<PAGE> 1
SALARY CONTINUATION AGREEMENT
THIS SALARY CONTINUATION AGREEMENT between NCS HealthCare, Inc., an
Ohio corporation (the "Company"), and Jon H. Outcalt (the "Employee"), dated as
of the 29th day of September, 2000.
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company; and
WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations; and
WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 EFFECTIVE DATE OF THIS AGREEMENT.
(a) This Agreement shall become effective only upon the
Effective Date (as defined in Section 1.1(b)). Until such time, the Employee
shall have no rights against any person and no person shall have any obligations
to the Employee under or by virtue of this Agreement.
(b) The "Effective Date" shall be the first date during the
"Change of Control Period" (as defined in Section 1.1(c)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Employee's employment with the Company is terminated prior to the date on
which a Change of Control occurs, and it is reasonably demonstrated that such
termination (1) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (2) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
<PAGE> 2
(c) The "Change of Control Period" is the period commencing
on the date hereof and ending on the earlier to occur of (i) the first
anniversary of such date or (ii) the first day of the month next following the
Employee's 70th birthday (the "Normal Retirement Date"); PROVIDED, HOWEVER, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate on the earlier of (x) one
year from such Renewal Date or (y) the first day of the month coinciding with or
next following the Employee's Normal Retirement Date, unless at least 60 days
prior to the Renewal Date the Company shall give notice that the Change of
Control Period shall not be so extended.
1.2 CHANGE OF CONTROL. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition (other than from the Company) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this
purpose, the Company or its subsidiaries, or any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of voting
securities of the Company), of beneficial ownership, (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of a majority of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(b) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own a
majority of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or a liquidation or dissolution of the Company or
of the sale of all or substantially all of the assets of the Company.
2
<PAGE> 3
2. TERMINATION OF EMPLOYMENT.
2.1 TERMINATION BY THE COMPANY.
(a) COMPANY'S RIGHT TO TERMINATE. Subject to the Company's
obligations under Section 3 hereof subsequent to the Effective Date, the
Employee's employment with the Company may be terminated at any time without
cause.
(b) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Employee's death. If the Company determines in good faith
that the Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(c) CAUSE. The Company may terminate the Employee's
employment for "Cause." For purposes of this Agreement, "Cause" means (i) an act
or acts of personal dishonesty taken by the Employee and intended to result in
substantial personal enrichment of the Employee at the expense of the Company or
(ii) the conviction of the Employee of a felony, or (iii) illegal drug use.
2.2 TERMINATION BY THE EMPLOYEE. The Employee's employment may
be terminated by the Employee at any time for any reason, in the Employee's sole
discretion with or without "Good Reason." For purposes of this Agreement, "Good
Reason" means any of the following: (a) the reduction or diminution of the
Employee's base salary or other compensation or benefits, (b) the relocation of
the Company's principal executive offices outside the Cleveland, Ohio
metropolitan area, or (c) the requirement by the Company that the Employee be
based anywhere other than the Company's principal executive offices or the
Employee's then current office.
2.3 NOTICE OF TERMINATION.
(a) NOTICE. Any termination by the Company or by the
Employee shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 7(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
in the case of a termination for Cause, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under
3
<PAGE> 4
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than fifteen (15) days after the
giving of such notice).
(b) DATE OF TERMINATION. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be; PROVIDED, HOWEVER, that (i) if the Employee's
employment is terminated by the Company other than for death or Disability, the
Date of Termination shall be the date on which the Company notifies the Employee
of such termination and (ii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Employee or the Disability Effective Date, as the case may be.
3. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
3.1 WITHOUT CAUSE. If, at any time prior to the earlier of
(i) the date that is twenty-four (24) months subsequent to the Effective Date,
or (ii) the Employee's Normal Retirement Date (the "Salary Continuation
Period"), the Company shall terminate the Employee's employment other than for
Cause, Disability, or death or if the Employee shall terminate his employment
for Good Reason:
(a) The Company shall continue pay to the Employee in
accordance with its normal payroll practices the Employee's base salary at an
annual rate equal to the greater of the Employee's (i) highest monthly base
salary paid or payable by the Company during the twelve-month period immediately
preceding the Effective Date, or (ii) the highest monthly salary paid or payable
by the Company at any time from the 90-day period preceding the Effective Date
through the Date of Termination (the "Highest Base Salary"), for the remainder
of the Salary Continuation Period.
(b) For the remainder of the Salary Continuation Period, or
such longer period as any plan, program, practice or policy may provide, the
Company shall continue to provide health insurance, life insurance and
retirement benefits to the Employee and/or the Employee's family at least equal
to those which would have been provided to them if the Employee's employment had
not been terminated, in accordance with the most favorable plans, practices,
programs or policies of the Company and its subsidiaries during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families and for purposes of eligibility for retirement
benefits pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the end of the Salary
Continuation Period and to have retired on the last day of such period.
Notwithstanding the foregoing, the Employee shall have no right to participate
in any bonus plan of the Company subsequent to the Date of Termination.
3.2 DEATH. If the Employee's employment is terminated by
reason of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representatives under this Agreement, other
than those obligations accrued or earned and vested (if applicable) by the
Employee as of the Date of Termination, including, for this purpose
4
<PAGE> 5
(i) the Employee's base salary at the Highest Base Salary rate through the Date
of Termination, and (ii) any accrued vacation pay not yet paid by the Company
(such amounts specified in clauses (i) and (ii) are hereinafter referred to as
"Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries to surviving families of employees of the Company and such
subsidiaries under such plans, programs, practices and policies relating to
family death benefits, if any, in accordance with the most favorable plans,
programs, practices and policies of the Company and its subsidiaries in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Employee and/or the Employee's family, as in effect
on the date of the Employee's death with respect to other key employees of the
Company and its subsidiaries and their families.
3.3 DISABILITY. If the Employee's employment is terminated
by reason of the Employee's Disability, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of Termination,
including for this purpose, all Accrued Obligations. All such Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability Effective
Date to receive disability and other benefits at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
3.4 CAUSE. If the Employee's employment shall be terminated
for Cause, this Agreement shall terminate without further obligations to the
Employee.
4. NON-EXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit the
Employee's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices, provided by the Company or any
of its subsidiaries and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
stock option or other agreements with the Company or any of its subsidiaries.
Amounts which are vested benefits or which the Employee is otherwise entitled to
receive under any plan, policy, practice or program of the Company or any of its
subsidiaries at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program.
5. FULL SETTLEMENT.
5
<PAGE> 6
The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others. In no
event shall the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee under any of
the provisions of this Agreement, nor shall any amounts actually paid to the
Employee by any person for services rendered during the Salary Continuation
Period reduce the Company's payment obligations under Section 3.1(a) hereof. The
Company agrees to pay, to the full extent permitted by law, all legal fees and
expenses which the Employee may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof, plus in each case interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Code.
6. SUCCESSORS.
(a) This Agreement is personal to the Employee and without
the prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Employee's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (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
expressly 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. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
7. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee: Jon H. Outcalt
1405 Hartwell Trail
6
<PAGE> 7
Novelty, Ohio 44072
If to the Company: NCS HealthCare, Inc.
3201 Enterprise Parkway
Suite 220
Beachwood, Ohio 44122
Attention: President and Chief
Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Employee with respect to the subject matter hereof.
(g) The Employee and the Company acknowledge that the
employment of the Employee by the Company is "at will", and, prior to the
Effective Date, may be terminated by either the Employee or the Company at any
time without any obligation under or by virtue of this Agreement. Upon a
termination of the Employee's employment or upon the Employee's ceasing to be an
officer of the Company, in each case, prior to the Effective Date, there shall
be no further rights under this Agreement.
(Signature Page Follows)
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto set their hands
as of the day and year first above written.
--------------------------------------
Jon H. Outcalt
("Employee")
NCS HEALTHCARE, INC.
By:
--------------------------------------
Kevin B. Shaw,
President and Chief Executive Officer
(the "Company")
8
