Exhibit 10.4
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT is made as of the 28th day of July, 1998
(the "Effective Date"), by and between Vencor Operating, Inc., a Delaware
corporation (the "Company"), and W. Xxxxx Xxxxxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive is employed by the Company, a wholly owned
subsidiary of Vencor, Inc. ("Parent"), and the parties hereto desire to provide
for Executive's continued employment by the Company; and
WHEREAS, the Board of Directors of Parent (the "Board") have
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
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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. 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 in an executive
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capacity.
3. Extent of Services. Executive, subject to the direction and
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control of 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 working time, attention, labor,
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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, except for Executive's responsibilities as CEO of Ventas,
Inc.
4. Compensation. As compensation for services hereunder rendered,
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Executive shall receive during the Term:
(a) A base salary ("Base Salary") of not less than $550,000 per year
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 may be eligible to receive
such other bonuses or incentive compensation as the Board may approve from
time to time.
5. Benefits.
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(a) Executive shall be entitled to participate in any and all
Executive 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 Executives of the Company and
its affiliates.
(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 executives of the Company.
(c) Executive shall be entitled to four weeks of paid vacation each
year. The Executive shall schedule the timing of such vacations in a
reasonable manner. The Executive may also 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
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Company shall reimburse Executive for all such reasonable expenses in
accordance with the Company's reimbursement policies and procedures.
6. Termination of Employment.
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(a) Death or Disability. Executive's employment shall terminate
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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 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
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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
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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
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Executive for Good Reason. "Good Reason" shall exist upon the occurrence,
without Executive's
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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);
(iv) the Company shall require Executive to relocate
Executive's principal business office more than 30 miles from its
location on the Effective Date; 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
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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"
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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,
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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 30 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
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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 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
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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
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Executive 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
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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
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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 and Performance Share Award for Executive for the year in which
the Date of Termination occurs, and (ii) an amount equal to three
times the sum of (x) the Executive's Base Salary and Target Bonus as
of the Date of Termination, and (y) the number of performance shares
awarded to the Executive pursuant to the Vencor, Inc. 1998 Incentive
Compensation Plan (the "1998 Plan") (including assumed awards granted
under the Vencor, Inc. 1987 Incentive Compensation Program (the "1987
Program") and the Vencor, Inc. 1997 Incentive Compensation Plan (the
"1997 Plan")) in respect of the year in which such Date of Termination
occurs (without regard to any acceleration of the award for such
year), assuming for such purpose that all performance criteria
applicable to such award with respect to the year in which such Date
of Termination occurs were deemed to be satisfied (the "Performance
Share Award").
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For purposes of this Agreement: "fair market value" shall have the
meaning ascribed to such term under the 1998 Plan; and "Target Bonus"
shall mean the full amount of bonuses and/or performance compensation
(other than Base Salary and awards under the 1998 Plan (including
assumed awards granted under the 1987 Program and the 1997 Plan)) that
would be payable to the Executive, assuming all performance criteria
on which such bonus and/or performance compensation are 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 three years following the Date of
Termination, the Executive shall be treated as if he or she 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 Benefits") treating
the end of this period as a termination of the Executive's employment
if allowed by law.
(3) For a period of three years following the Date of
Termination, Parent shall maintain in force, at its expense, the
Executive's life insurance in effect under the Vencor, Inc. Voluntary
Life Insurance Benefit Plan as of the Date of Termination.
(4) For a period of three years following the Executive's 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
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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 Vencor 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 shall adopt such amendments to its Executive benefit
plans, if any, as are necessary to effectuate the provisions of this
Agreement.
(7) The Company shall take such action as is required to cause
the promissory note or other agreement (the "Preferred Stock Loan
Agreement") entered into in respect of the loan to Executive, dated
April 30, 1998 in an original principal amount of $4,088,700 (the
"Preferred Stock Loan") to be amended to provide that (x) the
Preferred Stock Loan and any payments scheduled to be made in respect
thereof shall not be due and payable prior to the fifth anniversary of
the Date of Termination, (y) if the average closing price of the
Company's common stock for the 90 days prior to any interest payment
date is less than $8.00, such interest payment shall be forgiven and
(z) during the five-day period following the expiration of the fifth
anniversary of the Date of Termination, the Executive shall have the
right to put the preferred stock underlying the Preferred Stock Loan
to the Company at par.
(8) Executive shall be credited with an additional three years of
vesting for purposes of all outstanding stock option awards and
Executive will have an additional three years in which to exercise
such stock options.
(9) Following the Executive's Date of Termination, the Executive
shall receive the computer which Executive is utilizing as of the
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Date of Termination. In addition, the Executive shall have the right
to purchase the furniture in Executive's office suite as of the Date
of Termination, at the book value thereof. In addition, for a period
of three years following the Executive's Date of Termination, the
Company shall provide the Executive with an office suite and
administrative assistant, in each substantially comparable to the
office suite and administrative assistant that were furnished to the
Executive as of the date of the Executive's Date of Termination.
(c) Cause; Other than for Good Reason. If Executive's employment
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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.
(d) Death after Termination. In the event of the death of Executive
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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
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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.
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(a) This Agreement is personal to Executive and without the prior
written consent of the Company shall
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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
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consideration for the payments to be received under this Agreement, Executive
waives any and all rights to any payments or benefits under any plans, programs,
contracts or arrangements of the Company or their respective affiliates that
provide for severance payments or benefits upon a termination of employment,
other than the Change in Control Severance Agreement between the Company and
Executive dated as of May 1, 1998 (the "Severance Agreement"); provided that any
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payments payable to Executive hereunder shall be offset by any payments payable
under the Severance Agreement.
11. Withholding. All payments to be made to Executive hereunder will
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be subject to all applicable required withholding of taxes.
12. No Mitigation. Executive shall have no duty to mitigate his
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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
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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. Notices. Any notice required or permitted to be given under this
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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:
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W. Xxxxx Xxxxxxxx
_____________________
Louisville, KY _____
If to Company:
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Vencor Operating, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: General Counsel
14. Waiver of Breach and Severability. The waiver by either party of
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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.
15. Entire Agreement; Amendment. This instrument contains the entire
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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.
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16. Governing Law. This Agreement shall be construed in accordance
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with and governed by the laws of the State of Delaware.
17. Headings. The headings in this Agreement are for convenience
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only and shall not be used to interpret or construe its provisions.
18. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VENCOR OPERATING, INC.
By:/s/ Xxxxxxx X. Xxxx
Solely for the purpose
of Section 7
VENCOR, INC.
By:/s/ Xxxxxxx X. Xxxx
W. XXXXX XXXXXXXX
/s/ W. Xxxxx Xxxxxxxx
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