EXHIBIT 10.2
SEVERANCE
AGREEMENT
AGREEMENT made as of October 5,
2000 (the “Effective Date”) between BEVERLY
ENTERPRISES, INC., a Delaware corporation (the
“Company”), and DAVID R. DEVEREAUX (the
“Executive”).
WHEREAS, the Executive is employed by
the Company, or by one of its wholly-owned consolidated
subsidiaries; and
WHEREAS, the Company recognizes that
the Executive’s contribution to the Company’s growth
and success will be substantial; and
WHEREAS, the Company wishes to
encourage the Executive to remain with and devote full time and
attention to the business affairs of the Company and wishes to
provide income protection to the Executive for a period of time in
the event of an involuntary Termination of Employment not for Cause
or a voluntary Termination of Employment for Good Reason within the
Term of this Agreement;
NOW, THEREFORE, in consideration of
the mutual agreements and understandings set forth herein and for
other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the Company and the Executive hereby
agree as follows:
1. Definitions .
(a) “ Base Salary ” shall mean
the Executive’s regular annual rate of base pay as of the
date in question.
(b) The “ Benefit Multiplier ”
shall be equal to 1.0 except that if Executive’s Termination
of Employment is pursuant to paragraph 3(b), it shall be equal to
3.0.
(c) The “ Benefit Period ”
shall be the period of years, equal to the Benefit Multiplier,
which follows the Executive’s Termination of Employment.
(d) “ Cause ” shall mean the
Executive’s (i) conviction of a crime involving moral
turpitude, theft or embezzlement of property from the Company or
(ii) willful misconduct or willful failure substantially to
perform the duties of his position, but only if such has continued
after receipt of such notices and cure periods as are provided for
by the Company’s disciplinary process.
(e) A “ Change in Control ”
shall be deemed to have taken place if: (i) any person,
corporation, or other entity or group, including any
“group” as defined in Section l3(d)(3) of the
Securities Exchange Act of 1934, other than any employee benefit
plan then maintained by the Company, becomes the beneficial owner
of shares of the Company having 30 percent or more of the total
number of votes that may be cast for the election of Directors of
the Company; (ii) as the result of, or in connection with, any
contested election for the Board of Directors of the Company, or
any tender or exchange offer, merger or other business combination
or sale of assets, or any combination of the foregoing (a
“Transaction”), the persons who were Directors of the
Company before the Transaction shall cease to constitute a majority
of the Board of Directors of the Company or any successor to the
Company or its assets, or (iii) at any time (a) the
Company shall consolidate with, or
merge with, any other Person and the Company shall not be the
continuing or surviving corporation, (b) any Person shall
consolidate with, or merge with the Company, and the Company shall
be the continuing or surviving corporation and in connection
therewith, all or part of the outstanding Company stock shall be
changed into or exchanged for stock or other securities of any
other Person or cash or any other property, (c) the Company
shall be a party to a statutory share exchange with any other
Person after which the Company is a subsidiary of any other Person,
or (d) the Company shall sell or otherwise transfer 50% or
more of the assets or earning power of the Company and its
subsidiaries (taken as a whole) to any Person or Persons; provided,
however, that notwithstanding anything to the contrary herein, a
Change in Control shall not include either any transfer to a
consolidated subsidiary, reorganization, spin-off, split-up,
distribution, or other similar or related transaction(s) or any
combination of the foregoing in which the core business and assets
of the Company and its subsidiaries (taken as a whole) are
transferred to another entity (“Controlled”) with
respect to which (1) the majority of the Board of Directors of
the Company (as constituted immediately prior to such
transaction(s)) also serve as directors of Controlled and
immediately after such transaction(s) constitute a majority of
Controlled’s board of directors, and (2) more than 70%
of the shareholders of the Company (immediately prior to such
transaction(s)) become shareholders or other owners of Controlled
and immediately after the transaction(s) control more than 70% of
the ownership and voting rights of Controlled.
(f) The “ Change in Control Date
” shall mean the date immediately prior to the effectiveness
of the Change in Control.
(g) The “ Committee ” shall
mean the Compensation Committee of the Company’s Board of
Directors.
(h) The “ Competitive Businesses
” shall mean any of the health care businesses in which the
Company is engaged on the Effective Date.
(i) The Executive shall have “ Good
Reason ” to terminate employment if: (i) the
Executive is not elected, reelected, or otherwise continued in the
office of the Company or any of its subsidiaries which he held
immediately prior to the Change in Control Date, or he is removed
as a member of the Board of Directors of the Company or any of its
subsidiaries if the Executive was a director immediately prior to
the Change in Control Date; (ii) the Executive’s duties,
responsibilities or authority as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without the Executive’s consent; (iii) the
Executive’s duties, responsibilities, or authority as an
employee are materially reduced or diminished from those in effect
on the Effective Date without the Executive’s consent;
(iv) the Executive’s compensation or benefits are
reduced without the Executive’s consent, unless all
Executive-level officers have their compensation or benefits
reduced in the same percentage amount; (v) the Company reduces
the potential earnings of the Executive under any performance-based
bonus or incentive plan of the Company in effect immediately prior
to the Change in Control Date; (vi) the Company requires that
the Executive’s employment be based other than at its
location on the Effective Date without his consent; (vii) any
purchaser, assign, surviving corporation, or successor of the
Company or its business or assets (whether by acquisition, merger,
liquidation, consolidation, reorganization, sale or transfer of
assets or business, or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and
obligations of the Company hereunder pursuant to Section 16
hereof; or (viii) the Company breaches any of the provisions
of this Agreement.
(j) “ Person ” shall have the
meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act of 1934 and used in Sections 13(d) and
14(d) thereof, including a “group” as defined in
Section 13(d).
(k) “ Target Bonus ” shall
mean the target bonus (100% level) established for the Executive
for the year in question under the Company’s “Annual
Incentive Plan.”
(l) “ Termination of Employment
” shall mean the termination of the Executive’s
employment by the Company other than such a termination in
connection with an offer of immediate reemployment by a successor
or assign of the Company or purchaser of the Company or its assets
under terms and conditions which would not permit the Executive to
terminate his employment for Good Reason.
2. Term . The initial
term of this Agreement shall be for the period commencing on the
Effective Date and ending on the third anniversary of the Effective
Date. The Term shall be automatically extended by one additional
day for each day beyond the Effective Date of this Agreement that
the Executive remains employed by the Company until such time as
the Company elects to cease such extension by giving written notice
of such to the Executive. (In such event, the Agreement shall thus
terminate on the third anniversary of the effective date of such
notice.)
3. Eligibility for Severance
Benefits . The Executive shall be eligible for the benefits
described in Paragraph 4 (the “Severance
Benefits”) if, (a) during the Term, the Executive has a
Termination of Employment initiated (i) by the Company without
Cause, or (ii) by the Executive for Good Reason, and, in
either case, subsection (b) does not apply; or (b) during
the Term (i) there has been a Change in Control and during the
two year period commencing on the Change in Control Date, the
Executive has a Termination of Employment initiated by the Company
without Cause or by the Executive for Good Reason, or (ii) the
Executive has a Termination of Employment initiated by the Company
without Cause or by the Executive for Good Reason following the
commencement of any discussion with a third person that ultimately
results in a Change in Control with such third person within
12 months of the commencement of such discussions (in which
case, the date of such discussion shall be substituted for the
Change in Control Date wherever appropriate, including the
definition of “Good Reason” and in Paragraph 4
hereof).
4. Severance Benefit .
Upon satisfaction of the requirements set forth in
Paragraph 3, and subject to Paragraphs 5 and 9, the Executive
shall be entitled to the following Severance Benefits:
(a) Cash Payment . The Executive shall be
entitled to receive an amount of cash equal to the Benefit
Multiplier times the greater of:
(i) the sum of the Executive’s Base
Salary as in effect upon the Termination of Employment, and the
greater of
(A) the Executive’s Target
Bonus as in effect upon the Termination of Employment or,
(B) the Executive’s actual
bonus under the Company’s “Annual Incentive Plan”
for the year prior to the year of the Executive’s Termination
of Employment; or
(ii) the sum of the Executive’s Base
Salary as in effect on the Change in Control Date, and the greater
of
(A) the Executive’s Target
Bonus as in effect upon the Change in Control Date or,
(B) the Executive’s actual
bonus under the Company’s “Annual Incentive Plan”
for the year prior to the Change in Control Date.
The payment shall
be made in a single lump sum within ten days following the
Executive’s Termination of Employment.
(b) Continuation of Benefits .
(i) For the Benefit Period, the Executive
shall be treated as if he or she had continued to be an employee
for all purposes under the Company’s Medical Plan, Executive
Medical Reimbursement Plan and Dental Plan. Following this period,
the Executive shall be entitled to receive continuation coverage
under Part Six of Title I of ERISA (“COBRA”
Benefits) treating the end of this period as a termination of the
Executive’s employment (other than for gross misconduct).
(ii) The Company shall maintain in force,
at its own expense, for the remainder of the Executive’s
life, the vested life insurance, if any, in effect under the
Company’s Executive Life Insurance Plan as of the Change in
Control Date or as of the date of Termination of Employment,
whichever is greater.
(c) Relocation Benefit . If within the
Benefit Period after the Executive’s Termination of
Employment, the Executive gives the Company written notice that he
or she desires to relocate within the continental United States,
the Company will reimburse the Executive for any reasonable
relocation expenses (in accordance with the Company’s general
relocation policy for executives as then in effect, or, at the
Executive’s election, as in effect on the Change in Control
Date) in connection with such relocation. This benefit shall
include only valid relocation expenses which are not reimbursed by
a third party.
(d) Executive SavingsPlus Plan . For the
year of the Executive’s Termination of Employment, the
Company will make the contribution to its Executive SavingsPlus
Plan (the “SavingsPlus Plan”) that it would have made
if the Executive had not had a Termination of Employment, taking
account of the
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