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 a
