-renewal is given by either party to the other. Mr. Cash is eligible to receive an annual bonus to be determined by the Compensation Committee of an amount between 100% and 200% of his base compensation. Upon termination of Mr. Cash's employment due to death or disability of Mr. Cash, Meditrust shall pay to Mr. Cash (or his beneficiary in the event of his death) any base salary, bonus or other compensation earned but not paid and the pro rata amount of the annual base target bonus payable. Additionally, Meditrust will continue to provide health benefits for at least two years. Upon termination of Mr. Cash's employment by Meditrust other than for cause or by Mr. Cash for "Good Reason," Meditrust shall pay Mr. Cash, in addition to the amounts described in the immediately preceding paragraph, a lump sum payment equal to two times the sum of Mr. Cash's base salary and base target bonus. Further, 20% of the original number of Mr. Cash's Performance Shares and Options covering 20% of the original number of Shares in each Option shall accelerate and become vested and exercisable. Additionally, Meditrust will continue to provide health benefits for at least two years. If a "Change in Control" (as defined in Mr. Cash's Employment Agreement) occurs and Mr. Cash's employment is terminated within two years of such Change in Control as a result of an Executive Termination Event (as defined in Mr. Cash's Employment Agreement), Mr. Cash shall be entitled to the following severance benefits: (i) an amount equal to three times the average of his annual base salary (for the three fiscal years preceding the Change in Control) and three times the average of his cash bonuses paid (for the two fiscal years preceding the Change in Control); (ii) an amount equal to Mr. Cash's full base salary through the termination date and the pro rata amount of the maximum base target bonus available during such year; and 16 (iii) all unvested equity, including Performance Shares and Options, shall become fully vested and exercisable. Additionally, Meditrust will purchase Mr. Cash's house at market value, provide certain outplacement assistance and will continue to provide health benefits for the balance of the term. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER MICHAEL F. BUSHEE. Effective January 1, 1999, Michael F. Bushee ("Mr. Bushee") entered into an Employment Agreement with Meditrust. Mr. Bushee's Employment Agreement provides that he will serve as the Chief Operating Officer of Meditrust until the third anniversary of the effective date of the Employment Agreement. The Employment Agreement is automatically extended for an additional one-year term unless either of the parties thereto elects to terminate the Employment Agreement by notice in writing at least 90 days prior to the end of the term of such Employment Agreement. Mr. Bushee is eligible to receive an annual bonus to be determined by the Compensation Committee of an amount up to 100% of his base compensation. Upon termination of employment due to the death or disability of Mr. Bushee, all unexercisable stock options and non-vested stock-based grants and performance units will immediately vest and will be exercisable for 90 days. Additionally, Meditrust will provide health insurance coverage for at least two years. If Mr. Bushee's employment is terminated by Mr. Bushee for "good reason," or if Meditrust terminates his employment without "cause," Meditrust will pay Mr. Bushee a severance payment equal to, at a minimum, two times the sum of his average base compensation (determined in accordance with the respective Employment Agreement) and average incentive compensation (determined in accordance with the respective Employment Agreement) (the "Severance Payment"). If a "Change in Control" (as defined in the Employment Agreement) occurs and Mr. Bushees's employment is terminated for any reason other than death, disability or voluntary resignation within two years of such Change in Control, Meditrust must pay Mr. Bushee a lump sum amount equal to Mr. Bushee's Severance Payment and all stock options and other stock-based awards and performance units will become immediately exercisable or non-forfeitable. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER DAVID L. REA. Effective June 12, 2000, David L. Rea ("Mr. Rea") entered into an Employment Agreement with Meditrust. Mr. Rea's Employment Agreement provides that he will serve as Executive Vice President, Chief Financial Officer and Treasurer of Meditrust until the third anniversary of the effective date of the Employment Agreement, at which time the Employment Agreement will be renewed automatically thereafter for successive one-year terms unless six (6) months notice of non-renewal is given by either party to the other. Mr. Rea is eligible to receive an annual bonus to be determined by the Compensation Committee of an amount between 75% and 150% of his base compensation. Upon termination of Mr. Rea's employment due to death or disability of Mr. Rea, Meditrust shall pay to Mr. Rea (or his beneficiary in the event of his death) any base salary, bonus or other compensation earned but not paid and the pro rata amount of the annual base target bonus payable. Additionally, Meditrust will continue to provide health benefits for at least two years. Upon termination of Mr. Rea's employment by Meditrust other than for cause or by Mr. Rea for "Good Reason," Meditrust shall pay Mr. Rea, in addition to the amounts described in the immediately preceding paragraph, a lump sum payment equal to two times the sum of Mr. Rea's base salary and base target bonus. Further, 20% of the original number of Mr. Rea's Performance Units and Options covering 20% of the original number of Shares in each Option shall accelerate and become vested and exercisable. Additionally, Meditrust will continue to provide health benefits for at least two years. If a "Change in Control" (as defined in Mr. Rea's Employment Agreement) occurs and Mr. Rea's employment is terminated within two years of such Change in Control as a result of an Executive Termination Event (as defined in Mr. Rea's Employment Agreement), Mr. Rea shall be entitled to the following severance benefits: (i) an amount equal to three times the average of his annual base salary (for the three fiscal years 17 preceding the Change in Control) and three times the average of his cash bonuses paid (for the two fiscal years preceding the Change in Control); (ii) an amount equal to Mr. Rea's full base salary through the termination date and the pro rata amount of the maximum base target bonus available during such year; and (iii) all unvested equity, including Performance Units and Options, shall become fully vested and exercisable. Additionally, Meditrust will purchase Mr. Rea's house at market value, provide certain outplacement assistance and will continue to provide health benefits for the balance of the term. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER JOHN F. SCHMUTZ. Effective December 17, 1999, John F. Schmutz ("Mr. Schmutz") received certain letter agreements from Operating providing (i) that he shall become eligible for a lump sum severance benefit including a payment of $500,000 and continuation of medical benefits at Operating's expense for two years in lieu of any other compensation except for vested interests in all stock options and other stock-based awards and performance units which will become immediately exercisable and non-forfeitable and (ii) the terms and conditions upon which certain Performance Units (as defined in the letter agreements) shall become payable. If a "Change of Control" (as defined in the letter agreements) occurs, if Mr. Schmutz's employment is terminated for any reason other than for cause or in the event of death or disability all Performance Units shall immediately vest in full with the value of each such Performance Unit determined in accordance with the terms of the letter agreements. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER STEPHEN T. PARKER. Effective May 3, 2000, Stephen T. Parker ("Mr. Parker") received certain letter agreements from Operating. Mr. Parker's letter agreements provide that he will serve as Senior Vice President of Sales & Marketing and his employment may be terminated with or without cause by either party. Mr. Parker is eligible to receive an annual bonus with a target of 40% of his base compensation. If Mr. Parker is terminated without cause, Operating will pay Mr. Parker one year's salary and a prorated bonus for the year of termination of employment. If a "Change of Control" (as defined in the respective letter agreement) occurs, if Mr. Parker's employment is terminated for any reason other than for cause or in the event of death or disability all Performance Units (as defined in the respective letter agreement) shall immediately vest in full with the value of each Unit determined by the respective letter agreement. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER VITO J. STELLATO. Effective January 4, 1999, Vito J. Stellato ("Mr. Stellato") received certain letter agreements from Operating. Mr. Stellato's letter agreements provide that he will serve as Senior Vice President of Human Resources and his employment may be terminated with or without cause by either party. Mr. Stellato is eligible to receive an annual bonus with a target of 40% of his base compensation. If Mr. Stellato is terminated without cause, Operating will pay Mr. Stellato two years' salary and a prorated bonus for the year of termination of employment. If a "Change of Control" (as defined in the respective letter agreements) occurs, if Mr. Stellato's employment is terminated for any reason other than for cause or in the event of death or disability all Performance Units (as defined in the respective letter agreement) shall immediately vest in full with the value of each Unit determined by the respective letter agreement. EMPLOYMENT ARRANGEMENT WITH EXECUTIVE OFFICER DEBORA A. PFAFF. Effective January 1, 1999, Debora A. Pfaff, Vice President of Operations, ("Ms. Pfaff") entered into a Severance 18 Agreement, as amended by a First Amendment to Severance Agreement dated January 2000 with Meditrust. The Severance Agreement provides that Ms. Pfaff shall remain with Meditrust as Vice President of Operations until December 31, 2002 (the "Anticipated Termination Date") and continue to implement the strategic plan of The Meditrust Companies. If Ms. Pfaff's employment is terminated by Ms. Pfaff for "good reason," or if Meditrust terminates her employment without "cause," Meditrust will pay Ms. Pfaff a severance payment based upon her base salary and bonus for the three (3) immediately preceding fiscal years. Ms. Pfaff shall be eligible to be paid a bonus up to 100% of her base salary on December 31, 2000, December 31, 2001, and December 31, 2002, provided, however, that with respect to each such bonus payment, 80% of each such bonus shall be based on performance criteria and 20% of each such bonus payment shall be discretionary. If Ms. Pfaff is terminated other than "For Good Cause" or in a "Termination for Good Reason" prior to the Anticipated Termination Date, Ms. Pfaff shall be paid the maximum bonus payments that would have been paid on December 31st of each year after such termination. If a "Change of Control" (as defined in the Severance Agreement) occurs and Ms. Pfaff's employment is terminated for any reason other than death, disability or voluntary resignation within nine (9) months following such Change in Control, Meditrust must pay Ms. Pfaff a lump sum amount equal to MS. Pfaff's Severance Payment and all stock options and other stock-based awards and performance units will become immediately exercisable or non-forfeitable. EMPLOYMENT SEPARATION AGREEMENT WITH FORMER CHIEF EXECUTIVE OFFICER DAVID F. BENSON. On January 28, 2000, David F. Benson and The Meditrust Companies entered into a separation agreement terminating the Employment Agreement entered into as of January 1, 1999, by and between Meditrust and Mr. Benson, (the "Separation Agreement"). The Separation Agreement governs the separation of Mr. Benson from The Meditrust Companies and confirms his resignation from the office of Chief Executive Officer of Meditrust. As part of the Separation Agreement Mr. Benson received a severance payment of $8,995,000 in cash and 155,000 Shares (which represented the vesting of previously awarded Performance Units), and, to the extent he had participated in such plans prior to the separation, the continuation for a five year period of participation in The Meditrust Companies' group health and dental plans and in the life and disability insurance plans. Both Mr. Benson and The Meditrust Companies agreed to release and discharge all charges, complaints, claims, causes of action, damages and debts that related in any manner to Mr. Benson's employment with or termination of employment from The Meditrust Companies. As part of the Separation Agreement Mr. Benson agreed to provide consulting services to The Meditrust Companies for a ten (10) month period for which The Meditrust Companies agreed to pay him a fee of $400,000. EMPLOYMENT SEVERANCE ARRANGEMENT WITH FORMER EXECUTIVE OFFICER B.G. MOORE. Effective January 4, 1999, B.G. Moore ("Mr. Moore") received certain letter agreements from Operating. Mr. Moore's letter agreements provided that he would serve as Vice President and Chief Information Officer of La Quinta Inns, Inc. Mr. Moore ceased to serve in such capacity effective January 2001. Pursuant to certain letter agreements, Mr. Moore received a severance payment of two years salary and the full vesting of performance shares previously earned. EMPLOYMENT RELEASE AGREEMENT WITH FORMER EXECUTIVE OFFICERS MICHAEL S. BENJAMIN AND LAURIE T. GERBER. Effective December 19, 2000, Michael S. Benjamin and Laurie T. Gerber (each an " Executive") entered into Release Agreements terminating their Employment Agreements entered into as of January 1, 1999, by and between each Executive and Meditrust. The Release Agreements govern the separation of each Executive from Meditrust and confirm the resignation of Mr. Benjamin as Senior Vice President and Secretary and Ms. Gerber as Chief Financial Officer. Pursuant to their respective Employment Agreements each Executive received a Severance Payment under their respective Release Agreement. Mr. Benjamin received a Severance Payment of $4,745,421 in cash and 90,000 Shares (which represent the vesting of previously awarded Performance Units). Ms. Gerber received a Severance Payment of $4,357,835 in cash and 90,000 Shares (which represent the vesting of previously awarded Performance Units). 19 The Executives each received medical and dental coverage for three years. Each Executive and Meditrust agreed to release and discharge all charges, complaints, claims, causes of action, damages and debts that related in any manner to either Executive's employment with or termination of employment from Meditrust. Compensation Committee Interlocks and Insider Participation Meditrust and Operating have each established a Compensation Committee consisting of Messrs. Stephen E. Merrill, William C. Baker, Clive D. Bode, Francis W. Cash and John C. Cushman, III. Mr. Baker, the former Chief Executive Officer, President and Treasurer of Operating, ceased to serve in such capacity in April 2000. Mr. Cash has been the Chief Executive Officer and President of Meditrust and Operating since April, 2000. Messrs. Merrill, Bode and Cushman are not, and have not been, officers or employees nor do they have any other business relationship or affiliation with The Meditrust Companies, other than through serving on the Board of Directors. Messrs. Merrill, Bode and Cushman have not had any relationships with either Meditrust or Operating requiring disclosure under applicable rules and regulations. 20 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Principal and Management Shareholders of The Meditrust Companies The following table sets forth as of December 31, 2000 except as otherwise noted, the number of Shares beneficially owned, directly or indirectly, by (i) each of the Directors of each of The Meditrust Companies, (ii) all persons who served as chief executive officer of either of The Meditrust Companies for the year ended December 31, 2000, (iii) each of the named executive officers for the year ended December 31, 2000, (iv) all Directors and current executive officers of The Meditrust Companies as a group, and (v) all persons who, to the knowledge of The Meditrust Companies, beneficially own five percent or more of the Shares as of December 31, 2000. Unless otherwise indicated, all information concerning beneficial ownership was provided by the respective Director, executive officer or five percent beneficial owner, as the case may be. All Directors and current executive officers have a mailing address of La Quinta Inns, Inc., 909 Hidden Ridge, Suite 600, Irving, TX 75038.
Amount and Nature of Name of Beneficial Owner Beneficial Ownership(1) Percent of Class - ------------------------ ----------------------- ---------------- DIRECTORS AND CURRENT EXECUTIVE OFFICERS: William C. Baker 176,400 * Clive D. Bode 865,000 * William G. Byrnes 211,517 * Francis W. Cash 500,000 * James P. Conn 84,909 * John C. Cushman, III 332,817(2) * Stephen E. Merrill 37,565 * Michael F. Bushee 106,178 * David L. Rea 300,000 * John F. Schmutz 47,827 * Debora A. Pfaff 32,442 * Stephen Parker 50,000 * Vito J. Stellato 30,265 * Bobby G. Moore, III 33,333 * All Directors and current executive officers of The Meditrust Companies as a group 2,808,253(3) 2.0% 5% SHAREHOLDERS: Joint Schedule 13G-A Filing(4): Sid R. Bass, Inc. 2,442,067(5) 1.7% Lee M. Bass, Inc. 2,442,067(6) 1.7% The Bass Management Trust 2,714,164(7) 1.9% The Airlie Group, L.P. 269,633(8)(9) William P. Hallman, Jr. 300,002(10) Annie R. Bass Grandson's Trust for Lee M. Bass 527,188(11) Annie R. Bass Grandson's Trust for Sid R. Bass 527,188(12) Peter Sterling 337,600(13) Hyatt Anne Bass Successor Trust 1,013,918(14) Samantha Sims Bass Successor Trust 1,013,918(15) TF Investors, L.P. 32,783(16) FW Trinity Limited Investors, L.P. 419,398(17) Sterling 1990 Trust 106,999(18) Lee C. Hallman Trust 30,000(19) Mary S. Hallman Trust 30,000(20) William P. Hallman III Trust 30,000(21) Herbert T. Hughes 45,000 Total 12,281,925 8.5% 22 Merrill Lynch & Co., Inc. 14,516,387(22) 10.1% ------------------------ FORMER EXECUTIVE OFFICERS: Michael S. Benjamin 104,527 * David F. Benson 179,835 * Laurie T. Gerber 95,634 *
* Denotes less than 1%. (1) Unless otherwise indicated, the number of Shares stated as being owned beneficially includes (i) Shares beneficially owned by spouses, minor children and/or other relatives in which the Director or officer may share voting power and (ii) any of the Shares listed as being subject to options exercisable within sixty days of December 31, 2000 (2) Includes 306,591 Shares beneficially owned by Mr. Cushman as Trustee of the Cushman Family Trust (3) Does not include an aggregate of 8,701 Shares owned by or for parents, spouses or children, as to which Shares the Directors or officers disclaim any beneficial interest. (4) Information reported in a Schedule 13G-A filed February 14, 2001. The principal business office for each reporting person set forth in the Schedule 13G-A is 201 Main Street, Suite 3200, Fort Worth, Texas 76102. Clive D. Bode, The Meditrust Companies' Chairman, is also a reporting person within the Schedule 13G-A, although, for purposes of this table, his shares are presented above under the heading "Directors and Current Executive Officers." The aggregate number of shares reported in this Schedule 13G-A, including Mr. Bode's 865,000 shares, is 12,281,925 or 8.8% of the class. (5) Mr. Sid R. Bass, solely in his capacity as President of Sid R. Bass, Inc., may also be deemed a beneficial owner of such Shares. (6) Mr. Lee M. Bass, solely in his capacity as President of Lee M. Bass, Inc., may also be deemed a beneficial owner of such Shares. (7) Mr. Perry R. Bass, solely in his capacity as sole Trustee and as one of two trustors of The Bass Management Trust, may also be deemed a beneficial owner of such Shares. (8) Mr. Dort A. Cameron, III, solely in his capacity as one of two general partners of EBD L.P., which is the sole general partner of The Airlie Group, L.P., may also be deemed a beneficial owner of such Shares. (9) Mr. William P. Hallman, Jr., solely in his capacity as President and sole stockholder of TMT-FW, Inc., which is one of two general partners of EBD L.P., which is the sole general partner of The Airlie Group, L.P., may also be deemed a beneficial owner of such Shares. (10) This amount does not include (a) 527,188 Shares held by Annie R. Bass Grandson's Trust for Lee M. Bass of which Mr. Hallman is the Trustee, (b) 527,188 Shares held by Annie R. Bass Grandson's Trust for Sid R. Bass of which Mr. Hallman is the Trustee, (c) 32,783 Shares held by TF Investors, L.P., which is indirectly controlled by Trinity Capital Management, Inc., of which Mr. Hallman is the President and sole stockholder, (d) 269,633 Shares held by The Airlie Group, L.P., which is indirectly controlled by TMT-FW, Inc. of which Mr. Hallman is the President and sole stockholder, (e) 106,999 Shares held by the 1990 Sterling Trust, of which Mr. Hallman is a trusteee and (f) 419,398 Shares held by FW Trinity Limited Investors, L.P., which is indirectly controlled by TF-FW Investors, Inc. of which Mr. Hallman is President and one of two stockholders. 22 (11) Mr. Hallman, solely in his capacity as Trustee of the Annie R. Bass Grandson's Trust for Lee M. Bass, may also be deemed a beneficial owner of such Shares. (12) Mr. Hallman, solely in his capacity as Trustee of the Annie R. Bass Grandson's Trust for Sid R. Bass, may also be deemed a beneficial owner of such Shares. (13) This amount does not include 419,398 Shares held by FW Trinity Limited Investors, L.P., whose sole general partner is TF-TW Investors, Inc., of which Mr. Sterling is one of two stockholders. (14) Panther City Production Company, solely in its capacity as sole shareholder of Panther City Investment Company, the Trustee of the Hyatt Anne Bass Successor Trust, may also be deemed a beneficial owner of such Shares. (15) Panther City Production Company, solely in its capacity as sole shareholder of Panther City Investment Company, the Trustee of Samantha Sims Bass Successor Trust, may also be deemed a beneficial owner of such Shares. (16) Mr. Hallman, solely in his capacity as President and sole stockholder of Trinity Capital Management, Inc., the sole general partner of TF Investors, L.P., may also be deemed a beneficial owner of such Shares. (17) Mr. Hallman, solely in his capacity as President and one of two stockholders of TF-FW Investors, Inc., which is the sole general partner of FW Trinity Limited Investors, L.P., may also be deemed a beneficial owner of such Shares. Mr. Sterling, solely in his capacity as one of two stockholders of TF-TW Investors, Inc., which is the sole general partner of FW Trinity Limited Investors, L.P., may also be deemed a beneficial owner of such Shares. (18) Mr. Hallman, solely in his capacity as Trustee of the Sterling 1990 Trust, may also be deemed a beneficial owner of such Shares. (19) Mr. W. R. Cotham, solely in his capacity as Trustee of the Lee C. Hallman Trust, may also be deemed a beneficial owner of such Shares. (20) Mr. W. R. Cotham, solely in his capacity as Trustee of the Mary S. Hallman Trust, may also be deemed a beneficial owner of such Shares. (21) Mr. W. R. Cotham solely in his capacity as Trustee of the William P. Hallman III Trust, may also be deemed a beneficial owner of such Shares. (22) Information provided is based solely on information contained in a Schedule 13G/A filed by Merrill Lynch & Co., Inc. on behalf of Merrill Lynch Investment Managers, on February 6, 2001. The information reflected for certain beneficial owners listed under the heading "5% Shareholders" is based on statements and reports filed with the SEC and furnished to The Meditrust Companies by such holders. No independent investigation concerning the accuracy thereof has been made by The Meditrust Companies. 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On March 4, 1998, Meditrust provided acquisition financing in the amount of $24,228,723 to an entity in which Mr. Bushee owns a 2.5% equity interest, for the development of 134 acres of land in Jupiter, Florida. The loan balance on April 27, 2001 was $10,085,092. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDITRUST CORPORATION By: /s/ David L. Rea ----------------------------- David L. Rea Chief Financial Officer and Treasurer Dated: April 30, 2001 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDITRUST OPERATING COMPANY By: /s/ David L. Rea ----------------------------- David L. Rea Chief Financial Officer and Treasurer Dated: April 30, 2001 26 EXHIBITS INDEX
EXHIBIT NO. TITLE METHOD OF FILING - -------------------- --------------------------------------------- --------------------------------- 10.1 Pfaff Severance Letter Agreement Included in this filing 10.2 Pfaff Severance Agreement Included in this filing 10.3 First Amendment to Pfaff Severance Agreement Included in this filing 10.4 Schmutz Severance Letter Agreement Included in this filing 10.5 Form of Performance Units Award Letter Agreement Included in this filing
EX-10.1 2 a2047171zex-10_1.txt EXHIBIT 10.1 Exhibit 10.1 Severance Letter Agreement June 30, 2000 Ms. Debora A. Pfaff 534 Everett Street Westwood, MA 02090 RE: Severance Agreement dated as of January 1, 1999 between Meditrust Corporation (the "Company" or "Employer") and Debora A. Pfaff (the "Employee"), as amended by First Amendment to Severance Agreement dated January, 2000 (the "Severance Agreement") ------------------------------------------------------------------------ Dear Debora: This will confirm that the Company has requested that you remain employed with the Company at its Needham office (or an alternative office in the Boston metropolitan area) until December 31, 2002 (the "Anticipated Termination Date") and that, until the Anticipated Termination Date, you continue to implement the Company's strategic plan to sell a significant portion of the healthcare portfolio. You have agreed to the foregoing, subject to the following conditions, all of which shall be deemed to supplement and amend the Severance Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning as defined in the Severance Agreement. 1. Payment with respect to your Performance Units shall be made in cash on the earlier to occur of (i) the Anticipated Termination Date or (ii) a Termination Other Than for Cause or Termination for Good Reason; 2. The Employee's Base Salary shall be increased effective on July 1, 2000 to $220,000; 3. Termination of your employment with the Company on the Anticipated Termination Date shall be considered a Termination Other Than for Cause (or a Termination Upon a Change in Control in the event a Change in Control has occurred prior to, or occurs within nine (9) months following, such date); 4. The Employer has requested that the Employee continue to work for the Employer through the Anticipated Termination Date and as an additional inducement to Employee to continue his/her employment through such date, in addition to the Severance Compensation provided in the Severance Agreement, which shall also be payable in connection with a termination on the Anticipated Termination Date, the Employee shall be eligible to be paid a bonus equal to 100% of his/her Base Salary (the "Maximum Bonus Payment") on December 31, 2000, December 31, 2001 and December 31, 2002, provided, however, that with Ms. Debora A. Pfaff June 30, 2000 Page 2 of 3 respect to each such bonus payment, 80% of each such bonus payment shall be based on achievement of the asset sale criteria described on Schedule A attached hereto and incorporated herein and 20% of each such bonus payment shall be discretionary. Although nothing herein shall be deemed to be a guaranty of employment through the Anticipated Termination Date; if Employee is terminated in a Termination Other Than for Cause or in a Termination for Good Reason prior to the Anticipated Termination Date, in addition to and simultaneously with the Severance Compensation, Employee shall be paid the Maximum Bonus Payment(s) that would have been paid on December 31st of each year after such termination, through and including the Anticipated Termination Date; 5. In accordance with the change to the Company's vacation policy, upon any termination you shall be paid for all accrued and unused vacation time; 6. Outplacement services shall be made available to you for a reasonable period of time after any termination; such services shall be provided on a basis and for a duration comparable to outplacement services offered by the Company to terminated employees in November 1998; 7. It is hereby agreed that neither the relocation of the Company's principal offices from Needham, Massachusetts to Dallas, Texas, nor the fact that your duties and responsibilities will hereinafter change, including a primary focus towards selling a significant portion of the Company's healthcare portfolio, will be considered to be a Termination for Good Reason under the Severance Agreement; 8. For purposes of determining whether a Change in Control has occurred pursuant to Paragraph 1.8(d) of the Severance Agreement, the initial measurement date shall be January 1, 1999 and the calculation shall be based upon the net book value of such assets as reported on the Company's financial statements as of that date; and 9. Except as amended hereby, the Severance Agreement shall remain in full force and effect. Ms. Debora A. Pfaff June 30, 2000 Page 3 of 3 Thank you for your ongoing participation in effectuating the Company's strategic plan. Please acknowledge your agreement to the foregoing by signing this letter where indicated below and returning it to the undersigned. Very truly yours, MEDITRUST CORPORATION By: /s/ Francis W. Cash ----------------------- Francis W. Cash Acknowledged and Agreed /s/ Debora A. Pfaff - --------------------- Debora A. Pfaff EX-10.2 3 a2047171zex-10_2.txt EXHIBIT 10.2 Exhibit 10.2 Pfaff Severance Agreement SEVERANCE AGREEMENT SEVERANCE AGREEMENT (the "Agreement") made and entered into as of the 1st day of January, 1999 by and between Meditrust Corporation, a Delaware corporation (the "Employer"), and Debora Pfaff (the "Employee"). WHEREAS, the Employee is currently employed by the Employer as its Vice President of Operations; and WHEREAS, the Employer desires to provide severance compensation to key management personnel upon the occurrence of certain events; NOW, THEREFORE, in consideration of the mutual promises hereinafter contained, the parties hereto hereby agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: 1.1 "Termination For Cause" shall mean termination by the Employer of the Employee's employment by reason of (i) the Employee's fraud upon, deliberate injury or attempted injury to, or dishonesty towards the Employer that causes material and demonstrable injury to the Employer, (ii) the Employee's intentional and material breach of the provisions of Section 4 of this Agreement, (iii) the Employee's intentional and material breach of, or material failure to perform under, this Agreement (other than the provisions of Section 5 hereof) that is not cured by the Employee within 30 days after written notice from the President specifying the breach and requesting a cure, or (iv) the conviction of any felony involving a crime of moral turpitude. 1.2 "Termination Other Than For Cause" shall mean termination by the Employer of the Employee's employment other than a Termination For Cause, a Termination Upon Death or Disability, or a Termination Upon a Change in Control. 1.3 "Termination for Good Reason" shall mean termination of employment by the Employee after (i) a material reduction by the Employer, without the Employee's consent, in the Employee's major duties and major responsibilities, (ii) the reduction by the Employer of the Employee's Base Salary (except for across-the-board salary reductions similarly affecting all management personnel), (iii) the relocation of the Employer's offices at which the Employee is principally employed to a location which is more than 35 miles from the current location of the 1 Employer's office or the requirement that the Employee be based (1) anywhere other than the Employer's principal offices, as the same may be relocated within 35 miles as provided above, or (2) more than 35 miles from the Employer's current offices, except for required travel on the Employer's business to an extent substantially consistent with the Employee's present business travel obligations, (iv) a material breach of this Agreement by the Employer that is not rectified within 30 days of notification to the President of the Employer by the Employee of such breach, or (v) the failure of the Employer to obtain an agreement from any successor or assign of the Employer, to assume and agree to perform this Agreement, as contemplated by Section 6.14. Notwithstanding the foregoing, in connection with a Permitted Spin-Off, if the Employee continues to be Vice President of Operations of the Spin-Off Entity, such change in title and position shall not be deemed to be a material reduction in the Employee's duties and responsibilities for purposes of clause (i) above. 1.4 "Termination Upon a Change in Control" shall mean termination of the Employee's employment with the Employer within two (2) years following a Change in Control either by the Employer as a Termination Other Than For Cause or by the Employee as a Termination for Good Reason. 1.5 "Termination Upon Death or Disability" shall mean termination by the Employer by reason of the Employee's death or disability. For purposes hereof, "disability" shall mean any termination of employment by the Employer, if the Employee, in the reasonable judgment of the President, has failed to perform her duties because of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than four (4) consecutive months. 1.6 "Permitted Spin-Off" shall mean a corporate restructuring of The Meditrust Companies pursuant to which all of the stock of any existing or newly-created subsidiary of The Meditrust Companies (or either of them) which owns (or acquires by purchase, dividend, investment or otherwise) all of the healthcare assets and investments of The Meditrust Companies (or the stock of subsidiaries which own such assets and investments) existing immediately prior thereto is "spun-off" ratably to the shareholders of The Meditrust Companies at the time of such spin-off. 1.7 "Spin-Off Entity" shall mean any Person resulting from a Permitted Spin-Off. 1.8 "Change in Control" shall mean (a) an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the then outstanding voting securities of the Employer entitled to vote generally in the election of directors of the Employer (the "Outstanding Voting Securities") or 20% or 2 more of the combined market value of the equity securities of the Employer (the "Equity Value"); provided, however, that any acquisition directly from or by the Employer or any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Employer or an affiliated company or any acquisition by a company pursuant to a transaction which complies with clauses (i), (ii) and (iii) of (c) below shall be excluded from this clause (a); or (b) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") of the Employer, cease for any reason to constitute at least 60% of the Board of Directors of the Employer; provided, however, that any individual becoming a director whose election, or nomination for election by the Employer's stockholders, was approved by a vote of at least 60% of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of the Employer; or (c) consummation of a reorganization, merger or consolidation of the Employer (a "Business Combination"), unless, in each case, following such Business Combination, (i) all or substantially all the individuals and entities who were the beneficial owners, respectively, of the outstanding Equity Value and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the combined market value of the equity securities and more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Employer or all or substantially all of the Employer's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Equity Value and Outstanding Voting Securities, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Employer or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities or 20% or more of the combined market value of the equity securities of the corporation resulting from such business combination except to the extent that such ownership existed prior to the Business Combination and (iii) at least 60% of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination, (d) the sale or other disposition of more than 50% of the healthcare assets of the Employer, or (e) a complete liquidation or dissolution of the Employer or approval thereof by the stockholders of the Employer. For purposes of this definition, "Employer" shall mean either (x) Meditrust Corporation or Meditrust Operating Company ("Meditrust" and together with the Employer, "The Meditrust Companies") or (y) any subsidiary of Meditrust Corporation, the assets of which are substantially all of the healthcare assets and investments of Meditrust Corporation (or the stock of subsidiaries, the assets of which are substantially all of the healthcare assets and investments of Meditrust Corporation). Notwithstanding the foregoing, any corporate restructuring directly related to a Permitted Spin-Off, including any related change to the Board of Directors shall not be deemed to be a Change in Control; provided, however, that this exclusion shall not apply to any 3 simultaneous or subsequent sale of, or Business Combination, or other events described in clauses (a) through (e) of this Section 1.8 involving such Spin-Off Entity. 2. PERFORMANCE SHARES AND PERFORMANCE UNITS 2.1 PERFORMANCE SHARES. The Employer has previously awarded the Employee 10,000 performance shares in accordance with the terms described in Exhibit A hereto and the Employer's 1995 Share Award Plan (the "Performance Shares"). 2.2 PERFORMANCE UNITS. The Employer has previously issued to the Employee 10,000 performance units ("Performance Units") in the Employer's Long Term Bonus Program. Such Performance Units shall become payable only to pursuant to the provisions of Section 4.1 or 4.3. 3. 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 her death, to her 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 her duties hereunder, all to the date of termination. The Employee, or her estate or beneficiaries in the case of her death, shall not be entitled to any other compensation or reimbursement of any kind, including, without limitation, severance compensation, except as provided in Section 4 hereof. Unless otherwise provided in writing or as provided in Section 4 hereof, upon termination of employment, all options held by the Employee that are not then currently exercisable and all Performance Units shall immediately lapse and have no force or effect, all then unvested Performance Shares held by the Employee shall be forfeited and returned to the Employer, and the Employer shall have no further obligation to continue to issue to the Employee previously authorized stock grants. 4. SEVERANCE COMPENSATION. The Employee shall be paid severance compensation in accordance with and subject to the terms and conditions of this Section 4. 4.1 SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE OR TERMINATION FOR GOOD Reason. In the event the Employee's employment is terminated in a Termination Other Than For Cause or in a Termination for Good Reason, subject to the signing by the Employee of a general release of employment-related claims (other than continuing rights under this Agreement) in a form and manner reasonably satisfactory to the Employer, (i) all unvested Performance Shares held by the Employee shall become immediately vested in full, (ii) all Performance Units issued to the Employee shall become immediately vested in full with the value of each unit deemed to be $25; provided that payment with respect to the Performance Units shall be made in cash no earlier than January 1, 2002, (iii) any unvested 4 options to purchase paired shares of The Meditrust Companies held by the Employee shall become immediately vested and exercisable in full in accordance with the Employer's 1995 Share Award Plan, (iv) all previously authorized but unissued stock grants shall immediately be issued by the Employer to the Employee, and (v) the Employee shall be paid a lump sum within 30 days of such termination equal to the sum of her base salary and the average of the bonuses received by the Employee for the three (3) immediately preceding fiscal years (or such shorter period that the Employee was eligible for a bonus). The Employee shall continue to enjoy the benefits under the medical and dental insurance plans for one (1) year. Notwithstanding the foregoing, in the event a Change in Control occurs within nine (9) months after a termination under this Section 4.1, the Employee's employment shall be deemed to have been terminated in a Termination Upon a Change in Control and the benefits inuring to the Employee shall be recalculated and paid or delivered to the Employee as though Section 4.3 applied at the time of such termination. 4.2 SEVERANCE COMPENSATION UPON DEATH OR DISABILITY. In the event the Employee's employment is terminated in a Termination Upon Death or Disability, and in the case of Termination Upon Disability, subject to the signing by the Employee (in the case of Disability) of a general release of employment-related claims (other than continuing rights under this Agreement) in a form and manner reasonably satisfactory to the Employer, (i) any unvested options to purchase shares of The Meditrust Companies held by the Employee shall become immediately vested and exercisable in full in accordance with the Plan and (ii) the Employee or her estate shall be paid a lump sum within 30 days of such termination equal to the sum of her Base Salary and the average of the bonuses received by the Employee for the three (3) immediately preceding fiscal years (or for such shorter period that the Employee was eligible for a bonus). The Employee (or dependents, in the case of the Employee's death) shall continue to enjoy the benefits under the medical and dental insurance plans for one (1) year. 4.3 SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL. (a) Upon a Change in Control, (i) all unvested Performance Shares held by the Employee shall become immediately vested in full, (ii) all Performance Units issued to the Employee shall become immediately vested in full with the value of each unit deemed to be $50, (iii) any unvested options to purchase paired shares of The Meditrust Companies held by the Employee shall become immediately vested and exercisable in full in accordance with the Employer's 1995 Share Award Plan, and (iv) all previously authorized but unissued stock grants shall immediately be issued by the Employer to the Employee. In the event the Employee's employment is terminated in a Termination Upon a Change in Control, subject to the signing by the Employee of a general release of employment-related claims (other than continuing rights under this Agreement) in a form and manner reasonably satisfactory to the Employer, the Employee shall be paid a lump sum in cash within 30 days of such termination in an amount equal to the full value of her Performance Units and an amount equal to the sum of (A) her base salary and (B) her maximum bonus opportunity (but not less than 50% of base salary) for the 5 year of termination. The Employee shall continue to enjoy the benefits under the medical and dental insurance plan for one (1) year. (b) Notwithstanding the foregoing, in the event of the determination (as hereinafter provided) that any required payment by the Employer to or for the 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, "Severance Payments")) would be subject to 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 following provisions shall apply: (i) If the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes payable by the Employee on the amount of the Severance Payments which are in excess of the Threshold Amount (as defined below), are greater than or equal to the Threshold Amount, the Employee shall be entitled to the full benefits payable under this Agreement. (ii) If the Threshold Amount is less than (a) the Severance Payments, but greater than (b) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the benefits payable under this Agreement shall be reduced (but not below zero (0)) to the extent necessary so that the maximum Severance Payments shall equal the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, the Employee shall determine which method shall be followed; provided that if the Employee fails to make such determination within 15 days after the Employer has sent the Employee written notice of the need for such reduction, the Employer may determine the amount of such reduction in its sole discretion. For the purposes of this section, "Threshold Amount" shall mean three (3) times the Employee's "base amount" within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00). The determination as to which provisions of this Section 4.3(b) shall apply to the Employee shall be made by PriceWaterhouseCoopers or such other nationally recognized accounting firm retained by the Employer and reasonably acceptable to the Employee (the "Accounting Firm"). The Employer shall direct the Accounting Firm to submit its determination and detailed supporting calculations both to the Employer and the Employee within 30 days after the Change in Control, or at such earlier time as is reasonably requested by the Employer or the Employee. For purposes of this Section 4.3(b), the Employee shall be deemed to pay Federal income taxes 6 at the highest marginal rate of Federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Employee's residence on the Change in Control, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Employer and the Employee. (c) 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. (d) 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. 5. NON-COMPETITION AND NON-DISCLOSURE. 5.1 NON-COMPETITION. During the Employee's employment with the Employer, without approval by the Board, the Employee will not, directly or indirectly, (i) engage or become interested, directly or indirectly, as owner, employee, director, partner, consultant, through stock ownership (except ownership of not more than one percent (1%) of any class of securities of a corporation which is publicly traded), investment of capital, lending of money or property, rendering of services, or otherwise, either alone or in association with others, in any business which competes directly or indirectly with the business of the Employer, (ii) induce or attempt to induce any customer of the Employer to reduce such customer's business with the Employer, or (iii) solicit any of the Employer's employees to leave the employ of the Employer or employ any of such Employees. As used in Sections 5.1, 5.2, 6.2 and 6.3, the term "Employer" shall mean Meditrust Corporation or its subsidiaries and affiliates. 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 at all times, both during the Employee's employment with the Employer and after its termination, 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. 7 6. MISCELLANEOUS. 6.1 ARBITRATION; DISPUTE RESOLUTION. (a) ARBITRATION PROCEDURE. Any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof shall be settled by final and binding arbitration in Boston, Massachusetts in accordance with the Employment Dispute Resolution Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"); PROVIDED, that nothing contained herein shall be deemed to prohibit either party to apply to a court of competent jurisdiction for temporary or preliminary equitable relief. The arbitral tribunal shall consist of one arbitrator. In making any decision, the arbitrator shall apply and follow the substantive law of Massachusetts without reference to the conflicts of law provisions thereof. The parties to the arbitration jointly shall directly appoint such arbitrator within 30 days of the initiation of arbitration. If the parties shall fail to appoint such arbitrator as provided above, such arbitrator shall be appointed by the AAA as provided in the Arbitration Rules. The Employee and the Employer agree that the decision of the arbitrator shall be final, the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction thereof. The Employer shall pay all fees and expenses of the Arbitrator regardless of the result and shall provide all witnesses and evidence reasonably required by the Employee to present her case. The Employer shall pay to the Employee all reasonable arbitration expenses and legal fees incurred by the Employee as a result of a termination of the Employee's employment in seeking to obtain or enforce any right or benefit provided by this Agreement (whether or not the Employee is successful in obtaining or enforcing such right or benefit). Such payments shall be made within five (5) days after the Employee's request for payment accompanied with such evidence of fees and expenses incurred as the Employer reasonably may require. (b) COMPENSATION DURING DISPUTE. The Employee's compensation during any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement shall be as follows: If there is a termination by the Employer followed by a dispute as to whether the Employee is entitled to the payments and other benefits provided under this Agreement, then, during the period of that dispute the Employer shall pay the Employee 50% of the amount specified in Section 4.1 hereof and the Employer shall provide the Employee with the benefits provided in Section 4.1 hereof, if, but only if, the Employee agrees in writing that if the dispute is resolved against the Employee, the Employee shall promptly refund to the Employer all payments received under Section 4.1 of this Agreement plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. If the dispute is resolved in the Employee's favor, promptly after resolution of the dispute, the Employer shall pay to the Employee the sum 8 that was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. 6.2 LITIGATION AND REGULATORY COOPERATION. During and after the Employee's employment, the Employee shall reasonably cooperate with the Employer in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Employer which relate to events or occurrences that transpired while the Employee was employed by the Employer; provided, however, that such cooperation shall not materially and adversely affect the Employee or expose the Employee to an increased probability of civil or criminal litigation. The Employee's cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee's employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall also provide the Employee with compensation on an hourly basis calculated at her final base compensation rate for requested litigation and regulatory cooperation that occurs after her termination of employment, and reimburse the Employee for all costs and expenses incurred in connection with her performance under this Section 6.2, including, but not limited to, reasonable attorneys' fees and costs. 6.3 NONDISPARAGEMENT. During and after the Employee's employment, the Employee agrees that she shall not take any action or make any statement, written or oral, which disparages or criticizes the Employer or The Meditrust Companies, or their respective officers, directors, agents, or management and business practices, or which disrupts or impairs the normal operations of the Employer or The Meditrust Companies. During and after the Employee's employment, the Employer agrees that it shall not take any action or make any statement, written or oral, which disparages or criticizes Employee or Employee's management and business practices and that it shall instruct its officers, directors and agents not to take any action or make any statement, written or oral, which disparages or criticizes the Employee or the Employee's management and business practices. 6.4 NO MITIGATION. The Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Employee by the Employer under this Agreement. Further, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by the Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Employee to the Employer, or otherwise. 6.5 AUTHORITY; NO RESTRICTIONS. Each party represents and warrants that it has full power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and this Agreement is the legal, valid and binding obligation of 9 the party, enforceable against the party in accordance with its terms. No consent, approval or agreement of any person, party, court, government or entity is required to be obtained by either party in connection with the execution and delivery of this Agreement. Each party is not subject to any agreement, restriction, lien, encumbrance or right, title or interest in anyone limiting in any way the scope of this Agreement or in any way inconsistent herewith, and each party will not hereafter grant anyone the same. 6.6 EQUITABLE RELIEF. The obligations of the Employee under Section 5 hereunder are special, unique and extraordinary, and any breach by the Employee thereof shall be deemed material and to cause irreparable injury not properly compensated by damages in an action at law. Notwithstanding Section 6.1, the Employer's rights and remedies hereunder shall therefore be enforceable both at law and in equity, by injunction and otherwise; and the rights and remedies of the Employer hereunder with respect thereto shall be cumulative and not alternative and shall not be exhausted by any one or more uses thereof. 6.7 CONSENT TO JURISDICTION. To the extent that any court action is permitted consistent with or to enforce Section 5, 6.1, 6.2 or 6.6 of this Agreement, the parties hereby consent to the jurisdiction of the Courts of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Employee (a) submits to the personal jurisdiction and venue of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of process. 6.8 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. 6.9 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. 6.10 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: 10 If to the Employer: Meditrust Corporation 197 First Avenue Needham, MA 02494 Attention: General Counsel If to the Employee: Debora Pfaff 534 Everett Street Westwood, MA 02090 Any party may change such party's address for notices by notice duly given pursuant to this Section 6.10. 6.11 HEADINGS. The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement. 6.12 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, applied without regard to conflict of law principles. 6.13 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. 6.14 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by the Employee without the prior written consent of the Employer, and may be assigned by the Employer and shall be binding upon, and inure to the benefit of, the Employer's successors and assigns. The Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Employer to assume expressly and agree to perform this Agreement in the same manner and to the extent that the Employer would be required to perform it if no such succession had taken place. As used in this Agreement, "Employer" shall mean the Employer as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 6.15 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 6.16 WITHHOLDINGS. All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local and other withholdings and similar taxes and payments required by applicable law. The Employee agrees to pay all federal, state and local taxes owed by her in connection with this Agreement. 11 6.17 SUBSTITUTION OF EMPLOYER. Upon a Permitted Spin-Off, the Spin-Off Entity shall be deemed to be the Employer for all purposes of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first above written. MEDITRUST CORPORATION SEAL By: /s/ David F. Benson ---------------------------------------- Name: David F. Benson Title: President and Chief Executive Officer /s/ Debora A. Pfaff ---------------------------------------- Debora A. Pfaff 12 Exhibit A THE PERFORMANCE SHARES 100% of the Performance Shares described in Section 2.1 shall be deemed issued as of February 27, 1998 upon payment by the Employee of the par value thereof to The Meditrust Companies. Subject to the terms of the Agreement, the Performance Shares shall vest on the earliest of (a) eight (8) years after the date of issuance, (b) on March 31 of the year following the first fiscal year after issuance in which the Performance Goal is achieved or (c) as the Board of Directors may determine. The Performance Goal for all outstanding grants of Performance Shares shall be deemed achieved in any fiscal year commencing with the year 2000 that meets both criteria specified below:
Fiscal FFO Cumulative FFO per Share Year Per Share Since January 1, 1998 ---- --------- --------------------- 2000 $2.92 $ 8.28 2001 3.10 11.38 2002 3.28 14.66 2003 3.48 18.14 2004 3.69 21.83
For purposes of the foregoing calculation, "FFO" shall mean funds from operations as reported by The Meditrust Companies. The above Performance Goals may be adjusted by the Board of Directors of the Employer to reflect changes in accounting rules or changes in corporate structure. Subject to the terms of the Agreement, upon termination of the Employee's employment by The Meditrust Companies for any reason, all right, title and interest in any unvested Performance Shares shall be transferred to The Meditrust Companies in exchange for the par value of such Performance Shares, and the Employee shall not receive any unissued Performance Shares. The Employee shall receive all voting rights and dividends paid with respect to unvested Performance Shares from the date of issuance so long as the Employee is an employee of The Meditrust Companies or any subsidiary thereof. 13 Exhibit A Management has prepared a three year forecast for the years 2000 - 2002 based on actual Ql 2000 results and other expectations. This forecast was provided to the banks in negotiating the extension and to the Boards of Directors at the June 8, 2000 Board Meeting. o Asset sales and mortgage repayments were estimated as follows: Q2 - Q4 2000 2001 2002 --------------------------------------- Expected cash proceeds $106 $398 $325 Year 2000 asset sales and mortgage repayments include: o Repayment of two MOB Mortgages with a face value of $55M, which generated proceeds of $48M and closed on April 7, 2000. o An expected mortgage repayment in Q3 of $8M. o Unidentified mortgage repayments with a face value of $70M generating proceeds of approximately $50M in Q4. EX-10.3 4 a2047171zex-10_3.txt EXHIBIT 10.3 Exhibit 10.3 First Amendment to Pfaff Severance Agreement FIRST AMENDMENT TO SEVERANCE AGREEMENT THIS FIRST AMENDMENT TO SEVERANCE AGREEMENT, is made and entered into as of this 24th day of January, 2000 by and between Meditrust Corporation, a Delaware corporation (the "Employer") and Debora A. Pfaff (the "Employee"). WHEREAS, the Employer and the Employee entered into a Severance Agreement (the "Severance Agreement") dated as of January 1, 1999; and WHEREAS, the Employer has increased certain of the Employee's benefits, effective as of January 1, 2000; and WHEREAS, the Employer and the Employee wish to modify the Severance Agreement to incorporate such changes. NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby agree as follows: Section 2.1 of the Severance Agreement is hereby deleted in its entirety and is replaced with the following: "2.1 PERFORMANCE SHARES.The Employer has previously awarded the Employee 30,000 performance shares in accordance with the terms described in Exhibit A hereto and the Employer's 1995 Share Award Plan and in the future may award additional shares from time-to-time (the "Performance Shares")." Except as modified hereby, the Severance Agreement shall remain in full force and effect and unaffected hereby. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Severance Agreement under seal as of the day and year first above written. MEDITRUST CORPORATION By: /s/ David F. Benson --------------------------------- Name: David F. Benson Title: Chief Executive Officer /s/ Debora A. Pfaff --------------------------------- Debora A. Pfaff EX-10.4 5 a2047171zex-10_4.txt EXHIBIT 10.4 Exhibit 10.4 Schmutz Severance Letter Agreement December 17, 1999 Mr. John F. Schmutz 17122 Eagle Star San Antonio, TX 78248 RE: Severance Benefits Dear John: This letter will document your severance benefits in the event you are terminated from employment with La Quinta Inns, Inc. under certain circumstances. The severance benefit in such event shall be a lump sum payment of $500,000 and the continuation of medical benefits at La Quinta's expense for two years in lieu of any other compensation except for vested interests in the La Quinta Retirement Plan, the Supplemental Executive Retirement Plan, the Executive Savings Plan, Meditrust stock options, Meditrust performance units and the like. Said lump sum payment (reduced by any required withholding taxes) shall be payable within five (5) days of your termination. You will become eligible for this lump sum severance benefit in the following events: 1.) a Termination Other Than For Cause; 2.) your Death or Disability; or 3.) a Termination Upon a Change In Control; all as the foregoing events are described in Exhibit "A", attached hereto. It is the intention of the Board to consider Employment Agreements for you and other members of La Quinta's Executive Team following the public announcement of a new President and Chief Executive Officer for La Quinta. Very truly yours, /s/ Clive D. Bode - ----------------------- Clive D. Bode Chairman EXHIBIT "A" For purposes of this Letter, the following terms shall have the following meanings: (1) "Termination For Cause" shall mean termination by the Employer of the Employee's employment by reason of (i) the Employee's fraud upon, deliberate injury or attempted injury to, or dishonesty towards the Employer that causes material and demonstrable injury to the Employer, or (ii) the conviction of any felony involving a crime of moral turpitude. (2) "Termination Other Than For Cause" shall mean termination by the Employer of the Employee's employment other than a Termination for Cause, a Termination Upon Death or Disability, or a Termination Upon a Change in Control. (3) "Termination Upon a Change in Control" shall mean termination of the Employee's employment with the Employer within two (2) years following a Change in Control either by the Employer as a Termination Other Than For Cause. (4) "Termination Upon Death or Disability" shall mean termination by the Employer by reason of the Employee's death or disability shall mean a termination 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) consecutive months, or 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. (5) "Permitted Spin-Off" shall mean a corporate restructuring of the Meditrust Companies pursuant to which all of the stock of any existing or newly-created subsidiary of the Meditrust Companies (or either of them) which owns (or acquires by purchase, dividend, investment or otherwise) all of the healthcare assets and investments of the Meditrust Companies (or the stock of subsidiaries which own such assets and investments) existing immediately prior thereto is "spun-off" ratably to the shareholders of the Meditrust Companies at the time of such spin-off. (6) "Spin-Off Entity" shall mean any Person resulting from a Permitted Spin-Off. (7) "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 an employee benefit plan (or related trust) sponsored or maintained by the Employer or an affiliated company or any acquisition by a company pursuant to a transaction which complies with clauses (i), (ii) and (iii) of (c) below shall be excluded from this clause (a); or (b) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") of the Employer, cease for any reason to constitute at least 60% of the Board of Directors of the Employer; PROVIDED, HOWEVER, that any individual becoming a director whose election, or nomination for election by the Employer's stockholders, was approved by a vote of at least 60% of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of the Employer; or (c) consummation of a reorganization, merger or consolidation of the Employer (a "Business Combination"), unless, in each case, following such Business Combination, (i) all or substantially all the individuals and entities who were the beneficial owners, respectively, of the outstanding Equity Value and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the combined market value of the equity securities and more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Employer or all or substantially all of the Employer's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Equity Value and Outstanding Voting Securities, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Employer or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities or 20% or more of the combined market value of the equity securities of the corporation resulting from such business combination except to the extent that such ownership existed prior to the Business Combination and (iii) at least 60% of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination, (d) the sale or other disposition of more than 50% of the lodging assets of the Employer, or (e) a complete liquidation or dissolution of the Employer or approval thereof by the stockholders of the Employer. For purposes of this definition, "Employer" shall mean either (x) Meditrust Corporation or Meditrust Operating Company ("Meditrust" and together with the Employer, "the Meditrust Companies") or (y) any subsidiary of Meditrust Corporation or Meditrust Operating Company, the assets of which are substantially all of the lodging assets and investments of Meditrust Corporation (or the stock of subsidiaries, the assets of which are substantially all of the lodging assets and investments of Meditrust Corporation). Notwithstanding the foregoing, any corporate restructuring directly related to a Permitted Spin-Off, including any related change to the Board of Directors shall not be deemed to be a Change in Control; provided, however, that this exclusion shall not apply to any simultaneous or subsequent sale of, or Business Combination, or other events described in clauses (a) through (e) of this subparagraph (7) involving such Spin-Off Entity. -2- EX-10.5 6 a2047171zex-10_5.txt EXHIBIT 10.5 Exhibit 10.5 Form of Performance Units Award Letter Agreement [Date] [Address] RE: Performance Unit Award Dear [_________]: This letter will confirm that Meditrust Operating Company ("Meditrust") awarded you 25,000 Performance Units in its long Term Bonus Program on December 10, 1998. Said award was in recognition of your current and anticipated future contributions and importance to the success of Meditrust, and as a result of the Board's confidence in you. Such Performance Units shall become payable only under the following terms and conditions: 1. Termination Other Than for Cause - all Performance Units issued to you shall become immediately vested in full with the value of each Unit deemed to be $25; provided that payment with respect to the Performance Units shall be made in cash no earlier than January 1, 2000 2. Death or Disability - all Performance Units issued to you shall become immediately vested in full with the value of each Unit deemed to be $25; provided that the payment with respect to the Performance Units shall be made in cash no earlier than April 1, 2002; or 3. Change In Control - all Performance Units issued to you shall become immediately vested in full with the value of each Unit deemed to be $50. The terms and conditions defining the aforesaid events are set forth in Exhibit "A", attached hereto. Very truly yours, /s/ Clive D. Bode - -------------------------- Clive D. Bode Chairman EXHIBIT "A" For purposes of this Letter, the following terms shall have the following meanings: (1) "Termination For Cause" shall mean termination by the Employer of the Employee's employment by reason of (i) the Employee's fraud upon, deliberate injury or attempted injury to, or dishonesty towards the Employer that causes material and demonstrable injury to the Employer, or (ii) the conviction of any felony involving a crime of moral turpitude. (2) "Termination Other Than For Cause" shall mean termination by the Employer of the Employee's employment other than a Termination for Cause, a Termination Upon Death or Disability, or a Termination Upon a Change in Control. (3) "Termination Upon a Change in Control" shall mean termination of the Employee's employment with the Employer within two (2) years following a Change in Control either by the Employer as a Termination Other Than For Cause. (4) "Termination Upon Death or Disability" shall mean termination by the Employer by reason of the Employee's death or disability shall mean a termination 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) consecutive months, or 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. (5) "Permitted Spin-Off" shall mean a corporate restructuring of the Meditrust Companies pursuant to which all of the stock of any existing or newly-created subsidiary of the Meditrust Companies (or either of them) which owns (or acquires by purchase, dividend, investment or otherwise) all of the healthcare assets and investments of the Meditrust Companies (or the stock of subsidiaries which own such assets and investments) existing immediately prior thereto is "spun-off" ratably to the shareholders of the Meditrust Companies at the time of such spin-off. (6) "Spin-Off Entity" shall mean any Person resulting from a Permitted Spin-Off. (7) "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 an employee benefit plan (or related trust) sponsored or maintained by the Employer or an affiliated company or any acquisition by a company pursuant to a transaction which complies with clauses (i), (ii) and (iii) of (c) below shall be excluded from this clause (a); or (b) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") of the Employer, cease for any reason to constitute at least 60% of the Board of Directors of the Employer; PROVIDED, HOWEVER, that any individual becoming a director whose election, or nomination for election by the Employer's stockholders, was approved by a vote of at least 60% of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of the Employer; or (c) consummation of a reorganization, merger or consolidation of the Employer (a "Business Combination"), unless, in each case, following such Business Combination, (i) all or substantially all the individuals and entities who were the beneficial owners, respectively, of the outstanding Equity Value and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the combined market value of the equity securities and more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Employer or all or substantially all of the Employer's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Equity Value and Outstanding Voting Securities, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Employer or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities or 20% or more of the combined market value of the equity securities of the corporation resulting from such business combination except to the extent that such ownership existed prior to the Business Combination and (iii) at least 60% of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination, (d) the sale or other disposition of more than 50% of the lodging assets of the Employer, or (e) a complete liquidation or dissolution of the Employer or approval thereof by the stockholders of the Employer. For purposes of this definition, "Employer" shall mean either (x) Meditrust Corporation or Meditrust Operating Company ("Meditrust" and together with the Employer, "the Meditrust Companies") or (y) any subsidiary of Meditrust Corporation or Meditrust Operating Company, the assets of which are substantially all of the lodging assets and investments of Meditrust Corporation (or the stock of subsidiaries, the assets of which are substantially all of the lodging assets and investments of Meditrust Corporation). Notwithstanding the foregoing, any corporate restructuring directly related to a Permitted Spin-Off, including any related change to the Board of Directors shall not be deemed to be a Change in Control; provided, however, that this exclusion shall not apply to any simultaneous or subsequent sale of, or Business Combination, or other events described in clauses (a) through (e) of this subparagraph (7) involving such Spin-Off Entity. -2- -----END PRIVACY-ENHANCED MESSAGE-----