SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
AND
RESTRICTIVE
COVENANT AGREEMENT
THIS
SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
(the
“Agreement”) is dated as of April 26, 2006 between MATRIA
HEALTHCARE, INC.,
a
Delaware corporation (the “Company”), and XXXXXXX
X. XXXXX (the
“Executive”).
WHEREAS,
the
severance benefits payable by the Company to the Executive as provided herein
are in part intended to ensure that the Executive receives reasonable
compensation given the specific circumstances of Executive’s employment history
with the Company;
NOW,
THEREFORE,
in
consideration of their respective obligations to one another set forth in
this
Agreement, and other good and valuable consideration, the receipt, sufficiency
and adequacy of which the parties hereby acknowledge, the parties to this
Agreement, intending to be legally bound, hereby agree as follows:
1. Term.
The
term of this Agreement began on April 26, 2006 and shall terminate, except
to
the extent that any obligation of the Company hereunder remains unpaid as
of
such time, upon the Date of Termination (as hereinafter defined) of the
Executive’s employment with the Company as a result of the Executive’s death,
Disability (as defined in Section 2(b)) or Retirement (as defined in
Section 2(c)), by the Company for Cause (as defined in Section 2(d)), or by
the Executive other than for Good Reasons (as defined in Section
2(e)).
2. Termination
of Employment During the Term.
(a) General.
The
Executive shall be entitled to the compensation and benefits provided in
Section 3 upon the termination of the Executive’s employment with the
Company by the Executive or by the Company during the term of this Agreement,
unless such termination is as a result of (i) the
Executive’s death; (ii) the
Executive’s Disability; (iii) the
Executive’s Retirement; (iv) the
Executive’s termination by the Company for Cause; or (v) the
Executive’s decision to terminate employment other than for Good
Reason.
(b) Disability.
The
term “Disability” as used in this Agreement shall mean termination of the
Executive’s employment by the Company as a result of the Executive’s incapacity
due to physical or mental illness, provided that the Executive shall have
been
absent from his duties with the Company on a full-time basis for six consecutive
months and such absence
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shall
have continued unabated for 30 days after Notice of Termination as described
in
Section 2(f) is thereafter given to the Executive by the Company.
(c) Retirement.
The
term “Retirement” as used in this Agreement shall mean termination of the
Executive’s employment by the Company based on the Executive’s having attained
age 65 or such later retirement age as shall have been established pursuant
to a
written agreement between the Company and the Executive.
(d) Cause.
The
term “Cause” for purposes of this Agreement shall mean (i) the Executive’s
failure, neglect or refusal, as determined by the reasonable judgment of
the
Company, to perform the duties of her position, unless the Executive shall
have
cured such failure, neglect or refusal within 30 days of receipt of written
notice from the Company of such failure, neglect or refusal and has not at
any
time thereafter repeated such failure or failed to sustain such cure; (ii)
any
intentional act by the Executive that has the effect of injuring the reputation
or business of the Company or any of its affiliates in any material respect;
(iii) the Executive’s continued or repeated absence from the Company, unless
such absence is (x) approved or excused by the Chief Executive Officer of
the
Company or (y) is the result of illness, Disability or incapacity; (iv) the
Executive’s use of illegal drugs or repeated drunkenness; (v) the Executive’s
arrest and/or conviction for the commission of a felony; or (vi) the commission
by the Executive of an act of fraud, deceit, material misrepresentation or
embezzlement against the Company or any of its affiliates. For purposes of
this
Agreement only, the preparation and filing of fictitious, false or misleading
claims in connection with any federal, state or other third party medical
reimbursement program, or any other violation of any rule or regulation in
respect of any federal, state or other third party medical reimbursement
program
by the Company or any subsidiary of the Company shall not be deemed to
constitute “criminal fraud” or “civil fraud.”
(e) Good
Reason.
For
purposes of this Agreement, “Good Reason” shall mean (i) a reduction of the
Executive’s base salary; (ii) any failure of the Company to continue the
Executive’s participation in its applicable Management Incentive Plan or any
reduction in the Executive’s bonus amount as expressed as a percentage of the
Executive’s base salary; (iii) failure of the Company to continue the
Executive’s participation in any benefit programs except those programs or
arrangements that may be discontinued for all other similarly situated
executives of the Company; or (iv) a relocation of the Company’s principal
executive offices to a location more than 50 miles outside of Marietta, Georgia
or the relocation of the Executive’s office to any place other than the
Company’s principal executive offices.
(f) Notice
of Termination.
Any
termination of the Executive’s employment by the Company for a reason specified
in Section 2(b), 2(c) or 2(d) shall be communicated to the Executive by a
Notice of Termination prior to the effective date of the termination. For
purposes of this Agreement, a “Notice of Termination” shall mean a written
notice which shall indicate whether such termination is for the reason set
forth
in Section 2(b), 2(c) or 2(d) and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated. For purposes of this
Agreement, no
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termination
of the Executive’s employment by the Company shall constitute a termination for
Disability, Retirement or Cause unless such termination is preceded by a
Notice
of Termination.
(g) Date
of Termination.
For
purposes of this Agreement, “Date of Termination” shall mean (a) if
the Executive’s employment is terminated by the Company for Disability, 30 days
after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive’s duties
on a full-time basis during such 30-day period) or (b) if
the Executive’s employment is terminated by the Company or the Executive for any
other reason, the date on which the Executive’s termination is
effective.
3. Compensation
and Benefits upon Termination of Employment.
(a) If
the
Company shall terminate the Executive’s employment other than pursuant to
Section 2(b), 2(c) or 2(d) and Section 2(f), or if the Executive shall
terminate his or her employment for Good Reason, then, provided the Executive
shall have executed the Company’s standard general release (which release shall
not obligate the Executive to release any benefits payable in connection
with
any supplemental executive retirement plan or other retiree benefit), the
Company shall pay to the Executive, as severance compensation and in
consideration of the Executive’s adherence to the terms of Section 4 hereof and
execution of the aforesaid general release, the following:
(i) On
the
Date of Termination, the Company shall become liable to the Executive for
an
amount equal to one times the Executive’s annual base compensation, targeted
base bonus and annual car allowance, which amount shall be payable over the
one
year following the Date of Termination on the regular payroll
dates.
(ii) For
a
period of one year following the Date of Termination, the Executive and anyone
entitled to claim under or through the Executive shall be entitled to all
benefits under the group hospitalization plan, health care plan, dental care
plan, life insurance or death benefit plan, or other present or future similar
group employee benefit plan or program of the Company for which she was eligible
at the Date of Termination, to the same extent as if the Executive had continued
to be an employee of the Company during such period.
(iii) Notwithstanding
any other provision of this Agreement, it is intended that any payment or
benefit provided pursuant to or in connection with this Agreement that is
considered to be nonqualified deferred compensation subject to Section 409A
of
the Code shall be provided and paid in a manner, and at such time and in
such
form, as complies with the applicable requirements of Section 409A of the
Code.
If and to the extent required by Section 409A of the Code, no payment or
benefit
shall be made or provided to a “specified employee” (as defined below) prior to
the six-month anniversary of the Executive’s separation from service
(within
the meaning of Section
409A(a)(2)(A)(i) of the Code). The amounts provided for in this Agreement
that
constitute nonqualified deferred compensation shall be paid as soon as the
six-month deferral period ends. In the event that benefits are required to
be
deferred, any such
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benefit
may be provided during such six-month deferral period at the Executive’s
expense, with the Executive having a right to reimbursement from the Company
for
the amount of any premiums or expenses paid by the Executive once the six
month
deferral period ends. For this purpose, a specified employee shall mean an
individual who is a key employee (as defined in Section 416(i) of the Code
without regard to Section 416(i)(5) of the Code) of the Company at any time
during the 12-month period ending on each December 31 (the “identification
date”). If the Executive is a key employee as of an identification date, the
Executive shall be treated as a specified employee for the 12-month period
beginning on the April 1 following the identification date. Notwithstanding
the
foregoing, the Executive shall not be treated as a specified employee unless
any
stock of the Company or a corporation or business affiliated with it pursuant
to
Sections 414(b) or (c) of the Code is publicly traded on an established
securities market or otherwise.
(b) The
parties hereto agree that the payments provided in Section 3(a) hereof are
reasonable compensation in light of the Executive’s services rendered to the
Company and in consideration of the Executive’s adherence to the terms of
Section 4 hereof.
(c) The
payments provided in Section 3(a) above shall be in lieu of any other
severance compensation otherwise payable to Executive under any other agreement
between Executive and the Company (other than the Change in Control Severance
Compensation and Restrictive Covenant Agreement of even date (the “CIC”)) or the
Company’s established severance compensation policies; provided, however, that
nothing in this Agreement shall affect or impair Executive’s vested rights under
any other employee benefit plan or policy of the Company. In circumstances
in
which the Executive is entitled to severance benefits under the CIC, the
Company’s obligations under this Agreement shall be null and void.
4. Protective
Covenants.
(a) Definitions.
This
Subsection sets forth the definition of certain capitalized terms used in
Subsections (a) through (f) of this Section 4.
(i)
“Competing
Business”
shall
mean a business (other than the Company) that, directly or through a controlled
subsidiary or through an affiliate, (a) provides disease management programs
for
diabetes, congestive heart failure, coronary artery disease, chronic obstructive
pulmonary disease, cancer, pregnancy, depression, chronic pain or hepatitis
C;
and/or (b) provides obstetrical home care; and/or (c) provides on-line programs
targeting weight loss, nutrition and diet, fitness, smoking cessation or
stress
management; and/or (d) provides informatics services (collectively, “Competing
Services”). Notwithstanding the foregoing, no business shall be deemed a
“Competing Business” unless, within at least one of the business’s three most
recently concluded fiscal years, that business, or a division of that business,
derived more than twenty
4
percent
(20%) of its gross revenues or more than $2,000,000 in gross revenues from
the
provision of Competing Services.
(ii)
“Competitive
Position”
shall
mean: (A) the Executive’s direct or indirect equity ownership (excluding
ownership of less than one percent (1%) of the outstanding common stock of
any
publicly held corporation) or control of any portion of any Competing Business;
or (B) any employment, consulting, partnership, advisory, directorship, agency,
promotional or independent contractor arrangement between the Executive and
any
Competing Business where the Executive performs services for the Competing
Business substantially similar to those the Executive performed for the Company,
provided, however, that the Executive shall not be deemed to have a Competitive
Position solely because of the Executive’s services for a Competing Business
that are not directly related to the provision of Competing Services, unless
more than thirty-five percent (35%) of the gross revenues of the Competing
Business are derived from the provision of Competing Services.
(iii)
“Covenant
Period”
shall
mean the period of time from the date of this Agreement to the date that
is one
year after the Date of Termination.
(iv)
“Customers”
shall
mean actual customers, clients or referral sources to or on behalf of which
the
Company provides Competing Services (A) during the one year prior to the
date of
this Agreement and (B) during the Covenant Period.
(v)
“Restricted
Territory”
shall
mean the 00 xxxxxxxxxx xxxxxx xx xxx xxxxxxxxxxx Xxxxxx Xxxxxx.
(b) Limitation
on Competition.
In
consideration of the Company’s entering into this Agreement, the Executive
agrees that during the Covenant Period, the Executive will not, without the
prior written consent of the Company, anywhere within the Restricted Territory,
either directly or indirectly, alone or in conjunction with any other party,
accept, enter into or take any action in conjunction with or in furtherance
of a
Competitive Position (other than action to reject an unsolicited offer of
a
Competitive Position).
(c) Limitation
on Soliciting Customers.
In
consideration of the Company’s entering into this Agreement, the Executive
agrees that during the Covenant Period, the Executive will not, without the
prior written consent of the Company, alone or in conjunction with any other
party, solicit, divert or appropriate or attempt to solicit, divert or
appropriate on behalf of a Competing Business with which Executive has a
Competitive Position any Customer located in the Restricted Territory (or
any
other Customer with which the Executive had any direct contact on behalf
of the
Company) for the purpose of providing the Customer or having the Customer
provided with a Competing Service.
(d) Limitation
on Soliciting Personnel or Other Parties.
In
consideration of the Company’s entering into this Agreement, the Executive
hereby agrees that he will not, without the
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prior
written consent of the Company, alone or in conjunction with any other party,
solicit or attempt to solicit any employee, consultant, contractor, independent
broker or other personnel of the Company or any subsidiary of the Company
to
terminate, alter or lessen that party’s affiliation with the Company or to
violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and the Company or any subsidiary
of the
Company.
(e) Acknowledgement.
The
parties acknowledge and agree that the Protective Covenants are reasonable
as to
time, scope and territory given the Company’s need to protect its trade secrets
and confidential business information and given the substantial payments
and
benefits to which the Executive may be entitled pursuant to this
Agreement.
(f) Remedies.
The
parties acknowledge that any breach or threatened breach of a Protective
Covenant by the Executive is reasonably likely to result in irreparable injury
to the Company, and therefore, in addition to all remedies provided at law
or in
equity, the Executive agrees that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or contemplated
breach of the Protective Covenant. If the Company seeks an injunction, the
Executive waives any requirement that the Company post a bond or any other
security.
5. No
Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All
compensation and benefits provided to the Executive under this Agreement
are in
consideration of the Executive’s services rendered to the Company and of the
Executive’s adhering to the terms set forth in Section 4 hereof and the
Executive shall not be required to mitigate damages or the amount of any
payment
provided for under this Agreement by seeking other employment or otherwise,
nor
shall the amount of any payment provided for under this Agreement be reduced
by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
(b) The
provisions of this Agreement, and any payment provided for hereunder, shall
not
reduce any amounts otherwise payable, or in any way diminish the Executive’s
existing rights, or rights which would accrue solely as a result of the passage
of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment
agreement or other contract, plan or arrangement.
6. Notice.
For
purposes of this Agreement, notices and all other communications provided
for in
this Agreement shall be in writing and shall be deemed to have been duly
given
when delivered by overnight courier service (e.g., Federal Express) or mailed
by
United States certified mail, return receipt required, postage prepaid, as
follows:
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If
to
Company:
Matria
Healthcare, Inc.
0000
Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx,
XX 00000
Attention:
General Counsel
If
to
Executive:
Xxxxxxx
X. XxXxx
000
Xxxxxxxx Xxxxx
Xxxxxxx,
XX 00000
or
such
other address as either party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
7. Miscellaneous.
No
provisions of this Agreement may be modified, waived or discharged unless
such
waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed
a waiver of similar or dissimilar provisions or conditions at the same or
at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by
either party which are not set forth expressly in this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the State
of
Delaware.
8. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
9. Section
409A Indemnification.
Notwithstanding any other provision of this Agreement, it is intended that
any
payment or benefit which is provided pursuant to or in connection with this
Agreement which is considered to be nonqualified deferred compensation subject
to Section 409A of the Code shall be provided and paid in a manner, and at
such
time and in such form, as complies with the applicable requirements of Section
409A of the Code. The Company and the Executive shall cooperate to modify
this
Agreement as necessary to comply with the requirements of Section 409A of
the
Code. In the event the Company does not so cooperate, it shall indemnify
and
hold harmless the Executive on an after-tax basis from any tax or interest
penalty imposed under Section 409A of the Code with respect to any payment
or
benefit provided pursuant to this Agreement or any other plan or arrangement
sponsored or maintained by the Company to the extent such tax or interest
penalty is imposed as a result of any failure of the Company to comply with
Section 409A of the Code with respect to such payment or
benefit.
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10. Severability;
Modification.
All
provisions of this Agreement are severable from one another, and the
unenforceability or invalidity of any provision of this Agreement shall not
affect the validity or enforceability of the remaining provisions of this
Agreement, but such remaining provisions shall be interpreted and construed
in
such a manner as to carry out fully the intention of the parties. Should
any
judicial body interpreting this Agreement deem any provision of this Agreement
to be unreasonably broad in time, territory, scope or otherwise, it is the
intent and desire of the parties that such judicial body, to the greatest
extent
possible, reduce the breadth of such provision to the maximum legally allowable
parameters rather than deeming such provision totally unenforceable or
invalid.
11. Confidentiality.
The
Executive acknowledges that he has previously entered into, and continues
to be
bound by the terms of, a Confidentiality and Non-Solicitation Agreement with
the
Company.
12. Agreement
Not an Employment Contract.
This
Agreement shall not be deemed to constitute or be deemed ancillary to an
employment contract between the Company and the Executive, and nothing herein
shall be deemed to give the Executive the right to continue in the employ
of the
Company or to eliminate the right of the Company to discharge the Executive
at
any time.
IN
WITNESS WHEREOF,
the
parties have executed this Agreement to be effective as of the date first
above
written.
MATRIA
HEALTHCARE, INC.
By:
Its
Chief
Executive Officer
XXXXXXX
X. XXXXX
Executive
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