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Exhibit 10.21
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement dated as of October 20,
1997 (the "AGREEMENT") by and between Mariner Health Group, Inc., a Delaware
corporation (the "COMPANY"), and Xxxxxx X. Xxxxxxxx, Xx., M.D.
(the "EXECUTIVE"):
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has made
and is expected to continue to make major contributions to the profitability,
growth and financial strength of the Company;
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, to render services
to the Company on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Company and the Executive previously entered into an
Employment Agreement dated as of January 1, 1995, and now desire to amend and
restate such Employment Agreement on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of these premises and of the covenants
and agreements set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT. The Company shall continue to employ the Executive, and the
Executive agrees to continue to serve the Company, as its Chief Executive
Officer upon the terms and conditions set forth in this Agreement.
2. TERM. Unless earlier terminated in accordance with this Agreement, the
term of the Executive's employment under this Agreement (the "TERM") shall
commence on the date hereof and shall expire on December 31, 2002; PROVIDED,
HOWEVER, that upon expiration of such term, this Agreement shall be extended
from year to year without further action on the part of the parties hereto,
unless either party hereto gives written notice of termination to the other
party at least 90 days prior to the expiration of the then current term.
3. DUTIES AND RESPONSIBILITIES. (a) During the Term, the Executive shall
serve as the Chief Executive Officer of the Company. In the performance of his
responsibilities as the Chief Executive Officer, the Executive shall be subject
to all of the Company's policies, rules and regulations applicable to its
executives of comparable status and shall report directly to, and shall be
subject to the direction and control of, the Board of Directors of the Company
(the "BOARD"), and shall perform such duties as shall be assigned to him by the
Board. In performing such duties, the Executive will be subject to and will
substantially abide by, and will use reasonable efforts to cause employees of
the Company to be subject to and substantially abide by, all policies and
procedures developed by the Company. Each year when the Company's budget for the
following fiscal year is presented to the Board, the Executive shall also
present to the Board a written description, in reasonable detail, of the goals
the Executive then intends to accomplish during the following fiscal year.
(b) During the Term, the Executive shall devote all of his
business time, energies, skills and attention to the affairs and activities of
the Company and any corporation, partnership or other entity
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controlled by the Company (each, a "SUBSIDIARY"). The Executive shall provide
these services to the Company and its Subsidiaries described in this Agreement
in a professional and diligent manner and in a manner consistent with the
highest standards of performance in the health care field. During the Term, the
Executive shall not devote any of his business time, energies, skills or
attention to the affairs or activities of any other business or organization,
without the prior approval of the Board (which approval shall not be
unreasonably withheld).
(c) To induce the Company to enter into this Agreement, the
Executive represents and warrants to the Company that: (i) the Executive is not
a party or subject to any employment agreement or arrangement with any other
person, firm, company, corporation or other business entity and the Executive is
subject to no restraint, limitation or restriction by virtue of any agreement or
arrangement, or by virtue of any law or rule of law or otherwise which would
impair the Executive's right or ability (A) to enter the employ of the Company,
or (B) to perform fully his duties and obligations pursuant to this Agreement,
and (ii) to the Executive's knowledge, no material litigation is pending or
threatened against any business or business entity owned or controlled or
formerly owned or controlled by the Executive.
4. COMPENSATION. (a) For all services rendered by the Executive under this
Agreement, the Company shall pay or cause to be paid to the Executive, and the
Executive shall accept, the Base Salary and Bonus, if any (as such terms are
hereinafter defined in this Section 4), all in accordance with and subject to
the terms of this Agreement. For the purposes of this Agreement, the term
"COMPENSATION" shall mean the Base Salary and Bonus, if any. The Executive shall
have the right to elect to defer in accordance with applicable Internal Revenue
Service requirements for a reasonable time the Compensation payable to him, such
deferral to be evidenced by appropriate documentation at the time of such
deferral. In addition, to the Base Salary and Bonus, the Executive shall be
entitled to receive such other bonuses, options and other remuneration as the
Board may from time to time approve, in its sole discretion.
(b) During the Term, the Company shall pay the Executive a base
salary (the "BASE SALARY") at an annual rate of $750,000 from the date of this
Agreement through December 31, 1997 and $850,000 thereafter. The Executive's
Base Salary shall be reviewed at least annually by the Compensation Committee of
the Board (the "COMPENSATION COMMITTEE") and may be increased (but not
decreased) by the Compensation Committee in its sole discretion. The Base Salary
shall be payable in installments in accordance with the Company's regular
practices, as such practices may be modified from time to time, but in no event
less often than monthly.
(c) During the Term, the Executive shall be eligible to earn an
annual performance bonus (the "BONUS") of up to 100% of his Base Salary if the
Company meets the performance objectives established by the Compensation
Committee for purposes of this Agreement for the applicable period during the
Term. The Bonus shall be reviewed at least annually by the Compensation
Committee and shall be payable as determined by the Compensation Committee in
its sole discretion.
(d) The Executive shall be entitled to reasonable periods of paid
vacation, personal and sick leave during the Term in accordance with the
Company's policies regarding such vacation and leaves; PROVIDED, HOWEVER, that
in no event shall the Executive be entitled to less than four weeks of vacation
per year. The Executive shall be entitled to carry over or be compensated for
accrued but unused vacation from any year in accordance with the Company's
regular practices, as such practices may be modified from time to time;
PROVIDED, HOWEVER, that the Executive shall be entitled to carry over up to two
weeks of accrued but unused vacation from one year to the next.
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(e) The Executive is authorized to incur reasonable expenses in
the performance of his duties hereunder during the Term. The Company shall
reimburse the Executive for all such expenses upon the presentation by the
Executive, not less frequently than monthly, of signed, itemized accounts of
such expenditures and vouchers, all in accordance with the Company's procedures
and policies as adopted and in effect from time to time and applicable to its
executives of comparable status.
(f) The Executive shall be eligible to participate in qualified
retirement, deferred compensation, group medical, accident, disability and
health benefit plans of the Company as may be provided by the Company from time
to time to Company executives of comparable status, subject to, and to the
extent that, the Executive is eligible under such benefit plans in accordance
with their respective terms; PROVIDED, HOWEVER, that the Company shall continue
to provide the coverage for the Executive and his dependents under its group
medical and health benefit plans or arrangements (which shall be of the type and
at a level of coverage at least as beneficial to the Executive and his
dependents as the coverage in effect on the date hereof). The Company shall pay
the expenses associated with the Executive's participation in such benefit plans
to the same extent the Company pays the expenses associated with participation
by other employees; PROVIDED, HOWEVER, that the Company shall reimburse the
Executive for all out-of-pocket costs incurred and paid by the Executive
relating to the health care of the Executive and his dependents that are not
covered by the Company's health benefit plans or arrangements. In addition, the
Executive shall be entitled to use the Company's airplane in accordance with the
Company's policies regarding use of such airplane by the Company's employees.
(g) During the Term, the Company shall maintain (i) life insurance
on the life of the Executive with death benefits in the amount of $2,000,000,
which shall be payable in accordance with the Executive's written instructions,
and (ii) disability insurance with disability benefits payable to the Executive
in the amount of 70% of the average Compensation that the Executive received
over the three years immediately preceding his disability. During the Term, the
Company shall pay the reasonable fees and expenses for the Executive's
participation in an appropriate flight safety training program.
(h) During the Term, the Company shall, at the Company's expense,
provide the Executive with a suitable automobile, which automobile shall be
consistent with the automobile the Company currently leases for the Executive to
use.
(i) The Company has previously granted to the Executive options to
purchase an aggregate of 600,000 shares of Common Stock, of which options to
purchase 300,000 shares were granted in each of 1995 and 1996 (collectively, the
"OPTIONS"). Each of the Options was granted pursuant to a stock plan maintained
by the Company in compliance with Rule 16b-3 under the Securities Exchange Act
of 1934. The Options have a ten-year term and become exercisable in such
installments as the Compensation Committee specified. Each of the Options is
intended to qualify as an "incentive stock option" under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "CODE"), to the maximum extent
eligible under the Company's stock plans and applicable law.
(j) During the Term, the Company shall pay the reasonable fees and
expenses of an accountant acceptable to the Company to prepare the Executive's
federal and state tax returns.
5. TERMINATION. (a) During the Term (regardless of whether or not the
Company experiences a Change in Control (as defined below)), the Company may
terminate the employment of the Executive for "Cause." For purposes of this
Agreement, "CAUSE" means: (a) the Executive's conviction of any crime (whether
or not involving the Company) which constitutes a felony in the jurisdiction
involved (other
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than unintentional motor vehicle felonies); (b) any intentional act of theft,
fraud or embezzlement by the Executive in connection with his work with the
Company; (c) the Executive's continuing, repeated and willful failure or refusal
to perform his duties and services under this Agreement (other than due to his
incapacity due to illness or injury), provided that such failure or refusal
continues uncorrected for a period of 30 days after the Executive shall have
received written notice from the Board stating with specificity the nature of
such failure or refusal; or (d) the Executive's violation of Section 7.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire Board at a meeting of the Board called and held for (but
not necessarily exclusively for) that purpose (after reasonable notice to
Executive and an opportunity for Executive, together with counsel of his choice,
to be heard by the Board) finding that Executive has, in the good faith opinion
of the Board, engaged in conduct constituting Cause and specifying the
particulars thereof in reasonable detail.
(b)(i) During the Term (regardless of whether or not the Company
experiences a Change in Control), the Company may terminate the Executive's
employment at any time without Cause. For purposes of this Agreement, if the
Company gives written notice of termination to the Executive at least 90 days
prior to the expiration of the then current Term, such action shall be
considered termination of the Executive's employment without Cause pursuant to
this Section 5(b)(i).
(ii) The Company may terminate the Executive's employment
following a determination by the Board that the Executive has a Permanent
Disability (as hereinafter defined); PROVIDED, HOWEVER, that no such termination
shall be effective (A) prior to the expiration of the 180-day period following
the date the Executive first incurred the condition which is the basis for the
Permanent Disability or (B) if the Executive begins to substantially perform the
significant aspects of his regular duties prior to the proposed effective date
of such termination. For purposes of this Agreement, "PERMANENT DISABILITY"
shall mean the Executive's inability, by reason of any physical or mental
impairment, to substantially perform the significant aspects of his regular
duties, as contemplated by this Agreement, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence and at
least 90 days from the date of such determination. Any question as to the
existence, extent, or potentiality of the Executive's Permanent Disability shall
be determined by a qualified independent physician selected by the Executive
(or, if the Executive is unable to make such selection, by an adult member of
the Executive's immediate family) and reasonably acceptable to the Board.
(c) The Executive may voluntarily terminate his employment at any
time by giving the Board at least six months' prior written notice; PROVIDED,
HOWEVER, that, at any time after receiving such written notice, the Board may
terminate the Executive's employment on shorter notice or with no prior notice
(which termination shall not be deemed a termination without Cause under this
Agreement); and PROVIDED FURTHER that if the Executive's termination of his
employment pursuant to the provisions of this Section 5(c) is because of a
breach by the Company of its obligations under Sections 3(a), 4(a), 4(b), 4(c),
4(g), 4(i) or 6 (a "MATERIAL BREACH"), such termination shall be effective upon
receipt of written notice thereof to the Company.
(d) Following a Change in Control of the Company, the Executive
may voluntarily terminate his employment at any time prior to the first
anniversary of such Change in Control for Good Reason (as defined below).
(e)(i) If the Company terminates the Executive's employment
pursuant to the provisions of Section 5(a) (for Cause) at any time (regardless
of whether or not the Company experiences a Change of
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Control), the Executive shall not be entitled to any Compensation or benefits
following the date of such termination, other than Compensation and benefits
required to be paid or provided by law and payment of the Executive's normal
post-termination benefits in accordance with the Company's retirement, insurance
and other benefit plans and arrangements.
(ii) If either (x) the Company terminates the Executive's
employment at any time either prior to a Change in Control or from and after the
first anniversary of a Change in Control pursuant to the provisions of Section
5(b)(i) (without Cause), or (y) the Executive terminates his employment at any
time either prior to a Change in Control or from and after the first anniversary
of a Change in Control pursuant to the provisions of Section 5(c) because of a
Material Breach, (A) the Executive shall receive an aggregate amount equal to
five times the Base Severance Amount (as hereinafter defined), which amount
shall be payable in equal installments over the five-year period following such
termination in the manner in which the Executive's Base Salary is paid at the
time of such termination (collectively, the "SEVERANCE BENEFIT"); and (B) the
Company shall pay the Executive's normal post-termination benefits in accordance
with the Company's retirement, insurance and other benefit plans and
arrangements and as contemplated by this Agreement; PROVIDED, HOWEVER, that the
Company shall continue to provide the coverage for the Executive and his
dependents under its health benefit plans or arrangements (which shall be of the
type and at a level of coverage at least as beneficial to the Executive and his
dependents as the coverage in effect under this Agreement or in effect at the
time of such termination, whichever is more favorable to the Executive and his
dependents) until the fifth anniversary of such termination. The "BASE SEVERANCE
AMOUNT" shall mean an amount equal to (x) the greater of (1) $1,000,000 or (2)
the Base Salary being paid to the Executive immediately prior to such
termination, plus (y) the greater of (1) the Bonus paid to the Executive by the
Company with respect to the most recently completed fiscal year, (2) the
aggregate amount of all Bonuses paid to the Executive by the Company during the
12 months prior to such termination or (3) 100% of the Base Salary being paid to
the Executive immediately prior to such termination.
(iii) If either (x) the Company terminates the Executive's
employment at any time during a period commencing with a Change in Control and
ending one year from such Change in Control pursuant to the provisions of
Section 5(b)(i) (without Cause), or (y) the Executive terminates his employment
at any time during a period commencing with a Change in Control and ending one
year from such Change in Control pursuant to the provisions of Section 5(c)
because of a Material Breach or Section 5(d) (for Good Reason), (A) the
Executive shall receive an amount equal to seven times the Base Severance
Amount, which amount shall be payable in equal installments over a seven-year
period in the manner in which the Executive's Base Salary is paid at the time of
such termination (collectively, the "EXTENDED SEVERANCE BENEFIT"); and (B) the
Company shall pay the Executive's normal post-termination benefits in accordance
with the Company's retirement, insurance and other benefit plans and
arrangements and as contemplated by this Agreement; PROVIDED, HOWEVER, that the
Company shall continue to provide the coverage for the Executive and his
dependents under its health benefit plans or arrangements (which shall be of the
type and at a level of coverage at least as beneficial to the Executive and his
dependents as the coverage in effect under this Agreement or in effect at the
time of such termination, whichever is more favorable to the Executive and his
dependents) until the seventh anniversary of such termination.
(iv) If the Executive voluntarily terminates his employment with
the Company pursuant to the provisions of Section 5(c) for any reason other than
a Material Breach, or dies, the Executive shall not be entitled to receive any
Compensation or benefits following the date of such termination or death.
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(v) If the Company terminates the Executive's employment pursuant
to the provisions of Section 5(b)(ii) because of his Permanent Disability, the
Company shall (A) for a period of 54 months following the effective date of such
termination (the "DISABILITY PERIOD"), pay the Executive compensation at an
annual rate equal to the Base Severance Amount, offset by the amount, if any,
paid to the Executive under the salary replacement portion of disability
benefits paid under a disability plan or policy paid for by the Company; and (B)
pay the Executive's normal post-termination benefits in accordance with the
Company's retirement, insurance and other benefit plans and arrangements and as
contemplated by this Agreement; PROVIDED, HOWEVER, that the Company shall
continue to provide the coverage for the Executive and his dependents under its
health benefit plans or arrangements (which shall be of the type and at a level
of coverage at least as beneficial to the Executive and his dependents as the
coverage in effect under this Agreement or in effect at the time of such
termination, whichever is more favorable to the Executive and his dependents)
during the entire Disability Period.
(vi) If the Executive dies, or if the Company terminates the
Executive's employment pursuant to the provisions of Section 5(b)(ii) because of
his Permanent Disability, before receipt of any or all payments to which the
Executive is entitled to under Section 5(e) (or in the case of the Executive's
death following his termination on account of Permanent Disability, before
receipt of all payments under Section 5(e)(v)), the balance of the payments to
which the Executive is entitled under Section 5(e) shall continue to paid to the
Executive (in the case of his disability) or to the executors or administrators
of the Executive's estate (in the event of the Executive's death); PROVIDED,
HOWEVER, that the Company may, at any time within its discretion, accelerate any
payments and pay the Executive or his estate the present value of such payments
(using the prime rate used by the Company's primary bank or, if none, Citibank,
N.A.) in a lump sum cash payment.
(f) If the Company terminates the Executive's employment pursuant
to the provisions of Section 5(b)(i) (without Cause) at any time (regardless of
whether or not the Company experiences a Change of Control) or pursuant to the
provisions of Section 5(b)(ii) because of his Permanent Disability, if the
Executive dies, or if the Executive terminates his employment pursuant to the
provisions of Section 5(c) because of a Material Breach or Section 5(d) (for
Good Reason), (x) all outstanding stock options (including the Options),
warrants and the like held by the Executive at the time of such termination
which have not yet vested at the time of such termination shall immediately be
fully vested and (y) the Executive shall have the option to require that the
Company pay an amount equal to the then present value of the Severance Benefit,
the Extended Severance Benefit or any other amounts then payable under this
Agreement, as the case may be, to which he would be entitled (using the prime
rate used by the Company's primary bank or, if none, Citibank, N.A.) within 30
days of a request therefor. The option referred to in clause (y) of the
preceding sentence shall be exercised, if at all, within 60 days after such
termination.
(g) For purposes of this Agreement, the following terms shall have
the meanings set forth below:
"CHANGE IN CONTROL" means the occurrence of any of the following
events during the Term:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
surviving, resulting or reorganized corporation or person immediately
after such transaction is held in the aggregate by the holders of the
then-outstanding securities entitled to vote generally in the election of
directors of the Company ("VOTING STOCK") immediately prior to such
transaction;
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(ii) The Company sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal person, and as a
result of such sale or transfer less than a majority of the combined
voting power of the then-outstanding securities of such corporation or
person immediately after such sale or transfer is held in the aggregate by
the holders of Voting Stock of the Company immediately prior to such sale
or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant
to the 1934 Act, disclosing that any "person" (as such term is used in
Section 13(d)(3) or Section 14(d)(2) of the 0000 Xxx) has become the
"beneficial owner" (as such term is used in Rule 13d-3 under the 0000 Xxx)
of securities representing 35% or more of the Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the 1934 Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company has
occurred; or
(v) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election, or
the nomination for election by the Company's stockholders, of each
director of the Company first elected during such period was approved by a
vote of at least a majority of the directors then still in office who were
directors of the Company at the beginning of any such period;
PROVIDED, HOWEVER, that a "CHANGE IN CONTROL" shall not be deemed to have
occurred for purposes of this Agreement solely because (i) the Company, (ii) an
entity in which the Company directly or indirectly beneficially owns 50% or more
of the voting securities, or (iii) any Company-sponsored employee stock
ownership plan or any other employee benefit plan of the Company, either files
or becomes obligated to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report) under the Securities Exchange Act of 1934, disclosing
beneficial ownership by it of shares of Voting Stock or because the Company
reports that a change in control of the Company has occurred by reason of such
beneficial ownership.
"GOOD REASON" means the occurrence of one or more of the following
events following a Change in Control:
(A) Failure to elect, reelect or otherwise maintain the Executive
in the office or position in the Company which the Executive held
immediately prior to a Change in Control, or the removal of the Executive
as a director of the Company (or any successor thereto) if the Executive
shall have been a director of the Company immediately prior to the Change
in Control;
(B) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company which the Executive held immediately prior to
the Change in Control, a reduction in the aggregate of the Executive's
Compensation received from the Company, or the termination of the
Executive's rights to any benefits to which he was entitled immediately
prior to the Change in Control or a reduction in scope or value thereof
without the prior written consent of the Executive, any of which is not
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remedied within 10 calendar days after receipt by the Company of written
notice from the Executive of such change, reduction or termination, as the
case may be;
(C) A determination by the Executive made in good faith that as a
result of a Change in Control and a change in circumstances thereafter
significantly affecting his position, including a change in the scope of
the business or other activities for which he was responsible immediately
prior to the Change in Control, he has been rendered substantially unable
to carry out, has been substantially hindered in the performance of, or
has suffered a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position held by the
Executive immediately prior to the Change in Control, which situation is
not remedied within 10 calendar days after written notice to the Company
from the Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or a significant portion
of its business or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization or otherwise) to which
all or a significant portion of its business or assets have been
transferred (directly or by operation of law) shall have assumed all
duties and obligations of the Company under this Agreement pursuant to
Section 10(c);
(E) The Company shall relocate its principal executive offices, or
require the Executive to have his principal location of work changed, to
any location which is in excess of 25 miles from the location thereof
immediately prior to the Change in Control or the Company shall require
the Executive to travel away from his office in the course of discharging
his responsibilities or duties thereunder significantly more (in terms of
either consecutive days or aggregate days in any calendar year) than was
required of him prior to the Change in Control without, in either case,
his prior written consent; or
(F) Without limiting the generality or effect of the foregoing,
any Material Breach of this Agreement by the Company or any successor
thereto.
(h) Notwithstanding anything to the contrary in this Agreement and
in addition to any other Compensation, Severance Benefits, Extended Severance
Benefits or other amounts payable by the Company to the Executive pursuant to
this Agreement or otherwise, if (i) the Company terminates the Executive's
employment pursuant to the provisions of Section 5(b)(i) (without Cause) or
pursuant to the provisions of Section 5(b)(ii) because of his Permanent
Disability, if the Executive dies, or if the Executive terminates his employment
pursuant to the provisions of Section 5(c) because of a Material Breach or
Section 5(d) (for Good Reason), after a Change in Control of the Company and
(ii) it shall be determined that any payment or distribution (actual or deemed)
by the Company to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise or resulting from the accelerated vesting of then outstanding options
to purchase shares of Common Stock (including the Options) (a "PAYMENT"), would
be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "EXCISE TAX"), the Executive shall be entitled to receive an additional
payment (a "GROSS-UP PAYMENT") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any 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. If the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion
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of the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. If the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Payments. All determinations required to be made under
this Section 5(h), including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the Company's independent
accountants.
6. NOMINATION TO BOARD OF DIRECTORS. During the Term, the Company shall
use all reasonable efforts to cause the Executive to be reelected as a director
of the Company for so long as the Executive shall be an employee of the Company.
7. RESTRICTIVE COVENANTS. (a) Executive acknowledges that (i) he has a
major responsibility for the operation, administration, development and growth
of the Company's business, (ii) the Company's business is or may become national
or international in scope, (iii) his work for the Company has brought him and
will continue to bring him into close contact with confidential information of
the Company and its customers, and (iv) the agreements and covenants contained
in this Section 7 are essential to protect the business interests of the Company
and that the Company will not enter into this Agreement but for such agreements
and covenants.
(b) (i) During the Term and until three years following the date
of termination of Executive's employment with the Company for any reason (the
"TERMINATION PERIOD"), the Executive shall not, directly or indirectly, perform
any services in the United States for any person or entity other than the
Company that is in the business, directly or indirectly, of providing health
care services of the type the Company is providing, or is contemplating
providing, at the time of the Executive's termination (the "BUSINESS"); or,
without limiting the generality of the foregoing, be or become or agree to be or
become, interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm, association, partnership, joint venture or other business entity that
competes in the Business; PROVIDED, HOWEVER, that the Executive may own, solely
as an investment, not more than one percent (1%) of any class of securities of
any corporation that is publicly traded on any national securities exchange in
the United States of America or reported on the National Association of
Securities Dealers, Inc.'s Automated Quotation System.
(ii) During the Term and during the Termination Period, the
Executive shall not, directly or indirectly, (i) induce or attempt to influence
any employee of the Company or its Subsidiaries to leave its employ, (ii) aid or
agree to aid any competitor, customer or supplier of the Company or its
Subsidiaries in any attempt to hire any person who shall have been employed by
the Company or its Subsidiaries within the one-year period preceding such
requested aid, or (iii) induce or attempt to influence any person or business
entity who was a customer of the Company or its Subsidiaries during
10
Amended and Restated Employment Agrement -- Page 10
any portion of the Term or the Termination Period to transact business with a
competitor of the Company in the Company's business.
(iii) During the Term, the Termination Period and
thereafter, the Executive shall not disclose to anyone any material information
about the affairs of the Company or its Subsidiaries, including trade secrets,
trade "know-how," inventions, customer lists, business plans, operational
methods, pricing policies, marketing plans, sales plans, identity of customers,
sales, profits or other financial information which is confidential to the
Company or is not generally known in the relevant trade.
(c) If the Executive breaches, or threatens to commit a breach of
Section 7(b) (the "RESTRICTIVE COVENANTS"), the Company shall have the following
rights and remedies, each of which shall be in addition to any other rights and
remedies available to the Company at law or in equity:
(i) The Executive shall account for and pay over to the
Company all compensation, profits, and other benefits, after taxes, which
inure to the Executive's benefit which are derived or received by the
Executive or any person or business entity controlled by the Executive
resulting from any actions or transactions constituting a breach of any of
the Restrictive Covenants.
(ii) Notwithstanding the provisions of Section 7(c)(i), the
Executive acknowledges and agrees that in the event of a violation or
threatened violation of any of the provisions of Sections 7(b) , the
Company shall have no adequate remedy at law and shall therefore be
entitled to enforce each such provision by temporary or permanent
injunctive or mandatory relief obtained in any court of competent
jurisdiction without the necessity of proving damages, posting any bond or
other security, and without prejudice to any other rights and remedies
which may be available at law or in equity.
(d) If any of the Restrictive Covenants, or any part thereof, is
held to be invalid or unenforceable, the same shall not affect the remainder of
the covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties hereto agree that the court making such determination shall
have the power to reduce the duration and/or area of such provision and, in its
reduced form, such provision shall then be enforceable.
(e) The parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Restrictive Covenants. In the event that the courts
of any one or more of such jurisdictions shall hold such Restrictive Covenants
wholly unenforceable by reason of the breadth of such scope or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of any
other jurisdictions within the geographical scope of such Restrictive Covenants,
as to breaches of such covenants as they relate to each jurisdiction being, for
this purpose, severable into diverse and independent covenants.
8. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult, and may be impossible, for the Executive to find reasonably
comparable employment in the event of his termination pursuant to the provisions
of Section 5(b)(i) (without Cause) or Section 5(c) hereof because of a Material
Breach or Section 5(d), and that the noncompetition covenant contained in
Section 7 will further limit the employment opportunities for the Executive.
Accordingly, the parties hereto expressly
11
Amended and Restated Employment Agreement -- Page 11
agree that the payment of the Severance Benefit or Extended Severance Benefits,
as the case may be, by the Company to the Executive in accordance with the terms
of this Agreement will be liquidated damages, and that the Executive shall not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor shall any profits, income,
earnings or other benefits from any source whatsoever create any mitigation,
offset, reduction or any other obligation on the part of the Executive hereunder
or otherwise.
9. LEGAL FEES AND EXPENSES. (a) Except as provided in Section 9(b), each
party shall pay or cause to be paid and shall be solely responsible for any and
all attorneys' and related fees and expenses incurred by it in connection with
any dispute arising with respect to this Agreement; PROVIDED, HOWEVER, that if
the Executive prevails in any such dispute, the Company shall reimburse the
Executive for any and all such fees and expenses incurred by the Executive in
connection with such dispute.
(b) Except in the event that the Executive is terminated for
Cause, it is the intent of the Company that, if a Change in Control has
occurred, the Executive not be required to incur the expenses associated with
the enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that, after a Change in Control, the Company has
failed to comply with any of its obligations under this Agreement or if the
Company or any other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation designed to deny, or to recover
from, the Executive the benefits intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to time to
retain counsel of his choice, at the expense of the Company as hereinafter
provided, to represent the Executive in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. If a Change in Control has occurred, the
Company shall pay or cause to be paid and shall be solely responsible for any
and all attorneys' and related fees and expenses incurred by the Executive as a
result of the Company's failure to perform this Agreement or any provision
hereof or as a result of the Company or any person contesting the validity or
enforceability of this Agreement or any provision hereof as aforesaid.
10. MISCELLANEOUS. (a) The Company may, from time to time apply for and
take out, in its own name and at its own expense, life, health, accident,
disability or other insurance upon the Executive in any sum or sums that it may
deem necessary to protect its interests, and the Executive agrees to aid and
cooperate in all reasonable respects with the Company in procuring any and all
such insurance, including without limitation, submitting to the usual and
customary medical examinations, and by filling out, executing and delivering
such applications and other instruments in writing as may be reasonably required
by an insurance company or companies to which an application or applications for
such insurance may be made by or for the Company.
(b) This Agreement is a personal contract, and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged or hypothecated, except as otherwise expressly permitted by the
provisions of this Agreement. Except as otherwise expressly provided herein, the
Executive shall not have any power of anticipation, alienation or assignment of
payments contemplated hereunder, and all rights and benefits of the Executive
shall be for the sole personal benefit of the Executive, and no other person
shall acquire any right, title or interest hereunder by reason of any sale,
assignment, transfer, claim or judgment or bankruptcy proceedings against the
Executive; PROVIDED, HOWEVER, that in the event of the Executive's death, the
Executive's estate, legal representative or beneficiaries (as the case may be)
shall have the right to receive all of the benefits that accrued to the
12
Amended and Restated Employment Agreement -- Page 12
Executive pursuant to, and in accordance with, the terms of this Agreement prior
to the date of the Executive's death.
(c) The Company shall have the right to assign this Agreement to
any successor of substantially all of its business or assets, and any such
successor shall be bound by all of the provisions hereof; PROVIDED, HOWEVER,
that such assignment shall not preclude the exercise of the Executive's rights,
if any, pursuant to Section 5(d).
(d) Any notice required or permitted to be given pursuant to this
Agreement shall be in writing, and sent to the party for whom or which it is
intended, at the address of such party set forth below, by registered or
certified mail, return receipt requested, or at such other address as either
party shall designate by notice to the other in the manner provided herein for
giving notice.
If to the Company: Mariner Health Group, Inc.
000 Xxxxxx X'Xxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Chairman of the Compensation Committee
of the Board of Directors
with copies to: Mariner Health Group, Inc.
000 Xxxxxx X'Xxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Chief Financial Officer
and
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
If to the Executive: Xxxxxx X. Xxxxxxxx, Xx., M.D.
000 Xxxxxxxx Xxxx
Xxxxxx, XX 00000
(e) This Agreement may not be changed, amended, terminated or
superseded orally, but only by an agreement in writing, nor may any of the
provisions hereof be waived orally, but only by an instrument in writing, in any
such case signed by the party against whom enforcement of any change, amendment,
termination, waiver, modification, extension or discharge is sought.
(f) Except as otherwise provided herein, this Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Connecticut, without giving effect to the principles of conflict of
laws thereof.
(g) All descriptive headings of the several Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
13
Amended and Restated Employment Agreement -- Page 13
(h) If any provision of this Agreement, or part thereof, is
held to be unenforceable, the remainder of this Agreement and provision, as the
case may be, shall nevertheless remain in full force and effect.
(i) Each of the parties hereto shall, at any time and from time
to time hereafter, upon the reasonable request of the other, take such further
action and execute, acknowledge and deliver all such instruments of further
assurance as necessary to carry out the provisions of this Agreement.
(j) This Agreement contains the entire agreement and
understanding between the Company and the Executive with respect to the subject
matter hereof. No representations or warranties of any kind or nature relating
to the Company or its affiliates or their respective businesses, assets,
liabilities, operations, future plans or prospects have been made by or on
behalf of the Company to the Executive; nor have any representations or
warranties of any kind or nature been made by the Executive to the Company,
expect as expressly set forth in this Agreement.
14
Amended and Restated Employment Agreement -- Page 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MARINER HEALTH GROUP, INC.
By:
---------------------------
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Xxxxxx X. Xxxxxxxx, Xx., M.D.
