EXECUTION COPY
|__| Employee's Copy
|__| Company's Copy
XXXXXXXXXX HEALTHCARE CORPORATION
EMPLOYMENT AGREEMENT
To XXXXX X. XXXXXXXXXXX
This Agreement establishes the terms of your continued employment
with Xxxxxxxxxx Healthcare Corporation, Inc., a California corporation
(the "COMPANY") and reflects your new position as the
Company's interim chief executive officer ("CEO").
EMPLOYMENT AND DUTIES You and the Company agree to your employment as
interim CEO. In such position, you will report
directly to the Company's Board of Directors (the
"BOARD"). You agree to perform whatever duties the
Board may assign you from time to time that are
consistent with those of the CEO of a public company.
During your employment, you agree to devote your full
business time, attention, and energies to performing
those duties (except as the Board otherwise agrees
from time to time). On termination of this
Agreement, you agree that you resign as an officer
and director and from all other officer and director
positions at the Company and subsidiaries.
You agree that, if the Company hires or promotes a
new CEO during the Term but retains your services in
some other capacity, your change in position by
itself does not constitute termination without CAUSE
and does not entitle you to any SEVERANCE, whether
under this Agreement or otherwise. However, the
hiring or promotion of a new CEO does not alter the
Company's obligations to you under this Agreement,
including those obligations described under the
SALARY, BENEFITS, BONUS, PAYMENTS ON TERMINATION, and
SEVERANCE sections.
TERM OF EMPLOYMENT Your employment under this Agreement begins as of
July 1, 1999 (the "EFFECTIVE DATE") and, unless
sooner terminated or extended, ends on December 31,
1999. The period running from the Effective Date to
the applicable date in the preceding sentence is the
"TERM."
COMPENSATION
SALARY The Company will pay you a salary (the "SALARY") from
the Effective Date at the rate of not less than
$45,000 per month in accordance with its generally
applicable payroll practices.
BENEFITS During the Term, you will continue to be eligible to
participate in employee benefit and fringe benefit
plans and programs generally available to the
Company's executive officers and such additional
benefits as the Board may from time to time provide.
In addition, during the Term, you will continue to be
entitled to the following life insurance and
disability coverages and fringe benefits:
LIFE The Company will maintain for your benefit life
insurance
INSURANCE coverage with a face amount equal to three times
the amount of your annual SALARY as in effect
from time to time; PROVIDED, HOWEVER, that if
the Company cannot obtain the full amount of
such life insurance coverage at a reasonable
cost, the Company may instead provide you with a
lump sum death benefit, payable within 90 days
following your death, in such amount as will,
when added to any life insurance coverage the
Company actually obtains, provide your
beneficiary or beneficiaries with a net amount,
after payment of any Federal and state income
taxes, equal to the net, after-tax amount such
beneficiary or beneficiaries would have received
had the Company obtained the full amount of life
insurance coverage provided for above. You will
have the right to name and to change from time
to time the beneficiary or beneficiaries under
such life insurance coverage (and death
benefits, if any). Such life insurance coverage
(and death benefits, if any) will be in addition
to any death benefits that may be payable under
any accidental death and dismemberment plan, any
separate business travel accident coverage, or
any pension plan in which you may participate,
and such coverage will also be in addition to
any life insurance that you purchase for
yourself.
LONG-TERM If you become disabled (as defined in the long-
term
DISABILITY disability plan the Company presently
maintains), you are to receive disability
benefits in an amount equal to 60% of your then
annual Salary. Any amount payable under any
salary continuation plan (including any salary
continuation provided under this Agreement) or
disability plan maintained by the Company, and
any amount payable to you or to your immediate
family as a Social Security disability benefit
or similar benefit will be counted towards the
Company's fulfillment of such obligation.
Disability benefits will be payable monthly
beginning 30 days following disability and will
continue until you are no longer disabled, or if
earlier, until you reach age 65.
VACATIONS You will be entitled to such paid vacation time
as you may
AND reasonably take in your discretion so long as
such vacation
HOLIDAYS time does not interfere with the efficient
discharge of your duties and responsibilities.
You will be entitled to all holidays as listed
annually in the Company's official holiday
schedule.
TAX RETURN The Company will provide you with the
assistance of its
PREPARATION; regular auditors for the preparation of your
Federal and
FINANCIAL state tax returns without charge to you. In
addition, the
ADVICE Company will reimburse you up to $5,000 per year
for the costs you incur for financial planning
services .
ANNUAL The Company will reimburse you 100% of the costs
you
PHYSICAL incur in obtaining an annual comprehensive
physical examination to be conducted by your
choice of physician, clinic, or medical group
located within a reasonable distance from your
place of employment.
Reimbursement for business expenses, including travel
and entertainment, will be limited to reasonable and
necessary expenses you incur on the Company's behalf
in connection with performing duties on the Company's
behalf and subject to (i) timely submission of a
properly executed Company expense report form
accompanied by appropriate supporting documentation,
and (ii) compliance with Company policies and
procedures governing business expense reimbursement
and reporting based upon principles and guidelines
established from time to time by the Board's Audit
Committee, including periodic audits by the Company's
Internal Audit Department and/or the Audit Committee.
BONUS You will receive one but only one of the bonus
payments described below if the related event set
forth below (a "BONUS DETERMINATION") is completed
before December 31, 1999, with payment on the date of
completion:
1. Upon the sale of the Salt Lake facilities (Pioneer
Valley Hospital, Salt Lake City Regional Medical
Center, State Street Hospital, Xxxxx Hospital Medical
Center, Jordan Valley Hospital, and related operating
Utah assets), a bonus of $125,000, plus 1% of the
gross sales proceeds in excess of $306 million
(excluding any payments for working capital included
the gross sales proceeds),
2. Upon the sale of [-----------------------------]*,
a bonus of $125,000, plus 1% of the gross proceeds
in excess of [----------]* (excluding any payments
for working capital included in the gross sales
proceeds),
3. Upon the sale of all of the shares or assets of the
Company, a bonus of $125,000, plus 1% of the total
enterprise value (gross sales proceeds plus assumed
funded indebtedness) in excess of [-------------]*,
4 Upon a recapitalization and sale of at least $25
million of additional common stock in a private
transaction (i.e., other than through a public
offering), a bonus of $125,000, plus 1% of the
total amount received in excess of [-----] per
common share sold (with appropriate adjustments
for stock splits).
------------------------------------------
* Certain information was omitted pursuant to a request for confidential
treatment which was filed separately with the Securities and Exchange
Commission on August 16, 1999.
TERMINATION Subject to the provisions of this section, you and the
Company agree that it may terminate your employment, or
you may resign, except that, if you voluntarily resign,
you must provide the Company with 30 days' prior written
notice (unless the Board has previously waived such notice
in writing or authorized a shorter notice period).
FOR CAUSE The Company may terminate your employment for "CAUSE"
if you:
(i) commit an act of gross negligence or
otherwise act with willful disregard for the
Company's best interests;
(ii) fail or refuse to perform any duties
delegated to you that are consistent with the
duties of similarly-situated executives or are
otherwise required under this Agreement;
(iii) seize a corporate opportunity for
yourself instead of offering such opportunity to
the Company; or
(iv) are convicted of or plead guilty or no
contest to a misdemeanor (other than a traffic
violation) or felony, or, with respect to your
employment, commit either a material dishonest
act or common law fraud or intentionally violate
any federal or state securities or tax laws.
Your termination for Cause will be effective
immediately upon the Company's mailing or
transmission of notice of such termination. Before
terminating your employment for Cause under clauses
(i) - (iii) above, the Company will specify in
writing to you the nature of the act, omission,
refusal, or failure that it deems to constitute Cause
and, if the Board considers the situation to be
correctable, give you 30 days after you receive such
notice to correct the situation (and thus avoid
termination for Cause), unless the Company agrees to
extend the time for correction. You agree that the
Board will have the reasonable discretion to
determine whether the situation is correctable and
whether your correction is sufficient.
WITHOUT CAUSE Subject to the provisions below under PAYMENTS ON
TERMINATION, the Company may terminate your
employment under this Agreement before the end of the
Term without CAUSE. The termination will take effect
15 days after the Company gives you written notice.
PAYMENTS ON If you resign or the Company terminates your
employment with
TERMINATION or without CAUSE or because of disability or death or
this Agreement expires, the Company will pay you any
unpaid portion of your Salary pro-rated through the
date of actual termination (and unless your
termination is for CAUSE, any bonus payments
(i) already determined by such date but not yet paid
or (ii) whose Bonus Determination occurs within 30
days of your actual termination), reimburse any
substantiated but unreimbursed business expenses, pay
any accrued and unused vacation time (to the extent
consistent with the Company's policies), and provide
such other benefits as applicable laws or the terms
of the benefits require. Except to the extent the
law requires otherwise or as provided in the
SEVERANCE paragraph, neither you nor your beneficiary
or estate will have any rights or claims under this
Agreement or otherwise to receive severance or any
other compensation, or to participate in any other
plan, arrangement, or benefit, after such termination
or resignation.
SEVERANCE In addition to the foregoing payments, if
before the end of the Term, the Company terminates
your employment without CAUSE, the Company will pay
you severance equal to the Salary due between the
date of termination and December 31, 1999, in a
single lump sum, on your actual date of termination.
The Company will also, to the extent permissible by
the terms of its benefit plans, insurance contracts,
and applicable law and except as provided in the next
sentence, cover you for a period of 36 months under
the medical, accident, disability, and life insurance
programs of the Company, or, if shorter, until you
are provided a substantially equivalent benefit by a
new employer. You acknowledge that such continued
coverage may not be possible or practical and agree
to accept in lieu of such coverage (i) payment by the
Company of the premiums for the period indicated
above on individual insurance policies either you or
the Company obtain that provide substantially
equivalent benefits or (ii) if you are unable to
obtain such coverage (because you are uninsurable at
commercially reasonable rates or, as with disability,
because coverage may be unavailable if you are not
working), one or more payments totaling 150% of the
combined premium cost the Company paid on your behalf
in 1999 (annualized) for any of those coverages under
which you cannot participate after employment ends.
You are not required to mitigate amounts payable
under the SEVERANCE paragraph by seeking other
employment or otherwise. Expiration of this
Agreement, whether because of notice of non-renewal
or otherwise, does not constitute termination without
CAUSE and does not entitle you to Severance.
NONCOMPETITION You specifically agree that the noncompetition and
confidentiality
AND SECRECY obligations referenced in &&10 and 12 of the
Memorandum of Understanding among the Company, you,
and certain others dated as of November 25, 1998
("MOU") bar you from competition and disclosure or
use of confidential information for the periods
stated or incorporated by reference and according to
the terms of those paragraphs. You further
specifically agree that, for 36 months after your
employment ends, you will not become employed by or a
consultant to the Dakota Clinic. You agree that you
were separately and adequately compensated for the
noncompetition obligations, that they are ancillary
to the MOU and other agreements, and that they
reasonably reflect the need for the Company to
protect its business interests.
ASSIGNMENT The Company may assign or otherwise
transfer this Agreement and any and all of its
rights, duties, obligations, or interests under it to
any of the affiliates or subsidiaries of the Company.
Upon such assignment or transfer, any such business
entity will be deemed to be substituted for the
Company for all purposes. You agree that assignment
or transfer does not entitle you to Severance. This
Agreement binds and benefits the Company and its
assigns and your heirs and the personal
representatives of your estate. Without the Board's
prior written consent, you may not assign or delegate
this Agreement or any or all rights, duties,
obligations, or interests under it.
SEVERABILITY If the final determination of an arbitrator or a
court of competent jurisdiction declares, after the
expiration of the time within which judicial review
(if permitted) of such determination may be
perfected, that any term or provision of this
Agreement is invalid or unenforceable, the remaining
terms and provisions will be unimpaired, and the
invalid or unenforceable term or provision will be
deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or
provision.
AMENDMENT; WAIVER Neither you nor the Company may modify, amend, or
waive the terms of this Agreement other than by a
written instrument signed by you and a director of
the Company duly authorized by the Board. Either
party's waiver of the other party's compliance with
any provision of this Agreement is not a waiver of
any other provision of this Agreement or of any
subsequent breach by such party of a provision of
this Agreement.
WITHHOLDING The Company will reduce its compensatory payments to
you for withholding and FICA taxes and any other
withholdings and contributions required by law.
GOVERNING LAW The laws of the State of Texas (other than its
conflict of laws provisions) govern this Agreement.
NOTICES Notices must be given in writing by personal
delivery, by certified mail, return receipt
requested, by telecopy, or by overnight delivery. You
must send or deliver your notices to the Company's
corporate headquarters. The Company will send or
deliver any notice given to you at your address as
reflected on the Company's personnel records. You
and the Company may change the address for notice by
like notice to the others. You and the Company agree
that notice is received on the date it is personally
delivered, the date it is received by certified mail,
the date of guaranteed delivery by the overnight
service, or the date the fax machine confirms
effective transmission.
SUPERSEDING EFFECT Except as set forth below, this Agreement supersedes
any prior oral or written employment, severance, or
fringe benefit agreements between you and the
Company, other than with respect to your eligibility
for generally applicable employee benefit plans and
supersedes any other prior or contemporaneous
negotiations, commitments, agreements, and writings,
with respect to this Agreement, relating to the
subject matter of this Agreement, except as specified
in this Agreement. All such other negotiations,
commitments, agreements, and writings, with respect
to this Agreement, will have no further force or
effect; and the parties to any such other
negotiation, commitment, agreement, or writing will
have no further rights or obligations thereunder.
Notwithstanding the previous paragraph, this
Agreement does not supersede or render invalid the
following agreements into which you previously
entered: (1) the MOU, as amended by the Derivative
Settlement Agreement dated March 17, 1999, should
that agreement become effective, except to the extent
a matter specifically addressed in this Agreement
conflicts with the MOU, in which event, this
Agreement will control; (2) the Derivative Settlement
Agreement dated March 17, 1999, except with respect
to those conflicts referenced in subparagraph (1) of
this paragraph; (3) the Class Action Memorandum of
Understanding dated March 24, 1999; (4) the
Stipulation of Settlement dated May 11, 1999; (5) the
Settlement Agreement referencing the Great American
Insurance Company Policy bearing policy number
DFX0009397; and (6) the XxxXxxxxxxx to Xxxxxxxxxx
Release of SERP Benefits dated as of December 3,
1998. This Agreement must not be construed to
deprive you of any of your rights created or
preserved in any agreement or order entered into
after the Effective Date and relating to the
settlement of the IN RE: XXXXXXXXXX SECURITIES CORP.,
the Xxxxx, or the Xxxxxxx litigation, unless such
agreement or order specifically provides that this
Agreement will control. This Agreement must not be
construed to abrogate or render invalid any
obligation or right of indemnification or advancement
of costs or expenses that may be owed to you under
any contract, the Company's Articles of Incorporation
or Bylaws, California law, or Texas law or to alter
any right created or preserved as part of the pending
settlement of the IN RE: XXXXXXXXXX SECURITIES CORP.,
the Xxxxx, or the Xxxxxxx litigation, unless such
right is specifically altered by this Agreement.
This Agreement does not impair the effectiveness of
the release between the parties to this Agreement
delivered to you on April 14, 1999, by Bank One as
escrow agent.
If you accept the terms of this Agreement, please sign in the space
indicated below. We encourage you to consult with any advisors you
choose.
XXXXXXXXXX HEALTHCARE CORPORATION
By: __________________________________
Name: ______________________
Title: ______________________
I accept and agree to the terms of employment set
forth in this Agreement:
___________________________
Xxxxx X. XxxXxxxxxxx
Dated:_____________________
