EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of the 24th day of March,
2003 by and between Kindred Healthcare, Inc., a Delaware corporation (the
"Company") and Xxxxxx X. Xxxxx ("Xxxxx").
W I T N E S S E T H:
WHEREAS, Xxxxx is employed as Chairman and Chief Executive
Officer by the Company, and the parties hereto desire to provide for the
transition of Xxxxx'x employment to solely Executive Chairman of the Board, on
or before January 1, 2004; and
WHEREAS, the Executive Compensation Committee (the "Executive
Compensation Committee") of the Board of Directors (the "Board") has determined
that it is in the best interests of the Company and its subsidiaries 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 Xxxxx agree as follows:
1. Employment as Chairman of the Board and Chief Executive
Officer.
A. Term. The Company hereby agrees to employ Xxxxx and
Xxxxx hereby agrees to be employed by the Company as Chairman of the Board and
Chief Executive Officer on the terms and conditions herein set forth. The term
of Xxxxx'x employment as Chairman and Chief Executive Officer shall be for a
period commencing on the date hereof and terminating on December 31, 2003 unless
earlier terminated by an Acceleration Notice (as defined) (the "CEO Term"). The
Board may terminate the CEO Term prior to December 31, 2003 by providing written
notice to Xxxxx of its desire to implement Section 2 of this Agreement (the
"Acceleration Notice"). The Accelerated Notice shall indicate the date that
Xxxxx will no longer be chief executive officer and will transition to Executive
Chairman. At such time, the provisions of this Section 1 shall have no further
effect. Xxxxx shall provide the Company with a notice of resignation as chief
executive officer at or prior to the expiration of the CEO Term.
B. Duties. Xxxxx is engaged as Chairman of the Board and
Chief Executive Officer and shall perform such duties commensurate with his
title and as otherwise designated by the Board.
C. Extent of Services. Xxxxx, subject to the direction and
control of the Board, shall have the power and authority commensurate with his
executive status and necessary to perform his duties hereunder. During the CEO
Term, Xxxxx shall devote his full working time, attention, labor, skill and
energies to the business of the
Company, and shall not, without the consent of the Board, be actively engaged in
any other business activity, whether or not such business activity is pursued
for gain, profit or other pecuniary advantage.
D. Compensation. As compensation for services hereunder
rendered, Xxxxx shall receive during the CEO Term:
(i) A base salary ("Base Salary") of not less than $819,000
per year payable in equal installments in accordance with the Company's
normal payroll procedures. Xxxxx may receive increases in his Base
Salary from time to time, as approved by the Executive Compensation
Committee.
(ii) In addition to Base Salary, Xxxxx will be eligible to
receive a bonus in accordance with the Company's short-term incentive
compensation plan and such other incentive compensation as the Executive
Compensation Committee may approve from time to time.
E. Benefits. During the CEO Term:
(i) Xxxxx 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.
(ii) Xxxxx 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.
(iii) Xxxxx shall be entitled to paid time off benefits each
year consistent to those provided to the Company's executives. Xxxxx
shall schedule the timing of such paid time off in a reasonable manner.
Xxxxx also may be entitled to such other leave, with or without
compensation, as shall be mutually agreed by the Company and Xxxxx.
(iv) Xxxxx may incur reasonable expenses for promoting the
Company's business, including expenses for entertainment, travel and
similar items. The Company shall reimburse Xxxxx for all such reasonable
expenses in accordance with the Company's reimbursement policies and
procedures.
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2. Employment as Executive Chairman of the Board.
A. Term. Unless Xxxxx receives the Election Notice (as
defined), the Company hereby agrees to employ Xxxxx and Xxxxx hereby agrees to
be employed solely as Executive Chairman of the Board of Directors ("Executive
Chairman") effective January 1, 2004 on the terms and conditions herein set
forth. If the Board of Directors determines not to have Xxxxx serve as Executive
Chairman, it shall provide written notice of such to Xxxxx on or prior to
November 15, 2003 (the "Election Notice"). If the Election Notice is not
delivered to Xxxxx, the term of Xxxxx'x employment as Executive Chairman shall
be for a period of three years commencing on the earlier of the date provided in
the Acceleration Notice or January 1, 2004 (the "Chairman Term"). For purposes
of this Agreement, the time periods defined as the "CEO Term" and "Chairman
Term" shall be referred to collectively as the "Term."
B. Duties. As Executive Chairman, Xxxxx shall perform the
following duties: (i) coordinate all Board matters and committee activities and
act as the principal liaison between the Board and senior management; (ii)
continue his responsibility for public lobbying and relationships with various
healthcare related organizations; (iii) advise the chief executive officer and
senior management on strategic initiatives including financing, acquisition and
development activities; (iv) advise the chief executive officer and senior
management concerning all compliance and regulatory matters including the
Corporate Integrity Agreement; and (v) such other similar matters as reasonably
requested by the Board.
C. Extent of Services. Xxxxx, subject to the direction and
control of the Board, shall have the power and authority commensurate with his
status as Executive Chairman and necessary to perform his duties hereunder.
During the Chairman Term, Xxxxx shall devote approximately two days a week or 60
hours a month to the business of the Company. With notice to the Board, Xxxxx
may engage in any other business activities, whether or not such business
activities are pursued for gain, profit or other pecuniary advantage provided
such activities do not conflict with the Company's objectives and operations.
D. Compensation. As compensation for services rendered as
Executive Chairman, Xxxxx shall receive during the Chairman Term:
(i) A salary ("Chairman Salary") of not less than $600,000
per year payable in equal installments in accordance with the Company's
normal payroll procedures. Xxxxx may receive increases in his Chairman
Salary from time to time, as approved by the Executive Compensation
Committee.
(ii) Xxxxx may be eligible to receive additional compensation
as the Executive Compensation Committee may approve from time to time
but is not intended that Xxxxx will continue to participate in the
Company's standard bonus or long-term incentive plans.
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E. Benefits. During the Chairman Term:
(i) Xxxxx shall be entitled to participate in any and all
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.
(ii) Xxxxx may incur reasonable expenses for promoting the
Company's business, including expenses for entertainment, travel and
similar items. The Company shall reimburse Xxxxx for all such reasonable
expenses in accordance with the Company's reimbursement policies and
procedures.
(iii) Xxxxx will continue to vest in his existing stock
options, restricted stock and accrued long-term incentive benefits.
(iv) The Company shall provide Xxxxx with an office suite in
Houston, Texas and an administrative assistant substantially comparable
to his existing office suite and administrative assistant being
furnished as of the date of this Agreement.
3. Termination of Employment.
A. Death or Disability. Xxxxx'x employment shall terminate
automatically upon Xxxxx'x death during the Term. If the Board determines in
good faith that the Disability of Xxxxx has occurred during the Term (pursuant
to the definition of Disability set forth below) it may give to Xxxxx written
notice of its intention to terminate Xxxxx'x employment. In such event, Xxxxx'x
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by Xxxxx (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, Xxxxx shall not have returned to
performance of Xxxxx'x duties. For purposes of this Agreement, "Disability"
shall mean Xxxxx'x absence from his duties hereunder for a period of 90 days.
B. Cause. The Company may terminate Xxxxx'x employment
during the Term for Cause. For purposes of this Agreement, "Cause" shall mean
the Xxxxx'x (i) conviction of or plea of nolo contendere to a crime involving
moral turpitude; or (ii) willful and material breach by Xxxxx 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 Xxxxx 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 Xxxxx in good faith and in the best interests
of the Company.
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C. Good Reason. Xxxxx'x employment may be terminated by
Xxxxx for Good Reason. "Good Reason" shall exist upon the occurrence, without
Xxxxx'x express written consent, of any of the following events:
(i) the Company shall assign to Xxxxx duties of a
substantially nonexecutive or nonmanagerial nature during the CEO Term;
(ii) an adverse change in Xxxxx'x status or position as an
executive officer of the Company during the CEO Term, including, without
limitation, an adverse change in Xxxxx'x status or position as a result
of a diminution in Xxxxx'x 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 compensation
of Xxxxx or (B) materially reduce his benefits and perquisites;
(iv) the Company shall require Xxxxx to relocate Xxxxx'x
principal business office more than 30 miles from its location on the
date of this Agreement;
(v) If Xxxxx ceases to be Chairman of the Board, for any
reason, including failing to be elected at any annual or special meeting
of the shareholders of the Company;
(vi) If the Board of Directors sends the Election Notice as
provided in Section 2; or
(vii) the failure of the Company to obtain the assumption of
this Agreement as contemplated by Section 6(c).
For purposes of this Agreement, "Good Reason" shall not exist until
after Xxxxx has given the Company notice of the applicable event within
10 days of such event and which is not remedied within 10 days after
receipt of written notice from Xxxxx specifically delineating such
claimed event and setting forth Xxxxx'x intention to terminate
employment if not remedied; provided, that if the specified event cannot
reasonably be remedied within such 10-day period and the Company
commences reasonable steps within such 10-day period to remedy such
event and diligently continues such steps thereafter until a remedy is
effected, such event shall not constitute "Good Reason" provided that
such event is remedied within 30 days after receipt of such written
notice.
D. Notice of Termination. Any termination by the Company
for Cause, or by Xxxxx 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
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provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Xxxxx'x 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 10 days after the giving of such notice). The
failure by Xxxxx 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 Xxxxx or the Company, respectively, hereunder or
preclude Xxxxx or the Company, respectively, from asserting such fact or
circumstance in enforcing Xxxxx'x or the Company's rights hereunder.
E. Date of Termination. "Date of Termination" means (i) if
Xxxxx'x employment is terminated by the Company for Cause, or by Xxxxx 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
Xxxxx'x employment is terminated by the Company other than for Cause or
Disability, or Xxxxx resigns without Good Reason, the Date of Termination shall
be the date on which the Company or Xxxxx notified Xxxxx or the Company,
respectively, of such termination and (iii) if Xxxxx'x employment is terminated
by reason of death or Disability, the Date of Termination shall be the date of
death of Xxxxx or the Disability Effective Date, as the case may be.
4. Obligations of the Company Upon Termination. Following
any termination of Xxxxx'x employment hereunder, the Company shall pay Xxxxx his
accrued wages through the Date of Termination and any amounts owed to Xxxxx
pursuant to the terms and conditions of the benefit plans and programs of the
Company at the time such payments are due. In addition, subject to Xxxxx'x
execution of a general release of claims in form satisfactory to the Company,
Xxxxx shall be entitled to the following additional payments:
A. Death or Disability. If, during the CEO Term, Xxxxx'x
employment shall terminate by reason of Xxxxx'x death or Disability, the Company
shall pay to Xxxxx (or his designated beneficiary or estate, as the case may be)
the prorated portion of any Target Bonus (as defined below) Xxxxx 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 Xxxxx if Xxxxx'x employment had not terminated. Xxxxx shall not be entitled
to any additional benefits by reason of his death or Disability during the
Chairman Term.
B. Good Reason; Other than for Cause. If, during the Term,
the Company shall terminate Xxxxx'x employment other than for Cause (but not for
Disability), or the Xxxxx shall terminate his employment for Good Reason:
(i) Within 14 days of Xxxxx'x Date of Termination, the
Company shall pay to Xxxxx (a) if the Date of Terminations occurs during
the CEO Term, the prorated portion of Xxxxx'x Target Bonus for the year
in which the Date of Termination occurs, and an amount equal to three
times the sum of the Xxxxx'x Base Salary and Target Bonus as of the Date
of
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Termination, or (b) if the Date of Terminations occurs during the
Chairman Term, an amount equal to three times the Chairman Salary as the
Date of Termination.
For purposes of this Agreement: "Target Bonus" shall mean the full
amount of the targeted annual short-term incentive bonus that would be
payable to the Xxxxx, assuming all performance criteria on which such
target bonus is based were deemed to be satisfied, in respect of
services for the calendar year in which the date in question occurs.
(ii) For a period of three years following the Date of
Termination, the Xxxxx shall be treated as if he had continued to be an
executive for all purposes under the Company's health insurance plan and
dental insurance plan; or if Xxxxx is prohibited from participating in
such plans, the Company shall otherwise provide such benefits. Following
this continuation period, Xxxxx 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 Xxxxx'x
employment if allowed by law.
(iii) For a period of three years following the Date of
Termination, the Company shall maintain in force, at its expense,
Xxxxx'x life insurance in effect under the Company's voluntary life
insurance benefit plan as of the Date of Termination.
(iv) For a period of three years following Xxxxx'x Date of
Termination, the Company shall provide short-term and long-term
disability insurance benefits to Xxxxx equivalent to the coverage that
Xxxxx would have had had he remained employed under the disability
insurance plans applicable to Xxxxx on the Date of Termination. Should
Xxxxx become disabled during such period, Xxxxx shall be entitled to
receive such benefits, and for such duration, as the applicable plan
provides.
(v) To the extent not already vested pursuant to the terms
of such plan, Xxxxx'x interests under the Company'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 Xxxxx'x years of service with the Company.
(vi) The Company shall adopt such amendments to its benefit
plans, if any, as are necessary to effectuate the provisions of this
Agreement.
(vii) Xxxxx shall be credited with an additional three years
of vesting for purposes of all outstanding stock option and restricted
stock
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awards and Xxxxx will have an additional three years in which to
exercise such stock options.
(viii) Following the Date of Termination, Xxxxx shall receive
the computer which Xxxxx is utilizing as of the Date of Termination. In
addition, Xxxxx shall be entitled to the furniture in Xxxxx'x office
suite as of the Date of Termination. In addition, for a period of three
years following Xxxxx'x Date of Termination, the Company shall provide
Xxxxx with an office suite and administrative assistant, each
substantially comparable to the office suite and administrative
assistant that were furnished to Xxxxx as of the date of Xxxxx'x Date of
Termination.
C. Cause; Other than for Good Reason. If Xxxxx'x employment
shall be terminated for Cause or Xxxxx terminates employment without Good Reason
(and other than due to Xxxxx'x death) during the Term, this Agreement shall
terminate without further additional obligations to Xxxxx under this Agreement.
D. Death after Termination. In the event of the death of
Xxxxx during the period Xxxxx is receiving payments pursuant to this Agreement,
Xxxxx'x 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 Xxxxx'x estate.
5. Disputes. Any dispute or controversy arising under, out
of, or in connection with this Agreement shall, at the election and upon written
demand of either party, be finally determined and settled by binding arbitration
in the City of Louisville, Kentucky, in accordance with the Labor Arbitration
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof. The Company
shall pay all costs of the arbitration and all reasonable attorneys' and
accountants' fees of Xxxxx in connection therewith, including any litigation to
enforce any arbitration award.
6. Successors.
A. This Agreement is personal to Xxxxx and without the
prior written consent of the Company shall not be assignable by Xxxxx otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Xxxxx'x 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 Xxxxx'x 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
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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.
7. Other Severance Benefits. Xxxxx hereby agrees that in
consideration for the payments to be received under this Agreement, Xxxxx 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
Xxxxx dated as of November 9, 1998 (the "Severance Agreement"); provided that
any payments payable to Xxxxx hereunder shall be offset by any payments payable
under the Severance Agreement.
8. Withholding. All payments to be made to Xxxxx hereunder
will be subject to all applicable required withholding of taxes.
9. Non-solicitation. During the Term and for a period of
one year thereafter (collectively, the "Non-solicitation Period"), Xxxxx shall
not directly or indirectly, individually or on behalf of any person other than
the Company, aid or endeavor to solicit or induce any of the Company's or its
affiliates' employees to leave their employment with the Company or such
affiliates in order to accept employment with Xxxxx or any other person,
corporation, limited liability company, partnership, sole proprietorship or
other entity. If the restrictions set forth in this section would otherwise be
determined to be invalid or unenforceable by a court of competent jurisdiction,
the parties intend and agree that such court shall exercise its discretion in
reforming the provisions of this Agreement to the end that Xxxxx will be subject
to a non-solicitation covenant which is reasonable under the circumstances and
enforceable by the Company. It is agreed that no adequate remedy at law exists
for the parties for violation of this section and that this section may be
enforced by any equitable remedy, including specific performance and injunction,
without limiting the right of the Company to proceed at law to obtain such
relief as may be available to it. The running of the Non-solicitation Period
shall be tolled for any period of time during which Xxxxx is in violation of any
covenant contained herein, for any reason whatsoever.
10. No Mitigation. Xxxxx shall have no duty to mitigate his
damages by seeking other employment and, should Xxxxx actually receive
compensation from any such other employment, the payments required hereunder
shall not be reduced or offset by any such compensation. Further, the Company's
obligations to make any payments hereunder shall not be subject to or affected
by any setoff, counterclaims or defenses which the Company may have against
Xxxxx or others.
11. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or sent by telephone facsimile transmission, personal or
overnight couriers, or registered mail with confirmation or receipt, addressed
as follows:
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If to Xxxxx:
Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxxx Xxxx.
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
If to Company:
Kindred Healthcare, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Facsimile: 000-000-0000
12. Assignment to Subsidiary. The Company may assign its
obligations under this Agreement to one or more of its subsidiaries but such
assignment will not relieve the Company of its obligations and liabilities
hereunder.
13. Waiver of Breach and Severability. The waiver by either
party of a breach of any provision of this Agreement by the other party shall
not operate or be construed as a waiver of any subsequent breach by either
party. In the event any provision of this Agreement is found to be invalid or
unenforceable, it may be severed from the Agreement and the remaining provisions
of the Agreement shall continue to be binding and effective.
14. Entire Agreement; Amendment. This instrument contains
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior agreements (including the Employment Agreement dated
February 12, 1999 between the Company and Xxxxx), 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 Xxxxx and
such officer of the Company specifically designated by the Board.
15. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
16. Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe its provisions.
17. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
KINDRED HEALTHCARE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxxx,
Senior Vice President, Chief Financial
Officer and Treasurer
/s/ Xxxxxx X. Xxxxx
---------------------------------------------
XXXXXX X. XXXXX
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