EXHIBIT 10.1
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of the 22nd day of March, 2005, by and between Michael
Newman ("Executive") and SUN HEALTHCARE GROUP, INC. , a
Delaware corporation ("Sun" or "Company").
WHEREAS, Executive has been appointed to serve as the Executive
Vice President and General Counsel of Sun;
WHEREAS, Sun and Executive desire to set forth the terms and
conditions of Executive's employment as Executive Vice President
and General Counsel of Sun in an employment agreement, and
Executive is willing to perform such services for Sun under the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the above recitals and the
mutual covenants and agreements contained herein, Executive and Sun
agree as follows:
Section
1: Employment; Term of
Employment.
(a) Employment. Sun agrees to
employ Executive and Executive agrees to accept employment with
Sun, subject to the terms and conditions of this Agreement.
(b) Term of Employment. The period
of Executive's employment under this Agreement shall begin as of
March 22, 2005 and shall continue until terminated in accordance
with Section 5 below. As used in this Agreement, the phrase
"Employment Term" refers to Executive's period of employment from
the date of this Agreement until the date his employment is
terminated.
Section
2: Duties and
Responsibilities. Executive shall devote his full
employment time, efforts, skills and attention exclusively to his
duties as Executive Vice Executive and General Counsel; provided,
however, that to the extent the following activities do not
materially interfere or conflict with his duties and
responsibilities hereunder, Executive may (i) serve as a member of
the boards of directors of other corporations with the prior
written consent of the Chief Executive Officer of Sun; and (ii)
engage in charitable, civic and religious affairs.
Section
3: Compensation, Benefits and Related
Matters.
(b) Cash Bonus/Incentive Compensation. In
addition to the Base Salary provided for in Section 3(a)
above, Executive shall be eligible to receive an annual bonus
("Bonus"). Bonus targets for each fiscal year shall be set by
the Compensation Committee of the Board of Directors of Sun, which
may use as performance measurements, EBITDA (as defined below), or
in lieu or in addition thereto, return on capital, gross revenues
or any combination of such factors or other factors as determined
by the Compensation Committee and generally applicable to senior
executives of Sun. For the fiscal year in which this Agreement
becomes effective, if Sun achieves or exceeds consolidated earnings
before interest, taxes, depreciation and amortization
("EBITDA") targets as follows:
(1) If EBITDA is
equal to or greater than 100% of target but less than 120% of
target, Executive shall receive an annual bonus equal to 50% of
Base Salary earned during such fiscal year.
(2) If EBITDA is
equal to or greater than 120% of target but less than 140% of
target, Executive shall receive an annual bonus equal to 75% of
Base Salary earned during such fiscal year.
(3) If EBITDA is
equal to or greater than 140% of target, Executive shall receive an
annual bonus equal to 100% of Base Salary earned during such fiscal
year.
The Bonus for the fiscal year in which this Agreement becomes
effective shall be pro-rated based on Executive's employment during
such year. Such Bonus shall be payable at the same time as other
annual bonuses are paid to senior management personnel.
Subject to the provisions of Section 6(b) and Section 6(d), in
order to have earned and to be paid any such Bonus, Executive 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 Internal Revenue
Code, to the extent necessary to preserve the Company's ability to
deduct such bonus. The maximum annual bonus that may be paid
pursuant to this Section 3(b) is $1.3 million.
(c) Equity
Incentive. During the Employment Term, Executive shall be
eligible to be granted equity incentive awards during his
employment on the same basis as other senior executive officers of
Sun. Such equity incentive awards may include stock options
and restricted units. Executive's eligibility, rights and
entitlement to such equity incentive awards shall be governed by
the applicable equity incentive plan, award agreement, award and/or
grant.
(d) Retirement and
Benefit Plans. During the Employment Term, Executive shall
be eligible to participate in or receive benefits under any pension
plan, 401(k) savings plan, nonqualified deferred compensation plan,
supplemental executive retirement plan, medical and dental benefits
plan, life insurance plan, short-term and long-term disability
plans, or any other employee benefit or fringe benefit plan,
generally made available by Sun to senior executives in accordance
with the eligibility requirements of such plans and subject to the
terms and conditions set forth in this Agreement. Such plans,
programs and arrangements are subject to change during employment
at the sole discretion of the Company.
(e) Sick, Holiday
and Vacation Pay. Executive is entitled to holiday and sick
pay consistent with Sun's Employee Handbook or other policy
applicable to senior executives. Sick and Holiday Pay is
subject to change during employment at the sole discretion of the
Company. Executive shall be entitled to up to 160 hours of
vacation per year, which shall accrue at the rate of 6.152 hours
per pay period (26 pay periods). However, in accordance with Sun's
Employee Handbook or other policy applicable to senior executives,
vacation hours shall be subject to an accrual cap of two times
Executive's annual allotment of vacation hours and shall be subject
to change during employment at the sole discretion of the
Company.
(f) Indemnification,
Liability/Insurance. Executive shall be entitled to
indemnification by Sun to the extent required by applicable law and
the charter and bylaws of Sun. In addition, Sun shall maintain
during Executive's employment customary directors and officers'
liability insurance and Executive shall be covered by such
insurance.
(g) Taxes.
All compensation payable to Executive shall be subject to
withholding for all applicable federal, state and local income
taxes, occupational taxes, Social Security and similar mandatory
withholdings.
Section 4: Medical
Reimbursement. Upon proof of payment, Sun agrees to
reimburse Executive out of pocket costs for maintaining his current
medical insurance. Said costs are estimated to be $990 per
month. During this time Executive will not participate in
Sun's health plan.
Section
5: Termination of Employment.
Sun, at any time in its sole discretion, may terminate Executive as
Executive Vice President and General Counsel and from all other
positions with Sun and its direct and indirect subsidiaries.
Upon termination, Executive (or his beneficiary or estate as the
case may be) shall be entitled to receive the compensation and
benefits described in Section 6 below.
(a) Termination by
Sun for "Good Cause." Sun may, at any time, by written
notice to Executive 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 Executive as an officer and employee and from all
other positions with Sun for Good Cause. Sun may relieve Executive
of his duties and responsibilities pending a final determination of
whether Good Cause exists, and such action shall not constitute
Good Reason (as defined in Section 5(c) below) for purposes of this
Agreement. Payment to Executive upon a termination for Good Cause
is set forth in Section 6(a). "Good Cause" for termination shall
mean any one of the following:
(1) Any criminal
conviction (including conviction on 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 Chief
Executive Officer of Sun, renders Executive unsuitable as an
officer or employee of Sun.
(2) Executive's
continued failure to substantially perform the duties reasonably
requested by the Chief Executive Officer of Sun and commensurate
with his position as Executive Vice President and General Counsel
of Sun (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 Chief Executive
Officer of Sun, which demand specifically identifies the manner in
which the Chief Executive Officer of Sun believes that Executive
has not substantially performed his duties, and which performance,
in the sole discretion of the Chief Executive Officer is determined
to not be substantially corrected by Executive within ten
(10) calendar days of receipt of such demand;
(3) 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 Executive which, in the sole discretion of the Chief
Executive
Officer of Sun, renders Executive
unsuitable as an officer or employee; and
(4) Breach of any of
the covenants set forth in Section 8 of this Agreement.
Regardless of whether Executive's
employment initially was considered to be terminated for any reason
other than Good Cause, Executive's employment will be considered to
have been terminated for Good Cause for purposes of this Agreement
if the Chief Executive Officer of Sun subsequently determines that
Executive engaged in an act constituting Good Cause.
(b)
Termination by Sun without Good Cause. Sun may at any
time in its sole discretion, by written notice to Executive at
least five (5) business days prior to date of termination specified
in such notice, terminate Executive as an officer and employee and
from all other positions with Sun. If such termination is made by
Sun other than by reason of Executive's death or Disability (as
defined in Section 5(e)) and Good Cause does not exist, such
termination shall be treated as a termination without Good Cause
and Executive shall be entitled to payment in accordance with
Section 6(b).
(c)
Termination by Executive for Good Reason. Executive
may, at any time at his option within sixty (60) calendar days
following an event or condition that constitutes Good Reason (as
defined below), resign for Good Reason, as an officer and
employee and from all other positions with Sun by written notice to
Sun at least thirty (30) calendar days prior to the date of
termination 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
Executive upon a termination for Good Reason is set forth in
Section 6(b).
(1) "Good Reason"
shall mean the occurrence of any one of the following events or
conditions (but only if Executive provides a notice of resignation
to Sun within sixty (60) calendar days following the first
occurrence of such event or condition and Sun thereafter fails to
cure such circumstance within sixty (60) calendar days after its
receipt of that notice):
a. A meaningful and
detrimental reduction, without Executive's written consent, in the
nature of his responsibilities or a meaningful and detrimental
change in his reporting responsibilities or titles;
b. A reduction of
compensation as set forth in Sections 3(a) - 3(c) (collectively the
"Compensation") (other than a reduction of compensation uniformly
applicable to other members of Senior Management or as a result of
disciplinary action against Executive), a reduction of the benefits
set forth in Sections 3(d) - 3(g) (collectively, the "Benefits")
(other than a reduction of Benefits uniformly applicable to other
members of senior management), or failure by Sun to pay to
Executive any portion of
the Compensation or Benefits within
seven (7) business days of the date such compensation or other
payments and benefits are due; or
c. A change in
Executive's principal work location to a place other than Orange
County or Los Angeles County, California.
Notwithstanding any provision of this
Paragraph 5(c) to the contrary, the occurrence of a "Change in
Control" (as defined in Section 6 below) shall not, by itself,
constitute Good Reason hereunder.
(d) Voluntary
Resignation Without Good Reason. Executive may, at any time
at his option with thirty (30) calendar days written notice to Sun,
voluntarily resign without Good Reason as an officer and employee
and from all positions with Sun. Payment to Executive upon his
voluntary resignation without Good Reason is set forth in Section
6(a). Resignation from employment shall automatically constitute
resignation from all positions of any subsidiary or affiliated
corporation.
(e) Death or
Disability. Executive's employment under this Agreement
shall terminate automatically as of the date of Executive's death.
Sun, at any time by written notice to Executive at least five (5)
business days prior to the date of termination specified in such
notice, terminate Executive as an officer and employee and from all
other positions with Sun by reason of his Disability. "Disability"
shall mean any physical or mental condition or illness that
prevents Executive from performing the essential duties of his
position (where such failure cannot be remedied with reasonable
accommodation) for a period of 120 substantially consecutive
calendar days, as determined by a physician selected by Sun and
reasonably acceptable to Executive or, if Executive is
incapacitated, reasonably acceptable to the Director of Medicine or
equivalent senior physician at a hospital of Executive's choice. In
addition, Executive's receipt of disability benefits under Sun's
long-term disability benefits plan or receipt of Social Security
disability benefits shall be deemed conclusive evidence of
Disability for purpose of this Agreement. Payment to
Executive upon his termination by reason of his death or Disability
is set forth in Section 6(d).
Section 6: Payments Upon
Termination.
(a) Payment Upon
Termination for Good Cause, or Resignation without Good Reason,
Death or Disability. In the event of termination of his
employment pursuant to Sections 5(a) or 5(d), Executive, or his
estate where applicable, shall be paid any earned but unpaid Base
Salary through the date of termination and any accrued but unused
vacation through the date of termination.
Executive also shall 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 shall cease as of the date of termination, except
to the extent Executive 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.
