EMPLOYMENT AGREEMENT
Employment Agreement dated as of February 12, 1998 between Xxxxxx X.
Xxxxxx (the "Executive") and Paragon Health Network, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Company desires to employ the Executive as a Senior Vice
President and Chief Information Officer, and the Executive desires to accept
such employment, for the term and upon the other conditions hereinafter set
forth; and
WHEREAS, as a condition of entering into this Agreement, the Executive
agrees to waive the Executive's rights, if any, against the Company and any
predecessor company (including GranCare, Inc.) under (i) any employment
agreement and (ii) any other plan, arrangement or agreement of any kind that
provides any form of severance payments; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions of the employment relationship of the Executive with the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Employment The Company hereby employs the Executive, and the Executive
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hereby accepts employment with the Company, upon the terms and subject to the
conditions set forth herein.
2. Term This Agreement shall commence on the date hereof (the "Effective
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Date") and continue for the two-year period (the "Term") terminating on the
second anniversary of the Effective Date, or upon the Executive's earlier death,
disability or other termination of employment pursuant to Section 11; provided,
however, that commencing on the second anniversary of the Effective Date and on
each anniversary thereafter, the Term shall automatically be extended for one
additional year unless, not later than 90 days prior to any such anniversary,
either party hereto shall have notified the other party hereto in writing that
such extension shall not take effect.
3. Position. During the Term, the Executive shall serve as Senior Vice
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President and Chief Information Officer of the Company or in such other
executive position in the Company as the Executive shall approve.
4. Duties and Reporting Relationship. During the Term, the Executive
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shall, on a full time basis, use his skills and render services to the best of
his abilities in supervising and conducting the operations of the Company and
shall not engage in any other business activities except with the prior written
approval of the Board of Directors of the Company (the "Board") or its duly
authorized designee. The Executive shall also perform such other executive and
administrative duties (not inconsistent with the position of Senior Vice
President and Chief Information Officer) as the Executive may reasonably be
expected to be capable of performing on behalf of the Company, as may from time
to time be authorized or directed by the Board. The
Executive agrees to be employed by the Company in all such capacities for the
Term, subject to all the covenants and conditions hereinafter set forth.
5. Place of Performance. The Executive shall perform his duties and
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conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business.
6. Salary and Annual Bonus.
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(a) Base Salary. The Executive's base salary hereunder shall be
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$270,000.00 a year, payable monthly and prorated for any partial
year of employment. The Board shall review such base salary at
least annually and make such adjustment from time to time as it
may deem advisable, but the base salary shall not at any time be
less than $270,000.00 a year.
(b) Annual Bonus. The Company shall provide the Executive with an
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opportunity to earn upon achievement of target performance, an
annual bonus equal to fifty percent (50%) of his base salary (the
"Target Bonus"), with a minimum bonus of between fifty percent
(50%) of Target Bonus upon achievement of threshold performance
and an opportunity to earn up to one hundred fifty percent (150%)
of the Target Bonus for performance in excess of the targets.
7. Vacation, Holidays and Sick Leave. During the Term, the Executive
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shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior vice presidents.
8. Business Expenses. The Executive shall be reimbursed for all ordinary
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and necessary business expenses incurred by him in connection with his
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's normal procedures.
9. Pension and Welfare Benefits. During the Term, the Executive shall be
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eligible to participate fully in all health benefits, insurance programs,
pension and retirement plans and other employee benefit and compensation
arrangements available to vice presidents of the Company generally.
10. Stock Options The Company, pursuant to the terms of its stock option
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plan, may grant to the Executive, stock options to purchase a number of shares
of common stock.
11. Termination of Employment.
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(a) General. The Executive's employment hereunder may be terminated
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without any breach of this Agreement only under the following
circumstances.
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(b) Death or Disability.
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(i) The Executive's employment hereunder shall automatically
terminate upon the death of the Executive.
(ii) If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is unable to
perform the essential functions of his job for any one
hundred eighty (180) days (whether or not consecutive)
during any eighteen (18) month period, and no reasonable
accommodation can be made that will allow Executive to
perform his essential functions, the Company may terminate
the Executive's employment hereunder for any such incapacity
(a "Disability").
(c) Termination by the Company. The Company may terminate the
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Executive's employment hereunder at any time, whether or not for
Cause. For purposes of this Agreement, "Cause" shall mean (i)
the failure or refusal by the Executive to perform his duties
hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness), which
has not ceased within ten (10) days after a written demand for
substantial performance is delivered to the Executive by the
Company, which demand identifies the manner in which the Company
believes that the Executive has not performed such duties, (ii)
the engaging by the Executive in willful misconduct or an act of
moral turpitude which is materially injurious to the Company,
monetarily or otherwise (including, but not limited to, conduct
which violates Section 15 hereof) or (iii) the conviction of the
Executive of, or the entering of a plea of nolo contendere by,
the Executive with respect to, a felony.
(d) Termination by the Executive. The Executive shall be entitled to
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terminate his employment hereunder (A) for Good Reason, (B) if
his health should become impaired to an extent that makes his
continued performance of his duties hereunder hazardous to his
physical or mental health, provided that the Executive shall
have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at
the Company's request, the Executive shall submit to an
examination by a doctor selected by the Company and such doctor
shall have concurred in the conclusion of the Executive's doctor
or (C) without the Executive's express written consent, any
failure by the Company to comply with any material provision of
this Agreement, which failure has not been cured within ten (10)
days after notice of such noncompliance has been given by the
Executive to the Company. For purposes of this Agreement, "Good
Reason" shall mean the occurrence following a Change in Control
during the term of this Agreement, of any one of the following
acts by the Company, or failures by the Company to act, unless,
in the case of any act or failure to act described below, such
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act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in
respect thereof:
(i) any material diminution in the Executive's authorities or
responsibilities (including reporting responsibilities)
which were in effect immediately prior to the Change in
Control or from his status, title, position or
responsibilities (including reporting responsibilities)
which were in effect following a Change in Control pursuant
to the Executive's consent to accept any such change; the
assignment to him of any duties or work responsibilities
which are inconsistent with such status, title, position or
work responsibilities; or any removal of the Executive
from, or failure to reappoint or reelect him to any of such
positions, except if any such changes are because of
Disability, retirement, death or Cause;
(ii) a reduction by the Company in the Executive's base salary
or Target Bonus as in effect on the date hereof or as the
same may be increased from time to time except for across-
the-board salary reductions similarly affecting all senior
executives of the Company and all senior executives of any
Person (as defined in Section 11(h)(i) below) in control of
the Company provided in no event shall any such reduction
reduce the Executive's base salary below $270,000.00;
(iii) the relocation of the Executive's office at which he is to
perform his duties, to a location more than fifty (50)
miles from the location at which the Executive performed
his duties prior to the Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with his business travel
obligations prior to the Change in Control;
(iv) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the
Executive's current compensation;
(v) the failure by the Company to continue to provide the
Executive with benefits substantially similar in value to
the Executive in the aggregate to those enjoyed by the
Executive under any of the Company's pension, life
insurance, medical, health and accident, or disability
plans in which the Executive was participating immediately
prior to the Change in Control, unless the Executive
participates after the Change in Control in other
comparable benefit plans generally available to senior
executives of the Company and senior executives of any
Person in control of the Company;
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(vi) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 11(f) below; for
purposes of this Agreement, no such purported termination
shall be effective.
The Executive's continued employment for 6 months following any act or failure
to act constituting Good Reason hereunder without the delivery of a Notice of
Termination shall constitute consent to, and a waiver of rights with respect to,
such act or failure to act.
(e) Voluntary Resignation. Should the Executive wish to resign from
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his position with the Company or terminate his employment for
other than Good Reason during the Term, the Executive shall give
sixty (60) days written notice to the Company ("Notice Period"),
setting forth the reasons and specifying the date as of which
his resignation is to become effective. During the Notice
Period, the Executive shall cooperate fully with the Company in
achieving a smooth transition of the Executive's duties and
responsibilities to such person(s) as may be designated by the
Company. The Company reserves the right to accelerate the Date
of Termination by giving the Executive notice and payment of
amounts due to the Executive under Section 6(a) and, to the
extent applicable, Section 6(b) for the balance of the Notice
Period. The Company's obligation to continue to employ the
Executive or to continue payment of the amounts described in the
preceding sentence shall cease immediately if: (1) the Executive
has not satisfied his obligations to cooperate fully with a
smooth transition or (2) the Company has grounds to terminate
the Executive's employment immediately for Cause.
(f) Notice of Termination. Any purported termination of the
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Executive's employment by the Company or by the Executive shall
be communicated by written Notice of Termination to the other
party hereto in accordance with Section 19. "Notice of
Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and
shall set 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 the
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Executive's employment is terminated because of death, the date
of the Executive's death, (ii) if the Executive's employment is
terminated for Disability, the date Notice of Termination is
given, (iii) if the Executive's employment is terminated
pursuant to Subsection (c), (d) or (e) hereof or for any other
reason (other than death or Disability), the date specified in
the Notice of Termination which shall not be less than sixty
(60) days from the date such Notice of Termination is given.
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(h) Change in Control. For purposes of this Agreement, a Change in
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Control of the Company shall have occurred if
(i) any "Person" (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") as
modified and used in Sections 13(d) and 14(d) of the
Exchange Act (other than (1) the Company or any of its
subsidiaries, (2) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any of its subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of such
securities, (4) any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
the Company's common stock or (5) Apollo Management, LP,
any of its affiliates and any investments funds managed by
it (collectively, "Apollo"), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of
the Company's then outstanding voting securities;
(ii) during any period of not more than two (2) consecutive
years, not including any period prior to the date of this
Agreement, individuals who at the beginning of such period
constitute the Board, and any new director (other than a
director designated by a person (other than Apollo) who has
entered into an agreement with the Company to effect a
transaction described in clause (i), (iii), or (iv) of this
Section 1l(h)) whose election by the Board or nomination
for election by the Company's stockholders was (A) made
pursuant to the Stockholders Agreement affecting the
Company dated November 4, 1997 or (B) approved by a vote of
at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute
at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than both (A) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more
of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a
merger or consolidation in which no person acquires 50% or
more of the combined voting power of the Company's then
outstanding securities; or
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(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of
the Company's assets (or any transaction having a similar
effect) other than such a sale or disposition to Apollo.
(i) Return of Property. When the Executive ceases to be employed by
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the Company, the Executive will promptly surrender to the
Company all Company property, including without limitation, all
records and other documents obtained by him or entrusted to him
during the course of his employment with the Company provided,
however, that the Executive may retain copies of such documents
as necessary for the Executive's personal records for federal
income tax purposes.
12. Compensation During Disability; Death or Upon Termination.
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(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to
receive his base salary at the rate then in effect for such
period until his employment is terminated pursuant to Section
1l(b)(ii) hereof, provided that payments so made to the
Executive during the Disability Period shall be reduced by the
sum of the amounts, if any, payable to the Executive with
respect to such period under disability benefit plans of the
Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce
any such payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any base salary due to the
Executive under Section 6(a) through the date of such
termination and (ii) an amount equal to the Target Bonus he
would have received for the fiscal year that ends on or
immediately after the Date of Termination, assuming the Company
achieved the lowest target level for which a bonus is paid under
the plan described in Section 6(b), prorated for the period
beginning on the first day of the fiscal year in which occurs
the Date of Termination through the Date of Termination. In
addition, if the Executive's employment is terminated by his
death, the Company shall continue to pay to his estate his
salary for an additional six months at the rate then in effect.
(c) If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the
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Company shall pay the Executive his base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, and the Company shall have no further
obligations to the Executive under this Agreement.
(d) If following a Change in Control (A) the Company terminates the
Executive's employment without Cause, or (B) the Executive
terminates his employment for Good Reason, then
(i) the Company shall pay the Executive his base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given and all other
unpaid amounts, if any, to which the Executive is entitled
as of the Date of Termination under any compensation plan
or program of the Company, at the time such payments are
due;
(ii) in lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination, the
Company shall pay as liquidated damages to the Executive
an aggregate amount equal to the product of (A) the sum of
(1) the Executive's base salary at the rate in effect of
the Date of Termination and (2) the average of the annual
bonuses actually paid to the Executive by the Company with
respect to the two (2) fiscal years which immediately
precede the year of the Term which the Date of Termination
occurs provided if there was bonus or bonuses paid to the
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Executive with respect only to one fiscal year that
immediately precedes the year within the Term in which the
Date of Termination occurs, then such single year's bonus
or bonuses shall be utilized in the calculation pursuant
to this clause (2), provided, further, that for purposes
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of this Agreement, if the Date of Termination occurs
before the end of the first fiscal year that ends after
the Effective Date, the amount of the bonus paid by the
Company to the Executive shall be deemed to be the Target
Bonus and (B) the number two (2);
(iii) the Company shall pay the Executive an amount equal to the
prorated Target Bonus that would have been paid for the
period beginning on the first day of the fiscal year in
which the Date of Termination occurs;
(iv) the Company shall continue coverage for the Executive, on
the same terms and conditions as would be applicable if
the Executive were an active Employee, under the Company's
life insurance, medical, health and similar welfare
benefit plans (other then group disability benefits) for a
period of twenty-four (24) months. Benefits otherwise
receivable by the Executive pursuant to this Section
12(d)(iv) shall be reduced to the extent comparable
benefits are actually received by the Executive from a
subsequent employer during the period during which the
Company is required to provide such benefits, and the
Executive shall report any such benefits actually received
by him to the Company; and
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(v) the payments provided for in this Section 12(d) (other
than Section 12(d)(iv)) shall be made not later than the
thirtieth (30th) day following the Date of Termination,
provided, however, that if the amounts of such payments,
and the limitation on such payments set forth in Section
16 hereof, cannot be finally determined on or before such
day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive
is clearly entitled and shall pay the remainder of such
payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code (as defined in Section
16)) as soon as the amount thereof can be determined but
in no event later than the sixtieth (60th) day after the
Date of Termination. In the event that the amount of the
estimated payments exceeds the amount determined by the
Company within six (6) months after payment to have been
due, such excess shall constitute a loan by the Company to
the Executive, payable no later than the thirtieth (30th)
business day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this
Section 12(d), the Company shall provide the Executive
with a written statement setting forth the manner in which
such payments were calculated and the basis for such
calculations including, without limitation, any opinions
or other advice the Company has received from outside
counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the
statement).
(vi) If the Executive continues to be employed by the Company
for one (1) year after a Change of Control and has not by
such time given Notice of Termination for Good Reason, the
Executive will have waived his right to exercise his
rights under Section 12(d) hereof with respect to any act
or failure to act which constitutes Good Reason.
(e) If the Executive terminates his employment under clause (C) of
Section 11(d) hereof or, prior to any Change of Control, the
Company terminates the Executive's employment without Cause,
then
(i) the Company shall pay the Executive his base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given and all other
unpaid amounts, if any, to which the Executive is entitled
as of the Date of
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Termination under any compensation plan or program of the
Company, at the time such payments are due;
(ii) the Company shall pay to the Executive the greater of
either (A) the remaining amount of base salary owed for the
Term; or (B) an aggregate amount equal to the sum of (1)
nine (9) months of the Executive's base salary at the rate
in effect as of the Date of Termination plus (2) one (1)
additional month of the Executive's base salary at such
rate for each full year of service beyond the first
anniversary of this Agreement, not to exceed eighteen (18)
months of base salary payments; such amount to be paid in
substantially equal monthly installments during the period
commencing with the month immediately following the month
in which the Date of Termination occurs or in a lump sum
payment, as decided by the Company;
(iii) the Company shall pay the Executive his Target Bonus
prorated for the period beginning on the first day of the
fiscal year in which occurs the Date of Termination through
the Date of Termination;
(iv) the Company shall continue coverage for the Executive, on
the same terms and conditions as would be applicable if the
Executive were an active employee, under the Company's life
insurance, medical, health, and similar welfare benefit
plans (other then group disability) for a period not to
exceed the number of months the Executive will be paid
under Section 12(e)(ii) beginning on the Date of
Termination;
(v) benefits otherwise receivable by the Executive pursuant to
clause (iv) of this Section 12(e) shall be reduced to the
extent comparable benefits are actually received by the
Executive from a subsequent employer during the period
which the Company is required to provide such benefits, and
the Executive shall report any such benefits actually
received by him to the Company;
(vi) the payments made to the Executive under Section 12(e)
hereof will be reduced by the amount of payments provided
for by any subsequent employer of the executive for a
position obtained after the Date of Termination.
(f) If the Executive experiences a termination under Section 12(d)
or 12(e) hereof, until the Executive finds another full-time
position or for 6 months, whichever is earlier, the Company
shall provide the Executive with professional outplacement
services of the Executive's choosing and shall reimburse the
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Executive documented incidental outplacement expenses directly
related to the Executive's job search such as resume mailing,
interview trips, and clerical support, subject to a maximum cost
of $10,000 for such outplacement services and incidental
expenses. The Executive's choice of professional outplacement
services is subject to the Company's reasonable prior approval.
If the Company has not approved or disapproved of the
Executive's choice within ten (10) business days of receiving
notice of such choice, the Company will be deemed to have given
is approval. Any approval by the Company will be in writing and
will state the basis for such disapproval. The Executive will
not be entitled to receive cash or lieu of the professional
outplacement services provided pursuant to this Section.
(g) If the Executive shall terminate his employment under clause (B)
of Sections 11(d) or 11(e) hereof, the Company shall pay the
Executive his base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given, and
the Company shall have no further obligations to the Executive
under this Agreement.
(h) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 12 by seeking other
employment or otherwise, and, except as provided in Sections
12(e) hereof, the amount of any payment or benefit provided for
in this Section 12 shall not be reduced by any compensation
earned by the Executive as the result of employment by another
employer or by retirement benefits.
(i) Release. Prior to making any payment pursuant to Sections
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12(d)(iii) and 12(d)(iv) or Sections 12(e)(ii) and 12(e)(iii),
whichever is applicable, the Company shall have the right to
require the Executive to sign, and the Executive hereby agrees
to sign, an agreement to be bound by the terms of Section 15 of
this Agreement and a waiver of all claims the Executive
may have (including any claims under the Age Discrimination in
Employment Act), and the Company may withhold payment of such
amount until the period during which the Executive may revoke
such waiver (normally seven days) has elapsed.
13. Representations and Covenants.
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(a) The Company represents and warrants that this Agreement has been
authorized by all necessary corporate action of the Company and
is a valid and binding agreement of the Company enforceable
against it in accordance with its terms.
(b) The Executive represents and warrants that he is not a party to
any agreement or instrument which would prevent him from
entering into or performing his duties in any way under this
Agreement. The Executive agrees and covenants that he will
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obtain, and submit to, such physical examinations as may be
necessary to facilitate the Company obtaining an insurance
policy for its benefit insuring the life of the Executive.
14. Successors: Binding Agreement.
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(a) The Company will 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 to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold,
transferred, assigned, pledged, encumbered, or hypothecated by
him, except as otherwise expressly permitted by the provisions
of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die
while any amount would still be payable to him hereunder had the
Executive continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or other designee or, if
there is no such designee, to his estate.
15. Confidentiality and Non-Competition Covenants.
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(a) The Executive covenants and agrees that he will not at any time
during or at any time after the end of the Term, directly or
indirectly, use for his own account, or disclose to any person,
firm or corporation, other than authorized officers, directors
and employees of the Company or its subsidiaries, Confidential
Information (as hereinafter defined) that is treated as trade
secrets by the Company and will not at any time during or for a
period equal to the number of payments which are being made
under Section 12(e) hereof directly or indirectly, use for his
own account, or disclose to any person, firm or corporation,
other than authorized officers, directors and employees of the
Company or its subsidiaries, any other Confidential Information.
As used herein, "Confidential Information" of the Company means
information of any kind, nature or description which is
disclosed to or otherwise known to the Executive as a direct or
indirect consequence of his association with the Company, which
information is not generally known to the public or in the
business in which the Company is engaged or which information
relates to specific investment opportunities within the scope of
the Company's business which were considered by the Executive or
the Company during the term of this Agreement. Confidential
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Information that is treated as confidential trade secrets by the
Company shall include, but not be limited to, strategic
operating plans and budgets, policy and procedure manuals,
computer programs, financial forms and information, patient or
resident lists and accounts, supplier information, accounting
forms and procedures, personnel policies, information pertaining
to the salaries, positions and performance reviews of the
Company's employees, information on the methods of the Company's
operations, research and data developed by or for the benefit of
the Company and information relating to revenues, costs, profits
and the financial condition of the Company. During the Term and
for a period of two years following the termination of the
Executive's employment, the Executive shall not induce any
employee of the Company or its subsidiaries to terminate his or
her employment by the Company or its subsidiaries in order to
obtain employment by any person, firm or corporation affiliated
with the Executive.
(b) The Executive covenants and agrees that any information,
materials, ideas, discoveries, techniques or programs developed
or discovered by the Executive in connection with the
performance of his duties hereunder shall remain the sole and
exclusive property of the Company and, to the extent it
constitutes Confidential Information, shall be subject to the
covenants contained in the preceding paragraph.
(c) The Executive covenants and agrees that during the Term and, if
the Executive's employment is terminated by the Executive for
other than Good Reason, for a period of two (2) years following
the termination of the Executive's employment, the Executive
shall not, directly or indirectly, own an interest in, operate,
join, control, or participate as a partner, director, principal,
officer, or agent of, enter into the employment of, or act as a
consultant to, in any case in which he has control or
supervision over a significant portion of any entity (i) whose
principal business is the operation of one or more skilled
nursing facilities or (ii) which operates a skilled nursing
business that is material in relation to the Company's
comparable business and (iii) in either case, which derives at
least 10% of its skilled nursing facility revenue from
facilities which are located within 35 miles of centers or
facilities operated by the Company. Notwithstanding anything
herein to the contrary, the foregoing provisions of this Section
15(c) shall not prevent the Executive from acquiring securities
representing not more than 5% of the outstanding voting
securities of any publicly held corporation.
(d) Without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the
Executive of the covenants contained in this Section 15, it is
expressly agreed by the Executive and the Company that such
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other remedies cannot fully compensate the Company for any such
violation and that the Company shall be entitled to injunctive
relief, without the necessity of proving actual monetary loss,
to prevent any such violation or any continuing violation
thereof. Each party intends and agrees that if in any action
before any court or agency legally empowered to enforce the
covenants contained in this Section 15, any term, restriction,
covenant or promise contained herein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency. The
covenants contained in Section 15 shall survive the conclusion
of the Executive's employment by the Company.
16. Prohibition on Parachute Payments.
---------------------------------
(a) Notwithstanding any other provisions of this Agreement, any
payment or benefit received or to be received by the Executive
in connection with a Change in Control of the Company or the
termination of the Executive's employment (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) (all such payments and benefits, including, without
limitation, base salary and bonus payments, being hereinafter
called "Total Payments") would not be deductible (in whole or in
part), by the Company, an affiliate or any Person making such
payment or providing such benefit as a result of section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"),
then, to the extent necessary to make such portion of the Total
Payments deductible (and after taking into account any reduction
in the Total Payments provided by reason of section 280G of the
Code in such other plan, arrangement or agreement), (A) such
cash payments shall first be reduced (if necessary, to zero),
and (B) all other non-cash payments by the Company to the
Executive shall next be reduced (if necessary, to zero). For
purposes of this limitation (i) no portion of the Total Payments
the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the Date of Termination
shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which in the opinion of tax
counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of
the Code, including by reason of section 280G(b)(4)(A) of the
Code, (iii) such payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred
to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within
the meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the
opinion of the tax counsel referred to in clause (ii); and (iv)
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the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by
the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(b) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Company
in applying the terms of this Section 16, the aggregate
"parachute payments" paid to or for the Executive's benefit are
in an amount that would result in any portion of such "parachute
payments" not being deductible by reason of section 280G of the
Code, then the Executive shall have an obligation to pay the
Company upon demand an amount equal to the sum of (i) the excess
of the aggregate "parachute payments" paid to or for the
Executive's benefit over the aggregate "parachute payments" that
could have been paid to or for the Executive's benefit without
any portion of such "parachute payments" not being deductible by
reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate
provided in section 1274(b)(2)(B) of the Code from the date of
the Executive's receipt of such excess until the date of such
payment.
17. Entire Agreement. This Agreement contains all the understandings
----------------
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether oral
or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and has
not relied upon any representation or statement not set forth herein made by the
Company with regard to the subject matter, bases or effect of this Agreement or
otherwise.
18. Amendment or Modification. Waiver. No provision of this Agreement may
---------------------------------
be amended or waived unless such amendment or waiver is agreed to in writing,
signed by the Executive and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
19. Notices. Any notice to be given hereunder shall be in writing and
-------
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: Xxxxxx X. Xxxxxx
0000 Xxx Xxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
To the Company at: Paragon Health Network, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
00
Xxxxxxx, Xxxxxxx 00000
Any notice delivered personally or by courier under this Section 19
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
20. Severability. If any provision of this Agreement or the application of
------------
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
21. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
22. Governing Law: Attorney's Fees.
------------------------------
(a) This Agreement will be governed by and construed in accordance
with the laws of the State of Georgia, without regard to its
conflicts of laws principles.
(b) The prevailing party in any dispute arising out of this
Agreement shall be entitled to be paid its reasonable attorney's
fees incurred in connection with such dispute from the other
party to such dispute.
23. Dispute Resolution. The Executive and the Company shall not initiate
------------------
legal proceedings relating in any way to this Agreement or to the Executive's
employment or termination from employment with the Company until thirty (30)
days after the party against whom the claim is made ("respondent") receives
written notice from the claiming party of the specific nature of any purported
claims and the amount of any purported damages attributable to each such claim.
The Executive and the Company further agree that if respondent submits the
claiming party's claim to the CPR Institute for Dispute Resolution,
JAMS/Endispute, or other local dispute resolution service for nonbinding
mediation prior to the expiration of such thirty (30) day period, the claiming
party may not institute arbitration or other legal proceedings against
respondent until the earlier of: (a) the completion of good-faith mediation
efforts or (b) 90 days after the date on which the respondent received written
notice of the claimant's claim(s); provided, however, that nothing in this
Section 23 shall prohibit the Company from pursuing injunctive or other
equitable relief against the Executive prior to, contemporaneous with, or
subsequent to invoking or participating in these dispute resolution processes.
The Company shall pay the cost of the mediator.
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24. Headings. All descriptive headings of sections and paragraphs in this
--------
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Withholdings. All payments to the Executive under this Agreement
------------
shall be reduced by all applicable withholding required by federal, state or
local tax laws.
26. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PARAGON HEALTH NETWORK, INC.
BY: /s/ Xxxxx Xxxxxx Xxxxxxx
--------------------------------------
NAME: Xxxxx Xxxxxx Xxxxxxx
--------------------------------------
TITLE: Senior Vice President and General Counsel
------------------------------------------
EXECUTIVE
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
17
