EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 29th day of September, 1997 by and
between NOVACARE, INC., a Delaware corporation (the "Company"), and XXXXXX X.
XXXXXXX (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive has heretofore been employed in the
Outpatient Division of the Company, and the Company wishes to continue to retain
the Executive and the Executive wishes to continue to serve the Company, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto hereby agree as
follows:
1. Employment, Term.
1.1 Employment. The Company agrees to employ the Executive,
and the Executive agrees to serve in the employ of the Company, for the term set
forth in Section 1.2, in the positions and with the responsibilities, duties and
authority set forth in Section 2 and on the other terms and conditions set forth
in this Agreement.
1.2 Term. The term of the Executive's employment under this
Agreement shall commence on the date hereof and shall terminate on the second
anniversary of the date hereof, unless extended or sooner terminated in
accordance with this Agreement.
1.3 Automatic Extension. As of the first anniversary date
hereof, and as of each subsequent anniversary (each, an "Automatic Renewal
Date"), unless either party shall have given a notice of non-extension prior to
such Automatic Renewal Date, the term of this Agreement shall be extended
automatically for a period of one year to the anniversary of the expiration date
of the then current term of this Agreement. Once a notice of non-extension shall
have been given by either party, there shall be no further automatic extension
of this Agreement.
2. Position, Duties.
The Executive shall serve the Company in the position of
President and General Manager of the Outpatient Division. The Executive shall
perform, faithfully and diligently, such duties, and shall have such
responsibilities, appropriate to said position, as shall be assigned to him from
time to time by the Chief Executive Officer, the President and Chief Operating
Officer and the Board of Directors of the Company. The Executive shall report to
the Chief Executive Officer or the President and Chief Operating Officer of the
Company. The Executive shall devote his full business time and attention to the
performance of his duties and responsibilities hereunder.
3. Salary, Incentive Bonus, Stock Options.
3.1 Salary. During the term of this Agreement, in
consideration of the performance by the Executive of the services set forth in
Section 2 and his observance of the other covenants set forth herein, the
Company shall pay to the Executive, and the Executive shall accept, a base
salary at the rate of $280,105 per annum, payable in accordance with the
standard payroll practices of the Company. The Executive shall be entitled to
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such increases in base salary during the term hereof, as shall be determined by
the Chief Executive Officer and approved by the Compensation Committee of the
Board of Directors of the Company in their sole discretion, taking account of
the performance of the Outpatient Division, the Company and the Executive, and
other factors generally considered relevant to the salaries of executives
holding similar positions with enterprises comparable to the Company.
3.2 Bonus. (a) In addition to the base salary provided for in
Section 3.1, the Executive shall have the opportunity to participate in the
Company's Executive Incentive Compensation Plan (the "Plan"), as approved by the
Compensation Committee of the Board of Directors, in each fiscal year of the
Company ending during the term of this Agreement. The current target bonus for
Executive is 50% of base salary; however, the determination as to the amount, if
any, of the bonus which the Executive has earned shall be in the sole discretion
of the Company based upon the terms and conditions of the Plan. The bonus shall
be payable upon or within a reasonable period of time after the receipt of the
Company's audited financial statements for the applicable fiscal year in
accordance with the Company's normal practices.
(b) In the event of the termination of employment of
the Executive pursuant to Section 6.1 (Death), Section 6.2 (Disability), or
Section 6.4 (Without Cause) of this Agreement, and provided that all of the
terms and conditions of the Plan are satisfied including, but not limited to,
the attainment of stated objectives, the Executive (or his estate or other legal
representative) shall be entitled to a pro-rated bonus for the fiscal year in
which such termination takes place in an amount equal to the product of (i) the
bonus for such fiscal year determined pursuant to Section 3.2, multiplied by
(ii) a fraction, the numerator of which is the number of days from the beginning
of such fiscal year to the date of termination, and the denominator of which is
365. In the event of the termination of employment of the Executive pursuant to
Section 6.3 (Due Cause) or Section 6.5 (Voluntary Termination) of this
Agreement, the Executive shall not be entitled to a bonus for the fiscal year of
the Company in which such termination takes place. The Executive shall not be
entitled to a bonus for any fiscal year of the Company subsequent to the fiscal
year in which the termination of his employment takes place.
3.3 Stock Options. (a) In the event that a person or "group"
of persons as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, other than the Executive or a group that includes the Executive, either
(i) acquires twenty percent (20%) or more of the combined voting power of the
outstanding securities of the Company having a right to vote in elections of
directors and such acquisition shall not have been approved within sixty (60)
days following such acquisition by a majority of the Continuing Directors (as
hereinafter defined) then in office or (ii) acquires fifty percent (50%) or more
of the combined voting power of the outstanding securities of the Company having
a right to vote in the elections of directors, and in either case, the Executive
is involuntarily terminated, all options to purchase shares of the common stock,
$.01 par value, of the Company (the "Common Stock"), awarded to the Executive
shall become fully vested as of that date. For purposes of this Agreement, the
term "Continuing Director" shall mean a member of the Board of Directors of the
Company who either was a member of the Board of Directors on the date hereof or
who subsequently became a Director and whose election, or nomination for
election, was approved by a vote of at least two-thirds of the Continuing
Directors then in office.
(b) Executive may participate in future awards
of options to purchase Common Stock in a manner consistent with any stock
option plan adopted by the Company. The determination as to the amount of
options, if any, shall be at the sole discretion of the Board of Directors of
the Company.
4. Expense Reimbursement.
During the term of this Agreement, the Company shall reimburse
the Executive for all reasonable and necessary out-of-pocket expenses incurred
by him in connection with the performance of his duties hereunder, upon the
presentation of proper accounts therefor in accordance with the Company's
policies.
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5. Benefits.
5.1 Benefit Plans. During the term of this Agreement, the
Executive will be eligible to participate in all employee benefit plans and
programs (including, without limitation Supplemental Benefits Plan, 401(k) Plan,
medical, dental, life, and disability plans of the Company) offered by the
Company from time to time to its senior executives, subject to the provisions of
such plans and programs as in effect from time to time.
5.2 Vacation. The Executive shall be entitled to four (4)
weeks vacation per annum.
6. Termination of Employment.
6.1 Death. In the event of the death of the Executive, the
Company shall pay to the estate or other legal representative of the Executive
the base salary provided for in Section 3.1 (at the annual rate then in effect)
accrued to the date of the Executive's death and not theretofore paid to the
Executive. Rights and benefits of the estate or other legal representative of
the Executive (a) with respect to stock options shall be determined in
accordance with the applicable option grant and (b) under the benefit plans and
programs of the Company, shall be determined in accordance with the provisions
of such plans and programs. Neither the estate or other legal representative of
the Executive nor the Company shall have any further rights or obligations under
this Agreement.
6.2 Disability. If the Executive shall become incapacitated by
reason of sickness, accident or other physical or mental disability and shall be
entitled to payment of benefits under the Company's Supplemental Benefits Plan
disability provision, the employment of the Executive hereunder may be
terminated by the Company or the Executive. Rights and benefits of the Executive
(a) with respect to stock options shall be determined in accordance with the
applicable option grant and (b) under the other benefit plans and programs of
the Company, shall be determined in accordance with the terms and provisions of
such plans and programs. Neither the Executive nor the Company shall have any
further rights or obligations under this Agreement, except as provided in
Section 7.
6.3 Due Cause. The employment of the Executive hereunder may
be terminated by the Company at any time for Due Cause (as hereinafter defined).
In the event of such termination, the Company shall pay to the Executive the
base salary provided for in Section 3.1 (at the annual rate then in effect)
accrued to the date of such termination and not theretofore paid to the
Executive. Rights and benefits of the Executive or his transferee (a) with
respect to stock options shall be determined in accordance with the applicable
option grant and (b) under the benefit plans and programs of the Company, shall
be determined in accordance with the provisions of such plans and programs. For
purposes hereof, "Due Cause" shall include (a) the Executive's willful and
continuing failure to discharge his duties and responsibilities under this
Agreement or (b) any material act of dishonesty involving the Company or (c)
conviction of (i) a felony or (ii) any crime or offense involving moral
turpitude. After the satisfaction of any claim of the Company against the
Executive incidental to such Due Cause, neither the Executive nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Section 7.
6.4 Termination by the Company Without Cause. The Company may
terminate the Executive's employment at any time for whatever reason it deems
appropriate or without reason; provided, however, that in the event that such
termination is not pursuant to Section 6.1 (Death), 6.2 (Disability), 6.3 (Due
Cause) or 6.5 (Voluntary Termination), the Company shall pay to the Executive
severance pay in the form of salary continuation for a period of twelve (12)
months commencing on the date of termination, at a rate equal to the base salary
provided for in Section 3.1 (at the annual rate then in effect). The Executive
shall be obligated to seek other employment and any amounts earned from such
other employment (whether as an employee, a consultant or otherwise) shall be
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offset against the severance payments referred to in this Section 6.4 for the
first twelve (12) months following the termination of Executive's employment.
During the twelve (12) month severance pay period referred to in this Section
6.4, the Company shall continue to provide life, disability, medical, and dental
coverage for the Executive at the levels which were being provided to the
Executive immediately prior to the termination of his employment (or such other
benefits as shall be provided to senior executives of the Company in lieu of
such benefits from time to time during such twelve (12) month period) on the
same basis, including Company payment of premiums and Company contributions, as
such benefits are provided to other senior executives of the Company. In
addition, the Executive will be provided with Outplacement Benefits commensurate
with those provided to other executives of the Company through a vendor selected
by the Company. Rights and benefits of the Executive or his transferee (a) with
respect to stock options shall be determined in accordance with the applicable
option grant and (b) under the other benefit plans and programs of the Company,
shall be determined in accordance with the provisions of such plans and
programs. Neither the Executive nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Section 7.
6.5 Voluntary Termination. The Executive may terminate his
employment with the Company at any time upon thirty (30) days' prior written
notice to the Company. In the event of such termination, the Company shall pay
to the Executive the base salary provided for in Section 3.1 (at the annual rate
then in effect) accrued to the date of such termination and not theretofore paid
to the Executive. Rights and benefits of the Executive or his transferee (a)
with respect to stock options shall be determined in accordance with the
applicable stock option grant and (b) under the benefit plans and programs of
the Company, shall be determined in accordance with the provisions of such plans
and programs. Neither the Executive nor the Company shall have any further
rights or obligations under this Agreement, except as provided in Section 7.
7. Confidential Information.
7.1 Nondisclosure. Unless the Executive secures the Company's
written consent, the Executive will not disclose, use, disseminate, lecture upon
or publish Confidential Information of which he becomes informed during his
employment, whether or not developed by him.
7.2 Confidential Information Defined. "Confidential
Information" means information disclosed to the Executive or known by him as a
result of his employment by the Company, not generally known in the
Rehabilitation Provider or Professional Employer Organization industry, about
the Company's services, products or customers, including, but not limited to,
clinical programs, procedures and protocols, research, operating models,
finance, strategic planning, client retention, data processing, insurance plans,
risk management, marketing, contracting and selling.
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8. Interference with the Company.
The Executive will not, (a) for a period of one (1)
year after termination of his employment with the Company, directly or
indirectly, (i) engage, whether as principal, agent, investor, representative,
stockholder (other than as the holder of not more than five percent (5%) of the
stock or equity of any corporation the capital stock of which is publicly
traded), employee, consultant, volunteer or otherwise, with or without pay, in
any activity or business venture, anywhere within the continental United States,
which is competitive with the business of the Company Group on the date of
termination, (ii) solicit or entice or endeavor to solicit or entice away from
the Company any director, officer, employee, agent or consultant, of the
Company, either on his own account or for any person, firm, corporation or other
organization, whether or not the person solicited would commit any breach of
such person's contract of employment by reason of leaving the Company's service,
(iii) solicit or entice or endeavor to solicit or entice away any of the clients
or customers of the Company, either on his own account or for any other person,
firm, corporation or organization, or (iv) employ any person who was a director,
officer or employee of the Company, at any time during the year preceding
termination of his employment with the Company, unless such person's employment
was terminated by the Company, or any person who is or may be likely to be in
possession of any Confidential Information, or (b) at any time take any action
or make any statement the effect of which would be, directly or indirectly, to
impair the good will of the Company or the business reputation or good name of
the Company, or be otherwise detrimental to the Company, including any action or
statement intended, directly or indirectly, to benefit a competitor of the
Company. Because the remedy at law for any breach of the foregoing provisions of
this Section 8 would be inadequate, the Executive hereby consents, in case of
any such breach, to the granting by any court of competent jurisdiction of
specific enforcement, including, but not limited to pre-judgment injunctive
relief, of such provisions, as provided for in Section 8 hereof.
The parties hereto agree that if, in any proceeding, the court
or other authority shall refuse to enforce the covenants set forth in this
Section 8 because such covenants cover too extensive a geographic area or too
long a period of time, any such covenant shall be deemed appropriately amended
and modified in keeping with the intention of the parties to the maximum extent
permitted by law.
9. Injunctive Relief.
Notwithstanding the provisions of Section 8 hereof, in the
event of my breach or threatened breach of the provisions of Section 7 or 8 of
this Agreement, the Executive hereby consents and agrees that the Company shall
be entitled, in order to maintain the status quo ante pending the outcome of
arbitration under Section 14 hereof, to an injunction or similar equitable
relief restraining the Executive from committing or continuing any such breach
or threatened breach or granting specific performance of any act required to be
performed by the Executive under any such provision, without the necessity of
showing any actual damage or that money damages would not afford an adequate
remedy and without the necessity of posting any bond or other security. The
Executive agrees that the Executive shall not use the availability of
arbitration in Section 14 hereof as grounds for the dismissal of any injunctive
actions instituted by the Company pursuant to this Section 9.
10. Successors and Assigns.
10.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
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succession had taken place. As used in this Section, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law and this Agreement shall be
binding upon, and inure to the benefit of, the Company, as so defined.
10.2 Assignment by the Executive. The Executive may not assign
this Agreement or any part thereof without the prior written consent of a
majority of the Board of Directors of the Company; provided, however, that
nothing herein shall preclude one or more beneficiaries of the Executive from
receiving any amount that may be payable following the occurrence of his legal
incompetency or his death and shall not preclude the legal representative of his
estate from receiving such amount or from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of intestacy,
to the person or persons entitled thereto under the laws of intestacy applicable
to his estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Executive
(in the event of his incompetency) or the Executive's estate.
11. Governing Law.
This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the Commonwealth
of Pennsylvania applicable to contracts to be performed entirely within such
state. In the event that a court of any jurisdiction shall hold any of the
provisions of this Agreement to be wholly or partially unenforceable for any
reason, such determination shall not bar or in any way affect the Company's
right to relief as provided for herein in the courts of any other jurisdiction.
Such provisions, as they relate to each jurisdiction, are, for this purpose,
severable into diverse and independent covenants. Service of process on the
parties hereto at the addresses set forth herein shall be deemed adequate
service of such process.
12. Entire Agreement.
This Agreement contains all the understandings and
representations between the parties hereto pertaining to the subject matter
hereof and supersedes all undertakings and agreements, whether oral or in
writing, if any there be, previously entered into by them with respect thereto.
13. Amendment, Modification, Waiver.
No provision of this Agreement may be amended or modified
unless such amendment or modification is agreed to in writing and signed by the
Executive and by a duly authorized representative of the Company other than the
Executive. Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time, nor shall the failure of or delay by
either party hereto in exercising any right, power or privilege hereunder
operate as a waiver thereof to preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
14. Arbitration.
The Company and the Executive will attempt amicably to resolve
disagreements and disputes hereunder or in connection with the employment of
Executive by negotiation. If the matter is not amicably resolved through
negotiation, within thirty (30) days after written notice from either party, any
controversy, dispute or disagreement arising out of or relating to this
Agreement, or the breach thereof, will be subject to exclusive, final and
binding arbitration, which will be conducted in Philadelphia, Pennsylvania in
accordance with the J.A.M.S./ENDISPUTE Rules of Procedure for Arbitration.
Either party may bring a court action to compel arbitration under this Agreement
or to enforce an arbitration award.
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15. Notices.
Any notice to be given hereunder shall be in writing and
delivered personally or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or at
such other address as such party may subsequently designate by like notice:
If to the Company:
NovaCare, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Chief Operating Officer
If to the Executive:
Xxxxxx X. Xxxxxxx
16. Severability.
Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if modified,
such holding shall not affect the validity of the remainder of this Agreement,
the balance of which shall continue to be binding upon the parties hereto with
any such modification to become a part hereof and treated as though originally
set forth in this Agreement. The parties further agree that any such court or
arbitration panel is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as so modified by the court or arbitration panel shall be binding
upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
17. Withholding.
Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
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18. Survivorship.
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
19. Titles.
Titles of the sections and paragraphs of this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section or paragraph.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NOVACARE, INC.
By/s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
EXECUTIVE:
/s/ Xxxxxx X. Xxxxxxx
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