<PAGE> 1
================================================================================
- --------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-10858
HEALTH CARE AND RETIREMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-1687107
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE SEAGATE, TOLEDO, OHIO 43604-2616
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 252-5500
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on April 30, 1998.
Common stock, $0.01 par value - 44,791,042 shares
================================================================================
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Income -
Three months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
HEALTH CARE AND RETIREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
(Unaudited) (Note)
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,460 $ 7,455
Receivables, less allowances for
doubtful accounts of $17,799 and $19,184 138,505 138,049
Prepaid expenses 5,320 5,408
Deferred income taxes 19,839 19,839
-------- --------
Total current assets 167,124 170,751
Property and equipment, net of accumulated
depreciation of $145,873 and $137,484 555,214 552,973
Intangible assets, net of amortization of $14,886 and $13,764:
Goodwill 107,240 102,078
Other 31,679 32,124
Other assets 88,059 78,425
--------- ---------
Total assets $949,316 $936,351
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,742 $ 36,580
Employee compensation and benefits 32,951 36,855
Accrued insurance liabilities 18,117 17,873
Other accrued liabilities 39,119 29,162
Long-term debt due within one year 868 854
--------- ----------
Total current liabilities 122,797 121,324
Long-term debt 292,603 292,951
Deferred income taxes 67,276 67,276
Other liabilities 21,088 20,794
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized
Common stock, $.01 par value, 80,000,000 shares authorized,
49,199,906 and 48,860,406 shares issued 492 489
Capital in excess of par value 274,037 273,325
Retained earnings 287,972 275,519
-------- --------
562,501 549,333
Less treasury stock, at cost (4,365,839 and 4,637,597 shares) (116,949) (115,327)
--------- ---------
Total stockholders' equity 445,552 434,006
-------- --------
Total liabilities and stockholders' equity $949,316 $936,351
======== ========
<FN>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
<TABLE>
<CAPTION>
HEALTH CARE AND RETIREMENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
(In thousands, except earnings per share)
<S> <C> <C>
Revenues $226,512 $213,912
Expenses:
Operating 176,705 170,415
General and administrative 9,438 7,808
Depreciation and amortization 9,658 8,766
-------- --------
195,801 186,989
-------- --------
Income from operations 30,711 26,923
Interest expense, net (4,110) (3,812)
Equity in earnings of partnership 1,191 444
-------- --------
Income before income taxes 27,792 23,555
Income taxes 8,532 7,231
-------- --------
Net income $ 19,260 $ 16,324
======== ========
Earnings per share:
Basic $ .43 $ .37
Diluted $ .42 $ .35
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
HEALTH CARE AND RETIREMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $19,260 $16,324
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,970 8,836
Provision for bad debts 693 1,480
Equity in earnings of partnership (1,191) (444)
Changes in assets and liabilities, excluding businesses acquired:
Receivables (1,149) (6,793)
Prepaid expenses and other assets (8,533) (2,991)
Accounts payable (4,838) (2,644)
Employee compensation and benefits (3,300) (2,880)
Accrued insurance and other liabilities 1,872 8,417
------- -------
Total adjustments (6,476) 2,981
------- -------
Net cash provided by operating activities 12,784 19,305
INVESTING ACTIVITIES
Purchases and construction of property and equipment (10,521) (12,693)
Cash paid to acquire businesses (5,964) (45,201)
------- -------
Net cash used in investing activities (16,485) (57,894)
------- -------
FINANCING ACTIVITIES
Net borrowings under bank credit agreement 72,600
Principal payments of long-term debt (334) (18,473)
Proceeds from exercise of stock options 598 804
Purchase of common stock for treasury (558) (10,625)
-------- --------
Net cash provided by (used in) financing activities (294) 44,306
-------- --------
Net increase (decrease) in cash (3,995) 5,717
Cash and cash equivalents at beginning of year 7,455 2,389
------- -------
Cash and cash equivalents at end of period $ 3,460 $ 8,106
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HEALTH CARE AND RETIREMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Principles of Consolidation and Presentation
- -----------------------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management of HCR, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results of the interim periods. Operating
results for the three months ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in HCR's annual report on Form 10-K for the year
ended December 31, 1997.
NOTE 2 - Earnings Per Share
- ---------------------------
The calculation of earnings per share (EPS) is as follows for the three months
ended March 31:
1998 1997
---- ----
(In thousands)
[S] [C] [C]
Numerator:
Net income (income available to
common stockholders) $19,260 $16,324
======= =======
Denominator:
Denominator for basic EPS -
weighted-average shares 44,327 44,673
Effect of dilutive securities:
Stock options 1,902 1,859
Nonvested restricted stock 31
------- -------
Denominator for diluted EPS -
adjusted for weighted-average
shares and assumed conversions 46,260 46,532
====== ======
Basic EPS $.43 $.37
Diluted EPS $.42 $.35
6
<PAGE> 7
NOTE 3 - New Accounting Standard
- --------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS 131),
which is effective December 31, 1998, with interim disclosures beginning in
1999. Comparative information for prior years is required to be restated. This
Statement requires public business enterprises to report certain information
about operating segments, their products and services, the geographic areas in
which they operate, and their major customers. The operating segments should be
based on the structure of the enterprise's internal organization whose operating
results are regularly reviewed by the company's chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its
performance. Management has not determined the effect, if any, of FAS 131 on the
consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1998 increased $12,600,000 or 6%
to $226,512,000 as compared to the same period in 1997. Of the increase, 73%
related to mix changes and improved per diem rates, and the remaining increase
was due to the acquisition of various businesses in 1997. The improved per diem
rates, resulted from more specialized care, such as subacute medical care and
rehabilitation services for more acutely ill patients. The occupancy levels and
quality mix, which reflects revenues from Medicare, private pay and insured
patients, were 90% and 70%, respectively, for the first quarter of both 1997 and
1998.
Operating expenses for the three months ended March 31, 1998 increased
$6,290,000 or 4% to $176,705,000 from the comparable period in 1997. Of the
increase, 60% related to labor costs offset by decreases in other general
expenses. The remaining increase was attributable to the acquisition of various
businesses in 1997. Labor costs, excluding those related to the acquisitions,
represented 62% of the increase which was attributable to average wage rate
increases, as well as growth in the staffing levels related to medical specialty
units and rehabilitative services.
General and administrative expense, which approximated 4% of revenue, increased
$1,630,000 in the first quarter of 1998 compared to 1997 due to increased labor
and consulting costs from the implementation of new information systems as well
as increases in other deferred costs. The increase in depreciation and
amortization of $892,000 between the first quarter of 1997 and 1998 related
primarily to additional depreciation on prior year capital expenditures. The
increase in net interest expense of $298,000 was attributable to an increase in
debt levels partially offset by additional interest income earned on cash
equivalents. The equity in earnings of the partnership increased $747,000 as a
result of the growth in supplying pharmaceutical needs of HCR centers and
Omnicare pharmacies.
7
<PAGE> 8
NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS 131),
which is effective December 31, 1998, with interim disclosures beginning in
1999. Comparative information for prior years is required to be restated. This
Statement requires public business enterprises to report certain information
about operating segments, their products and services, the geographic areas in
which they operate, and their major customers. The operating segments should be
based on the structure of the enterprise's internal organization whose operating
results are regularly reviewed by the company's chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its
performance. Management has not determined the effect, if any, of FAS 131 on the
consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1998, HCR satisfied its cash requirements primarily
from cash generated from operating activities. HCR used the cash principally for
capital expenditures and the acquisition of businesses. At March 31, 1998, the
Company maintained $3,460,000 in cash and cash equivalents, of which $600,000
was invested in short-term investments.
Cash used in investing activities amounted to $16,485,000. Expenditures for
property and equipment of $10,521,000 related to renovations, capital
improvements, information systems and the ongoing construction of a new facility
near Milwaukee, Wisconsin. As part of the diversification into other health care
services, HCR made an acquisition and paid contingent consideration for prior
year acquisitions for a total of $5,964,000 in the first quarter of 1998.
Net cash used in financing activities during the first quarter of 1998 amounted
to $294,000. This included $558,000 for the purchase of HCR common stock and
$334,000 to repay scheduled long-term debt maturities. This use was partially
offset by $598,000 received from the exercise of stock options.
The bank credit agreement permits HCR to borrow up to $325,000,000 through
August 2, 2001, then the borrowing capacity is reduced to $295,000,000 through
August 2, 2002. At March 31, 1998, HCR had borrowed $285,000,000 and issued
letters of credit totalling $9,966,000 which left a remaining unused borrowing
capacity of $30,034,000.
HCR believes that its cash flow from operations will be sufficient to cover debt
payments, future capital expenditures and operating needs. It is likely that HCR
will pursue growth from acquisitions, partnerships and other ventures which
would be funded from excess cash from operations, credit available under the
bank credit agreement and other financing arrangements that are normally
available in the marketplace.
8
<PAGE> 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
The Company is party to various legal proceedings arising in the
ordinary course of business. The Company does not believe that the
results of such proceedings, even if unfavorable to the Company,
would have a material adverse effect on its financial position.
Item 2. Changes in Securities.
----------------------
None
Item 3. Defaults Upon Senior Securities.
--------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None
Item 5. Other Information.
------------------
None
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a)Exhibits
S-K Item
601 No.
-------
10 Form of Second Amended Employment Agreement between HCRA,
HCR and M. Keith Weikel
27 Financial Data Schedule for the three months ended
March 31, 1998
(b) Reports on Form 8-K
None
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH CARE AND RETIREMENT
CORPORATION
(Registrant)
Date May 11, 1998 By /s/ Geoffrey G. Meyers
---------------- ----------------------
Geoffrey G. Meyers,
Executive Vice President,
Chief Financial Officer and Treasurer
10
<PAGE> 11
EXHIBIT INDEX
Exhibit
- -------
10 Form of Second Amended Employment Agreement between HCRA, HCR
and M. Keith Weikel
27 Financial Data Schedule for the three months ended
March 31, 1998
11
<PAGE> 1
EXHIBIT 10
SECOND AMENDED EMPLOYMENT AGREEMENT
-----------------------------------
This SECOND AMENDED EMPLOYMENT AGREEMENT ("Agreement"), effective as of
April 1, 1997 between HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, an Ohio
corporation (the "Company"), HEALTH CARE AND RETIREMENT CORPORATION, a Delaware
corporation and sole stockholder of the Company ("HCR) and M. KEITH WEIKEL
("Employee"), supersedes and replaces all prior employment agreements between
the parties hereto.
RECITALS
--------
A. The Company has agreed to employ Employee in the position and at the
base rate of pay set forth on Schedule I.
B. The Company has further agreed to provide severance benefits to
Employee upon a termination of Employee's employment resulting from
certain specified events.
C. The Company wishes to insure that its senior executives and other key
employees are not practically disabled from discharging their duties in
respect to a proposed or actual transaction involving a Change in
Control.
D. The Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and
other key employees, including Employee, applicable in the event of a
Change in Control.
EVENTS
------
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employee and the Company hereby agree as follows:
1. CERTAIN DEFINED TERMS. The following terms have the meanings set
forth below:
(a) "Accounting Firm" is defined in Section 10(b).
(b) "Aggregate Cash Compensation" means the sum of Base Pay
and Employee's cash bonuses pursuant to the Company's Annual Incentive
Plan and Performance Award Plan as in effect at any time of
determination.
(c) "Base Pay" means Employee's annual base salary as in
effect at any time of determination.
(d) "Board" means the Board of Directors of HCR.
(e) "Cause" means Employee's financial dishonesty, fraud in
the performance of his duties, willful failure to perform assigned
duties hereunder or the commission of a felony.
(f) "Change in Control" means the occurrence during the
Protected Term of any of the following events:
<PAGE> 2
(i) HCR is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less
than sixty-five percent of the combined voting power of the
then outstanding securities of such resulting corporation or
person immediately after such transaction are held in the
aggregate by the holders of Voting Stock of HCR immediately
prior to such transaction;
(ii) HCR sells or otherwise transfers all or
substantially all of its assets to another corporation or
other legal person, and as a result of such sale or transfer
less than sixty-five percent of the combined voting power of
the then outstanding Voting Stock of such corporation or
person immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock of HCR immediately
prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Exchange Act, disclosing
that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become
the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of 15% or more of the then
outstanding Voting Stock of HCR;
(iv) HCR files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a
Change in Control of HCR has occurred or will occur in the
future pursuant to any then existing contract or transaction;
or
(v) If, during any consecutive twelve month period,
individuals who at the beginning of any such period constitute
the Directors cease for any reason to constitute at least a
majority thereof, PROVIDED, HOWEVER, that for purposes of this
clause (v) each Director who is first elected, or first
nominated for election by HCR's stockholders, by a vote of at
least one-half of the Directors (or a committee thereof) then
still in office who were Directors at the beginning of any
such period will be deemed to have been a Director at the
beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(f)(iii)
or 1(f)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Sections 1(f)(iii) or 1(f)(iv) solely because
(1) HCR, (2) any Subsidiary (including, without limitation, the
Company) or (3) any employee stock ownership plan or any other employee
benefit plan of HCR or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock of HCR,
whether in excess of 15% or otherwise, or because HCR reports that a
change in control of HCR has occurred or will occur in the future by
reason of such beneficial ownership.
(g) "Competing Business" shall mean any person, corporation or
other entity engaged in the United States of America in providing
long-term care, skilled nursing or rehabilitative services or selling
or attempting to sell or providing or attempting to provide any
2
<PAGE> 3
other product or service which is the same as or similar to products or
services sold or provided by the Company within the last 2 years prior
to termination of Employee's employment hereunder.
(h) "Continuation Period" means the thirty-six months
immediately following the Termination Date.
(i) "Director" means a member of the Board.
(j) "Employee Benefits" means the perquisites and benefits as
provided under any and all employee retirement income and welfare
benefit policies, plans, programs or arrangements in which Employee is
entitled to participate at any time of determination, including,
without limitation, any stock option, stock purchase, stock
appreciation, savings, pension, supplemental employee retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured
by the Company), disability, salary continuation, expense reimbursement
and other employee benefit policies.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(l) "Excise Tax" is defined in Section 10(a).
(m) "Gross-Up Payment" is defined in Section 10(a).
(n) "ISO" is defined in Section 10(a).
(o) "Payment" is defined in Section 10(a).
(p) "Protected Term" means the period commencing as of the
date hereof and expiring as of the close of business on March 31, 2000;
PROVIDED, HOWEVER, that: (i) commencing on April 1, 1998 and each April
1 thereafter, the term of this Agreement will automatically be extended
for an additional year unless, not later than December 31 of the
immediately preceding year, the Company or Employee shall have given
notice that it or Employee, as the case may be, does not wish to have
the Protected Term extended; and (ii) except as otherwise provided in
the last sentence of Section 12, if, prior to a Change in Control,
Employee ceases for any reason to be an employee of the Company,
thereupon without further action the Protected Term shall be deemed to
have expired and Sections 8, 10, 11 and 14(a) and the last sentence of
Section 12 of this Agreement and the portion of any other provision of
this Agreement that incorporates such provisions will immediately
terminate and be of no further effect. For purposes of this Section
1(p), Employee shall not be deemed to have ceased to be an employee of
the Company by reason of the transfer of Employee's employment between
or among HCR and the Company or any other Subsidiary.
(q) "Severance Period" means the period of time commencing on
the date of the occurrence of a Change in Control and continuing until
the earliest of (i) the third anniversary of the occurrence of the
Change in Control (ii) Employee's death, or (ii) Employee's attainment
of age 65.
(r) "Severance Benefits" are defined in Section 8(b).
3
<PAGE> 4
(s) "Subsidiary" means any entity in which HCR directly or
indirectly beneficially owns 50% or more of the then outstanding Voting
Stock.
(t) "Termination Date" means the effective date of Employee's
termination of employment with the Company; provided that for purposes
of this Section 1(t), Employee shall not be deemed to have ceased to be
an employee of the Company by reason of the transfer of Employee's
employment between or among HCR and the Company or any other
Subsidiary.
(u) "Underpayment" is defined in Section 10(a).
(v) "Voting Stock" means securities entitled to vote generally
in the election of directors.
2. SALARY AND POSITION. Employee's Base Pay and job title shown on
Schedule I are correct as of the date hereof and in accordance with Employee's
understanding.
3. AT-WILL EMPLOYMENT. Employee's employment with the Company is not
for any specified term and may be terminated by Employee or by the Company at
any time for any reason, with or without Cause.
4. NO OTHER AGREEMENTS. Except as specifically set forth herein and in
Schedule II attached hereto, Employee represents and warrants that there are no
other written or oral agreements, understandings or commitments relating to
Employee's future employment, work assignments, compensation (including
compensation upon termination), benefits, or any other term or condition of
employment.
5. ENTIRE AGREEMENT. This Agreement and the agreements listed in
Schedule II attached hereto constitute the complete agreement between Employee
and the Company regarding any and all aspects of their employment relationship
and supersede any and all prior written or oral agreements, understandings or
commitments. Employee understands that no representative of the Company has been
authorized to enter into any agreement, understanding or commitment with
Employee which is inconsistent in any way with the terms of this Agreement.
6. PROHIBITION AGAINST AMENDMENT. Employee's Base Pay may be modified
by the Company at any time in its sole discretion. The retirement and benefit
plans set forth in Schedule II attached hereto in which Employee is entitled to
participate may be improved, reduced or terminated by the Company at any time in
its sole discretion; provided, however, that no vested or accrued benefit shall
be adversely affected. No term set forth in this Agreement, including without
limitation the terms set forth in Section 3 hereof, may be modified in any way
except by a written agreement signed by Employee and by an authorized
representative of the Company which expressly states the intention of the
parties to modify the terms of this Agreement.
7. SEVERANCE PAYMENT NOT FOLLOWING A CHANGE IN CONTROL. Except as
provided in Section 8:
(a) Upon the termination of Employee's employment as a result
of Employee's electing to resign his employment or to retire without
the consent of the Company, no payments shall be required or made
pursuant to this Section 7.
4
<PAGE> 5
(b) Upon the termination of Employee's employment by the
Company for Cause, no payments shall be required or made pursuant to
this Section 7.
(c) Upon the termination of Employee's employment by the
Company for any reason other than for Cause or disability, the Company
shall continue payment of Employee's Base Pay, at the rate then in
effect on the Termination Date, for a period of one year after such
Termination Date. The Company shall give thirty (30) days written
notice of any such termination which notice shall specify the
Termination Date.
(d) Upon the termination of Employee's employment as a result
of the death of Employee, the Company shall continue payment of
Employee's Base Pay, at the rate then in effect on the Termination
Date, for a period of one year after such Termination Date; PROVIDED,
HOWEVER, that such payments shall be offset by any survivor benefits,
excluding life insurance proceeds, received by Employee's spouse or
other designated beneficiary under the Company's plans, programs and
policies.
(e) Upon the termination of Employee's employment as a result
of his becoming unable to perform his duties due to a disability as
established by the award of long-term disability benefits under the
Company's long-term disability plan, the Company may terminate
Employee's employment by giving Employee thirty (30) days written
notice of its intention to terminate. In such event, Company shall
continue payment of Employee's Base Pay, at the rate then in effect on
the Termination Date, for a period of one year after such Termination
Date; PROVIDED, HOWEVER, that such payments shall be offset by any
disability benefits received by Employee, or his legal guardian, under
the Company's plans, programs and policies.
(f) Notwithstanding anything to the contrary contained in this
Section 7, upon the termination of Employee's employment for any reason
other than pursuant to Section 8, whether voluntarily or involuntarily
and whether with or without Cause, Employee shall be entitled to the
payments provided for hereunder and such rights as he otherwise has
under the Company's Restricted Stock Plan and the Company's Stock
Option Plan in the circumstances of his particular termination.
8. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) ELIGIBILITY FOR SEVERANCE BENEFITS.
(i) If, during the Severance Period, Employee's
employment is terminated by the Company other than for Cause
and other than as a result of his death or disability pursuant
to Section 7(d) or (e), Employee shall be entitled to the
Severance Benefits.
(ii) Following the consummation of a Change in
Control, Employee may elect, within the 60-day period
following the occurrence of one of the following events, to
terminate employment with the Company and receive the
Severance Benefits (pursuant to written notice to the Board
specifying the effective date of such termination which shall
not be earlier than the date of the Board's receipt of such
notice and shall not be later than the end of such 60-day
period):
5
<PAGE> 6
(A) Failure to elect or reelect or otherwise to maintain
Employee in the office or position, or a substantially equivalent
office or position, of or with the Company or successor, as the case
may be, which Employee held immediately prior to a Change in Control,
or the removal of Employee as a Director (or as a member of the board
of directors of any successor thereto) if Employee shall have been a
Director immediately prior to the Change in Control;
(B) The occurrence of any of the following:
(I) a significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities
or duties attached to the position with the Company or
successor, as the case may be, which Employee held immediately
prior to the Change in Control;
(II) a reduction in Employee's Base Pay as in effect
immediately prior to the Change in Control;
(III) a material reduction in the scope or value of
Employee Benefits as in effect immediately prior to a Change
in Control; or
(IV) any material breach of this Agreement by the
Company or any successor thereto,
which situation is not remedied within 10 calendar days after
written notice to the Board (or the board of any successor)
from Employee;
(C) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all
of its business and/or assets, unless the surviving or successor
entity, if other than the Company (by liquidation, merger,
consolidation, reorganization, transfer or otherwise), to which all or
substantially all of such business and/or assets have been transferred
(directly or by operation of law) assumes all duties and obligations of
the Company under this Agreement pursuant to Section 16(a); or
(D) The Company or any successor, as the case may be, by which
Employee is employed relocates its principal executive offices, or
requires Employee to have his principal location of work changed, to
any location which increases by more than 25 miles Employee's commute
to such location immediately prior to the Change in Control, or
requires Employee to travel away from his office in the course of
discharging his responsibilities or duties hereunder at least 20% more
(in terms of aggregate days in any calendar year or in any calendar
quarter when annualized for purposes of comparison to any prior year)
than the average of such time that was required of Employee in the
three full years immediately prior to the Change of Control without, in
either case, his prior written consent.
6
<PAGE> 7
(iii) If Employee elects to terminate employment with
the Company or any successor, as the case may be, for any
reason, or without reason, during such portion of the 180-day
period immediately following the first anniversary of the
occurrence of any Change in Control that falls within the
Severance Period, Employee shall be entitled to the Severance
Benefits.
(B) SEVERANCE BENEFITS. If, following the occurrence of a
Change in Control, Employee's employment with the Company is terminated
pursuant to Section 8(a)(i), (ii) or (iii), the Company will pay to
Employee the following amounts within five business days after the
Termination Date and will provide to Employee the following benefits
(collectively, the "Severance Benefits"):
(i) A lump sum payment equal to three times the
highest Aggregate Cash Compensation paid or payable to
Employee for any of the three calendar years preceding the
year in which the Termination Date occurs or for the year in
which the Termination Date occurs if the Termination Date
occurs after the end of the first quarter; for purposes of
this Section 8(b)(i), if the Company's financial performance
for the year-to-date period preceding the Termination Date is
consistent with budgeted levels (as certified by the
Compensation Committee) then the Aggregate Cash Compensation
for the year in which the Termination Date occurs shall be
assumed to be equal to the sum of: (A) the Employee's Base
Pay, (B) the Employee's Annual Incentive Plan bonus payable
for the year in which the Termination Date occurs, calculated
by multiplying the product of the Employee's Base Pay and the
Employee's bonus percentage by 150%, and (C) the Employee's
Performance Award Plan award payable for the award period
ending with the year in which the Termination Date occurs as
if the earnings per share growth rate for such year were
assumed to be the actual growth rate for the year-to-date
period prior to the Termination Date;
(ii) During the Continuation Period:
(A) the Company will arrange to provide
Employee with group medical, dental and vision
benefits substantially similar to those which
Employee was receiving or entitled to receive
immediately prior to the Change in Control; and
(B) the Company (or successor) will provide
Employee the use of office space, furnishings and
secretarial support services comparable to those
provided to Employee immediately prior to the Change
in Control;
If and to the extent that any benefit
described in Section 8(b)(ii)(A) is not or cannot be
paid or provided under any policy, plan program or
arrangement of the Company, then the Company will pay
or provide for the payment to Employee, his
dependents and beneficiaries, of such Employee
Benefits in any manner selected by the Company.
Without otherwise limiting the purposes or effect of
Section 8, Employee Benefits otherwise receivable by
Employee pursuant to Section 8(b)(ii)(A) will be
reduced to the extent comparable welfare benefits are
actually received by Employee from another employer
during the Continuation Period, and any such benefits
received by Employee shall be reported by Employee to
the Company.
7
<PAGE> 8
(iii) The Company shall take whatever action is
necessary to fund completely any split-dollar life insurance
arrangement maintained by the Company for the benefit of
Employee, effective as of the Termination Date and based upon
Employee's service through the end of the Continuation Period;
(iv) Effective as of the Termination Date, Employee
will be credited with service with the Company for an
additional 36 months for the purpose of determining service
credits and benefits due and payable to Employee under the
Company's retirement income, supplemental retirement and other
benefit plans of the Company applicable to Employee, his
dependents or his beneficiaries immediately prior to the
Change in Control; and
(v) Employee shall be permitted to elect to defer
receipt of amounts payable to him, if any, under the Company's
Senior Management Savings Plan and Senior Management Savings
Plan for Corporate Officers until any date not later than the
expiration of the Continuation Period.
(c) Without limiting the rights of Employee at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided under this Section 8 on a timely basis,
the Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Any change in such prime
rate will be effective on and as of the date such change is so
published.
(d) Notwithstanding any other provision hereof, the parties'
respective rights and obligations under this Section 8 and under
Section 11 will survive:
(i) any termination or expiration of this Agreement
following a Change in Control prior to the expiration of the
Protected Term; and
(ii) the termination of Employee's employment for any
reason whatsoever following a Change in Control prior to the
expiration of the Protected Term.
9. NO SET-OFF; NO MITIGATION OBLIGATION. The Company hereby
acknowledges that it will be difficult and may be impossible (a) for Employee to
find reasonably comparable employment following the Termination Date; and (b) to
measure the amount of damages which Employee may suffer as a result of
termination of employment hereunder. In addition, the Company acknowledges that
its severance pay plans applicable to corporate officers do not provide for
mitigation, offset or reduction of any severance payment received thereunder.
Accordingly, the payment of the severance compensation by the Company to
Employee in accordance with the terms of this Agreement is hereby acknowledged
by the Company to be reasonable and will be liquidated damages, and Employee
will not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of Employee
hereunder or otherwise, except as expressly provided in Sections 7(d) and (e)
and the last sentence of Section 8 (b)(ii).
8
<PAGE> 9
10. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that a Change in Control occurs prior to
the expiration of the Protected Term and it shall be determined (as
hereafter provided) that any payment or distribution by the Company or
any of its affiliates to or for the benefit of Employee, whether paid
or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right,
or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (collectively, a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code (or any successor provision thereto) by reason of
being considered "contingent on a change in ownership or control" of
the Company, within the meaning of Section 280G of the Internal Revenue
Code (or any successor provision thereto) or to any similar tax imposed
by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the "Excise
Tax"), then Employee shall be entitled to receive an additional payment
or payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER,
that no Gross-up Payment shall be made with respect to the Excise Tax,
if any, attributable to: (i) any incentive stock option, as defined by
Section 422 of the Internal Revenue Code ("ISO"), granted prior to the
execution of this Agreement; or (ii) any stock appreciation or similar
right, whether or not limited, granted in tandem with any ISO described
in clause (i). The Gross-Up Payment shall be in an amount such that,
after payment by Employee of all taxes, including any Excise Tax (and
including any interest or penalties imposed with respect to such
taxes), imposed upon the Gross-Up Payment, Employee retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payment.
(b) Subject to the provisions of Section 10(f) hereof, all
determinations required to be made under this Section 10, including
whether an Excise Tax is payable by Employee and the amount of such
Excise Tax and whether a Gross-Up Payment is required to be paid by the
Company to Employee and the amount of such Gross-Up Payment, if any,
shall be made by a nationally recognized accounting firm (the
"Accounting Firm") selected by the Company. The Company shall direct
the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and Employee within thirty (30)
calendar days after any Termination Date arising pursuant to Section
8(a). If the Accounting Firm determines that any Excise Tax is payable
by Employee, the Company shall pay the required Gross-Up Payment to
Employee within five (5) business days after receipt of such
determination. If the Accounting Firm determines that no Excise Tax is
payable by Employee, it shall, at the same time as it makes such
determination, furnish the Company and Employee an opinion that
Employee has substantial authority not to report any Excise Tax on his
federal, state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Internal Revenue
Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the
time of any determination by the Accounting Firm hereunder, it is
possible that a Gross-Up Payment which will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section
10(f) hereof and Employee thereafter is required to make a payment of
any Excise Tax, Employee shall direct the Accounting Firm to determine
the amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company
and Employee as promptly as possible. Any such
9
<PAGE> 10
Underpayment shall be promptly paid by the Company to, or for the
benefit of, Employee within five business days after receipt of such
determination and calculations.
(c) The Company and Employee shall each provide the Accounting
Firm access to and copies of any books, records and documents in the
possession of the Company or Employee, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination and calculations contemplated by Section 10(b) hereof.
Except as contemplated by Sections 10(f) or 10(g), any final
determination by the Accounting Firm as to the amount of the Gross-Up
Payment shall be binding upon the Company and Employee.
(d) The federal, state and local income or other tax returns
filed by Employee shall be prepared and filed on a consistent basis
with the determinations of the Accounting Firm with respect to the
Excise Tax payable by Employee. Employee shall make proper payment of
the amount of any Excise Payment, and at the request of the Company,
provide to the company true and correct copies (with any amendments )
of his federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other documents
reasonably requested by the Company, evidencing such payment. If prior
to the filing of Employee's federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, Employee
shall within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 10(b) hereof shall be borne by the Company.
(f) Employee shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable
but no later than 10 business days after Employee actually receives
notice of such claim and Employee shall further apprise the Company of
the nature of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by Employee). Employee
shall not pay such claim prior to the earlier of: (i) the expiration of
the ten (10) calendar day period following the date on which he gives
such notice to the Company; and (ii) the date that any payment of such
amount with respect to such claim is due. If the Company notifies
Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim reasonably
requested by the Company;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including without limitation accepting
legal representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
10
<PAGE> 11
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any
proceedings relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless
Employee, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this Section
10(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 10(f) and,
at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided, however, that Employee
may participate therein at his own cost and expense) and may, at its
option, either direct Employee to pay the tax claimed and sue for
refund or contest the claim in any permissible manner, and Employee
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; PROVIDED,
HOWEVER, that if the Company directs Employee to pay the tax claimed
and sue for a refund, the Company shall advance the amount of such
payment to Employee on an interest-free basis and shall indemnify and
hold Employee harmless, on an after tax basis, from any Excise Tax or
income or other tax, including interest or penalties with respect
thereto, imposed with respect to such advance; and PROVIDED, FURTHER,
HOWEVER, that any extension of the statute of limitations relating to
payment of taxes for the taxable year of Employee with respect to which
the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by Employee of any amount advanced
by the Company pursuant to Section 10(f) hereof, Employee receives any
refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 10(f) hereof)
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by Employee of any amount advanced by
the Company pursuant to Section 10(f) hereof, a determination is made
that Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify Employee in writing of its intent
to contest such denial or refund prior to the expiration of 30 calendar
days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to Employee pursuant to this Section
10.
11. LEGAL FEES AND EXPENSES. It is the intent of the Company that
Employee not be required to incur legal fees and the related expenses associated
with the interpretation, enforcement or defense of Employee's rights under
Section 8 of this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to Employee hereunder. Accordingly, if the Company fails to comply with
any of its obligations under this
11
<PAGE> 12
Agreement or in the event that the Company or any other person takes any action
to declare this Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from, Employee the
benefits provided or intended to be provided to Employee hereunder, the Company
irrevocably authorizes Employee from time to time to retain counsel of
Employee's choice, at the expense of the Company as hereafter provided, to
advise and represent Employee in connection with any such interpretation,
enforcement or defense, including, without limitation, the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Director, officer, stockholder or other person affiliated with the Company,
in any jurisdiction. Without respect to whether Employee prevails, in whole or
in part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all reasonable attorneys' and related
fees and expenses by Employee in connection with any of the foregoing.
12. EMPLOYMENT RIGHTS: TERMINATION PRIOR TO CHANGE IN CONTROL. Nothing
expressed or implied in this Agreement will create any right or duty on the part
of the Company or Employee to have Employee remain in the employment of the
Company prior to or following any Change in Control. Any termination of
employment of Employee by the Company other than for Cause or by reason of his
death or disability pursuant to Sections 7(b), (d) or (e) during the period
beginning on the date that is sixty (60) days prior to the date of the first
public announcement by the Company of the potential occurrence of an event that
would constitute a Change in Control and ending on the date of consummation of
such Change in Control shall be deemed to be a termination of Employee after a
Change in Control for purposes of this Agreement.
13. NON-COMPETITION/NON-SOLICITATION.
(a) COVENANT NOT TO COMPETE. Employee covenants and agrees
that during the period of Employee's employment hereunder and for a
period of one (1) year following the termination of Employee's
employment, including without limitation termination by the Company for
cause or without cause, Employee shall not, in the United States of
America, engage, directly or indirectly, whether as principal or as
agent, officer, director, employee, consultant, shareholder or
otherwise, alone or in association with any other person, corporation
or other entity, in any Competing Business.
(b) NON-SOLICITATION OF CUSTOMERS. Employee agrees that during
his employment with the Company he shall not, directly or indirectly,
solicit the business of, or do business with, any customer or
prospective customer of the Company for any business purpose other than
for the benefit of the Company. Employee further agrees that for one
(1) year following termination of his employment with the Company,
including without limitation termination by the Company for cause or
without cause, Employee shall not, directly or indirectly, solicit the
business of, or do business with, any customers or prospective
customers of the Company.
(c) NON-SOLICITATION OF EMPLOYEES. Employee agrees that,
during his employment with the Company and for one (1) year following
termination of Employee's employment with the Company, including
without limitation termination by the Company for cause or without
cause, Employee shall not, directly or indirectly, solicit or induce,
or attempt to solicit or induce, any employee of the Company to leave
the employment of the Company for any reason whatsoever, or hire any
employee of the Company except into the employment of the Company.
14. VESTING OF OPTIONS AND RESTRICTED STOCK; EMPLOYEE BENEFITS.
12
<PAGE> 13
(a) Upon the consummation of a Change in Control prior to the
expiration of the Protected Term,
(i) all options to purchase Company stock then held
by Employee shall be fully vested and exercisable in full as
of such date;
(ii) all shares of restricted Company stock issuable
to Employee under outstanding restricted stock awards made to
Employee prior to the date of such Change in Control shall be
issued to Employee as of such date; and
(iii) the restrictions applicable to all shares of
restricted stock then held by Employee (including shares
issued pursuant to subsection (ii) above) shall lapse as of
such date.
(b) Except as otherwise expressly provided herein, no
termination of Employee's employment with the Company will affect any
rights which Employee may have pursuant to any agreement, policy, plan,
program or arrangement of the Company providing Employee Benefits.
15. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or governmental regulation
or ruling.
16. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require all successors (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to any substantial portion of the business or assets of the
Company, by agreement in form and substance satisfactory to Employee,
jointly and severally expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would
be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company
and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of
the business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement),
but will not otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement will inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 16(a) and 16(b)
hereof. Without limiting the generality or effect of the foregoing,
Employee's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Employee's will or
by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 16(c), the
Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
13
<PAGE> 14
17. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express or UPS, addressed to the Company (to the attention of the Secretary of
the Company) at its principal executive office and to Employee at his principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
18. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
19. VALIDITY. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. MISCELLANEOUS. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. References to
Sections are to references to Sections of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
22. TITLES. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
HEALTH CARE AND RETIREMENT
CORPORATION OF AMERICA
By: _________________________________
Its: _______________________________
HEALTH CARE AND RETIREMENT
CORPORATION
By: _________________________________
Its: _______________________________
EMPLOYEE:
______________________________________
M. Keith Weikel
15
<PAGE> 16
SCHEDULE I
----------
Employee: M. Keith Weikel
Current Base Rate: $325,000
Job Titles: Senior Executive Vice President and Chief
Operating Officer
<PAGE> 17
SCHEDULE II
-----------
Annual Incentive Plan
Performance Award Plan
Stock Option Plan
Amended Restricted Stock Plan
Salary Retirement Plan (prior to January 1, 1993)
Stock Purchase and Savings Program (prior to January 1, 1993)
Senior Executive Retirement Plans
Supplemental Offset Plan
Excess and Supplemental Benefit Plans
Corporate Officer and Senior Executive Life Insurance Program
Senior Management Savings Plan
Senior Management Savings Plan For Corporate Officers
Such other benefit plans and arrangements as the Company provides, from time to
time, to salaried employees generally participation in which is approved by the
President.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,460
<SECURITIES> 0
<RECEIVABLES> 156,304
<ALLOWANCES> 17,799
<INVENTORY> 0
<CURRENT-ASSETS> 167,124
<PP&E> 701,087
<DEPRECIATION> 145,873
<TOTAL-ASSETS> 949,316
<CURRENT-LIABILITIES> 122,797
<BONDS> 292,603
0
0
<COMMON> 492
<OTHER-SE> 445,060
<TOTAL-LIABILITY-AND-EQUITY> 949,316
<SALES> 0
<TOTAL-REVENUES> 226,512
<CGS> 0
<TOTAL-COSTS> 176,705
<OTHER-EXPENSES> 9,658
<LOSS-PROVISION> 693
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,792
<INCOME-TAX> 8,532
<INCOME-CONTINUING> 19,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,260
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
