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EMPLOYMENT AGREEMENT
AGREEMENT made as of October 13, 1995, between Coram
Healthcare Corporation, a Delaware corporation (the "Company"), and Xxxxxx X.
Xxxxxx ("Executive").
The execution and delivery of this Agreement by the Company
and Executive are conditioned upon, and this Agreement will not become
effective until, the execution and delivery by the Company of that certain
Fourth Amendment and Limited Waiver to Credit Agreement and First Amendment to
Security Documents dated as of October 13, 1995.
In consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and
Executive accepts employment with the Company, upon the terms and conditions
set forth in this Agreement for the period beginning on the date hereof and
ending as provided in paragraph 5 hereof (the "Employment Period").
2. Position and Duties. During the Employment Period,
Executive shall serve as the President and Chief Executive Officer of the
Company and its wholly-owned subsidiary, Coram, Inc., and shall have the normal
duties, responsibilities and authority of the President and Chief Executive
Officer.
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary
shall be $600,000 per annum (the "Base Salary") payable in cash and in
accordance with the Company's general payroll practices. The Base Salary shall
be reviewed annually by the Board of Directors of the Company (the "Board") and
increased (but not decreased) based upon Executive's performance. The Base
Salary shall, at a minimum, be increased on each anniversary date of this
Agreement by the amount obtained by multiplying the then current Base Salary by
the percentage by which the level of the Denver-Boulder, Colorado Consumer
Price Index For All Urban Consumers, as reported for the immediately preceding
June 30 by the Bureau of Labor and Statistics of the United States Department
of Labor, has increased over the level thereof at June 30 of the preceding
year.
(b) In addition to the Base Salary, Executive shall be
entitled to a performance bonus (the "Bonus") payable within 90 days of the end
of each fiscal year based upon the Company's operating results, as follows: if
earnings before interest, taxes, depreciation and amortization (EBITDA) of the
Company, as measured by the audited financial statements of the Company in any
one year equals or exceeds 100% of the target amounts (the "EBITDA Targets") to
be determined by the Compensation Committee of the Board of Directors of the
Company (consisting of at least two outside directors) and Executive in good
faith, Executive shall be entitled to a bonus for such year (the "Bonus") equal
to the percentage of his then current Base Salary set forth on Schedule A
hereto. Fifty percent of any Bonus earned by Executive hereunder with respect
to the Company's fiscal year ending December 31, 1996 shall be payable by the
Company in cash, and 50% of such Bonus shall be payable in shares of Common
Stock of the Company based on the average closing price of the Company's Common
Stock on the New York Stock Exchange in the 30-day period immediately preceding
the issuance of such shares of Common Stock. In all other years, the Bonus
shall be paid in cash.
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(c) In addition to the Base Salary and any Bonuses
payable to Executive hereunder upon execution of this Agreement, Executive
shall be granted options to purchase 2,200,000 shares of Common Stock of the
Company (the "Option Shares") at a price equal to the average closing price of
the Common Stock on the New York Stock Exchange in the five days immediately
preceding October 12, 1995. An aggregate of 1,400,000 of the Option Shares
shall be granted to Executive under the Company's 1994 Stock Option/Stock
Issuance Plan (the "Plan") and the remaining 800,000 Option Shares shall be
granted to Executive outside of the Plan. The Company agrees to seek
shareholder approval of an increase in the authorized number of shares under
the Plan at its next annual meeting of shareholders, currently scheduled to be
held in December 1995. If such increase is approved by the shareholders, then
upon Executive's written request, the Company will immediately grant Executive
an option under the Plan to purchase 800,000 Option Shares under the Plan on
the same terms as the original option, and the option granted to Executive to
purchase shares outside of the Plan shall be terminated. Each of the options
(collectively, the "Options") shall vest and become exercisable by Executive as
to 33-1/3% of the Option Shares covered thereby on each of the first, second
and third anniversaries of the date hereof, and which will vest as to 100% of
such Option Shares upon (i) a Change in Control (as defined below); (ii) any
termination by the Company of this Agreement other than termination by the
Company for Cause (as defined below); (iii) any termination by Executive
pursuant to Paragraph 5(a)(iii) hereof; or (iv) if the Employment Period is
terminated as a result of Executive's death or permanent Disability (as defined
below). The Company covenants and agrees that it shall not enter into any
agreement providing for a Change in Control on or before the six month
anniversary of the date upon which the last of the Options were issued
(including, if applicable, the replacement Options issued under the Plan, if
any), unless provision is made for the assumption of the Options granted to
Employee, or the substitution for such Options of new options of the successor
corporation or a parent or subsidiary thereof, with such adjustments to the
number and kinds of shares and the per share exercise price as shall be
necessary to maintain the proportionate interest of Executive and preserve the
value of the Options.
For purposes of this Agreement, a Change in Control of the
Company shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the Exchange Act")), other than a trustee or other fiduciary holding
securities of the Company under an employee benefit plan of the Company,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of (A) the outstanding shares of Common Stock of the
Company or (B) the combined voting power of the Company's then-outstanding
securities entitled to vote generally in the election of directors; (ii) during
any period of not more than two consecutive years, not including any period
prior to the date of this Agreement, 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 paragraph (i) or (iii) of this paragraph
3(c)) whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote by at least two-thirds of the directors
still in office who either were in office at the beginning of such period or
whose election or nomination for election was previously so approved, ceases
for any reason to constitute a majority of the Board; or (iii) the shareholders
of the Company approve a merger or consolidation which would result in the
holders of voting securities of the Company outstanding immediately prior
thereto failing to continue to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets or any transaction having a similar
effect.
(d) In addition to the Base Salary and any bonuses
payable to Executive pursuant to this paragraph, Executive shall be entitled to
the following benefits during the Employment Period, unless otherwise increased
by the Board:
(i) Health insurance and disability insurance of
such coverage as is made generally available to the senior executives
of the Company and term life insurance with a policy value of
$2,000,000 naming Executive's wife and two children as beneficiaries;
(ii) a maximum of four weeks vacation each year
with salary; and
(iii) participation in any profit sharing plan,
retirement plan, group life insurance plan, or other insurance plan,
medical expense plan or other benefit arrangement maintained by the
Company for its senior executives generally and, if applicable, their
family members.
(e) The Company shall reimburse Executive for all
reasonable expenses incurred by him in the course of performing his duties
under this Agreement, including upgrades for first class air travel, which are
consistent with the Company's policies in effect from time to time with respect
to travel, entertainment and other business expenses, subject to the Company's
requirements with respect to reporting and documentation of such expenses. In
addition, the Company agrees that Executive shall have first priority use of
any aircraft owned by the Company.
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4. Board Membership. With respect to all regular
elections of directors during the Employment Period, the Company shall
nominate, and use its best efforts to elect, Executive to serve as a member of
the Board. Upon the termination of the Employment Period for any reason,
Executive shall resign as a director of the Company and its Subsidiaries, as
the case may be. For purposes of this Agreement, "Subsidiaries" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
5. Term.
(a) The Employment Period shall end on the third
anniversary hereof; provided that (i) the Employment Period shall terminate
prior to such date upon Executive's resignation, death or permanent disability
(defined as the expiration of a continuous period of 180 days during which
Executive is unable to perform his assigned duties due to physical or mental
incapacity); (ii) the Employment Period may be terminated by Executive at any
time prior to such date if the Company fails to comply with any material
provision of this Agreement, which failure has not been cured within 10
business days after notice of such noncompliance has been given by Executive to
the Company; and (iii) the Employment Period may be terminated by the Company
at any time prior to such date for Cause.
(b) If the Employment Period is terminated by the Company
for Cause or is terminated by Executive's resignation, Executive shall be
entitled to receive all amounts due to him through the date of termination.
(c) If the Employment Period is terminated as a result of
Executive's death or permanent Disability, the Company shall pay any amounts
due to Executive through the date of termination and a Bonus (payable as set
forth in paragraph 3(b)) in an amount equal to the Bonus which would have
otherwise been payable to Executive pursuant to paragraph 3(b) with respect to
the fiscal year in which such termination occurs.
(d) If the Employment Period is terminated by the Company
other than for Cause or by Executive pursuant to paragraphs 5(a)(ii) above,
Executive shall be entitled to receive his Base Salary through the third
anniversary of the date hereof (or, if longer, for a period of 12 months after
the date of termination), payable in accordance with the Company's general
payroll practices, and a Bonus payable within ninety days after the end of each
of the Company's fiscal years ending thereafter through 1998, in an amount
equal to the average of the Bonuses earned by Executive during the Employment
Period. The Company shall also continue coverage for Employee under the
Company's life insurance, medical, health, disability and similar welfare
benefit plans and the term life insurance plan described in paragraph 3(d)(i)
through the third anniversary of the date hereof (or, if longer, for a period
of twelve months after the date of termination).
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(e) Except as otherwise set forth above, all of
Executive's rights to fringe benefits and bonuses hereunder (if any) accruing
after the termination of the Employment Period shall cease upon such
termination.
(f) For purposes of this Agreement, "Cause" shall mean
(i) the willful failure or refusal by Executive to perform his duties hereunder
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness), which has not ceased within 10 business days after
written demand for substantial performance is delivered to Executive by the
Company, which demand identifies the manner in which the Company believes that
Executive has not performed such duties and the steps required to cure such
failure to perform; (ii) Executive shall intentionally and willfully engage in
misconduct toward the Company which is materially injurious to the Company and
its Subsidiaries, monetarily or otherwise (including, but not limited to,
conduct in violation of paragraph 6 or 7 hereof), or (iii) the conviction of
Executive of or the entering of a plea of nolo contendere by Executive with
respect to, a felony. Notwithstanding the foregoing, Executive's Employment
hereunder shall not be deemed to be terminated for Cause unless and until there
shall have been delivered to Executive a copy of a resolution duly adopted by
an affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board (after written notice to Executive and a
reasonable opportunity for Executive, together with Executive's counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive should be terminated for Cause.
(g) In the event of any dispute regarding the existence
of Executive's Disability hereunder, the matter will be resolved by the
determination of a majority of three physicians qualified to practice medicine
in Colorado, one to be selected by each of Executive and the Board and the
third to be selected by the two designated physicians. For this purpose,
Executive will submit to appropriate medical examinations.
(h) Executive shall not be required to mitigate the
amount of any payment provided for in this paragraph 5 by seeking other
employment or otherwise, and the amount of any payment or benefit provided for
in this paragraph 5 shall not be reduced by any compensation earned by
Executive as a result of employment by another employer or by retirement
benefits.
6. Confidential Information. The Executive acknowledges
that the information, observations and data obtained by him while employed by
the Company concerning the business or affairs of the Company or any Subsidiary
("Confidential Information") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Board, unless and to the extent
required by law, rule or regulation or pursuant to any administrative or court
order. The term "Confidential Information" shall not include (i) information
which is generally available to the public or those in the Company's industry
as of the date of execution of this Agreement or which later becomes generally
available to the public or those in the Company's industry other than as a
result of Executive's prohibited disclosure; (ii) information which comes to
Executive from a bona fide third party source so long as such source was not,
to Executive's knowledge, prohibited from providing such information to
Executive by any contractual, legal, fiduciary or other obligation; and (iii)
information which was known to Executive before such information was obtained
from the Company. Executive shall deliver to the Company at the termination of
the Employment Period, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and
other documents and data (and copies thereof) relating to the Confidential
Information or the business of the Company or any Subsidiary which he may then
possess or have under his control.
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7. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company's trade
secrets and with other confidential information concerning the Company and its
predecessors and that his services will be of special, unique and extraordinary
value to the Company. Therefore, Executive agrees that (i) during the period
in which Executive is receiving compensation from the Company pursuant to
paragraph 5 hereof, or (ii) if the Employment Period is terminated as provided
in paragraph 5(b), for a period of one year following such termination (the
"Noncompete Period"), he shall not directly or indirectly own, manage, control,
participate in, consult with, render services for, or in any manner engage in
any business competing with the businesses of the Company or its Subsidiaries
as such businesses exist or are in process on the date of the termination of
Executive's employment, within any geographical area in which the Company or
its Subsidiaries engage or plan to engage in such businesses. Geographic areas
in which the Company plans to operate and any businesses of the Company which
exist or are in process will be identified in writing upon request of Executive
within 30 days of the date of termination of the Employment Period. Nothing
herein shall prohibit Executive from being a passive owner of not more than 5%
of the outstanding stock of any class of a corporation which is publicly
traded, so long as Executive has no active participation in the business of
such corporation.
(b) During the Noncompete Period, Executive shall not
directly or indirectly through another entity (i) induce or attempt to induce
any employee of the Company or any Subsidiary to leave the employ of the
Company or such Subsidiary, or in any way interfere with the relationship
between the Company or any Subsidiary and any employee thereof, (ii) solicit
any person who was an employee of the Company or any Subsidiary at any time
within one year prior to termination of the Employment Period, or (iii) induce
or attempt to induce any customer, supplier, licensee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company or any Subsidiary.
(c) If, at the time of enforcement of this paragraph 8, a
court shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law.
(d) In the event of the breach or a threatened breach by
Executive of any of the provisions of this paragraph 8, the Company, in
addition and supplementary to other rights and remedies existing in its favor,
may apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce or prevent
any violations of the provisions thereof (without posting a bond or other
security).
8. Executive and Company Representations. Executive
hereby represents and warrants to the Company that (i) the execution, delivery
and performance of this Agreement by Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Executive is a party or by which
he is bound, (ii) Executive is not a party to or bound by any employment
agreement, noncompete agreement or confidentiality agreement with any other
person or entity other than that certain Resignation Agreement dated as of
August 31, 1995 between Executive and OrNda Healthcorp and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall
be the valid and binding obligation of Executive, enforceable in accordance
with its terms. The Company hereby represents and warrants to Executive that
it is not entering into this Agreement in contemplation of any merger or sale
of the Company.
9. Survival. Paragraphs 5, 6, 7 and 8 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
10. Notices. All notices, requests, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to be delivered and received five business days
after having been deposited in the United States mail and enclosed in a
registered or certified post-paid envelope; one business day after having been
sent by overnight courier; when personally delivered or sent by facsimile
communications equipment of the sending party on a business day, or otherwise
on the next succeeding business day thereafter; and in each case addressed to
the respective party at the address set forth below or to such other changed
addresses as the party may have fixed by notice as provide herein:
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Notices to Executive:
Xxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Stroock & Stroock & Xxxxx
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
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Notices to the Company:
Coram Healthcare Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
11. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof
in any way.
13. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
14. Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by Executive, the
Company and their respective heirs, successors and assigns, except that
Executive may not assign his rights or delegate his obligations hereunder
without the prior written consent of the Company. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) of all or substantially all of the business and/or assets of the
Company, to expressly 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.
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15. Attorneys' Fees and Costs. If any action at law or
equity is necessary to enforce or interpretate the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which that party may be
entitled. In addition, the Company shall pay on behalf of Executive the
reasonable fees and expenses of his counsel in connection with the negotiation
and execution of this Agreement in an amount not to exceed $5,000.
16. Choice of Law. This Agreement will be governed by
the internal law, and not the laws of conflicts, or the State of Colorado.
17. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written consent of the
Company and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
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CORAM HEALTHCARE CORPORATION
By
______________________________
__________________ Its
______________________________
__________________
________________________________________
____________ XXXXXX X. XXXXXX
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SCHEDULE A
BONUS COMPENSATION
If the Company hits the percentage of its EBITDA Target set forth below,
Executive will be entitled to receive as Bonus that percentage of his Base
Salary (as in effect on the last day of the fiscal year in question) set forth
below.
PERCENTAGE OF EBITDA TARGET PERCENTAGE OF BASE SALARY
100% 60%
101.5 65%
103.0 70%
104.5 75%
106.0 80%
107.5 85%
109.0 90%
110.5 95%
112% 100%
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