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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Agreement made effective as of August 16, 1999 by and between
ADVOCAT INC., a Delaware corporation (the "Company"), and Xxxxxxx Xxxxx (the
"Executive").
In consideration of the mutual covenants contained in this Agreement,
the parties hereby agree as follows:
SECTION I
EMPLOYMENT
The Company agrees to employ the Executive and the Executive agrees to
be employed by the Company for the Period of Employment as provided in Section
III.A. below and upon the terms and conditions provided in the Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive agrees to serve as
Executive Vice- President, Chief Financial Officer, Secretary and Treasurer of
the Company and to be responsible for the typical management responsibilities
expected of an officer holding such positions and such other responsibilities as
may be assigned to Executive from time to time by the Chief Executive Officer or
Board of Directors of the Company.
SECTION III
TERMS AND DUTIES
A. Period of Employment
The period of Executive's employment under this Agreement will
commence as of the date hereof and shall continue through August 16, 2000,
subject to extension or termination as provided in this Agreement ("Period of
Employment"). On each anniversary of the commencement of the Period of
Employment, the period of Executive's employment shall be extended for
additional one (1) year periods, unless either party gives notice thirty (30)
days in advance of the expiration of the then current period of employment of
such party's intent not to extend the Period of Employment.
B. Duties
During the Period of Employment, the Executive shall devote
all of his business time, attention and skill to the business and affairs of the
Company and its subsidiaries. The
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Executive will perform faithfully the duties which may be assigned to him from
time to time by the Chief Executive Officer or the Board of Directors.
SECTION IV
COMPENSATION AND BENEFITS
A. Compensation
For all services rendered by the Executive in any capacity
during the Period of Employment, the Executive shall be compensated as follows:
1. Base Salary
The Company shall pay the Executive a base salary
("Base Salary") as follows: One Hundred Seventy-Five Thousand Dollars ($175,000)
per annum.
Base Salary shall be payable according to the
customary payroll practices of the Company but in no event less frequently than
once each month. The base salary shall be reviewed annually and shall be subject
to increase according to the policies and practices adopted by the Company from
time to time.
B. Annual Incentive Awards
The Company will pay the Executive annual incentive
compensation awards as may be granted by the Board or a Compensation Committee
to the Executive up to 30% of Base Salary, conditional upon achievement of
pre-agreed goals.
C. Additional Benefits
The Executive will be entitled to participate in all
compensation or employee benefit plans or programs and receive all benefits and
perquisites for which any salaried employees are eligible under any existing or
future plan or program established by the Company for salaried employees. The
Executive will participate to the extent permissible under the terms and
provisions of such plans or programs in accordance with program provisions.
These may include group hospitalization, health, dental care, life or other
insurance, tax qualified pension, car allowance, savings, thrift and profit
sharing plans, termination pay programs, sick leave plans, travel or accident
insurance, disability insurance, and contingent compensation plans including
capital accumulation programs, Restricted Stock programs, stock purchase
programs and stock option plans. Nothing in this Agreement will preclude the
Company from amending or terminating any of the plans or programs applicable to
salaried or senior executives as long as such amendment or termination is
applicable to all salaried employees or senior executives. The Executive will be
entitled to an annual four-week paid vacation.
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D. Stock Option Plan
The Company will grant to the Executive options for the
purchase of 25,000 shares of the Company under the Company's 1994 Incentive and
Nonqualified Stock Option Plan for Key Personnel. The exercise price for these
options will be the price on the market close on August 13, 1999.
E. 401(k) Plan
If the Executive declines to participate in the 401(k) Plan
provided by the Company, an amount equivalent to what the Executive would
receive by the Company pursuant to the 401(k) Plan will be paid toward the
monthly premiums for the life insurance policy which has served as the funding
vehicle for the nonqualified Retirement Supplement Plan provided by Xxxxxx Small
Apparel plc.
SECTION V
BUSINESS EXPENSES
The Company will reimburse the Executive for all reasonable travel and
other expenses incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement.
SECTION VI
DISABILITY
A. In the event of disability of the Executive during the Period of
Employment, the Company will continue to pay the Executive according to the
compensation provisions of this Agreement during the period of his disability,
until such time as Executive's long term disability insurance benefits are
available. However, in the event the Executive is disabled for a continuous
period of six (6) months after the Executive first becomes disabled, the Company
may terminate the employment of the Executive. In this case, normal compensation
will cease except for earned but unpaid Base Salary and Incentive Compensation
Awards which would be payable on a pro-rated basis for the year in which the
disability occurred. In the event of such termination, all unvested stock
options held by Executive shall be deemed fully vested on the date of such
termination.
B. During the period the Executive is receiving payments of either
regular compensation or disability insurance described in this Agreement and as
long as he is physically and mentally able to do so, the Executive will furnish
information and assistance to the Company and from time to time will make
himself available to the Company to undertake assignments consistent with his
prior position with the Company and his physical and mental health. If the
Company fails to make a payment or provide a benefit required as part of the
Agreement, the Executive's obligation to furnish information and assistance will
end.
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C. The term "disability" will have the same meaning as under any
disability insurance provided pursuant to this Agreement or otherwise.
SECTION VII
DEATH
In the event of the death of the Executive during the Period of
Employment, the Company's obligation to make payments under this Agreement shall
cease as of the date of death, except for earned but unpaid Base Salary and
Incentive Compensation Awards which will be paid on a pro-rated basis for that
year. The Executive's designated beneficiary will be entitled to receive the
proceeds of any life or other insurance or other death benefit programs provided
in this Agreement.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. If the Executive's employment terminates due to either a Without
Cause Termination or a Constructive Discharge, as defined later in this
Agreement, the Company will pay the Executive in a lump sum upon such
Termination or Constructive Discharge an amount equal to 200% of his Base Salary
as in effect at the time of the termination. Earned but unpaid Base Salary and
Incentive Compensation Awards will be paid in a lump sum at such time. The
benefits and perquisites described in this Agreement as in effect at the date of
termination of employment will be continued for eighteen (18) months. If the
Executive's employment terminates due to either a Without Cause Termination or a
Constructive Discharge, or pursuant to Section XI, all stock options ("Options")
granted to the Executive under the Company's 1994 Non-Qualified Stock Option
Plan or other stock option program or plan (the "Plan") shall be deemed vested,
and the Company shall cause the Options to remain exercisable for eighteen (18)
months from the date of termination.
B. If the Executive's employment terminates due to a Termination for
Cause, earned but unpaid Base Salary will be paid on a pro-rated basis for the
year in which the termination occurs. No other payments will be made or benefits
provided by the Company.
C. Upon termination of the Executive's employment other than for
reasons due to death, disability, or pursuant to Paragraph A of this Section or
Section XI, the Period of Employment and the Company's obligation to make
payments under this Agreement will cease as of the date of the termination
except as expressly defined in this Agreement.
D. For this Agreement, the following terms have the following meanings:
1. "Termination for Cause" means termination of the Executive's
employment by the Company's Board of Directors acting in good faith by the
Company by
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written notice to the Executive specifying the event relied upon for such
termination, due to the Executive's serious, willful misconduct with respect to
his duties under this Agreement, including but not limited to conviction for a
felony or perpetration of a common law fraud, which has resulted or is likely to
result in material economic damage to the Company.
2. "Constructive Discharge" means termination of the Executive's
employment by the Executive due to a failure of the Company to fulfill its
obligations under this Agreement in any material respect including any reduction
of the Executive's Base Salary or other compensation other than reductions
applicable to all employees of the Company or failure to appoint or reappoint
the Executive to the position specified in Section II hereof, or other material
change by the Company in the functions, duties or responsibilities of the
position which would reduce the ranking or level, responsibility, importance or
scope of the position. The Executive will provide the Company a written notice
which describes the circumstances being relied on for the termination with
respect to the Agreement within ninety (90) days after the event giving rise to
the notice. The Company will have thirty (30) days to remedy the situation prior
to the Termination for Constructive Dismissal.
3. "Without Cause Termination" means termination of the Executive's
employment by the Company (a) other than due to death, disability, Termination
for Cause or pursuant to Section XI; or (b) upon expiration of the Period of
Employment as a result of the giving of notice by the Company of its intent not
to extend the Period of Employment as provided in Section III.A.
E. Stock Option Repurchase
If the Executive's employment terminates due to either a Without
Cause Termination or a Constructive Discharge or pursuant to Section XI,
Executive may require the Company to repurchase any Options for an amount equal
to the difference between the fair market value of a share of the Company's
common stock on the date of termination and the per share exercise price set
forth in the Options, times the number of shares (whether vested or unvested)
granted to the Executive under the Options.
SECTION IX
OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE PERIOD OF EMPLOYMENT
A. The Executive will, with reasonable notice during or after the
Period of Employment, furnish information as may be in his possession and
cooperate with the Company as may reasonably be requested in connection with any
claims or legal actions in which the Company is or may become a party.
B. The Executive recognizes and acknowledges that all information
pertaining to the affairs, business, clients, customers or other relationships
of the Company, as hereinafter defined, is confidential and is a unique and
valuable asset of the Company. Access to and knowledge of
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this information are essential to the performance of the Executive's duties
under this Agreement. The Executive will not during the Period of Employment or
after except to the extent reasonably necessary in performance of the duties
under this Agreement, give to any person, firm, association, corporation or
governmental agency any information concerning the affairs, business, clients,
customers or other relationships of the Company except as required by law. The
Executive will not make use of this type of information for his own purposes or
for the benefit of any person or organization other than the Company. The
Executive will also use his best efforts to prevent the disclosure of this
information by others. All records, memoranda, etc. relating to the business of
the Company whether made by the Executive or otherwise coming into his
possession are confidential and will remain the property of the Company.
C. During the Period of Employment and for a twelve (12) month period
thereafter, the Executive will not use his status with the Company to obtain
loans, goods or services from another organization on terms that would not be
available to him in the absence of his relationship to the Company. During the
Period of Employment and for a twelve (12) month period following termination of
the Period of Employment, other than termination due to a Without Cause
Termination, a Constructive Discharge or termination pursuant to Section XI: the
Executive will not make any statements or perform any acts intended to advance
the interest of any existing or prospective competitors of the Company in any
way that will injure the interest of the Company; the Executive without prior
express written approval by the Board of Directors of the Company will not
directly or indirectly own or hold any proprietary interest in or be employed by
or receive compensation from any party engaged in the same or any similar
business in the same geographic areas the Company does business; and the
Executive without express prior written approval from the Board of Directors,
will not solicit any members of the then current clients of the Company or
discuss with any employee of the Company information or operation of any
business intended to compete with the Company. For the purposes of the
Agreement, proprietary interest means legal or equitable ownership, whether
through stock holdings or otherwise, of a debt or equity interest (including
options, warrants, rights and convertible interests) in a business firm or
entity, or ownership of more than 5% of any class of equity interest in a
publicly-held company. The Executive acknowledges that the covenants contained
herein are reasonable as to geographic and temporal scope. For a twelve (12)
month period after termination of the Period of Employment for any reason, the
Executive will not directly or indirectly hire any employee of the Company or
solicit or encourage any such employee to leave the employ of the Company.
D. The Executive acknowledges that his breach or threatened or
attempted breach of any provision of Section IX would cause irreparable harm to
the Company not compensable in monetary damages and that the Company shall be
entitled, in addition to all other applicable remedies, to a temporary and
permanent injunction and a decree for specific performance of the terms of
Section IX without being required to prove damages or furnish any bond or other
security.
E. The Executive shall not be bound by the provisions of Section IX in
the event of the default by the Company in its obligations under this Agreement
which are to be performed upon or after termination of this Agreement.
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SECTION X
INDEMNIFICATION, LITIGATION
The Company will indemnify the Executive to the fullest extent
permitted by the laws of the state of incorporation in effect at that time, or
certificate of incorporation and by-laws of the Company whichever affords the
greater protection to the Executive. The Executive will be entitled to any
insurance proceeds related to any award, or any fees or expenses incurred in
connection with any action, suit or proceeding to which he may be made a party
by reason of being a director or officer of the Company.
SECTION XI
CHANGE IN CONTROL
In the event there is a Change in Control of the ownership of the
Company, the Executive may at any time immediately resign upon written notice to
the Company. In this event, the Company shall pay to the Executive in a lump sum
upon such resignation an amount equal to 200% of his Base Salary as in effect at
the time of such resignation. In addition, earned but unpaid Base Salary and
Incentive Compensation Awards will be paid on a pro-rated basis for the year in
which resignation occurs. Any stock options granted to the Executive prior to
termination pursuant to the Plan, but subject to vesting restrictions, will be
fully vested upon a Change in Control whether or not the Executive resigns. The
benefits and perquisites described in this Agreement as in effect at the date of
termination of employment will also be continued for eighteen (18) months from
the effective date of termination pursuant to Change of Control.
A "Change in Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of more than 50% of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, as the same shall have existed immediately prior to
such merger or consolidation, (iii) the Company shall sell all or substantially
all of its assets to another corporation which is not a wholly-owned subsidiary,
or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
(as in effect on the date hereof) of the Securities and Exchange Act of 1934
("Exchange "Act")), shall acquire more than 50% of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange
Act.
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SECTION XII
WITHHOLDING TAXES
The Company may directly or indirectly withhold from any payments under
this Agreement all federal, state, city or other taxes that shall be required
pursuant to any law or governmental regulation.
SECTION XIII
EFFECTIVE PRIOR AGREEMENTS
This Agreement contains the entire understanding between the Company
and the Executive with respect to the subject matter and supersedes any prior
employment or severance agreements between the Company and its affiliates, and
the Executive.
SECTION XIV
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a Consolidation, Merger or Sale
of Assets, the term "the Company" as used will mean the other corporation and
this Agreement shall continue in full force and effect. This Section XIV is not
intended to modify or limit the rights of the Executive hereunder, including
without limitation, the rights of Executive under Section XI.
SECTION XV
MODIFICATION
This Agreement may not be modified or amended except in writing signed
by the parties. No term or condition of this Agreement will be deemed to have
been waived except in writing by the party charged with waiver. A waiver shall
operate only as to the specific term or condition waived and will not constitute
a waiver for the future or act on anything other than that which is specifically
waived.
SECTION XVI
GOVERNING LAW; ARBITRATION
This Agreement has been executed and delivered in the State of
Tennessee and its validity, interpretation, performance and enforcement shall be
governed by the laws of that state.
Any dispute among the parties hereto shall be settled by arbitration in
Nashville, Tennessee, in accordance with the rules then obtaining of the
American Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof.
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SECTION XVII
NOTICES
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid by registered mail, return receipt requested,
or if delivered by hand, overnight delivery service or confirmed facsimile
transmission, to the following:
(a) If to the Company, at 000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxxx 00000, Attention: President or Chief Executive Officer, or
at such other address as may have been furnished to the Executive by the Company
in writing; or
(b) If to the Executive, at 000 Xxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000, or such other address as may have been furnished to the Company
by the Executive in writing.
SECTION XVIII
BINDING AGREEMENT
This Agreement shall be binding on the parties' successors, heirs and
assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ADVOCAT INC.
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
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Title: Chairman & CEO
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EXECUTIVE:
/s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
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