EXHIBIT (a)(16)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between
NeighborCare, Inc., a Pennsylvania corporation (the "Company") with a place of
business at Third Floor, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000 and Xxxxxxx
X. Xxxx (the "Executive"), shall be effective as of June 29, 2004(the "Effective
Date").
WITNESSETH
WHEREAS, the Company desires to employ the Executive as an employee of
the Company, and the Executive desires to provide services to the Company, all
upon the terms and conditions hereinafter set forth; and
WHEREAS, upon due consideration, the Executive acknowledges that the
consideration set forth herein is reasonable and adequate, including the terms
of employment and covenants contained herein; and
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment.
The Company hereby agrees to employ the Executive as its
Senior Vice President and Chief Financial Officer and Executive's principal
place of business shall be located at the Company's headquarters currently
located in Baltimore, Md. The Executive accepts such employment and agrees to
perform the customary responsibilities of such position during the term of this
Agreement. The Executive will perform such other duties as may from time to time
be reasonably assigned to the Executive by the Board of Directors of the Company
(the "Board") or the Company's Chief Executive Officer, provided such duties are
consistent with and do not interfere with the performance of the duties
described herein and are of a type customarily performed by persons of similar
titles with similar corporations. Nothing in this Agreement shall preclude the
Executive from serving as a director, trustee, officer of, or partner in, any
other firm, trust, corporation or partnership, as long as such activities do not
interfere with the Executive's performance of the Executive's duties hereunder
or violate the terms of Section 8 hereof, and so long as the Executive has
received written approval by the Chief Executive Officer of the Company.
Furthermore, nothing in this Agreement shall preclude the Executive from
pursuing personal investments, as long as such activities do not interfere with
the Executive's performance of the Executive's duties hereunder or violate the
terms of Section 8 hereof.
2. Period of Employment.
(a) Period of Employment. The period of the Executive's
employment under this Agreement shall commence on the Effective Date and shall,
unless sooner terminated pursuant to Section 4, terminate one year thereafter
("First Anniversary Date") (such period, as extended from time to time, herein
referred to as the "Term"). Subject to
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Section 2(b), and if the Term has not been terminated pursuant to Section 4, on
the First Anniversary Date and on each anniversary thereafter (each such
anniversary, an "Automatic Extension Date"), the Term shall be extended for an
additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company
or the Executive may elect to terminate the automatic extension of the Term set
forth in Section 2(a) ("Automatic Extension") by giving written notice of such
election. Any notice given hereunder must be given at least 60 days prior to the
applicable Automatic Extension Date.
3. Compensation and Benefits.
(a) Base Salary. As long as the Executive remains an employee
of the Company, the Executive will be paid an annual base salary of $250,000,
which shall continue at this rate, subject to adjustment as hereinafter
provided. The Executive's annual base salary shall be reviewed periodically and
the Company may increase such annual base salary, by an amount, if any, it
determines to be appropriate. Any such increase shall not reduce or limit any
other obligation of the Company hereunder. The Executive's annual base salary
payable hereunder, as it may be increased from time to time and without
reduction for any amounts deferred as described below, is referred to herein as
"Base Salary". The Executive's Base Salary, as in effect from time to time, may
not be reduced by the Company without the Executive's consent, provided that the
Base Salary payable under this paragraph shall be reduced to the extent the
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay the Executive the portion of
the Executive's Base Salary not deferred in accordance with its customary
periodic payroll practices.
(b) Incentive Compensation. The Executive shall be eligible to
participate in equity incentive, cash incentive compensation and other plans at
a level consistent with the Executive's position with the Company and the
Company's then current policies and practices.
(c) Restricted Stock. The Company shall, subject to approval
by the Board of Directors, pursuant to the terms of its 2004 Equity Incentive
Plan, grant to the Executive 50,000 shares of Restricted Stock. Except as
provided in Section 5(c) and Section 6, twenty-five (25) percent of the shares
of Restricted Stock will vest 45 days after the date of grant and the remainder
will vest in three equal installments on the first three anniversaries of the
Effective Date. The Executive must be employed with the Company on each vesting
date in order for those shares which vest on those respective vesting dates to
vest except as provided in Section 5(c).
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(d) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, the Executive shall be
eligible to participate in (1) each welfare benefit plan sponsored
or maintained by the Company, including, without limitation, each
life, hospitalization, medical, dental, health, accident or
disability insurance or similar plan or program of the Company, and
(2) each pension, profit sharing, retirement, deferred compensation
or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent
that the Executive is eligible to participate in any such plan under
the generally applicable provisions thereof. With respect to the
pension or retirement benefits payable to the Executive, the
Executive's service credited for purposes of determining the
Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this
Section 3(c), in and of itself, shall be construed to limit the
ability of the Company to amend or terminate any particular plan,
program or arrangement.
(ii) Vacation. During the Term, the Executive shall be
entitled to the number of paid vacation days in each anniversary
year determined by the Company from time to time for its senior
executive officers, but not less than four (4) weeks . The Executive
shall also be entitled to all paid holidays given by the Company to
its senior officers. Vacation days which are not used during any
calendar year may not be accrued, nor shall the Executive be
entitled to compensation for unused vacation days, during the Term
or upon termination of employment.
(iii) Executive Benefits. During the Term, the
Executive shall be entitled to receive such perquisites (e.g.,
fringe benefits), plans and other benefits as are generally provided
to other senior officers of the Company in accordance with the then
current policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company
shall pay or reimburse the Executive for all reasonable expenses
incurred or paid by the Executive in the performance of the
Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may
reasonably require and in accordance with the generally applicable
policies and practices of the Company. The Company shall reimburse
the Executive for reasonable costs associated with temporary housing
and shall pay for moving expenses (including gross up).
4. Employment Termination.
The Term of employment under this Agreement may be earlier terminated
only as follows:
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(a) Cause. The Company shall have the right to terminate the
Executive's employment for Cause. For purposes hereof, a termination by the
Company for "Cause" shall mean termination by action of a majority of the
non-management membership of the Board at a meeting duly called and held upon at
least fifteen (15) days prior written notice to the Executive specifying the
particulars of the action or inaction alleged to constitute "Cause" because of
(i) the Executive's conviction of, or plea of guilty or nolo contendere to, (A)
any felony (whether or not involving the Company or any of its subsidiaries) or
(B) any other crime involving moral turpitude which subjects, or if generally
known, would subject, the Company or any of its subsidiaries to public ridicule
or embarrassment, (ii) habitual intoxication, the use of illegal drugs, or the
abuse of chemical substances by the Executive, (iii) fraud or other willful
misconduct by the Executive in respect of the Executive's obligations under this
Agreement, (iv) willful and continued failure of the Executive to perform
substantially the Executive's duties (as contemplated by Section 1 of this
Agreement) with the Company (other than any such failure resulting from
incapacity due to physical or mental illness or following the Executive's
delivery of a Notice of Termination (as defined in Section 4(f)) for Good
Reason), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company that
specifically identifies the manner in which the Board or the Chief Executive
Officer of the Company believes that the Executive has not substantially
performed the Executives duties, (v) the willful engaging by the Executive in
gross misconduct or a material violation of the Company's code of conduct or
corporate policies, or (vi) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board following thirty days prior written notice to the
Executive of the Executive's refusal to perform, or failure to attempt to
perform such duties and which during such thirty day period such refusal or
failure to attempt is not cured by the Executive. "Cause" shall not include a
bona fide disagreement over a corporate policy, so long as the Executive does
not willfully violate specific written directions from the Board, which
directions are consistent with the provisions of this Agreement. Action or
inaction by the Executive shall not be considered "willful" unless done or
omitted by the Executive intentionally and without the Executive's reasonable
belief that the Executive's action or inaction was in the best interests of the
Company, and shall not include failure to act by reason of total or partial
incapacity due to physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company may, at any time after at least thirty
(30) days prior written notice in accordance with Section 4(f) hereof to the
Executive, terminate the Executive's employment hereunder without Cause.
(c) Death or Disability. If the Executive dies, the
Executive's employment shall terminate as of the date of death. If the Executive
develops a disability, the Company may terminate the Executive's employment for
Disability. As used in this Agreement, the term "Disability" shall mean
incapacity due to physical or mental illness which has caused the Executive to
be unable to substantially perform the essential functions of the Executive's
duties with or without a reasonable accommodation with the
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Company on a full time basis for (i) a period of six (6) consecutive months, or
(ii) for shorter periods aggregating more than six (6) months in any twelve (12)
month period. During any period of Disability, the Executive agrees to submit to
reasonable medical examinations upon the reasonable request, and at the expense,
of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following,
without the Executive's written consent, provided, that (x) the Executive shall
provide the Company with written notice thereof within thirty (30) days after
the Executive has knowledge of the occurrence of any of the events or
circumstances set forth in clauses (i) through (v) below, which notice shall
specifically identify the event or circumstance that the Executive believes
constitutes Good Reason, (y) the Company fails to correct the circumstance or
event so identified within thirty (30) days after the date of delivery of the
notice referred to in clause (x) above, and (z) the Executive resigns his
employment for Good Reason within ninety (90) days after the date of delivery of
the notice referred to in (x) above:
(i) a reduction by the Company in the Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time during the term of this Agreement;
(ii) any material failure by the Company to comply with
any of the material provisions of this Agreement including the
failure by the Company to award the restricted stock set forth in
Section 3 (c);
(iii) the Company's termination of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
(iv) following a Change of Control, the assignment to
the Executive by the Company of any duties that constitute a
material reduction in the Executive's status with the Company or a
substantial reduction in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change of Control, or a reduction in the Executive's titles or
offices as in effect immediately prior to the Change of Control, or
any removal of the Executive from, or any failure to reelect the
Executive to, any of such positions, except in connection with the
termination of the Executive's employment for Disability or Cause or
as a result of the Executive's death or by the Executive other than
for Good Reason; and
(v) following a Change of Control, any relocation of
the Executive's principal place of employment to a location more
than forty-five (45) miles beyond the location at which the
Executive was employed immediately prior to the Change of Control.
(vi) without regard for the notice periods above, the
Executive resigns from the Company's employ during the ninety (90)
day period commencing on
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the date that is six (6) months after a Change of Control for any
reason by providing written notice to the Company.
(e) Executive's Voluntary Termination. Notwithstanding
anything to the contrary contained in this Agreement, the Executive may, at any
time after at least sixty (60) days but no more than ninety (90) days prior
written notice in accordance with Section 4(f) hereof to the Company, terminate
voluntarily the Executive's employment hereunder.
(f) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (i)
if this Agreement is terminated by the Company for Disability, thirty (30) days
after Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period), (ii) if the Executive's
employment is terminated due to the Executive's death, on the date of death;
(iii) if the Executive's employment is terminated due to the Executive's
voluntary resignation pursuant to Section 4(e), the date specified in the notice
(which shall not be less than sixty (60) days nor more than ninety (90) days
from the date such Notice of Termination is given); or (iii) if the Executive's
employment is terminated for any other reason, the date specified in the Notice
of Termination (which shall not be less than thirty (30) days from the date such
Notice of Termination is given).
(h) Resignation from All Positions. Notwithstanding any other
provision of this Agreement, upon the termination of the Executive's employment
for any reason, unless otherwise requested by the Board, the Executive shall
immediately resign from all positions that the Executive holds or has ever held
with the Company and any other affiliate of the Company (and with any other
entities with respect to which the Company has requested the Executive to
perform services). The Executive hereby agrees to execute any and all
documentation to effectuate such resignations upon request by the Company, but
he shall be treated for all purposes as having so resigned upon termination of
his employment, regardless of when or whether he executes any such
documentation.
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the
Executive's death or the termination of the Executive's employment by reason of
the Disability of the Executive, to the extent not theretofore paid or provided,
(i) the Company shall pay to the Executive's estate or the Executive, as
applicable, within thirty (30) days after the Date of Termination (1) the
Executive's full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or termination of employment by
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reason of the Executive's Disability, (2) all deferred compensation of any kind,
including, without limitation, any amounts earned under any bonus plan, and (3)
if any bonus, under any bonus plan of the Company, shall be payable in respect
of the year in which the Executive's death or termination of employment by
reason of the Executive's Disability occurs, such bonus(es) prorated up to the
last day of the month of the Executive's death or termination of employment by
reason of the Executive's Disability and (ii) all restricted stock, stock option
and performance share awards made to the Executive and outstanding as of the
Date of Termination shall automatically become fully vested as of the Date of
Termination.
(b) Termination for Cause. If the Executive's employment shall
be terminated for Cause, the Company shall pay the Executive, within thirty (30)
days after the Date of Termination: the Executive's full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given. The Company shall have no further obligations to the Executive under this
Agreement.
(c) Termination by the Executive for Good Reason or by the
Company for Reasons other than for Cause, Disability or Death.
(i) In the event that on or after the First
Anniversary Date, (1) the Company terminates the Executive's
employment during the Term other than for Cause, death or Disability
or (2) the Executive resigns during the Term for Good Reason, then
the Executive shall receive:
(A) Benefit Continuation;
(B) Pro Rata Bonus;
(C) Severance Benefit; and
(D) Full Equity Vesting.
(ii) In the event that before the First Anniversary
Date, (1) the Company terminates the Executive's employment during
the Term other than for Cause, death or Disability or (2) the
Executive resigns for Good Reason, then the Executive shall receive:
(A) Benefit Continuation;
(B) Pro Rata Bonus; and
(C) Severance Benefit.
As used in this section,
"Benefit Continuation" means that the Company shall maintain in full
force and effect, for the continued benefit of the Executive and his dependents
for a period equal to the greater of (x) the remaining period of the then
current Term without giving effect to such termination or (y) two (2) years, all
employee insurance benefit plans and programs to which the Executive was
entitled prior to the Date of Termination (including, without limitation, the
health, dental, vision, life and other voluntary insurance programs, but
specifically excluding any company paid disability plan or program provided by
the
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Company) if the Executive's continued participation is permissible under the
general terms and provisions of such plans and programs and the Executive
continues to pay all applicable premiums. In the event that the Executive's
participation in any health, medical or life insurance plan or program is
barred, the Company shall obtain and pay for, on the Executive's behalf,
individual insurance plans, policies or programs which provide to the Executive
health, medical, and life insurance coverage which is equivalent to the
insurance coverage to which the Executive was entitled prior to the Date of
Termination.
"Executive's Average Base Salary" means the Executive's Base Salary for
(a) the most recent two years (including the year in which the Date of
Termination occurs) divided by two if the Executive has been employed hereunder
for more than two years, or (b) the year in which the Date of Termination occurs
if the Executive has been employed hereunder for less than two years.
"Executive's Average Assumed Cash Incentive Compensation" means all
annual bonuses earned under the Company's annual incentive compensation plan
(which is intended to be a cash plan as of the Effective Date) in consideration
of services for the two (2) most recent completed fiscal years prior to the Date
of Termination, divided by two (2), or the average annual bonuses earned in such
shorter number of fiscal years during which an annual bonus incentive plan
existed or the Executive was employed.
"Full Equity Vesting" means that the previously granted and outstanding
stock options and restricted stock shall fully and immediately vest and, in the
case of stock options, shall remain exercisable for a period of at least ninety
(90) days following the Date of Termination (or, if sooner, the end of the
scheduled award term).
"Pro Rata Bonus" means a pro rata bonus for the portion of the year in
which the date of termination occurs preceding the date of termination based
upon the amount that would have been earned based on the Company's actual
performance for the portion of the year ending on the date of termination, using
performance goals that are pro-rated to reflect the portion of the year prior to
the date of termination (which amount will be paid as soon as practicable
following the date of termination).
"Severance Benefit" means a lump-sum cash payment to the Executive,
within thirty (30) days after the Date of Termination, equal to the sum of (x)
the Executive's Average Base Salary and (y) the Executive's Average Assumed Cash
Incentive Compensation, except during the two year period following a Change of
Control, "Severance Benefit" means a lump-sum cash payment to the Executive,
within thirty (30) days after the Date of Termination, equal to two (2) times
the sum of (x) the Executive's Average Base Salary and (y) the Executive's
Average Assumed Cash Incentive Compensation.
(iii) The payments under this Section are subject
to, and conditional upon, the Executive executing and not revoking a
general release of all statutory
and common law claims relating to employment and termination from
employment in a form provided by the Company.
(iv) The Executive recognizes and accepts that
the Company shall not, in any case, be responsible for any
additional amount, severance pay, termination pay, severance
obligation, incentive compensation payments, costs, attorneys fees
or other damages whatsoever arising from termination of the
Executive's employment, above and beyond those specifically provided
for herein. Notwithstanding anything herein to the contrary, the
Executive shall maintain his/her rights under any Company sponsored
qualified or nonqualified retirement plan.
6. Change of Control.
(a) For purposes of this Agreement, unless 75 percent of the
Incumbent Directors (as defined in the Company's 2004 Performance Incentive
Plan) determine prior to the events which would otherwise constitute a Change of
Control that such events shall not be deemed a Change of Control within the
meeting of this Agreement, the term "Change of Control" shall mean the
occurrence of any of the following:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of forty percent (40%) or more
of either (A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the combined
voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that,
for purposes of this Section 6(a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its affiliates,
(iv) any acquisition by any corporation pursuant to a transaction
that complies with Sections 6(c)(i), 6(c)(ii) and 6(c)(iii), (v) any
acquisition by any underwriter temporarily holding securities
pursuant to an offering of such securities, (vi) any acquisition by
Xxxxxxx Xxxxx Capital Partners or Highland Capital, (vii) any
acquisition by the Executive or any group of persons including the
Executive (or any entity controlled by the Executive or any group of
persons including the Executive) or (viii) a beneficial owner of
less than forty percent (40%) of the Outstanding Company Voting
Securities that becomes a beneficial owner of forty percent (40%) or
more of the Outstanding Company Voting Securities solely by reason
of redemption or repurchase of such securities by the Company so
long as such beneficial owner takes immediate action to reduce its
beneficial ownership of Company Voting Securities below forty
percent (40%);
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(ii) Any time at which individuals who, as of the
date hereof, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; provided, further, that any individual
becoming a director subsequent to the date hereof who was elected
by, or on the recommendation of any person described in clause (vi)
of Section 6(a) above pursuant to contractual rights as of the
Effective Date with respect to Outstanding Company Voting Securities
owned by such person shall be treated as a member of the Incumbent
Board;
(iii) Consummation of a merger, statutory share
exchange or consolidation or similar corporate transaction involving
the Company or any of its subsidiaries, a sale or other disposition
of all or substantially all of the assets of the Company, or the
acquisition of assets or stock of another entity by the Company or
any of its subsidiaries (each, a "Business Combination"), in each
case unless, following such Business Combination, (i) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than fifty percent (50%) of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a
result of such transaction, owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, forty percent (40%) or more of,
respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior
to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution
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of the initial agreement or of the action of the Board providing for
such Business Combination; provided, however, that a spinoff of
subsidiaries or divisions of the Company to an entity which is owned
by the shareholders of the Company in substantially the same
proportion as their ownership of the Company shall not constitute a
Change of Control; or
(iv) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(b) Notwithstanding anything to the contrary contained in an
equity compensation plan of the Company or in any award agreements granted
thereunder, upon a Change of Control, (1) if on or prior to December 31, 2004,
30,000 shares of the shares granted pursuant to section 3(c) shall immediately
vest or (2) if after December 31, 2004, any and all equity-based compensation
awards held by the Executive that are outstanding as of a Change of Control and
which are not then exercisable or vested shall immediately vest, unless
otherwise specifically provided by a specific reference to this Agreement in an
equity compensation plan of the Company or in any award agreements granted
thereunder that the accelerated vesting provided for in this sentence shall not
occur, in which case the provision of the grant or of this Agreement that
otherwise determined the vesting schedule for such awards shall continue to
control.
7. Certain Tax Matters.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any Payment would be subject to the
Excise Tax, then the Executive shall be entitled to receive an additional
payment (the "Gross-Up Payment") in an amount such that, after payment by the
Executive of all taxes (and any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. The Company's obligation to make
Gross-Up Payments under this Section 7 shall not be conditioned upon the
Executive's termination of employment.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made, to
the extent permitted by applicable law, by the Company's auditors as of
immediately prior to the Change of Control, or such other nationally recognized
certified public accounting firm as may be designated by the Executive (the
"Accounting Firm"). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive may appoint another nationally
recognized accounting firm to make the
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determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 7, shall be paid by the Company to the Executive within
5 days of the receipt of the Accounting Firm's determination. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company
should have been made (the "Underpayment"), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 7(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable, but no later than 10 business days after the Executive
is informed in writing of such claim. The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing
Xxxxxxx X. Xxxx
Employment Agreement
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provisions of this Section 7(c), the Company shall control all proceedings taken
in connection with such contest, and, at its sole discretion, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the applicable taxing authority in respect of such claim and may, at its
sole discretion, either pay the tax claimed to the appropriate taxing authority
on behalf of the Executive and direct the Executive to xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company pays such claim
and directs the Executive to xxx for a refund, the Company shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
payment or with respect to any imputed income in connection with such payment;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of a Gross-Up
Payment or payment by the Company of an amount on the Executive's behalf
pursuant to Section 7(c), the Executive becomes entitled to receive any refund
with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 7(c), if applicable) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after payment by the Company of an
amount on the Executive's behalf pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then the amount of such payment shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 7, the
Company may, in its sole discretion, withhold and pay over to the Internal
Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following
meanings for purposes of this Section 7.
"Excise Tax" shall mean the excise tax imposed by Section 4999
of the Code, together with any interest or penalties imposed with respect to
such excise tax.
Xxxxxxx X. Xxxx
Employment Agreement
Page 14 of 19
A "Payment" shall mean any payment or distribution in
the nature of compensation (within the meaning of Section 280G(b)(2) of the
Code) to or for the benefit of the Executive, whether paid or payable pursuant
to this Agreement or otherwise.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the
Term, the Executive shall keep confidential and shall not, except with the
Company's express prior written consent, or except in the proper course of the
Executive's employment with the Company, directly or indirectly, communicate,
disclose, divulge, publish, or otherwise express, to any Person, or use for the
Executive's own benefit or the benefit of any Person, any trade secrets,
confidential or proprietary knowledge or information, no matter when or how
acquired concerning the conduct and details of the Company's business, including
without limitation, names of customers and suppliers, marketing methods, trade
secrets, policies, prospects and financial condition. For purposes of this
Section 8, confidential information shall not include any information which is
now known by or readily available to the general public or which becomes known
by or readily available to the general public other than as a result of any
improper act or omission of the Executive.
(b) Non-Competition. During the Term hereof and for
a period of two (2) years following the Executive's termination of employment
for any reason, the Executive shall not, except with the Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person with whom Executive had
substantial contact or about whom Executive acquired confidential
information during Executive's employment with the Company in any
manner which interferes or might interfere with such Person's
relationship with the Company, or in an effort to obtain such Person
as a customer, supplier, salesman, agent, or representative of any
business in competition with the Company.
(ii) Solicit the employment of or hire, whether
as an employee, officer, director, agent, consultant or independent
contractor, any person who is, or was at any time during the twelve
(12) month period preceding the termination of the Executive's
employment through the expiration of this covenant, an employee,
consultant, officer or director of the Company or any of its
subsidiaries and affiliates (except for such employment by the
Company or any of its subsidiaries and affiliates);
(iii) Establish, engage, own, manage, operate,
join or control, or participate in the establishment, ownership
(other than as the owner of less than one percent (1%) of the stock
of a corporation whose shares are publicly traded), management,
operation or control of, or be a director, officer, employee,
salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with the Company anywhere in
the United States or act or
Xxxxxxx X. Xxxx
Employment Agreement
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conduct himself in any manner which the Executive would have reason
to believe inimical or contrary to the best interests of the
Company. Executive acknowledges that this nationwide restriction is
reasonable and necessary because Executive's responsibilities
include strategies for geographic expansion throughout the United
States. Executive acknowledges that the provisions contained in this
section will not impair Executive's ability to earn a livelihood
because Executive has the ability to engage in other professional
activities that will not breach these provisions.
(c) Enforcement. The Executive acknowledges that any
breach by the Executive of any of the covenants and agreements of this Section 8
("Covenants") will result in irreparable injury to the Company for which money
damages could not adequately compensate the Company, and therefore, in the event
of any such breach, the Company shall be entitled, in addition to all other
rights and remedies which the Company may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining the Executive
and/or all other Persons involved therein from continuing such breach. The
existence of any claim or cause of action which the Executive or any such other
Person may have against the Company shall not constitute a defense or bar to the
enforcement of any of the Covenants. If the Company is obliged to resort to
litigation to enforce any of the Covenants which has a fixed term, then such
term shall be extended for a period of time equal to the period during which a
material breach of such Covenant was occurring, beginning on the date of a final
court order (without further right of appeal) holding that such a material
breach occurred, or, if later, the last day of the original fixed term of such
Covenant.
(d) Consideration. The Executive expressly acknowledges that
the Covenants are a material part of the consideration bargained for by the
Company and, without the agreement of the Executive to be bound by the
Covenants, the Company would not have agreed to enter into this Agreement.
(e) Scope. If any portion of any Covenant or its application
is construed to be invalid, illegal or unenforceable, then the other portions
and their application shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or similar
factor, then the court making such determination shall have the power to reduce
or limit such scope, duration, area or other factor, and such Covenant shall
then be enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
The Executive shall not be required to mitigate damages or the amount
of any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of payment provided for under this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Date of Termination, or otherwise. The amounts
payable to the Executive under Section 5 hereof shall not be treated as damages
but as severance compensation to which
Xxxxxxx X. Xxxx
Employment Agreement
Page 16 of 19
the Executive is entitled by reason of termination of the Executive's employment
in the circumstances contemplated by this Agreement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to the Company, to:
NeighborCare, Inc.
Third Floor
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chairman and Chief Executive Officer
with a copy: Attention: General Counsel
If to the Executive, to:
Xxxxxxx X. Xxxx
00000 Xxxxx'x Xxx
Xxxxxx, XX 00000
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be
amended, modified, supplemented or terminated except in writing signed by both
parties. No action taken by the Company hereunder, including without limitation
any waiver, consent or approval, shall be effective unless approved by a
majority of the Board.
(d) Assignability and Binding Effect. This Agreement
(including the covenants set forth in Section 8) shall inure to the benefit of
and shall be binding upon the Company and its successors (including successors
to all or substantially all of the Company's assets) and permitted assigns and
upon the Executive and the Executive's heirs, executors, legal representatives,
successors and permitted assigns. This Agreement, including but not limited to
the covenants contained in Section 8 above, may
Xxxxxxx X. Xxxx
Employment Agreement
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be assigned or otherwise transferred by the Company to any of its subsidiaries
or other affiliates and by such transferees to its subsidiaries or other
affiliates, provided that, in any assignment or transfer the assignee or
transferee agrees to be bound by the terms and conditions hereof. Upon
assignment or transfer, the "Company" herein shall mean the buyer, assignee or
transferee of this Agreement. This Agreement may not, however, be assigned by
the Executive to a third party, nor may the Executive delegate his duties under
this Agreement.
(e) Severability. If any provision of this Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart hereof.
(g) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(h) References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
(i) Controlling Law. This Agreement is made under, and shall
be governed by, construed and enforced in accordance with, the substantive laws
of the State of Maryland applicable to agreements made and to be performed
entirely therein.
(j) Settlement of Disputes. Except with respect to injunctive
relief under Section 8 or otherwise, the Executive and the Company will attempt
in good faith to resolve any and all controversies, claims, and disputes of
every kind and nature, including both common law and statutory, between the
parties to this Agreement, arising out of or in connection with the Executive's
employment relationship, terms and conditions of employment, or separation of
employment with the Company for whatever reason, (including without limitation,
any such claim, dispute or controversy arising under any federal, state or local
law, statute, regulation or ordinance or arising under the Company's employee
benefit plans, policies or programs), including the existence, construction,
validity, interpretation or meaning, performance, non-performance, enforcement,
operation, breach, continuance, or termination of this Agreement (each, a
"Dispute") promptly by discussions between the parties to this Agreement. If the
Dispute cannot be resolved through such discussions, the Dispute shall be
submitted to arbitration in accordance with the National Rules for the
Resolution of Employment Disputes ("the Rules") of the American Arbitration
Association ("AAA") then in effect, except as otherwise agreed to herein. The
time limitation for submitting a Dispute to arbitration pursuant to this
Agreement is sixty (60) days from the date of the occurrence giving rise to the
Dispute, unless the Dispute is based on statutory rights, in which case the
Xxxxxxx X. Xxxx
Employment Agreement
Page 18 of 19
applicable statute of limitations governs the time period in which a Dispute
must be submitted to arbitration. By submitting a Dispute to arbitration
pursuant to this Agreement, the Executive and the Company acknowledge and agree
to waive their respective rights to seek relief in a judicial forum and before a
jury. The arbitration shall be conducted by a single arbitrator, selected by
alternately striking from a list of five (5) arbitrators supplied by the AAA.
The arbitrator's fees shall be borne by the Company. The Executive and the
Company are separately responsible for their costs, transcript fees, expenses,
witness fees, attorney's fees and other costs associated with the arbitration.
The parties agree that any arbitration conducted pursuant to this section shall
be held in the county in which the Company's corporate headquarters is located
(or at such other location as shall be mutually agreed to by the parties). The
decision of the arbitrator shall be final and binding upon the parties. In
rendering a decision, the arbitrator shall apply all legal principles and
standards that would govern if the Dispute were being brought in a judicial
forum, including all statute of limitations and defenses. Discovery shall be
allowed pursuant to the Rules then in effect as the arbitrator determines
appropriate under the circumstances. The arbitrator may grant injunctions or
provide other relief available in a court of law or equity. Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or the Executive pursues any claim, dispute or controversy against
the other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action. Nothing herein shall preclude the Company from seeking, in any
court of competent jurisdiction in Pennsylvania, damages, specific performance,
or other equitable or legal remedies in the case of any breach or threatened
breach by the Executive of this Agreement. The arbitrator shall be required to
apply the contractual provisions hereof or the Company's policies and procedures
in deciding any matter submitted to him and shall not have any authority, by
reason of this Agreement or otherwise, to render a decision that is contrary to
the mutual intent of the parties as set forth in this Agreement or the Company's
intent as set forth in the Company's policies and procedures. Any of the
parties, before or during the arbitration contemplated by this section, may
apply to a court for a temporary restraining order or preliminary injunction or
similar equitable relief to protect its interests pending completion of such
arbitration proceedings and, in particular, to enforce the provisions of this
section and to aid the arbitration contemplated thereby.
(k) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board.
(l) Indulgences, Etc. Neither the failure nor delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall the single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or
Xxxxxxx X. Xxxx
Employment Agreement
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privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
(m) Legal Expenses. In the event that the Executive
institutes any legal action to enforce the Executive's rights under, or to
recover damages for breach of this Agreement, the Executive, if the Executive is
the prevailing party, shall be entitled to recover from the Company any
reasonable expenses for attorney's fees and disbursements incurred by the
Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above mentioned, under seal, intending to be legally
bound hereby.
COMPANY:
By: /s/Xxxx X. Xxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxx
-------------------------
Title: Chairman, President and
Chief Executive Officer
-------------------------
Witness: EXECUTIVE
/s/ Xxxxxxx X. Xxxx
/s/Xxxx X. Xxxxxxx, Xx. Name: Xxxxxxx X. Xxxx
------------------------ -------------------------
Title: Senior Vice President
and Chief Financial
Officer
-------------------------
