REHABCARE GROUP, INC. TERMINATION COMPENSATION AGREEMENT
Exhibit
10.2
REHABCARE
GROUP, INC.
This
agreement ("Agreement") has been entered into as of the 1st day of July, 2008,
by and between RehabCare Group, Inc., a Delaware corporation (the "Company"),
and Xxxxx X. Xxxxx, an individual (the "Executive").
RECITALS
The Board
of Directors of the Company has determined that it is in the best interests of
the Company and its stockholders to reinforce and encourage the continued
attention and dedication of the Executive to the Company as the Company's Senior
Vice President, Hospital Division and to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility or
occurrence of a Change in Control (as defined below). The Board
desires to provide for the continued employment of the Executive as Senior Vice
President, Hospital Division on terms competitive with those of other
corporations, and the Executive is willing to rededicate himself and continue to
serve the Company as its Senior Vice President, Hospital
Division. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a potential or pending Change in Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any potential or pending Change in Control, and to
provide the Executive with compensation and benefits arrangements upon any
termination after a Change in Control and certain terminations of employment
prior to a Change in Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied. Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
IT
IS AGREED AS FOLLOWS:
Section
1: Definitions
and Construction.
1.1 Definitions.
For purposes of this Agreement, the following words and phrases, whether or not
capitalized, shall have the meanings specified below, unless the context plainly
requires a different meaning.
1.1(a) "Accrued
Obligations" has the meaning set forth in Section 4.1(a) of this
Agreement.
1.1(b) "Annual
Base Salary" has the meaning set forth in Section 2.4(a) of this
Agreement.
1.1(c) "Board"
means the Board of Directors of the Company.
1.1(d) "Cause"
has the meaning set forth in Section 3.3 of this Agreement.
1.1(e) "Change
in Control" means:
(i) The
acquisition by any individual, entity or group, or a Person (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of ownership of thirty
percent (30%) or more of either (a) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (b) 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"); or
(ii) Individuals
who, as the date hereof, 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 date
hereof whose election, or nomination for election, by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, as a member of the Incumbent Board, any
such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Approval
by the stockholders of the Company of a reorganization, merger or consolidation,
in each case, unless, following such reorganization, merger or consolidation,
(a) more than fifty percent (50%) of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (b) no Person beneficially owns, directly or indirectly, thirty
percent (30%) or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation, entitled to vote generally in the election of
directors and (c) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation;
- 2
-
(iv) Approval
by the stockholders of the Company of (a) a complete liquidation or dissolution
of the Company or (b) the sale or other disposition of all or substantially all
of the assets of the Company, other than to a corporation, with respect to which
following such sale or other disposition, (1) more than forty percent (40%) of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (2) no Person beneficially owns, directly
or indirectly, thirty percent (30%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (3) at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company.
1.1(f) "Change
in Control Date" means the date that the Change in Control first
occurs.
1.1(g) "Company"
has the meaning set forth in the first paragraph of this Agreement and,
with regard to successors, in Section 6.2 of this Agreement.
1.1(h) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
1.1(i) "Date
of Termination" has the meaning set forth in Section 3.7 of this
Agreement. In all cases, a "Date of Termination" shall only occur
upon separation from service from the Company and all of its affiliates, as
defined in Treasury regulations under Section 409A of the Code.
1.1(j) "Disability"
has the meaning set forth in Section 3.2 of this Agreement.
1.1(k) "Disability
Effective Date" has the meaning set forth in Section 3.2 of this
Agreement.
1.1(l) "Effective
Date" means the date of this Agreement specified in the first paragraph
of this Agreement.
1.1(m) "Employment
Period" means the period beginning on the Effective Date and ending on
the later of (i) December 31, 2008, or (ii) December 31 of any succeeding year
during which notice is given by either party (as described in Section 2.1 of
this Agreement) of such party's intent not to renew this Agreement.
- 3
-
1.1(n) "Exchange
Act" means the Securities Exchange Act of 1934, as amended.
1.1(o) "Excise
Tax" has the meaning set forth in Section 4.2(f)(i) of this
Agreement.
1.1
(p) "Good
Reason" has the meaning set forth in Section 3.4 of this
Agreement.
1.1(q) "Gross-Up
Payment" has the meaning set forth in Section 4.2(f)(i) of this
Agreement.
1.1(r) "Incumbent
Board" has the meaning set forth in Section 1.1(e)(ii) of this
Agreement.
1.1(s) "Notice
of Termination" has the meaning set forth in Section 3.6 of this
Agreement.
1.1(t) "Other
Benefits" has the meaning set forth in Section 4.1(e) of this
Agreement.
1.1(u) "Outstanding
Company Common Stock" has the meaning set forth in Section 1.1(e)(i) of
this Agreement.
1.1(v) "Outstanding
Company Voting Securities" has the meaning set forth in Section 1.1(e)(i)
of this Agreement.
1.1(w) "Payment"
has the meaning set forth in Section 4.2(f)(i) of this
Agreement.
1.1(x) "Person"
means any "person" within the meaning of Sections 13(d) and 14(d) of the
Exchange Act.
1.1(y) "Prorated
Target Bonus" has the meaning set forth in Section 4.2(a) of this
Agreement.
1.1(z) "Specified
Employee" has the meaning set forth in Section 4.9 of this
Agreement.
1.1(aa) "Target
Bonus" has the meaning set forth in Section 2.4(b) of this
Agreement.
- 4
-
1.1(bb) "Term"
means the period that begins on the Effective Date and ends on the earlier of:
(i) the Date of Termination, or (ii) the close of business on the later of
December 31, 2008 or December 31 of any renewal term.
1.2 Gender
and Number. When appropriate, pronouns in this Agreement used
in the masculine gender include the feminine gender, words in the singular
include the plural, and words in the plural include the singular.
1.3 Headings. All
headings in this Agreement are included solely for ease of reference and do not
bear on the interpretation of the text. Accordingly, as used in this
Agreement, the terms "Article" and "Section" mean the text that accompanies the
specified Article or Section of the Agreement.
1.4 Applicable
Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Missouri, without reference to
its conflict of law principles.
Section
2: Terms
and Conditions of Employment.
2.1 Period
of Employment. The Executive shall remain in the employ of the
Company throughout the Term of this Agreement in accordance with the terms and
provisions of this Agreement. This Agreement will automatically renew
for annual one-year periods unless either party gives the other written notice,
by September 30, 2008, or September 30 of any succeeding year, of such party's
intent not to renew this Agreement.
2.2 Positions
and Duties.
2.2(a) Throughout
the Term of this Agreement, the Executive shall serve as Senior Vice President,
Hospital Division of the Company subject to the reasonable directions of the
Board. The Executive shall have such authority and shall perform such
duties as are specified by the Bylaws of the Company and the Board for the
office of Senior Vice President, Hospital Division, subject to the control
exercised by the Board from time to time.
2.2(b) Throughout
the Term of this Agreement (but excluding any periods of vacation and sick leave
to which the Executive is entitled), the Executive shall devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and shall use his reasonable best efforts to perform faithfully and
efficiently such responsibilities as are assigned to him under or in accordance
with this Agreement; provided that, it shall not be a violation of this Section
2.2(b) for the Executive to (i) serve on corporate, civic or charitable boards
or committees with or without compensation, (ii) deliver lectures or fulfill
speaking engagements, with or without compensation, or (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement, violate the terms of this Agreement or any other
agreement between Executive and the Company, or violate the Company's conflict
of interest policy or any applicable law.
- 5
-
2.3 Situs
of Employment. Throughout the Term of this Agreement, the Executive's
services shall be performed at and out of the Company's executive offices
located in the greater St. Louis, Missouri metropolitan area or such other
office as shall be agreed to between the Executive and the President and Chief
Executive Officer of the Company.
2.4 Compensation.
2.4(a) Annual
Base Salary. At the date of this Agreement, the Executive will
be paid a base salary ("Annual Base Salary") at an annual rate of Three Hundred
Twenty-Five Thousand Dollars ($325,000.00), which shall be paid in equal or
substantially equal semi-monthly installments. During the Term of
this Agreement, the Annual Base Salary payable to the Executive shall be
reviewed at least annually after the end of the first calendar quarter (starting
with calendar year 2009) and shall be increased at the discretion of the Board
or the Compensation and Nominating/Corporate Governance Committee of the Board
but shall not be reduced.
2.4(b) Incentive
Bonuses. In addition to Annual Base Salary, the Executive
shall be awarded the opportunity to earn an incentive bonus on an annual basis
under any incentive compensation plan which is generally available to other peer
executives of the Company. The Board of Directors or the Compensation
and Nominating/Corporate Governance Committee shall establish at the beginning
of each calendar year a target incentive award equal to a designated percentage
of the Executive's Annual Base Salary paid during that plan year (the "Target
Bonus"). The Board and/or the Compensation and Nominating/Corporate Governance
Committee may also establish minimum and maximum incentive bonus opportunities
on an annual basis in addition to the Target Bonus. The Board of Directors shall
be exclusively responsible for decisions relating to administration of the
executive incentive plans.
2.4(c) Incentive,
Savings and Retirement Plans. Throughout the Term of this
Agreement, the Executive shall be entitled to participate in all equity
incentive, savings and retirement plans generally available to other peer
executives of the Company; provided, however, that the nature and level of any
equity incentive awards shall be solely determined by the Board or the
Compensation and Nominating/Corporate Governance Committee in its
discretion. Also, during the Term, the Executive shall be eligible to
participate in the Company's long term cash incentive plan. During
the Term, the percentage of Annual Base Salary upon which a potential award
shall be based shall be established by the Board or the Compensation and
Nominating/Corporate Governance Committee in its discretion. For each
three (3) year performance period during the Term and under the plan, the
financial metrics for receiving a payout will be established by the Board or the
Committee in its discretion and otherwise determined by the terms of the plan.
Payment of awards under the long term cash incentive plan, and eligibility to
receive any payment, will be determined under and according to the terms of that
plan and based upon performance criteria established annually by the Board or
the Committee under the plan. Nothing herein prevents the Company
from terminating or changing the long term cash incentive plan in its
discretion, subject to a participant's right under the plan as to any incentive
award which has already been earned.
- 6
-
2.4(d) Welfare
Benefit Plans. Throughout the Term of this Agreement (and
thereafter, subject to Section 4.1(d) or 4.2(d) hereof), the Executive and/or
the Executive's family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent generally available to other peer executives of the
Company.
2.4(e) Expenses. Throughout
the Term of this Agreement, the Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by the Executive in
accordance with the policies, practices and procedures of the
Company.
2.4(f) Fringe
Benefits. Throughout the Term of this Agreement, the Executive
shall be entitled to such fringe benefits as generally are provided to other
peer executives of the Company.
2.4(g) Office
and Support Staff. Throughout the Term of this Agreement, the
Executive shall be entitled to an office or offices at the Company's executive
offices in the greater St. Louis, Missouri metropolitan area and/or at such
other location as the Executive and the President and Chief Executive Officer of
the Company shall agree of a size and with furnishings and other appointments,
and to personal secretarial and other assistance, as are generally provided to
other peer executives of the Company.
2.4(h) Vacation. Throughout
the Term of this Agreement, the Executive shall be entitled to paid vacation in
accordance with the plans, policies, programs and practices as are generally
provided to other peer executives of the Company.
Section
3: Termination
of Employment.
3.1 Death. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period.
3.2 Disability. If
the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), the Company may give to the Executive written notice in
accordance with Section 7.2 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean that the Executive has been
unable with reasonable accommodation to perform the services required of the
Executive hereunder on a full-time basis for a period of one hundred eighty
(180) consecutive business days by reason of a physical and/or mental
condition. "Disability" shall be deemed to exist when certified by a
physician selected by the Company and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably). The Executive will submit to such medical or
psychiatric examinations and tests as such physician deems necessary to make any
such Disability determination.
- 7
-
3.3 Termination
for Cause or without Cause. The Company may terminate the
Executive's employment during the Employment Period for "Cause," which shall
mean termination based upon: (i) the Executive's willful and continued failure
to substantially perform his duties with the Company (other than as a result of
incapacity due to physical or mental condition), after a written demand for
substantial performance is delivered to the Executive by the Company, which
specifically identifies the manner in which the Executive has not substantially
performed his duties, (ii) the Executive's commission of an act constituting a
criminal offense that would be classified as a felony under the applicable
criminal code or involving moral turpitude, dishonesty, or breach of trust, or
(iii) the Executive's material breach of any provision of this
Agreement. For purposes of this Section, no act or failure to act on
the Executive's part shall be considered "willful" unless done, or omitted to be
done, without good faith and without reasonable belief that the act or omission
was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Cause
unless and until (i) he receives a Notice of Termination from the Company, (ii)
he is given the opportunity, with counsel, to be heard before the Board, and
(iii) the Board finds, in its good faith opinion, that the Executive was guilty
of the conduct set forth in the Notice of Termination. The Company also may
terminate the Executive's employment at any time during the Employment Period
without Cause.
3.4 Termination
by Executive for Good Reason. The Executive may terminate his
employment with the Company during the Employment Period for "Good Reason,"
which shall mean termination based upon: (i) the assignment to the Executive of
any duties inconsistent in any respect with the position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities held by the Executive as of the date of this Agreement or any
other action by the Company which results in a material diminution in such
position, authority, duties and responsibilities; (ii) the Company's requiring
the Executive to have any office arrangements for performing his duties which
are different than the arrangements in effect as of the date of this Agreement;
(iii) any reduction in Executive's Annual Base Salary; (iv) any reduction in
Executive's annual Target Bonus; or (v) a material breach by the Company of any
provision of this Agreement. Any termination of the Executive's employment based
upon a good faith determination of "Good Reason" made by the Executive shall be
subject to a delivery of a Notice of Termination by the Executive to the Company
in the manner prescribed in Section 3.6 and subject further to the ability of
the Company to remedy promptly any action not taken in bad faith by the Company
that may otherwise constitute Good Reason under this Section 3.4.
- 8
-
3.5 Voluntary
Termination by the Executive. The Executive may voluntarily
terminate his employment with the Company for any reason or for no reason at any
time during the Employment Period.
3.6 Notice
of Termination. Any termination by the Company for Cause,
without Cause, or Disability, or by the Executive for any reason or no reason,
shall be communicated by Notice of Termination to the other party, given in
accordance with Section 7.2. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the Date of Termination (as defined in
Section 3.7 hereof) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure of the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Cause shall not waive any right of the Company hereunder or preclude
the Company from asserting such fact or circumstance in enforcing the Company's
rights hereunder.
3.7 Date
of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, the Date of
Termination shall be the date of receipt by the Executive of the Notice of
Termination or any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be, or (iii) if the Executive's employment is
voluntarily terminated by the Executive for any reason or no reason, the Date of
Termination shall be a date specified in the Notice of Termination, (iv) if the
Executive's employment is terminated by the Company other than for Cause, death,
or Disability, the Date of Termination shall be the date of receipt by the
Executive of the Notice of Termination.
Section
4: Certain
Benefits Upon Termination.
4.1 Termination
Without Cause or Timely Termination for Good Reason Prior to a Change in
Control. Subject to the provisions of Section 4.9, if, prior
to a Change in Control during the Employment Period, the Company terminates the
Executive's employment without Cause or the Executive terminates his employment
with the Company for Good Reason within forty-five (45) days of the first
occurrence of an event that would constitute Good Reason, the Executive shall be
entitled to the payment of the benefits provided below:
4.1(a) Accrued
Obligations. Within thirty (30) days after the Date of
Termination, the Company shall pay to the Executive the sum of (1) the
Executive's accrued salary through the Date of Termination, and (2) any accrued
and unused paid days off; in each case to the extent not previously paid. In
addition, Executive shall be entitled to the accrued benefit payable to the
Executive under any deferred compensation plan, program or arrangement in which
the Executive is a participant subject to the computation of benefits and
payment provisions of such plan, program or arrangement. All of the amounts due
and owing to the Executive pursuant to this Section 4.1(a) are hereinafter
referred to collectively as the "Accrued Obligations". Payment under
any annual or long-term cash incentive plan shall be determined and governed
solely by the terms of the applicable plan.
- 9
-
4.1(b) Annual
Base Salary and Target Bonus Continuation. For a period of
twelve (12) months beginning in the month after the Date of Termination, the
Company shall pay to the Executive on a monthly basis one-twelfth of an amount
equal the sum of Executive's then-current Annual Base Salary and Target Bonus
for the year in which the Date of Termination occurs. Payments under
any long term cash incentive plan are not part of or included in this
calculation.
4.1(c) Stock-Based
Awards. All stock-based awards held by the Executive will be
exercisable or vested, expire or terminate in accordance with the terms of their
respective grant agreements.
4.1(d) Health
Benefit Continuation. For twelve (12) months following the
Date of Termination, the Executive and his spouse and other dependents shall
continue to be covered by the medical, dental, vision and prescription drug
plan(s) maintained by the Company in which the Executive and his spouse or other
dependents were participating immediately prior to the Date of Termination;
provided that to the extent such continued coverage is not permitted under the
Company's plans, for each of the twelve (12) months beginning in the month the
Date of Termination occurs, the Company will provide substantially similar
benefits or, at the Company's option, pay to Executive an amount, grossed up for
income and employment taxes thereon, equal to the dollar amount that would have
been paid by the Company for such coverage for the Executive and/or the
Executive's family under the Company's plan(s) during such period; provided,
however, that if the Executive becomes reemployed with another employer
and is eligible to receive medical or health benefits under another
employer-provided plan, program, practice or policy the medical and health
benefits described herein shall be immediately terminated upon the commencement
of coverage under the new employer's plan, program, practice or
policy.
4.1(e) Outplacement. During
the twelve (12) month period following the Date of Termination, the Company
shall provide to Executive executive-level outplacement services by a vendor
selected by the Company.
4.2 Benefits
Upon a Change in Control. Subject to the provisions of Section
4.9, if a Change in Control occurs during the Employment Period and within two
(2) years after the Change in Control Date (a) the Company terminates the
Executive's employment without Cause, or (b) the Executive terminates employment
with the Company for Good Reason, then the Executive shall become entitled to
the payment of the benefits as provided below:
4.2(a) Accrued
Obligations. Within thirty (30) days after the Date of
Termination, the Company shall pay to the Executive the Accrued Obligations and
the "Prorated Target Bonus." For purposes of this Agreement, the term
"Prorated Target Bonus" means an amount determined by multiplying the actual
percentage of the Executive's base salary that was to be paid to the Executive
as his Target Bonus in the year in which the Change in Control Date occurs by
the Executive's then-current Annual Base Salary as of the Date of Termination
and prorating this amount by multiplying it by a fraction, the numerator of
which is the number of days during the then-current calendar year that the
Executive was employed by the Company up to and including the Date of
Termination and the denominator of which is 365. Payment under any
long term cash incentive plan shall be determined and governed solely by the
terms of such plan.
- 10
-
4.2(b) Severance
Amount. Within thirty (30) days after the Date of Termination,
the Company shall pay to the Executive as severance pay in a lump sum, in cash,
an amount equal to 1.5 times the sum of the Executive's then-current Annual Base
Salary plus Target Bonus for the year in which the Change in Control Date
occurs. Payments under any long term cash incentive plan are not part
of or included in this calculation.
4.2(c) Stock-Based
Awards. All stock-based awards held by the Executive will be
exercisable or vested, expire or terminate in accordance with the terms of their
respective grant agreements.
4.2(d) Health
Benefit Continuation. For eighteen (18) months following the
Date of Termination, the Executive and his spouse and other dependents shall
continue to be covered by the medical, dental, vision and prescription drug
plan(s) maintained by the Company in which the Executive and his spouse or other
dependents were participating immediately prior to the Date of Termination;
provided that to the extent such continued coverage is not permitted under the
Company's plan(s), for each of the eighteen (18) months beginning in the month
the Date of Termination occurs, the Company will provide substantially similar
benefits or, at the Company's option, pay to Executive an amount, grossed up for
income and employment taxes thereon, equal to the dollar amount that would have
been paid by the Company for such coverage for the Executive and/or the
Executive's family under the Company's plan(s) during such period; provided,
however, that if the Executive becomes reemployed with another employer
and is eligible to receive medical or health benefits under another
employer-provided plan, program, practice or policy the medical and health
benefits described herein shall be immediately terminated upon the commencement
of coverage under the new employer's plan, program, practice or
policy.
4.2(e) Outplacement. During
the twelve (12) month period following the Date of Termination, the Company
shall provide to Executive executive-level outplacement services by a vendor
selected by the Company.
- 11
-
4.2(f) Gross-up
Payments.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event that it shall be
determined that any payment by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise but determined without regard to any
additional payments required under this Section 4.2(f)) (a "Payment") would be
subject to the excise tax imposed by Code Section 4999 (or any successor
provision) or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest or penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment on an after-tax basis
equal to the Excise Tax imposed upon the Payment. Any Gross-Up
Payment required under this Section 4.2(f) shall be made on the April 1 of each
of the three years immediately following the year in which the Date of
Termination occurred. The intent of the parties is that the Company
shall be responsible in full for, and shall pay, any and all Excise Tax on any
Payments and Gross-up Payment(s) and any income and all excise and employment
taxes (including, without limitation, penalties and interest) imposed on any
Gross-up Payment(s) as well as any loss of deduction caused by or related to the
Gross-up Payment(s).
(ii) Subject
to the provisions of Section 4.2(f)(iii), all determinations required to be made
under this Section 4.2(f), including whether and when a Gross-up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determinations, shall be made by the outside
accounting firm that then audits the Company's financial
statements (the "Accounting Firm"), which Accounting Firm shall
provide detailed supporting calculations both to the Company and to the
Executive within fifteen (15) business days of receipt of notice from the
Company or the Executive that there has been or will be a Payment. In
the event that the Accounting Firm is serving as the accountant or auditor for
the Person effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the "Accounting
Firm" hereunder). All fees and expenses of the Accounting Firm shall
be paid solely by the Company. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive in the absence of a
material mathematical or legal error. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the Gross-Up
Payments will not have been made by the Company that should have been made or
that the Gross-Up Payments will have been made that should not have been made,
in each case consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section 4.2(f)(iii) below and a
- 12
-
payment
of any Excise Tax or any interest, penalty or addition to tax related thereto is
determined to be due, the Accounting Firm shall determine the amount of the
underpayment of Excise Taxes that has occurred and such underpayment and
interest, penalty or addition to tax shall be promptly paid by the Company to
the Internal Revenue Service in satisfaction of the Company's original
withholding obligations. In the event that the Accounting Firm
determines that an overpayment of Gross-Up Payment(s) has occurred, the
Executive shall be responsible for the immediate repayment to the Company of
such overpayment with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided,
however, that the Executive shall have no duty or obligation whatsoever
to repay such overpayment if Executive's receipt of the overpayment, or any
portion thereof, is included in the Executive's income and the Executive's
repayment of the same is not deductible by the Executive for federal or state
income tax purposes.
(iii) The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment of the Excise
Tax. Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed in writing of
such claim by the Internal Revenue Service and the notification shall apprise
the Company of the nature of the claim and the date on which such claim is
required to be paid. The Executive shall not pay such claim prior to
the expiration of a 30-day period following the date on which the Executive has
given such notification to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
required). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(A) give
the Company any information reasonably requested by the Company relating to such
claim;
(B) take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company;
(C) cooperate
with the Company in good faith in order to effectively contest such claim;
and
(D) permit
the Company to participate in any proceedings relating to such
claim;
provided,
however, that the Company shall bear and pay all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest, and shall indemnify and hold the Executive harmless, on an after-tax
basis to the Executive, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
contest. Without limitation on the foregoing provisions of this
Section 4.2(f), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction or in one or more appellate courts, as the Company shall
determine.
- 13
-
4.3 Death. If
the Executive's employment is terminated by reason of the Executive's death
during the Employment Period (either prior or subsequent to a Change
in Control), this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than for payment
of Accrued Obligations (as defined in Section 4.1(a)) (which shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within thirty (30) days of the Date of Termination) and any other benefits to
which the Executive's beneficiaries are entitled under the terms of any of the
Company's benefit plans or programs, including death benefits pursuant to the
terms of any plan, policy, or arrangement of the Company. Payment under any long
term cash incentive plan or other incentive compensation plan shall be
determined and governed solely by the terms of the applicable plan.
4.4 Disability.
If the Executive's employment is terminated by reason of the Executive's
Disability during the Employment Period (either prior or subsequent to a Change
in Control), this Agreement shall terminate without further obligations to the
Executive, other than for (i) payment of Accrued Obligations (as defined in
Section 4.1(a)) (which shall be paid to the Executive in a lump sum in cash
within thirty (30) days of the Date of Termination) and (ii) the timely payment
or provision of any other benefits to which the Executive is entitled under the
terms of any of the Company's benefit plans or programs, including Disability
benefits pursuant to the terms of any plan, policy or arrangement of the
Company. Payment under any long term cash incentive plan or other incentive
compensation plan shall be determined and governed solely by the terms of the
applicable plan.
4.5 Termination
by the Company for Cause, Voluntary Termination by the Executive, or Untimely
Termination for Good Reason Prior to a Change in
Control. During the Employment Period, if the Executive's
employment shall be terminated: (i) by the Company for Cause, either prior or
subsequent to a Change in Control, or (ii) voluntarily by the Executive for any
reason other than Good Reason, either prior to or subsequent to a Change in
Control, or (iii) by the Executive for Good Reason prior to a Change in Control
but after the forty-five (45) day period for such termination as set forth in
Section 4.1 of this Agreement, then this Agreement shall terminate without
further obligations to the Executive, other than for (y) payment of the
Executive's Accrued Obligations (as defined in Section 4.1(a)) (which shall be
paid to the Executive in a lump sum in cash within thirty (30) days of the Date
of Termination), and (z) the timely payment or provision of any other benefits
to which Executive is entitled under the terms of any of the Company's benefit
plans or programs. Payment under any long term cash incentive plan or
other incentive compensation plan shall be determined and governed solely by the
terms of the applicable plan.
- 14
-
4.6 Non-Exclusivity
of Rights. Except as provided in Sections 4.1(d) and 4.1(e) or
4.2(d) and 4.2(e), nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company and for which the Executive may
qualify. Amounts which are vested benefits of which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of, or
any other contract or agreement with, the Company at or subsequent to the Date
of Termination, shall be payable in accordance with such plan, policy, practice
or program or contract or agreement.
4.7 Full
Settlement. The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Sections
4.1(d) and 4.2(d), such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay
promptly as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 Conditions
To Payments. To be eligible to receive (and continue to
receive) and retain the payments and benefits described in Sections 4.1(b) - (e)
or Sections 4.2(b) – (e), the Executive must comply with the terms of paragraph
5, and must execute and deliver to the Company an agreement, in form and
substance satisfactory to the Company, effectively releasing and giving up all
claims the Executive may have against the Company and its subsidiaries,
shareholders, successors and affiliates (and each of their respective employees,
officers, plans and agents) arising out of or based upon any facts or conduct
occurring prior to that date, and reaffirming and agreeing to comply with the
terms of this Agreement and any other agreement signed by the Executive in favor
of the Company or any of its subsidiaries or affiliates. The agreement will be
prepared by the Company and provided to the Executive at the time the
Executive's employment is terminated or as soon as administratively practicable
thereafter. The agreement also will require the Executive, among other things,
to consult with Company representatives, and voluntarily appear as a witness for
trial or deposition (and to prepare for any such testimony) in connection with,
any claim which may be asserted by or against the Company, or any business
matter concerning the Company or any of its transactions or operations. The
Company will have no obligations to make the payments and/or provide the
benefits specified in Sections 4.1(b) – (e) or Sections 4.2(b) – (e) specified
above, when applicable, unless and until the Executive signs and delivers the
agreement described in this Section 4.8 and all conditions to the effectiveness
of the release and waiver (including but not limited to the expiration of any
applicable time period to consider signing the agreement or to revoke acceptance
without any action being taken to revoke acceptance or otherwise invalidate the
agreement) have been satisfied.
- 15
-
4.9 Key
Employee Six Month Deferral. Notwithstanding anything to the
contrary in this Section 4, a "Specified Employee" may not receive a payment of
nonqualified deferred compensation, as defined in Code Section 409A and the
regulations thereunder, until at least six months after a Date of
Termination. Any payment of nonqualified deferred compensation
otherwise due in such six month period shall be suspended and become payable at
the end of such six month period.
A
"Specified Employee," for each calendar year, means an employee who is a key
employee, as defined by the Company in accordance with Section 409A and the
regulations thereunder.
Section
5: Non-Competition.
The
provisions of this Section 5 and any related provisions shall survive
termination of this Agreement and/or Executive's employment with the Company and
do not supersede, but are in addition to and not in lieu of, any other
agreements signed by Executive concerning non competition, confidentiality,
solicitation of employees, or trade secrets (whether included in a stock option
agreement or otherwise), and are included in consideration for the Company
entering into this Agreement. Executive's right to receive and retain the
benefits specified in Sections 4.1(b) – (e) or Sections 4.2(b) –
(e) are conditioned upon Executive's compliance with the terms of
this Section 5:
5.1 Non-Compete
Agreement.
5.1(a) During
the Executive's employment with the Company and during the period beginning on
the date the Executive's employment with the Company terminates and ending one
(1) year thereafter (i.e., on the anniversary of the date the Executive's
employment terminates), the Executive shall not, without prior written approval
of the Company's Chief Executive Officer, become an officer, employee, agent,
partner, or director of, or provide any services or advice to or for, any
business enterprise in substantial direct competition (as defined in Section
5.1(b)) with the Company. The above constraint shall not prevent the Executive
from making passive investments, not to exceed five percent (5%), in any
enterprise where Executive's services or advice is not required or
provided.
5.1(b) For
purposes of Section 5.1, a business enterprise with which the Executive becomes
associated as an officer, employee, agent, partner, or director shall be
considered in substantial direct competition, if such entity competes with the
Company in any business in which the Company or any of its direct or indirect
subsidiaries is engaged or provides services or products of a type which is
marketed, sold or provided by the Company or any of its subsidiaries or
affiliates (including but not limited to any product or service which the
Company or any such other entity is developing) within any State or country
where the Company or any such affiliate or subsidiary then provides or markets
(or plans to provide or market) any service or product as of the date the
Executive's Company employment terminates.
- 16
-
5.1(c) During
the Executive's employment with the Company and during the period beginning on
the date the Executive's employment with the Company terminates and ending one
(1) year thereafter (i.e., on the anniversary of the date the Executive's
employment terminates), the Executive shall not, without prior written approval
of the Company's Chief Executive Officer, directly or indirectly, solicit,
provide to, take away, or attempt to take away or provide to any customer or
solicited prospect of the Company or any of its subsidiaries any business of a
type which the Company or such subsidiary provides or markets or which is
competitive with any business then engaged in (or product or services marketed
or planned to be marketed) by the Company or any of its subsidiaries; or induce
or attempt to induce any such customer to reduce such customer's business with
that business entity, or divert any such customer's business from the Company
and its subsidiaries; or discuss that subject with any such
customer.
5.1(d) During
the Executive's employment with the Company and during the period beginning on
the date the Executive's employment with the Company terminates and ending one
(1) year thereafter (i.e., on the first anniversary of the date Executive's
employment terminates), the Executive shall not, without prior written approval
of the Company's Chief Executive Officer, directly or indirectly solicit the
employment of, recruit, employ, hire, cause to be employed or hired, entice
away, or establish a business with, any then current officer, office manager,
staffing coordinator or other employee or agent of the Company or any
of its subsidiaries or affiliates (other than
non-supervisory or non-managerial personnel who are employed in a clerical or
maintenance position) or any other such person who was employed by the Company
or any of its subsidiaries or affiliates within the twelve (12) months
immediately prior to the date the Executive's employment with the Company
terminated; or suggest to or discuss with any such employee the discontinuation
of that person's status or employment with the Company or any of its
subsidiaries and affiliates, or such person's employment or participation in any
activity in competition with the Company or any of its subsidiaries or
affiliates.
5.2 Confidential
Information. The Executive has received (and will receive)
under a relationship of trust and confidence, and shall hold in a fiduciary
capacity for the benefit of the Company, all "Confidential Information" and
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies or direct or indirect subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Executive's
employment with the Company and after termination of the Executive's employment
with the Company, the Executive shall never, without the prior written consent
of the Company, or as may otherwise be required by law or legal process, use
(other than during Executive's employment with the Company for the benefit of
the Company), or communicate, reveal, or divulge any such information, knowledge
or data, to anyone other than the Company and those designated by
it. In no event shall an asserted violation of the provisions of this
Section 5.2 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement. "Confidential
Information" means confidential and/or proprietary information and trade secrets
of or relating to the Company or any of its subsidiaries and affiliates
- 17
-
(and includes information
the disclosure of which might be injurious to those companies), including but
not limited to information concerning personnel of the Company or any of its
subsidiaries and affiliates, confidential financial information, customer or
customer prospect information, information concerning temporary staffing
candidates, temporary employees, and personnel, temporary employee and customer
lists and data, methods and formulas for estimating costs and setting prices,
research results (such as marketing surveys, or trials), software, programming,
and programming architecture, enhancements and developments, cost data (such as
billing, equipment and programming cost projection models), compensation
information and models, business or marketing plans or strategies, new products
or marketing strategies, deal or business terms, budgets, vendor names,
programming operations, information on proposed acquisitions or dispositions,
actual performance compared to budgeted performance, long-range plans, results
of internal analyses, computer programs and programming information, techniques
and designs, business and marketing plans, acquisition plans and strategies,
divestiture plans and strategies, internal valuations of Company assets, and
trade secrets, but does not include information generally known in the
marketplace. In addition, Confidential Information includes
information of another company given to the Company with the understanding that
it will be kept information confidential. All Confidential
Information described herein is and constitutes trade secret information
(regardless of whether the same is legally determined to be a trade secret) and
is not the property of the Executive.
5.3 Non
Disparagement. The Executive will never criticize, denigrate, disparage,
or make any derogatory statements about the Company or its respective business
plans, policies and practices, or about any of the Company's officers, employees
or former officers or employees, to customers, competitors, suppliers,
employees, former employees, members of the public, members of the media, or any
other person; nor shall the Executive harm or in any way adversely affect the
reputation and goodwill of the Company. Nothing in this paragraph
shall preclude or prevent the Executive from giving truthful testimony or
information to law enforcement entities, administrative agencies or courts or in
any other legal proceedings as required by law.
5.4 Provisions
Relating To Non Competition, Non Solicitation And
Confidentiality. The provisions of this Section 5 survive the
termination of Executive's employment and this Agreement and shall not be
affected by any subsequent changes in employment terms, positions, duties,
responsibilities, authority, or employment termination, permitted or
contemplated by this Agreement. To the extent that any covenant set
forth in this Section 5 of this Agreement shall be determined to be invalid or
unenforceable in any respect or to any extent, the covenant shall not be void or
rendered invalid, but instead shall be automatically amended for such lesser
term, to such lesser extent, or in such other lesser degree, as will grant the
Company the maximum protection and restrictions on the Executive's activities
permitted by applicable law in such circumstances. In cases where there is a
dispute as to the right to terminate the Executive's employment or the basis for
such termination, the term of any covenant set forth in Section 5 shall commence
as of the date specified in the Notice of Termination and shall not be deemed to
be tolled or delayed by reason of the provisions of this Agreement. The Company
shall have the right to injunctive relief to restrain any breach or threatened
breach of any provisions in this Section 5 in addition to and not in lieu of any
rights to recover damages or cease making payments under this Agreement. The
Company shall have the right to advise any prospective or then current employer
of Executive of the provisions of this Agreement without liability. The
Company's right to enforce the provisions of this Agreement shall not be
affected by the existence, or non-existence, of any other similar agreement for
any other executive, or by the Company's failure to exercise any of its rights
under this Agreement or any other similar agreement or to have in effect a
similar agreement for any other employee.
- 18
-
Section
6: Successors.
6.1 Successors
of Executive.
This Agreement is personal to the Executive and, without the prior written
consent of the Company, the rights (but not the obligations) shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
6.2 Successors
of Company. This Agreement is freely assignable by the Company
and its successors/assignees. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the division
in which the Executive is employed, as the case may be, to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to terminate the Agreement at his option on or after
the Change in Control Date for Good Reason.
Section
7: Miscellaneous.
7.1 Other
Agreements. This Agreement supersedes all prior dated
agreements, letters and understandings concerning employment or severance
benefits payable to the Executive, either before or after a Change in
Control. The Board may, from time to time in the future, provide
other incentive programs and bonus arrangements to the Executive with respect to
the occurrence of a Change in Control that will be in addition to the benefits
required to be paid in the designated circumstances in connection with the
occurrence of a Change in Control. Such additional incentive programs
and/or bonus arrangements will affect or abrogate the benefits to be paid under
this Agreement only in the manner and to the extent explicitly agreed to by the
Executive in any such subsequent program or arrangement. This Agreement does not
supersede or affect in any way the validity of any agreement signed by Executive
concerning confidentiality, stock options, post-employment competition, non
solicitation of business, accounts or employees, or agreements of a similar type
or nature; and any provisions of this Agreement shall be in addition to and not
in lieu of (or replace) any such other agreements.
- 19
-
7.2 Notice. For
purposes of this Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses as set forth
below; provided that all notices to the Company shall be directed to the
attention of the Board of Directors, or to such other address as one party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
Notice
to the Executive:
000 Xxxx
Xxxx
Xxxx, XX
00000
Notice
to the Company:
RehabCare
Group, Inc.
0000
Xxxxxxx Xxxxxxxxx
Xxxxx
0000
Xx.
Xxxxx, Xxxxxxxx 00000
Att:
Board of Directors
7.3 Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
7.4 Withholding. The
Company may withhold from any amounts payable under this Agreement such Federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
7.5 Waiver. The
Executive's or the Company's failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.
7.6 Section
409A Compliance. The parties intend that all provisions of
this Agreement comply with the requirements of Code Section 409A to the extent
applicable. No provision of this Agreement shall be operative to the
extent that it will result in the imposition of the additional tax described in
Code Section 409A(a)(1)(B)(i)(II) and the parties agree to revise the Agreement
as necessary to comply with Section 409A and fulfill the purpose of the voided
provision. Nothing in this Agreement shall be interpreted to permit
accelerated payment of nonqualified deferred compensation, as defined in Section
409A, or any other payment in violation of the requirements of such Code Section
409A.
- 20
-
IN
WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization
from its Board, have caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
|
/s/
|
Xxxxx X.
Xxxxx
|
|
|
Xxxxx
X. Xxxxx
|
||
|
REHABCARE
GROUP, INC.
|
||
|
By /s/
|
Xxxx X.
Short
|
|
|
Xxxx
X. Short
|
||
|
President
and Chief Executive
Officer
|
- 21
-
