Exhibit 10.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") dated as
of January 1, 1998, is made by and between PARAGON REHABILITATION, INC., a
Delaware corporation ("Employer"), and XXXXXXXX X. XXXXXX, an individual
resident of Tennessee ("Executive").
WHEREAS, Employer recognizes that Executive's contribution to the growth
and success of Employer in future years will be a significant factor in the
success of Employer and Employer's parent corporation, Centennial HealthCare
Corporation, a Georgia corporation ("Centennial");
WHEREAS, Employer desires to provide for the employment of Executive in a
manner which will reinforce and encourage the dedication of Executive to
Employer and promote the best interests of Employer, Centennial and its
shareholders;
WHEREAS, Executive is willing to serve Employer on the terms and conditions
herein provided. Certain terms used in this Agreement are defined in Section 17
hereof; and
WHEREAS, Employer has no publicly registered securities eligible for
distribution to Executive and Centennial does have employee stock programs
available for employees of its subsidiary corporations.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. EMPLOYMENT. Employer shall employ Executive, and Executive shall serve
Employer, as President and Chief Executive Officer of Employer upon the terms
and conditions set forth herein. In such capacity he shall have full authority
to manage the operations of Employer, including, without limitation, the
discretion over personnel, facilities, budgets, and other operational matters,
subject to the direction of the sole member of the Board of Directors of
Employer (the "Board"). Executive shall devote his full business time,
attention, skill and efforts to the performance of his duties hereunder, except
during periods of illness or periods of vacation and leaves of absence
consistent with Employer policy. Executive may devote reasonable periods to
service as a director or advisor to other organizations, to charitable and
community activities, and to managing his personal investments, PROVIDED that
such activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of Employer.
2. TERM. Unless earlier terminated as provided herein, Executive's
employment under this Agreement shall be for an initial term (the "Term") of
three (3) years which, beginning on the second anniversary of the effective
date of this Agreement, shall be extended automatically (without further action
of Employer or Executive) each day for an additional day so that the remaining
term shall continue to be (2) two years.
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3. COMPENSATION AND BENEFITS.
(a) As compensation for his services hereunder, Employer shall pay to
Executive a base salary of $ 184,000 per year, payable in bi-weekly or semi-
monthly installments. Such base salary shall be reviewed at least annually on
January 1 of each year by the Board to determine whatever increase may be
merited; PROVIDED, HOWEVER, that the minimum annual increase shall be the
increase in the Consumer Price Index as published by the U.S. Department of
Labor, Bureau of Statistics, for the period since the last annual review (or, in
the case of the first such review, the date of this Agreement).
(b) Executive shall participate in Centennial's management incentive
program and shall be eligible to receive annual payments based upon achievement
of targeted levels of performance and such other criteria as the Board of
Directors of Centennial (the "Centennial Board") or an appropriate committee
thereof shall establish from time to time.
(c) Executive shall participate in Centennial's long-term equity
incentive program and be eligible for the grant of stock options as determined
by the Centennial Board or a committee thereof.
(d) Executive shall participate in all retirement, welfare and other
benefit plans or programs of Employer (including, at Employer's sole expense,
health, dental and hospitalization insurance coverage for Executive, his spouse
and dependents) now or hereafter applicable generally to employees of Employer
or to a class of employees that includes senior executives of Employer; PROVIDED
that during any period during the Term that Executive is subject to a
Disability, and during the one-hundred-eighty (180) day period of physical or
mental infirmity leading up to Executive's Disability, the amount of Executive's
compensation provided under this Section 3 shall be reduced by the sum of the
amounts, if any, paid to Executive for the same period under any disability
benefit or pension plan of Employer or any of its subsidiaries.
(e) Employer shall reimburse Executive for reasonable travel and other
expenses related to Executive's duties which are incurred and accounted for in
accordance with the normal practices of Employer.
(f) Executive shall be entitled to and Employer shall provide for
Executive's personal use access to up to $ 10,000 in the aggregate of legal,
accounting or other professional advice ordinarily available to Employer which,
subject to professional responsibility requirements, will be provided to
Executive by Employer's primary legal counsel, accountants or other appropriate
professionals.
(g) Executive shall receive an automobile allowance of $500 per month
during the term of this Agreement.
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4. TERMINATION.
(a) Executive's employment under this Agreement may be terminated
prior to the end of the Term only as follows:
(i) upon the death of Executive;
(ii) by Employer due to the Disability of Executive upon delivery
of a Notice of Termination to Executive;
(iii) by Employer for Cause upon delivery of a Notice of
Termination to Executive;
(iv) by Executive for Good Reason upon delivery of a Notice of
Termination to Employer within a ninety (90) day period beginning on the
30th day after the occurrence of a Change in Control or within a ninety
(90) day period beginning on the one- year anniversary of the occurrence of
a Change in Control;
(v) by Employer at any time upon delivery of a Notice of
Termination to Executive after a vote of a majority of Employer's Board in
favor of the termination of Executive, other than termination pursuant to
clause (i), (ii) or (iii) of this paragraph 4(a); and
(vi) by Executive effective upon the 90th day after delivery of a
Notice of Termination.
(b) If Executive's employment with Employer shall be terminated during
the Term pursuant to clause (i), (ii) or (iv) of paragraph 4(a) , Executive (or,
in the case of his death, Executive's estate) shall be entitled to the
following:
(i) Employer shall pay Executive in cash within fifteen (15) days
of the Termination Date an amount equal to all Accrued Compensation;
(ii) Employer shall pay to Executive in cash at the end of each
of the twelve (12) consecutive months following the Termination Date the
Base Amount divided by (12) twelve; and
(iii) the restrictions on any outstanding incentive awards
granted to Executive under Centennial's long-term equity incentive program
or under any other incentive plan or arrangement shall lapse and such
incentive awards shall become 100% vested, and all stock options and stock
appreciation rights granted to Executive shall become immediately
exercisable and shall become 100% vested.
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(c) If Executive's employment with Employer shall be terminated during
the Term pursuant to clause (v) of paragraph 4(a), Executive (or, in the case of
his death, Executive's estate) shall be entitled to the following:
(i) Employer shall pay Executive in cash within fifteen (15) days
of the Termination Date an amount equal to all Accrued Compensation; and
(ii) Employer shall pay to Executive in cash at the end of each
of the twelve (12) consecutive months following the Termination Date the
Base Amount, divided by (12) twelve.
(d) If Executive's employment with Employer shall be terminated during
the Term pursuant to clause (iii) or clause (vi) of the foregoing paragraph (a),
Executive shall be entitled to be paid by Employer in cash within fifteen (15)
days of the Termination Date an amount equal to all Accrued Compensation.
(e) Executive shall be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise and such
payment shall be offset or reduced by the amount of any compensation or benefits
provided to Executive in any subsequent employment.
(f) In the event that any payment or benefit (within the meaning of
Section 280(b)(2) of the Code) to Executive or for his benefit paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, his employment with Employer or
a change in ownership or effective control of Employer or of a substantial
portion of its assets (a "Payment" or "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by 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 Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by Executive
of all taxes (including any interest or penalties, other than interest and
penalties imposed by reason of Executive's failure to file timely a tax return
or pay taxes shown due on his return, imposed with respect to such taxes and the
Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(g) The severance pay and benefits provided for in this Section 4
shall be in lieu of any other severance or termination pay to which Executive
may be entitled under any Employer severance or termination plan, program,
practice or arrangement. Executive's entitlement to any other compensation or
benefits shall be determined in accordance with Employer's employee benefit
plans and other applicable programs, policies and practices then in effect.
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5. TRADE SECRETS.
(a) Executive agrees to keep confidential, and agrees that he shall
not, at any time, either during the Term of his employment or after the
Termination Date, use or disclose any Trade Secrets of the Employer, except in
fulfillment of his duties as Executive during his employment, for so long as the
pertinent information or data remain Trade Secrets, whether or not the Trade
Secrets are in written or tangible form.
(b) Executive agrees to maintain in strict confidence and, except as
necessary to perform his or her duties for Employer, not to use or disclose any
Confidential Business Information of Employer during his employment.
(c) Executive agrees that upon termination of his employment for any
reason, Executive shall forthwith return to or leave with Employer all business
records, contracts, calendars, telephone lists and other materials relating to
Employer, its business or its clientele, including all copies thereof, whether
or not Executive prepared them himself or they were provided by Employer.
6. NON-COMPETITION AND NON-SOLICITATION COVENANTS.
(a) Executive recognizes that Executive is expected to be a key
employee whose specialized skills, abilities and contacts are considered
essential for the success of Employer. Executive further recognizes that
Employer specifically would not enter into this Agreement if it could not rely
on obtaining Executive's exclusive and undivided loyalty and attention and
Executive's compliance with the terms of this Agreement.
(b) During the Term and following any termination of his employment,
Executive shall not, directly or indirectly, (as a director, officer, employee,
manager, consultant, independent contractor, agent, advisor, equity or debt
holder or otherwise) engage in competition with, or own any interest in, perform
any services for, participate in or be connected with any business or
organization which provides rehabilitative therapy services including, but not
limited to, physical therapy, occupational therapy and speech therapy in the
Territory; PROVIDED, HOWEVER, that the provisions of this paragraph (b) shall
not prohibit Executive's ownership of not more than 5% of the total shares of
all classes of stock outstanding of any publicly held company.
(c) During the Term and following any termination of his employment,
Executive shall not solicit, directly or indirectly, any Customers (as
hereinafter defined) of Employer with whom Executive had material contact during
his employment.
(d) During the Term and following any termination of his employment,
Executive shall not, directly or indirectly, solicit for employment or advise or
recommend to any other person that he, she or it employ or solicit for
employment, any employee of Employer.
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(e) The restrictions set forth in Sections 6(b), (c) and (d) shall
last for one (1) year following any termination of Executive's employment
pursuant to Section 4 hereof.
(f) For purposes of this Agreement:
"Customers" shall mean the companies that lease, manage or own the nursing
home facilities that currently contract with Employer for the provision of
rehabilitative therapy services during the one (1) year period preceding the
Termination Date.
The "Territory" shall mean the area located within the 10-mile radius of
any skilled nursing care or other facility at which Employer provides
rehabilitative therapy services, on the Termination Date. Set forth on the
attached Schedule I, which is incorporated herein by reference, is the name and
street address of each such facility on the date of this Agreement. The
Employer shall, with the consent of Executive (which consent shall not be
unreasonably withheld), revise Schedule I from time to time to reflect any
additions, deletions, or changes in the facilities operated by Employer. It is
mutually acknowledged that Executive has significant management and operations
responsibility with respect to the provision of rehabilitative therapy at such
facilities.
7. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon and shall inure to the
benefit of Employer, its Successors and Assigns and Employer shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that Employer would be required to
perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's legal
personal representative.
8. PUBLICITY. Except as set forth below, after the Termination Date (a)
no disclosure, public or otherwise, shall be made by Executive or Employer, as
the case may be, with respect to the terms and conditions of this Agreement or
the severance of Executive's employment relationship with Employer, except as
may be required by law, (b) Executive further agrees that Executive will not
demean or disparage Employer or Centennial or its subsidiaries, publicly or
otherwise, and (c) any inquiries made of Employer, its officers, employees or
representatives concerning Executive shall be answered only with a "neutral
reference." The phrase "neutral reference" as used herein shall mean only the
inclusive dates of Executive's tenure with Employer, the positions Executive
held with Employer during Executive's employment, and the rate at which
Executive was compensated for Executive's positions with Employer. Employer
shall not provide any additional information about Executive whatsoever;
PROVIDED, HOWEVER, that Employer shall explain in response to such inquiries
that "Company policy requires us to refrain from making any further response."
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9. NOTICE. Any notice and all other communications provided for in the
Agreement (including the Notice of Termination) shall be in writing and
delivered by personal delivery, courier, telecopier (transmission confirmed),
overnight delivery service or certified mail (return receipt requested, postage
prepaid) addressed as follows:
If to Employer:
Paragon Rehabilitation, Inc.
c/o Centennial HealthCare Corporation
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxxx Xxxxx, Chairman
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Quir\s, Esq.
Telecopier: (000) 000-0000
Telephone: (000)000-0000
If to Executive:
Xx. Xxxxxxxx X. Xxxxxx
c/o Paragon Rehabilitation, Inc.
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
or to such other addresses or numbers as shall be specified by like notice. A
notice shall be deemed to have been given to a party to whom it is directed (i)
if by courier, personal delivery, or certified mail, upon actual receipt by such
party, (ii) if by telecopier or overnight delivery service, one business day
after such notice was sent.
10. SETTLEMENT OF CLAIMS. Employer's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder may be affected by circumstances, including, without limitation, any
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set-off, counterclaim, recoupment, defense or other right which Employer may
have against Executive or others. Employer may withhold from any benefits
payable under this Agreement all federal, state, city, or other taxes as shall
be required pursuant to any law or governmental regulation or ruling.
11. MODIFICATION AND WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Executive and Employer. No waiver by any
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.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Employer and Executive agree
that venue for any dispute that may arise concerning this agreement shall be in
DeKalb County, Georgia, or Xxxxxx County, Georgia.
13. SEVERABILITY. The parties agree that the provisions of this
Agreement are severable and the invalidity or unenforceability of any provision
in whole or part shall not affect the validity or enforceability of any
enforceable part of such provision or any other provisions hereof.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof, including without limitation that certain Employment
Agreement dated as of December 1, 1994 by and among Executive and Transitional
Health Services, Inc., a Delaware corporation and Transitional Health Partners,
a Delaware general partnership.
15. HEADINGS. The headings of Sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Compensation" shall mean an amount which shall include
all amounts earned or accrued through the Termination Date but not paid as of
the Termination Date including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by Executive on behalf of Employer
during the period ending on the Termination Date, and (iii) bonuses and
incentive compensation which has been awarded or which has vested.
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(b) "Base Amount" shall mean the greater of Executive's annual base
salary (i) at the rate in effect on the Termination Date or (ii) at the highest
rate in effect at any time during the ninety day period prior to the Change in
Control, and shall include all amounts of his base salary that are deferred
under the qualified and non-qualified employee benefit plans of Employer or any
other agreement or arrangement.
(c) The termination of Executive's employment shall be for "Cause" if
it is a result of:
(i) any act that constitutes, on the part of Executive, fraud,
dishonesty, negligence or malfeasance of duty, or conduct inappropriate to
Executive's office; or
(ii) the conviction (from which no appeal may be or is timely
taken) of Executive of a felony, or a misdemeanor involving moral
turpitude.
(d) A "Change in Control" shall mean the occurrence during the Term of
any of the following events:
(i) An acquisition (other than directly from Centennial) of any
voting securities of Centennial (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act")) immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 0000 Xxx) of 60% or more of the combined voting power
of Centennial's then outstanding Voting Securities; PROVIDED, HOWEVER, that
in determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a Change in Control.
A "Non-Control Acquisition" shall mean an acquisition by (1) an employee
benefit plan (or a trust forming a part thereof) maintained by (x)
Centennial or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by Centennial (a "Subsidiary"), (2) Centennial or
any Subsidiary, or (3) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined); or
(ii) Approval by shareholders of Centennial of:
(A) A merger, consolidation or reorganization involving
Centennial, unless
(1) the shareholders of Employer, immediately before
such merger, consolidation or reorganization, own,
directly or indirectly, immediately following such
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merger, consolidation or reorganization, at least
two-thirds of the combined voting power of the
outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the Voting Securities immediately
before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the incumbent
board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds
of the members of the board of directors of the
Surviving Corporation.
A transaction described in clauses (1) and (2) shall
herein be referred to as a "Non-Control Transaction;"
(B) A complete liquidation or dissolution of Centennial; or
(C) An agreement for the sale or other disposition of all
or substantially all of the assets of Centennial to any
Person (other than a transfer to a Subsidiary).
(e) "Confidential Business Information" shall mean any internal, non-
public information (other than Trade Secrets) concerning Employer's,
Centennial's and its subsidiaries' financial position and results of operations
(including revenues, margins, assets, net income, etc.); annual and long-range
business plans; service and product plans; marketing plans and methods; account
invoices; training, educational and administrative manuals; customer
information, including names, addresses, telephones, customer requirements and
purchase histories; and employee lists.
(f) "Disability" shall mean a physical or mental infirmity as defined
by Employer's long-term disability insurance policy provided as a benefit to
Executive.
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(g) "Good Reason" shall mean the occurrence after a Change in Control
of any of the following events or conditions:
(i) a change in Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in
Executive's reasonable judgment, represents a material adverse change from
his status, title, position or responsibilities as in effect at any time
within ninety days preceding the date of a Change in Control or at any time
thereafter;
(ii) a reduction in Executive's base salary or any failure to pay
Executive any compensation or benefits to which he is entitled within
twenty (20) days of the date due;
(iii) Employer's requiring Executive to be based at any place
outside a thirty (30) mile radius from the executive offices occupied by
Executive immediately prior to the Change in Control, except for reasonably
required travel on Employer's business which is not materially greater than
such travel requirements prior to the Change in Control;
(iv) the failure by Employer or Centennial, or its or their
successors, to (A) continue in effect (without reduction in benefit level
and/or reward opportunities) any material compensation or employee benefit
plan in which Executive was participating at any time within ninety days
preceding the date of a Change in Control or at any time thereafter, unless
such plan is replaced with a plan that provides substantially equivalent
compensation or benefits to Executive or (B) provide Executive with
compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which Executive
was participating at any time within ninety days preceding the date of a
Change in Control or at any time thereafter;
(v) the insolvency or the filing by Employer of a petition for
bankruptcy of Employer, which petition is not dismissed within sixty (60)
days;
(vi) any material breach by Employer of any provision of this
Agreement;
(vii) any purported termination of Executive's employment for
Cause by Employer which does not comply with the terms of this Agreement;
or
(viii) the failure of Employer to obtain an agreement,
satisfactory to Executive, from any Successors and Assigns of Employer to
assume and agree to perform this Agreement, as contemplated in Section 7
hereof.
(h) "Notice of Termination" shall mean a written notice of termination
from Employer or Executive which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon, and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
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(i) "Successors and Assigns" shall mean Employer or a corporation or
other entity acquiring all or substantially all the assets and business of
Employer (including this Agreement), whether by operation of law or otherwise.
(j) "Termination Date" shall mean, in the case of Executive's death,
his date of death, and in all other cases, the date specified in the Notice of
Termination.
(k) "Trade Secrets" shall mean any information relating to Employer,
Centennial and its subsidiaries, including but not limited to technical or non-
technical data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data, financial plans,
product plans, information on customers, or a list of actual or potential
customers or suppliers, which: (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use, and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. Some of the information that Employer
,Centennial and its subsidiaries treat as trade secrets includes financial
information (revenues, margins, assets, net income, etc.); annual and long-range
business plans; product plans; marketing plans and methods; account invoices;
training, educational, and administrative manuals; customer information;
employee lists; suppliers; wholesalers; and future business plans of Employer,
Centennial and its subsidiaries.
IN WITNESS WHEREOF, Employer has executed this Agreement and its seal to be
affixed hereunto by its officers thereunto duly authorized, and Executive has
signed and sealed this Agreement, effective as of the date first above written.
EMPLOYER:
CENTENNIAL HEALTHCARE CORPORATION
By: /s/ J. Xxxxxxx Xxxxx
----------------------------------------------
J. Xxxxxxx Xxxxx, President and
Chief Executive Officer
EXECUTIVE:
XXXXXXXX X. XXXXXX
/s/ Xxxxxxxx X. Xxxxxx (SEAL)
-----------------------------------------
Xxxxxxxx X. Xxxxxx
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