EXHIBIT 10.33
EMPLOYMENT AND SEVERANCE AGREEMENT
AGREEMENT made as of June 1, 2001 (the "Effective Date")
between XXXXXXX ENTERPRISES, INC., a Delaware corporation (the "Company"), and
XXXXX X. XXXXXXXXX (the "Executive").
WHEREAS, Executive is currently employed by the Company; and
WHEREAS, in connection with this Agreement and in exchange for
the consideration described herein (the receipt and sufficiency of which is
hereby acknowledged), the Executive has agreed to waive any right he may
currently have under the Severance Agreement dated October 5, 2000 and any
change in control, severance, or employment agreement or other compensation or
employee benefit plan with or previously assumed by the Company and has agreed
to waive any claim that any previous sale, transfer of assets, acquisition,
spin-off, merger, restructuring, reorganization, or any other corporate
transaction constitutes a "Change in Control" to terminate his employment under
any such agreements or other employee benefit or compensation plans with the
Company or its predecessors except as set forth herein; and
WHEREAS, it is the intent of the parties that all the terms of
the Severance Agreement dated October 5, 2000 shall be superceded by this
Agreement and the rights and obligations of the parties shall be governed by
this Agreement as of its Effective Date; and
WHEREAS, it is also the intent of the parties that, in
consideration for Executive's waiver of his rights under the Severance Agreement
dated October 5, 2000 and the acceptance of benefits under this Agreement,
Executive shall receive: (1) an increase in his base salary to $400,000 per
year; (2) a new target bonus level of 50% of base salary; and (3) a retention
bonus of 100,000 performance-based non-qualified stock options (NQ's) cliff
vesting on December 31, 2004 and expiring on March 31, 2005; and
WHEREAS, it is further the intent of the parties that if the
Executive remains employed by the Company on or after the first anniversary of
the Effective Date of this Agreement and then has a Termination of Employment
without Cause, or has a "Change in Control" as described in paragraph 1(e), he
shall receive the severance benefits under this Agreement upon the execution of
a Severance Agreement and Release of Claims; and
WHEREAS, the Company desires to assure itself of the
management services of the Executive by directly engaging the Executive as the
President and Chief Operating Officer of Xxxxxxx Health and Rehabilitation
Services, Inc. ("BHRS") a/k/a Xxxxxxx Healthcare; and
WHEREAS, the Company recognizes that the Executive's
contribution to the Company's growth and success will be substantial; and
WHEREAS, the Company wishes to encourage the Executive to
remain with and devote full time and attention to the business affairs of the
Company and wishes to provide income protection to the Executive for a period of
time in the event of an involuntary
Termination of Employment without Cause under paragraph 1(d) or due to a Change
in Control under Paragraph 1(e).
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agrees as follows:
1. Definitions.
(a) "Base Salary" shall mean the Executive's regular annual
rate of base pay, as set forth in Paragraph 4(a), as of the date in question.
(b) The "Benefit Multiplier" shall be equal to 2.0, except
that if Executive's Termination of Employment is pursuant to Paragraph 7(b), it
shall be equal to 3.0.
(c) The "Benefit Period" shall be the period of years equal
to the Benefit Multiplier which follows the Executive's Termination of
Employment.
(d) "Cause" shall mean the Executive's: (i) conviction of a
crime involving moral turpitude or theft or embezzlement of property from the
Company; or (ii) willful misconduct or willful failure substantially to perform
the duties of his position, but only if such has continued after receipt of
notice from the Company's Board of Directors and such reasonable cure period as
is set forth in such notice.
(e) A "Change in Control" shall be deemed to have taken place
if, after the Effective Date: (i) any person, corporation, or other entity or
group, including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than any employee benefit plan then maintained by
the Company, becomes the beneficial owner of shares of the Company having 30
percent or more of the total number of votes that may be cast for the election
of Directors of the Company; (ii) as the result of, or in connection with, any
contested election for the Board of Directors of the Company, or any tender or
exchange offer, merger or other business combination or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were Directors
of the Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company or its
assets or (iii) at any time (a) the Company shall consolidate with, or merge
with, any other Person and the Company shall not be continuing or surviving
corporation, (b) any Person shall consolidate with, or merge with the Company,
and the Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, (c) the Company shall be a party to a statutory
share exchange with any other Person after which the Company is a subsidiary of
any other Person, or (d) the Company shall sell or otherwise transfer 50% or
more of the assets or earning power of the Company and its subsidiaries (taken
as a whole) to any Person or Persons; provided, however, that notwithstanding
anything to the contrary
2
herein, a Change in Control shall not include any transfer to a consolidated
subsidiary, reorganization, spin-off, split-up, distribution, or other similar
or related transaction(s) or any combination of the foregoing in which the core
business and assets of the Company and its subsidiaries (taken as a whole) are
transferred to another entity ("Controlled") with respect to which (1) the
majority of the Board of Directors of the Company (as constituted) immediately
prior to such transaction(s)) also serve as directors of Controlled and
immediately after such transaction(s) constitute a majority of Controlled's
board of directors, and (2) more than 70% of the shareholders of the Company
(immediately prior to such transaction(s)) become shareholders of other owners
of Controlled and immediately after the transaction(s) control more than 70% of
the ownership and voting rights of Controlled.
(f) The "Change in Control Date" shall mean the date
immediately prior to the effectiveness of the Change in Control.
(g) The "Committee" shall mean the Nominating and
Compensation Committee of the Company's Board of Directors.
(h) The "Competitive Businesses" shall mean any of the health
care businesses or research and development activities in which the Company is
engaged on the Effective Date.
(i) "Effective Date" shall mean the date first shown above.
(j) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d).
(k) "Target Bonus" shall mean the target bonus (100% level)
established for the Executive for the year in question under the Company's
"Annual Incentive Plan."
(l) "Termination of Employment" shall mean the termination of
the Executive's employment by the Company other than such a termination in
connection with an offer of immediate reemployment by a successor or assign of
the Company or purchaser of the Company or its assets.
2. Term. The term of this Agreement shall be for the period commencing
on the Effective Date and ending on the third anniversary of the Effective Date.
3. Position and Duties. During the Term, the Executive shall serve as
an employee of the Company in the position of President and Chief Operating
Officer of BHRS, and shall have such duties, functions, responsibilities and
authority as determined by the Chief Executive Officer of the Company.
4. Compensation and Related Matters.
3
(a) Annual Base Salary. The Executive shall receive a Base
Salary at a rate of $400,000 per annum through December 31, 2001 and thereafter
at any such greater rate as is determined by the Committee.
(b) Retention Benefits. The Company wishes to retain Executive
as a key employee whose contributions to the Company could be substantial. As an
inducement for him to remain with the Company in his position as President and
Chief Operating Officer of BHRS, Company grants the following retention benefits
as of the date of this Agreement, unless previously implemented:
(i) increase in base annual salary to $400,000 per
year;
(ii) increase target bonus to 50% of annual base
salary;
(iii) grant of 100,000 non-qualified stock options
(NQ's) with a "cliff" vesting on December 31, 2004 subject to:
(1) BHRS meeting or exceeding cumulative financial targets in
2004 which will be reviewed annually by Executive and Xxxxxxx
X. Xxxxx; and (2) the authorization by the Nominating and
Compensation Committee of the Board of Directors. Price for
such stock options will be determined by using the closing
price of the Company's common stock on the NYSE on June 1,
2001. If the financial targets of BHRS are not met, the
options will expire March 31, 2005.
5. Non-Solicitation.
(a) Executive shall not at any time during the period of his
employment with the Company, or during the one (1) year period immediately
following his Termination of Employment with the Company ("Non-Solicitation
Period"), without the prior written consent of the Company, on behalf of himself
or any other person, solicit for employment or employ any of the current
officers or employees of the Company; provided, however, that nothing contained
herein shall prohibit Executive from hiring employees of the Company when such
employment results from general solicitations for employment.
(b) Executive shall not at any time during the period of his
employment with the Company, or during the Non-Solicitation Period, without the
prior written consent of the Company, solicit for his own use, or for the use of
any company or person by whom he is employed, or for whom he may be acting, any
of the current customers of the Company, nor shall he divulge to any other
person any information or fact relating to the management, business (including
prospective business), finances, its customers or the terms of any of the
contracts of the Company which has heretofore or which may hereafter come to the
knowledge of Executive which is not freely available to the public.
(c) Executive shall not, during the Non-Solicitation Period,
in any way defame the Company or disparage its business capabilities, products,
plans or management to any customer, potential customer, vendor, supplier,
contractor,
4
subcontractor of the Company so as to affect adversely the goodwill or business
of the Company.
(d) Executive covenants and agrees that a breach of these
subparagraphs (a), (b) or (c) would immediately and irreparably harm the Company
and that a remedy at law would be inadequate to compensate the Company for its
losses by reason of such breach and therefore that the Company shall, in
addition to any rights and remedies available under this Agreement, at law or
otherwise, be entitled to any injunction to be issued by any court of competent
jurisdiction enjoining and restraining Executive from committing any violation
of these subparagraphs (a), (b) or (c), and Executive hereby consent to the
issuance of such injunction.
(e) For purposes of this Paragraph 5 and in consideration of
this Agreement, this non-solicitation agreement has been separately negotiated
and bargained for, and constitutes a substantial portion of the consideration
for this Agreement.
6. Non-disclosure of Proprietary Information, Surrender of Records;
Inventions and Patents.
(a) Proprietary Information. Executive shall not during the
term of employment or at any time thereafter (irrespective of the circumstances
under which Executive's employment terminates), directly or indirectly use for
his own purpose or for the benefit of any person or entity other than Company,
nor otherwise disclose, any proprietary information, as defined below, to any
individual or entity, unless such disclosure has been authorized in writing by
the Company or is otherwise required by law. For purposes of this Agreement, the
term "proprietary information" shall include, but is not limited to: (a) the
name or address of any client or affiliate of Company or any information
concerning the transactions or relations of any client or affiliate of Company
with Company or any of its shareholders; (b) any information concerning any
product, service, methodology, analysis, presentation, technology or procedure
employed by Company but not generally known to its clients or competitors, or
under development by or being tested by Company but not at the time offered
generally to clients; (c) any information relating to Company's computer
software, computer systems, pricing or marketing methods, capital structure,
operating results, borrowing arrangements or business plans; (d) any information
which is generally regarded as confidential or proprietary in any line of
business engaged in by Company; (e) any information contained in any of
Company's written or oral policies and procedures or employee manuals; (f) any
information belonging to clients or affiliates of Company which Company has
agreed to hold in confidence; (g) any inventions, innovations or improvements
covered by subparagraph 6(c) below; (h) any other information which Company has
reasonably determined to be confidential or proprietary; and (i) all written,
graphic, electronic and other material relating to any of the foregoing.
Information that is not novel or copyrighted or patented may nonetheless be
proprietary information. Proprietary information, however, shall not include any
information that is or becomes generally known, or is readily accessible through
public means, to the industries in which Company competes through sources
independent of Company or Executive or through authorized publication by Company
to persons other than Company's employees.
5
(b) Confidentiality and Surrender of Records. Executive shall
not during the term of employment or at any time thereafter (irrespective of the
circumstances under which Executive's employment terminates), except as required
by law, directly or indirectly give or disclose any "confidential records" (as
hereinafter defined) to, or permit any inspection of copying of confidential
records by, any individual or entity other than in the ordinary course and scope
of such individual's or entity's employment or retention by Company, nor shall
he use or retain any of the same following termination of his employment.
Executive shall promptly return to Company all "confidential records" upon the
termination of Executive's employment with Company. For purposes hereof,
"confidential records" means all correspondence, memoranda, files, analyses,
studies, reports, notes, documents, manuals, books, lists, financial, operating
or marketing records, computer software, magnetic tape, or electronic or other
media or equipment of any kind which may be in Executive's possession or under
his control or accessible to him which contain any proprietary information as
defined in subparagraph 6(a) above. All confidential records shall be and remain
the sole property of Company during the term of employment and thereafter.
(c) Inventions, Patents, and Copyrights. All inventions,
innovations or improvements in Company's method of conducting its business
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether or not patentable or copyrightable) conceived or made by
Executive, either alone or jointly with others, during the term of employment
belong to Company. Executive will promptly disclose in writing such inventions,
innovations or improvements to Company and perform all actions reasonably
requested by Company to establish and confirm such ownership by Company,
including, but not limited to, cooperating with and assisting Company in
obtaining patents and copyrights for Company in the United States and in foreign
countries. Any patent or copyright application filed by Executive within a year
after termination of his employment hereunder shall be presumed to relate to an
invention or work of authorship which was made during the term of employment
unless Executive can provide evidence to the contrary.
7. Eligibility for Severance Benefits. The Executive shall be eligible
for the benefits described in Paragraph 8 (the "Severance Benefits") if:
(a) during the Term, the Executive has a Termination of
Employment initiated by the Company without Cause under paragraph 1(d) and
subsection (b) does not apply; or
(b) during the Term either (i) there has been a Change in
Control and during the two year period commencing on the Change in Control Date
the Executive has a Termination of Employment which is initiated by the Company
without Cause, or (ii) the Executive has a Termination of Employment initiated
by the Company without Cause following the commencement of any discussion with a
third person that ultimately results in a Change in Control with such third
person within 12 months of the commencement of such discussions (in which case,
the date of such discussion shall be substituted for the Change in Control Date
wherever appropriate).
6
8. Severance Benefit. Upon satisfaction of the requirements
set forth in Paragraph 7, and subject to Paragraphs 9 and 12, the Executive
shall be entitled to the following Severance Benefits:
(a) Cash Payment. If the Executive's Termination of
Employment arises under Paragraph 7(a), the Executive shall be
entitled to receive an amount of cash equal to the Benefit
Multiplier times:
(i) the sum of the Executive's Base Salary as in
effect upon the Termination of Employment, and the greater of
(A) the Executive's Target Bonus as in
effect upon the Termination of Employment or,
(B) the Executive's actual bonus under the
Company's "Annual Incentive Plan" for the year prior
to the year of the Executive's Termination of
Employment; or
(b) Cash Payment. If the Executive's Termination of
Employment arises under Paragraph 7(b), the Executive shall be
entitled to receive an amount of cash equal to the Benefit
Multiplier times:
(i) the sum of the Executive's Base Salary as in
effect on the Change in Control Date, and the greater of
(A) the Executive's Target Bonus as in
effect upon the Change in Control Date or,
(B) the Executive's actual bonus under the
Company's "Annual Incentive Plan" for the year prior
to the Change in Control Date.
The payment shall be made in a single lump sum within ten days following the
Executive's Termination of Employment.
(c) Continuation of Benefits.
(i) For the Benefit Period, the Executive shall be
treated as if he had continued to be an employee for all
purposes under the Company's Medical Plan, Executive Medical
Reimbursement Plan and Dental Plan. Following this period, the
Executive shall be entitled to receive continuation coverage
under Part Six of Title I of ERISA ("COBRA Benefits") treating
the end of this period as a termination of the Executive's
employment (other than for gross misconduct).
(ii) The Company shall maintain in force, at its own
expense, for the remainder of the Executive's life, the vested
life insurance in effect under the Company's Executive Split
Dollar Life Insurance Plan (as described in
7
Paragraph 4(b)) as of the Change in Control Date or as of the
date of Termination of Employment, whichever is greater.
(d) Relocation Benefit. If, within one (1) year after
the Employee's Termination Date, the Employee gives the Company
written notice that he desires to relocate within the continental
United States, the Company will reimburse the Employee for any
reasonable relocation expenses (in accordance with the Company's
general relocation policy for employees as then in effect, or, at
the Employee's election, as in effect on the Termination Date) in
connection with such relocation.
(e) Executive Savings Plus Plan. For the year of the
Executive's Termination of Employment, the Company will make the
contribution to the Executive Savings Plus Plan on behalf of the
Executive that it would have made if the Executive had not had a
Termination of Employment, but in no event less than the percentage
contribution it made for the Executive in the immediately preceding
year (and increased to take account of the additional year of
service), in each case taking account of the Executive's annualized
rate of "Compensation" (as defined in the Executive Savings Plus
Plan) and the percentage of such Compensation that the Executive is
contributing to the Executive Savings Plus Plan, as of the date of
Termination of Employment, and the Company's matching contribution
rate for such year (or, if greater, the preceding year). The portion
of the Company's matching contribution which is based on the
preceding year's contribution percentage shall be contributed to the
Executive Savings Plus Plan on behalf of the Executive immediately
upon the Executive's Termination of Employment and any additional
contribution required shall be paid as soon as the amount is
determined.
(f) Executive Deferred Compensation Plan. For the year
of the Executive's Termination of Employment, the Company will make
the contribution to its Executive Deferred Compensation Plan (the
"EDC Plan") that it would have made if the Executive had not had a
Termination of Employment determined based on the Executive's
deferral for such year. At Executive's election, the Company
contribution shall be paid to the Executive immediately upon his
Termination of Employment.
9. Waiver and Release of Other Severance Benefits. The
benefits payable pursuant to this Agreement are in lieu of any other severance
benefits which may otherwise be payable to the Executive upon termination of
employment with the Company, whether or not in connection with a Change in
Control (including, without limitation, any benefits to which Executive might
otherwise have been entitled under any employment, change in control, or
severance agreement or other compensation or employee benefit plan to which the
Company was a party or which was assumed by the Company), except those benefits
which are to be made available to the Executive as required by applicable law.
Except as otherwise provided herein, Executive waives and releases any claims
Executive may have under the Severance Agreement dated October 5, 2000 for any
severance benefits.
10. Disputes. Any dispute or controversy arising under, out
of, in connection with or in relation to this Agreement shall, at the election
and upon written demand of either party, be finally determined and settled by
binding arbitration in the city of Fort Xxxxx, Arkansas, using a single
arbitrator, in accordance with the Labor Arbitration rules and procedures of the
8
American Arbitration Association, and judgment upon the award may be entered in
any court having jurisdiction thereof. The arbitrator shall have the power to
order specific performance, mandamus, or other appropriate legal or equitable
relief to enforce the provisions of this Agreement. The Company shall pay all
costs of the arbitration and all reasonable attorney's and accountant's fees of
the Executive in connection therewith.
11. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement.
12. No Mitigation Obligation. The parties hereto expressly
agree that the payment of the benefits by the Company to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and that
the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.
13. Successors: Binding Agreement.
(a) This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company or by any merger
or consolidation where the Company is not the surviving corporation,
or upon any transfer of all or substantially all of the Company's
assets, or any other Change in Control. The Company shall require
any purchaser, assign, surviving corporation or successor (whether
direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such
succession had taken place. This Agreement shall be binding upon and
insure to the benefit of the Company and any purchaser, assign,
surviving corporation or successor to the Company, including without
limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company
whether by purchase, merger, consolidation, reorganization, transfer
of all of substantially all of the business or assets of the
Company, or otherwise (and such purchaser, assign, surviving
corporation or successor shall thereafter be deemed the "Company"
for the purposes of this Agreement), but this Agreement shall not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 15. Without
limiting the generality of the foregoing, the Executive's right to
receive
9
payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale
encumbrance, charge, hypothecation, or set-off in respect of any
claims, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntary or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
14. Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be writing and delivered personally or sent by
telex, telecopy, or certified or registered mail, postage prepaid, or other
similar means of communication, as follows:
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him at the address set
forth below under the Executive's signature, or at any such other
address as either party shall have specified by notice in writing to
the other.
15. Amendments: Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Board of Directors
except as set forth in Paragraph 2. By an instrument in writing similarly
executed, either party may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated to comply
with or perform; provided, however, that such waiver shall not operate as a
waiver of, or estoppel with respect to, any other or subsequent failure. No
failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, or power provided
herein or by law or in equity.
16. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto. The parties further
intend that this Agreement shall constitute the complete and exclusive statement
of its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
17. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance
shall be held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such provisions as applied to other
persons, places and circumstances shall remain in full force and effect.
10
18. Indemnification. Executive has entered into an
Indemnification Agreement dated February 3, 1999 which shall govern the rights
and obligations of the parties with respect to indemnification.
19. Governing Law. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of Arkansas,
except (i) to the extent pre-empted by Federal law, and (ii) Paragraph 20 which
shall be interpreted, administered and enforced in accordance with the law of
the State of Delaware.
20. Severance Agreement and Release. As a precondition to
obtaining any severance benefits under this Agreement, Executive agrees to
execute the attached form of Severance Agreement and Release of Claims within
twenty-one (21) days of his Termination of Employment unless he agrees to a
shorter period of time for consideration of the Severance Agreement and Release
of Claims.
11
The parties have duly executed this Agreement as of the date
first written above.
XXXXXXX ENTERPRISES, INC. EXECUTIVE
By:
--------------------------- -----------------------------
Xxxxxxx X. Xxxxx Xxxxx X. Xxxxxxxxx
Chairman, President and
Chief Executive Officer
By:
-----------------------------------
Xxxxxxx X. Xxxx
Executive Vice President -
Law and Government Relations,
and Secretary
One Thousand Xxxxxxx Xxx
Xxxx Xxxxx, XX 00000
12
