EXHIBIT 10.41
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made as of March 27, 1998
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between Fountain View, Inc., a Delaware corporation (the "Company"), and William
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C. Scott (the "Executive").
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Introduction
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This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
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Company by means of the merger (the "Merger") of a wholly-owned subsidiary of
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the Company with and into Summit.
The Acquisition and related transactions are referred to collectively
herein as the "Transactions".
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The Company desires to retain the services of the Executive and the
Executive wishes to be employed by the Company. The Executive is a stockholder,
director and officer of the Company, and has had full access to information
concerning the Company. The disclosure of such information or the engaging in
competitive activities would cause substantial harm to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
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commencing on the date of the closing of the Merger and continue for a period of
five (5) years, unless earlier terminated pursuant to Section 7 (the "Employment
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Period"). This Agreement shall automatically renew at the end of the Employment
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Period for up to five additional one year terms, unless either party hereto
provides written notice of termination to the other party not less than thirty
(30) days prior to the end of the Employment Period or the end of any subsequent
renewal period.
Section 2. Duties. The Executive shall be employed as the Chairman of the
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Company, with such duties of an executive nature as the Board of Directors of
the Company (the "Board") shall determine. The Executive will report to the
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Board.
Section 3. Full Time. During the term of this Agreement, the Executive
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shall use the Executive's best efforts to promote the interests of the Company
and the direct and indirect subsidiaries of the Company, and shall devote
substantially the Executive's full business time and efforts to their business
and affairs. The Executive may engage in other business activities
that do not interfere materially with the performance of the Executive's duties,
services and responsibilities hereunder.
Section 4. Compensation. The Executive shall be entitled to compensation
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as follows:
(a) Base Salary. During the term of the Executive's employment with
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the Company, the Executive will receive a salary at the rate of $450,000
annually (the "Base Salary"), payable in equal installments not less than bi-
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weekly in arrears. The Company shall withhold from compensation payable to the
Executive all applicable federal, state and local withholding taxes. The Base
Salary will be subject to annual consumer price adjustments.
(b) Bonus. In addition to the payment of the Base Salary and the
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other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
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of (i) an annual bonus of $200,000 if the Company achieves Base Case EBITDA and
(ii) up to an additional bonus of $150,000 determined ratably based on the
Company's EBITDA being between the Base Case and the Target Case, such Bonus
payable within 120 days after the end of such fiscal year, as determined by the
Board, in its discretion (with the approval of a director of the Company who is
an employee of Heritage Partners Management Company, Inc). Payments with respect
to partial percentages will be prorated. The payment of the Bonus shall be
prorated for any partial fiscal year during the term of this Agreement.
(c) Definition of Base Case, Mid Case and Target Case. As used
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herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
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specified on Exhibit A hereto, on the respective dates indicated, and may be
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changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit A hereto.
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Section 5. Benefits. In addition to salary and Bonus, the Executive shall
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be entitled to receive reasonable and customary fringe benefits in an amount not
less than the greater of those benefits that are generally and customarily
available to the Company's executive and managerial employees and those benefits
that are generally and customarily available to Summit's executive and
managerial employees. Such benefits include health insurance and vacation time
in accordance with the Company or Summit's policies, consistent with prior
practices. The Company
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will also reimburse the Executive for the cost of an automobile, including fuel,
maintenance and insurance expenses relating thereto, not to exceed $600 per
month. The Executive will be entitled to reimbursement of all reasonable
expenses incurred in the ordinary course of business on behalf of the Company,
subject to presentation of appropriate documentation, in accordance with
policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of, and
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as a condition to, the Transactions, and in consideration of the mutual promises
contained herein, and to preserve the goodwill of the Company and its direct and
indirect subsidiaries (collectively, the "Companies"), the Executive agrees as
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follows:
(a) The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the executive during the
executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
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non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
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Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the executive's duties for the Companies.
(c) Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the executive's possession which contain or relate to
Confidential Information.
(d) All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the
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executive's rights to the same to the Companies. The Executive shall sign all
instruments necessary for the filing and prosecution of any applications for or
extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
(e) All copyrightable work by the Executive during the term of the
Executive's employment by the Company which relates to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
(f) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
three years after such termination, the Executive will not directly or
indirectly, individually or as a consultant to, or Executive, officer, director,
stockholder, partner or other owner or participant in any business entity,
engage in or assist any other person to engage in any business which competes
with the Business of any of the Companies or any business in which any of the
Companies is planning to engage anywhere in the counties of the State of
California identified on Schedule A hereto or in Arizona, Texas or any other
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state within the United States; provided, however, that the Executive may own
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not more than a 5% equity interest in any publicly-traded company.
(g) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially interfere with the business relationship of the Companies
with, (i) any person who is, or was within the one-year period immediately prior
to the termination of the Executive's employment by the Companies, employed by,
a consultant to or associated with the Companies or (ii) any person or entity
who is, or was within the two-year period immediately prior to the
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termination of the Executive's employment by the Companies, a customer, client
of or supplier to the Companies.
(h) Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
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(a) The Executive's employment with the Company may be terminated at
any time by the Company with cause or without cause or in the event of the death
or Disability of the Executive. As used herein, "cause" shall mean the
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reasonable and good faith determination by a majority of the Board (other than
the Executive), after reasonable notice to the Executive and after the Executive
has had an opportunity to present his view of the relevant facts and
circumstances to the Board, that the Executive has (i) breached any material
term of this Agreement, which breach has not been cured by the Executive within
20 days after notice to him or her by any of the Companies, (ii) engaged in
criminal acts or acts of moral turpitude causing injury to the Companies or
their reputations or (iii) engaged in material acts of dishonesty affecting the
Companies. As used herein, "disability" shall mean illness (mental or physical)
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or accident which, in the good faith and reasonable determination of a majority
of the Board, based on the report of a reputable physician, renders him unable
to perform his duties for six months during any 12-month period.
(b) If the Executive's employment is terminated hereunder for any
reason, the Company shall have no further obligation to make any payments or
provide any benefits to the Executive hereunder except for (i) payments of Base
Salary that had accrued but had not been paid prior to the date of termination,
(ii) payments of Bonus that had been earned by the Executive but not paid prior
to the date of termination and (iii) if the Executive's employment is terminated
by the Company without cause (other than on death or Disability), but only as
long as the Executive remains in material compliance with the provisions of
Section 6, the Executive's Base Salary for the
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duration of the Executive's scheduled term of employment, such amount to be
reduced by the amount, if any, that the Executive is then due under the Summit
Special Severance Plan adopted by Summit in connection with the Acquisition (the
"Summit Severance Plan").
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(c) The provisions of Section 6 shall survive the termination of the
Executive's employment in accordance with its terms.
Section 8. Enforceability, etc. This Agreement shall be interpreted so as
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to be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
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this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) If to the Company:
Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With copies to:
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
and
Stephen M. L. Cohen, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
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(b) If to the Executive:
William C. Scott
c/o Summit Care Corporation
2600 W. Magnolia Road
Burbank, California 91505-3031
With a copy to:
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
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Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
as a waiver by that party of the same or any subsequent breach of any provision
of this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding
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on and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in part by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
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entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
Section 14. Counterparts. This Agreement may be executed in any number of
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counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 15. Effect on Severance Plan. The execution and performance of
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this Agreement and the termination of the Executive's employment with Summit
will not constitute an event
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entitling the Executive to payments under the Summit Severance Plan until such
time, if any, as the Executive's employment with the Company is terminated.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
FOUNTAIN VIEW, INC.
By /s/ [SIGNATURE ILLEGIBLE]^^
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(Title)
/s/ William C. Scott
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William C. Scott
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EXHIBIT B
EBITDA TARGETS (ooo)
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?? ?? ??
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30-Jun-99 45,1?? 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 5?,??? 67,030 7?,287
30-Jun-02 60,3?3 78,196 85,390
30-Jun-03 66,0?0 87,??? ??,?21
EXHIBIT B
Identified Counties
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Alameda Orange
Alpine Placer
Amador Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Benito
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Joaquin
Glenn San Luis Obispo
Humboldt San Mateo
Imperial Santa Barbara
Inyo Santa Clara
Kern Santa Cruz
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Solano
Madera Sonoma
Marin Stanislaus
Mariposa Sutter
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
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