8-K: Current report filing

Exhibit 10.1

Execution Version

TRANSITION AGREEMENT AND RELEASE

THIS TRANSITION AGREEMENT AND RELEASE (the “Agreement”) is made effective as of the 8th day of July, 2020 (the “Effective Date”), except as otherwise provide herein, among Omega Healthcare Investors, Inc. (“Parent”), Omega Asset Management LLC (the “Company”) and Michael D. Ritz (“Executive”). The Parent, the Company and the Executive, when collectively referred to, are hereinafter identified as the “Parties”.

INTRODUCTION

Effective August 15, 2020 (the “Transition Effective Date”), Executive will terminate employment from the Company and its “Affiliates,” which shall mean, for purposes of this Agreement, any person, firm, corporation, partnership, association or entity that, directly or indirectly or through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Company; and the term of the Employment Agreement effective January 1, 2020 among Parent, the Company and Executive (the “Employment Agreement”) is hereby terminated as of August 15, 2020. In addition, effective as of August 16, 2020, Parent and Executive shall enter into a Consulting Agreement (the “Consulting Agreement”), substantially in the form attached as Exhibit A hereto, pursuant to which Executive shall perform business consulting and business advisory services to Parent and its Affiliates from and after August 16, 2020 through January 1, 2021. As a result of the level of services expected under the Consulting Agreement, Executive is expected to incur a “Separation from Service” within the meaning of Section 409A of the Internal Revenue Code on November 2, 2020. Pursuant to the Employment Agreement, Executive’s termination of employment on August 15, 2020 constitutes a termination of employment by the Company without “Cause,” as defined in the Employment Agreement, and as a result, Executive is entitled to certain payments, including prorated incentive compensation. Further, the Company recognizes that due in part to Executive’s long tenure with the Company and its Affiliates, Executive has unique knowledge, experience and skills, and the Company has a unique need to engage Executive for an interim period to assist in a smooth transition of his duties and knowledge to other officers. Accordingly, the Parties desire to enter into this Agreement pursuant to which Executive will receive certain compensation as provided under the Employment Agreement and certain other prorated incentive compensation and agree to provide transitional consulting services to the Company from August 16, 2020 through January 1, 2021, in each case upon the terms set forth below.

NOW, THEREFORE, the Parties agree as follows:

1.            Terms and Conditions of Engagement.

(a)            Transitional Employment and Consulting Agreement. The Company and Executive agree that Executive shall remain employed by the Company through and until August 15, 2020, and Parent and Executive shall enter into the Consulting Agreement, pursuant to which Executive shall perform such business consulting and business advisory services to Parent and its Affiliates as Parent may require from time to time from and after August 16, 2020 through January 1, 2021.

Execution Version

2.            Compensation.

The Parties hereby agree that, in consideration for Executive’s promises contained herein, the Executive shall remain employed in his current role and be paid his base salary at his current rate through and until the Transition Effective Date, as well as continue participation in any Company benefit plans through and until the Transition Effective Date. Further, in consideration for Executive’s promises contained herein, and provided that Executive executes this Agreement and returns it to the Company within twenty-one (21) days of it first being provided to Executive (regardless of whether revisions are made after that date), executes and returns to the Company the Release Agreement described in Section 2(e) hereof as of August 16, 2020, and does not challenge any portion of this Agreement, including the Release Agreement, or revoke the Release Agreement within the revocation period provided therein, and provided that Executive complies with this Agreement, the Employment Agreement and Intellectual Property Agreement (as defined below), Executive shall be entitled to receive the following amounts (collectively referred to herein as the “Transition Amounts”), in accordance with Sections 3(b) and 3(c)(1) of the Employment Agreement, in addition to any consulting fees payable pursuant to the Consulting Agreement:

(a)            Benefits. Following the Transition Effective Date, should Executive elect to receive benefits through COBRA, Executive shall be entitled to, in accordance with Section 3(c)(i)(B) of the Employment Agreement, payment of 100% of the applicable monthly COBRA premium under the Company’s group health plan for the coverage elected by Executive, his spouse and his eligible dependents, continued for the lesser of eighteen (18) month or until such COBRA coverage for Executive (or his spouse or dependents) terminates, which the Company shall pay directly to its group health plan insurer on Executive’s behalf, provided however, that if such payment would violate applicable law or result in liability or penalties under applicable law, the Company shall instead pay Executive a taxable amount equal to the amount of each such monthly premium, with one-half of each monthly premium being added to each of the two monthly installment payments in clause (b) below until all such required taxable amounts have been paid.

(b)            Transition Payment. Subject to lawful deductions, the gross sum of $853,455, equal to one and one-half times the sum of (i) Executive’s annual base salary plus (ii) an amount equal to Executive’s “Average Annual Bonus” as defined in the Employment Agreement (the “Transition Payment”), in accordance with Section 3(c)(i)(A) of the Employment Agreement. Executive acknowledges and agrees that payment of the Transition Payment shall be made in substantially equal installments not less frequently than twice per month over the eighteen (18) month period commencing as of the date of his Separation from Service (expected to be November 2, 2020), provided that, the first payment shall be made sixty (60) days following the date of Separation form Service (or the first business day following such 60 day period) and shall include all payments accrued from the date of Separation from Service to the date of the first payment.

Execution Version

(c)            Equity Awards. In accordance with Section 3(b) of the Employment Agreement, any rights to, amounts due under or vesting of any unvested and outstanding equity awards made by Parent or any of its Affiliates to Executive, as specified according to the terms and conditions of such awards or grants or pursuant to any plans or documents otherwise governing such awards or grants, provided that, if Executive complies with the Consulting Agreement and does not terminate the Consulting Agreement before January 1, 2021 and the Company does not terminate the Consulting Agreement before January 1, 2021 due to breach by Executive, the prorated vesting for such awards shall assume that Executive has provided services through January 1, 2021, reflecting the period of services to be provided by Executive pursuant to the Consulting Agreement, instead of through the date of his termination of employment by the Company without Cause. For the avoidance of doubt, the amounts of all such outstanding equity awards due to Executive hereunder are limited to the amounts specified below, but otherwise remain subject to all the terms and conditions of such equity awards:

Execution Version

(d)            Expenses. Executive shall be entitled to be reimbursed in accordance with Company policy for reasonable and necessary expenses incurred by Executive in connection with the performance of Executive’s duties of employment hereunder through the Transition Effective Date in accordance with the Employment Agreement.

(e)            Release Contingency. The payments to Executive required by Sections 2(a) through 2(c) are contingent upon Executive executing the Release Agreement attached hereto as Exhibit B (the “Release Agreement”) on August 16, 2020, and delivering it to the Company on August 16, 2020 and not revoking the Release Agreement in accordance with its procedures within the revocation period provided in the Release Agreement. If Executive fails to timely execute and deliver the Release Agreement or if Executive revokes the Release Agreement within the revocation period provided in the Release Agreement, this Agreement shall thereupon automatically terminate, without the requirement of any further action by any party, provided that the provisions of Sections 4 and 5 hereof shall continue to apply to Executive.

(f)            Section 409(a). All payments provided for in this Agreement are intended to be exempt from Code Section 409A to the maximum extent possible, and any payments that are subject to Code Section 409A are intended to be compliant therewith, and this Agreement shall be construed consistent with such intent. While the Company intends that no payment under this Agreement shall be subject to tax under Code Section 409A, the Company provides no guarantee of tax consequences to Executive and Executive shall be responsible for Executive’s own taxes. Notwithstanding the foregoing, if the total payments to be paid to Executive hereunder, along with any other payments to Executive, would result in Executive being subject to the excise tax imposed by Code Section 4999, the Company shall reduce the aggregate payments to the largest amount which can be paid to Executive without triggering the excise tax, but only if and to the extent that such reduction would result in Executive retaining larger aggregate after-tax payments. The determination of the excise tax and the aggregate after-tax payments to be received by Executive will be made by the Company after consultation with its advisors and in material compliance with applicable law. For this purpose, the Parties agree that the payments provided for in Section 3(c)(i) of the Employment Agreement are intended to be reasonable compensation for refraining from performing services after termination of employment (i.e., Executive’s obligations pursuant to Sections 4, 5 and 6) to the maximum extent possible, and if necessary or desirable, the Company will retain a valuator or consultant to determine the amount constituting reasonable compensation. If payments are to be reduced, to the extent permissible under Code Section 4999, payments will be reduced in a manner that maximizes the after-tax economic benefit to Executive and to the extent consistent with that objective, in the following order of precedence: (A) first, payments will be reduced in order of those with the highest ratio of value for purposes of the calculation of the parachute payment to projected actual taxable compensation to those with the lowest such ratio, (B) second, cash payments will be reduced before non-cash payments, and (C) third, payments to be made latest in time will be reduced first. Any reduction will be made in a manner that is intended to avoid a tax being incurred under Code Section 409A.

Execution Version

(g)            Incentive Recovery Policy. Pursuant to Section 8 of the Employment Agreement, Executive has agreed to be bound by the Company’s Incentive Compensation Recovery Policy, and that this provision shall survive termination of the Employment Agreement and this Agreement.

3.            Termination.

(a)            Termination. This Agreement may be terminated only: (i) by mutual agreement of the Parties; (ii) as provided in Section 2, as a result of the failure of Executive to timely execute and deliver the Release Agreement or as a result of Executive revoking the Release Agreement or (iii) by the Company, as a result of Executive’s material breach of this Agreement or the Employment Agreement, and if the breach is determined to be curable in the reasonable judgment of the Company, only if the Company has first given Executive written notice of the breach and a reasonable opportunity to cure the same. Notice of termination shall be given prior to termination in writing and shall specify the effective date of termination. Except for earned and accrued salary and benefits and expenses under Sections 2 and 2(d), Executive shall not be entitled to any payments if this Agreement is terminated under clauses (ii) or (iii) above.

(b)            Survival. The covenants of Executive in Sections 4 and 5 hereof and shall survive the termination of this Agreement and shall not be extinguished thereby.

4.            Restrictive Covenants.

Executive previously agreed pursuant to Sections 4, 5, 6 and 8 of the Employment Agreement to be subject to certain nondisclosure, cooperation noncompetition, nonsolicitation and nondisparagement obligations, as well as the Company’s Incentive Compensation Recovery Policy and Intellectual Property Agreement, each of which survived his termination of employment. Executive confirms that he agrees to comply with his obligations pursuant to Sections 4, 5, 6 and 8 of the Employment Agreement and that Executive’s compliance with the same shall be a condition of his receiving the amounts payable under Sections 2(a) through 2(c) hereof.

5.            Remedies and Enforceability.

Executive agrees that the covenants, agreements, and representations contained in Section 4 hereof are of the essence of this Agreement; that each of such covenants are reasonable and necessary to protect and preserve the interests and properties of the Company and its Affiliates; that irreparable loss and damage will be suffered by the Company and its Affiliates should Executive breach any of such covenants and agreements; that each of such covenants and agreements is separate, distinct and severable not only from the other of such covenants and agreements but also from the other and remaining provisions of this Agreement; that the unenforceability of any such covenant or agreement shall not affect the validity or enforceability of any other such covenant or agreements or any other provision or provisions of this Agreement; and that (a) Executive shall forfeit any unpaid compensation under Sections 2(a) through 2(c) if Executive materially breaches a covenant in Section 4 hereof, and (b) the Company and Parent shall be entitled to seek both temporary and permanent injunctions to prevent a breach or contemplated breach by Executive of any of such covenants or agreements, in addition to other remedies available to them.

Execution Version

6.            Notice.

All notices, requests, demands and other communications required hereunder shall be in writing and shall be deemed to have been duly given if delivered or if mailed, by United States certified or registered mail, prepaid to the party to which the same is directed at the following addresses (or at such other addresses as shall be given in writing by the Parties to one another):

Notices delivered in person shall be effective on the date of delivery. Notices delivered by mail as aforesaid shall be effective upon the fourth calendar day subsequent to the postmark date thereof.

7.            Miscellaneous.

(a)            Assignment. The rights and obligations of the Company and Parent under this Agreement shall inure to the benefit of the Company’s and Parent’s successors and assigns. This Agreement may be assigned by the Company or Parent to any legal successor to the Company’s or Parent’s business or to an entity that purchases all or substantially all of the assets of the Company or Parent, but not otherwise without the prior written consent of Executive. Executive may not assign this Agreement.

(b)            Waiver. The waiver of any breach of this Agreement by any party shall not be effective unless in writing, and no such waiver shall constitute the waiver of the same or another breach on a subsequent occasion.

(c)            Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland. The Parties agree that any appropriate state or federal court located in Baltimore, Maryland shall have jurisdiction of any case or controversy arising under or in connection with this Agreement and shall be a proper forum in which to adjudicate such case or controversy. The Parties consent to the jurisdiction of such courts.

Execution Version

(d)            Entire Agreement. This Agreement embodies the entire agreement of the Parties hereto relating to the subject matter hereof and supersedes all oral agreements, and to the extent inconsistent with the terms hereof, all other written agreements. The Parties agree that the term of the Employment Agreement is terminated effective August 15, 2020 and that the Employment Agreement is hereby terminated effective August 15, 2020, except as to the terms which survive termination, including without limitation Sections 4 and 5 of the Employment Agreement. As of August 15, 2020, Executive resigns from all positions that he holds with Parent, the Company and the Affiliates.

(e)            Amendment. This Agreement may not be modified, amended, supplemented or terminated except by a written instrument executed by the Parties hereto.

(f)            Severability. Each of the covenants and agreements hereinabove contained shall be deemed separate, severable and independent covenants, and in the event that any covenant shall be declared invalid by any court of competent jurisdiction, such invalidity shall not in any manner affect or impair the validity or enforceability of any other part or provision of such covenant or of any other covenant contained herein.

(g)            Captions and Section Headings. Captions and section headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it.

Execution Version

IN WITNESS WHEREOF, Parent, the Company and Executive have each executed and delivered this Agreement as of the date first shown above.

Execution Version

EXHIBIT B

CONSULTING AGREEMENT

Execution Version

CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”) is entered to be effective as of August 16, 2020, by and between Omega Healthcare Investors, Inc. (hereinafter “Omega” or the “Company”) and Michael D. Ritz (hereinafter “Consultant”).

RECITALS

WHEREAS, until August 15, 2020, Consultant was an officer of Omega, as well as an officer and director of subsidiaries of Omega (collectively, the “Omega Companies”);

WHEREAS, Consultant has expertise in the area of Omega’s business and is willing to provide consulting services to Omega as set forth herein; and

WHEREAS, Omega is willing and desires to engage Consultant as an independent contractor, during the Term (as defined below), on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises set forth herein, and intending to be legally bound, the parties hereto agree as follows:

AGREEMENT

Execution Version

Execution Version

Execution Version

 IN WITNESS WHEREOF, Omega and Consultant have executed this Agreement effective as of the date first written above.

Execution Version

SCHEDULE A

SCOPE OF SERVICES

Consultant shall render such transitional support services and perform such individual projects as may be requested by the Chief Financial Officer of Omega from time to time during the Term (the “Services”).

It is contemplated that the Consultant may not be asked to perform any or all of the specified services above during the performance of this Agreement. At the same time, it is contemplated that the Consultant may be asked to render and perform other valued consulting services to the Company.

All services rendered and performance thereof shall be at the direction of the Chief Financial Officer of Omega.

Execution Version

EXHIBIT B

RELEASE AGREEMENT

Execution Version

RELEASE AGREEMENT

This Agreement (this “Agreement”) is made this 16^th day of August, 2020, among Omega Healthcare Investors, Inc. (“Parent”), OHI Asset Management LLC (“Employer”), and Michael D. Ritz (“Employee”).

Introduction

On August 15, 2020, Employee ceased to be employed as an employee of the Company and an executive officer of Parent and the Company as provided in that certain Transition and Release Agreement dated July 8, 2020 (the “Transition and Release Agreement”). Effective August 16, 2020, Employer, Parent and Employee entered into a Consulting Agreement (the “Consulting Agreement”).

The Transition and Release Agreement requires that as a condition to Employee’s right to receive payments under Sections 2(a) through 2(c) thereunder (the “Transition Amounts”) and as a condition to the effectiveness of the Consulting Agreement, Employee must execute this Agreement.

NOW, THEREFORE, the parties agree as follows:

The release given by Employee in this Agreement is given solely in exchange for the consideration set forth in Section 2 of this Agreement and such consideration is in addition to anything of value that Employee was entitled to receive prior to entering into this Agreement.

Employee has been advised to consult an attorney prior to entering into this Agreement, and this provision of the Agreement satisfies the requirement of the Older Workers Benefit Protection Act that Employee be so advised in writing.

Execution Version

By entering into this Agreement, Employee does not waive any rights or claims that may arise after the date this Agreement is executed.

Execution Version

Execution Version

Employee’s signature below indicates Employee’s understanding and agreement with all of the terms in this Agreement.

Employee should take this Agreement home and carefully consider all of its provisions before signing it. Employee has been provided at least twenty-one (21) days to decide whether Employee wants to accept and sign this Agreement. Also, if Employee signs this Agreement, Employee will then have an additional seven (7) days in which to revoke Employee’s acceptance of this Agreement after Employee has signed it. This Agreement will not be effective or enforceable, nor will any consideration be paid, until after the seven (7) day revocation period has expired. Again, Employee is free and encouraged to discuss the contents and advisability of signing this Agreement with an attorney of Employee’s choosing.

Employee should read carefully. This agreement includes a release of all known and unknown claims through the effective date. Employee is strongly advised to consult with an attorney before executing this document.

Execution Version

IN WITNESS WHEREOF, Parent, Employer and Employee have executed this Agreement effective as of the date first written above.