Exhibit 10.6
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(“Agreement”) is entered into this 17th day of
December, 2008, by and between Richard K. Matros (“Mr.
Matros”) and Sun Healthcare Group, Inc. , a Delaware
corporation (“Sun” or
“Company”).
WHEREAS, Mr. Matros has served as the Chairman
of the Board of Directors and Chief Executive Officer
(“CEO”) of Sun since November 2001;
WHEREAS, Sun and Mr. Matros are parties to that
certain Employment Agreement dated October 12, 2006, as amended on
October 31, 2007 and March 31, 2008 (the
“Existing Agreement”); and
WHEREAS, Sun and Mr. Matros wish to amend and
restate the Existing Agreement upon the terms set forth in this
Agreement to comply with Section 409A of the Internal Revenue Code
of 1986, as amended effective as of the date hereof.
NOW, THEREFORE, in consideration of the above
recitals and the mutual covenants and agreements contained herein,
Mr. Matros and Sun agree as follows:
Section
1: Term of
Employment. Sun agrees to employ Mr. Matros and
Mr. Matros agrees to accept employment with Sun, subject to the
terms and conditions of this Agreement. Unless earlier terminated
pursuant to the provisions of Sections 5 and 6 hereof, the initial
term of employment of Mr. Matros under this Agreement is for a
period of three (3) years (the “Initial Term”),
commencing as of March 28, 2006 (the “Effective Date”),
and terminating March 27, 2009. Thereafter, this Agreement shall be
renewed for successive one (1) year periods (each such period a
“Renewal Term”) (the Initial Term and all full or
partial Renewal Terms occurring prior to termination or non-renewal
of this Agreement being collectively referred to as the
“Term”) unless earlier terminated pursuant to the
provisions of Sections 5 and 6 hereof, or by written notice of
non-renewal given by either party to the other not less than ninety
(90) days prior to the expiration of the Initial Term or then
current Renewal Term, as the case may be.
Section
2: Duties and
Responsibilities. Mr. Matros is employed as CEO and is
engaged as Chairman of the Board of Directors of
Sun. During the Term, Mr. Matros shall devote his full
employment time, efforts, skills and attention exclusively to
advancing and rendering profitable the business interests of Sun,
its direct and indirect subsidiaries and their lines of business;
provided , however, that to the extent the following
activities do not materially interfere or conflict with his duties
and responsibilities hereunder and as imposed by applicable laws,
rules and regulations, Mr. Matros may (i) continue to serve as a
member of the boards of directors of the companies previously
disclosed in writing to the Board of Directors of Sun (“Board
of Directors”), (ii) engage in charitable, civic and
religious affairs and (iii) with the prior written consent of the
Board of Directors, serve as a member of the board of directors of
other companies. Mr. Matros agrees to report to and
render such services, commensurate with his positions as Chairman
or CEO, as the Board of Directors may from time to time reasonably
direct. In addition, at the reasonable request of the
Board of Directors, Mr. Matros shall serve as
director or
senior executive officer of one or more direct or indirect
subsidiaries of Sun without additional compensation.
Section
3:
Compensation, Benefits and
Related Matters.
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a.
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Annual
Base Salary. Sun shall pay during the Term to Mr.
Matros a base salary at an annual rate of $700,000 (“Base
Salary”), such salary to be payable in accordance with
Sun’s customary payroll practices (but not less frequently
than monthly). If Sun’s EBITDA for fiscal year
2006 equals or exceeds the amount of EBITDA set forth in
Sun’s budget for 2006 as approved by the Board of Directors,
Mr. Matros’ base salary will be increased to an annual rate
of $750,000 retroactive to November 5, 2005. On or about
each anniversary of the Effective Date during the Term, the Board
of Directors or the Compensation Committee of the Board of
Directors shall review Mr. Matros’ annual base salary for
possible merit increases in its sole discretion, and any increase
in Mr. Matros’ annual base salary rate shall thereafter
constitute “Base Salary” for purposes of this
Agreement. The parties intend that such retroactive
increase not be treated as or deemed to be deferred compensation
for purposes of Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”) and the rules and regulations
promulgated thereunder (“Section 409A”).
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b.
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Cash
Bonus/Incentive Compensation. In addition to the Base Salary provided for in
Section 3(a) above, Mr. Matros shall be entitled to receive an
annual bonus (“Bonus”) in accordance with the
SunHealthcare Group, Inc. Executive Bonus Plan (the
“Plan”), as it may be amended from time to time by the
Compensation Committee of the Board of Directors; provided,
however, that no amendment shall be effective if it reduces
the percentage of Base Salary that would constitute the
minimum or maximum potential amount of the Bonus as compared
to the prior year, unless such amendment has been agreed to in
writing by Mr. Matros. The Bonus shall be payable at
the same time as other annual bonuses are paid to senior management
personnel with respect to that fiscal year. Subject
to the provisions of Section 6, in order to have earned and to be
paid any such Bonus, Mr. Matros must be employed by Sun on the date
of such payment. It is intended that the Bonus described in this
Section 3(b) qualify as "performance based compensation" under
Section 162(m) of the Code to the extent necessary to preserve
Sun’s ability to deduct such Bonus. In the event
the minimum financial performance threshold is met as set forth in
the Plan, Mr. Matros’ minimum Bonus shall be no less than 10%
of his Base Salary for the applicable fiscal year.
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c.
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Restricted Stock and Options.
Mr. Matros shall
participate in such restricted stock and option plans of the
Company as are made available generally to senior executive
officers of the Company. Any grants under such plans
shall be made by the Board of Directors (or appropriate committee
thereof) in its sole discretion and such plans are subject to
change during the Term at the sole discretion of the
Company.
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d.
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Retirement and Benefit Plans.
During the Term, Mr.
Matros shall be entitled to participate in all retirement plans,
health benefit programs, insurance programs and other similar
employee welfare benefit arrangements available generally to senior
executive officers of Sun from time to time. Such plans,
programs and arrangements are subject to change during the Term at
the sole discretion of the Company.
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e.
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Paid Time
Off. During the Term, Mr. Matros shall be
entitled to paid time off in accordance with Sun’s policy for
senior executive officers.
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f.
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Indemnification
Liability/Insurance. Mr. Matros shall be entitled to
indemnification by Sun to the fullest extent permitted by
applicable law and the charter and by laws of Sun. In
addition, Sun shall maintain during Mr. Matros’ employment
customary director’s and officers’ liability insurance
and Mr. Matros shall be covered by such insurance.
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g.
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Taxes. All compensation payable to Mr.
Matros shall be subject to withholding for all applicable federal,
state and local income taxes, occupational taxes, Social Security
and similar mandatory withholdings.
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h.
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Expenses. Mr. Matros shall be entitled to
reimbursement for expenses incurred by him in connection with the
discharge of his duties hereunder. All such expense
reimbursement shall be subject to and shall be submitted,
documented and paid in accordance with the expense reimbursement
policies of the Company, as such policies may change from time to
time. Mr. Matros agrees that he will provide such
documentation to the Company promptly after expenses are
incurred.
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Section
5:
Termination.
Sun may, at any time, in
its sole discretion, terminate Mr. Matros as Chairman and CEO and
from all other positions with Sun and its direct and indirect
subsidiaries; provided, however, that Sun shall provide Mr. Matros
with at least five (5) business days prior written notice of such
termination and shall make the payments associated with such
termination in accordance with Section
6. Notwithstanding any provision in Section 1 hereof,
the Term shall end on the date of Mr. Matros’ termination of
employment in accordance with this Agreement.
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a.
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Termination by Sun for “Good
Cause.” Sun may at any time, by written
notice to Mr. Matros at least five (5) business days prior to the
date of termination specified in such notice and specifying the
acts or omissions believed to constitute Good Cause (as defined
below), terminate Mr. Matros as Chairman and CEO and from all other
positions with Sun and its direct and indirect subsidiaries for
Good Cause. Sun may relieve Mr. Matros of his duties and
responsibilities pending a final determination of whether Good
Cause exists, and such action shall not constitute Good Reason (as
defined below) for purposes of this Agreement. Payment
to Mr. Matros upon a termination for Good Cause is set forth in
Section 6(a). “Good Cause” for termination
shall mean any one of the following:
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Any felony
criminal conviction (including conviction pursuant to a nolo
contendere plea) under the laws of the United States or any state
or other political subdivision thereof which, in the sole
discretion of the Board of Directors, renders Mr. Matros unsuitable
for the position of either Chairman or CEO;
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Any act of
financial malfeasance or financial impropriety, as determined by
the Board of Directors in good faith;
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Mr.
Matros’ continued willful failure to perform the duties
reasonably requested by the Board of Directors and commensurate
with his positions as Chairman and CEO (other than any such failure
resulting from his incapacity due to his physical or mental
condition) after a written demand for substantial performance is
delivered to him by the Board of Directors, which demand
specifically identifies the manner in which the Board of Directors
believes that he has not substantially performed his duties, and
which performance is not substantially corrected by him within ten
(10) days of receipt of such demand;
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Any material
workplace misconduct or willful failure to comply with Sun’s
general policies and procedures as they may exist from time to time
by Mr. Matros which, in the good faith determination of the Board
of Directors, renders Mr. Matros unsuitable for the position of
either Chairman or CEO;
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Any material
breach by Mr. Matros of the provisions of this Agreement which has
not been cured by Mr. Matros thirty (30) days following delivery of
notice to Mr. Matros specifying such material breach, or the
repetition of any such material breach after it has been cured;
or
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Any act of
moral turpitude, as determined by the Board of Directors in good
faith.
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b.
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Termination by Sun without Good
Cause. Sun may at any time, by written
notice to Mr. Matros at least five (5) business days prior to date
of termination specified in such notice, terminate Mr. Matros as
Chairman and CEO and from all other positions with Sun and its
direct and indirect subsidiaries. If such termination is
made by Sun other than by reason of Mr. Matros’ death,
Disability (as defined in Section 5(e)) or expiration of the Term,
and Good Cause does not exist, such termination shall be treated as
a termination without Good Cause and Mr. Matros shall be entitled
to payment in accordance with Section 6(b).
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c.
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Termination by Mr. Matros for Good
Reason. Mr. Matros may, at any time at his
option within sixty (60) days following an event or condition that
constitutes Good Reason (as defined below), resign for Good Reason
as Chairman and CEO and from all other positions with Sun and its
direct and indirect subsidiaries by written notice to Sun at least
thirty (30) days prior to the date of termination
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specified in
such notice; provided, however, that Sun has not substantially
corrected the event or condition that would constitute Good Reason
prior to the date of termination. Payment to Mr. Matros
upon a termination for Good Reason is set forth in Section
6(b).
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“Good
Reason” shall mean the occurrence of any one of the following
events or conditions without Mr. Matros’ written
consent:
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A meaningful
and detrimental reduction in Mr. Matros’ authority, duties or
responsibilities or a meaningful and detrimental change in his
reporting responsibilities;
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A material
failure of Sun to comply with the compensation provisions set forth
in Sections 3(a) and 3(b) or benefits provisions set forth in
Sections 3(d) - 3(f) (collectively, the “Benefits”)
(other than a reduction of Benefits uniformly applicable to other
members of senior management); or
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A material
relocation of Mr. Matros’ principal work location from its
current location in Orange County, California;
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provided that Sun is provided with notice and opportunity
to cure such breach and Mr. Matros terminates his employment with
Sun, in each case within the time periods prescribed under this
Section 5(c).
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Voluntary
Resignation. Mr. Matros may, at any time at his
option with thirty (30) calendar days written notice to Sun,
voluntarily resign without Good Reason as Chairman and CEO and from
all other positions with Sun and its direct and indirect
subsidiaries. Payment to Mr. Matros upon his voluntary
resignation without Good Reason is set forth in Section
6(a). Resignation from Sun shall automatically
constitute resignation from all positions of any
subsidiary.
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Death or
Disability. Mr. Matros’ employment under
this Agreement and the Term shall terminate automatically as of the
date of Mr. Matros’ death. Sun may, at any time by
written notice to Mr. Matros at least five (5) business days prior
to the date of termination specified in such notice, terminate Mr.
Matros as Chairman and CEO and from all other positions with Sun
and its direct or indirect subsidiaries by reason of his
Disability. “Disability” shall mean any
physical or mental condition or illness that prevents Mr.
Matros’ from performing his duties hereunder in any material
respect for a period of 120 substantially consecutive calendar
days, as determined by a physician selected by Sun or, if Mr.
Matros is incapacitated, reasonably acceptable to the Director of
Medicine or equivalent senior physician at Hoag
Hospital. Payment to Mr. Matros upon his termination by
reason of his death or Disability is set forth in Section
6(a).
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Section
6:
Payments Upon
Termination.
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Payment
Upon Termination for Good Cause, Resignation without Good Reason,
Death or Disability. In the event of termination of
employment during the Term pursuant to Sections 5(a), 5(d) or 5(e),
Mr. Matros, or his estate where applicable, shall be paid any
earned but unpaid Base Salary through the date of termination and
any accrued and unused paid time off through the date of
termination, which shall be paid to Mr. Matros or his estate or
beneficiary, as applicable, in a lump sum in cash upon or promptly
following (and in all events within 30 days after) the date of
termination of employment (collectively, the “Accrued
Obligations”). In addition, in the case of a
termination of employment pursuant to Sections 5(e), but not
Sections 5(a) or 5(d), Mr. Matros or his estate shall be paid (i)
any accrued and unpaid Bonus for any prior fiscal year, which shall
be paid to Mr. Matros or his estate or beneficiary, as applicable,
in a lump sum in cash at the time that annual bonuses are paid to
senior management personnel with respect to that fiscal year, but
in any event within seventy-five (75) days after the conclusion of
the fiscal year to which such Bonus relates, and (ii) a pro rata
portion (based on the number of days of employment in the fiscal
year of termination divided by 365 or 366, as applicable) of the
Bonus, if any, for the fiscal year in which the termination occurs,
which shall be paid at the time that annual bonuses are paid to
senior management personnel with respect to that fiscal year, but
in any event within seventy-five (75) days after the conclusion of
the fiscal year to which such Bonus relates. Mr. Matros
shall also receive his vested benefits in accordance with the terms
of Sun’s compensation and benefit plans, and his
participation in such plans and all other perquisites (including,
but not limited to, his car allowance) shall cease as of the date
of termination, except to the extent Mr. Matros may elect to
continue coverage as under any welfare benefit plans as required by
Part 6, Title I of the Employee Retirement Income Security Act of
1974, as amended. Upon a termination under Section 5(a),
5(d) or 5(e), Mr. Matros shall not be entitled to any compensation
or benefits under this Agreement except as set forth in this
Section 6(a).
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Payment
Upon Termination by Sun without Good Cause, or following
expiration
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