EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of the 25th day of February
2003 (the "Effective Date"), by and between Kindred Healthcare Operating, Inc.,
a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxxxxxx (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Company, a
wholly-owned subsidiary of Kindred Healthcare, Inc. ("Parent"), and the parties
hereto desire to provide for the terms of Executive's employment by the Company;
and
WHEREAS, the Company has determined that it is in the best
interests of the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective covenants and agreements contained herein, and intending to be
legally bound hereby, the Company and Executive agree as follows:
1. Employment. The Company hereby agrees to employ
Executive and Executive hereby agrees to be employed by the Company on the terms
and conditions herein set forth. The initial term of this Agreement shall be for
a one-year period commencing on the Effective Date. The term shall be
automatically extended by one additional day for each day beyond the Effective
Date that the Executive remains employed by the Company until such time as the
Company elects to cease such extension by giving written notice of such election
to the Executive (the "Term"). In such event, the Agreement shall terminate on
the first anniversary of the effective date of such election notice.
2. Duties. Executive is engaged by the Company as Vice
President of Corporate Legal Affairs and Corporate Secretary.
3. Extent of Services. Executive, subject to the direction
and control of the Board of Directors (the "Board"), shall have the power and
authority commensurate with his executive status and necessary to perform his
duties hereunder. During the Term, Executive shall devote his entire working
time, attention, labor, skill and energies to the business of the Company, and
shall not, without the consent of the Company, be actively engaged in any other
business activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage.
4. Compensation. As compensation for services hereunder
rendered, Executive shall receive during the Term:
(a) Executive's current base salary per year existing on the
date hereof ("Base Salary") payable in equal installments in accordance
with the Company's normal payroll procedures. Executive may receive
increases in his Base Salary from time to time, as approved by the
Board.
(b) In addition to Base Salary, Executive will be eligible
to receive a bonus of his Base Salary and other incentive compensation
as the Board may approve from time to time.
5. Benefits.
(a) Executive shall be entitled to participate in any and
all pension benefit, welfare benefit (including, without limitation,
medical, dental, disability and group life insurance coverages) and
fringe benefit plans from time to time in effect for officers of the
Company and its affiliates following the Company's standard waiting
periods, if any.
(b) Executive shall be entitled to participate in such
bonus, stock option, or other incentive compensation plans of the
Company and its affiliates in effect from time to time for officers of
the Company.
(c) Executive shall be entitled to paid time off each year
consistent with the Company's policies. The Executive shall schedule the
timing of such paid time off in a reasonable manner. The Executive also
may be entitled to such other leave, with or without compensation, as
shall be mutually agreed by the Company and Executive.
(d) Executive may incur reasonable expenses for promoting
the Company's business, including expenses for entertainment, travel and
similar items. The Company shall reimburse Executive for all such
reasonable expenses in accordance with the Company's reimbursement
policies and procedures.
6. Termination of Employment.
(a) Death or Disability. Executive's employment shall
terminate automatically upon Executive's death during the Term. If the
Company determines in good faith that the Disability of Executive has
occurred during the Term (pursuant to the definition of Disability set
forth below) it may give to Executive written notice of its intention to
terminate Executive's employment. In such event, Executive's employment
with the Company shall terminate effective on the 30th
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day after receipt of such notice by Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, Executive
shall not have returned to full-time performance of Executive's duties.
For purposes of this Agreement, "Disability" shall mean Executive's
absence from his full-time duties hereunder for a period of 90 days.
(b) Cause. The Company may terminate Executive's employment
during the Term for Cause. For purposes of this Agreement, "Cause" shall
mean the Executive's (i) conviction of or plea of nolo contendere to a
crime involving moral turpitude; or (ii) willful and material breach by
Executive of his duties and responsibilities, which is committed in bad
faith or without reasonable belief that such breaching conduct is in the
best interests of the Company and its affiliates, but with respect to
(ii) only if the Board adopts a resolution by a vote of at least 75% of
its members so finding after giving the Executive and his attorney an
opportunity to be heard by the Board. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board
or based upon advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in good faith
and in the best interests of the Company.
(c) Good Reason. Executive's employment may be terminated by
Executive for Good Reason. "Good Reason" shall exist upon the
occurrence, without Executive's express written consent, of any of the
following events:
(i) the Company shall assign to Executive duties of a
substantially nonexecutive or nonmanagerial nature;
(ii) an adverse change in Executive's status or position
as an executive officer of the Company, including, without
limitation, an adverse change in Executive's status or position
as a result of a diminution in Executive's duties and
responsibilities (other than any such change directly
attributable to the fact that the Company is no longer publicly
owned);
(iii) the Company shall (A) materially reduce the Base
Salary or bonus opportunity of Executive, or (B) materially
reduce his benefits and perquisites (other than pursuant to a
uniform reduction applicable to all similarly situated
executives of the Company);
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(iv) the Company shall require Executive to relocate
Executive's principal business office more than 30 miles,
provided that the Executive and the Company acknowledge that
Executive's principal business office is 000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000; or
(v) the failure of the Company to obtain the assumption
of this Agreement as contemplated by Section 9(c).
For purposes of this Agreement, "Good Reason" shall not exist until
after Executive has given the Company notice of the applicable event
within 90 days of such event and which is not remedied within 30 days
after receipt of written notice from Executive specifically delineating
such claimed event and setting forth Executive's intention to terminate
employment if not remedied; provided, that if the specified event cannot
reasonably be remedied within such 30-day period and the Company
commences reasonable steps within such 30-day period to remedy such
event and diligently continues such steps thereafter until a remedy is
effected, such event shall not constitute "Good Reason" provided that
such event is remedied within 60 days after receipt of such written
notice.
(d) Notice of Termination. Any termination by the Company
for Cause, or by Executive for Good Reason, shall be communicated by
Notice of Termination given in accordance with this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) 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 and (iii)
specifies the intended termination date (which date, in the case of a
termination for Good Reason, shall be not more than thirty days after
the giving of such notice). The failure by Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any
right of Executive or the Company, respectively, hereunder or preclude
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by the Company for Cause, or by
Executive for Good Reason, the later of the date specified in the Notice
of Termination or the date that is one day after the last day of any
applicable cure period, (ii) if Executive's employment is terminated by
the Company other than for Cause or Disability, or Executive resigns
without Good Reason, the Date of Termination shall be the date on which
the Company or Executive notified Executive or the Company,
respectively, of such termination and (iii) if Executive's employment is
terminated
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by reason of death or Disability, the Date of Termination shall be the
date of death of Executive or the Disability Effective Date, as the case
may be.
7. Obligations of the Company Upon Termination. Following
any termination of Executive's employment hereunder, the Company shall pay
Executive his Base Salary through the Date of Termination and any amounts owed
to Executive pursuant to the terms and conditions of the benefit plans and
programs of the Company at the time such payments are due. In addition, subject
to Executive's execution of a general release of claims in form satisfactory to
the Company, Executive shall be entitled to the following additional payments:
(a) Death or Disability. If, during the Term, Executive's
employment shall terminate by reason of Executive's death or Disability,
the Company shall pay to Executive (or his designated beneficiary or
estate, as the case may be) the prorated portion of any Target Bonus (as
defined below) Executive would have received for the year of termination
of employment. Such amount shall be paid within 30 days of the date when
such amounts would otherwise have been payable to the Executive if
Executive's employment had not terminated.
(b) Good Reason; Other than for Cause. If, during the Term,
the Company shall terminate Executive's employment other than for Cause
(but not for Disability), or the Executive shall terminate his
employment for Good Reason:
(1) Within 14 days of Executive's Date of
Termination, the Company shall pay to Executive (i) the prorated
portion of the Target Bonus for Executive for the year in which
the Date of Termination occurs, and (ii) an amount equal to 1.5
times the sum of the Executive's Base Salary and Target Bonus as
of the Date of Termination.
For purposes of this Agreement: "Target Bonus" shall mean the
full amount of the targeted annual incentive bonus that would be
payable to the Executive, assuming the targeted performance
criteria on which such annual incentive bonus is based were
deemed to be satisfied, in respect of services for the calendar
year in which the date in question occurs.
(2) For a period of 18 months following the Date of
Termination, the Executive shall be treated as if he had
continued to be an Executive for all purposes under the Parent's
Health Insurance Plan and Dental Insurance Plan; or if the
Executive is prohibited from participating in such plan, the
Company or Parent shall otherwise provide such benefits.
Following this continuation period, the Executive shall be
entitled to receive continuation coverage under Part 6 of Title
I or ERISA ("COBRA
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Benefits") treating the end of this period as a termination of
the Executive's employment if allowed by law.
(3) For a period of 18 months following the Date of
Termination, Parent shall maintain in force, at its expense, the
Executive's life insurance in effect under the Parent's
Voluntary Life Insurance Benefit Plan as of the Date of
Termination.
(4) For a period of 18 months following the Date of
Termination, the Company or Parent shall provide short-term and
long-term disability insurance benefits to Executive equivalent
to the coverage that the Executive would have had he remained
employed under the disability insurance plans applicable to
Executive on the Date of Termination. Should Executive become
disabled during such period, Executive shall be entitled to
receive such benefits, and for such duration, as the applicable
plan provides.
(5) To the extent not already vested pursuant to the
terms of such plan, the Executive's interests under the Parent's
Retirement Savings Plan shall be automatically fully (i.e.,
100%) vested, without regard to otherwise applicable percentages
for the vesting of employer matching contributions based upon
the Executive's years of service with the Company.
(6) Parent may adopt such amendments to its
executive benefit plans, if any, as are necessary to effectuate
the provisions of this Agreement.
(7) Executive shall be entitled to an additional 18
months of vesting for purposes of all outstanding stock option
awards and restricted stock awards and Executive will have an
additional 18 months following the Date of Termination in which
to exercise such stock options.
(8) Following the Executive's Date of Termination,
the Executive shall receive the computer which Executive is
utilizing as of the Date of Termination.
(c) Cause; Other than for Good Reason. If Executive's
employment shall be terminated for Cause or Executive terminates
employment without Good Reason (and other than due to such Executive's
death) during the Term, this Agreement shall terminate without further
additional obligations to Executive under this Agreement.
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(d) Death after Termination. In the event of the death of
Executive during the period Executive is receiving payments pursuant to
this Agreement, Executive's designated beneficiary shall be entitled to
receive the balance of the payments; or in the event of no designated
beneficiary, the remaining payments shall be made to Executive's estate.
8. Disputes. Any dispute or controversy arising under, out
of, or in connection with 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 Louisville, Kentucky, in accordance with the Labor Arbitration
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof. The Company
shall pay all costs of the arbitration and all reasonable attorneys' and
accountants' fees of the Executive in connection therewith, including any
litigation to enforce any arbitration award.
9. Successors.
(a) This Agreement is personal to Executive and without the
prior written consent of the Company shall not be assignable by
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, or any
business of the Company for which Executive's services are principally
performed, to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used
this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
10. Other Severance Benefits. Executive hereby agrees that
in consideration for the payments to be received under this Agreement, Executive
waives any and all rights to any payments or benefits under any severance plans
or arrangements of the Company or their respective affiliates that specifically
provide for severance payments, other than the Change in Control Severance
Agreement between the Company and Executive (the "Change in Control Severance
Agreement"); provided that any payments payable to Executive hereunder shall be
offset by any payments payable under the Change in Control Severance Agreement.
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11. Withholding. All payments to be made to Executive
hereunder will be subject to all applicable required withholding of taxes.
12. No Mitigation. Executive shall have no duty to mitigate
his damages by seeking other employment and, should Executive actually receive
compensation from any such other employment, the payments required hereunder
shall not be reduced or offset by any such compensation. Further, the Company's
and Parent's obligations to make any payments hereunder shall not be subject to
or affected by any setoff, counterclaims or defenses which the Company or Parent
may have against Executive or others.
13. Non-solicitation. During the Term and for a period of
one year thereafter (collectively, the "Non-solicitation Period"), Executive
shall not directly or indirectly, individually or on behalf of any person other
than the Company, aid or endeavor to solicit or induce any of the Company's or
its affiliates' employees to leave their employment with the Company or such
affiliates in order to accept employment with Executive or any other person,
corporation, limited liability company, partnership, sole proprietorship or
other entity. If the restrictions set forth in this section would otherwise be
determined to be invalid or unenforceable by a court of competent jurisdiction,
the parties intend and agree that such court shall exercise its discretion in
reforming the provisions of this Agreement to the end that the Executive will be
subject to a non-solicitation covenant which is reasonable under the
circumstances and enforceable by the Company. It is agreed that no adequate
remedy at law exists for the parties for violation of this section and that this
section may be enforced by any equitable remedy, including specific performance
and injunction, without limiting the right of the Company to proceed at law to
obtain such relief as may be available to it. The running of the
Non-solicitation Period shall be tolled for any period of time during which
Executive is in violation of any covenant contained herein, for any reason
whatsoever.
14. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or sent by telephone facsimile transmission, personal or
overnight couriers, or registered mail with confirmation or receipt, addressed
as follows:
If to Executive:
Xxxxxx X. Xxxxxxxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
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If to Company:
Kindred Healthcare Operating, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
15. Waiver of Breach and Severability. The waiver by either
party of a breach of any provision of this Agreement by the other party shall
not operate or be construed as a waiver of any subsequent breach by either
party. In the event any provision of this Agreement is found to be invalid or
unenforceable, it may be severed from the Agreement and the remaining provisions
of the Agreement shall continue to be binding and effective.
16. Entire Agreement; Amendment. This instrument contains
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter hereof. No provisions of this Agreement
may be modified, waived or discharged unless such modification, waiver or
discharge is agreed to in writing signed by Executive and such officer of the
Company specifically designated by the Board.
17. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
18. Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe its provisions.
19. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
20. Cancellation of Prior Agreement. The Executive hereby
acknowledges and agrees that this Agreement is intended to and does hereby
replace that certain employment agreement, between the Company (or its
predecessor) and the Employee, and that such agreement is cancelled, terminated
and of no further force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
KINDRED HEALTHCARE OPERATING, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
Solely for the purpose
of Section 7
KINDRED HEALTHCARE, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
XXXXXX X. XXXXXXXXXX
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