AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit
10.7
AMENDED
AND RESTATED
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of the 17th day of December, 2008, by and between L. ▇▇▇▇▇ ▇▇▇▇▇ (“▇▇. ▇▇▇▇▇”)
and Sun Healthcare Group,
Inc., a Delaware corporation (“Sun” or the “Company”).
WHEREAS,
▇▇. ▇▇▇▇▇ serves as the Executive Vice President and Chief Financial Officer of
Sun;
WHEREAS,
Sun and ▇▇. ▇▇▇▇▇ are parties to that certain Employment Agreement dated as of
February 14, 2005, as amended on October 12, 2006, October 31, 2007 and March
31, 2008 (the “Existing Agreement”); and
WHEREAS,
Sun and ▇▇. ▇▇▇▇▇ wish to amend and restate the Existing Agreement upon the
terms set forth in this Agreement to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), effective as of the date
hereof.
NOW,
THEREFORE, in consideration of the above recitals and the mutual covenants and
agreements contained herein, ▇▇. ▇▇▇▇▇ and Sun agree as follows:
Section
1: Employment. Sun
agrees to employ ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ agrees to accept employment with Sun,
subject to the terms and conditions of this Agreement.
Section
2: Duties
and Responsibilities. ▇▇. ▇▇▇▇▇ shall devote his full
employment time, efforts, skills and attention exclusively to his duties as
Executive Vice President and Chief Financial Officer; provided, however, that to
the extent the following activities do not materially interfere or conflict with
his duties and responsibilities hereunder, ▇▇. ▇▇▇▇▇ may (i) serve as a member
of the boards of directors of other corporation with the prior written consent
of the Chief Executive Officer of Sun; and (ii) engage in charitable, civic and
religious affairs.
Section
3: Compensation,
Benefits and Related Matters.
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a.
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Annual
Base Salary. Sun shall pay to ▇▇. ▇▇▇▇▇ a base salary at
an annual rate of $400,000 ("Base Salary"), such salary to be payable in
accordance with Sun's customary payroll practices as in effect from time
to time (but not less frequently than monthly). The annual base
salary will be reviewed at least annually for possible merit increases and
any increase in ▇▇. ▇▇▇▇▇'▇ annual base salary rate shall thereafter
constitute "Base Salary" for purposes of this
Agreement.
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b.
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Cash
Bonus/Incentive Compensation. In addition to the Base
Salary provided for in Section 3(a) above, ▇▇. ▇▇▇▇▇ shall be entitled to
receive an annual bonus (“Bonus”) in accordance with the Sun Healthcare
Group, Inc. Executive Bonus Plan, as it may be amended from
time to time by the Compensation Committee of the Board of Directors;
provided, however, that no amendment shall be
effective
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if
it reduces the percentage of Base Salary that would constitute the minimum
or maximum potential amount of the Bonus as compared to the prior year,
unless such amendment has been agreed to in writing by ▇▇. ▇▇▇▇▇. The
Bonus shall be payable at the same time as other annual bonuses are paid
to senior management personnel with respect to that fiscal year. Subject
to the provisions of Section 6, in order to have earned and to be paid any
such Bonus, ▇▇. ▇▇▇▇▇ must be employed by Sun on the date of such
payment. It is intended that the Bonus described in this
Section 3(b) qualify as “performance based compensation” under Section
162(m) of the Code to the extent necessary to preserve Sun’s ability to
deduct such Bonus.
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c.
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Equity
Incentive. ▇▇. ▇▇▇▇▇ shall be entitled to the following
equity incentive as of the date his employment
begins:
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1.
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A
non-qualified stock option ("Stock Option") to purchase 150,000 shares of
Common Stock of Sun at an exercise price per share equal to the fair
market value of the Common Stock on the date of this
Agreement. One-fifth of the shares of Common Stock underlying
the Stock Option will vest effective as of February 14, 2005, and
one-fifth will vest on each of the next four anniversaries of February 14,
2005 thereafter, provided that ▇▇. ▇▇▇▇▇ is employed by Sun or any of its
subsidiaries on each such date of vesting. The Stock Option
shall have a 7 year term. ▇▇. ▇▇▇▇▇ acknowledges that Sun has
satisfied its obligation to grant such Stock
Option.
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2.
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Restricted
stock units ("RSUs") with respect to 20,000 shares of Sun common
stock. One-fourth of the restricted stock units will vest on
February 14, 2006, and one-fourth will vest on each of the next three
anniversaries of February 14, 2006 thereafter. ▇▇. ▇▇▇▇▇
acknowledges that Sun has satisfied its obligation to grant such
RSUs.
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3.
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If,
during the Term, ▇▇. ▇▇▇▇▇'▇ employment with Sun is terminated for any
reason other than his death or Disability (as defined in Section 5(e)),
Good Cause (as defined in Section 5(a)) or his voluntary resignation
without Good Reason (as defined in Section 5(c)), then the unvested
portion of his Stock Options and RSUs will thereupon immediately be
vested.
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d.
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Retirement
and Benefit Plans. During his employment, ▇▇. ▇▇▇▇▇
shall be entitled to participate in all retirement plans, health benefit
programs, insurance programs and other similar employee welfare benefit
arrangements available generally to senior executive officers of
Sun. Such plans, programs and arrangements are subject to
change during employment at the sole discretion of the
Company.
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e.
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Paid
Time Off. ▇▇. ▇▇▇▇▇ shall be entitled to paid time off
in addition to holiday and sick time, of not less than 160 hours per
year.
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f.
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Indemnification
Liability/Insurance. ▇▇. ▇▇▇▇▇ shall be entitled to
indemnification by Sun to the fullest extent permitted by applicable law
and the charter and bylaws of Sun. In addition, Sun shall
maintain during ▇▇. ▇▇▇▇▇'▇ employment customary director's and officers'
liability insurance and ▇▇. ▇▇▇▇▇ shall be covered by such
insurance.
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g.
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Taxes. All
compensation payable to ▇▇. ▇▇▇▇▇ shall be subject to withholding for all
applicable federal, state and local income taxes, occupational taxes,
Social Security and similar mandatory
withholdings.
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Section
4: Travel
and Relocation. Sun will reimburse certain of ▇▇. ▇▇▇▇▇'▇
expenses to move his primary residence to Southern California; provided that
reimbursable expenses will be limited to house hunting trips, actual moving
expenses and temporary housing expenses. Any real estate expenses ▇▇.
▇▇▇▇▇ incurs in connection with the purchase or sale of any real property will
not be reimbursed by Sun. Sun will also pay ▇▇. ▇▇▇▇▇ a $50,000
relocation allowance, net of applicable taxes, upon the completion of the
relocation of his primary residence to Southern California. For the
purposes of this Paragraph 4, the term "Southern California" shall be limited to
those portions of the Counties of Orange, Riverside, Los Angeles and San Diego
that are located within a reasonable commuting distance from Sun's executive
offices in Irvine, California. Until such relocation of his primary
residence is completed, ▇▇. ▇▇▇▇▇ shall be entitled to reimbursement for
reasonable travel and housing expenses incurred by him in connection with his
performance of services pursuant to this Agreement. ▇▇. ▇▇▇▇▇ agrees
that Sun has satisfied its obligations pursuant to this Section 4.
Section
5: Termination. Sun
may, at any time in its sole discretion, terminate ▇▇. ▇▇▇▇▇ as Executive Vice
President and Chief Financial Officer and from all other positions with Sun and
its direct and indirect subsidiaries; provided, however, that Sun shall provide
▇▇. ▇▇▇▇▇ with at least five (5) business days prior written notice of such
termination and shall make the payments associated with such termination in
accordance with Section 6.
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a.
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Termination
by Sun for "Good Cause." Sun may at any time, by written notice to
▇▇. ▇▇▇▇▇ at least five (5) business days prior to the date of termination
specified in such notice and specifying the acts or omissions believed to
constitute Good Cause (as defined below), terminate ▇▇. ▇▇▇▇▇ as an
officer and employee and from all other positions with Sun for Good
Cause. Sun may relieve ▇▇. ▇▇▇▇▇ of his duties and
responsibilities pending a final determination of whether Good Cause
exists, and such action shall not constitute Good Reason (as defined
below) for purposes of this Agreement. Payment to ▇▇. ▇▇▇▇▇
upon a termination for Good Cause is set forth in Section
6(a). "Good Cause" for termination shall mean any one of the
following:
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1.
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Any
criminal conviction under the laws of the United States or any state or
other political subdivision thereof which, in the good faith determination
of the Chief Executive Officer of Sun, renders ▇▇. ▇▇▇▇▇ unsuitable as an
officer or employee of Sun.
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2.
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▇▇.
▇▇▇▇▇'▇ continued failure to substantially perform the duties reasonably
requested by the Chief Executive Officer of Sun and commensurate with his
position as Executive Vice President and Chief Financial Officer of Sun
(other than any such failure resulting from his incapacity due to his
physical or mental condition) after a written demand for substantial
performance is delivered to him by the Chief Executive Officer of Sun,
which demand specifically identifies the manner in which the Chief
Executive Officer of Sun believes that he has not substantially performed
his duties, and which performance is not substantially corrected by him
within ten (10) days of receipt of such demand;
and
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3.
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Any
material workplace misconduct or willful failure to comply with Sun's
general policies and procedures as they may exist from time to time by ▇▇.
▇▇▇▇▇ which, in the good faith determination of the Chief Executive
Officer of Sun, renders ▇▇. ▇▇▇▇▇ unsuitable as an officer or
employee.
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b.
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Termination
by Sun without Good Cause. Sun may at any time, by
written notice to ▇▇. ▇▇▇▇▇ at least five (5) business days prior to date
of termination specified in such notice, terminate ▇▇. ▇▇▇▇▇ as an officer
or employee and from all other positions with Sun. If such
termination is made by Sun other than by reason of ▇▇. ▇▇▇▇▇'▇ death,
Disability (as defined in Section 5(e)) and Good Cause does not exist,
such termination shall be treated as a termination without Good Cause and
▇▇. ▇▇▇▇▇ shall be entitled to payment in accordance with Section
6(b).
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c.
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Termination
by ▇▇. ▇▇▇▇▇ for Good Reason. ▇▇. ▇▇▇▇▇ may, at any time
at his option within sixty (60) days following an event or condition that
constitutes Good Reason (as defined below), resign for Good Reason as an
officer and employee and from all other positions with Sun by written
notice to Sun at least thirty (30) days prior to the date of termination
specified in such notice; provided, however, that Sun has not
substantially corrected the event or condition that would constitute Good
Reason prior to the date of termination. Payment to ▇▇. ▇▇▇▇▇
upon a termination for Good Reason is set forth in Section
6(b).
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"Good
Reason" shall mean the occurrence of any one of the following events or
conditions without ▇▇. ▇▇▇▇▇’▇ written consent:
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1.
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A
meaningful and detrimental reduction in ▇▇. ▇▇▇▇▇’▇ authority, duties or
responsibilities or a meaningful and detrimental change in his reporting
responsibilities;
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2.
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A
material failure of Sun to comply with the compensation provisions as set
forth in Sections 3(a) - 3(c) or the benefit provisions as set forth in
Sections 3(d) - 3(f) (collectively, the “Benefits”) (other than a
reduction of Benefits uniformly applicable to other members of senior
management); or
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3.
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A
material relocation of ▇▇. ▇▇▇▇▇’▇ principal work location to a place
other than Orange County or Los Angeles County,
California;
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provided that Sun is provided
with notice and opportunity to cure such breach and Executive terminates his
employment with Sun, in each case within the time periods prescribed under this
Section 5(c).
Notwithstanding
any provision of this Paragraph 5(c) to the contrary, the occurrence of a
“Change in Control” (as defined in Section 6 below) shall not, by itself,
constitute Good Reason hereunder.
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d.
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Voluntary
Resignation. ▇▇. ▇▇▇▇▇ may, at any time at his option
with thirty (30) calendar days written notice to Sun, voluntarily resign
without Good Reason as an officer and employee and from all positions with
Sun. Payment to ▇▇. ▇▇▇▇▇ upon his voluntary resignation
without Good Reason is set forth in Section 6(a). Resignation
from employment shall automatically constitute resignation from all
positions of any subsidiary or affiliated
corporation.
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e.
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Death
or Disability. ▇▇. ▇▇▇▇▇'▇ employment under this
Agreement shall terminate automatically as of the date of ▇▇. ▇▇▇▇▇'▇
death. Sun, at any time by written notice to ▇▇. ▇▇▇▇▇ at least
five (5) business days prior to the date of termination specified in such
notice, terminate ▇▇. ▇▇▇▇▇ as an officer and employee and from all other
positions with Sun by reason of his Disability. “Disability”
shall mean any physical or mental condition or illness that prevents ▇▇.
▇▇▇▇▇ from performing his duties hereunder in any material respect for a
period of 120 substantially consecutive calendar days, as determined by a
physician selected by Sun and reasonably acceptable to ▇▇. ▇▇▇▇▇ or, if
▇▇. ▇▇▇▇▇ is incapacitated, reasonably acceptable to the Director of
Medicine or equivalent senior physician at a hospital of ▇▇. ▇▇▇▇▇'▇
choice. Payment to ▇▇. ▇▇▇▇▇ upon his termination by reason of
his death or Disability is set forth in Section
6(a).
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Section
6: Payments
Upon Termination.
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a.
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Payment
Upon Termination for Good Cause, Resignation without Good Reason, Death or
Disability. In the event of termination of his
employment pursuant to Sections 5(a), 5(d) or 5(e), ▇▇. ▇▇▇▇▇, or his
estate where applicable, shall be paid any earned but unpaid Base Salary
through the date of termination and any accrued and unused paid time off
through the date of termination in accordance with Company policy, which
shall be paid to ▇▇. ▇▇▇▇▇ or his estate or beneficiary, as applicable, in
a lump sum in cash upon or promptly following (and in all events within 30
days after) the date of termination of employment (collectively, the
“Accrued Obligations”). In addition, in the case of a
termination of employment pursuant to Sections 5(e), but not Sections 5(a)
or 5(d), ▇▇. ▇▇▇▇▇ or his estate shall be paid (i) any accrued and unpaid
bonus for any prior fiscal year, which shall be paid to ▇▇. ▇▇▇▇▇ or his
estate or beneficiary, as applicable, in a lump sum in cash at the time
that annual bonuses are paid to senior management personnel with respect
to that fiscal year, but in any event within
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seventy-five
(75) days after the conclusion of the fiscal year to which such Bonus
relates; and (ii) a pro rata portion (based on the number of days of
employment in the fiscal year of termination divided by 365 or 366, as
applicable) of the bonus, if any, for the fiscal year in which the
termination occurs, which shall be paid at the time that annual bonuses
are paid to senior management personnel with respect to that fiscal year,
but in any event within seventy-five (75) days after the conclusion of the
fiscal year to which such Bonus relates. ▇▇. ▇▇▇▇▇ shall also
receive his vested benefits in accordance with the terms of Sun's
compensation and benefit plans, and his participation in such plans and
all other perquisites shall cease as of the date of termination, except to
the extent ▇▇. ▇▇▇▇▇ may elect to continue coverage as under any welfare
benefit plans as required by Part 6, Title I of the Employee Retirement
Income Security Act of 1974, as amended. Upon a termination
under Section 5(a), 5(d) or 5(e), ▇▇. ▇▇▇▇▇ shall not be entitled to any
compensation or benefits under this Agreement except as set forth in this
Section 6(a).
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b.
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Payment
Upon Termination by Sun without Good Cause or by ▇▇. ▇▇▇▇▇ for Good
Reason. In the event of termination of employment
pursuant to Sections 5(b) or 5(c), ▇▇. ▇▇▇▇▇ shall be entitled to a lump
sum severance payment in an amount equal to two year's Base Salary, with
such amount to be paid to ▇▇. ▇▇▇▇▇ in the month immediately following the
month in which ▇▇. ▇▇▇▇▇’▇ termination of employment
occurs. ▇▇. ▇▇▇▇▇ shall also be entitled to: (i) any earned
Bonus pursuant to Section 3(b) for the fiscal year prior to the fiscal
year of termination in the event ▇▇. ▇▇▇▇▇ was employed the entire prior
fiscal year but is not employed by Sun on the date said Bonus is paid,
payable to ▇▇. ▇▇▇▇▇ in a lump sum in cash at the time that annual bonuses
are paid to senior management personnel with respect to that fiscal year,
but in any event within seventy-five (75) days after the conclusion of the
fiscal year to which such Bonus relates; (ii) an amount equal to the
annual bonus compensation which he would have earned for the year in which
his termination occurs (determined by multiplying the amount ▇▇. ▇▇▇▇▇
would have received based upon actual performance had his employment
continued through the end of the fiscal year by a fraction, the numerator
of which is the number of days during the year of termination that ▇▇.
▇▇▇▇▇ is employed by the Company and the denominator of which is 365 or
366, as applicable), payable to ▇▇. ▇▇▇▇▇ at the time that annual bonuses
are paid to senior management personnel with respect to that fiscal year,
but in any event within seventy-five (75) days after the conclusion of the
fiscal year to which such Bonus relates; and (iii) payment of any Accrued
Obligations payable as set forth in Section
6(a). Notwithstanding the foregoing, ▇▇. ▇▇▇▇▇'▇ right to
receive the severance payment hereunder shall be conditioned upon his
execution of a release in favor of Sun, which shall not be inconsistent
with the terms of this Agreement and which ▇▇. ▇▇▇▇▇ shall deliver to the
Company within twenty-one (21) days following the date of his termination
of employment. ▇▇. ▇▇▇▇▇'▇ participation in any other
retirement and benefit plans and perquisites shall cease as of the date of
termination, except ▇▇. ▇▇▇▇▇ and his eligible dependents (as determined
under Sun's health plan) shall be entitled to continuing coverage under
Sun's health plans on the same basis as active employees until the earlier
of (i) the first
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anniversary
of the date of termination or (ii) the date on which ▇▇. ▇▇▇▇▇ or his
eligible dependents become eligible to participate in a plan of a
successor employer.
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c.
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"Change
in Control." For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if any of the following events
occurs:
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1.
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Any
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities and Exchange Act of 1934, as amended (the "1934 Act")),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of Sun (an "Acquiring Person"), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of more than 33 1/3% of the then outstanding voting stock
of Sun;
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2.
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A
merger or consolidation of Sun with any other corporation, other than a
merger or consolidation which would result in the voting securities of Sun
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 51% of the combined voting power of the voting
securities of Sun or surviving entity outstanding immediately after such
merger or consolidation;
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3.
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A
sale or other disposition by Sun of all or substantially all of Sun's
assets;
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4.
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During
any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board of Directors and any new director
(other than a director who is a representative or nominee of an Acquiring
Person) whose election by the Board of Directors or nomination for
election by Sun's shareholders was approved by a vote of at least a
majority of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination was
previously so approved, no longer constitute a majority of the Board of
Directors;
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provided, however, in no
event shall any acquisition of securities, a change in the composition of the
Board of Directors or a merger or other consolidation pursuant to a plan of
reorganization under chapter 11 of the Bankruptcy Code with respect to Sun
(“Chapter 11 Plan”), or a liquidation under the Bankruptcy Code constitute a
Change in Control. In addition, notwithstanding Sections 6(c)(1),
6(c)(2), 6(c)(3) and 6(c)(4), a Change in Control shall not be deemed to have
occurred in the event of a sale or conveyance in which Sun continues as a
holding company of an entity or entities that conduct the business or businesses
formerly conducted by Sun, or any transaction undertaken for the purpose of
reincorporating Sun under the laws of another jurisdiction, if such transaction
does not materially affect the beneficial ownership of Sun's capital
stock. ▇▇. ▇▇▇▇▇’▇ continued employment without objection following a
Change in Control shall not, by itself, constitute
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consent
to or a waiver of rights with respect to any circumstances constituting Good
Reason hereunder.
Section
7: Additional
Payments.
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▇.
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▇▇▇▇▇-Up
Payments. Notwithstanding anything herein to the
contrary, if it is determined that any payment to ▇▇. ▇▇▇▇▇ pursuant to
this Agreement would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any interest or penalties
thereon, is herein referred to as an “Excise Tax”), then ▇▇. ▇▇▇▇▇ shall
be entitled to an additional payment (a “Gross-Up Payment”) in an amount
that will place ▇▇. ▇▇▇▇▇ in the same after-tax economic position that he
would have enjoyed if the Excise Tax had not applied to the
payment. The amount of the Gross-Up Payment shall be determined
by an accounting firm retained by Sun (the “Accounting Firm”) using such
formulas as the Accounting Firm deems appropriate. No Gross-Up
Payment shall be payable hereunder if the Accounting Firm determines that
the payments are not subject to an Excise
Tax.
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b.
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Determination
of Gross-Up Payment. Subject to the provisions of
Section 7(c), all determinations required under this Section 7, including
whether a Gross-Up Payment is required, the amount of the payments
constituting parachute payments, and the amount of the Gross-Up Payment,
shall be made by the Accounting Firm, which shall provide detailed
supporting calculations both to Sun and ▇▇. ▇▇▇▇▇ within fifteen business
days of ▇▇. ▇▇▇▇▇’▇ date of termination or any other date reasonably
requested by Sun or ▇▇. ▇▇▇▇▇ on which a determination under Section 7 is
necessary or advisable. Within five days of the receipt by ▇▇.
▇▇▇▇▇ and Sun of the Accounting Firm’s determination of the initial
Gross-Up Payment, Sun shall pay the amount of such Gross-Up Payment to the
applicable taxing authorities for the benefit of ▇▇. ▇▇▇▇▇. If the
Accounting Firm determines that no Excise Tax is payable by ▇▇. ▇▇▇▇▇, Sun
shall cause the Accounting Firm to provide ▇▇. ▇▇▇▇▇ and Sun with an
opinion that Sun has substantial authority under the Internal Revenue Code
and regulations thereunder not to report an Excise Tax on ▇▇. ▇▇▇▇▇’▇
federal income tax return. Any determination by the Accounting
Firm shall be binding upon ▇▇. ▇▇▇▇▇ and Sun. If the initial Gross-Up
Payment is insufficient to cover the amount of the Excise Tax that is
ultimately determined to be owing by ▇▇. ▇▇▇▇▇ with respect to any payment
(hereinafter an “Underpayment”), Sun, after exhausting its remedies under
Section 7(c) below, shall promptly pay to the applicable taxing
authorities for the benefit of ▇▇. ▇▇▇▇▇ (or directly to ▇▇. ▇▇▇▇▇ in the
event ▇▇. ▇▇▇▇▇ previously paid the related tax amounts) an additional
Gross-Up Payment in respect of the
Underpayment.
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c.
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Procedures. ▇▇.
▇▇▇▇▇ shall notify Sun in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by Sun of a
Gross-Up Payment. Such notice shall be given as soon as
practicable after ▇▇. ▇▇▇▇▇ knows of such claim and ▇▇. ▇▇▇▇▇ shall
apprise Sun of the nature of the
claim
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and
the date on which the claim is requested to be paid. ▇▇. ▇▇▇▇▇
agrees not to pay the claim until the expiration of the thirty-day period
following the date on which ▇▇. ▇▇▇▇▇ notifies Sun, or such shorter period
ending on the date the taxes with respect to such claim are due (the
“Notice Period”). If Sun notifies ▇▇. ▇▇▇▇▇ in writing prior to
the expiration of the Notice Period that it desires to contest the claim,
▇▇. ▇▇▇▇▇ shall: (i) give Sun any information reasonably requested by Sun
relating to the claim; (ii) take such action in connection with the claim
as Sun may reasonably request, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by Sun and reasonably acceptable to ▇▇. ▇▇▇▇▇; (iii) cooperate
with Sun in good faith in contesting the claim; and (iv) permit Sun to
participate in any proceedings relating to the claim. ▇▇. ▇▇▇▇▇
shall permit Sun to control all proceedings related to the claim and, at
its option, permit Sun to pursue or forgo any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority
in respect of such claim. If requested by Sun, ▇▇. ▇▇▇▇▇ agrees
either to pay the tax claimed and ▇▇▇ for a refund or contest the claim in
any permissible manner and 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 Sun shall determine; provided, however,
that if Sun directs ▇▇. ▇▇▇▇▇ to pay such claim and pursue a refund, Sun
shall pay such claim on ▇▇. ▇▇▇▇▇’▇ behalf (the “Claim
Payment”). Sun’s control of the contest related to the claim
shall be limited to the issues related to the Gross-Up Payment and ▇▇.
▇▇▇▇▇ shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or other taxing
authority. If Sun does not notify ▇▇. ▇▇▇▇▇ in writing prior to
the end of the Notice Period of its desire to contest the claim, Sun shall
pay to the applicable taxing authorities on ▇▇. ▇▇▇▇▇’▇ behalf an
additional Gross-Up Payment in respect of the excess parachute payments
that are the subject of the claim. Any Gross-Up Payment shall
be made without additional tax consequences to ▇▇.
▇▇▇▇▇.
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d.
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Repayments. If,
after a Claim Payment is made by Sun, ▇▇. ▇▇▇▇▇ becomes entitled to a
refund with respect to the claim to which such Claim Payment relates, ▇▇.
▇▇▇▇▇ shall pay Sun the amount of the refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after a Claim Payment is made by Sun, a determination is made that ▇▇.
▇▇▇▇▇ shall not be entitled to any refund with respect to the claim and
Sun does not promptly notify ▇▇. ▇▇▇▇▇ of its intent to contest the denial
of refund, then the amount of the Claim Payment shall offset the amount of
the additional Gross-Up Payment then owing to ▇▇.
▇▇▇▇▇.
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e.
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Further
Assurances. Sun shall indemnify ▇▇. ▇▇▇▇▇ and hold him
harmless, on an after-tax basis, from any costs, expenses, penalties,
fines, interest or other liabilities (“Losses”) incurred by ▇▇. ▇▇▇▇▇ with
respect to the exercise by Sun of any of its rights under Section 7,
including, without limitation, any Losses related to Sun’s decision to
contest a claim or any imputed income to him resulting from any Claim
Payment or action taken on ▇▇. ▇▇▇▇▇’▇ behalf by Sun
hereunder. Sun shall pay all legal fees and expenses incurred
under Section 7 and shall promptly
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9
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reimburse
▇▇. ▇▇▇▇▇ for the reasonable expenses incurred by him in connection with
any actions taken by Sun or required to be taken by ▇▇. ▇▇▇▇▇
hereunder. Sun shall also pay all of the fees and expenses of
the Accounting Firm, including, without limitation, the fees and expenses
related to the opinion referred to in Section
7(b).
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f.
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Section
409A. Notwithstanding anything to the contrary in this
Section 7, any payment under this Section 7 shall be paid to ▇▇. ▇▇▇▇▇
promptly but in no event later than the last day of the end of ▇▇. ▇▇▇▇▇’▇
taxable year following the taxable year in which ▇▇. ▇▇▇▇▇ (or Sun) pays
or remits the related taxes.
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Section
8: Protection
of Sun’s Interests.
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a.
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Confidentiality. ▇▇.
▇▇▇▇▇ agrees that he will not at any time, during or after the term of
this Agreement, except in performance of his obligations to Sun hereunder
or with the prior written consent of the Chief Executive Officer of Sun,
directly or indirectly disclose to any person or organization any secret
or “Confidential Information” that ▇▇. ▇▇▇▇▇ may learn or has learned by
reason of his association with Sun. The term “Confidential
Information” means any information not previously disclosed to the public
or to the trade by Sun’s management with respect to Sun’s products,
services, business practices, facilities and methods, salary and benefit
information, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, pricing
information, customer lists, financial information (including revenues,
costs or profits associated with any of Sun's products or lines of
business), business plans, prospects or opportunities, compliance and
clinical processes, policies and
procedures.
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b.
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Exclusive
Property. ▇▇. ▇▇▇▇▇ confirms that all Confidential
Information is and shall remain the exclusive property of
Sun. All business records, papers and documents kept or made by
▇▇. ▇▇▇▇▇ relating to the business of Sun shall be and remain the property
of Sun. Upon the termination of ▇▇. ▇▇▇▇▇’▇ employment for any
reason or upon the request of Sun at any time, ▇▇. ▇▇▇▇▇ shall promptly
deliver to Sun, and shall not without the consent of the Board of
Directors of Sun, retain copies of, Confidential Information, or any
written materials not previously made available to the public, or records
and documents made by ▇▇. ▇▇▇▇▇ or coming into ▇▇. ▇▇▇▇▇’▇ possession
concerning the business or affairs of
Sun.
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c.
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Nonsolicitation. ▇▇.
▇▇▇▇▇ shall not, during his employment under this Agreement, and for two
(2) years following the termination of this Agreement, for whatever reason
or cause, in any manner induce, attempt to induce, or assist others to
induce, or attempt to induce, any employee, agent, representative or other
person associated with Sun or any customer, patient or client of Sun to
terminate his or her association or contract with Sun, nor in any manner,
directly or indirectly, interfere with the relationship between Sun and
any of such persons or entities.
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10
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d.
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Non-Disparagement. ▇▇.
▇▇▇▇▇ shall not during his employment under this Agreement and for two
years following termination of the Agreement, for whatever reason, make
any statements that are intended to or that would reasonably be expected
to harm Sun or any of its subsidiaries or affiliates, their respective
predecessors, successors, assigns and employees and their respective past,
present or future officers, directors, shareholders, employees, trustees,
fiduciaries, administrators, agents or representatives. Sun and
its officers and directors will not make any statements that are intended
to or that would reasonably be expected to harm ▇▇. ▇▇▇▇▇ or his
reputation or that reflect negatively on ▇▇. ▇▇▇▇▇'▇ performance, skills
or ability.
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e.
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Relief. Without
intending to limit the remedies available to Sun, ▇▇. ▇▇▇▇▇ acknowledges
that a breach of any of the covenants in Section 8 may result in material
irreparable injury to Sun for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, Sun
shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining ▇▇. ▇▇▇▇▇ from engaging in
activities prohibited by Section 8 or such other relief as may be required
to specifically enforce any of the covenants in Section
8.
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Section
9: Miscellaneous
Provisions.
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a.
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Amendments,
Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by both parties. 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.
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b.
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Validity. The
invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and
effect.
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c.
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Entire
Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
matters covered hereby and supersedes all prior agreements and
understandings of the parties with respect to the subject matter
hereof. 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 expressly set forth in this Agreement
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter
hereof.
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d.
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Resolution
of Disputes. Any disputes arising under or in connection
with this Agreement may, at the election of ▇▇. ▇▇▇▇▇ or Sun, be resolved
by binding
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arbitration,
to be held in Orange County, California in accordance with the rules and
procedures of the American Arbitration Association. If
arbitration is elected, ▇▇. ▇▇▇▇▇ and Sun shall mutually select the
arbitrator. If ▇▇. ▇▇▇▇▇ and Sun cannot agree on the selection
of an arbitrator, each party shall select an arbitrator and the two
arbitrators shall select a third arbitrator who shall resolve the
dispute. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Nothing
herein shall limit the ability of Sun to obtain the injunctive relief
described in Section 8(d) pending final resolution of matters that are
sent to arbitration.
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e.
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Attorneys’
Fees. Sun shall pay or reimburse ▇▇. ▇▇▇▇▇ on an
after-tax basis for all costs and expenses (including, without limitation,
court costs, costs of arbitration and reasonable legal fees and expenses
which reflect common practice with respect to the matters involved)
incurred by ▇▇. ▇▇▇▇▇ as a result of any claim, action or proceeding (i)
contesting or otherwise relating to the existence of Good Cause in the
event of ▇▇. ▇▇▇▇▇'▇ termination of employment during the Term for Good
Cause; (ii) enforcing any right, benefit or obligation under this
Agreement, or otherwise enforcing the terms of this Agreement or any
provision thereof; or (iii) asserting or otherwise relating to the
existence of Good Reason in the event of ▇▇. ▇▇▇▇▇’▇ termination of
employment during the Term for Good Reason; provided, however that this
provision shall not apply if the relevant trier-of-fact determines that
▇▇. ▇▇▇▇▇ claim or position was without reasonable
foundation.
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f.
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Governing
Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State
of California.
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g.
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Notice. For
the purpose of this Agreement, notice, demands and all other communication
provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered by hand delivery or overnight courier
or mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows or to other addresses as
each party may have furnished to the
other:
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To
Sun:
Attention:
General Counsel
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To ▇▇.
▇▇▇▇▇:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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h.
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Successors
and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
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12
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i.
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Section
409A.
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1.
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If
▇▇. ▇▇▇▇▇ is a “specified employee” within the meaning of Treasury
Regulation Section 1.409A-1(i) as of the date of ▇▇. ▇▇▇▇▇’▇ separation
from service (within the meaning of Treasury Regulation Section
1.409A-1(h)(1), without regard to the optional alternative definitions
available thereunder) and any payment or benefit provided in Section 6
hereof constitutes a “deferral of compensation” within the meaning of
Section 409A of the Code, ▇▇. ▇▇▇▇▇ shall not be entitled to any such
payment or benefit until the earlier of: (i) the date which is six (6)
months after his separation from service for any reason other than death,
or (ii) the date of his death. The provisions of this paragraph
shall only apply if, and to the extent, required to avoid the imputation
of any tax, penalty or interest pursuant to Section 409A of the
Code. Any amounts otherwise payable to ▇▇. ▇▇▇▇▇ upon or in the
six (6) month period following his separation from service that are not so
paid by reason of this Section 9(i)(1) shall be paid (without interest) as
soon as practicable (and in all events within thirty (30) days) after the
date that is six (6) months after ▇▇. ▇▇▇▇▇’▇ separation from service (or,
if earlier, as soon as practicable, and in all events within thirty (30)
days, after the date of his death).
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2.
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To
the extent that any reimbursements pursuant to Sections 4, 6(b), 7(e) and
9(e) are taxable to ▇▇. ▇▇▇▇▇, any reimbursement payment due to ▇▇. ▇▇▇▇▇
pursuant to such provision shall be paid to ▇▇. ▇▇▇▇▇ on or before the
last day of ▇▇. ▇▇▇▇▇’▇ taxable year following the taxable year in which
the related expense was incurred. The benefits and
reimbursements pursuant to Sections 4, 6(b), 7(e) and 9(e) are not subject
to liquidation or exchange for another benefit and the amount of such
benefits and reimbursements that ▇▇. ▇▇▇▇▇ receives in one taxable year
shall not affect the amount of such benefits and reimbursements that ▇▇.
▇▇▇▇▇ receives in any other taxable
year.
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3.
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It
is intended that any amounts payable under this Agreement and Sun’s and
▇▇. ▇▇▇▇▇’▇ exercise of authority or discretion hereunder shall comply
with and avoid the imputation of any tax, penalty or interest under
Section 409A of the Code. This Agreement shall be construed and
interpreted consistent with that
intent.
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[Signatures
Commence on Immediately Following Page]
13
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
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/s/
L. ▇▇▇▇▇ ▇▇▇▇▇
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L.
▇▇▇▇▇ ▇▇▇▇▇
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SUN
HEALTHCARE GROUP, INC.
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By:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇
▇▇▇▇▇▇
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Its
Executive Vice President
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14