May 25, 2010
Exhibit 10.3
May 25, 2010
Via Hand Delivery
Xxxxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxx 00000
Xxxxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxx 00000
Re: Termination of Employment
Dear Xxx:
This letter will confirm the terms of the agreement (the “Agreement”) between Xxxxxxx X. Xxxxx
(“Xxxxx”) and Advocat Inc. and/or any of its wholly-owned subsidiaries (collectively the
“Company”). Capitalized terms used in this letter but not defined herein shall have the meaning
ascribed to them in the Employment Agreement between Xxxxx and the Company dated March 31, 2006 as
amended March 9, 2009 (“Employment Agreement”).
1. Xxxxx has submitted, and the Company has accepted, a notice of termination of employment
with the Company pursuant to the Constructive Discharge provisions effective as of the close of
business on May 25, 2010 (“Date of Termination”). In return for the agreements set forth herein,
the Company will pay Xxxxx a lump sum payment of $308,000 as provided in the Employment Agreement,
payable pursuant to Section 409A(a)(2)(B)(i) of the Internal Revenue Code (“Section 409A”), on the
six month anniversary of the Date of Termination. The foregoing sum shall be offset by any
amounts that Xxxxx may owe the Company at the time of termination. The Company shall also pay Xxxxx
in a lump sum on his Date of Termination an amount equal to his accrued but unused vacation time.
For a period of eighteen months after his Date of Termination, if requested by Xxxxx, the Company
shall continue to pay his disability insurance premium and if Xxxxx elects to continue COBRA
benefits, the Company shall reimburse Tyler for the cost of such health insurance
benefits.
Xxxxx’x outstanding stock options and stock appreciation rights (“SARs”) shall be deemed
vested, and the options and SARs shall remain exercisable until December 31, 2010. In addition,
pursuant to the requirements of Section 409A, the amount of Xxxxx’x bonus for 2008 and 2009 that he
deferred under the 2008 Stock Purchase Plan for Key Personnel plus accrued dividends will be paid
to Xxxxx on October 14, 2011, and the Company will report 50% of such amount to the IRS for tax
year 2010, with respect to which there shall be an additional tax of 20%.
2. Xxxxx will return any Company property in his possession, custody, or control including,
without limitation, all records, memoranda, etc. relating to the business of the Company whether
made by Xxxxx or otherwise coming into his possession. Xxxxx acknowledges that all such property
is confidential and will remain the property of the Company.
3. On behalf of Xxxxx and his heirs, representatives, and assigns, Xxxxx discharges and
releases the Company and its affiliates and agents (collectively the “Released Parties”) from all
claims, obligations, and demands that Xxxxx had, has, or may have arising out of or related to
his employment and/or the termination of his employment. Without limiting the generality of the
foregoing, Xxxxx discharges and releases any claims, causes of action, liabilities, covenants,
agreements, obligations, damages, and/or demands of every nature, character, and description under
Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Tennessee Human Rights Act, the Civil
Rights Act of 1991, the Age Discrimination in Employment Act, the Older Worker Benefit Protection
Act, the Employee Retirement Income Security Act of 1974 (except with respect to benefits to which
Xxxxx has a vested entitlement), and all other federal, state, and local laws including any laws
regarding wrongful discharge, breach of contract, retaliation, infliction of emotional distress
(collectively, the “Released Claims”).
4. Xxxxx agrees and understands that the effect of this Agreement is to waive and release any
and all claims, causes of action, liabilities, covenants, agreements, obligations, damages and/or
demands of every nature, character, and description, without limitation in law, equity, or
otherwise, that Xxxxx had, has, or may have, whether known or unknown, against any of the Released
Parties for any liability, whether vicarious, derivative, direct, or indirect. The foregoing
includes, without limitation, any claims for damages (actual or punitive), back wages, future
wages, commission payments, bonuses, reinstatement, past and future employee benefits (except to
which there is vested entitlement) including contributions to the Company’s employee benefit plans,
compensatory damages, penalties, equitable relief, attorneys’ fees, costs of court, interest, and
any and all other loss, expense, or detriment of whatever kind arising out of or related in any way
to your employment by the Company and/or the termination of such employment. However, Xxxxx does
not by virtue of this Agreement waive or release any claims that arise after his signature below.
5. Xxxxx will not initiate, or cause to be initiated, any lawsuit based on the Released
Claims. Except as prohibited by law, Xxxxx will indemnify the Company and all other Released
Parties for any sum of money that any of them may hereafter be compelled to pay Xxxxx, his heirs,
representatives, or assigns and any of the Company’s legal fees and/or costs associated therewith
on account Xxxxx bringing or allowing to be brought on his behalf legal action based upon the
Released Claims. Furthermore, Xxxxx understands and agrees that this Agreement does not constitute
any admission by the Company of any liability or of any violation of any federal, state, or local
laws.
6. Xxxxx and the Company will treat the terms, conditions, amount, and circumstances relating
to this Agreement as confidential, except as disclosure may be required by applicable law. Xxxxx
may disclose the terms of this Agreement to his tax advisor or counsel, provided that they agree to
maintain the confidentiality of this Agreement. If Xxxxx is required to make any disclosure
required by law, Xxxxx agrees to inform the Company immediately and prior to any such disclosure.
Obligations under this paragraph shall terminate to the extent that information contained herein is
made public by the Company in the course of its compliance with public disclosure obligations.
7. Xxxxx shall have a period of up to 21 calendar days in which to consider entering into this
Agreement. Xxxxx acknowledges that he has had the opportunity to read and review this Agreement
and seek legal advice. Xxxxx freely and voluntarily, and without coercion, agrees to
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and understands the significance and consequences of the terms of this Agreement. Xxxxx agrees not
to sign this Agreement prior to the Date of Termination. Following the date of Xxxxx’x signature
below, Xxxxx shall have a period of 7 calendar days within which to revoke his acceptance of this
Agreement, in which case this Agreement shall be null and void. If Xxxxx does not exercise his
right to revoke this Agreement within 7 calendar days of Xxxxx’x signature, this Agreement shall be
held in full force and effect as of the 8th calendar day (the “Effective Date”) and each
party shall be obligated to comply with its requirements. The parties agree that any changes made
to this Agreement (whether material or immaterial) as a result of the negotiation of the parties do
not restart the running of the 21-day period noted above.
8. Xxxxx and the Company will not engage in any conduct, verbal or otherwise, that would
disparage or harm the reputation of the other. Such conduct shall include, without limitation, any
negative statements made verbally or in writing by Xxxxx or the Company about the other.
9. Xxxxx will at all times maintain strict confidentiality of, and will not 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. Xxxxx 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. Xxxxx will also use his best efforts to
prevent the disclosure of this information by others.
10. For a period of Twelve (12) months following the termination of his employment, Xxxxx 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 Xxxxx in the absence of his relationship to the Company.
11. For a period of Twelve (12) months following the termination of his employment, Xxxxx will
not (and Xxxxx will not assist others to) directly or indirectly, hire any employee of the Company
or solicit or encourage any such employee to leave the employ of the Company.
12. In his letter dated April 23, 2010, Xxxxx indicated that he believed that certain of the
non-compete provisions of Section IX(C) of Xxxxx’x Employment Agreement would not apply since his
termination of employment is pursuant to a Constructive Discharge. The Company acknowledges that
the provisions of the second sentence of Section IX(C) of Xxxxx’x Employment Agreement do not apply
to his termination as Xxxxx’x termination is pursuant to a Constructive Discharge. However, Xxxxx
and the Company confirm and agree that all other confidentiality, non-solicit, non-hire and related
provisions will continue to apply according to their terms. Specifically, Sections IX(A), (B),
(D) and (E), as well as the first and the last sentence in Section IX (C) shall survive this
Agreement and continue to apply according to their terms.
13. As part of his employment, Xxxxx acknowledges and agrees that he has obtained knowledge,
information, and expertise regarding the operations of the Company that may be useful to the
Company in prosecuting, defending and otherwise managing current and future litigation matters by
or against the Company. Therefore, Xxxxx will, with reasonable notice after
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the Date of Termination, 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.
14. In response to inquiries from his prospective employers, Xxxxx agrees that the Company may
provide his dates of employment with the Company, job titles while employed by the Company, and
final salary. Xxxxx agrees to advise any prospective employers to contact the Human Resources
Department of the Company with regard to any references or other inquiries.
15. Xxxxx acknowledges that his breach or threatened or attempted breach of any provision of
this Agreement would cause irreparable harm to the Company not compensable in monetary damages.
Notwithstanding the parties’ agreement to arbitrate disputes, Xxxxx consents to the issuance of a
temporary restraining order and preliminary injunction by a court of competent jurisdiction to
prohibit and enjoin any breach of a provision of this Agreement.
16. Except with respect to the release of claims provided for above, the provisions of this
Agreement shall be severable, and the invalidity of any provisions or portion thereof shall not
affect the validity of the other provisions. To the extent that a court of competent jurisdiction
deems any provision of this Agreement unenforceable (except the release of claims), such court
shall modify the terms of the Agreement by adding, deleting, or changing in its discretion any
language necessary to make such provision enforceable to the maximum extent permitted by law, and
the parties expressly agree to be bound by any such provision as reformed by such court. If this
Agreement is not enforceable in whole or in part after such severance or reformation, the Company
shall have a contractual right of restitution, recoupment, and set-off to recover from Xxxxx any
consideration paid to him under this Agreement.
17. This Agreement constitutes the entire agreement between the parties with respect to its
subject matter and, except as expressly set forth above, supersedes all previous agreements and
understandings between the parties. This Agreement may not be modified except in a writing signed
by both parties. This Agreement shall be governed by and construed in accordance with the laws of
the State of Tennessee and without regard to any rule of construction under which an agreement may
be construed against the drafter or any rule regarding conflicts of law. 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.
Xxxxx has carefully read this Agreement. Xxxxx hereby accepts and agrees to all of the terms
and conditions of this Agreement.
| Advocat Inc. | ||||||
| /s/ Xxxxxxx X. Council III | /s/ Xxxxxxx X. Xxxxx | |||||
Title:
|
President | Date: May 25, 2010 | ||||
Date:
|
May 25, 2010 | |||||
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