EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "AGREEMENT") is made as
of _______________________, 1997 (the "EFFECTIVE DATE"), by and between Assisted
Living Concepts, Inc., a corporation organized under the laws of the state of
Nevada ("ALC" or the "COMPANY") and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ("EXECUTIVE"), amends and
restates the Employment Agreement, dated October 24, 1994, by and between ALC
and Executive (the "PRIOR EMPLOYMENT AGREEMENT").
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Appointment, Title and Duties.
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(a) ALC hereby employs Executive to serve as its President and
Chief Executive Officer; provided, however, in the event ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ accepts
ALC's offer to become Chief Executive Officer of ALC, then Executive shall serve
as ALC's President and Chief Operating Officer. In such capacity, Executive
shall report to the Board of Directors of the Company, and shall have such
duties, powers and responsibilities as are customarily assigned to persons
serving in such capacities for a publicly held corporation in a business such as
that conducted by the Company. Executive shall serve as Vice Chairman of the
Board of Directors of ALC.
(b) The parties understand and agree that Executive also shall
serve as the President and Chief Executive Officer of the wholly-owned
development and operations subsidiary, Assisted Living Concepts Services, Inc.,
a Nevada corporation, and shall serve as Chairman of its Board of Directors.
2. Term of Agreement.
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(a) The initial term of this Agreement shall be for a four (4)
year period from and after the Effective Date, unless terminated earlier by (i)
termination for Cause; (ii) the voluntary resignation of Executive for Good
Reason; or (iii) the expiration of six (6) months from and after the date
Executive provides written notice of termination to Company; or (iv) Executive's
death or Permanent Disability (defined in SECTION 5(A) below).
(b) If this Agreement has not terminated as of the date of the
expiration of the initial term, this Agreement shall be automatically extended
on a continuous basis daily from and after that date, until the occurrence of
one of the following events of termination: (i) termination for Cause; (ii)
voluntary resignation of Executive for Good Reason; (iii) Executive's death or
Permanent Disability; (iv) the expiration of six (6) months from and after the
date Executive provides written notice of intent not to renew this Agreement to
Company; or (v) the expiration of four (4) years from and after the date Company
provides written notice of intent not to renew this Agreement to Executive.
(c) A termination hereunder shall constitute a termination of
employment with any wholly owned subsidiary or other affiliate of Company.
3. Acceptance of Position. Executive accepts the position set forth
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in SECTION 1 above and agrees that during the term of this Agreement, Executive
will faithfully perform Executive's duties and, except as expressly approved by
the Board of Directors of ALC and except as set forth herein, will devote
substantially all of Executive's business time to the business and affairs of
ALC, and will not engage, for Executive's own account or for the account of any
other person or entity, in a business which competes with ALC. During the term
of this Agreement, Executive shall not directly own, or own as part of a
consortium, more than five percent (5%) of a publicly held corporation which
conducts the same business as does ALC or its affiliates. It is acknowledged
and agreed that Executive may, from time to time during the term of this
Agreement, serve as a member of the Board of Directors of other companies, in
which event the Board of Directors of ALC must expressly approve such service.
4. Salary and Benefits. During the term of this Agreement:
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(a) ALC shall pay to Executive a base salary in an annual amount
of not less than Two Hundred Thousand Dollars ($200,000) per annum, paid in
approximately equal installments at intervals in accordance with the then
prevailing policy of the Company with respect to its senior executives
generally, but in no event, less frequently than monthly. ALC agrees to consider
from time to time increases in such base salary in the discretion of the Board
of Directors. Any increase, once granted by the Board of Directors, shall be
deemed to automatically amend this Agreement to provide that thereafter
Executive's base salary shall not be less than the annual amount to which the
base salary has been increased.
(b) Concurrently herewith ALC and Executive shall execute and
deliver a Restricted Stock Agreement for Employees in substantially the same
form as that attached hereto as EXHIBIT "A," pursuant to which Executive shall
be issued 50,000 shares of restricted common stock of ALC pursuant to ALC's
Amended and Restated 1994 Stock Option Plan (the "PLAN"). The Restricted Stock
Agreement provides that the restrictions on the stock shall be lifted to the
extent of 25% of the stock per year commencing on the fourth anniversary date
from the Effective Date hereof, subject to earlier acceleration as provided in
the Restricted Stock Agreement.
(c) Executive shall participate in all health, retirement,
Company-paid insurance, sick leave, disability, expense reimbursement and other
benefit programs which ALC makes available to any of its senior executives, and
shall be eligible for bonuses in the discretion (as to bonuses) of the Board of
Directors.
(d) Executive shall be entitled to vacation time of not less
than four (4) weeks per year, provided that not more than two (2) weeks of such
vacation time may be taken consecutively without prior notice to, and non-
objection by, the Compensation Committee of the Board of Directors or, if there
is no Compensation Committee, the Board of Directors.
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5. Certain Terms Defined. For purposes of this Agreement:
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(a) Executive shall be deemed to be "PERMANENTLY DISABLED" if a
physical or mental condition occurs and persists which, in the written opinion
of a licensed physician selected by the Board of Directors in good faith, has
rendered Executive unable to perform Executive's duties hereunder for a period
of ninety (90) days or more and, in the written opinion of such physician, the
condition will continue for an indefinite period of not less than an additional
ninety (90) day period, rendering the Executive unable to return to Executive's
duties.
(b) A termination of Executive's employment by ALC shall be deemed
for "CAUSE" if, and only if, seventy-five percent (75%) of the Board of
Directors entitled to vote, at a meeting in which a quorum is present at the
time of the vote, vote for such termination and the termination is based upon
one or more of the following: (i) conviction of a felony; (ii) material
disloyalty to the Company such as embezzlement, misappropriation of corporate
assets or, except as provided in SECTION 3 of this Agreement, breach of
Executive's agreement not to engage in business for another enterprise of the
type engaged in by the Company or not to purchase more than five percent (5%) of
stock in a publicly held corporation which conducts the same business as does
ALC or its affiliates; or (iii) the engaging in immoral, unethical or illegal
behavior which is of public nature, brings ALC into disrepute, and results in
material damage to the Company. The Company shall have the right to suspend
Executive, with pay, for a reasonable period to investigate allegations of
conduct which, if proven, would establish a right to terminate this Agreement
for Cause, or to permit a felony charge to be tried. Immediately upon the
conclusion of such temporary period, unless Cause to terminate this Agreement
has been established, Executive shall be restored to all duties and
responsibilities as if such suspension had never occurred.
(c) A resignation by Executive shall not be deemed to be voluntary
and shall be deemed to be a resignation with "GOOD REASON" if it is based upon
one or more of the following: (i) a material diminution in Executive's title,
duties or salary; (ii) a reduction in benefits which is not part of an across-
the-board reduction in benefits of all senior executive personnel; or (iii) a
direction by the Board of Directors that Executive report to any person or group
other than the Board of Directors. It shall also constitute Good Reason for
Executive to resign Executive's employment if the shareholders of ALC shall fail
to elect or re-elect Executive to the Board of Directors of ALC, unless
Executive declines to be elected to such Board of Directors, or if the directors
fail to elect Executive Vice Chairman of the Board, unless Executive declines to
be elected such. Executive's statement that a resignation was based upon one of
the events stated in this SECTION 5(C) shall be conclusive and binding for
purposes of this Agreement, if the resignation occurs within three (3) months
following the event.
(d) "AFFILIATE" means any corporation affiliated with any Person
whose actions result in a Change in Control (or which, as a result of the
completion of the transactions causing a Change in Control shall become
affiliated) within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "CODE").
(e) "BASE SALARY" means, as of any date of termination of
employment,
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the highest annual base salary of Executive in any of the last five fiscal years
preceding such date of termination of employment.
(f) "BENEFICIAL OWNER" shall have the meaning given to such term
in Rule 13d-3 under Exchange Act (defined in Subsection (i) below);
(g) A "CHANGE IN CONTROL" occurs if:
(i) any Person (other than Executive) or that Person's
Affiliate is or becomes the Beneficial Owner, directly or indirectly, of
securities of ALC representing 30% of more of the combined voting power of ALC's
then outstanding securities; or
(ii) the stockholders of ALC approve a merger or
consolidation of ALC with any other corporation (or other entity), other than a
merger or consolidation which would result in the voting securities of ALC
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of ALC or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of ALC (or similar transaction) in
which no Person acquires more than 30% of the combined voting power of ALC's
then outstanding securities shall not constitute a Change in Control; or
(iii) the stockholders of ALC approve a plan of complete
liquidation or an agreement for the sale or disposition of all or substantially
all of ALC's assets; or
(iv) a majority of the members of the Board of Directors of
ALC cease to be Continuing Directors.
(h) "CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of ALC who (i) was a member of such Board
of Directors on the date of the Agreement or (ii) was nominated for election or
elected to such Board of Directors who were members of such Board at the time of
such nomination or election.
(i) "PERSON" is given the meaning as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"); provided, however, that unless this Agreement provides to the
contrary, the term shall not include ALC, any trustee or other fiduciary holding
securities under an employee benefit plan of ALC, or any corporation owned,
directly or indirectly, by the stockholders of ALC in substantially the same
proportions as their ownership of stock of ALC.
6. Certain Benefits Upon Termination.
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(a) If Executive's employment by ALC terminates for any reason
(including by reason of death or Permanent Disability), except for a termination
for Cause or
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a voluntary resignation by Executive without a Good Reason or pursuant to
SECTION 2(A)(III) or 2(B)(IV), and SECTION 6(B) is inapplicable to such
termination, then ALC shall pay Executive a lump sum severance payment (the
"SEVERANCE PAYMENT") equal to four times Executive's Base Salary.
(b) If within one (1) year after a Change in Control of the
Company, Executive gives notice of termination of employment for any reason,
gives notice of non-renewal, or Executive otherwise terminates employment (other
than due to Executive's death or Permanent Disability) or is terminated by the
Company without Cause, ALC shall pay Executive a Severance Payment in cash equal
to $3 million. In the event of a Change in Control and Executive dies or becomes
Permanently Disabled within one year after such Change in Control, then the
Severance Payment shall be equal to four times Executive's Base Salary.
(c) Company shall offer to Executive the opportunity to
participate in whatever Company-provided medical and dental plans exist as of
the date of termination from that date for a period of three (3) years
commencing Executive's date of termination, if such plans permit such
participation; provided, however, in the event there is a Change in Control of
the Company and Executive's employment terminates, then Executive shall not be
given the opportunity to participate in any such medical and dental plans except
as may otherwise be provided by law.
(d) In the event either (a) or (b) above occurs, (i) ALC shall pay
all accrued but unpaid or unused vacation, sick pay and expense reimbursement
benefit, (ii) all restrictions on Executive's restricted stock shall lapse,
(iii) the exercisability of all stock options held by Executive shall accelerate
and (iv) all other benefits shall vest (unless a plan governs vesting, such as
the deferred compensation plan, in which event the plan's terms and conditions
shall govern vesting).
(e) In the event that Executive's employment terminates by reason
of Executive's death, all benefits provided in this SECTION 6 shall be paid to
Executive's estate or as Executive's executor shall direct, but payment may be
deferred until Executive's executor or personal representative has been
appointed and qualified pursuant to the laws in effect in Executive's
jurisdiction of residence at the time of Executive's death.
(f) Company shall make all cash payments to which Executive is
entitled hereunder within thirty (30) days following the date of termination of
Executive's employment or earlier, if required by applicable law.
(g) In the event Executive has provided notice to the Company of
his intent to terminate or not renew this Agreement pursuant to SECTION
2(A)(III) OR 2(B)(IV) or Company has provided written notice to the Executive of
its intent not to renew this Agreement pursuant to SECTION 2(B)(V):
(i) Salary and Benefits. The salary and other benefits to
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which Executive would have otherwise been entitled shall continue
through the remainder of the period of notice specified by SECTION
2(A)(III), 2(B)(IV) OR 2(B)(V), provided that Executive is otherwise
in compliance with the terms of this
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Agreement, unless (I) Executive subsequently terminates his employment
without Good Reason or the Company terminates Executive's employment
with Cause, (II) Executive is entitled to the extraordinary payment
provided in SECTION 6(A) pursuant to the provisions of SECTION
6(G)(II), or (III) Executive is entitled to the extraordinary payment
provided in SECTION 6(B).
(ii) Section 6(a) Benefit. Executive shall be entitled to
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the extraordinary payment provided in SECTION 6(A) (unless Executive
is otherwise entitled to the extraordinary payment provided by SECTION
6(B)) in the event that, subsequent to such notice, (I) Executive is
terminated without Cause by the Company, (II) Executive's employment
terminates due to death or Permanent Disability, or (III) Executive
terminates his employment with Good Cause.
(iii) Section 6(b) Benefit. Executive shall have no rights
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under SECTION 6(B); provided, however, that if Company and a third
party have executed a commitment letter or agreement under which a
Change in Control is to occur and such agreement was entered into
prior to the Company having provided notice to Executive of its intent
not to renew pursuant to SECTION 2, then Executive shall be entitled
to the extraordinary payment provided in SECTION 6(B), if that Change
in Control in fact occurs and Executive otherwise is entitled to those
benefits as set forth in SECTION 6(B).
(h) In the event Executive is entitled hereunder to any payments
or benefits set forth in SECTION 6(A) OR (B), Executive shall have no obligation
to notify Company of employment subsequent to Executive's termination or to
offset Company's obligation by payments due to such employment and shall have no
duty to mitigate.
(i) The provisions for Severance Payments contained in this
SECTION 6 may be triggered only once during the term of this Agreement, so that,
for instance, should Executive terminate owing to a Permanent Disability and
should there thereafter be a Change in Control, then Executive would be entitled
to be paid only under 6(a) and not under 6(b) as well. In addition, Executive
shall not be entitled to receive severance benefits of any kind from any wholly
owned subsidiary or other affiliated entity of ALC if in connection with the
same event of series of events the Severance Payments provided for in this
SECTION 6 have been triggered.
(j) Gross-Up.
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(i) If it is determined that any payment, distribution
or benefit received or to be received by Executive from the Company (whether
payable pursuant to the terms of this Agreement or any other plan, arrangements
or agreement with the Company or an affiliate of Company ("PAYMENTS") would be
subject to the excise tax imposed by Section 4999 of the Code (the "EXCISE
TAX"), then Executive shall be entitled to receive an additional payment (the
"EXCISE TAX GROSS-UP PAYMENT") in an amount such that the aggregate amount of
the Payment and Excise Tax Gross-Up Payment to be retained by Executive, after
the deduction of any Excise Tax on the Payments and any federal, state and local
income taxes and excise tax on the Excise Tax Gross-Up Payment provided for in
this SECTION 6(J)(I), shall be equal to the
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Payments. In determining this amount, the amount of the Excise tax Gross-Up
Payment attributable to federal income taxes shall be reduced by the maximum
reduction in federal income taxes that could be obtained by the deduction of the
portion of the Excise Tax Gross-Up Payment attributable to state and local
income taxes. Finally, the Excise Tax Gross-Up Payment shall be reduced by
income or excise tax withholding payments made by the Company or any affiliate
of either to any federal, state or local taxing authority with respect to the
Excise Tax Gross-Up Payment that was not deducted from compensation payable to
Executive.
(ii) All determinations required to be made under this
SECTION 6 (J), including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in SECTION
6(J)(I) above, shall be made by the Company's independent auditors (the
"ACCOUNTING FIRM"), which shall provide detailed supporting calculations both to
the Company and Executive within fifteen (15) business days after the Company
makes any Payments to Executive. Such determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with such determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make such determination. All reasonable fees and expenses of the accountants and
tax advisors retained by either Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this SECTION
6(J), shall be paid by the Company to Executive within five (5) days after the
receipt of such determination. Any determination by a jointly designated public
accounting firm shall be binding upon the Company and Executive.
(iii) As a result of the uncertainty in the application
of Subsection 4999 of the Code at the time of the initial determination
hereunder, it is possible that Excise Tax Gross-up Payment will not have been
made by the Company that should have been made consistent with the calculations
required to be made hereunder ("UNDERPAYMENT"). In the event that Executive
thereafter is required to make a payment of any Excise Tax, any such
Underpayment calculated in accordance with and in the same manner as the Excise
Tax Gross-up Payment exceeds the amount subsequently determined to be due, such
excess shall constitute a loan from the Company to Executive payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274 (b)(2)(B) of the Code).
(k) Company agrees to take reasonable steps to ensure that in the
event Company has an obligation to perform under SECTION 6(B), Company shall
have the financial ability to do so.
7. Indemnification.
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(a) ALC and Executive shall enter into an indemnification
agreement in substantially the same form as that which is attached hereto as
EXHIBIT "B" and incorporated herein by this reference.
(b) ALC shall include Executive as an insured in its directors
and officers
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insurance policy and shall provide evidence of such coverage to Executive upon
Executive's written request.
8. Dispute Resolution.
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(a) Mediation. If a dispute arises out of or relates to this
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Agreement or the breach of it (the "DISPUTE"), and if the Dispute cannot be
settled through negotiation, the parties agree first to attempt in good faith to
settle the Dispute by nonbinding mediation under the then effective rules of the
Arbitration Service of Portland, Inc. (the "SERVICE") or, if the Service is no
longer doing business, then under the Mediation Rules of the American
Arbitration Association (the "AAA") before resorting to arbitration.
(b) Arbitration. In the event the parties fail to resolve the
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Dispute through mediation, then either party or both of them shall have the
right to submit the Dispute to final and binding arbitration by the Service or,
if the Service is no longer doing business, then by the American Arbitration
Association. The parties agree to arbitration as an alternative to court
proceedings in order (i) to obtain a prompt evidentiary hearing and an
arbitrator's final award resolving any dispute, (ii) to do so expeditiously, and
(iii) to do so economically. During the arbitration proceeding, the arbitrator,
in the arbitrator's sole discretion, shall have the right to grant requests for
discovery of documents, the taking of depositions, and the issuance of subpoenas
in accordance with Rules of the Service or AAA, whichever is applicable. Each
party hereby promises to cooperate in the arbitration process to effectuate
these purposes. The arbitration shall be conducted in accordance with the Rules
of the Service or, if the Service is no longer doing business, then in
accordance with the Rules of the AAA which are in effect at the time of the
arbitration. Judgment rendered by the arbitrator may be entered in any court
having competent jurisdiction in accordance with Oregon law.
(c) Waiver of Jury Trial. By submitting a Dispute to mediation
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and arbitration, the parties hereto understand that they will not enjoy the
benefits of a jury trial. Accordingly, the parties hereto expressly waive the
right to a jury trial.
(d) Nonexclusive Remedy. Notwithstanding the above provisions
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regarding mediation and arbitration, the parties each retain their respective
rights to seek injunctive relief or other provisional remedies provided under
the law in any court having competent jurisdiction.
9. Attorneys Fees.
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(a) In the event of mediation, the parties shall bear their own
attorneys fees and costs, except that the cost of mediation shall be shared
equally.
(b) In the event of arbitration, the arbitrator shall award
reasonable attorneys fees and costs of the mediation and arbitration to the
prevailing party, including the fees of the arbitrator, unless such award of
fees and costs would be manifestly unjust for reasons set forth by the
arbitrator in his written decision. In determining the amount of reasonable
attorneys fees to a party, the arbitrator may take into account (i) each party's
respective efforts
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to achieve an economical and expeditious resolution of the dispute in
accordance with this SECTION; and (ii) the final settlement offers, if any, of
the parties at least ten (10) calendar days prior to the commencement of the
hearing. In accordance with the rules of evidence, however, settlement offers
shall not be considered in relation to the merits of any Dispute that is subject
to this SECTION other than the award of attorneys fees and costs.
(c) Notwithstanding (b) above, if a suit, action or other
proceeding of any nature whatsoever (including any contested matter or adversary
proceeding under the U.S. Bankruptcy Code) is instituted in connection with any
controversy arising out of this Agreement or to interpret or enforce any rights
hereunder, the prevailing party shall be entitled to recover its reasonable
attorneys, paralegals, accountants and other experts fees, and all other fees,
costs and expenses actually incurred in connection therewith, as determined by
the judge at trial or on appeal or review, in addition to all other amounts
provided by law.
(d) ALC agrees to reimburse Executive in an amount not to exceed
$2500 for Executive's attorneys fees incurred in the negotiations for, and
preparation of, this Agreement.
10. Notices. All notices and other communications provided to either
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party under this Agreement shall be in writing and delivered by overnight
courier or other personal delivery to such party at its address set forth below
its signature hereto, or at such other address as may be designated by such
party in a notice to the other party. Any notice, if so delivered and properly
addressed with postage prepaid, shall be deemed given when received.
11. Binding Effect. This Agreement shall be binding upon and inure
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to the benefit of Executive's heirs, representatives and executors and ALC's
successors and assigns, respectively.
12. Construction. In construing this Agreement, if any portion of
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this Agreement shall be found to be invalid or unenforceable, the remaining
terms and provisions of this Agreement shall be given effect to the maximum
extent permitted without considering the void, invalid or unenforceable
provision. In construing this Agreement, the singular shall include the plural,
the masculine shall include the feminine and neuter genders as appropriate, and
no meaning or effect shall be given to the captions of the sections in this
Agreement, which are inserted for convenience of reference only.
13. Headings. The section headings hereof have been inserted for
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convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
14. Governing Law. The provisions of this Agreement shall be
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construed and interpreted in accordance with the internal laws of the State of
Oregon as at the time in effect.
15. Entire Agreement. This Agreement constitutes the final and
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entire agreement and supersedes all other prior agreements and undertakings,
both written and oral,
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including without limitation the Prior Employment Agreement, among Executive and
the Company, with respect to the subject matter hereof.
16. Counterpart. This Agreement may be executed in one or more
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counterparts, each of which shall be an original, but all of which taken
together shall constitute one instrument.
IN WITNESS WHEREOF, this Agreement has been executed on the dates set
forth below, to be effective as of the date specified in the first paragraph of
this Agreement.
"EXECUTIVE"
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Date: 10/3 1997 _______________________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, as an individual
Home Address:
__________________________
Portland, OR
"ALC OR COMPANY"
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Date: 10/3 1997 _______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Address:
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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