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EXHIBIT 10.5
EMPLOYMENT AGREEMENT BETWEEN LIVING CENTERS OF AMERICA, INC. AND
XXXXXXX X. XXXXXX
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated this 13th day of December , 1996, by and
between LIVING CENTERS OF AMERICA, INC., a Delaware corporation (the
"Employer"), and XXXXXXX X. XXXXXX (the "Employee");
W I T N E S S E T H:
For and in consideration of the agreement of the Employer to employ the
Employee at the salary and upon the terms and conditions herein set forth, and
the Employee's agreement to accept such employment and to serve the Employer
for such salary and on such terms and conditions, the parties hereto hereby
agree as follows:
1. Employment. Employer hereby employs the Employee, and Employee hereby
accepts employment upon the terms and conditions set forth in this Employment
Agreement effective as of October 1, 1996.
2. Duties. The Employer agrees to employ the Employee and the Employee
agrees to accept employment by the Employer and to serve the Employer, in such
capacities and with such powers and duties as may from time to time be
determined by the Chief Executive Officer of the Employer, on a basis involving
the Employee's full working time. It is anticipated that in performing such
services the Employee will serve as Executive Vice President and Chief
Financial Officer of the Employer, but such title or office shall in no way
diminish or inhibit the authority of the Chief Executive Officer of the
Employer to reasonably enlarge or restrict the duties and functions of the
Employee. Such duties shall be performed in Houston, Texas and at such other
places as the Chief Executive Officer may reasonably require without
necessitating any change in the Employee's place of residence.
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3. Annual Compensation. As his compensation for services to the Employer
under this Employment Agreement, in whatever capacity or capacities rendered,
the Employer shall pay to the Employee during the term of this Employment
Agreement a salary, in the aggregate of Two Hundred Forty Thousand Dollars
($240,000.00) per year, plus such increases as may be granted by the Board of
Directors, ("Annual Compensation"), payable bi-weekly, subject only to such
payroll and withholding deductions as may be required by law. The Employee
shall be reimbursed for all of the actual costs and expenses incurred by him in
the performance of his services and duties hereunder, including travel and
entertainment expenses.
4. Bonuses, Stock Options and Other Benefits. The Employee shall
participate in the Employer's Management Incentive Bonus Plan ("MIB Plan"),
1992 Stock Option Plan, Executive Benefits Plan, Employee Stock Purchase Plan,
all of which as may be amended from time to time, and other present or future
benefits provided for other employees of the Employer. The Annual Compensation
to be paid to the Employee shall not operate as a limitation upon or as a
direction against the exercise by the Board of Directors of the Employer of its
power and discretion to grant bonuses, options, awards or other additional
direct or indirect benefits to or on behalf of the Employee if, in the judgment
of such Board of Directors, such action is in the best interest of the
Employer.
5. Term and Termination.
5.1 This Employment Agreement shall be for a term of two (2) years,
commencing on the effective date hereof. The term shall be extended for
additional one (1) year periods on the anniversary date of each one year period
of the term with the Employee's consent and the approval of the Board of
Directors. This Employment Agreement may be terminated at will, with or without
cause, by the Employer prior to the expiration of such term upon thirty (30)
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days written notice of election so to terminate; provided, however, that if
this Employment Agreement is terminated by the Employer without good cause
prior to the expiration of the three year term, the Employee's Annual
Compensation hereunder shall continue for the remainder of the two(2) year term
and the Employee shall be paid his prorata bonus pursuant to the MIB Plan for
the fiscal year in which this Employment Agreement is terminated.
5.2 Termination for "good cause" shall include termination for such
things as fraud or dishonesty, willful failure to perform assigned duties,
willful violation of the Employer's Business Conduct Policy, or intentionally
working against the best interest of the Employer.
6. Extent of Services. Consistent with his obligations hereunder, the
Employee shall regulate his own hours of employment, performing the duties
assigned to him from time to time by the Chief Executive Officer of the
Employer to the best of his ability and with reasonable care and diligence.
7. Obligations Surviving Employment.
7.1 Employer is an operator of long-term health care centers and
provides long term care and assisted living services, and rehabilitation
therapy services, and pharmaceutical and infusion therapy services and supplies
throughout various states. It has a valuable, special, unique and proprietary
interest in its various business methods and systems, which include, but are
not limited to, strategic operating plans and budgets, policy and procedure
manuals, computer programs, financial forms and information, supplier
information, accounting forms and procedures, personnel policies, information
on the needs of residents, techniques and methods of operation, prospects,
research and data developed by or for the benefit of the Employer, and
information relating to strategic plans, revenues, costs, profits and the
financial condition of the Employer, and all other information developed by or
for the benefit of the Employer, all of which
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information is considered by the Employer to be confidential trade secrets
("Confidential Information"), to the extent such information is not publicly
disclosed.
7.2 The Employer may, pursuant to Employee's employment hereunder,
provide and confide to Employee, and Employee will have access to the
Employer's Confidential Information, which were developed at great expense by
or on behalf of the Employer, all of which Employee recognizes and acknowledges
to be unique valuable and confidential assets of the Employer. Further, as an
adjunct of Employee performing his duties hereunder, Employee may develop
additional information, techniques and programs for the Employer which Employee
agrees shall be the sole and exclusive property of the Employer. Employee
agrees that he shall not, and he shall not, during or after the term of
employment hereunder, directly or indirectly, in any manner, utilize, disclose
or otherwise divulge to any person, firm, corporation, association or other
entity engaged in the same business as Employer, for any reason whatsoever, any
such Confidential Information or other such information, techniques, methods of
operations, or programs, whether developed by him on behalf of, or by the
Employer independent of Employee, which is not generally known to the public or
recognized as standard practice in the industry in which the Employer shall be
engaged.
7.4 This Employment Agreement by Employee shall cover and be
enforceable by the Employer in all states in which the Employer is engaged in
business at the termination of Employee's employment or has been so engaged at
any time during the term hereof. For purposes of this Article 7, the term
"Employer" shall include the Employer as herein defined and any direct or
indirect subsidiary or affiliate.
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8. Remedies.
8.1 Employee acknowledges that in the event of any violation by
Employee of the provisions set forth in Article 7 hereof the Employer will
sustain serious, irreparable and substantial harm to its business, the extent
of which will be difficult to determine and impossible to remedy solely by an
action at law for money damages. Accordingly, Employee agrees that, in the
event of such violation or threatened violation by Employee, the Employer shall
be entitled to, in addition to all such other legal and equitable remedies as
may be available to the Employer, an injunction before trial from any court of
competent jurisdiction as a matter of course upon the posting of not more than
a nominal bond, restraining Employee from such violation or threatened
violation. Nothing herein contained shall be construed as limiting or
prohibiting the Employer from pursuing other remedies available to the Employer
therefor, including recovery of money damages through an action at law against
Employee. Employee further agrees that, in the event any of the provisions of
this Agreement are determined by a court of competent jurisdiction to be
contrary to any applicable statute, law or rule, or for any reason
unenforceable as written, such court may modify any of such provisions so as to
permit enforcement thereof as thus modified.
8.2 In the event a legal action is filed by either party to enforce its
rights under this Employment Agreement, the prevailing party shall be
reimbursed by the other party for the prevailing party's reasonable enforcement
costs, including without limitation, attorneys' fees and costs of investigation
and court.
9. Change of Control of the Employer. In the event of a change of control
of the Employer and either the Employee's (a) involuntary termination by the
Employer or (b) voluntary termination for good cause after a change of control,
then the Employee shall be entitled to receive a lump sum payment from the
Employer of an amount equal to two times (i) Employee's Annual
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base salary in effect at the date of termination plus (ii) Employee's base
bonus for Employee's grade as of the date of termination as set forth in
Employer's policy statement on the Management Incentive Bonus Program. For
purposes of this Article 9 "voluntary termination for good cause after a change
of control" shall include within the six month time period after a change of
control, a change in title or working responsibilities. For purposes of this
Article 9, "change of control" is the occurrence of one or more of the
following events: (i) any person or entity, together with all associates of
such person or entity, becomes the beneficial owner of 30% or more of the
Employer's outstanding common stock, except where such person or entity is
bound by the terms of a standstill agreement under which the parties cannot
acquire more than 30% of the outstanding common stock or (ii) during any two
year period, directors serving at the beginning of such period cease for any
reason to constitute a majority of the directors serving, unless the election
of at least 75% of the new directors was approved by at least 75% of the
directors in office at the time of election.
10. Binding Effect. The respective rights and obligations of the Employer
and the Employee under this Employment Agreement shall inure to the benefit of
and shall be binding upon the Employer and the Employee and the respective
successors and assigns of the Employer. This Employment Agreement shall not be
assignable by the Employee. As used herein, the term "successors and assigns"
shall include any corporation or corporations which acquire all or
substantially all of the assets and businesses of the Employer whether by
purchase, merger, consolidation or otherwise.
11. Applicable Law. This Employment Agreement shall be interpreted and
construed in accordance with the laws of the State of Texas.
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IN WITNESS WHEREOF, the Employer and the Employee have executed this
Employment Agreement in duplicate originals as of the date first above written.
LIVING CENTERS OF AMERICA, INC.
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
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XXXXXXX X. XXXXXX Name: Xxxxxx X. Xxxxx
"EMPLOYEE" Title: Chairman and Chief Executive
Officer
"EMPLOYER"
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