EXHIBIT 10.39
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made as of March 27, 1998
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between Fountain View, Inc., a Delaware corporation (the "Company") and Xxxxxx
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X. Xxxxxx (the "Executive").
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Introduction
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This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
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Company.
The Acquisition and related transactions and the investments and
acquisitions entered into on August 1, 1997 among the Executive, the Company,
Heritage Fund II Investment Corporation, are referred to collectively herein as
the "Transactions".
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The Company desires to retain the services of the Executive and the
Executive wishes to be employed by the Company. The Executive is a stockholder,
director and officer of the Company, and has had full access to information
concerning the Company. The disclosure of such information or the engaging in
competitive activities would cause substantial harm to the Company.
This Agreement replaces and supersedes the Employment Agreement made as of
August 1, 1997 by and among Fountain View Holdings, Inc., Heritage Fund II
Investment Corporation and the Executive.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
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commencing on the date of the closing of the Offer and continue for a period of
five (5) years, unless earlier terminated pursuant to Section 7 (the "Employment
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Period"). This Agreement shall automatically renew at the end of the Employment
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Period for up to five additional one year terms, unless either party hereto
provides written notice of termination to the other party not less than thirty
(30) days prior to the end of the Employment Period or the end of any subsequent
renewal period.
Section 2. Duties. The Executive shall be employed as the Chief Executive
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Officer of the Company, with such duties of an executive nature as the Board of
Directors of the Company (the "Board") shall determine. The Executive will
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report to the Board.
Section 3. Full Time. During the term of this Agreement, the Executive
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shall use the Executive's best efforts to promote the interests of the Company
and the direct and indirect subsidiaries of the Company, and shall devote
substantially the Executive's full business time and efforts to their business
and affairs. The Executive may engage in other business activities that do not
interfere materially with the performance of the Executive's duties, services
and responsibilities hereunder.
Section 4. Compensation. The Executive shall be entitled to compensation
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as follows:
(a) Base Salary. During the term of the Executive's employment with
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the Company, the Executive will receive a salary at the rate of $500,000
annually (the "Base Salary"), payable in equal installments not less than bi-
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weekly in arrears. The Company shall withhold from compensation payable to the
Executive all applicable federal, state and local withholding taxes. The Base
Salary will be subject to annual consumer price adjustments.
(b) Bonus. In addition to the payment of the Base Salary and the
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other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
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of (i) an annual bonus of $250,000 if the Company achieves Base Case EBITDA and
(ii) up to an additional bonus of $250,000 determined ratably based on the
Company's EBITDA being between the Base Case and the Target Case, such Bonus
payable within 120 days after the end of such fiscal year, as determined by the
Board, in its discretion. Payments with respect to partial percentages will be
prorated. [The payment of the Bonus shall be prorated for any partial fiscal
year during the term of this Agreement.- Question re year one?]
(c) Definition of Base Case, Mid Case and Target Case. As used
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herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
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specified on Exhibit A hereto, on the respective dates indicated, and may be
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changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit A hereto.
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Section 5. Benefits. In addition to salary and Bonus, the Executive shall
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be entitled to receive reasonable and customary fringe benefits in an amount not
less than the greater of those benefits that are generally and customarily
available to the
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Company's executive and managerial employees and those benefits that are
generally and customarily available to Summit's executive and managerial
employees. Such benefits include health insurance and vacation time in
accordance with the Company or Summit's policies, consistent with prior
practices. The Company will also reimburse the Executive for the cost of an
automobile, including fuel, maintenance and insurance expenses relating thereto,
not to exceed $600 per month. The Executive will be entitled to reimbursement of
all reasonable expenses incurred in the ordinary course of business on behalf of
the Company, subject to presentation of appropriate documentation, in accordance
with policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of, and
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as a condition to, the Transactions, and in consideration of the mutual promises
contained herein, and to preserve the goodwill of the Company and its direct and
indirect subsidiaries (collectively, the "Companies"), the Executive agrees as
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follows:
(a) The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the executive during the
executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
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non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
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Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the executive's duties for the Companies.
(c) Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the executive's possession which contain or relate to
Confidential Information.
(d) All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
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engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the executive's rights to the same to the Companies. The Executive shall sign
all instruments necessary for the filing and prosecution of any applications for
or extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
(e) All copyrightable work by the Executive during the term of the
Executive's employment by the Company which relates to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
(f) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
three years after such termination, the Executive will not directly or
indirectly, individually or as a consultant to, or Executive, officer, director,
stockholder, partner or other owner or participant in any business entity,
engage in or assist any other person to engage in the businesses of skilled
nursing facilities, assisted living facilities, inpatient or outpatient therapy
services, pharmacies, urological supplies, enteral feeding supplies and
orthodics anywhere in the counties of the State of California identified on
Schedule A hereto or in Arizona, Texas or any other state within the United
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States; provided, however, that the Executive may own not more than a 5% equity
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interest in any publicly-traded company.
(g) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially
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interfere with the business relationship of the Companies with, (i) any person
who is, or was within the one-year period immediately prior to the termination
of the Executive's employment by the Companies, employed by, a consultant to or
associated with the Companies or (ii) any person or entity who is, or was within
the two-year period immediately prior to the termination of the Executive's
employment by the Companies, a customer, client of or supplier to the Companies.
(h) Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
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(a) The Executive's employment with the Company may be terminated at
any time by the Company with cause or without cause or in the event of the death
or Disability of the Executive. As used herein, "cause" shall mean the
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reasonable and good faith determination by a majority of the Board (other than
the Executive), after reasonable notice to the Executive and after the Executive
has had an opportunity to present his view of the relevant facts and
circumstances to the Board, that the Executive has (i) breached any material
term of this Agreement, which breach has not been cured by the Executive within
20 days after notice to him or her by any of the Companies, (ii) engaged in
criminal acts or acts of moral turpitude causing injury to the Companies or
their reputations or (iii) engaged in material acts of dishonesty affecting the
Companies. As used herein, "disability" shall mean illness (mental or physical)
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or accident which, in the good faith and reasonable determination of a majority
of the Board, based on the report of a reputable physician, renders him unable
to perform his duties for six months during any 12-month period.
(b) If the Executive's employment is terminated hereunder for any
reason, the Company shall have no further obligation to make any payments or
provide any benefits to the Executive hereunder except for (i) payments of Base
Salary that had accrued but had not been paid prior to the date of
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termination, (ii) payments of Bonus that had been earned by the Executive but
not paid prior to the date of termination, and (iii) if the Executive's
employment is terminated by the Company without cause (other than on death or
Disability), but only as long as the Executive remains in material compliance
with the provisions of Section 6, continuation of the Executive's Base Salary
(plus an additional $25,000 annually in the case of such termination of both the
Executive and Xxxxxx Xxxxxx) for the duration of the Executive's scheduled term
of employment (excluding any renewal periods not then commenced).
(c) The provisions of Section 6 shall survive the termination of the
Executive's employment in accordance with its terms.
Section 8. Enforceability, etc. This Agreement shall be interpreted so as
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to be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
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this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) If to the Company:
Fountain View, Inc.
00000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
With copies to:
Heritage Partners, Inc.
00 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
and
Xxxxxxx X. X. Xxxxx, Esq.
Xxxxxx, Hall & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
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Xxxxxx, XX 00000-0000
(b) If to the Executive:
Xxxxxx Xxxxxx
c/o Fountain View, Inc.
00000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
With a copy to:
Xxxxx Xxxxx, Esq.
Law Offices of Xxxxx Xxxxx
0000 Xxxxxxxx Xxxxxxxxx
0xx Xxxxx
Xxx Xxxxxxx, XX 00000
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
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Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
as a waiver by that party of the same or any subsequent breach of any provision
of this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding
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on and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in part by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
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entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
Section 14. Counterparts. This Agreement may be executed in any number of
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counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
FOUNTAIN VIEW, INC.
By /s/ Xxxxxx X. Xxxxxx
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(Title)
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
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Exhibit B
EBITDA Targets (000)
Base Mgmt Upside
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30-Jun-99 45,188 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 56,499 67,030 71,287
30-Jun-02 60,395 78,196 85,390
30-Jun-03 65,080 87,063 95,621
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EXHIBIT B
Identified Counties
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Alameda Orange
Alpine Placer
Xxxxxx Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Xxxxxx
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Xxxxxxx
Xxxxx San Xxxx Obispo
Humboldt San Mateo
Imperial Santa Xxxxxxx
Inyo Santa Xxxxx
Xxxx Santa Xxxx
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Xxxxxx
Xxxxxx Sonoma
Marin Stanislaus
Mariposa Xxxxxx
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
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Exhibit B
EBITDA Targets
Base Mgmt Upside
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30-Jun-99 45,188 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 56,499 67,030 71,287
30-Jun-02 60,395 78,196 85,390
30-Jun-03 65,080 87,063 95,621
