EXHIBIT 10.3
SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
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THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
dated December 22, 1994 is effective as of the date set forth in Paragraph IV
and is between SALICK HEALTH CARE, INC., a Delaware corporation, hereinafter
referred to as "Employer", and Bernard Salick, M.D., hereinafter referred to as
"Employee".
I. Employment and Compensation.
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A. Employer hereby employs Employee as its Chairman of the Board, Chief
Executive Officer and President and as Medical Director of its health care
facilities. Employee shall receive a base annual salary payable in bi-weekly
installments, in advance, during the term hereof ("Base Annual Salary").
Initially, Employee's Base Annual Salary shall be $878,320, payable in bi-weekly
installments of $33,781.54.
B. Employee shall be eligible to earn and receive an annual bonus which
is the greater of that determined (i) by the Executive Compensation Committee of
Employer, (ii) by the Board of Directors, or (iii) as calculated and determined
in accordance with the provisions of Exhibit "A" attached hereto and made part
hereof by this reference. The payment of the bonus which may be earned under
this Agreement shall, for convenience, budget, and fiscal purposes be estimated
to be $300,000 per year, and such amount shall be payable in equal bi-weekly
installments with the normal recurring payroll and as further described in
Exhibit "A".
C. Base Annual Salary shall be increased at least annually during the
term hereof by an amount at least equal to the annual increase in the All Urban
Consumers Los Angeles-Long Beach-Anaheim consumer price index, as applicable
each year for the same month as the month in which the term hereof begins. If
the above-described index is discontinued, a comparable index shall be used.
Notwithstanding the use of the index, in no event shall the Base Annual Salary
of Employee be subject to downward modification. For purposes of calculating
increases to Base Annual Salary, the formula shall apply to the sum of the
amounts payable pursuant to Paragraphs I.A and I.B.
D. In addition to the above, Employee shall continue to be a participant
in Employer's Management Incentive Compensation Plan.
E. During the term of this Agreement, Employer shall nominate Employee to
serve as a director of Employer, and use its best efforts to cause his election.
II. Duties and Authority.
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A. Subject to the provisions of Paragraph II.D, and consistent with
Employee's practice prior to the date hereof, Employee shall devote such of his
working time as is necessary to the discharge of his duties for Employer.
B. Consistent with the Governance Agreement dated as of December 22, 1994
among Employer, Employee and Zeneca Limited (the "Acquiring Company") and
consistent with the authority reposed in Employer's Board of Directors, Employee
shall have overall authority for and be in sole charge of all of Employer's
operations and activities, and (i) with respect to matters for which Employee
has responsibility under this Agreement concerning Zeneca Group PLC and any
company in which it directly or indirectly holds at least a 50% ownership
interest in value or voting power (collectively, "Zeneca Group") shall report
only to the Chief Executive Officer of Zeneca Pharmaceuticals, a business unit
of the Acquiring Company (presently Thomas McKillop) and (ii) with respect to
other matters shall report only to the Salick Board of Directors as a whole.
C. As a result of the transactions contemplated by the Merger Agreement
dated as of December 22, 1994 among Employer, the Acquiring Company and Atkemix
Thirty-Nine Inc. (the "Merger Agreement") and pursuant to the Governance
Agreement, all employees of Employer will be bound by Employer's Employee
Handbook, Employer's Personnel Policy & Procedure Manual and the Policy on the
Ethical Conduct of Business faxed to Employee on December 19, 1994
(collectively, the "Code of Conduct"). Employee acknowledges that he has read
and agrees to be bound by the Code of Conduct; provided that, to the extent the
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Code of Conduct conflicts with the express provisions of Section VII of this
Agreement, the provisions of Section VII shall govern.
D. Notwithstanding anything to the contrary in this Agreement or the Code
of Conduct, Employer acknowledges that Employee devotes a substantial portion of
his time on a regular basis to the practice of internal medicine and nephrology
(which includes a dialysis practice) and providing health care treatment and
services, as well as to (i) business activities including, without limitation, a
horse breeding and sale business and real estate activities, and (ii)
philanthropic activities including without limitation, charitable foundations
and school boards
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(collectively, the "Outside Activities"). The Outside Activities are deemed and
acknowledged not to be competitive with the business of Employer or violative of
Paragraphs XI.A(iv) or (v) of this Agreement. Employee may maintain his level
of involvement in his Outside Activities and shall not be accountable to
Employer in any way for his Outside Activities (other than with respect to
activities relating to Items 6 and 10 of Exhibit "B"). In addition, Employee
may engage in other business and philanthropic activities in the future provided
that they are not competitive with the business of Employer.
E. Employer and Employee acknowledge and confirm that the position
conferred on Employee pursuant to Paragraph I.A on the Commencement Date (the
"New Position") is substantially the same as the position he held as Chairman of
the Board, Chief Executive Officer and President and as Medical Director of
Salick Health Care, Inc. immediately prior to the Commencement Date (the "Old
Position") and that when the New Position is compared to the Old Position, there
is (i) no reduction in total compensation and benefits, (ii) no significant
change in the nature or scope of Employee's authority, duties or status, and
(iii) no significant change in circumstances that affect his position, the
duties attached to his position or his ability to exercise the authority,
powers, functions, or duties attached thereto, such as would give rise to an
event of "Good Reason" as defined in Paragraph XI.B. Such acknowledgment by
Employee does not waive his right to take action pursuant to Paragraph XI.B with
respect to changes in the New Position which arise after the Commencement Date.
III. Benefit Plans.
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A. All Employer benefits presently available to Employee as listed on
Exhibit "B" shall continue to be available to Employee, on the same basis as
they are currently available, throughout the term of this Agreement. Any other
benefits (whether under a plan or otherwise) provided by Employer in the future
for key executives shall also be made available to Employee, and shall be deemed
incorporated into Exhibit B hereto.
B. If the Acquiring Company (as defined in Paragraph IV), acquires all
shares of Employee's common stock, it may, at its option, offer a package of
benefit programs to Employee. If the Acquiring Company makes such an offer,
Employee may choose to be entitled to either, but not both, Employer's or the
Acquiring Company's package of benefits (in the latter case, all of Employee's
years of service with Employer shall be included in calculating years of
employment for purposes of eligibility and benefit participation in such
programs).
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IV. Term.
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The term of this Agreement is five years, commencing upon the date
(the "Commencement Date") of the consummation of the transactions contemplated
by the Merger Agreement. Employer shall, not less than eighteen months prior to
the expiration of the employment term, notify Employee if Employer intends to
retain Employee following the expiration of the then current term, in which
event the parties shall enter into good faith negotiations with regard to the
terms of such continued employment.
V. Vacation and Sick Leave.
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Employee shall be entitled to six weeks vacation every year during the
term of this Agreement, with up to a maximum of six weeks of unused vacation
time being carried forward during the term hereof. Employee shall be entitled
annually during the term of this Agreement to sick days equal to the number of
days of the waiting period for the earliest period of eligibility under any
Employer disability plan. Sick days not taken during the calendar year shall be
forfeited.
VI. Death and Disability.
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If Employee shall die during the term hereof or should he become so
ill that he is unable to substantially perform his duties hereunder and should
such illness continue for a period of six (6) consecutive months during the term
hereof, then Employer may, at its option, terminate this Agreement subject to
the following: (1) in the event of death, all Compensation shall continue to be
paid to Employee's surviving spouse and in the absence of a surviving spouse,
Employee's heirs for twenty four (24) additional months; (2) in the event of
permanent disability, Employee's Compensation shall be paid for the first twelve
(12) months of such disability, sixty-six percent (66%) thereof shall be paid
during the succeeding six (6) month period and thirty-three percent (33%)
thereof shall be paid during the second succeeding six (6) month period. All
payments due Employee hereunder shall be accrued and paid at, as and when due.
Disability shall only give rise to Employer's option to terminate hereunder if a
physician selected by Employer, and reasonably acceptable to Employee or his
legal representative has determined that such disability is total and permanent.
For purposes of this Paragraph VI, "Compensation" shall mean the amounts
described in paragraphs I.A, I.B and I.D and the Items set forth in Exhibit "B"
(other than Items 6 and 10).
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VII. Expenses of Employee.
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A. Employee shall receive reimbursement for all business expenses
incurred by him during the term hereof (including the cost of first class
travel, lodging and related expenses) for which he shall account in accordance
with the regular and standard practices maintained by Employer in that regard.
B. In addition, during the term hereof, Employer shall directly pay or
reimburse Employee for professional publications, professional society dues,
staff privileges and professional licensing fees (including but not limited to
continuing education requirements required for license maintenance),
conventions, lectures and seminars (including but not limited to fees, first
class travel, lodging and related expenses), and similar expenses, all
consistent with prior practice. Such expenses have averaged less than $50,000
per year during the past three years.
VIII. Insurance
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In addition to the insurance benefits listed in Exhibit "B", Employer
shall, during the term hereof, provide Employee, at no cost to Employee, with
general and professional liability and malpractice insurance coverage (as an
officer and physician practicing medicine) to be not less than the amount
currently in existence. To the extent available at a reasonable cost (e.g.
market rates), Employer shall procure and maintain a policy of officers' and
directors' insurance in a mutually acceptable amount (not less than at present)
with Employee as a named insured thereunder. Further, Employer shall cause
Employee to be added as a named insured under all of its other liability
policies, to the extent such addition is permitted by the insurer in respect of
such policies.
IX. Employee and Employer Representations.
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Employee warrants and represents that he is legally able to and
authorized to make and enter into this Agreement and that the execution hereof
is in no way in breach or violation of any agreement to which Employee is a
party. Employer represents and warrants that (a) this Agreement and all acts
contemplated hereunder will have been duly authorized by Employer and approved
by a majority of the disinterested directors of Employer following thorough
review and discussion of the terms hereof; (b) this Agreement is fully binding
upon Employer; and (c) this
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Agreement does not violate any of the organizational or governing documents of
Employer.
X. Covenants.
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A. At any and all times, both during employment by Employer and after
termination thereof, Employee will, promptly upon request of Employer, do all
acts and execute, acknowledge and deliver all written instruments as may be
necessary to vest in Employer, its affiliates or successors, the entire right,
title, and interest of Employee to any patentable inventions made by Employee
either solely or jointly with any other person or persons, at any time during
the period of employment by Employer, while working on Employer's business
("Inventions"), and to enable it (at Employer's sole cost and expense) properly
to prepare, file, and prosecute applications for, and to obtain, Letters Patent
thereon in any and all countries selected by Employer, its affiliates or
successors, as well as reissues, renewals and extensions thereof, and to obtain
the record title to such applications and Letters Patent, so that Employer, its
affiliates or successor shall be the sole and absolute owner thereof to the
extent of Employee's interest. Employee will cooperate with Employer, to
include its affiliates and successors, and its counsel in the prosecution and
defense, or either, of any litigation which may arise in connection with any of
the Inventions, provided, however, that any requested cooperation shall be
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reasonable in amount, shall not interfere with other obligations of Employee and
shall be provided in Los Angeles, California. Should such services be rendered
after the termination of employment with Employer, a reasonable compensation
shall be paid to Employee on a per diem basis, based on the Base Annual Salary
which Employee was receiving from Employer at the termination of employment, in
addition to first class travel and personal expenses incurred by Employee in
rendering the services.
B. Employee and Employer acknowledge that the terms and conditions of
this Agreement are confidential and may be disclosed, in the case of Employee,
only to family members, attorneys, accountants and as required by law and, in
the case of Employer, only to members of the Boards of Directors of Employer and
the Acquiring Company, attorneys, accountants and employees of Employer and the
Acquiring Company on a "need to know" basis.
C. At any and all times, Employee agrees not to, except to the
extent required to properly perform Employee's duties as an officer of Employer
in the ordinary course of business, directly or indirectly, disclose or
communicate any trade secrets (as defined in Section 3426.1 of the
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California Civil Code) of Employer or its subsidiaries or the Zeneca Group or
relating to the "Business" of Employer or the Zeneca Group; provided, however,
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that the foregoing shall not apply to information which is not unique to
Employer or its subsidiaries or the Zeneca Group or which is generally known to
the industry or the public other than as a result of Employee's breach of this
covenant. The term "Business" shall have the meaning set forth in "Core
Business" in Section 1.1 of the Governance Agreement.
D. Any "Written Matter" prepared by Employee during employment by
Employer, whether during working hours or at any other time, for use by Employer
or related to the actual or contemplated operations of Employer at the time the
matter is prepared shall be considered a work made for hire, and the copyright
in such Written Matter shall belong exclusively to Employer, its affiliates and
successors, or any member of the Zeneca Group. Employer, its affiliates and
successors, or any member of the Zeneca Group shall further have the unlimited
right to use, copy, reproduce, publish or otherwise disseminate any such Written
Matter. At any and all times, both during employment by Employer or after
termination thereof, Employee will promptly on request of Employer do all things
as may be necessary to vest in Employer, its affiliates or successors, or any
member of the Zeneca Group, the entire right, title, and interest to the
copyright in any such Written Matter; provided, however, that any requested
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cooperation shall be reasonable in amount, not interfere with other obligations
of Employee and shall be provided in Los Angeles, California. Should such
services be rendered after the termination of employment with Employer, a
reasonable compensation shall be paid to Employee on a per diem basis, based on
the Base Annual Salary which Employee was receiving from Employer at the
termination of employment, in addition to first class travel and personal
expenses incurred by Employee in rendering the services. All rights being
conferred hereunder by Employee relate only to the extent of ownership of such
right by Employee. The term "Written Matter" shall include practice guidelines,
managed care standard operating procedures, marketing literature and brochures,
journal articles or other publications and data acquisition proformas and
quality satisfaction instruments.
E. Upon termination of employment, Employee shall deliver to Employer all
writings, records, data, memoranda, contracts, orders, sales literature, price
lists, customer lists, data processing materials, manufacturing and production
materials, and other documents, whether or not obtained from Employer, which
pertain to or were used by Employee in connection with employment by Employer
(but Employee may keep any of his personal writings, documents and personal
possessions); provided Employee may make copies
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of patients' medical records if requested by Employee's patients or as required
by law.
XI. Termination
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A. Other than as provided in Paragraph VI, this Agreement may be
terminated by Employer only for "Good Cause". Good Cause shall mean and be
deemed to exist only if:
(i) (x) a final court judgment has been entered that Employee has
been convicted of a felony or (y) Employee has engaged in intentional acts of
fraud;
(ii) Employee has misappropriated Employer funds;
(iii) Employee engages in "repeated willful misconduct" (as defined
in Paragraph XIII.B) or a single act of wanton and egregious misconduct (e.g.
embezzlement);
(iv) Employee obtains a material personal benefit from a transaction
with Employer in which Employee has an interest which is adverse to the interest
of Employer, unless Employee shall have first obtained the consent of Employer's
Board of Directors;
(v) Employee engages in any other business, profession or occupation
which is competitive with the business of Employer after being notified by the
Board of Directors to cease engaging in such other business, profession or
occupation; or
(vi) there is a breach by Employee of a covenant set forth in
Paragraph X.
In addition, consistent with the treatment of all employees of Employer, any
violation of the Code of Conduct is grounds for appropriate disciplinary action,
up to and including dismissal for "Good Cause". Disciplinary action, if any,
will suit the nature of the infraction. Notwithstanding anything to the contrary
set forth in this Paragraph XI.A., (a) the conduct set forth in Paragraph II.D.,
(b) any pending or presently threatened investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, with
respect to which Employee has actual knowledge and has specifically disclosed to
the Acquiring Company in the disclosure schedule faxed to Employer on December
20, 1994 (the "Disclosure Schedule") and (c) any other action which is
inadvertent or based upon a reasonable or good faith mistake or de minimis,
shall not, at any time, constitute Good Cause for termination.
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B. This Agreement may be terminated by Employee only for "Good Reason".
Good reason shall mean and be deemed to exist if:
(i) there is a reduction in Employee's Base Annual Salary;
(ii) Employer changes the principal offices of Employer (presently
located at 8201 Beverly Boulevard, Los Angeles), unless relocated
to substantially similar size and quality facilities in West Los
Angeles, Beverly Hills, or Santa Monica, California (Employer
acknowledges and agrees that (a) Employee may perform services
from his home and locations other than Employer's principal
office and (b) Employee will not be required to perform any
services at any other location, except in connection with
ordinary business travel of the type engaged in the past, without
his consent);
(iii) if, as the result of an action of Employer's Board of Directors
initiated and supported by the members of the Board designated by
the Acquiring Company and any of its affiliates ("Zeneca
Initiated"), Employer reduces Employer's employees or employee
working hours by at least 30% and such action is not caused by a
significant decline in the economic performance of Employer;
(iv) there is a material adverse change in the operations, policies,
funding, procedures, practices, or professionalism relating to
the overall quality of patient care by Employer that is
inconsistent with Employer's past or existing practices;
(v) the name of Employer is changed to not include the name "Salick"
therein. In this event, in addition to Employee's right to
terminate for Good Reason, Employee may use the name Salick,
Salick Health Care, Inc. or any name which includes "Salick" in
other activities and Employer may no longer use such name or any
similar or confusing name and Employer shall assign all rights to
the trademark, tradename or similar right to use the name "Salick
Health Care, Inc." to Employee;
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(vi) there is (a) a reduction in Employee's benefits as set forth in
Exhibit B (provided Employer may substitute different benefits so
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long as they are not significantly different from Employee's
current benefits and so long as Employee's years of service with
Employer are included in calculating years of employment for
purposes of eligibility and benefit participation in such
different benefits), or (b) a change in the calculation for
Employee's bonus as described either in Section I.B, or Exhibit
"A" or pursuant to Employer's Management Incentive Compensation
Plan (provided Employer may substitute a new bonus plan, so long
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as the new bonus plan does not significantly affect the
accounting method for or calculation of the bonus);
(vii) there is a reasonable determination by Employee that, as a result
of a Zeneca Initiated change that significantly adversely affects
Employee's position (including a change in his title, status or
position as director), Employee is unable to exercise the nature
or scope of his authority, duties, powers, or functions that
Employee exercised at the time of Execution of this Agreement;
(viii) Employer has breached this Agreement; or
(ix) if there is a Change in Control of Employer, as defined in
Paragraph XV, during the first 30 months following the
Commencement Date.
C. Notwithstanding anything herein to the contrary, if either party
claims a breach or default hereunder by the other party or a right to terminate
hereunder or Employer claims a violation of the Code of Conduct (whether for
purposes of termination pursuant to Paragraph XI or otherwise), the party
claiming such breach, violation or right to terminate shall first give written
notice specifying the nature of the alleged breach, violation or cause for
termination to the other party, and that party shall have 10 business days after
receipt of notice to cure a monetary breach, if curable, and 30 days after
receipt of notice to cure a nonmonetary breach, if curable, provided, however,
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that if the alleged nonmonetary breach cannot be cured within 30 days and the
party makes reasonable efforts to cure such alleged breach, the time shall be
extended as necessary to complete the cure.
D. Employer hereby agrees that, notwithstanding anything to the contrary
set forth herein, if Employee
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terminates employment with Employer for Good Reason, such termination shall not
be deemed to be or constitute a breach or default of or under this Agreement by
Employee.
XII. Severance Pay.
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If any of the matters hereinafter set forth occur (and with all
capitalized terms, unless otherwise defined, having the meaning therefor set
forth in Paragraph XV), the following provisions are applicable and supersede
the amounts owed but not paid set forth in Paragraphs I, III, V and VII.
A. Entitlement to Severance Pay. If at any time during the term of this
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Agreement, (a) Employee's employment with Employer is terminated by Employer for
any reason other than Good Cause, or (b) Employee terminates employment with
Employer for Good Reason, then, in such event, Employer, within a period of
thirty (30) days, shall pay to Employee an amount equal to 299% of Employee's
Base Salary ("Severance Pay"); provided, however, that if Employee would, except
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for this provision, be subject to a tax pursuant to Section 4999 of the Code or
any successor provision that may be in effect, as a result of a "parachute
payment" (as that term is defined in Section 280G of the Code) being made
pursuant to this Agreement, or a deduction would not be allowed to Employer for
all or any part of such payment by reason of Section 280G of the Code, or any
successor provision that may be in effect, then there shall be deducted from the
amounts payable hereunder such amounts ("Excess Payment") as are required to
reduce the aggregate "present value" (as that term is defined in Section 280G of
the Code) of such payment to 299% of an amount equal to Employee's "base amount"
(as that term is defined in Section 280G of the Code), to the end that Employee
is not subject to tax pursuant to such Section 4999 and no deduction is
disallowed by reason of such Section 280G. The entire amount payable hereunder
shall be paid to Employee in one lump sum payment within 30 days following the
date of termination of employment as provided in this Paragraph XII.A. If after
payment is made pursuant to this Paragraph XII.A, it is determined by the
Internal Revenue Service (or any court to which the determination is appealed)
that, notwithstanding the foregoing provision in the first sentence of this
Paragraph, the aggregate "present value" (as that term is defined in Section
280G of the Code) of the payment made to Employee pursuant to this Paragraph XII
equalled or exceeded three times of an amount equal to Employee's "base amount"
(as that term is defined in Section 280G of the Code) so that Employee is
subject to tax pursuant to Section 4999 or a deduction will not be allowed to
Employer by reason of Section 280G, Employee shall,
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within 30 days thereafter reimburse Employer for that portion of the payment
equal to the amount of such excess plus $1.00.
B. Termination for Good Cause or Without Good Reason. If Employee's
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employment with Employer is terminated by Employer for Good Cause, or by
voluntary action by Employee without Good Reason, Employer shall have no
obligation to Employee under Paragraph XII.A hereof.
C. Benefits Unfunded. Except as provided in Paragraph XII.A, all of
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Employee's rights under Paragraph XII.A shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder and Employee shall
have no interest in or rights against any specific assets of Employer and
Employee shall have only the rights of a general creditor of Employer.
XIII. Indemnification.
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A. Pre Commencement Date Indemnifiable Litigation. With respect to
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Indemnifiable Litigation (as defined below) which arises in connection with
actions taken or omitted to be taken prior to the Commencement Date, Employer
shall hold harmless, indemnify, and defend Employee against all claims, damages,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines, taxes or penalties and amounts paid or to be paid in any
settlement with the approval of Employer, which approval shall not be
unreasonably withheld) (collectively, "Indemnifiable Expenses") incurred or
suffered by Employee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Employee is a party or is threatened
to be made a party by reason of conduct of Employee in any manner related to his
service as an officer, director, employee, or agent of Employer; or (ii) based
in whole or in part on or arising in whole or in part out of the fact that
Employee is or was a director, officer, employee or agent of Employer or any
subsidiary or affiliate thereof, or is or was serving at the request of Employer
as a director, officer, employee or agent of another corporation.
Notwithstanding the foregoing, for the purposes of this Paragraph XIII.A.,
Indemnifiable Litigation shall not include pending or presently threatened
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative,
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with respect to which Employee has actual knowledge and has failed to
specifically disclose in the Disclosure Schedule.
B. Post Commencement Date Indemnifiable Litigation. With respect to
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any Indemnifiable Litigation which arises in connection with actions taken or
omitted to be taken after the Commencement Date, Employer shall hold harmless,
indemnify, and defend Employee against all Indemnifiable Expenses incurred or
suffered by Employee in connection with any such Indemnifiable Litigation (i) to
which Employee is a party or is threatened to be made a party by reason of
conduct of Employee in any manner related to his service as an officer,
director, employee or agent of Employee, (ii) based in whole or in part on or
arising in whole or in part out of the fact that Employee is or was a director,
officer, employee or agent of Employer or any subsidiary or affiliate thereof,
or is or was serving at the request of Employer as a director, officer, employee
or agent of another corporation or (iii) which Employee may incur in connection
with any audit, appeal, court, or other governmental proceeding involving
Employee's or Employer's tax returns (collectively, "Audit") in which a matter
under contest is the applicability or amount of tax pursuant to Section 4999 of
the Code on account of the payment of any Severance Pay pursuant to Paragraph
XII.A hereof. Notwithstanding the foregoing, for the purposes of this Paragraph
XIII.B., (x) Indemnifiable Litigation shall not include threatened or pending
investigations, claims, actions, suits or proceedings, whether civil, criminal,
administrative or investigative which arise as a result of Employee's "repeated
willful misconduct" (as described below) or a single act of wanton and egregious
misconduct (e.g. embezzlement) on the part of Employee, which, in either case,
is engaged in after the Commencement Date and (y) Indemnifiable Expenses shall
not include any costs and expenses incurred in an audit in connection with a
matter other than the matter described in clause (iii) above and, if other
matters are involved in an Audit of the matter described in clause (iii), an
equitable apportionment as to the payment of the costs and expenses as between
Employee and Employer shall be made. For purposes of this Paragraph XIII.B,
Employee shall have engaged in "repeated willful misconduct" if, following an
initial act of willful misconduct and the receipt of a written warning from
Employer, Employee engages in the same or a similar act of misconduct.
C. Procedures. Employer shall pay Indemnifiable Expenses incurred by
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Employee in connection with any Indemnifiable Litigation as incurred and in
advance of the final disposition thereof, it being understood that attorneys'
fees of Employee in connection with Indemnifiable Litigation will be so paid as
incurred, subject to
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reimbursement by Employee to Employer if same are ultimately determined not to
constitute Indemnifiable Expenses.
If Employer acknowledges, in writing, that a particular claim asserted
is subject to its obligation to indemnify Employee, without reservation of
rights, and agrees to, and does, pay the costs and fees (including attorneys'
fees) incurred in the defense of the claim and agrees in writing to pay all
Indemnifiable Expenses in connection with such claim, subject to the provisions
of any insurance policy which covers such claim, the Acquiring Company's Board
of Director nominees shall have the right to select counsel for Employee,
control the litigation and assume the defense, and may settle or compromise such
claim on behalf of Employee; provided that such right to settle or compromise
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such claim shall require the consent of Employee only if (i) Employee would be
compelled or required to admit to guilt or responsibility or to the truth of any
material, significant, injurious or charging allegations, (ii) Employee would be
compelled or required to contribute to such settlement or compromise or (iii)
any such settlement or compromise does not involve the settlement and general
release of any and all claims of claimant against or involving Employee (whether
or not included in the proceeding). Any order or judgment related to any claim
shall be paid and satisfied by Employer prior to any levy, distraint or
execution against Employee without any right of subrogation.
If Employee provides to Employer written notice of his desire to
accept a settlement offer made by the party asserting claims against Employee,
and Employer does not approve the settlement, Employee shall have the right, but
not the obligation, to accept the settlement, and Employer shall pay the full
amount of the settlement, less only such portion of the settlement amount that
Employer contests and provides the written reasons why it is not obligated to
pay such portion in settlement. Employee shall have the right to commence an
action against Employer to reimburse Employee for that portion of the settlement
that is reasonably allocable to claims which Employer is obligated to indemnify
hereunder. Employee shall promptly give notice to Employer after Employee has
knowledge that any legal proceeding has been instituted or any claim or other
matter has been asserted in respect of which indemnification may be sought
hereunder, provided that failure to give such notice shall not preclude
--------
indemnification except to the extent of actual prejudice directly caused by such
failure. If Employer, within a reasonable period of time after receipt of
notice of a claim, fails to assume the defense (including the retention of legal
counsel), Employee shall have the right to undertake the defense, compromise, or
settlement on behalf of and for the account and risk of Employer.
14
If Employee is required to bring any action to enforce his rights
pursuant to this Paragraph, if Employee prevails, Employee shall also be
entitled to be paid all expenses (including attorneys' fees), in bringing such
action. Employer shall not amend its Certificate of Incorporation or bylaws in
any way that adversely affects Employee's rights under this Paragraph XIII.
This Paragraph XIII shall not apply to any action which involves only claims
between the parties and which is otherwise provided for pursuant to Paragraph
XVI.J.
D. Conflicts of Interest. Notwithstanding anything set forth above,
---------------------
if (x) the use of counsel selected by Employer pursuant to Paragraph XIII.C
would present such counsel a conflict of interest or (y) Employer and Employee
shall have reasonably concluded that there may be legal defenses available to
Employee or other employees which are inconsistent with or in conflict with
those available to Employer (collectively, "Conflicts"), Employee shall have the
right to select, subject to Employer's consent (which consent shall not be
unreasonably withheld), and employ separate counsel (at the Employer's expense)
to represent Employee and, solely to the extent required to mitigate the
Conflict, Employer shall not have the right to control the Indemnifiable
Litigation on behalf of Employee. The existence of a Conflict shall not affect
Employer's right to settle or compromise a claim in accordance with the
provisions of Paragraph XIII.C. For purposes of this Paragraph XIII.D, the
parties acknowledge and agree that, with respect to matters set forth in the
Disclosure Schedule: there was no Conflict at the time counsel was selected,
there has been no conflict to date and, based upon the facts available to the
parties to date, the parties do not anticipate a future Conflict.
Notwithstanding the absence of any Conflict, Employer shall bear the cost of
independent counsel up to a maximum of $100,000 in the aggregate for defense
costs incurred after the Commencement Date with respect to the matter referred
to in Item 1 of the Disclosure Schedule. In addition, Employee may, at his own
expense, retain independent counsel to act in an advisory capacity as to all
other matters. Employer shall cause the counsel which it has selected to
consult with Employee's counsel in good faith with respect to all significant
aspects of a claim.
XIV. Covenant Not to Compete. Employee agrees that during the term hereof, and
-----------------------
if his employment is terminated pursuant to Paragraph XI.A by Employer or other
than pursuant to Paragraph XI.B by Employee, the provisions of the Covenant Not
to Compete attached hereto as Exhibit C shall be effective for the term set
forth therein; provided, however, that if Employee terminates his employment
--------
pursuant
15
to Paragraph XI.B(vii) within thirty (30) months of the date hereof, the
provisions of the Covenant Not to Compete shall also be effective.
XV. Definitions.
-----------
A. For purposes of Paragraph XI.B, "Affiliate" shall have the meaning set
------------------------------
forth in the Securities Exchange Act of 1934.
B. For purposes of Paragraph XII, "Base Salary" shall mean the amounts
-----------------------------
described in paragraphs I.A, I.B and I.D and the Items set forth in
Exhibit "B" (other than Items 6 and 10); such annualized includable
compensation for such period to be determined in accordance with
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code").
C. For purposes of Paragraph XI.B, a "Change in Control" shall mean and
------------------------------
be deemed to have occurred in connection with any of the following
events:
(i) The acquisition, other than from Bernard Salick, M.D., by an
entity, person or group (including all Affiliates of such entity,
person or group, but excluding the Acquiring Company or
affiliates thereof, Bernard Salick, M.D., Leslie F. Bell or the
Family Members of any of the foregoing, and trusts for the
benefit of any of the foregoing described persons or Family
Members or any entity operated, managed or in substantial part
owned by any of them) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
of capital stock of Employer: (a) entitled to exercise 30% or
more of the outstanding voting power of all capital stock of
Employer ("Voting Stock") or (b) equal to 30% or more of the
outstanding Capital Stock of Employer; or
(ii) The commencement by any entity, person, or group (including any
Affiliates of such entity, person or group, but excluding
Employer or an Affiliate of Employer or any entity owned by any
of them) of a tender offer or an exchange offer for more than 30%
of the outstanding Capital Stock irrespective of voting rights;
or
16
(iii) (A) a merger or consolidation of Employer, other than as approved
by Bernard Salick, M.D., with one or more other corporations as a
result of which the holders of the outstanding Voting Stock
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate thereof) hold
70% or less of the Capital Stock of the surviving or resulting
corporation, or (B) a transfer, other than by Bernard Salick,
M.D., of a majority of the Capital Stock (excluding transfers to
Bernard Salick, M.D., Leslie F. Bell or the Family Members of any
of the foregoing, and trusts for the benefit of any of the
foregoing described persons or Family Members or any entity
operated, managed or in substantial part owned by any of them),
or of a Substantial Portion of the Property, of Employer other
than to an entity of which Employer owns at least 70% of the
Capital Stock.
D. For purposes of Paragraph XV.C, "Family Members" shall mean Employee's
------------------------------
spouse, ancestors, lineal descendants, siblings and their descendants,
aunts and uncles, mother-in-law, father-in-law, sons-in-law,
daughters-in-law, brothers-in-law, sisters-in-law and first cousins;
and a child legally adopted by Employee shall be treated as your child
by blood.
E. For purposes of Paragraph XV.C, "Substantial Portion of the Property
------------------------------
of Employer" shall mean 50% or more of the aggregate book value of the
assets of Employer as set forth on the most recent balance sheet of
Employer, prepared on a consolidated basis, by its regularly employed
accountants.
XVI. Miscellaneous.
-------------
A. Entire Agreement. This is the entire agreement of the parties
----------------
relating to the subject matter set forth herein. Except as specifically set
forth in this Agreement, or in other agreements related to or entered into at
the time of the Merger Agreement, there are no other understandings or
agreements concerning the subject matter hereof between the parties which have
been relied upon or which shall survive the execution hereof. This Agreement
supersedes any and all other agreements or understandings, oral or written,
between the parties concerning the subject matter set forth herein,
17
including, without limitation, the prior Employment Agreement of Employee, as
amended, except as to accrued but unpaid rights; provided that in the event the
--------
transactions contemplated by the Merger Agreement are not consummated, this
Agreement shall terminate.
B. Modification. This Agreement may not be modified or varied in any
------------
way, except by a subsequent writing signed by each of the parties hereto.
C. Assignment. This Agreement is binding on and inures to the benefit of
----------
the parties hereto and their respective heirs, successors, or assigns. This
Agreement may not be assigned by either party, except that, in the event
Employer is adjudicated bankrupt, Employer may assign this Agreement to another
member of the Zeneca Group with the prior written consent of Employee.
D. Gender and Number. As used herein, where the context so indicates,
-----------------
reference to one gender includes the other and the neuter and vice versa, if
applicable under the circumstances. When the context so indicates that such is
the intent, words in the singular include the plural and vice versa.
E. Invalidity and Severability. In the event any provision herein (or
---------------------------
any portion of any provision) contained shall be declared by a court of
competent jurisdiction to be invalid, that provision shall be limited to the
extent necessary to make it enforceable, and, if necessary, severed from the
Agreement. Notwithstanding the unenforceable provision, the remaining
provisions (or portions of any provision), hereof shall be deemed severable
therefrom and remain in full force and effect.
F. Governing Law; Jurisdiction and Venue. This Agreement and any dispute
-------------------------------------
or claims arising hereunder shall be governed by, and construed according to,
and enforced under the laws of the State of California, without regard to the
conflict of laws provisions of California law. The State and Federal courts
located in Los Angeles, California shall be the sole forum for any action for
relief arising out of or pursuant to, or to enforce or interpret this Agreement.
Each party to this Agreement consents to the personal jurisdiction in such forum
and courts and each party hereto waives any right to seek a transfer of venue
from such jurisdiction on any grounds. It is the specific intent of the parties
that no part of this Agreement be construed in accordance with or governed by
the laws of any other country.
G. Notices. Any notice or demand hereunder shall be given in writing to
-------
each person at the addresses set forth
18
below by personal service or registered or certified mail, postage prepaid,
return receipt requested, or overnight courier:
1. To Employer at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
2. To Employee at:
8201 Beverly Blvd.
Los Angeles, CA 90048-4520
and
175 North Bentley Avenue
Los Angeles, CA 90049
With copies to:
Marshall B. Grossman, Esq., Leslie Bell, Esq., Michael Fiore
Such addresses may be changed by notice to the other party given as above
provided. Notices so given shall be deemed given upon receipt.
H. Waiver. No waiver of any default or breach shall be implied from any
------
failure to take action on account of such default. No express written waiver
shall be deemed to waive or render unnecessary the consent or approval to or of
any subsequent act.
I. Captions. Section captions used in this Agreement are descriptive and
--------
for convenience only, and shall not affect the construction of this Agreement.
J. Attorneys' Fees. In any proceeding or any action at law or in equity
---------------
commenced hereunder, the prevailing party shall receive its attorneys' fees,
costs and disbursements in addition to any other relief granted. Each party may
be represented by counsel of its choice, even though such counsel may have
represented the other party in matters related to the business of Employer.
K. No Mitigation. Without limiting any other provision hereof, any
-------------
compensation and other benefits received by Employee from any and all sources
other than Employer before or after the expiration or termination of this
Agreement for any reason whatever shall in no way reduce or effect Employer's
obligation to make payments hereunder.
19
L. Independent Counsel; Interpretation. Each of the parties hereto has
-----------------------------------
been represented by independent counsel in the negotiation and review of this
Agreement. The provisions of this Agreement were negotiated by each of the
parties hereto and this Agreement shall be deemed to have been drafted by each
party.
M. Survival. The provisions of Paragraphs X, XII, XIII, XIV and XVI.F,
--------
G, J, K and N shall survive any termination of this Agreement.
N. California Counsel. Except as provided in the Governance Agreement or
------------------
with respect to those matters which would have a material adverse effect on
Employer or claims in which Employee is a named party, Employee shall be
entitled to select legal counsel to represent Employer in California in
connection with any claim against Employer related to actions occurring in
California.
O. Reimbursement for Negotiation. Employer shall reimburse Employee for
-----------------------------
all professional fees and costs incurred by Employee in the drafting and
negotiation of this Agreement and any amendments or extensions hereto and any
other agreements related to or entered into at the time of the Merger Agreement.
20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
EMPLOYER:
--------
Salick Health Care, Inc.,
a Delaware corporation
By: /s/ Leslie F. Bell
------------------------
EMPLOYEE:
--------
/s/ Bernard Salick
---------------------------
Bernard Salick, M.D.
21
EXHIBIT A
Part I - Operations
- - -------------------
The net profits (pre-tax) realized from all businesses or activities
done, engaged in, managed, owned or operated by Employer or any division or
subsidiary of Employer (hereafter collectively "affiliates") as determined on
the accrual basis of accounting principles including all opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and of the Financial Accounting Standards Board, but subject in any
event to the following:
1. Expenses incurred for any pension or other fringe benefit plans made
available to employees of company and its subsidiaries and the cost of insurance
are excluded as expenses for purposes of calculating said net profits.
2. Net profits shall be calculated before provision for applicable
federal and state income taxes.
3. Appropriate adjustments will be made to insure that there is no
material or substantial upward or downward adjustment in income during any
period due to the acceleration or deferral of revenues or other income into a
period other than that which would normally accrue or occur, or due to the
acceleration or deferral of any losses, costs or expenses into any period other
than that in which same would normally accrue or occur.
4. If Employer is hereafter merged or otherwise combined in any way into
or with any other operating entity, net profits shall be calculated as if such
merger, combination, addition or consolidation had not been made unless Employee
consents thereto in writing.
5. The automobile and office rent amounts described in Exhibit "B" of the
Employment Agreement shall be included as expenses in calculating net profits.
After such net profits are determined, Employee shall be entitled to
retain the first $300,000 as a bonus.
Part II - Calculation and Payment of Bonus
- - ------------------------------------------
A. Net profits and the bonus shall be calculated for each of Employer's
fiscal years or prorated for fiscal quarters, quarters or part thereof if a full
fiscal year or quarter is not completed.
22
B. The bonus shall be estimated and paid as set forth in Paragraph I.B of
the Agreement to which this Exhibit A is attached and incorporated by reference.
C. At the end of each fiscal year (or quarter, if applicable), Employer's
independent public accountants shall determine under Part I, the fiscal year's
(or quarter, if applicable) net profits and the bonus Employee is entitled to
receive. To the extent that (a) Employee is entitled to any additional sum it
shall be paid within thirty (30) days of such determination and (b) if Employee
has been paid more than he has earned, except with respect to the final year of
the term (for which Employee shall promptly repay such overpayment), the sole
remedy for such overpayment shall be by way of offset against future bonuses
due. The accountants' determination is binding on Employer and Employee, absent
palpable mistake or fraud.
23
EXHIBIT B
BENEFIT PLANS OF EMPLOYER IN EFFECT
AS OF DECEMBER 1, 1994
1. Participation in Employer's Management Incentive Compensation Plan.
2. Participation in Employer's Stock Option and Stock Purchase Plan.
3. Participation in Employer's Life Insurance policy.
4. The Salick Health Care, Inc. Salary Savings Plan (401(k) Plan), to which
Employer makes a matching contribution.
5. Employer pays a premium for "split-dollar" life insurance policies for
Employee. The current amount of the premium is approximately $285,000 per
year.
6. Payment of 90% of the medical office expenses related to any cost incurred
by or activity of Employee at the medical office building located at 9400
Brighton Way, Suite 301, Beverly Hills, CA or any similar successor office
of comparable size and scope of activity. The total annual expense for
1994 was approximately $100,000.
7. Insurance and reimbursement of expenses to provide 100% medical, dental,
visual and psychiatric/psychological coverage for Employee and immediate
family, which amounts to an average aggregate of approximately $19,800 per
year for each of the past three years.
8. Disability and accidental death and dismemberment rights and insurance.
9. Use of company automobile of Employee's choice, selected annually,
consistent with that currently being provided to Employee, including gas,
maintenance, car telephone, and insurance, and licensing. Employee may, at
his option, acquire the company car that Employee is using for the greater
of 7.5% of the original cost or book value (and Employer will then provide
a replacement car).
10. Continued coverage under Employer's workers compensation insurance and
medical, dental, long term disability and life insurance plans for certain
of
24
Employee's entities covered by such plans, which coverage shall be paid for
by Employee or his entities; provided such coverage is permitted both by
--------
Employer's plans and by law; and provided further that such coverage shall
-------- -------
not jeopardize the qualified status of such plans or require amendments
thereto.
25