Exhibit 10.1
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 9, 1998 between Xxx X. Xxxxxx
(the "Executive") and Paragon Health Network, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Company desires to employ the Executive as the Senior Vice
President and Chief Human Resources Officer, and the Executive desires to accept
such employment, for the term and upon the other conditions hereinafter set
forth; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company;
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the
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Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
2. Term. This Agreement shall commence on the date hereof (the
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"Effective Date") and continue for the two-year period (the "Term") terminating
on the second anniversary of the Effective Date, or upon the Executive's earlier
death, disability or other termination of employment pursuant to Section 11;
provided, however, that commencing on the second anniversary of the Effective
Date and on each anniversary thereafter, the Term shall automatically be
extended for one additional year unless, not later than 90 days prior to any
such anniversary, either party hereto shall have notified the other party hereto
in writing that such extension shall not take effect.
3. Position. During the Term, the Executive shall serve as Senior Vice
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President and Chief Human Resources Officer of the Company or in such other
executive position in the Company as the Executive shall approve.
4. Duties and Reporting Relationship. During the Term, the Executive
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shall, on a full time basis, use her skills and render services to the best of
her abilities in supervising and conducting the operations of the Company and
shall not engage in any other business activities except with the prior written
approval of the Board of Directors of the Company (the "Board") or its duly
authorized designee. The Executive shall also perform such other executive and
administrative duties (not inconsistent with the position of Senior Vice
President and Chief Human Resources Officer) as the Executive may reasonably be
expected to be capable of performing on behalf of the Company, as may from time
to time be authorized or directed by the Board. The Executive agrees to be
employed by the Company in all such capacities for the Term, subject to all the
covenants and conditions hereinafter set forth.
5. Place of Performance. The Executive shall perform her duties and
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conduct her business at the principal executive offices of the Company, except
for required travel on the Company's business.
6. Salary and Annual Bonus.
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(a) Base Salary. The Executive's base salary hereunder shall
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be $280,000.00 a year, payable monthly and prorated for any partial
year of employment. The Board shall review such base salary at least
annually and make such adjustment from time to time as it may deem
advisable, but the base salary shall not at any time be less than
$280,000.00 a year.
(b) Annual Bonus. The Company shall provide the Executive with
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an opportunity to earn upon achievement of target performance, an
annual bonus equal to fifty percent (50%) of her base salary (the
"Target Bonus"), with a minimum bonus of between fifty percent (50%) of
Target Bonus upon achievement of threshold performance and an
opportunity to earn up to one hundred fifty percent (150%) of the
Target Bonus for performance in excess of the targets.
(c) Execution Bonus. On the Effective Date, the Company shall pay to
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the Executive $125,000 (subject to any applicable payroll or other
taxes required to be withheld).
(d) Relocation Bonus. On the Effective Date, the Company shall
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pay to the Executive $50,000 (subject to applicable payroll or other
taxes required to be withheld) to assist the Executive with other
expenses of relocation, which shall be in addition to the payments
under the Company's relocation policy. The Executive shall not be
required to account to the Company as to the use of the Relocation
Bonus.
(e) Outplacement Assistance. On the Effective Date, the
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Company shall provide the Executive's spouse with outplacement services
in an amount not exceeding $10,000, for the purposes of assisting the
Executive's spouse in locating suitable employment in the Atlanta,
Georgia area. All outplacement services shall be provided by an
outplacement agency approved in advance by the Company.
7. Vacation, Holidays and Sick Leave. During the Term, the Executive
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shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior vice presidents.
8. Expenses. The Executive shall be reimbursed for all ordinary and
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necessary business expenses incurred by her in connection with her employment
upon timely submission by the Executive of receipts and other documentation as
required by the Internal Revenue Code and in conformance with the Company's
normal procedures.
9. Pension and Welfare Benefits. During the Term, the Executive shall
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be eligible to participate fully in all health benefits, insurance programs,
pension and retirement plans and other employee benefit and compensation
arrangements available to vice presidents of the Company generally.
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10. Stock Options. The Company, pursuant to the terms of its
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stock option plan, may grant to the Executive, stock options to purchase a
number of shares of common stock.
11. Termination of Employment.
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(a) General. The Executive's employment hereunder may be
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terminated without any breach of this Agreement only under the
following circumstances.
(b) Death or Disability.
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(i) The Executive's employment hereunder shall
automatically terminate upon the death of the Executive.
(ii) If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is unable to perform the
essential functions of her job for any one hundred eighty (180)
days (whether or not consecutive) during any eighteen (18) month
period, and no reasonable accommodation can be made that will allow
Executive to perform 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
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Executive's employment hereunder at any time, whether or not for Cause.
For purposes of this Agreement, "Cause" shall mean (i) the failure or
refusal by the Executive to perform her duties hereunder (other than
any such failure resulting from the Executive's incapacity due to
physical or mental illness), which has not ceased within ten (10) days
after a written demand for substantial performance is delivered to the
Executive by the Company, which demand identifies the manner in which
the Company believes that the Executive has not performed such duties,
(ii) the engaging by the Executive in willful misconduct or an act of
moral turpitude which is materially injurious to the Company,
monetarily or otherwise (including, but not limited to, conduct which
violates Section 15 hereof) or (iii) the conviction of the Executive
of, or the entering of a plea of nolo contendere by, the Executive with
respect to, a felony.
(d) Termination by the Executive. The Executive shall be
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entitled to terminate her employment hereunder (A) for Good Reason, (B)
if her health should become impaired to an extent that makes her
continued performance of her duties hereunder hazardous to 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 or (C) without the Executive's express written consent, any
failure by the Company to comply with any material provision of this
Agreement, which failure has not been cured within ten (10) days after
notice of such noncompliance has been given by the Executive to the
Company. For purposes of this Agreement, "Good Reason" shall mean the
occurrence following a
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Change in Control during the term of this Agreement, of any one of the
following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described below, such
act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) any material diminution in the Executive's
authorities or responsibilities (including reporting
responsibilities) which were in effect immediately prior to
the Change in Control or from her status, title, position or
responsibilities (including reporting responsibilities) which
were in effect following a Change in Control pursuant to the
Executive's consent to accept any such change; the assignment
to 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 her to any of such positions,
except if any such changes are because of Disability,
retirement, death or Cause;
(ii) a reduction by the Company in the Executive's
base salary or Target Bonus as in effect on the date hereof or
as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person (as defined in Section 11(h)(i) below) in control
of the Company provided in no event shall any such reduction
reduce the Executive's base salary below $280,000;
(iii) the relocation of the Executive's office at
which she is to perform her duties, to a location more than
fifty (50) miles from the location at which the Executive
performed her duties prior to the Change in Control, except
for required travel on the Company's business to an extent
substantially consistent with her business travel obligations
prior to the Change in Control;
(iv) the failure by the Company, without the
Executive's consent, to pay to the Executive any portion of
the Executive's current compensation;
(v) the failure by the Company to continue to
provide the Executive with benefits substantially similar in
value to the Executive in the aggregate to those enjoyed by
the Executive under any of the Company's pension, life
insurance, medical, health and accident, or disability plans
in which the Executive was participating immediately prior to
the Change in Control, unless the Executive participates after
the Change in Control in other comparable benefit plans
generally available to senior executives of the Company and
senior executives of any Person in control of the Company;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 11(f)
below; for purposes of this Agreement, no such purported
termination shall be effective.
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The Executive's continued employment for 6 months following any act or
failure to act constituting Good Reason hereunder without the delivery
of a Notice of Termination shall constitute consent to, and a waiver of
rights with respect to, such act or failure to act.
(e) Voluntary Resignation. Should the Executive wish to resign
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from her position with the Company or terminate her employment for
other than Good Reason during the Term, the Executive shall give sixty
(60) days written notice to the Company ("Notice Period"), setting
forth the reasons and specifying the date as of which 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 notice and payment of
amounts due to the Executive under Section 6(a) and, to the extent
applicable, Section 6(b) for the balance of the Notice Period. The
Company's obligation to continue to employ the Executive or to continue
payment of the amounts described in the preceding sentence shall cease
immediately if: (1) the Executive has not satisfied her obligations to
cooperate fully with a smooth transition or (2) the Company has grounds
to terminate the Executive's employment immediately for Cause. If the
Executive terminates her employment for other than Good Reason within
twelve (12) months from the Effective Date, the Executive shall be
obligated to refund the amounts that were received under Sections 6(c)
and 6(d) of this Agreement.
(f) Notice of Termination. Any purported termination of the
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Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Section 19. "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (i)
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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, the date Notice of Termination is given,
(iii) if the Executive's employment is terminated pursuant to
Subsection (c), (d) or (e) hereof or for any other reason (other than
death or Disability), the date specified in the Notice of Termination
which shall not be less than sixty (60) days from the date such Notice
of Termination is given.
(h) Change in Control. For purposes of this Agreement, a
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Change in Control of the Company shall have occurred if
(i) any "Person" (as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") as
modified and used in Sections 13(d) and 14(d) of the Exchange
Act (other than (1) the Company or any of its subsidiaries,
(2) any trustee or other fiduciary holding securities under an
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employee benefit plan of the Company or any of its
subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, (4) any
corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of the Company's common stock or (5) Apollo
Management, LP, any of its affiliates and any investments
funds managed by it (collectively, "Apollo"))), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting
power of the Company's then outstanding voting securities;
(ii) during any period of not more than two (2)
consecutive years, not including any period prior to the date
of this Agreement, individuals who at the beginning of such
period constitute the Board, and any new director (other than
a director designated by a person (other than Apollo) who has
entered into an agreement with the Company to effect a
transaction described in clause (i), (iii), or (iv) of this
Section 1l(h)) whose election by the Board or nomination for
election by the Company's stockholders was (A) made pursuant
to the Stockholders Agreement affecting the Company dated
November 4, 1997 or (B) approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than both (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) 50% or
more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a merger
or consolidation in which no person acquires 50% or more of
the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets (or any transaction having a similar
effect) other than such a sale or disposition to Apollo.
(i) Return of Property. When the Executive ceases to be
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employed by the Company, the Executive will promptly surrender to the
Company all Company property, including without limitation, all records
and other documents obtained by her or entrusted to her during the
course of her employment with the Company provided, however, that the
Executive may retain copies of such documents as necessary for the
Executive's personal records for federal income tax purposes.
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12. Compensation During Disability; Death or Upon Termination.
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(a) During any period that the Executive fails to perform her
duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to receive
her base salary at the rate then in effect for such period until her
employment is terminated pursuant to Section 1l(b)(ii) hereof, provided
that payments so made to the Executive during the Disability Period
shall be reduced by the sum of the amounts, if any, payable to the
Executive with respect to such period under disability benefit plans of
the Company or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any such
payment.
(b) If the Executive's employment is terminated by her death
or Disability, the Company shall pay (i) any base salary due to the
Executive under Section 6(a) through the date of such termination and
(ii) an amount equal to the Target Bonus she would have received for
the fiscal year that ends on or immediately after the Date of
Termination, assuming the Company achieved the lowest target level for
which a bonus is paid under the plan described in Section 6(b),
prorated for the period beginning on the first day of the fiscal year
in which occurs the Date of Termination through the Date of
Termination. In addition, if the Executive's employment is terminated
by her death, the Company shall continue to pay to her estate her
salary for an additional six months at the rate then in effect.
(c) If the Executive's employment is terminated by the Company
for Cause or by the Executive for other than Good Reason, the Company
shall pay the Executive 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 following a Change in Control (A) the Company
terminates the Executive's employment without Cause, or (B) the
Executive terminates her employment for Good Reason, then
(i) the Company shall pay the Executive 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 average of the annual bonuses
actually paid to the Executive by the Company with respect to
the two (2) fiscal years which immediately precede the year of
the Term which the Date of Termination occurs
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provided if there was bonus or bonuses paid to the Executive
with respect only to one fiscal year that immediately precedes
the year within the Term in which the Date of Termination
occurs, then such single year's bonus or bonuses shall be
utilized in the calculation pursuant to this clause (2),
provided, further, that for purposes of this Agreement, if the
Date of Termination occurs before the end of the first fiscal
year that ends after the Effective Date, the amount of the
bonus paid by the Company to the Executive shall be deemed to
be the Target Bonus and (B) the number two (2);
(iii) the Company shall pay the Executive an amount
equal to the prorated Target Bonus that would have been paid
for the period beginning on the first day of the fiscal year
in which the Date of Termination occurs;
(iv) the Company shall continue coverage for the
Executive, on the same terms and conditions as would be
applicable if the Executive were an active Employee, under the
Company's life insurance, medical, health and similar welfare
benefit plans (other then group disability benefits) for a
period of twenty-four (24) months. Benefits otherwise
receivable by the Executive pursuant to this Section 12(d)(iv)
shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer
during the period during which the Company is required to
provide such benefits, and the Executive shall report any such
benefits actually received by her to the Company; and
(v) the payments provided for in this Section 12(d)
(other than Section 12(d)(iv)) shall be made not later than
the thirtieth (30th) day following the Date of Termination,
provided, however, that if the amounts of such payments, and
the limitation on such payments set forth in Section 16
hereof, cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Company, of the
minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section
1274(b)(2)(B) of the Code (as defined in Section 16)) as soon
as the amount thereof can be determined but in no event later
than the sixtieth (60th) day after the Date of Termination. In
the event that the amount of the estimated payments exceeds
the amount determined by the Company within six (6) months
after payment to have been due, such excess shall constitute a
loan by the Company to the Executive, payable no later than
the thirtieth (30th) business day after demand by the Company
(together with interest at the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 12(d), the Company shall provide the
Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or
other advice the Company has received from outside counsel,
auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
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(vi) If the Executive continues to be employed by the
Company for one (1) year after a Change of Control and has not
by such time given Notice of Termination for Good Reason, the
Executive will have waived her right to exercise her rights
under Section 12(d) hereof with respect to any act or failure
to act which constitutes Good Reason.
(e) If the Executive terminates her employment under clause
(C) of Section 11(d) hereof or, prior to any Change of Control, the
Company terminates the Executive's employment without Cause, then
(i) the Company shall pay the Executive 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) the Company shall pay to the Executive the greater
of either (A) the remaining amount of base salary owed for the
Term; or (B) an aggregate amount equal to the sum of (1) nine
(9) months of the Executive's base salary at the rate in
effect as of the Date of Termination plus (2) one (1)
additional month of the Executive's base salary at such rate
for each full year of service beyond the first anniversary of
this Agreement, not to exceed eighteen (18) months of base
salary payments; such amount to be paid in substantially equal
monthly installments during the period commencing with the
month immediately following the month in which the Date of
Termination occurs or in a lump sum payment, as decided by the
Company;
(iii) the Company shall pay the Executive 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;
(iv) the Company shall continue coverage for the
Executive, on the same terms and conditions as would be
applicable if the Executive were an active employee, under the
Company's life insurance, medical, health, and similar welfare
benefit plans (other then group disability) for a period not
to exceed the number of months the Executive will be paid
under Section 12(e)(ii) beginning on the Date of Termination;
(v) benefits otherwise receivable by the Executive
pursuant to clause (iv) of this Section 12(e) shall be reduced
to the extent comparable benefits are actually received by the
Executive from a subsequent employer during the period which
the Company is required to provide such benefits, and the
Executive shall report any such benefits actually received by
her to the Company;
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(vi) the payments made to the Executive under Section
12(e) hereof will be reduced by the amount of payments
provided for by any subsequent employer of the executive for a
position obtained after the Date of Termination.
(f) If the Executive experiences a termination under Section
12(d) or 12(e) hereof, until the Executive finds another full-time
position or for 6 months, whichever is earlier, the Company shall
provide the Executive with professional outplacement services of the
Executive's choosing and shall reimburse the Executive documented
incidental outplacement expenses directly related to the Executive's
job search such as resume mailing, interview trips, and clerical
support, subject to a maximum cost of $10,000 for such outplacement
services and incidental expenses. The Executive's choice of
professional outplacement services is subject to the Company's
reasonable prior approval. If the Company has not approved or
disapproved of the Executive's choice within ten (10) business days of
receiving notice of such choice, the Company will be deemed to have
given is approval. Any approval by the Company will be in writing and
will state the basis for such disapproval. The Executive will not be
entitled to receive cash or lieu of the professional outplacement
services provided pursuant to this Section.
(g) If the Executive shall terminate her employment under
clause (B) of Sections 11(d) or 11(e) hereof, the Company shall pay the
Executive 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 12 by seeking other
employment or otherwise, and, except as provided in Sections 12(e)
hereof, the amount of any payment or benefit provided for in this
Section 12 shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer or by
retirement benefits.
(i) Release. Prior to making any payment pursuant to Sections
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12(d)(iii) and 12(d)(iv) or Sections 12(e)(ii) and 12(e)(iii),
whichever is applicable, the Company shall have the right to require
the Executive to sign, and the Executive hereby agrees to sign, an
agreement to be bound by the terms of Section 15 of this Agreement and
a waiver of all claims the Executive may have (including any claims
under the Age Discrimination in Employment Act), and the Company may
withhold payment of such amount until the period during which the
Executive may revoke such waiver (normally seven days) has elapsed.
13. Representations and Covenants.
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(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company
and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms.
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(b) The Executive represents and warrants that she is not
a party to any agreement or instrument which would prevent her from
entering into or performing her duties in any way under this Agreement.
The Executive agrees and covenants that 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.
14. Successors: Binding Agreement.
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(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
(b) This Agreement is a personal contract and the rights
and interests of the Executive hereunder may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him, except as
otherwise expressly permitted by the provisions of this Agreement. This
Agreement shall inure to the benefit of and be enforceable by the
Executive and 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
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 her devisee, legatee or other designee or,
if there is no such designee, to her estate.
15. Confidentiality and Non-Competition Covenants.
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(a) The Executive covenants and agrees that she will not
at any time during or at any time after the end of the Term, directly
or indirectly, use for her own account, or disclose to any person, firm
or corporation, other than authorized officers, directors and employees
of the Company or its subsidiaries, Confidential Information (as
hereinafter defined) that is treated as trade secrets by the Company
and will not at any time during or for a period equal to the number of
payments which are being made under Section 12(e) hereof directly or
indirectly, use for her own account, or disclose to any person, firm or
corporation, other than authorized officers, directors and employees of
the Company or its subsidiaries, any other Confidential Information. As
used herein, "Confidential Information" of the Company means
information of any kind, nature or description which is disclosed to or
otherwise known to the Executive as a direct or indirect consequence of
her association with the Company, which information is not generally
known to the public or in the business in which the Company is engaged
or which information relates to specific investment opportunities
within the scope of the Company's business which were considered by the
Executive or the Company during the term of this Agreement.
Confidential Information that is treated as confidential trade secrets
by the Company shall include, but not be limited to, strategic
operating plans and budgets, policy and procedure manuals, computer
programs, financial forms and information, patient or resident lists
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and accounts, supplier information, accounting forms and procedures,
personnel policies, information pertaining to the salaries, positions
and performance reviews of the Company's employees, information on the
methods of the Company's operations, research and data developed by or
for the benefit of the Company and information relating to revenues,
costs, profits and the financial condition of the Company. During the
Term and for a period of two years following the termination of the
Executive's employment, the Executive shall not induce any employee of
the Company or its subsidiaries to terminate her or her employment by
the Company or its subsidiaries in order to obtain employment by any
person, firm or corporation affiliated with the Executive.
(b) The Executive covenants and agrees that any
information, materials, ideas, discoveries, techniques or programs
developed or discovered by the Executive in connection with the
performance of her duties hereunder shall remain the sole and exclusive
property of the Company and, to the extent it constitutes Confidential
Information, shall be subject to the covenants contained in the
preceding paragraph.
(c) The Executive covenants and agrees that during the
Term and, if the Executive's employment is terminated by the Executive
for other than Good Reason, for a period of two (2) years following the
termination of the Executive's employment, the Executive shall not,
directly or indirectly, own an interest in, operate, join, control, or
participate as a partner, director, principal, officer, or agent of,
enter into the employment of, or act as a consultant to, in any case in
which she has control or supervision over a significant portion of any
entity (i) whose principal business is the operation of one or more
skilled nursing facilities or (ii) which operates a skilled nursing
business that is material in relation to the Company's comparable
business and (iii) in either case, which derives at least 10% of its
skilled nursing facility revenue from facilities which are located
within 35 miles of centers or facilities operated by the Company.
Notwithstanding anything herein to the contrary, the foregoing
provisions of this Section 15(c) shall not prevent the Executive from
acquiring securities representing not more than 5% of the outstanding
voting securities of any publicly held corporation.
(d) Without limiting the right of the Company to pursue
all other legal and equitable remedies available for violation by the
Executive of the covenants contained in this Section 15, it is
expressly agreed by the Executive and the Company that such other
remedies cannot fully compensate the Company for any such violation and
that the Company shall be entitled to injunctive relief, without the
necessity of proving actual monetary loss, to prevent any such
violation or any continuing violation thereof. Each party intends and
agrees that if in any action before any court or agency legally
empowered to enforce the covenants contained in this Section 15, any
term, restriction, covenant or promise contained herein is found to be
unreasonable and accordingly unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency. The covenants
contained in Section 15 shall survive the conclusion of the Executive's
employment by the Company.
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16. Prohibition on Parachute Payments.
---------------------------------
(a) Notwithstanding any other provisions of this
Agreement, any payment or benefit received or to be received by the
Executive in connection with a Change in Control of the Company or the
termination of the Executive's employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) (all
such payments and benefits, including, without limitation, base salary
and bonus payments, being hereinafter called "Total Payments") would
not be deductible (in whole or in part), by the Company, an affiliate
or any Person making such payment or providing such benefit as a result
of section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), then, to the extent necessary to make such portion of the
Total Payments deductible (and after taking into account any reduction
in the Total Payments provided by reason of section 280G of the Code in
such other plan, arrangement or agreement), (A) such cash payments
shall first be reduced (if necessary, to zero), and (B) all other non-
cash payments by the Company to the Executive shall next be reduced (if
necessary, to zero). For purposes of this limitation (i) no portion of
the Total Payments the receipt or enjoyment of which the Executive
shall have effectively waived in writing prior to the Date of
Termination shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which in the opinion of tax
counsel selected by the Company's independent auditors and reasonably
acceptable to the Executive does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code, including by
reason of section 280G(b)(4)(A) of the Code, (iii) such payments shall
be reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of
the tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and
(4) of the Code.
(b) If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding
that, notwithstanding the good faith of the Executive and the Company
in applying the terms of this Section 16, the aggregate "parachute
payments" paid to or for the Executive's benefit are in an amount that
would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive
shall have an obligation to pay the Company upon demand an amount equal
to the sum of (i) the excess of the aggregate "parachute payments" paid
to or for the Executive's benefit over the aggregate "parachute
payments" that could have been paid to or for the Executive's benefit
without any portion of such "parachute payments" not being deductible
by reason of section 280G of the Code; and (ii) interest on the amount
set forth in clause (i) of this sentence at the rate provided in
section 1274(b)(2)(B) of the Code from the date of the Executive's
receipt of such excess until the date of such payment.
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17. Entire Agreement. This Agreement contains all the understandings
----------------
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether oral
or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, 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.
18. Amendment or Modification. Waiver. No provision of this Agreement
---------------------------------
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
19. Notices. Any notice to be given hereunder shall be in writing and
-------
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: Xxx X. Xxxxxx
1310 North Xxxxxxx Court
Number 3DA
Xxxxxxx, Xxxxxxxx 00000
To the Company at: Paragon Health Network, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Any notice delivered personally or by courier under this Section 19
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
20. Severability. If any provision of this Agreement or the application
------------
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
21. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
14
22. Governing Law: Attorney's Fees.
------------------------------
(a) This Agreement will be governed by and construed in
accordance with the laws of the State of Georgia, without regard to its
conflicts of law principles.
(b) The prevailing party in any dispute arising out of this
Agreement shall be entitled to be paid its reasonable attorney's fees
incurred in connection with such dispute from the other party to such
dispute.
23. Dispute Resolution. The Executive and the Company shall not
------------------
initiate legal proceedings relating in any way to this Agreement or to the
Executive's employment or termination from employment with the Company until
thirty (30) days after the party against whom the claim is made ("respondent")
receives written notice from the claiming party of the specific nature of any
purported claims and the amount of any purported damages attributable to each
such claim. The Executive and the Company further agree that if respondent
submits the claiming party's claim to the CPR Institute for Dispute Resolution,
JAMS/Endispute, or other local dispute resolution service for nonbinding
mediation prior to the expiration of such thirty (30) day period, the claiming
party may not institute arbitration or other legal proceedings against
respondent until the earlier of: (a) the completion of good-faith mediation
efforts or (b) 90 days after the date on which the respondent received written
notice of the claimant's claim(s); provided, however, that nothing in this
Section 23 shall prohibit the Company from pursuing injunctive or other
equitable relief against the Executive prior to, contemporaneous with, or
subsequent to invoking or participating in these dispute resolution processes.
The Company shall pay the cost of the mediator.
24. Headings. All descriptive headings of sections and paragraphs in
--------
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Withholdings. All payments to the Executive under this Agreement
------------
shall be reduced by all applicable withholding required by federal, state or
local tax laws.
26. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Signatures appear on the following page]
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PARAGON HEALTH NETWORK, INC.
BY: /s/ Xxxxx Xxxxxx Xxxxxxx
NAME: Xxxxx Xxxxxx Xxxxxxx
TITLE: Senior Vice President and General Counsel
EXECUTIVE
/s/ Xxx Xxxxxx
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