Exhibit 10.8
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made and entered into this 1 6th day of December, 1 998,
by and between SELECT MEDICAL CORPORATION, a Delaware corporation ("Employer"),
having an address do Select Medical Corporation, 0000 Xxx Xxxxxxxxxx Xxxx, X.X.
Xxx 0000, Xxxxxxxxxxxxx, XX 1 7055, and XXXXX X. XXXXX, an individual
("Employee"), residing at 00 Xxxxxxxxx Xxxxx, Xx. Xxxxx, Xxxxxxxx 00000.
BACKGROUND:
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A. Employer is in the business of operating long-term acute care hospitals
("LTACHs") throughout the United States (the "Business").
B. In accordance with that certain Third Amended and Restated Employment
Agreement of Xxxxx X. Xxxxx, dated as of October 12, 1998 (the "Prior
Agreement"), Employee was employed as the President and Chief Executive Officer
of Intensiva Healthcare Corporation, a Delaware corporation ("Intensiva"), prior
to its acquisition by Employer. Pursuant to Section 7.2(e) of the Prior
Agreement, Employee desires to terminate the Prior Agreement, effective on the
date hereof, based on the occurrence of a Change of Control (as that term is
defined in the Prior Agreement) of Intensiva and to resign as the President and
Chief Executive Officer of Intensiva.
C. Employer desires to employ Employee to serve as its Senior Vice
President -Development and to develop new LTACHs for the Business.
D. Employee desires to be employed by Employer to render such services in
connection with the Business, on the terms and conditions specified below.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises and conditions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Employee and Employer, intending to be legally bound hereby, covenant and agree
as follows:
1. Resignation and Employment. (a) Employee hereby elects to terminate the
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Prior Agreement, effective on the date hereof, based on the occurrence of a
Change of Control (as that term is defined in the Prior Agreement) of Intensiva
and to resign as the President and Chief Executive Officer of lntensiva.
Employer and Intensiva agree that, in lieu of the salary continuation, employee
and other benefits and considerations to which Employee would otherwise be
entitled under the terms of Section 7(d) of the Prior Agreement, Intensiva shall
make a lump-sum payment to Employee, on January 15, 1999, in the amount of Three
Hundred Eighty Thousand Dollars ($380,000), less required withholdings.
(b) Employer agrees to employ Employee, and Employee hereby accepts such
employment and agrees to serve Employer, upon and subject to the terms and
conditions set forth herein.
2. Employee's Representations and Warranties.
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(a) Employee represents and warrants to Employer that Employee has
disclosed, and at all times during the Employment Term (as hereinafter defined)
will disclose, to Employer the following matters, whether occurring at any time
prior to or during the Employment Term:
(i) any criminal complaint, indictment or criminal proceeding (involving
other than a misdemeanor offense) in which Employee is named as a
defendant;
(ii) any investigation or proceeding, whether administrative, civil or
criminal, relating to an allegation against Employee of filing false
health care claims, violating anti-kickback laws, or engaging in
other billing improprieties; or
(iii) any dependency on, habitual use or episodic abuse of, alcohol or
controlled substances by Employee, or any participation by Employee
in any alcohol or controlled substance detoxification, treatment,
recovery, rehabilitation, counseling, screening or monitoring
program.
(b) Employee shall at all times render services hereunder in a
competent, professional and ethical manner, in accordance with all applicable
statutes, regulations, rules, orders and directives of any and all governmental
and regulatory bodies having competent jurisdiction.
(c) Employee further represents and warrants that Employee is not, and
has not been, excluded from participation in the Medicare or Medicaid programs
or otherwise found to be in violation of any of the rules or regulations of such
programs.
3. Employee's Duties and Responsibilities.
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3.1 General. (a) During the Employment Term, Employee shall be employed
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to perform services for and on behalf of Employer as specified in this Section
3.
(b) Employee shall serve as Employer's Senior Vice President Development
and will develop new LTACHs for the Business throughout the United States at
such locations as are approved by Employer. In such capacity, Employee will, as
directed by Employer, also seek contracts to manage rehabilitation units in
general acute care hospitals. Employee shall report to Employer's President and
Chief Operating Officer. Employee shall not be required to relocate from St.
Louis, Missouri.
3.2 Obligations and Duties of Employee. Employee shall devote a minimum
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of forty (40) hours a week to the performance of Employee's duties hereunder.
Subject to Employee's right to paid time off as permitted under Section 4.4
below, Employee's duties are to be carried out over a 52-week period. Employee
agrees to perform Employee's duties diligently and to the best of Employee's
abilities, and to perform such additional or different duties and services
appropriate to Employee's position which Employee from time to time may be
reasonably directed to perform by Employer.
3.3 Authority and Control of Employer. Employee shall at all times
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comply with, and be subject to, such reasonable policies, procedures, rules and
regulations as Employer or its
parent company may establish from time to time (including, without limitation,
Employer's Code of Conduct), and all work performed by Employee shall be subject
to review and evaluation by Employer.
3.4 Duty; Conflicts. Employee acknowledges and agrees that Employee owes
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a duty of loyalty, fidelity and allegiance to act at all times in the best
interests of Employer and to do no act which would injure Employer's business,
interests or reputation. Employee shall devote Employee's full business time,
energy and best efforts to the business and affairs of Employer and to the
fulfillment of Employee's obligations hereunder. Employee shall not, during the
Employment Term, without the prior written consent of Employer, engage in any
other business, investment or activity, directly or indirectly, whether or not
such activity is pursued for gain, profit, or other pecuniary advantage, which
interferes with the performance of Employee's duties hereunder or is contrary to
the interests of Employer. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might in any way adversely affect Employer, involves
a possible conflict of interest. In keeping with Employee's fiduciary duties to
Employer, Employee agrees that Employee shall not knowingly become involved in a
conflict of interest with Employer, or upon discovery thereof, allow such a
conflict to continue. Employee shall disclose to Employer any facts which might
involve a conflict of interest. Employee shall request the written consent of
Employer prior to accepting a position as a trustee or director of any outside
organization.
3.5 Time Records. Employee shall submit to Employer such time records as
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Employer may require from time to time (for example, in order to allocate
Employee's time if such allocations are necessary to permit Employer or its
affiliates to file accurate Medicare cost reports) showing the nature of the
services performed by Employee and the time Employee actually spent performing
those services.
4. Financial Terms.
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4.1 Base Salary. In consideration of Employee's services hereunder,
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Employer agrees to pay Employee, during the Employment Term, the annual base
salary of One Hundred Ninety Thousand Dollars ($190,000), payable in either
biweekly or monthly installments based on Employer's salary policy in effect
from time to time.
4.2 Incentive Compensation. Employee shall be entitled to incentive
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compensation no less favorable in method of determination or amount than
received from time to time by a Senior Vice President of Employer.
4.3 Employee Benefits. During the Employment Term, in addition to the
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compensation paid to Employee pursuant to Sections 4.1 and 4.2 above, Employee
shall be entitled to any employment and fringe benefits under Employer's
employment policies and employee benefit plans, as they may exist from time to
time, and which are no less favorable than those received by a Senior Vice
President of Employer. Nothing in this Agreement shall be construed to obligate
Employer to institute, maintain, or refrain from changing, amending or
discontinuing any incentive compensation or employee benefit program or plan, so
long as such actions are similarly applicable to one or more Senior Vice
Presidents of Employer. Employer shall have no obligation to secure or otherwise
fund any of the aforesaid benefits and
arrangements, and each shall instead constitute an unfunded and unsecured
promise to pay money in the future exclusively from the general assets of
Employer.
4.4 Paid Time Off. During the Employment Term, Employee shall be
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entitled to paid time off in accordance with Employer's policy relating thereto
and applicable to a Senior Vice President of Employer. Vacation schedules will
be coordinated and approved by Employer so as to facilitate the steady ongoing
development of the Business.
4.5 Income and Employment Taxes. Employee shall be an employee of
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Employer for all purposes. Employer shall withhold amounts from Employee's
compensation in accordance with the requirements of applicable law for federal
and state income tax, FICA, FUTA, and other employment or payroll tax purposes.
It shall be Employee's responsibility to report and pay all federal, state, and
local taxes arising from Employee's receipt of compensation hereunder.
4.6 Reimbursement of Expenses. In addition to the compensation provided
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for under this Section 4, upon submission of proper vouchers and in accordance
with the policies and procedures established by Employer in effect from time to
time, Employer shall directly pay or reimburse Employee for all normal and
reasonable travel and lodging expenses incurred by Employee during the
Employment Term in connection with Employee's responsibilities to Employer.
4.7 Sign-On Bonus. In order to induce Employee to enter into this
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Agreement, Employer will, on January 15, 1999, pay to Employee a one-time sign-
on bonus in the amount of Three Hundred Thousand Dollars ($300,000), less
required withholdings.
4.8 Stock Options. Employer will, effective on the date hereof, grant to
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Employee options to purchase One Hundred Thousand (100,000) shares of Employer's
common stock at a strike price of $3.50 per share, with fifty percent (50%) of
such options (i.e., 50,000 shares) to vest on the first anniversary of
Employee's employment with Employer, and the balance of such options (i.e.,
50,000 shares) to vest on the second anniversary of Employee's employment with
Employer. Employee will have thirty (30) days after the termination of this
Agreement to exercise any options vested and outstanding on the date of
termination.
4.9 Investment Opportunity. Employee will have a one-time opportunity to
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purchase, on or before December 31, 1998, up to 75,000 shares of Employer's
common stock at a purchase price of $3.50 per share.
5. Term and Termination.
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(a) This Agreement shall commence on the date hereof and remain in
effect, unless this Agreement is terminated by either party hereto, or extended
by the written agreement of both parties hereto, for a period of two (2) years
after the date hereof. Thereafter, this Agreement shall continue in effect from
month to month unless either party shall notify the other party in writing of
its decision to terminate this Agreement effective thirty (30) days after the
other party's receipt of such notice. Employer may terminate this Agreement in
the case of a breach of this Agreement by Employee under Section 5(c) below
effective upon written notice to Employee.
(b) Upon termination of employment hereunder, Employee shall be entitled
to receive such salary and fringe benefits, if any, accrued under the terms of
this Agreement, but unpaid, as of the date of such termination, and all future
compensation and all future benefits shall cease and terminate as of the date of
termination. Employee shall be entitled to pro rata salary through the date of
such termination, but Employee shall not be entitled to any incentive
compensation not yet paid as of the date of termination.
(c) Employer shall be entitled to terminate this Agreement, for cause,
if any of the following events shall occur:
(i) Employee's death or upon Employee's becoming incapacitated due to
accident, sickness or other circumstances which render Employee
mentally or physically incapable of performing the duties and
services required of Employee for a period of sixty (60) consecutive
days, as determined by a physician mutually selected by Employer and
Employee;
(ii) Employee engages in criminal or fraudulent conduct, in the good
faith opinion of Employer, or Employee is found guilty of such
conduct by any court or governmental agency of competent
jurisdiction;
(iii) Breach by Employee of any material representation, warranty or other
material term or provision in this Agreement, which breach has not
been cured to the satisfaction of Employer within twenty (20)
calendar days after notice of such breach;
(iv) Intentional refusal by Employee to perform any duty reasonably
required of Employee hereunder for a continuous period of three (3)
calendar days after delivery of written notice thereof to Employee
by Employer;
(v) The observed use of illegal drugs by Employee at any time or place
or the abuse of alcohol or the appearance, in the good faith
determination of Employer, of Employee being under the influence of
drugs and/or alcohol on the premises of Employer or any client of
Employer, during any time during which Employee is performing
services for Employer, or the good faith determination of Employer
that Employee is addicted to drugs or alcohol and has refused any
recognized rehabilitation procedures; or
(vi) Employee's gross negligence or willful misconduct in the performance
of the duties and services required of Employee.
(d) Following any involuntary termination of his employment with
Employer (other than a termination for cause in accordance with
Section 5(c) above), Employer shall be obligated to pay to Employee,
as severance pay, an amount equal to one (1) year of base salary,
payable in substantially equal bi-weekly installments at the level
then being paid to Employee. Employer shall also continue Employee's
medical and other benefits until Employee is re-employed or for the
balance of the Employment Term, which ever is first to occur. In the
event that Employee is re-employed, but the benefits provided
through such reemployment are less than the benefits provided under
this Agreement, then Employer shall pay to Employee, in monthly
installments,
such difference in value. Should Employee die before receipt of the severance
payments, then such payments will be made to the executors or administrators of
Employee's estate.
6. Non-Solicitation. During the Employment Term, and for a period of one
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(1) year after the expiration or earlier termination of this Agreement, Employee
shall not, directly or indirectly, without the express written consent of
Employer (which consent may be withheld in the Employer's sole discretion),
solicit or contact, cause others to solicit or contact, with a view to engaging
or employing, any person who, during the Employment Term, was an employee of
Employer or any of its subsidiaries or affiliates.
7. Non-Compete.
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(a) Employee recognizes that Employer's entering into this Agreement is
induced primarily because of the covenants and assurances made by Employee, that
Employee's covenant not to compete is necessary to insure that continuation of
the Business, and that irreparable harm and damage will be done to Employer and
its affiliates in the event that Employee competes with Employer or its
affiliates within the geographic areas described below. Therefore, Employee
agrees that, during the Employment Term, Employee shall not, directly or
indirectly, in whole or in part, without the express written consent of Employer
(which consent may be withheld in Employer's sole discretion), own, manage,
operate, control, establish, participate in the management or control of, be
employed by, lend Employee's name to or maintain or continue any interest
whatsoever in, provide financial assistance to, or provide consulting or other
services related to, any enterprise (a) having to do with the provision,
distribution, marketing, promotion, or advertising of any type(s) of service(s)
or product(s) in direct competition to those offered by Employer within (i) the
fifty (50) states of the United States, (ii) United States territories and
possessions, and (iii) each foreign country, possession or territory in which
Employer may be engaged in business at the termination of Employee's employment.
Additionally for a period of one (1) year after the end of the Employment Term
or the earlier termination of this Agreement, Employee shall not, directly or
indirectly, in whole or in part, without the express written consent of Employer
(which consent may be withheld in Employer's sole discretion), own, manage,
operate, control, establish, participate in the management or control of, be
employed by, lend Employee's name to or maintain or continue any interest
whatsoever in, provide financial assistance to, or provide consulting or other
services related to, any enterprise in direct competition with the business of
Employer or any of its affiliates within a 50-mile radius of the location of any
competing or substantially similar facility or business of Employer, or an
affiliate, which was in operation on the date of termination or expiration of
this Agreement.
(b) Nothing contained in this Section 7 or in Section 3.4 of this
Agreement shall prevent Employee from (i) passively investing in one or more
venture capital funds managed by Collinson Xxxx and Xxxxxx Venture Partners,
Inc. (New York, NY) or Three Arch Partners (Menlo Park, CA), or similar funds,
which may in turn invest in businesses which compete with Employer, provided
that Employee shall not be entitled to provide advice to, or consult in any way
with, such competing businesses nor shall Employee be entitled to own directly
or indirectly more than ten percent (10%) of any such fund or underlying
competing business, or (ii) investing in, or serving as a director of Odessey
Healthcare so long as such company remains a provider of hospice services and
does not compete with Employer.
(c) If any part of Section 6 or this Section 7 shall be determined by a
court of competent jurisdiction to be unreasonable in duration, geographic area
or scope, then this Agreement is intended to and shall extend only for such
period of time, in such area and with respect to such activity, as is determined
by such court to be reasonable.
8. Ownership and Protection of Information. Intellectual Property and
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Goodwill.
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(a) All records, files, reports and documents pertaining to services
rendered by Employee hereunder, or to the development or operation of the
Business, or any business hereafter operated by Employer, belong to and shall
remain the property of Employer. Employee recognizes and acknowledges that the
terms of this Agreement, the names and addresses of the patients and clients of
the Business, as well as Employer's proprietary information and trade secrets as
they may exist from time to time, are valuable, special, and unique assets of
Employer's business. Employee also recognizes and acknowledges that the systems,
protocols, policies, procedures, manuals, reports, data bases, documents,
instruments and other materials used by Employer in connection with the Business
are proprietary to Employer, and are valuable, special and unique assets of
Employer's business. Employee shall not, during or after the term of Employee's
employment hereunder, disclose either Employer's proprietary information or
trade secrets to any other person, or entity for any reason or purpose
whatsoever, without the written consent of Employer. All written materials,
records and other documents made by, or coming into the possession of, Employee
during the term hereof which contain or disclose any of the foregoing shall be
and remain the property of Employer. Upon the termination of this Agreement for
any reason whatsoever, Employee shall promptly deliver the same, and all copies
thereof, to Employer.
(b) All information, ideas, concepts, improvements, discoveries and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee or which are disclosed or made known to Employee,
individually or in conjunction with others, during the Employment Term (whether
during business hours or otherwise and whether on Employer's premises or
elsewhere) which relate to Employer's past, present or anticipated business,
products or services (including, without limitation, all such information
relating to corporate opportunities, financial and sales data, pricing and
contractual terms, employee evaluations, opinions, interpretations, prospects,
the identity of patients or entities that refer patients to Employer, the
identity of key contacts within the entities that refer patients to Employer,
and marketing and merchandising information or techniques, prospective names,
and methods of doing business) shall be disclosed to Employer and are and shall
be the sole and exclusive property of Employer. All memoranda, notes, records,
files, correspondence, drawings, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of Employer. Employee hereby
specifically sells, assigns, and transfers to Employer all of Employee's right,
title and interest in and to all such information, ideas, concepts,
improvements, discoveries or inventions, and any United States or foreign
applications for patents, inventor's certificates, or other industrial rights
that may be filed thereon, including divisions, continuations, continuations-in-
part, reissues and/or extensions thereof.
9. Equitable Relief. The parties hereto hereby acknowledge and agree
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that the restrictions and obligations set forth herein, including but not
limited to the restrictions and obligations set forth in Sections 6, 7 and 8
herein, are reasonable and necessary, and that any violation thereof would
result in substantial and irreparable injury to Employer, and that Employer may
not have an adequate remedy at law with respect to any such violation.
Accordingly, Employee agrees that, in the event of any actual or threatened
violation of any restriction or obligation set forth herein, Employer shall have
the right and privilege to obtain, in addition to any other remedies that may be
available, equitable relief, including temporary and permanent injunctive
relief, to cease or prevent any actual or threatened violation of any provision
hereof.
10. Miscellaneous.
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10.1 Governing Law. This Agreement shall be governed and interpreted in
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accordance with, and the rights of the parties shall be determined by, the laws
of the Commonwealth of Pennsylvania.
10.2 Severability. If any provision of this Agreement shall be declared
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invalid or illegal for any reason whatsoever, then notwithstanding such
invalidity or illegality, the remaining terms and provisions of this Agreement
shall remain in full force and effect in the same manner as if the invalid or
illegal provision had not been contained herein.
10.3 Amendment. No alteration or modification of this Agreement shall be
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valid unless made in writing and executed by each of the parties hereto.
10.4 Counterparts. This Agreement may be executed in more than one
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counterpart, and each executed counterpart shall be considered as the original.
10.5 Successors; Binding Agreement. This Agreement shall be binding upon,
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and shall inure to the benefit of, the parties hereto and their respective
personal representatives, successors and permitted assigns.
10.6 Notices. Any notice or other communication by one party hereto to
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the other shall be in writing and shall be given, and be deemed to have been
given, if either hand delivered or mailed, postage prepaid, certified mail
(return receipt requested), addressed as follows:
If to Employer: c/o Select Medical Corporation
0000 Xxx Xxxxxxxxxx Xxxx
Post Office Box 2034
Mechanicsburg, PA 17055
Attention: General Counsel
If to Employee: Xxxxx X. Xxxxx
00 Xxxxxxxxx Xxxxx
Xx. Xxxxx, XX 00000
Either party hereto may change the address for notice by notifying the other
party, in writing, of the new address.
10.7 Waiver. A waiver of the breach of any term or condition of this
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Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition.
10.8 Assignment. Employee shall have no right to assign this Agreement.
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Employer may assign its rights and obligations hereunder to an affiliate or
successor in ownership of the Business.
10.9 Entire Agreement. This Agreement contains the entire agreement of
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the parties relating to the subject matter hereof and supersedes and merges all
previous agreements and discussions between Employer and/or Intensiva, on the
one hand, and Employee, on the other hand, including, specifically and without
limitation, the Prior Agreement, and constitutes the entire agreement of the
parties with respect to Employee's employment by Employer.
10.10 Survival. The covenants contained in Sections 5(b), 6, 7, 8, 10.7
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and 10.10 shall survive any termination or expiration of this Agreement.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
Employer:
SELECT MEDICAL CORPORATION, a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
President
Employee:
/s/ Xxxxx X. Xxxxx
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JOINDER
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The undersigned, intending to be legally bound hereby, joins in the
execution and delivery of the aforesaid Employment Agreement, dated December 16,
1998 (the "Agreement"), for the purpose of agreeing to and accepting the terms
and conditions of Sections 1(a) and 10.9 thereto.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly
executed this 1 6th day of December, 1 998.
INTENSIVA HEALTHCARE CORPORATION, a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
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