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Exhibit 10.4 REHABCARE GROUP, INC. CHANGE IN CONTROL TERMINATION
AGREEMENT
This agreement (“Agreement”) has been entered into as
of the 8th day of December, 2008, by and between RehabCare Group,
Inc., a Delaware corporation (the “Company”), and
________________________________________, an individual (the
“Executive”).
RECITALS
The Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders to reinforce
and encourage the continued attention and dedication of the
Executive to the Company as the Company’s
___________________________ and to assure that the Company will
have the continued dedication of the Executive, notwithstanding the
possibility or occurrence of a Change in Control (as defined
below). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a potential or pending
Change in Control and to encourage the Executive’s full
attention and dedication to the Company in the event of any
potential or pending Change in Control. Therefore, in
order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
Section
1: Definitions
and Construction.
1.1 Definitions. For
purposes of this Agreement, the following words and phrases,
whether or not capitalized, shall have the meanings specified
below, unless the context plainly requires a different meaning.
1.1(a) “Board”
means the Board of Directors of the Company.
1.1(b) “Cause”
means termination based upon: (i) the Executive's willful and
continued failure to substantially perform his duties with the
Company (other than as a result of incapacity due to physical or
mental condition), after a written demand for substantial
performance is delivered to the Executive by the Company, which
specifically identifies the manner in which the Executive has not
substantially performed his duties, (ii) the Executive's
commission of an act constituting a criminal offense that would be
classified as a felony under the applicable criminal code or
involving moral turpitude, dishonesty, or breach of trust, or (iii)
the Executive's material breach of any provision of this
Agreement. For purposes of this Section, no act or
failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith
and without reasonable belief that the act or omission was in the
best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until (i) he receives a Notice of
Termination from the Company, (ii) he is given the opportunity,
with counsel, to be heard before the Board, and (iii) the Board
finds, in its good faith opinion, that the Executive was guilty of
the conduct set forth in the Notice of Termination.
1.1(c) “Change
in Control” means:
(i) The
acquisition by one person, or more than one person acting as a
group, of ownership of stock of the Company that, together with
stock held by such person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of
the Company;
(ii) The
acquisition by one person, or more than one person acting as a
group, of ownership of stock of the Company, that together with
stock of the Company acquired during the twelve-month period ending
on the date of the most recent acquisition by such person or group,
constitutes 30% or more of the total voting power of the stock of
the Company;
(iii) A
majority of the members of the Company’s board of directors
is replaced during any twelve-month period by directors whose
appointment or election is not endorsed by a majority of the
members of the Company’s board of directors before the date
of the appointment or election;
(iv) One
person, or more than one person acting as a group, acquires (or has
acquired during the twelve-month period ending on the date of the
most recent acquisition by such person or group) assets from the
Company that have a total gross fair market value (determined
without regard to any liabilities associated with such assets)
equal to or more than 40% of the total gross fair market value of
all of the assets of the Company immediately before such
acquisition or acquisitions.
Persons will not be considered to be acting as a group solely
because they purchase or own stock of the same corporation at the
same time, or as a result of the same public
offering. However, persons will be considered to be
acting as a group if they are owners of a corporation that enters
into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the Company.
This definition of Change in Control shall be interpreted in
accordance with, and in a manner that will bring the definition
into compliance with, the regulations under Code Section 409A.
1.1(d) “Change
in Control Date” means the date that the Change in Control
first occurs.
1.1(e) “Company”
has the meaning set forth in the first paragraph of this Agreement
and, with regard to successors, in Section 4.2 of this
Agreement.
1.1(f) “Code”
shall mean the Internal Revenue Code of 1986, as amended.
1.1(g) “Date
of Termination” means the date, on or after a Change in
Control Date, that Executive’s employment with the Company
terminates due to the termination of Executive’s employment
by the Company without Cause or Executive’s termination of
employment with the Company for Good Reason. In all
cases, a “Date of Termination” shall only occur upon
separation from service from the Company and all of its affiliates,
as defined in Treasury regulations under Section 409A of the Code
(generally, separation from the 50% controlled group that includes
the Company).
1.1(h) “Effective
Date” means the date of this Agreement specified in the first
paragraph of this Agreement.
1.1(i) “Good
Reason” means termination based upon the occurrence of one or
more of the following without the consent of the Executive: (i) a
material reduction in the Executive’s authority, duties and
responsibilities; (ii) a material reduction in Executive’s
Annual Base Salary; (iii) a material reduction in the budget over
which the Executive retains authority; (iv) a material change in
the primary geographic location at which the Executive performs his
duties under this Agreement; or (v) any other action or inaction
that constitutes a material breach by the Company of any provision
of this Agreement. Any termination of the
Executive’s employment based upon a good faith determination
of “Good Reason” made by the Executive shall be subject
to a delivery of a Notice of Termination by the Executive to the
Company in the manner prescribed in Section 1.1(j) within fifteen
(15) days of the first occurrence of an event that would constitute
Good Reason and subject further to the ability of the Company to
remedy within thirty (30) days of receipt of such notice any action
that may otherwise constitute Good Reason under this Section
1.1(i).
1.1(j) “Notice
of Termination” means a written notice, given in accordance
with Section 5.2, which (i) indicates the specific termination
provision in this Agreement relied upon; (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to be a basis for termination of the
Executive’s employment under the provision so indicated; and
(iii) if the Date of Termination is other than the date of receipt
of such notice, specifies the termination date (which date shall
not be more than fifteen (15) days after the giving of such
notice).
1.1(k) “Term”
means the period that begins on the Effective Date and ends on the
earlier of:
(i) the
date of Executive’s termination of employment from the
Company for any reason prior to the Change in Control Date;
(ii) the
date of Executive’s termination of employment after a Change
in Control Date for any reason other than the involuntary
termination of Executive’s employment without Cause or the
termination of employment with the Company by the Executive for
Good Reason;
(iii) the
Date of Termination; or
(iv) the
close of business on the later of December 31, 200___ or December
31st of any renewal term. This Agreement will
automatically renew for annual one-year periods unless the Company
gives written notice to Executive, by September 30, 200___, or
September 30th of any succeeding year, of the Company’s
intent not to renew this Agreement.
1.2 Gender
and Number. When appropriate, pronouns in this Agreement
used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include
the singular.
1.3 Headings. All
headings in this Agreement are included solely for ease of
reference and do not bear on the interpretation of the text.
1.4 Applicable
Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Missouri,
without reference to its conflict of law principles.
Section
2: Change
in Control Severance Benefits
2.1 Benefits
Upon a Change in Control. Subject to the provisions of
Section 2.5, if a Change in Control occurs during the Term and
within two (2) years after the Change in Control Date (a) the
Company terminates the Executive’s employment without Cause,
or (b) the Executive terminates employment with the Company for
Good Reason, then the Executive shall become entitled to the
payment of the benefits as provided below:
2.1(a) Accrued
Obligations. Within thirty (30) days after the Date of
Termination, the Company shall pay to the Executive the sum of the
Executive’s accrued salary through the Date of Termination
and any accrued and unused vacation days, in each case to the
extent not previously paid, and the “Prorated Target
Bonus.” For purposes of this Agreement, the term
“Prorated Target Bonus” means an amount determined by
multiplying the actual percentage of the Executive’s base
salary that was to be paid to the Executive as his Target Bonus in
the year in which the Change in Control Date occurs by the
Executive’s then-current annual base salary as of the Date of
Termination and prorating this amount by multiplying it by a
fraction, the numerator of which is the number of days during the
then-current calendar year that the Executive was employed by the
Company up to and including the Date of Termination and the
denominator of which is 365. Payment under any long-term
cash incentive plan or other incentive compensation plan shall be
determined and governed solely by the terms of the applicable
plan.
2.1(b) Severance
Amount. Within thirty (30) days after the Date of
Termination, the Company shall pay to the Executive as severance
pay in a lump sum, in cash, an amount equal to one (1) times the
sum of the Executive’s then-current annual base salary plus
Target Bonus for the year in which the Change in Control Date
occurs. Payments under any long term cash incentive plan
are not part of or included in this calculation. For
purposes of this Agreement, Target Bonus means the designated
percentage of Executive’s target annual incentive award,
expressed as a designated percentage of Executive’s annual
base salary, as established by the Board of Directors or the
Compensation and Nomination/Corporate Governance Committee at the
beginning of the year in which the Change of Control Date
occurs.
2.1(c) Stock-Based
Awards. All stock-based awards held by the Executive
will be exercisable or vested, expire or terminate in accordance
with the terms of their respective grant agreements.
2.1(d) Health
Benefit Continuation. For twelve (12) months following
the Date of Termination, the Company shall pay the COBRA premiums
for the Executive and his spouse and other eligible dependents for
the medical, dental, vision, and prescription drug plan(s)
maintained by the Company in which the Executive and his spouse or
other eligible dependents were participating immediately prior to
the Date of Termination; provided, however, that if the Executive
becomes reemployed with another employer and is eligible to receive
such benefits under another employer-provided plan, program,
practice or policy the Company’s COBRA premium payments
described herein shall be immediately terminated upon the
commencement of coverage under the new employer’s plan,
program, practice or policy. In addition, to the extent
that the COBRA premiums paid by the Company are taxable to the
Executive, the Company shall pay to the Executive a gross-up
payment for applicable taxes. Such payment shall be made
monthly during the period the COBRA premiums are paid by the
Company.
2.1(e) Outplacement. During
the one-year period beginning on the Date of Termination, the
Company shall provide to Executive executive-level outplacement
services by a vendor selected by the Company.
2.1(f) Gross-up
Payments.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event
that it shall be determined that any payment by the Company to or
for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any
additional payments required under this Section 2.1(f)) (a
“Payment”) would be subject to the excise tax imposed
by Code Section 4999 (or any successor provision) or any interest
or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest or penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment on an after-tax basis equal to the Excise
Tax imposed upon the Payment. Any Gross-Up Payment
required under this Section 2.1(f) shall be made on the last day of
the month in which the Executive remits such taxes to the required
taxing authority. In no event will any such Gross-Up
Payment be paid to Executive later than the end of the
Executive’s taxable year following the Executive’s
taxable year in which the related taxes are remitted to the
required taxing authority. The intent of the parties is
that the Company shall be responsible in full for, and shall pay,
any and all Excise Tax on any Payments and Gross-up Payment(s) and
any income and all excise and employment taxes (including, without
limitation, penalties and interest) imposed on any Gross-up
Payment(s) as well as any loss of deduction caused by or related to
the Gross-up Payment(s).
(ii) Subject
to the provisions of Section 2.1(f)(iii), all determinations
required to be made under this Section 2.1(f), including whether
and when a Gross-up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at
such determinations, shall be made by the outside accounting firm
that then audits the Company’s financial
statements (the “Accounting Firm”), which
Accounting Firm shall provide detailed supporting calculations both
to the Company and to the Executive within fifteen (15) business
days of receipt of notice from the Company or the Executive that
there has been or will be a Payment. In the event that
the Accounting Firm is serving as the accountant or auditor for the
person effecting the Change in Control, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then
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