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EXHIBIT 10.1
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the "Agreement"), dated as of June 30, 1999,
is by and between Xxxx Xxxxxxxx Xxxxxxx ("Xxxxxxx") and Advocat Inc., a Delaware
corporation (the "Company").
RECITALS
1. Xxxxxxx and the Company entered into an Employment Agreement dated
as of May 14, 1994 (the "Employment Agreement").
2. Xxxxxxx and the Company desire to document their agreement regarding
Xxxxxxx'x separation from employment with the Company effective June 30, 1999
(the "Effective Date").
3. Under the Company's 1994 Non-Qualified Stock Option Plan for
Directors of Advocat Inc. (the "Directors Plan"), Xxxxxxx was granted a total of
20,000 options to purchase shares of Company stock, and under the Company's
Incentive and Non-Qualified Stock Option Plan for Key Personnel of Advocat Inc.
(the "Key Personnel Plan"), Xxxxxxx was granted a total of 110,000 options to
purchase shares of Company stock (together the "Options") pursuant to certain
stock option agreements dated May 10, 1994, December 31, 1995, March 1, 1996,
December 31, 1997, April 1, 1998 and December 31, 1998 between Xxxxxxx and the
Company (collectively, the "Option Agreements").
4. The parties have agreed to settle in the manner set forth in this
Agreement any claims or controversies which might arise between Xxxxxxx and the
Company with respect to Xxxxxxx'x employment with the Company, Xxxxxxx'x
separation from the Company, and any claims pursuant to the Employment
Agreement, or any issues concerning the Options.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Termination. Xxxxxxx'x employment with the Company and her position
as Director, Chief Financial Officer, Executive Vice President and Secretary of
the Company and its subsidiaries are hereby terminated as of the Effective Date
of this Agreement.
2. Agreements with Respect to Certain Obligations. Xxxxxxx and the
Company agree as follows:
(a) In full satisfaction of the Company's obligations to Xxxxxxx
under the Employment Agreement, the Company hereby agrees (i) to pay Xxxxxxx a
sum equal to one hundred percent (100%) of her annual base salary, including
monthly auto allowance,
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as in effect on the Effective Date, in twelve (12) equal monthly installments,
less the usual and customary withholdings, commencing on the Effective Date;
(ii) that all Options issued to Xxxxxxx under the Option Agreements shall be
fully vested as of the Effective Date, and Xxxxxxx shall have eighteen (18)
months to exercise such options; (iii) to pay Xxxxxxx accrued but unpaid salary,
including accrued but unpaid vacation pay, due from Company through the
Effective Date; (iv) to continue providing Xxxxxxx employee benefits and
perquisites to which she is entitled on the Effective Date for twelve (12)
months; or until Xxxxxxx begins receiving similar benefits and perquisites from
another employer, whichever is earlier; and (v) to provide continuing coverage
under the Company's directors and officers insurance plan as specified in
Section 2(b) below. With respect to subsection 2(a)(iv) hereof, any such
benefits and perquisites Xxxxxxx does not receive from another employer will
continue for the full 12 months.
(b) The Company will provide director and officer liability
insurance coverage in amounts, and on terms and conditions, no less favorable to
Xxxxxxx than the coverage provided for any other present or former officer or
director of the Company, until the earlier of (i) the fifth anniversary of the
Effective Date or (ii) such time as the Company and its affiliates no longer
maintain any policy of insurance covering errors or omissions by any of the
Company's present or former officers or directors. The Company will, promptly
upon written request and to the fullest extent legally permitted or authorized
by the Company's certificate of incorporation, by-laws or Board resolutions or,
if greater, by the laws of the State of Delaware, indemnify and hold harmless
Xxxxxxx in all pending or threatened actions, suits and proceedings, against her
or threatened against her, whether civil, criminal, administrative, or
investigative by reason of the fact that Xxxxxxx was a director, officer, or
agent of the Company, or was at the Company's request serving as a director,
officer, employee or agent of another entity, against all costs, expenses,
liabilities and losses (including, without limitation, judgments, interest,
penalties, fines, ERISA excise taxes or penalties, attorneys' fees reasonably
incurred, expenses of investigation reasonably incurred, and reasonably amounts
paid to or to be paid in settlement) that are suffered or incurred by her in
connection with any such pending or threatened action, suit or proceeding, and
such indemnification shall inure to the benefit of Xxxxxxx'x heirs, executives,
and administrators. In addition, The Company shall advance to Xxxxxxx all costs
and expenses (including, without limitation, attorneys fees) reasonably incurred
by her in connection with any such pending or threatened action, suit or
proceeding within 20 days after receipt by the Company of a written request for
advancement accompanied by (x) documentation reasonably evidencing the sums for
which advancement is sought and (y) to the extent required by law, an
undertaking by Xxxxxxx to repay the amount advanced if she is ultimately
determined not to be entitled to indemnification against such costs and
expenses. Notwithstanding anything herein to the contrary, Xxxxxxx shall not be
entitled to indemnification if it is prohibited by Delaware General Corporation
Law, and nothing in this Agreement shall limit or reduce Xxxxxxx'x rights under
the Company's current Certificate of Incorporation.
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(c) In the event that any of the entities or individuals with
which Xxxxxxx has worked on the Company's behalf during the twelve (12) months
preceding the Effective Date enters into a binding agreement before the first
(1st) anniversary of the Effective Date which ultimately results in change of
control of the Company, the Change in Control provisions set forth in Section XI
of the Employment Agreement shall apply, and any payments due under Section
2(a)(i) hereof shall be accelerated and the total of such payments under Section
2 (a)(i) shall be applied toward any amounts owed to Xxxxxxx under Section XI of
the Employment Agreement. For purposes of this section, a Change in Control
shall be defined as such term is defined in the Employment Agreement.
(d) If a significant number of options belonging to directors or
management employees are repriced during the 18 months after the Effective Date,
the Company will reprice Xxxxxxx'x options in the same manner at the same price
level.
3. Releases. Xxxxxxx and the Company agree as follows:
(a) Xxxxxxx hereby releases the Company and its shareholders,
affiliates, agents and representatives from any causes of action, claims,
demands, debts, liability, expense or costs of court of any and every character
and nature whatsoever, whether or not previously asserted, whether known or
unknown, either in or arising out of law of contracts, torts, property rights,
statutes or ordinances as to all wrongful discharge claims, all tort,
intentional tort, negligence, employee benefit claims and contract claims, any
claim for attorneys' fees, costs, or expenses or any claim arising from any
federal, state or local civil rights and/or employment law (including but not
limited to, Title VII of the Civil Rights Act of 1964, The Age Discrimination in
Employment Act, and the Americans With Disabilities Act) and/or wages bonuses,
commissions, at law or in equity, arising out of any matter at any time up to
and including the date of execution of this Agreement; and any other matter
whatsoever, it being the parties' intention that the scope and breadth of this
release be as broad and extensive as lawfully possible in order to lay to rest
forever any potential controversies concerning any matters existing or occurring
prior to the execution of this Agreement; provided, however, that Xxxxxxx does
not intend by this Agreement to release any rights that she may have arising
from the terms of this Agreement.
(b) The Company hereby releases Xxxxxxx from any causes of action,
claims, demands, debts, liability, expense or costs of court of any and every
character and nature whatsoever, whether or not previously asserted, whether
known or unknown, either in or arising out of the law of contracts, torts,
property rights, statutes or ordinances, all tort, intentional tort, negligence,
reimbursement claims, employee benefit claims and contract claims, any claim for
attorneys' fees, costs, or expenses, at law or in equity, arising out of any
matter related to the Company employment of Xxxxxxx up to and including the date
of execution of this Agreement; and any other matter whatsoever, it being the
parties' intention that the scope and breadth of this release be as broad and
extensive as lawfully possible in order to lay to rest forever any potential
controversies concerning any matters existing or occurring prior to the
execution of this Agreement; provided, however, that the Company does not intend
by this Agreement to release any rights that it may have arising
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from the terms of this Agreement or from the provisions of the Employment
Agreement that by their terms survive a termination of the Period of Employment.
(c) Although Xxxxxxx has never raised an age discrimination issue,
in order for this Agreement to embody a release of all claims as contemplated by
both parties, federal law stipulates that Xxxxxxx specifically release any
potential claims on the basis of age discrimination. Therefore, in consideration
for such release, and in addition to other considerations stipulated in this
Agreement, the Company has agreed that it will pay Xxxxxxx an additional One
Hundred and No/100 Dollars ($100.00) promptly upon the following release
becoming effective. For such consideration, Xxxxxxx specifically releases the
Company from any claims based upon any law prohibiting discrimination on the
basis of Xxxxxxx'x age including but not limited to the Age Discrimination in
Employment Act ("ADEA").
(d) Xxxxxxx acknowledges she understands the terms and conditions of
this Agreement. Xxxxxxx has had the opportunity to discuss thoroughly all
aspects of this Agreement with Xxxxxxx'x legal counsel and has been advised to
do so by the Company. Xxxxxxx is voluntarily entering into this Agreement of her
own free will, free of any coercion, pressure or duress. She is knowingly
releasing the Company in accordance with the terms contained herein. Xxxxxxx
further acknowledges that she is receiving consideration beyond anything of
value to which she is already entitled. Should Xxxxxxx ever attempt to challenge
this Agreement, Xxxxxxx will, as a precondition, return to the Company all
consideration provided to Xxxxxxx hereunder. Xxxxxxx will have up to twenty-one
(21) days in which to consider this Agreement. After the execution of this
Agreement, Xxxxxxx will have an additional seven (7) days to revoke this
Agreement. Therefore, this Agreement will become final on the eighth (8th) day
after Xxxxxxx has executed it. Notwithstanding anything to the contrary stated
in this Agreement, the Company will not be required to make any payments or
provide any benefits or other consideration to Xxxxxxx as stipulated under this
Agreement until this Agreement becomes final pursuant to the provisions of this
Section 3.
(e) The parties declare that each has carefully read this Agreement,
that each has reviewed its terms with each one's respective counsel, and that
each agrees to it for the purpose of making a full and final adjustment and
resolution of the matters addressed herein. Nothing in this Agreement is to be
construed as an admission of any kind by either Xxxxxxx or the Company.
4. Confidential Information. Xxxxxxx recognizes and acknowledges that
all information pertaining to the affairs, business, clients, customers or other
relationships of the Company is confidential and is a unique and valuable asset
of the Company. Xxxxxxx will not, except to the extent required by law, give to
any person, firm, association, corporation or governmental agency any
information concerning the affairs, business, clients, customers or other
relationships of the Company. Xxxxxxx will not make use of this type of
information for her own purposes or for the benefit of any person or
organization
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other than the Company. Xxxxxxx will also use her best efforts to prevent the
disclosure of this information by others. All records, memoranda, etc. relating
to the business of the Company, whether made by Xxxxxxx or otherwise in her
possession, are confidential and will remain property of the Company.
5. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given properly addressed, certified mail, return receipt
requested, postage prepaid as follows: if to the Company, to:
Advocat Inc.
000 Xxxxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: X.X. Xxxxxxx, CEO
with a copy to:
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Manner
and if to Xxxxxxx, at:
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
6. In the event that any provision of this Agreement shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of this Agreement, but this Agreement shall be construed and
enforced as if the illegal or invalid provision had never been inserted.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
8. Entire Agreement. Except as set forth herein, this Agreement
constitutes the entire Agreement among the parties with respect to the
transactions contemplated in this Agreement and there are no understandings or
agreements relating to this Agreement that are not fully expressed in this
Agreement.
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9. Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed, or modified, and the terms hereof may be waived, only by a
written instrument signed by the parties, or in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising the
right, power or privilege hereunder shall authorize a waiver thereof.
10. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and the respective successors and
permitted assigns and legal representatives.
11. Arbitration. The parties agree to negotiate in good faith with
respect to any dispute with respect to this Agreement or the transactions
contemplated hereby. If the parties are not successful in resolving the dispute
through such negotiations, then the parties agree that the dispute shall be
settled by arbitration in accordance with the provisions of the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. Notwithstanding anything in this Agreement to the contrary, this
Section 12 shall not apply to any dispute arising from an alleged breach of
Section 4 of this Agreement.
12. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
13. Headings. The headings in this Agreement are for reference only,
and shall not effect the interpretation of this Agreement.
14. Authorization. The Company represents and warrants that the person
executing this Agreement on behalf of the Company is duly authorized to act for
and on behalf of the Company to execute and deliver this Agreement and that this
Agreement is a valid, binding and enforceable agreement of the Company.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of June
30, 1999.
ADVOCAT INC.
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
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Name: Chairman/CEO
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Its:
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/s/ Xxxx Xxxxxxxx Xxxxxxx
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XXXX XXXXXXXX XXXXXXX
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