EXHIBIT 10.32
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1995, between The Multicare Companies, Inc., a Delaware corporation (the
"Company"), and Stephen R. Baker (the "Executive").
The Company desires to employ the Executive, and the Executive
desires to accept such employment, on the term and conditions of this
Agreement.
Certain terms used herein are defined in Section 11.1.
NOW, THEREFORE, in consideration of the agreements and obligations
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 Employment by the Company. The Company agrees to employ
the Executive for the Term (as defined in Section 2), to render full-time
services to the Company as its Executive Vice President and Chief Operating
Officer to perform such duties commensurate with such office as the Board of
Directors of the Company (the "Board of Directors") and/or the Co-Chief
Executive Officers of the Company shall reasonably direct. The Executive
shall report directly to the Co-Chief Executive Officers of the Company. The
Executive shall devote his full business time to the business of the Company
during the term.
1.2 Acceptance of Employment by the Executive. The Executive
hereby accepts such employment and agrees to render the services described
above. The Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company and as an officer or
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director of any subsidiary of the Company, without any compensation therefor
other than as specified in this Agreement, if elected to any such position.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this
Agreement (the "Term") shall commence on the date hereof and shall end on
December 31, 1997, unless earlier terminated pursuant to Section 4 hereof;
provided, that the Term shall automatically be extended for successive one-
year periods on each January 1, commencing January 1, 1998 unless timely
written notice of termination of the Term is provided in accordance with
Section 2.2. Each one-year period commencing each January 1 during the Term
is referred to herein as an "Employment Year".
2.2 The Company or the Executive may choose not to extend or
renew the Term of Executive's employment hereunder without cause or reason,
upon written notice to the other at least one hundred eighty (180) days prior
to any January 1 occurring after January 1, 1997.
3. COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive, for
each Employment Year during the Term, an annual direct salary of $250,000 per
year (the "Annual Direct Salary"). The Annual Direct Salary shall be
reviewed by the Board of Directors on each anniversary of this Agreement and
may be adjusted upwards as of each such anniversary. In no event shall the
Annual Direct Salary be decreased from the Annual Direct Salary payable for
the immediately preceding year without the express written consent of the
Executive.
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3.2 Incentive Compensation. The Co-Chief Executive Officers
shall prepare a business plan establishing the financial and business goals
of the Company prior to the start of each fiscal year during the Term (the
"Business Plan"). The Business Plan shall set forth the goals of, and
performance expectations for, the Executive for such year. The Board of
Directors shall establish an incentive compensation opportunity for the
Executive under the Company's Key Employee Incentive Compensation Plan (the
"KEICP") based on such Business Plan. For 1995, the Executive's incentive
for achieving Expected Performance under the KEICP shall be 50% of the
Executive's Annual Direct Salary in effect on January 1, 1995; Threshold
Performance shall be 30% of such Annual Direct Salary; and Outstanding
Performance shall be 75% of such Annual Direct Salary.
3.3 Employee Benefit Plans. The Executive shall be entitled
to participate in or receive benefits under all Company employment benefit
plans including, but not limited to, any pension, profit-sharing plan, stock
option or other equity award or participation plans, savings plan,
supplemental retirement income, medical or health-and-accident plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. The
Company shall also provide the Executive with the following minimum benefits:
(i) Life Insurance: the Company shall
acquire, promptly following the execution of this Agreement, and maintain for
the Executive a supplemental term life insurance policy with a death benefit
equal to at least four (4) times the Executive's then current Annual Direct
Salary to a maximum death benefit of $2,000,000, provided, that such policy
is obtainable on standard underwriting terms. The Executive agrees to
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cooperate with the Company in obtaining such policy, including undertaking
such physical examinations and completing such applications as may be
required. The Executive, or a valid trust established by the Executive,
shall own such policy and the Executive shall be liable for any income taxes
due annually on the reported income resulting from the Company's payment of
annual premiums during the Term. This policy shall be, and shall provide
that it is, assumable by the Executive at the termination or expiration of
the Term.
(ii) Disability Insurance: In the event that
the Company's group long-term disability insurance policy benefit limit, if
any, does not provide for the Executive to receive the 66.67% of income
replacement at the time of disability, or the Company does not at any time
during the Term maintain a group long-term disability insurance policy, the
Company shall make available a long-term disability insurance policy for the
Executive, which policy shall provide that in the event the Executive is
unable to perform his duties hereunder as a result of incapacity due to
physical or mental illness, he shall be entitled to receive benefits from all
sources (Social Security, group long-term disability and supplemental long-
term disability) equal to 66.67% of his then current Annual Direct Salary
until the Executive reaches the age of 65 or dies. The Company shall
continue to pay to the Executive his Annual Direct Salary during any
applicable elimination or waiting period not in excess of one hundred eighty
(180) days.
(iii) 401(k) Wrap Plan/Deferred Compensation
Plan Participation: The Executive shall have the option to participate in a
401(k) Wrap Plan to be established by the Company to enable the Executive to
defer portions of current income from income tax liability until a later
time, provided such election to defer income is made in compliance with the
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Code and such plan has been established to benefit other key officers of the
Company.
(iv) Health and Medical Insurance: The Company
shall pay all premiums otherwise due from the Executive for family coverage
in the medical and dental insurance programs offered by the Company to its
executives from time to time.
3.4 Vacation. During the Term, the Executive shall be
entitled to four (4) weeks of paid vacation in each calendar year. The
Executive shall also be entitled to all paid holidays given by the Company to
its senior executive officers.
3.5 Reimbursement of Expenses. During the Term, the Company
shall reimburse the Executive promptly for all reasonable expenses incurred
by him (in accordance with the policies and procedures established by the Co-
Chief Executive Officers or the Board of Directors for the Company's senior
executive officers) in performing services hereunder.
3.6 Automobile Allowance. During the Term, the Executive
shall be entitled to use for business and personal reasons an automobile of
his choice leased by the Company, subject to the approval of the Co-Chief
Executive Officers, in an amount up to $600 per month. The Company shall pay
all amounts in respect of premiums for collision and liability insurance (in
amounts determined by the Executive) and will reimburse the Executive for all
operating, maintenance and repair expenses.
3.7 Agreement Signing Incentive. The Executive shall receive
as of the date hereof a special one-time grant pursuant to the Company's
Stock Option Plan of 9,000 nonqualified options to purchase shares of the
Company's common stock (the "Options"). The Options shall have an exercise
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price equal to the closing bid price of the Company's common stock on the
date hereof as reported by The NASDAQ Stock Market and shall vest ratably
over three years.
3.8 Other Benefits. The Executive shall be entitled to
receive such other requisites, e.g. club memberships and fringe benefits as
the Co-Chief Executive Officers or the Board of Directors deems appropriate.
4. TERMINATION.
4.1 Termination Upon Death. If the Executive dies during the
Term, this Agreement shall terminate as of the date of death, and the
Executive's legal representatives, successors, heirs or assigns shall be
entitled to receive the amounts set forth in Section 6.1.
4.2 Termination Upon Disability. If during the Term, the
Executive becomes subject to a Disability (as defined in the following
sentence), the Company may at any time thereafter, by notice to the
Executive, terminate the Term of Executive's employment hereunder, except
that the Executive shall be entitled to receive the amounts specified in
Section 6.1. For purposes of 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 one hundred eighty (180) consecutive
days or (ii) for shorter periods aggregating two hundred seventy (270) days
in any three hundred sixty-five (365) day period. During any period of
Disability, the Executive agrees to submit to reasonable medical examinations
upon the request, and at the expense, of the Company. Nothing in this
Section 4.2 shall be deemed to extend the Term.
4.3 Termination for Cause. During the Term, the Company
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shall have the right to terminate the Term of Executive's employment with the
Company for Cause. For purpose hereof, a termination by the Corporation for
"Cause" shall mean termination 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 either of the Co-Chief
Executive Officers or the Board of Directors.
5. TERMINATION BY THE EXECUTIVE.
The Executive may terminate this Agreement, if any one or more
of the following shall occur (any such event "Good Reason"):
(a) a material breach of the terms of this
Agreement by the Company and such breach continues for 30 days after the
Executive gives the Company written notice of such breach;
(b) the Company shall make a general assignment for
benefit of creditors; or any proceeding shall be instituted by the Company
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking entry of an order for
relief or the appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property or the Company shall take
any corporate action to authorize any of the actions set forth above in this
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Section 5(b);
(c) an involuntary petition shall be filed or an
action or proceeding otherwise commenced against the Company seeking
reorganization, arrangement or readjustment of the Company's debts or for any
other relief under the Federal Bankruptcy Code, as amended, or under any
other bankruptcy or insolvency act or law, state or federal, now or hereafter
existing and remain undismissed or unstayed for a period of 30 days; or
(d) a receiver, assignee, liquidator, trustee or
similar officer for the Company or for all or any part of its property shall
be appointed involuntarily.
6. PAYMENTS UPON TERMINATION.
6.1 Termination Due to Death or Disability. Upon the death
or Disability of the Executive the Company shall pay to the Executive or his
estate (i) the Annual Direct Salary and other accrued benefits earned up to
the last day of the month of the Executive's death or Disability (subject to
the last sentence of 3.3(ii)), (ii) all deferred amounts earned under the
KEICP or similar bonus plan and (iii) if any bonus, under the KEICP or
otherwise, 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.
6.2 Termination for Cause. Upon termination of the Term by
the Company for Cause, the Company's obligations to the Executive under this
Agreement shall be limited to the payment of unpaid Annual Direct Salary and
benefits accrued up to the effective date of termination specified in the
Company's notice of termination.
6.3 Termination by Executive for Good Reason or by the
Company other than for Certain Reasons.
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In the event (i) the Company terminates the Term for
a reason other than for Cause or due to death or Disability or (ii) the
Executive terminates the Term for Good Reason, then: (1) the Company shall
pay the Executive (i) the Annual Direct Salary and other accrued benefits
earned up to the last day of the month of the Executive's employment, (ii)
all deferred amounts earned under the KEICP or similar bonus plan, and (iii)
a lump sum cash payment within thirty (30) days following the date of
termination equal to the greater of (x) all remaining Annual Direct Salary
payable during the Term and (y) an amount equal to the Annual Direct Salary
for the then current Employment Year and (2) 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, and (3) the Company shall
continue to provide all employee benefit plans and programs to which the
Executive was entitled prior to the date of termination, subject to COBRA, at
the Company's expense for one year.
6.4 Termination Due to a Change of Control. Upon the
termination of the Term due to a Change of Control, the Company shall pay the
amounts to and provide the benefits for the Executive as set forth in Section
7.1 and 7.4 hereof.
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7. CHANGE OF CONTROL.
7.1 (a) Upon a Change of Control, the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control. In the event that the
Executive terminates the Term pursuant to this Section 7.1, the Company shall
make a lump-sum payment to the Executive equal to three times the sum of (i)
his then current Annual Direct Salary and (ii) an amount equal to the highest
annual bonus (KEICP and other amounts being aggregated) award received within
the three (3) years immediately preceding the Employment Year in which such
termination occurs; provided, that in no event shall such amount be less than
the bonus payable at an Expected Level of performance under the KEICP for
1995. The Company shall also maintain all employee benefit plans and
programs to which the Executive have entitled on or prior to the date of a
Change of Control for a period of twenty-four (24) months following such date
of a Change of Control.
(b) Immediately prior to the consummation of any
transaction which, if consummated, could result in a Change in Control, all
restricted stock, stock option and performance share awards made to the
Executive shall become automatically fully vested 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.
In the event the Executive does not exercise any such accelerated restricted
stock, stock options or awards in the transaction resulting in a Change of
Control, the Executive will have a six month period from the date of a Change
of Control in which to exercise such restricted stock, stock options and
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awards. In the event the subject transaction is not consummated and no
Change of Control occurs, all accelerated restricted stock, stock options and
awards shall be deemed restored to the vesting schedules in effect at the
time of such acceleration.
7.2 For purposes of this Agreement, the term "Change of
Control" shall mean:
(a) the acquisition (after the date hereof) of the
beneficial ownership of a majority of the Company's voting securities and/or
substantially all of the assets of the Company by a single person or entity
or a group of affiliated persons or entities (other than any such person
involving or including either or both of the Company's Co-Chief Executive
Officers); or
(b) the merger, consolidation or combination or
similar transaction of the Company with an unaffiliated corporation in which
the Board of Directors immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of directors of the
surviving, new or combined entity.
7.3 For purposes of this Agreement the term a "date of a
Change of Control" shall mean:
(a) the first date (after the date hereof) on which
a single person and/or entity, or group of affiliated persons and/or entities
(other than either or both of the Co-Chief Executive Officers or their
Affiliates), acquire the beneficial ownership of majority of the Company's
voting securities; or
(b) the date of the transfer of all or
substantially all of the Company's voting securities other than to either or
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both of the Co-Chief Executive Officers or their Affiliates; or
(c) the date on which a merger, consolidation or
combination of the type specified in Section 7.2(b) is consummated.
7.4 Certain Taxes. 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 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 not 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 pay 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 maximum reduction in federal income taxes that could be
obtained from deduction of such state and local taxes.
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8. RESTRICTIVE COVENANTS.
8.1 Noncompetition Agreement. In the event that (i) the Term
is terminated by the Company for Cause, (ii) the Term is terminated by the
Executive for other than Good Reason or (iii) the Executive does not accept
the Company's offer to extend or renew the Term, the Executive shall not
directly or indirectly enter into or engage generally in direct or indirect
competition with the Company in the business of nursing care in any state in
which the Company is then doing business either as an individual on his own
or as a partner or joint venturer, or as a director, officer, shareholder
(except as an incidental shareholder), employee or agent for any person, for
a period of one year after the date of such termination of the Term.
8.2 Confidentiality. During the Term and for two (2) years
thereafter, the Executive shall not, without the written consent of the Board
of Directors or a person authorized thereby, knowingly disclose to any
person, other than an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by
the Executive of his duties as an executive of the Company, any material
confidential information obtained by him while in the employ of the Company
with respect to any of the Company's services, products, improvements,
processes, customers, methods of distribution or any business practices the
disclosure of which he knows will be materially damaging to the Company;
provided, however, that confidential information shall not include any
information publicly available at the time of the alleged disclosure (other
than as a result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
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Company. Upon termination of the Term upon the request of the Company, the
Executive shall promptly deliver to the Corporation all correspondence,
manuals, letters, notes, notebooks, reports and any other documents or
tangible items containing or constituting confidential information about the
business of the Company.
8.3 Nonsolicitation of Employees. The Executive agrees not
to entice or solicit, directly or indirectly, any employee of the Company to
leave the employ of the Company to work with the Executive or the entity with
which the Executive was affiliated for a period of two years following the
Executive's termination of employment with the Company.
8.4 Injunctive Relief. The Executive agrees that any breach
of the restrictions set forth in this Section 8 will result in irreparable
injury to the Company for which it shall have no meaningful remedy in law and
the Company shall be entitled to injunctive relief in order to enforce the
provisions thereof. In the event that any provision of this Section 8 shall
be determined by any court of competent jurisdiction to be unenforceable in
part by reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
9. INDEMNIFICATION.
(a) The Executive shall be provided with directors' and
officers' insurance in connection with his employment hereunder and service
as a director as contemplated hereby with such coverage and in amounts
determined by the Board from time to time to be reasonable.
(b) To the fullest extent permitted or required by the laws
of the State of Delaware, the Company shall indemnify and provide reasonable
advances for expenses to the Executive, in accordance with the terms of such
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laws, if the Executive is made a party, or threatened to be made a party, to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
the Executive is or was an officer or director of the Company or any
subsidiary or the Company, in which capacity the Executive is or was serving
at the Company's request and in furtherance of the Company's best interests,
against expenses (including reasonable attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
10. NO DUTY TO MITIGATE. The Executive shall have no duty to
mitigate any severance amount or any other amounts payable to him hereunder
and such amounts shall not be subject to reduction for any compensation
received by the Executive from employment in any capacity or other source
following the termination of the Executive's employment with the Company and
its subsidiaries.
11. OTHER PROVISIONS.
11.1 Certain Definitions. As used herein, the following terms
shall be defined as follows:
"affiliate" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purpose of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" have meanings correlative to the foregoing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
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"person" means individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof.
11.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by express mail, or if sent by certified or registered
mail, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
telephone: (201)488-8818
Telecopy: (201)525-5952
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Carl L. Reisner, Esq.
Telephone: (212)373-3000
Telecopy: (212)373-2038
(ii) if to the Executive, to him at his address
then reflected in the personnel records of the Company.
Either party may change its or his address for notice hereunder by
notice to the other party in accordance with this Section 11.2.
11.3 Waivers and Amendments. This Agreement may be amended,
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modified, superseded or cancelled, and the terms and conditions hereof may be
waived, only by a written instrument signed by the parties or, in the case of
a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right or remedy hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right or
remedy, nor any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
11.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State.
11.5 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 void and without effect.
11.6 Enforcement of Separate Provisions. Should any provision
or provisions of this Agreement be determined to be unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
11.7 Arbitration. In the event that any disagreement or
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dispute shall arise between the parties concerning this Agreement, the
issue(s) will be submitted to JAMS/Endispute, Inc. for binding arbitration.
Any award entered shall be final and binding upon the parties hereto and
judgment upon the award may be entered in any court having jurisdiction
thereof. All fees of attorneys, accountants, advisors or other experts or
witnesses, together with all administrative costs incurred in connection with
such actions, shall be paid by the Company.
11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused the
execution of this Agreement as of the date first above written.
THE MULTICARE COMPANIES, INC.
/S/ DANIEL E. STRAUS
By: ___________________________
Name: DANIEL E. STAUS
Title: PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER
/S/ STEPHEN R. BAKER
____________________________
Stephen R. Baker
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