<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11666
GENESIS HEALTH VENTURES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
101 East State Street
Pennsylvania Kennett Square, PA 19348 06-1132947
(State or other jurisdiction of (Address of principal executive (I.R.S. Employer
incorporation or organization) offices including zip code) Identification Number)
(610) 444-6350
(Registrant's telephone number, including area code)
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
<S> <C>
Common Stock, par value $.02 per share New York Stock Exchange
9 3/4% Senior Subordinated Debentures due 2005 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (ii) has been subject to such filing
requirements for the past 90 days. YES _X_ NO__
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of voting stock held by non-affiliates of
the Registrant is $281,820,464 (1). As of December 14, 1998, 35,227,558 shares
of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific sections incorporated are identified under applicable items herein)
Certain exhibits to the Company's Current Report on Form 8-K and 8-K/A
dated October 10, 1997, July 11, 1996, May 3, 1996, November 30, 1995, August
18, 1995, November 30, 1993 and September 19, 1993, Registration Statement on
Form S-1 (File No. 33-4007), Registration Statement on Form S-1 (File No.
33-51670), Registration Statement on Form S-3 (file No. 33-9350), Registration
Statement on Form S-4 (File No. 333-15267), Registration Statement on Form S-4
(File No. 333-58221), Registration Statement on Form S-8 (File No. 333-53043),
Annual Reports on Form 10-K for the fiscal years ended September 30, 1996, 1995,
1993 and 1992, and Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998, March 31, 1997, March 31, 1996 and March 31, 1994, Registration
Statement on Form 8-A dated May 11, 1995, Filing on Schedule 13D on May 6, 1998
and the Tender Offer Statement on Schedule 14D-1 filed by Genesis Eldercare
Corp. on June 20, 1997 are incorporated by reference as Exhibits in Part IV of
this Report.
- ----------------------------
(1) The aggregate dollar amount of the voting stock set forth equals the number
of shares of the Company's Common Stock outstanding, reduced by the amount
of Common Stock held by officers, directors and shareholders owning in
excess of 10% of the Company's Common Stock, multiplied by the last reported
sale price for the Company's Common Stock on December 14, 1998. The
information provided shall in no way be construed as an admission that any
officer, director or 10% shareholder in the Company may or may not be deemed
an affiliate of the Company or that he/it is the beneficial owner of the
shares reported as being held by him/it, and any such inference is hereby
disclaimed. The information provided herein is included solely for
recordkeeping purposes of the Securities and Exchange Commission.
1
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information with respect to the
Directors of the Company. Information concerning certain Executive Officers of
the Company was set forth in Item 4.1 of this Form 10-K filed with Commission on
December 28, 1998.
Jack R. Anderson (age 73) has served as a director of the Company since
November 1998. Since 1982, Mr. Anderson has been President of Calver
Corporation, a Dallas based health care consulting and investing firm. From
September 1981 until May 1982, Mr. Anderson served as President of Manor Care,
Inc. From 1970 until 1981, Mr. Anderson served as President and later as
Chairman of Hospital Affiliates International, Inc., a hospital management
company in Nashville. Mr. Anderson is a member of the Board of Directors of
Horizon Health Corporation and PacifiCare Health Systems, Inc.
Richard R. Howard (age 49) has served as a director of the Company
since its inception, as Vice President of Development from September 1985 to
June 1986, as President and Chief Operating Officer from June 1986 to April
1997, as President from April 1997 to November 1998 and as Vice Chairman since
November 1998. Mr. Howard's background in healthcare includes two years as the
Chief Financial Officer of Health Group Care Centers ("HGCC"). Mr. Howard's
experience also includes over ten years with Fidelity Bank, Philadelphia,
Pennsylvania and one year with Equibank, Pittsburgh, Pennsylvania. Mr. Howard is
a graduate of the Wharton School, University of Pennsylvania, where he received
a Bachelor of Science degree in Economics in 1971. Mr. Howard is a member of the
Board of Directors of The Multicare Companies, Inc. ("Multicare").
Samuel H. Howard (age 59) has served as a director of the Company since
March 1988. He is the founder and chairman of Xantus Corporation and the founder
and President of Phoenix Communications Group, Inc. and Phoenix Holdings, Inc.
all of which are based in Nashville, Tennessee. Mr. Howard's past corporate and
operations experience in the healthcare industry include having served as the
Senior Vice President of Public Affairs for Hospital Corporation of America from
August 1981 to January 1990, Vice President and Treasurer for Hospital
Affiliates International Inc., and Vice President of Finance and Business for
Meharry Medical College. In addition, Mr. Howard was a financial analyst for
General Electric and a White House Fellow with U.S. Ambassador Arthur Goldberg.
Mr. Howard is a member of the Board of Directors of O'Charley's Inc.
Richard R. Howard and Samuel H. Howard are not related.
Michael R. Walker (age 50) is the founder of the Company and has served
as Chairman and Chief Executive Officer of the Company since its inception. In
1981, Mr. Walker co-founded HGCC. At HGCC, he served as Chief Financial Officer
and, later, as President and Chief Operating Officer. Prior to its sale in 1985,
HGCC operated nursing homes with 4,500 nursing beds in 12 states. From 1978 to
1981, Mr. Walker was the Vice President and Treasurer of AID Healthcare Centers,
Inc. ("AID"). AID, which owned and operated 20 nursing centers, was co-founded
in 1977 by Mr. Walker as the nursing home division of Hospital Affiliates
International. Mr. Walker holds a Master of Business Administration degree from
Temple University and a Bachelor of Arts in Business Administration from
Franklin and Marshall College. Mr. Walker has served as Chairman of the Board of
Trustees of ElderTrust since its inception in January 1998 and has served as
Chairman of the Board of Directors of Multicare since October 1997.
Roger Lipitz (age 56) has served as a director of the Company since
March 1994. From January 1994 until January 1996, Mr. Lipitz served on a
consulting basis as Director of Government Relations of the Company. From 1969
until its acquisition by the Company in 1993, Mr. Lipitz served as Chairman of
the Board of Meridian Healthcare, Inc., a Maryland based long-term care company
which operated over 5,000 beds and related businesses. Mr. Lipitz is a past
president of the American Health Care Association, Health Facilities Association
of Maryland and the National Council of Health Care Services. Mr. Lipitz is a
member of the Board of Directors of Blue Cross and Blue Shield of Maryland.
2
<PAGE>
Stephen E. Luongo (age 51) has served as a director of the Company
since June 1985. He is a Partner in the law firm of Blank Rome Comisky &
McCauley LLP. Blank Rome Comisky & McCauley LLP serves as outside legal counsel
for the Company.
Alan B. Miller (age 61) has served as a director of the Company since
October 1993. Since 1978, he has been Chairman of the Board, President and Chief
Executive Officer of Universal Health Services, Inc., a Pennsylvania based
health services company. Prior thereto, Mr. Miller was Chairman of the Board,
President and Chief Executive Officer of American Medicorp, Inc. Mr. Miller is
Chairman of the Board of Trustees of Universal Health Realty Income Trust and a
member of the Board of Directors of CDI Corp. and Penn Mutual Life Insurance
Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% shareholders
are required by the Commission regulation to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were complied with, except that
Robert Reitz, Richard R. Howard, Barbara Hauswald, Fred Nazem and Vince Barnaba,
each filed a late report on Form 4.
3
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding the
compensation paid to the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company for services rendered in
all capacities for fiscal 1998, fiscal 1997 and fiscal 1996.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------ ------------
Name and Position Fiscal Option
With the Company Year Salary (2) Bonus (3) Awards (3)(4) All Other Compensation(1)
---------------- ---- ---------- --------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Walker 1998 $626,931 $ 0 0 $11,997
Chairman and Chief 1997 521,621 0 200,000 23,673
Executive Officer 1996 450,329 0 0 7,844
Richard R. Howard 1998 $376,924 $ 0 67,900 $ 9,054
Vice Chairman and Director 1997 340,710 0 9,000 15,829
1996 307,035 0 67,000 6,875
David C. Barr 1998 $311,539 $ 0 0 $ 7,767
Vice Chairman 1997 273,333 0 18,500 8,662
1996 256,095 53,000 2,200
George V. Hager, Jr. 1998 $287,616 $ 0 0 $ 3,787
Senior Vice President and 1997 253,557 5,159 15,000 5,961
Chief Financial Officer 1996 224,994 4,143 45,000 3,247
Michael G. Bronfein 1998 $267,306 $ 0 10,000 $ 3,606
President, 1997 250,000 0 0 0
NeighborCare(SM) (5) 1996 65,032 0 75,000 0
</TABLE>
- ---------------
(1) Represents the Company's matching contribution under the 401(k), Profit
Sharing Plan, Execuflex Plan and executive insurance policies.
(2) Includes compensation deferred under the Company's 401(k), Profit Sharing
Plan, Execuflex Plan and other arrangements with the Company; does not
include other payments made by the Company under the Company's 401(k),
Profit Sharing Plan and Execuflex Plan.
(3) Under the Company's incentive compensation program, stock options issued
under the Employee Stock Option Plan are the sole form of incentive
compensation to most eligible employees, including the Company's executive
officers.
(4) Does not include 100,000, 42,500, 45,000 and 37,500 stock options Messrs.
Walker, Howard, Barr and Hager forfeited, respectively.
(5) Mr. Bronfein joined the Company on June 5, 1996.
4
<PAGE>
Employment Agreements
The Company entered into new employment agreements, effective August
12, 1998, with Michael R. Walker as its Chairman and Chief Executive Officer,
Richard R. Howard and David C. Barr as its Vice Chairmen and George V. Hager,
Jr., as its Senior Vice President and Chief Financial Officer. The agreement
with Mr. Walker currently expires on August 12, 2003; the agreements with
Messrs. Howard, Barr and Hager each currently expire on August 12, 2001. Unless
notice of non-renewal is given by two-thirds of the entire Board of Directors,
the current term of Mr. Walker's agreement shall automatically extend an
additional year beginning on the anniversary thereof in 2001, and the agreements
for Messrs. Barr, Howard and Hager extend an additional year beginning on the
anniversary thereof in 1999. The annual base salaries of Messrs. Walker, Howard,
Barr and Hager currently are $650,000, $400,000, $333,000 and $295,000,
respectively, and are reviewable by the Company's Board of Directors at least
annually. The agreements may be terminated by the Company at any time for Cause
(as defined), upon the vote of not less than two-thirds of the entire membership
of the Company's Board of Directors. Each Genesis Executive may terminate his
employment agreement upon notice to the Company of the occurrence of certain
events, including an election by the Company not to renew the term of the
agreement, as described above. In the event that the Company terminates the
Genesis Executive's employment agreement without Cause, or the Genesis Executive
terminates his employment agreement as described in the preceding sentence, Mr.
Walker is entitled to severance compensation equal to the greater of the
remainder of the term of the agreement or three years average base salary plus
the value of stock options (using a Black-Scholes valuation method) granted
during such period and Messrs. Barr, Howard, and Hager are entitled to severance
compensation equal to three years base salary plus the value of stock options
(using a Black-Scholes valuation method) and cash bonus granted during such
period. In each case, the value of such stock options and cash bonus may not
exceed 100% of such base salary. Messrs. Walker, Barr and Howard are entitled to
certain insurance benefits. If a Genesis Executive becomes disabled, he will
continue to receive all of his compensation and benefits so long as such period
of disability does not exceed 12 consecutive months or shorter period
aggregating 12 months in any 24 month period. Each employment agreement also
contains provisions which are intended to limit the Genesis Executive from
competing with the Company throughout the term of the agreement and for a period
of two years thereafter. In addition, under the Senior Executive Employee Stock
Ownership Program, the Company may make loans to the Genesis Executives to
maintain a predetermined stock ownership position in the Company.
The Company entered into an employment agreement, effective November
11, 1998, with Michael G. Bronfein as President and Chief Executive Officer of
Neighborcare pharmacies, a wholly-owned subsidiary of the Company. The Company
has consolidated its pharmacy, medical supply and infusion business under the
brand name "NeighborCare," and Mr. Bronfein is the president of all subsidiaries
of the Company which do business as NeighborCare. The agreement with Mr.
Bronfein currently expires on November 11, 2001. The annual base salary of Mr.
Bronfein is $350,000, and is reviewable by the Company's Board of Directors at
least annually. The agreement may be terminated by the Company at any time for
Cause (as defined), upon the vote of not less than two-thirds of the entire
membership of the Company's Board of Directors. In the event that the Company
terminates Mr. Bronfein's employment agreement without Cause, or Mr. Bronfein
terminates his employment agreement as described in the preceding sentence, Mr.
Bronfein is entitled to severance compensation equal to three years base salary
plus the value of stock options (using a Black-Scholes valuation method) and
cash bonus granted during such period, which value may not exceed 60% of his
base salary. If Mr. Bronfein becomes disabled, he will continue to receive all
of his compensation and benefits so long as such period of disability does not
exceed 12 consecutive months or shorter period aggregating 12 months in any 24
month period. Mr. Bronfein's agreement also contains provisions which are
intended to limit him from competing with the Company throughout the term of the
agreement and for a period of two years thereafter.
5
<PAGE>
Retirement Plan
On January 1, 1989, the Company adopted an employee Retirement Plan
which consists of a 401(k) component and a profit sharing component. The
Retirement Plan, which is intended to be qualified under Sections 401(a) and (k)
of the Code, is a cash deferred profit-sharing plan covering all of the
employees of the Company (other than certain employees covered by a collective
bargaining agreement) who have completed at least 1,000 hours of service and
twelve months of employment. Under the 401(k) component, each employee may elect
to contribute a portion of his or her current compensation up to the lesser of
$10,000 (or the maximum then permitted by the Code) or 15% (or for more highly
compensated employees 2%) of such employee's annual compensation. The Company
may make a matching contribution each year as determined by the Board of
Directors. The Board of Directors may establish this contribution at any level
each year, or may omit such contribution entirely.
The Company match since January, 1995 has been based on years of
service. For an employee who has completed six years of service prior to the
beginning of the calendar year, he receives a match of $0.75 per $1.00 of
contribution up to 4% of his salary. Therefore, if this employee contributes 4%
or more of his salary, the Company contributes 3% of his salary. If the employee
contributes less than 4%, the Company contributes $0.75 per $1.00 of
contribution.
If an employee has not completed six years of service, he is matched
$0.50 per $1.00 of contribution up to 2% of his salary. Therefore, if this
employee contributes 2% or more of his salary, the Company contributes 1% of his
salary. If the employee contributes less than 2%, the Company contributes $0.50
per $1.00 of contribution. Highly Compensated Employees (as such term is defined
in the Code) regardless of their years of service, are matched $0.50 per $1.00
of contribution up to 2% of salary.
Under the profit sharing provisions of the Retirement Plan, the Company
may make an additional employer contribution as determined by the Board of
Directors each year. The Board of Directors may establish this contribution at
any level each year, or may omit such contribution entirely. It is the Company's
intent that employer contributions under the profit sharing provisions of the
Retirement Plan are to be made 50% in the form of Common Stock and 50% in cash,
and are to be made only if there are sufficient profits to do so. Profit sharing
contributions are allocated among the accounts of participants in the proportion
that their annual compensation bears to the aggregate annual compensation of all
participants. All employee contributions to the Retirement Plan are 100% vested.
Company contributions are vested in accordance with a schedule that generally
provides for vesting after five years of service with the Company (any
non-vested amounts that are forfeited by participants used to reduce the
following year's contribution by the Company). Distribution of benefits normally
will commence upon the participant's reaching age 65 (or, if earlier, upon the
participant's death or disability). Payment of Retirement Plan benefits will
generally be made in a lump sum unless an alternative equivalent form of benefit
is elected. Certain special rules apply to the distribution of benefits to
participants for whom the Retirement Plan has accepted a transfer of assets from
another tax-qualified pension plan.
Stock Option Plans
Amended and Restated Employee Stock Option Plan. Pursuant to the
Employee Stock Option Plan (the "Employee Stock Option Plan"), stock options may
be granted which are intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), as well as stock options not intended to so qualify
("Non-Qualified Options"). The primary purpose of the Employee Stock Option Plan
is to provide additional incentive to key employees and officers of the Company
by encouraging them to invest in the Company's Common Stock and thereby acquire
a proprietary interest in the Company and an increased personal interest in the
Company's continued success and progress.
All officers and key employees of, and consultants and advisors to, the
Company or any current or future subsidiary ("Subsidiary") (currently in excess
of 1300 people) are eligible to receive options under the Employee Stock Option
Plan. The Employee Stock Option Plan is administered by the Stock Option
Committee. Subject to the provisions of the Employee Stock Option Plan, the
Stock Option Committee determines, among other things, which officers, key
employees, consultants and advisors of the Company and any subsidiary will be
granted options under the Employee Stock Option Plan, whether options granted
will be Incentive Options or Non-Qualified Options, the number of shares subject
to an option, the time at which an option is granted, the rate of option
exercisability, the duration of an option and the exercise price of an option.
The Stock Option Committee has the exclusive right to adopt or rescind rules for
the administration of the Employee Stock Option Plan, correct defects and
omissions in, reconcile inconsistencies in, and construe the Employee Stock
Option Plan. The Stock Option Committee also has the right to modify, suspend or
terminate the Employee Stock Option Plan, subject to certain conditions.
6
<PAGE>
The aggregate number of shares which may be issued upon the exercise of
options granted under the Employee Stock Option Plan currently is 6,250,000
shares of the Company's Common Stock. The aggregate number and kind of shares
issuable under the Employee Stock Option Plan is subject to appropriate
adjustment to reflect changes in the capitalization of the Company, such as by
stock dividend, stock split or other circumstances deemed by the Stock Option
Committee to be similar. Any shares of Common Stock subject to options that
terminate unexercised will be available for future options granted under the
Employee Stock Option Plan. The maximum number of shares for which options may
be granted to any participant in any year is 750,000 shares of Common Stock,
subject to certain adjustments in the event of any change in the outstanding
shares of the Common Stock of the Company.
The Company anticipates submitting certain amendments to the Employee
Stock Option Plan to the shareholders of the Company at its 1999 Annual Meeting
of Shareholders, including increasing the number of shares which may be issued
under the plan to 6,750,000.
1998 Non-Qualified Employee Stock Option Plan. On November 11, 1998,
the Company adopted the 1998 Non-Qualified Employee Stock Option Plan (the
"Non-Officer Stock Option Plan") which authorizes the issuance of up to
1,500,000 shares of the Company's Common Stock. The Company uses the Non-Officer
Stock Option Plan as a long-term incentive plan for non-officer employees of the
Company. The objectives of the Non-Officer Stock Option Plan are to align the
long-term interests of employees and shareholders by creating a direct link
between compensation and shareholder return, and to enable employees to develop
and maintain a significant long-term equity interest in the Company. The
Employee Plan authorizes the Chief Executive Office to award Non-Qualified Stock
Options to employees of the Company.
Director Plan. In March 1992, the Company adopted, and in February
1993, the shareholders approved, the Company's 1992 Stock Option Plan for
Non-Employee Directors (the "Director Plan"). The purpose of the Director Plan
is to attract and retain non-employee directors and to provide additional
incentive to them by encouraging them to invest in the Common Stock and acquire
an increased personal interest in the Company's business. Payment of the
exercise price for options granted under the Director Plan may be made in cash,
shares of Common Stock or a combination of both. All options granted pursuant to
the Director Plan are immediately exercisable and, except as indicated below,
may not be exercised more than ten years from the date of grant.
The Director Plan is administered by the Board of Directors of the
Company, including non-employee directors, who may modify, amend, suspend or
terminate the Director Plan, other than the number of shares with respect to
which options are to be granted, the option exercise price, the class of persons
eligible to participate, or options previously granted. Pursuant to the Director
Plan, options may be granted for an aggregate of 225,000 shares of Common Stock.
Options granted under the Director Plan are not incentive stock options under
Section 422 of the Code. The Director Plan terminates ten years after its
approval by shareholders.
At each Annual Meeting of shareholders, each individual who is elected,
re-elected or continues as a non-employee director automatically is granted an
option to purchase 4,500 shares of Common Stock at the then fair market value of
the Common Stock. On February 24, 1998, each non-employee director of the
Company was granted an option to purchase 4,500 shares of Common Stock at an
exercise price of $28.75 per share.
7
<PAGE>
Option Grants
The following table sets forth certain information concerning stock
options granted and not forfeited under the Employee Stock Option Plan during
fiscal 1998 to the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value
at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term
----------------------------------------------------------- ----------------------------
Percent of Total
Options Granted Option
Options to Employees In Exercise Expiration
Name Granted Fiscal Year Price Date 5% 10%
---- ------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Walker 0 0% -- -- --
Richard R. Howard 67,900 6.32% $28.75 2/24/08 $1,186,758 $3,056,022
David C. Barr 0 0% -- -- -- --
George V. Hager, Jr. 0 0% -- -- -- --
Michael G. Bronfein 10,000 .93% $28.75 2/24/08 $ 174,780 $ 448,604
</TABLE>
The following table sets forth certain information concerning the
shares acquired upon exercise of options, the number of unexercised options and
the value of unexercised options at the end of fiscal 1998 held by the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at Fiscal
Fiscal Year-End Year-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable(1)
---- --------------- -------------- --------------- -------------------
<S> <C> <C> <C> <C>
Michael R. Walker - - 417,501/150,000 $967,262/$0
Richard R. Howard - - 203,750/76,900 $237,231/$0
David C. Barr - - 213,270/18,500 $516,495/$0
George V. Hager, Jr. - - 111,500/21,000 $286,875/$0
Michael G. Bronfein - - 52,500/32,500 $0/$0
</TABLE>
(1) Stock Price at close of business on September 30, 1998 was $12.25.
Execuflex Plan
In November 1991, the Company adopted the Execuflex Plan. All Company
employees who achieve a certain salary grade and all employed physicians are
entitled to participate in the Execuflex Plan. Pursuant to the terms of the
Execuflex Plan, an eligible employee may authorize the Company to reduce his or
her base compensation or bonuses and credit such amounts to a retirement
account, education account or fixed period account.
8
<PAGE>
The Company match since March 1, 1997 has been based on years of
service. For an employee who has completed ten years of service prior to the
beginning of the calendar year, he receives a match of $0.75 per $1.00 of
contribution up to 3% of his salary. Therefore, if this employee contributes 4%
or more of his salary, the Company contributes 3% of his salary. If the employee
contributes less than 4%, the Company contributes $0.75 per $1.00 of
contribution. If an employee has completed more than six and less than ten years
of service, he is matched $0.50 per $1.00 of contribution up to 2% of his
salary. Therefore, if this employee contributes 4% or more of his salary, the
Company contributes 2% of his salary. If the employee contributes less than 4%,
the Company contributes $0.50 per $1.00 of contribution. If an employee has not
completed seven years of service, he is matched $0.25 per $1.00 of contribution
up to 1% of his salary. Therefore, if this employee contributes 4% or more of
his salary, the Company contributes 1% of his salary. If the employee
contributes less than 4%, the Company contributes $0.25 per $1.00 of
contribution. Benefits derived from employee deferral contributions are not
subject to forfeiture for any reason. Benefits derived from matching
contributions made by the Company are forfeited if a member of the Execuflex
Plan separates from the Company's employ prior to completing five years of
employment with the Company.
9
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth at December 31, 1998, certain
information with respect to the beneficial ownership of Common Stock (i) by each
person who is known by the Company to be the beneficial owner of more than five
percent of the Common Stock, (ii) by each director, (iii) by each of the
Company's five most highly compensated executive officers and (iv) by all
directors and executive officers as a group.
Shares of
Common Stock Percent of
Beneficially Common Stock
Owned (1) Owned
------------ ------------
Putnam Investments, Inc. (2)
One Post Office Square
Boston, Massachusetts 02109 3,289,151 9.0%
HCR Manor Care, Inc.
One Seagate
Toledo, OH 43604-2616 (3) 7,879,570 18.3%
Jack R. Anderson (4) 200,000 *
Richard R. Howard (5) 306,450 *
Samuel H. Howard (6) 18,000 *
Roger C. Lipitz (7) 43,000 *
Stephen E. Lungo(8) 52,018 *
Alan B. Miller (9) 28,000 *
Michael R. Walker (10) 926,400 *
David C. Barr (11) 243,270 *
George V. Hager, Jr. (12) 143,353 *
Michael G. Bronfein (13) 271,911 *
All executive officers and directors as
a group (18 persons) 2,441,235 6.9%
- -------------------
* Less than one percent.
(1) The securities "beneficially owned" by a person are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations
of the Securities and Exchange Commission (the "Commission") and
accordingly, may include securities owned by or for, among others, the
spouse, children or certain other relatives of such person as well as other
securities as to which the person has or shares voting or investment power
or has the right to acquire within 60 days after December 31, 1998. The same
shares may be beneficially owned by more than one person. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Based upon a Schedule 13G, dated January 28, 1998. Consists of 2,984,152
shares beneficially owned by Putnam Investment Management, Inc. and 605,948
shares beneficially owned by The Putnam Advisory Company, Inc. which are
registered investment advisors, and are wholly-owned by Putnam Investments,
Inc. Putnam Investments, Inc. is a wholly-owned subsidiary of Marsh &
McLennon Companies, Inc.
(3) Consists of 586,240 shares of Preferred Stock, which are convertible into
7,874,570 shares of Common Stock. Does not include shares beneficially owned
by Jack R. Anderson who is Manor's designee to the Board of Directors.
(4) Does not include shares beneficially owned by Manor; Jack R. Anderson is
Manor's designee to the Board of Directors.
(5) Includes 203,750 shares of Common Stock which may be acquired upon the
exercise of stock options.
10
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(6) Consists of 18,000 shares of Common Stock which may be acquired upon the
exercise of stock options.
(7) Includes 18,000 shares of Common Stock which may be acquired upon the
exercise of stock options.
(8) Includes 30,000 shares of Common Stock which may be acquired upon the
exercise of stock options.
(9) Includes 22,500 shares of Common Stock which may be acquired upon the
exercise of stock options.
(10) Includes 467,500 shares of Common Stock which may be acquired upon the
exercise of stock options.
(11) Includes 213,270 shares of Common Stock which may be acquired upon the
exercise of stock options.
(12) Includes 111,500 shares of Common Stock which may be acquired upon the
exercise of stock options.
(13) Includes 55,000 shares of Common Stock which may be acquired upon the
exercise of stock options.
11
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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fred F. Nazem is a former director of the Company. A limited
partnership (the "Nazem Affiliate") affiliated with Mr. Nazem owns 1.4% of the
outstanding Common Stock of Genesis ElderCare Corp., the parent corporation of
Multicare. Multicare is owned 44% by the Company and is consolidated for
financial accounting purposes.
The Nazem Affiliate's stock ownership is subject to an agreement (the
"Put/Call Agreement") pursuant to which, among other things, the Company will
have the option, on the terms and conditions set forth in the Put/Call Agreement
to purchase (the "Call") Genesis ElderCare Corp. Common Stock held by the Nazem
Affiliate commencing on October 9, 2001 and for a period of 270 days thereafter,
at a price determined pursuant to the terms of the Put/Call Agreement. The Nazem
Affiliate will have the option, on the terms and conditions set forth in the
Put/Call Agreement, to require the Company to purchase (the "Put") such Genesis
ElderCare Corp. Common Stock commencing on October 9, 2002 and for a period of
one year thereafter, at a price determined pursuant to the Put/Call Agreement.
Upon exercise of the Call, the Nazem Affiliate will receive at a minimum its
original investment plus a 25% compound annual return thereon. Upon exercise of
the Put, there will be no minimum return to the Nazem Affiliate; any payment to
the Nazem Affiliate will be based upon a formula set forth in the terms of the
Put/Call Agreement which provides generally for the preferential return of the
stockholders' capital contributions (subject to certain priorities), a 25%
compound annual return on the Nazem Affiliate's capital contributions and
additional amounts to be divided based upon the proportionate share of the
capital contributions of the stockholders to Genesis ElderCare Corp.
In connection with the Multicare acquisition, the Company entered into
a management agreement (the "Management Agreement") pursuant to which the
Company will manage Multicare's operations. The Management Agreement has a term
of five years with automatic renewals for two years unless either party
terminates the Management Agreement. The Company will be paid a fee of six
percent of Multicare's net revenues for its services under the Management
Agreement provided that payment of such fee in respect of any month in excess of
the greater of (i) $1,991,666 and (ii) four percent of Multicare's consolidated
net revenues for such month, shall be subordinate to the satisfaction of
Multicare's senior and subordinate debt covenants; and provided, further, that
payment of such fee shall be no less than $23,9000,000 in any given year. Under
the Management Agreement, the Company is responsible for Multicare's
non-extraordinary sales, general and administrative expenses (other than certain
specified third party expenses), and all other expenses of Multicare will be
paid by Multicare. The Company also entered into an asset purchase agreement
with Multicare and certain of its subsidiaries pursuant to which the Company
acquired all of the assets used in Multicare's outpatient and inpatient
rehabilitation therapy business for $24,000,000 subject to adjustment and a
stock purchase agreement with Multicare and certain subsidiaries pursuant to
which the Company acquired all of the outstanding capital stock and limited
partnership interests of certain subsidiaries of Multicare that are engaged in
the business of providing institutional pharmacy services to third parties for
$50,000,000, subject to adjustment.
In 1998 the Company sponsored the formation of ElderTrustSM ("ETT"), a
Maryland real estate investment trust. ETT completed an initial public offering
(the "ETT Offering") on January 26, 1998.
Substantially all of the ETT operations are conducted through
ElderTrust Operating Limited Partnership (the "Operating Partnership"). In
fiscal year 1997, Messrs. Walker, Howard, Barr, and Hager formed MGI Limited
Partnership ("MGI"). Upon completion of ETT Offering, MGI received 95,454 units
in the Operating Partnership ("Units"), having a total value of approximately
$1.9 million based on the ETT Offering price of the Common Shares of ETT.
Certain other executives of the Company, including Mr. Bronfein, are also a
partners of MGI.
In connection with the ETT Offering, Mr. Walker received cash
distributions totaling approximately $358,000 from the sale of his interests in
GHV Associates SMOPBGP to the Operating Partnership. Mr. Walker also received a
direct or indirect interest in 88,110 Units in exchange for his ownership
interests in GHV Associates, SMOBGP and two other limited partnerships. Such
Units, together with Mr. Walker's interest in the Units distributed to MGI, have
a total value of approximately $2.5 million based on the ETT Offering price of
the Common Shares of ETT. In addition, Mr. Walker received approximately $1.9
million in cash from ETT as repayment of first mortgage indebtedness loaned by
Mr. Walker to GHV Associates and SMOBGP.
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Mr. Walker received $50,000 in cash (representing a return of his
initial investment) indirectly from the Operating Partnership upon the
dissolution of Elder Trust Realty Group, Inc. following the sale by Elder Trust
Realty Group, Inc. of all its assets and liabilities to the Operating
Partnership.
ETT granted to Mr. Walker options to purchase 150,000 Common Shares
under ETT's 1998 Share Option and Incentive Plan. These options vest over three
years.
Upon consummation of the ETT Offering, Mr. Howard received a cash
distribution totaling approximately $91,000 from SMOBGP. In addition, Messrs.
Howard, Barr and Hager received a direct or indirect interest in 24,139 Units in
the aggregate in exchange for their ownership interests in certain limited
partnerships. Such Units have a total value of approximately $483,000 based on
the assumed ETT Offering price of the Common Shares of ETT.
The Company leases the Windsor Office Building and the Windsor Clinic
and Training Facility (the "Buildings") from GHV Associates. Payments under
these leases approximate $191,000 per year and the current term expires on
December 31, 2004. The Company believes that the terms of these leases are at
least as favorable to the Company as those it would have obtained from an
unaffiliated party. The Company rents space in Maryland which is used as a
medical clinic and therapy clinic pursuant to two leases with SMOBGP. Payments
under these leases approximate $169,000 per year. The leases expire on September
30, 1999. The Company believes that the terms of these leases are at least as
favorable to the Company as those it would have obtained from an unaffiliated
party. GHV Associates is a partnership which was owned prior to the ETT Offering
by among others, Michael R. Walker, an officer and director of the Company.
Salisbury Medical Office Building General Partnership ("SMOBGP") is a
partnership which was owned prior to the ETT Offering by among others, Richard
R. Howard and Michael R. Walker, officers and directors of the Company.
The Company has made loans of approximately $7.8 million as of December
31, 1998 (the "Loan") for the benefit of HealthObjects Corporation and its
subsidiaries (collectively, "HealthObjects"). HealthObjects is 82% beneficially
owned by Michael G. Bronfein, an officer of the Company. Pursuant to a
Participation Agreement between the Company and Mr. Bronfein and his wife, the
Bronfeins participate in 50% of the Loan exceeding $5,000,000. In connection
with the loan, HealthObjects has issued warrants for the purchase of 5% of all
outstanding shares of HealthObjects to the Company.
Stephen E. Luongo, a director and member of the Compensation Committee,
is a partner in the law firm of Blank Rome Comisky & McCauley LLP which serves
as outside legal counsel for the Company.
On November 30, 1993, the Company paid approximately $205,000,000 to
acquire substantially all of the assets and stock of Meridian Healthcare. Roger
C. Lipitz, a director, is a former stockholder of Meridian Healthcare and served
as Meridian's Chairman. As part of the Meridian Transaction, the Company entered
into agreements to lease and operate, for ten years with a five year renewal
option, at an aggregate cost of $6,000,000 per year, seven geriatric care
facilities owned by seven different partnerships formed by certain former
shareholders of Meridian, including Mr. Lipitz (the "Former Shareholders"). In
March 1996, the Company acquired for total consideration approximately
$31,900,000, including the payment of assumed debt, the remaining partnership
interest owned by the Former Shareholders in five geriatric care facilities
which were jointly owned by the Company and limited partnerships owned by the
Former Shareholders. The Company also pays approximately $923,000 per year to
Towson Building Associates, L.P., a limited partnership formed by the Former
Shareholders, to lease the Company's regional headquarters located in Towson,
Maryland. In addition, the Company manages a retirement center owned by
Brendenwood MRC L.P., a limited partnership owned by the Former Shareholders.
Mr. Lipitz beneficially owns between 20% to 26.5% of the partnership interests
in the referenced partnerships formed and owned by the Former Shareholders.
Pursuant to the Senior Executive Officer Stock Ownership Plan, the
Company has loans outstanding to Messrs. Howard Barr, and Hager in the amounts
of $646,889.00, $820,962.00, and $624,244.00, respectively.
13
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PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(3) Exhibits
The following exhibits are hereby amended:
No. Description
--- -----------
+10.57 Employment Agreement between the Company and Michael R.
Walker dated August 12, 1998, as amended.
+10.58 Employment Agreement between the Company and George V.
Hager dated August 12, 1998, as amended.
+10.59 Employment Agreement between the Company and Richard R.
Howard dated August 12, 1998, as amended.
+10.60 Employment Agreement between the Company and David C.
Barr dated August 12, 1998, as amended.
+10.61 Employment Agreement between the Company and Michael G.
Bronfein dated November 11, 1998, as amended.
+10.62 Employment Agreement between the Company and Maryann
Timon dated November 11, 1998, as amended.
+10.63 Employment Agreement between the Company and Marc. D.
Rubinger dated November 11, 1998, as amended.
- -------------------------
+ Management contract or compensatory plan or arrangement
14
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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
Amendment No. 1 to its Report to be signed on its behalf on January 28, 1999 by
the undersigned hereunto duly authorized.
Genesis Health Ventures, Inc.
/s/ James V. McKeon
---------------------------------------
James V. McKeon
Vice President and Corporate Controller
15
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 12, 1998
by and between Genesis Health Ventures, Inc., a Pennsylvania corporation with
its principal place of business at 101 East State Street, Kennett Square, PA
19348 (the "Company"), and Michael R. Walker (the "Executive").
WITNESSETH
The Company desires to continue to employ the Executive as an employee
of the Company, and the Executive desires to continue to provide services to the
Company, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as the Chairman and Chief Executive Officer of the Company.
The Executive accepts such employment and agrees to perform the customary
responsibilities of such position during the term of this Agreement. The
Executive will perform such other duties as may from time to time be reasonably
assigned to him by the Board, provided such duties are consistent with and do
not interfere with the performance of the duties described herein and are of a
type customarily performed by persons of similar titles with similar
corporations. Nothing in this Agreement shall preclude Executive from serving as
a director, trustee, officer of, or partner in, any other firm, trust,
corporation or partnership or from pursuing personal investments, as long as
such activities do not interfere with Executive's performance of his duties
hereunder.
2. Period of Employment.
(a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a five year period ending on
August 12, 2003 (such period, as extended from time to time, herein referred to
as the "Term"). Subject to Section 2(b), and if the Term has not been terminated
pursuant to Section 4, on August 12, 2001 and on each August 12 thereafter (each
such August 12, an "Automatic Extension Date") the Term shall be extended for an
additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company (with
the affirmative vote of two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. The
Compensation Committee of the Board of Directors shall review Executive's base
salary on an annual basis and make recommendations with respect to increases in
base salary to the Board of Directors. Any increase in base salary shall not
reduce or limit any other obligation of the Company hereunder. Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described below, is referred
to herein as "Base Salary". Executive's Base Salary, as in effect from time to
time, may not be reduced by the Company without Executive's consent, provided
that the Base Salary payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with its customary periodic payroll
practices.
(b) Incentive Compensation. Executive shall be eligible to receive
incentive compensation in the form of stock options in amounts determined from
time to time by the Stock Option Subcommittee of the Compensation Committee of
the Board of Directors, subject to the approval of the Board of Directors.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. Without in any way limiting the foregoing,
Executive shall be provided with term life insurance providing a $6,000,000
death benefit to Executive's designated beneficiaries. With respect to the
pension or retirement benefits payable to Executive, Executive's service
credited for purposes of determining Executive's benefits and vesting shall be
determined in accordance with the terms of the applicable plan or program.
Nothing in this Section 3(c), in and of itself, shall be construed to limit the
ability of the Company to amend or terminate any particular plan, program or
arrangement.
(ii) Vacation. During the Term, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less than
five weeks in any calendar year. The Executive shall also be entitled to all
paid holidays given by the Company to its senior officers.
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<PAGE>
Vacation days which are not used during any calendar year may not be accrued,
nor shall Executive be entitled to compensation for unused vacation days.
(iii) Perquisites. During the Term, Executive shall be entitled
to receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Directors of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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<PAGE>
(c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for Disability or Cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's Base Salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement;
(iii) a relocation of the Executive's principal place of
employment or the relocation of the Company's principal office or corporate
headquarters to a location outside the Borough of Kennett Square, Pennsylvania.
(iv) any "Change of Control" (as defined in Section 6 hereof);
(v) any material failure by the Company to comply with any of
the provisions of this Agreement;
(vi) any termination of the Executive's employment for reasons
other than death, Disability or Cause.
(vii) the termination by the Board of Directors of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
(viii) the commencement of a proceeding or case, with or without
the application or consent of the Company or any of its subsidiaries, in any
court or competent
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<PAGE>
jurisdiction, seeking (A) the liquidation, reorganization, dissolution or
winding-up of the Company or its subsidiaries, or the composition or
readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof or if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which shall not be less
than 90 nor more than 180 days from the date such Notice of Termination is
given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
(b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. In addition, Executive
shall have the option to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance policy owned by the
Company and relating
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<PAGE>
specifically to Executive. The Company shall have no further obligations to the
Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause, Death or Disability.
(i) In the event (1) the Company terminates the Term without
cause, or (2) the Executive terminates the Term for Good Reason, then (I) the
Company shall make a lump-sum payment to the Executive equal to three times the
sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means (x) the greater of (i) Executive's Base Salary for
the most recent three years (including the current year) or (ii) Executive's
Base Salary for the remainder of the then current term without giving effect to
the termination giving rise to the payment divided by (y) three. "Executive's
Average Assumed Cash Incentive Compensation" means (x) the sum of (i) the value
as of the dates of grant (using a Black-Scholes valuation method) of all stock
options granted to Executive in consideration for services in any of the three
most recent fiscal years plus (ii) the amount of any cash bonus awarded to the
Executive in consideration for services in any of the three most recent fiscal
years divided by (y) three; provided that the Executive's Average Assumed Cash
Incentive Compensation shall not exceed 100% of the Executive's Average Base
Salary.
(ii) Following termination of the Term for any reason, other
than for Cause or upon the death of the Executive, the Company shall also
maintain in full force and effect, for the continued benefit of the Executive
for a period equal to the greater of (x) the period of the then current Term
without giving effect to such termination or (y) two (2) years without giving
effect to such termination, all employee benefit plans and programs to which the
Executive was entitled prior to the date of termination (including, without
limitation, the benefit plans and programs provided for herein) if the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred by the terms thereof, the
Company shall pay to the Executive an amount equal to the annual contribution,
payments, credits or allocations made by the Company to him, to his account or
on his behalf under such plans and programs from which his continued
participation is barred except that if the Executive's participation in any
health, medical, life insurance or disability plan or program is barred, the
Company shall obtain and pay for, on the Executive's behalf, individual
insurance plans, policies or programs which provide to the Executive health,
medical, life and disability insurance coverage which is equivalent to the
insurance coverage to which the Executive was entitled prior to the date of
termination.
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<PAGE>
6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice (i) for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control, or (ii) at any time, within
twenty-four (24) months following the date of a Change of Control, if any other
event constituting Good Reason hereunder continues for more than ten (10) days
after the Executive delivers notice thereof to the Company. The failure of
Executive to exercise his rights hereunder following an event constituting a
Change of Control shall not preclude Executive from exercising such rights
following the occurrence of a subsequent Change of Control event, even if
related to a prior Change of Control Event.
(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" or voting agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of Control"
shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)
of the Exchange Act but excluding the Company and any subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 25
percent or more of the combined voting power of the Company's then outstanding
securities;
(ii) when, during any period of 24 consecutive months after the
date of this Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority
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thereof; provided that a director who was not a director at the beginning of
such 24-month period shall be deemed to have satisfied such 24-month requirement
(and be an Incumbent Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24-month period) or by prior operation of
this Section 6(d)(ii); or
(iii) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise.
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, in the opinion of independent tax counsel reasonably acceptable to the
Company, there is no reasonable basis for taking the position that any such
payment is not subject to the Excise Tax under U.S. tax law then in effect. If
the Internal Revenue Service makes a claim that any payment or portion thereof
is subject to the Excise Tax, at the Company's election, and the Company's
direction and expense, the Executive shall contest such claim; provided,
however, that the Company shall advance to the Executive the costs and expenses
of such contest, as incurred. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in which
such indemnity payment is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals as are in effect in
the jurisdiction in which the Executive is resident, net of the reduction in
federal income taxes that is obtained from deduction of such state and local
taxes.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with Company's express prior
written consent, or except in the proper course of his employment with Company,
directly or indirectly, communicate, disclose, divulge, publish, or otherwise
express, to any Person, or use for his own benefit or the benefit of any Person,
any trade secrets, confidential or proprietary knowledge or information, no
matter when or how acquired concerning the conduct and details of Company's
business, including without limitation, names of customers and suppliers,
marketing methods, trade secrets, policies, prospects and financial condition.
For purposes of this Section 8, confidential information shall not include any
information which is now known by or readily available to the
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general public or which becomes known by or readily available to the general
public other than as a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period of two
(2) years thereafter, Executive shall not, except with Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of Company, in
any manner which interferes or might interfere with such Person's relationship
with Company, or in an effort to obtain such Person as a customer, supplier,
employee, salesman, agent, or representative of any business in competition with
Company which conducts operations within 15 miles of any office or facility
owned, leased or operated by Company or in any county, or similar political
subdivision, in which the Company conducts substantial business.
(ii) Establish, engage, own, manage, operate, join or control,
or participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company if such Person has any office
or facility, at any location within 15 miles of any office or facility owned,
leased or operated by Company or conducts substantial business in any county, or
similar political subdivision in which the Company conducts substantial
business, or act or conduct himself in any manner which he would have reason to
believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him of
any of the covenants and agreements of this Section 8 ("Covenants") will result
in irreparable injury to Company for which money damages could not adequately
compensate Company, and therefore, in the event of any such breach, Company
shall be entitled, in addition to all other rights and remedies which Company
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Executive and/or all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which Executive or any such other Person may have against Company shall
not constitute a defense or bar to the enforcement of any of the Covenants. If
Company is obliged to resort to litigation to enforce any of the Covenants which
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a material breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a material breach occurred, or, if later, the last day of the
original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
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(e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
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with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
Michael R. Walker
228 N. Garfield Street
Kennett Square, PA 19348
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by Company hereunder, including without limitation any waiver, consent or
approval, shall be effective unless approved by a majority of the Board of
Directors.
(d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and Company and/or any of its affiliates (and any
of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it
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shall not be necessary in making proof of this Agreement to produce or account
for more than one counterpart hereof.
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
(j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
(m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver
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thereof, nor shall the single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
________________________ By: ________________________________
Secretary President
(Corporate Seal)
EXECUTIVE:
____________________________________
Chairman and Chief Executive Officer
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 12, 1998
by and between Genesis Health Ventures, Inc., a Pennsylvania corporation with
its principal place of business at 101 East State Street, Kennett Square, PA
19348 (the "Company"), and George V. Hager, Jr. (the "Executive").
WITNESSETH
The Company desires to continue to employ the Executive as an employee
of the Company, and the Executive desires to continue to provide services to the
Company, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as Senior Vice President and Chief Financial Officer of the
Company. The Executive accepts such employment and agrees to perform the
customary responsibilities of such position during the term of this Agreement.
The Executive will perform such other duties as may from time to time be
reasonably assigned to him by the Board, provided such duties are consistent
with and do not interfere with the performance of the duties described herein
and are of a type customarily performed by persons of similar titles with
similar corporations. Nothing in this Agreement shall preclude Executive from
serving as a director, trustee, officer of, or partner in, any other firm,
trust, corporation or partnership or from pursuing personal investments, as long
as such activities do not interfere with Executive's performance of his duties
hereunder.
2. Period of Employment.
(a) Period of Employment. The period of the Executive's
employment under this Agreement shall commence on the date hereof and shall,
unless sooner terminated pursuant to Section 4, continue for a three year period
ending on August 12, 2001 (such period, as extended from time to time, herein
referred to as the "Term"). Subject to Section 2(b), and if the Term has not
been terminated pursuant to Section 4, on August 12, 1999 and on each August 12
thereafter (each such August 12, an "Automatic Extension Date") the Term shall
be extended for an additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company
(with the affirmative vote of two-thirds of the entire membership of the Board
of Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. The
Compensation Committee of the Board of Directors shall review Executive's base
salary on an annual basis and make recommendations with respect to increases in
base salary to the Board of Directors. Any increase in base salary shall not
reduce or limit any other obligation of the Company hereunder. Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described below, is referred
to herein as "Base Salary". Executive's Base Salary, as in effect from time to
time, may not be reduced by the Company without Executive's consent, provided
that the Base Salary payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with its customary periodic payroll
practices.
(b) Incentive Compensation. Executive shall be eligible to
receive incentive compensation in the form of stock options in amounts
determined from time to time by the Stock Option Subcommittee of the
Compensation Committee of the Board of Directors, subject to the approval of the
Board of Directors.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be
eligible to participate in (1) each welfare benefit plan sponsored or maintained
by the Company, including, without limitation, each life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (2) each pension, profit sharing, retirement,
deferred compensation or savings plan sponsored or maintained by the Company, in
each case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. With respect to the pension or retirement
benefits payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this Section 3(c),
in and of itself, shall be construed to limit the ability of the Company to
amend or terminate any particular plan, program or arrangement.
(ii) Vacation. During the Term, the Executive shall
be entitled to the number of paid vacation days in each calendar year determined
by the Company from time to time for its senior executive officers, but not less
than five weeks in any calendar year. The
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Executive shall also be entitled to all paid holidays given by the Company to
its senior officers. Vacation days which are not used during any calendar year
may not be accrued, nor shall Executive be entitled to compensation for unused
vacation days.
(iii) Perquisites. During the Term, Executive shall
be entitled to receive such perquisites (e.g., fringe benefits) as are generally
provided to other senior officers of the Company in accordance with the then
current policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company
shall pay or reimburse Executive for all reasonable expenses incurred or paid by
Executive in the performance of Executive's duties hereunder, upon presentation
of expense statements or vouchers and such other information as the Company may
reasonably require and in accordance with the generally applicable policies and
practices of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company
for "Cause" shall mean termination by action of at least two-thirds of the
members of the Board of Directors of the Company at a meeting duly called and
held upon at least 15 days' prior written notice to Executive specifying the
particulars of the action or inaction alleged to constitute "Cause" (and at
which meeting Executive and his counsel were entitled to be present and given
reasonable opportunity to be heard) because of (i) Executive's conviction of any
felony (whether or not involving the Company or any of its subsidiaries)
involving moral turpitude which subjects, or if generally known, would subject,
the Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment
shall terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of
any duties inconsistent with the Executive's status with the Company or a
substantial alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the date hereof, or a
reduction in the Executive's titles or offices as in effect immediately prior to
the date hereof, or any removal of the Executive from, or any failure to reelect
the Executive to, any of such positions, except in connection with the
termination of his employment for Disability or Cause or as a result of the
Executive's death or by the Executive other than for Good Reason, or the
termination by the Company's Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's
Base Salary as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement;
(iii) a relocation of the Executive's principal place
of employment or the relocation of the Company's principal office or corporate
headquarters to a location outside the Borough of Kennett Square, Pennsylvania.
(iv) any "Change of Control" (as defined in Section 6
hereof);
(v) any material failure by the Company to comply
with any of the provisions of this Agreement;
(vi) any termination of the Executive's employment
for reasons other than death, Disability or Cause;
(vii) the termination by the Board of Directors of
the Automatic Extension pursuant to Section 2(b) of this Agreement;
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(viii) the commencement of a proceeding or case, with
or without the application or consent of the Company or any of its subsidiaries,
in any court or competent jurisdiction, seeking (A) the liquidation,
reorganization, dissolution or winding-up of the Company or its subsidiaries, or
the composition or readjustment of the debts of the Company or its subsidiaries,
(B) the appointment of a trustee, receiver, custodian, liquidator or the like
for the Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i)
if this Agreement is terminated by the Company for disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period), (ii) if Executive's employment is
terminated due to Executive's death, on the date of death; (iii) if the
Executive's employment is terminated for Good Reason as a result of a Change of
Control, as set forth in Section 6 hereof or if the Executive's employment is
terminated for any other reason, the date specified in the Notice of Termination
(which shall not be less than 90 nor more than 180 days from the date such
Notice of Termination is given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
(b) Termination for Cause. If the Executive's employment shall
be terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company
for Reasons other than for Cause, Death or Disability.
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(i) In the event (1) the Company terminates the Term
without cause, or (2) the Executive terminates the Term for Good Reason, then
(I) the Company shall make a lump-sum payment to the Executive equal to three
times the sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means (x) Executive's Base Salary for the most recent three
years (including the current year) divided by (y) three. "Executive's Average
Assumed Cash Incentive Compensation" means (x) sum of (i) the value as of the
dates of grant (using a Black-Scholes valuation method) of all stock options
granted to Executive in consideration for services in any of the three most
recent fiscal years plus (ii) the amount of any cash bonus awarded to the
Executive in consideration for services in any of the three most recent fiscal
years divided by (y) three; provided that the Executive's Average Assumed Cash
Incentive Compensation shall not exceed 100% of the Executive's Average Base
Salary.
(ii) Following termination of the Term for any
reason, other than for Cause or upon the death of the Executive, the Company
shall also maintain in full force and effect, for the continued benefit of the
Executive for a period equal to the greater of (x) the period of the then
current Term without giving effect to such termination or (y) two (2) years
without giving effect to such termination, all employee benefit plans and
programs to which the Executive was entitled prior to the date of termination
(including, without limitation, the benefit plans and programs provided for
herein) if the Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred by the terms
thereof, the Company shall pay to the Executive an amount equal to the annual
contribution, payments, credits or allocations made by the Company to him, to
his account or on his behalf under such plans and programs from which his
continued participation is barred except that if the Executive's participation
in any health, medical, life insurance or disability plan or program is barred,
the Company shall obtain and pay for, on the Executive's behalf, individual
insurance plans, policies or programs which provide to the Executive health,
medical, life and disability insurance coverage which is equivalent to the
insurance coverage to which the Executive was entitled prior to the date of
termination.
6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive
may terminate the Term upon notice to the Company, effective as set forth in
such notice (i) for any reason or for no reason during the initial ninety (90)
day period following the date of such Change of Control, or (ii) at any time,
within twenty-four (24) months following the date of a Change of Control, if any
other event constituting Good Reason hereunder continues for more than ten (10)
days after the Executive delivers notice thereof to the Company. The failure of
Executive to exercise his rights hereunder following an event constituting a
Change of Control shall not preclude Executive from exercising such rights
following the occurrence of a subsequent Change of Control event, even if
related to a prior Change of Control Event.
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(b) Upon (i) the execution of a definitive agreement
(including, without limitation, any "lock-up" or voting agreement with any of
the Company's principal stockholders) which contemplates a transaction, or (ii)
the commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of
Control" shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as
used in Section 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding the Company and any subsidiary
thereof and any employee benefit plan sponsored or maintained by the Company or
any subsidiary (including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act, as amended from time to time), of securities of the Company
representing 25 percent or more of the combined voting power of the Company's
then outstanding securities;
(ii) when, during any period of 24 consecutive months
after the date of this Agreement, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof; provided that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of this Section
6(d)(ii); or
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(iii) the occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, or by merger, or
otherwise.
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, in the opinion of independent tax counsel reasonably acceptable to the
Company, there is no reasonable basis for taking the position that any such
payment is not subject to the Excise Tax under U.S. tax law then in effect. If
the Internal Revenue Service makes a claim that any payment or portion thereof
is subject to the Excise Tax, at the Company's election, and the Company's
direction and expense, the Executive shall contest such claim; provided,
however, that the Company shall advance to the Executive the costs and expenses
of such contest, as incurred. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in which
such indemnity payment is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals as are in effect in
the jurisdiction in which the Executive is resident, net of the reduction in
federal income taxes that is obtained from deduction of such state and local
taxes.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the Term,
Executive shall keep confidential and shall not, except with Company's express
prior written consent, or except in the proper course of his employment with
Company, directly or indirectly, communicate, disclose, divulge, publish, or
otherwise express, to any Person, or use for his own benefit or the benefit of
any Person, any trade secrets, confidential or proprietary knowledge or
information, no matter when or how acquired concerning the conduct and details
of Company's business, including without limitation, names of customers and
suppliers, marketing methods, trade secrets, policies, prospects and financial
condition. For purposes of this Section 8, confidential information shall not
include any information which is now known by or readily available to the
general public or which becomes known by or readily available to the general
public other than as a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period
of two (2) years thereafter, Executive shall not, except with Company's express
prior written consent, directly or indirectly, in any capacity, for the benefit
of any Person:
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(i) Solicit any Person who is or during such period
becomes a customer, supplier, employee, salesman, agent or representative of
Company, in any manner which interferes or might interfere with such Person's
relationship with Company, or in an effort to obtain such Person as a customer,
supplier, employee, salesman, agent, or representative of any business in
competition with Company which conducts operations within 15 miles of any office
or facility owned, leased or operated by Company or in any county, or similar
political subdivision, in which the Company conducts substantial business.
(ii) Establish, engage, own, manage, operate, join or
control, or participate in the establishment, ownership (other than as the owner
of less than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him
of any of the covenants and agreements of this Section 8 ("Covenants") will
result in irreparable injury to Company for which money damages could not
adequately compensate Company, and therefore, in the event of any such breach,
Company shall be entitled, in addition to all other rights and remedies which
Company may have at law or in equity, to have an injunction issued by any
competent court enjoining and restraining Executive and/or all other Persons
involved therein from continuing such breach. The existence of any claim or
cause of action which Executive or any such other Person may have against
Company shall not constitute a defense or bar to the enforcement of any of the
Covenants. If Company is obliged to resort to litigation to enforce any of the
Covenants which has a fixed term, then such term shall be extended for a period
of time equal to the period during which a material breach of such Covenant was
occurring, beginning on the date of a final court order (without further right
of appeal) holding that such a material breach occurred, or, if later, the last
day of the original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
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(e) Scope. If any portion of any Covenant or its application
is construed to be invalid, illegal or unenforceable, then the other portions
and their application shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or similar
factor, then the court making such determination shall have the power to reduce
or limit such scope, duration, area or other factor, and such Covenant shall
then be enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
with a copy to:
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Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
George V. Hager, Jr.
320 Bellevue Avenue
Haddonfield, NJ 08033
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended,
modified, supplemented or terminated except in writing signed by both parties.
No action taken by Company hereunder, including without limitation any waiver,
consent or approval, shall be effective unless approved by a majority of the
Board of Directors.
(d) Termination of Prior Employment Agreements. All prior
employment agreements between Executive and Company and/or any of its affiliates
(and any of their predecessors) are hereby terminated as of the date hereof as
fully performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its successors
and permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart hereof.
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(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
(j) Controlling Law. This Agreement is made under, and shall
be governed by, construed and enforced in accordance with, the substantive laws
of the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree
that any claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
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(m) Indulgences, Etc. Neither the failure nor delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall the single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes
any legal action to enforce his rights under, or to recover damages for breach
of this Agreement, the Executive, if he is the prevailing party, shall be
entitled to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
By:
- -------------------------- -------------------------------
Secretary President
(Corporate Seal)
EXECUTIVE:
-------------------------------
Senior Vice President and
Chief Financial Officer
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 12, 1998
by and between Genesis Health Ventures, Inc., a Pennsylvania corporation with
its principal place of business at 101 East State Street, Kennett Square, PA
19348 (the "Company"), and Richard R. Howard (the "Executive").
WITNESSETH
The Company desires to continue to employ the Executive as an employee
of the Company, and the Executive desires to continue to provide services to the
Company, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as Vice Chairman of the Company. The Executive accepts such
employment and agrees to perform the customary responsibilities of such position
during the term of this Agreement. The Executive will perform such other duties
as may from time to time be reasonably assigned to him by the Board, provided
such duties are consistent with and do not interfere with the performance of the
duties described herein and are of a type customarily performed by persons of
similar titles with similar corporations. Nothing in this Agreement shall
preclude Executive from serving as a director, trustee, officer of, or partner
in, any other firm, trust, corporation or partnership or from pursuing personal
investments, as long as such activities do not interfere with Executive's
performance of his duties hereunder.
2. Period of Employment.
(a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a three year period ending on
August 12, 2001 (such period, as extended from time to time, herein referred to
as the "Term"). Subject to Section 2(b), and if the Term has not been terminated
pursuant to Section 4, on August 12, 1999 and on each August 12 thereafter (each
such August 12, an "Automatic Extension Date") the Term shall be extended for an
additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company (with
the affirmative vote of two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. The
Compensation Committee of the Board of Directors shall review Executive's base
salary on an annual basis and make recommendations with respect to increases in
base salary to the Board of Directors. Any increase in base salary shall not
reduce or limit any other obligation of the Company hereunder. Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described below, is referred
to herein as "Base Salary". Executive's Base Salary, as in effect from time to
time, may not be reduced by the Company without Executive's consent, provided
that the Base Salary payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with its customary periodic payroll
practices.
(b) Incentive Compensation. Executive shall be eligible to receive
incentive compensation in the form of stock options in amounts determined from
time to time by the Stock Option Subcommittee of the Compensation Committee of
the Board of Directors, subject to the approval of the Board of Directors.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. Without in any way limiting the foregoing,
Executive shall be provided with term life insurance providing a $3,000,000
death benefit to Executive's designated beneficiaries. With respect to the
pension or retirement benefits payable to Executive, Executive's service
credited for purposes of determining Executive's benefits and vesting shall be
determined in accordance with the terms of the applicable plan or program.
Nothing in this Section 3(c), in and of itself, shall be construed to limit the
ability of the Company to amend or terminate any particular plan, program or
arrangement.
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(ii) Vacation. During the Term, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less than
five weeks in any calendar year. The Executive shall also be entitled to all
paid holidays given by the Company to its senior officers. Vacation days which
are not used during any calendar year may not be accrued, nor shall Executive be
entitled to compensation for unused vacation days.
(iii) Perquisites. During the Term, Executive shall be entitled
to receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.
4. Employment Termination. The Term of employment under this
Agreement may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Directors of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for Disability or Cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's Base Salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement;
(iii) a relocation of the Executive's principal place of
employment or the relocation of the Company's principal office or corporate
headquarters to a location outside the Borough of Kennett Square, Pennsylvania.
(iv) any "Change of Control" (as defined in Section 6 hereof);
(v) any material failure by the Company to comply with any of
the provisions of this Agreement;
(vi) any termination of the Executive's employment for reasons
other than death, Disability or Cause;
(vii) the termination by the Board of Directors of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
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(viii) the commencement of a proceeding or case, with or without
the application or consent of the Company or any of its subsidiaries, in any
court or competent jurisdiction, seeking (A) the liquidation, reorganization,
dissolution or winding-up of the Company or its subsidiaries, or the composition
or readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof or if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which shall not be less
than 90 nor more than 180 days from the date such Notice of Termination is
given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
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(b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. In addition, Executive
shall have the option to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance policy owned by the
Company and relating specifically to Executive. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause, Death or Disability.
(i) In the event (1) the Company terminates the Term without
cause, or (2) the Executive terminates the Term for Good Reason, then (I) the
Company shall make a lump-sum payment to the Executive equal to three times the
sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means the (x) Executive's Base Salary for the most recent
three years (including the current year) divided by (y) three. "Executive's
Average Assumed Cash Incentive Compensation" means (x) sum of (i) the value as
of the dates of grant (using a Black-Scholes valuation method) of all stock
options granted to Executive in consideration for services in any of the three
most recent fiscal years plus (ii) the amount of any cash bonus awarded to the
Executive in consideration for services in any of the three most recent fiscal
years divided by (y) three; provided that the Executive's Average Assumed Cash
Incentive Compensation shall not exceed 100% of the Executive's Average Base
Salary.
(ii) Following termination of the Term for any reason, other
than for Cause or upon the death of the Executive, the Company shall also
maintain in full force and effect, for the continued benefit of the Executive
for a period equal to the greater of (x) the period of the then current Term
without giving effect to such termination or (y) two (2) years without giving
effect to such termination, all employee benefit plans and programs to which the
Executive was entitled prior to the date of termination (including, without
limitation, the benefit plans and programs provided for herein) if the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred by the terms thereof, the
Company shall pay to the Executive an amount equal to the annual contribution,
payments, credits or allocations made by the Company to him, to his account or
on his behalf under such plans and programs from which his continued
participation is barred except that if the Executive's participation in any
health, medical, life insurance or disability plan or program is barred, the
Company shall obtain and pay for, on the Executive's behalf, individual
insurance plans, policies or programs which provide to the Executive health,
medical, life and disability insurance coverage which is equivalent to the
insurance coverage to which the Executive was entitled prior to the date of
termination.
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6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive
may terminate the Term upon notice to the Company, effective as set forth in
such notice (i) for any reason or for no reason during the initial ninety (90)
day period following the date of such Change of Control, or (ii) at any time,
within twenty-four (24) months following the date of a Change of Control, if any
other event constituting Good Reason hereunder continues for more than ten (10)
days after the Executive delivers notice thereof to the Company. The failure of
Executive to exercise his rights hereunder following an event constituting a
Change of Control shall not preclude Executive from exercising such rights
following the occurrence of a subsequent Change of Control event, even if
related to a prior Change of Control Event.
(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" or voting agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of Control"
shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)
of the Exchange Act but excluding the Company and any subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 25
percent or more of the combined voting power of the Company's then outstanding
securities;
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(ii) when, during any period of 24 consecutive months after the date
of this Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or by prior operation of this Section 6(d)(ii); or
(iii) the occurrence of a transaction requiring stockholder approval
for the acquisition of the Company by an entity other than the Company or a
subsidiary through purchase of assets, or by merger, or otherwise.
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, in the opinion of independent tax counsel reasonably acceptable to the
Company, there is no reasonable basis for taking the position that any such
payment is not subject to the Excise Tax under U.S. tax law then in effect. If
the Internal Revenue Service makes a claim that any payment or portion thereof
is subject to the Excise Tax, at the Company's election, and the Company's
direction and expense, the Executive shall contest such claim; provided,
however, that the Company shall advance to the Executive the costs and expenses
of such contest, as incurred. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in which
such indemnity payment is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals as are in effect in
the jurisdiction in which the Executive is resident, net of the reduction in
federal income taxes that is obtained from deduction of such state and local
taxes.
8. Executive's Covenants.
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(a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with Company's express prior
written consent, or except in the proper course of his employment with Company,
directly or indirectly, communicate, disclose, divulge, publish, or otherwise
express, to any Person, or use for his own benefit or the benefit of any Person,
any trade secrets, confidential or proprietary knowledge or information, no
matter when or how acquired concerning the conduct and details of Company's
business, including without limitation, names of customers and suppliers,
marketing methods, trade secrets, policies, prospects and financial condition.
For purposes of this Section 8, confidential information shall not include any
information which is now known by or readily available to the general public or
which becomes known by or readily available to the general public other than as
a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period of two
(2) years thereafter, Executive shall not, except with Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of Company, in
any manner which interferes or might interfere with such Person's relationship
with Company, or in an effort to obtain such Person as a customer, supplier,
employee, salesman, agent, or representative of any business in competition with
Company which conducts operations within 15 miles of any office or facility
owned, leased or operated by Company or in any county, or similar political
subdivision, in which the Company conducts substantial business.
(ii) Establish, engage, own, manage, operate, join or control,
or participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him of
any of the covenants and agreements of this Section 8 ("Covenants") will result
in irreparable injury to Company for which money damages could not adequately
compensate Company, and therefore, in the event of any such breach, Company
shall be entitled, in addition to all other rights and remedies which Company
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Executive and/or all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which Executive or any such other Person may have against Company shall
not constitute a defense or bar to the enforcement of any of the Covenants. If
Company is obliged to resort to litigation to enforce any of the Covenants which
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a material breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a material breach occurred, or, if later, the last day of the
original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
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(e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
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with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
Richard R. Howard
2280 S. Chester Springs Road
Chester Springs, PA 19425
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by Company hereunder, including without limitation any waiver, consent or
approval, shall be effective unless approved by a majority of the Board of
Directors.
(d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and Company and/or any of its affiliates (and any
of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
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(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
(j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
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(m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall the single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
By:
- ---------------------------------- ----------------------------------
Secretary President
(Corporate Seal)
EXECUTIVE:
---------------------------------
Vice Chairman
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 12, 1998
by and between Genesis Health Ventures, Inc., a Pennsylvania corporation with
its principal place of business at 101 East State Street, Kennett Square, PA
19348 (the "Company"), and David C. Barr (the "Executive").
WITNESSETH
The Company desires to continue to employ the Executive as an employee
of the Company, and the Executive desires to continue to provide services to the
Company, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as Vice Chairman of the Company. The Executive accepts such
employment and agrees to perform the customary responsibilities of such position
during the term of this Agreement. The Executive will perform such other duties
as may from time to time be reasonably assigned to him by the Board, provided
such duties are consistent with and do not interfere with the performance of the
duties described herein and are of a type customarily performed by persons of
similar titles with similar corporations. Nothing in this Agreement shall
preclude Executive from serving as a director, trustee, officer of, or partner
in, any other firm, trust, corporation or partnership or from pursuing personal
investments, as long as such activities do not interfere with Executive's
performance of his duties hereunder.
2. Period of Employment.
(a) Period of Employment. The period of the Executive's
employment under this Agreement shall commence on the date hereof and shall,
unless sooner terminated pursuant to Section 4, continue for a three year period
ending on August 12, 2001 (such period, as extended from time to time, herein
referred to as the "Term"). Subject to Section 2(b), and if the Term has not
been terminated pursuant to Section 4, on August 12, 1999 and on each August 12
thereafter (each such August 12, an "Automatic Extension Date") the Term shall
be extended for an additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company
(with the affirmative vote of two-thirds of the entire membership of the Board
of Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. The
Compensation Committee of the Board of Directors shall review Executive's base
salary on an annual basis and make recommendations with respect to increases in
base salary to the Board of Directors. Any increase in base salary shall not
reduce or limit any other obligation of the Company hereunder. Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described below, is referred
to herein as "Base Salary". Executive's Base Salary, as in effect from time to
time, may not be reduced by the Company without Executive's consent, provided
that the Base Salary payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with its customary periodic payroll
practices.
(b) Incentive Compensation. Executive shall be eligible to
receive incentive compensation in the form of stock options in amounts
determined from time to time by the Stock Option Subcommittee of the
Compensation Committee of the Board of Directors, subject to the approval of the
Board of Directors.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be
eligible to participate in (1) each welfare benefit plan sponsored or maintained
by the Company, including, without limitation, each life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (2) each pension, profit sharing, retirement,
deferred compensation or savings plan sponsored or maintained by the Company, in
each case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. Without in any way limiting the foregoing,
Executive shall be provided with term life insurance providing a $3,000,000
death benefit to Executive's designated beneficiaries. With respect to the
pension or retirement benefits payable to Executive, Executive's service
credited for purposes of determining Executive's benefits and vesting shall be
determined in accordance with the terms of the applicable plan or program.
Nothing in this Section 3(c), in and of itself, shall be construed to limit the
ability of the Company to amend or terminate any particular plan, program or
arrangement.
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(ii) Vacation. During the Term, the Executive shall
be entitled to the number of paid vacation days in each calendar year determined
by the Company from time to time for its senior executive officers, but not less
than five weeks in any calendar year. The Executive shall also be entitled to
all paid holidays given by the Company to its senior officers. Vacation days
which are not used during any calendar year may not be accrued, nor shall
Executive be entitled to compensation for unused vacation days.
(iii) Perquisites. During the Term, Executive shall
be entitled to receive such perquisites (e.g., fringe benefits) as are generally
provided to other senior officers of the Company in accordance with the then
current policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company
shall pay or reimburse Executive for all reasonable expenses incurred or paid by
Executive in the performance of Executive's duties hereunder, upon presentation
of expense statements or vouchers and such other information as the Company may
reasonably require and in accordance with the generally applicable policies and
practices of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company
for "Cause" shall mean termination by action of at least two-thirds of the
members of the Board of Directors of the Company at a meeting duly called and
held upon at least 15 days' prior written notice to Executive specifying the
particulars of the action or inaction alleged to constitute "Cause" (and at
which meeting Executive and his counsel were entitled to be present and given
reasonable opportunity to be heard) because of (i) Executive's conviction of any
felony (whether or not involving the Company or any of its subsidiaries)
involving moral turpitude which subjects, or if generally known, would subject,
the Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment
shall terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of
any duties inconsistent with the Executive's status with the Company or a
substantial alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the date hereof, or a
reduction in the Executive's titles or offices as in effect immediately prior to
the date hereof, or any removal of the Executive from, or any failure to reelect
the Executive to, any of such positions, except in connection with the
termination of his employment for Disability or Cause or as a result of the
Executive's death or by the Executive other than for Good Reason, or the
termination by the Company's Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's
Base Salary as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement;
(iii) a relocation of the Executive's principal place
of employment or the relocation of the Company's principal office or corporate
headquarters to a location outside the Borough of Kennett Square, Pennsylvania.
(iv) any "Change of Control" (as defined in Section 6
hereof);
(v) any material failure by the Company to comply
with any of the provisions of this Agreement;
(vi) any termination of the Executive's employment
for reasons other than death, Disability or Cause;
(vii) the termination by the Board of Directors of
the Automatic Extension pursuant to Section 2(b) of this Agreement;
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(viii) the commencement of a proceeding or case, with
or without the application or consent of the Company or any of its subsidiaries,
in any court or competent jurisdiction, seeking (A) the liquidation,
reorganization, dissolution or winding-up of the Company or its subsidiaries, or
the composition or readjustment of the debts of the Company or its subsidiaries,
(B) the appointment of a trustee, receiver, custodian, liquidator or the like
for the Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i)
if this Agreement is terminated by the Company for disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period), (ii) if Executive's employment is
terminated due to Executive's death, on the date of death; (iii) if the
Executive's employment is terminated for Good Reason as a result of a Change of
Control, as set forth in Section 6 hereof or if the Executive's employment is
terminated for any other reason, the date specified in the Notice of Termination
(which shall not be less than 90 nor more than 180 days from the date such
Notice of Termination is given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
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(b) Termination for Cause. If the Executive's employment shall
be terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. In addition, Executive
shall have the option to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance policy owned by the
Company and relating specifically to Executive. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the
Company for Reasons other than for Cause, Death or Disability.
(i) In the event (1) the Company terminates the Term
without cause, or (2) the Executive terminates the Term for Good Reason, then
(I) the Company shall make a lump-sum payment to the Executive equal to three
times the sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means the (x) Executive's Base Salary for the most recent
three years (including the current year) divided by (y) three. "Executive's
Average Assumed Cash Incentive Compensation" means (x) sum of (i) the value as
of the dates of grant (using a Black-Scholes valuation method) of all stock
options granted to Executive in consideration for services in any of the three
most recent fiscal years plus (ii) the amount of any cash bonus awarded to the
Executive in consideration for services in any of the three most recent fiscal
years divided by (y) three; provided that the Executive's Average Assumed Cash
Incentive Compensation shall not exceed 100% of the Executive's Average Base
Salary.
(ii) Following termination of the Term for any
reason, other than for Cause or upon the death of the Executive, the Company
shall also maintain in full force and effect, for the continued benefit of the
Executive for a period equal to the greater of (x) the period of the then
current Term without giving effect to such termination or (y) two (2) years
without giving effect to such termination, all employee benefit plans and
programs to which the Executive was entitled prior to the date of termination
(including, without limitation, the benefit plans and programs provided for
herein) if the Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred by the terms
thereof, the Company shall pay to the Executive an amount equal to the annual
contribution, payments, credits or allocations made by the Company to him, to
his account or on his behalf under such plans and programs from which his
continued participation is barred except that if the Executive's participation
in any health, medical, life insurance or disability plan or program is barred,
the Company shall obtain and pay for, on the Executive's behalf, individual
insurance plans, policies or programs which provide to the Executive health,
medical, life and disability insurance coverage which is equivalent to the
insurance coverage to which the Executive was entitled prior to the date of
termination.
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6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive
may terminate the Term upon notice to the Company, effective as set forth in
such notice (i) for any reason or for no reason during the initial ninety (90)
day period following the date of such Change of Control, or (ii) at any time,
within twenty-four (24) months following the date of a Change of Control, if any
other event constituting Good Reason hereunder continues for more than ten (10)
days after the Executive delivers notice thereof to the Company. The failure of
Executive to exercise his rights hereunder following an event constituting a
Change of Control shall not preclude Executive from exercising such rights
following the occurrence of a subsequent Change of Control event, even if
related to a prior Change of Control Event.
(b) Upon (i) the execution of a definitive agreement
(including, without limitation, any "lock-up" or voting agreement with any of
the Company's principal stockholders) which contemplates a transaction, or (ii)
the commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of
Control" shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as
used in Section 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act but excluding the Company and any subsidiary
thereof and any employee benefit plan sponsored or maintained by the Company or
any subsidiary (including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act, as amended from time to time), of securities of the Company
representing 25 percent or more of the combined voting power of the Company's
then outstanding securities;
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(ii) when, during any period of 24 consecutive months
after the date of this Agreement, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof; provided that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of this Section
6(d)(ii); or
(iii) the occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, or by merger, or
otherwise.
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, in the opinion of independent tax counsel reasonably acceptable to the
Company, there is no reasonable basis for taking the position that any such
payment is not subject to the Excise Tax under U.S. tax law then in effect. If
the Internal Revenue Service makes a claim that any payment or portion thereof
is subject to the Excise Tax, at the Company's election, and the Company's
direction and expense, the Executive shall contest such claim; provided,
however, that the Company shall advance to the Executive the costs and expenses
of such contest, as incurred. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in which
such indemnity payment is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals as are in effect in
the jurisdiction in which the Executive is resident, net of the reduction in
federal income taxes that is obtained from deduction of such state and local
taxes.
8. Executive's Covenants.
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(a) Nondisclosure. At all times during and after the Term,
Executive shall keep confidential and shall not, except with Company's express
prior written consent, or except in the proper course of his employment with
Company, directly or indirectly, communicate, disclose, divulge, publish, or
otherwise express, to any Person, or use for his own benefit or the benefit of
any Person, any trade secrets, confidential or proprietary knowledge or
information, no matter when or how acquired concerning the conduct and details
of Company's business, including without limitation, names of customers and
suppliers, marketing methods, trade secrets, policies, prospects and financial
condition. For purposes of this Section 8, confidential information shall not
include any information which is now known by or readily available to the
general public or which becomes known by or readily available to the general
public other than as a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period
of two (2) years thereafter, Executive shall not, except with Company's express
prior written consent, directly or indirectly, in any capacity, for the benefit
of any Person:
(i) Solicit any Person who is or during such period
becomes a customer, supplier, employee, salesman, agent or representative of
Company, in any manner which interferes or might interfere with such Person's
relationship with Company, or in an effort to obtain such Person as a customer,
supplier, employee, salesman, agent, or representative of any business in
competition with Company which conducts operations within 15 miles of any office
or facility owned, leased or operated by Company or in any county, or similar
political subdivision, in which the Company conducts substantial business..
(ii) Establish, engage, own, manage, operate, join or
control, or participate in the establishment, ownership (other than as the owner
of less than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him
of any of the covenants and agreements of this Section 8 ("Covenants") will
result in irreparable injury to Company for which money damages could not
adequately compensate Company, and therefore, in the event of any such breach,
Company shall be entitled, in addition to all other rights and remedies which
Company may have at law or in equity, to have an injunction issued by any
competent court enjoining and restraining Executive and/or all other Persons
involved therein from continuing such breach. The existence of any claim or
cause of action which Executive or any such other Person may have against
Company shall not constitute a defense or bar to the enforcement of any of the
Covenants. If Company is obliged to resort to litigation to enforce any of the
Covenants which has a fixed term, then such term shall be extended for a period
of time equal to the period during which a material breach of such Covenant was
occurring, beginning on the date of a final court order (without further right
of appeal) holding that such a material breach occurred, or, if later, the last
day of the original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
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(e) Scope. If any portion of any Covenant or its application
is construed to be invalid, illegal or unenforceable, then the other portions
and their application shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or similar
factor, then the court making such determination shall have the power to reduce
or limit such scope, duration, area or other factor, and such Covenant shall
then be enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
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with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
David C. Barr
45 Blue Stone Drive
Chadds Ford, PA 19317
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended,
modified, supplemented or terminated except in writing signed by both parties.
No action taken by Company hereunder, including without limitation any waiver,
consent or approval, shall be effective unless approved by a majority of the
Board of Directors.
(d) Termination of Prior Employment Agreements. All prior
employment agreements between Executive and Company and/or any of its affiliates
(and any of their predecessors) are hereby terminated as of the date hereof as
fully performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its successors
and permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
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(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart hereof.
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
(j) Controlling Law. This Agreement is made under, and shall
be governed by, construed and enforced in accordance with, the substantive laws
of the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree
that any claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
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(m) Indulgences, Etc. Neither the failure nor delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall the single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes
any legal action to enforce his rights under, or to recover damages for breach
of this Agreement, the Executive, if he is the prevailing party, shall be
entitled to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
_________________________ By:______________________________
Secretary President
(Corporate Seal)
EXECUTIVE:
_________________________________
Vice Chairman
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of November 11,
1998 by and between Genesis Health Ventures, Inc., a Pennsylvania corporation
with its principal place of business at 101 East State Street, Kennett Square,
PA 19348 (the "Company"), and Michael G. Bronfein (the "Executive").
WITNESSETH
The Company desires to employ the Executive as an employee of the
Company, and the Executive desires to provide services to the Company, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as President and Chief Executive Officer of NeighborCare
pharmacies. The Executive accepts such employment and agrees to perform the
customary responsibilities of such position during the term of this Agreement.
The Executive will perform such other duties as may from time to time be
reasonably assigned to him by the Board, provided such duties are consistent
with and do not interfere with the performance of the duties described herein
and are of a type customarily performed by persons of similar titles with
similar corporations. Nothing in this Agreement shall preclude Executive from
serving as a director, trustee, officer of, or partner in, any other firm,
trust, corporation or partnership or from pursuing personal investments, as long
as such activities do not interfere with Executive's performance of his duties
hereunder
2. Period of Employment.
(a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a two year period ending on
November 11, 2000 (such period, as extended from time to time, herein referred
to as the "Term"). Subject to Section 2(b), and if the Term has not been
terminated pursuant to Section 4, on November 11, 1999 and on each November 11
thereafter (each such November 11, an "Automatic Extension Date") the Term shall
be extended for an additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company (with
the affirmative vote of two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. Executive's
base salary shall be reviewed on an annual basis and the Company shall increase
such base salary, by an amount, if any, it determines to be appropriate. Any
such increase shall not reduce or limit any other obligation of the Company
hereunder. Executive's annual base salary payable hereunder, as it may be
increased from time to time and without reduction for any amounts deferred as
described below, is referred to herein as "Base Salary". Executive's Base
Salary, as in effect from time to time, may not be reduced by the Company
without Executive's consent, provided that the Base Salary payable under this
paragraph shall be reduced to the extent Executive elects to defer or reduce
such salary under the terms of any deferred compensation or savings plan or
other employee benefit arrangement maintained or established by the Company. The
Company shall pay Executive the portion of his Base Salary not deferred in
accordance with its customary periodic payroll practices.
(b) Incentive Compensation. Executive shall be eligible to
participate in stock option, incentive compensation and other plans at a level
consistent with Executive's position with the Company and the Company's then
current policies and practices.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. With respect to the pension or retirement
benefits payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this Section 3(c),
in and of itself, shall be construed to limit the ability of the Company to
amend or terminate any particular plan, program or arrangement.
(ii) Vacation. During the Term, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less than
four (4) weeks in any calendar year. The Executive shall also be entitled to all
paid holidays given by the Company to its senior officers. Vacation days which
are not used during any calendar year may not be accrued, nor shall Executive be
entitled to compensation for unused vacation days.
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(iii) Perquisites. During the Term, Executive shall be entitled
to receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Directors of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for Disability or Cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's Base Salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement;
(iii) a relocation of the Executive's principal place of
employment to a location outside of Baltimore, Maryland following a Change of
Control or the relocation of the Company's principal office or corporate
headquarters to a location outside the Borough of Kennett Square, Pennsylvania.
(iv) any material failure by the Company to comply with any of
the provisions of this Agreement;
(v) any termination of the Executive's employment for reasons
other than death, Disability or Cause;
(vi) the termination by the Board of Directors of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
(vii) the commencement of a proceeding or case, with or without
the application or consent of the Company or any of its subsidiaries, in any
court or competent jurisdiction, seeking (A) the liquidation, reorganization,
dissolution or winding-up of the Company or its subsidiaries, or the composition
or readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
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(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof or if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which shall not be less
than 90 nor more than 180 days from the date such Notice of Termination is
given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
(b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause or Death.
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(i) In the event (1) the Company terminates the Term without
cause, or (2) the Executive terminates the Term for Good Reason, then (I) the
Company shall make a lump-sum payment to the Executive equal to three times the
sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means the (x) Executive's Base Salary for the most recent
three years (including the current year)(1) divided by (y) three(1).
"Executive's Average Assumed Cash Incentive Compensation" means (x) the sum of
(i) the value as of the dates of grant (using a Black-Scholes valuation method)
of all stock options granted to Executive in consideration for services in any
of the three most recent fiscal years1 plus (ii) the amount of any cash bonus
awarded to the Executive in consideration for services in any of the three most
recent fiscal years1 divided by (y) three1; provided that the Executive's
Average Assumed Cash Incentive Compensation shall not exceed 60% of the
Executive's Average Base Salary.
(ii) Following termination of the Term for any reason, other
than for Cause or upon the death of the Executive, the Company shall also
maintain in full force and effect, for the continued benefit of the Executive
for a period equal to the greater of (x) the period of the then current Term
without giving effect to such termination or (y) two (2) years, all employee
benefit plans and programs to which the Executive was entitled prior to the date
of termination (including, without limitation, the benefit plans and programs
provided for herein) if the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred by the
terms thereof, the Company shall pay to the Executive an amount equal to the
annual contribution, payments, credits or allocations made by the Company to
him, to his account or on his behalf under such plans and programs from which
his continued participation is barred except that if the Executive's
participation in any health, medical, life insurance or disability plan or
program is barred, the Company shall obtain and pay for, on the Executive's
behalf, individual insurance plans, policies or programs which provide to the
Executive health, medical, life and disability insurance coverage which is
equivalent to the insurance coverage to which the Executive was entitled prior
to the date of termination.
6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice if at any time, within twenty-four (24) months following the date of a
Change of Control, any event constituting Good Reason hereunder continues for
more than ten (10) days after the Executive delivers notice thereof to the
Company. The failure of Executive to exercise his rights hereunder following an
event constituting a Change of Control shall not preclude Executive from
exercising such rights following the occurrence of a subsequent Change of
Control event, even if related to a prior Change of Control Event.
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(1) Or such shorter period for which Executivehas been employed by the Company
if Executive was not employed by the Company for all of such period.
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(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" or voting agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of Control"
shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)
of the Exchange Act but excluding the Company and any subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 25
percent or more of the combined voting power of the Company's then outstanding
securities;
(ii) when, during any period of 24 consecutive months after the
date of this Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or by prior operation of this Section 6(d)(ii); or
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<PAGE>
(iii) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise; or
(iv) the sale of all or substantially all of the Company's
pharmacy operations.
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, independent tax counsel reasonably acceptable to the Company determines
after consultation with counsel for the Company that there is no reasonable
basis for taking the position that any such payment is not subject to the Excise
Tax under U.S. tax law then in effect. If the Internal Revenue Service makes a
claim that any payment or portion thereof is subject to the Excise Tax, at the
Company's election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the purpose
of determining the amount of any payment under clause (ii) of the first sentence
of this paragraph, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
in the calendar year in which such indemnity payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the reduction in federal income taxes that is obtained from
deduction of such state and local taxes.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with Company's express prior
written consent, or except in the proper course of his employment with Company,
directly or indirectly, communicate, disclose, divulge, publish, or otherwise
express, to any Person, or use for his own benefit or the benefit of any Person,
any trade secrets, confidential or proprietary knowledge or information, no
matter when or how acquired concerning the conduct and details of Company's
business, including without limitation, names of customers and suppliers,
marketing methods, trade secrets, policies, prospects and financial condition.
For purposes of this Section 8, confidential information shall not include any
information which is now known by or readily available to the general public or
which becomes known by or readily available to the general public other than as
a result of any improper act or omission of Executive.
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<PAGE>
(b) Non-Competition. During the Term hereof and for a period of two
(2) years thereafter, Executive shall not, except with Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of Company, in
any manner which interferes or might interfere with such Person's relationship
with Company, or in an effort to obtain such Person as a customer, supplier,
employee, salesman, agent, or representative of any business in competition with
Company which conducts operations within 15 miles of any office or facility
owned, leased or operated by Company or in any county, or similar political
subdivision, in which the Company conducts substantial business.
(ii) Establish, engage, own, manage, operate, join or control,
or participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him of
any of the covenants and agreements of this Section 8 ("Covenants") will result
in irreparable injury to Company for which money damages could not adequately
compensate Company, and therefore, in the event of any such breach, Company
shall be entitled, in addition to all other rights and remedies which Company
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Executive and/or all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which Executive or any such other Person may have against Company shall
not constitute a defense or bar to the enforcement of any of the Covenants. If
Company is obliged to resort to litigation to enforce any of the Covenants which
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a material breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a material breach occurred, or, if later, the last day of the
original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
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<PAGE>
(e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
with a copy to:
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Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
Michael G. Bronfein
4 Bell Chase Court
Baltimore, MD 21208
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by Company hereunder, including without limitation any waiver, consent or
approval, shall be effective unless approved by a majority of the Board of
Directors.
(d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and Company and/or any of its affiliates (and any
of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
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<PAGE>
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
(j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
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<PAGE>
(m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall the single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
By:
- ---------------------------- ----------------------------------
Secretary President
(Corporate Seal)
EXECUTIVE:
---------------------------------
President-NeighborCare
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of November 11,
1998 by and between Genesis Health Ventures, Inc., a Pennsylvania corporation
with its principal place of business at 101 East State Street, Kennett Square,
PA 19348 (the "Company"), and Maryann Timon (the "Executive").
WITNESSETH
The Company desires to employ the Executive as an employee of the
Company, and the Executive desires to provide services to the Company, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as Senior Vice President-Managed Care Group. The Executive
accepts such employment and agrees to perform the customary responsibilities of
such position during the term of this Agreement. The Executive will perform such
other duties as may from time to time be reasonably assigned to him by the
Board, provided such duties are consistent with and do not interfere with the
performance of the duties described herein and are of a type customarily
performed by persons of similar titles with similar corporations. Nothing in
this Agreement shall preclude Executive from serving as a director, trustee,
officer of, or partner in, any other firm, trust, corporation or partnership or
from pursuing personal investments, as long as such activities do not interfere
with Executive's performance of his duties hereunder
2. Period of Employment.
(a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a two year period ending on
November 11, 2000 (such period, as extended from time to time, herein referred
to as the "Term"). Subject to Section 2(b), and if the Term has not been
terminated pursuant to Section 4, on November 11, 1999 and on each November 11
thereafter (each such November 11, an "Automatic Extension Date") the Term shall
be extended for an additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company (with
the affirmative vote of two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. Executive's
base salary shall be reviewed on an annual basis and the Company shall increase
such base salary, by an amount, if any, it determines to be appropriate. Any
such increase shall not reduce or limit any other obligation of the Company
hereunder. Executive's annual base salary payable hereunder, as it may be
increased from time to time and without reduction for any amounts deferred as
described below, is referred to herein as "Base Salary". Executive's Base
Salary, as in effect from time to time, may not be reduced by the Company
without Executive's consent, provided that the Base Salary payable under this
paragraph shall be reduced to the extent Executive elects to defer or reduce
such salary under the terms of any deferred compensation or savings plan or
other employee benefit arrangement maintained or established by the Company. The
Company shall pay Executive the portion of his Base Salary not deferred in
accordance with its customary periodic payroll practices.
(b) Incentive Compensation. Executive shall be eligible to
participate in stock option, incentive compensation and other plans at a level
consistent with Executive's position with the Company and the Company's then
current policies and practices.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. With respect to the pension or retirement
benefits payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this Section 3(c),
in and of itself, shall be construed to limit the ability of the Company to
amend or terminate any particular plan, program or arrangement.
(ii) Vacation. During the Term, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less than
four (4) weeks in any calendar year. The Executive shall also be entitled to all
paid holidays given by the Company to its senior officers. Vacation days which
are not used during any calendar year may not be accrued, nor shall Executive be
entitled to compensation for unused vacation days.
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<PAGE>
(iii) Perquisites. During the Term, Executive shall be entitled
to receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Directors of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for Disability or Cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's Base Salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement;
(iii) a relocation of the Company's principal office or
corporate headquarters to a location outside the Borough of Kennett Square,
Pennsylvania;
(iv) any material failure by the Company to comply with any of
the provisions of this Agreement;
(v) any termination of the Executive's employment for reasons
other than death, Disability or Cause;
(vi) the termination by the Board of Directors of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
(vii) the commencement of a proceeding or case, with or without
the application or consent of the Company or any of its subsidiaries, in any
court or competent jurisdiction, seeking (A) the liquidation, reorganization,
dissolution or winding-up of the Company or its subsidiaries, or the composition
or readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
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(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof or if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which shall not be less
than 90 nor more than 180 days from the date such Notice of Termination is
given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
(b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause or Death.
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(i) In the event (1) the Company terminates the Term without
cause, or (2) the Executive terminates the Term for Good Reason, then (I) the
Company shall make a lump-sum payment to the Executive`s Average Assumed Cash
Incentive Compensation (as defined below); and (II) all stock options, stock
awards and similar equity rights, if any, shall vest and become exercisable
immediately prior to the termination of the Term and remain exercisable through
their original terms with all rights. "Executive's Average Base Salary" means
the (x) Executive's Base Salary for the most recent two years (including the
current year) divided by (y) two. "Executive's Average Assumed Cash Incentive
Compensation" means (x) the sum of (i) the value as of the dates of grant (using
a Black-Scholes valuation method) of all stock options granted to Executive in
consideration for services in any of the two most recent fiscal years plus (ii)
the amount of any cash bonus awarded to the Executive in consideration for
services in any of the two most recent fiscal years divided by (y) two; provided
that the Executive's Average Assumed Cash Incentive Compensation shall not
exceed 60% of the Executive's Average Base Salary.
(ii) Following termination of the Term for any reason, other
than for Cause or upon the death of the Executive, the Company shall also
maintain in full force and effect, for the continued benefit of the Executive
for a period equal to the greater of (x) the period of the then current Term
without giving effect to such termination or (y) two (2) years, all employee
benefit plans and programs to which the Executive was entitled prior to the date
of termination (including, without limitation, the benefit plans and programs
provided for herein) if the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred by the
terms thereof, the Company shall pay to the Executive an amount equal to the
annual contribution, payments, credits or allocations made by the Company to
him, to his account or on his behalf under such plans and programs from which
his continued participation is barred except that if the Executive's
participation in any health, medical, life insurance or disability plan or
program is barred, the Company shall obtain and pay for, on the Executive's
behalf, individual insurance plans, policies or programs which provide to the
Executive health, medical, life and disability insurance coverage which is
equivalent to the insurance coverage to which the Executive was entitled prior
to the date of termination.
6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice if at any time, within twenty-four (24) months following the date of a
Change of Control, any event constituting Good Reason hereunder continues for
more than ten (10) days after the Executive delivers notice thereof to the
Company. The failure of Executive to exercise his rights hereunder following an
event constituting a Change of Control shall not preclude Executive from
exercising such rights following the occurrence of a subsequent Change of
Control event, even if related to a prior Change of Control Event.
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(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" or voting agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) For purposes of this Agreement, the term "Change of Control"
shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)
of the Exchange Act but excluding the Company and any subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 25
percent or more of the combined voting power of the Company's then outstanding
securities;
(ii) when, during any period of 24 consecutive months after the
date of this Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or by prior operation of this Section 6(d)(ii); or
(iii) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise.
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<PAGE>
7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, independent tax counsel reasonably acceptable to the Company determines
after consultation with counsel for the Company that there is no reasonable
basis for taking the position that any such payment is not subject to the Excise
Tax under U.S. tax law then in effect. If the Internal Revenue Service makes a
claim that any payment or portion thereof is subject to the Excise Tax, at the
Company's election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the purpose
of determining the amount of any payment under clause (ii) of the first sentence
of this paragraph, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
in the calendar year in which such indemnity payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the reduction in federal income taxes that is obtained from
deduction of such state and local taxes.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with Company's express prior
written consent, or except in the proper course of his employment with Company,
directly or indirectly, communicate, disclose, divulge, publish, or otherwise
express, to any Person, or use for his own benefit or the benefit of any Person,
any trade secrets, confidential or proprietary knowledge or information, no
matter when or how acquired concerning the conduct and details of Company's
business, including without limitation, names of customers and suppliers,
marketing methods, trade secrets, policies, prospects and financial condition.
For purposes of this Section 8, confidential information shall not include any
information which is now known by or readily available to the general public or
which becomes known by or readily available to the general public other than as
a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period of two
(2) years thereafter, Executive shall not, except with Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of Company, in
any manner which interferes or might interfere with such Person's relationship
with Company, or in an effort to obtain such Person as a customer, supplier,
employee, salesman, agent, or representative of any business in competition with
Company which conducts operations within 15 miles of any office or facility
owned, leased or operated by Company or in any county, or similar political
subdivision, in which the Company conducts substantial business.
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<PAGE>
(ii) Establish, engage, own, manage, operate, join or control,
or participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him of
any of the covenants and agreements of this Section 8 ("Covenants") will result
in irreparable injury to Company for which money damages could not adequately
compensate Company, and therefore, in the event of any such breach, Company
shall be entitled, in addition to all other rights and remedies which Company
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Executive and/or all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which Executive or any such other Person may have against Company shall
not constitute a defense or bar to the enforcement of any of the Covenants. If
Company is obliged to resort to litigation to enforce any of the Covenants which
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a material breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a material breach occurred, or, if later, the last day of the
original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
(e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
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(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
If to Executive, to:
Maryann Timon
201 Lafayette Street
Havre de Grace, MD 21078
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<PAGE>
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by Company hereunder, including without limitation any waiver, consent or
approval, shall be effective unless approved by a majority of the Board of
Directors.
(d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and Company and/or any of its affiliates (and any
of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
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<PAGE>
(j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
(m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall the single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
By:
- ------------------------------ ----------------------------------------
Secretary President
(Corporate Seal)
EXECUTIVE:
----------------------------------------
Senior Vice President-Managed Care Group
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of November 11,
1998 by and between Genesis Health Ventures, Inc., a Pennsylvania corporation
with its principal place of business at 101 East State Street, Kennett Square,
PA 19348 (the "Company"), and Marc D. Rubinger (the "Executive").
WITNESSETH
The Company desires to employ the Executive as an employee of the
Company, and the Executive desires to provide services to the Company, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Offer and Acceptance of Employment. The Company hereby agrees to
employ the Executive as Senior Vice President-Chief Information Officer of the
Company. The Executive accepts such employment and agrees to perform the
customary responsibilities of such position during the term of this Agreement.
The Executive will perform such other duties as may from time to time be
reasonably assigned to him by the Board, provided such duties are consistent
with and do not interfere with the performance of the duties described herein
and are of a type customarily performed by persons of similar titles with
similar corporations. Nothing in this Agreement shall preclude Executive from
serving as a director, trustee, officer of, or partner in, any other firm,
trust, corporation or partnership or from pursuing personal investments, as long
as such activities do not interfere with Executive's performance of his duties
hereunder
2. Period of Employment.
(a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a two year period ending on
November 11, 2000 (such period, as extended from time to time, herein referred
to as the "Term"). Subject to Section 2(b), and if the Term has not been
terminated pursuant to Section 4, on November 11, 1999 and on each November 11
thereafter (each such November 11, an "Automatic Extension Date") the Term shall
be extended for an additional period of one year.
(b) Termination of Automatic Extension by Notice. The Company (with
the affirmative vote of two-thirds of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than 180
days prior to the applicable Automatic Extension Date.
<PAGE>
3. Compensation and Benefits.
(a) Base Salary. As long as Executive remains an employee of
Company, Executive will be paid a base salary which shall continue at the rate
currently in effect, subject to adjustment as hereinafter provided. Executive's
base salary shall be reviewed on an annual basis and the Company shall increase
such base salary, by an amount, if any, it determines to be appropriate. Any
such increase shall not reduce or limit any other obligation of the Company
hereunder. Executive's annual base salary payable hereunder, as it may be
increased from time to time and without reduction for any amounts deferred as
described below, is referred to herein as "Base Salary". Executive's Base
Salary, as in effect from time to time, may not be reduced by the Company
without Executive's consent, provided that the Base Salary payable under this
paragraph shall be reduced to the extent Executive elects to defer or reduce
such salary under the terms of any deferred compensation or savings plan or
other employee benefit arrangement maintained or established by the Company. The
Company shall pay Executive the portion of his Base Salary not deferred in
accordance with its customary periodic payroll practices.
(b) Incentive Compensation. Executive shall be eligible to
participate in stock option, incentive compensation and other plans at a level
consistent with Executive's position with the Company and the Company's then
current policies and practices.
(c) Benefits, Perquisites and Expenses.
(i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. With respect to the pension or retirement
benefits payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this Section 3(c),
in and of itself, shall be construed to limit the ability of the Company to
amend or terminate any particular plan, program or arrangement.
(ii) Vacation. During the Term, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less than
four (4) weeks in any calendar year. The Executive shall also be entitled to all
paid holidays given by the Company to its senior officers. Vacation days which
are not used during any calendar year may not be accrued, nor shall Executive be
entitled to compensation for unused vacation days.
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(iii) Perquisites. During the Term, Executive shall be entitled
to receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.
(iv) Business Expenses. During the Term, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.
4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:
(a) Cause. For purposes hereof, a termination by the Company for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Directors of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Directors following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Directors, which directions are consistent with the provisions of this
Agreement. Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable belief
that his action or inaction was in the best interests of the Company, and shall
not include failure to act by reason of total or partial incapacity due to
physical or mental illness.
(b) Without Cause. Notwithstanding anything to the contrary
contained in this Agreement, the Company (with the affirmative vote of
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.
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(c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability"shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.
(d) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for Disability or Cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Directors of the Automatic Extension;
(ii) a reduction by the Company in the Executive's Base Salary
as in effect on the date hereof or as the same may be increased from time to
time during the term of this Agreement;
(iii) a relocation of the Company's principal office or
corporate headquarters to a location outside the Borough of Kennett Square,
Pennsylvania;
(iv) any material failure by the Company to comply with any of
the provisions of this Agreement;
(v) any termination of the Executive's employment for reasons
other than death, Disability or Cause;
(vi) the termination by the Board of Directors of the Automatic
Extension pursuant to Section 2(b) of this Agreement;
(vii) the commencement of a proceeding or case, with or without
the application or consent of the Company or any of its subsidiaries, in any
court or competent jurisdiction, seeking (A) the liquidation, reorganization,
dissolution or winding-up of the Company or its subsidiaries, or the composition
or readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
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(e) Notice of Termination. Any termination, except for death,
pursuant to this Section 4 shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
this Agreement is terminated by the Company for disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof or if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which shall not be less
than 90 nor more than 180 days from the date such Notice of Termination is
given).
5. Payments upon Termination.
(a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted stock, stock option and
performance share awards made to the Executive shall automatically become fully
vested as of the date of death or Disability.
(b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. The Company shall have no
further obligations to the Executive under this Agreement.
(c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause or Death.
(i) In the event (1) the Company terminates the Term without
cause, or (2) the Executive terminates the Term for Good Reason, then (I) the
Company shall make a lump-sum payment to the Executive equal to two times the
sum of (x) Executive's Average Base Salary (as defined below) plus (y)
Executive's Average Assumed Cash Incentive Compensation (as defined below); and
(II) all stock options, stock awards and similar equity rights, if any, shall
vest and become exercisable immediately prior to the termination of the Term and
remain exercisable through their original terms with all rights. "Executive's
Average Base Salary" means the (x) Executive's Base Salary for the most recent
two years (including the current year) divided by (y) two. "Executive's Average
Assumed Cash Incentive Compensation" means (x) the sum of (i) the value as of
the dates of grant (using a Black-Scholes valuation method) of all stock options
granted to Executive in consideration for services in any of the two most recent
fiscal years plus (ii) the amount of any cash bonus awarded to the Executive in
consideration for services in any of the two most recent fiscal years divided by
(y) two; provided that the Executive's Average Assumed Cash Incentive
Compensation shall not exceed 60% of the Executive's Average Base Salary.
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(ii) Following termination of the Term for any reason, other
than for Cause or upon the death of the Executive, the Company shall also
maintain in full force and effect, for the continued benefit of the Executive
for a period equal to the greater of (x) the period of the then current Term
without giving effect to such termination or (y) two (2) years, all employee
benefit plans and programs to which the Executive was entitled prior to the date
of termination (including, without limitation, the benefit plans and programs
provided for herein) if the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred by the
terms thereof, the Company shall pay to the Executive an amount equal to the
annual contribution, payments, credits or allocations made by the Company to
him, to his account or on his behalf under such plans and programs from which
his continued participation is barred except that if the Executive's
participation in any health, medical, life insurance or disability plan or
program is barred, the Company shall obtain and pay for, on the Executive's
behalf, individual insurance plans, policies or programs which provide to the
Executive health, medical, life and disability insurance coverage which is
equivalent to the insurance coverage to which the Executive was entitled prior
to the date of termination.
6. Change of Control.
(a) Upon a Change of Control (as defined below), the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice if at any time, within twenty-four (24) months following the date of a
Change of Control, any event constituting Good Reason hereunder continues for
more than ten (10) days after the Executive delivers notice thereof to the
Company. The failure of Executive to exercise his rights hereunder following an
event constituting a Change of Control shall not preclude Executive from
exercising such rights following the occurrence of a subsequent Change of
Control event, even if related to a prior Change of Control Event.
(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" or voting agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of the
type described by clause (i) or (ii), if consummated, could result in a Change
of Control, all restricted stock, stock option and performance share awards made
to the Executive shall become automatically fully vested and exercisable in
order to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards then
held by him. Such restricted stock options and performance share awards shall
become automatically exercisable and shall remain exercisable through their
original terms with all rights; provided, however, in the event the transaction
contemplated by the definitive agreement referred to above is not consummated
and such definitive agreement is terminated, all accelerated restricted stock,
stock options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
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(c) For purposes of this Agreement, the term "Change of Control"
shall mean the happening of any of the following:
(i) when any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)
of the Exchange Act but excluding the Company and any subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 25
percent or more of the combined voting power of the Company's then outstanding
securities;
(ii) when, during any period of 24 consecutive months after the
date of this Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or by prior operation of this Section 6(d)(ii); or
(iii) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise.
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7. Certain Tax Matters. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the"Excise
Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (or
any successor provision thereto, the "Code"), on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. The Executive shall not take the position on any tax return or other
filing that any payment made under this Agreement is subject to the Excise Tax,
unless, independent tax counsel reasonably acceptable to the Company determines
after consultation with counsel for the Company that there is no reasonable
basis for taking the position that any such payment is not subject to the Excise
Tax under U.S. tax law then in effect. If the Internal Revenue Service makes a
claim that any payment or portion thereof is subject to the Excise Tax, at the
Company's election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the purpose
of determining the amount of any payment under clause (ii) of the first sentence
of this paragraph, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
in the calendar year in which such indemnity payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the reduction in federal income taxes that is obtained from
deduction of such state and local taxes.
8. Executive's Covenants.
(a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with Company's express prior
written consent, or except in the proper course of his employment with Company,
directly or indirectly, communicate, disclose, divulge, publish, or otherwise
express, to any Person, or use for his own benefit or the benefit of any Person,
any trade secrets, confidential or proprietary knowledge or information, no
matter when or how acquired concerning the conduct and details of Company's
business, including without limitation, names of customers and suppliers,
marketing methods, trade secrets, policies, prospects and financial condition.
For purposes of this Section 8, confidential information shall not include any
information which is now known by or readily available to the general public or
which becomes known by or readily available to the general public other than as
a result of any improper act or omission of Executive.
(b) Non-Competition. During the Term hereof and for a period of two
(2) years thereafter, Executive shall not, except with Company's express prior
written consent, directly or indirectly, in any capacity, for the benefit of any
Person:
(i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of Company, in
any manner which interferes or might interfere with such Person's relationship
with Company, or in an effort to obtain such Person as a customer, supplier,
employee, salesman, agent, or representative of any business in competition with
Company which conducts operations within 15 miles of any office or facility
owned, leased or operated by Company or in any county, or similar political
subdivision, in which the Company conducts substantial business.
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(ii) Establish, engage, own, manage, operate, join or control,
or participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any
office or facility at any location within 15 miles of any office or facility
owned, leased or operated by Company or conducts substantial business in any
county, or similar political subdivision, in which the Company conducts
substantial business, or act or conduct himself in any manner which he would
have reason to believe inimical or contrary to the best interests of Company.
(c) Enforcement. Executive acknowledges that any breach by him of
any of the covenants and agreements of this Section 8 ("Covenants") will result
in irreparable injury to Company for which money damages could not adequately
compensate Company, and therefore, in the event of any such breach, Company
shall be entitled, in addition to all other rights and remedies which Company
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining Executive and/or all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which Executive or any such other Person may have against Company shall
not constitute a defense or bar to the enforcement of any of the Covenants. If
Company is obliged to resort to litigation to enforce any of the Covenants which
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a material breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a material breach occurred, or, if later, the last day of the
original fixed term of such Covenant.
(d) Consideration. Executive expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Company and,
without the agreement of Executive to be bound by the Covenants, Company would
not have agreed to enter into this Agreement.
(e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
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9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.
10. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.
If to Company, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
Attention: Chairman and Chief Executive Officer
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen E Luongo, Esquire
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If to Executive, to:
Marc D. Rubinger
718 Amherst Circle
Newtown Square, PA 19073-2602
(b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.
(c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by Company hereunder, including without limitation any waiver, consent or
approval, shall be effective unless approved by a majority of the Board of
Directors.
(d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and Company and/or any of its affiliates (and any
of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.
(e) Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party may
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any of its or his rights hereunder without prior written consent of
the other party, and any such attempted assignment, transfer, pledge,
encumbrance, hypothecation or other disposition without such consent shall be
null and voice without effect.
(f) Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
(h) Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
(i) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
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(j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the Commonwealth of Pennsylvania applicable to agreements made and to be
performed entirely therein.
(k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorney's fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other than the arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorney's fees related to
such action.
(l) Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board of Directors.
(m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall the single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
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(n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.
COMPANY:
Attest:
By:
- ----------------------------- --------------------------------------
Secretary President
(Corporate Seal)
EXECUTIVE:
---------------------------------------
Senior Vice President-Chief Information
Officer
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