Execution Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of October 1, 1995 by and between Charter Medical Corporation, a
Delaware Corporation ("Employer"), and E. Xxx Xxxxxxxx
("Officer").
WHEREAS, Employer desires to obtain the continued services
of Officer and Officer desires to continue to render services to Employer; and
WHEREAS, Employer and Officer desire to set forth the terms
and conditions of Officer's employment with Employer under this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals
and of the mutual covenants and agreements contained in this Agreement, the
parties agree as follows:
1. Term. Employer agrees to employ Officer, and Officer
agrees to serve Employer, in accordance with the terms of this Agreement, for a
term (the "Term") beginning on the date of this Agreement and ending, unless
earlier terminated in accordance with the provisions of this Agreement, on
December 31, 1997.
2. Employment of Officer.
(a) Specific Position. Employer and Officer
agree that, subject to the provisions of this Agreement, Employer will employ
Officer and Officer will serve Employer as Chairman of the Board of Directors,
President and Chief Executive Officer. Employer agrees that Officer's duties
under this Agreement shall be the usual and customary duties of a Chief
Executive Officer and, consistent with the foregoing, as are determined from
time to time by the Board of Directors of Employer (the "Board"), and shall not
be inconsistent with the provisions of the Certificate of Incorporation of
Employer or applicable law.
(b) Promotion of Employer's Business. During
the Term, Officer shall devote his full business time and energy to the
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business, affairs and interests of Employer and related matters, and shall use
his best efforts and abilities to promote Employer's interests. Officer agrees
that he will diligently endeavor to perform services contemplated by this
Agreement in accordance with the policies established by the Board, subject to
the provisions of the second sentence of Section 2(a).
(c) Permitted Activities. Officer may serve
as an officer, director, agent or employee of any direct or indirect
subsidiary or other affiliate of Employer but may not serve as an officer,
director, agent or employee of any other business enterprise without the
written approval of the Board; provided, that Officer may make and manage
personal business investments of his choice (and, in so doing, may serve as
an officer, director, agent or employee of entities and business enterprises
that are related to such personal business investments) and serve in any
capacity with any civic, educational or charitable organization, or any
governmental entity or trade association, without seeking or obtaining
such written approval of the Board, if such activities and services do
not significantly interfere or conflict with the performance of his duties
under this Agreement.
(d) Principal Office. Officer's principal
office and normal place of work shall be at Employer's principal executive
offices.
3. Salary. Employer shall pay Officer a salary in the amount
of $600,000 per year (pro-rated for any partial year during the Term) payable in
equal semi-monthly installments, less state and federal tax and other legally
required and Officer-authorized withholdings. Such salary shall be subject to
review and adjustment by the Board (or a Board Committee) from time to time
consistent with past practice; provided, that, during the Term, such salary may
not be reduced below any previous level paid during the Term as a result of such
review.
4. Contract Bonus Compensation. On December 31, 1997,
Employer shall pay in cash to Officer $10 million minus the amount
determined under the next two paragraphs, whichever is applicable.
If, on December 31, 1997, Officer has not exercised, between
the date of this Agreement and December 31, 1997, any options held by Officer on
the date of this Agreement under Employer's 1992 Stock Option Plan, then the
amount shall be the result obtained by
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multiplying (i) 462,990 (the number of options held by Officer as of the date of
this Agreement under Employer's 1992 Stock Option Plan) by (ii) the excess of
the lesser of (A) $18.00 and (B) the arithmetic average of the closing sale
price per share of Employer's Common Stock on the American Stock Exchange (or if
the Common Stock is not then traded on such exchange, on the largest national
securities exchange on which the Common Stock is then traded or, if not then
traded on a national securities exchange, on the NASD market in or on which the
Common Stock is then traded) for the ten trading days immediately preceding the
date of payment, over (iii) $4.36.
If, on December 31, 1997, Officer has exercised, between the
date of this Agreement and December 31, 1997, any of such options held by him on
the date of this Agreement, then the amount shall be the sum of (a) and (b), as
follows:
(a) the result obtained by multiplying (i) the
number of options held by Officer on the date of this Agreement under
Employer's 1992 Stock Option Plan, which options have not been
exercised as of December 31, 1997, by (ii) the excess of the lesser
of (A) and (B) in the immediately-preceding paragraph, over (iii)
$4.36.
(b) the result obtained by multiplying (i) the
number of options held by Officer on the date of this Agreement under
Employer's 1992 Stock Option Plan, which options are exercised by
Officer between the date of this Agreement and December 31, 1997, by
(ii) the excess of $18 over $4.36, or $13.64.
If, prior to the date of payment pursuant to this Section 4,
Employer effects a change in capitalization, as described in Section 10 of
Employer's 1992 Stock Option Plan, then the number and dollar amounts in (i),
(ii)(A) and (iii) in the second paragraph of this Section 4 and in (i) and (ii)
of the third paragraph of this Section 4 shall be adjusted in the manner
provided in Section 10 of Employer's 1992 Stock Option Plan (as such plan is
worded on the date of this Agreement).
A change in the per share exercise price of such options
pursuant to Section 3(b) of the Stock Option Agreement, dated as of
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July 21, 1992, between Employer and Officer shall not affect the amount payable
to Officer under this Section 4.
5. Benefits.
(a) Fringe Benefits. In addition to the
compensation provided for in Sections 3 and 4, Officer shall be entitled during
the Term of this Agreement to such other benefits of employment with Employer as
are now or may hereafter be in effect for (i) salaried officers of Employer or
(ii) senior executives of Employer, including, without limitation, all bonus,
incentive and deferred compensation, pension, stock option, life and other
insurance, disability (insured and uninsured), medical and dental and other
benefit plans or programs; provided, that bonuses, life insurance and disability
insurance for Officer during the Term shall be in amounts and on other terms
that are not less and no less favorable than those provided, on average, by
comparable hospital management companies for a comparable officer position.
(b) Expenses. During the Term, Employer shall
reimburse Officer promptly for all reasonable travel, entertainment, parking,
business meeting and similar expenditures in pursuance and furtherance of
Employer's business upon receipt of reasonable supporting documentation as
required by Employer's policies applicable to its officers generally.
6. Termination.
(a) Termination Due to Resignation and Termination
For Cause. (1) Officer's employment under this Agreement shall be terminated
and, except as provided in this Section 6, all of his rights to receive salary
and other benefits (except for salary, bonus and other benefits accrued through
the date of termination) shall terminate upon the occurrence of (i) Officer's
resignation other than for "good reason," as defined in Section 6(e), or (ii)
termination by Employer for "cause," as defined below, during the Term. Employer
shall have the right, exercisable upon 30 days' written notice, to terminate,
without liability except as provided in the parenthetical in the preceding
sentence, Officer's employment for "cause" if Officer (i) materially breaches
any material term of this Agreement, (ii) is convicted by a court of competent
jurisdiction of a felony, (iii) refuses, fails or neglects to perform his duties
under this Agreement in a manner substantially detrimental to the business of
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the Employer, (iv) engages in illegal or other wrongful conduct substantially
detrimental to the business or reputation of Employer, or (v) develops or
pursues interests substantially adverse to Employer; provided that in the case
of clauses (i), (iii), (iv), or (v), no such termination shall be effective
unless (1) Employer shall have given Officer 30 days' prior written notice of
any conduct or deficiency in performance by Officer that Employer believes
could, if not discontinued or corrected, lead to Officer's termination under
this Section 6(a) in order that Officer shall have had an opportunity to cure
such noncomplying conduct or performance, and (2) Officer shall not have cured
such noncomplying conduct or performance during such notice period.
(2) If this Agreement is terminated due to
Officer's resignation other than for "good reason" as defined in Section
6(e), then Employer shall pay to Officer, in addition to any amounts payable
pursuant to Section 6(a)(1), an amount equal to the result obtained by
multiplying (i) the number of options held by Officer as of the date of
this Agreement, which options have not been exercised by Officer between
the date of this Agreement and the date of such termination of this Agreement
by (ii) the excess, if any, of (A) $18.00 over (B) the arithmetic average
of the closing sale price per share of Employer's Common Stock on the
American Stock Exchange (or other exchange or market, as described in the
second paragraph of Section 4) for the ten trading days immediately preceding
the date of termination.
(b) Termination Due to Death or Disability.
Officer's employment and all of his rights to receive salary and other benefits
under this Agreement may be terminated by Employer upon Officer's death, or on
30 days' written notice from Employer to Officer if Officer has been unable to
perform substantially all of his duties under this Agreement for a period of 180
days, or can reasonably be expected to be unable to do so for such period, as
the result of physical or mental impairment; provided that upon any termination
pursuant to this Section 6(b), Officer (or in the event of his death, his
estate) shall be entitled to receive the Specified Amount (as defined below),
and such Specified Amount shall be payable in a lump sum on the date of
termination. In addition to the Specified Amount, if Officer is terminated due
to death or disability, Officer (or in the event of his death, his estate) shall
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be entitled to receive the portion or portions of any bonus or other cash
incentive compensation that had been accrued with respect to Officer on the
books of Employer through the date of termination pursuant to this Section 6(b)
or otherwise.
The term "Specified Amount" shall mean the sum of
(x) the greater of (i) the total of all salary payments pursuant to Section 3
that would thereafter have come due during the Term had there been no
such termination or resignation or (ii) three years' salary pursuant to
Section 3, (in each case as the same may have been extended and assuming a
continuation for the remainder of the Term of then current salary levels)
and (y) the amount payable to Officer on December 31, 1997, pursuant to Section
4, except that the references in Section 4 to "December 31, 1997" shall be
changed to the date of termination of this Agreement.
(c) Termination Without Cause. Subject to
compliance with the provisions of Section 6(d), Employer shall have the right,
exercisable on 30 days' written notice, to terminate Officer's employment under
this Agreement without cause at any time during the Term.
(d) Payments Upon Termination Without Cause.
If Officer is terminated by Employer without cause pursuant to Section
6(c), Officer (i) shall be entitled to receive the Specified Amount in cash
on the date of such termination; (ii) any stock option or other
stock-based compensation plan shall be governed by the terms of such plans
(and any related stock option or similar agreements); and (iii) the portion
or portions of any bonus or other cash incentive compensation that had been
accrued with respect to Officer on the books of Employer through the date of
termination pursuant to this Section 6(d) or otherwise shall be paid to
Officer in cash on the date of such termination.
(e) Termination By Officer For Good Reason.
Officer shall be entitled to terminate his employment for "good reason"
and in such event shall be entitled to all of the salary, benefits and other
rights provided in this Agreement as though the termination was initiated by
Employer without "cause". For purposes of this Agreement, "good reason"
shall mean any of the following events, which event shall continue for 30
days after notice to the Employer, unless the event occurs with Officer's
express prior written consent:
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(i) the assignment to Officer of any duties
inconsistent with his status as Chairman of the Board of Directors,
President and Chief Executive Officer of Employer or a substantial
alteration in the nature or status of his responsibilities from those
in effect immediately prior to the date of this Agreement;
(ii) a reduction by Employer in Officer's annual
base salary as in effect from time to time during the Term;
(iii) the failure by Employer to comply with
Section 3 or Section 5; or
(iv) any other material breach of this Agreement
by Employer.
(f) Termination Upon a Change of Control.
Officer shall be entitled to terminate his employment upon a change of control
and shall be entitled to (i) all of the salary, benefits and other rights
provided in this Agreement (including those payments provided under Section
6(d)) as though the termination has been initiated by Employer without cause,
and (ii) a Gross-Up Payment (as defined), to the extent provided by the
second paragraph of this Section 6(f), upon the occurrence of any of the
following events: (a) the acquisition after the date of this Agreement, in
one or more transactions, of beneficial ownership (within the meaning
of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) by any person or entity (other than Officer) or any
group of persons or entities (other than Officer) who constitute a group
(within the meaning of Section 13(d)(3) of the Exchange Act) of any
securities of Employer such that as a result of such acquisition such
person or entity or group beneficially owns (within the meaning of Rule
13d-3(a)(1) under the Exchange Act) more than 50% of Employer's then
outstanding voting securities entitled to vote on a regular basis for a
majority of the Board; or (b) the sale of all or substantially all of the
assets of Employer (including, without limitation, by way of merger,
consolidation, lease or transfer) in a transaction where Employer or the
holders of common stock of Employer do not receive (i) voting securities
representing a majority of the voting power entitled to vote on a regular
basis for the Board of Directors of the acquiring entity or of an affiliate
which controls
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the acquiring entity, or (ii) securities representing a majority of the equity
interests in the acquiring entity or of an affiliate that controls the acquiring
entity, if other than a corporation.
A Gross-Up Payment (as defined) shall be payable upon
termination of employment pursuant to this Section 6(f) on and subject to the
following terms and conditions:
(1) If any payment or other benefit (a "Termination
Payment") to Officer under this Section 6(f) is or will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), Employer shall pay to Officer, at the time the
applicable Termination Payment is made, an additional amount (the "Gross-Up
Payment") such that the net amount retained by Officer, after deduction of any
Excise Tax on such Termination Payment and any federal, state and local income
tax and Excise Tax on the Gross-Up Payment, shall be equal to the amount or
value of such Termination Payment. For purposes of determining whether any such
Termination Payment will be subject to the Excise Tax, any other payments or
benefits received or to be received by Officer in connection with an event
giving rise to a Termination Payment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Employer, with any
person whose actions result in a change in control or with any person affiliated
with Employer or such person) shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as being subject to the Excise Tax. The amount of the Termination Payment that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(i) the total amount of the Termination Payment or (ii) the amount of excess
parachute payments within the meaning of Sections 280G(b)(1) and (4) of the Code
(after applying the immediately preceding sentence). The full amount of the
Gross-Up Payment shall be treated as being subject to the Excise Tax. The value
of any non-cash benefits or any deferred payment or benefit shall be determined
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
(2) For purposes of determining the amount of any
Gross-Up Payment, Officer shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the applicable Termination Payment or Gross-Up Payment is made, and shall be
deemed to pay state and local income
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taxes at the highest marginal rates of taxation in the state and locality of his
residence on the date the applicable Termination Payment or Gross-Up Payment is
made, net of the maximum reduction in federal income taxes that could be
obtained from deduction of such state and local taxes.
(3) If the Excise Tax or income tax payable with
respect to a Gross-Up Payment as finally determined exceeds the amount taken
into account or paid to Officer at the time the applicable Termination Payment
or Gross-Up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the applicable Gross-Up
Payment), Employer shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable by Officer with respect to such excess) at the
time that the amount of such excess is finally determined.
7. Confidentiality and Noncompetition.
(a) Confidentiality. Officer acknowledges that, by
reason of his employment with Employer, he may learn trade secrets and obtain
other confidential information concerning the business and policies of Employer
and its subsidiaries. Officer agrees that he will not voluntarily divulge or
otherwise disclose, directly or indirectly, any such trade secrets or other
confidential information concerning the business or policies of Employer or any
of its subsidiaries that he may learn as a result of his employment during the
Term or may have learned prior to the Term, except to the extent such
information is lawfully obtainable from public sources or such use or disclosure
is (i) necessary to the performance of this Agreement and in furtherance of
Employer's best interests, (ii) required by applicable laws, or (iii) authorized
by Employer.
(b) Noncompetition. In order to protect any
confidential information that Officer may learn during the Term and in order to
protect any goodwill that Employer has earned and may earn during the Term,
Officer agrees that, if Officer voluntarily terminates this Agreement without
good reason during the Term, he shall not, at any location in the State of
Georgia, for a period of 12 months after such termination, provide services, as
employee, officer, director, consultant or otherwise, which services are
substantially similar to the hospital management company chief
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executive officer services performed by Officer under this Agreement, for any
company, firm or entity that owns and operates (directly or through
subsidiaries) more than one hospital and that owns and operates one or more
psychiatric hospitals located in Georgia within 25 miles of a similar
(psychiatric) hospital owned and operated by Employer and located within the
State of Georgia.
8. Miscellaneous.
(a) Succession. This Agreement shall inure to
the benefit of and shall be binding upon Employer, its successors and assigns,
but Employer shall not have the right to assign this Agreement without the
prior written consent of Officer. The obligations and duties of Officer
under this Agreement shall be personal and not assignable.
(b) Notices. Any notice, request, instruction
or other document to be given under this Agreement by any party to the others
shall be in writing and delivered in person or by courier, telegraphed,
telexed or sent by facsimile transmission or mailed by certified mail,
postage prepaid, return receipt requested (such mailed notice to be effective
on the date of such receipt is acknowledged), as follows:
If to Officer:
E. Xxx Xxxxxxxx
000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, XX 00000
If to Employer:
Charter Medical Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Secretary
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
(c) Entire Agreement. This Agreement contains
the entire agreement of the parties relating to the subject matter of
this Agreement, and, subject to Section 8(k), it replaces and
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supersedes any prior agreements between the parties relating to said
subject matter.
(d) Waiver; Amendment. No provision of this
Agreement may be waived except by a written agreement signed by the waiving
party. The waiver of any term or of any condition of this Agreement shall not be
deemed to constitute the waiver of any other term or condition. This Agreement
may be amended only by a written agreement signed by the parties.
(e) Governing Law. This Agreement shall be
construed under and governed by the internal laws of the State of
Georgia.
(f) Arbitration. Except for an action for
injunctive relief, any disputes or controversies arising under this Agreement
shall be settled by arbitration in Atlanta, Georgia in accordance with the rules
of the American Arbitration Association relating to the arbitration of
commercial disputes. The determination and findings of such arbitrators shall be
final and binding on all parties and may be enforced, if necessary, in the
courts of the State of Georgia.
(g) Attorneys' Fees in Action by Employee on
Contract. In the event of litigation or arbitration between Officer and Employer
arising out of or as a result of this Agreement or the acts of the parties
pursuant to this Agreement, or seeking an interpretation of this Agreement, if
Officer is the party in such litigation or arbitration, in addition to any other
judgment or award, he shall be entitled to receive such sums as the court or
panel hearing the matter shall find to be reasonable as and for attorneys' fees.
(h) Remedies of Employer. Officer acknowledges
that the services he is obligated to render under the provisions of this
Agreement are of a special, unique and intellectual character, which gives
this Agreement peculiar value to Employer. The loss of these services cannot
be reasonably or adequately compensated in damages in an action at law and it
would be difficult (if not impossible) to replace such services. Accordingly,
Officer agrees and consents that, if he materially violates any of the material
provisions of
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this Agreement, including, without limitation, Section 7, Employer, in addition
to any other rights and remedies available under this Agreement or under
applicable law, shall be entitled during the remainder of the Term (and, in the
case of Section 7, after the Term to the extent provided in Section 7) to seek
injunctive relief, from a court of competent jurisdiction, restraining Officer
from committing or continuing any violation of this Agreement, or from the
performance of services to any other business entity, or both.
(i) Captions. Captions have been inserted
solely for the convenience of reference and in no way define, limit or
describe the scope or substance of any provisions of this Agreement.
(j) Severability. If this Agreement shall be
any reason be or become unenforceable by any party, this Agreement shall
thereupon terminate and become unenforceable by the other party as well.
In all other respects, if any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect and, if any provision if held invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances.
(k) Prior Employment Agreement. The July 21,
1992, Employment Agreement, if not previously terminated, shall terminate as
of the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CHARTER MEDICAL CORPORATION
BY: /s/ E. Xxx Xxxxxxxx
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Name: E. Xxx Xxxxxxxx
Title:
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