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EXHIBIT 10.9
SECOND AMENDED EMPLOYMENT AGREEMENT
This SECOND AMENDED EMPLOYMENT AGREEMENT ("Agreement"), effective as of
April 1, 1997 between HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, an
Ohio corporation (the "Company"), HEALTH CARE AND RETIREMENT CORPORATION, a
Delaware corporation and sole stockholder of the Company ("HCR) and XXXX X.
XXXXXX ("Employee"), supersedes and replaces all prior employment agreements
between the parties hereto.
RECITALS
A. The Company has agreed to employ Employee in the position and at the base
rate of pay set forth on Schedule I.
B. The Company has further agreed to provide severance benefits to Employee
upon a termination of Employee's employment resulting from certain
specified events.
C. The Company wishes to insure that its senior executives and other key
employees are not practically disabled from discharging their duties in
respect to a proposed or actual transaction involving a Change in Control.
D. The Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other
key employees, including Employee, applicable in the event of a Change in
Control.
EVENTS
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employee and the Company hereby agree as follows:
1. CERTAIN DEFINED TERMS. The following terms have the meanings set forth
below:
(a) "Accounting Firm" is defined in Section 10(b).
(b) "Aggregate Cash Compensation" means the sum of Base Pay and
Employee's cash bonuses pursuant to the Company's Annual Incentive Plan
and Performance Award Plan as in effect at any time of determination.
(c) "Base Pay" means Employee's annual base salary as in effect at
any time of determination.
(d) "Board" means the Board of Directors of HCR.
(e) "Cause" means Employee's financial dishonesty, fraud in the
performance of his duties, willful failure to perform assigned duties
hereunder or the commission of a felony.
(f) "Change in Control" means the occurrence during the Protected
Term of any of the following events:
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(i) HCR is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than sixty-five
percent of the combined voting power of the then outstanding
securities of such resulting corporation or person immediately
after such transaction are held in the aggregate by the holders of
Voting Stock of HCR immediately prior to such transaction;
(ii) HCR sells or otherwise transfers all or substantially all
of its assets to another corporation or other legal person, and as
a result of such sale or transfer less than sixty-five percent of
the combined voting power of the then outstanding Voting Stock of
such corporation or person immediately after such sale or transfer
is held in the aggregate by the holders of Voting Stock of HCR
immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any
person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
15% or more of the then outstanding Voting Stock of HCR;
(iv) HCR files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule,
form or report or item therein) that a Change in Control of HCR has
occurred or will occur in the future pursuant to any then existing
contract or transaction; or
(v) If, during any consecutive twelve month period,
individuals who at the beginning of any such period constitute the
Directors cease for any reason to constitute at least a majority
thereof, provided, however, that for purposes of this clause (v)
each Director who is first elected, or first nominated for election
by HCR's stockholders, by a vote of at least one-half of the
Directors (or a committee thereof) then still in office who were
Directors at the beginning of any such period will be deemed to
have been a Director at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(f)(iii) or
1(f)(iv), unless otherwise determined in a specific case by majority vote of
the Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Sections 1(f)(iii) or 1(f)(iv) solely because (1) HCR, (2) any
Subsidiary (including, without limitation, the Company) or (3) any employee
stock ownership plan or any other employee benefit plan of HCR or any
Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock of HCR, whether in excess of 15% or otherwise, or because HCR reports
that a change in control of HCR has occurred or will occur in the future by
reason of such beneficial ownership.
(g) "Competing Business" shall mean any person, corporation or other
entity engaged in the United States of America in providing long-term care,
skilled nursing or rehabilitative services or selling or attempting to sell or
providing or attempting to provide any
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other product or service which is the same as or similar to products or
services sold or provided by the Company within the last 2 years prior to
termination of Employee's employment hereunder.
(h) "Continuation Period" means the thirty-six months immediately
following the Termination Date.
(i) "Director" means a member of the Board.
(j) "Employee Benefits" means the perquisites and benefits as
provided under any and all employee retirement income and welfare benefit
policies, plans, programs or arrangements in which Employee is entitled
to participate at any time of determination, including, without
limitation, any stock option, stock purchase, stock appreciation,
savings, pension, supplemental employee retirement, or other retirement
income or welfare benefit, deferred compensation, incentive compensation,
group or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), disability,
salary continuation, expense reimbursement and other employee benefit
policies.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Excise Tax" is defined in Section 10(a).
(m) "Gross-Up Payment" is defined in Section 10(a).
(n) "ISO" is defined in Section 10(a).
(o) "Payment" is defined in Section 10(a).
(p) "Protected Term" means the period commencing as of the date
hereof and expiring as of the close of business on March 31, 2000;
provided, however, that: (i) commencing on April 1, 1998 and each April 1
thereafter, the term of this Agreement will automatically be extended for
an additional year unless, not later than December 31 of the immediately
preceding year, the Company or Employee shall have given notice that it
or Employee, as the case may be, does not wish to have the Protected Term
extended; and (ii) except as otherwise provided in the last sentence of
Section 12, if, prior to a Change in Control, Employee ceases for any
reason to be an employee of the Company, thereupon without further action
the Protected Term shall be deemed to have expired and Sections 8, 10, 11
and 14(a) and the last sentence of Section 12 of this Agreement and the
portion of any other provision of this Agreement that incorporates such
provisions will immediately terminate and be of no further effect. For
purposes of this Section 1(p), Employee shall not be deemed to have
ceased to be an employee of the Company by reason of the transfer of
Employee's employment between or among HCR and the Company or any other
Subsidiary.
(q) "Severance Period" means the period of time commencing on the
date of the occurrence of a Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control (ii) Employee's death, or (ii) Employee's attainment of age 65.
(r) "Severance Benefits" are defined in Section 8(b).
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(s) "Subsidiary" means any entity in which HCR directly or
indirectly beneficially owns 50% or more of the then outstanding Voting
Stock.
(t) "Termination Date" means the effective date of Employee's
termination of employment with the Company; provided that for purposes of
this Section 1(t), Employee shall not be deemed to have ceased to be an
employee of the Company by reason of the transfer of Employee's
employment between or among HCR and the Company or any other Subsidiary.
(u) "Underpayment" is defined in Section 10(a).
(v) "Voting Stock" means securities entitled to vote generally in
the election of directors.
2. SALARY AND POSITION. Employee's Base Pay and job title shown on
Schedule I are correct as of the date hereof and in accordance with Employee's
understanding.
3. AT-WILL EMPLOYMENT. Employee's employment with the Company is not for
any specified term and may be terminated by Employee or by the Company at any
time for any reason, with or without Cause.
4. NO OTHER AGREEMENTS. Except as specifically set forth herein and in
Schedule II attached hereto, Employee represents and warrants that there are no
other written or oral agreements, understandings or commitments relating to
Employee's future employment, work assignments, compensation (including
compensation upon termination), benefits, or any other term or condition of
employment.
5. ENTIRE AGREEMENT. This Agreement and the agreements listed in
Schedule II attached hereto constitute the complete agreement between Employee
and the Company regarding any and all aspects of their employment relationship
and supersede any and all prior written or oral agreements, understandings or
commitments. Employee understands that no representative of the Company has
been authorized to enter into any agreement, understanding or commitment with
Employee which is inconsistent in any way with the terms of this Agreement.
6. PROHIBITION AGAINST AMENDMENT. Employee's Base Pay may be modified by
the Company at any time in its sole discretion. The retirement and benefit
plans set forth in Schedule II attached hereto in which Employee is entitled to
participate may be improved, reduced or terminated by the Company at any time
in its sole discretion; provided, however, that no vested or accrued benefit
shall be adversely affected. No term set forth in this Agreement, including
without limitation the terms set forth in Section 3 hereof, may be modified in
any way except by a written agreement signed by Employee and by an authorized
representative of the Company which expressly states the intention of the
parties to modify the terms of this Agreement.
7. SEVERANCE PAYMENT NOT FOLLOWING A CHANGE IN CONTROL. Except as
provided in Section 8:
(a) Upon the termination of Employee's employment as a result of
Employee's electing to resign his employment or to retire without the
consent of the Company, no payments shall be required or made pursuant to
this Section 7.
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(b) Upon the termination of Employee's employment by the Company for
Cause, no payments shall be required or made pursuant to this Section 7.
(c) Upon the termination of Employee's employment by the Company for
any reason other than for Cause or disability, the Company shall continue
payment of Employee's Base Pay, at the rate then in effect on the
Termination Date, for a period of two years after such Termination Date.
The Company shall give thirty (30) days written notice of any such
termination which notice shall specify the Termination Date.
(d) Upon the termination of Employee's employment as a result of the
death of Employee, the Company shall continue payment of Employee's Base
Pay, at the rate then in effect on the Termination Date, for a period of
two years after such Termination Date; provided, however, that such
payments shall be offset by any survivor benefits, excluding life
insurance proceeds, received by Employee's spouse or other designated
beneficiary under the Company's plans, programs and policies.
(e) Upon the termination of Employee's employment as a result of his
becoming unable to perform his duties due to a disability as established
by the award of long-term disability benefits under the Company's
long-term disability plan, the Company may terminate Employee's
employment by giving Employee thirty (30) days written notice of its
intention to terminate. In such event, Company shall continue payment of
Employee's Base Pay, at the rate then in effect on the Termination Date,
for a period of two years after such Termination Date; provided, however,
that such payments shall be offset by any disability benefits received by
Employee, or his legal guardian, under the Company's plans, programs and
policies.
(f) Notwithstanding anything to the contrary contained in this
Section 7, upon the termination of Employee's employment for any reason
other than pursuant to Section 8, whether voluntarily or involuntarily
and whether with or without Cause, Employee shall be entitled to the
payments provided for hereunder and such rights as he otherwise has under
the Company's Restricted Stock Plan and the Company's Stock Option Plan
in the circumstances of his particular termination.
8. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) Eligibility for Severance Benefits.
(i) If, during the Severance Period, Employee's employment is
terminated by the Company other than for Cause and other than as a
result of his death or disability pursuant to Section 7(d) or (e),
Employee shall be entitled to the Severance Benefits.
(ii) Following the consummation of a Change in Control,
Employee may elect, within the 60-day period following the
occurrence of one of the following events, to terminate employment
with the Company and receive the Severance Benefits (pursuant to
written notice to the Board specifying the effective date of such
termination which shall not be earlier than the date of the Board's
receipt of such notice and shall not be later than the end of such
60-day period):
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(A) Failure to elect or reelect or otherwise to maintain
Employee in the office or position, or a substantially
equivalent office or position, of or with the Company or
successor, as the case may be, which Employee held
immediately prior to a Change in Control, or the removal of
Employee as a Director (or as a member of the board of
directors of any successor thereto) if Employee shall have
been a Director immediately prior to the Change in Control;
(B) The occurrence of any of the following:
(I) a significant adverse change in the nature or
scope of the authorities, powers, functions,
responsibilities or duties attached to the position
with the Company or successor, as the case may be,
which Employee held immediately prior to the Change in
Control;
(II) a reduction in Employee's Base Pay as in
effect immediately prior to the Change in Control;
(III) a material reduction in the scope or value
of Employee Benefits as in effect immediately prior to
a Change in Control; or
(IV) any material breach of this Agreement by the
Company or any successor thereto,
which situation is not remedied within 10 calendar days
after written notice to the Board (or the board of any
successor) from Employee;
(C) The liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all or
substantially all of its business and/or assets, unless the
surviving or successor entity, if other than the Company (by
liquidation, merger, consolidation, reorganization, transfer
or otherwise), to which all or substantially all of such
business and/or assets have been transferred (directly or by
operation of law) assumes all duties and obligations of the
Company under this Agreement pursuant to Section 16(a); or
(D) The Company or any successor, as the case may be, by
which Employee is employed relocates its principal executive
offices, or requires Employee to have his principal location
of work changed, to any location which increases by more than
25 miles Employee's commute to such location immediately
prior to the Change in Control, or requires Employee to
travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison
to any prior year) than the average of such time that was
required of Employee in the three full years immediately
prior to the Change of Control without, in either case, his
prior written consent.
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(iii) If Employee elects to terminate employment with the
Company or any successor, as the case may be, for any reason, or
without reason, during such portion of the 180-day period
immediately following the first anniversary of the occurrence of
any Change in Control that falls within the Severance Period,
Employee shall be entitled to the Severance Benefits.
(b) Severance Benefits. If, following the occurrence of a Change in
Control, Employee's employment with the Company is terminated pursuant to
Section 8(a)(i), (ii) or (iii), the Company will pay to Employee the
following amounts within five business days after the Termination Date
and will provide to Employee the following benefits (collectively, the
"Severance Benefits"):
(i) A lump sum payment equal to three times the highest
Aggregate Cash Compensation paid or payable to Employee for any of
the three calendar years preceding the year in which the
Termination Date occurs or for the year in which the Termination
Date occurs if the Termination Date occurs after the end of the
first quarter; for purposes of this Section 8(b)(i), if the
Company's financial performance for the year-to-date period
preceding the Termination Date is consistent with budgeted levels
(as certified by the Compensation Committee) then the Aggregate
Cash Compensation for the year in which the Termination Date occurs
shall be assumed to be equal to the sum of: (A) the Employee's Base
Pay, (B) the Employee's Annual Incentive Plan bonus payable for the
year in which the Termination Date occurs, calculated by
multiplying the product of the Employee's Base Pay and the
Employee's bonus percentage by 150%, and (C) the Employee's
Performance Award Plan award payable for the award period ending
with the year in which the Termination Date occurs as if the
earnings per share growth rate for such year were assumed to be the
actual growth rate for the year-to-date period prior to the
Termination Date;
(ii) During the Continuation Period:
(A) the Company will arrange to provide Employee with
group medical, dental and vision benefits substantially
similar to those which Employee was receiving or entitled to
receive immediately prior to the Change in Control; and
(B) the Company (or successor) will provide Employee the
use of office space, furnishings and secretarial support
services comparable to those provided to Employee immediately
prior to the Change in Control;
If and to the extent that any benefit described in
Section 8(b)(ii)(A) is not or cannot be paid or provided
under any policy, plan program or arrangement of the Company,
then the Company will pay or provide for the payment to
Employee, his dependents and beneficiaries, of such Employee
Benefits in any manner selected by the Company. Without
otherwise limiting the purposes or effect of Section 8,
Employee Benefits otherwise receivable by Employee pursuant
to Section 8(b)(ii)(A) will be reduced to the extent
comparable welfare benefits are actually received by Employee
from another employer during the Continuation Period, and any
such benefits received by Employee shall be reported by
Employee to the Company.
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(iii) The Company shall take whatever action is necessary to
fund completely any split-dollar life insurance arrangement
maintained by the Company for the benefit of Employee, effective as
of the Termination Date and based upon Employee's service through
the end of the Continuation Period;
(iv) Effective as of the Termination Date, Employee will be
credited with service with the Company for an additional 36 months
for the purpose of determining service credits and benefits due and
payable to Employee under the Company's retirement income,
supplemental retirement and other benefit plans of the Company
applicable to Employee, his dependents or his beneficiaries
immediately prior to the Change in Control; and
(v) Employee shall be permitted to elect to defer receipt of
amounts payable to him, if any, under the Company's Senior
Management Savings Plan and Senior Management Savings Plan for
Corporate Officers until any date not later than the expiration of
the Continuation Period.
(c) Without limiting the rights of Employee at law or in equity, if
the Company fails to make any payment or provide any benefit required to
be made or provided under this Section 8 on a timely basis, the Company
will pay interest on the amount or value thereof at an annualized rate of
interest equal to the so-called composite "prime rate" as quoted from
time to time during the relevant period in the Midwest Edition of The
Wall Street Journal. Any change in such prime rate will be effective on
and as of the date such change is so published.
(d) Notwithstanding any other provision hereof, the parties'
respective rights and obligations under this Section 8 and under Section
11 will survive:
(i) any termination or expiration of this Agreement following
a Change in Control prior to the expiration of the Protected Term;
and
(ii) the termination of Employee's employment for any reason
whatsoever following a Change in Control prior to the expiration of
the Protected Term.
9. NO SET-OFF; NO MITIGATION OBLIGATION. The Company hereby acknowledges
that it will be difficult and may be impossible (a) for Employee to find
reasonably comparable employment following the Termination Date; and (b) to
measure the amount of damages which Employee may suffer as a result of
termination of employment hereunder. In addition, the Company acknowledges
that its severance pay plans applicable to corporate officers do not provide
for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to Employee in accordance with the terms of this Agreement is hereby
acknowledged by the Company to be reasonable and will be liquidated damages,
and Employee will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
will any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
Employee hereunder or otherwise, except as expressly provided in Sections 7(d)
and (e) and the last sentence of Section 8 (b)(ii).
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10. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that a Change in Control occurs prior to the expiration of the
Protected Term and it shall be determined (as hereafter provided) that
any payment or distribution by the Company or any of its affiliates to or
for the benefit of Employee, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing
(collectively, a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code (or any successor provision
thereto) by reason of being considered "contingent on a change in
ownership or control" of the Company, within the meaning of Section 280G
of the Internal Revenue Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with any
such interest and penalties, being hereafter collectively referred to as
the "Excise Tax"), then Employee shall be entitled to receive an
additional payment or payments (collectively, a "Gross-Up Payment");
provided, however, that no Gross-up Payment shall be made with respect to
the Excise Tax, if any, attributable to: (i) any incentive stock option,
as defined by Section 422 of the Internal Revenue Code ("ISO"), granted
prior to the execution of this Agreement; or (ii) any stock appreciation
or similar right, whether or not limited, granted in tandem with any ISO
described in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by Employee of all taxes, including any Excise Tax
(and including any interest or penalties imposed with respect to such
taxes), imposed upon the Gross-Up Payment, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 10(f) hereof, all
determinations required to be made under this Section 10, including
whether an Excise Tax is payable by Employee and the amount of such
Excise Tax and whether a Gross-Up Payment is required to be paid by the
Company to Employee and the amount of such Gross-Up Payment, if any,
shall be made by a nationally recognized accounting firm (the "Accounting
Firm") selected by the Company. The Company shall direct the Accounting
Firm to submit its determination and detailed supporting calculations to
both the Company and Employee within thirty (30) calendar days after any
Termination Date arising pursuant to Section 8(a). If the Accounting
Firm determines that any Excise Tax is payable by Employee, the Company
shall pay the required Gross-Up Payment to Employee within five (5)
business days after receipt of such determination. If the Accounting
Firm determines that no Excise Tax is payable by Employee, it shall, at
the same time as it makes such determination, furnish the Company and
Employee an opinion that Employee has substantial authority not to report
any Excise Tax on his federal, state or local income or other tax return.
As a result of the uncertainty in the application of Section 4999 of the
Internal Revenue Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local
tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that a Gross-Up Payment which will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies pursuant
to Section 10(f) hereof and Employee thereafter is required to make a
payment of any Excise Tax, Employee shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to submit
its determination and detailed supporting calculations to both the
Company and Employee as promptly as possible. Any such
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Underpayment shall be promptly paid by the Company to, or for the
benefit of, Employee within five business days after receipt of such
determination and calculations.
(c) The Company and Employee shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession
of the Company or Employee, as the case may be, reasonably requested by
the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination and
calculations contemplated by Section 10(b) hereof. Except as contemplated
by Sections 10(f) or 10(g), any final determination by the Accounting Firm
as to the amount of the Gross-Up Payment shall be binding upon the Company
and Employee.
(d) The federal, state and local income or other tax returns filed by
Employee shall be prepared and filed on a consistent basis with the
determinations of the Accounting Firm with respect to the Excise Tax
payable by Employee. Employee shall make proper payment of the amount of
any Excise Payment, and at the request of the Company, provide to the
company true and correct copies (with any amendments ) of his federal
income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the
applicable taxing authority, and such other documents reasonably requested
by the Company, evidencing such payment. If prior to the filing of
Employee's federal income tax return, or corresponding state or local tax
return, if relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, Employee shall within five business
days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Section 10(b) hereof shall be borne by the Company.
(f) Employee shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable but
no later than 10 business days after Employee actually receives notice of
such claim and Employee shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid (in
each case, to the extent known by Employee). Employee shall not pay such
claim prior to the earlier of: (i) the expiration of the ten (10) calendar
day period following the date on which he gives such notice to the
Company; and (ii) the date that any payment of such amount with respect to
such claim is due. If the Company notifies Employee in writing prior to
the expiration of such period that it desires to contest such claim,
Employee shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
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(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless
Employee, on an after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 10(f), the Company shall
control all proceedings taken in connection with the contest of any claim
contemplated by this Section 10(f) and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim (provided,
however, that Employee may participate therein at his own cost and
expense) and may, at its option, either direct Employee to pay the tax
claimed and xxx for refund or contest the claim in any permissible manner,
and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs Employee to pay the tax claimed and
xxx for a refund, the Company shall advance the amount of such payment to
Employee on an interest-free basis and shall indemnify and hold Employee
harmless, on an after tax basis, from any Excise Tax or income or other
tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided, further, however, that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of Employee with respect to which the contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of any such contested claim shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and Employee shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(g) If, after the receipt by Employee of any amount advanced by the
Company pursuant to Section 10(f) hereof, Employee receives any refund
with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 10(f) hereof) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the
receipt by Employee of any amount advanced by the Company pursuant to
Section 10(f) hereof, a determination is made that Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify Employee in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of any such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid by the Company to Employee
pursuant to this Section 10.
11. LEGAL FEES AND EXPENSES. It is the intent of the Company that
Employee not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Employee's rights
under Section 8 of this Agreement by litigation or otherwise because the cost
and expense thereof would substantially detract from the benefits intended to
be extended to Employee hereunder. Accordingly, if the Company fails to comply
with any of its obligations under this
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Agreement or in the event that the Company or any other person takes any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
Employee the benefits provided or intended to be provided to Employee
hereunder, the Company irrevocably authorizes Employee from time to time to
retain counsel of Employee's choice, at the expense of the Company as hereafter
provided, to advise and represent Employee in connection with any such
interpretation, enforcement or defense, including, without limitation, the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Without respect to whether
Employee prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all reasonable attorneys' and related fees and expenses by Employee in
connection with any of the foregoing.
12. EMPLOYMENT RIGHTS: TERMINATION PRIOR TO CHANGE IN CONTROL. Nothing
expressed or implied in this Agreement will create any right or duty on the
part of the Company or Employee to have Employee remain in the employment of
the Company prior to or following any Change in Control. Any termination of
employment of Employee by the Company other than for Cause or by reason of his
death or disability pursuant to Sections 7(b), (d) or (e) during the period
beginning on the date that is sixty (60) days prior to the date of the first
public announcement by the Company of the potential occurrence of an event that
would constitute a Change in Control and ending on the date of consummation of
such Change in Control shall be deemed to be a termination of Employee after a
Change in Control for purposes of this Agreement.
13. NON-COMPETITION/NON-SOLICITATION.
(a) Covenant Not to Compete. Employee covenants and agrees that
during the period of Employee's employment hereunder and for a period of
one (1) year following the termination of Employee's employment,
including without limitation termination by the Company for cause or
without cause, Employee shall not, in the United States of America,
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder or otherwise, alone or in
association with any other person, corporation or other entity, in any
Competing Business.
(b) Non-Solicitation of Customers. Employee agrees that during his
employment with the Company he shall not, directly or indirectly, solicit
the business of, or do business with, any customer or prospective
customer of the Company for any business purpose other than for the
benefit of the Company. Employee further agrees that for one (1) year
following termination of his employment with the Company, including
without limitation termination by the Company for cause or without cause,
Employee shall not, directly or indirectly, solicit the business of, or
do business with, any customers or prospective customers of the Company.
(c) Non-Solicitation of Employees. Employee agrees that, during his
employment with the Company and for one (1) year following termination of
Employee's employment with the Company, including without limitation
termination by the Company for cause or without cause, Employee shall
not, directly or indirectly, solicit or induce, or attempt to solicit or
induce, any employee of the Company to leave the employment of the
Company for any reason whatsoever, or hire any employee of the Company
except into the employment of the Company.
14. VESTING OF OPTIONS AND RESTRICTED STOCK; EMPLOYEE BENEFITS.
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(a) Upon the consummation of a Change in Control prior to the
expiration of the Protected Term,
(i) all options to purchase Company stock then held by
Employee shall be fully vested and exercisable in full as of such
date;
(ii) all shares of restricted Company stock issuable to
Employee under outstanding restricted stock awards made to Employee
prior to the date of such Change in Control shall be issued to
Employee as of such date; and
(iii) the restrictions applicable to all shares of restricted
stock then held by Employee (including shares issued pursuant to
subsection (ii) above) shall lapse as of such date.
(b) Except as otherwise expressly provided herein, no termination of
Employee's employment with the Company will affect any rights which
Employee may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits.
15. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or governmental regulation
or ruling.
16. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require all successors (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to any substantial portion of the business or assets of the
Company, by agreement in form and substance satisfactory to Employee,
jointly and severally expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company
and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement),
but will not otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement will inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 16(a) and 16(b) hereof. Without limiting
the generality or effect of the foregoing, Employee's right to receive
payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by Employee's will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 16(c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
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17. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express or UPS, addressed to the Company (to the attention of the Secretary of
the Company) at its principal executive office and to Employee at his principal
residence, or to such other address as any party may have furnished to the
other in writing and in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.
18. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to
the principles of conflict of laws of such State.
19. VALIDITY. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. MISCELLANEOUS. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement.
References to Sections are to references to Sections of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
22. TITLES. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
HEALTH CARE AND RETIREMENT
CORPORATION OF AMERICA
By:
--------------------------------
Its:
--------------------------------
HEALTH CARE AND RETIREMENT
CORPORATION
By:
--------------------------------
Its:
--------------------------------
EMPLOYEE:
-----------------------------------
Xxxx X. Xxxxxx
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SCHEDULE I
Employee: Xxxx X. Xxxxxx
Current Base Rate: $510,000
Job Titles: Chairman, President and Chief Executive Officer
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SCHEDULE II
Annual Incentive Plan
Performance Award Plan
Stock Option Plan
Amended Restricted Stock Plan
Salary Retirement Plan (prior to January 1, 1993)
Stock Purchase and Savings Program (prior to January 1, 1993)
Senior Executive Retirement Plans
Supplemental Offset Plan
Excess and Supplemental Benefit Plans
Corporate Officer and Senior Executive Life Insurance Program
Senior Management Savings Plan
Senior Management Savings Plan For Corporate Officers
Such other benefit plans and arrangements as the Company provides, from time to
time, to salaried employees generally participation in which is approved by the
President.
