Exhibit 10.19
EMPLOYMENT AGREEMENT
This Agreement is made as of this 2nd day of October, 2001, by and
between GENESIS HEALTH VENTURES, INC., a Delaware corporation (the "Company"),
and GEORGE V. HAGER, JR. ("Executive").
WHEREAS, the Company desires to continue to employ Executive, and
Executive desires to remain employed by the Company, in accordance with the
terms and conditions stated below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Employment. The Company agrees to continue to employ Executive, and
Executive agrees to remain an employee of the Company, for the period stated in
Section 2 hereof and upon the terms and conditions herein provided.
2. Term.
2.1 Relevant Dates. The period of Executive's employment under this
Agreement shall commence on the date hereof and shall, unless sooner terminated
pursuant to Section 6, continue for a three year period (such period, as
extended from time to time, herein referred to as the "Term"). Subject to
Section 2.2, and if the Term has not been terminated pursuant to Section 6, on
the first anniversary of this Agreement and on each successive anniversary
thereafter (each such anniversary an "Automatic Extension") the Term shall be
extended for an additional period of one year.
2.2 Non-Renewal Procedure. The Company (with the affirmative vote of
two-thirds (2/3) of the non-management membership of the Board of Directors at a
meeting of the Board of Directors called and held for such purpose) or Executive
may elect to terminate the automatic extension of this Agreement described in
Section 2.1 by giving written notice of such election. Any notice given
hereunder must be given not less than sixty (60) days prior to the applicable
Automatic Extension Date.
3. Position and Responsibilities.
3.1 Position. The Company agrees to employ Executive in the position of
Chief Financial Officer of the Company, and Executive agrees to perform such
services and have such duties and responsibilities, not inconsistent with his
position as Chief Financial Officer, customarily associated with and incidental
to such positions and as may from time to time be reasonably assigned to him by
the Board. Executive further agrees to serve as an executive officer or director
of any subsidiaries of the Company without additional compensation.
3.2 Duties. During the period of his employment hereunder Executive
shall devote all of his business time, attention, skill and efforts to the
earnest and faithful performance of his duties; provided, however, that
Executive may serve as a member of the board of directors of corporations or
similar positions with other organizations which, in the Board's judgment, will
not present any conflict of interest with the Company or any of its
subsidiaries, or materially interfere with the performance of Executive's
services, duties or responsibilities pursuant to this Agreement. Executive has
disclosed to the Board all current boards of directors on which he is a member
and shall disclose any additional boards of directors that Executive desires to
join.
3.3 Place of Employment. Executive shall perform his duties hereunder
at the Company's executive office located in Kennett Square, Pennsylvania, and
shall travel to the Company's other offices or locations as may be necessary or
appropriate for him to perform his duties hereunder.
4. Compensation and Benefits.
4.1 Salary. For all services rendered by Executive as Chief Financial
Officer, or as an officer or director of any subsidiary of the Company during
his employment under this Agreement, the Company shall pay Executive a base
salary at the annual rate of $400,000. During the Term, Executive's base salary
shall be reviewed at least annually, with the first such annual review on the
first anniversary of this Agreement. Such review shall be conducted by a
committee comprised of individuals designated by the Board from its members (the
"Compensation Committee"), and the Compensation Committee may increase said base
salary. The annual base salary payable to Executive in any year is referred to
herein as the "Base Salary" for such year.
4.2 Annual Bonus. For each fiscal year of the Company during the term
of this Agreement, the Company shall afford Executive the opportunity to earn an
incentive bonus ("Bonus") under the terms of the Genesis Health Venture, Inc.
Incentive Program or similar program. The aggregate target Bonus payable to
Executive under such program(s) shall equal at least 50% of the Base Salary for
such fiscal year, and shall be payable at the discretion of the Compensation
Committee, upon the achievement of certain targets (which shall be set by the
Compensation Committee within the first three (3) months of such year).
4.3 Equity Incentive.
(a) Stock Option. The Company shall, pursuant to the terms of its
stock option plan or any similar plan, grant to Executive as of the Effective
Date one or more options to acquire an aggregate of 75,000 shares of common
stock of the Company ("Company Stock"). The exercise price of the shares shall
be established at the time of the grant and shall be less than or equal to the
fair market value of the stock at the time of the grant. The stock options shall
vest with respect to the shares subject thereto in equal installments on each of
the first three (3) anniversaries of the Effective Date; provided that Executive
remains employed with the Company on such anniversary. In addition, the stock
options shall fully and immediately vest on (i) a Change in Control (as defined
in Section 6.5), (ii) any termination of Executive's employment with the Company
by the Company without Cause (as defined in Section 6.3(b) or because of
Executive's death or Disability (as defined in Section 6.2), or (iii) any
termination of Executive's employment by Executive's resignation for Good Reason
(as defined in Section 6.4). The stock options shall have a ten (10) year term
subject to earlier termination of such options on account of (i) Executive's
termination of employment for any reason or (ii) a Change in Control in which
the stock options are not assumed or replaced by the Company or its successor.
The stock options shall be "incentive stock options" to the fullest extent
permitted.
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(b) Restricted Stock Award. The Company shall make a restricted
stock award to Executive as of the Effective Date of 75,000 shares of Company
Stock. The shares underlying the restricted stock award shall vest in equal
quarterly installments (3,750 shares per installment) over a five (5) year
period, commencing three months after the anniversary of the Effective Date and
continuing every three months thereafter until the fifth anniversary of the
Effective Date; provided that Executive remains employed with the Company on
such anniversary. In addition, all shares of Company Stock underlying the
restricted stock award shall fully and immediately vest on (i) a Change in
Control, (ii) any termination of Executive's employment with the Company by the
Company without Cause or because of Executive's death or Disability, or (iii)
any termination of Executive's employment by Executive's resignation for Good
Reason.
4.4 Participation in Benefit Plans and Perquisites. Executive shall be
entitled to participate in each employee benefit plan or perquisite applicable
generally to executive officers of the Company (including health, life
insurance, long-term disability and deferred compensation benefits, but
excluding any severance benefit or termination pay plan) in accordance with the
provisions thereof. Notwithstanding the foregoing, Executive shall not be
entitled to receive any additional benefits or awards under discretionary plans
or programs of the Company unless the Executive Board of the Company (or the
Compensation Board) exercises the necessary discretion to provide Executive with
such benefits or awards.
4.5 Vacation and Holidays. Executive shall be entitled to vacation in
accordance with the Company's vacation policy in effect from time to time for
its executive officers, but not less than five (5) weeks in each full calendar
year. Executive shall also be entitled to all paid holidays given by the Company
to its senior officers. Vacation days that are not used during any calendar year
may not be accrued, nor shall Executive be entitled to compensation for unused
vacation days.
4.6 Forgiveness of Note. As a condition to continued employment in
1998, Executive was required to purchase a substantial amount of the Company's
common stock based on and exceeding Executive's annual salary. In connection
therewith, Executive borrowed funds from the Company for such stock purchases
and executed a promissory note in favor of the Company (the "Note"). A copy of
the Note is annexed hereto as Exhibit "A". Pursuant to the February 23, 2001
Order of the Bankruptcy Court (the "Bankruptcy Order"), in the event that (i)
Executive remains employed by the Company for one (1) year following the date of
this Agreement or, (ii) Executive's employment is terminated because of (A) his
death or Disability (pursuant to Section 6.2 of this Agreement), (B) his
termination for cause (pursuant to Section 6.3 of this Agreement) (C) his
resignation for Good Reason (pursuant to Section 6.4 of this Agreement), (D) his
resignation following a Change in Control (pursuant to Section 6.5 of this
Agreement) or (E) termination by the Company without Cause (pursuant to Section
6.6 of this Agreement), the Company will release Executive from his obligations
under the Note and cancel any related indebtedness and will also reimburse
Executive for any federal or state income taxes he owes as a result of such
release and cancellation.
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5. Reimbursement of Expenses. The Company shall pay or reimburse Executive
for all reasonable business expenses incurred by Executive in performing his
obligations under this Agreement in accordance with its business expense
policies in effect from time to time.
6. Events of Termination of Employment.
6.1 Expiration of Term. Executive's employment with the Company and its
subsidiaries shall cease automatically on the expiration of the term of this
Agreement pursuant to Section 2 hereof.
6.2 Death or Disability. Executive's employment with the Company and
its subsidiaries shall automatically terminate on Executive's death. Executive's
employment shall terminate thirty (30) days after Executive is notified that his
employment is terminated for Disability (provided Executive shall not have
returned to the performance of his duties on a full-time basis during such
thirty (30) day period). For purposes of this Agreement, "Disability" means an
incapacity due to a physical or mental condition which causes Executive to be
unable to substantially perform his duties under this Agreement on a full-time
basis for (i) a period of six (6) consecutive months, or (ii) for shorter
periods aggregating more than six (6) months in any twelve (12) month period.
"Disabling Condition" shall mean such an incapacity that does not meet the time
requirements for Disability. The Company may temporarily relieve Executive from
his duties and responsibilities during any period that he has a Disabling
Condition, provided that Executive shall be immediately restored to his duties
and responsibilities if Executive is able to resume his duties on a full-time
basis prior to his termination for Disability. Executive agrees to submit to
reasonable medical examination upon the reasonable request, and at the expense,
of the Company during any period when he (or his representative) claims that he
has a Disabling Condition.
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6.3 Termination by Company for Cause.
(a) The Company may, following any determination by the Board that
Cause exists, terminate Executive's employment with the Company and its
subsidiaries for Cause by notice to Executive describing the reasons for such
termination. In the event the Board believes Cause may exist for termination of
Executive's employment, the Board shall provide written notice to Executive
describing the basis for such belief. Executive shall be afforded a reasonable
period of time to and shall fully and promptly address, to the extent of
Executive's knowledge, any concerns raised by the Board regarding the existence
of Cause. The Company may temporarily relieve Executive from his duties and
responsibilities pending the outcome of any proceeding of the Board to determine
if Cause exists; provided that Executive shall be immediately restored to his
duties and responsibilities if the Board determines that Cause does not exist or
fails to render a prompt determination following the substantial completion of
its investigation. The final determination that Executive's employment shall be
terminated for Cause shall be made by the affirmative vote of two-thirds (2/3)
of the non-management membership of the Board at a meeting of the Board duly
called and held upon at least fifteen (15) days prior written notice to
Executive specifying the particulars of the action or inaction alleged to
constitute "Cause" (and at which meeting Executive and his counsel are entitled
to be present and are given a reasonable opportunity to be heard).
(b) For purposes of this Section 6.3, "Cause" means any of the
following events with respect to Executive:
(i) Executive has been convicted of, or pleads guilty or nolo
contendere to, any crime or offense constituting a felony under
applicable law (whether or not involving the Company or any of its
subsidiaries), including, without limitation, embezzlement, theft,
larceny or any crime of moral turpitude which subjects, or if
generally known, would subject, the Company or any of its
subsidiaries to public ridicule or embarrassment;
(ii) Executive's commission of a material act of fraud or
dishonesty against the Company or any of its subsidiaries, or
Executive's willful engaging in conduct which is significantly
injurious to the Company or any of its subsidiaries, monetarily or
otherwise;
(iii) Executive's abuse of illegal drugs and other controlled
substances or Executive's habitual intoxication, which conduct
continues after written demand for cessation of such conduct is
delivered to Executive by the Board;
(iv) Any willful, continuous or gross neglect of or refusal to
perform Executive's duties or responsibilities, in each case which
continues after detailed written notice thereof has been given to
Executive; or
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(v) The willful taking of actions by Executive which directly
and materially impair Executive's ability to perform his duties and
responsibilities hereunder, or willful misconduct (including gross
and willful violation of any written policies of the Company),
provided, however, that "Cause" shall not include a bona fide
disagreement over corporate policy, so long as Executive does not
willfully violate on a continuing basis specific written directions
from the Board, which directions are consistent with the provisions
of this Agreement.
Action or inaction by Executive shall not be considered "willful"
unless done or omitted by him intentionally and without his reasonable
belief that his action or inaction was in the best interests of the
Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental illness.
6.4 Resignation by Executive for Good Reason. Upon the occurrence of
any event described in this Section 6.4 below, Executive shall have the right to
elect to terminate his employment under this Agreement from all (but not less
than all) positions with the Company and its subsidiaries by resignation, upon
not less than thirty (30) days' prior written notice given within ninety (90)
days after the event purportedly giving rise to Executive's right to elect;
provided, however, that the Company has not cured or otherwise corrected such
event prior to the expiration of such 30-day period.
(a) Any reduction by the Company of Executive's Base Salary;
(b) Any relocation of Executive's principal place of employment or
the relocation of the Company's principal office or corporate headquarters to a
location more than forty-five (45) miles beyond the Borough of Kennett Square,
Pennsylvania;
(c) The assignment to Executive by the Company of any duties
inconsistent with Executive's status with the Company or a substantial
alteration in the nature of status of Executive's responsibilities from those in
effect immediately prior to the date hereof, or a reduction in Executive's
titles or offices as in effect immediately prior to the date hereof or any
removal of Executive from, or any failure to elect, re-elect or appoint
Executive to any such positions (including, without limitation, the position of
Vice Chairman, other than as a result of Executive's death, termination of
employment (and other than as a result of Executive's Disabling Condition or
pending a determination that Cause exists), or the failure to restore Executive
to his responsibilities following his recovery from a Disabling Condition prior
to his employment termination or following a determination that Cause does not
exist;
(d) Any liquidation or dissolution of the Company, unless the
voting common equity interests of an ongoing entity (other than a liquidating
trust) are beneficially owned, directly or indirectly, by the same persons in
substantially the same proportions as such persons' ownership immediately prior
to such liquidation or dissolution, and such ongoing entity assumes all existing
obligations of the Company to Executive under this Agreement;
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(e) Any material breach of this Agreement by the Company; or
(f) Any determination by the Board not to automatically extend the
term of this Agreement pursuant to Section 2.2
6.5 Resignation by Executive Following A Change in Control. Executive
may resign from the Company's employ during the thirty (30) day period
commencing on the first anniversary following a Change in Control of the Company
for any reason by providing the Company with a written notice of termination.
Should Executive notify the Company that Good Reason exists at any time within
the twenty-four (24) months following a Change in Control and should the event
constituting Good Reason continue for more than ten (10) days following
Executive's notice, Executive may, at his option, immediately resign or resign
at any time during such twenty-four month period and any such resignation shall
be treated as a resignation for Good Reason under this Agreement. For purposes
of this Agreement, a Change in Control of the Company means the occurrence of
one of the following events:
(a) any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becomes, after the Effective Date, the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the Company's then
outstanding securities eligible to vote for the election of the Company's Board
of Directors (the "Company Voting Securities"); provided, that an event
described in this paragraph (a) shall not be a Change in Control if any of the
following becomes such a beneficial owner: (i) the Company or any majority-owned
subsidiary of the Company (a "Subsidiary"), (ii) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary, (iii)
any underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) [Goldman Sachs Capital Partners, Highland Capital and Van
Kampen], (v) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including Executive),or
(vi) a beneficial owner of less than twenty-five percent (25%) of the Company
Voting Securities that becomes a beneficial owner of twenty-five percent (25%)
or more of the Company Voting Securities solely by reason of redemption of such
securities by the Company;
(b) the consummation of a merger, consolidation or reorganization
of the Company (a "Business Combination"), unless, following such Business
Combination, the owners of the Company Voting Securities immediately prior to
such Business Combination (or their affiliates) beneficially own, directly or
indirectly, fifty percent (50%) or more of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of the
directors of the corporation resulting from such Business Combination (a "Non-
Qualifying Transaction"); or
PAGE 7
(c) during any period of twenty-four (24) consecutive months after
the Effective Date, the failure (for any reason other than death) of individuals
who, at the beginning of such period, constitute the Board (the "Incumbent
Directors") to constitute at least a majority of the Board; provided that a
director who was not a director at the beginning of such twenty-four (24) month
period shall be deemed to have satisfied such twenty-four (24) month requirement
(and be an Incumbent Director) if such director is elected by, or on the
recommendation of (i) or with the approval of, at least two-thirds (2/3) of the
directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such twenty-four (24) month period) or
by prior operation of this Section 6.5(c) or (ii) any person described in clause
(iv) of Section 6.5(a) above pursuant to contractual rights as of the Effective
Date with respect to Company Voting Securities owned by such person.)
The initial public offering of common stock of the Company pursuant to
a registration statement filed under the Securities Act of 1933, as amended (a
"Public Offering"), the commencement of proceedings under the Bankruptcy Code
with respect to the Company, or the acquisition of equity in the Company or its
successor pursuant to a plan of reorganization approved by a bankruptcy court
with respect to the Company shall not be treated as a Change in Control for
purposes of this Agreement.
6.6 Termination by the Company without Cause. In addition to any
termination of Executive's employment with the Company and its subsidiaries for
reasons described in the foregoing provisions of this Section 6, the Company may
terminate such employment at any time without Cause. Such determination shall be
made by the affirmative vote of two-thirds (2/3) of the non-management
membership of the Board of Directors ("Board") at a meeting of the Board called
and held for such purpose. The Board shall provide Executive with written
determination of its decision no less than thirty (30) days prior to the
effective date of such employment termination..
7. Severance Upon an Event of Termination.
7.1 General Provision. Upon termination of Executive's employment by
the Company during the Term, Executive shall be entitled to no further
compensation hereunder other than (i) Executive's accrued and unpaid Base Salary
through the date of termination, (ii) any benefits accrued and vested under the
terms of the Company's employee benefit plans and programs through the date of
termination and (iii) any other payments or benefits specifically provided in
Sections 4.7 and 7 of this Agreement.
7.2 Termination Due to Death or Disability. Upon Executive's employment
termination due to his death or Disability, the Company shall pay to Executive
(or to his estate) (i) Executive's Base Salary and benefits as if Executive's
employment had terminated on the last day of the month; (ii) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (iii) if any bonus, under any bonus plan shall be
payable in respect of any years ending prior to the date Executive's employment
terminates, the bonus(es) set forth in section 7.2 (ii) above shall be further
pro-rated from the beginning of the fiscal year to the last day of the month of
Executive's employment termination. In addition, all restricted stock, stock
options and performance share awards made to Executive shall automatically
become fully vested and immediately exercisable as of the date of death (or in
the case of Disability, as of the date employment terminates).
PAGE 8
7.3 Termination for Cause. Upon Executive's employment termination for
Cause, the Company shall pay to Executive all deferred compensation of any kind.
In addition, Executive shall have the option to have assigned to him at no cost
and with no apportionment of prepaid premiums any assignable insurance policy
owned by the Company and relating specifically to Executive.
7.4 Severance. Upon Executive's employment termination by the Company
without Cause or by Executive for Good Reason or by Executive in accordance with
Section 6.5 following a Change in Control, the Company shall, subject to the
provisions of Section 10 and 11 below, provide the following to Executive (or,
in the event of Executive's subsequent death, his beneficiary or beneficiaries
or his estate, as provided):
(a) Accrued Bonuses. The Company shall pay to Executive (or his
estate) any accrued and unpaid bonuses in respect of years ending prior to the
date of termination, and a pro rata bonus for the portion of the year preceding
the date of termination in the actual amount that would have been earned based
on the Company's actual performance for the year,
(b) Severance Pay. The Company shall provide to Executive (or his
estate) as severance pay (the "Severance Payments") three (3) times Executive's
Termination Base Salary (as defined below) plus three (3) times Executive's
Average Incentive Compensation Award (as defined below).
"Termination Base Salary" means the highest Base Salary paid to
Executive in the three (3) years preceding his employment termination.
"Incentive Compensation Award" means all cash bonuses awarded in
consideration of services for the three (3) most recent fiscal years,
divided by three (3), or if there was no cash incentive program in any
of the three (3) most recent fiscal years, divided by the number of
fiscal years for which such cash incentive program existed. For
purposes of this calculation the "restructuring payment" which is
payable upon the effective date of the Company's chapter 11 plan of
reorganization in accordance with the Bankruptcy Order shall be treated
as a cash bonus for the fiscal year in which such bonus is paid. The
Incentive Compensation Award may not exceed 100% Executive's
Termination Base Salary.
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Payment under this section 7.4 (b) shall be made as follows:
(i) In the event that Executive's employment is
terminated pursuant to section 6.5 herein, Executive shall be
paid his severance in a lump sum at the time of his
termination;
(ii) In the event that Executive's employment is
terminated pursuant to sections 6.4 or 6.6 herein, the Company
has the discretion to pay Executive his severance in either a
lump sum at the time of his termination or in equal monthly
installments over a thirty-six (36) month period. In the event
that the Executive is paid in equal monthly installments over a
thirty-six (36) month period, the severance funds shall be
placed in escrow at the time of termination with an escrow
agent to be agreed upon by both parties.
In no event shall such payments be reduced for any reason, including the fact
that Executive is employed by any other entity.
(c) Benefit Continuation. The Company shall continue to provide, on
the same basis as executive officers generally, the health and life insurance
benefits (but excluding disability benefits) provided to Executive and his
spouse and eligible dependants immediately prior to his date of termination for
a period of two (2) years following the date of termination (provided that
Executive continues to make all required employee contributions). In the event
that Executive's participation in any such plan or program is barred by the
terms thereof, the Company shall pay to Executive an amount equal to the annual
contribution, payments, credits or allocation made by the Company to him, to his
account or on his behalf under such plans and programs from which his continued
participation is barred except that if Executive's participation in any health,
medical, or life insurance plan or program is barred, the Company shall obtain
and pay for, on Executive's behalf, individual insurance plans, policies or
programs that provide to Executive health, medical and life insurance coverage
which is equivalent to the insurance coverage to which Executive was entitled
prior to the date of termination.
(d) Equity. All restricted stock, stock option and performance
share awards made to Executive shall fully vest and be immediately exercisable
for a period of ninety (90) days following the termination of Executive's
employment.
[8. Potential Change in Control. Upon (i) the execution of a definitive
agreement (including, without limitation, any "lock-up" or voting agreement with
any of the Company's principal stockholders) that contemplates a transaction, or
(ii) the commencement of any tender or exchange offer or similar transaction for
or involving the Company's securities, which, in the case of any transaction of
the type described in clause (i) or (ii), could result in a Change in Control,
all restricted stock, stock option and performance share awards made to
Executive shall become automatically fully vested and exercisable in order to
provide Executive with a reasonable period to obtain the economic benefit of the
contemplated transaction with respect to all restricted stock, stock option and
performance share awards then held by him. Such restricted stock options and
performance share awards shall become automatically exercisable and shall remain
exercisable through their original terms with all rights; provided, however, in
the event the transaction contemplated by the definitive agreement referred to
above is not consummated and such definitive agreement is terminated, all
accelerated restricted stock, stock options and performance awards shall be
deemed restored to the vesting and exercisability schedules in effect at the
time of execution of such definitive agreement, and any action taken in
contemplation of the consummation of the transactions anticipated to result in a
Change in Control shall be null and void.]
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9. Certain Tax Matters. The Company shall indemnify and hold Executive
harmless from and against (i) the imposition of excise tax (the "Excise Tax")
under Section 4999 of the Internal Revenue Code of 1986, as amended (or any
successor provision thereto, the "Code"), on any payment made or benefit
provided by the Company or a subsidiary (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 or employment
tax imposed on any payment made pursuant to this paragraph. Executive shall not
take the position on any tax return or other filing that any payment made or
benefit provided by the Company is subject to the Excise Tax, unless, in the
opinion of independent tax counsel reasonably acceptable to the Company, there
is no reasonable basis for taking the position that any such payment or benefit
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, benefit or portion
thereof is subject to the Excise Tax, at the Company's election, and the
Company's direction and expense, Executive shall contest such claim; provided,
however, that the Company shall advance to Executive the costs and expenses of
such contest, as incurred. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable 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 Executive is resident, net of the reduction in federal
income taxes that is obtained from deduction of such state and local taxes.
10. Duties Upon Termination. Executive agrees that he will, upon
termination of his employment with the Company for any reason whatsoever,
deliver to the Company any and all records, forms, contracts, memoranda, work
papers, lists of names or other customer data and any other articles or papers
which have come into his possession by reason of his employment with the Company
or which he holds for the Company, regardless of whether or not any of said
items were prepared by him, and he shall not retain memoranda or copies of any
of said items. Executive shall assign to the Company all rights to trade secrets
and the products relating to the Company's business developed by him alone or in
conjunction with others at any time alike employed by the Company.
Notwithstanding anything herein to the contrary, Executive may retain this
Agreement, any documents relating to this Agreement and any documents relating
to Executive's compensation, benefits, retirement plans and deferred
compensation plans.
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11. Post-Termination Obligations. All payments and benefits to Executive
under this Agreement shall be subject to Executive's compliance with the
following provisions.
11.1 Confidential Information. At all times during and after the term
of this Agreement, Executive shall not disclose or reveal to any unauthorized
person any trade secret or other confidential information relating to the
Company, its subsidiaries or its affiliates, or to any businesses operated by
them, including, without limitation, any customer lists; and Executive confirms
that such information constitutes the exclusive property of the Company. For
purposes of this Section 11.1, confidential information shall not include any
information that is now known by or readily available to the general public or
which becomes known by or readily available to the general public other than as
a result of any improper act or omission of Executive. Notwithstanding anything
herein to the contrary, during the term of this Agreement, Executive may reveal
information, as necessary, pursuant to his conducting Company business.
11.2 Competitive Conduct. During the term of this Agreement and for a
further period of two (2) years thereafter, Executive shall not, except with the
Company's express prior written consent, directly or indirectly, in any capacity
for the benefit of any person:
(a) solicit any person who is or during such period becomes a customer,
supplier, employee, salesman, agent or representative of the Company, in any
manner which interferes or might interfere with such person's relationship with
the Company, or in an effort to obtain such person as a customer, supplier,
employee, salesman, agent or representative of any business in competition with
the Company which business conducts operations within fifteen (15) miles of any
office or facility owned, leased or operated by the Company or in any county, or
similar political subdivision, in which the Company conducts substantial
business.
(b) establish, engage, own, manage, operate, join or control, or
participate in the establishment, ownership (other than as the owner of less
than one percent (1%) of the stock of a corporation whose shares are publicly
traded) management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
person in any business in competition with the Company if such person has any
office or facility, at any location within fifteen (15) miles of any office or
facility owned, leased or operated by the Company or conducts substantial
business in any county, or similar political subdivision in which the Company
conducts substantial business, or act or conduct himself in any manner which he
would have reason to believe inimical or contrary to the best interests of the
Company.
11.3 Failure of Executive to Comply. If for any reason other than death
or disability, Executive shall, without written consent of the Company, fail to
comply with the provisions of this Section 11, his rights to any future payments
or other benefits hereunder shall terminate (without prejudice to any other
rights, including recovery of damages of the Company), and the Company's
obligations to make such payments and provide such benefits shall cease;
provided, however, that no failure to comply with any provision of this Section
11 shall be deemed to have occurred unless and until Executive receives written
notice from the Company specifying the conduct alleged to constitute such
failure.
PAGE 12
11.4 Remedies. Executive agrees that monetary damages would not be
adequate compensation for any loss incurred by the Company by reason of a breach
of the provisions of Sections 10 and 11 of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate. Accordingly, in addition to any other remedies that the
Company may have at law or in equity, the Company shall have the right to have
all obligations, agreements and other provisions of Sections 10 and 11
specifically performed by Executive, and the Company shall have the right to
obtain preliminary injunctive relief to secure specific performance and to
prevent a breach of Section 10 or 11. The existence of any claim or cause of
action which Executive or any other person may have against the Company shall
not constitute a defense or bar to the enforcement of Section 10 or 11. If the
Company is obliged to resort to litigation to enforce a covenant in Section 10
or 11 that contains a fixed term, then such fixed term shall be extended for a
period of time equal to the period during which a material breach of such
covenant was occurring, beginning on the date of a final court order (without
further right of appeal) holding that such a material breach occurred, or, if
later, the last day of the original fixed term of such covenant.
11.5 Consideration. Executive expressly acknowledges that the covenants
contained in Sections 10 and 11 are a material part of the consideration
bargained for by the Company and, without the agreement of Executive to be bound
by the covenants contained in such sections, the Company would not have agreed
to enter into this Agreement.
11.6 Scope. If any portion of the covenants contained in Section 10 or
11 or its application is construed to be invalid, illegal or unenforceable, then
the other portions and their application shall not be affected thereby and shall
be enforceable without regard thereto. If any of the such covenants is
determined to be unenforceable because of its scope, duration, geographical area
or similar factor, the court making such determination shall have the power to
reduce or limit such scope, duration, area or other factor, and such covenant
shall then be enforceable in its reduced or limited for.
12. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and, upon effectiveness of this
Agreement pursuant to Section 2 hereof, supersedes all prior agreements and
discussions between the Company and Executive but is not in any way intended to
supersede the Bankruptcy Order.
13. General Provisions.
13.1 Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in Chester
County, Pennsylvania (or at such other location as shall be mutually agreed by
the parties). The arbitration shall be conducted in accordance with the
Expedited Employment Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the arbitration, except that
the arbitration shall be selected by alternatively striking form a list of five
(5) arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented to the
arbitrator, the entire cost of such proceedings (including, without limitation,
Executive's reasonable attorneys' fees) shall be borne by the Company. If
Executive does not prevail as to any material issue, each party will pay for the
fees and expenses of its own attorneys, expert witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a
claim for which attorneys' fees are recoverable under the Rules). Any action to
enforce or vacate the arbitrator's award shall be governed by the Federal
Arbitration Act, if applicable, and otherwise by applicable state law. If either
the Company or Executive pursues any claim, dispute or controversy against the
other in a proceeding other that then arbitration provided for herein, the
responding party shall be entitled to dismissal or injunctive relief regarding
such action and recovery of all costs, losses and attorneys' fees related to
such action.
PAGE 13
13.2 Legal Expenses. Except as otherwise provided in Section 13.1, in
the event Executive prevails as to any material issue in any legal proceeding to
enforce the terms of this Agreement, the Company shall reimburse Executive for
reasonable legal costs incurred in connection therewith.
13.3 Mitigation. Executive shall not be obligated to seek other
employment or take any other action to mitigate any severance benefits
hereunder.
13.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the Company and
Executive and his heirs, executors, legal representatives, successors and
permitted assigns. Unless clearly inapplicable, reference herein to the Company
shall be deemed to include its 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, any such attempted assignment, transfer,
pledge, encumbrance, hypothecation or other disposition without such consent
shall be null and void, without effect.
13.5 Severability. In the event any provision of this Agreement or any
part hereof is held invalid, such invalidity shall not affect any remaining part
of such provision or any other provision, and to this end, the provisions of
this Agreement are intended to be and shall be deemed severable. If any court
construes any provision of this Agreement to be illegal, void or unenforceable
because of the duration or the area or matter covered thereby, such court shall
reduce the duration, area or matter of such provision, and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
PAGE 14
13.6 Withholding. Employer may withhold from any amounts payable under
this Agreement such taxes and governmentally required withholdings as may be
required to be withheld pursuant to any applicable law or regulation.
14. Modification and Waiver.
14.1 Amendment of Agreement. Except for increases in compensation made
as provided in Section 4.1, this Agreement may not be changed or modified except
by an instrument in writing signed by both of the parties hereto.
14.2 Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
15. Notices. Any notice to be given hereunder shall be in writing and shall
be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at:
George V. Hager, Jr.
320 Bellevue Avenue
Haddonfield, NJ 08033
with a copy:
To the Company at:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Law Department
And with a copy to:
[Members of/The Chairman of] the Compensation Committee
PAGE 15
16. Governing Law. The parties hereto intend that this Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer, and Executive has signed this
Agreement, all as of the day and year first above written.
GENESIS HEALTH VENTURES, INC.
/s/ Michael R. Walker
------------------------------------
By:
Name: Michael R. Walker
Title: Chief Executive Officer
/s/ George V. Hager, Jr.
------------------------------------
GEORGE V. HAGER, JR.
Acknowledged on Behalf of the Board:
/s/ James Wankmiller
- ------------------------------------------
Name: James Wankmiller
Title: Sr. Vice President, General Counsel
and Corporate Secretary
PAGE 16