EMPLOYMENT AGREEMENT
EXHIBIT
10.2
THIS
EMPLOYMENT AGREEMENT ("Agreement")
is made and entered into effective as of the 12th
day of
October, 2006, by and between Xxxxxxxx
X. Xxxxxx
("Executive") and SUN
HEALTHCARE GROUP, INC., a
Delaware corporation ("Sun"
or
“Company”).
WHEREAS,
Executive has been appointed to serve as the Chief Compliance and Risk Officer
of Sun;
WHEREAS,
Sun and Executive desire to set forth the terms and conditions of Executive’s
employment as Chief Compliance and Risk Officer of Sun in an employment
agreement, and Executive is willing to perform such services for Sun under
the
terms and conditions set forth below, including the terms and conditions of
Executive’s bonus eligibility, as approved by the Compensation Committee of the
Board of Directors of Sun on March 28, 2006.
NOW,
THEREFORE, in consideration of the above recitals and the mutual covenants
and
agreements contained herein, Executive and Sun agree as follows:
Section
1: Employment; Term of
Employment.
(a)
Employment.
Sun
agrees to employ Executive and Executive agrees to accept employment with Sun,
subject to the terms and conditions of this Agreement.
(b)
Term
of Employment.
The
period of Executive’s employment under this Agreement shall begin as of
September 1, 2006 and shall continue until terminated in accordance with Section
5 below. As used in this Agreement, the phrase “Employment Term” refers to
Executive’s period of employment from the date of this Agreement until the date
his employment is terminated.
Section
2: Duties and
Responsibilities.
Executive shall devote his full employment time, efforts, skills and attention
exclusively to his duties as Chief Compliance and Risk Officer; provided,
however, that to the extent the following activities do not materially interfere
or conflict with his duties and responsibilities hereunder, Executive may (i)
serve as a member of the boards of directors of other companies with the prior
written consent of the Chief Executive Officer of Sun; and (ii) engage in
charitable, civic and religious affairs.
Section
3: Compensation, Benefits and Related Matters.
(a) Annual
Base Salary.
During
the Employment Term, Sun shall pay to Executive a base salary at an annual
rate
of $300,000 ("Base Salary"), such salary to be payable in accordance with
Sun’s customary payroll practices as in effect from time to time (but not less
frequently than monthly). The annual Base Salary will be reviewed at least
annually for possible merit increases and any increase in Executive’s
annual base salary rate shall thereafter constitute "Base Salary" for purposes
of this Agreement.
(b) Cash
Bonus/Incentive Compensation.
In
addition to the Base Salary provided for in Section 3(a) above, Executive
shall be eligible to receive an annual bonus (“Bonus”) in accordance with
Schedule A hereto, as it may be amended from time to time by the Compensation
Committee of the Board of Directors; provided, however, that no amendment shall
be effective if it reduces the potential amount of the Bonus, when compared
to
the prior year, unless such amendment has been agreed to in writing by
Executive. Such Bonus shall be payable at the same time as annual bonuses are
paid to senior executives of Sun. Subject to the provisions of Section 6, in
order to have earned and to be paid any such Bonus, Executive must be employed
by Sun on the date of such payment. It is intended that the Bonus described
in
this Section 3(b) qualify as "performance based compensation" under Section
162(m) of the Code to the extent necessary to preserve the Company’s ability to
deduct such bonus.
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(c)
Equity
Incentive.
During
the Employment Term, Executive shall be eligible to be granted equity incentive
awards during his employment on the same basis as other senior executive
officers of Sun. Such equity incentive awards may include stock options and
restricted units. Executive’s eligibility, rights and entitlement to such equity
incentive awards shall be governed by the applicable equity incentive plan,
award agreement, award and/or grant.
(d) Retirement
and Benefit Plans.
During
the Employment Term, Executive shall be eligible to participate in or receive
benefits under any pension plan, 401(k) savings plan, nonqualified deferred
compensation plan, supplemental executive retirement plan, medical and dental
benefits plan, life insurance plan, short-term and long-term disability plans,
or any other employee benefit or fringe benefit plan, generally made available
by Sun to senior executives in accordance with the eligibility requirements
of
such plans and subject to the terms and conditions set forth in this Agreement.
Such plans, programs and arrangements are subject to change during employment
at
the sole discretion of the Company.
(e)
Sick,
Holiday and Vacation Pay.
Executive is entitled to holiday and sick pay consistent with Sun’s Employee
Handbook or other policy applicable to senior executives. Sick and Holiday
Pay
is subject to change during employment at the sole discretion of the Company.
Executive shall be entitled to up to 160 hours of vacation per year, which
shall
accrue at the rate of 6.152 hours per pay period (26 pay periods). However,
in
accordance with Sun’s Employee Handbook or other policy applicable to senior
executives, vacation hours shall be subject to an accrual cap of two times
Executive’s annual allotment of vacation hours and shall be subject to change
during employment at the sole discretion of the Company.
(f) Indemnification,
Liability/Insurance.
Executive shall be entitled to indemnification by Sun to the extent required
by
applicable law and the charter and bylaws of Sun. In addition, Sun shall
maintain during Executive’s employment customary directors and officers’
liability insurance and Executive shall be covered by such
insurance.
(g) Taxes.
All
compensation payable to Executive shall be subject to withholding for all
applicable federal, state and local income taxes, occupational taxes, Social
Security and similar mandatory withholdings.
(h) Expenses.
Executive shall be entitled to reimbursement for expenses incurred by him in
connection with the discharge of his duties hereunder, including reasonable
costs of traveling from Executive’s residence in Madison, Wisconsin to
Albuquerque, New Mexico or such other place of business as may be designated
by
the Chief Executive Officer, and reasonable housing expense at such times as
Executive is temporarily located in Albuquerque, New Mexico or such other place
of business. All such expense reimbursement shall be subject to and shall be
submitted, documented and paid in accordance with the expense reimbursement
policies of Sun, as such policies may change from time to time.
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Section
4: Cooperation.
Following the expiration or a termination of this Agreement for any reason,
Executive shall provide such cooperation as is reasonably required by the
Company, including, without limitation, consulting with the Company with respect
to litigation and/or matters that relate to facts and circumstances that
occurred during the Employment Term, and executing such documents and
instruments relating to such employment as are reasonably requested by
Sun.
Section
5: Termination of
Employment.
Sun, at
any time in its sole discretion, may terminate Executive as Chief Compliance
and
Risk Officer and from all other positions with Sun and its direct and indirect
subsidiaries. Upon termination, Executive (or his beneficiary or estate as
the
case may be) shall be entitled to receive the compensation and benefits
described in Section 6 below.
(a) Termination
by Sun for "Good Cause."
Sun may,
at any time, by written notice to Executive at least five (5) business days
prior to the date of termination specified in such notice and specifying the
acts or omissions believed to constitute Good Cause (as defined below),
terminate Executive as an officer and employee and from all other positions
with
Sun for Good Cause. Sun may relieve Executive of his duties and responsibilities
pending a final determination of whether Good Cause exists, and such action
shall not constitute Good Reason (as defined in Section 5(c) below) for purposes
of this Agreement. Payment to Executive upon a termination for Good Cause is
set
forth in Section 6(a). "Good Cause" for termination shall mean any one of the
following:
(1) Any
criminal conviction (including conviction on a nolo contendere plea) under
the
laws of the United States or any state or other political subdivision thereof
which, in the sole discretion of the Chief Executive Officer of Sun, renders
Executive unsuitable as an officer or employee of Sun.
(2) Executive’s
continued failure to substantially perform the duties reasonably requested
by
the Chief Executive Officer of Sun and commensurate with his position as Chief
Compliance and Risk Officer of Sun (other than any such failure resulting from
his incapacity due to his physical or mental condition) after a written demand
for substantial performance is delivered to him by the Chief Executive Officer
of Sun, which demand specifically identifies the manner in which the Chief
Executive Officer of Sun believes that Executive has not substantially performed
his duties, and which performance, in the sole discretion of the Chief Executive
Officer is determined to not be substantially corrected by Executive within
ten
(10) calendar days of receipt of such demand;
(3) Any
material workplace misconduct or willful failure to comply with Sun’s general
policies and procedures as they may exist from time to time by Executive which,
in the sole discretion of the Chief Executive Officer of Sun, renders Executive
unsuitable as an officer or employee; and
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(4)
Breach of any of the covenants set forth in Section 8 of this
Agreement.
Regardless
of whether Executive’s employment initially was considered to be terminated for
any reason other than Good Cause, Executive’s employment will be considered to
have been terminated for Good Cause for purposes of this Agreement if the Chief
Executive Officer of Sun subsequently determines that Executive engaged in
an
act constituting Good Cause.
(b) Termination
by Sun without Good Cause.
Sun may
at any time in its sole discretion, by written notice to Executive at least
five
(5) business days prior to date of termination specified in such notice,
terminate Executive as an officer and employee and from all other positions
with
Sun. If such termination is made by Sun other than by reason of Executive’s
death or Disability (as defined in Section 5(e)) and Good Cause does not exist,
such termination shall be treated as a termination without Good Cause and
Executive shall be entitled to payment in accordance with Section
6(b).
(c) Termination
by Executive for Good Reason.
Executive may, at any time at his option within sixty (60) calendar days
following an event or condition that constitutes Good Reason (as defined below),
resign for Good Reason, as an officer and employee and from all other positions
with Sun by written notice to Sun at least thirty (30) calendar days prior
to
the date of termination specified in such notice; provided, however, that Sun
has not substantially corrected the event or condition that would constitute
Good Reason prior to the date of termination. Payment to Executive upon a
termination for Good Reason is set forth in Section 6(b). "Good Reason"
shall mean the occurrence of any one of the following events or conditions
(but
only if Executive provides a notice of resignation to Sun within sixty (60)
calendar days following the first occurrence of such event or condition and
Sun
thereafter fails to cure such circumstance within sixty (60) calendar days
after
its receipt of that notice):
a. A
meaningful and detrimental reduction, without Executive’s written consent, in
the nature of his responsibilities or a meaningful and detrimental change in
his
reporting responsibilities or titles; or
b. A
reduction of compensation as set forth in Sections 3(a) - 3(c) (collectively
the
"Compensation") (other than a reduction of compensation uniformly applicable
to
other members of Senior Management or as a result of disciplinary action against
Executive), a reduction of the benefits set forth in Sections 3(d) - 3(g)
(collectively, the "Benefits") (other than a reduction of Benefits uniformly
applicable to other senior executives), or failure by Sun to pay to Executive
any portion of the Compensation or Benefits within seven (7) business days
of
the date such compensation or other payments and benefits are due;
or
c.
A
breach by Sun of Section 3(h)..
Notwithstanding
any provision of this Section 5(c) to the contrary, the occurrence of a “Change
in Control” (as defined in Section 6 below) shall not, by itself, constitute
Good Reason hereunder.
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(d) Voluntary
Resignation Without Good Reason.
Executive may, at any time at his option with thirty (30) calendar days written
notice to Sun, voluntarily resign without Good Reason as an officer and employee
and from all positions with Sun. Payment to Executive upon his voluntary
resignation without Good Reason is set forth in Section 6(a). Resignation from
employment shall automatically constitute resignation from all positions of
any
subsidiary or affiliated corporation.
(e) Death
or Disability.
Executive’s employment under this Agreement shall terminate automatically as of
the date of Executive’s death. Sun, at any time by written notice to Executive
at least five (5) business days prior to the date of termination specified
in
such notice, terminate Executive as an officer and employee and from all other
positions with Sun by reason of his Disability. "Disability" shall mean any
physical or mental condition or illness that prevents Executive from performing
the essential duties of his position (where such failure cannot be remedied
with
reasonable accommodation) for a period of 120 substantially consecutive calendar
days, as determined by a physician selected by Sun and reasonably acceptable
to
Executive or, if Executive is incapacitated, reasonably acceptable to the
Director of Medicine or equivalent senior physician at a hospital of Executive’s
choice. In addition, Executive’s receipt of disability benefits under Sun’s
long-term disability benefits plan or receipt of Social Security disability
benefits shall be deemed conclusive evidence of Disability for purpose of this
Agreement. Payment to Executive upon his termination by reason of his death
or
Disability is set forth in Section 6(d).
Section
6: Payments Upon Termination.
(a) Payment
Upon Termination for Good Cause, or Resignation without Good
Reason.
In the
event of termination of his employment pursuant to Sections 5(a) or 5(d),
Executive, or his estate where applicable, shall be paid any earned but unpaid
Base Salary through the date of termination and any accrued but unused vacation
through the date of termination.
Executive
also shall receive his vested benefits in accordance with the terms of Sun’s
compensation and benefit plans, and his participation in such plans and all
other perquisites shall cease as of the date of termination, except to the
extent Executive may elect to continue coverage as under any welfare benefit
plans as required by Part 6, Title I of the Employee Retirement Income Security
Act of 1974, as amended. Upon a termination under Section 5(a) or 5(d),
Executive shall not be entitled to any compensation or benefits under this
Agreement except as set forth in this Section 6(a).
(b) Payment
Upon Termination by Sun without Good Cause or by Executive for Good
Reason.
In the
event of termination of employment pursuant to Sections 5(b) or 5(c), Executive
shall be entitled to a lump sum severance payment in an amount equal to one
(1)
year Base Salary or, in the event such termination occurs on or within two
(2)
years following the change of a “Change in Control,” two (2) years Base Salary.
Executive also shall be entitled to (i) any earned Bonus pursuant to Section
3(b) for the fiscal year prior to the fiscal year of termination in the event
Executive was employed the entire prior fiscal year but is not employed by
Sun
on the date said Bonus is paid, (ii) a pro rata portion of the Bonus for the
fiscal year of termination, based on the number of days of employment during
the
fiscal year of termination (including holidays, vacation and sick days and
weekends during the period of employment) divided by 365 and (iii)
payment of any accrued but unused vacation pursuant to Section 3(e) in
accordance with Company policy. Notwithstanding the foregoing, Executive’s right
to receive the severance payment hereunder shall be conditioned upon his
execution of a release in favor of Sun, which shall not be inconsistent with
the
terms of this Agreement and such documents and instruments as are reasonably
requested by Sun. Executive’s participation in any other retirement and benefit
plans and perquisites shall cease as of the date of termination, except
Executive and his eligible dependents (as determined under Sun’s health plan)
shall be entitled to continuing coverage under Sun’s health plans on the same
basis as active employees until the earlier of (x) the first anniversary of
the
date of termination or (y) the date on which Executive or his eligible
dependents become eligible to participate in a plan of a successor employer.
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(c) "Change
in Control."
For
purposes of this Agreement, a "Change in Control" shall be deemed to have
occurred if any of the following events occurs:
(1) Any
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan
of
Sun (an "Acquiring Person"), is or becomes the "beneficial owner" (as defined
in
Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 33 1/3%
of
the then outstanding voting stock of Sun;
(2) A
merger or consolidation of Sun with any other corporation, other than a merger
or consolidation which would result in the voting securities of Sun outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 51% of the combined voting power of the voting securities
of
Sun or surviving entity outstanding immediately after such merger or
consolidation;
(3) A
sale or other disposition by Sun of all or substantially all of Sun’s
assets;
(4) During
any period of two (2) consecutive years, individuals who at the beginning of
such period constitute the Board of Directors and any new director (other than
a
director who is a representative or nominee of an Acquiring Person) whose
election by the Board of Directors or nomination for election by Sun’s
shareholders was approved by a vote of at least a majority of the directors
then
still in office who either were directors at the beginning of the period or
whose election or nomination was previously so approved, no longer constitute
a
majority of the Board of Directors;
provided,
however, in no event shall any acquisition of securities, a change in the
composition of the Board of Directors or a merger or other consolidation
pursuant to a plan of reorganization under chapter 11 of the Bankruptcy Code
with respect to Sun ("Chapter 11 Plan"), or a liquidation under the Bankruptcy
Code constitute a Change in Control. In addition, notwithstanding Sections
6(c)(1), 6(c)(2), 6(c)(3) and 6(c)(4), a Change in Control shall not be deemed
to have occurred in the event of a sale or conveyance in which Sun continues
as
a holding company of an entity or entities that conduct the business or
businesses formerly conducted by Sun, or any transaction undertaken for the
purpose of reincorporating Sun under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of Sun’s capital
stock. Executive’s continued employment without objection following a Change in
Control shall not, by itself, constitute consent to or a waiver of rights with
respect to any circumstances constituting Good Reason hereunder.
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(d) Payment
Upon Termination for Death or Disability.
In the
event of termination of his employment pursuant to Section 5(e), Executive,
or
his estate where applicable, shall be paid any earned but unpaid Base Salary
through the date of termination and any accrued but unused vacation through
the
date of termination.
Executive,
or his estate where applicable, also shall receive his vested benefits
(including those that vest by reason of death or disability) in accordance
with
the terms of Sun’s compensation and benefit plans, and his participation in such
plans and all other perquisites shall cease as of the date of termination,
except to the extent Executive may elect to continue coverage as under any
welfare benefit plans as required by Part 6, Title I of the Employee Retirement
Income Security Act of 1974, as amended. Upon a termination under Section 5(e),
Executive shall not be entitled to any compensation or benefits under this
Agreement except as set forth in this Section 6(d).
In
the
event Employee is unable to work due to death or disability on the date of
payment of Bonus as required by Section 3(b) above, Executive or his estate
shall be paid any unpaid Bonus for the prior fiscal year which shall be prorated
based on the number of days of employment (including holidays, vacation and
sick
days and weekends during the period of employment) during the prior fiscal
year
divided by 365. Executive also shall receive a pro rata portion (based on the
number of days of employment (including holidays, vacation and sick days and
weekends during the period of employment) in the fiscal year of termination
divided by 365) of the Bonus, if any, for the fiscal year in which the
termination pursuant to Section 5(e) occurs.
Section
7: Additional Payments.
(a) Gross-Up
Payments.
Notwithstanding anything herein to the contrary, if it is determined that any
payment or distribution by Sun 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, but determined without regard to any additional payments
required under this Section 7) (a “Payment”) would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise Tax"), then
Executive shall be entitled to an additional payment (a "Gross-Up Payment")
in
an amount that will place Executive in the same after-tax economic position
that
he would have enjoyed if the Excise Tax had not applied to the payment.
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(b) Determination
of Gross-Up Payment.
Subject
to the provisions of Section 7(c), all determinations required under this
Section 7, including whether a Gross-Up Payment is required, the amount of
the
payments constituting parachute payments, and the amount of the Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall
be
made by Sun’s independent auditors or such other certified public accounting
firm reasonably acceptable to Executive as may be designated by Sun (the
"Accounting Firm"), which shall provide detailed supporting calculations both
to
Sun and Executive within fifteen business days of Executive’s date of
termination or any other date reasonably requested by Sun or Executive on which
a determination under this Section 7 is necessary or advisable. Within five
days
of the receipt by Executive and Sun of the Accounting Firm’s determination of
the initial Gross-Up
Payment, Sun shall pay
the
amount of such Gross-Up Payment to the applicable taxing authorities for the
benefit of Executive. If
the
Accounting Firm determines that no Excise Tax is payable by Executive, Sun
shall
cause the Accounting Firm to provide Executive and Sun with an opinion that
Sun
has substantial authority under the Internal Revenue Code and regulations
thereunder not to report an Excise Tax on Executive’s federal income tax return.
Any determination by the Accounting Firm shall be binding upon Executive and
Sun. As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made by Sun
should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that Sun exhausts its remedies
pursuant to Section 7(c) and Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid
by Sun to the applicable taxing authorities for the benefit of Executive (or
directly to Executive in the event Executive previously paid the related tax
amounts).
(c) Procedures.
Executive shall notify Sun in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by Sun of a Gross-Up
Payment. Such notice shall be given as soon as practicable but not later than
ten business days after Executive knows of such claim and Executive shall
apprise Sun of the nature of the claim and the date on which the claim is
requested to be paid. Executive agrees not to pay the claim until the expiration
of the thirty-day period following the date on which Executive notifies Sun,
or
such shorter period ending on the date the taxes with respect to such claim
are
due (the "Notice Period"). If Sun notifies Executive in writing prior to the
expiration of the Notice Period that it desires to contest the claim, Executive
shall: (i) give Sun any information reasonably requested by Sun relating to
the
claim; (ii) take such action in connection with the claim as Sun may reasonably
request, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Sun and reasonably
acceptable to Executive; (iii) cooperate with Sun in good faith in contesting
the claim; and (iv) permit Sun to participate in any proceedings relating to
the
claim. Executive shall permit Sun to control all proceedings related to the
claim and, at its sole option, permit Sun to pursue or forgo any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority in respect of such claim. If requested by Sun, Executive agrees either
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner and to prosecute such contest to a determination before
any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts as Sun shall determine; provided, however, that if Sun directs
Executive to pay such claim and pursue a refund, Sun shall pay such claim to
the
applicable taxing authorities on Executive’s behalf (the "Claim Payment"). Sun’s
control of the contest related to the claim shall be limited to the issues
related to the Gross-Up Payment and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or other taxing authority. If Sun does not notify Executive in writing
prior to the end of the Notice Period of its desire to contest the claim, Sun
shall pay to the applicable taxing authorities on Executive’s behalf an
additional Gross-Up Payment in respect of the excess parachute payments that
are
the subject of the claim. Any Gross-Up Payment shall be made without additional
tax consequences to Executive.
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(d) Repayments.
If,
after a Claim Payment is made by Sun, Executive becomes entitled to a refund
with respect to the claim to which such Claim Payment relates, Executive shall
pay Sun the amount of the refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after a Claim Payment is made
by
Sun, a determination is made that Executive shall not be entitled to any refund
with respect to the claim and Sun does not promptly notify Executive of its
intent to contest the denial of refund, then the amount of the Claim Payment
shall offset the amount of the additional Gross-Up Payment then owing to
Executive.
(e) Further
Assurances.
Sun
shall indemnify Executive and hold him harmless, on an after-tax basis, from
any
costs, expenses, penalties, fines, interest or other liabilities ("Losses")
incurred by Executive with respect to the exercise by Sun of any of its rights
under Section 7, including, without limitation, any Losses related to Sun’s
decision to contest a claim or any imputed income to him resulting from any
Claim Payment or action taken on Executive’s behalf by Sun hereunder. Sun shall
pay all legal fees and expenses incurred under Section 7 and shall promptly
reimburse Executive for the reasonable expenses incurred by him in connection
with any actions taken by Sun or required to be taken by Executive hereunder.
Sun shall also pay all of the fees and expenses of the Accounting Firm,
including, without limitation, the fees and expenses related to the opinion
referred to in Section 7(b).
Section
8: Protection of Sun’s
Interests.
(a) Ownership
of Property.
Executive acknowledges and agrees that any and all property developed,
discovered or created by him during the pendency of his employment by the
Company, including, without limitation, any and all copyrights, trademarks,
trade secrets or other intellectual property is and shall remain the sole and
exclusive property of the Company and Executive hereby sells, assigns and
otherwise transfers all of his right, title and interest in and to such
property, if any, to the Company.
(b)
Confidentiality.
Executive agrees that he will not at any time, during or after the term of
this
Agreement, except in performance of his obligations to Sun hereunder or with
the
prior written consent of the Chief Executive Officer of Sun, directly or
indirectly disclose to any person or organization any secret or "Confidential
Information" that Executive may learn or has learned by reason of his
association with Sun. The term "Confidential Information" means any information
not previously disclosed to the public or to the trade by Sun’s management with
respect to Sun’s products, services, business practices, facilities and methods,
salary and benefit information, legal matters and claims (asserted and
unasserted), trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, product price lists, pricing information,
customer lists, financial information (including revenues, costs or profits
associated with any of Sun’s products or lines of business), business plans,
prospects or opportunities, compliance and clinical processes, policies and
procedures.
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(c) Exclusive
Property.
Executive confirms that all Confidential Information is and shall remain the
exclusive property of Sun. All business records, papers and documents kept
or
made by Executive relating to the business of Sun shall be and remain the
property of Sun. Upon the termination of Executive’s employment for any reason
or upon the request of Sun at any time, Executive shall promptly deliver to
Sun,
and shall not without the consent of the Board of Directors of Sun, retain
copies of, Confidential Information, or any written materials not previously
made available to the public, or records and documents made by Executive or
coming into Executive’s possession concerning the business or affairs of Sun.
(d) Nonsolicitation.
Executive shall not, during his employment under this Agreement, and for two
(2)
years following the termination of this Agreement, for whatever reason or cause,
in any manner induce, attempt to induce, or assist others to induce, or attempt
to induce, any employee, agent, representative or other person associated with
Sun or any customer, patient or client of Sun to terminate his or her
association or contract with Sun, nor in any manner, directly or indirectly,
interfere with the relationship between Sun and any of such persons or
entities.
(e) Non-Disparagement.
Executive shall not during his employment under this Agreement and for two
years
following termination of the Agreement, for whatever reason, make any statements
that are intended to or that would reasonably be expected to harm Sun or any
of
its subsidiaries or affiliates, their respective predecessors, successors,
assigns and employees and their respective past, present or future officers,
directors, shareholders, employees, trustees, fiduciaries, administrators,
agents or representatives. Sun and its officers and directors will not make
any
statements that are intended to or that would reasonably be expected to harm
Executive or his reputation or that reflect negatively on Executive’s
performance, skills or ability.
(f) Relief.
Without
intending to limit the remedies available to Sun, Executive acknowledges that
a
breach of any of the covenants in Section 8 may result in material irreparable
injury to Sun for which there is no adequate remedy at law, that it will not
be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, Sun shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
Executive from engaging in activities prohibited by Section 8 or such other
relief as may be required to specifically enforce any of the covenants in
Section 8.
Section
9: Miscellaneous
Provisions.
(a) Amendments,
Waivers, Etc.
No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by both
parties. No waiver by either party hereto at any time of any breach by the
other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
or
subsequent time.
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(b) Validity.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
(c) Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding of the parties
hereto with respect to the matters covered hereby and supersedes all prior
agreements and understandings of the parties with respect to the subject matter
hereof. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, including the Severance Agreement between Executive and
Sun dated March 22, 2002 (which is hereby terminated), negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(d) Resolution
of Disputes.
Any
disputes arising under or in connection with this Agreement shall be resolved
by
binding arbitration, to be held in Orange County, California in accordance
with
the National Rules for the Resolution of Employment Disputes and procedures
of
the American Arbitration Association. Executive and Sun shall mutually select
the arbitrator. If Executive and Sun cannot agree on the selection of an
arbitrator, each party shall select an arbitrator and the two arbitrators shall
select a third arbitrator who shall resolve the dispute. The fees of the
arbitrator and any administrative fees of AAA shall be paid by Sun. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Nothing herein shall limit the ability of Sun to obtain
the injunctive relief described in Section 8(d) pending final resolution of
matters that are sent to arbitration.
(e) Attorneys’
Fees.
In the
event Executive prevails on the merits on any claim, action or proceeding:
(i)
contesting or otherwise relating to the existence of Good Cause in the event
of
Executive’s termination of employment during the Term for Good Cause;
(ii) enforcing any right, benefit or obligation under this Agreement, or
otherwise enforcing the terms of this Agreement or any provision thereof; or
(iii) asserting or otherwise relating to the existence of Good Reason in the
event of Executive’s termination of employment during the Term for Good Reason,
Sun shall pay or reimburse Executive on an after-tax basis for reasonable costs
and expenses (including, without limitation, court costs, costs of arbitration
and reasonable legal fees and expenses which reflect common practice with
respect to the matters involved) incurred by Executive as a result of such
claim, action or proceeding.
(f) Governing
Law.
The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California.
(g) Notice.
For the
purpose of this Agreement, notice, demands and all other communication provided
for in this Agreement shall be in writing and shall be deemed to have been
duly
given when delivered by hand delivery or overnight courier or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed as follows or to other addresses as each party may have furnished
to
the other:
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To
Sun:
Attention:
Chief Executive Officer
00000 Xxx Xxxxxx Xxxxxx; Xxxxx 000.
Xxxxxx,
Xxxxxxxxxx 00000
To
Executive:
Xxxxxxxx
X. Xxxxxx
0000
Xxxxxxx Xxx
Xxxxxxx,
Xxxxxxxxx 00000
(h) Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
(i)
No
Claim Against Assets.
Nothing
in this Agreement shall be construed as giving Executive any claim against
any
specific assets of Sun or as imposing any trustee relationship upon Sun in
respect of Executive. Sun shall not be required to establish a special or
separate fund or to segregate any of its assets in order to provide for the
satisfaction of its obligations under this Agreement. Executive’s rights under
this Agreement shall be limited to those of an unsecured general creditor of
Sun
and its affiliates.
(j)
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, and such counterparts will together
constitute but one Agreement.
[Signatures
Commence on Immediately Following Page]
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IN
WITNESS
WHEREOF,
the
parties hereto have executed this Agreement as of the date first above
written.
/s/
Xxxxxxxx X.
Xxxxxx October
12, 2006
Xxxxxxxx X. Xxxxxx Date
Xxxxxxxx X. Xxxxxx Date
SUN
HEALTHCARE GROUP, INC.
By: /s/
Xxxxxxx X.
Xxxxxx October
12, 2006
Xxxxxxx
X. Xxxxxx Date
Chairman
and CEO
13
Schedule
A
Executive’s
Bonus for any fiscal year shall be based on the criteria set forth below. There
are two components to his Bonus: EBITDA and individual goals, which are
described below. The EBITDA component of the Bonus shall equal 70% of the
Maximum Amount (as defined below) and the individual goals component of the
Bonus shall equal up
to
30% of
the Maximum Amount. In no event shall his Bonus exceed 100% of his Base Salary
for such fiscal year.
1. Maximum
Amount.
The
maximum amount of the Bonus shall be determined solely by reference to earnings
before interest, taxes, depreciation and amortization of Sun (“EBITDA”), as
published by Sun in its press release announcing financial results for the
fiscal year in which the Base Salary was earned, but excluding the effect of
actuarial adjustments for self-insurance for general and professional liability.
The Compensation Committee reserves the right to make adjustments to the
calculation, including the inclusion or exclusion of discontinued operations.
The Compensation Committee shall establish the EBITDA target each year.
The
potential amount of the Bonus shall be based upon actual EBITDA attained as
a
percentage of the target EBITDA as follows: if actual EBITDA is less than 95%
of
target EBITDA, the Bonus will be zero; if actual EBITDA is 95% of target EBITDA,
the maximum amount of the Bonus (the “Maximum Amount”) shall equal 10% of Base
Salary; if actual EBITDA is 100% of target EBITDA, the Maximum Amount shall
equal 50% of Base Salary (if actual EBITDA is greater than 95% but less than
100% of target EBITDA, the Maximum Amount will be pro rated between 10% and
50%
of Base Salary); and if actual EBITDA is 120% (or greater) of target EBITDA,
the
Maximum Amount shall equal 100% of Base Salary (if actual EBITDA is greater
than
100% but less than 120% of target EBITDA, the Maximum Amount will be pro rated
between 50% and 100% of Base Salary).
2, EBITDA
Component.
The
EBITDA component of the Bonus shall equal 70% of the Maximum Amount.
3. Individual
Goals Component.
The
Chief Executive Officer of Sun (the “CEO”) shall establish the individual goals
each year after consulting with Executive, the Compensation Committee, and
such
others as the CEO deems appropriate. The amount of the individual goals
component of the Bonus shall be an amount up
to
30% of
the Maximum Amount, with the final amount to be determined as follows: after
the
fiscal year end, the CEO shall make a recommendation to the Compensation
Committee as to what extent the goals have been met. The Compensation Committee
shall determine the amount of this component of the Bonus to be paid to
Executive based upon the level of attainment of the goals.
4. Timing
of Payment.
Both
components of the Bonus shall be paid to Executive at the time specified in
Section 3(b).
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