SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
SEVERANCE
COMPENSATION
AND
RESTRICTIVE
COVENANT AGREEMENT
THIS
SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT (the
“Agreement”) is dated as of November 6, 2006, between MATRIA
HEALTHCARE, INC.,
a
Delaware corporation (the “Company”), and XXXXXX
X. XXXXXXXX
(the
“Executive”).
WHEREAS,
the
Board of Directors of the Company has determined that it is appropriate to
reward the Executive for her years of service to the Company and predecessor
companies and encourage the Executive to remain in the Company’s
employ;
NOW,
THEREFORE,
in
consideration of their respective obligations to one another set forth in
this
Agreement, and other good and valuable consideration, the receipt, sufficiency
and adequacy of which the parties hereby acknowledge, the parties to this
Agreement, intending to be legally bound, hereby agree as follows:
1. Term.
(a) The
term
of this Agreement shall begin on November 6, 2006 and shall continue in effect
until the termination of the Executive’s employment with the Company as a result
of (i) the Executive’s death; (ii) the Executive’s Disability;
(iii) the Executive’s termination by the Company for Cause; or
(iv) the Executive’s decision to terminate employment other than for Good
Reason.
2. Termination
of Employment during the Term.
(a) The
Executive shall be entitled to the compensation and benefits provided in
Section 3 upon the termination of the Executive’s employment with the
Company during the term of this Agreement by the Executive or by the Company,
unless such termination is as a result of (i) the Executive’s death;
(ii) the Executive’s Disability; (iii) the Executive’s termination by
the Company for Cause; or (iv) the Executive’s decision to terminate
employment other than for Good Reason.
(b) Disability.
The
term “Disability” as used in this Agreement shall mean termination of the
Executive’s employment by the Company as a result of the Executive’s incapacity
due to physical or mental illness, provided that the Executive shall have
been
absent from her duties with the Company on a full-time basis for six consecutive
months and such absence shall have continued unabated for 30 days after Notice
of Termination as described in Section 2(e) is thereafter given to the Executive
by the Company.
(c) Cause.
The
term “Cause” for purposes of this Agreement shall mean the Company’s termination
of the Executive’s employment by the Company on the basis of criminal or
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civil
fraud on the part of the Executive involving a material amount of funds of
the
Company. For purposes of this Agreement only, the preparation and filing
of
fictitious, false or misleading claims in connection with any federal, state
or
other third party medical reimbursement program, or any other violation of
any
rule or regulation in respect of any federal, state or other third party
medical
reimbursement program by the Company or any subsidiary of the Company shall
not
be deemed to constitute “criminal fraud” or “civil fraud.”
(d) Good
Reason.
For
purposes of this Agreement, “Good Reason” shall mean any of the following
actions taken by the Company without the Executive’s express written
consent:
(i)
Failure
to re-elect the Executive as an officer of the Company, or removal of the
Executive as an officer of the Company, except in connection with the
termination of her employment for Disability or Cause or as a result of the
Executive’s death or by the Executive;
(ii)
A
reduction in the Executive’s base salary as in effect on the date
hereof;
(iii)
Any
failure by the Company to continue in effect any incentive plan or arrangement
(including, without limitation, any bonus or contingent bonus arrangements
and
credits and the right to receive performance awards and similar incentive
compensation benefits) in which the Executive is participating on the date
of
this Agreement (hereinafter referred to as “Incentive Plans”) or the taking of
any action by the Company which would adversely affect the Executive’s
participation in any such Incentive Plan or reduce the Executive’s benefits
under any such Incentive Plan, expressed as a percentage of her base salary,
by
more than five percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(iv)
Any
failure by the Company to continue in effect any plan or arrangement to receive
securities of the Company (including, without limitation, the Company’s 1981
Incentive Stock Option Plan, 1983 Incentive Stock Option Plan, 1984 Nonqualified
Stock Option Plan, 1985 Nonqualified Stock Option Plan, 1991 Stock Option
Plan
and 1993 Stock Option Plan, 1996 Stock Incentive Plan, 1997 Stock Incentive
Plan, Employee Stock Purchase Plan and any other plan or arrangement to receive
and exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating or has the right
to
participate on the date of this Agreement (hereinafter referred to as
“Securities Plans”) or the taking of any action by the Company which would
adversely affect the Executive’s participation in or materially reduce the
Executive’s benefits under any such Securities Plan, provided that a diminution
in the number of option shares granted under any such Securities Plan shall
not
constitute Good Reason so long as the diminution in total grants to all key
executives is apportioned ratably among all such key executives;
(v)
Any
failure by the Company to allow the Executive to participate in any benefit
plan, program or arrangement (including, without limitation, any profit sharing
plan, group annuity contract, group life insurance supplement, or medical,
dental, accident and disability plans, but excluding Incentive Plans and
Securities Plans) to the same extent as other key executives of the
Company;
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(vi)
Any
failure by the Company to provide the Executive with the number of paid vacation
days (or compensation therefor at termination of employment) accrued to the
Executive through the Date of Termination (as defined in Section 2(f) below;
or
(vii)
Any
purported termination of the Executive’s employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Section 2(e), and for purposes of this Agreement, no such purported
termination shall be effective.
(e) Notice
of Termination.
Any
termination of the Executive’s employment by the Company for a reason specified
in Section 2(b) or 2(c) shall be communicated to the Executive by a Notice
of Termination prior to the effective date of the termination. For purposes
of
this Agreement, a “Notice of Termination” shall mean a written notice which
shall indicate whether such termination is for the reason set forth in Section
2(b) or 2(c) and which 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. For purposes of this Agreement,
no
termination of the Executive’s employment by the Company shall constitute a
termination for Disability or Cause unless such termination is preceded by
a
Notice of Termination.
(f) Date
of Termination.
“Date
of Termination” shall mean (a) if
the Executive’s employment is terminated by the Company for Disability, 30 days
after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive’s duties
on a full-time basis during such 30-day period) or (b) if
the Executive’s employment is terminated by the Company or the Executive for any
other reason, the date on which the Executive’s termination is
effective.
3. Compensation
and Benefits upon Termination of Employment.
(a) If
the
Company shall terminate the Executive’s employment other than pursuant to
Section 2(b) or 2(c) and Section 2(e), or if the Executive shall terminate
her employment for Good Reason, then the Company shall pay to the Executive,
as
severance compensation and in consideration of the Executive’s adherence to the
terms of Section 4 hereof, the following:
(i) On
the
Date of Termination, the Company shall become liable to the Executive for
an
amount equal to two times the Executive’s annual base compensation and targeted
base bonus on the Date of Termination, which amount shall be paid to the
Executive in cash on or before the fifth day following the Date of
Termination.
(ii) For
a
period of two years following the Date of Termination, the Executive and
anyone
entitled to claim under or through the Executive shall be entitled to all
benefits under the group hospitalization plan, health care plan, dental care
plan, life or other insurance or death benefit plan, or other present or
future
similar group employee benefit plan or program of the Company for which key
executives are eligible at the Date of Termination to the
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same
extent and at the same cost as if the Executive had continued to be an employee
of the Company during such period.
(iii) For
a
period of two years after the Date of Termination, the Company shall continue
the Executive’s car allowance (at the rate of $1,300 per month or at such higher
rate as is in effect for Executive’s position immediately prior to a Change in
Control or the Date of Termination) and extend full insurance coverage for
the
Executive’s primary automobile in favor of the Executive, as additional named
insured, during such two-year period.
(b) The
parties hereto agree that the payments provided in Section 3(a) hereof are
reasonable compensation in light of the Executive’s services rendered to the
Company and in consideration of the Executive’s adherence to the terms of
Section 4 hereof.
(c) The
payments provided in Section 3(a) above shall be in lieu of any other
severance compensation otherwise payable to Executive under the Company’s
established severance compensation policies; provided, however, that nothing
in
this Agreement shall affect or impair Executive’s vested rights under any other
employee benefit plan or policy of the Company.
4.
Protective
Covenants.
(a) Definitions.
This
Subsection sets forth the definition of certain capitalized terms used in
Subsections (a) through (f) of this Section 4.
(i)
“Competing
Business”
shall
mean a business (other than the Company) that, directly or through a controlled
subsidiary or through an affiliate, (a) develops, markets and/or sells diabetes
or respiratory supplies (“Competing Products”), and/or (b) provides obstetrical
home care services, including, without limitation, programs for monitoring
patients who are at risk of preterm delivery, programs for managing patients
suffering from obstetrical hypertension or diabetes, infusion therapy services
involving drugs to control preterm labor, nursing services and maternity
management services for both low and high risk pregnancies, or diabetes,
cardiac, cancer or respiratory disease management services, including, without
limitation, patient education, risk screening and stratification, case
management and clinical services (“Competing Services”). Notwithstanding the
foregoing, no business shall be deemed a “Competing Business” unless, within at
least one of the business’s three most recently concluded fiscal years, that
business, or a division of that business, derived more than twenty percent
(20%)
of its gross revenues or more than $2,000,000 in gross revenues from the
development, marketing or sale of Competing Products and/or the provision
of
Competing Services.
(ii)
“Competitive
Position”
shall
mean: (A) the Executive’s direct or indirect equity ownership (excluding
ownership of less than one percent (1%) of the outstanding common stock of
any
publicly held corporation) or control of any portion of any Competing Business;
or (B) any employment, consulting, partnership, advisory, directorship, agency,
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promotional
or independent contractor arrangement between the Executive and any Competing
Business where the Executive performs services for the Competing Business
substantially similar to those the Executive performed for the Company,
provided, however, that the Executive shall not be deemed to have a Competitive
Position solely because of the Executive’s services for a Competing Business
that are not directly related to the sale of Competing Products or the provision
of Competing Services, unless more than thirty-five percent (35%) of the
gross
revenues of the Competing Business are derived from the sale of Competing
Products and/or the provision of Competing Services.
(iii)
“Covenant
Period”
shall
mean the period of time from the date of this Agreement to the date that
is two
years after the Date of Termination.
(iv)
“Customers”
shall
mean actual customers, clients, referral sources or managed care organizations
or actively sought prospective customers, clients, referral sources or managed
care organizations of the Company (A) during the one year prior to the date
of
this Agreement and (B) during the Covenant Period.
(v)
“Restricted
Territory”
shall
mean the United States.
(b) Limitation
on Competition.
In
consideration of the Company’s entering into this Agreement, the Executive
agrees that during the Covenant Period, the Executive will not, without the
prior written consent of the Company, anywhere within the Restricted Territory,
either directly or indirectly, alone or in conjunction with any other party,
accept, enter into or take any action in conjunction with or in furtherance
of a
Competitive Position (other than action to reject an unsolicited offer of
a
Competitive Position).
(c) Limitation
on Soliciting Customers.
In
consideration of the Company’s entering into this Agreement, the Executive
agrees that during the Covenant Period, the Executive will not, without the
prior written consent of the Company, alone or in conjunction with any other
party, solicit, divert or appropriate or attempt to solicit, divert or
appropriate on behalf of a Competing Business with which Executive has a
Competitive Position any Customer located in the Restricted Territory (or
any
other Customer with which the Executive had any direct contact on behalf
of the
Company) for the purpose of providing the Customer or having the Customer
provided with a Competing Product or Competing Service.
(d) Limitation
on Soliciting Personnel or Other Parties.
In
consideration of the Company’s entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt
to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party’s affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the
Company.
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(e) Acknowledgement.
The
parties acknowledge and agree that the Protective Covenants are reasonable
as to
time, scope and territory given the Company’s need to protect its trade secrets
and confidential business information and given the substantial payments
and
benefits to which the Executive may be entitled pursuant to this
Agreement.
(f) Remedies.
The
parties acknowledge that any breach or threatened breach of a Protective
Covenant by the Executive is reasonably likely to result in irreparable injury
to the Company, and therefore, in addition to all remedies provided at law
or in
equity, the Executive agrees that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or contemplated
breach of the Protective Covenant. If the Company seeks an injunction, the
Executive waives any requirement that the Company post a bond or any other
security.
5. No
Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All
compensation and benefits provided to the Executive under this Agreement
are in
consideration of the Executive’s services rendered to the Company and of the
Executive’s adhering to the terms set forth in Section 4 hereof and the
Executive shall not be required to mitigate damages or the amount of any
payment
provided for under this Agreement by seeking other employment or otherwise,
nor
shall the amount of any payment provided for under this Agreement be reduced
by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
(b) The
provisions of this Agreement, and any payment provided for hereunder, shall
not
reduce any amounts otherwise payable, or in any way diminish the Executive’s
existing rights, or rights which would accrue solely as a result of the passage
of time, under any Incentive Plan or Securities Plan, or other contract,
plan or
arrangement.
6. Binding
Effect.
(a) This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive should die while
any amounts are still payable to her hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this
Agreement to the Executive’s devisee, legatee, or the designee or, if there be
no such designee, to the Executive’s estate.
7. Notice.
For
purposes of this Agreement, notices and all other communications provided
for in
this Agreement shall be in writing and shall be deemed to have been duly
given
when delivered or mailed by United States registered mail, return receipt
required, postage prepaid, as follows:
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If
to
Company: Matria
Healthcare, Inc.
0000
Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx,
Xxxxxxx 00000
Attention:
General Counsel
If
to
Executive: Xxxxxx
X.
Xxxxxxxx
0000
Xxxxxxxxxx Xxx
Xxxxxxx,
Xxxxxxx 00000
or
such
other address as either party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
8. Miscellaneous.
No
provisions of this Agreement may be modified, waived or discharged unless
such
waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed
a waiver of similar or dissimilar provisions or conditions at the same or
at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by
either party which are not set forth expressly in this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the State
of
Georgia.
9. Validity.
The
invalidity or unenforceability of any provisions of this Agreement shall
not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
10. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
12. Severability;
Modification.
All
provisions of this Agreement are severable from one another, and the
unenforceability or invalidity of any provision of this Agreement shall not
affect the validity or enforceability of the remaining provisions of this
Agreement, but such remaining provisions shall be interpreted and construed
in
such a manner as to carry out fully the intention of the parties. Should
any
judicial body interpreting this Agreement deem any provision of this Agreement
to be unreasonably broad in time, territory, scope or otherwise, it is the
intent and desire of the parties that such judicial body, to the greatest
extent
possible, reduce the breadth of such provision to the maximum legally allowable
parameters rather than deeming such provision totally unenforceable or
invalid.
13. Confidentiality.
The
Executive acknowledges that he or she has previously entered into, and continues
to be bound by the terms of, a Confidentiality and Non-Solicitation Agreement
with the Company.
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14. Agreement
Not an Employment Contract.
This
Agreement shall not be deemed to constitute or be deemed ancillary to an
employment contract between the Company and the Executive, and nothing herein
shall be deemed to give the Executive the right to continue in the employ
of the
Company or to eliminate the right of the Company to discharge the Executive
at
any time.
IN
WITNESS WHEREOF,
the
parties have executed this Agreement to be effective as of the date first
above
written.
MATRIA
HEALTHCARE, INC.
By: _____________________________
Its
Chairman of the Board
EXECUTIVE
___________________________________
Xxxxxx
X.
Xxxxxxxx
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