Exhibit 10.1
EMPLOYMENT
AGREEMENT (this “ Agreement ”) dated as of
June 13, 2007, between MANOR CARE, INC., a Delaware
corporation (the “ Company ”), and PAUL A.
ORMOND (the “ Executive ”).
WHEREAS
the Executive is a skilled and dedicated employee of the Company
who has important management responsibilities and talents that
benefit the Company; and
WHEREAS
the Compensation Committee (the “ Committee ”)
of the Board of Directors of the Company (the “ Board
”) considers it essential to the best interests of the
Company and its stockholders to assure that the Company and its
subsidiaries will have the continued dedication of the
Executive;
NOW,
THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
SECTION
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
(a) “ Affiliate(s)
” means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
(b) “ Annual Incentive
Plan ” means the Company’s Annual Incentive Plan as
in effect from time to time.
(c) “ Cause ”
means the occurrence of any one of the following:
(i) the Executive is convicted of, or
pleads guilty or nolo contendere to, any felony;
(ii) the Executive commits one or
more acts constituting wilful financial dishonesty or fraud in
connection with the performance of his duties; or
(iii) the Executive continually and
wilfully fails, for at least 14 days following written notice
from the Company, to perform substantially the Executive’s
employment duties (other than as a result of incapacity due to
physical or mental illness or after delivery by the Executive of a
Notice of Termination for Good Reason).
For
purposes of this provision, no act or failure to act on the part of
the Executive shall be considered “wilful” unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action
or
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omission
was in the best interests of the Company. The termination of
employment of the Executive for Cause shall not be effective unless
and until there has been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board (excluding the
Executive) at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that in the good faith opinion of
the Board, the Executive is guilty of the conduct described in
clause (i), (ii) or (iii) above and specifying the particulars
thereof in detail.
(d) “ Change in
Control ” means the occurrence of any of the
following:
(i) during any period of twelve
consecutive months, the individuals who, as of the beginning of
such period, were members of the Board (the “ Incumbent
Directors ”) cease for any reason, prior to the end of
such period, to constitute at least a majority of the Board;
provided , however , that any individual becoming a
director subsequent to the beginning of such period whose
appointment or election, or nomination for election, by the
Company’s stockholders was approved by a vote of at least a
majority of the Incumbent Directors shall be considered as though
such individual were an Incumbent Director, but excluding, for
purposes of this proviso, any such individual whose assumption of
office after the beginning of such period occurs as a result of an
actual or threatened proxy contest with respect to election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a “person” (as
such term is used in Section 13(d) of the Exchange Act) (each, a
“ Person ”) other than the Board or the
Company;
(ii) the consummation of (A) a
merger, consolidation, statutory share exchange, reorganization or
similar form of corporate transaction (including as a part of a
series of other transactions) involving (x) the Company or
(y) any of its Subsidiaries, but in the case of this clause
(y) only if Company Voting Securities (as defined below) are
issued or issuable or (B) a sale or other disposition of all
or substantially all the assets of the Company (any such event, a
“ Reorganization ”), unless, immediately
following such Reorganization, (1) all or substantially all
the individuals and entities who were the “beneficial
owners” (as such term is defined in Rule 13d-3 under the
Exchange Act (or a successor rule thereto)) of shares of the
Company’s common stock or other securities eligible to vote
for the election of the Board outstanding immediately prior to the
consummation of such Reorganization (such securities, the “
Company Voting Securities ”) beneficially own,
directly or indirectly, more than 65% of the combined voting power
of the then outstanding voting securities of the corporation or
other entity resulting from such Reorganization (including a
corporation or other entity that, as a result of such transaction,
owns the Company or all or substantially all the Company’s
assets either directly or through one or more subsidiaries) (the
“ Continuing Entity ”) in substantially the same
proportions as their ownership, immediately prior to the
consummation of such Reorganization, of the outstanding Company
Voting Securities (excluding any outstanding voting securities of
the Continuing
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Entity that
such beneficial owners hold immediately following the consummation
of the Reorganization as a result of their ownership prior to such
consummation of voting securities of any corporation or other
entity involved in or forming part of such Reorganization other
than the Company or a Subsidiary), (2) no Person (excluding
any employee benefit plan (or related trust) sponsored or
maintained by the Continuing Entity or any corporation or other
entity controlled by the Continuing Entity) beneficially owns,
directly or indirectly, 15% or more of the combined voting power of
the then outstanding voting securities of the Continuing Entity and
(3) at least a majority of the members of the board of
directors or other governing body of the Continuing Entity
immediately after the Reorganization are Incumbent Directors;
(iii) the stockholders of the
Company approve a plan of complete liquidation or dissolution of
the Company; or
(iv) any Person, corporation or
other entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
15% or more of the combined voting power of the Company Voting
Securities; provided , however , that for purposes of
this subparagraph (iv), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by the
Company or any Subsidiary, (B) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, (C) any acquisition by an
underwriter temporarily holding such Company Voting Securities
pursuant to an offering of such securities or (D) any
acquisition pursuant to a Reorganization that does not constitute a
Change in Control.
(e) “ Change in Control
Date ” means the date on which a Change in Control occurs
(if any).
(f) “ Code ”
means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
(g) “ Competing
Business ” shall mean any person, corporation or other
entity engaged in the United States of America in providing skilled
nursing, assisted living, home health, hospice or rehabilitation
services or providing or attempting to provide any other product or
service which is the same as or similar to products or services
sold or provided by the Company or any of its subsidiaries within
the two-year period prior to the Termination Date.
(h) “ Disability
” means that either (i) the Executive is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than twelve months or (ii) the
Executive is, by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
months,
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receiving income replacement benefits for a period of not less than
three months under an accident and health plan covering the
Company’s employees.
(i) “ Employee
Benefits ” means the perquisites and benefits as provided
under any and all employee retirement income and welfare benefit
policies, plans, programs or arrangements in which the Executive is
entitled to participate at any time of determination, including any
stock option, stock purchase, stock appreciation, savings, pension,
supplemental employee retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation,
group or other life, health, medical, hospital or other insurance
(whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement
and other employee benefit policies.
(j) “ Exchange Act
” means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.
(k) “ Excise Tax
” means the excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect
to such tax.
(l) “ Good Reason
” means, without the Executive’s express written
consent, the occurrence of any one or more of the following:
(i) the failure to elect or reelect
or otherwise to maintain Executive in the office(s) or position(s)
with the Company set forth in Section 3 and any other
office(s) or position(s) that Executive held immediately prior to
the Change in Control Date, or the removal of Executive as a member
of the Board or Chairman of the Board;
(ii) the occurrence of any of the
following which is not remedied within ten days after written
notice to the Board from Executive:
(A) a significant adverse change,
whether involving a reduction or expansion, in the nature or scope
of the authorities, positions, powers, functions, responsibilities
or duties attached to the office(s) and position(s) with the
Company set forth in Section 3 and any other office(s) or
position(s) that Executive held immediately prior to the Change in
Control Date, including any change in the reporting lines, offices
and positions to which Executive reported or which reported to the
Executive immediately prior to the Change in Control Date and any
change due to the Company no longer being a reporting company under
the Exchange Act;
(B) a reduction in Executive’s
annual base salary as in effect immediately prior to the Change in
Control Date;
(C) a material reduction in the scope
or value of Employee Benefits as in effect immediately prior to the
Change in Control Date;
(D) any material breach of this
Agreement by the Company; or
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(E) the continuation or repetition of
harassing or denigrating treatment of Executive which is
inconsistent with Executive’s position with the
Company;
(iii) the failure of the Company to
comply with and satisfy the requirements of Section 14(c);
or
(iv) the Company (A) relocates
its principal executive offices, or requires Executive to have his
principal place of employment changed, to any location which
increases by more than 25 miles Executive’s commuting
distance as compared to his commuting distance immediately prior to
the Change in Control Date or (B) requires Executive to travel
away from his principal place of employment in the course of
discharging his responsibilities or duties hereunder at least 20%
more (in terms of aggregate days in any calendar year or in any two
consecutive calendar quarters when annualized for purposes of
comparison to any prior year) than the average of such time that
was required of Executive in the three full years immediately prior
to the Change in Control Date.
The
Executive’s right to terminate employment for Good Reason
shall not be affected by the Executive’s incapacity due to
physical or mental illness. A termination of employment by the
Executive for Good Reason for purposes of this Agreement shall be
effectuated by giving the Company written notice (“ Notice
of Termination for Good Reason ”) of the termination
setting forth in reasonable detail the specific conduct of the
Company that constitutes Good Reason and the specific provisions of
this Agreement on which the Executive relied. A termination of
employment by the Executive for Good Reason shall be effective on
the 30th day following the date when the Notice of Termination for
Good Reason is given, unless the Company elects to treat such
termination as effective as of an earlier date. If the Executive
continues to provide services to the Company after one of the
events giving rise to Good Reason has occurred, the Executive shall
not be deemed to have consented to such event or to have waived the
Executive’s right to terminate his or her employment for Good
Reason in connection with such event.
(m) “ Incentive
Amount ” means the sum of (i) the amount payable on
a full-year basis to the Executive under his Performance Award Plan
award for the award period ending in the year in which the Change
in Control Date occurs (if any) determined on the basis of maximum
performance achievement and (ii) the amount payable on a
full-year basis to the Executive under his Annual Incentive Plan
award for the award period ending in the year in which the Change
in Control Date occurs determined on the basis of maximum award
level achievement.
(n) “ Payment
” means any payment, benefit or distribution (or combination
thereof) by the Company, any of its Affiliates or any trust
established by the Company or its Affiliates, to or for the benefit
of the Executive, whether paid, payable, distributed, distributable
or provided pursuant to this Agreement or otherwise, including any
payment, benefit or other right that constitutes a “parachute
payment” within the meaning of Section 280G of the
Code.
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(o) “ Performance Award
Plan ” means the Company’s Performance Award Plan
as in effect from time to time.
(p) “ Person
” shall have the meaning set forth in
Section 1(d)(i).
(q) “ Protection
Period ” means the period commencing on the Change in
Control Date and ending on the third anniversary thereof.
(r) “ Qualifying
Termination ” means any termination of the
Executive’s employment (i) by the Company, other than for
Cause, death or Disability, that is effective (or with respect to
which the Executive is given written notice) during the period
beginning on the date that is 60 days prior to the first public
announcement by the Company of the potential occurrence of an event
that would constitute a Change in Control and ending on the
expiration of the Protection Period, (ii) by the Executive for
Good Reason that is effective (or with respect to which the
Executive has given Notice of Termination for Good Reason) during
the Protection Period, or (iii) by the Executive, whether or
not for Good Reason, during the 180-day period beginning on the
first anniversary of the Change in Control Date.
(s) “ Specified
Performance Level ” means (i) in the case of any
Performance Share (as defined in Section 7), performance
achievement (expressed as a percentage) relative to the applicable
performance goals established by the Company for each applicable
year for Performance Shares generally (provided that, in the case
of any such year for which more than one actual performance level
was determined, the actual performance level for such year shall be
deemed to be the average of all such levels for such year), equal
to the greatest of, as applicable, (A) the average actual
aggregate award level or levels of the Company (as approved by the
Committee and expressed as a percentage) for each of the three full
years prior to the year in which the Change in Control Date occurs,
(B) if the Change in Control Date occurs after June 30 in
any year, the average actual aggregate award level or levels of the
Company (as approved by the Committee and expressed as a
percentage) for each of the two full years prior to the year in
which the Change in Control Date occurs and the partial year in
which the Change in Control Date occurs, utilizing, in the case of
such partial year, the aggregate award level of the Company for
such year as determined by the Committee prior to the Change in
Control Date and expressed as a percentage based on the
Committee’s review of year-to-date financial performance of
the Company for such year, and (C) such other performance
achievement level as may be determined by the Committee prior to
the Change in Control Date (expressed as a percentage) based on the
Committee’s review of Company performance, in comparison to
actual award levels approved by the Committee, for the multi-year
period commencing in 2005 with respect to which various awards of
Performance Shares were made and such other factors as the
Committee determines are relevant to determining an appropriate
performance achievement level, (ii) in the case of any Annual
Incentive Plan award, award level achievement (expressed as a
percentage) equal to the greater of (A) the average actual
award level achievement of the Executive (as approved by the
Committee and expressed as a percentage) for each of the three full
years prior to the year in which the Change in Control Date occurs
(or such lesser number of years for which the Executive was
employed by the Company) relative to the
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applicable performance goals established by the Company for each of
such full years and (B) such other award level achievement as may
be determined by the Committee prior to the Change in Control Date
(expressed as a percentage) based on the Committee’s review
of year-to-date performance of the Company and the Executive for
the year in which the Change in Control Date occurs and such other
factors as the Committee determines are relevant to determining an
appropriate performance achievement level and (iii) in the
case of any Performance Award Plan award, performance achievement
(expressed as a percentage) relative to the applicable performance
goals established by the Company for each applicable year for
Performance Award Plan awards generally (provided that, in the case
of any such year for which more than one actual performance level
was determined, the actual performance level for such year shall be
deemed to be the average of all such levels for such year), equal
to the greatest of, as applicable, (A) the average actual
performance achievement level of the Company (as approved by the
Committee and expressed as a percentage) for each of the three full
years prior to the year in which the Change in Control Date occurs,
(B) if the Change in Control Date occurs after June 30 in
any year, the average actual performance achievement level of the
Company (as approved by the Committee and expressed as a
percentage) for each of the two full years prior to the year in
which the Change in Control Date occurs and the partial year in
which the Change in Control Date occurs, utilizing, in the case of
such partial year, the performance achievement level of the Company
for such year as determined by the Committee prior to the Change in
Control Date and expressed as a percentage based on the
Committee’s review of year-to-date financial performance of
the Company for such year, and (C) such other performance
achievement level as may be determined by the Committee prior to
the Change in Control Date (expressed as a percentage) based on the
Committee’s review of Company performance, in comparison to
actual performance achievement levels approved by the Committee,
for the multi-year period commencing in 2005 with respect to which
various awards under the Performance Achievement Plan were made and
such other factors as the Committee determines are relevant to
determining an appropriate performance achievement level.
(t) “ Subsidiary
” means any entity in which the Company, directly or
indirectly, possesses 50% or more of the total combined voting
power of all classes of its stock.
(u) “ Termination
Date ” means the date (if any) on which the termination
of the Executive’s employment, in accordance with the terms
of this Agreement, is effective.
SECTION
2. Effectiveness; Effect on Prior Agreement. (a) This
Agreement and Executive’s employment hereunder shall become
effective as of the date hereof (the “ Effective Date
”). This Agreement and Executive’s employment hereunder
shall remain in effect until the third anniversary of the Effective
Date, except that, beginning on the second anniversary of the
Effective Date and on each anniversary thereafter (i.e., one year
prior to the scheduled expiration of the term hereof), the term of
this Agreement and Executive’s employment hereunder shall be
automatically extended for an additional one-year period, unless,
prior to the occurrence of a Change in Control, the Company or
Executive provides the other party with 90 days’ prior
written notice
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before
the applicable anniversary that the term of this Agreement and
Executive’s employment hereunder shall not be so extended
(the last day of such period, giving effect to all such extensions,
the “ Normal Expiration Date ”), provided
that upon the occurrence of a Change in Control prior to the Normal
Expiration Date, (A) the term of this Agreement shall not
expire or terminate, (B) the Company shall have no further
right to amend, modify or terminate this Agreement or the term
thereof without the Executive’s written consent in accordance
with Section 18, (C) the Employment Term (as defined in
Section 3) shall not expire unless expressly terminated by the
Company or Executive in accordance with Section 4 and
(D) any purported termination of this Agreement or the term
thereof by the Company (other than in connection with a termination
of Executive’s employment for any reason other than Cause,
death or Disability) shall be deemed to be a termination of
Executive’s employment by the Company other than for Cause;
provided , however , that Sections 6, 7 and 8 of
this Agreement shall only be effective with respect to the first
Change in Control that occurs during the term of this
Agreement.
(b) Effective as of the
Effective Date, this Agreement shall replace and supersede in its
entirety the Severance Agreement dated as of August 20, 1999
among the Executive, the Company and the other parties thereto (the
“ Prior Agreement ”), which shall have no
further force or effect. In addition, the receipt of severance
benefits under Section 5 or 6 shall be conditioned on the
waiver of any other cash severance benefits otherwise payable to
the Executive under any severance plan or policy available
generally to Company employees.
SECTION
3. Terms and Conditions of Employment. (a) The Company
hereby agrees to continue to employ the Executive, and the
Executive hereby agrees to continue to be employed by the Company,
as its Chairman, President and Chief Executive Officer on the terms
and conditions set forth herein for the period commencing on the
Effective Date and ending on the earlier of (i) the
termination of the Executive’s employment for any reason and
(ii) the termination of this Agreement in accordance with its
terms (such period of employment, the “ Employment
Term ”).
(b) During the Employment Term,
the Executive shall have authorities, powers, functions,
responsibilities and duties consistent with those held by the
Executive immediately prior to the Effective Date and shall devote
substantially all the Executive’s business time to the
performance of such responsibilities and duties.
(c) During the Employment Term,
the Executive shall report directly to the Board.
(d) During the Employment Term,
the Executive’s principal place of employment shall be at the
Company’s current principal executive offices in Toledo,
Ohio. The Executive acknowledges that his responsibilities and
duties shall require him to travel on business to the extent
necessary to fully perform such responsibilities and duties.
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(e) During the Employment Term,
the Executive shall, without limitation to Sections 3 and 4,
be entitled to the following compensation and benefits:
(i) Annual base salary at a rate no
less than the rate in effect immediately prior to the Effective
Date, subject to such subsequent upward adjustments as may be
determined by the Board from time to time, which shall be payable
on the Company’s normal payroll schedule;
(ii) Such annual, short-term and
long-term incentive and equity compensation awards as may be
determined by the Board; and
(iii) Participation in the employee
benefit, welfare, retirement, perquisite and other plans, programs
and policies provided to other similarly situated employees or
provided to other senior executives of the Company, as determined
by the Board from time to time, and subject to the terms and
conditions of such arrangements as in effect from time to
time.
(f) Exhibit A of
this Ag
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