Exhibit 10.1
TRANSITION AGREEMENT
This TRANSITION AGREEMENT (the "Agreement"), dated as of the 28th day
of May, 2002, is entered into by and between Genesis Health Ventures, Inc., a
Delaware corporation (together with its subsidiaries and affiliates being
collectively referred to herein as the "Company") and Michael R. Walker (the
"Executive").
WHEREAS, the Executive and the Company are parties to an Employment
Agreement dated as of October 2, 2001 (the "Employment Agreement");
WHEREAS, the Executive has agreed to resign from his employment with
the Company and relinquish his position as Chief Executive Officer of the
Company as of the Effective Date (as hereinafter defined), but has agreed to
continue in his position of Chairman ("Chairman") of the Board of Directors of
the Company (the "Board") and provide consulting services to the Company during
the Transition Period (as hereinafter defined);
WHEREAS, the Executive desires to assist the Company in effecting an
orderly and efficient transition in respect of the Company's senior management
following the Effective Date; and
WHEREAS, the Executive and the Company desire to set forth their
understanding of the Executive's role during the Transition Period (as
hereinafter defined) and the parties rights and obligations resulting from the
Executive ceasing to be employed by the Company as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, intending to be legally bound, the parties
hereto hereby agree as follows:
Section 1. Termination of Employment: Termination Payment.
(a) Termination of Employment; Relinquishment of Chief Executive
Officer and Chairman Positions. The Executive's employment with the Company
shall terminate as of the close of business on May 28, 2002 (the "Effective
Date"). The Executive shall relinquish his position as Chief Executive Officer
of the Company, including all duties and responsibilities associated with such
position, as of the Effective Date. During the period beginning on the Effective
Date and continuing through the earlier of (i) December 31, 2002 or (ii) such
date, reasonably determined by the Board, which shall not be less than five days
after notice of such determination is provided to the Executive (the "Transition
Period"), the Executive shall continue to serve as the Chairman of the Board.
Effective as of the end of the Transition Period, the Executive shall resign
from his position as a member of the Board and from his position as the Chairman
of the Board, including all duties and responsibilities associated with such
positions. During the period beginning on the Effective Date and continuing
through December 31, 2002, the Executive shall be entitled to continue engaging
in lobbying activities including, but not limited to, lobbying activities with
The Alliance for Quality Nursing Home Care.
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(b) Removal of Personal Property. In no event later than May 31, 2002,
the Executive shall remove all personal property from his office at the
Company's corporate offices, including but not limited to the paintings, books
and other artifacts located in such office as of the Effective Date. On and
after May 31, 2002, the Executive shall not maintain an office or presence at
the Company's corporate offices, including but not limited to the corporate
offices of Eldertrust.
(c) Payments and Benefits. In consideration for the Executive's
agreement to be bound by the terms of this Agreement, including but not limited
to Section 5(c) hereof and the Release set forth in Section 3 hereof, the
Executive shall be entitled to receive from the Company the payments and
benefits set forth in subparagraphs (i) through (iv) of this Section 1(c),
provided that the Executive shall not have revoked such Release:
(i) on the eighth day after the Executive's execution of this
Agreement, to the extent there has been no revocation of the Release by the
Executive prior to such date (the "Payment Date"), the Company shall pay the
Executive in a lump sum in cash any accrued and unpaid base salary, bonuses or
deferred compensation in respect of periods through the Effective Date;
provided, however, that, to the extent permitted under the terms of the
Company's Deferred Compensation Plan, the Executive shall be entitled to defer
payment of up to $2,528,834 of such deferred compensation until no later than
January 1, 2003;
(ii) on the Payment Date, the Company shall pay the Executive
a lump sum in cash in an amount equal to $5,525,000, less applicable
withholding, of which (1) $5,100,000 represents the severance pay the Executive
would have been entitled under Section 7.4 of the Employment Agreement as if his
employment had been terminated by the Company without "Cause" (as such term is
defined in the Employment Agreement) on the Effective Date and (2) $425,000
represents the Executive's incentive compensation bonus with respect to the
fiscal year of the Company during which the Effective Date occurs;
(iii) for a period of two years beginning on the Payment Date,
the Company will continue to provide, on the same basis as executive officers of
the Company generally, the health and life insurance benefits (but excluding
disability benefits) provided to the Executive and his spouse and eligible
dependants immediately prior to the Payment Date (provided that the Executive
continues to make all required employee contributions). In the event that the
Executive's participation in any such plan or program is barred by the terms
thereof, the Company shall pay to the 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 the Executive's participation in any
health, medical or life insurance plan or program is barred, the Company shall
obtain and pay for, on the Executive's behalf, individual insurance plans,
policies or programs that provide to the Executive's health, medical and life
insurance coverage which is equivalent to the insurance coverage to which the
Executive was entitled prior to the Payment Date;
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(iv) for a period of two years beginning on the Payment Date,
the Company shall continue to provide the Executive with life insurance policy
providing for a death benefit of at least $6,000,000 to the Executive's
designated beneficiaries. At the end of such period, the Executive shall be
entitled to receive the then cash value of such policy less the aggregate amount
of premiums paid by the Company on such policy;
(v) the Executive's outstanding deferred stock grant of
150,000 shares of the common stock of the Company shall fully vest as of the
Payment Date and, to the extent permitted by the terms of the Company's Deferred
Compensation Plan, the Executive shall be entitled to defer receipt of such
shares until no later than January 1, 2003; and
(vi) the Executive's outstanding stock options to purchase
225,000 shares of the common stock of the Company shall fully vest as of the
Payment Date, shall remain exercisable for a period of ninety (90) days
following the Effective Date and shall thereafter terminate to the extent
unexercised by the Executive; provided, however, that in no event will such
stock options be exercisable following the expiration of the term of such stock
options.
Section 2. Consulting Services During the Transition Period. During the
Transition Period, the Executive shall serve as a consultant to the Company and
shall perform such consulting services as the Board and/or the Interim Chief
Executive Officer of the Company shall reasonably request to assist the Company
in effecting an orderly and efficient transition in respect of the Company's
senior management. Effective as of the end of the Transition Period, the
Executive shall cease to be a consultant of the Company. During the Transition
Period, the Company shall pay the Executive a consulting fee of $70,833.33 per
month, payable at the end of each month during the Transition Period. During the
Transition Period, the Company shall, upon proper submission of proper vouchers
in respect thereof, pay or reimburse the Executive in accordance with the
Company's reimbursement and expense policies, as in effect from time to time,
for all reasonable expenses incurred by the Executive in performing consulting
services for the Company, provided that in no event shall any such payment or
reimbursement exceed $6,000 in any month during the Transition Period. During
the Transition Period, the Company shall provide the Executive an office, at a
location separate from the Company's corporate offices, and secretarial services
that are substantially comparable to the office and secretarial services
provided to the Executive immediately prior to the Effective Date.
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Section 3. Release by the Executive.
(a) The Executive knowingly and voluntarily releases and
forever discharges the Company and the Company's parents, subsidiaries and
affiliates, together with all of their respective past and present directors,
managers, officers, partners, employees and attorneys, and each of their
predecessors, successors and assigns, and any of the foregoing in their capacity
as a shareholder or agent of the Company (collectively, "Releasees") from any
and all claims, charges, complaints, promises, agreements, controversies, liens,
demands, causes of action, obligations, damages and liabilities of any nature
whatsoever, known or unknown, suspected or unsuspected, which against them the
Executive or his executors, administrators, successors or assigns ever had, now
have, or may hereafter claim to have against any of the Releasees by reason of
any matter, cause or thing whatsoever arising on or before the Effective Date
and whether or not previously asserted before any state or federal court or
before any state or federal agency or governmental entity (the "Release"). The
Release includes, without limitation, any rights or claims relating in any way
to the Executive's employment relationship with the Company or any of the
Releasees, or the termination thereof, or arising under any statute or
regulation, including the Age Discrimination in Employment Act of 1967, Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act of 1990, the Employee Retirement Income Security Act of
1974, and the Family Medical Leave Act of 1993, each as amended, or any other
federal, state or local law, regulation, ordinance or common law, or under any
policy, agreement, understanding or promise, whether written or oral, formal or
informal, between any of the Releasees and the Executive.
(b) Nothing herein shall be deemed to release (i) any of the
Executive's rights under this Agreement, (ii) any of the Executive's rights that
have accrued prior to the date hereof under the Company's employee benefit
plans; or (iii) any of the Executive's rights to indemnification under any
indemnification agreement, applicable law and the certificates of incorporation
and bylaws of the Company and/or any subsidiary or parent of the Company.
(c) The Executive represents that the Company has advised him
to consult with an attorney of his choosing prior to signing this Agreement. The
Executive further represents that he understands and agrees that he has the
right and has in fact reviewed this Agreement and, specifically, the Release,
with an attorney of the Executive's choice. The Executive further represents
that he understands and agrees that the Company is under no obligation to offer
him this Agreement, and that the Executive is under no obligation to consent to
the Release, and that he has entered into this Agreement freely and voluntarily.
(d) The Executive shall have twenty-one (21) days to consider
this Agreement and once he has signed this Agreement, the Executive shall have
seven additional days from the date of execution to revoke his consent to the
Release set forth above. Any such revocation shall be made by delivering written
notification to the Board.
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Section 4. Notices. For purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid as follows:
If to the Executive:
228 N. Garfield Street
Kennett Square, PA 19348
If to the Company:
101 East State Street
Kennett Square, PA 19348
Attention: Robert H. Fish, Interim Chief
Executive Officer
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or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
Section 5. Miscellaneous.
(a) Enforcement: Governing Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania without regard to its conflicts of law principles.
The Company shall have the right, without prejudice to any other rights or
remedies it might have under the law which are reserved, to obtain injunctive
relief to restrain any breach or threatened breach by the Executive of this
Agreement or otherwise to specifically enforce any provision of this Agreement;
provided, however, that such right to injunctive relief does not preclude the
Company from seeking monetary damages for a breach by the Executive of this
Agreement.
(b) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes any and all prior agreements, and understandings, both
written and oral, between the parties hereto with respect to the subject matter
hereof, including but not limited to the Employment Agreement and any separation
benefits payable thereunder, except as otherwise provided in Section 5(c) below.
(c) Survival of Certain Employment Agreement Provisions. The
Company and the Executive agree that Sections 9, 10, 11, 13.1 and 13.2 of the
Employment Agreement shall continue in full force and effect following the
Effective Date, provided, however, that the noncompetition covenant set forth in
Section 11.2 of the Employment Agreement shall be enforceable by the Company for
a period of one year following the Effective Date and shall thereafter
terminate.
(d) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect.
(e) Successors. This Agreement shall be binding upon and shall
inure to the benefit of each of the parties hereto, and their respective heirs,
legatees, executors, administrators, legal representatives, successors and
assigns.
(f) Withholding. All payments made by the Company to the
Executive pursuant to this Agreement shall be reduced by all federal, state,
city or other taxes that are required to be withheld pursuant to any law or
governmental regulation.
(g) Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
GENESIS HEALTH VENTURES, INC.
By: /s/ James Wankmiller
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Name: James Wankmiller
Title: Senior Vice President
/s/ Michael R. Walker
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Michael R. Walker
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