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Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of the 18 th day of December, 2008 (the
"Execution Date"), by and between Kindred Healthcare Operating,
Inc., a Delaware corporation (the "Company"), and Paul J. Diaz (the
"Executive").
WITNESSETH :
WHEREAS, the Executive is employed by the Company, a
wholly-owned subsidiary of Kindred Healthcare, Inc. ("Parent"), and
the parties hereto desire to provide for the terms of
Executive’s employment by the Company as President and Chief
Executive Officer; and
WHEREAS, the Executive Compensation Committee of the Board of
Directors of the Parent has determined that it is in the best
interests of the Company and Parent to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective covenants and agreements contained herein, and intending
to be legally bound hereby, the Company and Executive agree as
follows:
1. Employment . The Company hereby agrees to employ
Executive and Executive hereby agrees to be employed by the Company
on the terms and conditions herein set forth. The initial term (the
"Term") of this Agreement shall be for a three-year period
commencing on December 18, 2008 (the "Effective Date"). The Term
shall be automatically extended by one additional day for each day
beyond the Effective Date that the Executive remains employed by
the Company until such time as the Company elects to cease such
extension by giving written notice of such election to the
Executive. In such event, the Agreement shall terminate on the
third anniversary of the date of such election notice, unless a
later date is specified.
2. Duties . Executive is engaged by the Company as its
President and Chief Executive Officer. The Executive will have the
same titles with the Parent. Executive shall perform such duties
commensurate with his title and as otherwise designated by the
Board of Directors of the Parent (the "Board").
3. Extent of Services . Executive, subject to the
direction and control of the Board, shall have the power and
authority commensurate with his executive status and necessary to
perform his duties hereunder. During the Term, Executive shall
devote his entire working time, attention, labor, skill and
energies to the business of the Company, and shall not, without the
consent of the Company, be actively engaged in any other business
activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage. Notwithstanding the
foregoing, it shall not be a breach or
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violation of this Agreement for the Executive to
(i) serve on corporate boards with the prior approval of the
Board, (ii) serve on civic or charitable boards or committees,
or (iii) manage personal investments, so long as such
activities do not reasonably interfere with or reasonably detract
from the performance of the Executive’s responsibilities to
the Company in accordance with this Agreement.
4. Compensation . As compensation for services hereunder
rendered, Executive shall receive during the Term:
(a) A base salary ("Base Salary") of no less than his current
base salary per year payable in equal installments in accordance
with the Company’s normal payroll procedures. Executive may
receive increases in his Base Salary from time to time, as approved
by the Board.
(b) In addition to Base Salary, Executive shall be entitled to
receive bonuses and other incentive compensation as the Board may
approve from time to time, including participation in the
Company’s annual short-term incentive compensation plan and
its long-term incentive compensation plan, in accordance with the
terms and conditions of such plans as may be in effect from time to
time.
5. Benefits .
(a) Executive shall be entitled to participate in any and all
pension benefit, welfare benefit (including, without limitation,
medical, dental, disability and group life insurance coverages) and
fringe benefit plans from time to time in effect for executives of
the Company and its affiliates.
(b) Executive shall be entitled to participate in other bonus,
stock option, or other incentive compensation plans of the Company
and its affiliates in effect from time to time for executives of
the Company.
(c) Executive shall be entitled to paid time off benefits of the
Company and its affiliates in effect from time to time for
executives of the Company but such paid time off shall be
equivalent to at least 26 days of paid time off per year. The
Executive shall schedule the timing of such paid time off in a
reasonable manner. The Executive may also be entitled to such other
leave, with or without compensation, as shall be mutually agreed by
the Company and Executive.
(d) Executive may incur reasonable expenses for promoting the
Company’s business, including expenses for entertainment,
travel and similar items. The Company shall reimburse Executive for
all such reasonable expenses
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in accordance with the Company’s
reimbursement policies and procedures, as may be in effect from
time to time.
(e) While this Agreement is in effect, the Company shall provide
the Executive with (i) director’s and officer’s
liability insurance coverage; (ii) life insurance for which
the Executive may designate the beneficiary or beneficiaries; and
(iii) long-term disability insurance, consistent with the
benefits provided to the Company’s executive officers.
6. Termination of Employment .
(a) Death or Disability . Executive’s employment
shall terminate automatically upon Executive’s death during
the Term. If the Company determines in good faith that the
Disability of Executive has occurred during the Term (pursuant to
the definition of Disability set forth below) it may give to
Executive written notice of its intention to terminate
Executive’s employment. In such event, Executive’s
employment with the Company shall terminate effective on the 30th
day after receipt of such notice by Executive (the "Disability
Effective Date"), provided that, within the 30 days after such
receipt, Executive shall not have returned to full-time performance
of Executive’s duties. For purposes of this Agreement,
"Disability" shall mean Executive’s absence from
Executive’s full-time duties hereunder for a period of 90
days due to disability as defined in the long-term disability plan
provided to Executive by the Company.
(b) Cause . The Company may terminate Executive’s
employment during the Term for Cause. For purposes of this
Agreement, "Cause" shall mean the Executive’s
(i) conviction of or plea of nolo contendere to
a crime involving moral turpitude; or (ii) willful and
material breach by Executive of his duties and responsibilities,
which is committed in bad faith or without reasonable belief that
such breaching conduct is in the best interests of the Company and
its affiliates, but with respect to (ii) only if the Board
adopts a resolution by a vote of at least 75% of its members so
finding after giving the Executive and his attorney an opportunity
to be heard by the Board and a reasonable opportunity of not less
than 30 days to remedy or correct the purported breaching conduct.
Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon advice of
counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best
interests of the Company.
(c) Good Reason . Executive’s employment may be
terminated during the Term by Executive for Good Reason. "Good
Reason" shall exist upon the
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occurrence, without Executive’s express
written consent, of any of the following events:
(i) a material adverse change in Executive’s authority,
duties or responsibilities (including, without limitation the
Company assigning to Executive duties of a substantially
nonexecutive or nonmanagerial nature) (other than any such change
directly attributable to the fact that the Company is no longer
publicly owned);
(ii) the Company shall materially reduce the Base Salary or
annual bonus opportunity of Executive;
(iii) the Company shall require Executive to relocate
Executive’s principal business office more than 30 miles from
its location on the Execution Date; or
(iv) a material breach by the Company of Section 5(a),
Section 5(e) or Section 9(c) of this Agreement.
For purposes of this Agreement, "Good Reason" shall not exist
until after Executive has given the Company notice of the
applicable event within 90 days of the initial occurrence of such
event and which is not remedied within 30 days after receipt of
written notice from Executive specifically delineating such claimed
event and setting forth Executive’s intention to terminate
employment if not remedied; provided , that if the specified
event cannot reasonably be remedied within such 30-day period and
the Company commences reasonable steps within such 30-day period to
remedy such event and diligently continues such steps thereafter
until a remedy is effected, such event shall not constitute "Good
Reason" provided that such event is remedied within 60 days after
receipt of such written notice.
(d) Notice of Termination . Any termination by the
Company for Cause, or by Executive for Good Reason, shall be
communicated by Notice of Termination given in accordance with this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated and
(iii) specifies the intended termination date (which date, in
the case of a termination for Good Reason, shall be not more than
30 days after the giving of such notice). The failure by Executive
or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or
Cause
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shall not waive any right of Executive or the
Company, respectively, hereunder or preclude Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing Executive’s or the Company’s rights
hereunder.
(e) Date of Termination . "Date of Termination" means
(i) if Executive’s employment is terminated by the
Company for Cause, or by Executive for Good Reason, the later of
the date specified in the Notice of Termination or the date that is
one day after the last day of any applicable cure period,
(ii) if Executive’s employment is terminated by the
Company other than for Cause or Disability, or Executive resigns
without Good Reason, the Date of Termination shall be the date on
which the Company or Executive notified Executive or the Company,
respectively, of such termination and (iii) if
Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
7. Obligations of the Company Upon Termination .
Following any termination of Executive’s employment
hereunder, the Company shall pay Executive his Base Salary through
the Date of Termination and any amounts owed to Executive pursuant
to the terms and conditions of the benefit plans and programs of
the Company at the time such payments are due. In addition, subject
to Section 7(f) hereof and the conditions set forth below,
Executive shall be entitled to the following additional
payments:
(a) Death or Disability . If, during the Term,
Executive’s employment shall terminate by reason of
Executive’s death or Disability, the Company shall pay to
Executive (or his designated beneficiary or estate, as the case may
be) the prorated portion of any Target Bonus (as defined below)
Executive would have received for the year of termination of
employment. Such amount shall be paid on the date when such amounts
would otherwise have been payable to the Executive if
Executive’s employment with the Company had not terminated as
determined in accordance with the terms and conditions of the
applicable short-term incentive plan of the Company.
For purposes of this Agreement: "Target Bonus" shall mean the
full amount of the targeted annual short-term incentive bonus that
would be payable to the Executive, assuming the targeted
performance criteria on which such annual short-term incentive
bonus is based were deemed to be satisfied, in respect of services
for the calendar year in which the date in question occurs.
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(b) Good Reason; Other than for Cause .
If, during the Term, the Company shall terminate Executive’s
employment other than for Cause (but not for Disability), or the
Executive shall terminate his employment for Good
Reason:
(1) in satisfaction of the annual bonus Executive would
otherwise be eligible to receive under the short-term incentive
plan in respect of the calendar year in which the Date of
Termination occurs, the Company shall pay to Executive an amount
equal to the product of (i) the annual bonus, if any, to which
the Executive would have been entitled for the year in which the
Date of Termination occurs had Executive’s employment with
the Company not been terminated, as determined in accordance with
the terms and conditions of the applicable short-term incentive
plan of the Company as provided in Section 4(b) hereof, and
(ii) a fraction, the numerator of which is the number of days
in the period beginning on the first day of the calendar year in
which the Date of Termination occurs and ending on the Date of
Termination and the denominator of which is 365. Such amount shall
be paid on the date when such amounts would otherwise have been
payable to the Executive if Executive’s employment with the
Company had not terminated as determined in accordance with the
terms and conditions of the applicable short-term incentive plan of
the Company.
(2) Within 14 days following Executive’s Date of
Termination, the Company shall pay to Executive a cash severance
payment in an amount equal to three times the sum of the
Executive’s Base Salary and Target Bonus as of the Date of
Termination.
(3) For a period of three years following the Date of
Termination (the "Benefit Continuation Period") , the
Executive shall be treated as if he had continued to be an
executive for all purposes under the Company’s health
insurance plan and dental insurance plan; or if the Executive is
prohibited from participating in such plans, the Company shall
otherwise provide such benefits. Executive shall be responsible for
any employee contributions for such insurance coverage. Following
the Benefit Continuation Period, the Executive shall be entitled to
receive continuation coverage under Part 6 of Title I of ERISA
("COBRA Benefits") by treating the end of this period as the
applicable qualifying event (i.e., as a termination employment) for
purposes of ERISA Section 603(2)) and with the concurrent loss
of coverage occurring on the same date, to the extent allowed by
applicable law.
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(4) For the Benefit Continuation Period, Company
shall maintain in force, at its expense, the Executive’s life
insurance in effect under the Company’s life insurance
benefit plan as of the Date of Termination. Executive shall be
responsible for any employee contributions for such insurance
coverage. For purposes of clarification, the portion of the
premiums in respect of such voluntary life insurance for which
Executive and Company are responsible, respectively, shall be the
same as the portion for which Company and Executive are
responsible, respectively, immediately prior to the Date of
Termination.
(5) For the Benefit Continuation Period, the Company shall
provide short-term and long-term disability insurance benefits to
Executive equivalent to the coverage that the Executive would have
had if he had remained employed under the disability insurance
plans applicable to Executive on the Date of Termination. Executive
shall be responsible for any employee contributions for such
insurance coverage. Should Executive become disabled during such
period, Executive shall be entitled to receive such benefits, and
for such duration, as the applicable plan provides. For purposes of
clarification, the portion of the premiums in respect of such
short-term and long-term disability benefits for which Executive
and Company are responsible, respectively, shall be the same as the
portion for which Executive and Company are responsible,
respectively, immediately prior to the Date of Termination.
(6) Within fifteen (15) days after the Date of
Termination, the Company shall pay to Executive a cash payment in
an amount, if any, necessary to compensate Executive for the
Executive’s unvested interests under the C
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