UNITED STATES
SECURITIES AND EXCHANGE COMMISSON
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
December 1, 2006
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8351 31-0791746
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
2600 Chemed Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6900
Check the appropriate box below if the form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
230.425)
[_] Pre-commencement communications pursuant to Rule 14d-2 (b) under the
Exchange Act (17 CFR 230.425)
[_] Pre-commencement communications pursuant to Rule 13e-4 (c) under the
Exchange Act (17 CFT 230.425)
Page 1 of 3
Item 5.02(e) Compensatory Arrangements of Certain Officers
Employment Agreements
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On December 1, 2006 Chemed Corporation and David P. Williams, its Vice
President and Chief Financial Officer, entered into an Employment Agreement
which provides for an annual base salary of $313,500. If the Corporation
terminates Mr. Williams's employment without cause, as defined in the agreement,
he shall receive two and one-half times his annual base salary plus a pro-rated
portion of his annual incentive bonus, and shall continue to participate in the
Corporation's welfare benefit plans for eighteen months, in exchange for
one-year post termination noncompete and nonsolicitation covenants.
The Corporation's Board of Directors has authorized the execution of
comparable employment agreements with each of Kevin J. McNamara, its President
and Chief Executive Officer; and Timothy S. O'Toole, its Executive Vice
President and Chief Executive Officer of its Vitas Healthcare Corporation
subsidiary; upon expiration of their existing employment agreements, in May 2008
and May 2007, respectively.
Change in Control Severance Plan
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On December 1, 2006 the Compensation/Incentive Committee of the Chemed
Corporation Board of Directors ("CIC") approved the Change in Control Severance
Plan ("Control Plan"). The Control Plan provides severance benefits in the event
of a change in control of the Corporation, followed within two years by
termination of employment without cause, or constructive termination.
The Control Plan covers fifteen employees, including certain executive
officers and directors. It provides for payments of three times base salary and
bonus to Kevin J. McNamara, Timothy S. O'Toole, and David P. Williams, and of
two times base salary and bonus to the other participants. Participants would
also receive welfare benefits, company contributions to defined contribution
plans, and perquisites, for periods of three years for Messrs. McNamara, O'Toole
and Williams and two years for other participants.
Severance Policy
- ----------------
On December 1, 2006 the CIC approved the Chemed Senior Executive Severance
Policy ("Severance Policy") covering twelve employees, including a director and
two executive officers. The Severance Policy provides severance benefits upon
termination of employment without cause for employees who do not have employment
agreements. Severance consists of a lump sum payment of 1.5 times base salary,
pro-rated bonus, and continuation of welfare benefits for one year post
termination. Severance is conditioned on execution of a general release
including one-year post termination noncompete and nonsolicitation covenants.
Page 2 of 3
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
10.01 Employment Agreement dated as of December 1, 2006 between Chemed
Corporation and David P. Williams.
10.02 Chemed Corporation Change in Control Severance Plan.
10.03 Chemed Corporation Senior Executive Severance Policy as of December 1,
2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHEMED CORPORATION
Dated: December 1, 2006 By: /s/ Arthur V. Tucker, Jr.
---------------- ------------------------------------
Arthur V. Tucker, Jr.
Vice President and Controller
Page 3 of 3
Exhibit 10.01
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of December, 2006 by and between David P.
Williams, 8677 Emerald Isle, Mason, Ohio 45040 ("Employee"), and Chemed
Corporation, a Delaware corporation (the "Company").
WHEREAS, the Company has employed Employee and desires to continue to
employ Employee as a senior executive and Employee desires to work for the
Company or its subsidiaries in such capacity on the terms and conditions
hereinafter provided;
WHEREAS, Employee is a key senior executive of the Company with major
responsibilities for planning, directing, coordinating and controlling overall
corporate operations;
WHEREAS, in such capacity Employee will develop or have access to all or
substantially all of the business methods and confidential information relating
to the Company, including but not limited to, its financial performance and
results, its product formulae, its manufacturing organization and methods, its
product research and development policies and programs, its service techniques,
its purchasing organization and methods, its sales organization and methods, its
pricing of products, its market development and expansion plans, its personnel
policies and training and development programs, and its customer and supplier
relationships; and franchising programs and franchisee relationships;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
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1. EMPLOYMENT
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ss.1.1 Position and Duties.
(a) The Company agrees to employ Employee and Employee agrees to work for
the Company as a senior financial executive. Employee shall have such duties and
authority as are normally associated with his office. While employed hereunder,
Employee shall devote his full time, effort, skill and attention to the affairs
of the Company. During the term of his employment hereunder, Employee shall not
render any services to any other person that might be in competition with the
Company or any of its subsidiaries or affiliates or in conflict with his
position as a senior executive of the Company or his duty of undivided loyalty
to the Company.
ss.1.2 Term. Unless sooner terminated in accordance with the provisions
hereof, the term of employment shall commence on December 1, 2006 and shall
continue until November 30, 2008. This agreement shall automatically extend
thereafter on each anniversary of the commencement date for additional one-year
periods unless either party delivers written notice thirty days in advance of
such anniversary of the party's intent not to extend this agreement.
2. COMPENSATION
------------
ss.2.1 Base Salary. While employed hereunder the Company shall pay Employee
a base salary at an annual rate of $313,500.00 or such higher amount or amounts
as the Company may from time to time approve. The base salary shall be due and
payable at the same times and intervals at which salary payments are made to
other senior executives.
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ss.2.2 Incentive Compensation. Employee will be entitled to participate in
all incentive compensation and bonus plans as such have been maintained by the
Company for its senior executives generally. The Employee's annual incentive
compensation will be payable, with respect to each calendar year, on or before
February 28 in the following year.
ss.2.3 Employee Benefits. Employee shall be entitled to participate in
those "fringe" benefit plans which the Company provides for its executives
generally. Employee's participation in such plans will be in accordance with and
subject to the terms and provisions thereof.
ss.2.4 Pension. Employee will continue to participate in Chemed's Excess
Benefit Plan in accordance with and subject to its provisions.
ss.2.5 Miscellaneous.
(a) Company will pay or reimburse Employee for his reasonable business
expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation in accordance with current
Company policy. Employee will be entitled to payment for unused vacation time in
accordance with Company policy.
(c) Subject to ss.1.1(a) of this Agreement, compliance with applicable laws
relating to interlocking directorships, the Company's policies on conflicts of
interest and improper payments and accounting records contained in the Company's
"Policies on Business Ethics" and "Corporate Governance Principles" and to any
other current applicable Company policy, during the term of Employee's
employment hereunder, Employee will be permitted to accept election, and to
serve as, a director of other entities. Employee will be permitted to retain all
fees and other benefits resulting from his service as a director of any such
entity.
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(d) Each party shall pay their own legal fees incurred in connection with
any enforcement of rights under this Agreement. All disputes arising hereunder
shall be subject to arbitration according to the rules of the American
Arbitration Association. The Company and Employee shall share equally in any
third party costs of such arbitration.
3. TERMINATION.
-----------
ss.3.1 Termination of Employment. The employment of Employee shall
terminate prior to the expiration of the term specified in ss.1.2 upon the
occurrence of any of the following prior to such time:
(a) The death of Employee;
(b) The termination of Employee's employment due to Employee's disability
pursuant to ss.3.2;
(c) The termination by the Company of Employee's employment for Cause
pursuant to ss.3.3;
(d) The retirement of Employee under a retirement plan of the Company; or
(e) The resignation of Employee.
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The termination by the Company of Employee's employment hereunder for any
reason other than those specified in this ss.3.1 shall hereinafter be referred
to as a termination "Without Cause".
ss.3.2 Disability. If, by reason of physical or mental disability, Employee
is unable to carry out his duties pursuant to this Agreement for four (4)
consecutive months, his services hereunder may be terminated by the Company upon
two (2) months' written notice to be given to Employee at any time after the
period of four (4) continuous months of disability and while such disability
continues. If, prior to the expiration of the two (2) months after the giving of
such notice, Employee shall recover from such disability and return to the
active discharge of his duties, then such notice shall be of no further force
and effect and Employee's employment shall continue as if such disability had
not occurred. If Employee shall not so recover from his disability and return to
his duties, then his services shall terminate at the expiration date of such two
(2) months' notice. During the period of Employee's disability and until the
expiration date of such two (2) months' notice, Employee shall continue to
receive all compensation and other benefits provided herein as if he had not
been disabled, at the time, in the amounts and in the manner provided herein. In
the event a dispute arises between Employee and the Company concerning
Employee's physical or mental ability to continue or return to the performance
of his duties as aforesaid, Employee shall submit to examination by a competent
physician mutually agreeable to both parties, and such physician's opinion as to
Employee's ability to so perform will be final and binding.
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ss.3.3 For Cause. The Company may, at any time by written notice to the
Employee, terminate his services hereunder for Cause. Such notice shall specify
the event or events and the actions or failure to act constituting Cause.
"Cause" shall mean, with respect to a Employee's termination of employment: (a)
the willful and repeated failure of the Employee to perform substantially the
Employee's duties with Company (other than any such failure resulting from
incapacity due to physical or mental illness); (b) the Employee's conviction of,
or plea of guilty or nolo contendere to, which through lapse of time or
otherwise is not subject to appeal, a felony which is materially and
demonstrably injurious to Company; or (c) the Employee's engagement in willful
gross misconduct or gross negligence in connection with his or her employment.
If the basis for discharge is pursuant to paragraph (c) above, Employee
shall have thirty (30) days from his receipt of the notice of termination for
Cause to cure, if curable, the actions or failure to act specified in such
notice and, in the event of any such cure within such period, such conduct shall
not constitute Cause hereunder.
ss.3.4 Consequences of Termination.
(a) If Employee's employment hereunder shall terminate pursuant to any of
the provisions of this Article 3, his base salary and incentive compensation
referred to in ss.ss. 2.1 and 2.2 shall cease to accrue forthwith.
(b) If the Company shall terminate Employee's employment hereunder Without
Cause, the Company shall pay Employee a lump sum amount in cash on termination
equal to two and one-half times his then annual base salary plus a lump sum
amount in cash on termination equal to the product of: (i) the average amount of
the Employee's annual incentives under the Company's annual incentive plan paid
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or payable for the last three full fiscal years prior to termination; and (ii) a
fraction, the numerator of which is the number of days in the fiscal year
through the date of termination and the denominator of which is 365. Employee
shall also be eligible to participate in the Company's welfare benefits plans
such as health insurance, life insurance, long-term care insurance and long-term
disability benefits plans for eighteen months following termination, at the then
current employee contribution rates; provided that if the Employee is precluded
from continuing his or her participation in any applicable plan, program, or
arrangement, the Employee shall be provided with the after-tax cost of
continuation of such coverage, including premiums under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, ("COBRA Premiums"), for the
Employee with respect to the benefits provided under such plan, program, or
arrangement, paid as either a lump sum payment or monthly as COBRA Premiums are
due, at the discretion of the Company. If the Employee becomes reemployed with
another employer and is eligible to receive health insurance, life insurance,
long-term care insurance or long-term disability coverage under another
employer-provided plan (regardless of whether the Employee elects such
coverage), the welfare benefits provided pursuant to this agreement shall be
secondary to those provided under such other plan.
(c) In the event that Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, the rights of Employee
under any incentive compensation plan referred to in ss.2.2, under the executive
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or employee benefit plans or arrangements referred to in ss.2.3 and ss.2.4, or
otherwise shall be determined, subject to this Article 3, in accordance with the
terms and provisions of such plans, arrangements and options applicable to an
employee whose employment has terminated in the manner that occurred, except
that a termination Without Cause shall be treated as a retirement under a
retirement plan of the Company for the purposes of the Company stock incentive
plans.
(d) If the Employee's employment hereunder shall terminate pursuant to
ss.3.1(a), (b), or (d), the Company shall pay Employee in lieu of any amounts
that may be due and payable under the Company's annual incentive plan for the
fiscal year of termination a lump sum amount in cash on termination equal to the
product of: (i) the average amount of the Employee's annual incentives under the
Company's annual incentive plan paid or payable for the last three full fiscal
years prior to termination; and (ii) a fraction, the numerator of which is the
number of days in the fiscal year through the date of termination and the
denominator of which is 365.
(e) If the Employee's employment hereunder shall terminate pursuant to
ss.3.1(e) or if the Company shall terminate Employee's employment hereunder with
Cause pursuant to ss.3.1(c), Employee's annual incentive bonus shall then be
forfeited.
(f) Employee shall not be required to offset against amounts due from the
Company under this Article 3 for any salary, bonus or other benefits (other than
welfare benefits described above) received by Employee from a third-party, and
Employee shall be under no duty to mitigate by seeking or accepting another
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position. Any amounts paid or benefits received under this agreement are
conditioned upon execution of a waiver of liability in favor of the Company
executed by Employee, in the form approved by the Company's counsel.
4. OTHER COVENANTS OF EMPLOYEE.
---------------------------
ss.4.1 Employee shall have no right, title or interest in any reports,
studies, memoranda, correspondence, manuals, records, plans, or other written,
printed or otherwise recorded materials of any kind belonging to or in the
possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
ss.4.2 Without the prior written consent of the Company, Employee shall not
at any time (whether during or after his employment with the Company) use for
his own benefit or purposes or for the benefit or purposes of any other person,
firm, partnership, association, corporation or business organization, entity or
enterprise, or disclose (except in the performance of his duties hereunder) in
any manner to any person, firm, partnership, association, corporation or
business organization, entity or enterprise, or disclose (except in the
performance of his duties hereunder) in any manner to any person, firm,
partnership, association, corporation or business organization, entity or
enterprise, any trade secret, or other confidential or proprietary information,
9
data, know-how or knowledge (including, but not limited to, that relating to
financial policies, product composition, manufacturing organization and methods,
research and development policies and programs, service techniques, purchasing
organization and methods, sales organization and methods, product pricing,
market development and expansion plans, personnel policies and training and
development programs, customer and supplier relationships) belonging to, or
relating to the affairs of, the Company or its subsidiaries.
ss.4.3 Employee shall promptly disclose to the Company (and to no one else)
all improvements, discoveries and inventions that may be of significance to the
Company or its subsidiaries made or conceived alone or in conjunction with
others (whether or not patentable, whether or not made or conceived at the
request of or upon the suggestion of the Company during or out of his usual
hours of work or in or about the premises of the Company or elsewhere) while in
the employ of the Company, or made or conceived within six months after the
termination of his employment by the Company, if resulting from, suggested by or
relating to such employment. All such improvements, discoveries and inventions
shall, to the extent that they are patentable, be the sole and exclusive
property of the Company and are hereby assigned to the Company. At the request
of the Company and at its cost and without liability to Employee, Employee shall
assist the Company, or any person or persons from time to time designated by it,
in obtaining the grant of patents in the United States and/or in such other
country or countries as may be designated by the Company covering such
improvements, discoveries and inventions and shall be connection therewith
10
execute such applications, statements or other documents, furnish such
information and data and take all such other action (including, but not limited
to, the giving of testimony) as the Company may from time to time request.
ss.4.4 For a period of one year following Company's termination of
Employee's employment hereunder Without Cause, in the event Employee has agreed
to accept payment under Section 3.4(b) hereof: (i) Employee shall not directly,
or indirectly, as a stockholder owing beneficially or of record more than 5% of
the outstanding shares of any class of stock of any issuer, or as an officer,
director, employee, consultant, partner, joint venturer, proprietor, or
otherwise, engage in or become interested in any business that directly or
indirectly is in competition with the Company or any of its subsidiaries (or any
of their successors) as conducted at the time of Employee's termination, (ii)
Employee shall not, without the prior written consent of the Company, solicit or
hire or induce the termination of employment of any employee or other personnel
providing services to the Company, or any of its subsidiaries, for any business
activity, and (iii) Employee shall not, without the prior written consent of the
Company, solicit the business of any customer of the Company or any of its
subsidiaries (or any of their successors).
ss.4.5 The obligations of Employee set forth in this Article 4 are in
addition to and not in limitation of any obligations which would otherwise exist
as a matter of law. The provisions of this Article 4 shall survive the
termination of Employee's employment hereunder.
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5. CERTAIN REMEDIES
----------------
ss.5.1 Breach by the Company. In the event that the Company shall fail, in
any material respect, to observe and perform its obligations hereunder, the
Employee may give written notice to the Company specifying the nature of such
failure. If within thirty (30) days after its receipt of such notice the Company
shall not have remedied such failure, the Employee shall have the right and
option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article 3 hereof in the case of a termination by the Company Without Cause. The
remedy provided for in this ss.5.1 shall be in addition to and not in limitation
of any other remedies which would otherwise exist as a matter of law.
ss.5.2 Breach by the Employee. Employee acknowledges and agrees that the
Company's remedy at law for any breach of any of Employee's obligations under
ss.ss.1.1(a), 4.1, 4.2, 4.3 and 4.4 would be inadequate, and agrees and consents
that temporary and permanent injunctive relief may be granted in any proceeding
that may be brought to enforce any provision of any such sections, without the
necessity of proof of actual damage.
6. GENERAL PROVISIONS
------------------
ss.6.1 Representations and Warranties. Employee represents and warrants to
the Company that he is free to enter into this Agreement and that he has no
prior or other obligations or commitments of any kind to anyone that would in
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any way hinder or interfere with his acceptance of, or the full, uninhibited and
faithful performance of, his employment hereunder or the exercise of his best
efforts as an employee of the Company.
ss.6.2 Understandings; Amendments. Except as otherwise provided herein,
this Agreement sets forth the entire agreement and understanding of the parties
concerning the subject matter hereof and supersedes all prior agreements,
arrangements and understandings between Employee and the Company concerning such
subject matter. No representation, promise, inducement or statement of intention
has been made by or on behalf of either party hereto that is not set forth in
this Agreement or the documents referred to herein. This Agreement may not be
amended or modified except by a written instrument specifically referring to
this Agreement executed by the parties hereto.
ss.6.3 Notices.
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and may either be delivered personally to the
addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
Attn: President
with a copy to:
Secretary
Chemed Corporation
2600 Chemed Center
Cincinnati, OH 45202
13
If to Employee:
8677 Emerald Isle
Mason, Ohio 45040
(b) Either party may change the address to which any such notices or
communications are to be directed to it by giving written notice to the other
party in the manner provided in the preceding paragraph (a).
ss.6.4 Assignments; Binding Effect.
(a) Employee acknowledges that the services to be rendered by him are
unique and personal. Accordingly, Employee may not assign any of his rights or
delegate any of his duties or obligations under this Agreement. This Agreement
shall be binding upon, and to the extent herein permitted shall inure to the
benefit of, Employee's heirs, legatees and legal representatives.
(b) The Company may not assign this Agreement or its rights hereunder
except to a successor of all or substantially all of the business and assets of
the Company. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company's successors and permitted assigns.
ss.6.5 Severability. If any part of this Agreement shall be unenforceable
under applicable law, it shall not affect the remaining parts of this Agreement.
ss.6.6 Waivers. The failure of either party hereto at any time or from time
to time to require performance of any of the other party's obligations under
this agreement shall in no manner affect the right to enforce any provision of
this Agreement at a subsequent time, and the waiver of any rights arising out of
14
any breach shall not be construed as a waiver of any rights arising out of any
subsequent breach.
ss.6.7 Application of Section 409A of the Internal Revenue Code.
In the event that any payment or benefit to the Employee or for the
Employee's benefit paid or payable or distributed or distributable under this
Agreement ("Payment"), would be subject to the excise tax imposed by Section
409A of the Code, or any interest or penalties are incurred by the Employee with
respect to such excise tax (collectively, "Excise Tax"), the Employee will be
entitled to receive an additional payment ("Gross-Up Payment") in an amount such
that after payment by the Employee of all taxes (including any income or payroll
tax, interest or penalties imposed with respect to such taxes and the Excise
Tax, other than interest and penalties imposed by reason of the Employee's
failure to file timely a tax return or pay taxes shown due on the Employee's
return, and including any Excise Tax imposed upon the Gross-Up Payment), the
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
An initial determination as to whether and in what amount a Gross-Up
Payment is required will be made at the Company's expense by an accounting firm
of recognized national standing selected by the Company ("Accounting Firm"). The
Accounting Firm will provide its determination ("Determination"), together with
detailed supporting calculations and documentation, to the Company and the
Employee within five days of the Date of Termination, if applicable, or such
other time as requested by the Company or by the Employee (provided the Employee
reasonably believes that any of the Payments may be subject to the Excise Tax).
If the Accounting Firm determines that no Excise Tax is payable by the Employee
with respect to a Payment or Payments, it will furnish the Employee an opinion
15
reasonably acceptable to the Employee that no Excise Tax will be imposed. Within
10 days of the delivery of the Determination, the Employee will have the right
to dispute the Determination (the "Dispute"). The Gross-Up Payment, if any, as
determined pursuant to this Section will be paid by the Company to the Employee
within 5 days of the receipt of the Determination. The existence of the Dispute
will not in any way affect the Employee's right to receive the Gross-Up Payment
in accordance with the Determination. If there is no Dispute, the Determination
will be binding upon the Company and the Employee, subject to the following
paragraph.
As a result of uncertainty in the application of Section 409A of the Code,
it is possible that a Gross-Up Payment will be paid which should not be paid
("Excess Payment") or that a Gross-Up Payment which should be paid will not be
paid ("Underpayment"). An Underpayment will be deemed to have occurred (i) upon
notice to the Employee from any governmental taxing authority that the
Employee's tax liability (whether in respect of the Employee's current taxable
year or in respect of any prior taxable year) may be increased by reason of the
imposition of the Excise Tax on a Payment or Payments with respect to which the
Company has failed to make a sufficient Gross-Up Payment, (ii) upon a
determination by a court, (iii) by reason of a determination by the Company
(which will include the position taken by the Company on its federal income tax
return) or (iv) upon the resolution of the Dispute to the Employee's
satisfaction. If an Underpayment occurs, the Employee will promptly notify the
Company and the Company will promptly, but in any event at least 5 days prior to
16
the date on which the applicable government taxing authority has requested
payment, pay to the Employee an additional Gross-Up Payment equal to the amount
of the Underpayment plus any interest and penalties (other than interest and
penalties imposed by reason of the Employee's failure to file timely a tax
return or pay taxes shown due on the Employee's return) imposed on the
Underpayment.
An Excess Payment will be deemed to have occurred upon a Final
Determination (as hereinafter defined) that the Excise Tax will not be imposed
upon a Payment or Payments (or portion thereof) with respect to which the
Employee had previously received a Gross-Up Payment. A "Final Determination"
will be deemed to have occurred when the Employee has received from the
applicable government taxing authority a refund of taxes or other reduction in
the Employee's tax liability by reason of the Excise Payment and upon either (x)
the date a determination is made by, or an agreement is entered into with, the
applicable governmental taxing authority which finally binds the Employee and
such taxing authority, or if a claim is brought before a court, the date a final
determination has been made by such court and either all appeals have been
finally resolved or the time for all appeals has expired or (y) the statute of
limitations with respect to the Employee's applicable tax return has expired. If
an Excess Payment is determined to have been made, the Employee will pay to the
Company (but not less than 10 days after the determination of such Excess
Payment and written notice has been delivered to the Employee) the amount of the
Excess Payment plus interest at an annual rate equal to the Applicable Federal
Rate provided for in Section 1274(d) of the Code from the date the Gross-Up
17
Payment was paid until the date of repayment. The Employee will use reasonable
cooperative efforts at the request of the Company to assist in the determination
of the amount of any Excess Payment or Underpayment made to the Employee
pursuant to this Plan.
ss.6.8 Governing Law. This Agreement, the rights and obligations hereunder,
and any related claims shall be governed by and construed in accordance with the
laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written hereinabove.
CHEMED CORPORATION
By: /s/ Kevin J. McNamara
---------------------
Kevin J. McNamara, President
and Chief Executive Officer
EMPLOYEE
/s/ David P. Williams
---------------------
David P. Williams
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Exhibit 10.02
CHEMED CORPORATION
CHANGE IN CONTROL SEVERANCE PLAN
ARTICLE I
ESTABLISHMENT OF PLAN
---------------------
As of the Effective Date, the Company (as such term is hereinafter defined)
hereby establishes the Chemed Corporation Change in Control Severance Plan, as
set forth in this document.
ARTICLE II
PURPOSE
-------
Chemed Corporation, by means of this Change in Control Severance Plan,
desires to provide Participants (as such term is hereinafter defined) with
certain severance protections in the event of a Change in Control of the Company
(as both terms are hereinafter defined) in order to minimize the personal
financial concerns and to promote the best interests of the Company and any
successor.
ARTICLE III
DEFINITIONS
-----------
As used herein, the following words and phrases shall have meanings set
forth below (unless the context clearly indicates otherwise):
3.1 "Administrative Committee" shall mean the Compensation/Incentive
Committee of the Board of Directors or such other committee as determined by the
Board of Directors.
3.2 "Affiliate" shall mean an entity directly or indirectly controlled by,
controlling, or under common control with the Company.
3.3 "Annual Bonus" shall mean the average of the amounts of the
Participant's bonuses under an Employer's annual bonus plan paid or payable for
the last three full fiscal years prior to the Change in Control Date, or if more
favorable to the Participant, the Date of Termination. The amount shall include
any annual bonus or portion thereof which has been earned but deferred, and in
the event that the Participant was not employed by an Employer for the whole of
a particular fiscal year and such amount received by the Participant was reduced
pro-rata to reflect this fact, the amount shall be annualized.
3.4 "Base Salary" shall mean the amount a Participant is entitled to
receive from an Employer in cash as wages or salary on an annualized basis in
consideration for his or her services, including any such amounts which may have
been deferred, but excluding all other elements of compensation such as, without
limitation, any bonus, commissions, overtime, health benefits, perquisites, and
incentive compensation.
1
3.5 "Beneficiary" shall mean those designated by the Participant, or if not
so designated:
(a) with respect to a Participant who was married at the time of death, his
or her surviving spouse; and
(b) with respect to a Participant who was not married at the time of death,
the legal representative of the Participant's estate under the laws of the state
of the Participant's domicile at the time of death.
3.6 "Board" shall mean the Board of Directors of the Company.
3.7 "Cause" shall mean, with respect to a Participant's termination of
employment: (a) the willful and repeated failure of the Participant to perform
substantially the Participant's duties with an Employer (other than any such
failure resulting from incapacity due to physical or mental illness); (b) the
Participant's conviction of, or plea of guilty or nolo contendere to, which
through lapse of time or otherwise is not subject to appeal, a felony which is
materially and demonstrably injurious to an Employer; or (c) the Participant's
engagement in willful gross misconduct or gross negligence in connection with
his or her employment.
3.8 "Change in Control" shall mean the first to occur of any of the
following events after the Effective Date:
(a) the direct or indirect acquisition by any person, corporation, entity,
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")) (a "Person") of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either the then outstanding capital stock of the Company
("Outstanding Capital Stock") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote in the election of
members of the Board ("Outstanding Voting Securities") in a single transaction
or series of transactions; provided, however, that the following acquisitions
shall not constitute a Change in Control:
(i) an acquisition from the Company or an Affiliate;
(ii) an acquisition by the Company or an Affiliate;
(iii) an acquisition by an employee benefit plan or related trust sponsored
or maintained by the Company or an Affiliate; or
(iv) an acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii), and (iii) of Subsection (c) of this Section
3.8;
(b) Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any individual becoming a Board member subsequent
to the Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
Board members then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
2
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of Board members or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
(c) the consummation of a reorganization, merger, consolidation, or similar
transaction to which the Company is a party (a "Business Combination"), unless
following such Business Combination: (i) the Company is the surviving
corporation of such Business Combination, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan or related trust of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding capital stock or the combined voting power of
the then outstanding voting securities entitled to vote in the election of
members of the board, as the case may be, of the corporation resulting from such
Business Combination, except to the extent that such ownership existed prior to
such Business Combination; and (iii) individuals who were members of the
Incumbent Board constitute at least a majority of the members of the board of
the corporation resulting from such Business Combination;
(d) the approval by the shareholders of the Company of a plan for the
complete liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company; or
(e) any other transaction that the Administrative Committee deems to be a
Change in Control, which the Administrative Committee can deem to apply to all
Participants or only those Participants it selects.
3.9 "Change in Control Date" shall mean the date on which a Change in
Control occurs.
3.10 "Company" shall mean Chemed Corporation and any successor thereto.
3.11 "Date of Termination" shall mean the date on which a Participant's
employment with all Employers terminates.
3.12 "Disability" shall mean, with respect to a Participant's termination
of employment due to Disability: (a) a disability entitling the Participant to
long-term disability benefits under the applicable long-term disability plan of
the Company or an Affiliate or such other long-term disability plan under which
the Participant is entitled to long-term disability benefits; or (b) if the
Participant is not covered by such a plan, a physical or mental condition or
illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate for a total
of 180 days or more during any consecutive 12-month period.
3.13 "Effective Date" shall mean December 1, 2006.
3.14 "Employee" shall mean any full-time employee of an Employer.
3.15 "Employer" shall mean the Company or any of its Affiliates.
3
3.16 "Good Reason" shall mean, with respect to any Participant, the
occurrence of any of the following events after a Change in Control Date, or
prior to a Change in Control Date if any such events can be reasonably
demonstrated to have occurred in connection with, or in anticipation of, a
Change in Control:
(a) a material diminution in the nature and scope of the Participant's
responsibilities, authorities, powers, functions, or duties from the most
significant of those responsibilities, authorities, powers, functions, or duties
exercised by, and assigned to, the Participant at any time during the 120-day
period prior to the Change in Control Date, other than an isolated,
insubstantial, and inadvertent action not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Participant;
(b) a reduction in the Participant's Base Salary below the Required Base
Salary, other than an isolated, insubstantial, and inadvertent reduction not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Participant;
(c) a reduction in bonus under any current or subsequent annual bonus plan
available to the Participant below the average of the Participant's bonuses
under an Employer's annual bonus plan for the last three full fiscal years prior
to the Change in Control Date;
(d) a reduction in equity-based or other long-term incentive compensation
opportunity below that in effect for the Participant during the 120-day period
prior to the Change in Control Date;
(e) a reduction in the aggregate level of employee benefits offered to the
Participant in comparison to the most favorable of such employee benefit
programs and arrangements in effect for the Participant during the 120-day
period prior to the Change in Control Date, other than any across-the-board
reduction applicable to all Employees and other than an isolated, insubstantial,
and inadvertent reduction not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the Participant;
or
(f) a change at the request of an Employer in the Participant's principal
work location to a work location that is more than 50 miles from any location
where the Participant was based during the 120-day period prior to the Change in
Control Date, or an Employer's requiring the Participant to travel on Employer
business to a substantially greater extent than required during the 120-day
period prior to the Change in Control Date; or
(g) receipt of notice of Company's intention to cancel or not renew any
employment agreement of a Tier 1 Participant during the first year following a
Change in Control.
3.17 "Participant" shall mean an Employee who is designated in Appendix A
hereto to participate in the Plan or who may be added to such appendix from time
to time by the Administrative Committee.
3.18 "Plan" shall mean the Chemed Corporation Change in Control Severance
Plan.
3.19 "Required Base Salary" shall mean, with respect to any Participant,
the higher of: (a) the Participant's highest Base Salary as in effect during the
120-day period prior to the Change in Control Date; and (b) the Participant's
highest Base Salary in effect at any time thereafter.
4
3.20 "Severance Benefits" shall mean the payments and benefits provided in
accordance with Section 6.2 of the Plan.
3.21 "Severance Period" shall mean a period beginning on the Date of
Termination with a duration in years equal to the severance multiple the
Participant is entitled to receive under Section 6.2(a).
ARTICLE IV
ADMINISTRATION
--------------
4.1 Administration. Subject to the express provisions of the Plan, the
Administrative Committee shall have the authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. The determinations of the Administrative Committee pursuant to its
authority under the Plan shall be conclusive and binding.
ARTICLE V
DURATION OF PARTICIPATION
-------------------------
5.1 Duration of Participation. A Participant shall cease to be a
Participant in the Plan when he or she no longer is an Employee of any Employer.
Notwithstanding the foregoing, a Participant who is entitled, as a result of
ceasing to be an Employee of an Employer, to receipt of Severance Benefits or
any other amounts under the Plan shall remain a Participant in the Plan until
the full amount of the Severance Benefits and any other amounts payable under
the Plan have been paid to the Participant.
ARTICLE VI
SEVERANCE BENEFITS
------------------
6.1 Right to Severance Benefits.
(a) Terminations Which Give Rise to Severance Benefits. A Participant shall
be entitled to receive Severance Benefits as provided in Section 6.2, if a
Change in Control has occurred and the Participant's employment with an Employer
is terminated under the following circumstances: (i) by action of the Employer,
unless the termination is for Cause; or (ii) by action of the Participant within
90 days after the occurrence of an event constituting Good Reason; provided, in
either event, that (x) such termination occurs after such Change in Control and
on or before the second anniversary thereof, or (y) the termination described in
clause (i) above or the event constituting Good Reason giving rise to the
termination described in clause (ii) above, as applicable, occurs before such
Change in Control but the Participant can reasonably demonstrate that such
termination or event, as applicable, occurred in connection with, or in
anticipation of, a Change in Control. Severance Benefits or any other amounts
5
otherwise payable to a Participant under the Plan shall be conditioned upon
execution of a general release of claims in favor of the Company in a form
satisfactory to the Company's counsel.
(b) Terminations Which Do Not Give Rise to Severance Benefits. If a
Participant's employment is terminated: (i) by an Employer for Cause; (ii) due
to the Participant's death or Disability; or (iii) by the Participant other than
for Good Reason, the Participant shall not be entitled to the Severance Benefits
under the Plan, regardless of the occurrence of a Change in Control.
6.2 Severance Benefits.
(a) In General. If a Participant's employment is terminated in
circumstances entitling him or her to Severance Benefits as provided in Section
6.1(a), the Company shall pay such Participant (or in the event of a
Participant's death following entitlement to Severance Benefits, his or her
Beneficiary), an amount equal to three times for Tier 1 Participants and two
times for Tier 2 Participants, the sum of the Participant's: (i) Required Base
Salary; and (ii) Annual Bonus. In addition, Participant shall receive an amount
equal to the product of the Participant's: (x) Annual Bonus; and (ii) a
fraction, the numerator of which is the number of days in the fiscal year
through the Date of Termination and the denominator of which is 365, if such
termination occurs in a fiscal year other than the fiscal year of the Change in
Control. All such payments shall be made in a lump sum in cash within 10 days
after the Date of Termination. Regardless of termination, a Participant shall
receive an amount equal to the Participant's Annual Bonus within 10 days after
the Change in Control Date.
(b) Payment shall be made in a lump sum in cash.
(c) Welfare Benefits; Retirement Plans; Perquisites. In addition, a
Participant entitled to Severance Benefits pursuant to Section 6.1(a) will
continue to be provided with health insurance, life insurance, long-term care
insurance and long-term disability benefits comparable to the benefits provided
to the Participant immediately prior to the Date of Termination, or if more
favorable to the Participant, the Change in Control, for the duration of the
Severance Period, with no increase in the Employee's contribution rate on the
Date of Termination (without giving effect to any rate increase after the Change
in Control which constitutes or may constitute Good Reason); provided that if
the Participant is precluded from continuing his or her participation in any
applicable plan, program, or arrangement, the Participant shall be provided with
the after-tax cost of continuation of such coverage, including premiums under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA
Premiums"), for the Participant with respect to the benefits provided under such
plan, program, or arrangement, paid as either a lump sum payment or monthly as
COBRA Premiums are due, at the discretion of the Administrative Committee. Any
benefits so provided shall not be considered a continuation of coverage as
provided under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended. A Participant entitled to Severance Benefits pursuant to Section 6.1(a)
shall also receive a lump sum payment in cash within 10 days after the Change in
Control equal to the Employer contributions that would have been made on the
Participant's behalf pursuant to the Company's qualified and non-qualified
defined contribution retirement plans, assuming continued participation on the
same basis as immediately prior to the Date of Termination, or if more favorable
6
to the Participant, the Change in Control, which the Participant would have
received if the Participant's employment had continued during the Severance
Period, assuming that the Participant's compensation for each year during such
period is as in effect immediately prior to the Date of Termination, or if more
favorable to the Participant, the Change in Control, and that the Employer
contributions are determined pursuant to the applicable plans as in effect
immediately prior to the Date of Termination, or if more favorable to the
Participant, the Change in Control. A Participant entitled to Severance Benefits
pursuant to Section 6.1(a) will continue to be provided with perquisites
comparable to those provided to the Participant immediately prior to the Date of
Termination, or if more favorable to the Participant, the Change in Control, for
the duration of the Severance Period. If the Participant becomes reemployed with
another employer and is eligible to receive health insurance, life insurance,
long-term care insurance or long-term disability coverage under another
employer-provided plan (regardless of whether the Participant elects such
coverage), the health insurance, life insurance, and long-term disability
benefits provided pursuant to this section shall be secondary to those provided
under such other plan during the applicable period of eligibility.
(d) Equity Vesting. In the event of a Change in Control (whether or not a
Participant's employment terminates): (i) any unvested portions of stock awards
or options granted under the Company's equity-based plans shall become fully
vested upon the Change in Control; and (ii) any shares then unallocated under
the Company's equity-based plans shall then be allocated and distributed to such
plan's participants by the Compensation/Incentive Committee of the Company's
Board of Directors upon the Change in Control.
(e) Outplacement. A Participant entitled to Severance Benefits under
Section 6.1(a) shall be entitled to receive outplacement assistance at an agency
of his or her choice, in an amount not to exceed $25,000.00
6.3 Certain Additional Payments by the Company.
(a) In the event that any payment or benefit to the Participant or for the
Participant's benefit paid or payable or distributed or distributable pursuant
to the terms of this Plan or otherwise in connection with, or arising out of,
the Participant's employment with an Employer or a change in ownership or
effective control of the Company or of a substantial portion of its assets (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any tax imposed by Section 409A of the Code, or any interest or
penalties are incurred by the Participant with respect to such tax (such tax,
together with any such interest and penalties, are hereinafter collectively
referred to herein as the "Excise Tax"), then the Participant will be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Participant of all taxes (including any income, payroll,
interest or penalties imposed with respect to such taxes and the Excise Tax,
other than interest and penalties imposed by reason of the Participant's failure
to file timely a tax return or pay taxes shown due on the Participant's return,
and including any Excise Tax imposed upon the Gross-Up Payment), the Participant
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) An initial determination as to whether a Gross-Up Payment is required
pursuant to this Plan and the amount of such Gross-Up Payment will be made at
the Company's expense by an accounting firm of recognized national standing
selected by the Company (the "Accounting Firm"). The Accounting Firm will
provide its determination (the "Determination"), together with detailed
supporting calculations and documentation, to the Company and the Participant
7
within five days of the Date of Termination, if applicable, or such other time
as requested by the Company or by the Participant (provided the Participant
reasonably believes that any of the Payments may be subject to the Excise Tax).
If the Accounting Firm determines that no Excise Tax is payable by the
Participant with respect to a Payment or Payments, it will furnish the
Participant with an opinion reasonably acceptable to the Participant that no
Excise Tax will be imposed with respect to any such Payment or Payments. Within
10 days of the delivery of the Determination to the Participant, the Participant
will have the right to dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 6.3(b) will be paid by
the Company to the Participant within 5 days of the receipt of the
Determination. The existence of the Dispute will not in any way affect the
Participant's right to receive the Gross-Up Payment in accordance with the
Determination. If there is no Dispute, the Determination will be binding, final
and conclusive upon the Company and the Participant, subject to the application
of Section 6.3(c).
(c) As a result of uncertainty in the application of Sections 280G, 409A,
and 4999 of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not be paid (an "Excess Payment") or that a
Gross-Up Payment (or a portion thereof) which should be paid will not be paid
(an "Underpayment"). An Underpayment will be deemed to have occurred (i) upon
notice (formal or informal) to the Participant from any governmental taxing
authority that the Participant's tax liability (whether in respect of the
Participant's current taxable year or in respect of any prior taxable year) may
be increased by reason of the imposition of the Excise Tax on a Payment or
Payments with respect to which the Company has failed to make a sufficient
Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of a
determination by the Company (which will include the position taken by the
Company on its federal income tax return) or (iv) upon the resolution of the
Dispute to the Participant's satisfaction. If an Underpayment occurs, the
Participant will promptly notify the Company and the Company will promptly, but
in any event at least 5 days prior to the date on which the applicable
government taxing authority has requested payment, pay to the Participant an
additional Gross-Up Payment equal to the amount of the Underpayment plus any
interest and penalties (other than interest and penalties imposed by reason of
the Participant's failure to file timely a tax return or pay taxes shown due on
the Participant's return) imposed on the Underpayment. An Excess Payment will be
deemed to have occurred upon a Final Determination (as hereinafter defined) that
the Excise Tax will not be imposed upon a Payment or Payments (or portion
thereof) with respect to which the Participant had previously received a
Gross-Up Payment. A "Final Determination" will be deemed to have occurred when
the Participant has received from the applicable government taxing authority a
refund of taxes or other reduction in the Participant's tax liability by reason
of the Excise Payment and upon either (x) the date a determination is made by,
or an agreement is entered into with, the applicable governmental taxing
authority which finally and conclusively binds the Participant and such taxing
authority, or in the event that a claim is brought before a court of competent
jurisdiction, the date upon which a final determination has been made by such
court and either all appeals have been taken and finally resolved or the time
for all appeals has expired or (y) the statute of limitations with respect to
the Participant's applicable tax return has expired. If an Excess Payment is
determined to have been made, the Participant will pay to the Company (but not
8
less than 10 days after the determination of such Excess Payment and written
notice has been delivered to the Participant) the amount of the Excess Payment
plus interest at an annual rate equal to the Applicable Federal Rate provided
for in Section 1274(d) of the Code from the date the Gross-Up Payment (to which
the Excess Payment relates) was paid to the Participant until the date of
repayment to the Company. The Participant will use reasonable cooperative
efforts at the request of the Company to assist in the determination of the
amount of any Excess Payment or Underpayment made to the Participant pursuant to
this Plan.
6.4 Other Benefits Payable. The Severance Benefits provided pursuant to
Section 6.2 above shall be provided in addition to, and not in lieu of, all
other accrued or vested or earned but deferred compensation, rights, stock
options, or other benefits which may be owed to a Participant by an Employer,
with the exception of payments to be made under employment agreements for Tier 1
Participants.
6.5 Payment Obligations Absolute. The obligations of the Company to pay the
Severance Benefits described in Section 6.2 shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense, or other right which the Company
or any Affiliate may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to a Participant under any of the
provisions of this Plan, nor shall the amount of any payment hereunder be
reduced by any compensation earned by a Participant as a result of employment by
another employer, except with respect to the welfare benefits as provided under
Section 6.2(c).
ARTICLE VII
SUCCESSOR TO COMPANY
--------------------
This Plan shall bind any successor of the Company, its assets, or its
businesses (whether direct or indirect, by purchase, merger, consolidation, or
otherwise), in the same manner and to the same extent that the Company would be
obligated under this Plan if no succession had taken place. In the case of any
transaction in which a successor would not, by the foregoing provision or by
operation of law, be bound by this Plan, the Company shall require such
successor expressly and unconditionally to assume and agree to perform the
Company's obligations under this Plan, in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. The term "Company," as used in this Plan, shall mean the Company as
hereinbefore defined and any successor or assignee to the business or assets
which by reason hereof becomes bound by this Plan.
ARTICLE VIII
AMENDMENT, AND TERMINATION
--------------------------
8.1 Amendment and Termination. The Plan may be terminated or amended in any
respect by resolution adopted by a majority of the Administrative Committee,
unless a Change in Control has previously occurred. However, after the
Administrative Committee has knowledge of a transaction or event that, if
consummated, would constitute a Change in Control, this Plan may not be
terminated or amended in any manner which would adversely affect the rights or
potential rights of Participants, unless and until the Administrative Committee
9
has determined that such potential Change in Control has been abandoned and will
not be consummated, and the Administrative Committee does not have knowledge of
another transaction or event that, if consummated, would constitute a Change in
Control. If a Change in Control occurs, the Plan shall no longer be subject to
amendment or termination in any respect which adversely affects the rights of
Participants.
8.2 Form of Amendment. The form of any amendment or termination of the Plan
shall be a written instrument signed by a duly authorized officer or officers of
the Company, certifying that the amendment or termination has been approved by
the Administrative Committee. An amendment of the Plan in accordance with the
terms hereof shall automatically effect a corresponding amendment to all
Participants' rights hereunder. A termination of the Plan, subject to the terms
hereof, shall automatically effect a termination of all Participants' rights and
benefits hereunder.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Legal Fees and Expenses, Arbitration. Each party shall pay their own
legal fees incurred in connection with any enforcement of rights under this
Plan. Disputes arising under this Plan shall be subject to arbitration according
to the rules of the American Arbitration Association. The Company and
Participant shall share equally any third party costs of such arbitration.
9.2 Employment Status. This Plan does not constitute a contract of
employment or impose on a Participant's Employer any obligation to retain the
Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies or those of its Affiliates
regarding termination of employment.
9.3 Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.4 . Waiver. The Company's or a Participant's failure to insist upon
strict compliance with any provision of this Plan or the failure to assert any
right the Company or a Participant may have hereunder shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Plan.
9.5 Governing Law. The validity, interpretation, construction, and
performance of the Plan shall in all respects be governed by the laws of the
State of Ohio, without reference to its principles of conflict of law.
9.6 Claims Procedure. If an Employee or former Employee makes a written
request alleging a right to receive benefits under the Plan or alleging a right
to receive an adjustment in benefits being paid under the Plan, the Company
shall treat it as a claim for benefits. All claims for Severance Benefits under
the Plan shall be sent to the Legal Department of the Company and must be
received within 30 days after the Date of Termination. If the Company determines
that any individual who has claimed a right to receive Severance Benefits under
the Plan is not entitled to receive all or any part of the benefits claimed, it
10
will inform the claimant in writing of its determination and the reasons
therefor in terms calculated to be understood by the claimant. The notice will
be sent within 30 days of the written request, unless the Company determines
additional time, not exceeding 45 days, is needed. The notice shall make
specific reference to the pertinent Plan provisions on which the denial is
based, and describe any additional material or information that is necessary.
Such notice shall, in addition, inform the claimant what procedure the claimant
should follow to take advantage of the review procedures set forth below in the
event the claimant desires to contest the denial of the claim. The claimant may,
within 90 days thereafter, submit in writing to the Company a notice that the
claimant contests the denial of his or her claim by the Company and desires a
further review. The Company shall, within 30 days thereafter, review the claim
and authorize the claimant to appear personally and review pertinent documents
and submit issues and comments relating to the claim to the persons responsible
for making the determination on behalf of the Company. The Company will render
its final decision with specific reasons therefor in writing and will transmit
it to the claimant within 30 days of the written request for review, unless the
Company determines additional time, not exceeding 45 days, is needed, and so
notifies the Participant. If the Company fails to respond to a claim filed in
accordance with the foregoing within 30 days or any such extended period, the
Company shall be deemed to have denied the claim.
9.7 Indemnification of Administrative Committee. No member or agent of the
Administrative Committee shall be personally liable for any action,
determination, or interpretation made with respect to the Plan, and each member
of the Administrative Committee shall be indemnified by the Company to the
fullest extent permitted by applicable law and the governing instruments of the
Company.
9.8 Unfunded Plan Status. This Plan is intended to be an unfunded plan. All
payments pursuant to the Plan shall be made from the general funds of the
Company, and no special or separate fund shall be established or other
segregation of assets made to assure payment. No Participant or other person
shall have under any circumstances any interest in any particular property or
assets of the Company as a result of participating in the Plan. Notwithstanding
the foregoing, the Company may (but shall not be obligated to) create one or
more grantor trusts, the assets of which are subject to the claims of the
Company's creditors, to assist it in accumulating funds to pay its obligations
under the Plan.
9.9 Tax Withholding. Any payment provided for hereunder shall be paid net
of any applicable tax withholding required under federal, state, local, or
foreign law.
9.10 Nonalienation of Benefits. Except as otherwise specifically provided
herein, amounts payable under the Plan shall not be subject to any manner of
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary, including any liability which is for alimony or other payments for
the support of a spouse or former spouse, or for any other relative of a
Participant, prior to actually being received by the person entitled to payment
under the terms of the Plan. Any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge, garnish, execute, or levy upon,
otherwise dispose of any right to amounts payable hereunder, shall be null and
void.
11
9.11 Facility of Payment.
(a) If a Participant is declared an incompetent, and a conservator,
guardian, or other person legally charged with his or her care has been
appointed, any Severance Benefits to which such Participant is entitled may be
paid to such conservator, guardian, or other person legally charged with his or
her care;
(b) If a Participant is declared an incompetent and a conservator,
guardian, or other person charged with his or her care has not been appointed,
the Administrative Committee may: (i) require the appointment of a conservator
or guardian; (ii) distribute any Severance Benefits to which such Participant is
entitled to his or her spouse, with respect to a Participant who is married, or
to such other relative of an unmarried Participant for the benefit of such
Participant; or (iii) distribute any Severance Benefits to which such
Participant is entitled directly to or for the benefit of such Participant.
9.12 Gender and Number. Except when the context indicates to the contrary,
when used herein masculine terms shall be deemed to include the feminine, and
the plural shall be deemed to include the singular.
9.13 Headings. The headings of Articles and Sections are included solely
for convenience of reference and are not to be used in the interpretation of the
provisions of the Plan.
9.14 Equity-Based Plans. No provision hereunder is intended to restrict
acceleration of any interests granted under equity-based plans of the Company,
in accordance with the terms of said plans.
12
Appendix A to Chemed Corporation
Change in Control Severance Plan
Participant Designation
- --------------------------------------------------------------------------------
Tier 1
- ------
1. K. J. McNamara
2. D. P. Williams
3. T. S. O'Toole
Tier 2
- ------
4. T. C. Hutton
5. N. C. Dallob
6. A. V. Tucker
7. T. J. Reilly
8. L. A. Dittman
9. S. S. Lee
10. R. L. Arquilla
11. G. H. Sander
12. R. P. Goldschmidt
13. D. Lawe
14. P. Pettit
15. D. A. Wester
13
Exhibit 10.03
CHEMED CORPORATION
SENIOR EXECUTIVE SEVERANCE POLICY
Chemed Corporation hereby establishes the Chemed Corporation Senior
Executive Severance Policy ("the Policy").
1. PARTICIPATION. Participants in the Policy shall consist of those
officers designated from time to time on Attachment A to this Policy by the
Compensation/Incentive Committee of the Board of Directors, as may be approved
by the Board of Directors. The Compensation/Incentive Committee and/or the Board
shall have the ability to add or remove Participants at its discretion.
2. TERMINATION OF EMPLOYMENT.
ss.2.1 Termination of Employment. The employment of a Participant shall
terminate upon the occurrence of any of the following:
(a) The death of the Participant;
(b) The termination of the Participant's employment due to the
Participant's disability pursuant to ss.2.2;
(c) The termination by the Company of the Participant's employment for
Cause pursuant to ss.2.3;
(d) The retirement of the Participant under a retirement plan of the
Company; or
(e) The resignation of the Participant.
1
The termination by the Company of the Participant's employment for any
reason other than those specified in this ss.2.1 shall hereinafter be referred
to as a termination "Without Cause".
ss.2.2 Disability. If, by reason of physical or mental disability, the
Participant is unable to carry out his or her duties pursuant to this Policy for
four (4) consecutive months, the Participant's may be terminated by the Company
upon two (2) months' written notice to be given to the Participant at any time
after the period of four (4) continuous months of disability and while such
disability continues. If, prior to the expiration of the two (2) months after
the giving of such notice, the Participant shall recover from such disability
and return to the active discharge of his or her duties, then such notice shall
be of no further force and effect and the Participant's employment shall
continue as if such disability had not occurred. If the Participant shall not so
recover from his or her disability and return to his or her duties, then the
Participant's services shall terminate at the expiration date of such two (2)
months' notice. In the event a dispute arises between the Participant and the
Company concerning the Participant's physical or mental ability to continue or
return to the performance of his or her duties as aforesaid, the Participant
shall submit to examination by a competent physician mutually agreeable to both
parties, and such physician's opinion as to the Participant's ability to so
perform will be final and binding.
ss.2.3 For Cause. The Company may, at any time by written notice to the
Participant, terminate his or her services for Cause. Such notice shall specify
the event or events and the actions or failure to act constituting Cause.
"Cause" shall mean, with respect to a Participant's termination of employment:
(a) the willful and repeated failure of the Participant to perform substantially
2
the Participant's duties with Company (other than any such failure resulting
from incapacity due to physical or mental illness); (b) the Participant's
conviction of, or plea of guilty or nolo contendere to, which through lapse of
time or otherwise is not subject to appeal, a felony which is materially and
demonstrably injurious to Company; or (c) the Participant's engagement in
willful gross misconduct or gross negligence in connection with his or her
employment.
If the basis for discharge is pursuant to paragraph (c) above, the
Participant shall have thirty (30) days from receipt of the notice of
termination for Cause to cure, if curable, the actions or failure to act
specified in such notice and, in the event of any such cure within such period,
such conduct shall not constitute Cause hereunder.
ss.2.4 Consequences of Termination.
(a) If the Participant's employment shall terminate pursuant to any of the
provisions of this Article 2, the Participant's base salary and all incentive
compensation shall cease to accrue forthwith.
(b) If the Company shall terminate the Participant's employment Without
Cause, the Company shall pay the Participant a lump sum amount in cash equal to
one and one-half times the Participant's then annual base salary plus a lump sum
amount in cash equal to the product of: (i) the average amount of the
Participant's annual incentives under the Company's annual incentive plan paid
or payable for the last three full fiscal years prior to termination; and (ii) a
3
fraction, the numerator of which is the number of days in the fiscal year
through the date of termination and the denominator of which is 365. The
Participant shall also be eligible to participate in the Company's welfare
benefits plans such as health insurance, life insurance, long-term care
insurance, and long-term disability benefits plans for twelve months following
termination, at the then current employee contribution rates; provided that if
the Participant is precluded from continuing his or her participation in any
applicable plan, program, or arrangement, the Participant shall be provided with
the after-tax cost of continuation of such coverage, including premiums under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA
Premiums"), for the Participant with respect to the benefits provided under such
plan, program, or arrangement, paid as either a lump sum payment or monthly as
COBRA Premiums are due, at the discretion of the Company. If the Participant
becomes reemployed with another employer and is eligible to receive health
insurance, life insurance, long-term care insurance or long-term disability
coverage under another employer-provided plan (regardless of whether the
Participant elects such coverage), the welfare benefits provided pursuant to
this Policy shall be secondary to those provided under such other plan.
(c) In the event that the Participant's employment shall terminate pursuant
to any of the provisions of this Article 2, the rights of the Participant under
any incentive compensation plan of the Company, under any executive or employee
benefit plans or arrangements, or otherwise shall be determined, subject to this
Article 2, in accordance with the terms and provisions of such plans,
arrangements and options applicable to an employee whose employment has
terminated in the manner that occurred, except that a termination Without Cause
shall be treated as a retirement under a retirement plan of the Company for the
purposes of the Company stock incentive plans.
4
(d) If the Participant's employment shall terminate pursuant to ss.2.1(a),
(b), or (d), the Company shall pay the Participant in lieu of any amounts that
may be due and payable under the Company's annual incentive plan for the fiscal
year of termination a lump sum amount in cash equal to the product of: (i) the
average amount of the Participant's annual incentives under the Company's annual
incentive plan paid or payable for the last three full fiscal years prior to
termination; and (ii) a fraction, the numerator of which is the number of days
in the fiscal year through the date of termination and the denominator of which
is 365.
(e) If the Participant's employment shall terminate pursuant to ss.2.1(e)
or if the Company shall terminate Participant's employment with Cause pursuant
to ss.2.1(c), Participant's annual incentive bonus shall then be forfeited.
(f) Participant shall not be required to offset against amounts due from
the Company under this Article 2 for any salary, bonus or other benefits (other
than welfare benefits described above) received by the Participant from a
third-party, and the Participant shall be under no duty to mitigate by seeking
or accepting another position.
(g) Any amounts paid or benefits received under this Policy are conditioned
upon execution of a waiver of liability in favor of the Company executed by the
Participant, in the form approved by the Company's counsel.
(h) Any amounts paid or benefits received under this Policy are also
conditioned, other than a termination under Section 2.1(a), upon execution of
the following in a form approved by the Company's counsel: (i) an agreement
5
prohibiting directly or indirectly publishing or disclosing any confidential
information of the Company or any of its affiliates, or using such confidential
information for the Participant's own use or making it available to others; (ii)
a one-year post termination non-compete agreement under which the Participant
will not directly or indirectly engage in or become interested in any business
providing or arranging for any products or services that directly or indirectly
are in competition with the Company or any of its subsidiaries; and (iii) an
agreement prohibiting solicitation during such one-year period of the employment
of any employees or other personnel providing services to the Company or any of
its subsidiaries or soliciting the business of any customer of the Company or
any of its subsidiaries.
3. APPLICATION OF SECTION 409A OF THE INTERNAL REVENUE CODE. In the event
that any payment or benefit to the Participant or for the Participant's benefit
paid or payable or distributed or distributable under this Policy ("Payment"),
would be subject to the excise tax imposed by Section 409A of the Internal
Revenue Code ("Code"), or any interest or penalties are incurred by the
Participant with respect to such excise tax (collectively, "Excise Tax"), the
Participant will be entitled to receive an additional payment ("Gross-Up
Payment") in an amount such that after payment by the Participant of all taxes
(including any income or payroll tax, interest or penalties imposed with respect
to such taxes and the Excise Tax, other than interest and penalties imposed by
reason of the Participant's failure to file timely a tax return or pay taxes
shown due on the Participant's return, and including any Excise Tax imposed upon
the Gross-Up Payment), the Participant retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
6
An initial determination as to whether and in what amount a Gross-Up
Payment is required will be made at the Company's expense by an accounting firm
of recognized national standing selected by the Company ("Accounting Firm"). The
Accounting Firm will provide its determination ("Determination"), together with
detailed supporting calculations and documentation, to the Company and the
Participant within five days of the date of termination, if applicable, or such
other time as requested by the Company or by the Participant (provided the
Participant reasonably believes that any of the Payments may be subject to the
Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by
the Participant with respect to a Payment or Payments, it will furnish the
Participant an opinion reasonably acceptable to the Participant that no Excise
Tax will be imposed. Within 10 days of the delivery of the Determination, the
Participant will have the right to dispute the Determination (the "Dispute").
The Gross-Up Payment, if any, as determined pursuant to this Section will be
paid by the Company to the Participant within 5 days of the receipt of the
Determination. The existence of the Dispute will not in any way affect the
Participant's right to receive the Gross-Up Payment in accordance with the
Determination. If there is no Dispute, the Determination will be binding upon
the Company and the Participant, subject to the following paragraph.
As a result of uncertainty in the application of Section 409A of the Code,
it is possible that a Gross-Up Payment will be paid which should not be paid
("Excess Payment") or that a Gross-Up Payment which should be paid will not be
7
paid ("Underpayment"). An Underpayment will be deemed to have occurred (i) upon
notice to the Participant from any governmental taxing authority that the
Participant's tax liability (whether in respect of the Participant's current
taxable year or in respect of any prior taxable year) may be increased by reason
of the imposition of the Excise Tax on a Payment or Payments with respect to
which the Company has failed to make a sufficient Gross-Up Payment, (ii) upon a
determination by a court, (iii) by reason of a determination by the Company
(which will include the position taken by the Company on its federal income tax
return) or (iv) upon the resolution of the Dispute to the Participant's
satisfaction. If an Underpayment occurs, the Participant will promptly notify
the Company and the Company will promptly, but in any event at least 5 days
prior to the date on which the applicable government taxing authority has
requested payment, pay to the Participant an additional Gross-Up Payment equal
to the amount of the Underpayment plus any interest and penalties (other than
interest and penalties imposed by reason of the Participant's failure to file
timely a tax return or pay taxes shown due on the Participant's return) imposed
on the Underpayment.
An Excess Payment will be deemed to have occurred upon a Final
Determination (as hereinafter defined) that the Excise Tax will not be imposed
upon a Payment or Payments (or portion thereof) with respect to which the
Participant had previously received a Gross-Up Payment. A "Final Determination"
will be deemed to have occurred when the Participant has received from the
8
applicable government taxing authority a refund of taxes or other reduction in
the Participant's tax liability by reason of the Excise Payment and upon either
(x) the date a determination is made by, or an agreement is entered into with,
the applicable governmental taxing authority which finally binds the Participant
and such taxing authority, or if a claim is brought before a court, the date a
final determination has been made by such court and either all appeals have been
finally resolved or the time for all appeals has expired or (y) the statute of
limitations with respect to the Participant's applicable tax return has expired.
If an Excess Payment is determined to have been made, the Participant will pay
to the Company (but not less than 10 days after the determination of such Excess
Payment and written notice has been delivered to the Participant) the amount of
the Excess Payment plus interest at an annual rate equal to the Applicable
Federal Rate provided for in Section 1274(d) of the Code from the date the
Gross-Up Payment was paid until the date of repayment. The Participant will use
reasonable cooperative efforts at the request of the Company to assist in the
determination of the amount of any Excess Payment or Underpayment made to the
Participant pursuant to this Policy.
4. LEGAL FEES AND EXPENSES, ARBITRATION. Each party shall pay their own
legal fees incurred in connection with any enforcement of rights under this
Policy. All disputes arising hereunder shall be subject to arbitration according
to the rules of the American Arbitration Association. The Company and the
Participant shall share equally in any third party costs of such arbitration.
5. GOVERNING LAW. This Policy, the rights and obligations hereunder, and
any related claims shall be governed by and construed in accordance with the
laws of the State of Ohio.
9
Attachment A
Senior Executives
1. T. C. Hutton
2. N. C. Dallob
3. A. V. Tucker
4. T. J. Reilly
5. L. A. Dittman
6. S. S. Lee
7. R. L. Arquilla
8. G. H. Sander
9. R. P. Goldschmidt
10. D. Lawe
11. P. Pettit
12. D. A. Wester