EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of April 19, 1996, by and
between COMMUNITY CARE OF AMERICA, INC., a Delaware corporation (hereinafter
referred to as the "Company"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (hereinafter referred to as
the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of owning and operating
long-term care skilled nursing care facilities and other health care related
businesses through its subsidiaries and tradenames; and
WHEREAS, Company wishes to employ Employee, and Employee wishes to
accept such employment, on the terms and conditions set forth herein; and
WHEREAS, in the course of his employment, and as a necessary
consequence thereof, Employee will receive information and acquire knowledge of
special procedures, processes, business conduct, and knowledge that is private,
proprietary, and secret to the Company in its business; and
WHEREAS, the business, as well as the success and profits of the
Company, depend in large part upon the maintenance of secrecy as to such
information, processes, procedures and knowledge as to the conduct of the
Company's business generally.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, as well as the agreement to employ the Employee or
to continue to employ the
Employee under the terms and conditions contained herein, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I
EMPLOYMENT RELATIONSHIP
1.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts such employment, as Chief Executive Officer and
President of the Company, with the authority and responsibility, personally or
through other officers and employees of the Company designated by him, for
directing and supervising the day-to-day operations of the Company. The Employee
shall report to and be responsible directly to the Board of Directors of the
Company.
1.2 EXCLUSIVE EMPLOYMENT. During the continuation of the Employee's
employment by the Company hereunder, the Employee will, unless the Employee has
first received the prior written consent of the Company, devote the Employee's
entire business time, energy, attention, and skill to the services of the
Company and to the promotion of its interests, and covenants that during such
time the Employee will not: (a) engage in, be employed by, be a director of or
be otherwise directly or indirectly interested in any business or activity
competing with or of a nature similar to the businesses of the Company (or any
of its subsidiaries or affiliates), or (b) take any part in any activities
detrimental to the best interests of the Company (and its subsidiaries and
affiliates). Notwithstanding the foregoing, the Company shall permit Employee to
act as a consultant for Integrated Health Services, Inc.; provided that such
consulting work will not interfere with Employee's duties and obligations under
this Agreement.
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ARTICLE II
PERIOD OF EMPLOYMENT
2.1 TERM. The initial term of employment under this Agreement (the
"Initial Term") shall begin as of the date hereof (the "Commencement Date"), and
shall end on the third anniversary of the Commencement Date, unless sooner
terminated pursuant to Article IV, below. Unless either party shall give the
other notice of its or his election not to renew this Agreement at least ninety
(90) days prior to the termination of the Initial Term or any subsequent renewal
term, as the case may be, the term of this Agreement shall automatically be
renewed for the one-year period commencing on the first day following the
termination of the Initial Term or the renewal term then ended, as the case may
be. The provisions of Article V and of Sections 4.3 and 4.6 shall continue in
effect in accordance with their respective terms, notwithstanding any
termination or expiration of this Agreement.
ARTICLE III
COMPENSATION
3.1 BASE SALARY. For services rendered by Employee under this
Agreement, the Employee shall receive a base salary at an initial rate of
$300,000.00 per year (the "Base Salary"), payable in accordance with the pay
period policy established by the Company from time to time. On each anniversary
of the Commencement Date, the Base Salary shall be increased by a percentage
which is equal to the percentage increase in the "Consumer Price Index for All
Urban Consumers -- All Cities" published by the United States Department of
Labor's Bureau of Labor Statistics for the then most recently ended 12-month
period as of the date of such adjustment, and by such additional amounts as may
be determined at the discretion of the Board of Directors.
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3.2 BONUSES.
(A) SIGN-ON BONUS. Employee acknowledges the receipt,
concurrently herewith, of a bonus in the amount of $70,000 from the
Company. In addition, the Company shall promptly pay to Employee upon
execution hereof the sum of $6,110 as reimbursement for certain prepaid
vacation expenses which were forfeited by employee by reason of his
acceptance of this position.
(B) PERFORMANCE BONUS. Within one hundred and twenty (120)
days of the close of each calendar year (beginning with calendar year
1996), the Company shall pay to the Employee a cash bonus in such
amount as may be determined at the discretion of the Board of Directors
but in no event will such bonus exceed the Base Salary of Employee for
that calendar year.
(C) SALE OR MERGER OF COMPANY. In the event of:
(I) a sale for consideration consisting solely of
cash and/or debt securities of all or substantially all of the
capital stock of the Company pursuant to a single transaction
or a series of related transactions to a person (within the
meaning of Section 13(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")); or
(II) the merger or consolidation of the Company
pursuant to which shares of the Company's stock are converted
into the right to receive solely cash and/or debt securities;
then in either such event, Employee shall receive a bonus based upon the present
value of the consideration payable per share of the capital stock of the Company
in respect of such transaction as set forth below: PER SHARE CONSIDERATION BONUS
AMOUNT less than $10.00 no bonus
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$10.00 - $10.49 $50,000
$10.50 - $10.99 $100,000
$11.00 - $11.49 $150,000
$11.50 - $11.99 $200,000
$12.00 - $12.49 $250,000
$12.50 and above $300,000
Notwithstanding the foregoing, the present value of the per share consideration
of the capital stock of the Company shall be appropriately adjusted to account
for stock splits, reverse stock splits,
stock dividends and other recapitalizations.
3.3 STOCK OPTIONS. As additional compensation for the performance by
the Employee of his services hereunder and as soon as practicable following the
approval by the Board of Directors of the Company of an amendment to the
Company's 1995 Stock Option Plan to increase the number of shares of the
Company's common stock for which options under the 1995 Stock Option Plan may be
exercised, the Employee will be granted options to purchase 100,000 shares of
common stock of the Company at a price equal to the lower of $9.50 per share or
the fair market value of the shares of common stock of the Company on the date
of grant; provided, that if the shareholders of the Company shall fail to ratify
said amendment to the 1995 Stock Option Plan at the next annual meeting of the
shareholders of the Company, then such grant of options will be deemed
automatically terminated and to be of no force or effect. Such options shall be
subject to level vesting over a period of three (3) years.
3.4 ADDITIONAL BENEFITS. Separate and apart from Employee's cash
compensation as set forth above, the Company shall be entitled to:
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(a) coverage under the Company's standard life and health insurance
package for executives;
(b) a monthly automobile allowance equal to $750;
(c) participation in the Company's Supplemental Employee Retirement
Pension Plan;
(d) a temporary housing allowance in the amount of $3,250 per month
for such period as shall be necessary for Employee to arrange suitable
housing in the Naples, Florida area, but in any event, such allowance shall
be provided for no less than six (6) months and for no more than eighteen
(18) months from the date of the execution of this Agreement;
(e) reimbursement of reasonable travel expenses for Employee and his
wife, from time to time, between Baltimore, Maryland and Naples, Florida;
(f) reimbursement for reasonable costs of relocating Employee and his
wife from Baltimore, Maryland to Naples, Florida in an amount not to exceed
$50,000, including any such expenses which were previously reimbursed by
the Company;
(g) indemnification for any loss arising out of the sale of Employee's
house in Baltimore, Maryland; and
(h) four (4) weeks paid vacation annually.
In addition to the benefits listed above, Employee shall be entitled to
participate in and receive any other benefits as may be established by the Board
of Directors, on the same terms and conditions as provided to other executives
of the Company generally (including, but not limited to, any deferred
compensation plan, hospital plan or major medical insurance).
ARTICLE IV
TERMINATION AND SEVERANCE
4.1 TERMINATION FOR CAUSE. Subject to Company's obligation to pay Non-
Competition Severance Pay to the extent provided in Section 4.3(a), Company may
terminate this Agreement with cause upon the occurrence of any one or more of
the following events:
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(A) Employee ceases to perform any of his material duties of
employment or breaches any material provision of this Agreement, which
event is not corrected within thirty (30) days after written notice is
delivered by the Company to the Employee specifying said failure or
breach. In the event Company and Employee cannot agree as to whether
any such duty or provision is material, and in the event Employee
fails to correct the condition within thirty (30) days as set forth
above, then the parties shall submit the dispute (only as to
materiality) only to arbitration for determination in accordance with
the rules of the American Arbitration Association under the
jurisdiction of the regional headquarters in or closest to Naples,
Florida as follows:
(I) Each party shall select one (1) arbitrator, and the two
(2) so designated shall select a third arbitrator. If either
party shall fail to designate an arbitrator within seven (7) days
after arbitration is requested then the one selected arbitrator
shall conduct the proceeding. If the two (2) arbitrators shall
fail to select a third arbitrator within fourteen (14) days after
arbitration is requested, then an arbitrator shall be selected by
the American Arbitration Association upon application of either
party. Arbitration proceedings shall be conducted in accordance
with the rules then prevailing of the American Arbitration
Association. Judgment upon an award of a sole arbitrator, or if
there shall be three arbitrators, upon an award of the majority
of the arbitrators shall be binding, and shall be entered in a
court of competent jurisdiction as a finding of that court for
purposes of adjudication of the disputes between the parties on
the issue of materiality.
(II) After expiration of the thirty (30) day cure period set
forth above, the Company may treat the Employee as terminated
during the arbitration period subject to full reinstatement with
full back-pay and compensation as provided for in this Agreement
in the event the judgment of the arbitrators is in favor of the
Employee and against the Company.
(B) Employee commits a felony or commits theft, larceny or
embezzlement of Company's tangible or intangible property; or
(C) Employee becomes disabled or is unable to perform his normal
duties, which condition persists for a period of ninety (90) days or more,
and Company has provided Employee with disability insurance which shall
begin to pay after said ninety (90) day period expires. 4.2 TERMINATION
WITHOUT CAUSE. Subject to the Company's obligation to pay Non-
Competition Severance Pay to the extent provided in Section 4.3(b), Company may
terminate this Agreement at any time without cause.
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4.3 SEVERANCE PAY.
(A) In the event that this Agreement is terminated by the
Company at any time for cause, the Company shall pay to Employee
non-competition severance pay of Employee's Base Salary and additional
benefits described in this Agreement on a monthly basis
("Non-Competition Severance Pay") for a period of eighteen (18) months;
provided, however, that while Employee is receiving Non-Competition
Severance Pay, Employee shall be bound by the non-competition
restrictions of Section 5.2.
(B) In the event that this Agreement is terminated at any time
by the Company without cause, Company shall pay to Employee
Non-Competition Severance Pay for a period of twenty-four (24) months
as liquidated damages. In addition, upon a termination of the Employee
by the Company at any time without cause, all stock options then held
by the Employee will automatically become fully vested and Employee
shall be bound by the non-competition restrictions of Section 5.2
during the applicable period that Non- Competition Severance Pay is
being received by Employee.
(C) In the event that this Agreement is terminated at any time
by the Employee due to a Change of Control in accordance with Section
4.4, the Company shall pay to Employee non-competition severance pay
for a period of thirty-six (36) months; provided, however, while
Employee is receiving Non-Competition Severance Pay, Employee shall be
bound by the non-competition restrictions of Section 5.2. In addition,
upon a termination of this Agreement pursuant to Section 4.4, all stock
options then held by the Employee will automatically become fully
vested.
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4.4 CHANGE OF CONTROL.
(A) In the event of a Change of Control of the Company should
occur during the term of the Employee's employment hereunder, the
Employee shall have the right, upon the giving of thirty (30) days'
notice to the Company within one hundred eighty (180) days following
such event, to terminate his employment under this Agreement. For
purposes of this Agreement, a "Change of Control of the Company" shall
be deemed to occur if (i) there shall be consummated (x) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation other than a merger of the Company
in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale,
lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of
the Company, or (ii) the stockholders of the Company shall approve any
plan or proposal for liquidation or dissolution of the Company, or
(iii) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act), other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or any institutional
investor, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 20% or more of the Company's
outstanding Common Stock, or (iv) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease to be a
director of the Company.
(B) Notwithstanding anything herein to the contrary, the
present value of the payments and benefits to Employee, whether under
this Agreement or otherwise, which are includable in the computation of
"parachute payments" (as defined in Section 280G of the Internal
Revenue Code) shall not exceed 2.99 times the Employee's base amount,
all within the meaning and as computed under Section 280G of the Code.
Such determination
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shall be made by the regular independent accountants retained by the
Company immediately prior to the Change of Control, whose
determination shall be conclusive and binding on the parties.
4.5 DEATH OF THE EMPLOYEE. In the event of the death of the Employee
during the term of his employment hereunder, this Agreement shall terminate
immediately and the Employee's estate shall thereupon be entitled to receive
such portion of the Employee's Base Salary as has been accrued through the date
of his death.
4.6 CONTINUATION OF BENEFITS. Whenever under the provisions of this
Article IV the Employee shall be entitled to receive a continuation of his Base
Salary for a period of time following a termination or nonrenewal of his
employment under this Agreement, it is agreed that the Company also shall
continue to pay for or provide during such period of salary continuation any
hospital plan or major medical insurance and the automobile allowance provided
for in subparagraph (b) of Paragraph 3.4 of this Agreement.
ARTICLE V
COVENANTS OF THE EMPLOYEE
5.1 CONFIDENTIAL INFORMATION. In connection with employment at the
Company, Employee will have access to confidential information consisting of
some or all of the following categories of information. Company and Employee
consider their relation one of confidence with respect to such information:
(A) FINANCIAL INFORMATION, including but not limited to
information relating to the Company's earnings, assets, debts, prices,
pricing structure, volume of purchases or sales or other financial data
whether related to the Company or generally, or to particular products,
services, geographic areas, or time periods;
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(B) SUPPLY AND SERVICE INFORMATION, including but not limited
to information relating to goods and services, suppliers' names or
addresses, terms of supply or service contracts or of particular
transactions, or related information about potential suppliers to the
extent that such information is not generally known to the public, and
the extent that the combination of suppliers or use of a particular
supplier, though generally known or available, yields advantages to the
Company details of which are not generally known;
(C) MARKETING INFORMATION, including but not limited to
information relating to details about ongoing or proposed marketing
programs or agreements by or on behalf of the Company, sales forecasts,
advertising formats and methods or results of marketing efforts or
information about impending transactions;
(D) PERSONNEL INFORMATION, including but not limited to
information relating to any employee's personal or medical history,
compensation or other terms of employment actual or proposed
promotions, hirings, resignations, disciplinary actions, terminations
or reasons therefor, training methods, performance, or other employee
information; and
(E) CUSTOMER INFORMATION, including but not limited to
information relating to past, existing or prospective customers' names,
addresses or backgrounds, records of agreements and prices, proposals
or agreements between customers and the Company, status of customers'
accounts or credit, or related information about actual or prospective
customers as well as customer lists.
All of the foregoing are hereinafter referred to as "Trade Secrets."
During and after the employment by the Company, regardless of the reasons that
such employment ends, Employee agrees:
(AA) To hold all Trade Secrets in confidence and not discuss,
communicate or transmit to others, or make any unauthorized copy of or
use the Trade Secrets in any capacity, position or business except as
it directly relates to Employee's employment by the Company;
(BB) To use the Trade Secrets only in furtherance of proper
employment related reasons of the Company to further the interests of
the Company;
(CC) To take all reasonable actions that Company deems
necessary or appropriate, to prevent unauthorized use or disclosure of
or to protect the Company's interest in the Trade Secrets; and
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(DD) That any of the Trade Secrets, whether prepared by
Employee or which may come into Employee's possession during Employee's
employment hereunder, are and remain the property of the Company and
its affiliates, and all such Trade Secrets, including copies thereof,
together with all other property belonging to the Company or its
affiliates, or used in their respective businesses, shall be delivered
to or left with the Company. This Agreement does not apply to (i)
information that by means other than Employee's
deliberate or inadvertent disclosure becomes generally known to the public; and
(ii) disclosure compelled by judicial or administrative proceedings after
Employee diligently tries to avoid each disclosure and affords the Company the
opportunity to obtain assurance that compelled disclosures will receive
confidential treatment.
5.2 NON-COMPETITION. In consideration of the Employee's employment
hereunder, the Employee hereby agrees that, without the express written consent
of the Company, during the applicable period set forth in Article IV hereof
following a termination or nonrenewal of this Agreement, the Employee will not,
directly or indirectly, for the Employee or on behalf of any other person, firm,
entity or other enterprise (a) hire, or directly or indirectly solicit for
employment or recommend to any subsequent employer of the Employee the
solicitation for employment of, any person who, at the time of such hiring or
solicitation is, or during the prior three months was, employed by Company, (b)
directly or indirectly solicit, divert, or endeavor to entice away any customer
of the Company, or otherwise engage in any activity intended to terminate,
disrupt, or interfere with the Company's relationship with any customer,
supplier, lessor or other person, or (c) be employed by, be a director, officer
or manager of, act as a consultant for (other than as permitted under Section
1.2), be a partner in, have a proprietary interest in, give advice to, loan
money to or otherwise associate with, any person, enterprise,
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partnership, association, corporation, joint venture or other entity which is
directly in the business of owning, operating or managing any facility which
competes with any such type of facility then operated by the Company. This
provision shall not be construed to prohibit the Employee from owning up to five
(5%) percent of the issued shares of any company whose common stock is listed
for trading on any national securities exchange or on the NASDAQ System.
5.3 REMEDIES FOR BREACH. The Employee acknowledges that the covenants
contained in Article V of this Agreement are independent covenants and that any
failure by the Company to perform its obligations under this Agreement (other
than the act of nonpayment which is not cured by the Company within thirty (30)
days of the receipt of written notice of said condition from the Employee) shall
not be a defense to enforcement of the covenants contained in Article V,
including but not limited to a temporary or permanent injunction. The Employee
acknowledges that damages in the event of Employee's breach of this Article V
will be difficult, if not impossible, to ascertain and it is therefore agreed
that the Company, in addition to, and without limiting any other remedy or right
it may have, shall have the right to an injunction enjoining the said breach.
Notwithstanding anything to the contrary contained in this Agreement, and in
addition to any other remedy available to the Company at law or in equity or
otherwise, the Company's obligation to make payments of Non-Competition
Severance Payments shall cease if Employee shall violate any provision of this
Article V and such violation shall continue uncured for a period of thirty (30)
or more days.
5.4 AFFILIATES. For purposes of this Article V, the term "Company"
shall be deemed to include each of the Company's subsidiaries and other
affiliates.
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ARTICLE VI
ASSIGNMENT
6.1 PROHIBITION OF EMPLOYMENT ASSIGNMENT. The Employee agrees on behalf
of the Employee and the Employee's heirs and executors, personal
representatives, and any other person or persons claiming any benefit under the
Employee by virtue of this Agreement, that this Agreement and the rights,
interests, and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by the Employee or the Employee's heirs, executors and
personal representatives, and shall not be subject to execution, attachment or
similar process. Any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of this Agreement or any such rights, interests and benefits
thereunder contrary to the foregoing provision, or the levy of any attachment or
similar process thereupon shall be null and void and without effect and shall
relieve the Company of any and all liability hereunder.
6.2 RIGHT OF COMPANY TO ASSIGN. This Agreement shall be assignable and
transferable by the Company to Company's transferee, assignee or any
successor-in-interest, parent, subsidiary or affiliate of Company, and shall
inure to the benefit of and be binding upon the Employee, the Employee's heirs
and personal representatives, and the Company and its successors and assigns.
Employee agrees to execute all documents necessary to ratify and effectuate such
assignment. An assignment of this Agreement by the Company shall not release the
Company from its monetary and stock obligations under this Agreement.
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ARTICLE VII
GENERAL
7.1 GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of Florida, irrespective of the fact that the Employee may
be or become a resident of a different state.
7.2 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company and the Employee and their respective heirs, legal
representatives, executors, administrators, successors and permitted assigns.
7.3 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and contains all of the agreements between the parties with
respect to the subject matter hereof; this Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to the subject hereof. No change or modification of this Agreement shall
be valid unless the same be in writing and signed by both parties hereto. No
waiver of any provisions of this Agreement shall be valid unless in writing and
signed by the person or party to be charged.
7.4 SEVERABILITY. If any portion of this Agreement shall be for any
reason, invalid or unenforceable, the remaining portion or portions shall
nevertheless be valid, enforceable and carried into effect, unless to do so
would clearly violate the present legal and valid intention of the parties
hereto.
7.5 NOTICES. All notices, demands, requests, consents, approvals or
other communications required or permitted hereunder shall be in writing and
shall be delivered by hand, registered or certified mail with return receipt
requested or by a nationally recognized
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overnight delivery service, in each case with all postage or other delivery
charges prepaid, and to the address of the party to whom it is directed as
indicated below, or to such other address as such party may specify by giving
notice to the other in accordance with the terms hereof. Any such notice shall
be deemed to be received (a) when delivered, if by hand, (b) on the next
business day following timely deposit with a nationally recognized overnight
delivery service or (c) on the date shown on the return receipt as received or
refused or on the date the postal authorities state that delivery cannot be
accomplished, if sent by registered of certified mail, return receipt requested.
IF TO THE COMPANY: Community Care of America, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chairman of the Board
WITH A COPY TO: Blass & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
IF TO THE EMPLOYEE: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and its corporate seal to be hereunto affixed,
and the Employee has hereunto set Employee's hand on the day and year first
above written.
COMPANY EMPLOYEE
COMMUNITY CARE OF AMERICA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------- ---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
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