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EXHIBIT 10.2
EXECUTIVE RETENTION AGREEMENT
This EXECUTIVE RETENTION AGREEMENT ("Agreement"), effective as of June 9,
1998 (the "Effective Date"), is made by and among HEALTH CARE AND RETIREMENT
CORPORATION OF AMERICA, an Ohio corporation (the "Company"), HEALTH CARE AND
RETIREMENT CORPORATION, a Delaware corporation and sole stockholder of the
Company ("HCR) and M. Xxxxx Xxxxxx (the "Employee").
RECITALS
A. The Company, HCR and the Employee are parties to that certain Second
Amended Employment Agreement effective as of April 1, 1997 (the
"SAEA").
B. HCR is presently negotiating the acquisition of Manor Care, Inc.
pursuant to a transaction (the "HCR-Manor Care Merger") in which Manor
Care, Inc. will merge with and into a wholly-owned subsidiary of HCR,
and which will constitute a Change in Control under the SAEA.
C. In order to assure itself of the continuity of management following
the consummation of the HCR-Manor Care Merger, the Company desires to
retain the services of the Employee through such consummation by
establishing certain incentives for the Employee's continued
employment.
AGREEMENT
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Employee and the Company hereby agree as follows:
1. CERTAIN DEFINED TERMS. The following terms have the meanings set
forth below. Each capitalized term used but not defined herein shall have the
meaning assigned to such term under the SAEA.
(a) "1998 Aggregate Cash Compensation" means the sum of: (i) the
Employee's Base Pay Rate effective as of the Transaction Date as set forth
on Schedule I hereto; and (ii) the aggregate cash bonuses payable to the
Employee in respect of calendar year 1998 pursuant to the Company's Annual
Incentive Plan and Performance Award Plan, as determined by the
Compensation Committee of the Board.
(b) "Lump Sum Severance" means the lump sum severance payment
specified at Section 8(b)(i) of the SAEA.
(c) "Option" means the option to purchase shares of common stock of
HCR granted to Manor Care, Inc. pursuant to the agreement governing the
HCR-Manor Care Merger.
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(d) "Other Severance Benefits" means, collectively, the payments and
benefits provided by Sections 8(b)(ii), (iii) and (v) of the SAEA.
(e) "Transaction Date" means the date of consummation of the
HCR-Manor Care Merger.
2. AMENDMENT TO SAEA. This Agreement shall constitute an amendment to
the SAEA, effective as of the Effective Date; provided, however, that the SAEA
shall survive the Effective Date and the Transaction Date and remain in full
force and effect to the extent not amended hereunder. In the event of any
conflict between this Agreement and the SAEA, the terms of this Agreement shall
control.
3. CONTINUED EMPLOYMENT; SEVERANCE PAYMENT.
(a) The Company hereby agrees to employ the Employee, and the
Employee agrees to serve the Company for the period set forth in this
Section 3, in the position(s) and at the initial Base Pay Rate set forth in
Schedule I attached hereto and upon the other terms and conditions provided
herein and in the SAEA. The initial term of employment under this
Agreement (the "Initial Term") shall be for the period beginning on the
Effective Date and ending on the third anniversary thereof, unless sooner
terminated as provided herein or in the SAEA.
(b) The employment term hereunder shall automatically be extended for
successive one year periods (collectively with the Initial Term, the
"Term") unless either party gives notice of non-extension to the other no
later than 90 days prior to the expiration of the then-applicable Term.
(c) The provisions of Sections 7(c) through (e) of the SAEA are
hereby amended to delete the phrase "for a period of one year after such
Termination Date" from each occurrence thereof and to insert in lieu
thereof the phrase "for a period of three years after such Termination
Date."
4. ENTIRE AGREEMENT. This Agreement, the SAEA and the agreements listed
in Schedule II attached hereto constitute the complete agreement between the
Employee and the Company regarding any and all aspects of their employment
relationship and supersede any and all prior written or oral agreements,
understandings or commitments. The Employee understands that no representative
of the Company has been authorized to enter into any agreement, understanding or
commitment with the Employee which is inconsistent in any way with the terms of
this Agreement.
5. PROHIBITION AGAINST AMENDMENT. No term set forth in this Agreement
may be modified in any way except by a written agreement signed by the Employee
and by an authorized representative of the Company which expressly states the
intention of the parties to modify the terms of this Agreement.
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6. RETENTION BONUS.
(a) Subject to the Employee's employment with the Company immediately
prior to the Transaction Date and his compliance with the terms of this
Agreement, the Company shall pay the Employee, within five days following
the Board meeting in calendar year 1999 at which the Board approves the
Company's 1998 financial statements, a cash lump sum payment equal to three
times the 0000 Xxxxxxxxx Cash Compensation (the "Retention Bonus"). Payment
of the Retention Bonus shall be subject to the provisions of Section 10 of
the SAEA.
(b) In the event the Employee's employment with the Company is
terminated as a result of the Employee's electing to resign or to retire
without the consent of the Company (other than by reason of his disability)
and other than pursuant to Section 7(d) hereof within the three-year period
ending on the third anniversary of the Transaction Date, the Employee shall
return to the Company, in cash in a lump sum within 5 days of such
Termination Date, that portion of the Retention Bonus and any additional
payments in respect thereof pursuant to Section 10 of the SAEA equal to the
product of: (i) the Retention Bonus; and (ii) a fraction, the numerator of
which is the excess of 1095 over the number of days elapsed during the
period beginning on the Transaction Date and ending on the Termination
Date, and the denominator of which is 1095. The provisions of Section 10 of
the SAEA shall apply to the pro rata return of the Retention Bonus pursuant
to this Section 6.
7. ELIGIBILITY FOR SEVERANCE BENEFITS.
(a) The Employee hereby agrees that notwithstanding the provisions of
Section 1(f)(iii) of the SAEA the filing by Manor Care, Inc. of a report on
Schedule 13D or Schedule 14D-1 in connection with its receipt or exercise
of the Option shall not constitute a Change in Control under the SAEA.
(b) Notwithstanding the consummation of the HCR-Manor Care Merger,
the Employee hereby waives his eligibility for all Severance Benefits
provided by Sections 8(b)(i) through (v) in connection with any termination
of his employment pursuant to Section 8(a)(iii) of the SAEA in connection
with such transaction. Notwithstanding the foregoing, nothing herein shall
constitute a waiver of eligibility for the Lump Sum Severance or the Other
Severance Benefits in connection with the employee's termination of
employment pursuant to Section 8(a)(iii) of the SAEA following any
transaction other than the HCR-Manor Care Merger that occurs after the
Transaction Date and that constitutes a Change in Control.
(c) Notwithstanding the occurrence as of the Transaction Date of any
event set forth in Sections (A) through (D) of Section 8(a)(ii) of the
SAEA, the Employee hereby waives his eligibility for the Lump Sum Severance
and the Other Severance Benefits in connection with any termination of his
employment pursuant to Section 8(a)(ii) of the SAEA in connection with the
HCR-Manor Care Merger.
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(d) Notwithstanding Sections 7(a) or (b) above, following the Transaction
Date the Employee may elect, within the 60-day period following the occurrence
of one of the following events, to terminate employment with the Company and
receive the Other Severance Benefits (pursuant to written notice to the Board
specifying the effective date of such termination which shall not be earlier
than the fifth day following the date of the Board's receipt of such notice and
shall not be later than the end of such 60-day period):
(i) Failure to elect or reelect or otherwise to maintain the Employee
in the office or position, or a substantially equivalent office or
position, of or with the Company, which the Employee held immediately
following the Transaction Date, or the failure to elect or reelect, or the
removal of, the Employee as a Director if the Employee shall have been a
Director immediately following the Transaction Date;
(ii) The occurrence of any of the following:
(A) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
the position with the Company which the Employee held immediately
following the Transaction Date;
(B) a reduction in the Employee's Base Pay as in effect
immediately following the Transaction Date;
(C) a material reduction in the scope or value of Employee
Benefits as in effect immediately following the Transaction Date; or
(D) any material breach of this Agreement or the SAEA by the
Company or any successor thereto,
which situation is not remedied within 10 calendar days after written
notice to the Board (or the board of any successor) from the Employee;
(iii) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the surviving or successor entity, if
other than the Company (by liquidation, merger, consolidation,
reorganization, transfer or otherwise), to which all or substantially all
of such business and/or assets have been transferred (directly or by
operation of law) assumes all duties and obligations of the Company under
this Agreement and the SAEA pursuant to Section 12(a) hereof and Section
16(a) of the SAEA; or
(iv) The Company or any successor, as the case may be, by which the
Employee is employed relocates its principal executive offices, or requires
the Employee to have his principal location of work changed, to any
location which
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increases by more than 25 miles the Employee's commute to such
location immediately following the Transaction Date, or requires the
Employee to travel away from his office in the course of discharging
his responsibilities or duties hereunder and under the SAEA at least
20% more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any
prior year) than the average of such time that was required of the
Employee in the three full years immediately prior to the Transaction
Date without, in either case, his prior written consent.
(e) Nothing herein shall constitute a waiver of the Employee's
eligibility for the benefits provided by Section 14 of the SAEA in
connection with the HCR-Manor Care Merger.
(f) In the event the Employee's employment with the Company is
terminated by the Company other than for Cause or disability (pursuant to
Section 7(c) of the SAEA) during the three-year period ending on the third
anniversary of the Transaction Date, in addition to any payments and
benefits provided under the SAEA, the Employee will be entitled to the
Other Severance Benefits.
8. RETIREMENT BENEFIT. In the event the Employee's employment with the
Company is terminated for any reason other than by the Company for Cause
(pursuant to Section 7(a) or (c) through (e) of the SAEA), after the Transaction
Date and prior to the Employee's attainment of age 55 or prior to the fifth
anniversary of the Transaction Date, the Employee's qualified and non-qualified
defined benefit retirement plan benefits shall be calculated as if on the
Termination Date the Employee had attained at least age 55 and completed at
least five years of service from and after the Transaction Date. Any additional
benefit to which the Employee is entitled pursuant to this Section 8 shall be
paid either by the Company directly or pursuant to the terms of the
non-qualified plan.
9. TERMINATION OF THIS AGREEMENT. In the event the agreement governing
the HCR-Manor Care Merger is terminated: (i) this Agreement shall terminate as
of the date of such abandonment and thereafter shall be of no further force and
effect; and (ii) the provisions of the SAEA shall continue in effect without
amendment or modification by this Agreement.
10. LEGAL FEES AND EXPENSES. It is the intent of the Company that the
Employee not be required to incur legal fees and the related expenses associated
with the interpretation, enforcement or defense of the Employee's rights under
this Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to the
Employee hereunder. Accordingly, if the Company fails to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Employee the benefits provided or intended to be provided to
the Employee hereunder, the Company irrevocably authorizes the Employee from
time to time to retain counsel of the Employee's choice, at the expense of the
Company as hereafter provided, to advise and represent the Employee in
connection with any
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such interpretation, enforcement or defense, including, without limitation, the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Without respect to whether
the Employee prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all reasonable attorneys' and related fees and expenses by the Employee in
connection with any of the foregoing.
11. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or governmental regulation
or ruling.
12. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require all successors (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
to any substantial portion of the business or assets of the Company, by
agreement in form and substance satisfactory to the Employee, jointly and
severally expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform
if no such succession had taken place. This Agreement will be binding upon
and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly
all or substantially all of the business or assets of the Company whether
by purchase, merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 14(a) and 14(b) hereof. Without limiting
the generality or effect of the foregoing, the Employee's right to receive
payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by the Employee's will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 14(c), the Company shall have no liability to pay
any amount so attempted to be assigned, transferred or delegated.
13. Notices. Notices for all purposes of this Agreement shall be subject
to Section 17 of the SAEA.
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14. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
15. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
16. Miscellaneous. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. References to
Sections are to references to Sections of this Agreement, except where expressly
provided to the contrary.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
17. Titles. Paragraph titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
HEALTH CARE AND RETIREMENT
CORPORATION OF AMERICA
By: _______________________________
Its: _______________________________
HEALTH CARE AND RETIREMENT
CORPORATION
By: _______________________________
Its: _______________________________
THE EMPLOYEE:
___________________________________
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SCHEDULE I
Employee: M. Xxxxx Xxxxxx
Current Base Pay Rate: $345,000
Current Job Titles: Executive Vice President and Chief Operating Officer
Base Pay Rate effective as of the Transaction
Date: $450,000
Job Titles effective as of the Transaction Date: Executive Vice President and Chief Operating Officer
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SCHEDULE II
Annual Incentive Plan
Performance Award Plan
Stock Option Plan
Restricted Stock Plan
Salary Retirement Plan (prior to January 1, 1993)
Stock Purchase and Savings Program (prior to January 1, 1993)
Senior Executive Retirement Plans
Supplemental Offset Plan
Excess and Supplemental Benefit Plans
Corporate Officer and Senior Executive Life Insurance Program
Senior Management Savings Plan
Senior Management Savings Plan For Corporate Officers
Such other benefit plans and arrangements as the Company provides, from time to
time, to salaried employees generally participation in which is approved by the
President.
