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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 13, 1995
SALICK HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-13879 95-4333272
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
8201 Beverly Boulevard, Los Angeles, California 90048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 966-3400
(Former name or former address, if changed since last report.)
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Item 1. Changes in Control of Registrant.
--------------------------------
On April 13, 1995, pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of December 22, 1994, as amended,
among Registrant, Zeneca Limited, an English company ("Zeneca"), and Atkemix
Thirty-nine Inc., a Delaware corporation and an indirect wholly owned subsidiary
of Zeneca ("Merger Subsidiary"), Merger Subsidiary was merged with and into
Registrant, with Registrant being the surviving corporation. As a result of the
merger, there may be deemed to be a change in the control of Registrant.
At the effective time of the merger on April 13, 1995 (the "Effective
Time"), (a) each share of the Common Stock outstanding immediately prior to the
Effective Time were converted into the right to receive (1) although no
fractional shares will be issued, one-half share of Registrant's Callable
Puttable Common Stock, $.001 par value per share (the "Special Common Stock"),
(2) $18.875 in cash and (3) additional consideration in the amount of $0.625,
payable in two equal installments, the first to be paid 180 days after the
Effective Time and the second to be paid 360 days after the Effective Time, and
(b) the shares of the common stock of Merger Subsidiary were converted into the
right to receive a number of shares of the Common Stock, $.001 par value per
share, of Registrant (the "Common Stock") equal to the sum of the number of
shares of Special Common Stock that were outstanding immediately after the
Effective Time plus the number of shares of Special Common Stock issuable upon
the exercise of options to purchase shares thereof being issued in replacement
of options to purchase the Common Stock outstanding at the Effective Time. As of
immediately subsequent to the merger, Zeneca, through an indirect wholly owned
subsidiary, is the beneficial owner (possessing sole voting and investment
power) of 100% of the Common Stock of Registrant (which, other than in the case
of certain class voting rights which are provided in Registrant's Certificate of
Incorporation, represents at least 50% of the voting power of Registrant) and
the stockholders of Registrant as of immediately prior to the Effective Time own
100% of the Special Common Stock.
Effective as of the Effective Time, the terms of the Governance
Agreement, dated as of December 22, 1994, as amended (the "Governance
Agreement"), by and among Registrant, Zeneca and Dr. Bernard Salick, became
effective. A description of the Governance Agreement is set forth on pages 20
through 22 inclusive of the Proxy Statement/Prospectus of Registrant dated March
13, 1995 (the "Proxy Statement"), which description is incorporated herein by
this reference.
Effective as of the Effective Time, the terms of the Second Amended and
Restated Employment Agreement, dated as of December 22, 1994 (the "Salick
Agreement"), by and among Registrant and Bernard Salick, M.D., superseded the
agreement between Registrant and Dr. Salick existing prior to the merger and
became effective. The Salick Agreement is described on pages
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22 and 23 inclusive of the Proxy Statement, which description is incorporated
herein by reference.
As required under the Salick Agreement, Dr. Salick and Registrant
entered into an Agreement Not to Compete (the "Salick Non-Compete Agreement")
which prohibits him, for a period of thirty months from the consummation of the
Merger, from being employed by or otherwise participating in any business which
competes with the business of Registrant within certain geographical limits and
from soliciting employees or former employees without the prior written consent
of Registrant. Although entered into on December 22, 1994, the Salick Non-
Compete Agreement became effective after the Effective Time and then will be
effective only in the event that the employment of Dr. Salick is terminated by
Registrant for Good Cause or is terminated by him for any reason other than Good
Reason (other than termination for Zeneca-initiated changes included within the
definition of Good Reason), as those terms are defined in the Salick Agreement.
Concurrently with the consummation of the Merger, Registrant entered
into a Second Amended and Restated Employment Agreement and an Agreement Not to
Compete with each of Leslie F. Bell, Executive Vice President, Chief Financial
Officer, Secretary and a Director of Registrant, and Michael T. Fiore, Executive
Vice President, Chief Operating Officer and a Director of Registrant. The
employment agreement between Registrant and Mr. Bell and the employment
agreement between Registrant and Mr. Fiore existing prior to the Merger were
superseded by these new employment agreements. The new employment agreements
are described on page 23 of the Proxy Statement, which description is
incorporated herein by reference. The terms of the agreement not to compete
with each of Mr. Bell and Mr. Fiore are substantially the same as the terms of
the Salick Non-Compete Agreement.
The foregoing and the material incorporated by reference are summaries
of the terms of the Governance Agreement, Salick Agreement, the Salick Non-
Compete Agreement and such employment agreements and agreements not to compete
with Mr. Bell and Mr. Fiore and such summaries are qualified in their entirety
by the terms of such agreements, a copy of each of which is filed as an exhibit
to this report or incorporated by reference to a prior filing by Registrant.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
2 Agreement and Plan of Merger, dated as of December 22, 1994, as
amended, by and among Registrant, Zeneca Limited and Atkemix Thirty-
nine Inc. (incorporated by reference to Annex A to the Proxy
Statement/Prospectus of Registrant dated March 13, 1995).
10.1 Governance Agreement, dated as of December 22, 1994, as by and among
Registrant, Bernard Salick, M.D. and Zeneca Limited (incorporated by
reference to the exhibit of the same number to the Form 8-K of
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Registrant with date of earliest event being reported of December 22,
1994)
10.2 Amendment No. 1 to Governance Agreement, dated as of March 7, 1995, by
and among Registrant, Bernard Salick, M.D. and Zeneca Limited
(incorporated by reference to Exhibit 2.5 of Registrant's Registration
Statement on Form 8-A relating to Registrant's Callable Puttable
Common Stock).
10.3 Second Amended and Restated Employment Agreement, dated as of December
22, 1994, by and between Registrant and Bernard Salick, M.D.
10.4 Agreement Not to Compete, dated as of December 22, 1994, between
Registrant and Bernard Salick, M.D.
10.5 Second Amended and Restated Employment Agreement, dated as of April
13, 1995, by and between Registrant and Leslie F. Bell.
10.6 Agreement Not to Compete, dated as of April 13, 1995, between
Registrant and Leslie F. Bell.
10.7 Second Amended and Restated Employment Agreement, dated as of April
13, 1995, by and between Registrant and Michael T. Fiore.
10.8 Agreement Not to Compete, dated as of April 13, 1995, between
Registrant and Michael T. Fiore.
99.1 Pages 20 through 23 inclusive of Registrant's Proxy
Statement/Prospectus, dated March 13, 1995, incorporated by reference
in response to item 1 to this Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALICK HEALTH CARE, INC.
Date: April 19, 1995 By:/s/ Leslie F. Bell
__________________________
Leslie F. Bell,
Executive Vice President
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<TABLE>
<CAPTION>
EXHIBIT INDEX
Number Item Page
------ ---- ----
<C> <S> <C>
2 Agreement and Plan of Merger, dated as of December 22, 1994, as
amended, by and among Registrant, Zeneca Limited and Atkemix Thirty-
nine Inc. (incorporated by reference to Annex A to the Proxy
Statement/Prospectus of Registrant dated March 13, 1995).
10.1 Governance Agreement, dated as of December 22, 1994, as by and among
Registrant, Bernard Salick, M.D. and Zeneca Limited (incorporated by
reference to the exhibit of the same number to the Form 8-K of
Registrant with date of earliest event being reported of December 22,
1994)
10.2 Amendment No. 1 to Governance Agreement, dated as of March 7, 1995, by
and among Registrant, Bernard Salick, M.D. and Zeneca Limited
(incorporated by reference to Exhibit 2.5 of Registrant's Registration
Statement on Form 8-A relating to Registrant's Callable Puttable
Common Stock).
10.3 Second Amended and Restated Employment Agreement, dated as of December
22, 1994, by and between Registrant and Bernard Salick, M.D.
10.4 Agreement Not to Compete, dated as of December 22, 1994, between
Registrant and Bernard Salick, M.D.
10.5 Second Amended and Restated Employment Agreement, dated as of April
13, 1995, by and between Registrant and Leslie F. Bell.
10.6 Agreement Not to Compete, dated as of April 13, 1995, between
Registrant and Leslie F. Bell.
10.7 Second Amended and Restated Employment Agreement, dated as of April
13, 1995, by and between Registrant and Michael T. Fiore.
10.8 Agreement Not to Compete, dated as of April 13, 1995, between
Registrant and Michael T. Fiore.
99.1 Pages 20 through 23 inclusive of Registrant's Proxy
Statement/Prospectus, dated March 13, 1995, incorporated by reference
in response to item 1 to this Form 8-K.
</TABLE>
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EXHIBIT 10.3
SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
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THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
dated December 22, 1994 is effective as of the date set forth in Paragraph IV
and is between SALICK HEALTH CARE, INC., a Delaware corporation, hereinafter
referred to as "Employer", and Bernard Salick, M.D., hereinafter referred to as
"Employee".
I. Employment and Compensation.
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A. Employer hereby employs Employee as its Chairman of the Board, Chief
Executive Officer and President and as Medical Director of its health care
facilities. Employee shall receive a base annual salary payable in bi-weekly
installments, in advance, during the term hereof ("Base Annual Salary").
Initially, Employee's Base Annual Salary shall be $878,320, payable in bi-weekly
installments of $33,781.54.
B. Employee shall be eligible to earn and receive an annual bonus which
is the greater of that determined (i) by the Executive Compensation Committee of
Employer, (ii) by the Board of Directors, or (iii) as calculated and determined
in accordance with the provisions of Exhibit "A" attached hereto and made part
hereof by this reference. The payment of the bonus which may be earned under
this Agreement shall, for convenience, budget, and fiscal purposes be estimated
to be $300,000 per year, and such amount shall be payable in equal bi-weekly
installments with the normal recurring payroll and as further described in
Exhibit "A".
C. Base Annual Salary shall be increased at least annually during the
term hereof by an amount at least equal to the annual increase in the All Urban
Consumers Los Angeles-Long Beach-Anaheim consumer price index, as applicable
each year for the same month as the month in which the term hereof begins. If
the above-described index is discontinued, a comparable index shall be used.
Notwithstanding the use of the index, in no event shall the Base Annual Salary
of Employee be subject to downward modification. For purposes of calculating
increases to Base Annual Salary, the formula shall apply to the sum of the
amounts payable pursuant to Paragraphs I.A and I.B.
D. In addition to the above, Employee shall continue to be a participant
in Employer's Management Incentive Compensation Plan.
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E. During the term of this Agreement, Employer shall nominate Employee to
serve as a director of Employer, and use its best efforts to cause his election.
II. Duties and Authority.
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A. Subject to the provisions of Paragraph II.D, and consistent with
Employee's practice prior to the date hereof, Employee shall devote such of his
working time as is necessary to the discharge of his duties for Employer.
B. Consistent with the Governance Agreement dated as of December 22, 1994
among Employer, Employee and Zeneca Limited (the "Acquiring Company") and
consistent with the authority reposed in Employer's Board of Directors, Employee
shall have overall authority for and be in sole charge of all of Employer's
operations and activities, and (i) with respect to matters for which Employee
has responsibility under this Agreement concerning Zeneca Group PLC and any
company in which it directly or indirectly holds at least a 50% ownership
interest in value or voting power (collectively, "Zeneca Group") shall report
only to the Chief Executive Officer of Zeneca Pharmaceuticals, a business unit
of the Acquiring Company (presently Thomas McKillop) and (ii) with respect to
other matters shall report only to the Salick Board of Directors as a whole.
C. As a result of the transactions contemplated by the Merger Agreement
dated as of December 22, 1994 among Employer, the Acquiring Company and Atkemix
Thirty-Nine Inc. (the "Merger Agreement") and pursuant to the Governance
Agreement, all employees of Employer will be bound by Employer's Employee
Handbook, Employer's Personnel Policy & Procedure Manual and the Policy on the
Ethical Conduct of Business faxed to Employee on December 19, 1994
(collectively, the "Code of Conduct"). Employee acknowledges that he has read
and agrees to be bound by the Code of Conduct; provided that, to the extent the
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Code of Conduct conflicts with the express provisions of Section VII of this
Agreement, the provisions of Section VII shall govern.
D. Notwithstanding anything to the contrary in this Agreement or the Code
of Conduct, Employer acknowledges that Employee devotes a substantial portion of
his time on a regular basis to the practice of internal medicine and nephrology
(which includes a dialysis practice) and providing health care treatment and
services, as well as to (i) business activities including, without limitation, a
horse breeding and sale business and real estate activities, and (ii)
philanthropic activities including without limitation, charitable foundations
and school boards
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(collectively, the "Outside Activities"). The Outside Activities are deemed and
acknowledged not to be competitive with the business of Employer or violative of
Paragraphs XI.A(iv) or (v) of this Agreement. Employee may maintain his level
of involvement in his Outside Activities and shall not be accountable to
Employer in any way for his Outside Activities (other than with respect to
activities relating to Items 6 and 10 of Exhibit "B"). In addition, Employee
may engage in other business and philanthropic activities in the future provided
that they are not competitive with the business of Employer.
E. Employer and Employee acknowledge and confirm that the position
conferred on Employee pursuant to Paragraph I.A on the Commencement Date (the
"New Position") is substantially the same as the position he held as Chairman of
the Board, Chief Executive Officer and President and as Medical Director of
Salick Health Care, Inc. immediately prior to the Commencement Date (the "Old
Position") and that when the New Position is compared to the Old Position, there
is (i) no reduction in total compensation and benefits, (ii) no significant
change in the nature or scope of Employee's authority, duties or status, and
(iii) no significant change in circumstances that affect his position, the
duties attached to his position or his ability to exercise the authority,
powers, functions, or duties attached thereto, such as would give rise to an
event of "Good Reason" as defined in Paragraph XI.B. Such acknowledgment by
Employee does not waive his right to take action pursuant to Paragraph XI.B with
respect to changes in the New Position which arise after the Commencement Date.
III. Benefit Plans.
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A. All Employer benefits presently available to Employee as listed on
Exhibit "B" shall continue to be available to Employee, on the same basis as
they are currently available, throughout the term of this Agreement. Any other
benefits (whether under a plan or otherwise) provided by Employer in the future
for key executives shall also be made available to Employee, and shall be deemed
incorporated into Exhibit B hereto.
B. If the Acquiring Company (as defined in Paragraph IV), acquires all
shares of Employee's common stock, it may, at its option, offer a package of
benefit programs to Employee. If the Acquiring Company makes such an offer,
Employee may choose to be entitled to either, but not both, Employer's or the
Acquiring Company's package of benefits (in the latter case, all of Employee's
years of service with Employer shall be included in calculating years of
employment for purposes of eligibility and benefit participation in such
programs).
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IV. Term.
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The term of this Agreement is five years, commencing upon the date
(the "Commencement Date") of the consummation of the transactions contemplated
by the Merger Agreement. Employer shall, not less than eighteen months prior to
the expiration of the employment term, notify Employee if Employer intends to
retain Employee following the expiration of the then current term, in which
event the parties shall enter into good faith negotiations with regard to the
terms of such continued employment.
V. Vacation and Sick Leave.
-----------------------
Employee shall be entitled to six weeks vacation every year during the
term of this Agreement, with up to a maximum of six weeks of unused vacation
time being carried forward during the term hereof. Employee shall be entitled
annually during the term of this Agreement to sick days equal to the number of
days of the waiting period for the earliest period of eligibility under any
Employer disability plan. Sick days not taken during the calendar year shall be
forfeited.
VI. Death and Disability.
--------------------
If Employee shall die during the term hereof or should he become so
ill that he is unable to substantially perform his duties hereunder and should
such illness continue for a period of six (6) consecutive months during the term
hereof, then Employer may, at its option, terminate this Agreement subject to
the following: (1) in the event of death, all Compensation shall continue to be
paid to Employee's surviving spouse and in the absence of a surviving spouse,
Employee's heirs for twenty four (24) additional months; (2) in the event of
permanent disability, Employee's Compensation shall be paid for the first twelve
(12) months of such disability, sixty-six percent (66%) thereof shall be paid
during the succeeding six (6) month period and thirty-three percent (33%)
thereof shall be paid during the second succeeding six (6) month period. All
payments due Employee hereunder shall be accrued and paid at, as and when due.
Disability shall only give rise to Employer's option to terminate hereunder if a
physician selected by Employer, and reasonably acceptable to Employee or his
legal representative has determined that such disability is total and permanent.
For purposes of this Paragraph VI, "Compensation" shall mean the amounts
described in paragraphs I.A, I.B and I.D and the Items set forth in Exhibit "B"
(other than Items 6 and 10).
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VII. Expenses of Employee.
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A. Employee shall receive reimbursement for all business expenses
incurred by him during the term hereof (including the cost of first class
travel, lodging and related expenses) for which he shall account in accordance
with the regular and standard practices maintained by Employer in that regard.
B. In addition, during the term hereof, Employer shall directly pay or
reimburse Employee for professional publications, professional society dues,
staff privileges and professional licensing fees (including but not limited to
continuing education requirements required for license maintenance),
conventions, lectures and seminars (including but not limited to fees, first
class travel, lodging and related expenses), and similar expenses, all
consistent with prior practice. Such expenses have averaged less than $50,000
per year during the past three years.
VIII. Insurance
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In addition to the insurance benefits listed in Exhibit "B", Employer
shall, during the term hereof, provide Employee, at no cost to Employee, with
general and professional liability and malpractice insurance coverage (as an
officer and physician practicing medicine) to be not less than the amount
currently in existence. To the extent available at a reasonable cost (e.g.
market rates), Employer shall procure and maintain a policy of officers' and
directors' insurance in a mutually acceptable amount (not less than at present)
with Employee as a named insured thereunder. Further, Employer shall cause
Employee to be added as a named insured under all of its other liability
policies, to the extent such addition is permitted by the insurer in respect of
such policies.
IX. Employee and Employer Representations.
-------------------------------------
Employee warrants and represents that he is legally able to and
authorized to make and enter into this Agreement and that the execution hereof
is in no way in breach or violation of any agreement to which Employee is a
party. Employer represents and warrants that (a) this Agreement and all acts
contemplated hereunder will have been duly authorized by Employer and approved
by a majority of the disinterested directors of Employer following thorough
review and discussion of the terms hereof; (b) this Agreement is fully binding
upon Employer; and (c) this
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Agreement does not violate any of the organizational or governing documents of
Employer.
X. Covenants.
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A. At any and all times, both during employment by Employer and after
termination thereof, Employee will, promptly upon request of Employer, do all
acts and execute, acknowledge and deliver all written instruments as may be
necessary to vest in Employer, its affiliates or successors, the entire right,
title, and interest of Employee to any patentable inventions made by Employee
either solely or jointly with any other person or persons, at any time during
the period of employment by Employer, while working on Employer's business
("Inventions"), and to enable it (at Employer's sole cost and expense) properly
to prepare, file, and prosecute applications for, and to obtain, Letters Patent
thereon in any and all countries selected by Employer, its affiliates or
successors, as well as reissues, renewals and extensions thereof, and to obtain
the record title to such applications and Letters Patent, so that Employer, its
affiliates or successor shall be the sole and absolute owner thereof to the
extent of Employee's interest. Employee will cooperate with Employer, to
include its affiliates and successors, and its counsel in the prosecution and
defense, or either, of any litigation which may arise in connection with any of
the Inventions, provided, however, that any requested cooperation shall be
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reasonable in amount, shall not interfere with other obligations of Employee and
shall be provided in Los Angeles, California. Should such services be rendered
after the termination of employment with Employer, a reasonable compensation
shall be paid to Employee on a per diem basis, based on the Base Annual Salary
which Employee was receiving from Employer at the termination of employment, in
addition to first class travel and personal expenses incurred by Employee in
rendering the services.
B. Employee and Employer acknowledge that the terms and conditions of
this Agreement are confidential and may be disclosed, in the case of Employee,
only to family members, attorneys, accountants and as required by law and, in
the case of Employer, only to members of the Boards of Directors of Employer and
the Acquiring Company, attorneys, accountants and employees of Employer and the
Acquiring Company on a "need to know" basis.
C. At any and all times, Employee agrees not to, except to the
extent required to properly perform Employee's duties as an officer of Employer
in the ordinary course of business, directly or indirectly, disclose or
communicate any trade secrets (as defined in Section 3426.1 of the
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California Civil Code) of Employer or its subsidiaries or the Zeneca Group or
relating to the "Business" of Employer or the Zeneca Group; provided, however,
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that the foregoing shall not apply to information which is not unique to
Employer or its subsidiaries or the Zeneca Group or which is generally known to
the industry or the public other than as a result of Employee's breach of this
covenant. The term "Business" shall have the meaning set forth in "Core
Business" in Section 1.1 of the Governance Agreement.
D. Any "Written Matter" prepared by Employee during employment by
Employer, whether during working hours or at any other time, for use by Employer
or related to the actual or contemplated operations of Employer at the time the
matter is prepared shall be considered a work made for hire, and the copyright
in such Written Matter shall belong exclusively to Employer, its affiliates and
successors, or any member of the Zeneca Group. Employer, its affiliates and
successors, or any member of the Zeneca Group shall further have the unlimited
right to use, copy, reproduce, publish or otherwise disseminate any such Written
Matter. At any and all times, both during employment by Employer or after
termination thereof, Employee will promptly on request of Employer do all things
as may be necessary to vest in Employer, its affiliates or successors, or any
member of the Zeneca Group, the entire right, title, and interest to the
copyright in any such Written Matter; provided, however, that any requested
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cooperation shall be reasonable in amount, not interfere with other obligations
of Employee and shall be provided in Los Angeles, California. Should such
services be rendered after the termination of employment with Employer, a
reasonable compensation shall be paid to Employee on a per diem basis, based on
the Base Annual Salary which Employee was receiving from Employer at the
termination of employment, in addition to first class travel and personal
expenses incurred by Employee in rendering the services. All rights being
conferred hereunder by Employee relate only to the extent of ownership of such
right by Employee. The term "Written Matter" shall include practice guidelines,
managed care standard operating procedures, marketing literature and brochures,
journal articles or other publications and data acquisition proformas and
quality satisfaction instruments.
E. Upon termination of employment, Employee shall deliver to Employer all
writings, records, data, memoranda, contracts, orders, sales literature, price
lists, customer lists, data processing materials, manufacturing and production
materials, and other documents, whether or not obtained from Employer, which
pertain to or were used by Employee in connection with employment by Employer
(but Employee may keep any of his personal writings, documents and personal
possessions); provided Employee may make copies
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of patients' medical records if requested by Employee's patients or as required
by law.
XI. Termination
-----------
A. Other than as provided in Paragraph VI, this Agreement may be
terminated by Employer only for "Good Cause". Good Cause shall mean and be
deemed to exist only if:
(i) (x) a final court judgment has been entered that Employee has
been convicted of a felony or (y) Employee has engaged in intentional acts of
fraud;
(ii) Employee has misappropriated Employer funds;
(iii) Employee engages in "repeated willful misconduct" (as defined
in Paragraph XIII.B) or a single act of wanton and egregious misconduct (e.g.
embezzlement);
(iv) Employee obtains a material personal benefit from a transaction
with Employer in which Employee has an interest which is adverse to the interest
of Employer, unless Employee shall have first obtained the consent of Employer's
Board of Directors;
(v) Employee engages in any other business, profession or occupation
which is competitive with the business of Employer after being notified by the
Board of Directors to cease engaging in such other business, profession or
occupation; or
(vi) there is a breach by Employee of a covenant set forth in
Paragraph X.
In addition, consistent with the treatment of all employees of Employer, any
violation of the Code of Conduct is grounds for appropriate disciplinary action,
up to and including dismissal for "Good Cause". Disciplinary action, if any,
will suit the nature of the infraction. Notwithstanding anything to the contrary
set forth in this Paragraph XI.A., (a) the conduct set forth in Paragraph II.D.,
(b) any pending or presently threatened investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, with
respect to which Employee has actual knowledge and has specifically disclosed to
the Acquiring Company in the disclosure schedule faxed to Employer on December
20, 1994 (the "Disclosure Schedule") and (c) any other action which is
inadvertent or based upon a reasonable or good faith mistake or de minimis,
shall not, at any time, constitute Good Cause for termination.
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B. This Agreement may be terminated by Employee only for "Good Reason".
Good reason shall mean and be deemed to exist if:
(i) there is a reduction in Employee's Base Annual Salary;
(ii) Employer changes the principal offices of Employer (presently
located at 8201 Beverly Boulevard, Los Angeles), unless relocated
to substantially similar size and quality facilities in West Los
Angeles, Beverly Hills, or Santa Monica, California (Employer
acknowledges and agrees that (a) Employee may perform services
from his home and locations other than Employer's principal
office and (b) Employee will not be required to perform any
services at any other location, except in connection with
ordinary business travel of the type engaged in the past, without
his consent);
(iii) if, as the result of an action of Employer's Board of Directors
initiated and supported by the members of the Board designated by
the Acquiring Company and any of its affiliates ("Zeneca
Initiated"), Employer reduces Employer's employees or employee
working hours by at least 30% and such action is not caused by a
significant decline in the economic performance of Employer;
(iv) there is a material adverse change in the operations, policies,
funding, procedures, practices, or professionalism relating to
the overall quality of patient care by Employer that is
inconsistent with Employer's past or existing practices;
(v) the name of Employer is changed to not include the name "Salick"
therein. In this event, in addition to Employee's right to
terminate for Good Reason, Employee may use the name Salick,
Salick Health Care, Inc. or any name which includes "Salick" in
other activities and Employer may no longer use such name or any
similar or confusing name and Employer shall assign all rights to
the trademark, tradename or similar right to use the name "Salick
Health Care, Inc." to Employee;
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(vi) there is (a) a reduction in Employee's benefits as set forth in
Exhibit B (provided Employer may substitute different benefits so
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long as they are not significantly different from Employee's
current benefits and so long as Employee's years of service with
Employer are included in calculating years of employment for
purposes of eligibility and benefit participation in such
different benefits), or (b) a change in the calculation for
Employee's bonus as described either in Section I.B, or Exhibit
"A" or pursuant to Employer's Management Incentive Compensation
Plan (provided Employer may substitute a new bonus plan, so long
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as the new bonus plan does not significantly affect the
accounting method for or calculation of the bonus);
(vii) there is a reasonable determination by Employee that, as a result
of a Zeneca Initiated change that significantly adversely affects
Employee's position (including a change in his title, status or
position as director), Employee is unable to exercise the nature
or scope of his authority, duties, powers, or functions that
Employee exercised at the time of Execution of this Agreement;
(viii) Employer has breached this Agreement; or
(ix) if there is a Change in Control of Employer, as defined in
Paragraph XV, during the first 30 months following the
Commencement Date.
C. Notwithstanding anything herein to the contrary, if either party
claims a breach or default hereunder by the other party or a right to terminate
hereunder or Employer claims a violation of the Code of Conduct (whether for
purposes of termination pursuant to Paragraph XI or otherwise), the party
claiming such breach, violation or right to terminate shall first give written
notice specifying the nature of the alleged breach, violation or cause for
termination to the other party, and that party shall have 10 business days after
receipt of notice to cure a monetary breach, if curable, and 30 days after
receipt of notice to cure a nonmonetary breach, if curable, provided, however,
--------
that if the alleged nonmonetary breach cannot be cured within 30 days and the
party makes reasonable efforts to cure such alleged breach, the time shall be
extended as necessary to complete the cure.
D. Employer hereby agrees that, notwithstanding anything to the contrary
set forth herein, if Employee
10
<PAGE>
terminates employment with Employer for Good Reason, such termination shall not
be deemed to be or constitute a breach or default of or under this Agreement by
Employee.
XII. Severance Pay.
-------------
If any of the matters hereinafter set forth occur (and with all
capitalized terms, unless otherwise defined, having the meaning therefor set
forth in Paragraph XV), the following provisions are applicable and supersede
the amounts owed but not paid set forth in Paragraphs I, III, V and VII.
A. Entitlement to Severance Pay. If at any time during the term of this
----------------------------
Agreement, (a) Employee's employment with Employer is terminated by Employer for
any reason other than Good Cause, or (b) Employee terminates employment with
Employer for Good Reason, then, in such event, Employer, within a period of
thirty (30) days, shall pay to Employee an amount equal to 299% of Employee's
Base Salary ("Severance Pay"); provided, however, that if Employee would, except
--------
for this provision, be subject to a tax pursuant to Section 4999 of the Code or
any successor provision that may be in effect, as a result of a "parachute
payment" (as that term is defined in Section 280G of the Code) being made
pursuant to this Agreement, or a deduction would not be allowed to Employer for
all or any part of such payment by reason of Section 280G of the Code, or any
successor provision that may be in effect, then there shall be deducted from the
amounts payable hereunder such amounts ("Excess Payment") as are required to
reduce the aggregate "present value" (as that term is defined in Section 280G of
the Code) of such payment to 299% of an amount equal to Employee's "base amount"
(as that term is defined in Section 280G of the Code), to the end that Employee
is not subject to tax pursuant to such Section 4999 and no deduction is
disallowed by reason of such Section 280G. The entire amount payable hereunder
shall be paid to Employee in one lump sum payment within 30 days following the
date of termination of employment as provided in this Paragraph XII.A. If after
payment is made pursuant to this Paragraph XII.A, it is determined by the
Internal Revenue Service (or any court to which the determination is appealed)
that, notwithstanding the foregoing provision in the first sentence of this
Paragraph, the aggregate "present value" (as that term is defined in Section
280G of the Code) of the payment made to Employee pursuant to this Paragraph XII
equalled or exceeded three times of an amount equal to Employee's "base amount"
(as that term is defined in Section 280G of the Code) so that Employee is
subject to tax pursuant to Section 4999 or a deduction will not be allowed to
Employer by reason of Section 280G, Employee shall,
11
<PAGE>
within 30 days thereafter reimburse Employer for that portion of the payment
equal to the amount of such excess plus $1.00.
B. Termination for Good Cause or Without Good Reason. If Employee's
-------------------------------------------------
employment with Employer is terminated by Employer for Good Cause, or by
voluntary action by Employee without Good Reason, Employer shall have no
obligation to Employee under Paragraph XII.A hereof.
C. Benefits Unfunded. Except as provided in Paragraph XII.A, all of
-----------------
Employee's rights under Paragraph XII.A shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder and Employee shall
have no interest in or rights against any specific assets of Employer and
Employee shall have only the rights of a general creditor of Employer.
XIII. Indemnification.
---------------
A. Pre Commencement Date Indemnifiable Litigation. With respect to
----------------------------------------------
Indemnifiable Litigation (as defined below) which arises in connection with
actions taken or omitted to be taken prior to the Commencement Date, Employer
shall hold harmless, indemnify, and defend Employee against all claims, damages,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines, taxes or penalties and amounts paid or to be paid in any
settlement with the approval of Employer, which approval shall not be
unreasonably withheld) (collectively, "Indemnifiable Expenses") incurred or
suffered by Employee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Employee is a party or is threatened
to be made a party by reason of conduct of Employee in any manner related to his
service as an officer, director, employee, or agent of Employer; or (ii) based
in whole or in part on or arising in whole or in part out of the fact that
Employee is or was a director, officer, employee or agent of Employer or any
subsidiary or affiliate thereof, or is or was serving at the request of Employer
as a director, officer, employee or agent of another corporation.
Notwithstanding the foregoing, for the purposes of this Paragraph XIII.A.,
Indemnifiable Litigation shall not include pending or presently threatened
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative,
12
<PAGE>
with respect to which Employee has actual knowledge and has failed to
specifically disclose in the Disclosure Schedule.
B. Post Commencement Date Indemnifiable Litigation. With respect to
-----------------------------------------------
any Indemnifiable Litigation which arises in connection with actions taken or
omitted to be taken after the Commencement Date, Employer shall hold harmless,
indemnify, and defend Employee against all Indemnifiable Expenses incurred or
suffered by Employee in connection with any such Indemnifiable Litigation (i) to
which Employee is a party or is threatened to be made a party by reason of
conduct of Employee in any manner related to his service as an officer,
director, employee or agent of Employee, (ii) based in whole or in part on or
arising in whole or in part out of the fact that Employee is or was a director,
officer, employee or agent of Employer or any subsidiary or affiliate thereof,
or is or was serving at the request of Employer as a director, officer, employee
or agent of another corporation or (iii) which Employee may incur in connection
with any audit, appeal, court, or other governmental proceeding involving
Employee's or Employer's tax returns (collectively, "Audit") in which a matter
under contest is the applicability or amount of tax pursuant to Section 4999 of
the Code on account of the payment of any Severance Pay pursuant to Paragraph
XII.A hereof. Notwithstanding the foregoing, for the purposes of this Paragraph
XIII.B., (x) Indemnifiable Litigation shall not include threatened or pending
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative which arise as a result of Employee's "repeated
willful misconduct" (as described below) or a single act of wanton and egregious
misconduct (e.g. embezzlement) on the part of Employee, which, in either case,
is engaged in after the Commencement Date and (y) Indemnifiable Expenses shall
not include any costs and expenses incurred in an audit in connection with a
matter other than the matter described in clause (iii) above and, if other
matters are involved in an Audit of the matter described in clause (iii), an
equitable apportionment as to the payment of the costs and expenses as between
Employee and Employer shall be made. For purposes of this Paragraph XIII.B,
Employee shall have engaged in "repeated willful misconduct" if, following an
initial act of willful misconduct and the receipt of a written warning from
Employer, Employee engages in the same or a similar act of misconduct.
C. Procedures. Employer shall pay Indemnifiable Expenses incurred by
----------
Employee in connection with any Indemnifiable Litigation as incurred and in
advance of the final disposition thereof, it being understood that attorneys'
fees of Employee in connection with Indemnifiable Litigation will be so paid as
incurred, subject to
13
<PAGE>
reimbursement by Employee to Employer if same are ultimately determined not to
constitute Indemnifiable Expenses.
If Employer acknowledges, in writing, that a particular claim asserted
is subject to its obligation to indemnify Employee, without reservation of
rights, and agrees to, and does, pay the costs and fees (including attorneys'
fees) incurred in the defense of the claim and agrees in writing to pay all
Indemnifiable Expenses in connection with such claim, subject to the provisions
of any insurance policy which covers such claim, the Acquiring Company's Board
of Director nominees shall have the right to select counsel for Employee,
control the litigation and assume the defense, and may settle or compromise such
claim on behalf of Employee; provided that such right to settle or compromise
--------
such claim shall require the consent of Employee only if (i) Employee would be
compelled or required to admit to guilt or responsibility or to the truth of any
material, significant, injurious or charging allegations, (ii) Employee would be
compelled or required to contribute to such settlement or compromise or (iii)
any such settlement or compromise does not involve the settlement and general
release of any and all claims of claimant against or involving Employee (whether
or not included in the proceeding). Any order or judgment related to any claim
shall be paid and satisfied by Employer prior to any levy, distraint or
execution against Employee without any right of subrogation.
If Employee provides to Employer written notice of his desire to
accept a settlement offer made by the party asserting claims against Employee,
and Employer does not approve the settlement, Employee shall have the right, but
not the obligation, to accept the settlement, and Employer shall pay the full
amount of the settlement, less only such portion of the settlement amount that
Employer contests and provides the written reasons why it is not obligated to
pay such portion in settlement. Employee shall have the right to commence an
action against Employer to reimburse Employee for that portion of the settlement
that is reasonably allocable to claims which Employer is obligated to indemnify
hereunder. Employee shall promptly give notice to Employer after Employee has
knowledge that any legal proceeding has been instituted or any claim or other
matter has been asserted in respect of which indemnification may be sought
hereunder, provided that failure to give such notice shall not preclude
--------
indemnification except to the extent of actual prejudice directly caused by such
failure. If Employer, within a reasonable period of time after receipt of
notice of a claim, fails to assume the defense (including the retention of legal
counsel), Employee shall have the right to undertake the defense, compromise, or
settlement on behalf of and for the account and risk of Employer.
14
<PAGE>
If Employee is required to bring any action to enforce his rights
pursuant to this Paragraph, if Employee prevails, Employee shall also be
entitled to be paid all expenses (including attorneys' fees), in bringing such
action. Employer shall not amend its Certificate of Incorporation or bylaws in
any way that adversely affects Employee's rights under this Paragraph XIII.
This Paragraph XIII shall not apply to any action which involves only claims
between the parties and which is otherwise provided for pursuant to Paragraph
XVI.J.
D. Conflicts of Interest. Notwithstanding anything set forth above,
---------------------
if (x) the use of counsel selected by Employer pursuant to Paragraph XIII.C
would present such counsel a conflict of interest or (y) Employer and Employee
shall have reasonably concluded that there may be legal defenses available to
Employee or other employees which are inconsistent with or in conflict with
those available to Employer (collectively, "Conflicts"), Employee shall have the
right to select, subject to Employer's consent (which consent shall not be
unreasonably withheld), and employ separate counsel (at the Employer's expense)
to represent Employee and, solely to the extent required to mitigate the
Conflict, Employer shall not have the right to control the Indemnifiable
Litigation on behalf of Employee. The existence of a Conflict shall not affect
Employer's right to settle or compromise a claim in accordance with the
provisions of Paragraph XIII.C. For purposes of this Paragraph XIII.D, the
parties acknowledge and agree that, with respect to matters set forth in the
Disclosure Schedule: there was no Conflict at the time counsel was selected,
there has been no conflict to date and, based upon the facts available to the
parties to date, the parties do not anticipate a future Conflict.
Notwithstanding the absence of any Conflict, Employer shall bear the cost of
independent counsel up to a maximum of $100,000 in the aggregate for defense
costs incurred after the Commencement Date with respect to the matter referred
to in Item 1 of the Disclosure Schedule. In addition, Employee may, at his own
expense, retain independent counsel to act in an advisory capacity as to all
other matters. Employer shall cause the counsel which it has selected to
consult with Employee's counsel in good faith with respect to all significant
aspects of a claim.
XIV. Covenant Not to Compete. Employee agrees that during the term hereof, and
-----------------------
if his employment is terminated pursuant to Paragraph XI.A by Employer or other
than pursuant to Paragraph XI.B by Employee, the provisions of the Covenant Not
to Compete attached hereto as Exhibit C shall be effective for the term set
forth therein; provided, however, that if Employee terminates his employment
--------
pursuant
15
<PAGE>
to Paragraph XI.B(vii) within thirty (30) months of the date hereof, the
provisions of the Covenant Not to Compete shall also be effective.
XV. Definitions.
-----------
A. For purposes of Paragraph XI.B, "Affiliate" shall have the meaning set
------------------------------
forth in the Securities Exchange Act of 1934.
B. For purposes of Paragraph XII, "Base Salary" shall mean the amounts
-----------------------------
described in paragraphs I.A, I.B and I.D and the Items set forth in
Exhibit "B" (other than Items 6 and 10); such annualized includable
compensation for such period to be determined in accordance with
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code").
C. For purposes of Paragraph XI.B, a "Change in Control" shall mean and
------------------------------
be deemed to have occurred in connection with any of the following
events:
(i) The acquisition, other than from Bernard Salick, M.D., by an
entity, person or group (including all Affiliates of such entity,
person or group, but excluding the Acquiring Company or
affiliates thereof, Bernard Salick, M.D., Leslie F. Bell or the
Family Members of any of the foregoing, and trusts for the
benefit of any of the foregoing described persons or Family
Members or any entity operated, managed or in substantial part
owned by any of them) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
of capital stock of Employer: (a) entitled to exercise 30% or
more of the outstanding voting power of all capital stock of
Employer ("Voting Stock") or (b) equal to 30% or more of the
outstanding Capital Stock of Employer; or
(ii) The commencement by any entity, person, or group (including any
Affiliates of such entity, person or group, but excluding
Employer or an Affiliate of Employer or any entity owned by any
of them) of a tender offer or an exchange offer for more than 30%
of the outstanding Capital Stock irrespective of voting rights;
or
16
<PAGE>
(iii) (A) a merger or consolidation of Employer, other than as approved
by Bernard Salick, M.D., with one or more other corporations as a
result of which the holders of the outstanding Voting Stock
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate thereof) hold
70% or less of the Capital Stock of the surviving or resulting
corporation, or (B) a transfer, other than by Bernard Salick,
M.D., of a majority of the Capital Stock (excluding transfers to
Bernard Salick, M.D., Leslie F. Bell or the Family Members of any
of the foregoing, and trusts for the benefit of any of the
foregoing described persons or Family Members or any entity
operated, managed or in substantial part owned by any of them),
or of a Substantial Portion of the Property, of Employer other
than to an entity of which Employer owns at least 70% of the
Capital Stock.
D. For purposes of Paragraph XV.C, "Family Members" shall mean Employee's
------------------------------
spouse, ancestors, lineal descendants, siblings and their descendants,
aunts and uncles, mother-in-law, father-in-law, sons-in-law,
daughters-in-law, brothers-in-law, sisters-in-law and first cousins;
and a child legally adopted by Employee shall be treated as your child
by blood.
E. For purposes of Paragraph XV.C, "Substantial Portion of the Property
------------------------------
of Employer" shall mean 50% or more of the aggregate book value of the
assets of Employer as set forth on the most recent balance sheet of
Employer, prepared on a consolidated basis, by its regularly employed
accountants.
XVI. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, or in other agreements related to or entered into at
the time of the Merger Agreement, there are no other understandings or
agreements concerning the subject matter hereof between the parties which have
been relied upon or which shall survive the execution hereof. This Agreement
supersedes any and all other agreements or understandings, oral or written,
between the parties concerning the subject matter set forth herein,
17
<PAGE>
including, without limitation, the prior Employment Agreement of Employee, as
amended, except as to accrued but unpaid rights; provided that in the event the
--------
transactions contemplated by the Merger Agreement are not consummated, this
Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement is binding on and inures to the benefit of
----------
the parties hereto and their respective heirs, successors, or assigns. This
Agreement may not be assigned by either party, except that, in the event
Employer is adjudicated bankrupt, Employer may assign this Agreement to another
member of the Zeneca Group with the prior written consent of Employee.
D. Gender and Number. As used herein, where the context so indicates,
-----------------
reference to one gender includes the other and the neuter and vice versa, if
applicable under the circumstances. When the context so indicates that such is
the intent, words in the singular include the plural and vice versa.
E. Invalidity and Severability. In the event any provision herein (or
---------------------------
any portion of any provision) contained shall be declared by a court of
competent jurisdiction to be invalid, that provision shall be limited to the
extent necessary to make it enforceable, and, if necessary, severed from the
Agreement. Notwithstanding the unenforceable provision, the remaining
provisions (or portions of any provision), hereof shall be deemed severable
therefrom and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any dispute
-------------------------------------
or claims arising hereunder shall be governed by, and construed according to,
and enforced under the laws of the State of California, without regard to the
conflict of laws provisions of California law. The State and Federal courts
located in Los Angeles, California shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no part of this Agreement be construed in accordance with or governed by
the laws of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing to
-------
each person at the addresses set forth
18
<PAGE>
below by personal service or registered or certified mail, postage prepaid,
return receipt requested, or overnight courier:
1. To Employer at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Employee at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and
175 North Bentley Avenue
Los Angeles, CA 90049
With copies to:
Marshall B. Grossman, Esq., Leslie Bell, Esq., Michael Fiore
Such addresses may be changed by notice to the other party given as above
provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from any
------
failure to take action on account of such default. No express written waiver
shall be deemed to waive or render unnecessary the consent or approval to or of
any subsequent act.
I. Captions. Section captions used in this Agreement are descriptive and
--------
for convenience only, and shall not affect the construction of this Agreement.
J. Attorneys' Fees. In any proceeding or any action at law or in equity
---------------
commenced hereunder, the prevailing party shall receive its attorneys' fees,
costs and disbursements in addition to any other relief granted. Each party may
be represented by counsel of its choice, even though such counsel may have
represented the other party in matters related to the business of Employer.
K. No Mitigation. Without limiting any other provision hereof, any
-------------
compensation and other benefits received by Employee from any and all sources
other than Employer before or after the expiration or termination of this
Agreement for any reason whatever shall in no way reduce or effect Employer's
obligation to make payments hereunder.
19
<PAGE>
L. Independent Counsel; Interpretation. Each of the parties hereto has
-----------------------------------
been represented by independent counsel in the negotiation and review of this
Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
M. Survival. The provisions of Paragraphs X, XII, XIII, XIV and XVI.F,
--------
G, J, K and N shall survive any termination of this Agreement.
N. California Counsel. Except as provided in the Governance Agreement or
------------------
with respect to those matters which would have a material adverse effect on
Employer or claims in which Employee is a named party, Employee shall be
entitled to select legal counsel to represent Employer in California in
connection with any claim against Employer related to actions occurring in
California.
O. Reimbursement for Negotiation. Employer shall reimburse Employee for
-----------------------------
all professional fees and costs incurred by Employee in the drafting and
negotiation of this Agreement and any amendments or extensions hereto and any
other agreements related to or entered into at the time of the Merger Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
EMPLOYER:
--------
Salick Health Care, Inc.,
a Delaware corporation
By: /s/ Leslie F. Bell
------------------------
EMPLOYEE:
--------
/s/ Bernard Salick
---------------------------
Bernard Salick, M.D.
21
<PAGE>
EXHIBIT A
Part I - Operations
- - -------------------
The net profits (pre-tax) realized from all businesses or activities
done, engaged in, managed, owned or operated by Employer or any division or
subsidiary of Employer (hereafter collectively "affiliates") as determined on
the accrual basis of accounting principles including all opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and of the Financial Accounting Standards Board, but subject in any
event to the following:
1. Expenses incurred for any pension or other fringe benefit plans made
available to employees of company and its subsidiaries and the cost of insurance
are excluded as expenses for purposes of calculating said net profits.
2. Net profits shall be calculated before provision for applicable
federal and state income taxes.
3. Appropriate adjustments will be made to insure that there is no
material or substantial upward or downward adjustment in income during any
period due to the acceleration or deferral of revenues or other income into a
period other than that which would normally accrue or occur, or due to the
acceleration or deferral of any losses, costs or expenses into any period other
than that in which same would normally accrue or occur.
4. If Employer is hereafter merged or otherwise combined in any way into
or with any other operating entity, net profits shall be calculated as if such
merger, combination, addition or consolidation had not been made unless Employee
consents thereto in writing.
5. The automobile and office rent amounts described in Exhibit "B" of the
Employment Agreement shall be included as expenses in calculating net profits.
After such net profits are determined, Employee shall be entitled to
retain the first $300,000 as a bonus.
Part II - Calculation and Payment of Bonus
- - ------------------------------------------
A. Net profits and the bonus shall be calculated for each of Employer's
fiscal years or prorated for fiscal quarters, quarters or part thereof if a full
fiscal year or quarter is not completed.
22
<PAGE>
B. The bonus shall be estimated and paid as set forth in Paragraph I.B of
the Agreement to which this Exhibit A is attached and incorporated by reference.
C. At the end of each fiscal year (or quarter, if applicable), Employer's
independent public accountants shall determine under Part I, the fiscal year's
(or quarter, if applicable) net profits and the bonus Employee is entitled to
receive. To the extent that (a) Employee is entitled to any additional sum it
shall be paid within thirty (30) days of such determination and (b) if Employee
has been paid more than he has earned, except with respect to the final year of
the term (for which Employee shall promptly repay such overpayment), the sole
remedy for such overpayment shall be by way of offset against future bonuses
due. The accountants' determination is binding on Employer and Employee, absent
palpable mistake or fraud.
23
<PAGE>
EXHIBIT B
BENEFIT PLANS OF EMPLOYER IN EFFECT
AS OF DECEMBER 1, 1994
1. Participation in Employer's Management Incentive Compensation Plan.
2. Participation in Employer's Stock Option and Stock Purchase Plan.
3. Participation in Employer's Life Insurance policy.
4. The Salick Health Care, Inc. Salary Savings Plan (401(k) Plan), to which
Employer makes a matching contribution.
5. Employer pays a premium for "split-dollar" life insurance policies for
Employee. The current amount of the premium is approximately $285,000 per
year.
6. Payment of 90% of the medical office expenses related to any cost incurred
by or activity of Employee at the medical office building located at 9400
Brighton Way, Suite 301, Beverly Hills, CA or any similar successor office
of comparable size and scope of activity. The total annual expense for
1994 was approximately $100,000.
7. Insurance and reimbursement of expenses to provide 100% medical, dental,
visual and psychiatric/psychological coverage for Employee and immediate
family, which amounts to an average aggregate of approximately $19,800 per
year for each of the past three years.
8. Disability and accidental death and dismemberment rights and insurance.
9. Use of company automobile of Employee's choice, selected annually,
consistent with that currently being provided to Employee, including gas,
maintenance, car telephone, and insurance, and licensing. Employee may, at
his option, acquire the company car that Employee is using for the greater
of 7.5% of the original cost or book value (and Employer will then provide
a replacement car).
10. Continued coverage under Employer's workers compensation insurance and
medical, dental, long term disability and life insurance plans for certain
of
24
<PAGE>
Employee's entities covered by such plans, which coverage shall be paid for
by Employee or his entities; provided such coverage is permitted both by
--------
Employer's plans and by law; and provided further that such coverage shall
-------- -------
not jeopardize the qualified status of such plans or require amendments
thereto.
25
<PAGE>
EXHIBIT 10.4
AGREEMENT NOT TO COMPETE
------------------------
This Agreement Not to Compete ("Agreement"), dated as of December 22,
1994, among Zeneca Limited, an English company ("Zeneca"), the holder (the
"Stockholder") of the shares of capital stock (the "Shares") of Salick Health
Care, Inc., a Delaware corporation (the "Company") listed on the signature pages
hereof, and the Company.
WHEREAS, in order to induce Zeneca to enter into an agreement and plan
of merger dated as of the date hereof (the "Merger Agreement") with the Company,
Zeneca has requested the Stockholder, and the Stockholder has agreed, to enter
into this Agreement.
WHEREAS, this Agreement is only effective if triggered by Paragraph XIV
of the Employment Agreement dated December 22, 1994 between Stockholder and
Salick Health Care, Inc. (the "Employment Agreement").
WHEREAS, in consideration of an as an inducement and a necessary
prerequisite to Zeneca's agreement to acquire the Shares of the Stockholder
pursuant to the Merger Agreement, the Stockholder agrees to undertake and
covenant with the Company and Zeneca not to compete with the business of the
Company on the terms herein specified.
<PAGE>
Capitalized terms used but not defined herein have the respective
meanings attached thereto in the Merger Agreement.
Now, therefore, the parties hereto agree as follows:
1. Covenant. During the Non-Compete Period, as hereinafter defined,
--------
and within the Non-Compete Geographic Limits, as hereinafter defined, the
Stockholder agrees, except for those activities permitted pursuant to Paragraph
II.B of the Employment Agreement, not to be employed by, be an officer, agent,
or director of, or consult with or directly or indirectly own, manage,
participate in, operate or control, any interest in any business which competes
with the business of the Company or any of its Subsidiaries, as such business is
defined below (the "Business"); provided that the foregoing shall not prevent
the Stockholder from making and holding investments of up to 5% of the equity of
any entity engaged in such Business, if such equity is listed on a national
securities exchange or regularly traded in the over-the-counter market.
The Non-Compete Period shall be a period commencing on the date it is
triggered pursuant to the Employment Agreement and ending on a date which is
thirty (30) months from the Commencement Date of the Employment Agreement (as
defined therein).
2
<PAGE>
The Non-Compete Geographic Limits are defined as the counties listed on
Schedule A hereto. With respect to each listed county in the State of
California set forth above, this covenant not to compete is intended as a
separate covenant. If any one of such covenants is declared invalid for any
reason, this determination shall not affect the validity of the remainder of the
covenants or any covenant covering territory other than the State of California.
The other covenants in the non-competition provision shall remain in effect as
if the provision had been executed without the invalid covenants. The parties
hereby declare that they intend that the remaining covenants of the provision
continue to be effective without any covenants that have been declared invalid.
The term "Business" shall have the meaning set forth in Section 1.1
("Core Business") of the Governance Agreement dated December 22, 1994.
2. Solicitation of Employees. During the Non-Compete Period and
-------------------------
within the Non-Compete Geographic Limits, the Stockholder shall not, without the
prior written consent of the Company, solicit or assist in the solicitation of
any employee or former employee of the Company or its Subsidiaries unless such
person shall have ceased to be employed by the Company or such Subsidiary, other
than as a result of the Stockholder's actions. The parties acknowledge that mere
knowledge by a Company employee of the
3
<PAGE>
existence of a competing business by Stockholder shall not constitute a
solicitation of such employee.
3. Reasonableness of Covenants. The Stockholder expressly
---------------------------
understands and agrees that although the Company and Zeneca consider the
restrictions contained in Paragraph 1 and 2 above to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against the Stockholder, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
4. Injunctive Relief and Specific Performance. The Stockholder
------------------------------------------
acknowledges and agrees that Zeneca's and the Company's remedies at law for
breach of any of the provisions of this Agreement would be inadequate and, in
recognition of this fact, the Stockholder agrees that, in the event of such a
breach, in addition to any remedies at law, the Company and Zeneca, or either,
without posting any
4
<PAGE>
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available in any county in which
the Company or its Subsidiaries are engaged in the Business or from which they
derive a reasonable amount of their Business at the time of the breach. The
Stockholder further acknowledges that should the Stockholder violate any of the
provisions of this Agreement, it will be difficult to determine the amount of
damages resulting to the Company and in addition to any other remedies which it
may have, the Company and Zeneca or either shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages.
5. Acknowledgment. Each of the Stockholder, Zeneca and the Company
--------------
acknowledges and agrees that the covenants contained in Agreement have been
negotiated in good faith by the parties, are reasonable and are not more
restrictive or broader than necessary to protect the interests of the parties
hereto, and would not achieve their intended purpose if they were on different
terms or for periods of time shorter than the periods of time provided herein or
applied in more restrictive geographical areas than are provided herein. Each
party further acknowledges and agrees that Zeneca would not enter into the
Merger Agreement and the transactions contemplated thereby
5
<PAGE>
(including, without limitation, the acquisition of the shares of the Company
outstanding prior to the Merger from the Stockholder pursuant to the Merger
Agreement) but for the covenants contained in this Agreement and that such
covenants are essential to protect the value of the Business. Each party agrees
further that the transactions of which this Agreement is a part involves more
than $100,000.
6. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, there are no other understandings or agreements
concerning the subject matter hereof between the parties which have been relied
upon or which shall survive the execution hereof. This Agreement supersedes any
and all other agreements or understandings, oral or written, between the parties
concerning the subject matter set forth herein. Notwithstanding the foregoing,
in the event that the transactions contemplated by the Merger Agreement are not
consummated, this Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement may not, in whole or in part, be
----------
assigned by any party.
6
<PAGE>
D. Gender and Number. As used herein, where the content so indicates,
-----------------
reference to one gender includes the other and the neuter and vice versa, if
applicable under the circumstances. When the context so indicates that such is
the intent, words in the singular include the plural and vice versa.
E. Invalidity and Severability. In the event any provision herein
---------------------------
contained shall be declared by a court of competent jurisdiction to be invalid,
that provision shall be limited to the extent necessary to make it enforceable,
and if necessary, severed from the Agreement. Notwithstanding the unenforceable
provision, the remaining provisions hereof shall be deemed severable therefrom
and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any
-------------------------------------
dispute or claims arising hereunder shall be governed by, and construed
according to, and enforced under the laws of the State of Delaware, without
regard to the conflict of laws provisions of Delaware law. The State and Federal
courts located in Delaware shall be the sole forum for any action for relief
arising out of or pursuant to, or to enforce or interpret this Agreement. Each
party to this Agreement consents to the personal jurisdiction in such forum and
courts and each party hereto waives any right to seek a transfer of venue from
such jurisdiction on any grounds. It is the specific intent of the parties that
no
7
<PAGE>
part of this Agreement be construed in accordance with or governed by the laws
of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing
-------
at the address set forth below by personal service or registered or certified
mail, postage prepaid, return receipt requested, or overnight courier:
1. To Company at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Zeneca at:
15 Stanhope Gate
London W1Y 6LN
3. To the Stockholder at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and:
175 North Bentley Avenue
Los Angeles, CA 90049
With copies to Marshall Grossman, Leslie Bell, Esq. and Michael Fiore
at 8201 Beverly Blvd., Los Angeles, CA 90048-4520.
Such address may be changed by notice to the other party given as above
provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from
------
any failure to take action on account of such default. No express written wavier
shall be deemed to waive or render unnecessary the consent or approval to or of
any subsequent act.
8
<PAGE>
I. Captions. Section captions used in this Agreement are descriptive
--------
and for convenience only, and shall not affect the construction of this
agreement.
J. Independent Counsel; Interpretation. Each of the parties hereto
-----------------------------------
has been represented by independent counsel in the negotiation and review of
this Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
9
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
ZENECA LIMITED
an English company
By: /s/ William C. Lucas
------------------------------
Title: Attorney-in-Fact
SALICK HEALTH CARE, INC., a
Delaware Corporation
By: /s/ Leslie F. Bell
------------------------------
Title:Executive Vice President
Chief Financial Officer &
Secretary
/s/ Bernard Salick M.D.
----------------------------------
BERNARD SALICK, M.D.
10
<PAGE>
SCHEDULE A
California
- - ----------
Alameda County, Alpine County, Amador County, Butte County, Calaveras County,
Colusa County, Contra Costa County, Del Note County, El Dorado County, Fresno
County, Glenn County, Humboldt County, Imperial County, Inyo County, Kern
County, Kings County, Lake County, Lassen County, Los Angeles County, Madera
County, Marin County, Mariposa County, Mendocino County, Merced County, Modoc
County, Mono County, Monterey County, Napa County, Nevada County, Orange County,
Placer County, Plumas County, Riverside County, Sacramento County, San Benito
County, San Bernardino County, San Diego County, San Francisco County, San
Juaquin County, San Luis Obispo County, San Mateo County, Santa Barbara County,
Santa Clara County, Santa Cruz County, Shasta County, Sierra County, Siskiyou
County, Solano County, Sonoma County, Stanislaus County, Sutter County, Tehama
County, Trinity County, Tulare County, Tuolumne County, Ventura County, Yolo
County, Yuba County
Delaware
- - --------
Kent County, New Castle County, Sussex County
Florida
- - --------
Bradford County, Brevard County, Charlotte County, Citrus County, Columbia
County, De Soto County, Gadsden County, Gilchrist County, Glades County,
Hernando County, Hillsborough County, Lafayette County, Lake County, Lee County,
Leon County, Madison County, Nassua County, Okaloosa County, Okeechobee County,
Orange County, Palm Beach County, Pasco County, Santa Rosa County, Suwannee
County, Walton County
Kansas
- - ------
Brown County, Chase County, Clark County, Cloud County, Cowley County, Crawford
County, Decatur County, Douglas County, Elk County, Finney County, Franklin
County, Geary County, Greeley County, Greenwood County, Kearny County, Lane
County, Leavenworth County, Lyon County, Marion County, Marshall County, Meade
County, Mitchell County, Neosho County, Osborne County, Phillips County, Pratt
County, Reno County, Republic County, Rush County, Saline County, Scott County,
Sedgwick County, Shawnee County, Sherman County, Sumner County, Thomas County,
Wichita County, Wyandotte County
11
<PAGE>
Missouri
- - --------
Adair County, Andrew County, Atchison County, Audrain County, Barry County,
Barton County, Bates County, Benton County, Bollinger County, Boone County,
Buchanan County, Butler County, Caldwell County, Callaway County, Camden County,
Cape Girardeau County, Carroll County, Carter County, Cass County, Cedar County,
Charlton County, Christian County, Clark County, Clay County, Clinton County,
Cole County, Cooper County, Crawford County, Dade County, Dallas County, Daviess
County, De Kalb County, Dent County, Douglas County, Dunklin County, Franklin
County, Gasconade County, Gentry County, Greene County, Grundy County, Harrison
County, Henry County, Hickory County, Holt County, Howard County, Howell County,
Iron County, Jackson County, Jasper County, Jefferson County, Johnson County,
Knox County, Laclede County, Lafayette County, Lawrence County, Lewis County,
Lincoln County, Linn County, Livingston County, Macon County, Madison County,
Maries County, Marion County, McDonald County, Mercer County, Miller County,
Mississippi County, Moniteau County, Monroe County, Montgomery County, Morgan
County, New Madrid County, Newton County, Nodaway County, Oregon County, Osage
County, Ozark County, Pemiscot County, Perry County, Pettis County, Phelps
County, Pike County, Platte County, Polk County, Pulaski County, Putnam County,
Ralls County, Randolph County, Ray County, Reynolds County, Ripley County,
Saline County, Schuyler County, Scotland County, Scott County, Shannon County,
Shelby County, St. Charles County, St. Clair County, St. Francois County, St.
Louis County, Ste. Genevieve County, Stoddard County, Stone County, Sullivan
County, Taney County, Texas County, Vernon County, Warren County, Washington
County, Wayne County, Webster County, Worth County, Wright County
New Jersey
- - ----------
Atlantic County, Bergen County, Burlington County, Camden County, Cape May
County, Cumberland County, Essex County, Gloucester County, Hudson County,
Hunterdon County, Mercer County, Middlesex County, Monmouth County, Morris
County, Ocean County, Passaic County, Salem County, Somerset County, Sussex
County, Union County, Warren County
Pennsylvania
- - ------------
Adams County, Allegheny County, Armstrong County, Beaver County, Bedford County,
Berks County, Blair County, Bradford County, Bucks County, Butler County,
Cambria County, Cameron County, Carbon County, Centre County, Chester County,
Clarion County, Clearfield County, Clinton County, Columbia
12
<PAGE>
County, Crawford County, Cumberland County, Dauphin County, Delaware County, Elk
County, Erie County, Fayette County, Forest County, Franklin County, Fulton
County, Greene County, Huntingdon County, Indiana County, Jefferson County,
Juniata County, Lackawanna County, Lancaster County, Lawrence County, Lebanon
County, Lehigh County, Luzerne County, Lycoming County, McKean County, Mercer
County, Mifflin County, Monroe County, Montgomery County, Montour County,
Northampton County, Northumberland County, Perry County, Philadelphia County,
Pike County, Potter County, Schuylkill County, Snyder County, Somerset County,
Sullivan County, Susquehanna County, Tioga County, Union County, Venango County,
Warren County, Washington County, Wayne County, Westmoreland County, Wyoming
County, York Count
Virginia
- - --------
Albemarle County, Alleghany County, Bath County, Bland County, Buckingham
County, Campbell County, Caroline County, Carroll County, Fairfax County, Floyd
County, Fluvanna County, Gloucester County, Isle of Wright County, King and
Queen County, Louisa County, Madison County, Mecklenburg County, Nelson County,
Northampton County, Page County, Patrick County, Powhatan County, Prince William
County, Pulaski County, Rappahannock County, Roanoke County, Rockbridge County,
Shenandoah County, Southampton County, Sussex County, Tazewell County, Wise
County, Wythe County
13
<PAGE>
EXHIBIT 10.5
SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated
April 5, 1995 is effective as of the date set forth in Paragraph IV and is
between SALICK HEALTH CARE, INC., a Delaware corporation, hereinafter referred
to as "Employer", and Leslie Bell, hereinafter referred to as "Employee".
I. Employment and Compensation.
---------------------------
A. Employer hereby employs Employee as its Executive Vice President, Chief
Financial Officer, Secretary and General Counsel. Employee shall receive a base
annual salary payable in bi-weekly installments, in advance, during the term
hereof. Initially, Employee's base annual salary shall be $332,893, payable in
bi-weekly installments of $12,803.58. The law practice described in Paragraph
II.D(vii) of this Agreement shall be paid a retainer of 60,000, payable in
montly installments of $5,000. For purposes of this Agreement, the base annual
salary and the retainer are hereinafter collectively referred to as the "Base
Annual Salary".
B. Base Annual Salary shall be increased at least annually during the term
hereof by an amount at least equal to the annual increase in the All Urban
Consumers Los Angeles-Long Beach-Anaheim consumer price index, as applicable
each year for the same month as the month in which the term hereof begins. If
the above-described index is discontinued, a comparable index shall be used.
Notwithstanding the use of the index, in no event shall the Base Annual Salary
of Employee be subject to downward modification. For purposes of calculating
increases to Base Annual Salary, the formula shall apply to the amount payable
pursuant to Paragraph I.A.
C. In addition to the above, Employee shall continue to be a participant
in Employer's Management Incentive Compensation Plan.
D. During the term of this Agreement, Employer shall nominate Employee to
serve as a director of Employer, and use its best efforts to cause his election.
II. Duties and Authority.
--------------------
A. Subject to the provisions of Paragraph II.D, and consistent with
Employee's practice prior to the date
<PAGE>
hereof, Employee shall devote such of his working time as is necessary to the
discharge of his duties for Employer.
B. Employee shall have such duties and authority as shall be determined
from time to time by Employer's Board of Directors or its designee, consistent
with Employee's duties and authority prior to the date hereof, and shall report
to the Chief Executive Officer and the Employer's Board of Directors as a whole.
C. As a result of the transactions contemplated by the Merger Agreement
dated as of December 22, 1994 among Employer, the Acquiring Company and Atkemix
Thirty-Nine Inc. (the "Merger Agreement") and pursuant to the Governance
Agreement, all employees of Employer will be bound by Employer's Employee
Handbook, Employer's Personnel Policy & Procedure Manual and the Policy on the
Ethical Conduct of Business faxed to Employee on December 19, 1994
(collectively, the "Code of Conduct"). Employee acknowledges that he has read
and agrees to be bound by the Code of Conduct; provided that, to the extent the
--------
Code of Conduct conflicts with the express provisions of Section VII of this
Agreement, the provisions of Section VII shall govern.
D. Notwithstanding anything to the contrary in this Agreement or the Code
of Conduct, Employer acknowledges that Employee devotes a portion of his time to
(i) serving as Executor or Co-Executor, Trustee or Co-Trustee for the estates
and/or trusts of four unrelated individuals, (ii) providing legal services on
behalf of such estates and/or trusts, (iii) providing legal services for his
immediate family and certain friends and Employer employees (generally non-
compensated), (iv) serving as a director or advisor of charitable research or
educational foundations, (v) engaging in certain real estate activities, (vi)
investments in two family clothing stores, (vii) operating a professional law
corporation or law practice as to which the retainer described in Section I.A.
is for services provided to or for the benefit of the Employer and (viii)
engaging in philanthropic activities including without limitation, in respect of
charitable foundations (collectively, the "Outside Activities"). The Outside
Activities are deemed and acknowledged not to be competitive with the business
of Employer or violative of Paragraphs XI.A(iv) or (v) of this Agreement.
Employee may maintain his level of involvement in his Outside Activities and
shall not be accountable to Employer in any way for his Outside Activities. In
addition, Employee may engage in other business and philanthropic activities in
the future provided that they are not competitive with the business of Employer.
2
<PAGE>
E. Employer and Employee acknowledge and confirm that the position
conferred on Employee pursuant to Paragraph I.A on the Commencement Date (the
"New Position") is substantially the same as the position he held immediately
prior to the Commencement Date (the "Old Position") and that when the New
Position is compared to the Old Position, there is (i) no reduction in total
compensation and benefits, (ii) no significant change in the nature or scope of
Employee's authority, duties or status, and (iii) no significant change in
circumstances that affect his position, the duties attached to his position or
his ability to exercise the authority, powers, functions, or duties attached
thereto, such as would give rise to an event of "Good Reason" as defined in
Paragraph XI.B. Such acknowledgment by Employee does not waive his right to
take action pursuant to Paragraph XI.B with respect to changes in the New
Position which arise after the Commencement Date.
III. Benefit Plans.
-------------
A. All Employer benefits presently available to Employee as listed on
Exhibit "A" shall continue to be available to Employee, on the same basis as
they are currently available, throughout the term of this Agreement. Any other
benefits (whether under a plan or otherwise) provided by Employer in the future
for key executives shall also be made available to Employee, and shall be deemed
incorporated into Exhibit A hereto.
B. If the Acquiring Company (as defined in Paragraph IV), acquires all
shares of Employee's common stock, it may, at its option, offer a package of
benefit programs to Employee. If the Acquiring Company makes such an offer,
Employee may choose to be entitled to either, but not both, Employer's or the
Acquiring Company's package of benefits (in the latter case, all of Employee's
years of service with Employer shall be included in calculating years of
employment for purposes of eligibility and benefit participation in such
programs).
IV. Term.
----
The term of this Agreement is five years, commencing upon the date (the
"Commencement Date") of the consummation of the transactions contemplated by the
Merger Agreement. Employer shall, not less than eighteen months prior to the
expiration of the employment term, notify Employee if Employer intends to retain
Employee following the expiration of the then current term, in which event the
parties shall enter into good faith negotiations with regard to the terms of
such continued employment.
3
<PAGE>
V. Vacation and Sick Leave.
-----------------------
Employee shall be entitled to six weeks vacation every year during the term
of this Agreement, with up to a maximum of six weeks of unused vacation time
being carried forward during the term hereof. Employee shall be entitled
annually during the term of this Agreement to sick days equal to the number of
days of the waiting period for the earliest period of eligibility under any
Employer disability plan. Sick days not taken during the calendar year shall be
forfeited.
VI. Death and Disability.
--------------------
If Employee shall die during the term hereof or should he become so ill
that he is unable to substantially perform his duties hereunder and should such
illness continue for a period of six (6) consecutive months during the term
hereof, then Employer may, at its option, terminate this Agreement subject to
the following: (1) in the event of death, all Compensation shall continue to be
paid to Employee's surviving spouse and in the absence of a surviving spouse,
Employee's heirs for twenty four (24) additional months; (2) in the event of
permanent disability, Employee's Compensation shall be paid for the first twelve
(12) months of such disability, sixty-six percent (66%) thereof shall be paid
during the succeeding six (6) month period and thirty-three percent (33%)
thereof shall be paid during the second succeeding six (6) month period. All
payments due Employee hereunder shall be accrued and paid at, as and when due.
Disability shall only give rise to Employer's option to terminate hereunder if a
physician selected by Employer, and reasonably acceptable to Employee or his
legal representative has determined that such disability is total and permanent.
For purposes of this Paragraph VI, "Compensation" shall mean the amounts
described in paragraphs I.A and I.C and the Items set forth in Exhibit "A".
VII. Expenses of Employee.
--------------------
A. Employee shall receive reimbursement for all business expenses incurred
by him during the term hereof (including the cost of first class travel, lodging
and related expenses) for which he shall account in accordance with the regular
and standard practices maintained by Employer in that regard.
B. In addition, during the term hereof, Employer shall directly pay or
reimburse Employee for professional publications, professional society dues,
professional
4
<PAGE>
licensing fees (including but not limited to continuing education requirements
required for license maintenance), conventions, lectures and seminars (including
but not limited to fees, first class travel, lodging and related expenses), and
similar expenses, all consistent with prior practice. Such expenses have
averaged less than $12,500 per year during the past three years.
VIII. Insurance
---------
In addition to the insurance benefits listed in Exhibit "A", Employer
shall, during the term hereof, provide Employee, at no cost to Employee, with
general and professional liability and malpractice insurance coverage (as an
officer and an attorney practicing law) to be not less than the amount currently
in existence. To the extent available at a reasonable cost (e.g. market rates),
Employer shall procure and maintain a policy of officers' and directors'
insurance in a mutually acceptable amount (not less than at present) with
Employee as a named insured thereunder. Further, Employer shall cause Employee
to be added as a named insured under all of its other liability policies, to the
extent such addition is permitted by the insurer in respect of such policies.
IX. Employee and Employer Representations.
-------------------------------------
Employee warrants and represents that he is legally able to and authorized
to make and enter into this Agreement and that the execution hereof is in no way
in breach or violation of any agreement to which Employee is a party. Employer
represents and warrants that (a) this Agreement and all acts contemplated
hereunder will have been duly authorized by Employer and approved by a majority
of the disinterested directors of Employer following thorough review and
discussion of the terms hereof; (b) this Agreement is fully binding upon
Employer; and (c) this Agreement does not violate any of the organizational or
governing documents of Employer.
X. Covenants.
---------
A. At any and all times, both during employment by Employer and after
termination thereof, Employee will, promptly upon request of Employer, do all
acts and execute, acknowledge and deliver all written instruments as may be
necessary to vest in Employer, its affiliates or successors, the entire right,
title, and interest of Employee to any patentable inventions made by Employee
either solely or jointly with any other person or persons, at any time during
5
<PAGE>
the period of employment by Employer, while working on Employer's business
("Inventions"), and to enable it (at Employer's sole cost and expense) properly
to prepare, file, and prosecute applications for, and to obtain, Letters Patent
thereon in any and all countries selected by Employer, its affiliates or
successors, as well as reissues, renewals and extensions thereof, and to obtain
the record title to such applications and Letters Patent, so that Employer, its
affiliates or successor shall be the sole and absolute owner thereof to the
extent of Employee's interest. Employee will cooperate with Employer, to
include its affiliates and successors, and its counsel in the prosecution and
defense, or either, of any litigation which may arise in connection with any of
the Inventions, provided, however, that any requested cooperation shall be
--------
reasonable in amount, shall not interfere with other obligations of Employee and
shall be provided in Los Angeles, California. Should such services be rendered
after the termination of employment with Employer, a reasonable compensation
shall be paid to Employee on a per diem basis, based on the Base Annual Salary
which Employee was receiving from Employer at the termination of employment, in
addition to first class travel and personal expenses incurred by Employee in
rendering the services.
B. Employee and Employer acknowledge that the terms and conditions of this
Agreement are confidential and may be disclosed, in the case of Employee, only
to family members, attorneys, accountants and as required by law and, in the
case of Employer, only to members of the Boards of Directors of Employer and the
Acquiring Company, attorneys, accountants and employees of Employer and the
Acquiring Company on a "need to know" basis.
C. At any and all times, Employee agrees not to, except to the extent
required to properly perform Employee's duties as an officer of Employer in the
ordinary course of business, directly or indirectly, disclose or communicate any
trade secrets (as defined in Section 3426.1 of the California Civil Code) of
Employer or its subsidiaries or the Zeneca Group or relating to the "Business"
of Employer or the Zeneca Group; provided, however, that the foregoing shall not
--------
apply to information which is not unique to Employer or its subsidiaries or the
Zeneca Group or which is generally known to the industry or the public other
than as a result of Employee's breach of this covenant. The term "Business"
shall have the meaning set forth in "Core Business" in Section 1.1 of the
Governance Agreement.
D. Any "Written Matter" prepared by Employee during employment by
Employer, whether during working hours or at any other time, for use by Employer
or related to the actual or contemplated operations of Employer at the time the
6
<PAGE>
matter is prepared shall be considered a work made for hire, and the copyright
in such Written Matter shall belong exclusively to Employer, its affiliates and
successors, or any member of the Zeneca Group. Employer, its affiliates and
successors, or any member of the Zeneca Group shall further have the unlimited
right to use, copy, reproduce, publish or otherwise disseminate any such Written
Matter. At any and all times, both during employment by Employer or after
termination thereof, Employee will promptly on request of Employer do all things
as may be necessary to vest in Employer, its affiliates or successors, or any
member of the Zeneca Group, the entire right, title, and interest to the
copyright in any such Written Matter; provided, however, that any requested
--------
cooperation shall be reasonable in amount, not interfere with other obligations
of Employee and shall be provided in Los Angeles, California. Should such
services be rendered after the termination of employment with Employer, a
reasonable compensation shall be paid to Employee on a per diem basis, based on
the Base Annual Salary which Employee was receiving from Employer at the
termination of employment, in addition to first class travel and personal
expenses incurred by Employee in rendering the services. All rights being
conferred hereunder by Employee relate only to the extent of ownership of such
right by Employee. The term "Written Matter" shall include practice guidelines,
managed care standard operating procedures, marketing literature and brochures,
journal articles or other publications and data acquisition proformas and
quality satisfaction instruments.
E. Upon termination of employment, Employee shall deliver to Employer all
writings, records, data, memoranda, contracts, orders, sales literature, price
lists, customer lists, data processing materials, manufacturing and production
materials, and other documents, whether or not obtained from Employer, which
pertain to or were used by Employee in connection with employment by Employer
(but Employee may keep any of his personal writings, documents and personal
possessions).
XI. Termination
-----------
A. Other than as provided in Paragraph VI, this Agreement may be
terminated by Employer only for "Good Cause". Good Cause shall mean and be
deemed to exist only if:
(i) (x) a final court judgment has been entered that Employee has
been convicted of a felony or (y) Employee has engaged in intentional acts of
fraud;
(ii) Employee has misappropriated Employer funds;
7
<PAGE>
(iii) Employee engages in "repeated willful misconduct" (as defined
in Paragraph XIII.B) or a single act of wanton and egregious misconduct (e.g.
embezzlement);
(iv) Employee obtains a material personal benefit from a transaction
with Employer in which Employee has an interest which is adverse to the interest
of Employer, unless Employee shall have first obtained the consent of Employer's
Board of Directors;
(v) Employee engages in any other business, profession or occupation
which is competitive with the business of Employer after being notified by the
Board of Directors to cease engaging in such other business, profession or
occupation; or
(vi) there is a breach by Employee of a covenant set forth in
Paragraph X.
In addition, consistent with the treatment of all employees of Employer, any
violation of the Code of Conduct is grounds for appropriate disciplinary action,
up to and including dismissal for "Good Cause". Disciplinary action, if any,
will suit the nature of the infraction. Notwithstanding anything to the
contrary set forth in this Paragraph XI.A., (a) the conduct set forth in
Paragraph II.D., (b) any pending or presently threatened investigation, claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, with respect to which Employee has actual knowledge and has
specifically disclosed to the Acquiring Company in the disclosure schedule faxed
to Employer on December 20, 1994 (the "Disclosure Schedule") and (c) any other
action which is inadvertent or based upon a reasonable or good faith mistake or
de minimis, shall not, at any time, constitute Good Cause for termination.
B. This Agreement may be terminated by Employee only for "Good Reason".
Good reason shall mean and be deemed to exist if:
(i) there is a reduction in Employee's Base Annual Salary;
(ii) Employer changes the principal offices of Employer (presently
located at 8201 Beverly Boulevard, Los Angeles), unless relocated
to substantially similar size and quality facilities in West Los
Angeles, Beverly Hills, or Santa Monica, California (Employer
acknowledges and agrees that (a) Employee may perform services
from his home and locations other than Employer's principal
office and (b) Employee will not be required to perform
8
<PAGE>
any services at any other location, except in connection with
ordinary business travel of the type engaged in the past, without
his consent);
(iii) if, as the result of an action of Employer's Board of Directors
initiated and supported by the members of the Board designated by
the Acquiring Company and any of its affiliates ("Zeneca
Initiated"), Employer reduces Employer's employees or employee
working hours by at least 30% and such action is not caused by a
significant decline in the economic performance of Employer;
(iv) there is a material adverse change in the operations, policies,
funding, procedures, practices, or professionalism relating to
the overall quality of patient care by Employer that is
inconsistent with Employer's past or existing practices;
(v) the name of Employer is changed to not include the name "Salick"
therein;
(vi) there is (a) a reduction in Employee's benefits as set forth in
Exhibit A (provided Employer may substitute different benefits so
--------
long as they are not significantly different from Employee's
current benefits and so long as Employee's years of service with
Employer are included in calculating years of employment for
purposes of eligibility and benefit participation in such
different benefits), or (b) a change in the calculation for
Employee's bonus pursuant to Employer's Management Incentive
Compensation Plan (provided Employer may substitute a new bonus
--------
plan, so long as the new bonus plan does not significantly affect
the accounting method for or calculation of the bonus);
(vii) there is a reasonable determination by Employee that, as a result
of a Zeneca Initiated change that significantly adversely affects
Employee's position (including a change in his title, status or
position as director), Employee is unable to exercise the nature
or scope of his authority, duties, powers, or functions that
Employee exercised at the time of Execution of this Agreement;
(viii) Employer has breached this Agreement; or
9
<PAGE>
(ix) if there is a Change in Control of Employer, as defined in
Paragraph XV, during the first 30 months following the
Commencement Date.
C. Notwithstanding anything herein to the contrary, if either party
claims a breach or default hereunder by the other party or a right to terminate
hereunder or Employer claims a violation of the Code of Conduct (whether for
purposes of termination pursuant to Paragraph XI or otherwise), the party
claiming such breach, violation or right to terminate shall first give written
notice specifying the nature of the alleged breach, violation or cause for
termination to the other party, and that party shall have 10 business days after
receipt of notice to cure a monetary breach, if curable, and 30 days after
receipt of notice to cure a nonmonetary breach, if curable, provided, however,
--------
that if the alleged nonmonetary breach cannot be cured within 30 days and the
party makes reasonable efforts to cure such alleged breach, the time shall be
extended as necessary to complete the cure.
D. Employer hereby agrees that, notwithstanding anything to the contrary
set forth herein, if Employee terminates employment with Employer for Good
Reason, such termination shall not be deemed to be or constitute a breach or
default of or under this Agreement by Employee.
XII. Severance Pay.
-------------
If any of the matters hereinafter set forth occur (and with all
capitalized terms, unless otherwise defined, having the meaning therefor set
forth in Paragraph XV), the following provisions are applicable and supersede
the amounts owed but not paid set forth in Paragraphs I, III, V and VII.
A. Entitlement to Severance Pay. If at any time during the term of this
----------------------------
Agreement, (a) Employee's employment with Employer is terminated by Employer for
any reason other than Good Cause, or (b) Employee terminates employment with
Employer for Good Reason, then, in such event, Employer, within a period of
thirty (30) days, shall pay to Employee an amount equal to 299% of Employee's
Base Salary ("Severance Pay"); provided, however, that if Employee would, except
--------
for this provision, be subject to a tax pursuant to Section 4999 of the Code or
any successor provision that may be in effect, as a result of a "parachute
payment" (as that term is defined in Section 280G of the Code) being made
pursuant to this Agreement, or a deduction would not be allowed to Employer for
all or any part of such payment by reason of Section 280G of the Code, or any
successor provision that may be in effect, then there shall
10
<PAGE>
be deducted from the amounts payable hereunder such amounts ("Excess Payment")
as are required to reduce the aggregate "present value" (as that term is defined
in Section 280G of the Code) of such payment to 299% of an amount equal to
Employee's "base amount" (as that term is defined in Section 280G of the Code),
to the end that Employee is not subject to tax pursuant to such Section 4999 and
no deduction is disallowed by reason of such Section 280G. The entire amount
payable hereunder shall be paid to Employee in one lump sum payment within 30
days following the date of termination of employment as provided in this
Paragraph XII.A. If after payment is made pursuant to this Paragraph XII.A, it
is determined by the Internal Revenue Service (or any court to which the
determination is appealed) that, notwithstanding the foregoing provision in the
first sentence of this Paragraph, the aggregate "present value" (as that term is
defined in Section 280G of the Code) of the payment made to Employee pursuant to
this Paragraph XII equalled or exceeded three times of an amount equal to
Employee's "base amount" (as that term is defined in Section 280G of the Code)
so that Employee is subject to tax pursuant to Section 4999 or a deduction will
not be allowed to Employer by reason of Section 280G, Employee shall, within 30
days thereafter reimburse Employer for that portion of the payment equal to the
amount of such excess plus $1.00.
B. Termination for Good Cause or Without Good Reason. If Employee's
-------------------------------------------------
employment with Employer is terminated by Employer for Good Cause, or by
voluntary action by Employee without Good Reason, Employer shall have no
obligation to Employee under Paragraph XII.A hereof.
C. Benefits Unfunded. Except as provided in Paragraph XII.A, all of
-----------------
Employee's rights under Paragraph XII.A shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder and Employee shall
have no interest in or rights against any specific assets of Employer and
Employee shall have only the rights of a general creditor of Employer.
XIII. Indemnification.
---------------
A. Pre Commencement Date Indemnifiable Litigation. With respect to
----------------------------------------------
Indemnifiable Litigation (as defined below) which arises in connection with
actions taken or omitted to be taken prior to the Commencement Date, Employer
shall hold harmless, indemnify, and defend Employee against all claims, damages,
expenses, liabilities and losses (including, without limitation, attorneys'
fees,
11
<PAGE>
judgments, fines, taxes or penalties and amounts paid or to be paid in any
settlement with the approval of Employer, which approval shall not be
unreasonably withheld) (collectively, "Indemnifiable Expenses") incurred or
suffered by Employee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Employee is a party or is threatened
to be made a party by reason of conduct of Employee in any manner related to his
service as an officer, director, employee, or agent of Employer; or (ii) based
in whole or in part on or arising in whole or in part out of the fact that
Employee is or was a director, officer, employee or agent of Employer or any
subsidiary or affiliate thereof, or is or was serving at the request of Employer
as a director, officer, employee or agent of another corporation.
Notwithstanding the foregoing, for the purposes of this Paragraph XIII.A.,
Indemnifiable Litigation shall not include pending or presently threatened
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, with respect to which Employee has actual
knowledge and has failed to specifically disclose in the Disclosure Schedule.
B. Post Commencement Date Indemnifiable Litigation. With respect to
-----------------------------------------------
any Indemnifiable Litigation which arises in connection with actions taken or
omitted to be taken after the Commencement Date, Employer shall hold harmless,
indemnify, and defend Employee against all Indemnifiable Expenses incurred or
suffered by Employee in connection with any such Indemnifiable Litigation (i) to
which Employee is a party or is threatened to be made a party by reason of
conduct of Employee in any manner related to his service as an officer,
director, employee or agent of Employee, (ii) based in whole or in part on or
arising in whole or in part out of the fact that Employee is or was a director,
officer, employee or agent of Employer or any subsidiary or affiliate thereof,
or is or was serving at the request of Employer as a director, officer, employee
or agent of another corporation or (iii) which Employee may incur in connection
with any audit, appeal, court, or other governmental proceeding involving
Employee's or Employer's tax returns (collectively, "Audit") in which a matter
under contest is the applicability or amount of tax pursuant to Section 4999 of
the Code on account of the payment of any Severance Pay pursuant to Paragraph
XII.A hereof. Notwithstanding the foregoing, for the purposes of this Paragraph
XIII.B., (x) Indemnifiable Litigation shall not include threatened or pending
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative which arise as a result of Employee's "repeated
willful misconduct" (as described
12
<PAGE>
below) or a single act of wanton and egregious misconduct (e.g. embezzlement) on
the part of Employee, which, in either case, is engaged in after the
Commencement Date and (y) Indemnifiable Expenses shall not include any costs and
expenses incurred in an audit in connection with a matter other than the matter
described in clause (iii) above and, if other matters are involved in an Audit
of the matter described in clause (iii), an equitable apportionment as to the
payment of the costs and expenses as between Employee and Employer shall be
made. For purposes of this Paragraph XIII.B, Employee shall have engaged in
"repeated willful misconduct" if, following an initial act of willful misconduct
and the receipt of a written warning from Employer, Employee engages in the same
or a similar act of misconduct.
C. Procedures. Employer shall pay Indemnifiable Expenses incurred by
----------
Employee in connection with any Indemnifiable Litigation as incurred and in
advance of the final disposition thereof, it being understood that attorneys'
fees of Employee in connection with Indemnifiable Litigation will be so paid as
incurred, subject to reimbursement by Employee to Employer if same are
ultimately determined not to constitute Indemnifiable Expenses.
If Employer acknowledges, in writing, that a particular claim asserted
is subject to its obligation to indemnify Employee, without reservation of
rights, and agrees to, and does, pay the costs and fees (including attorneys'
fees) incurred in the defense of the claim and agrees in writing to pay all
Indemnifiable Expenses in connection with such claim, subject to the provisions
of any insurance policy which covers such claim, the Acquiring Company's Board
of Director nominees shall have the right to select counsel for Employee,
control the litigation and assume the defense, and may settle or compromise such
claim on behalf of Employee; provided that such right to settle or compromise
--------
such claim shall require the consent of Employee only if (i) Employee would be
compelled or required to admit to guilt or responsibility or to the truth of any
material, significant, injurious or charging allegations, (ii) Employee would be
compelled or required to contribute to such settlement or compromise or (iii)
any such settlement or compromise does not involve the settlement and general
release of any and all claims of claimant against or involving Employee (whether
or not included in the proceeding). Any order or judgment related to any claim
shall be paid and satisfied by Employer prior to any levy, distraint or
execution against Employee without any right of subrogation.
If Employee provides to Employer written notice of his desire to
accept a settlement offer made by the party
13
<PAGE>
asserting claims against Employee, and Employer does not approve the settlement,
Employee shall have the right, but not the obligation, to accept the settlement,
and Employer shall pay the full amount of the settlement, less only such portion
of the settlement amount that Employer contests and provides the written reasons
why it is not obligated to pay such portion in settlement. Employee shall have
the right to commence an action against Employer to reimburse Employee for that
portion of the settlement that is reasonably allocable to claims which Employer
is obligated to indemnify hereunder. Employee shall promptly give notice to
Employer after Employee has knowledge that any legal proceeding has been
instituted or any claim or other matter has been asserted in respect of which
indemnification may be sought hereunder, provided that failure to give such
--------
notice shall not preclude indemnification except to the extent of actual
prejudice directly caused by such failure. If Employer, within a reasonable
period of time after receipt of notice of a claim, fails to assume the defense
(including the retention of legal counsel), Employee shall have the right to
undertake the defense, compromise, or settlement on behalf of and for the
account and risk of Employer.
If Employee is required to bring any action to enforce his rights
pursuant to this Paragraph, if Employee prevails, Employee shall also be
entitled to be paid all expenses (including attorneys' fees), in bringing such
action. Employer shall not amend its Certificate of Incorporation or bylaws in
any way that adversely affects Employee's rights under this Paragraph XIII.
This Paragraph XIII shall not apply to any action which involves only claims
between the parties and which is otherwise provided for pursuant to
Paragraph XVI.J.
D. Conflicts of Interest. Notwithstanding anything set forth above,
---------------------
if (x) the use of counsel selected by Employer pursuant to Paragraph XIII.C
would present such counsel a conflict of interest or (y) Employer and Employee
shall have reasonably concluded that there may be legal defenses available to
Employee or other employees which are inconsistent with or in conflict with
those available to Employer (collectively, "Conflicts"), Employee shall have the
right to select, subject to Employer's consent (which consent shall not be
unreasonably withheld), and employ separate counsel (at the Employer's expense)
to represent Employee and, solely to the extent required to mitigate the
Conflict, Employer shall not have the right to control the Indemnifiable
Litigation on behalf of Employee. The existence of a Conflict shall not affect
Employer's right to settle or compromise a claim in accordance with the
provisions of Paragraph XIII.C. For purposes of this Paragraph XIII.D, the
parties acknowledge and agree that, with respect to matters set forth in the
Disclosure
14
<PAGE>
Schedule: there was no Conflict at the time counsel was selected, there has been
no conflict to date and, based upon the facts available to the parties to date,
the parties do not anticipate a future Conflict. Employer shall bear the cost
of independent counsel up to a maximum of $100,000 in the aggregate (which
$100,000 shall include any amounts paid by Employer in connection with
independent counsel retained for Dr. Salick's defense and shall be divided
between Dr. Salick and Employer as Dr. Salick and Employer shall agree) for
defense costs incurred after the Commencement Date with respect to the matter
referred to in Item 1 of the Disclosure Schedule. In addition, Employee may, at
his own expense, retain independent counsel to act in an advisory capacity as to
all other matters. Employer shall cause the counsel which it has selected to
consult with Employee's counsel in good faith with respect to all significant
aspects of a claim.
XIV. Covenant Not to Compete. Employee agrees that during the term hereof, and
-----------------------
if his employment is terminated pursuant to Paragraph XI.A by Employer or other
than pursuant to Paragraph XI.B by Employee, the provisions of the Covenant Not
to Compete attached hereto as Exhibit B shall be effective for the term set
forth therein; provided, however, that if Employee terminates his employment
--------
pursuant to Paragraph XI.B(vii) within thirty (30) months of the date hereof,
the provisions of the Covenant Not to Compete shall also be effective.
XV. Definitions.
-----------
A. For purposes of Paragraph XI.B, "Affiliate" shall have the meaning set
------------------------------
forth in the Securities Exchange Act of 1934.
B. For purposes of Paragraph XII, "Base Salary" shall mean the amounts
-----------------------------
described in paragraphs I.A and I.C and the Items set forth in Exhibit
"A"; such annualized includable compensation for such period to be
determined in accordance with Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code").
C. For purposes of Paragraph XI.B, a "Change in Control" shall mean and
------------------------------
be deemed to have occurred in connection with any of the following
events:
(i) The acquisition, other than from Bernard Salick, M.D., by an
entity, person or group (including all Affiliates of such entity,
person or group, but excluding the Acquiring Company or
affiliates thereof, Bernard
15
<PAGE>
Salick, M.D., Leslie F. Bell or the Family Members of any of the
foregoing, and trusts for the benefit of any of the foregoing
described persons or Family Members or any entity operated,
managed or in substantial part owned by any of them) of
beneficial ownership, as that term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934, of capital stock of
Employer: (a) entitled to exercise 30% or more of the outstanding
voting power of all capital stock of Employer ("Voting Stock") or
(b) equal to 30% or more of the outstanding Capital Stock of
Employer; or
(ii) The commencement by any entity, person, or group (including any
Affiliates of such entity, person or group, but excluding
Employer or an Affiliate of Employer or any entity owned by any
of them) of a tender offer or an exchange offer for more than 30%
of the outstanding Capital Stock irrespective of voting rights;
or
(iii) (A) a merger or consolidation of Employer, other than as approved
by Bernard Salick, M.D., with one or more other corporations as a
result of which the holders of the outstanding Voting Stock
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate thereof) hold
70% or less of the Capital Stock of the surviving or resulting
corporation, or (B) a transfer, other than by Bernard Salick,
M.D., of a majority of the Capital Stock (excluding transfers to
Bernard Salick, M.D., Leslie F. Bell or the Family Members of any
of the foregoing, and trusts for the benefit of any of the
foregoing described persons or Family Members or any entity
operated, managed or in substantial part owned by any of them),
or of a Substantial Portion of the Property, of Employer other
than to an entity of which Employer owns at least 70% of the
Capital Stock.
D. For purposes of Paragraph XV.C, "Family Members" shall mean Employee's
------------------------------
spouse, ancestors, lineal descendants, siblings and their descendants,
aunts and uncles, mother-in-law, father-in-law, sons-in-law,
daughters-in-law, brothers-in-law, sisters-in-law and first cousins;
and a child legally
16
<PAGE>
adopted by Employee shall be treated as your child by blood.
E. For purposes of Paragraph XV.C, "Substantial Portion of the Property
------------------------------
of Employer" shall mean 50% or more of the aggregate book value of the
assets of Employer as set forth on the most recent balance sheet of
Employer, prepared on a consolidated basis, by its regularly employed
accountants.
XVI. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, or in other agreements related to or entered into at
the time of the Merger Agreement, there are no other understandings or
agreements concerning the subject matter hereof between the parties which have
been relied upon or which shall survive the execution hereof. This Agreement
supersedes any and all other agreements or understandings, oral or written,
between the parties concerning the subject matter set forth herein, including,
without limitation, the prior Employment Agreement of Employee, as amended,
except as to accrued but unpaid rights; provided that in the event the
--------
transactions contemplated by the Merger Agreement are not consummated, this
Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement is binding on and inures to the benefit of
----------
the parties hereto and their respective heirs, successors, or assigns. This
Agreement may not be assigned by either party, except that, in the event
Employer is adjudicated bankrupt, Employer may assign this Agreement to another
member of the Zeneca Group with the prior written consent of Employee.
D. Gender and Number. As used herein, where the context so indicates,
-----------------
reference to one gender includes the other and the neuter and vice versa, if
applicable under the circumstances. When the context so indicates that such is
the intent, words in the singular include the plural and vice versa.
E. Invalidity and Severability. In the event any provision herein (or
---------------------------
any portion of any provision) contained shall be declared by a court of
competent jurisdiction to be invalid, that provision shall be limited to the
extent
17
<PAGE>
necessary to make it enforceable, and, if necessary, severed from the Agreement.
Notwithstanding the unenforceable provision, the remaining provisions (or
portions of any provision), hereof shall be deemed severable therefrom and
remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any dispute
-------------------------------------
or claims arising hereunder shall be governed by, and construed according to,
and enforced under the laws of the State of California, without regard to the
conflict of laws provisions of California law. The State and Federal courts
located in Los Angeles, California shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no part of this Agreement be construed in accordance with or governed by
the laws of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing to
-------
each person at the addresses set forth below by personal service or registered
or certified mail, postage prepaid, return receipt requested, or overnight
courier:
1. To Employer at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Employee at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and
704 North Oakhurst Drive
Beverly Hills, CA 90210
With copies to:
Marshall B. Grossman, Esq., Bernard Salick, M.D., Michael Fiore
Such addresses may be changed by notice to the other party given as above
provided. Notices so given shall be deemed given upon receipt.
18
<PAGE>
H. Waiver. No waiver of any default or breach shall be implied from any
------
failure to take action on account of such default. No express written waiver
shall be deemed to waive or render unnecessary the consent or approval to or of
any subsequent act.
I. Captions. Section captions used in this Agreement are descriptive and
--------
for convenience only, and shall not affect the construction of this Agreement.
J. Attorneys' Fees. In any proceeding or any action at law or in equity
---------------
commenced hereunder, the prevailing party shall receive its attorneys' fees,
costs and disbursements in addition to any other relief granted. Each party may
be represented by counsel of its choice, even though such counsel may have
represented the other party in matters related to the business of Employer.
K. No Mitigation. Without limiting any other provision hereof, any
-------------
compensation and other benefits received by Employee from any and all sources
other than Employer before or after the expiration or termination of this
Agreement for any reason whatever shall in no way reduce or effect Employer's
obligation to make payments hereunder.
L. Independent Counsel; Interpretation. Each of the parties hereto has
-----------------------------------
been represented by independent counsel in the negotiation and review of this
Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
M. Survival. The provisions of Paragraphs X, XII, XIII, XIV and XVI.F,
--------
G, J and K shall survive any termination of this Agreement.
N. Reimbursement for Negotiation. Employer shall reimburse Employee for
-----------------------------
all professional fees and costs incurred by Employee in the drafting and
negotiation of this Agreement and any amendments or extensions hereto and any
other agreements related to or entered into at the time of the Merger Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
EMPLOYER:
--------
Salick Health Care, Inc.,
a Delaware corporation
By: /s/ Bernard Salick
-----------------------------
Bernard Salick
EMPLOYEE:
--------
/s/ Leslie F. Bell
--------------------------------
Leslie F. Bell, Esq..
20
<PAGE>
EXHIBIT A
BENEFIT PLANS OF EMPLOYER IN EFFECT
AS OF DECEMBER 1, 1994
1. Participation in Employer's Management Incentive Compensation Plan.
2. Participation in Employer's Stock Option and Stock Purchase Plan.
3. Participation in Employer's Life Insurance policy.
4. The Salick Health Care, Inc. Salary Savings Plan (401(k) Plan), to which
Employer makes a matching contribution.
5. Participation in Employer's medical, dental, visual and
psychiatric/psychological insurance policies by Employee and immediate
family.
6. Disability and accidental death and dismemberment rights and insurance.
7. Use of company automobile of Employee's choice, selected every three years,
consistent with that currently being provided to Employee, including gas,
maintenance, car telephone, and insurance, and licensing. Employee may, at
his option, acquire the company car that Employee is using for the greater
of 7.5% of the original cost or book value (and Employer will then provide
a replacement car).
21
<PAGE>
EXHIBIT 10.6
AGREEMENT NOT TO COMPETE
------------------------
This Agreement Not to Compete ("Agreement"), dated as of April 5,
1995, among Zeneca Limited, an English company ("Zeneca"), the holder (the
"Stockholder") of the shares of capital stock (the "Shares") of Salick Health
Care, Inc., a Delaware corporation (the "Company") listed on the signature pages
hereof, and the Company.
WHEREAS, in order to induce Zeneca to enter into an agreement and plan
of merger dated as of the date hereof (the "Merger Agreement") with the Company,
Zeneca has requested the Stockholder, and the Stockholder has agreed, to enter
into this Agreement.
WHEREAS, this Agreement is only effective if triggered by Paragraph
XIV of the Employment Agreement dated April 5, 1995 between Stockholder and
Salick Health Care, Inc. (the "Employment Agreement").
WHEREAS, in consideration of an as an inducement and a necessary
prerequisite to Zeneca's agreement to acquire the Shares of the Stockholder
pursuant to the Merger Agreement, the Stockholder agrees to undertake and
covenant with the Company and Zeneca not to compete with the business of the
Company on the terms herein specified.
<PAGE>
Capitalized terms used but not defined herein have the respective
meanings attached thereto in the Merger Agreement.
Now, therefore, the parties hereto agree as follows:
1. Covenant. During the Non-Compete Period, as hereinafter defined,
--------
and within the Non-Compete Geographic Limits, as hereinafter defined, the
Stockholder agrees, except for those activities permitted pursuant to Paragraph
II.B of the Employment Agreement, not to be employed by, be an officer, agent,
or director of, or consult with or directly or indirectly own, manage,
participate in, operate or control, any interest in any business which competes
with the business of the Company or any of its Subsidiaries, as such business is
defined below (the "Business"); provided that the foregoing shall not prevent
the Stockholder from making and holding investments of up to 5% of the equity of
any entity engaged in such Business, if such equity is listed on a national
securities exchange or regularly traded in the over-the-counter market.
The Non-Compete Period shall be a period commencing on the date it is
triggered pursuant to the Employment Agreement and ending on a date which is
thirty (30) months from the Commencement Date of the Employment Agreement (as
defined therein).
2
<PAGE>
The Non-Compete Geographic Limits are defined as the counties listed
on Schedule A hereto. With respect to each listed county in the State of
California set forth above, this covenant not to compete is intended as a
separate covenant. If any one of such covenants is declared invalid for any
reason, this determination shall not affect the validity of the remainder of the
covenants or any covenant covering territory other than the State of California.
The other covenants in the non-competition provision shall remain in effect as
if the provision had been executed without the invalid covenants. The parties
hereby declare that they intend that the remaining covenants of the provision
continue to be effective without any covenants that have been declared invalid.
The term "Business" shall have the meaning set forth in Section 1.1
("Core Business") of the Governance Agreement dated December 22, 1994.
2. Solicitation of Employees. During the Non-Compete Period and
-------------------------
within the Non-Compete Geographic Limits, the Stockholder shall not, without the
prior written consent of the Company, solicit or assist in the solicitation of
any employee or former employee of the Company or its Subsidiaries unless such
person shall have ceased to be employed by the Company or such Subsidiary, other
than as a result of the Stockholder's actions. The parties acknowledge that
mere knowledge by a Company employee of the
3
<PAGE>
existence of a competing business by Stockholder shall not constitute a
solicitation of such employee.
3. Reasonableness of Covenants. The Stockholder expressly
---------------------------
understands and agrees that although the Company and Zeneca consider the
restrictions contained in Paragraph 1 and 2 above to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against the Stockholder, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
4. Injunctive Relief and Specific Performance. The Stockholder
------------------------------------------
acknowledges and agrees that Zeneca's and the Company's remedies at law for
breach of any of the provisions of this Agreement would be inadequate and, in
recognition of this fact, the Stockholder agrees that, in the event of such a
breach, in addition to any remedies at law, the Company and Zeneca, or either,
without posting any
4
<PAGE>
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available in any county in which
the Company or its Subsidiaries are engaged in the Business or from which they
derive a reasonable amount of their Business at the time of the breach. The
Stockholder further acknowledges that should the Stockholder violate any of the
provisions of this Agreement, it will be difficult to determine the amount of
damages resulting to the Company and in addition to any other remedies which it
may have, the Company and Zeneca or either shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages.
5. Acknowledgment. Each of the Stockholder, Zeneca and the Company
--------------
acknowledges and agrees that the covenants contained in Agreement have been
negotiated in good faith by the parties, are reasonable and are not more
restrictive or broader than necessary to protect the interests of the parties
hereto, and would not achieve their intended purpose if they were on different
terms or for periods of time shorter than the periods of time provided herein or
applied in more restrictive geographical areas than are provided herein. Each
party further acknowledges and agrees that Zeneca would not enter into the
Merger Agreement and the transactions contemplated thereby
5
<PAGE>
(including, without limitation, the acquisition of the shares of the Company
outstanding prior to the Merger from the Stockholder pursuant to the Merger
Agreement) but for the covenants contained in this Agreement and that such
covenants are essential to protect the value of the Business. Each party agrees
further that the transactions of which this Agreement is a part involves more
than $100,000.
6. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, there are no other understandings or agreements
concerning the subject matter hereof between the parties which have been relied
upon or which shall survive the execution hereof. This Agreement supersedes any
and all other agreements or understandings, oral or written, between the parties
concerning the subject matter set forth herein. Notwithstanding the foregoing,
in the event that the transactions contemplated by the Merger Agreement are not
consummated, this Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement may not, in whole or in part, be
----------
assigned by any party.
6
<PAGE>
D. Gender and Number. As used herein, where the content so
-----------------
indicates, reference to one gender includes the other and the neuter and vice
versa, if applicable under the circumstances. When the context so indicates
that such is the intent, words in the singular include the plural and vice
versa.
E. Invalidity and Severability. In the event any provision herein
---------------------------
contained shall be declared by a court of competent jurisdiction to be invalid,
that provision shall be limited to the extent necessary to make it enforceable,
and if necessary, severed from the Agreement. Notwithstanding the unenforceable
provision, the remaining provisions hereof shall be deemed severable therefrom
and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any
-------------------------------------
dispute or claims arising hereunder shall be governed by, and construed
according to, and enforced under the laws of the State of Delaware, without
regard to the conflict of laws provisions of Delaware law. The State and
Federal courts located in Delaware shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no
7
<PAGE>
part of this Agreement be construed in accordance with or governed by the laws
of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing
-------
at the address set forth below by personal service or registered or certified
mail, postage prepaid, return receipt requested, or overnight courier:
1. To Company at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Zeneca at:
15 Stanhope Gate
London W1Y 6LN
3. To the Stockholder at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and:
704 North Oakhurst Drive
Beverly Hills, CA 90210
With copies to Marshall Grossman, Dr. Bernard Salick and Michael
Fiore at 8201 Beverly Blvd., Los Angeles, CA 90048-4520.
Such address may be changed by notice to the other party given as
above provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from
------
any failure to take action on account of such default. No express written
wavier shall be deemed to waive or render unnecessary the consent or approval to
or of any subsequent act.
8
<PAGE>
I. Captions. Section captions used in this Agreement are descriptive
--------
and for convenience only, and shall not affect the construction of this
agreement.
J. Independent Counsel; Interpretation. Each of the parties hereto
-----------------------------------
has been represented by independent counsel in the negotiation and review of
this Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
9
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
ZENECA LIMITED
an English company
By: /s/ William C. Lucas
--------------------------------------
William C. Lucas
SALICK HEALTH CARE, INC., a
Delaware Corporation
By: /s/ Bernard Salick
--------------------------------------
Bernard Salick
STOCKHOLDER:
/s/ Leslie F. Bell
-----------------------------------------
Leslie F. Bell
10
<PAGE>
SCHEDULE A
California
- - ----------
Alameda County, Alpine County, Amador County, Butte County, Calaveras County,
Colusa County, Contra Costa County, Del Note County, El Dorado County, Fresno
County, Glenn County, Humboldt County, Imperial County, Inyo County, Kern
County, Kings County, Lake County, Lassen County, Los Angeles County, Madera
County, Marin County, Mariposa County, Mendocino County, Merced County, Modoc
County, Mono County, Monterey County, Napa County, Nevada County, Orange County,
Placer County, Plumas County, Riverside County, Sacramento County, San Benito
County, San Bernardino County, San Diego County, San Francisco County, San
Juaquin County, San Luis Obispo County, San Mateo County, Santa Barbara County,
Santa Clara County, Santa Cruz County, Shasta County, Sierra County, Siskiyou
County, Solano County, Sonoma County, Stanislaus County, Sutter County, Tehama
County, Trinity County, Tulare County, Tuolumne County, Ventura County, Yolo
County, Yuba County
Delaware
- - --------
Kent County, New Castle County, Sussex County
Florida
- - --------
Bradford County, Brevard County, Charlotte County, Citrus County, Columbia
County, De Soto County, Gadsden County, Gilchrist County, Glades County,
Hernando County, Hillsborough County, Lafayette County, Lake County, Lee County,
Leon County, Madison County, Nassua County, Okaloosa County, Okeechobee County,
Orange County, Palm Beach County, Pasco County, Santa Rosa County, Suwannee
County, Walton County
Kansas
- - ------
Brown County, Chase County, Clark County, Cloud County, Cowley County, Crawford
County, Decatur County, Douglas County, Elk County, Finney County, Franklin
County, Geary County, Greeley County, Greenwood County, Kearny County, Lane
County, Leavenworth County, Lyon County, Marion County, Marshall County, Meade
County, Mitchell County, Neosho County, Osborne County, Phillips County, Pratt
County, Reno County, Republic County, Rush County, Saline County, Scott County,
Sedgwick County, Shawnee County, Sherman County, Sumner County, Thomas County,
Wichita County, Wyandotte County
11
<PAGE>
Missouri
- - --------
Adair County, Andrew County, Atchison County, Audrain County, Barry County,
Barton County, Bates County, Benton County, Bollinger County, Boone County,
Buchanan County, Butler County, Caldwell County, Callaway County, Camden County,
Cape Girardeau County, Carroll County, Carter County, Cass County, Cedar County,
Charlton County, Christian County, Clark County, Clay County, Clinton County,
Cole County, Cooper County, Crawford County, Dade County, Dallas County, Daviess
County, De Kalb County, Dent County, Douglas County, Dunklin County, Franklin
County, Gasconade County, Gentry County, Greene County, Grundy County, Harrison
County, Henry County, Hickory County, Holt County, Howard County, Howell County,
Iron County, Jackson County, Jasper County, Jefferson County, Johnson County,
Knox County, Laclede County, Lafayette County, Lawrence County, Lewis County,
Lincoln County, Linn County, Livingston County, Macon County, Madison County,
Maries County, Marion County, McDonald County, Mercer County, Miller County,
Mississippi County, Moniteau County, Monroe County, Montgomery County, Morgan
County, New Madrid County, Newton County, Nodaway County, Oregon County, Osage
County, Ozark County, Pemiscot County, Perry County, Pettis County, Phelps
County, Pike County, Platte County, Polk County, Pulaski County, Putnam County,
Ralls County, Randolph County, Ray County, Reynolds County, Ripley County,
Saline County, Schuyler County, Scotland County, Scott County, Shannon County,
Shelby County, St. Charles County, St. Clair County, St. Francois County, St.
Louis County, Ste. Genevieve County, Stoddard County, Stone County, Sullivan
County, Taney County, Texas County, Vernon County, Warren County, Washington
County, Wayne County, Webster County, Worth County, Wright County
New Jersey
- - ----------
Atlantic County, Bergen County, Burlington County, Camden County, Cape May
County, Cumberland County, Essex County, Gloucester County, Hudson County,
Hunterdon County, Mercer County, Middlesex County, Monmouth County, Morris
County, Ocean County, Passaic County, Salem County, Somerset County, Sussex
County, Union County, Warren County
Pennsylvania
- - ------------
Adams County, Allegheny County, Armstrong County, Beaver County, Bedford County,
Berks County, Blair County, Bradford County, Bucks County, Butler County,
Cambria County, Cameron County, Carbon County, Centre County, Chester County,
Clarion County, Clearfield County, Clinton County, Columbia
12
<PAGE>
County, Crawford County, Cumberland County, Dauphin County, Delaware County, Elk
County, Erie County, Fayette County, Forest County, Franklin County, Fulton
County, Greene County, Huntingdon County, Indiana County, Jefferson County,
Juniata County, Lackawanna County, Lancaster County, Lawrence County, Lebanon
County, Lehigh County, Luzerne County, Lycoming County, McKean County, Mercer
County, Mifflin County, Monroe County, Montgomery County, Montour County,
Northampton County, Northumberland County, Perry County, Philadelphia County,
Pike County, Potter County, Schuylkill County, Snyder County, Somerset County,
Sullivan County, Susquehanna County, Tioga County, Union County, Venango County,
Warren County, Washington County, Wayne County, Westmoreland County, Wyoming
County, York County
Virginia
- - --------
Albemarle County, Alleghany County, Bath County, Bland County, Buckingham
County, Campbell County, Caroline County, Carroll County, Fairfax County, Floyd
County, Fluvanna County, Gloucester County, Isle of Wright County, King and
Queen County, Louisa County, Madison County, Mecklenburg County, Nelson County,
Northampton County, Page County, Patrick County, Powhatan County, Prince William
County, Pulaski County, Rappahannock County, Roanoke County, Rockbridge County,
Shenandoah County, Southampton County, Sussex County, Tazewell County, Wise
County, Wythe County
13
<PAGE>
EXHIBIT 10.7
SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
dated April 5, 1995 is effective as of the date set forth in Paragraph IV and is
between SALICK HEALTH CARE, INC., a Delaware corporation, hereinafter referred
to as "Employer", and Michael Fiore, hereinafter referred to as "Employee".
I. Employment and Compensation.
---------------------------
A. Employer hereby employs Employee as its Executive Vice President and
Chief Operating Officer. Employee shall receive a base annual salary payable in
bi-weekly installments, in advance, during the term hereof ("Base Annual
Salary"). Initially, Employee's Base Annual Salary shall be $307,528, payable
in bi-weekly installments of $11,828.
B. Base Annual Salary shall be increased at least annually during the term
hereof by an amount at least equal to the annual increase in the All Urban
Consumers Los Angeles-Long Beach-Anaheim consumer price index, as applicable
each year for the same month as the month in which the term hereof begins. If
the above-described index is discontinued, a comparable index shall be used.
Notwithstanding the use of the index, in no event shall the Base Annual Salary
of Employee be subject to downward modification. For purposes of calculating
increases to Base Annual Salary, the formula shall apply to the amount payable
pursuant to Paragraph I.A.
C. In addition to the above, Employee shall continue to be a participant
in Employer's Management Incentive Compensation Plan.
D. During the term of this Agreement, Employer shall nominate Employee to
serve as a director of Employer, and use its best efforts to cause his election.
II. Duties and Authority.
--------------------
A. Subject to the provisions of Paragraph II.D, and consistent with
Employee's practice prior to the date hereof, Employee shall devote such of his
working time as is necessary to the discharge of his duties for Employer.
B. Employee shall have such duties and authority as shall be determined
from time to time by Employer's Board of Directors or its designee, consistent
with Employee's duties
<PAGE>
and authority prior to the date hereof, and shall report to the Chief Executive
Officer and the Employer's Board of Directors as a whole.
C. As a result of the transactions contemplated by the Merger Agreement
dated as of December 22, 1994 among Employer, the Acquiring Company and Atkemix
Thirty-Nine Inc. (the "Merger Agreement") and pursuant to the Governance
Agreement, all employees of Employer will be bound by Employer's Employee
Handbook, Employer's Personnel Policy & Procedure Manual and the Policy on the
Ethical Conduct of Business faxed to Employee on December 19, 1994
(collectively, the "Code of Conduct"). Employee acknowledges that he has read
and agrees to be bound by the Code of Conduct; provided that, to the extent the
--------
Code of Conduct conflicts with the express provisions of Section VII of this
Agreement, the provisions of Section VII shall govern.
D. Notwithstanding anything to the contrary in this Agreement or the Code
of Conduct, Employer acknowledges that Employee devotes a portion of his time to
(i) philanthropic and community service activities and (ii) providing consulting
services to his wife's CPA/Tax consulting practice (collectively, the "Outside
Activities"). The Outside Activities are deemed and acknowledged not to be
competitive with the business of Employer or violative of Paragraphs XI.A(iv) or
(v) of this Agreement. Employee may maintain his level of involvement in his
Outside Activities and shall not be accountable to Employer in any way for his
Outside Activities. In addition, Employee may engage in other business and
philanthropic activities in the future provided that they are not competitive
with the business of Employer.
E. Employer and Employee acknowledge and confirm that the position
conferred on Employee pursuant to Paragraph I.A on the Commencement Date (the
"New Position") is substantially the same as the position he held immediately
prior to the Commencement Date (the "Old Position") and that when the New
Position is compared to the Old Position, there is (i) no reduction in total
compensation and benefits, (ii) no significant change in the nature or scope of
Employee's authority, duties or status, and (iii) no significant change in
circumstances that affect his position, the duties attached to his position or
his ability to exercise the authority, powers, functions, or duties attached
thereto, such as would give rise to an event of "Good Reason" as defined in
Paragraph XI.B. Such acknowledgment by Employee does not waive his right to
take action pursuant to Paragraph XI.B with respect to changes in the New
Position which arise after the Commencement Date.
2
<PAGE>
III. Benefit Plans.
-------------
A. All Employer benefits presently available to Employee as listed on
Exhibit "A" shall continue to be available to Employee, on the same basis as
they are currently available, throughout the term of this Agreement. Any other
benefits (whether under a plan or otherwise) provided by Employer in the future
for key executives shall also be made available to Employee, and shall be deemed
incorporated into Exhibit A hereto.
B. If the Acquiring Company (as defined in Paragraph IV), acquires all
shares of Employee's common stock, it may, at its option, offer a package of
benefit programs to Employee. If the Acquiring Company makes such an offer,
Employee may choose to be entitled to either, but not both, Employer's or the
Acquiring Company's package of benefits (in the latter case, all of Employee's
years of service with Employer shall be included in calculating years of
employment for purposes of eligibility and benefit participation in such
programs).
IV. Term.
----
The term of this Agreement is five years, commencing upon the date (the
"Commencement Date") of the consummation of the transactions contemplated by the
Merger Agreement. Employer shall, not less than eighteen months prior to the
expiration of the employment term, notify Employee if Employer intends to retain
Employee following the expiration of the then current term, in which event the
parties shall enter into good faith negotiations with regard to the terms of
such continued employment.
V. Vacation and Sick Leave.
-----------------------
Employee shall be entitled to six weeks vacation every year during the term
of this Agreement, with up to a maximum of six weeks of unused vacation time
being carried forward during the term hereof. Employee shall be entitled
annually during the term of this Agreement to sick days equal to the number of
days of the waiting period for the earliest period of eligibility under any
Employer disability plan. Sick days not taken during the calendar year shall be
forfeited.
VI. Death and Disability.
--------------------
If Employee shall die during the term hereof or should he become so ill
that he is unable to substantially
3
<PAGE>
perform his duties hereunder and should such illness continue for a period of
six (6) consecutive months during the term hereof, then Employer may, at its
option, terminate this Agreement subject to the following: (1) in the event of
death, all Compensation shall continue to be paid to Employee's surviving spouse
and in the absence of a surviving spouse, Employee's heirs for twenty four (24)
additional months; (2) in the event of permanent disability, Employee's
Compensation shall be paid for the first twelve (12) months of such disability,
sixty-six percent (66%) thereof shall be paid during the succeeding six (6)
month period and thirty-three percent (33%) thereof shall be paid during the
second succeeding six (6) month period. All payments due Employee hereunder
shall be accrued and paid at, as and when due. Disability shall only give rise
to Employer's option to terminate hereunder if a physician selected by Employer,
and reasonably acceptable to Employee or his legal representative has determined
that such disability is total and permanent. For purposes of this Paragraph VI,
"Compensation" shall mean the amounts described in paragraphs I.A and I.C and
the Items set forth in Exhibit "A".
VII. Expenses of Employee.
--------------------
A. Employee shall receive reimbursement for all business expenses incurred
by him during the term hereof (including the cost of first class travel, lodging
and related expenses) for which he shall account in accordance with the regular
and standard practices maintained by Employer in that regard.
B. In addition, during the term hereof, Employer shall directly pay or
reimburse Employee for professional publications, professional society dues,
professional licensing fees (including but not limited to continuing education
requirements required for license maintenance), conventions, lectures and
seminars (including but not limited to fees, first class travel, lodging and
related expenses), and similar expenses, all consistent with prior practice.
Such expenses have averaged less than $12,500 per year during the past three
years.
VIII. Insurance
---------
In addition to the insurance benefits listed in Exhibit "A", Employer
shall, during the term hereof, provide Employee, at no cost to Employee, with
general and professional liability and malpractice insurance coverage (as an
officer and an accountant) to be not less than the amount currently in
existence. To the extent available at a
4
<PAGE>
reasonable cost (e.g. market rates), Employer shall procure and maintain a
policy of officers' and directors' insurance in a mutually acceptable amount
(not less than at present) with Employee as a named insured thereunder.
Further, Employer shall cause Employee to be added as a named insured under all
of its other liability policies, to the extent such addition is permitted by the
insurer in respect of such policies.
IX. Employee and Employer Representations.
-------------------------------------
Employee warrants and represents that he is legally able to and authorized
to make and enter into this Agreement and that the execution hereof is in no way
in breach or violation of any agreement to which Employee is a party. Employer
represents and warrants that (a) this Agreement and all acts contemplated
hereunder will have been duly authorized by Employer and approved by a majority
of the disinterested directors of Employer following thorough review and
discussion of the terms hereof; (b) this Agreement is fully binding upon
Employer; and (c) this Agreement does not violate any of the organizational or
governing documents of Employer.
X. Covenants.
---------
A. At any and all times, both during employment by Employer and after
termination thereof, Employee will, promptly upon request of Employer, do all
acts and execute, acknowledge and deliver all written instruments as may be
necessary to vest in Employer, its affiliates or successors, the entire right,
title, and interest of Employee to any patentable inventions made by Employee
either solely or jointly with any other person or persons, at any time during
the period of employment by Employer, while working on Employer's business
("Inventions"), and to enable it (at Employer's sole cost and expense) properly
to prepare, file, and prosecute applications for, and to obtain, Letters Patent
thereon in any and all countries selected by Employer, its affiliates or
successors, as well as reissues, renewals and extensions thereof, and to obtain
the record title to such applications and Letters Patent, so that Employer, its
affiliates or successor shall be the sole and absolute owner thereof to the
extent of Employee's interest. Employee will cooperate with Employer, to
include its affiliates and successors, and its counsel in the prosecution and
defense, or either, of any litigation which may arise in connection with any of
the Inventions, provided, however, that any requested cooperation shall be
--------
reasonable in amount, shall not interfere with other obligations of Employee and
shall be provided in Los
5
<PAGE>
Angeles, California. Should such services be rendered after the termination of
employment with Employer, a reasonable compensation shall be paid to Employee on
a per diem basis, based on the Base Annual Salary which Employee was receiving
from Employer at the termination of employment, in addition to first class
travel and personal expenses incurred by Employee in rendering the services.
B. Employee and Employer acknowledge that the terms and conditions of this
Agreement are confidential and may be disclosed, in the case of Employee, only
to family members, attorneys, accountants and as required by law and, in the
case of Employer, only to members of the Boards of Directors of Employer and the
Acquiring Company, attorneys, accountants and employees of Employer and the
Acquiring Company on a "need to know" basis.
C. At any and all times, Employee agrees not to, except to the extent
required to properly perform Employee's duties as an officer of Employer in the
ordinary course of business, directly or indirectly, disclose or communicate any
trade secrets (as defined in Section 3426.1 of the California Civil Code) of
Employer or its subsidiaries or the Zeneca Group or relating to the "Business"
of Employer or the Zeneca Group; provided, however, that the foregoing shall not
--------
apply to information which is not unique to Employer or its subsidiaries or the
Zeneca Group or which is generally known to the industry or the public other
than as a result of Employee's breach of this covenant. The term "Business"
shall have the meaning set forth in "Core Business" in Section 1.1 of the
Governance Agreement.
D. Any "Written Matter" prepared by Employee during employment by
Employer, whether during working hours or at any other time, for use by Employer
or related to the actual or contemplated operations of Employer at the time the
matter is prepared shall be considered a work made for hire, and the copyright
in such Written Matter shall belong exclusively to Employer, its affiliates and
successors, or any member of the Zeneca Group. Employer, its affiliates and
successors, or any member of the Zeneca Group shall further have the unlimited
right to use, copy, reproduce, publish or otherwise disseminate any such Written
Matter. At any and all times, both during employment by Employer or after
termination thereof, Employee will promptly on request of Employer do all things
as may be necessary to vest in Employer, its affiliates or successors, or any
member of the Zeneca Group, the entire right, title, and interest to the
copyright in any such Written Matter; provided, however, that any requested
--------
cooperation shall be reasonable in amount, not interfere with other obligations
of Employee and shall be provided in Los Angeles, California. Should such
services be rendered after the termination of employment
6
<PAGE>
with Employer, a reasonable compensation shall be paid to Employee on a per diem
basis, based on the Base Annual Salary which Employee was receiving from
Employer at the termination of employment, in addition to first class travel and
personal expenses incurred by Employee in rendering the services. All rights
being conferred hereunder by Employee relate only to the extent of ownership of
such right by Employee. The term "Written Matter" shall include practice
guidelines, managed care standard operating procedures, marketing literature and
brochures, journal articles or other publications and data acquisition proformas
and quality satisfaction instruments.
E. Upon termination of employment, Employee shall deliver to Employer all
writings, records, data, memoranda, contracts, orders, sales literature, price
lists, customer lists, data processing materials, manufacturing and production
materials, and other documents, whether or not obtained from Employer, which
pertain to or were used by Employee in connection with employment by Employer
(but Employee may keep any of his personal writings, documents and personal
possessions).
XI. Termination
-----------
A. Other than as provided in Paragraph VI, this Agreement may be
terminated by Employer only for "Good Cause". Good Cause shall mean and be
deemed to exist only if:
(i) (x) a final court judgment has been entered that Employee has been
convicted of a felony or (y) Employee has engaged in intentional acts of fraud;
(ii) Employee has misappropriated Employer funds;
(iii) Employee engages in "repeated willful misconduct" (as defined
in Paragraph XIII.B) or a single act of wanton and egregious misconduct (e.g.
embezzlement);
(iv) Employee obtains a material personal benefit from a transaction
with Employer in which Employee has an interest which is adverse to the interest
of Employer, unless Employee shall have first obtained the consent of Employer's
Board of Directors;
(v) Employee engages in any other business, profession or occupation
which is competitive with the business of Employer after being notified by the
Board of Directors to cease engaging in such other business, profession or
occupation; or
7
<PAGE>
(vi) there is a breach by Employee of a covenant set forth in
Paragraph X.
In addition, consistent with the treatment of all employees of Employer, any
violation of the Code of Conduct is grounds for appropriate disciplinary action,
up to and including dismissal for "Good Cause". Disciplinary action, if any,
will suit the nature of the infraction. Notwithstanding anything to the
contrary set forth in this Paragraph XI.A., (a) the conduct set forth in
Paragraph II.D., (b) any pending or presently threatened investigation, claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, with respect to which Employee has actual knowledge and has
specifically disclosed to the Acquiring Company in the disclosure schedule faxed
to Employer on December 20, 1994 (the "Disclosure Schedule") and (c) any other
action which is inadvertent or based upon a reasonable or good faith mistake or
de minimis, shall not, at any time, constitute Good Cause for termination.
B. This Agreement may be terminated by Employee only for "Good Reason".
Good reason shall mean and be deemed to exist if:
(i) there is a reduction in Employee's Base Annual Salary;
(ii) Employer changes the principal offices of Employer (presently
located at 8201 Beverly Boulevard, Los Angeles), unless relocated
to substantially similar size and quality facilities in West Los
Angeles, Beverly Hills, or Santa Monica, California (Employer
acknowledges and agrees that (a) Employee may perform services
from his home and locations other than Employer's principal
office and (b) Employee will not be required to perform any
services at any other location, except in connection with
ordinary business travel of the type engaged in the past, without
his consent);
(iii) if, as the result of an action of Employer's Board of Directors
initiated and supported by the members of the Board designated by
the Acquiring Company and any of its affiliates ("Zeneca
Initiated"), Employer reduces Employer's employees or employee
working hours by at least 30% and such action is not caused by a
significant decline in the economic performance of Employer;
8
<PAGE>
(iv) there is a material adverse change in the operations, policies,
funding, procedures, practices, or professionalism relating to
the overall quality of patient care by Employer that is
inconsistent with Employer's past or existing practices;
(v) the name of Employer is changed to not include the name "Salick"
therein;
(vi) there is (a) a reduction in Employee's benefits as set forth in
Exhibit A (provided Employer may substitute different benefits so
--------
long as they are not significantly different from Employee's
current benefits and so long as Employee's years of service with
Employer are included in calculating years of employment for
purposes of eligibility and benefit participation in such
different benefits), or (b) a change in the calculation for
Employee's bonus pursuant to Employer's Management Incentive
Compensation Plan (provided Employer may substitute a new bonus
--------
plan, so long as the new bonus plan does not significantly affect
the accounting method for or calculation of the bonus);
(vii) there is a reasonable determination by Employee that, as a result
of a Zeneca Initiated change that significantly adversely affects
Employee's position (including a change in his title, status or
position as director), Employee is unable to exercise the nature
or scope of his authority, duties, powers, or functions that
Employee exercised at the time of Execution of this Agreement;
(viii) Employer has breached this Agreement; or
(ix) if there is a Change in Control of Employer, as defined in
Paragraph XV, during the first 30 months following the
Commencement Date.
C. Notwithstanding anything herein to the contrary, if either party
claims a breach or default hereunder by the other party or a right to terminate
hereunder or Employer claims a violation of the Code of Conduct (whether for
purposes of termination pursuant to Paragraph XI or otherwise), the party
claiming such breach, violation or right to terminate shall first give written
notice specifying the nature of the alleged breach, violation or cause for
termination to the other party, and that party shall have 10 business days after
receipt of notice to cure
9
<PAGE>
a monetary breach, if curable, and 30 days after receipt of notice to cure a
nonmonetary breach, if curable, provided, however, that if the alleged
--------
nonmonetary breach cannot be cured within 30 days and the party makes reasonable
efforts to cure such alleged breach, the time shall be extended as necessary to
complete the cure.
D. Employer hereby agrees that, notwithstanding anything to the contrary
set forth herein, if Employee terminates employment with Employer for Good
Reason, such termination shall not be deemed to be or constitute a breach or
default of or under this Agreement by Employee.
XII. Severance Pay.
-------------
If any of the matters hereinafter set forth occur (and with all
capitalized terms, unless otherwise defined, having the meaning therefor set
forth in Paragraph XV), the following provisions are applicable and supersede
the amounts owed but not paid set forth in Paragraphs I, III, V and VII.
A. Entitlement to Severance Pay. If at any time during the term of this
----------------------------
Agreement, (a) Employee's employment with Employer is terminated by Employer for
any reason other than Good Cause, or (b) Employee terminates employment with
Employer for Good Reason, then, in such event, Employer, within a period of
thirty (30) days, shall pay to Employee an amount equal to 299% of Employee's
Base Salary ("Severance Pay"); provided, however, that if Employee would, except
--------
for this provision, be subject to a tax pursuant to Section 4999 of the Code or
any successor provision that may be in effect, as a result of a "parachute
payment" (as that term is defined in Section 280G of the Code) being made
pursuant to this Agreement, or a deduction would not be allowed to Employer for
all or any part of such payment by reason of Section 280G of the Code, or any
successor provision that may be in effect, then there shall be deducted from the
amounts payable hereunder such amounts ("Excess Payment") as are required to
reduce the aggregate "present value" (as that term is defined in Section 280G of
the Code) of such payment to 299% of an amount equal to Employee's "base amount"
(as that term is defined in Section 280G of the Code), to the end that Employee
is not subject to tax pursuant to such Section 4999 and no deduction is
disallowed by reason of such Section 280G. The entire amount payable hereunder
shall be paid to Employee in one lump sum payment within 30 days following the
date of termination of employment as provided in this Paragraph XII.A. If after
payment is made pursuant to this Paragraph XII.A, it is determined by the
Internal Revenue Service (or any court to which the determination is appealed)
that,
10
<PAGE>
notwithstanding the foregoing provision in the first sentence of this Paragraph,
the aggregate "present value" (as that term is defined in Section 280G of the
Code) of the payment made to Employee pursuant to this Paragraph XII equalled or
exceeded three times of an amount equal to Employee's "base amount" (as that
term is defined in Section 280G of the Code) so that Employee is subject to tax
pursuant to Section 4999 or a deduction will not be allowed to Employer by
reason of Section 280G, Employee shall, within 30 days thereafter reimburse
Employer for that portion of the payment equal to the amount of such excess plus
$1.00.
B. Termination for Good Cause or Without Good Reason. If Employee's
-------------------------------------------------
employment with Employer is terminated by Employer for Good Cause, or by
voluntary action by Employee without Good Reason, Employer shall have no
obligation to Employee under Paragraph XII.A hereof.
C. Benefits Unfunded. Except as provided in Paragraph XII.A, all of
-----------------
Employee's rights under Paragraph XII.A shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder and Employee shall
have no interest in or rights against any specific assets of Employer and
Employee shall have only the rights of a general creditor of Employer.
XIII. Indemnification.
---------------
A. Pre Commencement Date Indemnifiable Litigation. With respect to
----------------------------------------------
Indemnifiable Litigation (as defined below) which arises in connection with
actions taken or omitted to be taken prior to the Commencement Date, Employer
shall hold harmless, indemnify, and defend Employee against all claims, damages,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines, taxes or penalties and amounts paid or to be paid in any
settlement with the approval of Employer, which approval shall not be
unreasonably withheld) (collectively, "Indemnifiable Expenses") incurred or
suffered by Employee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Employee is a party or is threatened
to be made a party by reason of conduct of Employee in any manner related to his
service as an officer, director, employee, or agent of Employer; or (ii) based
in whole or in part on or arising in whole or in part out of the fact that
Employee is or was a director,
11
<PAGE>
officer, employee or agent of Employer or any subsidiary or affiliate thereof,
or is or was serving at the request of Employer as a director, officer, employee
or agent of another corporation. Notwithstanding the foregoing, for the
purposes of this Paragraph XIII.A., Indemnifiable Litigation shall not include
pending or presently threatened investigations, claims, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, with
respect to which Employee has actual knowledge and has failed to specifically
disclose in the Disclosure Schedule.
B. Post Commencement Date Indemnifiable Litigation. With respect to
-----------------------------------------------
any Indemnifiable Litigation which arises in connection with actions taken or
omitted to be taken after the Commencement Date, Employer shall hold harmless,
indemnify, and defend Employee against all Indemnifiable Expenses incurred or
suffered by Employee in connection with any such Indemnifiable Litigation (i) to
which Employee is a party or is threatened to be made a party by reason of
conduct of Employee in any manner related to his service as an officer,
director, employee or agent of Employee, (ii) based in whole or in part on or
arising in whole or in part out of the fact that Employee is or was a director,
officer, employee or agent of Employer or any subsidiary or affiliate thereof,
or is or was serving at the request of Employer as a director, officer, employee
or agent of another corporation or (iii) which Employee may incur in connection
with any audit, appeal, court, or other governmental proceeding involving
Employee's or Employer's tax returns (collectively, "Audit") in which a matter
under contest is the applicability or amount of tax pursuant to Section 4999 of
the Code on account of the payment of any Severance Pay pursuant to Paragraph
XII.A hereof. Notwithstanding the foregoing, for the purposes of this Paragraph
XIII.B., (x) Indemnifiable Litigation shall not include threatened or pending
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative which arise as a result of Employee's "repeated
willful misconduct" (as described below) or a single act of wanton and egregious
misconduct (e.g. embezzlement) on the part of Employee, which, in either case,
is engaged in after the Commencement Date and (y) Indemnifiable Expenses shall
not include any costs and expenses incurred in an audit in connection with a
matter other than the matter described in clause (iii) above and, if other
matters are involved in an Audit of the matter described in clause (iii), an
equitable apportionment as to the payment of the costs and expenses as between
Employee and Employer shall be made. For purposes of this Paragraph XIII.B,
Employee shall have engaged in "repeated willful misconduct" if, following an
initial act of willful misconduct and the receipt of a written warning from
12
<PAGE>
Employer, Employee engages in the same or a similar act of misconduct.
C. Procedures. Employer shall pay Indemnifiable Expenses incurred by
----------
Employee in connection with any Indemnifiable Litigation as incurred and in
advance of the final disposition thereof, it being understood that attorneys'
fees of Employee in connection with Indemnifiable Litigation will be so paid as
incurred, subject to reimbursement by Employee to Employer if same are
ultimately determined not to constitute Indemnifiable Expenses.
If Employer acknowledges, in writing, that a particular claim asserted
is subject to its obligation to indemnify Employee, without reservation of
rights, and agrees to, and does, pay the costs and fees (including attorneys'
fees) incurred in the defense of the claim and agrees in writing to pay all
Indemnifiable Expenses in connection with such claim, subject to the provisions
of any insurance policy which covers such claim, the Acquiring Company's Board
of Director nominees shall have the right to select counsel for Employee,
control the litigation and assume the defense, and may settle or compromise such
claim on behalf of Employee; provided that such right to settle or compromise
--------
such claim shall require the consent of Employee only if (i) Employee would be
compelled or required to admit to guilt or responsibility or to the truth of any
material, significant, injurious or charging allegations, (ii) Employee would be
compelled or required to contribute to such settlement or compromise or (iii)
any such settlement or compromise does not involve the settlement and general
release of any and all claims of claimant against or involving Employee (whether
or not included in the proceeding). Any order or judgment related to any claim
shall be paid and satisfied by Employer prior to any levy, distraint or
execution against Employee without any right of subrogation.
If Employee provides to Employer written notice of his desire to
accept a settlement offer made by the party asserting claims against Employee,
and Employer does not approve the settlement, Employee shall have the right, but
not the obligation, to accept the settlement, and Employer shall pay the full
amount of the settlement, less only such portion of the settlement amount that
Employer contests and provides the written reasons why it is not obligated to
pay such portion in settlement. Employee shall have the right to commence an
action against Employer to reimburse Employee for that portion of the settlement
that is reasonably allocable to claims which Employer is obligated to indemnify
hereunder. Employee shall promptly give notice to Employer after Employee has
knowledge that any legal proceeding has been instituted or any claim or other
matter has been
13
<PAGE>
asserted in respect of which indemnification may be sought hereunder, provided
--------
that failure to give such notice shall not preclude indemnification except to
the extent of actual prejudice directly caused by such failure. If Employer,
within a reasonable period of time after receipt of notice of a claim, fails to
assume the defense (including the retention of legal counsel), Employee shall
have the right to undertake the defense, compromise, or settlement on behalf of
and for the account and risk of Employer.
If Employee is required to bring any action to enforce his rights
pursuant to this Paragraph, if Employee prevails, Employee shall also be
entitled to be paid all expenses (including attorneys' fees), in bringing such
action. Employer shall not amend its Certificate of Incorporation or bylaws in
any way that adversely affects Employee's rights under this Paragraph XIII. This
Paragraph XIII shall not apply to any action which involves only claims between
the parties and which is otherwise provided for pursuant to Paragraph XVI.J.
D. Conflicts of Interest. Notwithstanding anything set forth above,
---------------------
if (x) the use of counsel selected by Employer pursuant to Paragraph XIII.C
would present such counsel a conflict of interest or (y) Employer and Employee
shall have reasonably concluded that there may be legal defenses available to
Employee or other employees which are inconsistent with or in conflict with
those available to Employer (collectively, "Conflicts"), Employee shall have the
right to select, subject to Employer's consent (which consent shall not be
unreasonably withheld), and employ separate counsel (at the Employer's expense)
to represent Employee and, solely to the extent required to mitigate the
Conflict, Employer shall not have the right to control the Indemnifiable
Litigation on behalf of Employee. The existence of a Conflict shall not affect
Employer's right to settle or compromise a claim in accordance with the
provisions of Paragraph XIII.C. For purposes of this Paragraph XIII.D, the
parties acknowledge and agree that, with respect to matters set forth in the
Disclosure Schedule: there was no Conflict at the time counsel was selected,
there has been no conflict to date and, based upon the facts available to the
parties to date, the parties do not anticipate a future Conflict. In addition,
Employee may, at his own expense, retain independent counsel to act in an
advisory capacity as to all other matters. Employer shall cause the counsel
which it has selected to consult with Employee's counsel in good faith with
respect to all significant aspects of a claim.
XIV. Covenant Not to Compete. Employee agrees that during the term hereof, and
-----------------------
if his employment is terminated
14
<PAGE>
pursuant to Paragraph XI.A by Employer or other than pursuant to Paragraph XI.B
by Employee, the provisions of the Covenant Not to Compete attached hereto as
Exhibit B shall be effective for the term set forth therein; provided, however,
--------
that if Employee terminates his employment pursuant to Paragraph XI.B(vii)
within thirty (30) months of the date hereof, the provisions of the Covenant Not
to Compete shall also be effective.
XV. Definitions.
-----------
A. For purposes of Paragraph XI.B, "Affiliate" shall have the meaning set
------------------------------
forth in the Securities Exchange Act of 1934.
B. For purposes of Paragraph XII, "Base Salary" shall mean the amounts
-----------------------------
described in paragraphs I.A and I.C and the Items set forth in Exhibit
"A"; such annualized includable compensation for such period to be
determined in accordance with Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code").
C. For purposes of Paragraph XI.B, a "Change in Control" shall mean and
------------------------------
be deemed to have occurred in connection with any of the following
events:
(i) The acquisition, other than from Bernard Salick, M.D., by an
entity, person or group (including all Affiliates of such entity,
person or group, but excluding the Acquiring Company or
affiliates thereof, Bernard Salick, M.D., Leslie F. Bell or the
Family Members of any of the foregoing, and trusts for the
benefit of any of the foregoing described persons or Family
Members or any entity operated, managed or in substantial part
owned by any of them) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
of capital stock of Employer: (a) entitled to exercise 30% or
more of the outstanding voting power of all capital stock of
Employer ("Voting Stock") or (b) equal to 30% or more of the
outstanding Capital Stock of Employer; or
(ii) The commencement by any entity, person, or group (including any
Affiliates of such entity, person or group, but excluding
Employer or an Affiliate of Employer or any entity owned by any
of them) of a tender offer or an exchange offer for more than 30%
15
<PAGE>
of the outstanding Capital Stock irrespective of voting rights;
or
(iii) (A) a merger or consolidation of Employer, other than as approved
by Bernard Salick, M.D., with one or more other corporations as a
result of which the holders of the outstanding Voting Stock
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate thereof) hold
70% or less of the Capital Stock of the surviving or resulting
corporation, or (B) a transfer, other than by Bernard Salick,
M.D., of a majority of the Capital Stock (excluding transfers to
Bernard Salick, M.D., Leslie F. Bell or the Family Members of any
of the foregoing, and trusts for the benefit of any of the
foregoing described persons or Family Members or any entity
operated, managed or in substantial part owned by any of them),
or of a Substantial Portion of the Property, of Employer other
than to an entity of which Employer owns at least 70% of the
Capital Stock.
D. For purposes of Paragraph XV.C, "Family Members" shall mean Employee's
------------------------------
spouse, ancestors, lineal descendants, siblings and their descendants,
aunts and uncles, mother-in-law, father-in-law, sons-in-law,
daughters-in-law, brothers-in-law, sisters-in-law and first cousins;
and a child legally adopted by Employee shall be treated as your child
by blood.
E. For purposes of Paragraph XV.C, "Substantial Portion of the Property
------------------------------
of Employer" shall mean 50% or more of the aggregate book value of the
assets of Employer as set forth on the most recent balance sheet of
Employer, prepared on a consolidated basis, by its regularly employed
accountants.
XVI. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, or in other agreements related to or entered into at
the time of the Merger Agreement, there are no other understandings or
agreements concerning the subject matter hereof between the parties which have
been relied upon or which shall survive
16
<PAGE>
the execution hereof. This Agreement supersedes any and all other agreements or
understandings, oral or written, between the parties concerning the subject
matter set forth herein, including, without limitation, the prior Employment
Agreement of Employee, as amended, except as to accrued but unpaid rights;
provided that in the event the transactions contemplated by the Merger Agreement
- - --------
are not consummated, this Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement is binding on and inures to the benefit of
----------
the parties hereto and their respective heirs, successors, or assigns. This
Agreement may not be assigned by either party, except that, in the event
Employer is adjudicated bankrupt, Employer may assign this Agreement to another
member of the Zeneca Group with the prior written consent of Employee.
D. Gender and Number. As used herein, where the context so indicates,
-----------------
reference to one gender includes the other and the neuter and vice versa, if
applicable under the circumstances. When the context so indicates that such is
the intent, words in the singular include the plural and vice versa.
E. Invalidity and Severability. In the event any provision herein (or
---------------------------
any portion of any provision) contained shall be declared by a court of
competent jurisdiction to be invalid, that provision shall be limited to the
extent necessary to make it enforceable, and, if necessary, severed from the
Agreement. Notwithstanding the unenforceable provision, the remaining
provisions (or portions of any provision), hereof shall be deemed severable
therefrom and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any dispute
-------------------------------------
or claims arising hereunder shall be governed by, and construed according to,
and enforced under the laws of the State of California, without regard to the
conflict of laws provisions of California law. The State and Federal courts
located in Los Angeles, California shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no part of this Agreement be construed in accordance with or governed by
the laws of any other country.
17
<PAGE>
G. Notices. Any notice or demand hereunder shall be given in writing to
-------
each person at the addresses set forth below by personal service or registered
or certified mail, postage prepaid, return receipt requested, or overnight
courier:
1. To Employer at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Employee at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and
15 Westport Street
Manhattan Beach, CA 90266
With copies to:
Marshall B. Grossman, Esq., Bernard Salick, M.D., Leslie Bell
Such addresses may be changed by notice to the other party given as above
provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from any
------
failure to take action on account of such default. No express written waiver
shall be deemed to waive or render unnecessary the consent or approval to or of
any subsequent act.
I. Captions. Section captions used in this Agreement are descriptive and
--------
for convenience only, and shall not affect the construction of this Agreement.
J. Attorneys' Fees. In any proceeding or any action at law or in equity
---------------
commenced hereunder, the prevailing party shall receive its attorneys' fees,
costs and disbursements in addition to any other relief granted. Each party may
be represented by counsel of its choice, even though such counsel may have
represented the other party in matters related to the business of Employer.
K. No Mitigation. Without limiting any other provision hereof, any
-------------
compensation and other benefits received by Employee from any and all sources
other than Employer before or after the expiration or termination of
18
<PAGE>
this Agreement for any reason whatever shall in no way reduce or effect
Employer's obligation to make payments hereunder.
L. Independent Counsel; Interpretation. Each of the parties hereto has
-----------------------------------
been represented by independent counsel in the negotiation and review of this
Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
M. Survival. The provisions of Paragraphs X, XII, XIII, XIV and XVI.F,
--------
G, J and K shall survive any termination of this Agreement.
N. Reimbursement for Negotiation. Employer shall reimburse Employee for
-----------------------------
all professional fees and costs incurred by Employee in the drafting and
negotiation of this Agreement and any amendments or extensions hereto and any
other agreements related to or entered into at the time of the Merger Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
EMPLOYER:
--------
Salick Health Care, Inc.,
a Delaware corporation
By: /s/ Bernard Salick
------------------------------
EMPLOYEE:
--------
/s/ Michael Thomas Fiore
---------------------------------
Michael Thomas Fiore
20
<PAGE>
EXHIBIT A
BENEFIT PLANS OF EMPLOYER IN EFFECT
AS OF DECEMBER 1, 1994
1. Participation in Employer's Management Incentive Compensation Plan.
2. Participation in Employer's Stock Option and Stock Purchase Plan.
3. Participation in Employer's Life Insurance policy.
4. The Salick Health Care, Inc. Salary Savings Plan (401(k) Plan), to which
Employer makes a matching contribution.
5. Participation in Employer's medical, dental, visual and
psychiatric/psychological insurance policies by Employee and immediate
family.
6. Disability and accidental death and dismemberment rights and insurance.
7. Use of company automobile of Employee's choice, selected every three years,
consistent with that currently being provided to Employee, including gas,
maintenance, car telephone, and insurance, and licensing. Employee may, at
his option, acquire the company car that Employee is using for the greater
of 7.5% of the original cost or book value (and Employer will then provide
a replacement car).
21
<PAGE>
EXHIBIT 10.8
AGREEMENT NOT TO COMPETE
------------------------
This Agreement Not to Compete ("Agreement"), dated as of April 5,
1995, among Zeneca Limited, an English company ("Zeneca"), the holder (the
"Stockholder") of the shares of capital stock (the "Shares") of Salick Health
Care, Inc., a Delaware corporation (the "Company") listed on the signature pages
hereof, and the Company.
WHEREAS, in order to induce Zeneca to enter into an agreement and plan
of merger dated as of the date hereof (the "Merger Agreement") with the Company,
Zeneca has requested the Stockholder, and the Stockholder has agreed, to enter
into this Agreement.
WHEREAS, this Agreement is only effective if triggered by Paragraph
XIV of the Employment Agreement dated April 5, 1995 between Stockholder and
Salick Health Care, Inc. (the "Employment Agreement").
WHEREAS, in consideration of an as an inducement and a necessary
prerequisite to Zeneca's agreement to acquire the Shares of the Stockholder
pursuant to the Merger Agreement, the Stockholder agrees to undertake and
covenant with the Company and Zeneca not to compete with the business of the
Company on the terms herein specified.
<PAGE>
Capitalized terms used but not defined herein have the respective
meanings attached thereto in the Merger Agreement.
Now, therefore, the parties hereto agree as follows:
1. Covenant. During the Non-Compete Period, as hereinafter defined,
--------
and within the Non-Compete Geographic Limits, as hereinafter defined, the
Stockholder agrees, except for those activities permitted pursuant to Paragraph
II.B of the Employment Agreement, not to be employed by, be an officer, agent,
or director of, or consult with or directly or indirectly own, manage,
participate in, operate or control, any interest in any business which competes
with the business of the Company or any of its Subsidiaries, as such business is
defined below (the "Business"); provided that the foregoing shall not prevent
the Stockholder from making and holding investments of up to 5% of the equity of
any entity engaged in such Business, if such equity is listed on a national
securities exchange or regularly traded in the over-the-counter market.
The Non-Compete Period shall be a period commencing on the date it is
triggered pursuant to the Employment Agreement and ending on a date which is
thirty (30) months from the Commencement Date of the Employment Agreement (as
defined therein).
2
<PAGE>
The Non-Compete Geographic Limits are defined as the counties listed
on Schedule A hereto. With respect to each listed county in the State of
California set forth above, this covenant not to compete is intended as a
separate covenant. If any one of such covenants is declared invalid for any
reason, this determination shall not affect the validity of the remainder of the
covenants or any covenant covering territory other than the State of California.
The other covenants in the non-competition provision shall remain in effect as
if the provision had been executed without the invalid covenants. The parties
hereby declare that they intend that the remaining covenants of the provision
continue to be effective without any covenants that have been declared invalid.
The term "Business" shall have the meaning set forth in Section 1.1
("Core Business") of the Governance Agreement dated December 22, 1994.
2. Solicitation of Employees. During the Non-Compete Period and
-------------------------
within the Non-Compete Geographic Limits, the Stockholder shall not, without the
prior written consent of the Company, solicit or assist in the solicitation of
any employee or former employee of the Company or its Subsidiaries unless such
person shall have ceased to be employed by the Company or such Subsidiary, other
than as a result of the Stockholder's actions. The parties acknowledge that
mere knowledge by a Company employee of the
3
<PAGE>
existence of a competing business by Stockholder shall not constitute a
solicitation of such employee.
3. Reasonableness of Covenants. The Stockholder expressly
---------------------------
understands and agrees that although the Company and Zeneca consider the
restrictions contained in Paragraph 1 and 2 above to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against the Stockholder, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
4. Injunctive Relief and Specific Performance. The Stockholder
------------------------------------------
acknowledges and agrees that Zeneca's and the Company's remedies at law for
breach of any of the provisions of this Agreement would be inadequate and, in
recognition of this fact, the Stockholder agrees that, in the event of such a
breach, in addition to any remedies at law, the Company and Zeneca, or either,
without posting any
4
<PAGE>
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available in any county in which
the Company or its Subsidiaries are engaged in the Business or from which they
derive a reasonable amount of their Business at the time of the breach. The
Stockholder further acknowledges that should the Stockholder violate any of the
provisions of this Agreement, it will be difficult to determine the amount of
damages resulting to the Company and in addition to any other remedies which it
may have, the Company and Zeneca or either shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages.
5. Acknowledgment. Each of the Stockholder, Zeneca and the Company
--------------
acknowledges and agrees that the covenants contained in Agreement have been
negotiated in good faith by the parties, are reasonable and are not more
restrictive or broader than necessary to protect the interests of the parties
hereto, and would not achieve their intended purpose if they were on different
terms or for periods of time shorter than the periods of time provided herein or
applied in more restrictive geographical areas than are provided herein. Each
party further acknowledges and agrees that Zeneca would not enter into the
Merger Agreement and the transactions contemplated thereby
5
<PAGE>
(including, without limitation, the acquisition of the shares of the Company
outstanding prior to the Merger from the Stockholder pursuant to the Merger
Agreement) but for the covenants contained in this Agreement and that such
covenants are essential to protect the value of the Business. Each party agrees
further that the transactions of which this Agreement is a part involves more
than $100,000.
6. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, there are no other understandings or agreements
concerning the subject matter hereof between the parties which have been relied
upon or which shall survive the execution hereof. This Agreement supersedes any
and all other agreements or understandings, oral or written, between the parties
concerning the subject matter set forth herein. Notwithstanding the foregoing,
in the event that the transactions contemplated by the Merger Agreement are not
consummated, this Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement may not, in whole or in part, be
----------
assigned by any party.
6
<PAGE>
D. Gender and Number. As used herein, where the content so
-----------------
indicates, reference to one gender includes the other and the neuter and vice
versa, if applicable under the circumstances. When the context so indicates
that such is the intent, words in the singular include the plural and vice
versa.
E. Invalidity and Severability. In the event any provision herein
---------------------------
contained shall be declared by a court of competent jurisdiction to be invalid,
that provision shall be limited to the extent necessary to make it enforceable,
and if necessary, severed from the Agreement. Notwithstanding the unenforceable
provision, the remaining provisions hereof shall be deemed severable therefrom
and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any
-------------------------------------
dispute or claims arising hereunder shall be governed by, and construed
according to, and enforced under the laws of the State of Delaware, without
regard to the conflict of laws provisions of Delaware law. The State and
Federal courts located in Delaware shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no
7
<PAGE>
part of this Agreement be construed in accordance with or governed by the laws
of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing
-------
at the address set forth below by personal service or registered or certified
mail, postage prepaid, return receipt requested, or overnight courier:
1. To Company at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Zeneca at:
15 Stanhope Gate
London W1Y 6LN
3. To the Stockholder at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and:
15 Westport Street
Manhattan Beach, CA 90266
With copies to Marshall Grossman, Dr. Bernard Salick and Leslie
Bell at 8201 Beverly Blvd., Los Angeles, CA 90048-4520.
Such address may be changed by notice to the other party given as
above provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from
------
any failure to take action on account of such default. No express written
wavier shall be deemed to waive or render unnecessary the consent or approval to
or of any subsequent act.
8
<PAGE>
I. Captions. Section captions used in this Agreement are descriptive
--------
and for convenience only, and shall not affect the construction of this
agreement.
J. Independent Counsel; Interpretation. Each of the parties hereto
-----------------------------------
has been represented by independent counsel in the negotiation and review of
this Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
9
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
ZENECA LIMITED
an English company
By: /s/ William C. Lucas
--------------------------------------
William C. Lucas
SALICK HEALTH CARE, INC., a
Delaware Corporation
By: /s/ Bernard Salick
--------------------------------------
Bernard Salick
STOCKHOLDER:
By: /s/ Michael Thomas Fiore
--------------------------------------
Michael Thomas Fiore
10
<PAGE>
SCHEDULE A
California
- - ----------
Alameda County, Alpine County, Amador County, Butte County, Calaveras County,
Colusa County, Contra Costa County, Del Note County, El Dorado County, Fresno
County, Glenn County, Humboldt County, Imperial County, Inyo County, Kern
County, Kings County, Lake County, Lassen County, Los Angeles County, Madera
County, Marin County, Mariposa County, Mendocino County, Merced County, Modoc
County, Mono County, Monterey County, Napa County, Nevada County, Orange County,
Placer County, Plumas County, Riverside County, Sacramento County, San Benito
County, San Bernardino County, San Diego County, San Francisco County, San
Juaquin County, San Luis Obispo County, San Mateo County, Santa Barbara County,
Santa Clara County, Santa Cruz County, Shasta County, Sierra County, Siskiyou
County, Solano County, Sonoma County, Stanislaus County, Sutter County, Tehama
County, Trinity County, Tulare County, Tuolumne County, Ventura County, Yolo
County, Yuba County
Delaware
- - --------
Kent County, New Castle County, Sussex County
Florida
- - --------
Bradford County, Brevard County, Charlotte County, Citrus County, Columbia
County, De Soto County, Gadsden County, Gilchrist County, Glades County,
Hernando County, Hillsborough County, Lafayette County, Lake County, Lee County,
Leon County, Madison County, Nassua County, Okaloosa County, Okeechobee County,
Orange County, Palm Beach County, Pasco County, Santa Rosa County, Suwannee
County, Walton County
Kansas
- - ------
Brown County, Chase County, Clark County, Cloud County, Cowley County, Crawford
County, Decatur County, Douglas County, Elk County, Finney County, Franklin
County, Geary County, Greeley County, Greenwood County, Kearny County, Lane
County, Leavenworth County, Lyon County, Marion County, Marshall County, Meade
County, Mitchell County, Neosho County, Osborne County, Phillips County, Pratt
County, Reno County, Republic County, Rush County, Saline County, Scott County,
Sedgwick County, Shawnee County, Sherman County, Sumner County, Thomas County,
Wichita County, Wyandotte County
11
<PAGE>
Missouri
- - --------
Adair County, Andrew County, Atchison County, Audrain County, Barry County,
Barton County, Bates County, Benton County, Bollinger County, Boone County,
Buchanan County, Butler County, Caldwell County, Callaway County, Camden County,
Cape Girardeau County, Carroll County, Carter County, Cass County, Cedar County,
Charlton County, Christian County, Clark County, Clay County, Clinton County,
Cole County, Cooper County, Crawford County, Dade County, Dallas County, Daviess
County, De Kalb County, Dent County, Douglas County, Dunklin County, Franklin
County, Gasconade County, Gentry County, Greene County, Grundy County, Harrison
County, Henry County, Hickory County, Holt County, Howard County, Howell County,
Iron County, Jackson County, Jasper County, Jefferson County, Johnson County,
Knox County, Laclede County, Lafayette County, Lawrence County, Lewis County,
Lincoln County, Linn County, Livingston County, Macon County, Madison County,
Maries County, Marion County, McDonald County, Mercer County, Miller County,
Mississippi County, Moniteau County, Monroe County, Montgomery County, Morgan
County, New Madrid County, Newton County, Nodaway County, Oregon County, Osage
County, Ozark County, Pemiscot County, Perry County, Pettis County, Phelps
County, Pike County, Platte County, Polk County, Pulaski County, Putnam County,
Ralls County, Randolph County, Ray County, Reynolds County, Ripley County,
Saline County, Schuyler County, Scotland County, Scott County, Shannon County,
Shelby County, St. Charles County, St. Clair County, St. Francois County, St.
Louis County, Ste. Genevieve County, Stoddard County, Stone County, Sullivan
County, Taney County, Texas County, Vernon County, Warren County, Washington
County, Wayne County, Webster County, Worth County, Wright County
New Jersey
- - ----------
Atlantic County, Bergen County, Burlington County, Camden County, Cape May
County, Cumberland County, Essex County, Gloucester County, Hudson County,
Hunterdon County, Mercer County, Middlesex County, Monmouth County, Morris
County, Ocean County, Passaic County, Salem County, Somerset County, Sussex
County, Union County, Warren County
Pennsylvania
- - ------------
Adams County, Allegheny County, Armstrong County, Beaver County, Bedford County,
Berks County, Blair County, Bradford County, Bucks County, Butler County,
Cambria County, Cameron County, Carbon County, Centre County, Chester County,
Clarion County, Clearfield County, Clinton County, Columbia
12
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County, Crawford County, Cumberland County, Dauphin County, Delaware County, Elk
County, Erie County, Fayette County, Forest County, Franklin County, Fulton
County, Greene County, Huntingdon County, Indiana County, Jefferson County,
Juniata County, Lackawanna County, Lancaster County, Lawrence County, Lebanon
County, Lehigh County, Luzerne County, Lycoming County, McKean County, Mercer
County, Mifflin County, Monroe County, Montgomery County, Montour County,
Northampton County, Northumberland County, Perry County, Philadelphia County,
Pike County, Potter County, Schuylkill County, Snyder County, Somerset County,
Sullivan County, Susquehanna County, Tioga County, Union County, Venango County,
Warren County, Washington County, Wayne County, Westmoreland County, Wyoming
County, York County
Virginia
- - --------
Albemarle County, Alleghany County, Bath County, Bland County, Buckingham
County, Campbell County, Caroline County, Carroll County, Fairfax County, Floyd
County, Fluvanna County, Gloucester County, Isle of Wright County, King and
Queen County, Louisa County, Madison County, Mecklenburg County, Nelson County,
Northampton County, Page County, Patrick County, Powhatan County, Prince William
County, Pulaski County, Rappahannock County, Roanoke County, Rockbridge County,
Shenandoah County, Southampton County, Sussex County, Tazewell County, Wise
County, Wythe County
13
<PAGE>
EXHIBIT 99.1
Governance Agreement. The Company is party to a Governance Agreement, dated
as of December 22, 1994, as amended (the "Governance Agreement"), with Zeneca
and Dr. Bernard Salick, the provisions of which become effective immediately
upon the consummation of the Merger and terminates upon the earlier of the date
upon which (1) the Company has exercised the Call and has paid to the
Depositary (as defined below) the aggregate Call Price and (2) the Put Period
has expired and the Company has paid the Depositary the Put Price for all
shares of Special Common Stock with respect to which the Put has been exercised
(the "Termination Date").
The Governance Agreement provides (and the By-Laws will provide) that the
Company will not take or agree to take (nor permit its subsidiaries to take or
agree to take), directly or indirectly, certain specified actions without the
approval of a majority of the Board present and voting at the meeting. The
majority must include at least one Common Stock Director who at such time is an
employee of Zeneca (or certain of its affiliates) and at least one Special
Common Stock Director who was an executive officer of the Company prior to the
Merger. Those actions include, without limitation (and, in certain cases,
subject to specified exceptions): (i) adoption, repeal or modification of any
business plan of the Company (as a business plan for fiscal year 1995, the
Governance Agreement contemplates a business plan consistent with the Company's
1995 budget, projections derived from which are set forth under "MERGER
PROPOSAL--Certain Projections"); (ii) authorization, sale, distribution or
other issuance of, or the granting of rights with respect to, any securities of
the Company, except for any issuances of Special Common Stock pursuant to the
terms of the Replacement Options (as defined below), (iii) a repurchase,
redemption or exchange of any shares of capital stock of the Company, other
than as contemplated by the terms of the Special Common Stock or in connection
with the exercise of the Replacement Options, (iv) amendment of the Certificate
of Incorporation or the By-Laws of the Company, (v) incurrence of debt (see
"Recommendation of the Company's Board of Directors"), (vi) the liquidation of
(or investment in) marketable securities, (vii) acquisition or sale of any
interest in a business or assets exceeding certain dollar thresholds, (viii)
the execution or amendment of certain agreements creating a liability, or
requiring payments, over certain dollar thresholds, (ix) entry into a line of
business other than providing diagnostic and therapeutic services to patients
with complex chronic illnesses requiring sophisticated long-term care, (x) the
making of any investment in or entry into joint ventures or partnerships, (xi)
the initiation or settlement of certain litigation matters, (xii) the taking of
certain extraordinary corporate actions (such as the sale of all or
substantially all of the Company's assets, a merger or recapitalization of the
Company, filing of a bankruptcy petition and the like), (xiii) except for any
transaction contemplated by, authorized by or described in the Employment
Agreements (defined below), the appointment or removal of or transactions by
the Company or its subsidiaries with any senior officer of the Company or any
transactions by the Company with any of its directors or any of its
subsidiaries or their affiliates or with any of Zeneca or certain of its
affiliates, (xiv) the creation and composition of any committee of the Board of
Directors, (xv) the adoption or amendment of any employee plan or arrangement
or the execution or amendment of or supplement to any collective bargaining or
union contract, (xvi) the payment of dividends or distributions, other than as
contemplated by the Merger Agreement, (xvii) licensing or sublicensing of
material intellectual property, (xviii) any change in the Company's fiscal
year, and (xix) the appointment or termination of the engagement of the
Company's accountants.
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<PAGE>
Pursuant to the terms of the Governance Agreement, Zeneca is required to
designate the persons who will serve as the five initial Common Stock
Directors, at least one of whom must be an independent director (as defined in
Section 6(c) of Schedule D to the By-laws of the National Association of
Securities Dealers, Inc. ("NASD")). Thereafter, Zeneca may (but is not
required) to nominate those persons who will stand for election as the
successors to the Common Stock Directors, at least one of whom at all times
will be an independent director. The five persons designated by Zeneca to serve
as the initial Common Stock Directors are Robert C. Black, Dr. Michael G.
Carter, John G. Goddard, Dr. Thomas F.W. McKillop and Dr. Clifford Richard Guy.
See "Conduct of the Company After the Merger." Pursuant to the Governance
Agreement, the Company has designated Dr. Salick, Leslie F. Bell, Michael T.
Fiore, Barbara Bromley-Williams and Thomas Mintz, M.D. as the persons to serve
as the five initial Special Common Stock Directors. See "ELECTION OF
DIRECTORS." Thereafter, a majority of the Special Common Stock Directors in
office will nominate those persons who will stand for election as the
successors to the Special Common Stock Directors, at least one of whom will, at
all times, be an independent director.
Upon the expiration of the term of directorship of those persons constituting
the Board immediately after the Effective Time, and thereafter upon the
expiration of the term of directorship of each successor thereto, the Company
will nominate the persons (and only those persons) selected in the manner
described above as the group of nominees proposed by the Board of Directors of
the Company for election to the Board at each meeting of the stockholders of
the Company being held for the election of directors, will recommend to the
stockholders of the Company each such nominee's election to the Board and
solicit proxies for each such nominee from all holders of voting securities of
the Company entitled to vote thereon.
The Governance Agreement further provides that the Company will have an
executive committee, an audit committee and a compensation committee, each
consisting of an equal number of Common Stock Directors and Special Common
Stock Directors. The Governance Agreement further requires (and the By-Laws
will permit) the establishment of an operational committee, also consisting of
an equal number of Common Stock Directors and Special Common Stock Directors,
to which committee the Board of Directors may delegate the power to approve the
taking of certain of the specified actions described above, as the Board
determines is appropriate, which approval otherwise requires approval by a
majority of the Board, including one Common Stock Director who is then an
employee of Zeneca or certain of its affiliates and one Special Common Stock
Director who was an executive officer of the Company prior to the Merger.
The Governance Agreement further provides that, at the written request of
Zeneca, the Company will take any action required to allow Zeneca to exercise
the Call. The members of the Board will use their best efforts, consistent with
their fiduciary duties to the Company, to do all necessary and useful actions
in connection with the exercise by Zeneca of the Call.
Zeneca has the right (but not the obligation) under the Governance Agreement
to designate (subject to the Company's approval) up to three employees of
Zeneca or its affiliates to be employed by the Company after the Closing, one
of whom would be an executive officer and the other two of whom would be staff-
level employees in the area of financial management and management information
systems. The salary and benefits of one staff-level employee will be paid by
the Company and the salary and benefits of the other two employees will be paid
by Zeneca, subject to review of the arrangements within one year after the
Merger.
Under the Governance Agreement, the Company will be subject to certain
continuing covenants including without limitation advising and consulting with
Zeneca as to the business of the Company and permitting Zeneca (or a
representative thereof) to visit and inspect any of the properties of the
Company or any of its subsidiaries, at such reasonable times and as often as
Zeneca may reasonably request. Further, the Company is required to deliver
copies of its monthly, quarterly and year-end financial and other operating
statements to Zeneca. Each of the parties to the Governance Agreement has
agreed to hold in confidence and not use (and use its best efforts to cause its
affiliates, shareholders, directors, officers, employees, accountants, counsel,
consultants, advisors and other agents to hold in confidence and not use),
subject to certain specified exceptions, all confidential documents and
information received from the other parties to the Governance Agreement.
21
<PAGE>
Zeneca may assign its rights, but not its obligations, under the Governance
Agreement to any Zeneca Group entity and may assign its rights and obligations
under the Governance Agreement to Zeneca PLC or Zeneca Holdings, Inc., a
Delaware corporation and an indirect wholly-owned subsidiary of Zeneca, without
the consent of the Company or Dr. Salick or it may assign its rights and
obligations under the Governance Agreement to any other Zeneca Group entity
with the consent of both Dr. Salick and the Company, such consent not to be
unreasonably withheld.
Employment Agreements. The Company is presently party to employment
agreements with each of Dr. Salick and Messrs. Bell and Fiore. The terms
thereof are summarized under "EXECUTIVE COMPENSATION--Employment Agreements"
below.
In connection with the Merger Agreement, the Company and Dr. Salick have
entered into a Second Amended and Restated Employment Agreement, dated as of
December 22, 1994 (the "Salick Agreement"), which will, on the consummation of
the Merger, supersede the existing employment agreement between the Company and
Dr. Salick. The compensation and benefits under the Salick Agreement are
substantially the same as those contained in Dr. Salick's existing employment
agreement. See "EXECUTIVE COMPENSATION--Employment Agreements" below. The
Salick Agreement provides that Dr. Salick will be employed as the Chairman of
the Board, Chief Executive Officer and President and as Medical Director of the
Company's facilities for a period of five years from the Closing. The Salick
Agreement provides for an annual salary of $878,320 (increased annually by an
amount at least equal to the annual increase in the All Urban Consumers Los
Angeles-Long Beach-Anaheim consumer price index), an annual bonus equal to the
greater of that determined by the Executive Compensation Committee, the Board
of Directors of the Company or as calculated as set forth in the Salick
Agreement (which formula provides that the first $300,000 of net profits of the
Company are payable to Dr. Salick as a bonus), continued participation in the
Company's Management Incentive Compensation Plan ("MICP"), and payment of
certain professional fees, expenses and benefits. The Salick Agreement may be
terminated by the Company for "Good Cause" as therein defined which includes,
without limitation, misappropriation of Company funds; repeated willful
misconduct or a single act of wanton and egregious misconduct; conviction of a
felony; engaging in intentional acts of fraud; engaging in any business,
profession or occupation which is competitive with the business of the Company;
a violation of the Company's Employee Handbook or Personnel Policy & Procedure
Manual or the Policy on the Ethical Conduct of Business developed by Zeneca;
and breach of certain covenants regarding the transfer of any patentable
inventions and the information with respect to the same which may be developed
by Dr. Salick. The Salick Agreement may be terminated by Dr. Salick for "Good
Reason" which includes, without limitation, a reduction in his base salary; a
change in the principal offices of the Company (other than to facilities of a
substantially similar size and quality in West Los Angeles or Santa Monica,
California); a reduction in the Company's employees or working hours by at
least thirty percent (which is not caused by a significant decline in the
economic performance of the Company); a material adverse change in the
operations, policies, funding, procedures, practices or professionalism
relating to the overall quality of patient care by the Company which is
inconsistent with the Company's past or existing practices; the name of the
Company being changed to not include the name "Salick;" certain reductions in
benefits to Dr. Salick or a change in the calculations of his bonus; a breach
by the Company of the Salick Agreement; a change in control of the Company
during the first thirty months after the Closing; and the reasonable
determination by Dr. Salick that, as a result of changes initiated by Zeneca
that significantly adversely affect his position, he is unable to exercise the
nature or scope of his authority, duties, powers, or functions that he
exercised at the time of execution of the Salick Agreement. If Dr. Salick's
employment is terminated during the term thereof for any reason other than Good
Cause or if Dr. Salick terminates the Salick Agreement for Good Reason, then he
will be entitled to severance pay in an amount equal to 299% of his "Base
Salary" (as therein defined). The Company has agreed to indemnify Dr. Salick
for any liabilities or losses incurred by him in connection with any litigation
relating to actions or omissions prior to the Effective Time to which he is a
party by reason of being an officer, director, employee or agent of the Company
or based on or arising out of his serving in such capacities, other than
litigation with respect to which Dr. Salick had actual knowledge and did not
disclose pursuant to the Merger Agreement. As to actions taken or omitted to be
taken after the Effective Time, the
22
<PAGE>
Company will indemnify Dr. Salick for any liabilities or losses incurred by him
in connection with any litigation to which he is made a party by reason of, or
based on or arising out of his services as, an officer, director, employee or
agent of the Company or out of certain tax audits, other than any litigation
arising from repeated willful misconduct by Dr. Salick.
As required under the Salick Agreement, Dr. Salick and the Company entered
into an Agreement Not to Compete which prohibits him, for a period of thirty
months from the Closing, from being employed by or otherwise participating in
any business which competes with the business of the Company within certain
geographical limits and from soliciting employees or former employees without
the prior written consent of the Company. Although entered into on December 22,
1994, the Agreement Not to Compete only becomes effective after the Effective
Time and then only in the event that the employment of Dr. Salick is terminated
by the Company for Good Cause or is terminated by him for any reason other than
Good Reason (other than termination for Zeneca-initiated changes included
within the definition of Good Reason).
As a condition to the obligations of Zeneca to proceed with the Closing, the
Company shall have also entered into employment agreements and agreements not
to compete with each of Leslie F. Bell and Michael T. Fiore in substantially
the same form as the Salick Agreement (collectively, the Salick Agreement and
such other employment agreements are referred to herein as the "Employment
Agreements"). The compensation and benefits under these agreements will be
substantially the same as those contained in Messrs. Bell's and Fiore's
existing employment agreements. See "EXECUTIVE COMPENSATION--Employment
Agreements." The Employment Agreement to be entered into with Mr. Bell will
provide for his employment as Executive Vice President, Chief Financial
Officer, Secretary and General Counsel to the Company at an annual salary of
$392,893 (with cost of living adjustments) and the Employment Agreement to be
entered into with Mr. Fiore will provide for his employment as Executive Vice
President and Chief Operating Officer of the Company at an annual salary of
$307,528 (with cost of living adjustments). Each of Messrs. Bell and Fiore will
be entitled to continued participation in the MICP. On the consummation of the
Merger, the employment agreements between the Company and each of Messrs. Bell
and Fiore will be superseded by the Employment Agreements.
23
