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Exhibit 10.5
REHABCARE GROUP, INC. SEVERANCE PLAN FOR COMPANY SENIOR VICE
PRESIDENTS (As Amended and Restated Effective January 1, 2009)
1. Purpose
and Effective Date The RehabCare Group, Inc. Severance Plan
for Company Senior Vice Presidents (“Plan”) was
established to provide severance benefits to eligible terminated
Employees while they seek alternative employment, provided such
termination of employment occurs prior to a Change in Control of
the Company. In consideration for such benefits, the
Employee shall be subject to a one-year non-compete agreement and
shall release the Company and its Affiliates from any claims
related to employment termination. The Plan was
effective January 1, 2006. RehabCare Group, Inc. now
wishes to amend and restate the Plan to conform the Plan to the
final regulations issued by the Internal Revenue Service under
Section 409A of the Internal Revenue Code. This Amended
and restated Plan is effective January 1, 2009.
2. Definitions
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(a)
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Affiliate means any corporation or other business entity that
from time to time is, along with the Company, a member of a
controlled group of businesses as defined in Code section 414(b)
and (c), as modified in accordance with Treas. Reg.
§1.409A-1(h)(3) (50%) control test). A corporation
or business entity is an Affiliate only while a member of such
controlled group.
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(b)
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Cause means (i) the Employee’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 Employee by the Company, which specifically
identifies the manner in which the Employee has not substantially
performed his duties, or (ii) the Employee’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. For purposes
of this section, no act or failure to act on the Employee’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.
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Notwithstanding the foregoing, the Employee 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 Employee
was guilty of the conduct set forth in the notice of termination.
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(c)
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Change in Control means:
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(i)
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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;
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(ii)
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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;
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(iii)
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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;
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(iv)
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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.
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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 Section 409A of the Code.
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(d)
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Code means the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall
include that section and any comparable section or sections of any
future legislation that amends, supplements or supersedes said
section.
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(e)
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Company means RehabCare Group, Inc.
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(f)
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Employee means an individual employed by the Company or an
Affiliate.
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(g)
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ERISA means the Employee Retirement Income Security Act of 1974,
as amended.
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(h)
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Good Reason means the Employee’s right to terminate his
employment prior to a Change in Control based upon the occurrence
of one or more of the following without the consent of the
Employee: (i) a material reduction in the Employee’s annual
base salary; (ii) a material reduction in the Employee’s
authority, duties and responsibilities; (iii) a material reduction
in the budget over which the Employee retains authority; or (iv) a
material change in the primary geographic location at which the
Employee performs services.
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Any termination of the Employee’s employment based
upon a good faith determination of “Good Reason” made
by the Employee shall be subject to a delivery of a notice of
termination by the Employee to the Company within 15 days of the
first occurrence of an event that would constitute Good Reason in
the manner prescribed herein, and subject further to the ability of
the Company to remedy within 30 days of receipt of such notice any
such action by the Company that may otherwise constitute Good
Reason.
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(i)
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Plan means the RehabCare Group, Inc. Severance Plan for Company
Senior Vice Presidents, as herein set forth and as amended from
time to time.
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(j)
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Plan Administrator means the Company or the Committee designated
by the Board of Directors of the Company to administer the
Plan.
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(k)
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Severance Period means the one-year period commencing on the
date an eligible Employee terminates his employment and is eligible
to receive Severance Pay and Severance Benefits.
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(l)
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Termination of Employment means separation from service with the
Company and its Affiliates (generally 50% common control with the
Company), as defined in IRS regulations under Code section 409A
(generally, a decrease in the performance of services to no more
than 20% of the average for the preceding 36-month period and
disregarding leaves of absence of up to six months where there is a
reasonable expectation the Employee will return).
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Each Employee whose title is Senior Vice President of the
Company shall be eligible to participate in the Plan; provided,
however, an Employee who is entitled to pre-Change in Control
severance benefits pursuant to a separate written agreement between
the Company and such Employee shall not be entitled to participate
in this Plan.
4. Severance
Pay and Benefits. Subject to Section 6, any eligible
Employee (i) who incurs a Termination of Employment prior to a
Change in Control as a result of termination of Employee’s
employment by the Company for any reason other than Cause or
disability or (ii) who terminates his employment with the Company
prior to a Change in Control for Good Reason within 45 days of the
first occurrence of an event that would constitute Good Reason that
has not been remedied by the Company, as described in Section 2(h),
shall be eligible for Severance Pay and Severance Benefits
hereunder. Severance Pay (as specified in subparagraph
(a) below) and Severance Benefits (as specified in subparagraph (b)
below) shall be offset by any severance pay payable to the eligible
Employee at the same time under any other severance program or plan
of the Company or an Affiliate.
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(a)
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Severance Pay. The total amount of Severance Pay to
which an eligible Employee is entitled hereunder shall be equal to
the sum of (i) the Employee’s annual rate of base
salary at the base salary rate in effect on the date of Termination
of Employment; and (ii) Employees’ target annual incentive
bonus for the calendar year containing the date of Termination of
Employment.
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Severance Pay shall be paid to an eligible Employee
during the Severance Period on a monthly basis in an amount equal
to one-twelfth of Employee’s total Severance Pay.
Anything herein to the contrary notwithstanding, in the event that
all or any portion of the Employee’s Severance Pay is subject
to Code section 409A and the Employee is a “specified
employee,” as defined in the regulations under Code section
409A, at the time of the Employee’s Termination of
Employment, the Severance Pay that is subject to 409A shall not be
paid until the expiration of six months following Termination of
Employment. In such event, any Severance Pay that would
otherwise have been paid in the preceding six month period shall be
paid in a lump sum on expiration of such period.
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(1)
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Health benefits. The eligible Employee and his or her
spouse and other eligible dependents may elect to continue to be
covered by the medical, dental, vision and prescription drug
plan(s) maintained by the Company in which the eligible Employee
and his or her spouse or other dependents were participating
immediately prior to the date of his or her Termination of
Employment in accordance with the COBRA provisions of Code section
4980B and ERISA section 602. During the Severance
Period, the Company shall pay the COBRA premiums for the same level
of coverage in which the Employee is enrolled at Termination of
Employment. In addition, to the extent that the COBRA
premiums paid by the Company are taxable to the Employee, the
Company shall pay to the Employee a gross-up payment for applicable
taxes. Such payment shall be made monthly during the
Severance Period; provided that if the gross-up payments are
subject to Code section 409A and the Employee is a “specified
employee,” as defined in the regulations under Code section
409A, at the time of the Employee’s Termination of
Employment, no payment shall be made until the expiration of six
months following Termination of Employment. In such
event, the gross-up payments for the preceding six months shall be
paid in a lump sum on expiration of such period.
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(2)
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Outplacement Services. During the Severance Period,
the Company shall provide for an eligible Employee executive-level
outplacement services by a vendor selected by the Company.
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In addition to the Severance Pay and Severance Benefits
provided in this Section 4, the eligible Employee shall be entitled
to payment of any base salary or vacation pay accrued on the Date
of Termination in accordance with the Company’s policies for
such payments.
5. Reductions
or Offsets to Severance Pay
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(a)
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The Company has the right to offset from any Severance Pay under
this Plan the amount of any monies that the Employee owes at the
time of separation to the Company or any Affiliate or to any
employee benefit plan maintained by the Company or any of its
Affiliates.
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(b)
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The Company has the right to offset from any Severance Pay under
this Plan the replacement value of any personal property owned by
the Company or any Affiliate but not returned by an eligible
Employee to the Company by the date of Termination of
Employment.
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