Exhibit 10.3
EMPLOYMENT AGREEMENT
BETWEEN
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
AND
GOVERNMENT PROPERTIES TRUST, INC.
This Employment Agreement (the "Agreement"), dated as of September 30,
2003 ("Effective Date"), between Government Properties Trust, Inc., a Maryland
corporation (the "Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a resident of Nebraska (the
"Executive"):
WHEREAS, the Executive has extensive experience in owning and operating
real estate companies which acquire, broker, lease and manage commercial real
estate and real estate investment entities and has previously served as the
President and as a Director of the Company's predecessor, Gen-Net Lease Income
Trust, Inc. ("Gen-Net"); and
WHEREAS, the Company wishes to continue to employ the Executive in the
capacities and on the terms and conditions set out below, and the Executive
desires to continue such employment, in the capacities and on the terms and
conditions set forth below.
NOW, THEREFORE, the Company and the Executive, in consideration of the
respective covenants set out below, hereby agree as follows:
1. EMPLOYMENT.
(a) POSITIONS. The Executive shall be employed by the Company
as its President and Chief Executive Officer ("CEO"). The Executive
shall also serve as a member of the Company's initial Board of
Directors and thereafter as elected.
(b) DUTIES. The Executive's principal employment duties and
responsibilities shall be those duties and responsibilities customary
for the positions of President and CEO and such other executive duties
and responsibilities as the Board of Directors ("Board") shall from
time to time reasonably assign to the Executive and as are set forth in
the Company's Bylaws applying to the President and CEO. The Executive
shall be responsible for and have authority over the day-to-day
operational management of the Company. The Executive shall report
directly to the Board. All other officers of the Company shall report
to the Executive or such person(s) as the Executive may designate from
time to time.
(c) EXTENT OF SERVICES. Except for illnesses and vacation
periods, the Executive shall devote a substantial majority of his time,
attention and best efforts to the performance of his business duties
and responsibilities under this Agreement. Notwithstanding the
foregoing, Executive (i) may make any passive investment where he is
not obligated or required to, and shall not in fact, devote any
managerial efforts, (ii) may participate in charitable, academic,
political or community activities and boards, and in trade or
professional organizations, and (iii) may hold directorships in other
companies consistent with the Company's conflict of interest policies
and corporate governance guidelines as in effect from time to time.
2. TERM. This Agreement shall be effective as of the Effective Date and
shall continue in full force and effect thereafter for a term of five (5) years
following the Effective Date. At the end of the five (5) year term this
Agreement shall be automatically extended for an additional one (1) year on each
anniversary of the Effective Date thereafter (the last day of each such term is
referred to herein as a "Term Date"), unless either party terminates this
Agreement not later than ninety (90) days prior to a Term Date by providing
written notice to the other party of such party's intent not to renew, or it is
sooner terminated pursuant to Section 7. For purposes of this Agreement, "Term"
shall mean the period of five (5) years following the Effective Date hereof plus
any extensions pursuant to this Section 2.
3. BASE SALARY. The Company shall pay the Executive a base salary
annually (the "Base Salary"), which shall be payable in periodic installments
according to the Company's normal payroll practices. The initial Base Salary
shall be $350,000.00. The Board or the Compensation and Human Resources
Committee of the Company (the "Compensation Committee") shall review the Base
Salary at least once a year to determine whether the Base Salary should be
increased effective January 1 of any year during the Term. For purposes of this
Agreement, the term "Base Salary" shall mean the amount established and adjusted
from time to time pursuant to this Section 3. The Base Salary shall be increased
for each calendar year during the Term by a percentage equal to the percentage
increase, if any, in the level of the CPI (as hereinafter defined) last
published prior to January 1 of the year in question over the level of the CPI
published in 2003. The Base Salary for any year, as increased under this
Section, shall not be subsequently reduced notwithstanding any reduction in the
level of the CPI.
The term "CPI" means the Consumer Price Index now known as the U.S.
Bureau of Labor and Statistics Consumer Price Index for Urban Wage Earners and
Clerical Workers, all Items for the Omaha, Nebraska SMSA. If the CPI shall be
discontinued, the foregoing calculation shall be made using a reasonably
equivalent successor or comparable measure of increase in the cost of living in
Omaha, Nebraska.
2 of 20
4. ANNUAL INCENTIVE BONUS. The Executive shall be entitled to receive
an annual cash incentive bonus for each fiscal year during the Term of this
Agreement consistent with a bonus policy ("Bonus Policy") adopted by the
Compensation Committee.
The Bonus Policy shall be applied under the following conditions: 1)
the first year the Bonus Policy shall be in effect is 2004; 2) For 2004 and
thereafter, the Compensation Committee and the Executive shall mutually agree,
by no later than March 31, on three (3) sets of financial performance goals for
the Company, based on Funds from Operations or Total Return to Shareholders and
the Company's audited financials for the prior year. If the first or threshold
set of goals is met by the Company, the Compensation Committee shall award the
Executive a cash bonus equal to forty percent (40%) of his Base Salary for the
prior year, as adjusted in Section 3 if applicable. If the second or target set
of goals is met by the Company, the Compensation Committee shall alternatively
award the Executive a cash bonus equal to sixty percent (60%) of his Base Salary
for the prior year, as adjusted in Section 3 if applicable. If the third or
maximum set of goals is met by the Company, the Compensation Committee shall
alternatively award the Executive a cash bonus equal to eighty percent (80%) of
his Base Salary for the prior year, as adjusted in Section 3 if applicable; and
3) A bonus shall be awarded and paid not more than thirty (30) days after the
Compensation Committee has received the final audited financial statements for
the Company for the prior year. All Bonus Policy award calculations shall be
based on the Company's most recent audited financial statements. If the Company
fails to achieve the threshold performance goals applicable for the year in
question, nothing herein shall be construed to prevent the Compensation
Committee from recommending to the Board of Directors and the Board thereafter
approving a cash bonus to the Executive based on terms determined to be fair,
reasonable and equitable by a majority of disinterested Board members.
5. STOCK GRANT. The Executive shall receive, not later than March 31,
2004, a one-time grant of restricted and unregistered shares of the Company's
voting common stock in a numerical amount equal to 0.625% of the number of
shares issued pursuant to the Company's public offering of its voting common
stock (rounded to the next whole share) which is anticipated to occur in late
2003. In no event shall the stock grant to the Executive provided for in this
Section 5 exceed an amount worth in excess of one million dollars
($1,000,000.00) based on the Issue Price of the Common Stock on the Effective
Date of the Company's Secondary Offering, assuming the shares issued pursuant to
the grant have the same value as the Company's trading shares. The shares of
common stock granted to the Executive pursuant to this Section 5 shall be issued
and shall vest to him at the rate of twenty percent (20%) per annum until fully
issued and vested, said issue date or dates to be set by agreement between the
Compensation Committee and the Executive. Notwithstanding anything to the
contrary, the Company shall pay either the dividends themselves or, in lieu
thereof, an amount equal to the
3 of 20
Executive's dividends declared based on the total number of shares granted to
the Executive under this Section 5, rather than the number of shares vested.
6. BENEFITS.
(a) VACATION. The Executive shall be entitled to twenty (20)
business days of vacation per full calendar year. Upon termination, the
Executive shall be entitled to cash in lieu of any unused vacation
time. Vacation time shall accrue in whole from year-to-year.
(b) SICK AND PERSONAL DAYS. The Executive shall be entitled to
sick and personal days on an as needed basis.
(c) BENEFIT PLANS.
(i) PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The
Executive and his spouse and eligible dependents, if any, and
their respective designated beneficiaries where applicable,
will be eligible for and entitled to participate in any
Company sponsored employee benefit plans, including but not
limited to benefits such as group health, dental, accident,
disability insurance, group life insurance, and a 401(k) plan,
as such benefits may be offered from time to time, on a basis
no less favorable than that applicable to any other executive
of the Company.
(ii) DEFERRED COMPENSATION PLAN. The Company may
adopt a deferred compensation plan for the benefit of the
Executive. The terms and conditions of the plan will be
negotiated between the Compensation Committee and the
Executive. The plan shall, at a minimum, provide for full
vesting of all benefits in not more than five (5) years.
(d) OTHER BENEFITS.
(i) CAR ALLOWANCE. The Company shall pay Executive a
monthly car allowance of $1,200.00 (or lease a car of his
selection for his exclusive use), plus related operating
expenses, taxes, insurance and fees which shall be reconciled
at the end of each fiscal year.
(ii) TAX PREPARATION AND FINANCIAL PLANNING. The
Company shall pay or promptly reimburse the Executive for
costs incurred by him in connection with tax preparation and
financial planning assistance, to be furnished by such
advisors as chosen by the Executive, up to a maximum aggregate
of $7,500.00 annually.
4 of 20
(iii) DIRECTORS AND OFFICERS INSURANCE. During the
Term and thereafter for a period sufficient to include any
claims made within applicable statute of limitations, the
Executive shall be entitled to director and officer insurance
coverage for his acts and omissions while an officer and
director of the Company on a basis no less favorable to him
than the coverage provided to any other current officers and
directors.
(iv) DISABILITY INSURANCE. By June 30, 2004, the
Company shall acquire and maintain, at its cost, supplemental
renewable long-term disability insurance for the benefit of
the Executive as agreed to by the Company and the Executive.
(v) LIFE INSURANCE. By June 30, 2004, the Company
shall purchase on the life of the Executive a whole life
insurance policy with a death benefit of $500,000.00 with the
Executive (or his assignee) as the owner of the policy and
with the right to designate the beneficiary of the death
benefit, provided that the Executive's health and other
underwriting conditions are satisfactory (or in lieu thereof,
at the Executive's election, the Company may assume the
payment of premiums for insurance policies in a like amount
currently in existence, all other provisions of Section
6(d)(v) applying). The premiums paid on this policy shall be
imputed as income to the Executive, and the Company will pay
to the Executive such additional amount as necessary to have
no federal, state or local tax effect on the Executive (the
"Executive Life Insurance Program"). The Executive Life
Insurance Program shall be issued by an AA or better rated (by
AM Best) insurer. The Company will obtain bids for this
program and review the final program with the Executive and
the Compensation Committee for approval.
(vi) EXPENSES, OFFICE AND SUPPORT. The Executive
shall be entitled to reimbursement of all reasonable expenses,
in accordance with the Company's policy as in effect from time
to time and on a basis no less favorable than that applicable
to any other executive of the Company, including, without
limitation, telephone, reasonable travel and reasonable
entertainment expenses incurred by the Executive in connection
with the business of the Company, promptly upon the
presentation by the Executive of appropriate documentation.
The Executive shall also be entitled to appropriate office
space, administrative and technological support, and such
other facilities and services as are suitable to the
Executive's positions and adequate for the performance of the
Executive's duties.
5 of 20
(vii) GENERAL. Subject to the provisions of each of
the respective plans, the Company shall provide to the
Executive all benefits which other employees of the Company
are entitled to receive, in accordance with the terms and
conditions of any policies or plans applicable to such
benefits. The Executive shall likewise participate in any
additional benefit as may be established during the term of
this Agreement, by standard written policy of the Company.
Notwithstanding anything herein to the contrary, the Company
shall not be obligated to institute, maintain, or refrain from
changing perquisite, so long as such changes applicable to the
Executive are equally applicable to other executives of the
Company (i.e., the benefits of the Executive will not be
singled out for reduction or modification in a manner
inconsistent to that provided to other executives of the
Company).
7. EMPLOYMENT TERMINATION.
(a) VOLUNTARY TERMINATION DUE TO RETIREMENT OR OTHERWISE. In
the event the Executive's employment is terminated, while this
Agreement is in force, by reason of voluntary retirement by the
Executive or other voluntary reasons, the Executive's benefits shall be
determined in accordance with the Company's defined benefit, deferred
compensation, health, disability and life insurance plans or policies,
then in effect.
Upon the effective date of such termination, the Company shall
pay to the Executive his full Base Salary (at the amount then in effect
as provided in Section 3 herein), accrued vacation pay, unreimbursed
business expenses, and all other items earned by and owed to the
Executive through and including the Effective Date of Termination. The
Executive also shall receive a pro rata bonus payment under the Bonus
Policy, based upon the level of achievement of the pre-established
performance goals up through and including the Effective Date of
Termination, as determined in good faith by the Board, plus all other
benefits to which the Executive has a vested right to at that time. The
Company's obligation to pay and provide to the Executive Base Salary,
annual bonus and any unvested shares reserved pursuant to the stock
grant (as provided in Sections 3, 4 and 5 herein, respectively), shall
immediately thereafter expire and the Company and the Executive
thereafter shall have no further obligations under this Agreement.
(b) TERMINATION DUE TO DEATH OR TOTAL DISABILITY. In the event
of the death or Total Disability (defined below), of the Executive
during the term of this Agreement, the Company shall pay, according to
the terms established by the Executive or his authorized
representative, to the Executive or the Executive's surviving spouse,
other authorized representative or other beneficiary as so designated
by the Executive during his lifetime, or to the
6 of 20
Executive's estate, as appropriate, the Executive's Base Salary, as
adjusted for the CPI, accrued vacation pay, unreimbursed business
expenses, and all other items earned by and owed to the Executive
through and including the Effective Date of Termination and the annual
cash bonus equal to the prior year's bonus or $150,000.00, whichever is
greater, for the remainder of the Term of this agreement or for a
period of three (3) years, whichever is greater. In addition, any
unvested portion of the stock granted under Section 5 shall immediately
vest for the Executive's benefit and be promptly distributed to the
same recipient receiving Executive's Base Salary.
The Company's obligation to provide to or for the Executive
his Base Salary, annual bonus, and stock grant (as provided in Sections
3, 4 and 5 herein, respectively), shall immediately thereafter expire
and, the Company shall have no further obligations under this
Agreement.
In the event that the Executive is unable to perform his
duties herein for a period of more than one hundred eighty (180)
calendar days in the aggregate, whether or not consecutive, during any
period of twelve (12) consecutive months, or in event of the Board's
reasonable expectation that the Executive's Disability will exist for
more than a period of one hundred eighty (180) calendar days during any
period of twelve (12) consecutive months based on the medical opinions
of two qualified and unaffiliated physicians ("Total Disability"), the
Company shall have the right to terminate this Agreement and the
Executive's employment hereunder. However, the Board shall deliver
written notice to the Executive of the Company's intent to terminate
for Total Disability at least ninety (90) calendar days prior to the
Effective Date of such termination.
The term "Disability" shall mean, for all purposes of this
Agreement, the incapacity of the Executive, due to injury, illness,
disease, or bodily or mental infirmity, to engage in the performance of
substantially all of the usual duties of employment as President and
Chief Executive Officer, as contemplated by Section 1 herein, such
Disability to be determined by the Board of Directors upon receipt of
and in reliance on competent medical advice from two or more
individuals selected by the Board and acceptable to the Executive who
are qualified to give such professional medical advice.
It is expressly understood that the Disability of the
Executive for a period of one hundred eighty (180) calendar days or
less in the aggregate during any period of twelve (12) consecutive
months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not
constitute a failure by him to perform his duties hereunder and shall
not be deemed a breach or default and the Executive shall receive full
compensation for
7 of 20
any such period of Disability or for any other temporary illness or
incapacity during the term of this Agreement.
(c) WITH CAUSE. At the election of the Company and subject to
the provisions of this Section 7(c), Executive shall be terminated
immediately upon written notice by the Company to the Executive of his
termination for Cause. For purposes of this Agreement, "Cause" for
termination shall be deemed to exist solely in the event of (i) the
conviction of the Executive of, or the entry of a plea of guilty or
nolo contendere by the Executive to, a felony (exclusive of any felony
relating to negligent operation of a motor vehicle and not including a
conviction, plea of guilty or nolo contendere arising solely under a
statutory provision imposing criminal liability upon the Executive on a
per se basis due to the Company offices held by the Executive, so long
as any act or omission of the Executive with respect to such matter was
not taken or omitted in contravention of any applicable policy or
directive of the Board), (ii) a willful breach of his duty of loyalty
which is materially detrimental to the Company, (iii) a willful failure
to perform or adhere to explicitly stated duties that are consistent
with the terms of this Agreement, or the Company's reasonable and
customary guidelines of employment or reasonable and customary
corporate governance guidelines or policies, including without
limitation any business code of ethics adopted by the Board, or to
follow the lawful directives of the Board (provided such directives are
consistent with the terms of this Agreement), which, in any such case,
continues for thirty (30) days after written notice from the Board to
the Executive, or (iv) gross negligence or willful misconduct in the
performance of the Executive's duties. For purposes of this Section
7(c), no act, or failure to act, on the Executive's part will be deemed
"gross negligence" or willful misconduct" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable
belief that the Executive's act, or failure to act, was in the best
interest of the Company. The parties agree that in order to terminate
the Executive pursuant to subsections (ii) through (iv) hereof, the
Company shall first be required to prove to the reasonable satisfaction
of the Executive that he engaged in improper conduct under these
subsections, and if the Executive shall not agree with the Company's
assessment of his conduct, then the Executive shall not be terminated
until an arbitrator, as provided for in Section 12, has determined that
the Executive's conduct constituted improper conduct under the
applicable subsection.
In the event the Executive is terminated for Cause, he shall
be entitled to the compensation and other benefits set forth in Section
7(a). In the event the Executive is terminated without Cause, he shall
be entitled to the compensation and other benefits set forth in Section
7(b) in addition to accrued vacation pay, unreimbursed business
expenses, and all other items earned by and owed to the Executive
through and including the Effective Date of Termination.
8 of 20
(d) FOR GOOD REASON. Executive may terminate his employment,
at his election, for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any of the following actions or omissions, provided
the Executive notifies the Company of his determination that Good
Reason exists within one hundred eighty (180) days of the action or
omission on which such determination is based:
(i) a material reduction of the Executive's duties or
responsibilities, a change in reporting requirements, or the
assignment to the Executive of any duties, responsibilities,
or reporting requirements that are inconsistent with his
position as President and Chief Executive Officer, as the case
may be,
(ii) an involuntary reduction in the Executive's
then-outstanding Base Salary,
(iii) a Change in Control of the Company,
(iv) a material reduction or loss of employee
benefits, in the aggregate, both in terms of the amount of the
benefit and the level of the Executive's participation
therein, enjoyed by the Executive under the employee benefit
and welfare plans of the Company, including without limitation
such benefits as group health, dental, 401(k), accident,
disability insurance, or group life insurance, that is caused
by the Company except as it required by applicable law,
(v) absent the Executive's prior written consent, the
requirement by the Company that the principal place of
business at which the Executive performs his duties be changed
to a location that is outside the Omaha, Nebraska MSA, or
(vi) a breach by the Company of any provision of this
Agreement that continues for a period of thirty (30) days
after Executive provides written notice to the Company of such
breach.
"Change in Control" means:
(i) The Board of Directors accepts, or recommends to
the Company's shareholders the acceptance, of an offer from
any "Person" (other than (w) those Persons in control of the
Company as of the Effective Date, (x) any Person or Persons
acting on behalf of the Company in a distribution of stock to
the public, or (y) a trustee or other fiduciary
9 of 20
holding securities under an employee benefit plan of the
Company, or (z) a corporation owned directly or indirectly by
the stockholders (immediately prior to such transaction) of
the Company in substantially the same proportions as their
ownership of stock of the Company) to become the beneficial
owner, directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined
voting power of the Company's then outstanding securities; or
(ii) The Board of Directors approves or recommends to
the Company's shareholders: (A) a plan of complete or
substantial liquidation of the Company; or (B) an agreement
for the sale or disposition of all or substantially all the
Company's assets; or (C) a merger, consolidation, or
reorganization of the Company with or involving any other
corporation or entity, other than a merger, consolidation, or
reorganization that would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least eighty-five percent (85%) of the combined voting power
of the voting securities of the Company (or such surviving
entity) outstanding immediately after such merger,
consolidation, or reorganization.
In the event the Executive elects to terminate this Agreement for Good
Reason, he shall be entitled to the compensation and other benefits
set forth in Section 7(b) hereof.
(e) TERMINATION ON FAILURE TO RENEW AT TERM DATE. In the event
the Company does not renew this Agreement at a Term Date, then
Executive shall receive a lump sum payment equal to two (2) years of
the most recent Base Salary plus the average of his bonus awarded
pursuant to the Bonus Policy for the previous two (2) years and full
acceleration of all unvested shares reserved under the stock grant
pursuant to Section 5. Additionally, Company shall pay expense
reimbursements and all other compensation related payments that are
payable as of the Term Date that are related to his period of
employment preceding the Term Date, including pay in lieu of accrued,
but unused, vacation.
(f) TERMINATION INVOLUNTARY AND WITHOUT CAUSE. In the event
Executive is terminated without cause or the Executive resigns from the
Company for Good Reason or the Company fails to renew the Executive's
Employment Agreement, the Company shall continue for a twelve (12)
month period from the Effective Date of termination, the Executive's
medical, group term life and disability insurance, the Executive Life
Insurance Program and, if applicable, Medicare supplemental coverages.
These benefits shall be provided by the Company at the same premium to
the Executive, and at the same coverage
10 of 20
levels in effect at the time of termination. The benefits set forth
herein shall be provided to the Executive in compliance with the terms
of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). These
benefits will be discontinued prior to the end of the twelve (12) month
period in the event the Executive receives substantially similar
benefits from a subsequent employer, as determined in good faith by the
Board of Directors. For purposes of enforcing this subsection, to the
extent necessary for the Company to make an off-set deduction, the
Executive shall have a duty to keep the Company informed as to the
terms and conditions of any subsequent employment and the corresponding
benefits from employment and shall provide or cause to provide to the
Company, in writing, correct, complete and timely information
concerning the same.
8. TERMINATION OF AUTHORITY. Immediately upon the Executive terminating
or being terminated from his employment with the Company for any reason,
notwithstanding anything else appearing in this Agreement or otherwise, the
Executive will stop serving the functions of his terminated or expired
positions, and shall be without any of the authority or responsibility for such
position. On request of the Board at any time following his termination of
employment for any reason, the Executive shall resign from the Board if then a
member.
9. EXCISE TAX.
(a) In the event that any payment or benefit received or to be
received by the Executive in connection with termination of the
Executive's employment (regardless of cause and whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a
change in control or any person affiliated with the Company or such
person) (all such payments and benefits being hereinafter called
"Total Payments"), such that the Executive will be subject (in whole
or in part) to the excise tax imposed under Code Section 4999 ("Excise
Tax") on such payments and benefits, then the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the
net amount retained by the Executive, after deduction of the Excise
Tax and any federal, state or local tax on the Gross-Up Payment, will
be equal to the Total Payments. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on such date,
net of the maximum deduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
11 of 20
(b) The Executive or the Company may request, prior to the
time any payments under this Agreement are made, a determination of
whether any or all of the Total Payments will be subject to the Excise
Tax and, if so, the amount of such Excise Tax and the federal, state
and local tax imposed on the Gross-Up Payment. If such a determination
is requested, it shall be made promptly, at the Company's expense, by
tax counsel selected by the Executive and approved by the Company
(with such approval not being unreasonably withheld), and such
determination shall be conclusive and binding on both parties. The
Company agrees to provide any information reasonably requested by such
tax counsel. Tax counsel may engage accountants or other experts, at
the Company's expense, to the extent deemed necessary or advisable for
them to reach a determination. For these purposes, the term "tax
counsel" shall mean a law firm with expertise in federal income tax
matters.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder,
the Executive will repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction plus that portion
of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment, without
any interest thereon. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder, the Company will
make an additional Gross-Up Payment in respect of such excess and in
respect of any portion of the Excise Tax with respect to which the
Company had not previously made a Gross-Up Payment (plus any interest,
penalties or additions payable by the Executive with respect to such
excess and such portion) at the time that the amount of such excess is
finally determined, without any interest thereon.
(d) Each party agrees to notify the other party, in writing,
of any claim that, if successful, would require the payment by the
Company of a Gross-Up Payment or might entitle the Company to a refund
of all or part of any previous Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten (10)
business days after the Executive or Company is informed in writing of
such claim or otherwise becomes aware of such claim. If notice of the
claim arose as a result of a claim made against the Executive by a
taxing authority, Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which
he gives notice to the Company. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall: (i) give the Company any
information reasonably requested by the Company relating to such
claim, (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by
12 of 20
an attorney selected by the Executive and approved by the Company in
good faith in order to effectively contest such claim, and (iii) permit
the Company to reasonably participate in any proceedings relating to
such claim. The Company shall bear and pay directly all costs and
expenses (including legal fees and additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expense.
(e) Notwithstanding the foregoing, the Company shall control
all audits and proceedings taken in connection with any claim, audit or
proceeding involving Excise Taxes or Gross-Up Payments and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of any such claim, audit or proceeding and may, at its sole
option, either direct the Executive to pay the tax claimed and ▇▇▇ for
a refund or contest the tax in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such tax and
▇▇▇ for a refund, the Company shall advance the amount of such payment
to the Executive (including interest or penalties with respect thereto)
and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such advance. The
Company shall be required to consult with and keep the Executive fully
apprised of developments and actions being considered or taken with
respect to such claim, audit or proceeding. The Company's control of
the contest shall be limited to issues with respect to which such a
Gross-Up Payment would be payable or refundable hereunder and the
Executive shall be entitled to settle or contest, as the case may be,
any other issue. Each party agrees to keep the other party fully
apprised of developments concerning such claim, audit or proceeding and
to cooperate with the other in good faith in order to effectively
resolve such claim, audit or proceeding.
(f) For purposes of this Section, a determination of whether
a payment is subject to Excise Taxes, including but not limited to, a
determination of change in control, shall be made pursuant to Internal
Revenue Code Section 280G.
10. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that certain assets of the Company constitute Confidential Information. The term
"Confidential Information" as used in this Agreement shall mean all information
which is known only to the Executive or the Company, other employees of
13 of 20
the Company, or others in a confidential relationship with the Company, and
relating to the Company's business including, without limitation, information
regarding clients, customers, pricing policies, methods of operation,
proprietary Company programs, sales products, profits, costs, markets, key
personnel, formulae, product applications, technical processes, and trade
secrets, as such information may exist from time to time, which the Executive
acquired or obtained by virtue of work performed for the Company, or which the
Executive may acquire or may have acquired knowledge of during the performance
of said work. The Executive shall not, during or after the Term, disclose all or
any part of the Confidential Information to any person, firm, corporation,
association, or any other entity for any reason or purpose whatsoever, directly
or indirectly, except as may be required pursuant to his employment hereunder,
unless and until such Confidential Information becomes publicly available other
than as a consequence of the breach by the Executive of his confidentiality
obligations hereunder by law or in any judicial or administrative proceeding (in
which case, the Executive shall provide the Company with notice). In the event
of the termination of his employment, whether voluntary or involuntary and
whether by the Company or the Executive, the Executive shall deliver to the
Company all documents or data of any kind or any reproductions (in whole or in
part) or extracts of any items relating to the Confidential Information. The
Company acknowledges that prior to his employment with the Company, the
Executive has lawfully acquired extensive knowledge of the industries and
businesses in which the Company engages in business, and that the provisions of
this Section 10 are not intended to restrict the Executive's use of such
previously acquired knowledge.
In the event that the Executive receives a request or is required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Confidential
Information, the Executive agrees to (a) promptly notify the Company in writing
of the existence, terms and circumstances surrounding such request or
requirement, (b) consult with the Company on the advisability of taking legally
available steps to resist or narrow such request or requirement, and (c) assist
the Company in seeking a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof, the Executive shall not be
liable for such disclosure unless disclosure to any such tribunal was caused by
or resulted from a previous disclosure by the Executive not permitted by this
Agreement.
11. ASSIGNMENT.
(a) ASSIGNMENT BY THE COMPANY. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and shall inure
to the benefit of, any successor of the Company, and such successor
shall be deemed substituted for all purposes for the "Company" under
the terms of this
14 of 20
Agreement. As used in this Agreement, the term "successor" shall mean
any person, firm, corporation, or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or essentially
all of the assets of business of the Company. Notwithstanding such
assignment, the Company shall remain, with such successor, jointly and
severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to compensation
from the Company in the same amount and on the same terms as the
Executive would be entitled to as provided in Section 7(b) and 7(f)
herein.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
(b) ASSIGNMENT BY EXECUTIVE. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, and administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive should die while
any amounts payable to the Executive hereunder remain outstanding, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, in the absence of such designee, to the
Executive's estate.
Executive shall not assign any obligations or responsibilities
he has under this Agreement.
12. DISPUTES.
(a) EQUITABLE RELIEF. The Executive acknowledges and agrees
that upon any breach by the Executive of his obligations under Sections
1(b) or 10 hereof, the Company will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other
appropriate injunctive and equitable relief.
(b) ARBITRATION. In the event that there is any claim or
dispute arising out of or relating to this Agreement or the breach
hereof, and the parties hereto shall not have resolved such claim or
dispute within sixty (60) days after written notice from one party to
the other setting forth the nature of such claim or dispute, then such
claim or dispute shall be settled exclusively by binding arbitration in
Omaha, ▇▇▇▇▇▇▇ County, Nebraska, in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association
15 of 20
("Rules") , by an arbitrator mutually agreed upon by the parties hereto
or, in the absence of such agreement, by an arbitrator selected
according to such Rules. Notwithstanding the foregoing, if either the
Company or the Executive shall request, such arbitration shall be
conducted by a panel of three (3) arbitrators, one selected by the
Company, one selected by the Executive and the third selected by
agreement of the first two arbitrators, or in the absence of such
agreement, in accordance with such Rules. Judgment upon the award
rendered by such arbitrator(s) shall be entered in any Court having
jurisdiction thereof upon the application of either party. The parties
agree to use their reasonable best efforts to have such arbitration
completed as soon as is reasonably practicable. Notwithstanding
anything herein to the contrary, the losing party shall pay the
reasonable costs and expenses (including reasonable attorney fees and
expenses) of the prevailing party with respect to such arbitration,
except the Executive, if he is the losing party, shall not be required
to pay such expenses and costs if the claim relates to statutory
discrimination claims that he would not otherwise be required to pay if
such claim had been brought in a court of competent jurisdiction.
13. INDEMNIFICATION. The Company shall indemnify the Executive, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Executive on a current basis, including
the cost of legal counsel and accountants selected and retained by the Executive
in connection with any action, suit or proceeding to which the Executive may be
made party involuntarily by reason of the Executive being or having been an
officer, director or employee of the Company.
14. COOPERATION IN FUTURE MATTERS. The Executive hereby agrees that for
a period of twelve (12) months following his termination of employment, he shall
cooperate with the Company's reasonable requests relating to matters that
pertain to the Executive's employment by the Company, including, without
limitation, providing information or limited consultation as to such matters,
participating in legal proceedings, investigations or audits on behalf of the
Company, or otherwise making himself reasonably available to the Company for
other related purposes. Any such cooperation shall be performed at scheduled
times taking into consideration the Executive's other commitments, and the
Executive shall be compensated at a reasonable hourly or per diem rate to be
agreed upon by the parties to the extent such cooperation is required on more
than an occasional and limited basis. The Executive shall not be required to
perform such cooperation to the extent it conflicts with any requirements of
exclusivity of services for another employer or otherwise, nor in any manner
that in the good faith belief of the Executive would conflict with his rights
under or ability to enforce this Agreement. Notwithstanding anything herein to
the contrary, no cooperation shall be required from the Executive after his
termination during any
16 of 20
period of time in which the Executive is in a dispute with the Company
concerning any compensation or arrangement or other benefit provided for herein.
15. GENERAL.
(a) NOTICES. All notices and other communications hereunder
shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if sent by
overnight courier or by certified mail, return receipt requested,
postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the
recipient of such notice or communication shall have specified in
writing to the other party hereto, in accordance with this Section
16(a).
If to the Company, to: Government Properties Trust
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chairman of the Board of
Directors
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Executive, at his last place of business and residence shown
on the records of the Company.
Any such notice shall be effective (i) if delivered personally, when
received, (ii) if sent by overnight courier, when receipted for, (iii)
if mailed, five (5) days after being mailed, and (iv) on confirmed
receipt if sent by written telecommunication or telecopy, provided a
copy of such communication is sent by regular mail, as described above.
(b) SEVERABILITY. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law,
the validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired.
(c) WAIVERS. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such
right, power or privileges, nor shall any single or partial exercise of
any such right, power or privilege preclude any further exercise
thereof or the exercise of any other right, power or privilege.
(d) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and same instrument. In making
proof of this
17 of 20
Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
(e) ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the Company's successors and the Executive's personal or
legal representatives, executors, administrators, heirs, distributees,
and legatees. For all purposes under this Agreement, the term "Company"
shall include any successor to the Company's business and/or assets
that executes and delivers an assumption agreement acceptable to
Executive's legal counsel, such acceptance not to be unreasonably
withheld, or that becomes bound by this Agreement by operation of law.
(f) DEFINITIONS.
(i) "Effective Date" shall mean the date set forth in
any written notice as the date on which an action shall be
effective, except that the Effective Date for this Agreement
is the date on which the Company's contemplated 2003 offering
of its common stock is completed pursuant to the terms and
conditions of an Underwriting Agreement with ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and, further, that the Term Date shall control
in any matter involving a non-renewal of this Agreement
(ii) "Person" is defined as any natural person or any
legally recognized entity.
(g) CHANGE OF ACCOUNTING YEAR. In the event that the Company
elects to change from a calendar to a fiscal accounting year, all
terms and conditions herein premised on a calendar year shall be
adjusted accordingly so as to not disadvantage the Executive in terms
of rights and benefits provided herein.
(h) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter
hereof and may not be amended except by a written instrument hereafter
signed by the Executive and a duly authorized representative of the
Board (other than the Executive).
(i) GOVERNING LAW. This Agreement and the performance hereof
shall be construed and governed in accordance with the laws of the
State of Nebraska, without giving effect to principles of conflicts of
law.
18 of 20
(j) CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any
party. The headings of Section of this Agreement are for convenience of
reference only and shall not affect its meaning or construction.
Whether any word is used herein in one gender, it shall be construed to
include the other gender, and any word used in the singular shall be
construed to include the plural in any case in which it would apply and
vice versa.
(k) PAYMENTS AND EXERCISE OF RIGHTS AFTER DEATH. Any amounts
payable hereunder after the Executive's death shall be paid to the
Executive's designated beneficiary or beneficiaries, whether received
as a designated beneficiary or by will or the laws of descent and
distribution. The Executive may designate a beneficiary or
beneficiaries for all purposes of this Agreement, and may change at any
time such designation, by notice to the Company making specific
reference to this Agreement. If no designated beneficiary survives the
Executive or the Executive fails to designate a beneficiary for
purposes of this Agreement prior to his death, all amounts thereafter
due hereunder shall be paid, as and when payable, to his spouse, if she
survives the Executive, and otherwise to his estate.
(l) CONSULTATION WITH COUNSEL. The Executive acknowledges that
he has had a full and complete opportunity to consult with counsel or
other advisers of his own choosing concerning the terms, enforceability
and implications of this Agreement, and that the Company has not made
any representations or warranties to the Executive concerning the
terms, enforceability and implications of this Agreement other than as
are reflected in this Agreement.
(m) WITHHOLDING. Any payments provided for in this Agreement
shall be paid net of any applicable income tax withholding required
under federal, state or local law.
(n) SURVIVAL. The provisions of Sections 7 through 15 shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.
19 of 20
GOVERNMENT PROPERTIES TRUST, INC. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board
Dated: September 30, 2003 Dated: September 30, 2003
20 of 20