EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") dated as of December 4,
2002, is between Xxxxxxx Xxxxx (the "Executive") and Mariner Health Care, Inc.,
a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive as Executive Vice
President ("EVP") and Chief Financial Officer, and wishes to define the terms
of the Executive's employment with the Company and the Executive desires to
accept such employment, for the term and upon the other conditions hereinafter
set forth.
NOW, THEREFORE, the parties agree as follows:
1. Employment. This Agreement shall constitute a binding
agreement between the parties as of the date hereof (the "Effective Date").
2. Term. Subject to the provisions of Section 10 of this
Agreement, this Agreement shall commence on the Effective Date and shall
continue during the period in which the Executive remains employed by the
Company. This Agreement shall govern the terms of the Executive's employment
with the Company which shall commence on January 14, 2003 and shall continue
until terminated as set forth below (the "Term"). The Executive shall be
considered an at-will employee and his employment may be terminated by either
party subject to the obligations of the parties upon such termination as may be
set forth hereinafter.
3. Position. During the Term, the Executive shall serve as EVP
and Chief Financial 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 shall, on a full time basis, use the Executive's skills and render
services to the best of the Executive's 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 EVP and Chief Financial 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 or the Chief
Executive Officer. 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. Salary and Annual Bonus.
(a) Base Salary. The Executive's base salary hereunder
shall be $450,000 a year, payable no less frequently than monthly and
prorated for any
partial year of employment. The Board shall review such base salary at
least annually and may increase, but not decease, such base salary as
it may deem advisable.
(b) Annual Bonus. The Company shall provide the
Executive with an opportunity to earn upon achievement of target
performance goals determined by the Board or the compensation
committee thereof, in consultation with the Executive, an annual bonus
equal to eighty percent (80%) of the Executive's base salary (the
"Target Bonus"), with a minimum bonus of fifty percent (50%) of base
salary upon achievement of threshold performance and an opportunity to
earn up to one hundred percent (100%) of base salary for performance
in excess of the targets.
6. Vacation, Holidays and Sick Leave. During the Term, the
Executive shall be entitled to paid vacation, paid holidays and sick leave in
accordance with the Company's standard policies for its senior executive
officers.
7. Business Expenses. The Executive shall be reimbursed for all
ordinary and necessary business expenses incurred by the Executive in
connection with the Executive's 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.
8. Pension and Welfare Benefits. During the Term, the Executive
shall be eligible to participate fully in all health benefits, insurance
programs, pension and retirement plans and other employee benefit and
compensation arrangements, as in effect from time to time, available to senior
executive officers of the Company generally.
9. Stock Options On the date Executive commences his employment
with the Company (the "Grant Date"), the Company shall grant to the Executive,
pursuant to the terms of the Mariner Health Care, Inc. 2002 Stock Incentive
Plan (the "2002 Plan"), options to purchase 200,000 shares of common stock of
the Company ("Common Stock"), all of which shall have such terms and be subject
to such conditions as are set forth in the form of Stock Option Agreement
promulgated under the 2002 Plan. Such options shall vest over a period of four
years in equal annual installments and have an exercise price equal to the
closing sale price of the Common Stock, on the Grant Date. If no transactions
in the Common Stock occur on the Grant Date on the exchange or market where the
Common Stock is traded, the closing price of the Common Stock on the most
recent day in which a transaction in the Common Stock occurred shall be the
exercise price. Thereafter, the Board of Directors of the Company or the
Compensation Committee thereof, may grant to the Executive such other and
additional awards under the 2002 Plan as may from time to time be deemed
appropriate.
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10. Termination of Employment.
(a) General. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the
following circumstances.
(b) Death or Disability.
(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 or her
job for one hundred eighty (180) days (whether or not
consecutive) during any period of eighteen (18) consecutive
months, and no reasonable accommodation can be made that will
allow Executive to perform his or her 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 Executive's employment hereunder at any time, whether or
not for Cause. For purposes of this Agreement, "Cause" shall mean (i)
continued failure by the Executive to substantially perform the duties
contemplated by Section 4 hereof, which failure is not remedied within
twenty (20) days after a written notice of such failure is delivered
to the Executive by the Company, which notice identifies with
particularity the manner in which the Company believes that the
Executive has failed to perform his duties under Section 4 of this
Agreement; (ii) the conviction (after exhausting all appeals) of the
Executive of, or the entering of a plea of nolo contendere by, the
Executive with respect to a felony; (iii) Executive's willful
malfeasance or willful misconduct in connection with Executive's
duties hereunder or any willful act or willful omission which is
materially injurious to the financial condition or business reputation
of the Company or any significant subsidiary; or (iv) Executive's
breach of the provisions of Section 14 of this Agreement.
Action or inaction by Executive shall not be considered
"willful" unless done or omitted by Executive intentionally and
without Executive's reasonable belief that Executive's action or
inaction was in the best interests of the Company, and shall not
include failure to act by reason of total or partial incapacity due to
physical or mental illness. The cessation of employment of the
Executive shall not be deemed to be for Cause unless prior to such
termination there shall have been delivered to the Executive a copy of
a resolution duly adopted by the affirmative vote of not less than a
majority of the disinterested membership of the Board of Directors at
a meeting of such Board of Directors called and held for such purpose
(after reasonable notice is provided to the Executive and the
Executive is given an
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opportunity, together with counsel, to be heard before such Board of
Directors), finding, that, in the good faith opinion of the Board of
Directors, the Executive is guilty of the conduct described in clause
(i), (ii) (iii) or (iv) above, and specifying the particulars thereof
in detail.
(d) Termination by the Executive. The Executive shall be
entitled to terminate his or her employment hereunder (A) upon sixty
(60) days' prior written notice, for Good Reason or (B) if his or her
health should become impaired to an extent that makes his or her
continued performance of his or her duties hereunder hazardous to his
or her 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.
For purposes of this Agreement, "Good Reason" shall mean 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 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) or from his or her title or position
without the Executive's express written consent to accept any
such change; the assignment to him or her 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 or her to any of such positions, except if any
such changes are because of Disability, resignation, death or
termination by the Company with Cause;
(ii) during the one year period commencing on
the date of a Change in Control, the relocation of the
Executive's office at which the Executive is to perform the
Executive's duties, to a location more than fifty (50) miles
from the location at which the Executive previously performed
the Executive's duties, except for required travel on the
Company's business to an extent substantially consistent with
the Executive's business travel;
(iii) 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, unless the
Executive participates after such failure in employee benefit
plans generally available to senior executives of the
Company;
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(iv) 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 twenty (20) days after notice of such
noncompliance has been given by the Executive to the Company;
or
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
10(f) below; for purposes of this Agreement, no such
purported termination shall be effective.
The Executive's continued employment for ninety (90) days 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 his or her position with the Company or terminate his or
her employment for other than Good Reason during the Term, the
Executive shall give sixty (60) days written notice to the Company
("Notice Period"), specifying the date as of which his or her
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 prior written notice
(f) Notice of Termination. Any purported termination of
the 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 18. "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 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 or termination by the Company for Cause,
the date Notice of Termination is given, (iii) if the Executive's
employment is terminated pursuant to Subsection (d) or (e) hereof or
for any other reason (other than death, Disability or by the Company
for Cause), 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.
(h) Change in Control. For purposes of this Agreement, a
Change in Control of the Company shall have occurred if:
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(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) any of Oaktree Capital
Management, LLC, Xxxxxxx Xxxxx Credit Partners, LP, Foothill
Partners, LP, Highland Capital Management, LP or their
respective affiliates (each a "Bank Permitted Holder" and (1)
through (5), collectively, the "Permitted Holders"), 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 25% 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
Effective Date, individuals who at the beginning of such
period constitute the Board and any new director (other than
a director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this Section 10(h)) whose
election by the Board or nomination for election by the
Company's stockholders 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 for election was previously so
approved, cease for any reason to constitute at least a
majority thereof;
(iii) the consummation of a merger or
consolidation of the Company with any other corporation,
other than (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 persons (other than the
Permitted Holders) acquire 25% or more of the combined voting
power of the Company's or such surviving or parent entity's
then outstanding securities;
(iv) the consummation of a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of at
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least a majority of the assets of the Company and its
operating subsidiaries, taken as a whole (or any transaction
having a similar effect) or the Board approves the entering
into of an agreement with one or more unrelated third parties
under which such one or more unrelated third parties are
given the power to control the management or operations of at
least a majority of the assets of the Company and its
subsidiaries, taken as a whole; or
(v) in the event of the occurrence of a
Potential Change in Control described in Section 11(f)(5) or
(6), the subsequent occurrence at any time thereafter of any
of the following events:
(A) the consummation of a merger or
consolidation of the Company or its affiliates with
any other Competitive Business (as defined in
Section 14 hereof) having gross revenues in excess
of 50% of the gross revenues of the Company and
following such merger or consolidation, a Bank
Permitted Holder whose acquisition of securities
triggered a Potential Change in Control pursuant to
Section 11(f)(5) or (6) hereof, owns at least 25% of
the outstanding voting securities of the entity
resulting from such combination; or
(B) the acquisition by the Company or
its affiliates of substantially all of the assets or
securities of any Competitive Business (as defined
in Section 14 hereof) having gross revenues in
excess of 50% of the gross revenues of Company and
(i) in the case of an acquisition of securities, the
securities acquired represent more than 50% of the
combined voting power of the Competitive Business's
then outstanding voting securities and (ii)
following such acquisition, a Bank Permitted Holder
whose acquisition of securities triggered a
Potential Change in Control pursuant to Section
11(f)(5) or (6) hereof, owns at least 25% of the
outstanding voting securities of the Company.
11. Compensation During Disability; Death or Upon Termination.
Notwithstanding any other provision of this Agreement, the provisions of this
Section 11 shall exclusively govern Executive's rights upon termination of
employment with the Company and its affiliates.
(a) During any period that the Executive fails to
perform his or her duties hereunder as a result of incapacity due to a
Disability ("Disability Period"), the Executive shall continue to
receive his or her base salary at the rate then in effect for such
period until his or her employment is terminated pursuant to Section
10(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
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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
or her death or Disability, the Company shall pay (i) any base salary
due to the Executive under Section 5(a) through the date of such
termination and (ii) an amount equal to the Target Bonus he or she
would have received for the fiscal year that ends on or immediately
after the Date of Termination, assuming the Company achieved the
target level for which a bonus is paid under the plan described in
Section 5(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.
(c) If the Executive's employment is terminated by the
Company for Cause or by the Executive for other than Good Reason, the
Company shall pay the Executive his or her 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 within one (1) year following a Change in Control
the Company terminates the Executive's employment without Cause or the
Executive terminates his or her employment for Good Reason, then
(i) the Company shall pay the Executive his or
her 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 greater of (I)
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 in which the Date of
Termination occurs (provided if there was a bonus paid to the
Executive with respect only to one fiscal year that
immediately precedes the year in which the Date of
Termination occurs, then such single year's bonus shall be
utilized in the calculation pursuant to this subclause (I))
and (II) the bonus the Executive would earn based on the
target level of bonus applicable for the year of termination
and (B) the number two and one-half (2.5);
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(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 thirty-six (36) months. Benefits otherwise
receivable by the Executive pursuant to this Section
11(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 to the Company any such benefits actually received by
him or her;
(v) all options, shares of restricted stock,
performance shares and any other equity based awards shall be
and become fully vested as of the Date of Termination; and
(vi) the payments provided for in this Section
11(d) (other than Section 11(d)(iv)) shall be made not later
than the thirtieth (30th) day following the Date of
Termination.
(e) Except as provided in Subsection (f) hereof, if
either prior to a Change in Control or following the first anniversary
of a Change in Control, the Company terminates the Executive's
employment without Cause or the Executive terminates his employment
with the Company for Good Reason, then
(i) the Company shall pay the Executive his or
her 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) subject to the Executive's continued
compliance with Section 14 of this Agreement, in lieu of any
further salary payments to the Executive for period
subsequent to the Date of Termination, the Executive shall,
for a period of two (2) years from the Date of Termination
(the "Severance Period"), be entitled to continued payment of
the Executive's base salary at the rate in effect as of the
Date of Termination; provided, however, that in the event
that the Executive engages in a Competitive Business,
provides services for pay (including, without limitation,
deferred compensation, equity awards or other property) to a
Competitive Business or obtains a financial interest in a
Competitive Business from the date
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Executive's employment hereunder is terminated until the
second anniversary of the Date of Termination, the Executive
shall no longer be entitled to any further payments of
Executive's base salary;
(iii) the Company shall pay the Executive at such
times as bonuses are generally payable to other executive
officers of the Company, a minimum Annual Bonus (determined
in accordance with Section 5(b) hereof) for the two fiscal
years of the Company ending after the Date of Termination;
(iv) the Company shall pay the Executive his or
her 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;
(v) 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 11(e)(ii) beginning on the Date of
Termination;
(vi) benefits otherwise receivable by the
Executive pursuant to clause (v) of this Section 11(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 to the Company any
such benefits actually received by him or her; and
(vii) all options, shares of restricted stock,
performance shares and any other equity based awards shall be
and become fully vested as of the Date of Termination.
(f) If during the Term, the Company (i) terminates the
Executive's employment other than for Cause, or the Executive
terminates his or her employment for Good Reason and (ii) the Date of
Termination occurs during the pendency of a Potential Change in
Control, and if a Change in Control occurs before the expiration of
the pendency of the Potential Change in Control during which the Date
of Termination occurred, the Executive shall be entitled upon such
Change in Control to:
(i) the cash payments that would have been made
under Section 11(d) hereof as if the Date of Termination had
occurred immediately on the date of the Change in Control,
reduced by any other severance, salary continuation or
similar payments previously made to the Executive under
Section 11(e) hereof or otherwise, if any; and
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(ii) benefit continuation provided for under
Section 11(d) in excess of the benefit continuation to which
he was otherwise entitled.
The payments provided for in this Section 11(f) shall be made
not later than the thirtieth (30th) day following the date of the
Change in Control.
As used in this Subsection (f), a "Potential Change in
Control" shall be deemed to have occurred upon the following events:
(1) the commencement of a tender or exchange
offer by any third person (other than a tender or exchange
offer which, if consummated, would not result in a Change in
Control) for twenty percent (20%) or more of the then
outstanding shares of common stock or combined voting power
of the Company's then outstanding voting securities;
(2) the execution of an agreement by the
Company, the consummation of which would result in the
occurrence of a Change in Control;
(3) the public announcement by any person
(including the Company) of an intention to take or to
consider taking actions which if consummated would constitute
a Change in Control other than through a contested election
for directors of the Company;
(4) the adoption by the Board, as a result of
other circumstances, including circumstances similar or
related to the foregoing, of a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control
has occurred; or
(5) the acquisition by a Bank Permitted Holder
of securities of the Company representing more than 30% of
the combined voting power of the Company's then outstanding
voting securities; or
(6) the consummation of a merger or
consolidation of the Company with any other corporation which
is not a Change in Control, but in which a Bank Permitted
Holder acquires 30% or more of the combined voting power of
the Company's or such surviving entity's then outstanding
securities.
A Potential Change in Control will be deemed to be pending from the
occurrence of the event giving rise to the Potential Change in Control
until the earlier of the first anniversary thereof or the date the
Board determines in good faith that such events will not result in the
occurrence of a Change in Control. Notwithstanding the foregoing, a
Potential Change in Control described in Subsections (5) or (6) hereof
will not end earlier than two (2) years from the occurrence of the
event
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giving rise to the Potential Change in Control. It is understood and
expressly agreed that a Potential Change in Control described in
Subsections (5) and (6) hereof will be applicable and given effect
only if such Potential Change in Control is followed by an event
described in Section 10(h)(v) hereof.
(g) If the Executive shall terminate his or her
employment under clause (B) of Section 10(d) or under Section 10(e)
hereof, the Company shall pay the Executive his or her 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 11 by seeking other
employment or otherwise, and, except as provided in Sections 11(e)
hereof, the amount of any payment or benefit provided for in this
Section 11 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 11(e)(ii) and 11(e)(iii), 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 14 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.
12. Representations and Covenants.
(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 or she
is not a party to any agreement or instrument which would prevent him
or her from entering into or performing his or her duties in any way
under this Agreement. The Executive agrees and covenants that he or
she will 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.
13. Successors: Binding Agreement.
(a) This Agreement shall not be assignable by Executive.
This Agreement may be assigned by the Company to a person or entity
which is an affiliate or a successor in interest to substantially all
of the business operations of
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the Company. 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 or her, 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 or her 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 or her 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 or her devisee,
legatee or other designee or, if there is no such designee, to his or
her estate.
14. Confidentiality and Non-Competition Covenants.
(a) Executive will not (whether during or after
Executive's employment with the Company) disclose, retain, or use for
Executive's own benefit, purposes or account or the benefit, purposes
or account of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or
enterprise other than the Company and any of its subsidiaries or
affiliates, any trade secrets, Company know-how, software
developments, inventions, formulae, technology, designs and drawings
or other works of authorship, or any Company property or confidential
information relating to research, operations, finances, current and
proposed products and services, vendors, customers, advertising,
costs, marketing, trading, investment, sales activities, promotion,
manufacturing processes, or the business and affairs of the Company
generally, or of any subsidiary or affiliate of the Company
("Confidential Information") without the written authorization of the
Board; provided that the foregoing obligation (i) shall not apply to
information which is not unique to the Company or which is generally
known to the industry or the public other than as a result of
Executive's breach of this covenant or the wrongful acts of others who
were under confidentiality obligations to the Company as to the item
or items involved and (ii) shall survive the termination of
Executive's employment for a period of three years with respect to
Confidential Information that does not qualify as a trade secret and,
with respect to trade secrets, for so long as the information
qualifies as a trade secret. Executive agrees that upon termination of
Executive's employment with the Company for any reason, he will return
to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or
therefrom, in any way relating to the business of the
13
Company, its affiliates and subsidiaries, except that he may retain
only those portions of personal notes, notebooks and diaries that do
not contain Confidential Information of the type described in the
preceding sentence. Executive further agrees that he will not retain
or use for Executive's own benefit, purposes or account or the
benefit, purposes or account of any other person, firm, partnership,
joint venture, association, corporation or other business designation,
entity or enterprise, other than the Company and any of its
subsidiaries or affiliates, at any time any trade names, trademark,
service xxxx, other proprietary business designation, patent, or other
intellectual property used or owned in connection with the business of
the Company or its affiliates.
(b) The Executive covenants and agrees that any
Confidential Information, including any confidential or proprietary
materials, ideas, discoveries, inventions, 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 Executive hereby assigns all of
his right, title and interest in and to any such Confidential
Information.
(c) Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and its affiliates
and accordingly agrees as follows:
(i) During the Term and, for a period of two
(2) years following the date Executive ceases to be employed
by the Company for any reason (the "Restricted Period"),
Executive will not, whether on Executive's own behalf or on
behalf of or in conjunction with any person, company,
business entity or other organization whatsoever, directly or
indirectly solicit or assist in soliciting in competition
with the Company, the business of any client or prospective
client:
(A) with whom Executive had personal
contact or dealings on behalf of the Company during
the one (1) year period preceding Executive's
termination of employment; or
(B) with whom employees reporting
directly to Executive have had personal contact or
dealings on behalf of the Company during the one
year immediately preceding the Executive's
termination of employment;
(ii) During the Term and, for a period of one
(1) year following the date the Executive ceases to be
employed by the Company due to the Executive's resignation
without Good Reason, Executive will not directly or
indirectly:
(A) engage in a capacity that involves
duties and responsibilities similar to those duties
and responsibilities
14
performed by Executive on behalf of the Company or
its subsidiaries, in any business that competes with
the business of the Company or its subsidiaries in
any geographical area that is within 15 miles of any
geographical area where the Company or its
subsidiaries provide their products or services (a
"Competitive Business");
(B) acquire a financial interest in
any Competitive Business, as an individual, partner,
shareholder, officer, director, principal, agent,
trustee or consultant; or
(C) interfere with, or attempt to
interfere with, business relationships (whether
formed before, on or after the date of this
Agreement) between the Company or any of its
affiliates and customers, clients, suppliers or
investors.
(iii) Notwithstanding anything to the contrary in
this Agreement, Executive may, directly or indirectly own,
solely as an investment, securities of any person engaged in
the business of the Company or its affiliates which are
publicly traded on a national or regional stock exchange or
on the over-the-counter market if Executive (i) is not a
controlling person of, or a member of a group which controls,
such person and (ii) does not, directly or indirectly, own 5%
or more of any class of securities of such person.
(iv) During the Restricted Period, Executive
will not, whether on Executive's own behalf or on behalf of
or in conjunction with any person, company, business entity
or other organization whatsoever, directly or indirectly:
(A) solicit or encourage any employee
(other than employees below the administrator level)
of the Company or its affiliates to leave the
employment of the Company or its affiliates; or
(B) hire any such employee who was
employed by the Company or its affiliates as of the
date of Executive's termination of employment with
the Company or who left the employment of the
Company or its affiliates coincident with, or within
one year prior to or after, the termination of
Executive's employment with the Company.
(d) It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this
Section 14 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is an unenforceable
restriction against Executive, the provisions of
15
this Agreement shall not be rendered void but shall be deemed amended
to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction
finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained herein.
(e) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the
provisions of Section 14 would be inadequate and the Company would
suffer irreparable damages as a result of such breach or threatened
breach. In recognition of this fact, Executive agrees that, in the
event of such a breach or threatened breach, in addition to any
remedies at law, the Company, without posting any bond, shall be
entitled to cease making any payments or providing any benefit
otherwise required by this Agreement and obtain equitable relief in
the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which
may then be available.
15. Tax Consideration.
Notwithstanding anything herein to the contrary, in the event any
payments to the Executive hereunder ("Total Payments") are determined by the
Company to be subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any similar federal or state
excise tax, FICA tax, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest or penalties are hereinafter collectively referred to as the
"Excise Tax"), the Company shall pay to the Executive at the time specified in
Section 11(d)(vi), an additional amount (the "Gross-Up Payment") such that
after the payment by the Executive of all federal, state, or local income
taxes, Excise Taxes, FICA taxes, or other taxes (including any interest or
penalties imposed with respect thereto) imposed upon the receipt of the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed on the Total Payments.
If the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of employment,
the Executive shall repay to the Company, at the time the reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction. If the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of termination of employment, the Company shall
make an additional Gross-Up Payment to the Executive in respect of such excess
at the time the amount of such excess is finally determined. The Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as practicable but
no later than ten (10) business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such claim and the
date on which such
16
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the thirty (30) day period following the date on which he or
she gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(a) give the Company any information reasonably
requested by the Company relating to such claim;
(b) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including legal and accounting fees and additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax, FICA
tax, or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 15, the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction, and in
one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim and xxx
for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the
17
Executive shall be entitled to settle or contest, as the case may be, other
issues raised by the Internal Revenue Service or any other taxing authority.
If any such claim referred to in this Section 15 is made by the
Internal Revenue Service and the Company does not request the Executive to
contest the claim within the thirty (30) day period following notice of the
claim, the Company shall pay to the Executive the amount on any Gross-Up
Payment owed to the Executive, but not previously paid pursuant to this Section
15, immediately upon the expiration of such thirty (30) day period. If any such
claim is made by the Internal Revenue Service and the Company requests the
Executive to contest such claim, but does not advance the amount of such claim
to the Executive for purposes of such contest, the Company shall pay to the
Executive the amount of any Gross-Up Payment owed to the Executive, but not
previously paid under the provisions of this Section 15, within five (5)
business days of a Final Determination of the liability of the Executive for
such Excise Tax. For purposes of this Agreement, a "Final Determination" shall
be deemed to occur with respect to a claim when (i) there is a decision,
judgment, decree, or other order by any court of competent jurisdiction, which
decision, judgment, decree, or other order has become final, i.e., all
allowable appeals pursuant to this Section 15 have been exhausted by either
party to the action, (ii) there is a closing agreement made under Section 7121
of the Code, or (iii) the time for instituting a claim for refund has expired,
or if a claim was filed, the time for instituting suit with respect thereto has
expired.
If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 15, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 15) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Executive of an amount advanced by the Company pursuant to this Section 15, a
determination is made by the Internal Revenue Service that the Executive is not
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
16. 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
or she 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.
17. Amendment or Modification. Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing,
18
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.
18. 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:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
To the Company at: Mariner Health Care, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: General Counsel
Any notice delivered personally or by courier under this Section 18
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.
19. 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.
20. 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.
21. Governing Law: Attorney's Fees.
(a) This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to
its conflicts of laws principles.
19
(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.
22. 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 22 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.
23. 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.
24. Withholdings. All payments to the Executive under this
Agreement shall be reduced by all applicable withholding required by federal,
state or local tax laws.
25. 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.
20
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
MARINER HEALTH CARE, INC.
BY: /s/ C. Xxxxxxxxx Xxxxxx
----------------------------------------
NAME: C. Xxxxxxxxx Xxxxxx
TITLE: President and Chief Executive
Officer
EXECUTIVE
/s/ Xxxxxxx Xxxxx
-------------------------------------------
Xxxxxxx Xxxxx
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