SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
Exhibit 10.55
SEVERANCE
COMPENSATION
AND
RESTRICTIVE
COVENANT AGREEMENT
THIS SEVERANCE COMPENSATION AND
RESTRICTIVE COVENANT AGREEMENT (the “Agreement”) is dated as of June 4,
2007 between MATRIA HEALTHCARE,
INC., a Delaware corporation (the “Company”), and XXXXXX X. XXXXXXXXX (the
“Executive”).
WHEREAS, the severance
benefits payable by the Company to the Executive as provided herein are in part
intended to ensure that the Executive receives reasonable compensation given the
specific circumstances of Executive’s employment history with the
Company;
NOW, THEREFORE, in
consideration of their respective obligations to one another set forth in this
Agreement, and other good and valuable consideration, the receipt, sufficiency
and adequacy of which the parties hereby acknowledge, the parties to this
Agreement, intending to be legally bound, hereby agree as follows:
1. Term. The
term of this Agreement began on June 4, 2007 and shall terminate, except to the
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the Date of Termination (as hereinafter defined) of the Executive’s
employment with the Company as a result of the Executive’s death, Disability (as
defined in Section 2(b)) or Retirement (as defined in Section 2(c)),
by the Company for Cause (as defined in Section 2(d)), or by the Executive other
than for Good Reasons (as defined in Section 2(e)).
2. Termination of Employment
During the Term.
(a) General. The
Executive shall be entitled to the compensation and benefits provided in
Section 3 upon the termination of the Executive’s employment with the
Company by the Executive or by the Company during the term of this Agreement,
unless such termination is as a result of (i) the Executive’s death;
(ii) the Executive’s Disability; (iii) the Executive’s Retirement;
(iv) the Executive’s termination by the Company for Cause; or (v) the
Executive’s decision to terminate employment other than for Good
Reason.
(b) Disability. The
term “Disability” as used in this Agreement shall mean termination of the
Executive’s employment by the Company as a result of the Executive’s incapacity
due to physical or mental illness, provided that the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months and such absence
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shall
have continued unabated for 30 days after Notice of Termination as described in
Section 2(f) is thereafter given to the Executive by the Company.
(c) Retirement. The
term “Retirement” as used in this Agreement shall mean termination of the
Executive’s employment by the Company based on the Executive’s having attained
age 65 or such later retirement age as shall have been established pursuant to a
written agreement between the Company and the Executive.
(d) Cause. The
term “Cause” for purposes of this Agreement shall mean (i) the Executive’s
failure, neglect or refusal, as determined by the reasonable judgment of the
Company, to perform the duties of his position, unless the Executive shall have
cured such failure, neglect or refusal within 30 days of receipt of written
notice from the Company of such failure, neglect or refusal and has not at any
time thereafter repeated such failure or failed to sustain such cure; (ii) any
intentional act by the Executive that has the effect of injuring the reputation
or business of the Company or any of its affiliates in any material respect;
(iii) the Executive’s continued or repeated absence from the Company, unless
such absence is (x) approved or excused by the Chief Executive Officer of the
Company or (y) is the result of illness, Disability or incapacity; (iv) the
Executive’s use of illegal drugs or repeated drunkenness; (v) the Executive’s
arrest and/or conviction for the commission of a felony; or (vi) the commission
by the Executive of an act of fraud, deceit, material misrepresentation or
embezzlement against the Company or any of its affiliates. For
purposes of this Agreement only, the preparation and filing of fictitious, false
or misleading claims in connection with any federal, state or other third party
medical reimbursement program, or any other violation of any rule or regulation
in respect of any federal, state or other third party medical reimbursement
program by the Company or any subsidiary of the Company shall not be deemed to
constitute “criminal fraud” or “civil fraud.”
(e) Good
Reason. For purposes of this Agreement, “Good Reason” shall
mean (i) a reduction of the Executive’s base salary; (ii) any failure of the
Company to continue the Executive’s participation in its applicable Management
Incentive Plan or any reduction in the Executive’s bonus amount as expressed as
a percentage of the Executive’s base salary; (iii) failure of the Company to
continue the Executive’s participation in any benefit programs except those
programs or arrangements that may be discontinued for all other similarly
situated executives of the Company; or (iv) a relocation of the Company’s
principal executive offices to a location more than 50 miles outside of
Marietta, Georgia or the relocation of the Executive’s office to any place other
than the Company’s principal executive offices.
(f) Notice of
Termination. Any termination of the Executive’s employment by
the Company for a reason specified in Section 2(b), 2(c) or 2(d) shall be
communicated to the Executive by a Notice of Termination prior to the effective
date of the termination. For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 2(b), 2(c) or 2(d) and which
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provision so
indicated. For purposes of this Agreement, no
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termination
of the Executive’s employment by the Company shall constitute a termination for
Disability, Retirement or Cause unless such termination is preceded by a Notice
of Termination.
(g) Date of
Termination. For purposes of this Agreement, “Date of
Termination” shall mean (a) if the Executive’s employment is terminated by
the Company for Disability, 30 days after a Notice of Termination is given to
the Executive (provided that the Executive shall not have returned to the
performance of the Executive’s duties on a full-time basis during such 30-day
period) or (b) if the Executive’s employment is terminated by the Company
or the Executive for any other reason, the date on which the Executive’s
termination is effective.
3. Compensation and Benefits
upon Termination of Employment.
(a) If
the Company shall terminate the Executive’s employment other than pursuant to
Section 2(b), 2(c) or 2(d) and Section 2(f), or if the Executive shall
terminate his or her employment for Good Reason, then, provided the Executive
shall have executed the Company’s standard general release (which release shall
not obligate the Executive to release any benefits payable in connection with
any supplemental executive retirement plan or other retiree benefits), the
Company shall pay to the Executive, as severance compensation and in
consideration of the Executive’s adherence to the terms of Section 4 hereof and
execution of the aforesaid general release, the following:
(i) On
the Date of Termination, the Company shall become liable to the Executive for an
amount equal to one times the Executive’s annual base compensation, targeted
base bonus and annual car allowance, which amount shall be payable over the one
year following the Date of Termination on the regular payroll
dates.
(ii) For
a period of one year following the Date of Termination, the Executive and anyone
entitled to claim under or through the Executive shall be entitled to all
benefits under the group hospitalization plan, health care plan, dental care
plan, life insurance or death benefit plan, or other present or future similar
group employee benefit plan or program of the Company for which he was eligible
at the Date of Termination, to the same extent as if the Executive had continued
to be an employee of the Company during such period.
(iii) Notwithstanding
any other provision of this Agreement, it is intended that any payment or
benefit provided pursuant to or in connection with this Agreement that is
considered to be nonqualified deferred compensation subject to Section 409A of
the Code shall be provided and paid in a manner, and at such time and in such
form, as complies with the applicable requirements of Section 409A of the
Code. If and to the extent required by Section 409A of the Code, no
payment or benefit shall be made or provided to a “specified employee” (as
defined below) prior to the six-month anniversary of the Executive’s separation
from service (within the meaning of Section 409A(a)(2)(A)(i) of the
Code). The amounts provided for in this Agreement that constitute
nonqualified deferred compensation shall be paid as soon as the six-month
deferral period ends. In the event that benefits are required to be
deferred, any such benefit may be provided during such six-month deferral period
at the Executive’s expense, with
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the
Executive having a right to reimbursement from the Company for the amount of any
premiums or expenses paid by the Executive once the six month deferral period
ends. For this purpose, a specified employee shall mean an individual
who is a key employee (as defined in Section 416(i) of the Code without
regard to Section 416(i)(5) of the Code) of the Company at any time during
the 12-month period ending on each December 31 (the “identification
date”). If the Executive is a key employee as of an identification
date, the Executive shall be treated as a specified employee for the 12-month
period beginning on the April 1 following the identification
date. Notwithstanding the foregoing, the Executive shall not be
treated as a specified employee unless any stock of the Company or a corporation
or business affiliated with it pursuant to Sections 414(b) or (c) of the Code is
publicly traded on an established securities market or
otherwise.
(b) The
parties hereto agree that the payments provided in Section 3(a) hereof are
reasonable compensation in light of the Executive’s services rendered to the
Company and in consideration of the Executive’s adherence to the terms of
Section 4 hereof.
(c) The
payments provided in Section 3(a) above shall be in lieu of any other
severance compensation otherwise payable to Executive under any other agreement
between Executive and the Company (other than the Change in Control Severance
Compensation and Restrictive Covenant Agreement of even date (the “CIC”)) or the
Company’s established severance compensation policies; provided, however, that
nothing in this Agreement shall affect or impair Executive’s vested rights under
any other employee benefit plan or policy of the Company. In
circumstances in which the Executive is entitled to severance benefits under the
CIC, the Company’s obligations under this Agreement shall be null and
void.
4. Protective
Covenants.
(a) Definitions.
This Subsection sets forth the
definition of certain capitalized terms used in Subsections (a) through (f) of
this Section 4.
(i) “Competing Business”
shall mean a business (other than the Company) that, directly or through a
controlled subsidiary or through an affiliate, (a) provides disease management
programs for diabetes, congestive heart failure, coronary artery disease,
chronic obstructive pulmonary disease, cancer, pregnancy, depression, chronic
pain or hepatitis C; and/or (b) provides obstetrical home care; and/or (c)
provides on-line programs targeting weight loss, nutrition and diet, fitness,
smoking cessation or stress management; and/or (d) provides
informatics services (collectively, “Competing
Services”). Notwithstanding the foregoing, no business shall be
deemed a “Competing Business” unless, within at least one of the business’s
three most recently concluded fiscal years, that business, or a division of that
business, derived more than twenty percent (20%) of its gross revenues or more
than $2,000,000 in gross revenues from the provision of Competing
Services.
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(ii) “Competitive Position”
shall mean: (A) the Executive’s direct or indirect equity ownership
(excluding ownership of less than one percent (1%) of the outstanding common
stock of any publicly held corporation) or control of any portion of any
Competing Business; or (B) any employment, consulting, partnership, advisory,
directorship, agency, promotional or independent contractor arrangement between
the Executive and any Competing Business where the Executive performs services
for the Competing Business substantially similar to those the Executive
performed for the Company, provided, however, that the Executive shall not be
deemed to have a Competitive Position solely because of the Executive’s services
for a Competing Business that are not directly related to the provision of
Competing Services, unless more than thirty-five percent (35%) of the gross
revenues of the Competing Business are derived from the provision of Competing
Services.
(iii) “Covenant Period”
shall mean the period of time from the date of this Agreement to the date that
is one year after the Date of Termination.
(iv) “Customers” shall mean
actual customers, clients or referral sources to or on behalf of which the
Company provides Competing Services (A) during the one year prior to the date of
this Agreement and (B) during the Covenant Period.
(v) “Restricted Territory”
shall mean the 00 xxxxxxxxxx xxxxxx xx xxx xxxxxxxxxxx Xxxxxx
Xxxxxx.
(b) Limitation on
Competition. In consideration of the Company’s entering into
this Agreement, the Executive agrees that during the Covenant Period, the
Executive will not, without the prior written consent of the Company, anywhere
within the Restricted Territory, either directly or indirectly, alone or in
conjunction with any other party, accept, enter into or take any action in
conjunction with or in furtherance of a Competitive Position (other than action
to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting
Customers. In consideration of the Company’s entering into
this Agreement, the Executive agrees that during the Covenant Period, the
Executive will not, without the prior written consent of the Company, alone or
in conjunction with any other party, solicit, divert or appropriate or attempt
to solicit, divert or appropriate on behalf of a Competing Business with which
Executive has a Competitive Position any Customer located in the Restricted
Territory (or any other Customer with which the Executive had any direct contact
on behalf of the Company) for the purpose of providing the Customer or having
the Customer provided with a Competing Service.
(d) Limitation on Soliciting
Personnel or Other Parties. In consideration of the Company’s
entering into this Agreement, the Executive hereby agrees that he will not,
without the prior written consent of the Company, alone or in conjunction with
any other party, solicit or attempt to solicit any employee, consultant,
contractor, independent broker or other personnel of the Company or any
subsidiary of the Company to terminate, alter or lessen that party’s affiliation
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with the
Company or to violate the terms of any agreement or understanding between such
employee, consultant, contractor or other person and the Company or any
subsidiary of the Company.
(e) Acknowledgement. The
parties acknowledge and agree that the Protective Covenants are reasonable as to
time, scope and territory given the Company’s need to protect its trade secrets
and confidential business information and given the substantial payments and
benefits to which the Executive may be entitled pursuant to this
Agreement.
(f) Remedies. The
parties acknowledge that any breach or threatened breach of a Protective
Covenant by the Executive is reasonably likely to result in irreparable injury
to the Company, and therefore, in addition to all remedies provided at law or in
equity, the Executive agrees that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or contemplated
breach of the Protective Covenant. If the Company seeks an
injunction, the Executive waives any requirement that the Company post a bond or
any other security.
5. No Obligation to Mitigate
Damages; No Effect on Other Contractual Rights.
(a) All
compensation and benefits provided to the Executive under this Agreement are in
consideration of the Executive’s services rendered to the Company and of the
Executive’s adhering to the terms set forth in Section 4 hereof and the
Executive shall not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
(b) The
provisions of this Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish the Executive’s
existing rights, or rights which would accrue solely as a result of the passage
of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment
agreement or other contract, plan or arrangement.
6. Notice. For
purposes 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 by overnight courier service (e.g., Federal Express) or mailed by
United States certified mail, return receipt required, postage prepaid, as
follows:
If to Company:
Matria Healthcare, Inc.
0000 Xxxxxxx Xxxxx, 00xx
Xxxxx
Xxxxxxxx,
XX 00000
Attention: General
Counsel
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If to Executive:
Xxxxxx X. Xxxxxxxxx
00000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
or such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
7. Miscellaneous. No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. 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 agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
8. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
9. Section 409A
Indemnification. Notwithstanding any other provision of this
Agreement, it is intended that any payment or benefit which is provided pursuant
to or in connection with this Agreement which is considered to be nonqualified
deferred compensation subject to Section 409A of the Code shall be provided and
paid in a manner, and at such time and in such form, as complies with the
applicable requirements of Section 409A of the Code. The Company and
the Executive shall cooperate to modify this Agreement as necessary to comply
with the requirements of Section 409A of the Code. In the event the
Company does not so cooperate, it shall indemnify and hold harmless the
Executive on an after-tax basis from any tax or interest penalty imposed under
Section 409A of the Code with respect to any payment or benefit provided
pursuant to this Agreement or any other plan or arrangement sponsored or
maintained by the Company to the extent such tax or interest penalty is imposed
as a result of any failure of the Company to comply with Section 409A of the
Code with respect to such payment or benefit.
10. Severability;
Modification. All provisions of this Agreement are severable
from one another, and the unenforceability or invalidity of any provision of
this Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement, but such remaining provisions shall be interpreted
and construed in such a manner as to carry out fully the intention of the
parties. Should any judicial body interpreting this Agreement deem
any provision of this Agreement to be unreasonably broad in time, territory,
scope or otherwise, it is the intent and desire of the parties that such
judicial body, to the greatest extent possible, reduce the breadth of
such
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provision
to the maximum legally allowable parameters rather than deeming such provision
totally unenforceable or invalid.
11. Confidentiality. The
Executive acknowledges that he has previously entered into, and continues to be
bound by the terms of, a Confidentiality and Non-Solicitation Agreement with the
Company.
12. Agreement Not an Employment
Contract. This Agreement shall not be deemed to constitute or
be deemed ancillary to an employment contract between the Company and the
Executive, and nothing herein shall be deemed to give the Executive the right to
continue in the employ of the Company or to eliminate the right of the Company
to discharge the Executive at any time.
IN WITNESS WHEREOF, the
parties have executed this Agreement to be effective as of the date first above
written.
MATRIA HEALTHCARE, INC.
By:
Its Chief Administrative
Officer
XXXXXX X. XXXXXXXXX
Executive
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