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Exhibit 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the
18 th day of
December, 2008 (the "Effective Date"), by and between Kindred
Healthcare Operating, Inc., a Delaware corporation (the "Company"),
and Frank J. Battafarano (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; 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 term of this
Agreement shall be for the period commencing on the Effective Date
and ending February 28, 2011 (the "Term"), subject to earlier
termination as provided in Section 6 hereof.
2. Duties . Executive is engaged by the Company as Chief
Operating Officer of Kindred Healthcare, Inc., reporting directly
to Paul J. Diaz, President and Chief Executive Officer.
3. Extent of Services . Executive, subject to the
direction and control of the Board of Directors of the Parent (the
"Board") and the Company, 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.
4. Compensation . As compensation for services hereunder
rendered, Executive shall receive during the Term:
(a) A base salary ("Base Salary") of not 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 in its sole discretion.
(b) During the Term, in addition to Base Salary,
Executive will be eligible to participate in the Company’s
short-term and long-term incentive plans, as such plans may be in
effect from time to time. The Executive’s full-year target
under the short-term incentive plan is 75% of Base Salary (the
"Target Bonus") (but the actual percentage awarded could be higher
or lower in accordance with the terms of the relevant plan). The
Executive’s full-year target under the long-term incentive
plan is 45% of Base Salary (the "Target Long-Term Bonus") (but the
actual percentage awarded could be higher or lower in accordance
with the terms of the relevant plan).
5. Benefits .
(a) Executive shall be entitled to participate in any and all
pension benefit (whether tax qualified or non-qualified), welfare
benefit (including, without limitation, medical, dental, disability
and group life insurance coverages) and fringe benefit plans from
time to time in effect for officers of the Company and its
affiliates following the Company’s standard waiting periods,
if any.
(b) Executive shall be entitled to participate in such bonus,
stock option, or other incentive compensation plans of the Company
and its affiliates in effect from time to time for officers of the
Company.
(c) Executive shall be entitled to earn paid time off each year
up to a maximum of 208 hours per year, subject to the
Company’s policies, as in effect from time to time. The
Executive shall schedule the timing of such paid time off in a
reasonable manner. The Executive also may 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 in accordance with the Company’s
reimbursement policies and procedures, as may be in effect from
time to time.
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 his
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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 by Executive during the Term for Good Reason. "Good
Reason" shall exist upon the occurrence, without Executive’s
express written consent, of any of the following events:
(1) 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);
(2) the Company shall materially reduce the Base Salary or
annual bonus opportunity of Executive;
(3) the Company shall require Executive to relocate
Executive’s principal business office more than 30 miles,
provided that the Executive and the Company acknowledge that
Executive’s principal business office is 680 South Fourth
Street, Louisville, Kentucky 40202; or
(4) a material breach by the Company of Section 5(a) 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
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not constitute "Good Reason" provided that such
event is remedied within 60 days after receipt of such written
notice.
(d) Expiration of the Term . In the event the Executive
is an employee of the Company on February 28, 2011, the
Executive’s employment with the Company shall terminate as of
such date and shall, for purposes of this Agreement, be deemed a
termination by the Company other than for Cause.
(e) 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
thirty 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 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.
(f) D ate 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 (other than as set forth in
Section 6(d) hereof) 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, (iii) February 28,
2011, if Executive’s employment is terminated as a result of
the expiration of the Term as provided for in Section 6(d)
hereof and (iv) 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 the termination of Executive’s employment hereunder
for any reason, 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(e) 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) an amount equal to the product of (i) the annual bonus to
which the Executive would have been entitled for
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the year of termination of employment had
Executive’s employment with the Company not been terminated,
as determined in accordance with Section 4(b) hereof, if any,
multiplied by (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 such 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.
(b) Good Reason; Other than for Cause . If the Company
shall terminate Executive’s employment other than for Cause
(including for this purpose, any termination pursuant to
Section 6(d) hereof, but excluding a termination of employment
for Disability), or the Executive shall terminate his employment
for Good Reason:
(1) Within 14 days of Executive’s Date of Termination, the
Company shall pay to Executive, a lump sum cash severance payment
in an amount equal to the sum of (i) the Base Salary Executive
would have received during the period commencing on the Date of
Termination and ending on the conclusion of the Term (the "Term
Remainder") had Executive remained an employee of the Company for
the duration of such period, (ii) the product of (A) the
number of full calendar years in the Term Remainder and
(B) the Target Bonus, and (iii) in the event the
Executive’s Date of Termination occurs after February 28,
2010, an additional $300,000.
(2) 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 to which the
Executive would have been entitled for the year of termination of
employment had Executive’s employment with the Company not
been terminated, as determined in
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