SUN HEALTHCARE GROUP, INC.
June 2, 1998
Xx. Xxxxxx X. Xxxxxx
0 Xxxxxx Xxxxxxx Xxxxx, X.X.
Xxxxxxxxxxx, XX 00000
EMPLOYMENT AGREEMENT
Dear Xx. Xxxxxx:
The following sets forth the agreement (this "AGREEMENT") between Sun
Healthcare Group, Inc. (the "COMPANY") and you regarding the terms and
provisions of your employment as an officer and employee of the Company and the
consequences of a termination thereof. Capitalized words which are not
otherwise defined herein shall have the meanings assigned to such words in
Section 10 of this Agreement.
1. TERM OF EMPLOYMENT UNDER THE AGREEMENT. The term of your employment
under this Agreement shall commence on June 2, 1998 (the "EFFECTIVE DATE") and
shall continue until the fifth anniversary of the Effective Date (the
"EMPLOYMENT TERM") unless earlier terminated by either you or the Company
pursuant to the terms of Section 9 hereof. The term of the severance
obligations provided under Section 4(ii) under this Agreement shall commence on
the Effective Date and shall survive expiration of the Employment Term.
Notwithstanding the foregoing, in the event of a Change in Control the two-year
period commencing on the Change in Control Date shall be referred to herein as
the "CHANGE IN CONTROL TERM."
2. EMPLOYMENT. During the Employment Term, you shall be employed as
Chief Executive Officer of the Company and shall report directly to the Board of
Directors of the Company (the "BOARD"), and your duties and responsibilities to
the Company shall be consistent in all respects with such position. Your
principal duties and responsibilities shall be to assume and exercise general
supervisory control of the day-to-day business and affairs of the Company. You
may be elected or appointed to serve as an officer of any Affiliate of the
Company, provided that the terms of such appointment or election are
satisfactory to you. You shall devote substantially all of your business time,
attention, skills, and efforts to the business and affairs of
the Company. Your principal place of employment shall be the executive offices
of the Company as established from time to time, although you understand and
agree that you may be required to travel from time to time for business
purposes.
3. COMPENSATION DURING THE EMPLOYMENT TERM.
(a) BASE SALARY.
(i) As compensation to you for all services rendered to the
Company, the Company shall pay you a base salary (the "SALARY") at the rate of
$700,000 per annum for the period from the Effective Date through March 31,
1999, $850,000 per annum for the period from April 1, 1999 through March 31,
2000, and $1,000,000 per annum for the period commencing April 1, 2000 through
the remainder of the Initial Term. Such Salary shall be reviewed annually by
the Board or, if such authority has been so delegated, by the compensation
committee, (the "COMPENSATION COMMITTEE") and may be increased but not decreased
by the Board or Compensation Committee on the basis of such review. Your Salary
shall be paid to you in accordance with the Company's regular payroll practices
applicable to its executive officers.
(ii) Should you become partially disabled (which for purposes of
this Section 3(a) means your inability because of any physical or emotional
illness to perform your assigned duties under this Agreement more than 20 hours
per week) the Salary shall nevertheless be paid in full until your termination
pursuant to Section 9 below. If, during any period of partial disability, you
receive any periodic payments representing lost compensation under any health
and accident policy or under any salary continuation policy the premiums for
which have been paid by the Company, the amount of salary that you would be
entitled to receive from the Company during the continuance of such partial
disability shall be decreased by the amounts of such payments.
(b) COMPANY CAR. The Company shall lease or purchase and insure at
its own expense and provide for your exclusive use an automobile of which make,
model, and year shall be mutually acceptable to you and to the Company. The
Company shall be responsible for all maintenance, gasoline, repair, and other
similar costs of ownership and operation of such automobile.
(c) ANNUAL BONUS. As additional compensation, the Company shall pay
to you an annual bonus pursuant to a formula which shall be established and
revised from time to
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time by the Board or by the Compensation Committee. Such bonus compensation
shall be prorated during any partial fiscal years of the Company covered by the
Employment Term.
(d) LIFE AND HEALTH INSURANCE. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance on
your life in any amount considered advisable by the Company, and you hereby
agree that, in connection therewith, you shall submit to any medical or other
examination and execute and deliver any application or other instrument in
writing reasonably necessary to effectuate such insurance. The Company shall
provide you with health insurance, including major medical coverage. All such
benefits provided by the Company to you shall be at least equivalent to the
benefits that are offered to other executive employees of the Company.
(e) EXPENSES. The Company shall pay or reimburse you for all
reasonable and necessary expenses incurred by you in the performance of the
duties and responsibilities pursuant to this Agreement.
(f) PERSONAL LEAVE. You shall be entitled to take such vacation and
personal leave from your employment duties hereunder at and for such periods as
shall be consistent with any policy or practice of the Company with regard
thereto, or in the absence thereof, as are enjoyed by persons serving in
comparable executive positions in the healthcare industry, but in no event shall
any such vacation and personal leave unreasonably interfere with the performance
of your duties and responsibilities hereunder.
4. EFFECT OF TERMINATION.
(a) INVOLUNTARY TERMINATION.
(i) ACCRUED COMPENSATION AND BENEFITS. In the event of your
Involuntary Termination, the Company shall pay you within 15 days of the date of
such Involuntary Termination the full amount of any earned but unpaid salary
through the date of such Involuntary Termination, plus a cash payment
(calculated on the basis of your salary at the rate then in effect) for all
unused paid time off which you may have earned (in accordance with Company
policy) as of the date of such Involuntary Termination, and a cash payment for
any unreimbursed expenses. The Company shall also pay you within 15 days of the
date of such Involuntary Termination, in accordance with current policy, a pro
rata portion of your annual bonus compensation for the year in which your
Involuntary Termination occurs, determined by multiplying the bonus compensation
received by you in the preceding year by a fraction, the numerator of which
shall be the number of calendar days in the year in which your Involuntary
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Termination occurs that precede such Involuntary Termination, and the
denominator of which shall be the total number of days in such year.
(ii) SEVERANCE PAYMENT. In the event of your Involuntary
Termination, the Company shall also pay you an additional amount (the "SEVERANCE
PAYMENT") as set forth in either Section 4(a)(ii)(A) or 4(a)(ii)(B) below. The
Severance Payment shall be in lieu of any other severance payments which you are
entitled to receive under any other severance pay plan or arrangement sponsored
by the Company and its subsidiaries.
(A) INVOLUNTARY TERMINATION. In the event of your
Involuntary Termination, the Company shall pay you, within 15 days of the date
of such Involuntary Termination, a Severance Payment equal to two (2) times your
Salary at the rate then in effect. Notwithstanding the foregoing, your right to
receive the Severance Payment described in this Section 4(a)(ii)(A) shall be
conditioned upon your execution of a release in favor of the Company, which
shall not be inconsistent with the terms of this Agreement, and which is not
revoked by you within the revocation period specified therein.
(B) INVOLUNTARY TERMINATION ON OR AFTER THE CHANGE IN
CONTROL DATE. In the event of your Involuntary Termination on or after the
Change in Control Date, the Company shall pay you, within 15 days of the date of
such Involuntary Termination, a Severance Payment equal to three (3) times your
Salary at the rate then in effect.
(iii) BENEFIT PAYMENT. In the event of your Involuntary
Termination, you and your eligible dependents shall continue to be eligible to
participate during the Benefit Continuation Period (as hereinafter defined) in
the medical, dental, health, life and other fringe benefit plans and
arrangements applicable to you immediately prior to your Involuntary Termination
on the same terms and conditions in effect for you and your dependents
immediately prior to such Involuntary Termination. For purposes of the previous
sentence, "BENEFIT CONTINUATION PERIOD" means the period beginning on the date
of such Involuntary Termination and ending on the earlier to occur of (A)(1) in
the event of your Involuntary Termination, the second anniversary of the date of
such Involuntary Termination or (2) in the event of your Involuntary Termination
on or after the Change in Control Date, the third anniversary of the date of
such Involuntary Termination, and (B) the date that you and your dependents are
eligible and elect coverage under the plans of a subsequent employer which
provide substantially equivalent or greater benefits to you and your dependents.
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(c) OTHER TERMINATION. In the event that your employment with the
Company terminates in accordance with Section 9 hereof, other than due to your
Involuntary Termination under Section 9(a)(i) hereof, the Company shall pay you
the full amount of any earned but unpaid salary through the date of such
termination, plus a cash payment (calculated on the basis of your salary at the
rate then in effect) for all unused paid time off which you may have earned (in
accordance with Company policy) as of the date of such termination, and a cash
payment for any unreimbursed expenses. As of the date of such termination, you
shall immediately relinquish the right to any additional payments or benefits
from the Company under this Agreement.
(d) NO MITIGATION OR OFFSET. You shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, not shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by you as the result
of employment by another employer or by pension benefits paid by the Company or
another employer after the date of termination or otherwise except as
specifically provided in clause (B) of the last sentence of Section 4(a)(iii).
5. ADDITIONAL PAYMENTS.
(a) GROSS-UP PAYMENT. Notwithstanding anything herein to the
contrary, if it is determined that any Change in Control Payment would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "EXCISE TAX"), then
you shall be entitled to an additional payment (a "GROSS-UP PAYMENT") in an
amount that shall place you in the same after-tax economic position that you
would have enjoyed if the Excise Tax had not applied to the Change in Control
Payment. The amount of the Gross-Up Payment shall be determined by the
Accounting Firm using such formula as the Accounting Firm deems appropriate. No
Gross-Up Payment shall be payable hereunder if the Accounting Firm determines
that the Change in Control Payments are not subject to an Excise Tax.
(b) DETERMINATION OF GROSS-UP PAYMENT. Subject to the provisions of
Section 5(c), all determinations required under this Section 5, including
whether a Gross-Up Payment is required, the amount of the Change in Control
Payments constituting excess parachute payments, and the amount of the Gross-Up
Payment, shall be made by the Accounting Firm, which shall provide detailed
supporting calculations both to you and the Company within fifteen days of the
change in the ownership or effective control of the Company or in the ownership
of a substantial portion of the assets of the Company (within the meaning of
such terms under Section 280G of
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the Code), your date of termination or any other data reasonably requested by
you or the Company on which a determination under this Section 5 is necessary or
advisable. The Company shall pay to you the initial Gross-Up Payment within 5
days of the receipt by you and the Company of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by you, the Company shall cause the Accounting Firm to provide you and the
Company with an opinion that the Company and you have substantial authority
under the Code and Regulations not to report an Excise Tax on your federal
income tax return. Any determination by the Accounting Firm shall be binding
upon you and the Company. If the initial Gross-Up Payment is insufficient to
cover the amount of the Excise Tax that is ultimately determined to be owing by
you with respect to any Change in Control Payment (hereinafter, an
"UNDERPAYMENT"), the Company, after exhausting its remedies under Section 5(c)
below, shall promptly pay to you an additional Gross-Up Payment in respect of
the Underpayment.
(c) PROCEDURES. You 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 a Gross-Up Payment. Such notice shall be given as soon as
practicable after you know of such claim and shall apprise the Company of the
nature of the claim and the date on which the claim is requested to be paid.
You agree not to pay the claim until the expiration of the thirty-day period
following the date on which you notify the Company, or such shorter period
ending on the date the Taxes with respect to such claim are due (the "NOTICE
PERIOD"). If the Company notifies you in writing prior to the expiration of the
Notice period that it desires to contest the claim, you shall: (i) give the
Company any information reasonably requested by the Company relating to the
claim, (ii) take such action in connection with the claim as the Company may
reasonably request, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company and reasonably acceptable to you, (iii) cooperate with the Company
in good faith in contesting the claim, and (iv) permit the Company to
participate in any proceedings relating to the claim. You shall permit the
Company to control all proceedings related to the claim and, at its option,
permit the Company to pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect of
such claim. If requested by the Company, you agree either to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner and
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts as the
Company shall determine; PROVIDED, HOWEVER, that, if the Company directs you to
pay such claim and pursue a refund, the Company shall advance the amount of such
payment to you on an after-tax and interest-free basis (the "ADVANCE"). The
Company's control of the contest related to the claim shall be limited to the
issues related to the
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Gross-Up Payment and you shall be entitled to settle or contest, as the case may
be, any other issues raised by the Internal Revenue Service or other taxing
authority. If the Company does not notify you in writing prior to the end of
the Notice Period of its desire to contest the claim, the Company shall pay to
you an additional Gross-Up Payment in respect of the excess parachute payments
that are the subject of the claim, and you agree to pay the amount of the Excise
Tax that is the subject of the claim to the applicable taxing authority in
accordance with applicable law.
(d) REPAYMENTS. If, after receipt by you of an Advance, you become
entitled to a refund with respect to the claim to which such Advance relates,
you shall pay the Company the amount of the refund (together with any interest
paid or credited thereon after Taxes applicable thereto). If, after receipt by
you of an Advance, a determination is made that you shall not be entitled to any
refund with respect to the claim and the Company does not promptly notify you of
its intent to contest the denial of refund, then the amount of the Advance shall
not be required to be repaid by you and the amount thereof shall offset the
amount of the additional Gross-Up Payment then owing to you.
(e) FURTHER ASSURANCES. The Company shall indemnify you and hold you
harmless, on an after-tax basis, from any costs, expenses, penalties, fines,
interest or other liabilities ("LOSSES") incurred by you with respect to the
exercise by the Company of any of its rights under this Section 5, including,
without limitation, any Losses related to the Company's decision to contest a
claim or any imputed income to you resulting from any Advance or action taken on
your behalf by the Company hereunder. The Company shall also pay all of the
fees and expenses of the Accounting Firm, including, without limitation, the
fees and expenses related to the opinion referred to in Section 5(b).
6. PROTECTION OF THE COMPANY'S INTERESTS.
(a) NO COMPETING EMPLOYMENT.
(i) As long as you are employed by the Company and continuing
for either (i) two years after the termination of your employment for any reason
or (ii) in the event of a Change in Control, two years after the termination of
your employment other than due to your Involuntary Termination under Section
9(a)(i) hereof on or after the Change in Control Date (such period being
referred to hereinafter as the "RESTRICTED PERIOD"), you shall not, unless you
receive the prior written consent of the Board, directly or indirectly, own an
interest in, manage, operate, join, control, lend money, or render financial or
other assistance to or participate in or be
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connected with as an officer, or employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes (as defined in subsection (ii) below) with
the Company.
(ii) The term "COMPETE" means engaging in any manner
whatsoever in the same or any similar business as the Company or any of its
Affiliates within a geographic area of 50 miles of any office, branch, or
other facility of the Company or any of its Affiliates, or any other location
at which the Company or any of its Affiliates provides services to patients
or customers, including, without limitation, as a proprietor, investor,
shareholder, director, officer, employee, consultant, independent contractor,
or otherwise, other than (A) as a passive investor owning less than five
percent (5%) equity interest in any one entity or enterprise, (B) as an
owner, either directly or indirectly, of less than five percent of any class
of securities which are listed on a national securities exchange or quoted on
the automated quotation system of the National Association of Securities
Dealers, Inc., or (C) as an employee of an entity that competes with the
Company in a capacity which does not facilitate the generation of operating
revenue.
(iii) Any investment or activity which is not in violation of
Section 6(a)(i) immediately prior to a Company Action (as hereinafter defined),
shall not become a violation of Section 6(a)(i) solely as a result of such
Company Action. This subsection (iii) shall not apply to an action by you which
causes a violation of Section 6(a)(i) on the date of such action. For purposes
of this Section 6(a)(iii), the term "Company Action" means any action on the
part of the Company or any Affiliate.
(b) NO INTERFERENCE. During the Restricted Period, you shall not,
whether for your own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than the
Company), intentionally solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with, any person who is
employed by or otherwise engaged to perform services for the Company or any
person or entity who is, or was within the then most recent twelve-month period,
a customer, client or supplier of the Company.
(c) CONFIDENTIALITY. You hereby covenant and agree that you shall
not at any time, except in performance of your obligations to the Company
hereunder or with the prior written consent of the Board, directly or indirectly
disclose to any person any secret or "confidential information" that you may
learn or have learned by reason of your association with the Company. The term
"CONFIDENTIAL INFORMATION" means any information not previously disclosed to the
public or to the trade by the Company's management with respect to the
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Company's products, facilities and methods, trade secrets and other intellectual
property systems, procedures, manuals, confidential reports, product price
lists, customer lists, financial information (including the revenues, costs or
profits associated with any of the Company's products), business plans,
prospects or opportunities.
(d) EXCLUSIVE PROPERTY. You hereby confirm that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by you relating to the
business of the Company shall be and remain the property of the Company. Upon
the termination of your employment with the Company for any reason, or upon the
request of the Company at any time, you shall promptly deliver to the Company
and shall not without the consent of the Board retain copies of any written
materials not previously made available to the public or records and documents
made by you or coming into your possession concerning the business or affairs of
the Company.
(e) RELIEF. Without intending to limit the remedies available to the
Company, you acknowledge that a breach of any of the covenants contained in this
Section 6 may result in material irreparable injury to the Company for which
there is no adequate remedy at law, that it shall not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction restraining you from engaging
in activities in violation of this Section 6 or such other relief as may be
required to specifically enforce any of the covenants in this Section 6.
7. LEGAL FEES AND EXPENSES. The Company shall pay or reimburse you on an
after-tax basis for all costs and expenses (including, without limitation, court
costs and reasonable legal fees and expenses which reflect common practice with
respect to the matters involved) incurred by you as a result of any claim,
action or proceeding (i) arising out of your termination of employment, (ii)
contesting, disputing or enforcing any right, benefits or obligations under this
Agreement or, (iii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; PROVIDED, HOWEVER,
that this provision shall not apply if the relevant trier-of-fact determines
that your claim or position was frivolous and without reasonable foundation.
8. SUCCESSORS; BINDING AGREEMENT.
(a) ASSUMPTION BY SUCCESSOR. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or
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substantially all of the business or assets of the Company (and may require any
subsidiary of the Company to which you have devoted a substantial portion of
your business time that is being spun off) expressly to assume and to 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;
PROVIDED, HOWEVER, that no such assumption shall relieve the Company of its
obligations hereunder. As used in this Agreement, the "COMPANY" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
(or subsidiary that is spun off) as aforesaid, which assumes and agrees to
perform this Agreement by operation of law or otherwise.
(b) ENFORCEABILITY BENEFICIARIES. This Agreement shall be binding
upon and inure to the benefit of you (and your personal representatives and
heirs) and the Company and any organization which succeeds to substantially all
of the business or assets of the Company, whether by means of merger,
consolidation, acquisition of all or substantially all of the assets of the
Company or otherwise, including, without limitation, as a result of a Change in
Control or by operation of law. This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
9. TERMINATION.
(a) TERMINATION EVENTS. Your employment by the Company pursuant to
the terms of this Agreement shall terminate:
(i) upon your Involuntary Termination;
(ii) upon notice to you, in accordance with and subject to
Section 9(b), that the Company is terminating your employment for Cause; and
(iii) at your election upon six (6) months' advance written
notice to the Company (or such other notice period as the parties may agree).
(b) TERMINATION FOR CAUSE.
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(i) Any claimed termination of your employment for Cause
pursuant to Section 9(a)(ii) hereof shall be communicated to you by written
notice from the Company. Such notice shall recite the facts and circumstances
claimed to provide the basis for such termination, and shall specify the Date of
Termination. As used in this Agreement, "DATE OF TERMINATION" shall mean the
date specified in the notice of termination, which date shall be not less than
thirty (30) nor more than sixty (60) days from the date the notice of
termination is given.
(ii) If, within thirty (30) days from the date the notice of
termination specified in subsection (i) is received, you notify the Company that
you dispute that the basis set forth in such notice of termination exists, the
Date of Termination shall be the date on which the dispute is finally resolved
in accordance with subsection (iii) hereof.
(iii) In the event that you dispute the existence of Cause, then
upon written notice to the American Arbitration Association given within ninety
(90) days after your receipt of notice of termination for Cause in accordance
with subsection (i), such issues shall be submitted to binding arbitration
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, and the costs of such arbitration proceedings shall be borne by the
non-prevailing party therein.
(iv) The Date of Termination shall be extended by a notice of
dispute in accordance with subsection (ii) hereof, provided that such notice is
given in good faith and you in fact submit such dispute to binding arbitration
within 90 days after your receipt of notice of termination for Cause.
(v) During the pendency of any dispute, the Company will
continue to pay your full salary in effect as of the date of the notice of
termination, and shall continue your participation in all other compensation,
benefit, and insurance plans in which you were participating at such date, until
the final resolution of such dispute in accordance with subsection (iii).
Subject to the provisions of the preceding sentence, at any time on or after the
date that a notice of termination is given by the Company, the Company shall be
entitled, at its option, to relieve you from any or all duties of employment
hereunder.
10. DEFINITIONS. For purposes of this Agreement, the flowing capitalized
words shall have the meanings set forth below:
"ACCOUNTING FIRM" shall mean Xxxxxx Xxxxxxxx LLP, or, if such firm is
unable or unwilling to perform such calculations, such other national accounting
firm as shall be designated by agreement between you and the Company.
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"AFFILIATE" shall mean any legal entity that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
control with the Company, including, without limitation, any wholly or
majority-owned subsidiaries of the Company.
"CAUSE" shall mean a termination of your employment which is a result
of (i) your felony conviction, (ii) a determination by the Board that you have
violated any of the protective covenants set forth in Section 6 of this
Agreement or (iii) your continued failure substantially to perform the duties
reasonably requested by the Company (other than any such failure resulting from
your incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from a resignation by you for Good Reason) after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, and which performance is not
substantially corrected by you within 30 days of receipt of such demand;
PROVIDED, HOWEVER, that, during the Change in Control Term, any such failure
shall not constitute cause unless such failure is willful. For purposes of the
previous sentence, no act or failure to act on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company.
A "CHANGE IN CONTROL" shall be deemed to have occurred if there is a
"change in control" of the Company within the meaning of Section 280G of the
Code and the Regulations; or
(i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended (the
"1934 ACT")), other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company (an "ACQUIRING PERSON"), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of more than 33 1/3% of the then outstanding voting stock of the
Company;
(ii) the shareholders of the Company and a majority of the
non-employee directors of the Company approve a merger or consolidation of the
Company with any other corporation, other than 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 entity) at
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least 66 2/3% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation;
(iii) the shareholders of the Company approve a plan of
reorganization (other than a reorganization or liquidation under the United
States Bankruptcy Code or 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;
(iv) during any period of two consecutive years (beginning on
or after the Effective Date), individuals who at the beginning of such period
constitute the Board and any new director (other than a director who is a
representative or nominee of an Acquiring Person) whose election by the Board
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, no longer constitute a majority of
the Board;
PROVIDED, HOWEVER, that notwithstanding parts (i), (ii), (iii) and (iv) of this
definition, a Change in Control shall not be deemed to have occurred in the
event of:
(x) a sale or conveyance in which the Company continues as a
holding company of an entity or entities that conduct the business or
businesses formerly conducted by the Company; or
(y) any transaction undertaken for the purpose of
reincorporating the Company under the laws of another jurisdiction, if
such transaction does not materially affect the beneficial ownership
of the Company's capital stock.
"CHANGE IN CONTROL DATE" shall mean the date on which the Change in
Control occurs; PROVIDED that if your employment with the Company terminates
prior to the Change in Control Date and it is reasonably demonstrated that your
termination of employment (i) was at the request of the third party who has
taken steps reasonably calculated to effect the Change in Control or (ii)
otherwise arose in connection with or in anticipation of the Change in Control,
then the Change in Control Date shall mean the date immediately prior to the
date of your termination of employment.
"CHANGE IN CONTROL PAYMENT" means (i) any amount due or paid to you
under this Agreement, (ii) any amount that is due or paid to you under any plan,
program, or arrangement of the Company and its subsidiaries (including, without
limitation, the Equity
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Plans), and (iii) any amount or benefit that is due or payable to you under this
Agreement, or under any plan, program or arrangement of the Company and its
subsidiaries not otherwise covered under clause (i) or (ii) hereof which must
reasonably be taken into account under Section 280G of the Code and the
Regulations in determining the amount of the "parachute payments" received by
you, including, without limitation, any amounts which must be taken into account
under the Code and Regulations as a result of (A) the acceleration of the
vesting of any option, restricted stock or other Equity Award granted under the
Equity Plans or otherwise, (B) the acceleration of the time at which any payment
or benefit is receivable by you, or (C) any contingent severance or other
amounts that are payable to you.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
any successor provisions thereto.
"COMMON STOCK" shall mean the common stock of the Company.
"DISABILITY" shall mean your inability to engage in substantial
gainful activity by reason of any medically determinable mental or physical
impairment which can be expected to result in death or which has lasted or can
be expected to last a continuous period of not less than twelve (12) months.
"EQUITY AWARDS" shall mean options, restricted stock or other grants
or awards which consist of, or relate to, equity securities of the Company and
which have been granted to you under the Equity Plans. For purposes of this
Agreement, Equity Awards shall also include any securities acquired upon the
exercise of an option, warrant or similar right that constitutes an Equity
Award.
"EQUITY PLAN CHANGE IN CONTROL" shall mean a change in control of the
Company as defined in the applicable Equity Plan.
"EQUITY PLANS" shall mean any equity-based incentive plan or
arrangement adopted by the Company.
"GOOD REASON" shall mean a resignation of your employment as a result
of any of the following:
(i) (A) a meaningful and detrimental alteration in your position
or the nature or status of your responsibilities, or a meaningful and
detrimental change in your reporting responsibilities or titles, as in effect
immediately prior to such alteration or change, or (B) during
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the Change in Control Term, a meaningful and detrimental alteration in your
position or the nature or status of your responsibilities, or a meaningful and
detrimental change in your reporting responsibilities or titles, as in effect
immediately prior to the Change in Control Date;
(ii) a reduction by the Company in your annual base salary as in
effect from time to time; a reduction in your target annual bonus (expressed as
a percentage of base salary) as in effect from time to time; or a failure by the
Company to provide you with any other form of compensation or benefit being
provided to you from time to time; PROVIDED that, in the event of your
resignation following a Change in Control of the Company, any such reduction in
your salary, target annual bonus or any other form of compensation or benefit
from the rate or level in effect immediately prior to the Change in Control Date
shall constitute Good Reason;
(iii) the relocation of the office of the Company outside of
Albuquerque, New Mexico; or a significant increase in the amount of time that
you are required to travel for business purposes;
(iv) the failure of the Company to obtain an agreement
reasonably satisfactory to you from any successor to assume and agree to
perform this Agreement, as contemplated in Section 8(a) hereof;
(v) any termination of your employment which is not effected
pursuant to the terms of this Agreement; or
(vi) a material breach by the Company of the provisions of this
Agreement;
PROVIDED, HOWEVER, that an event described above in clause (vi) shall not
constitute Good Reason unless it is communicated by you to the Company in
writing and is not corrected by the Company in a manner which is reasonably
satisfactory to you (including full retroactive correction with respect to any
monetary matter) within 10 days of the Company's receipt of such written notice
from you.
"INVOLUNTARY TERMINATION" shall mean (i) the termination of your
employment by the Company other than for Cause, including, without limitation,
by reason of your Disability, or (ii) your resignation of employment with the
Company for Good Reason.
"REGULATIONS" shall mean the proposed, temporary and final regulations
under Section 280G of the Code or any successor provision thereto.
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"TAXES" shall mean the federal, state and local income taxes to which
you are subject at the time of determination, calculated on the basis of the
highest marginal rates then in effect, plus any additional payroll or
withholding taxes to which you are then subject.
11. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
Chairperson of the Compensation Committee, with a copy to the General Counsel of
the Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12. MISCELLANEOUS.
(a) AMENDMENTS, WAIVERS, ETC. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No arrangements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement
and this Agreement shall supercede all prior agreements, negotiations,
correspondences, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof; PROVIDED, HOWEVER, that
except as expressly set forth herein, this Agreement shall not supercede the
terms of Equity Awards previously granted to you.
(b) VALIDITY. The invalidity or unenforceablilty of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) WITHHOLDING. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
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(e) SOURCE OF PAYMENTS. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. You shall have no right, title or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
hereunder. To the extent that any person acquires a right to receive payments
from the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
(f) HEADINGS. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(g) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understanding of the parties with
respect to the subject matter hereof, including, without limitation, the
Employment Agreement with the Company dated June 2, 1993 and the Severance
Agreement with the Company dated January 2, 1997; PROVIDED, HOWEVER, that the
parties hereto understand and agree that the Indemnity Agreement dated July 3,
1996 between you and the Company and any Equity Award agreements that are in
effect as of the Effective Date pertain to matters that are not covered by this
Agreement and therefore shall remain in effect after the Effective Date
according to the respective terms of such agreements.
(h) GOVERNING LAW. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
Mexico applicable to contracts entered into and performed in such State.
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
shall then constitute our agreement on this subject.
Sincerely,
SUN HEALTHCARE GROUP, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chair, Compensation
Committee
Agreed to as of the date first above written.
/s/ Xxxxxx X. Xxxxxx
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