EXHIBIT 10.1
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of April 4,
2002, between C. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Executive") and Mariner
Healthcare, Inc., a Delaware corporation (the "Company") and any
successor resulting from consummation of the Joint Plan of
Reorganization (the "Plan") of the Company.
WHEREAS, the Company has employed the Executive as Chief Executive
Officer and wishes to redefine the terms of the Executive's employment with the
Company and the Executive desires to accept such employment, for the term and
upon the other conditions hereinafter set forth; and
WHEREAS, as a condition of entering into this Agreement, the Executive
agrees to waive the Executive's rights, if any, against the Company and any
predecessor company or any affiliate of the foregoing under any employment
agreement between the Executive and the Company or any such predecessor company
or affiliate;
WHEREAS, the Company is in the process of seeking confirmation of the
Plan and is currently operating as a debtor in possession under the United
States Bankruptcy laws; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company.
NOW, THEREFORE, the parties agree as follows:
1. Employment. This Agreement shall constitute a binding
agreement between the parties as of the date hereof; provided that,
notwithstanding any other provision of this Agreement, the operative provisions
of this Agreement shall become effective only upon the date that the Plan is
declared consummated (the "Effective Date"). In the event the Plan is terminated
for any reason without the Effective Date having occurred or the Effective Date
does not occur prior to June 30, 2002, this Agreement shall be terminated
without further obligation or liability of either party.
2. Term. Subject to the provisions of Section 10 of this
Agreement, this Agreement shall commence on the Effective Date and shall
continue during the period in which the Executive remains employed by the
Company (the "Term"). The Executive shall be considered an at-will employee and
his employment may be terminated by either party subject to the obligations of
the parties upon such termination as are set forth hereinafter.
3. Position. During the Term, the Executive shall serve as Chief
Executive Officer of the Company or in such other executive position in the
Company as the Executive shall approve in writing.
4. Duties and Reporting Relationship. Subject to the terms and
conditions set forth herein, during the Term, the Executive shall, on a full
time basis, use the Executive's skills and render his services in supervising
the conduct of the Company's business and shall not engage in any other business
activities which interfere with such duties except with the prior written
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approval of the Board of Directors of the Company (the "Board"). The Executive
shall also perform such other executive and administrative duties (consistent
with the position of Chief Executive Officer) as may from time to time be
authorized or directed by the Board. The Executive shall report solely to the
Board. The Executive agrees to be employed by the Company in such capacities for
the Term, subject to all the covenants and conditions hereinafter set forth.
Executive shall perform his duties at the Company's principal executive offices,
either in Atlanta, Georgia, as currently located, or in such other location as
determined by the Board.
5. Salary and Annual Bonus.
(a) Base Salary. The Executive's base salary hereunder
shall be $750,000 a year, payable no less frequently than monthly and prorated
for any partial year of employment. The Board shall review such base salary at
least annually and may increase, but not decease, such base salary as it may
deem advisable.
(b) Annual Bonus. The Company shall provide the Executive
with an opportunity to earn upon achievement of target performance goals
determined by the Board or the compensation committee thereof, in consultation
with the Executive, an annual bonus equal to one hundred percent (100%) of the
Executive's base salary (the "Target Bonus"), with a minimum bonus of fifty
percent (50%) of Target Bonus upon achievement of threshold performance and an
opportunity to earn up to one hundred fifty percent (150%) of the Target Bonus
for performance in excess of the targets.
6. Vacation, Holidays and Sick Leave. During the Term, the
Executive shall be entitled to paid vacation, paid holidays and sick leave in
accordance with the Company's standard policies for its senior executive
officers.
7. Business Expenses. The Executive shall be reimbursed for all
business expenses incurred by the Executive in connection with the Executive's
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's current practices.
8. Pension and Welfare Benefits. During the Term, the Executive
shall be eligible to participate fully in all health benefits, insurance
programs, pension and retirement plans and other employee benefit and
compensation arrangements, as in effect from time to time, available to senior
executive officers of the Company generally.
9. Stock Options As soon as practicable following the Effective
Date, the Company shall grant to the Executive, pursuant to the terms of the
Company's 2002 Omnibus Incentive Equity Plan (the "2002 Plan"), an option (the
"Stock Option") to purchase 439,560 shares of common stock of the Company (the
"Option Shares"). The Stock Option shall (1) have an exercise price per share
equal to $20.12 (the "Exercise Price"), (2) subject to the Executive's continued
employment with the Company, vest in equal quarterly installments over the three
(3) year period commencing on the Effective Date, (3) be exercisable for ten
(10) years, subject to earlier termination upon the Executive's termination of
employment, (4) shall contain provisions for a cashless exercises through a
broker transaction, (5) shall vest in full on a Change in Control and (6) have
such other terms and be subject to such other conditions as are set forth in the
2002
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Plan and the form of Stock Option Agreement promulgated under the 2002 Plan. The
intent of the grant of the Stock Option is to provide Executive with an option
to purchase two percent (2%) of the Company's fully diluted common stock as of
the Effective Date at an exercise price equal to the common stock's price per
share (as determined by the Plan) on the Effective Date. Prior to the grant of
the stock option, the Company shall make any necessary adjustment to the number
of Option Shares and to the Exercise Price to effectuate the intent of the
immediately preceding sentence. The Company agrees to file and maintain the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, with respect to the shares underlying the Stock Option for so long as
such options remain exercisable. In addition, the Board or the Compensation
Committee thereof, may grant to the Executive such other and additional awards
under the 2002 Plan as may from time to time be deemed appropriate.
10. Termination of Employment.
(a) Death or Disability.
(i) The Executive's employment hereunder shall
automatically terminate upon the death of the Executive.
(ii) If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is unable to perform the
essential functions of his job for one hundred eighty (180) days
(whether or not consecutive) during any period of twelve (12)
consecutive months, and no reasonable accommodation can be made that
will allow Executive to perform his essential functions, the Company
may terminate the Executive's employment hereunder for any such
incapacity (a "Disability").
(b) Termination by the Company. The Company may terminate
the Executive's employment hereunder at any time, whether or not for Cause. For
purposes of this Agreement, "Cause" shall mean (i) continued failure by the
Executive to substantially perform the duties contemplated by Section 4 hereof,
which failure is not remedied within twenty (20) days after a written notice of
such failure is delivered to the Executive by the Company, which notice
identifies with particularity the manner in which the Company believes that the
Executive has failed to perform his duties under Section 4 of this Agreement;
(ii) the conviction (after exhausting all appeals) of the Executive of, or the
entering of a plea of nolo contendere by, the Executive with respect to a
felony; (iii) Executive's willful malfeasance or willful misconduct in
connection with Executive's duties hereunder or any willful act or willful
omission which is materially injurious to the financial condition or business
reputation of the Company or any significant subsidiary; (iv) Executive's breach
of the provisions of Section 14 of this Agreement; or (v) Executive's failure to
perform his duties at the Company's executive offices or one of the Company's
facilities at least four (4) weekdays per week (other than absences due to
business related travel, illness, vacation or other absences generally excused
for executive officers).
Action or inaction by Executive shall not be considered "willful"
unless done or omitted by Executive intentionally and without Executive's
reasonable belief that Executive's action or inaction was in the best interest
of the Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental illness. The cessation of
employment of the Executive shall not be deemed to be for Cause unless prior to
such termination there shall have
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been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the disinterested membership of
the Board at a meeting of such Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before such Board), finding,
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in clause (i), (ii), (iii), (iv) or (v) above, and specifying
the particulars thereof in detail.
(c) Termination by the Executive. The Executive shall be
entitled to terminate his employment hereunder, (A) upon sixty (60) days' prior
written notice, for Good Reason or (B) if his health should become impaired to
an extent that makes his continued performance of his duties hereunder hazardous
to his physical or mental health, provided that the Executive shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request, the Executive
shall submit to an examination by a doctor selected by the Company and such
doctor shall have concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" shall mean any one of the
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) any material diminution in the Executive's
authorities or responsibilities (including reporting responsibilities)
or from his title or position without the Executive's express written
consent to accept any such change; the assignment to him of any duties
or work responsibilities which are materially inconsistent with such
title, position or work responsibilities; or any removal of the
Executive from, or failure to reappoint or reelect him to any of such
positions, except if any such changes are because of Disability,
resignation, death or a termination by the Company for Cause;
(ii) the failure by the Company to continue to provide the
Executive with benefits substantially similar in value to the Executive
in the aggregate to those enjoyed by the Executive under any of the
Company's pension, life insurance, medical, health and accident, or
disability plans in which the Executive was participating immediately
prior to the Effective Date, unless the Executive participates after
the Effective Date in employee benefit plans generally available to
senior executives of the Company or any of its subsidiaries;
(iii) without the Executive's express written consent, any
failure by the Company to comply with any material provision of this
Agreement, which failure has not been cured within twenty (20) days
after notice of such noncompliance has been given by the Executive to
the Company;
(iv) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 10(e) below; for purposes of
this Agreement, no such purported termination shall be effective;
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(v) without the Executive's express written consent, the
Executive is not nominated by the Board for reelection as a director of
the Company;
(vi) the Company fails to obtain the full assumption of
this Agreement by a successor entity in accordance with Section 13(a)
of this Agreement; or
(vii) the Company fails to maintain directors and officers
liability insurance coverage for the Executive as provided in Section
12(d) of this Agreement.
The Executive's continued employment for ninety (90) days following his
knowledge of any act or failure to act constituting Good Reason hereunder
without the delivery of a Notice of Termination shall constitute consent to, and
a waiver of rights with respect to, such act or failure to act.
(d) Voluntary Resignation. Should the Executive wish to
resign from his position with the Company or terminate his employment for other
than Good Reason during the Term, the Executive shall give sixty (60) days prior
written notice to the Company ("Notice Period"), specifying the date as of which
his resignation is to become effective. During the Notice Period, the Executive
shall cooperate fully with the Company in achieving a smooth transition of the
Executive's duties and responsibilities to such person(s) as may be designated
by the Company. The Company reserves the right to accelerate the Date of
Termination by giving the Executive prior written notice.
(e) Notice of Termination. Any purported termination of
the Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 18. "Notice of Termination" shall mean a notice that
shall indicate the specific termination provision in this Agreement relied upon
and shall set 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.
(f) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated because of death, the date of
the Executive's death, (ii) if the Executive's employment is terminated for
Disability or by the Company for Cause, the date Notice of Termination is given,
(iii) if the Executive's employment is terminated pursuant to Subsection (c),
(d) or (e) hereof or for any other reason (other than by the Company for Cause,
death or Disability), the date specified in the Notice of Termination which
shall not be less than sixty (60) days from the date such Notice of Termination
is given.
(g) Change in Control. For purposes of this Agreement, a
Change in Control of the Company shall have occurred if:
(i) any "Person" (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") as modified and
used in Sections 13(d) and 14(d) of the Exchange Act) other than (1)
the Company or any of its subsidiaries, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, (4) any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
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the Company's common stock or (5) any of Oaktree Capital Management,
LLC, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners, LP, Foothill Partners, LP, Highland
Capital Management, L.P. or their respective affiliates (each a "Bank
Permitted Holder" and (1) through (5), collectively, the "Permitted
Holders") becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 25% of the combined voting power of the
Company's then outstanding voting securities;
(ii) during any period of not more than two (2)
consecutive years, not including any period prior to the Effective
Date, individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii), or (iv) of this Section
10(g)) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of a majority of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at least
a majority thereof;
(iii) the consummation of a merger or consolidation of the
Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the
combined voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation in which no persons
(other than the Permitted Holders) acquire 25% or more of the combined
voting power of the Company's or such surviving or parent entity's then
outstanding securities; or
(iv) the consummation of a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of a majority or more of the assets of the Company and its
subsidiaries, taken as a whole (or any transaction having a similar
effect), or the Board approves the entering into of an agreement with
one or more unrelated third parties under which one or more unrelated
third parties is given the power to control the management or
operations of at least a majority of the assets of the Company and its
subsidiaries, taken as a whole.
(v) in the event of the occurrence of a Potential Change
of Control described in Section 11(f)(5) or (6), the subsequent
occurrence during the pendency of such Potential Change of Control of
any of the following events:
(A) the consummation of a merger or
consolidation of the Company or its affiliates with any other
Competitive Business (as defined in Section 14 hereof) having
gross revenues in excess of 50% of the gross revenues of the
Company and following such merger or consolidation, the Bank
Permitted Holder whose acquisition of securities triggered
such Potential Change of Control pursuant to Section 11(f)(5)
or (6) hereof, owns at least 25% of the outstanding voting
securities of the entity resulting from such combination; or
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(B) the acquisition by the Company or its
affiliates of substantially all of the assets or securities of
any Competitive Business (as defined in Section 14 hereof)
having gross revenues in excess of 50% of the gross revenues
of the Company and (i) in the case of an acquisition of
securities, the securities acquired represent more than 50% of
the combined voting power of the Competitive Business's then
outstanding voting securities and (ii) following such
acquisition the Bank Permitted Holder whose acquisition of
securities triggered such Potential Change of Control pursuant
to Section 11(f)(5) or (6) hereof, owns at least 25% of the
outstanding voting securities of the Company.
11. Compensation During Disability; Death or Upon Termination.
Notwithstanding any other provision of this Agreement, the provisions of this
Section 11 shall exclusively govern Executive's rights upon termination of
employment with the Company and its affiliates.
(a) During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to a Disability ("Disability
Period"), the Executive shall continue to receive his base salary at the rate
then in effect for such period until his employment is terminated pursuant to
Section 10(a)(ii) hereof, provided that payments so made to the Executive during
the Disability Period shall be reduced by the sum of the amounts, if any,
payable to the Executive with respect to such period under disability benefit
plans of the Company or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any such payment.
(b) If the Executive's employment is terminated by his
death or Disability, the Company shall pay (i) any base salary due to the
Executive under Section 5(a) through the Date of Termination and (ii) an amount
equal to the Target Bonus he would have received for the fiscal year that ends
on or immediately after the Date of Termination, assuming the Company achieved
the target level for which a bonus is paid under the plan described in Section
5(b), prorated for the period beginning on the first day of the fiscal year in
which occurs the Date of Termination through the Date of Termination.
(c) If the Executive's employment is terminated by the
Company for Cause or by the Executive voluntarily for other than Good Reason,
the Company shall pay the Executive his base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
all other unpaid amounts, if any, to which the Executive is entitled as of the
Date of Termination under any compensation plan or program of the Company, at
the time such payments are due (the "Accrued Benefits").
(d) If the Company terminates the Executive's employment
without Cause, or the Executive terminates his employment for Good Reason (A)
prior to a Change in Control or (B) following the second anniversary of a Change
in Control, then
(i) the Company shall pay the Executive the Accrued
Benefits;
(ii) subject to the Executive's continued compliance with
Section 14 of this Agreement, in lieu of any further salary payments to
the Executive for periods subsequent to the Date of Termination, the
Executive shall, for a period of twenty-four (24) months
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(the "Severance Period"), be entitled to continued payment of the
Executive's base salary at the rate in effect as of the Date of
Termination; provided, however, that in the event that Executive
engages in a Competitive Business, provides services for pay
(including, without limitation, deferred compensation, equity awards or
other property) to a Competitive Business or obtains a financial
interest in a Competitive Business from the date Executive's employment
hereunder is terminated until the end of the Severance Period, the
Executive shall no longer to be entitled to any further payments of
Executive's base salary;
(iii) the Company shall pay the Executive a lump sum
payment, not later than the thirtieth (30th) day following the Date of
Termination, equal to the sum of (A) the prorated Target Bonus that
would have been paid for the period beginning on the first day of the
fiscal year in which the Date of Termination occurs and (B) two times
the greater of (1) the average of the annual bonus actually paid to the
Executive by the Company with respect to the two (2) fiscal years which
immediately precede the year in which the Date of Termination occurs
(provided if there was an annual bonus paid to the Executive with
respect only to one (1) fiscal year that immediately precedes the year
in which the Date of Termination occurs, then such single year's annual
bonus shall be utilized in the calculation pursuant to this subclause
(1)) and (2) the Target Bonus applicable for the year of termination;
(iv) the Company shall continue coverage for the
Executive, on the same terms and conditions as would be applicable if
the Executive were an active Employee, under the Company's life
insurance, medical, health and similar welfare benefit plans (other
then group disability benefits) during the Severance Period; provided,
however, that in the event that Executive engages in a Competitive
Business, provides services for pay (including, without limitation,
deferred compensation, equity awards or other property) to a
Competitive Business or obtains a financial interest in a Competitive
Business from the date Executive's employment hereunder is terminated
until the end of the Severance Period, the Executive shall no longer to
be entitled to such continued coverage. Benefits otherwise receivable
by the Executive pursuant to this Section 11(d)(iv) shall be reduced to
the extent comparable benefits are actually received by the Executive
from a subsequent employer during the period during which the Company
is required to provide such benefits, and the Executive shall report to
the Company any such benefits actually received by him; and
(v) all options, shares of restricted stock, performance
shares and any other equity based awards shall be and become fully
vested as of the Date of Termination and Executive shall have until the
earlier of (A) one (1) year following the Date of Termination and (B)
the expiration date of the Stock Option, to exercise the Stock Option.
(e) If, the Company terminates the Executive's employment
without Cause, or the Executive terminates his employment for Good Reason during
the 24 month period following a Change in Control, then
(i) the Company shall pay the Executive the Accrued
Benefits;
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(ii) in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination, the
Company shall pay to the Executive an aggregate amount equal to the
product of (A) the sum of (1) the Executive's base salary at the rate
in effect of the Date of Termination and (2) the greater of (I) the
average of the annual bonuses actually paid to the Executive by the
Company with respect to the two (2) fiscal years which immediately
precede the year in which the Date of Termination occurs (provided if
there was an annual bonus paid to the Executive with respect only to
one (1) fiscal year that immediately precedes the year in which the
Date of Termination occurs, then such single year's annual bonus shall
be utilized in the calculation pursuant to this subclause (I)) and (II)
the Target Bonus applicable for the year of termination and (B) 2.99;
(iii) the Company shall pay the Executive an amount equal
to the prorated Target Bonus that would have been paid for the period
beginning on the first day of the fiscal year in which the Date of
Termination occurs;
(iv) the Company shall continue coverage for the
Executive, on the same terms and conditions as would be applicable if
the Executive were an active Employee, under the Company's life
insurance, medical, health and similar welfare benefit plans (other
then group disability benefits) for a period of thirty-six (36) months;
provided, however, that in the event that Executive engages in a
Competitive Business, provides services for pay (including, without
limitation, deferred compensation, equity awards or other property) to
a Competitive Business or obtains a financial interest in a Competitive
Business from the date Executive's employment hereunder is terminated
until the end of the Severance Period, the Executive shall no longer to
be entitled to such continued coverage. Benefits otherwise receivable
by the Executive pursuant to this Section 11(e)(iv) shall be reduced to
the extent comparable benefits are actually received by the Executive
from a subsequent employer during the period during which the Company
is required to provide such benefits, and the Executive shall report to
the Company any such benefits actually received by him;
(v) all options, shares of restricted stock, performance
shares and any other equity based awards shall be and become fully
vested as of the Date of Termination and Executive shall have until the
earlier of (A) one (1) year following the Date of Termination and (B)
the expiration date of the Stock Option, to exercise the Stock Option;
and
(vi) the payments provided for in this Section 11(e)
(other than Section 11(e)(iv)) shall be made in a lump sum not later
than the thirtieth (30th) day following the Date of Termination.
(f) If during the Term, the Company (i) terminates the
Executive's employment without Cause, or the Executive terminates his or her
employment for Good Reason and (ii) the Date of Termination occurs during the
pendency of a Potential Change in Control, and if a Change in Control occurs
before the expiration of the pendency of the Potential Change in Control during
which the Date of Termination occurred, the Executive shall be entitled to upon
such Change in Control to:
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(i) the cash payments under Section 11(e) hereof, reduced
by any other severance, salary continuation or similar payments
previously made to the Executive under Section 11(d) hereof or
otherwise, if any;
(ii) benefit continuation provided for under Section
11(e)(iv);
The payments provided for in this Section 11(f) shall be made not later
than the thirtieth (30th) day following the date of the Change in
Control.
As used in this Subsection (f), a "Potential Change in
Control" shall be deemed to have occurred if:
(1) the commencement of a tender or exchange
offer by any third person (other than a tender or exchange
offer which, if consummated, would not result in a Change in
Control) for twenty percent (20%) or more of the then
outstanding shares of common stock or combined voting power of
the Company's then outstanding voting securities;
(2) the execution of an agreement by the
Company, the consummation of which would result in the
occurrence of a Change in Control;
(3) the public announcement by any person
(including the Company) of an intention to take or to consider
taking actions which if consummated would constitute a Change
in Control other than through a contested election for
directors of the Company; or
(4) the adoption by the Board, as a result of
other circumstances, including circumstances similar or
related to the foregoing, of a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control
has occurred.
(5) an acquisition by a Bank Permitted Holder of
securities of the Company representing more than 30% of the
combined voting power of the Company's then outstanding voting
securities; or
(6) the consummation of a merger or
consolidation of the Company with any other corporation which
is not a Change of Control, but in which a Bank Permitted
Holder acquires 30% or more of the combined voting power of
the Company's or such surviving entity's then outstanding
securities.
A Potential Change in Control will be deemed to be pending from the
occurrence of the event giving rise to the Potential Change in Control
until the earlier of the first anniversary thereof or the date the
Board determines in good faith that such events will not result in the
occurrence of a Change in Control. Notwithstanding the foregoing, a
Potential Change in Control described in Subsection (5) or (6) hereof
will not end earlier than two (2) years from the occurrence of the
event giving rise to the Potential Change in Control.
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(g) Upon termination of Executive's employment for any
reason, Executive agrees to resign, as of the date of such termination and to
the extent applicable, from the Board (and any committees thereof) and the Board
of Directors (and any committees thereof) of any of the Company's affiliates.
(h) The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking other
employment or otherwise, and, except as otherwise set forth in this Section 11,
the amount of any payment or benefit provided for in this Section 11 shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer or by retirement benefits.
12. Representations and Covenants.
(a) The Company represents and warrants that this
Agreement has been authorized by all necessary corporate action of the Company
and is a valid and binding agreement of the Company enforceable against it in
accordance with its terms.
(b) The Executive represents and warrants that Executive
is not a party to any agreement or instrument that would prevent him from
entering into or performing Executive's duties in any way under this Agreement.
The Executive agrees and covenants that Executive will obtain, and submit to,
such physical examinations as may be necessary to facilitate the Company
obtaining an insurance policy for its benefit insuring the life of the
Executive.
(c) The Company agrees that Executive shall be
indemnified for any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), Executive is made a party or
is threatened to be made a party to by reason of the fact that Executive is or
was a director or officer of the Company, or any subsidiary or affiliate of the
Company or is or was serving at the request of the Company, any subsidiary or
any affiliate as a director, officer, member, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a director, officer, member, employee or agent while serving as a
director, officer, member, employee or agent, pursuant to the By-Laws and
charter of the Company, as in effect from time to time.
(d) The Company agrees to obtain and maintain during the
Term and for a period of six (6) years thereafter a directors and officers
liability insurance policy covering the Executive in an amount and in accordance
with terms no less favorable than other senior executives of the Company, as in
effect from time to time
13. Successors: Binding Agreement.
(a) This Agreement shall not be assignable by Executive.
This Agreement may be assigned by the Company to a person or entity which is an
affiliate or a successor in interest to substantially all of the business
operations of the Company. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
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assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
(b) This Agreement is a personal contract and the rights
and interests of the Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him or her, except as otherwise
expressly permitted by the provisions of this Agreement. This Agreement shall
inure to the benefit of and be enforceable by the Executive and Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to him hereunder had the Executive continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his devisee, legatee or other
designee or, if there is no such designee, to his estate.
14. Confidentiality and Non-Competition Covenants.
(a) Executive will not (whether during or after
Executive's employment with the Company) disclose, retain, or use for
Executive's own benefit, purposes or account or the benefit, purposes or account
of any other person, firm, partnership, joint venture, association, corporation
or other business organization, entity or enterprise other than the Company and
any of its subsidiaries or affiliates, any trade secrets, Company know-how,
software developments, inventions, formulae, technology, designs and drawings or
other works of authorship, or any Company property or confidential information
relating to research, operations, finances, current and proposed products and
services, vendors, customers, advertising, costs, marketing, trading,
investment, sales activities, promotion, manufacturing processes, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company ("Confidential Information") without the written authorization of
the Board; provided that the foregoing obligations (i) shall not apply to
information which is not unique to the Company or which is generally known to
the industry or the public other than as a result of Executive's breach of this
covenant or the wrongful acts of others who were under confidentiality
obligations to the Company as to the item or items involved and (ii) shall
survive the termination of Executive's employment for a period of three (3)
years with respect to Confidential Information that does not qualify as a trade
secret and, with respect to trade secrets, for so long as the information
qualifies as a trade secret. Executive agrees that upon termination of
Executive's employment with the Company for any reason, he will return to the
Company immediately all memoranda, books, papers, plans, information, letters
and other data, and all copies thereof or therefrom, in any way relating to the
business of the Company, its affiliates and subsidiaries, except that he may
retain only those portions of personal notes, notebooks and diaries that do not
contain Confidential Information of the type described in the preceding
sentence. Executive further agrees that he will not retain or use for
Executive's own benefit, purposes or account or the benefit, purposes or account
of any other person, firm, partnership, joint venture, association, corporation
or other business designation, entity or enterprise, other than the Company and
any of its subsidiaries or affiliates, at any time any trade names, trademark,
service ▇▇▇▇, other proprietary business designation, patent, or other
intellectual property used or owned in connection with the business of the
Company or its affiliates.
(b) The Executive covenants and agrees that any
information, materials, ideas, discoveries, inventions, techniques or programs
developed or discovered by the Executive in
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connection with the performance of his duties hereunder, to the extent it
constitutes Confidential Information, shall remain the sole and exclusive
property of the Company and shall be subject to the covenants contained in the
preceding paragraph and Executive hereby assigns all of Executive's right, title
and interest in and to any such Confidential Information.
(c) Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and its affiliates and
accordingly agrees as follows:
(i) During the Term and, for a period of two (2) years
following the date Executive ceases to be employed by the Company for
any reason (the "Restricted Period"), Executive will not, whether on
Executive's own behalf or on behalf of or in conjunction with any
person, company, business entity or other organization whatsoever,
directly or indirectly solicit or assist in soliciting in competition
with the Company, the business of any client or prospective client:
(A) with whom Executive had personal contact or
dealings on behalf of the Company during the one (1) year
period preceding Executive's termination of employment; or
(B) with whom employees reporting directly to
Executive have had personal contact or dealings on behalf of
the Company during the one year immediately preceding the
Executive's termination of employment.
(ii) During the Term and, for a period of one (1) year
following the date Executive ceases to be employed by the Company due
to Executive's resignation without Good Reason, Executive will not
directly or indirectly:
(A) engage in a capacity that involves duties
and responsibilities similar to those duties and
responsibilities performed by Executive on behalf of the
Company or its subsidiaries, in any business that competes
with the business of the Company or its subsidiaries in any
geographical area that is within 15 miles of any geographical
area where the Company or its subsidiaries provides its
products or services (a "Competitive Business");
(B) acquire a financial interest in any
Competitive Business as an individual, partner, shareholder,
officer, director, principal, agent, trustee or consultant; or
(C) interfere with, or attempt to interfere
with, business relationships (whether formed before, on or
after the date of this Agreement) between the Company or any
of its affiliates and customers, clients, suppliers or
investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this
Agreement, Executive may, directly or indirectly own, solely as an
investment, securities of any person engaged in the business of the
Company or its affiliates which are publicly traded on a national or
regional stock exchange or on the over-the-counter market if Executive
(i) is not a
14
controlling person of, or a member of a group which controls, such
person and (ii) does not, directly or indirectly, own 5% or more of any
class of securities of such person.
(iv) During the Restricted Period, Executive will not,
whether on Executive's own behalf or on behalf of or in conjunction
with any person, company, business entity or other organization
whatsoever, directly or indirectly:
(A) solicit or encourage any employee of the
Company or its affiliates (other than employees below the
administrator level) to leave the employment of the Company or
its affiliates; or
(B) hire any such employee who was employed by
the Company or its affiliates as of the date of Executive's
termination of employment with the Company or who left the
employment of the Company or its affiliates coincident with,
or within one year prior to or after, the termination of
Executive's employment with the Company.
(d) It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this Section 14
to be reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive,
the provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
(e) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 14 would be inadequate and the Company would suffer irreparable damages
as a result of such breach or threatened breach. In recognition of this fact,
Executive agrees that, in the event of such a breach or threatened breach, in
addition to any remedies at law, the Company, without posting any bond, shall be
entitled to cease making any payments or providing any benefit otherwise
required by this Agreement and obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available.
15. Tax Consideration. Notwithstanding anything herein to the
contrary, in the event any payments to the Executive hereunder ("Total
Payments") are determined to be subject to the tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any similar
federal or state excise tax, FICA tax, or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest or penalties are hereinafter collectively referred to as the
"Excise Tax"), the Company shall pay to the Executive (or to the Internal
Revenue Service) at the time specified in Section 11(d)(vi), an additional
amount (the "Gross-Up Payment") such that after the payment by the Executive of
all federal, state, or local income taxes, Excise Taxes, FICA taxes, or other
taxes (including any
15
interest or penalties imposed with respect thereto) imposed upon the receipt of
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Total Payments.
If the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of employment, the
Executive shall repay to the Company, at the time the reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction. If the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of termination of employment, the Company shall
make an additional Gross-Up Payment to the Executive in respect of such excess
at the time the amount of such excess is finally determined. The Executive shall
notify the Company in writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
(10) business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the thirty (30) day period following the date on which he
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim;
(b) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including legal and accounting fees and
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax, FICA tax, or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section 15,
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and ▇▇▇ for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction, and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and ▇▇▇ for a refund, the
Company shall advance the amount of such payment to the Executive, on an
16
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and provided,
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, other
issues raised by the Internal Revenue Service or any other taxing authority.
If any such claim referred to in this Section 15 is made by the
Internal Revenue Service and the Company does not request the Executive to
contest the claim within the thirty (30) day period following notice of the
claim, the Company shall pay to the Executive (or the Internal Revenue Service)
the amount on any Gross-Up Payment owed to the Executive, but not previously
paid pursuant to this Section 15, immediately upon the expiration of such thirty
(30) day period. If any such claim is made by the Internal Revenue Service and
the Company requests the Executive to contest such claim, but does not advance
the amount of such claim to the Executive for purposes of such contest, the
Company shall pay to the Executive the amount of any Gross-Up Payment owed to
the Executive, but not previously paid under the provisions of this Section 15,
within five (5) business days of a Final Determination of the liability of the
Executive for such Excise Tax. For purposes of this Agreement, a "Final
Determination" shall be deemed to occur with respect to a claim when (i) there
is a decision, judgment, decree, or other order by any court of competent
jurisdiction, which decision, judgment, decree, or other order has become final,
i.e., all allowable appeals pursuant to this Section 15 have been exhausted by
either party to the action, (ii) there is a closing agreement made under Section
7121 of the Code, or (iii) the time for instituting a claim for refund has
expired, or if a claim was filed, the time for instituting suit with respect
thereto has expired.
If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section 15, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of this Section 15) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Executive of an amount advanced by the Company pursuant to this Section 15, a
determination is made by the Internal Revenue Service that the Executive is not
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
16. Entire Agreement. This Agreement contains all the
understandings between the parties hereto pertaining to the matters referred to
herein, and on the Effective Date shall supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. The Executive represents that, in executing this Agreement, he
does not rely and has not relied upon any representation or statement not set
forth herein made by the Company with regard to the subject matter, bases or
effect of this Agreement or otherwise.
17
17. Amendment or Modification. Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
18. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: C. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
To the Company at: Mariner Healthcare, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Any notice delivered personally or by courier under this Section 18
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
19. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
20. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
21. Governing Law: Attorney's Fees.
(a) This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
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(b) The prevailing party in any dispute arising out of
this Agreement shall be entitled to be paid its reasonable attorney's fees
incurred in connection with such dispute from the other party to such dispute.
(c) The Company shall reimburse Executive for his
reasonable attorneys and advisors fees and expenses in reviewing and negotiating
this Agreement, not to exceed $20,000.
22. Headings. All descriptive headings of sections and paragraphs
in this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
23. Withholdings. All payments to the Executive under this
Agreement shall be reduced by all applicable withholding required by federal,
state or local tax laws.
24. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
25. Release of Prior Employment Agreement. The Executive hereby
releases the Company and any predecessor company (including GranCare, Inc.,
Living Centers of America, Inc. and Paragon Health Network, Inc.) from all
obligations under any employment agreement entered into by the Executive and the
Company, including any obligation to pay severance or other post-termination
benefits, which shall be upon the execution hereof terminated and of no further
force or effect; provided, however, that in no event shall this release affect
the Executive's rights (i) under any grant or award under any stock option or
stock award plans of the Company and any predecessor company (including
GranCare, Inc., Living Centers of America, Inc. and Paragon Health Network,
Inc.), or (ii) to indemnification under any prior agreement or by-law or charter
provision of the Company or any predecessor company.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
MARINER HEALTHCARE, INC.
BY:
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NAME:
TITLE:
EXECUTIVE
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C. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇