Document:

Exhibit 10.7

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made the 3rd day of August, 2016, by and between Mark Ordan, a resident of the State of Maryland (“Executive”), and Quality Care Properties, Inc., a Maryland corporation (the “Company”).

 

WITNESSETH THAT:

 

WHEREAS, the Executive and HCP, Inc. (“HCP”) have entered into the Interim Consulting Agreement, dated July 6, 2016 (the “Consulting Agreement”); and

 

WHEREAS, the Company desires to employ Executive as its Chief Executive Officer, subject to the terms and conditions of this Agreement, to provide services to the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

 

1.                                    Term. The term of Executive’s employment with the Company shall commence on the consummation of the spin-off from HCP of the Company (which will consist of the HCR ManorCare portfolio of skilled nursing and assisted living assets, as well as other skilled nursing assets) (such spin-off, the “Spin” and such date, the “Effective Date”) and shall continue until and including the fourth (4th) anniversary of the Effective Date unless earlier terminated as provided herein (the “Term”).  Notwithstanding anything herein to the contrary, this Agreement shall automatically terminate without any action on the part of any person and be void ab initio if the Spin is not consummated and neither the Company nor any other person shall have any liability to Executive under this Agreement if the Spin is not consummated.

 

2.                                    Employment; Duties.

 

(a)                               During the Term, Executive shall be employed by the Company as its Chief Executive Officer and shall be a member of the Board of Directors of the Company (the “Board”).  Executive shall report directly and only to the Board and at all times during the Term shall have powers and duties commensurate with the position of Chief Executive Officer of a company the size and nature of the Company.  All other employees of the Company shall report directly or indirectly to Executive.

 

(b)                              Executive agrees to his employment as described in this Paragraph 2 and agrees to devote substantially all of his working time and efforts to the performance of his duties hereunder, except as otherwise approved by the Board or as specifically provided in this Agreement.  Executive shall be permitted to continue such outside positions as set forth in Exhibit A.  Executive may also engage in religious, charitable or other community activities as long as such activities do not materially interfere with Executive’s performance of his duties to the Company under this Agreement.  Other than as set forth in Exhibit A, Executive may not serve on other boards of directors of for-profit companies without the consent of the Board (which consent will not be unreasonably withheld for up to two other boards of directors).

 

 

3.                                    Compensation.

 

(a)                               Base Salary. The Company shall pay Executive during the Term an annual salary of Eight Hundred Thousand dollars ($800,000) (the “Base Salary”), payable in accordance with the Company’s normal business practices for senior executives (including tax withholding), but in no event less frequently than monthly.  Executive’s Base Salary shall be reviewed at least annually by the Compensation Committee of the Board (the “Compensation Committee”) and may be increased in its discretion (but not decreased).  After any such increase in Base Salary, the term “Base Salary” shall refer to the increased amount.

 

(b)                              Bonus. Executive shall be eligible to receive a cash bonus for each year (or prorated with respect to any partial years of employment) during the Term, provided that, except as otherwise provided herein, Executive has remained employed by the Company as of the end of the applicable year (or as of the end of the Term for the final calendar year of the Term). Executive’s target bonus opportunity for any particular year (“Target Bonus”) shall be 250% of Base Salary.  The amount of bonus payable to Executive for any particular year will be determined by the Compensation Committee, in its sole discretion, taking into account the performance of the Company and Executive for that particular year (or portion thereof).  All such bonuses shall be payable within 60 days after the end of the calendar year to which such bonus relates.

 

(c)                               Initial Equity Awards.1

 

(i)                                  Initial RSUs. On or promptly following the Effective Date, Executive shall be granted restricted stock units in respect of an aggregate of 1,000,000 shares of common stock of the Company (“Common Stock”) subject to, and in accordance with, the terms of an award agreement between the Company and Executive, substantially in the form attached hereto as Exhibit B (the “Initial RSUs”).

 

(ii)                              Initial Options.

 

(A)                          On or promptly following the Effective Date, Executive shall be granted stock options to purchase 8,000,000 shares of Common Stock subject to, and in accordance with, the terms of an award agreement between the Company and Executive, substantially in the form attached hereto as Exhibit C with an exercise price as described in the following Paragraph 3(c)(ii)(B) (the “Initial Options”).

 

(B)                           Exercise Price. A pricing committee consisting of two directors of HCP and one director of the Board (the “Pricing Committee”) shall be convened within 45 to 60 days after the Effective Date to determine the appropriate exercise price for the Initial Options based on (i) the long-term 45-60 day post-Spin volume weighted average price of one share of Common Stock as reported by the New York Stock Exchange (or the

 

 

1   The grant of the Initial RSUs and the Initial Options and the purchase of the Warrants shall be based on, as of the Effective Date, a fully diluted number of 473.2 million shares of Common Stock outstanding (and no other equity securities of the Company outstanding) and Company debt of $1.75 billion.  If there are more, less or different Company equity securities outstanding or reserved for issuance as of the Effective Date, the grant of Initial Options shall be adjusted to provide Executive with the economic value and opportunity contemplated based on a $4.0 billion gross valuation.

 

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primary automated quotation service or national securities exchange upon which the Common Stock may then be quoted or listed for trading), (ii) trading of comparable companies and (iii) a fixed price based on the net asset value for the assets of the Company and other Company risks and factors, in each case at the Spin as of such date; provided that the Pricing Committee shall be permitted to place greater weight on factor (iii).  Notwithstanding anything to the contrary, the exercise price shall be structured so that it is not less than fair market value of one share of Common Stock on the date of grant of the Initial Options for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

 

(d)                             Other Equity Compensation. In addition to the grants described in Section 3(c), Executive shall be eligible for annual equity awards during the Term, which shall have a target value equal to 250% of Base Salary and shall consist of restricted stock units of the Company and stock options to purchase shares of Common Stock with an exercise price equal to the fair market value of a share of Common Stock on the date of grant of such options.  Such awards shall be subject to time-based and performance-based vesting as determined by the Compensation Committee (which performance measures may include, but are not limited to, total stockholder return).  It is acknowledged and agreed that the awards will be granted beginning in 2017.

 

(e)                               Completion Bonus. On the Effective Date, Executive shall receive a one-time completion cash bonus of $3,000,000 (the “Completion Bonus”), the after-tax proceeds of which shall be used to promptly purchase fully vested warrants to acquire Common Stock (the “Warrants”), at a purchase price equal to 25% of the exercise price of the Warrants, subject to and in accordance with, an agreement between the Company and Executive, substantially in the form attached hereto as Exhibit D.  The exercise price of the Warrants shall be equal to the per share exercise price of the Initial Options.

 

(f)                                Initial Trading Award. On or promptly following the date on which Executive receives the Initial Trading Award (as defined in the Consulting Agreement), Executive shall use the proceeds of such Initial Trading Award to purchase Warrants on the same terms and conditions as the Warrants purchased pursuant to Section 3(e).

 

4.                                    Benefits and Perquisites.

 

(a)                               Retirement and Welfare Benefits. During the Term, Executive shall be eligible to participate in all fringe benefits, perquisites, and such other benefit plans and arrangements as are made available generally to the Company’s senior executives.  The benefits described herein shall be subject to the applicable terms of the applicable plans and shall be governed in all respects in accordance with the terms of such plans as from time to time in effect.  Notwithstanding anything to the contrary herein, during the Term, Executive shall not be eligible to participate in or receive benefits under any severance plan, program, policy, arrangement or agreement of the Company other than this Agreement.  Nothing in this Paragraph 4, however, shall require the Company to maintain any benefit plan or provide any type or level of benefits to its current or former employees, including Executive.

 

(b)                              Paid Time Off. During the Term, Executive shall be entitled to accrue vacation (at a rate of not less than four (4) weeks per full calendar year), in accordance with and subject to the Company’s vacation policies applicable to its executives generally as such policies are in effect from time to time.

 

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(c)                               Reimbursement of Expenses. The Company shall promptly reimburse Executive for any and all expenses reasonably incurred by Executive during the Term in performing Executive’s duties hereunder, including travel, meals and accommodations, upon submission by Executive of vouchers or receipts and in compliance with such rules and policies relating thereto as the Company may from time to time adopt.  Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.

 

5.                                    Indemnification. To the full extent permitted by law and subject to the Company’s Certificate of Incorporation and Bylaws, and under terms and conditions no less favorable to Executive in any regard than to any other officer or director of the Company, the Company shall indemnify Executive with respect to any actions commenced against Executive in his capacity as a director or officer or former director or officer of the Company or any Affiliate for which he may serve in such capacity, and the Company shall advance on a timely basis any expenses incurred in defending such actions, provided that prior to any such advancement, the Company may require Executive to enter into a standard undertaking of repayment.  Notwithstanding the preceding sentence, the Company shall not be required to indemnify or advance expenses to Executive in connection with (i) any dispute in connection with this Agreement or Executive’s employment hereunder or (ii) any action claim or proceeding (collectively, a “Proceeding”) initiated by Executive against the Company unless such Proceeding is approved in advance by the Board in writing. “Affiliate” means an affiliate of the Company (or other referenced entity, as the case may be) as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended.

 

6.                                    Company Authority/Policies. Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Board respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to his from time to time by the Board, to the extent consistent with Executive’s duties pursuant to Paragraph 2 above. Executive also agrees to comply with the Company’s stock ownership guidelines in effect from time to time.

 

7.                                    Covenants. Executive acknowledges that during the period of his employment with the Company or any Affiliate, he shall have access to the Company’s “Confidential Information” (as defined below) and will meet and develop relationships with the Company’s potential and existing suppliers, financing sources, clients, customers and employees.  Accordingly, Executive agrees to the following provisions of this Paragraph 7 (in addition to Executive’s confidentiality obligations to the Company and its subsidiaries pursuant to the Company’s policies as in effect from time to time) and agrees this Paragraph 7 shall survive the termination of this Agreement.

 

(a)                               Noncompetition.

 

(i)                                  Executive agrees that during the period of his employment with the Company, and for twenty-four (24) months thereafter, Executive shall not: (A) directly or indirectly, engage in, manage, operate, control, supervise, or participate in the management, operation, control or supervision of any business or entity which competes with (any such action individually and in the aggregate, to “compete with” or “competitive with”) (including, without limitation, skilled nursing facilities and senior housing owners or operators, HCR ManorCare and any of its related entities and any major equity holder of HCR ManorCare (currently, The Carlyle Group)) the Company or any of its subsidiaries (collectively, the “Company Group”) or serve as an employee, consultant or in any other

 

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capacity for such business or entity, or (B) have any ownership or financial interest, directly, or indirectly, in any competitor including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly-owned corporation in which Executive owns less than five percent (5%) of the outstanding shares of such corporation), officer, director, employee, principal, agent or consultant; any or all of which, without first obtaining written approval of the Board.

 

(b)                              Solicitation of Employees, Etc. Executive agrees that during the period of his employment with the Company and for twenty-four (24) months thereafter, Executive shall not, directly or indirectly, other than in connection with carrying out his duties during the period of his employment with the Company, solicit or induce any of the employees, consultants or other service providers of the Company Group (or individuals who served as employees, consultants or other service providers of the Company Group at any time during the preceding nine (9) month period): (i) to terminate their employment or relationship with the Company Group, and/or (ii) to work for Executive or any competitor of the Company Group.  Notwithstanding the foregoing, Executive shall not be in breach or violation hereof in the event Executive or any subsequent employer shall advertise for employees or other services in any form of industry-wide or public media so long as such advertising is not aimed specifically at employees of the Company Group.

 

(c)                               Solicitation of Clients, Etc. Executive agrees that during the period of his employment with the Company and for twenty-four (24) months thereafter, he will not use Confidential Information (as defined below) to, directly or indirectly, solicit, take away, divert or attempt to divert, the business or patronage of any clients or customers of the Company for the purpose of providing services that materially compete with the products provided by the Company at the time of Executive’s termination.  For purposes of this Agreement, “products provided by the Company” includes not only products and services which the Company then provides and/or markets or sells, but also those which it is in the process of researching and/or developing, at the time of Executive’s termination, and/or as to which, at the time of Executive’s termination, the Company has a strategic business plan in place to research, develop and/or market at some time in the future.  The restrictions on soliciting or providing services to customers of the Company apply to: (i) any customer or customer contact of the Company with whom Executive has had any business relations during his employment (whether before or after the Effective Date) with the Company; and (ii) any customer or customer contact who was a customer or customer contact of the Company on the date of Executive’s termination from the Company or during the twelve (12) month period prior to such termination, or who was a prospective customer or customer contact of the Company with whom the Company had actually met, or had written or telephonic communications, during said period(s).

 

(d)                             Disparaging Comments. Executive agrees not to make critical, negative or disparaging remarks about the Company or any of its Affiliates, including, but not limited to, comments about any of its assets, services, management, business or employment practices, and not to voluntarily aid or voluntarily assist any person in any way with respect to any third party claims pursued against the Company Group, and the Company agrees to instruct the officers and directors of the Company and each of its subsidiaries not to disparage the Executive, either orally or in writing.  Nothing in this Paragraph 7(d) will prevent Executive or the Company from (i) responding fully and accurately to any question, inquiry or request for information when required by applicable law, legal process, subpoena or court order or (ii) disclosing matters that are protected under any applicable whistleblower laws, including, without limitation, reporting possible violations of laws or regulations, or responding to inquiries from, or testifying before, any governmental agency or self-regulating authority.

 

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(e)                               Confidentiality. The Company and Executive acknowledge that:

 

(i)                                  The Company’s business is highly competitive;

 

(ii)                              The essence of that portion of the Company’s business in which Executive will be involved consists, in large degree, of trade secrets, proprietary or confidential business or financial affairs information, materials, know-how (whether or not in writing), technology, product information, personnel information regarding its employees, and intellectual property belonging to the Company and confidential and proprietary business and client relationships (all of the foregoing will be referred to collectively as “Trade Secrets”), which have been developed at great investment of time and resources by the Company Group so as to engender substantial goodwill of the Company, all of which are and will be the exclusive property of the Company, protected and kept secret by the Company; and

 

(iii)                          Executive agrees that during the period of his employment with the Company and at all times thereafter, Executive shall keep secret and retain in strictest confidence and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of the Company, all confidential information of and confidential matters (whether available in written, electronic form or orally) relating to (A) the Company Group’s pricing and business (including, without limitation, the strategies employed by and the actual investments of any member of the Company Group, the contemplated business strategies and/or investments of any member of the Company Group, and valuation judgments or valuation data developed or used by the Company Group with respect to any other company or assets), (B) all corporations or other business organizations in which the Company Group has or has had an investment and (C) third parties about which information was learned by Executive heretofore or hereafter directly or indirectly in connection with Executive’s employment with the Company or from the Company Group (the “Confidential Information”).  In consideration of, and as a condition to, continued access to Confidential Information and without prejudice to or limitation on any other confidentiality obligation imposed by agreement or law, Executive hereby agrees to undertake to use and protect Confidential Information in accordance with restrictions placed on its use or disclosure.  Without limiting the foregoing, Executive shall not disclose such Confidential Information to any director, officer, partner, employee or agent of the Company Group unless in Executive’s reasonable good faith judgment, such person has a need to know such Confidential Information in furtherance of the Company Group’s business, and (except in connection with the business and affairs of the Company) Executive shall not disclose Confidential Information to anyone outside of the Company Group except with the Board’s express written consent.

 

(iv)                          Executive acknowledges that the Company’s rights in its Trade Secrets and Confidential Information would be misappropriated should Executive use or disclose to others the Trade Secrets and/or Confidential Information outside the scope of his employment pursuant to this Agreement.

 

(v)                              Executive agrees that during the period of his employment with the Company, Executive shall not directly or indirectly, use, disseminate, or disclose, in whole or in part, any of the Company Group’s Trade Secrets to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, other than (A) in the regular and proper scope and course of Executive’s employment with the Company, (B) as required by law, subpoena or court order, or (C) in connection with disclosure protected under any applicable whistleblower laws, including, without limitation, reporting possible violations of laws or regulations, or responding to inquiries from, or testifying before, any governmental agency or self-regulating authority, provided, however, that Executive will give the Company reasonable advance notice of any such disclosure or use that is required by law.

 

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(vi)                          Executive is hereby notified that the immunity provisions in Section 1833 of Title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (A) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (B) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (C) to Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.

 

(vii)                      As used in this Agreement, each of the terms “Trade Secrets” and “Confidential Information” will not include any information that becomes generally known to the public or within the relevant trade or industry unless it becomes known due to Executive’s violation of this Agreement.

 

(f)                                Cooperation. Executive agrees that at all times following the termination of his employment, Executive will cooperate in all reasonable respects with the Company and its Affiliates in connection with (i) any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought by or against the Company or any of its Affiliates, or (ii) any audit of the financial statements of the Company or any Affiliate with respect to the period of time when Executive was employed by the Company or any Affiliate, in each case to the extent the Company reasonably deems Executive’s cooperation necessary.  Executive shall be reimbursed for all out-of-pocket expenses reasonably incurred by Executive as a result of such cooperation. With respect to any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought against Executive in connection with his employment by the Company, the Company will honor, and proceed in accordance with, Paragraph 5 of this Agreement and its Certificate of Incorporation and Bylaws as in effect from time to time.

 

(g)                              No Limitation. Nothing contained in this Paragraph 7 shall limit any common law or statutory obligation that Executive may have to the Company or any of its Affiliates.  For purposes of all provisions of this Paragraph 7, the “Company” refers to the Company and any incorporated or unincorporated Affiliates of the Company, including any entity which becomes Executive’s employer as a result of any reorganization or restructuring of the Company for any reason.

 

(h)                              Acknowledgement. Executive agrees and acknowledges that each restrictive covenant in this Paragraph 7 is reasonable as to duration, terms and geographical area and that the same protects the legitimate interests of the Company and its Affiliates, imposes no undue hardship on Executive, is not injurious to the public, and that, notwithstanding any provision in this Agreement to the contrary, any violation of this restrictive covenant shall be specifically enforceable in any court of competent jurisdiction.  Executive agrees and acknowledges that a portion of the compensation paid to Executive under this Agreement will be paid in consideration of the covenants contained in this Paragraph 7, the sufficiency of which consideration is hereby acknowledged.  If any provision of this Paragraph 7 as applied to Executive or to any circumstance is adjudged by a court with jurisdiction to be

 

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invalid or unenforceable, the same shall in no way affect any other circumstance or the validity or enforceability of any other provisions of this Paragraph 7.  If the scope of any such provision, or any part thereof, is too broad to permit enforcement of such provision to its full extent, Executive agrees that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced.  Executive agrees and acknowledges that the breach of this Paragraph 7 will cause irreparable injury to the Company and upon breach of any provision of this Paragraph 7, the Company shall be entitled to seek injunctive relief, specific performance or other equitable relief by any court with jurisdiction upon short notice; provided, however, that this shall in no way limit any other remedies which the Company may have (including, without limitation, the right to seek monetary damages).  Each of the covenants in this Paragraph 7 shall be construed as an agreement independent of any other provisions in this Agreement.

 

(i)                                  Permitted Statements. Nothing in this Agreement shall restrict either party from making truthful statements (i) when required by law, subpoena, court order or the like; (ii) when requested by a governmental, regulatory, or similar body or entity; (iii) in connection with disclosure protected under any applicable whistleblower laws, including, without limitation, reporting possible violations of laws or regulations, or responding to inquiries from, or testifying before, any governmental agency or self-regulating authority; or (iv) in confidence to a professional advisor for the purpose of securing professional advice.

 

8.                                    Termination/Severance.

 

(a)                               General.

 

(i)                                  At Will Employment. Executive’s employment hereunder is “at will” and, therefore, may be terminated at any time, with or without Cause or with or without Good Reason, at the option of the Company or Executive, subject only to the severance obligations under this Paragraph 8. Upon a termination of Executive’s employment hereunder, unless requested otherwise by the Company, Executive shall resign each position (if any) that Executive then holds as an officer of the Company or as an officer or director of any of the Company’s Affiliates.  Upon any termination of Executive’s employment hereunder, Executive shall be entitled to receive the following: (A) any accrued but unpaid Base Salary (to be paid as provided in Paragraph 3(a) hereof); (B) reimbursement for expenses incurred by Executive prior to the Date of Termination (as defined below) in accordance with Paragraph 4(c) hereof; (C) vested benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Date of Termination; and (D) any additional amounts or benefits due under any applicable plan, program, agreement or arrangement of the Company or its Affiliates (the amounts and benefits described in clauses (A) through (D) above, collectively, the “Accrued Benefits”).  Accrued Benefits under this Paragraph 8 shall in all events be paid in accordance with the Company’s payroll procedures, expense reimbursement procedures or plan terms, as applicable, or in accordance with applicable law.

 

(ii)                              Notice of Termination. Except for termination as a result of Executive’s death during the Term, any termination of Executive’s employment by the Company or by Executive shall be communicated by written Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision hereunder relied upon by the terminating party.

 

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(iii)                          Date of Termination. “Date of Termination” shall mean: (A) if Executive’s employment is terminated by his death, the date of his death; (B) if Executive’s employment is terminated on account of his Disability, the date on which Notice of Termination is received by Executive, or such later date as is indicated in the Notice of Termination; (C) if Executive’s employment is terminated by the Company for Cause, the date on which a Notice of Termination is given by the Company, or such later date as is indicated in the Notice of Termination; (D) if Executive’s employment is terminated by the Company without Cause, the date as is indicated in the Notice of Termination or, if later, the date on which Notice of Termination is received by Executive; (E) if Executive’s employment is terminated by Executive without Good Reason, thirty (30) days after the date on which a Notice of Termination is given by Executive, or such other date as is mutually agreed by Executive and the Company; and (F) if Executive’s employment is terminated by Executive for Good Reason, the date on which the Notice of Termination is given by Executive after the end of the Good Reason Period, or such other date as is mutually agreed by Executive and the Company.

 

(b)                              Termination for Death or Disability, by the Company for Cause or by Executive without Good Reason.

 

(i)                                  The Company may terminate Executive’s employment hereunder for any reason, including, but not limited to, for Cause. “Cause” means the occurrence of any of the following: (A) Executive’s willful and continued failure to perform his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness) after a written demand for performance is delivered to Executive by the Company, which demand specifically identifies the manner in which the Company believes that Executive has not performed his duties; (B) Executive’s willful and continued failure to follow and comply with the material policies of the Company as in effect from time to time (other than any such failure resulting from Executive’s incapacity due to physical or mental illness) after a written demand for performance is delivered to Executive by the Company, which demand specifically identifies the manner in which the Company believes that Executive has not followed or complied with such Company policies; (C) Executive’s willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Company; (D) Executive’s willful engagement in illegal conduct or gross misconduct resulting in material economic, financial or reputational injury to the Company; (E) Executive’s breach of any provision of Paragraph 7 of this Agreement; or (F) Executive’s indictment for, conviction of, or plea of guilty or nolo contendere to, any felony.

 

(ii)                              Executive may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. “Good Reason” means the occurrence, without the express prior written consent of Executive, of any of the following events: (A) the failure by the Company to pay Executive any portion of Executive’s Base Salary within ten (10) days of the date such compensation is due, (B) the relocation of Executive’s principal location of employment to a location which is more than 30 miles outside of Bethesda, Maryland, except for required travel for Company business, (C) any material diminution of Executive’s duties, responsibilities or authorities hereunder, (D) any material breach by the Company of any of its obligations to Executive, or (E) any failure of the Company to obtain the assumption in writing of its obligations under this Agreement by any successor to all or substantially all of its business or assets within thirty (30) days after any reorganization, amalgamation, combination, merger, consolidation, sale, liquidation, dissolution or similar transaction, unless such assumption occurs by operation of law.  Notwithstanding the foregoing, “Good Reason” to terminate Executive’s employment shall not exist unless (a) a written notice has first been delivered to

 

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the Board by Executive (the “Good Reason Notice”), which Good Reason Notice (1) specifically identifies the event(s) Executive believes constitutes Good Reason and (2) provides thirty (30) days from the date of such Good Reason Notice for the Company to cure such circumstances (the “Good Reason Period”) and (b) the Company has failed to cure such circumstances within such Good Reason Period.  If the Company fails to timely cure such circumstances in accordance with the foregoing, Executive may send a notice to the Board that he is terminating his employment for Good Reason (“Good Reason Termination Notice”), in which case his employment hereunder shall thereupon be terminated for Good Reason.  If any Good Reason Notice to the Board shall not have been delivered by Executive within ninety (90) days following the date Executive becomes aware of the purported existence of a Good Reason event, or any Good Reason Termination Notice to the Board shall not have been delivered by Executive within thirty (30) days following the end of the Good Reason Period, then any purported termination of Executive’s employment relating to the applicable event shall not be a termination for Good Reason under this Agreement.

 

(iii)                          Executive’s employment with the Company may be terminated as a result of Executive’s death or by the Company for Disability. “Disability” means that Executive (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (B) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan, or disability plan, covering employees of the Company.

 

(iv)                          If during the Term, Executive’s employment is terminated by the Company for Cause or Disability, by Executive without Good Reason or as a result of Executive’s death, then the Company shall, through the Date of Termination, pay Executive his Accrued Benefits.  Thereafter, the Company shall have no further obligations to Executive except as otherwise provided hereunder. The vesting and exercise of any stock options and the forfeitability of any stock-based grants held by Executive shall be governed by the terms of the applicable plan document and the related agreements between Executive and the Company.

 

(c)                               Termination by the Company without Cause or by Executive for Good Reason.  If during the Term, Executive’s employment is terminated by the Company without Cause or Executive terminates his employment for Good Reason, then, subject to (x) Executive’s signing a general release of claims in a form attached hereto as Exhibit E (the “Release”) and the Release becoming irrevocable, all within thirty (30) days after the Date of Termination, and (y) Executive’s continued compliance with the provisions of Paragraph 7, Executive shall be entitled to either (A) salary continuation in an amount equal to two (2) times the sum of his annual Base Salary and his Target Bonus, paid in equal installments in accordance with the Company’s payroll practice over a twenty-four (24) month period, beginning with the first payroll date that occurs at least thirty (30) days after the Date of Termination or (B) a lump sum payment within forty-five (45) days of the Date of Termination if such termination is upon or within two (2) years following a Change in Control (as defined in the Company’s 2016 Performance Incentive Plan) equal to three (3) times the sum of his annual Base Salary and his Target Bonus.  Solely for purposes of Section 409A of the Code, each installment payment is considered a separate payment.

 

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(d)                             Expiration/Non-Renewal of Term by the Company. For the avoidance of doubt, the expiration of the Term of this Agreement (in accordance with Paragraph 1(a) above) will not constitute a termination of employment by the Company other than for Cause, and Executive acknowledges that the severance provisions of Paragraph 8 shall not apply.

 

(e)                               No Mitigation. Without regard to the reason for the termination of Executive’s employment hereunder, Executive shall be under no obligation to mitigate damages with respect to such termination under any circumstances and in the event Executive is employed or receives income from any other source, there shall be no offset against the amounts due from the Company hereunder.

 

9.                                    Parachute Payments.

 

(a)                               Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Payments”), would be subject to the Excise Tax (as defined below), the following provisions shall apply:

 

(i)                                  If the Payments, reduced by the sum of (x) the Excise Tax and (y) the total of the Federal, state, and local income and employment taxes payable by Executive on the amount of the Payments which are in excess of the Threshold Amount (as defined below), are greater than or equal to the Threshold Amount, Executive shall be entitled to the full benefits payable under this Agreement.

 

(ii)                              If the Threshold Amount is less than (x) the Payments, but greater than (y) the 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 Payments which are in excess of the Threshold Amount, then the Payments shall be reduced (but not below zero) to the minimum extent necessary so that the sum of all Payments shall not exceed the Threshold Amount. In such event, the Payments shall be reduced in the following order: (A) cash payments not subject to Section 409A of the Code; (B) cash payments subject to Section 409A of the Code (to the extent such reduction does not result in tax penalties to Executive); (C) equity-based payments and acceleration; and (D) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order. No reductions shall be made under this Subparagraph 9(a)(ii) unless agreed to by Executive.

 

(b)                              For the purposes of this Paragraph 9, “Threshold Amount” shall mean three times Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by Executive with respect to such excise tax.

 

(c)                               The determination as to which of the alternative provisions of Subparagraph 9(a) shall apply to Executive shall be made by a nationally recognized accounting firm selected by the Company, which does not provide services to the acquirer or other counter-party in the transaction to which this Paragraph 9 applies (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or Executive. For purposes

 

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of determining which of the alternative provisions of Subparagraph 9(a) shall apply, Executive shall be deemed to pay federal income taxes 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 Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

 

10.                            Conflicting Agreements. Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which he is a party or is bound, and that he is not now subject to any covenants against competition or similar covenants which would affect the performance of his obligations hereunder.

 

11.                            Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of one (1) business day following personal delivery (including personal delivery by telecopy or telex), or the third (3rd) business day after mailing by first class mail to the recipient at the address indicated below:

 

To the Company:

 

 

To Executive:

 

At the address shown in the Company’s personnel records

 

or to such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party.

 

12.                            Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect to any related subject matter.

 

13.                            Assignment; Successors and Assigns, Etc. Neither the Company nor Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other party; provided that the Company may assign its rights under this Agreement without the consent of Executive to a successor to substantially all of the business of the Company in the event that the Company shall effect a reorganization, consolidate with or merge into any other corporation, partnership, organization or other entity, or transfer all or substantially all of its properties or assets to any other corporation, partnership, organization or other entity.  This Agreement shall inure to the benefit of and be binding upon the Company and Executive, their respective successors, executors, administrators, heirs and permitted assigns.

 

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14.                            Miscellaneous. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.

 

15.                            Amendment. This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective.

 

16.                            Disputes; Waiver of Jury Trial; Arbitration.

 

(a)                               If any legally actionable dispute arises arising out of or related to Paragraph 7, which cannot be resolved by mutual discussion between the parties, each of the parties hereto irrevocably agrees for the exclusive benefit of the other that any Proceeding shall be heard and determined in a Maryland state or federal court sitting in Maryland, and the parties hereby irrevocably submit to the exclusive jurisdiction of such courts in any such Proceeding.  Each of the parties hereto irrevocably waives any objection to the laying of venue of any such Proceeding brought in any such court and irrevocably waives any claim that any such Proceeding brought in any such court has been brought in an inconvenient forum.

 

(b)                              EACH OF THE COMPANY AND EXECUTIVE HEREBY WAIVES ANY RIGHTS IT OR HE MAY HAVE TO TRIAL BY JURY.

 

(c)                               If any legally actionable dispute arises (other than a dispute arising out of or related to Paragraph 7) which cannot be resolved by mutual discussion between the parties, each of Executive and the Company agree to resolve that dispute by arbitration before an arbitrator experienced in employment law.  Said arbitration will be conducted pursuant to the JAMS Employment Arbitration Rules and Procedures then in effect.  Maryland substantive law and statutes of limitations shall apply in any such proceeding, and for limitations purposes, the arbitration shall be deemed commenced when the matter is submitted to the arbitral forum.  The Company and Executive agree that this arbitration agreement includes any such disputes that the Company and its related entities may have against Executive, or Executive may have against the Company and/or its related entities and/or employees, arising out of or relating to Executive’s employment or its termination including any claims of discrimination or harassment in violation of applicable law and any other aspect of Executive’s compensation, training, employment or its termination.  The Company and Executive further agree that this arbitration provision is the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived.  The Company and Executive agree that the arbitration shall be conducted in Maryland, unless otherwise mutually agreed.

 

(d)                             In any such arbitration proceeding, any hearing must be transcribed by a certified court reporter and the arbitrator’s decision must be set forth in writing, consistent with the law of Maryland and supported by essential findings of fact and conclusion of law.  The arbitrator may issue any remedy or award available under applicable law but may not add to, modify, change or disregard any lawful terms of this Agreement or issue an award or remedy that is contrary to the law Maryland.  The Company and Executive further agree that each party shall pay its own costs and attorneys’ fees, if any.  If either the Company or Executive prevails on a statutory claim that affords the prevailing party an award of attorneys’ fees, then the arbitrator may award reasonable attorneys’ fees to the prevailing party, consistent with applicable law.

 

(e)                               Executive acknowledges that Executive has been provided with a copy of the current JAMS Employment Arbitration Rules and Procedures for Executive’s reference.

 

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17.                            Severability. If any provision of this Agreement shall to any extent be held void or unenforceable (as to duration, scope, activity, subject or otherwise) by a court of competent jurisdiction, such provision shall be deemed to be modified so as to constitute a provision conforming as nearly as possible to the original provision while still remaining valid and enforceable.  In such event, the remainder of this Agreement (or the application of such provision to persons or circumstances other than those in respect of which it is deemed to be void or unenforceable) shall not be affected thereby.  Each other provision of this Agreement, unless specifically conditioned on the voided aspect of such provision, shall remain valid and enforceable to the fullest extent permitted by law; any other provisions of this Agreement that are specifically conditioned on the voided aspect of such invalid provision shall also be deemed to be modified so as to constitute a provision conforming as nearly as possible to the original provision while still remaining valid and enforceable to the fullest extent permitted by law.

 

18.                            Withholding.  The Company shall be entitled to withhold from any amounts to be paid or benefits provided to Executive hereunder any federal, state, local or foreign withholding or other taxes or charges which it is from time to time required to withhold.

 

19.                            Governing Law. This Agreement shall be construed and regulated in all respects under the laws of the State of Maryland without reference to principles of conflict of laws.

 

20.                            Section 409A.

 

(a)                               Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Executive becomes entitled to under this Agreement on account of Executive’s separation from service would be considered “non-qualified deferred compensation” otherwise subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after Executive’s separation from service, or (B) Executive’s death.  If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

 

(b)                              All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Executive during the time periods set forth in this Agreement.  All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred.  The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses).  Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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(c)                               To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Executive’s termination of employment, then such payments or benefits shall be payable only upon Executive’s “separation from service.”  The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

 

(d)                             The parties intend that this Agreement will be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

 

(e)                               The Company makes no representation or warranty and shall have no liability to Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

21.                            Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

22.                            Legal Fees. The Company shall pay Executive’s reasonable legal fees incurred in connection with the contemplation, preparation, negotiation and execution of this Agreement and the ancillary agreements contemplated hereby.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.

 

 

 

	
 
    	
QUALITY CARE PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    
	
 
    	
 
    	
/s/ Michael D. McKee
    
	
 
    	
 
    	
 
    
	
 
    	
Name: Michael D. McKee
    
	
 
    	
 
    
	
 
    	
Title:   President and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Mark Ordan
    
	
 
    	
Mark Ordan
    

 

 

EXHIBIT A

 

Board member (non-employee) of VEREIT, Inc.

Board member (non-employee) of WP Glimcher Inc.

 

 

EXHIBIT B

 

Form of RSU Agreement

 

[See attached.]

 

 

QUALITY CARE PROPERTIES, INC.

[2016 PERFORMANCE INCENTIVE PLAN]

CEO INITIAL RSU AWARD AGREEMENT

 

THIS CEO INITIAL RSU AWARD AGREEMENT (this “Agreement”) is dated as of [·], 2016 (the “Award Date”) by and between Quality Care Properties, Inc., a Maryland corporation (the “Corporation”), and Mark Ordan (the “Participant”).

 

W I T N E S S E T H

 

WHEREAS, pursuant to the Quality Care Properties, Inc. [2016 Performance Incentive Plan], as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, an award of restricted stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

 

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

 

1.                                    Defined Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

 

2.                                    Grant.  Subject to the terms of this Agreement, the Corporation hereby grants to the Participant an Award with respect to an aggregate of 1,000,0001 stock units (subject to adjustment as provided in Section [7.1] of the Plan) (the “Stock Units”).  As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section [7.1] of the Plan) solely for purposes of the Plan and this Agreement.  The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Stock Units vest pursuant to Section 3.  The Stock Units shall not be treated as property or as a trust fund of any kind.  The Award is subject to all of the terms and conditions set forth in this Agreement and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Administrator, as such rules are in effect from time to time.

 

3.                                    Vesting.  Subject to Sections 8 and 9 below, the Award shall vest and become nonforfeitable with respect to one fourth (1/4th) of the total number of the Stock Units (subject to adjustment under Section [7.1] of the Plan) on each of the first four (4) anniversaries of the Award Date.

 

1   The grant of Initial RSUs is based on, as of the start date of the Employment Agreement, a fully diluted number of 473.2 million Shares of Common Stock outstanding (and no other equity securities outstanding) and debt of $1.75 billion.  If there are more, less or different equity securities outstanding or reserved for issuance as of the start date, the grant of initial RSUs will be adjusted to provide the Participant with the economic value and opportunity contemplated based on a $4.0 billion gross valuation.

 

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4.                                    Continuance of Employment.  The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement.  Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan.

 

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Participant’s status as an employee at will who is subject to termination without Cause, confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits.  Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

 

5.                                    Dividend and Voting Rights.

 

(a)                              Limitations on Rights Associated with Units.  The Participant shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalents) and no voting rights with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Participant.

 

(b)                             Dividend Equivalent Rights.  The Participant shall be credited with dividend equivalents with respect to the Stock Units (the “Dividend Equivalents”), calculated as follows: with respect to any Stock Units granted on or prior to the record date applicable to an ordinary cash dividend on the Common Stock, on each date that any such cash dividend is paid to all holders of shares of Common Stock while the Stock Units are outstanding, the Participant’s account shall be credited with an additional number of Stock Units equal to the number of whole shares of Common Stock (valued at fair market value (as defined in the Plan) on such date or the immediately preceding trading day as determined by the Administrator in its sole discretion) that could be purchased on such date with the aggregate dollar amount of the cash dividend that would have been paid on the Stock Units had the Stock Units been issued as shares of Common Stock.  The right to receive additional Stock Units credited under this Section 5(b) shall be subject to the same terms and conditions applicable to the Stock Units originally awarded hereunder and shall be settled on the same date as the Stock Units in respect of which such Dividend Equivalents are awarded.  No such Dividend Equivalents shall be made with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8 hereof.

 

6.                                    Restrictions on Transfer.  Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

 

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7.                                    Timing and Manner of Payment of Stock Units.  On or as soon as administratively practicable following each vesting date of the applicable portion of the total Award pursuant to the terms hereof (and in all events within sixty (60) days after such vesting date), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units subject to this Award that vest on the applicable vesting date.  The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Participant or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.  The Participant shall have no further rights with respect to any Stock Units that are paid or that terminate pursuant to Section 8.

 

8.                                    Effect of Termination of Employment or Services.  If the Participant ceases to be employed by or ceases to provide services to the Corporation and its Subsidiaries (the date of such termination of employment or service is referred to as the Participant’s “Severance Date”), the Participant’s Stock Units shall terminate to the extent such units have not become vested pursuant to Section 3 hereof upon the Severance Date regardless of the reason for the termination of the Participant’s employment or services.

 

9.                                    Adjustments Upon Specified Events; Change in Control Event.

 

(a)                              Adjustments.  Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section [7.1] of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award.  No such adjustment shall be made with respect to any ordinary cash dividend for which Dividend Equivalents are credited pursuant to Section 5(b) above.

 

(b)                             Change in Control Event.  Upon the occurrence of an event contemplated by Section [7.2 or 7.3] of the Plan and notwithstanding any provision of Section [7.2 and 7.3] of the Plan or any employment agreement to the contrary, the Award (to the extent outstanding at the time of such event) shall become fully vested as of the date of such event and shall be paid in accordance with Section 7 hereof.

 

10.                            Tax Withholding.  Upon vesting of any Stock Units or any distribution of shares of Common Stock in respect of the Stock Units, the Participant or other person entitled to receive such distribution may irrevocably elect, in such manner and at such time or times prior to any applicable tax date as may be permitted or required under Section [8.5] of the Plan and rules established by the Administrator, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that in the event that the Corporation cannot legally satisfy such 

 

B-3

 

withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

 

11.                            Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records.  Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.  Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five (5) business days after the date mailed in accordance with the foregoing provisions of this Section 11.

 

12.                            Plan.  The Award and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference.  The Participant agrees to be bound by the terms of the Plan and this Agreement.  The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

 

13.                            Entire Agreement.  This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Agreement may be amended pursuant to Section [8.6] of the Plan.  Any such amendment must be in writing and signed by the Corporation.  Any such amendment that materially and adversely affects the Participant’s rights under this Agreement requires the consent of the Participant in order to be effective with respect to the Award.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.  The Participant acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.  The Participant acknowledges that this Agreement is in full satisfaction of the Corporation’s obligations under Section 3(c)(i) of the Employment Agreement, dated as of August 3, 2016, by and between the Participant and the Corporation.

 

14.                            Limitation on Participant’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Participant shall have only the rights of a general unsecured creditor of the Corporation with 

 

B-4

 

respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Stock Units, as and when payable hereunder.  The Award has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.

 

15.                            Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

16.                            Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

 

17.                            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

 

18.                            Section 409A.  It is intended that the Award be exempt from or comply with Section 409A of the Code and this Award shall be interpreted consistent therewith.

 

19.                            Clawback Policy.  The Stock Units are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Stock Units or any shares of Common Stock or other cash or property received with respect to the Stock Units (including any value received from a disposition of the shares acquired upon payment of the Stock Units).

 

*                                        *                                        *

 

[The remainder of this page is intentionally left blank.]

 

B-5

 

IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.

 

 

 

 

 

	
 
    	
QUALITY   CARE PROPERTIES, INC. 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By   
    
	
 
    	
 
    	
 
    
	
 
    	
Name:   
    
	
 
    	
 
    
	
 
    	
Title:   
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Mark   Ordan 
    

 

[Signature Page to CEO Initial RSU Award Agreement]

 

 

EXHIBIT C

 

Form of Option Agreement

 

[See attached.]

 

 

QUALITY CARE PROPERTIES, INC.

[2016 PERFORMANCE INCENTIVE PLAN]

CEO INITIAL STOCK OPTION AGREEMENT

 

THIS CEO INITIAL STOCK OPTION AGREEMENT (this “Agreement”) is dated as of [·], 2016 (the “Award Date”)1 by and between Quality Care Properties, Inc., a Maryland corporation (the “Corporation”), and Mark Ordan (the “Grantee”).

 

W I T N E S S E T H

 

WHEREAS, pursuant to the Quality Care Properties, Inc. [2016 Performance Incentive Plan], as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Grantee, effective as of the date hereof, a nonqualified stock option, upon the terms and conditions set forth herein and in the Plan.

 

NOW THEREFORE, in consideration of services to be rendered by the Grantee, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

 

1.                                    Defined Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

 

2.                                    Grant.  Subject to the terms of this Agreement, the Corporation hereby grants to the Grantee a nonqualified stock option (the “Option”) to purchase 8,000,000 shares2 of the Corporation’s Common Stock (the “Shares”) at a price of $[·]3 per share (the “Exercise Price”).  The number of Shares and the Exercise Price are subject to adjustment as provided in Section [7.1] of the Plan.  The Option is subject to all of the terms and conditions set forth in this Agreement and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Administrator, as such rules are in effect from time to time.

 

3.                                    Vesting; Limits on Exercise; Incentive Stock Option Status.

 

(a)                               Vesting.  Subject to the other provisions of this Section 3 and Sections 4 and 6, the Shares subject to the Option (subject to adjustment under Section [7.1] of the Plan) shall vest as follows:4

 

1  On or promptly following the date of the consummation of the spinoff of the Corporation from HCP, Inc.

 

2  The grant of Initial Options is based on, as of the start date of the Employment Agreement, a fully diluted number of 473.2 million Shares of Common Stock outstanding (and no other equity securities outstanding) and debt of $1.75 billion.  If there are more, less or different equity securities outstanding or reserved for issuance as of the start date, the grant of initial options will be adjusted to provide Grantee with the economic value and opportunity contemplated based on a $4.0 billion gross valuation.

 

3  To be determined in accordance with Section 3(c)(ii)(B) of the Employment Agreement.

 

4  Provided, however, that if the Exercise Price is ultimately set at least 5% higher than the fair market value of a share of Common Stock on the Award Date, (i) 4,000,000 Shares subject to the Option shall vest immediately on the Award Date and (ii) the remaining 4,000,000 Shares subject to the Option shall, subject to continued employment, (i) vest and become exercisable as to 25% of such Shares on each of the first four (4) anniversaries of the Award Date and (ii) become 100% vested and exercisable upon a change in control.

 

C-1

 

(i)                                  4,000,000 Shares shall be vested on the Award Date;

 

(ii)                              1,000,000 Shares shall vest on the date that the volume weighted average price of one share of the Common Stock as reported by the New York Stock Exchange (or the primary automated quotation service or national securities exchange upon which the Common Stock may then be quoted or listed for trading) for the forty (40) consecutive trading days ending on the trading day immediately prior to the applicable valuation date (the “Target Price”) exceeds the Exercise Price by 25%;

 

(iii)                          1,000,000 Shares shall vest on the date that the Target Price exceeds the Exercise Price by 50%;

 

(iv)                          1,000,000 Shares shall vest on the date that the Target Price exceeds the Exercise Price by 75%; and

 

(v)                              1,000,000 Shares shall vest on the date that the Target Price exceeds the Exercise Price by 100%.

 

(b)                              Vesting and Termination Upon a Change in Control Event.  Notwithstanding any provision of this Agreement to the contrary, in the event of a Change in Control Event as provided in Sections [7.2] and [7.3] of the Plan, any Shares described in Sections 3(a)(ii) through (v) that remain unvested as of the date of such Change in Control Event shall immediately vest and become exercisable as of the consummation of such Change in Control Event to the extent that the transaction price (as determined by the Board or Committee in good faith) upon such Change in Control Event exceeds the Exercise Price by the percentage provided in the applicable clause (ii) through (v) of Section 3(a), subject to the Grantee’s continued employment through the consummation of the Change in Control Event.  Any Shares that do not vest pursuant to this Section 3(b) shall terminate as of the consummation of such Change in Control Event without any consideration therefor.

 

(c)                               Limits on Exercise.  The following limits shall apply with respect to the Option:

 

(i)                                  Restriction on Exercisability.  Except as otherwise provided in Section 3(b), the Shares subject to the Option shall not be exercisable until the later of (A) the third (3rd) anniversary of the Award Date and (B) the date that such Shares vest in accordance with the terms of this Agreement.

 

(ii)                              Cumulative Exercisability.  To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent not previously exercised), and such right shall continue until the Expiration Date or earlier termination of the Option.

 

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(iii)                          No Fractional Shares.  Fractional share interests shall be disregarded, but may be cumulated.

 

(d)                             Nonqualified Stock Option.  The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning of Section 422 of the Code.

 

4.                                    Continuance of Employment/Service Required; No Employment/Service Commitment.  The vesting schedule applicable to the Option requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Option and the rights and benefits under this Agreement.  Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 6 below or under the Plan.

 

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or services, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation or benefits.  Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Grantee without his consent thereto.

 

5.                                    Method of Exercise of Option.

 

The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other person as the Administrator may require pursuant to such reasonable administrative exercise procedures as the Administrator may implement from time to time) of:

 

(a)                               a written notice stating the number of Shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise procedures as the Administrator may require from time to time;

 

(b)                              payment in full for the Exercise Price of the Shares to be purchased in cash, check or by electronic funds transfer to the Corporation;

 

(c)                               any written statements or agreements required pursuant to Section [8.1] of the Plan; and

 

(d)                             satisfaction of the tax withholding provisions of Section [8.5] of the Plan.

 

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The Administrator also may, but is not required to, authorize a non-cash payment alternative by one or more of the following methods: (a) notice and third party payment in such manner as may be authorized by the Administrator, or (b) subject to such procedures as the Administrator may adopt, a “cashless exercise” with a third party who provides simultaneous financing for the purposes of (or who otherwise facilitates) the exercise of the Option.  The Administrator in its sole discretion may (but is not required to) permit the Grantee to elect in connection with an exercise of the Option (on his/her exercise notice to the Corporation (or its delegate)) to satisfy the Exercise Price of the Shares to be purchased and/or the minimum amount of any tax withholding obligations of the Corporation or its Subsidiaries arising in connection with the exercise by a reduction in the number Shares of Common Stock otherwise deliverable by the Corporation to the Grantee in connection with such exercise, in which case the number of Shares withheld (or immediately reacquired in connection with such exercise, as the case may be) by the Corporation shall be the number of whole Shares that have a fair market value as of the date of such exercise (with the “fair market value” of such Shares determined in accordance with the applicable provisions of the Plan) necessary to satisfy such Exercise Price and/or withholding obligation, as applicable.

 

6.                                    Early Termination of Option.

 

(a)                               Expiration Date.  Subject to adjustment under Section [7.1] of the Plan and subject to earlier termination as provided below in this Section 6, the Option will terminate on the seventh (7th) anniversary of the latest of (i) the Effective Date (as defined in the Employment Agreement by and between the Corporation and the Grantee, dated August 3, 2016 (the “Employment Agreement”), (ii) the date that the Employment Agreement is executed and (iii) the Award Date (the “Expiration Date”).

 

(b)                              Termination of Option Upon a Termination of Grantee’s Employment or Services.  Subject to earlier termination on the Expiration Date of the Option or pursuant to Section 6(b) above, if the Grantee ceases to be employed by or ceases to provide services to the Corporation and its Subsidiaries, the following rules shall apply (the last day that the Grantee is employed by or provides services to the Corporation and its Subsidiaries is referred to as the Grantee’s “Severance Date”):

 

(i)                                  other than as expressly provided below in this Section 6(c), (A) the Grantee will have until the date that is twelve (12) months after his Severance Date (or three (3) months after the Severance Date in the case of a termination due to death or by the Corporation due to Disability (as defined in the Employment Agreement)) to exercise the Option (or portion thereof) to the extent that it was vested and exercisable on the Severance Date, (B) the Option, to the extent not vested and exercisable on the Severance Date, shall be forfeited and terminate on the Severance Date, and (C) the Option, to the extent exercisable on the Severance Date and not exercised during such twelve (12) month period (or three (3) month period, as applicable), shall be forfeited and terminate at the close of business on the last day of the twelve (12) month period (or three (3) month period, as applicable); and

 

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(ii)                              if the Grantee’s employment or services are terminated by the Corporation for Cause (as defined in the Employment Agreement) or by the Grantee without Good Reason (as defined in the Employment Agreement), the entire Option (whether vested or unvested) shall be forfeited and terminate on the Severance Date.

 

In all events the Option (and any post-termination exercise period provided above in this Section 6(b)) is subject to earlier termination on the Expiration Date of the Option or as contemplated by Section 3(b) of this Agreement.  The Administrator shall be the sole judge of whether the Grantee continues to render employment or services for purposes of this Agreement.

 

7.                                    Non-Transferability.  Except as set forth in Section [5.7] of the Plan, the Option and any other rights of the Grantee under this Agreement or the Plan are nontransferable and exercisable only by the Grantee.

 

8.                                    Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Grantee at the Grantee’s last address reflected on the Corporation’s payroll records.  Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.  Any such notice shall be given only when received, but if the Grantee is no longer an Eligible Person, shall be deemed to have been duly given five (5) business days after the date mailed in accordance with the foregoing provisions of this Section 8.

 

9.                                    Plan.  The Option and all rights of the Grantee under this Agreement are subject to the terms and conditions of the Plan, incorporated herein by reference.  The Grantee agrees to be bound by the terms of the Plan and this Agreement.  The Grantee acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Grantee unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

 

10.                            Entire Agreement.  This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Agreement may be amended pursuant to Section [8.6] of the Plan.  Such amendment must be in writing and signed by the Corporation.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.  The Grantee acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.  The Grantee acknowledges that this Agreement is in full satisfaction of the Corporation’s obligations under Section 3(c)(ii) of the Employment Agreement.

 

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11.                            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

 

12.                            Effect of this Agreement.  Subject to the Corporation’s right to terminate the Option pursuant to Section [7.2] of the Plan, this Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Corporation.

 

13.                            Limitation on Grantee’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Grantee shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Option, as and when exercisable and actually exercised in accordance with the terms hereof.  The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee.

 

14.                            Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

15.                            Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

 

16.                            Clawback Policy.  The Option is subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Option and repayment or forfeiture of any Shares of Common Stock or other cash or property received with respect to the Option (including any value received from a disposition of the Shares acquired upon exercise of the Option).

 

*                                        *                                        *

 

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.

 

 

 

 

 

	
 
    	
QUALITY CARE PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
 
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Mark Ordan
    

 

[Signature Page to Warrant Agreement]

 

 

EXHIBIT D

 

Form of Warrant Agreement

 

[See attached.]

 

 

QUALITY CARE PROPERTIES, INC.

 

FORM OF WARRANT AGREEMENT

 

THIS WARRANT (AS DEFINED BELOW) AND THE SECURITIES REPRESENTED BY THIS AGREEMENT (AS DEFINED BELOW) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE ACT OR (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT.

 

THIS WARRANT IS SUBJECT TO THE CONDITION THAT THE PURCHASE PRICE (AS DEFINED BELOW) SHALL HAVE BEEN TIMELY RECEIVED BY THE COMPANY (AS DEFINED BELOW) IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.  IF THE PURCHASE PRICE IS NOT TIMELY RECEIVED BY THE COMPANY IN ACCORDANCE WITH THIS AGREEMENT, THIS AGREEMENT SHALL TERMINATE AND BE NULL AND VOID AB INITIO.

 

THIS WARRANT AGREEMENT (this “Agreement”) is dated as of [_______], 2016 (the “Award Date”) by and between Quality Care Properties, Inc., a Maryland corporation (the “Company”), and Mark Ordan (the “Purchaser”).

 

W I T N E S S E T H

 

WHEREAS, the Company is agreeing to sell and deliver to the Purchaser, and the Purchaser is agreeing to purchase and accept from the Company, a warrant (the “Warrant”) to purchase shares of common stock of the Company (“Common Stock”) in exchange for the purchase price set forth in this Agreement, and

 

WHEREAS, the Company and the Purchaser desire to enter into this Agreement to set forth the terms and conditions of the Warrant.

 

NOW THEREFORE, in consideration of the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

 

1.         Defined Terms.  As used in this Agreement, the following terms have the meanings set forth below:

 

(a)        “Board” shall mean the Board of Directors of the Company.

 

(b)       “Change in Control Event” shall mean the occurrence of any of the following after the Award Date:

 

(i)         The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”))  of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (1) the then-outstanding shares of 

 

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common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change in Control Event; (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate of the Company or a successor, (D) any acquisition by any entity pursuant to a transaction that complies with clauses (iii)(1), (2) and (3) below, and (E) any acquisition by a Person who owned at least 25% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities as of the Award Date or an affiliate of any such Person;

 

(ii)        A change in the Board or its members such that individuals who, as of the later of the Award Date or the date that is two years prior to such change (the later of such two dates is referred to as the “Measurement Date”), constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Measurement Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member and his or her predecessor twice) shall be considered as though such individual were 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;

 

(iii)       Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66 2/3% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company

 

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Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, more than 25% of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 25% existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a Parent were members of the Incumbent Board (determined pursuant to clause (b) above using the date that is the later of the Award Date or the date that is two years prior to the Business Combination as the Measurement Date) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)       Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a Change in Control Event under clause (iii) above.

 

Notwithstanding the foregoing, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in clause (i), (ii), (iii) or (iv) shall only constitute a Change in Control Event if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation 1.409A-3(i)(5).  The Board shall have full and final authority to determine conclusively whether a Change in Control Event of the Company has occurred pursuant to the above definition, the date of the occurrence of such Change in Control Event and any incidental matters relating thereto.

 

(c)        “Fair Market Value” shall mean, unless otherwise determined or provided by the Board in the circumstances, the closing price of a share of Common Stock as reported on the composite tape for securities listed on the New York Stock Exchange (the “Exchange”) for the date in question or, if no sales of Common Stock were made on the Exchange on that date, the average of the closing prices of a share of Common Stock as reported on said composite tape for the next preceding day and the next succeeding day on which sales of Common Stock were made on the Exchange.  The Board may, however, provide that the fair market value shall equal the closing price of a share of Common Stock as reported on the composite tape for securities listed on the Exchange for the last trading day prior to the date in question or the average of the high and low trading prices of a share of Common Stock as reported on the composite tape for securities listed on the Exchange for the date in question or the most recent trading day.  If the Common Stock is no longer listed or is no longer actively traded on the Exchange as of the applicable date, the fair market value of the Common Stock shall be the value as reasonably determined by the Board in good faith.  The Board also may adopt a different methodology for determining fair market value if a different methodology is necessary or advisable to secure for the Purchaser any intended favorable tax, legal or other treatment (for example, and without limitation, the Board may provide that fair market value will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

 

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(d)       “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(e)        “Subsidiary” shall mean any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

 

2.         Purchase.  Subject to the terms of this Agreement, the Company hereby agrees to sell and deliver to the Purchaser, and the Purchaser hereby agrees to purchase and accept from the Company, a Warrant to purchase [______] shares of Common Stock at a price of $[__________]1 per share (the “Strike Price”).  The number of shares of Common Stock and the Strike Price are subject to adjustment as provided in Section 9 of this Agreement].

 

3.         Purchase Price.  The aggregate purchase price for the Warrant is [__________] (the “Purchase Price”), which shall be equal to twenty-five percent (25%) of the aggregate Strike Price.  The Purchaser hereby agrees to pay the Purchase Price to the Company in cash, check or by electronic funds transfer to the Company no later than the Award Date.  If the Purchase Price is not timely received by the Company in accordance with the terms of this Section 3, then this Agreement and the Warrant shall terminate without further action and be null and void ab initio.

 

4.         Exercisability.  The Warrant may only be exercised on and after the third (3rd) anniversary of the Award Date and before the Expiration Date (as defined below), provided that the Warrant shall become fully exercisable upon the occurrence of a Change in Control Event.  Fractional share interests shall be disregarded, but may be cumulated.

 

5.         Early Termination of Warrant.

 

(a)        Expiration Date.  Subject to adjustment under Section 9 hereof and subject to earlier termination as provided below in this Section 5, the Warrant will terminate on the seventh (7th) anniversary of the latest of (i) the Effective Date (as defined in the Employment Agreement by and between the Company and the Purchaser, dated August 3, 2016 (the “Employment Agreement”), (ii) the date that the Employment Agreement is executed and (iii) the Award Date (the “Expiration Date”).

 

(b)        Termination of Warrant Upon a Termination of Purchaser’s Employment or Services.  Subject to earlier termination on the Expiration Date, if the Purchaser ceases to be employed by or ceases to provide services to the Company and its Subsidiaries, the following rules shall apply (the last day that the Purchaser is employed by or provides services to the Company and its Subsidiaries is referred to as the Purchaser’s “Severance Date”):

 

 

 

1                   The Strike Price shall be equal to the per share exercise price of the Initial Options.

 

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(i)                                  other than as expressly provided below in this Section 5(b), (A) the Purchaser will have until the date that is twelve (12) months after his Severance Date (or three (3) months after the Severance Date in the case of a termination due to death or by the Company due to Disability (as defined in the Employment Agreement)) to exercise the Warrant (or portion thereof) to the extent that it was exercisable on the Severance Date, (B) the Warrant, to the extent not exercisable on the Severance Date, shall be forfeited and terminate on the Severance Date, and (C) the Warrant, to the extent exercisable on the Severance Date and not exercised during such twelve (12) month period (or three (3) month period, as applicable), shall be forfeited and terminate at the close of business on the last day of the twelve (12) month period (or three (3) month period, as applicable); and

 

(ii)                              if the Purchaser’s employment or services are terminated by the Company for Cause (as defined in the Employment Agreement) or by the Purchaser without Good Reason (as defined in the Employment Agreement), the entire Warrant (whether or not exercisable) shall be forfeited and terminate on the Severance Date.

 

In all events the Warrant (and any post-termination exercise period provided above in this Section 5(b)) is subject to earlier termination on the Expiration Date.  The Board shall be the sole judge of whether the Purchaser continues to render employment or services for purposes of this Agreement.

 

6.         Method of Exercise of Warrant.

 

The Warrant shall be exercisable by the delivery to the Secretary of the Company (or such other person as the Board may require pursuant to such administrative exercise procedures as the Board may implement from time to time) of:

 

(a)        a written notice stating the number of shares of Common Stock to be purchased pursuant to the Warrant or by the completion of such other reasonable administrative exercise procedures as the Board may require from time to time,

 

(b)       payment in full in cash, check or by electronic funds transfer to the Company for the Strike Price of the shares of Common Stock to be purchased;

 

(c)        any written statements or agreements required pursuant to Section 15 of this Agreement; and

 

(d)       payment in full in cash, check or by electronic funds transfer to the Company for the amount of any taxes which the Company or its Subsidiaries determine are required to be withheld with respect to such exercise.

 

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The Board also may, but is not required to, authorize a non-cash payment alternative by one or more of the following methods: (a) notice and third party payment in such manner as may be authorized by the Board, or (b) subject to such procedures as the Board may adopt, a “cashless exercise” with a third party who provides simultaneous financing for the purposes of (or who otherwise facilitates) the exercise of the Warrant.  The Board in its sole discretion may (but is not required to) permit the Purchaser to elect in connection with an exercise of the Warrant (on his exercise notice to the Company (or its delegate)) to satisfy the Strike Price of the shares of Common Stock to be purchased and/or the amount of any tax withholding obligations of the Company or its Subsidiaries in connection with the exercise by a reduction in the number of shares of Common Stock otherwise deliverable by the Company to the Purchaser in connection with such exercise, in which case the number of shares of Common Stock withheld (or immediately reacquired in connection with such exercise, as the case may be) by the Company shall be the number of whole shares of Common Stock that have a Fair Market Value as of the date of such exercise necessary to satisfy such Strike Price and/or withholding obligation, as applicable.

 

7.         No Employment/Service Commitment.  Nothing contained in this Agreement constitutes a continued employment or service commitment by the Company or any of its Subsidiaries, affects the Purchaser’s status, if he is an employee, as an employee at will who is subject to termination without cause, confers upon the Purchaser any right to remain employed by or in service to the Company or any Subsidiary, or interferes in any way with the right of the Company or any Subsidiary at any time to terminate such employment or service.

 

8.         Non-Transferability; Legends.

 

(a)        The Warrant and any other rights of the Purchaser under this Agreement are (A) nontransferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge and (B) exercisable only by the Purchaser.  Shares of Common Stock issued pursuant to the exercise of the Warrant shall be delivered on to (or for the account of) the Purchaser.

 

(b)       This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) issued in certificated form shall be stamped or imprinted, and each book-entry position shall include a notation, with a legend in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE ACT OR (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT.

 

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9.         Adjustments.

 

(a)        Subject to Section 9(b) of this Agreement, upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock; or any exchange of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; then the Board shall equitably and proportionately adjust (1) the number, amount and type of shares of Common Stock (or other securities or property) subject to the Warrant, (2) the Strike Price, and/or (3) the securities, cash or other property deliverable upon exercise of the Warrant, in each case to the extent necessary to preserve (but not increase) the intent of this Agreement and the Warrant.  It is intended that, if possible, any adjustments contemplated by the preceding sentence be made in a manner that satisfies applicable U.S. legal, tax and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements.  Any good faith determination by the Board as to whether an adjustment is required in the circumstances pursuant to this Section 9(a), and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

 

(b)       Upon the occurrence of any of the following: any merger, combination, consolidation, or other reorganization; any exchange of Common Stock or other securities of the Company; a sale of all or substantially all the business, stock or assets of the Company; a dissolution of the Company; or any other event in which the Company does not survive (or does not survive as a public company in respect of its Common Stock); then the Board may make provision for a cash payment in settlement of, or for the assumption, substitution or exchange of the Warrant or the securities or property deliverable in respect of the Warrant, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Common Stock upon or in respect of such event.  Upon the occurrence of any event described in the preceding sentence, then, unless the Board has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Warrant, the Warrant shall terminate upon the related event; provided that the Purchaser shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise the Warrant in accordance with its terms before the termination of the Warrant (except that in no case shall more than ten business days’ notice of the impending termination be required).  The Board may adopt such valuation methodologies for the Warrant as it deems reasonable in the event of a cash or property settlement and may (but without limitation on other methodologies) base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the Strike Price.  Any good faith determination by the Board pursuant to its authority under this Section 9(b) shall be conclusive and binding on all persons.

 

10.       Purchaser Representations and Warranties.  The Purchaser represents and warrants to the Company (which representations and warranties will be deemed repeated on any exercise of this Warrant) as follows:

 

(a)        Purchase for Own Account.  This Warrant and the securities to be acquired upon exercise of this Warrant by the Purchaser are being acquired for investment for the Purchaser’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act except in compliance with the Act.

 

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(b)       Purchaser Disclosure of Information.  The Purchaser is aware of the Company’s business affairs and financial condition and has received or has had access to all the information the Purchaser considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities.  The Purchaser further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information  necessary to verify any information furnished to the Purchaser or to which the Purchaser has access.

 

(c)        Investment Experience.  The Purchaser understands that the purchase of this Warrant and its underlying securities involves substantial risk.  The Purchaser acknowledges that the Purchaser can bear the economic risk of the Purchaser’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Purchaser is capable of evaluating the merits and risks of the Purchaser’s investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Purchaser to be aware of the character, business acumen and financial circumstances of such persons.

 

(d)       Accredited Investor Status.  The Purchaser is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

(e)        The Act.  The Purchaser understands that this Warrant and the Common Stock issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Purchaser’s investment intent as expressed herein.  The Purchaser understands that this Warrant and the shares of Common Stock issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  The Purchaser is aware of the provisions of Rule 144.

 

(f)        No Voting Rights.  The Purchaser, as a Purchaser of this Warrant, will not have any voting rights until the exercise of this Warrant.

 

11.       Authorized Shares.  The Company shall at all times reserve and keep available for issuance upon the exercise of the Warrant such number of its authorized but unissued shares of Common Stock as will be required for issuance hereunder.  All Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all liens, taxes, charges and other encumbrances or restrictions on sale (other than those set forth herein).

 

12.       Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its principal office to the attention of the Secretary, and to the Purchaser at the address last reflected on the Company’s records, or at such other address as either party may hereafter designate in writing to the other.  Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States government.  Any such notice shall be given only when received, but if the Purchaser is no longer employed by the Company or a Subsidiary, shall be deemed to have been duly given five (5) business days after the date mailed in accordance with the foregoing provisions of this Section 12.

 

D-8

 

13.       Entire Agreement.  This Agreement together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Board may, by agreement or resolution, waive conditions of or limitations on the Warrant that the Board in the prior exercise of its discretion has imposed, without the consent of the Purchaser, and may make other changes to the terms and conditions of the Warrant, provided that no amendment, suspension or termination of this Agreement or the Warrant  shall, without written consent of the Purchaser, affect in any manner adverse to the Purchaser any rights or benefits of the Purchaser or obligations of the Company under this Agreement prior to the effective date of such change.  Such amendment must be in writing and signed by the Company.  The Company may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Purchaser hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

 

14.       Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland without regard to conflict of law principles thereunder.

 

15.       Compliance with Laws.  This Agreement, the purchase of the Warrant, and the issuance and delivery of shares of Common Stock pursuant to the exercise of the Warrant under this Agreement are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  The Purchaser will, if requested by the Company or one of its Subsidiaries, provide such assurances and representations to the Company or one of its Subsidiaries as the Board may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

 

16.       Tax Matters.  No representations or warranties have been made to the Purchaser by the Company or any of its representatives as to the tax consequences associated with this Agreement or the Warrant.  The Purchase is advised to consult his own tax advisers and counsel regarding such matters.

 

17.       Effect of this Agreement.  Subject to the Company’s right to terminate the Warrant pursuant to Section 9 of this Agreement, this Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Company.

 

18.       Limitation on Purchaser’s Rights.  The purchase of the Warrant confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust.  The Purchaser shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Warrant, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Warrant, as and when exercisable and actually exercised in accordance with the terms hereof.

 

D-9

 

19.       Further Assurances.  The Purchaser and the Company hereby agree, at the request of any other party, to execute and deliver all such other and additional instruments and documents and to do such other acts and things as may be reasonably necessary or appropriate to carry out the intent and purposes of this Agreement.

 

20.       Rights as a Stockholder.  The Purchaser shall have no rights as a stockholder with respect to any shares of Common Stock subject to the Warrant unless and until such Warrant is exercised and shares of delivered to the Purchaser pursuant to this Agreement.  No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of such exercise and delivery.

 

21.       Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

22.       Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

 

[The remainder of this page is intentionally left blank.]

 

D-10

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

 

	
 
    	
THE COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PURCHASER
    
	
 
    	
 
    
	
 
    	
 
    
				

 

[Signature Page to Warrant Agreement]

 

 

EXHIBIT E

 

FORM OF RELEASE AGREEMENT

 

This Release Agreement (this “Release Agreement”) is entered into this [_____] day of 20 , by and between Mark Ordan, an individual (“Executive”), and Quality Care Properties, Inc. (the “Company”).

 

WHEREAS, Executive has been employed by the Company; and

 

WHEREAS, Executive’s employment by the Company has terminated and, in connection with the Employment Agreement between the Company and Executive dated as of August 3, 2016 (the “Employment Agreement”), the Company and Executive desire to enter into this Release Agreement upon the terms set forth herein.

 

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Release Agreement, and in consideration of the obligations of the Company (or one of its subsidiaries) to pay severance benefits (conditioned upon this Release Agreement) under and pursuant to the Employment Agreement, Executive and the Company agree as follows:

 

1.         Release. Executive, on behalf of himself, his descendants, dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby acknowledges full and complete satisfaction of [_____] and covenants not to sue and fully releases and discharges the Company and each of its parents, subsidiaries and affiliates, past and present, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereinafter together and collectively referred to as the “Releasees,” with respect to and from any and all claims, wages, demands, rights, liens, agreements or contracts (written or oral), covenants, actions, suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden (each, a “Claim”), which he now owns or holds or he has at any time heretofore owned or held or may in the future hold as against any of said Releasees arising out of or in any way connected with Executive’s service as an officer, director, employee, member or manager of any Releasee or Executive’s separation from his position as an officer, director, employee, manager and/or member, as applicable, of any Releasee, whether known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of said Releasees, or any of them, committed or omitted prior to the date of this Release Agreement including, without limiting the generality of the foregoing, any Claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, the Maryland Equal Pay Act, Title 20 of the State Government Article of the Maryland Annotated Code or any other federal, state or local law, regulation, or ordinance, or any Claim for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers’ compensation or disability; provided however, that the foregoing release shall not apply to any obligation of the Company to Executive pursuant to or with respect to any of the following: (1) any obligation created by or arising out of Paragraph 8 of the Employment Agreement for which receipt or satisfaction has not been acknowledged, (2) any equity-based awards previously granted by the Company to Executive, to the extent that such awards continue after the termination of Executive’s employment with the Company in accordance with the applicable terms of such awards; (3) any right to indemnification that Executive may have pursuant to the Employment Agreement, the Company’s Bylaws or the Company’s corporate charter or under any

 

E-1

 

written indemnification agreement with the Company (or any corresponding provision of any subsidiary or affiliate of the Company) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to his service as an employee, officer or director of the Company or any of its subsidiaries or affiliates; (4) any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Company (or subsidiary or affiliate) directors and officers liability insurance policy; (5) any rights to continued medical or dental coverage that Executive may have under COBRA; (6) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Company that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended, or (7) any deferred compensation or supplemental retirement benefits that Executive may be entitled to under a nonqualified deferred compensation or supplemental retirement plan of the Company. In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

 

2.         Acknowledgment of Payment of Wages. Except for accrued vacation (which the parties agree totals approximately [ ] days of pay) and salary for the current pay period, Executive acknowledges that he/she has received all amounts owed for his regular and usual salary (including, but not limited to, any bonus, severance, or other wages), and usual benefits through the date of this Agreement.

 

3.         ADEA Waiver. Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), which have arisen on or before the date of execution of this Release Agreement. Executive further expressly acknowledges and agrees that:

 

(A)       In return for this Release Agreement, the Executive will receive consideration beyond that which the Executive was already entitled to receive before entering into this Release Agreement;

 

(B)       Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

 

(C)       Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

 

(D)       Executive was given a copy of this Release Agreement on [ , 20 ] and informed that he had [twenty one (21)/forty five (45)] days within which to consider this Release Agreement and that if he wished to execute this Release Agreement prior to expiration of such [21-day/45-day] period, he should execute the Endorsement attached hereto;

 

(E)       Executive was informed that he had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time.  Any revocation must be in writing and must be received by the Company during the seven-day revocation period.  In the event that Executive exercises his right of revocation, neither the Company nor Executive will have any obligations under this Release Agreement;

 

E-2

 

(F)       Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.2

 

4.         No Transferred Claims. Executive warrants and represents that the Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof and he shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys’ fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.

 

5.         Compliance With Employment Agreement. Executive warrants and represents that Executive has complied fully with his obligations pursuant to the Employment Agreement. Executive covenants that he will continue to abide by the applicable provisions of such Employment Agreement.

 

6.         Severability. It is the desire and intent of the parties hereto that the provisions of this Release Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Release Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Release Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

7.         Counterparts. This Release Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

8.         Governing Law. THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF MARYLAND, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF MARYLAND OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW OF THE STATE OF MARYLAND TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW, THE INTERNAL LAW OF THE STATE OF MARYLAND, WILL CONTROL THE INTERPRETATION AND

 

2   Whether the Executive has 21 days, 45 days, or some other period in which to consider the Release Agreement will be determined with reference to the requirements of the ADEA in order for such waiver to be valid in the circumstances. The determination referred to in the preceding sentence shall be made by the Company in its sole discretion. In any event, the Release Agreement will include the Executive’s acknowledgements and agreements set forth in clauses 4.A, 4.B, and 4.C.

 

E-3

 

CONSTRUCTION OF THIS RELEASE AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

 

9.         Amendment and Waiver. The provisions of this Release Agreement may be amended and waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Release Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Release Agreement or any provision hereof.

 

10.       Descriptive Headings. The descriptive headings of this Release Agreement are inserted for convenience only and do not constitute a part of this Release Agreement.

 

11.       Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The language used in this Release 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.

 

12.       Arbitration. Any claim or controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provision set forth in the Employment Agreement.

 

13.       Nouns and Pronouns. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.

 

14.       Legal Counsel. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Executive acknowledges and agrees that he has read and understands this Release Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Release Agreement and he has had ample opportunity to do so.

 

The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of Maryland that the foregoing is true and correct.

 

EXECUTED this [_____] day of 20 , at , Maryland.

 

 

 

	
 
    	
“Executive”
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Mark Ordan
    

 

E-4

 

	
 
    	
QUALITY CARE PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    
	
 
    	
 
    	
 
    

 

E-5

 

ENDORSEMENT

 

I, Mark Ordan, hereby acknowledge that I was given [21/45] days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the [21-day/45-day] period.

 

I declare under penalty of perjury under the laws of the United States and the State of Maryland that the foregoing is true and correct.

 

EXECUTED this [ ] day of [ 20 ], at , Maryland.

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Mark OrdanEX-4.1

 Exhibit 4.1 

Dated 1 October 2015 
 DIAGEO
PLC (1) 
 Kathryn Mikells (2) 
  

 
 SERVICE
AGREEMENT 

 CONTENTS 
  

							
	Clause	 	 	  	Page	 
			
	 1.
	 	DEFINITIONS AND INTERPRETATION	  	 	3	  
			
	 2.
	 	APPOINTMENT	  	 	4	  
			
	 3.
	 	WORK PERMITS AND WARRANTY	  	 	4	  
			
	 4.
	 	DURATION OF THE EMPLOYMENT	  	 	5	  
			
	 5.
	 	SCOPE OF THE EMPLOYMENT	  	 	7	  
			
	 6.
	 	HOURS OF WORK	  	 	9	  
			
	 7.
	 	PLACE OF WORK	  	 	9	  
			
	 8.
	 	REMUNERATION	  	 	9	  
			
	 9.
	 	EXPENSES	  	 	11	  
			
	 10.
	 	HOLIDAYS	  	 	12	  
			
	 11.
	 	SICKNESS BENEFITS	  	 	12	  
			
	 12.
	 	PENSION	  	 	13	  
			
	 13.
	 	OTHER BENEFITS	  	 	13	  
			
	 14.
	 	RESTRICTIONS DURING THE EMPLOYMENT	  	 	15	  
			
	 15.
	 	CONFIDENTIAL INFORMATION AND COMPANY DOCUMENTS	  	 	16	  
			
	 16.
	 	INVENTIONS AND OTHER INTELLECTUAL PROPERTY	  	 	17	  
			
	 17.
	 	TERMINATION	  	 	18	  
			
	 18.
	 	RESTRICTIVE COVENANTS	  	 	20	  
			
	 19.
	 	DISCIPLINARY AND GRIEVANCE PROCEDURES	  	 	23	  
			
	 20.
	 	DATA PROTECTION	  	 	23	  
			
	 21.
	 	NOTICES	  	 	24	  
			
	 22.
	 	FORMER CONTRACTS OF EMPLOYMENT	  	 	24	  
			
	 23.
	 	CHOICE OF LAW AND SUBMISSION TO JURISDICTION	  	 	24	  
			
	 24.
	 	GENERAL	  	 	25	  

  
 2 

 This Agreement is made on 1 October 2015 

Between 
  

	(1)	Diageo PLC (registered in England and Wales under number 23307) whose registered office is at Lakeside Drive, London, NW10 7HQ (the “Company”); and 

 

	(2)	Kathryn Mikells of 113 Harrison Avenue Unit B, New Canaan CT 06840, United States of America (the “Executive”). 

It is agreed 
  

	1.	DEFINITIONS AND INTERPRETATION 

  

	1.1	In this Agreement unless the context otherwise requires the following expressions have the following meanings: 

Board means the board of directors for the time being of the Company, any authorised director or any committee of directors for the time
being 
 Chairman means the Chairman of the Board 

Commencement Date means 9 November 2015 

Confidential information means details of suppliers and their terms of business, details of customers and their requirements the prices
charged to and terms of business with customers, marketing plans and sales forecasts, financial information, results and forecasts (save to the extent that these are included in published audited accounts), any proposals relating to the acquisition
or disposal of a company or business or any part thereof or to any proposed expansion or contraction of activities, details of employees and officers and of the remuneration and other benefits paid to them, trade secrets, information relating to
research activities, inventions, secret processes, designs, formulae and product lines, any information which is treated as confidential or which the Executive is told or ought reasonably to know is confidential and any information which has been
given to the Company or any Group Company in confidence by customers, suppliers or other persons 
 Employment means the
Executive’s employment under this Agreement 
 ERA means the Employment Rights Act 1996 as amended 

Group means the Company and the Group Companies 

Group Company means any company which is for the time being a subsidiary or holding company of the Company and any subsidiary of any
such holding company and for the purposes of this Agreement the terms subsidiary and holding company shall have the meanings ascribed to them by section 1159 Companies Act 2006 or in any subordinate legislation made under the Companies Act 2006 (and
Group Companies shall be interpreted accordingly) 
 Intellectual Property means all patents, registered designs, trade-marks
and service marks (whether registered or not and including any applications for the foregoing), copyrights, design rights, semiconductor topography rights, database rights and all other intellectual property and similar proprietary rights subsisting
in any part of the world (whether or not capable of registration) and including (without limitation) all such rights in materials, works,  

  
 3 

 
prototypes, inventions, discoveries, techniques, computer programs, source codes, data, technical, commercial or confidential information, trading, business or brand names, goodwill or the style
of presentation of the goods or services or any improvement of any of the foregoing and the right to apply for registration or protection of any of them and in existing applications for the protection of any of the above 

Minority Holder means a person who either solely or jointly holds (directly or through nominees) any shares or loan capital in any
company whose shares are listed or dealt in on a recognised investment exchange (as that term is defined by section 285 Financial Services and Markets Act 2000) provided that such holding does not, when aggregated with any shares or loan capital
held by the Executive’s partner and/or her or her partner’s children under the age of 18, exceed 3% of the shares or loan capital of the class concerned for the time being issued 

Remuneration Committee means the Remuneration Committee of the Company from time to time 

Salary means the salary referred to in Clause 8.1 

Sensitive Data means personal data consisting of information as to racial or ethnic origin; political opinions; religious beliefs or
other beliefs of a similar nature; membership of a trade union; physical or mental health or condition; sexual life; the commission or alleged commission of any offence or any proceedings for any offence committed or alleged to have been committed,
including the disposal of such proceedings or the sentence of any court in such proceedings 
 Termination Date means the date
of the termination of the Employment 
  

	1.2	References to Clauses and schedules are unless otherwise stated to Clauses of and schedules to this Agreement. 

  

	1.3	The headings to the Clauses are for convenience only and shall not affect the construction or interpretation of this Agreement. 

 

	2.	APPOINTMENT 

  

	2.1	The Company shall appoint the Executive and the Executive agrees to act as Chief Financial Officer of the Company with effect from the Commencement Date or in such other capacity (appropriate to the
Executive’s skills, experience and qualifications) of an equivalent status as the Company from time to time reasonably directs on the terms of this Agreement. 

 

	2.2	The Executive maybe required to act as a director of the Company and other Group Companies (either executive or non-executive) as the Board reasonably requires from time to time. The Company reserves the right on
giving written notice to the Executive to terminate any office or directorship immediately at any time and upon receipt of that notice the Executive will immediately resign from that office or directorship. 

 

	3.	WORK PERMITS AND WARRANTY 

 The Executive warrants that she is legally entitled to work
in the United Kingdom and will throughout the Employment continue to hold a valid United Kingdom work permit if appropriate. The Executive warrants that she will notify the Company in advance of any possible change to her immigration status, as soon
as she becomes aware of any circumstances that might give rise to such change. Should the Company discover that the Executive does not have permission to live and work in the United Kingdom or if any such permission is revoked, the Company reserves
the right to terminate the Employment 

  
 4 

 
immediately and without notice or pay in lieu of notice and without referring to the warning stages of the Company’s disciplinary procedure. 

 

	4.	DURATION OF THE EMPLOYMENT 

  

	4.1	Continuous Employment 

 The Executive’s continuous period of employment with the
Company commenced on 9 November 2015. 
  

	4.2	Duration 

 Subject to the provisions of Clauses 4 and 17, the Employment shall continue
unless and until terminated at any time by: 
  

	 	(a)	the Company, which must give to the Executive not less than twelve months’ prior written notice of termination of the Employment; or 

 

	 	(b)	the Executive, who must give to the Company not less than six months’ prior written notice of termination of the Employment. 

  

	4.3	Payment in lieu of notice 

  

	 	(a)	The Company shall be entitled, at its sole discretion, to terminate the Employment immediately at any time by giving the Executive notice in writing. In these circumstances, subject to the terms of Clause 4.3(b), the
Company will subsequently make a payment to the Executive in lieu of notice, calculated in accordance with the provisions of Clauses 4.3 and 4.4 (the payment being referred to as a “Notice Payment”). 

 

	 	(b)	For the avoidance of doubt, the Company is not obliged to make a Notice Payment. If the Company shall decide not to make a Notice Payment, the Executive shall not be entitled to enforce that payment as a contractual
debt nor as liquidated damages. 

  

	 	(c)	The Notice Payment will be paid less all deductions that are required or permitted by law to be made including in respect of income tax, national insurance contributions and any sums due to the Company or any Group
Company. 

  

	 	(d)	Subject to the terms of Clause 4.4, the Notice Payment will consist of a sum equivalent to the Salary which the Executive would have received in respect of any notice period outstanding on the Termination Date and the
cost to the Company of providing contractual benefits (excluding any benefits under Clause 8.3) in respect of that period. 

  

	 	(e)	The Notice Payment is in full and final settlement of all and any rights and claims that the Executive may have against the Company arising out of the termination of her employment (including both contractual and
statutory employment claims). The Executive agrees to waive, release and discharge any and all such rights and claims and acknowledges that it is a condition of the payment of the Notice Payment that she will execute a settlement agreement (and any
other documents reasonably required by the Company) in a form reasonably acceptable to the Company in order to give effect to the release and waiver in this Clause 4.3. 

 

	 	(f)	 If the Company has elected to make a Notice Payment and subsequently discovers that the Executive committed a
repudiatory breach of contract prior to the Termination Date, the Company shall be entitled to withhold the Notice Payment and 

  
 5 

	 	
the Executive agrees she will have no entitlement to the Notice Payment in these circumstances. 

  

	4.4	Payment in instalments 

  

	 	(a)	The Company may, at its sole discretion and subject to the terms of Clause 4.4(b), pay the Notice Payment as follows: (i) 50 % of the Notice Payment will be made within 28 days after the Termination Date; and
(ii) the remainder of the Notice Payment will be paid in equal monthly instalments over a period of six months (the “Instalment Period”), or such shorter period as the Company may determine in its discretion, the first
instalment payable on the day that is 6 months after the Termination Date. 

  

	 	(b)	If the Executive commences alternative employment during the Instalment Period then the gross instalments of Notice Payment payable after that date may at the Employer’s sole discretion be reduced by a sum equal to
the gross amount of the Executive’s income (including salary, benefits and incentives) payable or accruing in respect of the alternative employment in the period from the start of that employment until the end of Instalment Period.

  

	 	(c)	If the Executive obtains alternative employment that is to commence during the Instalment Period she will immediately advise the Company of that fact and of her gross monthly salary, benefits and incentive arrangements
from that employment. If the Executive fails to comply with this obligation, then from the date the Executive commences alternative employment, the Executive shall have no further entitlement to any payment of Notice Payment. 

 

	4.5	Corporate Change 

  

	 	(a)	If at any time within 12 months of a Corporate Change either the Company terminates the Employment other than pursuant to Clause 17.1(a)(a) and without any notice or on notice less than that required by Clause 4.2 or
the Executive resigns for Good Reason (in either event as a consequence of the Corporate Change), the Company shall make a payment in lieu of notice in accordance with Clause 4.3 save that it is agreed that it shall be paid as a single lump sum
payment within 28 days of the termination of the Employment. For the avoidance of doubt, in the event that the Executive resigns for Good Reason in accordance with this Clause 4.5(a), this shall be treated as a termination of the Employment by the
Company for the purposes of calculating the notice period and the relevant payment in lieu of notice under this Clause 4.5(a). This Clause 4.5(a) shall not apply in the event that the Executive gives notice to terminate the Employment other than for
Good Reason. 

  

	 	(b)	For the purposes of Clause 4.5(a) above “Corporate Change” means: 

  

	 	(i)	the acquisition by the Company or any Group Company of shares in any other company or any other assets or business which, in the opinion of the Remuneration Committee (whose determination in respect of such matters
shall be final and binding), constitutes a major acquisition or merger; or 

  

	 	(ii)	the Company coming under the control of any person or persons acting in concert (as those terms are defined for the time being in the City Code on Takeovers and Mergers) not having control of the Company at the date of
this Agreement. 

  

	 	(c)	 For the purposes of Clause 4.5(a), a “Good Reason” shall mean circumstances in which the
Executive resigns due to (a) a material diminution in her status and/or responsibilities and/or (b) a requirement for the Executive to be located permanently 

  
 6 

	 	
outside the United Kingdom and Eire (which shall include a requirement for long term extensive commuting to such a location other than during the six months immediately following the Corporate
Change). 

  

	4.6	Executive’s Representation 

 The Executive represents and warrants that she is not
bound by or subject to any court order, agreement, arrangement or undertaking that in any way restricts or prohibits her from entering into this Agreement or from performing her duties under it. 

 

	5.	SCOPE OF THE EMPLOYMENT 

  

	5.1	Duties 

 During the Employment the Executive shall: 

 

	 	(a)	undertake and carry out to the best of her ability and to the standard reasonable required by the Board such duties and exercise such powers in relation to the Group’s business as may from time to time be assigned
to or vested in her by the Board including where those duties require the Executive to work for any Group Company (but the Board will only assign such duties to the Executive as are appropriate to the Executive’s position); 

 

	 	(b)	unless prevented by ill-health, holidays or other unavoidable cause, devote the whole of her working time, attention and skill to the discharge of her duties under this Agreement; 

 

	 	(c)	in the discharge of those duties and the exercise of those powers observe and comply with all lawful resolutions, regulations and directions from time to time made by, or under the authority of, the Board and promptly
upon request, give a full account to the Board or a person duly authorised by the Board, in writing if requested, of all matters with which she is involved; 

  

	 	(d)	faithfully and diligently perform her duties and at all times use her best endeavours to promote and protect the interests of the Group; 

 

	 	(e)	comply with the articles of association of any Group Company of which she is a director and all statutory, fiduciary and common law duties that apply to her from time to time and do all such things as are necessary to
ensure compliance with the UK Corporate Governance Code; 

  

	 	(f)	do, or refrain from doing, such things as are necessary or expedient to ensure compliance by herself and any Group Company with applicable law and regulation and all regulatory authorities relevant to any Group Company;

  

	 	(g)	refrain from doing anything which would cause her to be disqualified from acting as a director; 

  

	 	(h)	promptly disclose to the Board full details of any wrongdoing by the Executive or any other employee of any Group Company where that wrongdoing is material to that employee’s employment by the relevant company or
to the interests or reputation of any Group Company; 

  

	 	(i)	not incur on behalf of the Company or any Group Company any capital expenditure in excess of such sum as may be authorised from time to time by resolution of the Board; 

  
 7 

	 	(j)	not enter into on behalf of the Company or any Group Company any commitment, contract or arrangement which is otherwise than in the normal course of the Company’s or the relevant Group Company’s business or is
outside the scope of her normal duties or authorisations or is of an unusual or onerous or long-term nature; 

  

	 	(k)	not engage any person on terms which vary from those established from time to time by resolution of the Board; 

  

	 	(l)	report to the Chief Executive (or such other person as the Board may from time to time nominate and notify the Executive); 

  

	 	(m)	travel to such places (within or outside the United Kingdom) as the Company may from time to time reasonably require; 

  

	 	(n)	refrain from doing or permitting any matter which causes any regulatory authority in the United Kingdom, United States or elsewhere to withdraw permission or in any way prevent the Company from employing or otherwise
using the services of the Executive. 

  

	5.2	Alternative Duties 

 The Board shall be entitled at any time to require the Executive to
perform duties consistent with her role and status not only for the Company but also for any Group Company including, if so required, acting as a director of any Group Company. The Board may at its discretion remove or procure the removal of the
Executive from any directorship to which she is appointed under this Clause. The Company may at its sole discretion transfer this Agreement or second the Executive to any Group Company at any time. 

 

	5.3	Non-executive positions 

 The Executive shall be entitled to take up one non-executive
appointment provided the discharge of her duties under this Agreement is not impaired as a result of the non-executive appointment and the appointment is approved by the Board in advance (such approval not to be unreasonably withheld). 

 

	5.4	Right to suspend duties and powers 

  

	 	(a)	During any notice period or if the Company believes it may be entitled to terminate the Employment for the purpose of investigating any matter in which the Executive is implicated or involved, the Company reserves the
right in its absolute discretion to suspend all or any of the Executive’s duties and powers on terms it considers expedient or to require her to perform only such duties, specific projects or tasks as are assigned to her expressly by the
Company (including the duties of another position of equivalent status) in any case for such period or periods and at such place or places (including, without limitation, the Executive’s home) as the Company in its absolute discretion deems
necessary (the “Garden Leave”). 

  

	 	(b)	The Company may, at its sole discretion, require that during the Garden Leave the Executive shall not: 

  

	 	(i)	enter or attend the premises of the Company or any Group Company; 

  

	 	(ii)	contact or have any communication with any client or prospective client or supplier of the Company or any Group Company in relation to the business of the Company or any Group Company; 

  
 8 

	 	(iii)	contact or have any communication with any employee, officer, director, agent or consultant of the Company or any Group Company in relation to the business of the Company or any Group Company; 

 

	 	(iv)	remain or become involved in any aspect of the business of the Company or any Group Company except as required by such companies; or 

 

	 	(v)	work either on her own account or on behalf of any other person. 

  

	 	(c)	During Garden Leave, the Executive will continue to receive her Salary and benefits but will not accrue any bonus, commission or share of profit. 

 

	5.5	Joint appointments 

 The Company shall be at liberty to appoint any other person or
persons to act jointly with the Executive in any position to which she may be assigned from time to time. 
  

	5.6	Group Policies 

 The Company has implemented a Code of Business Conduct and a number of
Policies all of which the Executive is obliged to comply with at all times during the Executive’s employment. In particular, the Executive’s attention is drawn to the sections of the Global Computer Usage, Email and Internet Policy which
indicate that the Company may from time to time monitor the Executive’s use of its communication systems, namely its computer systems and telephones. The Executive acknowledges that the Company has a legitimate interest in carrying out this
monitoring and that, by signing this Agreement, the Executive consents to it. 
  

	6.	HOURS OF WORK 

  

	6.1	The normal business hours of the Company are 9.00 am to 5.00 pm, Monday to Friday. However, the Executive shall be required to work such hours as are necessary to fulfil her duties under this Agreement. No
payment will be made for any additional hours worked by the Executive. 

  

	6.2	The Executive recognises that on account of her autonomous decision taking powers, the duration of her working time is not measured or predetermined and therefore she falls within the exemption set out in
Regulation 20 of the Working Time Regulations 1998 (“the Regulations”) and is thereby excluded from such Regulations as are referred to in Regulation 20. Notwithstanding the understanding of the parties that the Executive is an
employee in respect of whom Regulation 20 applies, the Executive agrees that, if the understanding of the parties is incorrect, she hereby opts out of the 48 hour week limit in Regulation 4, and that if she wishes to withdraw that opt-out, she will
give 3 months’ notice in writing to that effect. 

  

	7.	PLACE OF WORK 

 The Executive’s place of work will initially be the Company’s
offices at Lakeside Drive, London, NW10 7HQ but the Company may require the Executive to work at any other location for such periods as the Company may from time to time require. 

 

	8.	REMUNERATION 

  

	8.1	Basic Salary 

  

	 	(a)	 The Company shall pay to the Executive the Salary at the rate of £650,000 per annum, on or about the
27th day of each calendar month by credit transfer to her bank account 

  
 9 

	 	
payable by equal monthly instalments in arrears (or such other sum as may from time to time be agreed). 

  

	 	(b)	The Salary shall be inclusive of any fees to which the Executive may be entitled as a director of the Company or any Group Company. 

  

	 	(c)	Payment of the Salary to the Executive shall be made either by the Company or by a Group Company and, if by more than one company, in such proportions as the Board may from time to time think fit. 

 

	 	(d)	All payments described in this Agreement are gross amounts. All payments and benefits described in this Agreement will be subject to deductions of appropriate taxes and national insurance contributions before payment is
made to the Executive. 

  

	8.2	Salary review 

 The rate of Salary will normally be reviewed annually on 1 October
with the first such review expected to be in October 2016. The Company is not obliged to increase the Salary at any review. 
  

	8.3	Incentive Plans 

  

	 	(a)	In addition to her Salary, the Executive will be eligible to participate in the Diageo Long Term Incentive Plan (DLTIP) and Diageo Annual Incentive Plan (AIP), subject always to the rules of the plans as determined by
the Company from time to time. 

  

	 	(b)	The Executive’s participation in any such plans or schemes is at the discretion of the Company. If the Company shall make a payment or grant an award under such plans and/or schemes in any one year, this shall not
give rise to a contractual entitlement to a payment or award in future years. Further, the Company may at its discretion reduce the Executive’s participation in the DLTIP in the event that she fails to satisfy the minimum shareholding
requirement (based on his salary and length of service) applicable to her which will be notified to her from time to time. 

  

	 	(c)	Any shares awarded under the DLTIP will be subject to a right of forfeiture during either: 

  

	 	(i)	the applicable Retention Period, as defined in the DLTIP (if any); or 

  

	 	(ii)	if there is no applicable Retention Period, the period of 24 months beginning on the date that the beneficial ownership of the shares is transferred to the Executive. 

 

	 	(d)	If any of the events set out in rule 9.2 of the DLTIP occur during the period referred to in Clause 8.3(c) above, then, at the discretion of the Remuneration Committee, the Executive who is a participant under the DLTIP
may be required to transfer to the Company or to a person nominated by the Company, immediately upon demand by the Company, the number of shares determined by the Remuneration Committee. The consideration paid to the Participant will be either
nominal consideration or no consideration, at the discretion of the Remuneration Committee. 

  

	 	(e)	In connection with the grant of an award under the DLTIP, the Company may require the Executive to enter into any other documents which the Remuneration Committee consider necessary or desirable to give effect to the
terms of the award, including appointing a director of the Company as a power of attorney in respect to the shares and a blank stock transfer form in respect of the shares. 

  
 10 

	 	(f)	The Executive will be considered (at the sole discretion of the Company) for a bonus in respect of the then current bonus year in the event that the Employment is terminated by the Company pursuant to Clause 4.2, Clause
4.3 and Clause 4.5. The amount of bonus (if any) will be determined at the sole discretion of the Company and paid at the end of the bonus year at the same time as bonuses under the AIP are paid to employees who have remained in employment.

  

	 	(g)	All payments and/or benefits payable to the Executive are subject to and conditional upon: 

(i) the terms of applicable law, regulation and governance codes that regulate or govern executive pay from time to time; and 

(ii) the consent of the shareholders of the Company 

(together “Remuneration Governance”). 

The Company reserves the right to amend, reduce, hold back, defer, claw back and alter the structure of any payments and benefits payable to
the Executive in order to comply with Remuneration Governance. 
  

	8.4	Deductions 

 The Company shall be entitled to deduct from any sum due to the Executive
under the terms of this Agreement any monies that are owed by the Executive to the Company. 
  

	8.5	Corporate Governance 

 All payments and/or benefits payable to the Executive are subject
to and conditional upon: (i) the terms of applicable law, regulation and governance codes that regulate or govern executive pay from time to time; and (ii) the consent of the shareholders of the Company (together “Remuneration
Governance”). The Company reserves the right to amend, reduce, hold back, defer, claw back and alter the structure of any payments and benefits payable to the Executive in order to comply with Remuneration Governance. 

 

	9.	EXPENSES 

  

	9.1	Reimbursement 

 The Company shall reimburse the Executive in respect of all reasonable
expenses wholly, exclusively and necessarily incurred by her in the proper performance of her duties, subject to her providing such receipts or other appropriate evidence as the Company may require. 

 

	9.2	Company Credit Card 

 The Executive will be issued with a company credit card on
condition that she: 
  

	 	(a)	takes good care of such card and immediately reports any loss of it to the Company; 

  

	 	(b)	uses the card only for the purposes of the Company’s business or the business of the Group in accordance with any applicable Company policy; and 

 

	 	(c)	returns the card immediately to the Company on request. 

  
 11 

	10.	HOLIDAYS 

  

	10.1	The Executive shall be entitled, in addition to all Bank and Public holidays normally observed in England, to 28 working days’ paid holiday in each holiday year (being the period from 1 January to 31
December) together with such additional holidays as are acquired under the Diageo Flexible Benefits Programme. 

  

	10.2	In the respective holiday years in which the Employment commences or terminates, the Executive’s entitlement to holiday shall accrue on a pro rata basis for each completed calendar month of service during
the relevant year. 

  

	10.3	If, on the termination of the Employment, the Executive has exceeded her accrued holiday entitlement, the value of such excess, calculated by reference to clause 10.2 and the Salary, may be deducted by the
Company from any sums due to her. If the Executive has any unused holiday entitlement, the Company shall at its discretion either require the Executive to take such unused holiday during any notice period or make a payment to her in lieu of it
(calculated in accordance with this clause 10.3), provided always that if the Employment is terminated pursuant to clause 17.1 then, subject to the Regulations, the Executive shall not be entitled to any such payment. For these purposes, salary in
respect of one day’s holiday entitlement shall be calculated as 1/261 of Salary. 

  

	10.4	Holiday entitlement for one holiday year cannot be carried forward from one year to the next and failure to take holiday entitlement in the appropriate holiday year will lead to forfeiture of any accrued holiday
not taken without any right to payment in lieu of it provided always that any days of holiday not taken at the Company’s written request in one year may be carried forward to the next year. 

 

	11.	SICKNESS BENEFITS 

  

	11.1	Certification 

 If the Executive is absent from her duties as a result of sickness or
injury:- 
  

	 	(a)	for a period of 6 days or less, she will on her return to work on request, complete and produce a self-certificate; 

  

	 	(b)	for a period of 7 days or more she will, on request, produce medical certificates or “fit notes” 

to the Company in respect of such absence. 
  

	11.2	Payment of sick pay 

  

	 	(a)	Subject to clauses 2.1 and 17, and the Executive complying with clause 11.1, the Company shall continue to pay the Salary for the first twelve months’ absence on medical grounds in any one continuous period of
absence (or two or more linked periods as determined by the Social Security Contributions and Benefits Act 1992, as amended from time to time), provided that the Executive shall from time to time if required: 

 

	 	(i)	supply the Company with medical certificates covering any period of sickness or incapacity exceeding 6 days (including weekends); and 

 

	 	(ii)	 undergo at the Company’s expense, by a doctor appointed by the Company, any medical examination and the
Executive hereby authorises such doctor to 

  
 12 

	 	
disclose to, and discuss with the Company and its medical advisers, the results of such examinations. 

  

	 	(b)	Payment in respect of any other or further period of absence shall be at the Company’s discretion. 

  

	 	(c)	Any payment to the Executive pursuant to clause 11.2(a) shall be subject to set off by the Company in respect of any Statutory Sick Pay and any Social Security Sickness Benefit or other benefits to which the Executive
may be entitled. 

  

	 	(d)	Subject to clause 11.2(c), when all sick pay entitlement pursuant to clause 11.2(a) has been exhausted, no further salary will be payable by the Company to the Executive until the Executive has returned to active
service of the Company. 

  

	11.3	Absence caused by third party negligence 

 If the Executive’s absence shall be
occasioned by the actionable negligence of a third party in respect of which damages are recoverable, then all sums paid by the Company during the period of the absence shall constitute loans to the Executive who shall: 

 

	 	(a)	notify the Company immediately of all the relevant circumstances and of any claim, compromise, settlement or judgment made or awarded in connection with it; 

 

	 	(b)	give to the Company such information concerning the above matters as the Company may reasonably require; and 

  

	 	(c)	if the Company so requires, refund to the Company any amount received by her from any such third party provided that the refund shall be no more than the amount which she has recovered in respect of remuneration.

  

	12.	PENSION 

  

	12.1	The Company will at all times ensure that it complies with its auto-enrolment obligations in respect of the Executive under the Pensions Act 2008 (the “2008 Act”). 

 

	12.2	During the Employment the Executive shall be eligible for a pension benefit which is subject to the terms and conditions of the Diageo North America, Inc. Supplemental Executive Retirement Plan (the
“Supplemental Plan”). The Company will contribute a total of 20% of the Salary to the Supplemental Plan (less any amount contributed by the Company in respect of the Executive to an auto-enrollment pension scheme in accordance with
the 2008 Act). The terms and conditions of the Supplemental Plan may be amended at any time. 

  

	12.3	The Executive will be responsible for the payment of any taxes or charges which may arise in respect of her benefits under the Supplemental Plan. 

 

	12.4	A contracting out certificate under the Pension Schemes Act 1993 is not in force in respect of the Employment. 

  

	13.	OTHER BENEFITS 

  

	13.1	Insurance Schemes 

 During the Employment the Executive shall: 

 

	 	(a)	participate in such personal accident insurance at such level as the Company shall (in its absolute discretion) from time to time maintain for the benefit of the Executive; and 

  
 13 

	 	(b)	be provided with life insurance cover at a level of four times the Salary. 

  

	13.2	Conditions relating to insurance coverage 

 Clause 13.1 will be subject in each case to
the following terms and conditions: 
  

	 	(a)	the Executive’s and her family’s participation is subject to the Company’s rules regarding eligibility in force from time to time and the rules, terms and conditions of the relevant Scheme in force from
time to time; 

  

	 	(b)	the Company reserves the right to terminate the Executive’s or her family’s or the Company’s participation in any of the Schemes, substitute a new scheme for an existing Scheme and/or alter the level or
type of benefits available under any Schemes; 

  

	 	(c)	if the provider of one of the Schemes (e.g. an insurance company or pensions provider) refuses for any reason (whether under its own interpretation of the rules, terms and conditions of the relevant insurance policy or
otherwise) to accept a claim and/or provide the relevant benefit(s) to the Executive (or her family) under the applicable Scheme, the Company shall not be liable to provide (or compensate the Executive for the loss of) such benefit(s) nor shall it
be obliged to take action against the provider to enforce any rights under the Scheme; 

  

	 	(d)	the fact that the termination of the Employment under clauses 4 and 17 may result in the Executive or her family ceasing to be eligible to receive or continue to receive benefits under any Scheme does not remove the
Company’s right to terminate the Employment; and 

  

	 	(e)	the Executive’s acceptance of such variations to her terms and conditions of employment as may from time to time be required by the Company. 

 

	13.3	Flexible Benefits Scheme 

 During the Employment, the Executive will participate in the
Diageo Flexible Benefits Programme. This comprises a Flexible Allowance which will be reviewed from time to time and which will be £17,600 per annum as at the Commencement Date. With this allowance, the Executive may receive a combination
of any of the following benefits: 
  

	 	(a)	holidays; 

  

	 	(b)	company car(s); 

  

	 	(c)	private fuel; 

  

	 	(d)	financial consulting; and 

  

	 	(e)	private medical insurance. 

 The Flexible Benefits Programme allows the Executive to influence
the mix and level of benefits the Executive receives from the Company, within certain specified limits. Whilst the Company will take the Executive’s preferences into account, the ultimate decision as to the package of benefits received by the
Executive and as to the availability of any cash supplement is entirely at the Company’s discretion. The Company will offer the Executive a total package which the Executive may choose to accept. The offer may be revised from time to time but
shall not be reviewed more frequently than once a year. 

  
 14 

	13.4	Medical Examination 

 In accordance with Company policy on medical examinations, the
Executive will be entitled to an annual medical examination and test by a medical practitioner nominated by the Company. In addition, the Company may also require the Executive at any time to submit to a medical examination with such frequency as is
reasonable. The Executive will permit the results of such medical examinations to be disclosed to the Company. 
  

	13.5	Taxable Allowance 

 The Executive will be provided with a taxable product allowance, the
level of which will be notified to the Executive by the Company from time to time and will not exceed £1,250 per annum as at the Commencement Date. If the Executive is employed for part of a full calendar year, she will receive a pro
rated allowance. 
  

	13.6	Professional Subscription Fees 

 The Company shall pay on the Executive’s behalf the
annual subscription fees for one professional body relevant to the Employment. 
  

	13.7	Car or travel allowance 

 The Executive may choose to receive either: 

 

	 	(a)	the use of a chauffeur-driven car provided by the Company from time to time; or 

  

	 	(b)	a travel allowance of £10,000 per annum, subject to deduction of tax and National Insurance contributions payable in equal monthly instalments in arrears. The travel allowance does not form part of the
Executive’s Salary for the purpose of payments under the Supplemental Plan or otherwise. 

  

	13.8	General Terms 

 All benefits provided under this clause 13 are subject to the rules of
any applicable schemes from time to time in force. 
  

	14.	RESTRICTIONS DURING THE EMPLOYMENT 

  

	14.1	Disclosure of other interests 

 The Executive shall disclose to the Board any interest of
her own (or that of her partner or of any child of hers or of her partner under eighteen years of age): 
  

	 	(a)	in any trade, business or occupation whatsoever which is in any way similar to any of those in which the Company or any Group Company is involved; and 

 

	 	(b)	in any trade, business or occupation carried on by any supplier or customer of the Company or any Group Company whether or not such trade, business or occupation is conducted for profit or gain. 

 

	14.2	Restrictions on other activities and interests of the Executive 

  

	 	(a)	 During the Employment the Executive shall not at any time, without the prior written consent of the Board, either
alone or jointly with any other person, carry on or be directly or indirectly employed, engaged, concerned or interested in any business, prospective business or undertaking other than a Group Company. Nothing contained in this clause shall preclude
the Executive from being a Minority Holder unless the 

  
 15 

	 	
holding is in a company that is a direct business competitor of the Company or any Group Company in which case, the Executive shall obtain the prior consent of the Board to the acquisition or
variation of such holding. 

  

	 	(b)	If the Executive, with the consent of the Board, accepts any other appointment she must keep the Company accurately informed of the amount of time she spends working under that appointment. 

 

	14.3	Transactions with the Company 

 Subject to any regulations issued by the Company, the
Executive shall not be entitled to receive or obtain directly or indirectly any discount, rebate, commission or any other form of gift or gratuity (any of these referred to as a “Gratuity”) as a result of the Employment or any sale
or purchase of goods or services effected or other business transacted (whether or not by her) by or on behalf of the Company or any Group Company and if she (or any person in which she is interested) obtains any Gratuity she shall account to the
Company for the amount received by her (or a due proportion of the amount received by the person having regard to the extent of her interest therein). 
  

	14.4	Dealing in securities 

 The Executive shall comply with every rule of law (including but
not limited to the insider dealing provisions contained in Part V of the Criminal Justice Act 1993), the Financial Conduct Authority’s listing rules’ Model Code for transactions in securities by directors of listed companies, certain
employees and persons connected with them and every regulation of the Company for the time being in force in relation to dealings in shares or other securities of the Company or any Group Company. Under Rule 4 of the Model Code, the person to whom
notice should be given and from whom acknowledgement must be received before the Executive may deal in securities shall be the Company Secretary of the Company from time to time or such other person as shall be notified to the Executive. The
Executive also acknowledges that under the provisions of the Model Code the Executive must seek to ensure compliance with the Model Code by persons connected with the Executive (within the meaning of section 96B and Schedule 11B of the Financial
Services and Markets Act 2000) including, without limitation, the Executive’s spouse and dependent children, and by investment managers acting on the Executive’s behalf or on behalf of connected persons. The Executive undertakes to procure
that dealings by or on behalf of such persons are in compliance with the Model Code. 
  

	14.5	Compliance with the code on Corporate Governance 

 The Executive shall comply, to the
extent that the Board considers appropriate for a company the size of the Company, with the provisions of “The UK Corporate Governance Code” a corporate governance code issued by the Financial Reporting Council (as the same is amended from
time to time). 
  

	15.	CONFIDENTIAL INFORMATION AND COMPANY DOCUMENTS 

  

	15.1	Confidentiality 

 The Executive shall not during the Employment (except in the proper
performance of her duties or for the purpose of obtaining legal, accountancy or pension advice or with the express written consent of the Board) or at any time (without limit) after the termination of the Employment except in compliance with an
order of a competent court, the HMRC or any regulatory authority: 

  
 16 

	 	(a)	Divulge or communicate to any person, company, business entity or other organisation; 

  

	 	(b)	use for her own purposes or for any purposes other than those of the Company or any Group Company; or 

  

	 	(c)	through any failure to exercise due care and diligence, permit or cause any unauthorised disclosure of any Confidential Information. 

These restrictions shall cease to apply to any information that shall become available to the public generally otherwise than through any
breach by the Executive of the provisions of this Agreement or other default of the Executive. 
  

	15.2	Property of the Company 

 The Executive acknowledges that all books, notes, memoranda,
records, lists of customers and suppliers and employees, correspondence, documents, computer and other discs and tapes, data listings, codes, designs and drawings and other documents and material whatsoever (whether made or created by the Executive
or otherwise) relating to the business of the Company or any Group Company (and any copies of the same): 
  

	 	(a)	shall be and remain the property of the Company or the relevant Group Company; and 

  

	 	(b)	shall be handed over by the Executive to the Company or to the relevant Group Company on demand and in any event on the termination of the Employment and the Executive shall certify that all such property has been
handed over on request by the Board; 

 provided that following the termination of the Employment, the Executive shall be
provided with reasonable access to Board Minutes and agendas of the Company or any Group Company relating to a period during which she was a director of the Company or such Group Company that shall nevertheless remain confidential. 

 

	16.	INVENTIONS AND OTHER INTELLECTUAL PROPERTY 

  

	16.1	The parties foresee that the Executive may make inventions or create other Intellectual Property in the course of her duties and agree that in this respect the Executive has a special responsibility to further
the interests of the Company and any Group Company. 

  

	16.2	Any invention, improvement, design, process, information, copyright work, computer program, trade mark, trade name or get-up, work or other output made, created or discovered by the Executive during the
Employment (whether capable of being patented or registered or not and whether or not made or discovered in the course of the Employment) in conjunction with or in any way affecting or relating to the business of the Company or of any Group Company
or capable of being used or adapted for use in or in connection with such business, together with all Intellectual Property subsisting therein, (collectively “Intellectual Property Rights”) shall be disclosed immediately to the
Company and shall (subject to sections 39 to 43 Patents Act 1977) belong to and be the absolute property of the Company or such Group Company as the Company may direct and the Executive hereby assigns to the Company with full title guarantee and by
way of present assignment of future rights, all such copyright, database rights, design rights (and any other Intellectual Property capable of assignment by way of present assignment of future rights) which may fall within the definition of the
Intellectual Property Rights absolutely for the full term of those rights. 

  
 17 

	16.3	If and whenever required so to do by the Company the Executive shall at the expense of the Company or such Group Company as the Company may direct: 

 

	 	(a)	apply or join with the Company or such Group Company in applying for patent or other protection or registration in the United Kingdom and in any other part of the world for any Intellectual Property Rights; and

  

	 	(b)	execute all instruments and do all things necessary for vesting all Intellectual Property Rights (including such patent or other protection or registration when so obtained) and all right, title and interest to and in
them absolutely, with full title guarantee and as sole beneficial owner, in the Company or such Group Company or in such other person as the Company may specify. 

  

	16.4	The Executive irrevocably and unconditionally waives all rights under Chapter IV of Part I Copyright Designs and Patents Act 1988 in connection with her authorship of any existing or future copyright work in the
course of the Employment, in whatever part of the world such rights may be enforceable including, without limitation: 

  

	 	(a)	the right conferred by section 77 of that Act to be identified as the author of any such work; and 

  

	 	(b)	the right conferred by section 80 of that Act not to have any such work subjected to derogatory treatment. 

  

	16.5	The Executive irrevocably appoints the Company to be her Attorney in her name and on her behalf to execute any such instrument or do any such thing and generally to use her name for the purpose of giving to the
Company the full benefits of this clause. A certificate in writing in favour of any third party signed by any director or by the Secretary of the Company that any instrument or act falls within the authority conferred by this Agreement shall be
conclusive evidence that such is the case. 

  

	16.6	Nothing in this clause 16 shall be construed as restricting the rights of the Executive or the Company under sections 39 to 43 Patents Act 1977. 

 

	17.	TERMINATION 

  

	17.1	Termination events 

  

	 	(a)	Notwithstanding any other provisions of this Agreement, in any of the following circumstances the Company may terminate the Employment summarily by serving written notice on the Executive to that effect. In such event
the Executive shall not be entitled to any further payment from the Company except such sums as shall have accrued due at the date of service of such notice. The circumstances are if the Executive: 

 

	 	(i)	is guilty of any gross misconduct or gross incompetence; 

  

	 	(ii)	commits any serious breach of this Agreement or of the Diageo Code of Business Conduct, or any willful neglect or unreasonable refusal to discharge her duties provided that if such breach is capable of remedy, she shall
have failed to remedy it within such reasonable period as is specified in a written notice from the Company pointing out the breach and requiring it to be remedied; 

 

	 	(iii)	repeats or continues (after warning) any breach of this Agreement or of the Diageo Code of Business Conduct; 

  
 18 

	 	(iv)	is guilty of any fraud, dishonesty or conduct tending to bring herself, the Company or any Group Company into disrepute; 

  

	 	(v)	commits any act of bankruptcy or takes advantage of any statute for the time being in force offering relief for insolvent debtors; 

  

	 	(vi)	is convicted of any criminal offence (other than minor offences under the Road Traffic Acts or the Road Safety Acts for which a fine or non-custodial penalty is imposed) which might reasonably be thought to affect
adversely the performance of her duties; 

  

	 	(vii)	has an order made against her disqualifying her from acting as a company director or is found to have committed any serious disciplinary offence by any professional or other body, which undermines the confidence of the
Board in her continued employment with the Company; or 

  

	 	(viii)	resigns other than at the request of the Company or otherwise ceases to be or becomes prohibited by law from being a director of the Company, otherwise than at the Company’s request. 

Any delay by the Company in exercising such right of termination shall not constitute a waiver of it. The proper exercise by the Company of its
right of termination under this clause is without prejudice to any other rights or remedies which it or any Group Company may have or be entitled to exercise against the Executive. 

 

	 	(b)	If at any time the Executive is unable to perform her duties properly because of ill health accident or otherwise for a period or periods totalling at least 12 months, or becomes incapable by reason of mental disorder
of managing and administering her property and affairs, then the Company may in its absolute discretion terminate the Employment by giving her not less than three months’ written notice to that effect provided that, if at any time during the
currency of such a notice the Executive shall provide a medical certificate satisfactory to the Board to the effect that she has fully recovered her physical and/or mental health and that no recurrence of illness or incapacity can reasonably be
anticipated, the Company shall withdraw the notice unless, by that date, a replacement for the Executive has been appointed. 

  

	17.2	Events on Termination 

 On the termination of the Employment or upon the Company having
exercised its rights under clause 4.4 or if requested to do so by the Company in circumstances where the Executive has been prevented from performing her duties through long term sickness (for a period of 12 months), the Executive shall: 

 

	 	(a)	at the request of the Company resign from office as a director of the Company and all offices held by her in any Group Company and shall transfer to the Company without payment or as the Company may direct any
qualifying shares held by her as nominee for the Company provided however that such resignation shall be without prejudice to any claims which the Executive may have against the Company or any Group Company arising out of the termination of the
Employment; 

  

	 	(b)	 immediately deliver to the Company all materials within the scope of Clause 15.2, any Company car, mobile
telephone or other Company equipment in her possession and all keys, credit cards, and other property of or relating to the business of the Company or of any Group Company which may be in her possession or under her power or control but excluding,
in the event that the Company exercises its rights 

  
 19 

	 	
under Clause 4.4, any Company car, mobile telephone or other Company equipment provided to the Executive for her benefit during the Employment; 

and the Executive irrevocably authorises the Company to appoint any person in her name and on her behalf to sign any documents and do any
things necessary or requisite to give effect to her obligations under this Clause 16.2. 
  

	17.3	Reconstruction 

 If the Employment shall be terminated (otherwise than in circumstances
set out in Clause 4.5) for the purpose of reorganisation, reconstruction or amalgamation for whatever reason and the Executive is offered employment with any concern or undertaking resulting from such reorganisation, reconstruction or amalgamation
on terms and conditions which as a whole are no less favourable than the terms of this Agreement, then she shall have no claim against the Company in respect of the termination of the Employment. 

 

	17.4	No public statement 

 The Executive shall not at any time during any period when she is
required to cease the performance of her duties under Clause 5.4 or after the Termination Date make any public statement in relation to the Company or any Group Company or any of their officers or employees. The Executive shall not without the
Company’s consent after the termination of the Employment represent herself as being employed by or connected with the Company or any Group Company. 
  

	17.5	No claim for loss of incentives or benefits 

 On the termination of the Employment
(howsoever arising, including lawfully or unlawfully), the Executive shall not be entitled to any compensation or payment for the loss of any incentives or benefits granted under Clause 8.3 or any benefit which could have been derived from them,
whether the compensation or payment is claimed by way of a payment in lieu of notice, damages for wrongful dismissal, breach of contract or loss of office, or compensation for unfair dismissal, or on any other basis. 

 

	18.	RESTRICTIVE COVENANTS 

  

	18.1	Definitions 

 Since the Executive is likely to obtain Confidential Information in the
course of the Employment and personal knowledge of and influence over suppliers, customers, clients and employees of the Company and Group Companies, the Executive hereby agrees with the Company that in addition to the other terms of this Agreement
and without prejudice to the other restrictions imposed upon her by law, she will be bound by the covenants and undertakings contained in Clauses 18.2 to 18.5. In this Clause 18, unless the context otherwise requires: 

 

			
	 “Customer”
	  	means any person to which the Company distributed, sold or supplied Restricted Products or Restricted Services during the Relevant Period and with which, during that period either the Executive, or any employee under the direct or
indirect supervision of the Executive, had material dealings in the course of the Employment, but always excluding any division, branch or office of such person with which the Executive and/or
any

  
 20 

			
		  	such employee had no dealings during that period;
		
	 “Prospective Customer”
	  	means any person with which the Company had discussions during the Relevant Period regarding the possible distribution, sale or supply of Restricted Products or Restricted Services and with which during such period the Executive, or
any employee who was under the direct or indirect supervision of the Executive, had material dealings in the course of the Employment, but always excluding any division, branch or office of that person with which the Executive and/or any such
employee had no dealings during that period;
		
	 “Relevant Period”
	  	means: (i) where the Employment is continuing, the period of the Employment; and (ii) where the Employment has terminated, the period of 12 months immediately preceding the Termination Date;
		
	 “Restricted Employee”
	  	means any person who was a director, employee or consultant of the Company or any Group Company or any joint venture between the Company (or any Group Company) and a third party at any time within the Relevant Period who by reason
of that position and in particular either (i) their seniority (level 3 or above) and expertise or (ii) knowledge of Confidential Information or knowledge of or influence over the clients, customers or contacts of the Company is likely to cause
damage to the Company if they were to leave the employment of the Company and become employed by a competitor of the Company;
		
	 “Restricted Period”
	  	means the period commencing on the Termination Date and, subject to the terms of 17.4, continuing for 9 months;
		
	 “Restricted Products”
	  	means any products, equipment or machinery researched into, developed, manufactured, supplied, marketed, distributed or sold by the Company and with which the duties of the Executive were materially concerned or for which she was
responsible during the Relevant Period, or any products, equipment or machinery of the same type or materially similar to those products, equipment or machinery;
		
	 “Restricted Services”
	  	means any services (including but not limited to technical and product support, technical advice and customer services) researched into, developed or supplied by the Company and with which the duties of the Executive were materially
concerned or for which she was responsible during the Relevant Period, or any services of the same type or materially similar to those services;
		
	 “Supplier”
	  	means any supplier, agent, distributor or other person who, during the Relevant Period was in the habit of dealing with the Company and with which, during that period, the Executive, or any employee under the direct or indirect
supervision of the Executive, had material dealings in the course of the Employment.

  

	18.2	Restrictive covenants 

 Both during the Employment and during the Restricted Period, the
Executive will not, without the prior written consent of the Company (such consent not to be unreasonably withheld), 

  
 21 

 
whether by herself, through her employees or agents or otherwise and whether on her own behalf or on behalf of any person, directly or indirectly: 

 

	 	(a)	so as to compete with the Company, solicit business from or canvas any Customer or Prospective Customer in respect of Restricted Products or Restricted Services; 

 

	 	(b)	so as to compete with the Company, accept orders from, act for or have any business dealings with, any Customer or Prospective Customer in respect of Restricted Products or Restricted Services; 

 

	 	(c)	be employed, engaged or concerned, or at all interested (except as a Minority Holder) in:- (i) the businesses of AB InBev, Bacardi Limited, Brown-Forman, Carlsberg A/S, Heineken NV, PernodRicard or SAB Miller. The
Company may notify the Executive from time to time of addition to the foregoing list of companies, such additions being businesses which are similar to and compete with any business being carried on by the Company or any Group Company; or
(ii) that part of a business or person which is involved in the business of researching into, developing, manufacturing, distributing, selling, supplying or otherwise dealing with Restricted Products or Restricted Services, if the business or
person is or seeks to be in competition with the Company; 

  

	 	(d)	solicit or induce or endeavour to solicit or induce any person who, on the Termination Date, was a Restricted Employee (and with whom the Executive had dealings during the Relevant Period) to cease working for or
providing services to the Company, whether or not any such person would thereby commit a breach of contract; 

  

	 	(e)	employ or otherwise engage any Restricted Employee in the business of researching into, developing, manufacturing, distributing, selling, supplying or otherwise dealing with Restricted Products or Restricted Services if
that business is, or seeks to be, in competition with the Company; or 

  

	 	(f)	solicit or induce or endeavour to solicit or induce any Supplier to cease to deal with the Company and shall not interfere in any way with any relationship between a Supplier and the Company. 

 

	18.3	Application of restrictive covenants to other Group Companies 

 Clause 18 shall also
apply as though references to the “Company” include references to each Group Company in relation to which the Executive has in the course of the Employment or by reason of rendering services to or holding office in such Group Company: 

 

	 	(a)	acquired knowledge of its products, services, trade secrets or Confidential Information; or 

  

	 	(b)	had personal dealings with its Customers or Prospective Customers; or 

  

	 	(c)	supervised directly or indirectly employees having personal dealings with its Customers or Prospective Customers. 

The obligations undertaken by the Executive pursuant to this Clause 18 shall, with respect to each Group Company, constitute a separate and
distinct covenant and the invalidity or unenforceability of any such covenant shall not affect the validity or enforceability of the covenants in favour of any other Group Company. 

  
 22 

	18.4	Effect of suspension on Restricted Period 

 If the Company exercises its right to suspend
the Executive’s duties and powers under Clause 5.4 after notice of termination of the Employment has been given, the aggregate of the period of the suspension and the Restricted Period shall not exceed nine months and if the aggregate of the
two periods would exceed nine months, the Restricted Period shall be reduced accordingly. 
  

	18.5	Further undertakings 

 The Executive hereby undertakes to the Company that she will not
at any time: 
  

	 	(a)	during the Employment or after the Termination Date engage in any trade or business or be associated with any person engaged in any trade or business using any trading names used by the Company or any Group Company
including the name(s) or incorporating the word(s) “Diageo”; or 

  

	 	(b)	after the Termination Date represent or otherwise indicate any continuing association or connection with the Company or any Group Company or for the purpose of carrying on or retaining any business represent or
otherwise indicate any past association with the Company or any Group Company. 

  

	18.6	Severance 

 The restrictions in this Clause 18 (on which the Executive has had the
opportunity to take independent advice, as the Executive hereby acknowledges) are separate and severable restrictions and are considered by the parties to be reasonable in all the circumstances. It is agreed that if any such restrictions, by
themselves, or taken together, shall be adjudged to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company or a Group Company but would be adjudged reasonable if some part of it were
deleted, the relevant restriction or restrictions shall apply with such deletion(s) as may be necessary to make it or them valid and enforceable. 
  

	19.	DISCIPLINARY AND GRIEVANCE PROCEDURES 

  

	19.1	If the Executive wishes to obtain redress of any grievance relating to the Employment or is dissatisfied with any reprimand, suspension or other disciplinary step taken by the Company, she may apply in writing to
the Chief Executive, setting out the nature and details of any such grievance or dissatisfaction. Should the Executive wish to appeal against any grievance decision, she should submit her appeal in writing to the Chairman whose decision shall be
final. The provisions of this Clause shall not apply in any event, to any action taken by the Company under Clause 17.1(a) or Clause 5.4. 

  

	19.2	There are no specific disciplinary rules which apply to the Executive and any disciplinary matters affecting her will be dealt with by the Chief Executive. Should the Executive wish to appeal against any
disciplinary action, she should submit her appeal in writing to the Chairman whose decision on such appeal shall be final. 

  

	19.3	The provisions of Clauses 19.1 and 19.2 do not form part of the Executive’s contract of employment. 

  

	20.	DATA PROTECTION 

 For the purposes of the Data Protection Act 1998, the Executive
consents to the Company’s processing of personal data, including Sensitive Data, of which the Executive is the subject, details of which are specified in the Company’s Data Privacy Policy. In particular: 

  
 23 

	 	(a)	The Executive agrees that personal data relating to the Executive which has been or is in the future obtained by the Group may be held and processed by the Group either by computer or manually for any purpose relating
to the administration, management and operation of the Executive’s employment, or in relation to the Group’s legal obligations or business needs; 

  

	 	(b)	The Executive hereby agrees that Sensitive Data concerning the Executive which have been or is in the future obtained by the Group may also be held and processed as above for the purposes of keeping under review
equality of opportunity and for ensuring the Company’s compliance with any legal obligations; and 

  

	 	(c)	Due to the multinational nature of the Group’s business, it may be necessary for the Group’s overseas offices to have access to information held about the Executive in the UK by the Group. However, it is only
intended that information about the Executive will be used by the Group’s overseas offices for the purposes of enabling the Group to deal with personnel issues connected with the Executive’s employment, including advising relevant
statutory authorities in order to obtain a work permit or visa or assisting in the Executive’s secondment to an overseas office for payroll purposes. The Executive agrees that the Company may, where appropriate, transfer personal information
about the Executive to the Group’s overseas offices. 

  

	21.	NOTICES 

  

	21.1	Any notice or other document to be given under this Agreement shall be in writing and may be given personally to the Executive or to the Secretary of the Company (as the case may be) or may be sent by first class
post or other fast postal service or by facsimile transmission to, in the case of the Company, its registered office for the time being and in the case of the Executive either to her address shown on the face of this Agreement or to her last known
place of residence. 

  

	21.2	Any such notice shall (unless the contrary is proved) be deemed served when in the ordinary course of the means of transmission it would first be received by the addressee in normal business hours. In the case of
first class post, this shall be deemed to be no later than two working days after posting. In proving such service it shall be sufficient to prove, where appropriate, that the notice was addressed properly and posted, or that the facsimile
transmission was dispatched. 

  

	22.	FORMER CONTRACTS OF EMPLOYMENT 

  

	22.1	This Agreement and the documents referred to in it, constitute the entire agreement and understanding of the parties. 

  

	22.2	This Agreement shall be in substitution for any previous contracts, whether by way of letters of appointment, agreements or arrangements, whether written, oral or implied, relating to the employment of the
Executive, which shall be deemed to have been terminated by mutual consent as from the Commencement Date and the Executive acknowledges that she has no outstanding claims of any kind against the Company or any Group Company in respect of any such
contract. 

  

	22.3	For the avoidance of doubt, this clause shall not affect benefits which have already accrued to the Executive prior to the date hereof under any pre-existing scheme or arrangement by virtue of which she was
entitled to benefits. 

  

	23.	CHOICE OF LAW AND SUBMISSION TO JURISDICTION 

  

	23.1	This Agreement shall be governed by and interpreted in accordance with English law. 

  
 24 

	23.2	The parties submit to the exclusive jurisdiction of the English courts but this Agreement may be enforced by the Company in any court of competent jurisdiction. 

 

	24.	GENERAL 

  

	24.1	The expiration or termination of this Agreement shall not prejudice any claim which either party may have against the other in respect of any pre-existing breach of or contravention of or non-compliance with any
provision of this Agreement nor shall it prejudice the coming into force or the continuance in force of any provision of this Agreement which is expressly or by implication intended to or has the effect of coming into or continuing in force on or
after such expiration or termination. 

  

	24.2	No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise by the Company of any right, power or
privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. 

  

	24.3	There are no collective agreements directly affecting the Executive’s employment. 

  

	24.4	This Agreement constitutes the written statement of the terms of employment of the Executive provided in compliance with Part I of the ERA. 

 

	24.5	A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement but this does not affect any right or remedy of a third
party which exists or is available apart from that Act. 

  

							
	Executed as a deed	  	)	  		  	
	by the Company	  	)	  	  
	  	
		  		  	Director	  	

 In the presence of: 
  

			
	 	 	 
	  

Signature of witness

		
	 Name:
	 	  

		
	 Address:
	 	  

  

  
 25 

							
	Executed as a deed by	  	)	  		  	
	the Executive	  	)	  	  
	  	

 In the presence of: 
  

			
	 	 	 
	  

Signature of witness

		
	 Name:
	 	  

		
	 Address:
	 	  

  

  
 26

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