Exhibit 10.28
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
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THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the "Agreement") is made as of
May 1, 1998, by and between VENCOR OPERATING, INC., a Delaware corporation, (the
"Company") and ____________________, (the "Employee").
RECITALS:
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A. The Employee is employed by the Company, a wholly owned subsidiary of
Vencor, Inc. (the "Parent").
B. The Company recognizes that the Employee's contribution to the
Company's growth and success has been and continues to be significant.
C. The Company wishes to encourage the Employee to remain with and devote
full time and attention to the business affairs of the Company and wishes to
provide income protection to the Employee for a period of time in the event of a
Change in Control.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT:
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1. DEFINITIONS.
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a. "BASE SALARY" shall mean the Employee's regular annual rate of base
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pay in gross as of the date in question as elected under Paragraph 3(a).
b. "CAUSE" shall mean the Employee's (i) conviction of or plea of nolo
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contendere to a crime involving moral turpitude; or (ii) willful and material
breach by Employee 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, but with respect to (ii) only if the Board of
Directors of Parent (the "Board") adopts a resolution by a vote of at least 75%
of its members so finding after giving the Employee and his attorney an
opportunity to be heard by the Board.
c. "CHANGE IN CONTROL" The term "Change in Control" shall mean any one
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of the following events:
(i) An acquisition (other than directly from Parent) of any voting
securities of Parent (the "Voting Securities") by any "Person" (as defined in
Paragraph 1(f) hereof) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 under the 0000 Xxx) of 20% or more
of the combined voting power of Vencor, Inc.'s then outstanding Voting
Securities; provided, however, that in determining whether a Change in Control
has occurred, Voting Securities which are acquired in an acquisition by (i)
Parent or any of its subsidiaries, (ii) an employee benefit plan (or a trust
forming a part thereof) maintained by Parent or any of its subsidiaries or (iii)
any Person in connection with an acquisition referred to in the immediately
preceding clauses (i) and (ii) shall not constitute an acquisition which would
cause a Change in Control.
(ii) The individuals who, as of May 1, 1998, constituted the Board of
Directors of Parent (the "Incumbent Board") cease for any reason to constitute
over 50% of the Board; provided, however, that if the election, or nomination
for election by Vencor Inc.'s stockholders, of any new director was approved by
a vote of over 50% of the Incumbent Board, such new director shall, for purposes
of this Section 1(c)(ii), be considered as though such person were a member of
the Incumbent Board; provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 0000 Xxx) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors of Parent (a "Proxy Contest"), including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest.
(iii) Consummation of a merger, consolidation or reorganization
involving Parent, unless each of the following events occurs in connection with
such merger, consolidation or reorganization:
(A) the stockholders of Parent, immediately before such merger,
consolidation or reorganization, own, directly or indirectly immediately
following such merger, consolidation or reorganization, over 50% of the combined
voting power of all voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving Company") over which
any Person has Beneficial Ownership in substantially the same proportion as
their ownership of the Voting Securities immediately before such merger,
consolidation or reorganization;
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute over 50% of the members of the board
of directors of the Surviving Company; and
(C) no Person (other than Parent, any of its subsidiaries, any
employee benefit plan (or any trust forming a part thereof) maintained by
Parent, the Surviving Company or any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of 20% or more
of the then outstanding Voting Securities) has Beneficial
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Ownership of 20% or more of the combined voting power of the Surviving Company's
then outstanding voting securities.
(iv) Approval by Parent's stockholders of a complete liquidation or
dissolution of Parent.
(v) Approval by Parent's stockholders of an agreement for the sale or
other disposition of all or substantially all of the assets of Parent to any
Person (other than a transfer to a subsidiary of Parent).
(vi) Any other event that the Board shall determine constitutes an
effective Change in Control of Parent.
(vii) Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by Parent which,
by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person; provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by Parent, and after such
share acquisition by Parent, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
d. "CHANGE-IN-CONTROL DATE" shall mean the date immediately prior to
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the effectiveness of the Change in Control.
e. "GOOD REASON" The Employee shall have good reason to terminate
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employment with the Company if (i) the Employee's title, duties,
responsibilities or authority is reduced or diminished from those in effect on
the Change-in-Control Date without the Employee's written consent; (ii) the
Employee's compensation is reduced; (iii) the Employee's benefits are reduced,
other than pursuant to a uniform reduction applicable to all managers of the
Company; or (iv) the Employee is asked to relocate his office to a place more
than 30 miles from his business office on the Change-in-Control Date.
f. "PERSON" shall have the meaning ascribed to such term in Section
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3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
g. "TARGET BONUS" shall mean the full amount of bonuses and/or
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performance compensation (other than Base Salary and awards under Parent's 1998
Incentive Compensation Plan (including assumed awards granted under the Vencor,
Inc. 1987 Incentive Compensation Program and the Vencor, Inc. 1997 Incentive
Compensation Plan)) that would be payable to the Employee, assuming all
performance criteria on which such bonus and/or performance
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compensation are based were deemed to be satisfied, in respect of services for
the calendar year in which the date in question occurs.
h. "TERMINATION OF EMPLOYMENT" shall mean (i) the termination of the
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Employee's employment by the Company other than such a termination in connection
with an offer of immediate reemployment by a successor or assign of the Company
or a purchaser of the Company or its assets under terms and conditions which
would not permit the Employee to terminate his employment for Good Reason or
otherwise during any Window Period; or (ii) the Employee's termination of
employment with the Company for Good Reason or during any Window Period.
i. "WINDOW PERIOD" shall mean either of two 30-day periods of time
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commencing 30 days after (i) a Change in Control and (ii) one year after a
Change in Control.
2. TERM. The initial term of this Agreement shall be for a three-year
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period commencing on May 1, 1998 (the "Effective Date"). The Term shall be
automatically extended by one additional day for each day beyond the Effective
Date that the Employee 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 Employee. In such event, the Agreement shall terminate on the third
anniversary of the effective date of such election notice. Notwithstanding the
foregoing, this Agreement shall automatically terminate if and when the Employee
terminates his employment with the Company or two years after the Change-in-
Control Date, whichever first occurs.
3. SEVERANCE BENEFITS. If at any time following a Change in Control and
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continuing for two years thereafter, the Company terminates the Employee without
Cause, or the Employee terminates employment with the Company either for Good
Reason or during any Window Period, then as compensation for services previously
rendered the Employee shall be entitled to the following benefits:
a. CASH PAYMENT. The Employee shall be paid cash equal to three times
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the greater of:
(i) the sum of (x) the Employee's Base Salary and Target Bonus as of
the Termination of Employment, and (y) the fair market value (determined as of
the Termination of Employment) of the targeted number of performance shares
authorized to be issued to the Employee pursuant to a Performance Share Award
Agreement in respect of the year in which such Termination of Employment 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 Termination of Employment occurs were deemed to be
satisfied, or
(ii) the sum of (x) the Employee's Base Salary and Target Bonus as of
the Change-in-Control Date, and (y) the fair market value (determined as of the
Change-in-Control Date) of the targeted number of performance shares authorized
to be issued to the Employee
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pursuant to a Performance Share Award Agreement in respect of the year in which
such Change-in-Control Date 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 Change-in-
Control Date occurs were deemed to be satisfied.
For purposes of this Agreement, "fair market value" shall have the meaning
ascribed to such term under the Parent's 1998 Incentive Compensation Plan.
Payment shall be made in a single lump sum upon the Employee's effective date of
termination.
b. CONTINUATION OF BENEFITS.
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(i) For a period of three years following the Termination of
Employment, the Employee shall be treated as if he or she had continued to be an
employee for all purposes under Parent's Health Insurance Plan and Dental
Insurance Plan; or if the Employee is prohibited from participating in such
plan, the Company or Parent shall otherwise provide such benefits. Following
this continuation period, the Employee 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 Employee's employment if allowed by law.
(ii) For a period of three years following the Termination of
Employment, Parent shall maintain in force, at its expense, the Employee's life
insurance in effect under Parent's Voluntary Life Insurance Benefit Plan as of
the Change-in-Control Date or as of the date of Termination of Employment,
whichever coverage limits are greater.
(iii) For a period of three years following the Employee's
Termination of Employment, the Company or Parent shall provide short-term and
long-term disability insurance benefits to Employee equivalent to the coverage
that the Employee would have had had he remained employed under the disability
insurance plans applicable to Employee on the date of Termination of Employment,
or, at the Employee's election, the plans applicable to Employee as of the
Change-in-Control Date. Should Employee become disabled during such period,
Employee shall be entitled to receive such benefits, and for such duration, as
the applicable plan provides.
c. RETIREMENT SAVINGS PLAN. To the extent not already vested pursuant
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to the terms of such plan, the Employee'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 Employee's years of service with the
Company.
D. PLAN AMENDMENTS. Parent shall adopt such amendments to its employee
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benefit plans, if any, as are necessary to effectuate the provisions of this
Agreement.
E. FRINGE BENEFITS. Following the Employee's Termination of
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Employment, the Employee shall receive the computer which Employee is utilizing
as of the date of such Termination of Employment. In addition, for a period of
one year following Employee's Termination of Employment, Employee shall be
entitled to be reimbursed for any legal or accounting services
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utilized by Employee to minimize any personal income tax obligations arising
from the Change in Control, in an amount not to exceed $5,000.
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4. GOLDEN PARACHUTE TAX REIMBURSEMENT. Whether or not any payments are
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made pursuant to Section 3 above, if a Change in Control occurs at any time and
the Employee reasonably determines that any payment or distribution by the
Company or any of its affiliates to or for the benefit of the Employee, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any restricted stock,
stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisablility of any of
the foregoing (individually and collectively, the "Payment"), would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control," within the meaning
of Section 280G of the Code (or any successor provision thereto), or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, being hereinafter collectively referred to
as the "Excise Tax"), then the Company or Parent shall pay to the Employee an
additional payment or payments (individually and collectively, the "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that, after payment
by the Employee of all taxes required to be paid by the Employee with respect to
the receipt thereof under the terms of any federal, state or local government or
taxing authority (including any interest or penalties imposed with respect to
such taxes), including any Excise Tax imposed with respect to the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment. The Gross-Up Payment shall be paid to the
Employee within 30 days of its receipt of written notice from the Employee that
such Excise Tax has been paid or will be payable at any time in the future.
5. NO MITIGATION REQUIRED OR SETOFF PERMITTED. In no event shall
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Employee be obligated to seek other employment or take other action by way of
mitigation of the amounts payable to Employee under the terms of this Agreement,
and all such amounts shall not be reduced whether or not Employee obtains other
employment. 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 Employee
or others.
6. WAIVER OF OTHER SEVERANCE BENEFITS. The benefits payable pursuant to
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this Agreement are in lieu of any other severance benefits which may otherwise
be payable by the Company or its affiliates to the Employee upon termination of
employment pursuant to a severance program of the Company or its affiliates
(including, without limitation, any benefits to which Employee might otherwise
be entitled under any other severance or change in control or similar agreement
previously entered into between Employee and the Company or any of its
affiliates).
7. EMPLOYMENT AT WILL. Notwithstanding anything to the contrary contained
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herein, the Employee's employment with the Company is not for any specified term
and may be terminated by the Employee or by the Company at any time, for any
reason, with or without cause,
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without any liability, except with respect to the payments provided hereunder or
as required by law or any other contract or employee benefit plan.
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 attorneys' and accountants' fees of the
Employee in connection therewith, including any litigation to enforce any
arbitration award.
9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall not be terminated
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by the voluntary or involuntary dissolution of the Company or by any merger or
consolidation where the Company is not the surviving corporation, or upon any
transfer of all or substantially all of the Company's stock or assets. In the
event of such merger, consolidation or transfer, the provisions of this
Agreement shall be binding upon and shall inure to the benefit of the surviving
corporation or corporation to which such stock or assets of the Company shall be
transferred.
10. NOTICES. Any notice or other communication hereunder shall be in
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writing and shall be effective upon receipt (or refusal of receipt) if delivered
personally, or sent by overnight courier if signature for the receiving party is
obtained, or sent by certified or registered mail, postage prepaid, to the other
party at the address set forth below:
If to the Company: Vencor Operating, Inc.
Suite 3300, 000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
If to Employee: __________________________________
__________________________________
__________________________________
Either party may change its specified address by giving notice in
writing to the other.
11. INDEMNIFICATION. The Company shall indemnify, defend and hold the
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Employee harmless from and against any liability, damages, costs and expenses
(including attorneys' fees) in connection with any claim, cause of action,
investigation, litigation or proceeding involving him by reason of his having
been an officer, director, employee or agent of the Company, except to the
extent it is judicially determined that the Employee was guilty of gross
negligence or willful misconduct in connection with the matter giving rise to
the claim for indemnification. This indemnification shall be in addition to and
shall not be substituted for any other indemnification or similar agreement or
arrangement which may be in effect between the Employee and the Company or may
otherwise exist. The Company also agrees to maintain
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adequate directors and officers liability insurance, if applicable, for the
benefit of Employee for the term of this Agreement and for five years
thereafter.
12. ERISA. Many or all of the employee benefits addressed in Paragraph
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3(b) and (c) exist under plans which constitute employee welfare benefit plans
("Welfare Plans") within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Any payments pursuant to
this Agreement which could cause any of such Plans not to constitute a Welfare
Plan shall be deemed instead to be made pursuant to a separate "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA or a "top hat" plan
under Section 201(2) of ERISA as to which the applicable portions of the
document constituting the Welfare Plan shall be deemed to be incorporated by
reference. None of the benefits hereunder may be assigned in any way.
13. SEVERABILITY. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision, which other provision shall remain in full force and effect.
14. INTERPRETATION. The headings used herein are for convenience only and
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do not limit or expand the contents of this Agreement. Use of any male gender
pronoun shall be deemed to include the female gender also.
15. NO WAIVER. No waiver of a breach of any provision of this Agreement
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shall be construed to be a waiver of any other breach of this Agreement. No
waiver of any provision of this Agreement shall be enforceable unless it is in
writing and signed by the party against whom it is sought to be enforced.
16. SURVIVAL. Any provisions of this Agreement creating obligations
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extending beyond the term of this Agreement shall survive the expiration or
termination of this Agreement, regardless of the reason for such termination.
17. AMENDMENTS. Any amendments to this Agreement shall be effective only
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if in writing and signed by the parties hereto.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
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the parties with respect to the subject matter hereof.
19. GOVERNING LAW. This Agreement shall be interpreted in accordance with
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and governed by the law of the State of Delaware.
20. COUNTERPARTS. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
21. CANCELLATION OF PRIOR AGREEMENT. The Employee hereby acknowledges and
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agrees that this Agreement is intended to and does hereby replace that certain
change-in-control
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severance agreement, dated as of _______, as amended, between Vencor, Inc. 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.
VENCOR OPERATING, INC.
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By: W. Xxxxx Xxxxxxxx
Chairman, President and Chief
Executive Officer
Solely for the purposes of
Sections 3, 4, 5 and 11:
VENCOR, INC.
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By: W. Xxxxx Xxxxxxxx
Chairman, President and Chief
Executive Officer
EMPLOYEE
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