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EXHIBIT 10.44
PARACELSUS HEALTHCARE CORPORATION
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 17, 1996, between Paracelsus Healthcare
Corporation, a California corporation (the "Company"), and R. J. Messenger (the
"Executive").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive
and the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein. In addition, the Executive and the Company hereby
agree that subject to and effective as of the closing of the proposed merger
transaction among the Company, Champion Healthcare Corporation, a Delaware
corporation ("Champion"), and PC Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company ("PC Merger Sub"), whereby Champion will
become a wholly owned subsidiary of the Company (the "Merger"), this Agreement
shall supersede that certain employment agreement (the "Prior Agreement")
between the Company and the Executive, dated as of November 20, 1983, as
amended from time to time, and the Prior Agreement shall thereupon
automatically terminate without further obligation by either Executive or the
Company.
2. TERM OF EMPLOYMENT; DUTIES. From the period commencing on the
date hereof and ending immediately prior to the Effective Time (as defined in
the Agreement and Plan of Merger by and among the Company, Champion and PC
Merger Sub dated as of April 12, 1996, as amended May 29, 1996, and as such
agreement may be amended from time to time (the "Merger Agreement")), the
employment of the Executive shall be governed by the terms and conditions set
forth in the Prior Agreement. The term of this Agreement (the "Term"), and
Executive's employment with the Company hereunder, shall commence at the
Effective Time and, unless earlier terminated in accordance with the terms
hereof, shall continue until the fifth anniversary of the Effective Time (such
initial term of the Agreement referred to as the "Initial Term"); PROVIDED,
HOWEVER, that the Term shall automatically be renewed for an additional period
of five years (each such period, a "Renewal Period") at the end of the Initial
Term and at the end
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of each Renewal Period, if any, unless either the Company or the Executive
provides at least one year's notice to the other of its intention not to renew
the Term; and PROVIDED, FURTHER, that if the Merger Agreement is terminated in
accordance with its terms prior to the Effective Time or if the Merger is
abandoned or otherwise does not close, (x) this Agreement shall automatically
terminate without further obligation by either party hereto, (y) the terms and
conditions set forth in this Agreement shall not apply and (z) the employment
of the Executive shall continue to be governed by the terms and conditions set
forth in the Prior Agreement.
During the Term, the Executive shall be employed as the Chief
Executive Officer of the Company serving at the will of the Board of Directors
of the Company (the "Board") with, subject to the express terms and conditions
hereof, the traditional duties, responsibilities and authority of such office
in companies similar in size to the Company. The Executive agrees that he
shall perform his duties hereunder faithfully and to the best of his abilities
and in furtherance of the business of the Company and its subsidiaries and
shall devote substantially all of his business time, energy and attention to
the business of the Company and its subsidiaries; PROVIDED, HOWEVER, that
subject to the provisions of Section 10, Executive may devote a portion of his
time while an employee of the Company to international commitments and other
personal, philanthropic and business affairs and interests (including but not
limited to businesses providing security, catering, cleaning and related
services on an international basis to commercial establishments), to the extent
such activities do not materially interfere with the performance of his duties
and obligations to the Company; and PROVIDED, FURTHER, that Executive may also
attend various industry board and other meetings of professional societies of
which he is a member, consistent with his past practice while an employee of
the Company. In addition, (i) for so long as Executive is a Shareholder
Director (as defined in the Shareholder Agreement of the Company to be entered
into in connection with the Merger (the "Shareholder Agreement")), Executive
shall serve as the Vice Chairman of the Board, and (ii) for so long as
Executive shall serve as a member of the Board, he shall serve as Chairman of
the Executive Committee of the Board (the "Executive Committee").
The Executive agrees to use his authorities as Chief Executive
Officer, as Vice Chairman of the Board and as a member of the Executive
Committee to manage and cause others to manage
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the Company in accordance with the management guidelines set forth on Exhibit A
hereto; PROVIDED, HOWEVER, that nothing in this Section shall require the
Executive to violate or breach his duties under the law of the state of
incorporation of the Company or any other applicable laws. The Company agrees
to use its best efforts to manage and cause others to manage the Company in
accordance with the management guidelines set forth in Exhibit A hereto.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to
the Executive an annual base salary (the "Base Salary") at an initial rate of
$750,000 per year, payable in accordance with the Company's normal payroll
practices or as the Company and Executive may otherwise agree. The Base Salary
shall be reviewed by the Company annually and shall be subject to discretionary
increase by the Company from time to time, but shall not be decreased from the
rate in effect at any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled
to participate in the Paracelsus Healthcare Corporation Executive Officer
Performance Bonus Plan or any similar or successor annual bonus plan of the
Company (the "Performance Bonus Plan") and to receive an annual performance
bonus upon the achievement of one or more annual performance goals (the
"Performance Goals") in accordance with the terms of the Performance Bonus
Plan; PROVIDED, that Executive's annual target bonus under the Performance
Bonus Plan (the "Annual Target Bonus") shall not be less than 100% of the Base
Salary in effect at the time the Performance Goals for such plan year are
established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to
participate in any long-term incentive compensation and/or stock option plans
maintained from time to time by the Company. In addition, pursuant to prior
action of the Stock Option Committee of the Board, Executive has previously
been granted (i) options (the "Value Options") to purchase an aggregate of
1,000,000 shares of Company common stock, no stated par value (the "Common
Stock"), at an exercise price of $.01 per share with a term of 10 years from
the date of grant and (ii) an option (the "Market Option") to purchase an
additional 1,000,000 shares of Common Stock at an exercise price equal to the
fair
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market value (as defined in the Paracelsus Healthcare Corporation 1996 Stock
Incentive Plan (the "1996 Stock Incentive Plan")) of the Common Stock on the
date of the Effective Time with a term of 10 years from the date of grant. The
Value Options will be fully vested on grant and will become fully exercisable
at the Effective Time, and the Market Option will generally vest and become
exercisable in equal annual installments of 25% on each of the first four
anniversaries of the Effective Time; PROVIDED, that neither the Value Options
nor the Market Option will become exercisable in whole or in part in the event
the Merger Agreement is terminated in accordance with its terms prior to the
Effective Time or if the Merger is abandoned or otherwise does not close; and
PROVIDED, FURTHER, that the Value Options and the Market Option shall each be
subject to the terms of the 1996 Stock Incentive Plan and the stock option
agreements to be entered into in connection with the grant of such options.
(d) BENEFITS, PERQUISITES AND EXPENSES. During the Term,
the Executive shall be eligible to participate in employee benefit and fringe
benefit plans and programs generally available to the Executive officers of the
Company and such additional benefits as the Board may from time to time
provide. In addition, Executive shall be entitled to receive the personal
benefits described in Exhibit B hereto. Executive shall be entitled to
reimbursement for business expenses, including travel and entertainment;
PROVIDED, that such reimbursement shall be limited to reasonable and necessary
expenses incurred by Executive in connection with the performance of duties on
behalf of the Company subject to: (i) timely submission of a properly executed
Company expense report form accompanied by appropriate supporting
documentation, and (ii) compliance with Company policies and procedures
governing business expense reimbursement and reporting based upon principles
and guidelines established by the Audit Committee of the Board, including
periodic audits by the Internal Audit Department of the Company and/or the
Audit Committee of the Board; and PROVIDED, FURTHER, that the Company shall
reimburse Executive for reasonable expenses incurred by Executive's spouse when
traveling with Executive on Company business.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to
participate in the Paracelsus Healthcare Corporation Supplemental Executive
Retirement Plan or any similar or successor plan (the "SERP") and in any tax-
qualified and any other supplemental pension plans generally available to the
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Incentive Plan and the stock option agreements to be entered into in connection
with the grant of such options.
(d) BENEFITS, PERQUISITES AND EXPENSES. During the Term,
the Executive shall be eligible to participate in employee benefit and fringe
benefit plans and programs generally available to the Executive officers of the
Company and such additional benefits as the Board may from time to time
provide. In addition, Executive shall be entitled to receive the personal
benefits described in Exhibit B hereto. Executive shall be entitled to
reimbursement for business expenses, including travel and entertainment;
PROVIDED, that such reimbursement shall be limited to reasonable and necessary
expenses incurred by Executive in connection with the performance of duties on
behalf of the Company subject to: (i) timely submission of a properly executed
Company expense report form accompanied by appropriate supporting
documentation, and (ii) compliance with Company policies and procedures
governing business expense reimbursement and reporting based upon principles
and guidelines established by the Audit Committee of the Board, including
periodic audits by the Internal Audit Department of the Company and/or the
Audit Committee of the Board; and PROVIDED, FURTHER, that the Company shall
reimburse Executive for reasonable expenses incurred by Executive's spouse when
traveling with Executive on Company business.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to
participate in the Paracelsus Healthcare Corporation Supplemental Executive
Retirement Plan or any similar or successor plan (the "SERP") and in any tax-
qualified and any other supplemental pension plans generally available to the
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Executive officers of the Company. The Company shall not take any action,
whether by amendment of the SERP or otherwise, to adversely affect Executive's
accrued benefits and other rights under the SERP as of the Effective Time.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term
and subject to the payment of any amounts required under Section 5, the
Executive's employment with the Company may be terminated (a) by the Company
for Cause (as defined herein) or without Cause, PROVIDED that no less than 80%
of the then members of the Board (excluding, for the purposes of such
calculation, the Executive) and no less than 2/3 of the Independent Directors
(as defined in the Shareholder Agreement) have approved such termination, (b)
by the Executive for or without Good Reason (as defined herein), (c) by reason
of the Executive's death or Disability (as defined herein) or (d) by the mutual
written consent of the parties hereto. For purposes of this Agreement:
(i) "Cause" means (A) acts of embezzlement, theft and fraud
established by a preponderance of the evidence; (B) actions which have had or
will likely have a material adverse financial effect on the Company as a whole
for an extended period of time, where appropriate evidence exists that such
actions are directly attributable to the (I) gross management negligence or
repeated ineptitude of the Executive and/or (II) deliberate refusal of the
Executive to follow the instructions or directions of the Board; (C) conviction
of or a plea of guilty or NOLO CONTENDERE to a felony; (D) violation of the
noncompete or confidentiality provisions of this Agreement, PROVIDED, that no
such violation will be deemed to have occurred if, within 30 days following
receipt by Executive of a notice from the Board identifying the violation, the
Executive (I) cures the violation and (II) establishes that the violation was
unintentional and not reasonably likely to result in harm to the Company, in
each case to the reasonable satisfaction of the Board; (E) material
incapacitation or repeated absence from work due to reckless and self-abusive
behavior or conduct, such as alcoholism and drug abuse, which renders Executive
incapable of performing his duties; PROVIDED, that physical or mental
disability due to injury or disease shall not be grounds for termination for
Cause; (F) material repeated incompetence in performing the duties of the
Executive's office, PROVIDED, that such incompetence is: (I) supported by
written documentation of such incompetence, (II) occurs after the Executive has
been previously counseled by the Board both orally and in writing with respect
to specific
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examples of such incompetence and has been provided the opportunity to respond
in kind, and (III) determined to be incurable and to be of such a nature as to
have had or which would have been reasonably likely at the time of such
commission to have a material adverse effect on the Company as a whole; or (G)
a material violation by the Executive of the provisions set forth in Exhibit A
hereto; PROVIDED, that the Company provides the Executive with notice of such
violation within 30 days of its discovery of such violation and the Executive
fails to cure such breach to the reasonable satisfaction of the Board within 10
days of receipt of such notice.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate, then
constitute Cause, after which period no Cause with respect to such specific set
of facts shall be deemed to exist; PROVIDED, that the repetition or
reoccurrence of the same or a similar set of facts shall constitute a separate
ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the
full-time performance of his duties with the Company for one hundred eighty
(180) days or more within any period of 12 consecutive months as a result of
the Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by reason
of Disability in which Executive is absent from the full-time performance of
his duties with the Company due to Disability, the Company shall continue to
pay Executive his Base Salary at the rate in effect at the commencement of such
period of Disability;
(iii) "Good Reason" means, without the Executive's express
written consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's
Base Salary or Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation and
benefit opportunities under all other compensation and employee benefit plans
in which Executive is entitled to participate from time to time; PROVIDED,
HOWEVER, that changes affecting the participation in or benefits under such
plans (other than the Performance Bonus Plan, the SERP and the benefits
described in Exhibit B) with respect to
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similarly situated Executives of the Company shall not constitute Good Reason
hereunder; (C) a reduction in the Executive's titles, duties or authority with
the Company or a material adverse change in Executive's reporting
relationships; (D) notification by the Company of its intention not to renew
this Agreement pursuant to the provisions of Section 2; (E) the failure of the
Executive to be nominated for election to and elected to serve as a member of
the Board or, for so long as he is a Shareholder Director, to appointed as Vice
Chairman of the Board, or for so long as he is a member of the Board, to be
appointed as Chairman of the Executive Committee; (F) the termination of the
Executive's employment by the Executive for any reason within 12 months
following a Change in Control (as defined herein); or (G) failure of the
Company, Dr. Manfred G. Krukemeyer or Mr. Charles R. Miller to comply with any
of the applicable provisions set forth in Exhibit A hereto, without regard to
whether such terms are enforceable, which is not cured by the Company, Dr.
Krukemeyer or Mr. Miller, as applicable, within 30 days of its or his receipt
of a notice specifying the manner in which the Company, Dr. Krukemeyer and/or
Mr. Miller is failing or has failed to comply with the applicable provisions
set forth in Exhibit A hereto.
(iv) "Change in Control" means the occurrence of any one of
the following events:
(A) any "person" (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any person
that is not bound by the Shareholder Agreement becomes the beneficial owner (as
defined in Rule 13d- 3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the undiluted total
voting power of the Company's then outstanding securities eligible to vote for
the election of members of the Board (the "Company Voting Securities");
PROVIDED, HOWEVER, that no event described in the immediately preceding clause
shall be deemed to constitute a Change in Control by virtue of any of the
following: (I) an acquisition of Company Voting Securities by the Company
and/or one or more direct or indirect majority-owned subsidiaries of the
Company; (II) an acquisition of Company Voting Securities by any employee
benefit plan sponsored or maintained by the Company or any corporation
controlled by the Company; (III) an acquisition by any
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underwriter temporarily holding securities pursuant to an offering of such
securities; or (IV) any acquisition by the Executive or any "group" (as such
term is defined in Rule 3d-5 under the Exchange Act) of persons including the
Executive; or
(B) individuals who, at the beginning of any period
of twenty-four (24) consecutive months, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or nomination
for election, by the Company's shareholders was approved by either (i) the
Board consistent with the terms of the Shareholder Agreement, during the period
the Shareholder Agreement is in effect, or (ii) a vote of at least 75% of the
directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director, without objection to such nomination) shall be, for
purposes of this paragraph (B), considered as though such person were a member
of the Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be a member of the Incumbent Board; or
(C) there is consummated a merger or consolidation
of the Company or a subsidiary thereof with or into any other corporation other
than a merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
represent immediately after such merger or consolidation at least 60% of the
combined voting power of the then outstanding voting securities of either the
Company or the other entity which survives such merger or consolidation or any
parent of such other entity; or
(D) the stockholders of the Company approve (i) a
plan of complete liquidation or dissolution of the Company or (ii) an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets.
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5. PAYMENTS UPON TERMINATION OF EXECUTIVE
If the employment of the Executive shall be terminated other
than by reason of death or Disability (i) by the Company (other than for Cause)
or (ii) by the Executive for Good Reason, then the Company shall pay or provide
to the Executive (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such
termination of employment ("Termination Date"), a lump-sum cash amount equal to
the sum of (i) the Executive's unpaid Base Salary through the Termination Date;
(ii) any accrued but unpaid annual bonus under the Performance Bonus Plan in
respect of the annual bonus period preceding the bonus period in which the
Termination Date occurs; (iii) any unpaid reimbursable business expenses
properly incurred through the Termination Date; and (iv) a bonus payment equal
to the Executive's Annual Target Bonus in the year of termination, multiplied
by a fraction the numerator of which is the number of months in the bonus year
of termination in which the Executive has worked at least one day and the
denominator of which is 12;
(2) within thirty (30) days following the Termination Date,
a lump-sum cash amount equal to the greater of (A) the Executive's then Base
Salary payable over the remainder of the Term plus a bonus equal to the
Executive's Annual Target Bonus in the year of termination multiplied by a
fraction the numerator of which is the number of complete months remaining in
the Term and the denominator of which is 12, or (B) 3.0 times the sum of: (i)
the Executive's annual rate of Base Salary as of the Termination Date plus (ii)
the Annual Target Bonus for the year in which the Termination Date occurs (in
each such case, Executive's Base Salary and Annual Target Bonus being
determined without taking into account any reductions thereto constituting Good
Reason); PROVIDED, HOWEVER, that the Executive shall not be entitled to any
severance benefits from the Company or under any Company severance plan, policy
or arrangement other than as specified in this Agreement;
(3) for a period terminating on the earlier of (A) the
commencement of the provision of substantially equivalent benefits by a new
employer or (B) the later of (I) the last day of the Term, or (II) thirty-six
(36) months following the Termination Date, the Company shall continue to keep
in full force and effect (or otherwise provide) all policies of medical,
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accident, disability and life insurance with respect to the Executive and his
dependents with substantially the same level of coverage, upon substantially
the same terms and otherwise substantially to the same extent as such policies
shall have been in effect immediately prior to the Termination Date, and, as
applicable, the Company and the Executive shall share the costs of the
continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the date of termination;
(4) for purposes of determining final average compensation (or
making any similar calculation) and years of service (for purposes of
eligibility, vesting and benefit accrual) under any tax-qualified or
supplemental defined benefit retirement plan (including without limitation the
SERP), Executive shall be deemed to have remained employed by the Company
hereunder until the end of the Term and to have received his then current Base
Salary and Annual Target Bonus through the end of the Term; PROVIDED, that to
the extent such benefits cannot be accrued under and paid from any
tax-qualified pension plan, such benefits shall be accrued under and paid from
the SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive
shall immediately become fully vested and exercisable and shall remain
exercisable until the earlier of (A) the date that is 24 months following the
Termination Date and (B) the expiration of the stated term of such options;
PROVIDED, that the Value Options shall remain exercisable until expiration of
their stated term; and
(b) If the employment of the Executive shall be terminated (i) by
reason of the Executive's death or Disability, (ii) by the Company for Cause,
(iii) by the Executive without Good Reason, or (iv) by the mutual written
consent of the parties hereto (each a "Nonqualifying Termination"), then the
Company shall pay to the Executive (or the Executive's beneficiary or estate)
within thirty (30) days following the Termination Date a lump-sum cash amount
equal to the sum of the Executive's unpaid Base Salary through the Termination
Date plus any bonus payments which have been earned or become payable, to the
extent not theretofore paid, plus any unpaid reimbursable business expenses
properly incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days
following the termination of his employment
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pursuant to a Nonqualifying Termination to exercise any outstanding options to
the extent vested and exercisable as of the Termination Date; PROVIDED, that
the Value Options shall remain exercisable until the expiration of their stated
term.
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the
contrary, in the event that any payment or distribution by the Company, by any
affiliate of the Company or by any person whose actions result in a Change in
Control of the Company (to the extent the Company approves of the arrangements
pursuant to which the payment by such person is made to the Executive) to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 6) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes) including, without limitation, any income and employment taxes and
Excise Tax, imposed upon the Gross-Up Payment but before deduction for any
federal, state or local income or other tax upon the Payments, the Executive
will retain a net amount equal to the sum of (i) the Payments and (ii) an
amount equal to the product of any deductions (or portions thereof) disallowed
because of the inclusion of the Gross-Up Payment in the Executive's adjusted
gross income for federal income tax purposes and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (1) pay applicable federal
income taxes at the highest applicable marginal rates of federal income
taxation (including surcharges) for the calendar year in which the Gross-Up
Payment is to be made, (2) pay applicable state and local income taxes at the
highest applicable marginal rate of taxation (including surcharges) for the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of
such state and
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local taxes and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all
determinations required to be made under this Section 6, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive may
appoint another nationally recognized public accounting firm reasonably
acceptable to the Company to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All reasonable fees and expenses of the Accounting Firm shall be borne solely
by the Company and, subject to applicable law and obligations to the Company's
stockholders, the Company shall enter into any agreement reasonably requested
by the Accounting Firm that is generally recognized as standard in connection
with the performance of the services hereunder. The Gross-Up Payment under
this Section 6 with respect to any Payment shall be made no later than thirty
(30) days following the date of such Payment. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on the Executive's applicable federal income
tax return should not result in the imposition of a negligence or similar
penalty. The Determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of uncertainty in the application of
Section 4999 of the Code at the time of the Determination, it is possible that
Gross- Up Payments which will not have been made by the Company should have
been made ("Underpayment") or Gross-Up Payments are made by the Company which
should not have been made ("Overpayment"), consistent with the calculations
required to be made hereunder. In the event that
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the Executive thereafter is required to make payment of any additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of the Executive. In the event the amount of the
Gross-Up Payment exceeds the amount necessary to reimburse the Executive for
his Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by the Executive to or for the benefit of the Company. The Executive shall
cooperate, to the extent his reasonable expenses in connection therewith are
reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold
from any and all payments due to the Executive (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law,
the Company is required to withhold therefrom.
8. SUCCESSORS; BINDING AGREEMENT
(a) This Agreement is personal in nature and none of the
parties hereto shall, without the consent of the other, assign, or transfer
this Agreement or any rights or obligations hereunder; PROVIDED, that in the
event of the merger, consolidation, transfer or sale of substantially all of
the assets of the Company with or to any other individual or entity, this
Agreement shall, subject to the provisions hereof, be binding upon and inure to
the benefit of such successor and such successor shall discharge and perform
all the promises, covenants, duties and obligations of the Company hereunder,
and all references herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amounts remain payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
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accordance with the terms of this Agreement to such person or persons appointed
in writing by the Executive to receive such amounts or, if no person is so
appointed, to the Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES; NO MITIGATION
(a) Except as provided in Sections 10 and 11, all disputes
hereunder shall be settled by final, binding arbitration, conducted before a
panel of three (3) arbitrators in California in accordance with the rules of
the American Arbitration Association then in effect. Judgment on the
arbitration award may be entered in any court having jurisdiction. The Company
shall bear the expenses of such arbitration.
(b) If any contest or dispute shall arise under this
Agreement involving termination of the Executive's employment with the Company
or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall advance and reimburse the
Executive, on a current basis, all legal fees and expenses, if any, incurred by
the Executive in connection with such contest or dispute; PROVIDED, that the
Executive agrees to return any advanced or reimbursed expenses to the extent
the arbitrators (or the court, in the case of a dispute described in Section 10
or 11) determine that the Company has prevailed as to the material issues
raised in determination of the dispute.
(c) The Company's obligation to make any payments provided
for in this Agreement to the Executive and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and
such amounts shall not be reduced whether or not the Executive obtains other
employment.
10. NONCOMPETITION
(a) DISCLOSURE. The Executive has disclosed to the Board,
in writing, all healthcare-related interests, investments, or business
activities, whether as proprietor, stockholder,
16
partner, co-venturer, director, officer, employee, independent contractor,
agent, consultant, or in any other capacity or manner whatsoever. The
Executive shall notify the Board, in writing, of any changes in or additions to
such interests, activities or investments permitted in accordance with the
terms of this Agreement, within 15 days of such change or addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a
majority of the Independent Directors, the Executive may not engage in any of
the following actions during the period that is (A) prior to the Executive's
termination of employment with the Company, (B) within two years following the
termination of his employment with the Company during the Initial Term if such
termination is by the Company for Cause or by the Executive other than for Good
Reason and (C) within one year following his termination of employment during
the Term but after the Initial Term if such termination is by the Company for
Cause or by the Executive other than Good Reason.
(i) own, either directly or indirectly, any
interest in any business that competes with the "Primary Business" in which the
Company or any subsidiary or affiliate is engaged, within a radius of 30 miles
from any site, facility, or location which is owned, managed or operated by or
affiliated with the Company or any of its subsidiaries and affiliates,
including physician practices of any kind. For purposes of this Agreement,
"Primary Business" shall mean the delivery of integrated healthcare services in
markets where the Company or its subsidiaries own hospitals and/or skilled
nursing facilities ("SNFs") with the hospital serving as the hub of the local
delivery system in conjunction with its physician medical staff. In addition
to inpatient acute care, psychiatric care, and skilled nursing care, these
services can include (A) individual physician practices and/or physician-based
organizations such as primary care and specialty clinics, physician-hospital
organizations ("PMOs") or medical service organizations ("MSOs"), or physician
medical groups and (B) ambulatory programs such as home health care, ambulatory
surgery, psychiatric services, occupational and sports medicine centers,
psychiatric after-care and day care programs, and other diagnostic,
rehabilitative and treatment services. Some of these services, sites and
facilities may be located in satellite areas for the purpose of extending the
hub hospital's geographic service area and to serve as access points and/or
referral sources for either the local delivery system or the hub hospital's
geographic service area and to serve
17
as access points and/or referral sources for either the local delivery system
or the hub hospital. The Board may modify, from time to time, the definition
of Primary Business to include any additional business or service activity in
which the Company may engage during the Term or to exclude any business or
service in which the Company ceases to engage. The definition of "Primary
Business" may also be modified to include any business or service into which,
as of the Termination Date, the Company definitively intends to expand,
regardless of whether such expansion actually occurs after the Executive's
termination. For purposes of the preceding sentence, the date on which a
modification of the definition of "Primary Business" shall be effective shall
be the date on which the Executive is provided written notice of such
modification (the "Notice Date"); PROVIDED, HOWEVER, that no such modification
as to which notice is provided on or after the Termination Date shall be
effective against the Executive; and PROVIDED, FURTHER, that no such
modification shall be effective with respect to any interests, investments or
business activities engaged in by Executive prior to the Notice Date of such
modification and properly disclosed prior to such Notice Date pursuant to
Section 10(a);
(ii) participate or serve, either directly or
indirectly, whether as a proprietor, stockholder, partner, co-venturer,
director, officer, employee, independent contractor, agent, consultant, or in
any other capacity or manner whatsoever in any business or service activity
that competes with the Primary Business;
(iii) directly or indirectly, solicit or recruit
any individual employed by the Company, its subsidiaries or affiliates for the
purpose of being employed by him or by any competitor of the Company on whose
behalf he is acting as an agent, representative or employee, or convey any
confidential information or trade secrets regarding other employees of the
Company, its subsidiaries or affiliates to any other person; or
(iv) directly or indirectly, influence or attempt
to influence customers of the Company or any of its subsidiaries or affiliates
to direct their business to any competitor of the Company;
PROVIDED, HOWEVER, that neither (i) the "beneficial ownership" by Executive,
either individually or as a member of a "group," as such terms are used in Rule
13d under the Exchange Act, as a
18
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by Executive
of any interest described in the first sentence of Section 10(a) and properly
and timely disclosed in accordance with the terms therewith, shall alone
constitute a violation of this Agreement.
In the event that the Executive engages in the conduct
proscribed by this Section 10, the Executive agrees to repay any lump-sum
severance amount received pursuant to Section 5 of this Agreement, and all
outstanding stock options held by the Executive shall expire as of the date of
the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to compete with the Company or any subsidiary or affiliate in
violation of this Agreement and that the Company would by reason of such
competition be entitled to preliminary or injunctive relief in a court of
appropriate jurisdiction, and Executive further consents and stipulates to the
entry of such preliminary or injunctive relief in such a court prohibiting
Executive from competing with the Company or any subsidiary or affiliate of the
Company in violation of this Agreement upon an appropriate finding by such
court that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the
intent of the parties that the provisions of this Section 10 shall be
enforceable to the fullest extent permissible under applicable law and public
policy. Accordingly, if this Section 10 or any portion thereof shall be
adjudicated to be invalid or unenforceable whether because of the duration and
scope of the covenants set forth herein or otherwise, the length and scope of
the restrictions set forth in this Section 10 shall be reduced to the extent
necessary so that this covenant may be enforced to the fullest extent possible
under applicable law.
11 CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose
19
to others or use, whether directly or indirectly, any Confidential Information
regarding the Company, its subsidiaries and affiliates. "Confidential
Information" shall mean information about the Company, its subsidiaries and
affiliates, and their respective clients and customers that is not publicly
disclosed by the Company or otherwise generally available to members of the
public seeking such information and that was learned by the Executive in the
course of his employment by the Company, its subsidiaries and affiliates,
including (without limitation) any proprietary knowledge, trade secrets, data,
formulae, information and client and customer lists and all papers, resumes,
and records (including computer records) of the documents containing such
Confidential Information. The Executive acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the Company,
its subsidiaries and affiliates, and that such information gives the Company,
its subsidiaries and affiliates a competitive advantage. The Executive agrees
to deliver or return to the Company, at the Company's request at any time or
upon termination or expiration of his employment or as soon thereafter as
possible, all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries
and affiliates.
In the event that the Executive engages in any conduct
proscribed by this Section 11, the Executive agrees to repay any lump-sum
severance amount received pursuant to Section 5 of this Agreement, and all
outstanding stock options held by the Executive shall expire as of the date of
the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to disclose or threaten to disclose Confidential Information
regarding the Company or any subsidiary or affiliate in violation of this
Agreement or otherwise fail to comply with the provisions of this Section 11,
and that the Company would, by reason of such disclosure or threatened
disclosure or other failure to comply, be entitled to preliminary or permanent
injunctive relief in a court of appropriate jurisdiction, and Executive further
consents and stipulates to the entry of such preliminary or permanent
injunctive relief in such a court prohibiting Executive from disclosing
Confidential Information in violation of this Agreement or otherwise requiring
Executive to comply with the provisions of this Section 11 upon
20
an appropriate finding by such court that Executive has violated this Section
11.
12 NOTICE. For the purposes of this Agreement, any notices, demands
and all other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery
by a standard overnight carrier or (c) the expiration of five business days
after the day when mailed by certified or registered mail, postage prepaid,
addressed as follows (or at such other address as the parties hereto shall
specify by like notice):
If to Executive: R.J. Messenger
-------------------------
-------------------------
-------------------------
If to Company: Paracelsus Healthcare Corporation
515 West Greens Road
Suite 800
Houston, Texas 77067
Telecopy No. (713) 878-6686
Attention: Robert C. Joyner, Senior
Vice President and General Counsel
with a copy to: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 990071
Telecopy No. (213) 687-5600
Attention: Thomas C. Janson
13. AMENDMENT, WAIVER. No provisions of this Agreement may be
waived, modified or discharged unless such waiver, modification or discharge is
agreed to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
21
14. ENTIRE AGREEMENT. This Agreement and Exhibits A and B hereto
set forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersede all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party
hereto; provided, however that nothing herein shall be construed to adversely
affect in any respect the Executive's rights to accrued vacation pay earned
during his employment with the Company through the Effective Time.
15. GOVERNING LAW; VENUE; VALIDITY. The interpretation,
construction and performance of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California without regard to the principle of conflicts of laws and, at the
election of the Executive, the venue of any dispute arising under this
Agreement shall be California. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.
16. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
17. SEVERABILITY. In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, only the portions of this Agreement that violate
such statute or public policy shall be stricken. All portions of this
Agreement that do not violate any statute or public policy shall continue in
full force and effect. Further, any court order striking any portion of this
Agreement shall modify the stricken terms as narrowly as possible to give as
much effect as possible to the intentions of the parties under this Agreement.
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
PARACELSUS HEALTHCARE CORPORATION
By: \s\ DR. MANFRED G. KRUKEMEYER
-------------------------------------
Name: Dr. Manfred George Krukemeyer
Title: Chairman
\s\ R. J. MESSENGER
-------------------------------------
R. J. Messenger
23
EXHIBIT A
MANAGEMENT RIGHTS TERMS
In so much as the Board of Directors and Dr. Manfred Krukemeyer recognize the
value to recruiting and retaining the services of a highly qualified executive
team and that such objective is in the best interests of the Company and all
its stockholders, and further that Messrs. Messenger, Miller, VanDevender and
Patterson are instrumental to insuring the success of the merger between
Paracelsus and Champion, and that a clear delineation of duties, authority and
responsibility is essential to the foregoing, the Board of Directors, Dr.
Krukemeyer, and Messrs. Messenger and Miller ("The Parties") agree that the
concepts set forth herein will be incorporated in the various merger
transaction documents, including employment contracts:
Board of Directors Authority and Responsibility - Ron Messenger and Charles
Miller shall have the authority to discharge their duties and responsibilities
as outlined herein for managing the affairs of the corporation except for those
items delineated below which is understood normally requires Board approval.
The Board, in its discretion, may delegate any such authority and approval
powers as it deems appropriate with respect to the items delineated below to
duly constituted committees of the Board excepting those powers and authority
which require the action of the Board acting as a whole.
1) Acquisitions & Divestitures of any kind
2) Capital expenditures exceeding $5 million per project ($10
million for construction and/or renovation projects and acquisition of real
estate) and $50 million in aggregate, including but not limited to equipment
purchases, capitalized leases and acquisition of physician practices, clinic,
surgery center, or other healthcare entities
3) Major financings and any offerings of equity or debt
4) Issuance of stock
5) Appointment of corporate officers
6) Stock option plans or stock grants
7) Approval of annual operating and capital budget
8) Employment Agreements for Executive Management
24
9) Changes or amendments to corporate charter of incorporation or
by-laws
10) Material change in Company business strategy
11) Liquidation or sale of Company or any subsidiary or merger or
other business combination with another company
12) Compensation and benefit levels and incentive plans for executive
officers
13) Termination of the: (i) CEO, (ii) President and COO, and (iii)
CFO
The Board shall designate an Executive Committee of the Board which shall be
delegated such authority as decided by the Board of Directors for conducting
the business of the Company. Members of the Executive Committee shall be: (i)
Mr. Messenger, as Chairman, (ii) Mr. Miller, and (iii) Mr. VanDevender. The
Executive Committee shall be delegated the authority to act on behalf of the
Board on any business issues not otherwise requiring action by the Board as a
whole except:
1) Major financings and any offerings of equity or debt
2) Issuance of stock or approval of stock option plans
3) Employment Agreements for (i) CEO, (ii) President & COO, and
(iii) CFO
4) Compensation, benefits and incentive plans, including allocation
of stock options for (i) CEO, (ii) President & COO, and (iii) CFO
5) Termination of (i) CEO, (ii) President & COO, and (iii) CFO
6) Material change in Company business strategy
7) Changes or amendments to the corporate charter of incorporation
or by-laws
8) Liquidation or sale of Company or subsidiary or merger or other
business combination with another company
9) Any hospital acquisition transaction involving more than a $30
million expenditure of capital, excluding working capital and/or assumption of
debt
10) Divestiture of any hospital
25
11) Approval of annual operating and capital budget
12) Capital expenditures exceeding $5 million per project ($10
million for construction and/or renovation projects and acquisition of real
estate) and $50 million in aggregate, including but not limited to equipment
purchases, capitalized leases and acquisition of physician practices, clinic,
surgery center, or other healthcare entities
MR. MESSENGER AUTHORITY AND RESPONSIBILITY - The parties agree that Mr.
Messenger shall be Chairman of The Executive Committee of the Board of
Directors and serve as Chief Executive Officer of the new company. Except
where otherwise noted, decisions with respect to the following shall be
reserved exclusively to Mr. Messenger at his sole discretion:
1) serving as liaison with Board of Directors
2) Relocation of corporate offices
3) Capital expenditures, as defined above, which exceed $3 million
and up to $5,000,000
4) Employment and compensation status of direct reports to Mr.
Messenger (as defined throughout this agreement, references to Messenger
"direct reports" shall exclude Mr. Miller)
5) Approval of senior lender participants and agent bank
6) Approval of investment bankers, upon concurrence by Mr. Miller
7) Chairmanship of the Executive Committee of the Board of Directors
Any and all proposals to be presented to the Board, or any of its Committees,
or the Executive Committee are subject to the review of and approval,
disapproval or modification by Mr. Messenger.
Mr. Messenger, in his sole discretion and to the extent practicable, may elect
to exempt himself, and his direct reports from any changes in corporate
policies and procedures which: (i) were not agreed to at the time of the
merger, or (ii) reduce or materially affect the agreed upon status or benefits
of Mr. Messenger or his direct reports.
Mr. Messenger shall develop and be solely responsible for administering and
controlling an overhead budget for the Office of the CEO which shall include
himself and his direct reports with such budget subject to the approval by the
Board of Directors, provided
26
however that such budget does not otherwise breach or circumvent Mr. Miller's
authority and responsibility as set forth herein.
Any other duties, authority and responsibilities not delineated above, or which
are not otherwise reserved specifically to the Board or Mr. Miller, shall be
reserved to Mr. Messenger so long as such duties, authority and
responsibilities do not otherwise unreasonably abridge Mr. Miller's rights to
manage the day-to-day affairs of the new Company as delineated below.
MR. MILLER AUTHORITY AND RESPONSIBILITY - The parties have agreed that it is in
the best interests of the Company and its stockholders to retain Mr. Miller's
services following the merger and that he shall be elected President and Chief
Operating Officer of the new company and, along with Mr. VanDevender, be
appointed to the Executive Committee of the Board. The parties also agree that
Mr. Miller shall be delegated full authority and responsibility for managing
the day-to-day affairs of the corporation, subject to the powers and authority
reserved exclusively to the Board of Directors and Mr. Messenger as delineated
above and the mutual areas of responsibility to be shared by Messrs. Messenger
and Miller delineated below. Therefore, the parties agree that Mr. Charles R.
Miller in his sole discretion shall have such authority and responsibility as
is reasonably required to manage and oversee the day-to-day affairs of the
corporation, including but not limited to the following:
1) HOSPITAL, SUBSIDIARY AND BUSINESS UNITS - Complete responsibility
for management and decisions associated with the operations of the Company's
hospitals, business units, subsidiaries and markets, including but not limited
to: (i) determination of staffing levels, (ii) control of expenses, (iii)
recruitment, selection and employment of key management, (iv) management and
financial reporting and systems, including data processing systems, (v) medical
staff issues, including credentialing and modifications to and enforcement of
medical staff by-laws, rules and regulations, (vi) quality of care and service,
(vii) decisions regarding programs and services to be offered or discontinued,
(viii) use or discontinuance of vendors, contractors and consultants, (ix) any
and all contracts and the approval, discontinuance or modification thereof,
including physician contracts, (x) accounting, budgeting, reimbursement,
financial and cash management policies, procedures and systems, (xi) market
strategy development and implementation, (xii) composition of local boards,
(xiii) policies, by-laws, rules & regulations, (xiv) promotional and marketing
activities, and (xv) capital expenditures up to but not exceeding $3 million.
2) CONTRACTS AND LEASES - Approval or disapproval of any and all
contracts and leases within Mr. Miller's authority level.
27
3) CORPORATE OVERHEAD BUDGET & EXPENSES - Complete authority for
development, control, administration and management of the Company's corporate
overhead budget, after approved by Board, and control of all corporate
expenses, excluding the CEO's direct reports and corporate overhead budget.
4) CORPORATE MATTERS - Management and supervision of the Company's
corporate activities and operations (excluding Mr. Messenger's direct reports
and corporate overhead budget), responsibility for all decisions pertaining
thereto, including but not limited to, (i) establishing or changing of job
titles, duties and responsibilities, (ii) recruiting, hiring, firing,
promoting, demoting, transferring, and relocating employees, (iii) determining
compensation levels, incentive plans, and benefit programs, (iv) establishment,
revision or discontinuance of Company policies and procedures, (v) legal
affairs and related matters, including risk management and insurance, (vi)
budgeting, data processing, tax, fiscal, accounting, reimbursement, cash
management and corporate finance, including policies, procedures and systems,
(vii) management and financial reporting policies, procedures and systems,
(viii) construction and renovation projects, (ix) managed care contracting, (x)
acquisition and development activities, (xi) physician recruiting and
associated physician activities such as practice management, (xii) development
and execution of Company business plan and strategies, (xiii) press releases,
public relations, and media relations, (xiv) preparation of the Company's
annual operating and capital budget, and (xv) investor and banking relations
(except as noted below under "Mutual Responsibility").
The parties agree that any duties, responsibilities, functions, or authority
not specifically delineated in this section but which would otherwise
reasonably be considered integral to managing the day-to-day affairs of the
Company and its operations, including its business units, subsidiaries and
affiliates, both now and in the future, will be reserved to Mr. Miller as part
of this Management Rights Agreement.
MUTUAL RESPONSIBILITY - Messrs. Messenger and Miller agree to jointly develop
plans and strategies for promoting the Company to the financial community,
including but not limited to: (i) preparation of the annual report, (ii)
analyst meetings, (iii) road shows, (iv) presentations at conferences, (v) bank
meetings and presentations, (vi) mergers, acquisitions, and divestitures, and
(vii) media interviews.
Further, Messrs. Messenger and Miller will be considered "ex-officio" members
of any and all boards of the new company's subsidiary operations and may elect
to attend any meetings of such boards at their sole discretion.
28
COVENANT NOT TO BREACH AGREEMENT - The Board of Directors, Dr. Krukemeyer and
Mr. Messenger agree not to initiate any actions or decisions which in any way
would breach Mr. Miller's duties, authority and responsibility as specified
herein, except where the Board's authority or approval is otherwise required.
The Board and Dr. Krukemeyer further agree not to initiate any actions or
decisions which in any way breach Mr. Messenger's duties, authority and
responsibility as specified herein, except where the Board's authority or
approval is otherwise required.
The parties agree that any breach of the above duties, authority and
responsibility of Messrs. Miller and Messenger shall constructively constitute
Termination Without Cause as specified in Messrs. Messenger's and Miller's
Employment Agreements, unless such breach is waived in writing by Messrs.
Messenger and Miller.
These "Management Rights Terms" shall be incorporated into the Employment
Contracts of Messrs. Messenger and Miller and/or such other documents as is
appropriate and shall be in full force and effect through each contract renewal
term of Messrs. Messenger and Miller until Mr. Miller shall become CEO of the
Company.
29
EXHIBIT B
During the Term of the Agreement, the Company shall provide Executive
with the following group health, group life insurance and disability coverages:
(1) HEALTH BENEFITS - Executive, his wife, minor children and any
other eligible dependents (as defined in the health plan maintained by the
Company) are to be reimbursed for 100% of the hospital and medical expenses
presently covered by the Company's health plan which Executive and such
dependents may incur;
(2) DENTAL BENEFITS - Executive, his wife, minor children and any
other eligible dependents (as defined in any dental plan which may be
maintained by the Company, or in the absence of a dental plan, as defined in
the health plan maintained by the Company) are to be reimbursed for 100% of the
dental expenses presently covered by the Company's dental plan which he and
such dependents may incur;
(3) LIFE INSURANCE - Executive, subject to health eligibility, is to
be covered by life insurance equal to four times the amount of his salary as in
effect from time to time, provided, however, that if the Company may not
reasonably obtain life insurance coverage equal to four times such salary, the
Company will provide a lump-sum death benefit in the amount necessary when
added to any life insurance provided by the Company to provide Executive's
beneficiary(ies) with the amount he (they) would have received after payment of
income tax, had the Company been able to obtain such full life insurance
coverage, payable within ninety (90) days following the date of Executive's
death. Executive shall have the right to name and to change the
beneficiary(ies) under such life insurance coverage.
The above described life insurance coverage will be in addition to any
death benefits which may be payable under any accidental death and
dismemberment plan, any separate business travel accident coverage, and any
pension plan which the Company maintains, and such coverage shall also be in
addition to any life insurance which Executive himself purchases;
(4) LONG-TERM DISABILITY - In the event Executive becomes disabled
(as defined in the long-term disability plan presently maintained by the
Company), Executive is to receive disability benefits in an amount equal to 60%
of his then salary. Any amount payable under any salary continuation plan
(including any salary continuation provided under this agreement) or disability
plan maintained by the Company, and any amount payable as a Social Security
disability benefit or similar benefit to Executive or his immediate family
shall be counted towards the Company's fulfillment of such obligation.
Disability benefits will be payable monthly commencing thirty (30) days
following disability and
30
will continue until Executive is no longer disabled or, if earlier, until he
reaches age 65.
During the Term of the Agreement, the Company shall also provide
Executive with the following additional fringe benefits:
(1) COMPANY CAR - provide Executive with an appropriate automobile
selected by Executive and acceptable to the Company.
(2) CLUB MEMBERSHIPS - reimburse Executive for the cost of membership
in any two (2) local recreational clubs of his choice and for expenses incurred
at such clubs in connection with Company business within fifteen (15) days of
submission of invoices and charges. Expenses of a personal nature are not
reimbursable by the Company.
(3) VACATIONS AND HOLIDAYS - Executive shall be entitled to such paid
vacation time as may be reasonably taken at Executive's discretion so long as
such vacation time does not interfere with the efficient discharge of the
Executive's duties and responsibilities. Executive shall be entitled to all
holidays as delineated annually in the Company's official holiday schedule.
(4) PERSONAL LIABILITY - will indemnify Executive, through insurance
or otherwise, against any and all personal liability incurred in the conduct of
the Company's business, other than liability arising from Executive's
dishonesty, gross or willful misfeasance or nonfeasance of duty, or criminal
conduct. The Company will purchase and keep in effect a personal liability
insurance policy insuring Executive in the face amount of not less than Ten
Million Dollars ($10,000,000) in his capacity as an individual, corporate
officer and corporate director.
(5) TAX RETURN PREPARATION ASSISTANCE; FINANCIAL ADVICE - will
provide the Executive with the assistance of the Company's regular auditors for
the preparation of Executive's United States Federal and State tax returns
without charge to Executive. In addition, the Company shall reimburse
Executive for the costs incurred by Executive for financial planning services
in an amount not to exceed $5,000 annually.
(6) ANNUAL PHYSICAL EXAMINATION - The Company shall reimburse
Executive 100% of all costs incurred by Executive in obtaining an annual
comprehensive physical examination to be conducted by a physician, clinic, or
medical group of the Executive's choice and which is located within reasonable
proximity to Executive's place of Employment
31
FIRST AMENDMENT TO PARACELSUS HEALTHCARE CORPORATION
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO PARACELSUS HEALTHCARE CORPORATION EMPLOYMENT AGREEMENT,
dated as of July 17, 1996, between Paracelsus Healthcare Corporation, a
California corporation (the "Company") and R.J. Messenger (the "Executive")
RECITALS:
WHEREAS, the Company and the Executive entered into that certain
Paracelsus Healthcare Corporation Employment Agreement dated as of July 17,
1996, (the "Employment Agreement"), and
WHEREAS, the parties desire to amend the Employment Agreement to
clearly reflect that Executive will not be forced to relocate.
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each party, the parties
intending to be legally bound hereby agree as follows:
1. Paragraph 4(iii)(D) is hereby deleted in its entirety, and the
following is added in its place:
"(D) The Constructive Relocation of Executive, defined as
(I) reassignment of the executive, (II) relocation of the principal executive
offices of the Company, or (iii) assignment of duties, such that any of the
foregoing, either individually or in combination would require Executive to
either (a) effectively relocate Executive's primary residence or (b) increase
Executive's one-way commute by more than 25 miles from Executive's current
primary residence."
2. All other terms and conditions not changed hereby shall remain
in full force and effect.
32
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Paracelsus Healthcare Corporation Employment Agreement as of the date and year
first written above.
PARACELSUS HEALTHCARE CORPORATION
By: /s/ DR. MANFRED G. KRUKEMEYER
-------------------------------------
Name: Dr. Manfred George Krukemeyer
Title: Chairman
/s/ R. J. MESSENGER
-------------------------------------
R. J. Messenger