Exhibit 10.1
 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
by and between
ODYSSEY HEALTHCARE, INC.
and
ROBERT A. LEFTON
Effective as of
October 11, 2005
(unless otherwise specified herein)
 

 

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TABLE OF CONTENTS

                              Page 1.   Certain Definitions     1  
 
                2.   Term of Employment; Non-Renewal of Term     5  
 
                3.   Terms of Employment     5  
 
  (a)   Position and Duties     5  
 
  (b)   Compensation     6  
 
                4.   Termination of Employment     8  
 
  (a)   Death     8  
 
  (b)   Disability     8  
 
  (c)   Cause     8  
 
  (d)   Resignation by Employee     8  
 
  (e)   Agreement Not to Terminate     8  
 
                5.   Compensation Upon Termination Prior to a Change in Control
of the Company and After the Second Anniversary of such Change in Control     8
 
 
  (a)   Death or Disability     9  
 
  (b)   For Cause; Resignation by Employee Without Good Reason; Non-Renewal
Election by Employee     9  
 
  (c)   Without Cause; Resignation by Employee for Good Reason; Non-Renewal
Election by the Company     10  
 
                6.   Compensation Upon Employment Termination Occurring On or
Within Two Years After a Change in Control of the Company     12  
 
  (a)   Compensation Upon Termination     12  
 
                7.   Other Provisions Relating to Termination     14  
 
  (a)   Notice of Termination     14  
 
  (b)   Date of Termination     14  
 
  (c)   Good Reason     15  
 
  (d)   Cause     15  
 
  (e)   Full Settlement; Mitigation     16  
 
  (f)   Release and Other Agreements     16  
 
  (g)   Six Month Delay     16  
 
                8.   Disclosure of, Access to and Entrustment of Confidential
Information, Business Opportunities and Business Goodwill     16  
 
                9.   Confidential Information; Ownership of Property     17  
 
  (a)   Obligations to Maintain Confidentiality     17  
 
  (b)   Ownership of Work Product     18  
 
                10.   Non-Competition; Non-Solicitation; Non-Disparagement    
19  

 

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                              Page 11.   Successors; Binding Agreement     20  
 
                12.   Effect of Agreement on Plans and Agreements Governing
Awards     21  
 
                13.   Miscellaneous     21  
 
  (a)   Construction     21  
 
  (b)   Notices     21  
 
  (c)   Severability     22  
 
  (d)   Withholding     22  
 
  (e)   No Waiver     22  
 
  (f)   Equitable and Other Relief     22  
 
  (g)   Entire Agreement     23  
 
  (h)   Arbitration     23  
 
  (i)   Attorney Fees     24  
 
  (j)   Survival     24  
 
  (k)   Governing Law     24  
 
  (l)   Amendments     24  
 
  (m)   Employee Acknowledgement     24  
 
  (n)   Counterparts     24  

 

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is dated
December 23, 2008, to be effective as of October 11, 2005 (unless otherwise
specified herein) (the “Effective Date”), by and between Odyssey HealthCare,
Inc., a Delaware corporation (the “Company”), and Robert A. Lefton (“Employee”).
RECITALS:
     A. The Company is a national provider of hospice services and previously
entered into that certain Employment Agreement dated October 11, 2005 (the
“Original Employment Agreement”) with Employee as the President and Chief
Executive Officer of the Company that provided certain severance benefits to
Employee in the event that Employee’s employment is terminated or changed under
the circumstances described in such employment agreement.
     B. The severance benefits provided under the Original Employment Agreement
are subject to the requirements of section 409A of the Internal Revenue Code of
1986, as amended (the “Code”).
     C. The Company and Employee desire to amend and restate the Original
Employment Agreement to comply with the requirements of section 409A of the
Code.
AGREEMENTS:
     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
     1. Certain Definitions. As used in this Agreement, the following terms have
the meanings set forth below:
          (a) “Acquiring Person” means any Person or group of related Persons
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other
than (i) Employee or any Employee Affiliate, or (ii) the Company, any of the
Company’s Subsidiaries, any employee benefit plan of the Company or of a
Subsidiary of the Company or of a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or of a Subsidiary of
the Company or of a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company.
          (b) “Affiliate” means, with respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with the Person in question. As used in this definition of “Affiliate,”
the term “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of Voting Securities, by contract, or otherwise.

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          (c) “Board” means the Board of Directors of the Company and any
committee thereof.
          (d) “Cause” means Employee’s
               (i) continued failure to substantially perform Employee’s
material obligations and duties under Section 3(a) (other than as a result of
physical or mental incapacity), as reasonably determined by the Board, and which
is not remedied within 30 days after receipt of written notice from the Company
specifically identifying the manner in which the Company believes that Employee
has not substantially performed Employee’s material obligations and duties under
Section 3(a);
               (ii) commission of an act of fraud, embezzlement,
misappropriation, willful misconduct, bad faith, dishonesty, breach of trust, or
breach of fiduciary duty against the Company;
               (iii) material breach of Sections 8, 9 or 10;
               (iv) conviction, plea of no contest or nolo contendere, deferred
adjudication or unadjudicated probation for any felony or any crime involving
moral turpitude;
               (v) failure to carry out, or comply with, in any material
respect, any lawful directive of the Board consistent with the terms of this
Agreement, which is not remedied within 30 days after receipt of written notice
from the Company specifying such failure;
               (vi) violation of the Company’s substance abuse policy; or
               (vii) suspension or termination of Employee from participation in
the Medicare or Medicaid programs.
          (e) “Change in Control” means the occurrence of any of the following
events:
               (i) any of the events described in clauses (ii), (iii) and
(iv) of the definition of “Change in Control” in the Odyssey HealthCare, Inc.
2001 Equity-Based Compensation Plan as in effect on the date of this Agreement;
or
               (ii) any Acquiring Person is or becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent or more of the combined
voting power of the then outstanding Voting Securities of the Company.
          (f) “Competing Business” means a business that competes in any
material respect with the business engaged in by the Company or any of its
Subsidiaries, (A) at the time in question in respect of the Term of
Non-Competition (as defined in Section 1(p)) occurring prior to the Date of
Termination and (B) as of the Date of Termination (as defined in Section 7(b))
in respect of the Term of Non-Competition occurring on and after the Date of
Termination.

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          (g) “Competing Services” means services that, if provided to a
business other than a Competing Business, would constitute the conduct of a
Competing Business.
          (h) “Disability” means Employee’s inability to perform, with or
without reasonable accommodations, the essential functions of Employee’s
position hereunder for a period of 180 consecutive days due to mental or
physical incapacity, as determined by mutual agreement of a physician selected
by the Company or its insurers and a physician selected by Employee; provided,
however, that if the opinion of the Company’s physician and Employee’s physician
conflict, the Company’s physician and Employee’s physician shall together agree
upon a third physician, whose opinion shall be binding. The foregoing definition
of “Disability” is not intended to and shall not affect the definition of
“disability” or any similar term in any insurance policy the Company or any of
its Subsidiaries may provide.
          (i) “Employee Affiliate” means any Person directly or indirectly
controlled by Employee. For purposes of this Agreement, a Person shall be
presumed to be controlled by Employee if (i) Employee is a general partner of
such Person (including any partnership in which Employee is a general partner or
any trust in which Employee is a trustee or beneficiary), (ii) Employee directly
or indirectly beneficially owns 10% or more of the outstanding Voting Securities
of such Person or (iii) such Person is controlled by any Person contemplated in
clauses (i) or (ii) of this definition.
          (j) “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
          (k) “Geographic Area” means each city (including the 50-mile radius
surrounding such city) in which the Company or any of its Subsidiaries has a
facility that engages in its respective business or any line of its business
(A) at the time in question in respect of the Term of Non-Competition occurring
prior to the Date of Termination and (B) as of the Date of Termination in
respect of the Term of Non-Competition occurring on and after the Date of
Termination.
          (l) “Good Reason” means, subject to the terms and provisions of this
Agreement (including Sections 1(d) and 4(b)), the occurrence of one or more of
the following events:
               (i) any removal of Employee from the offices of President and
Chief Executive Officer of the Company; provided, however, that Good Reason may
not be asserted by Employee under this clause (i) after a Non-Renewal Notice has
been given by either the Company or Employee;
               (ii) any termination or material reduction of a material benefit
under any Investment Plan or Welfare Plan in which Employee participates unless
(A) there is substituted a comparable benefit that is economically substantially
equivalent to the terminated or reduced benefit prior to such termination or
reduction or (B) benefits under such Investment Plan or Welfare Plan are
terminated or reduced with respect to all employees previously granted benefits
thereunder;
               (iii) any reduction in Employee’s Annual Base Salary;

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               (iv) any failure by the Company to comply with any of the
provisions of Section 3(b), which failure is not contemplated previously within
this definition;
               (v) any failure by the Company to comply with Section 11(c);
               (vi) the relocation or transfer of Employee’s principal office to
a location more than 50 miles from Employee’s work address as of the Effective
Date in the city of Dallas, Texas, without Employee’s consent; or
               (vii) without limiting the generality of the foregoing, any
material breach by the Company or any of its Subsidiaries or other Affiliates of
(A) this Agreement or (B) any other agreement between Employee and the Company
or any such Subsidiary or other Affiliate,
excluding, in the case of clauses (i) through (vii), any isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Employee.
          (m) “Person” means any individual, partnership, limited liability
partnership, joint venture, corporation, limited liability company, trust,
association, or other entity or organization.
          (n) “Pro Rata Bonus” means the amount equal to the product of (i) the
amount of the Annual Bonus (as defined in Section 3(b)(ii)), if any, to which
Employee would have been entitled for the calendar year in which Employee’s Date
of Termination occurs if Employee’s employment were not terminated during such
calendar year, multiplied by (ii) a fraction, the numerator of which is the
number of days that have elapsed since the beginning of such calendar year
through (but not including) Employee’s Date of Termination, and the denominator
of which is the total number of days in such calendar year. The amount, if any,
of the Annual Bonus to which Employee would have been entitled for the calendar
year in which the Date of Termination occurs shall be determined by the Board in
its sole good faith discretion; provided, however, that during the period on or
within two years after a Change in Control, for purposes of determining the
amount of the Pro Rata Bonus, Employee shall be deemed to have been entitled to
an Annual Bonus of not less than the amount of the last Annual Bonus awarded to
Employee prior to such Change in Control, and provided further however that any
determination by the Board as to satisfaction of a performance standard shall be
made in the same manner as such determination is made for the other executive
officers of the Company.
          (o) “Subsidiary” means, with respect to any Person, any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by that Person.
          (p) “Term of Non-Competition” means the period of time beginning on
the Effective Date and continuing until 5:00 p.m., Dallas, Texas time, on the
second anniversary of the Date of Termination.

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          (q) “Voting Securities” means any securities that vote generally in
the election of directors, in the admission of general partners, or in the
selection of any other similar governing body.
          (r) “without Cause” means a termination by the Company of Employee’s
employment during the Term at the Company’s sole discretion for any reason other
than a termination based upon Cause, death or Disability; provided that,
“without Cause” does not include termination of this Agreement and Employee’s
employment pursuant to Section 2.
     2. Term of Employment; Non-Renewal of Term. Subject to the terms and
provisions of this Agreement, the Company hereby agrees to employ Employee, and
Employee hereby agrees to be employed by the Company, for the period (the
“Term”) commencing on the Effective Date and, unless Employee’s employment
hereunder is sooner terminated in accordance with the terms hereof, expiring at
5:00 p.m., Dallas Texas time, on October 10, 2008; provided, however, that
commencing on October 10, 2008 (the “Employment Expiration Date”), and on each
October 10th occurring thereafter, the Term shall automatically (without any
action by either party) be extended for one additional calendar year unless, at
least 30 days prior to the expiration of the Term, the Company or Employee shall
have given written notice (a “Non-Renewal Notice”) that it or Employee, as
applicable, does not wish to extend this Agreement (a “Non-Renewal”). Either
party may elect not to renew this Agreement. The term “Term,” as utilized in
this Agreement, shall refer to the Term as so automatically extended. The Term
shall expire as a result of any Non-Renewal at 5:00 p.m., Dallas, Texas time, on
the October 10th of the extension period during which a Non-Renewal Notice is
given, and Employee’s employment shall terminate at the expiration of the Term.
     3. Terms of Employment.
          (a) Position and Duties.
               (i) During the Term, Employee shall serve as President and Chief
Executive Officer of the Company. In so doing, Employee shall have such powers
and duties (including holding officer positions with one or more Subsidiaries of
the Company) as may be assigned from time to time by the Board, so long as such
powers and duties are reasonable and customary for president and chief executive
officers of an enterprise comparable to the Company. Employee shall report to
the Board.
               (ii) During the Term, and excluding any periods of vacation and
sick leave to which Employee is entitled, Employee agrees to devote all of
Employee’s business time to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to Employee
hereunder, to (a) use Employee’s best efforts to perform diligently, faithfully,
effectively and efficiently such responsibilities, (b) use Employee’s best
efforts to promote the interests of the Company; (c) use Employee’s reasonable
best efforts to maintain Employer’s status as a participating provider under the
Medicare and Medicaid programs; and (d) perform such other duties appropriate
for Employee’s position as the Board may from time to time reasonably direct.

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               (iii) Employee shall not engage, directly or indirectly, in any
other business, investment, or activity that interferes with the performance of
Employee’s duties under this Agreement, is contrary to the interests of the
Company or requires any portion of Employee’s business time; provided, however,
that during the Term, it shall not be a violation of this Agreement for Employee
to (1) serve on the board of directors (or similar governing body) of one or
more other companies that do not engage in a Competing Business if the Board has
provided prior approval (which shall not be unreasonably withheld) for such
service, (2) serve on corporate, civic, charitable or industry sector
association boards or committees, (3) deliver lectures or fulfill speaking
engagements and (4) manage personal investments, so long as such activities do
not materially interfere with the performance of Employee’s responsibilities as
an employee of the Company in accordance with this Agreement. Company hereby
acknowledges and approves that Employee currently serves on the board of
directors of Horizon Health Corporation. Notwithstanding the provisions of
Sections 3(a)(ii) and (iii), Employee may continue to fulfill his obligations to
Select Medical Corporation, provided such obligations do not (A) interfere with
the performance of Employee’s responsibilities as an Employee of the Company in
accordance with this Agreement and (B) violate Employee’s covenants and
obligations under this Agreement, including Sections 8, 9 and 10.
          (b) Compensation.
               (i) Annual Base Salary. During the Term, Employee shall receive
an annual base salary (“Annual Base Salary”), which shall be paid bi-weekly in
accordance with the customary payroll practices for executive officers of the
Company, in an amount at least equal to $543,000.00 per year, effective
January 1, 2008. At least annually (by no later than January 31 of each year)
during the Term, the Board shall review the Annual Base Salary of Employee and
may increase (but not decrease) the Annual Base Salary by such amount as the
Board shall deem appropriate. The term “Annual Base Salary” as used in this
Agreement shall refer to the Annual Base Salary as it may be so increased.
               (ii) Annual Bonus. During the Term, Employee shall be eligible to
receive, in addition to the Annual Base Salary, an annual bonus in an amount not
less than 100% of the Annual Base Salary (each, an “Annual Bonus”), subject to
achieving the performance goals established by the Board as described below.
Annually (by no later than March 15 of each calendar year during the Term), the
Board shall determine the amount (or amount range) of the Annual Bonus that
Employee shall be eligible to receive for the calendar year and the performance
goals that must be achieved for Employee to become entitled to receive the
Annual Bonus for such calendar year. For each calendar year (or partial calendar
year) during the Term, the Board shall determine in its sole good faith
discretion whether the performance goals established for Employee for such
calendar year have been achieved, such determination to be made by no later than
the date on which the Company publicly announces its earnings for such calendar
year in a press release in the immediately following calendar year. Subject to
the terms hereof, any Annual Bonus that Employee becomes entitled to receive
shall be payable to Employee within fifteen days after such determination by the
Board, but in no event later than March 15 of the calendar year following the
calendar year to which such Annual Bonus relates; provided, that if the Board’s
determination is not complete by such day, such that calculation of the amount
of such bonus is not administratively practicable as of March 15, the bonus
shall still be treated as being paid no later than March 15 if payment of the
bonus is made during the first taxable year of the Employee in which calculation
of the bonus amount is administratively practicable.

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               (iii) Stock Options. On the Effective Date, the Company shall
grant Employee an option to purchase an aggregate of 500,000 shares of the
Company’s common stock, which grant shall be subject to the terms and provisions
of the Odyssey HealthCare, Inc. 2001 Equity-Based Compensation Plan Management
Stock Option Agreement, dated October 11, 2005, attached hereto as Exhibit A and
the Odyssey HealthCare, Inc. 2001 Equity-Based Compensation Plan dated as of
November 5, 2001, as amended by that certain First Amendment to the Odyssey
HealthCare, Inc. 2001 Equity-Based Compensation Plan dated as of May 5, 2005 and
by that certain Second Amendment to the Odyssey HealthCare, Inc. 2001
Equity-Based Compensation Plan dated as of May 5, 2005. A portion of the grant
equal to the maximum number of options permitted under the Code shall be treated
as incentive stock options, with the balance of the grant treated as
non-qualified stock options.
               (iv) Incentive, Savings, Stock Option and Retirement Plans.
During the Term, Employee shall be entitled to participate in all incentive,
savings, stock option, equity-based, profit sharing and retirement plans,
practices, policies and programs applicable generally to other executive
officers of the Company (“Investment Plans”), subject to all of the terms and
conditions of such Investment Plans.
               (v) Welfare Benefit Plans. During the Term, Employee and/or
Employee’s family, as the case may be, shall be eligible for participation in
and shall receive all benefits under the welfare benefit plans, practices,
policies and programs (“Welfare Plans”) provided by the Company (including,
without limitation, medical, prescription, dental, short-term and long-term
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other executives of the Company, subject to all of the terms and conditions
of such Welfare Plans.
               (vi) Perquisites. During the Term, Employee shall be entitled to
receive (in addition to the benefits described above) such perquisites and
fringe benefits appertaining to Employee’s position in accordance with any
policies, practices, and procedures established by the Board. In addition to the
forgoing, Employee shall be entitled to receive a health club dues allowance of
not more than $100.00 per month, as determined by the Board.
               (vii) Expenses. During the Term, Employee shall be entitled to
receive prompt reimbursement for all reasonable business-related expenses
incurred by Employee in the performance of Employee’s duties in accordance with
the Company’s policies, practices and procedures.
               (viii) Vacation and Holidays. During the Term, Employee shall be
entitled to paid vacation, in accordance with the plans, policies, programs and
practices of the Company for its executive officers. In addition, Employee shall
be entitled to sick leave and paid holidays, in accordance with the plans,
policies, programs and practices of the Company for its executive officers.

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               (ix) Proration. Any payments or benefits payable to Employee
hereunder in respect of any calendar year during which Employee is employed by
the Company for less than the entire year, unless otherwise provided in the
applicable plan or arrangement, shall be prorated in accordance with the number
of days in such calendar year during which Employee is so employed.
     4. Termination of Employment.
          (a) Death. Employee’s employment hereunder shall terminate
automatically upon Employee’s death during the Term.
          (b) Disability. If the Disability of Employee has occurred during the
Term, the Company may give to Employee a written Notice of Termination (as
defined in Section 7(a)) in accordance with Section 7(a) of its intention to
terminate Employee’s employment hereunder. In such event, Employee’s employment
shall terminate effective on the 30th day after receipt of such notice by
Employee (the “Disability Effective Date”); provided that, within 30 days after
receipt of the Notice of Termination, Employee shall not have returned to
perform, with or without reasonable accommodations, the essential functions of
Employee’s position on a full-time basis. During any period of Employee’s
Disability, the Company may assign Employee’s duties to any other Employee of
the Company or may engage or hire a third party to perform such duties and any
such action shall not be deemed “Good Reason” for Employee to terminate this
Agreement pursuant to Section 4(d)(i) so long as Employee continues to receive
the compensation and benefits under Section 3 during such period.
          (c) Cause. Subject to Section 7(d), the Company may terminate
Employee’s employment at any time during the Term for Cause or without Cause.
          (d) Resignation by Employee. At Employee’s option, Employee may
terminate Employee’s employment hereunder (i) subject to Section 7(c), for Good
Reason or (ii) without Good Reason.
          (e) Agreement Not to Terminate. Notwithstanding any provision to the
contrary contained in this Agreement, the Company agrees that it shall not have
the right to terminate Employee’s employment, other than for Cause, for a period
of time commencing on the Effective Date and ending at 5:00 p.m., Dallas, Texas
time, on the 180th day following the Effective Date.
     5. Compensation Upon Termination Prior to a Change in Control of the
Company and After the Second Anniversary of such Change in Control. Prior to the
occurrence of a Change in Control of the Company and after the second
anniversary of such Change in Control of the Company, conditioned on the
execution and delivery of a Release (as defined in Section 7(f)) signed by
Employee or Employee’s legal representative pursuant to Section 7(f), Employee
shall, subject to the provisions of Section 7(g), be entitled to the following
compensation from the Company upon the termination of Employee’s employment
during the Term, which shall be in lieu of any other severance pay or employment
benefits to which Employee might otherwise be entitled (whether contractual or
under a severance plan, the WARN Act, any other applicable law, or otherwise):

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          (a) Death or Disability. If Employee’s employment is terminated by
reason of Employee’s death or Disability, the Company shall pay to Employee or
Employee’s legal representatives:
               (i) within 60 days after the Employee’s Date of Termination, a
lump sum in cash equal to the sum of Employee’s Annual Base Salary through the
Date of Termination to the extent not previously paid and any compensation
previously deferred by Employee (together with any accrued interest or earnings
thereon) (the “Accrued Obligations”);
               (ii) the amount of any Annual Bonus to which Employee was
entitled for the calendar year ending prior to the Date of Termination to the
extent not previously paid, which amount shall be paid at such time as the
Company pays other executives of the Company annual bonuses for the prior
calendar year (but in no event later than the time specified in Section 3(b)(ii)
of this Agreement);
               (iii) without duplication of any amount payable pursuant to
clause (ii) above, the amount of any Pro Rata Bonus, which shall be paid at such
time as the Company pays the other executives of the Company annual bonuses for
the calendar year in which Employee’s Date of Termination occurs (but in no
event later than the time specified in Section 3(b)(ii) of this Agreement);
               (iv) any amounts arising from Employee’s participation in, or
benefits under, any Investment Plan (the “Accrued Investments”), which amounts
shall be paid in accordance with the terms and conditions of such Investment
Plan; and
               (v) any amounts to which Employee or Employee’s spouse,
beneficiaries or estate are entitled from Employee’s participation in, or
benefits under, any Welfare Plan (“Accrued Welfare Benefits”), which amounts
shall be paid in accordance with the terms and conditions of such Welfare Plan.
     Except as described in this Section 5(a), in the event of Employee’s
termination by reason of Employee’s death or Disability, Employee and Employee’s
legal representatives, as applicable, shall forfeit all rights to any other
compensation.
          (b) For Cause; Resignation by Employee Without Good Reason;
Non-Renewal Election by Employee. If the Company shall terminate Employee’s
employment for Cause or Employee resigns without Good Reason or Employee’s
employment is terminated due to a Non-Renewal election by Employee, the Company
shall have no further obligations to Employee other than the obligation for
payment of:
               (i) the Accrued Obligations, which shall be payable within
60 days after Employee’s Date of Termination;
               (ii) the amount of any Annual Bonus to which Employee was
entitled for the calendar year ending prior to the Date of Termination to the
extent not previously paid, which amount shall be payable at such time as the
Company pays other executive of the Company annual bonuses for the prior
calendar year (but in no event later than the time specified in Section 3(b)(ii)
of this Agreement);

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               (iii) the Accrued Investments, which amounts shall be paid in
accordance with the terms and conditions of the Investment Plans;
               (iv) the Accrued Welfare Benefits, which amounts shall be paid in
accordance with the terms and conditions of the Welfare Plans; and
               (v) without duplication of any amount payable pursuant to clause
(ii) above, solely in the case of a Non-Renewal by Employee, the amount of any
Pro Rata Bonus, which shall be paid at such time as the Company pays the other
executives of the Company annual bonuses for the calendar year in which
Employee’s Date of Termination occurs (but in no event later than the time
specified in Section 3(b)(ii) of this Agreement).
     Except as described in this Section 5(b), in the event of Employee’s
termination by the Company for Cause or by Employee without Good Reason or due
to a Non-Renewal election by Employee, Employee shall forfeit all rights to any
other compensation.
          (c) Without Cause; Resignation by Employee for Good Reason;
Non-Renewal Election by the Company. If the Company shall terminate Employee’s
employment without Cause (other than by reason of Employee’s death or Disability
or a Non-Renewal by Employee) or Employee resigns for Good Reason or Employee’s
employment is terminated due to a Non-Renewal election by the Company, then the
Company shall pay or provide Employee:
               (i) within 60 days after Employee’s Date of Termination, a lump
sum in cash equal to the aggregate of the following amounts: (A) the Accrued
Obligations and (B) the amount of any Annual Bonus to which Employee was
entitled for the calendar year ending prior to the Date of Termination to the
extent not previously paid;
               (ii) without duplication of any amount payable pursuant to clause
(i)(B) above, the amount of any Pro Rata Bonus, which shall be paid at such time
as the Company pays the other executives of the Company annual bonuses for the
calendar year in which Employee’s Date of Termination occurs (but in no event
later than the time specified in Section 3(b)(ii) of this Agreement);
               (iii) the Accrued Investments, which amounts shall be paid in
accordance with the terms and conditions of the Investment Plans;
               (iv) the Accrued Welfare Benefits, which amounts shall be paid in
accordance with the terms and conditions of the Welfare Plans;
               (v) subject to the provisions of Section 7(g), within 60 days
after the Employee’s Date of Termination, a lump sum in cash equal to two times
the Employee’s Annual Base Salary as of the Date of Termination; provided,
however, that Employee shall be entitled to receive the amount payable pursuant
to this Section 5(c)(v) only to the extent Employee has not breached the
provisions of Section 8, 9 or 10, at which time the Company’s payment
obligations pursuant to this Section 5(c)(v) shall immediately cease;
               (vi) if Employee is entitled on the Date of Termination to
coverage under the medical, prescription, and dental portions of the Welfare
Plans, continuation of such

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coverage for Employee and Employee’s dependents for a period ending on the later
to occur of (A) the second anniversary of the Date of Termination or (B) the
Employment Expiration Date. During the period of time that Employee would, but
for the continued coverage provided pursuant to this Section 5(c)(vi), be
entitled to continuation coverage in these portions of the Welfare Plans
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), if Employee elected such coverage and paid the applicable
premiums (the “COBRA Continuation Period”), coverage under this Section 5(c)(vi)
will be provided to Employee at the active employee cost payable by Employee
with respect to those costs paid by Employee prior to the Date of Termination
and whereby the balance of applicable premiums, as determined by the Company,
shall be paid by the Company, with income applicable to such premiums imputed to
Employee. Following the COBRA Continuation Period, to the extent Employee is
still entitled to continued coverage pursuant to this Section 5(c)(vi), the
medical, prescription and dental coverage to be continued shall be provided in
accordance with the provisions of Treas. Reg. § 1.409A-3(i)(1)(iv)(A) as it
applies to the provision of in-kind benefits, including but not limited to the
requirements that (I) the in-kind benefits provided will be determined by
reference to the objective and nondiscretionary criteria set forth in the
applicable Welfare Plans, (II) the in-kind benefits provided during one taxable
year of the Employee will not affect the in-kind benefits to be provided in any
other taxable year (provided, that a limit imposed on the amount of benefits
that may be provided over some or all of the continuation period described in
this Section 5(c)(vi) shall not in and of itself cause the arrangement described
herein to fail to satisfy the requirements of Treas. Reg. § 1.409A-3(i)(1)(iv)),
and (III) the right to receive in-kind benefits is not subject to liquidation or
exchange for another benefit. Notwithstanding any provision of the foregoing to
the contrary, the continued coverage provided pursuant to this Section 5(c)(vi)
will count towards the depletion of any continued health care coverage rights
that Employee and Employee’s dependents may have pursuant to COBRA, and
Employee’s or Employee’s dependents’ rights to continued health care coverage
pursuant to this Section 5(c)(vi) shall terminate at the time Employee or
Employee’s dependents become covered, as described in COBRA, under another group
health plan that does not limit coverage with respect to any preexisting
conditions of Employee or Employee’s dependents, and shall also terminate as of
the date the Company ceases to provide coverage to its senior executives
generally under any such Welfare Plan; and
               (vii) notwithstanding the terms or conditions of any Award (as
defined in the Odyssey HealthCare, Inc. 2001 Equity-Based Compensation Plan),
Employee shall be entitled to exercise Employee’s Awards (other than incentive
stock option Awards, which shall be governed by the terms of such Award) that
are vested as of the Date of Termination until the first anniversary of the Date
of Termination; provided, however, that if the terms of the plan or agreement
governing such Awards (other than the meaning of “Cause” and “Disability”) are
more favorable to Employee as to exercisability than the terms of this
Section 5(c)(vii), then the more favorable term(s) of such Award agreement or
plan shall govern the exercisability of such Award upon Employee’s termination;
provided, further, however, that in no event shall Employee be entitled to
exercise such Awards on any date later than the earlier of (A) the latest date
upon such the Award could have expired by its original terms under any
circumstances, or (B) the tenth anniversary of the original date of grant of the
Award.

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     Except as described in this Section 5(c), in the event of Employee’s
termination by the Company without Cause or by Employee for Good Reason or due
to a Non-Renewal election by the Company, Employee shall forfeit all rights to
any other compensation.
     6. Compensation Upon Employment Termination Occurring On or Within Two
Years After a Change in Control of the Company.
          (a) Compensation Upon Termination. After the occurrence of a Change in
Control of the Company and on or before the second anniversary of such Change in
Control, conditioned on the execution and delivery of a Release signed by
Employee or Employee’s legal representative pursuant to Section 7(f), Employee
shall, subject to the provisions of Section 7(g), be entitled to the following
compensation from the Company upon the termination of Employee’s employment
during the Term, which shall be in lieu of any other severance pay or employment
benefits to which Employee might otherwise be entitled (whether contractual or
under a severance plan, the WARN Act, any other applicable law, or otherwise):
               (i) Death or Disability. If Employee’s employment is terminated
by reason of Employee’s death or Disability, then Employee or Employee’s legal
representatives shall be entitled to the same compensation benefits from the
Company as set forth in Section 5(a) to which Employee would have been entitled
if the termination of Employee’s employment had occurred prior to the occurrence
of a Change in Control or after the second anniversary of such Change in
Control. Except as described in this Section 6(a)(i), Employee’s death or
Disability, Employee and Employee’s legal representatives, as applicable, shall
forfeit all rights to any other compensation.
               (ii) For Cause; Resignation by Employee Without Good Reason;
Non-Renewal Election by Employee. If the Company shall terminate Employee’s
employment for Cause or Employee resigns without Good Reason or Employee’s
employment is terminated due to a Non-Renewal election by Employee, then
Employee or Employee’s legal representatives shall be entitled to the same
compensation benefits from the Company as set forth in Section 5(b) to which
Employee would have been entitled if the termination of Employee’s employment
had occurred prior to the occurrence of a Change in Control or after the second
anniversary of such Change in Control. Except as described in this
Section 6(a)(ii), in the event of Employee’s termination by the Company for
Cause or by Employee without Good Reason or due to a Non-Renewal election by
Employee, Employee shall forfeit all rights to any other compensation.
               (iii) Without Cause; Resignation by Employee for Good Reason;
Non-Renewal Election by the Company. If the Company shall terminate Employee’s
employment without Cause (other than by reason of Employee’s death or Disability
or a Non-Renewal by Employee) or Employee resigns for Good Reason or Employee’s
employment is terminated due to a Non-Renewal election by the Company, then the
Company shall pay or provide Employee:
               (A) within 60 days after Employee’s Date of Termination, a lump
sum in cash equal to the aggregate of the following amounts: (1) the Accrued
Obligations and (2) the amount of any Annual Bonus to which Employee was
entitled for the calendar year ending prior to the Date of Termination to the
extent not previously paid;

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               (B) the amount of any Pro Rata Bonus, which shall be paid at such
time as the Company pays the other executives of the Company annual bonuses for
the calendar year in which Employee’s Date of Termination occurs (but in no
event later than the time specified in Section 3(b)(ii) of this Agreement);
               (C) the Accrued Investments, which amounts shall be paid in
accordance with the terms and conditions of the Investment Plans;
               (D) the Accrued Welfare Benefits, which amounts shall be paid in
accordance with the terms and conditions of the Welfare Plans;
               (E) subject to the provisions of Section 7(g), within 60 days
after the Employee’s Date of Termination, a lump sum in cash equal to two times
the highest Annual Base Salary to which Employee was entitled during the
24-month period ending on the Date of Termination; provided, however, that
Employee shall be entitled to receive the amount payable pursuant to this
Section 6(a)(iii)(E) only to the extent Employee has not breached the provisions
of Section 8, 9 or 10, at which time the Company’s payment obligations pursuant
to this Section 6(a)(iii)(E) shall immediately cease; and
               (F) if Employee is entitled on the Date of Termination to
coverage under the medical, prescription, and dental portions of the Welfare
Plans, continuation of such coverage for Employee and Employee’s dependents for
a period ending on the later to occur of (1) the second anniversary of the Date
of Termination or (2) the Employment Expiration Date. During the COBRA
Continuation Period, coverage under this Section 6(a)(iii)(F) will be provided
to Employee at the active employee cost payable by Employee with respect to
those costs paid by Employee prior to the Date of Termination and whereby the
balance of applicable premiums, as determined by the Company, shall be paid by
the Company, with income applicable to such premiums imputed to Employee.
Following the COBRA Continuation Period, to the extent Employee is still
entitled to continued coverage pursuant to this Section 6(a)(iii)(F), the
medical, prescription and dental coverage to be continued shall be provided in
accordance with the provisions of Treas. Reg. § 1.409A-3(i)(1)(iv)(A) as it
applies to the provision of in-kind benefits, including but not limited to the
requirements that (I) the in-kind benefits provided will be determined by
reference to the objective and nondiscretionary criteria set forth in the
applicable Welfare Plans, (II) the in-kind benefits provided during one taxable
year of the Employee will not affect the in-kind benefits to be provided in any
other taxable year (provided, that a limit imposed on the amount of benefits
that may be provided over some or all of the continuation period described in
this Section 6(a)(iii)(F) shall not in and of itself cause the arrangement
described herein to fail to satisfy the requirements of Treas. Reg. §
1.409A-3(i)(1)(iv)), and (III) the right to receive such in-kind benefits is not
subject to liquidation or exchange for another benefit. Notwithstanding any
provision of the foregoing to the contrary, the continued coverage provided
pursuant to this Section 6(a)(iii)(F) will count towards the depletion of any
continued health care coverage rights that Employee and Employee’s dependents
may have pursuant to COBRA, and Employee’s or Employee’s dependents’ rights to
continued health care coverage pursuant to this Section 6(a)(iii)(F) shall
terminate at the

13

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time Employee or Employee’s dependents become covered, as described in COBRA,
under another group health plan that does not limit coverage with respect to any
preexisting conditions of Employee or Employee’s dependents, and shall also
terminate as of the date the Company ceases to provide coverage to its senior
executives generally under any such Welfare Plan; and
               (G) notwithstanding the terms or conditions of any Award (as
defined in the Odyssey HealthCare, Inc. 2001 Equity-Based Compensation Plan),
Employee shall be entitled to exercise Employee’s Awards (other than incentive
stock option Awards, which shall be governed by the terms of such Award) that
are vested as of the Date of Termination until the first anniversary of the Date
of Termination; provided, however, that if the terms of the plan or agreement
governing such Awards (other than the meaning of “Cause” and “Disability”) are
more favorable to Employee as to exercisability than the terms of this Section
6(a)(iii)(G), then the more favorable term(s) of such Award agreement or plan
shall govern the exercisability of such Award upon Employee’s termination;
provided, further, however, that in no event shall Employee be entitled to
exercise such Awards on any date later than the earlier of (I) the latest date
upon such the Award could have expired by its original terms under any
circumstances, or (II) the tenth anniversary of the original date of grant of
the Award.
     Except as described in this Section 6(a)(iii), in the event of Employee’s
termination by the Company without Cause or by Employee for Good Reason or due
to a Non-Renewal election by the Company, Employee shall forfeit all rights to
any other compensation.
     7. Other Provisions Relating to Termination.
          (a) Notice of Termination. Any termination by the Company for Cause or
without Cause or by reason of Employee’s Disability, or by Employee’s
resignation for Good Reason or without Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 13(b). For purposes of this Agreement, a “Notice of Termination” means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon and (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee’s employment under the provision so indicated. The
failure by the Company or Employee to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Cause or Good Reason
shall not waive any right of the Company or Employee hereunder or preclude the
Company or Employee from asserting such fact or circumstance in enforcing the
Company’s or Employee’s rights hereunder.
          (b) Date of Termination. “Date of Termination” means (i) if Employee’s
employment is terminated by reason of Employee’s death, the date of Employee’s
death; (ii) if Employee’s employment is terminated by reason of Employee’s
Disability, the Disability Effective Date (provided that Employee shall not have
returned to perform, with or without reasonable accommodation, the essential
functions of Employee’s position on a full-time basis during such 30-day
period); (iii) if Employee’s employment is terminated by the Company without
Cause or by Employee for Good Reason or without Good Reason, then, subject to
Section 7(c), the date specified in the Notice of Termination (which date shall
be a date between

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the date that the Notice of Termination is given and 30 days thereafter
(inclusive)); (iv) if Employee’s employment is terminated by the Company for
Cause then, subject to Section 7(d), the date on which the Notice of Termination
is given; and (v) if Employee’s employment is terminated due to a Non-Renewal
election by Employee or the Company, the date on which the Term expires.
Notwithstanding the foregoing, in no event shall the Date of Termination occur
prior to the date the Employee incurs a “separation from service” within the
meaning of section 409A of the Code, and the guidance promulgated thereunder
(collectively, the “Nonqualified Deferred Compensation Rules”).
          (c) Good Reason. Upon Employee’s learning of the occurrence of any
event described in the definition of Good Reason in Section 1(l), Employee may
terminate Employee’s employment hereunder for Good Reason within 60 days
thereafter by giving a Notice of Termination to the Company to that effect,
describing in reasonable detail the facts or circumstances giving rise to
Employee’s right to terminate Employee’s employment for Good Reason (and, if
applicable, the action required to cure same). If the effect of the occurrence
of the event described in Section 1(l) may be cured, the Company shall have the
opportunity to cure any such effect for a period of 60 days following receipt of
Employee’s Notice of Termination. If within 60 days following the Company’s
receipt of a Notice of Termination for Good Reason the Company has not cured the
facts or circumstances giving rise to Employee’s right to terminate Employee’s
employment for Good Reason, then the termination by Employee for Good Reason
shall be effective as of the date specified in Employee’s Notice of Termination.
If Employee does not give a Notice of Termination to the Company within 60 days
after learning of the occurrence of an event giving rise to Good Reason, then
this Agreement shall remain in effect; provided, however, that the failure of
Employee to terminate this Agreement for Good Reason shall not be deemed a
waiver of Employee’s right to terminate Employee’s employment for Good Reason
upon the occurrence of a subsequent event described in Section 1(l) in
accordance with the terms of this Agreement. Notwithstanding the foregoing, the
right of Employee to terminate Employee’s employment for Good Reason under
Section 4(d)(i) shall not limit the Company’s right to terminate Employee’s
employment for Cause under Section 4(c) if Cause is determined to exist prior to
the time Good Reason is determined to exist.
          (d) Cause. Upon the Company learning of the occurrence of any event
described in Section 1(d), the Company may at any time terminate Employee’s
employment hereunder for Cause within 60 days thereafter by giving Employee a
Notice of Termination to that effect, describing in reasonable detail the facts
or circumstances giving rise to the Company’s right to terminate Employee’s
employment for Cause (and, if applicable, the action required to cure same). If
the Company does not give a Notice of Termination to Employee within 60 days
after learning of the occurrence of an event giving rise to Cause, then this
Agreement shall remain in effect; provided, however, that the failure of the
Company to terminate this Agreement for Cause shall not be deemed a waiver of
the Company’s right to terminate Employee’s employment for Cause upon the
occurrence of a subsequent event described in Section 1(d) in accordance with
the terms of this Agreement. Notwithstanding the foregoing, the right of the
Company to terminate Employee’s employment for Cause under Section 4(c) shall
not limit Employee’s right to resign for Good Reason under Section 4(d)(i) if
Good Reason is determined to exist prior to the time Cause is determined to
exist.

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          (e) Full Settlement; Mitigation. In no event shall Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Employee under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or not Employee obtains
other employment. The Company shall not be liable to Employee for any damages
for breach of this Agreement in addition to the amounts payable under Section 5
or 6 arising out of the termination of Employee’s employment prior to the end of
the Term. The Company shall be entitled to seek damages from Employee for any
breach of Section 8, 9 or 10 by Employee or for Employee’s criminal misconduct.
          (f) Release and Other Agreements. Notwithstanding any other provision
in this Agreement to the contrary, in consideration for receiving the severance
benefits described in this Agreement, Employee hereby agrees to execute within
forty-five (45) days of the Date of Termination (and not revoke thereafter) a
release in substantially the form attached hereto as Exhibit B (the “Release”).
If Employee fails to properly execute and deliver the Release (or revokes the
Release), Employee agrees that Employee shall not be entitled to receive such
severance benefits. Without limiting the foregoing, in consideration for
receiving such severance benefits, upon any termination of Employee’s employment
(other than by reason of death), whether Employee’s employment is terminated by
Employee or by the Company, Employee hereby agrees to resign in writing, in form
and substance reasonably acceptable to the Company, from all officer and/or
director positions with the Company or any Subsidiary or Affiliate thereof,
effective on the Date of Termination. For purposes of this Agreement, the
Release and the resignation shall be considered to have been executed by
Employee if it is signed by Employee’s legal representative in the case of
Employee’s legal incompetence or on behalf of Employee’s estate in the case of
Employee’s death. Upon Employee’s execution and delivery of the Release, the
Company shall also promptly execute and deliver the Release.
          (g) Six Month Delay. Notwithstanding any time of payment otherwise
designated in Section 5 or Section 6 hereof, if on Employee’s Date of
Termination he is a “specified employee” within the meaning of the Nonqualified
Deferred Compensation Rules, any amounts payable to Employee by reason of his
termination of employment with the Company pursuant to Section 5(c)(v) or
Section 6(a)(iii)(E) hereof shall not be paid to Employee until the date that is
six months and one day following the Date of Termination.
     8. Disclosure of, Access to and Entrustment of Confidential Information,
Business Opportunities and Business Goodwill. During the course of Employee’s
employment with the Company (including during the 180-day period following the
Effective Date), the Company shall disclose to Employee, or place Employee in a
position to have access to or develop, Confidential Information (as defined in
Section 9(a)(i)), and/or shall entrust Employee with business opportunities of
the Company, and/or shall place Employee in a position to develop business
goodwill on behalf of the Company. There is a need and desire on the part of the
Company and Employee to specify the parties’ rights and obligations with respect
to the ownership and protection of such Confidential Information, business
opportunities and goodwill. Accordingly, as a material inducement to the Company
to enter into this Agreement; in consideration for the compensation and other
benefits payable hereunder to Employee; to protect the Company’s Confidential
Information that has been and will be in the future disclosed or entrusted to
Employee (the disclosure of which by Employee in violation of this Agreement
would adversely affect the business goodwill of the Company), the business
goodwill of the

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Company that has been and will in the future be developed in Employee and the
business opportunities that have been and will in the future be disclosed or
entrusted to Employee by the Company; and for other good and valuable
consideration, Employee agrees to comply with, and be bound by, Sections 9 and
10. As used in this Section 8, “Company” shall include the Company and any of
its Subsidiaries.
     9. Confidential Information; Ownership of Property.
          (a) Obligations to Maintain Confidentiality.
               (i) Employee acknowledges that the Company has trade, business
and financial secrets and other confidential and proprietary information
regarding the Company and its business, in whatever form, tangible or intangible
(collectively, the “Confidential Information”), and that, during the course of
Employee’s employment with the Company (including during the 180-day period
following the Effective Date), Employee has received, shall receive or be placed
in a position to have access to or develop Confidential Information. Employee
further acknowledges and agrees that Employee’s use of Confidential Information
in the conduct of business on behalf of a competitor of the Company would
constitute unfair competition with the Company and would adversely affect the
business goodwill of the Company. Confidential Information includes sales
materials, technical information, processes and compilations of information,
records, specifications and information concerning customers, prospective
customers, customer and prospective customer lists, and information regarding
methods of doing business. As defined herein, Confidential Information shall not
include information that is (i) obtained by Employee from a source other than
the Company or its Affiliates, which source is not under a duty of
non-disclosure in regard to such information or (ii) becomes generally available
to the public other than through disclosure by Employee in violation of the
provisions of this Agreement.
               (ii) Employee is aware of those policies implemented by the
Company to keep its Confidential Information secret, including those policies
limiting the disclosure of information on a need-to-know basis and requiring the
keeping of information in secure areas. Employee acknowledges that the
Confidential Information has been developed or acquired by the Company through
the expenditure of substantial time, effort and money and provides the Company
with an advantage over competitors who do not know or use such Confidential
Information.
               (iii) During and following Employee’s employment by the Company,
Employee shall hold in confidence and not directly or indirectly disclose, use
(for Employee’s commercial advantage or otherwise), copy, make lists of, or make
available to others any Confidential Information except in Employee’s good faith
performance of Employee’s duties to the Company as an executive of the Company
or to the extent authorized in writing by the Board or required by law or
compelled by legal process. Employee agrees to use reasonable efforts to give
the Company notice of any and all attempts to compel disclosure of any
Confidential Information, in such a manner so as to provide the Company with
written notice at least five days before disclosure or within three business
days after Employee is informed that such disclosure is being or shall be
compelled, whichever is earlier. Such written notice shall include a description
of the information to be disclosed, the court, government agency, or other forum
through which

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the disclosure is sought, and the date by which the information is to be
disclosed, and shall contain a copy of the subpoena, order or other process used
to compel disclosure.
               (iv) Employee further agrees not to use any Confidential
Information for the benefit of any person or entity other than the Company.
               (v) Employee agrees that all Confidential Information and other
files, documents, materials, records, notebooks, customer lists, business
proposals, contracts, agreements and other repositories containing information
concerning the Company or the business of the Company, in whatever form,
tangible or intangible (including all copies thereof), that Employee shall
prepare, or use, or be provided with as a result of Employee’s employment with
the Company, shall be and remain the sole property of the Company. Upon
termination of Employee’s employment hereunder, Employee agrees that all
Confidential Information and other files, documents, materials, records,
notebooks, customer lists, business proposals, contracts, agreements and other
repositories containing information concerning the Company or the business of
the Company (including all copies thereof) in Employee’s possession, custody or
control, whether prepared by Employee or others, shall remain with or be
returned to the Company promptly (within 48 hours) after the Date of
Termination. The materials required to be returned pursuant to this
Section 9(a)(v) shall not include personal correspondence or other personal
property of Employee that does not relate to the Company or the business of the
Company.
               (vi) Notwithstanding anything herein to the contrary, Employee
may disclose to any and all persons, without limitation of any kind, the U.S.
federal income tax treatment and tax structure of the transactions contemplated
in this Agreement and all materials of any kind (including opinions and other
tax analyses) that are provided to Employee relating to such tax treatment and
tax structure. For this purpose, “tax structure” is limited to facts relevant to
the U.S. federal income tax treatment of the transactions contemplated in this
Agreement and does not include information relating to the identity of the
parties hereto.
          (b) Ownership of Work Product. Employee acknowledges that all
discoveries, concepts, ideas, inventions, innovations, improvements,
developments, methods, processes, programs, designs, analyses, drawings,
reports, patent applications, copyrightable work and mask work (whether or not
including any confidential information) and all registrations or applications
related thereto, all other proprietary information and all similar or related
information (whether or not patentable) that relate to the Company’s or its
Affiliates’ actual or anticipated business, research and development, or
existing or future products or services and that are conceived, developed,
contributed to, made, or reduced to practice by Employee (either solely or
jointly with others) while employed by the Company (including any of the
foregoing that constitutes any proprietary information or records) (“Work
Product”) belong to the Company or its Affiliates, as applicable, and Employee
hereby assigns, and agrees to assign, all of the above Work Product to the
Company or its Affiliates, as applicable. Any copyrightable work prepared in
whole or in part by Employee in the course of Employee’s work for any of the
foregoing entities shall be deemed a “work made for hire” under the copyright
laws, and the Company or its Affiliates, as applicable, shall own all rights
therein. To the extent that any such copyrightable work is not a “work made for
hire,” Employee hereby assigns and agrees to assign to the Company all right,
title, and interest, including without limitation,

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copyright in and to such copyrightable work. Employee shall promptly disclose
such Work Product and copyrightable work to the Board and perform all actions
reasonably requested by the Board (whether during or after the Term) to
establish and confirm the Company’s or its Affiliates’, as applicable, ownership
(including, without limitation, assignments, consents, powers of attorney, and
other instruments).
          (c) As used in this Section 9 “Company” shall include the Company and
any of its Subsidiaries.
     10. Non-Competition; Non-Solicitation; Non-Disparagement.
          (a) For the reasons and consideration specified in Section 8, Employee
hereby covenants and agrees that, during the Term of Non-Competition, Employee
shall not, directly or indirectly, individually or as an officer, director,
manager, employee, stockholder, consultant, contractor, partner, member, joint
venturer, agent, equity owner or in any capacity whatsoever:
               (i) own, engage in, manage, operate, join, control, be employed
by, provide Competing Services to, or participate in the ownership, management,
operation or control of or provision of Competing Services to, a Competing
Business operating in the Geographic Area;
               (ii) knowingly recruit, hire, assist in hiring, attempt to hire,
or contact or solicit with respect to hiring any Person who, at any time during
the 12 month period ending on the Date of Termination, was an employee of the
Company; provided, that Employee may hire any Person that served as an
administrative assistant or clerical employee at the time Employee’s employment
with the Company terminates;
               (iii) induce or attempt to induce any employee of the Company to
terminate, or in any way interfere with, the relationship between the Company
and any employee thereof; or
               (iv) induce or attempt to induce any customer, client, patient,
supplier, service provider, or other business relation of the Company in the
Geographic Area to cease doing business with the Company, or in any way
interfere with the relationship between the Company and any such Person.
          Notwithstanding the foregoing, the Company agrees that Employee may
own less than one percent of the outstanding voting securities of any publicly
traded company that is a Competing Business so long as Employee does not
otherwise participate in such competing business in any way prohibited by this
Section 10. This Section 10(a) shall not apply in the event Company breaches any
of its obligations under Section 5 or 6.
          (b) Employee shall not make any negative or disparaging comments
regarding the Company, its Subsidiaries or Affiliates or any of their respective
officers, directors, shareholders, partners, members, managers, agents or
employees (collectively, the “Representatives”), including regarding the
performance of the Company, its Subsidiaries or Affiliates, or otherwise take
any action that could reasonably be expected to adversely affect the Company,
its Subsidiaries or Affiliates or the personal or professional reputation of any
of their

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respective Representatives. Information required to be disclosed by Employee
pursuant to any applicable law, court order, subpoena, process or governmental
decree shall not constitute a violation or breach of this Section 10(b);
provided, that Employee delivers written notice of such required disclosure to
the Company promptly before making such disclosure if such notice is not
prohibited by applicable law, court order, subpoena, process or governmental
decree.
          (c) Employee acknowledges that the geographic boundaries, scope of
prohibited activities, and time duration of the preceding paragraphs in this
Section 10 (including the defined terms for “Competing Business,” “Geographic
Area,” and “Term of Non-Competition” set forth in Section 1) are reasonable in
nature and are no broader than are necessary to maintain the goodwill of the
Company and the confidentiality of its Confidential Information and to protect
the goodwill and other legitimate business interests of the Company, and also
that the enforcement of such covenants would not cause Employee any undue
hardship or unreasonably interfere with Employee’s ability to earn a livelihood.
If Employee violates the covenants and restrictions in this Section 10 and the
Company brings legal action for injunctive or other equitable relief, Employee
agrees that the Company shall not be deprived of the benefit of the full period
of the restrictive covenant, as a result of the time involved in obtaining such
relief. Accordingly, Employee agrees that the provisions in Section 10(a) shall
have a duration determined pursuant to Section 10(a), computed from the date the
legal or equitable relief is granted.
          (d) If any court in any jurisdiction determines that any portion of
this Section 10 (including the defined terms for “Competing Business,”
“Geographic Area,” and “Term of Non-Competition” set forth in Section 1) is
invalid or unenforceable within such jurisdiction under circumstances then
existing, the remainder of this Section 10 (including the defined terms for
“Competing Business,” “Geographic Area,” and “Term of Non-Competition” set forth
in Section 1) shall not thereby be affected and shall be given full effect
without regard to the invalid or unenforceable provisions. If any court in any
jurisdiction construes any of the provisions of this Section 10 (including the
defined terms for “Competing Business,” “Geographic Area,” and “Term of
Non-Competition” set forth in Section 1) to be invalid or unenforceable within
such jurisdiction under circumstances then existing, because of the duration,
scope or geographical area of such provision, such court shall be required to
substitute the maximum duration, scope or geographical area reasonable under
such circumstances within such jurisdiction for the stated period, scope or area
with respect to such jurisdiction and such court shall be allowed to revise the
restrictions contained herein to cover the maximum duration, scope and area
permitted by law, and to enforce such provision as so revised.
          (e) As used in this Section 10 (and the defined terms for “Competing
Business,” “Geographic Area,” and “Term of Non-Competition” set forth in
Section 1), “Company” shall include the Company and any of its Subsidiaries.
     11. Successors; Binding Agreement.
          (a) This Agreement is personal to Employee and shall not be assignable
by Employee otherwise than by will or the by laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Employee’s
personal and legal representatives, executors, administrators, heirs,
distributes, devisees and legatees.

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          (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
          (c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, sale of assets or otherwise) to
all or substantially all of the business and/or assets of the Company, by a
written agreement in form and substance reasonably satisfactory to Employee, to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the
same amount and on the same terms as Employee would be entitled to pursuant to
Section 6 if Employee terminated Employee’s employment for Good Reason after,
but before the second anniversary of, the occurrence of a Change in Control,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement and after any such succession, “Company” shall mean the
Company as hereinbefore defined and any successor and/or assigns as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
     12. Effect of Agreement on Plans and Agreements Governing Awards.
Notwithstanding anything to the contrary contained in any plan or agreement
governing an Award granted to Employee prior to, on or after the date of this
Agreement, the respective meanings of “Cause” and “disability” as used in any
such plans or agreements shall have the meaning ascribed to such terms by this
Agreement for purposes of giving effect to such Awards on and after the date of
this Agreement.
     13. Miscellaneous.
          (a) Construction. This Agreement shall be deemed drafted equally by
both the parties. Its language shall be construed as a whole and according to
its fair meaning. Any presumption or principle that the language is to be
construed against any party shall not apply. The headings in this Agreement are
only for convenience and are not intended to affect construction or
interpretation. Any references to paragraphs, subparagraphs, sections,
subsections or clauses are to those parts of this Agreement, unless the context
clearly indicates to the contrary. Also, unless the context clearly indicates to
the contrary, (i) the plural includes the singular and the singular includes the
plural; (ii) “and” and “or” are each used both conjunctively and disjunctively;
(iii) “any,” “all,” “each,” or “every” means “any and all”, and “each and
every”; (iv) “includes” and “including” are each “without limitation”; (v)
“herein,” “hereof,” “hereunder” and other similar compounds of the word “here”
refer to the entire Agreement and not to any particular paragraph, subparagraph,
section or subsection; and (vi) all pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the entities or persons referred to may require.
          (b) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

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           If to Employee   If to the Company  
Robert A. Lefton
  Odyssey HealthCare, Inc.
5528 Weatherby Lane
  717 North Harwood, Suite 1500
Plano, Texas 75093
  Dallas, Texas 75201
 
  Attn: General Counsel
 
   
 
  with a copy to:
 
   
 
  P. Gregory Hidalgo
 
  Vinson & Elkins L.L.P.
 
  3700 Trammell Crow Center
 
  2001 Ross Avenue
 
  Dallas, Texas 75201

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
          (c) Severability. Except as otherwise provided in Section 10(d), if
any provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term of this Agreement, such
provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a portion of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, except as otherwise provided in Section 10(d), in lieu
of such illegal, invalid or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
          (d) Withholding. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
          (e) No Waiver. Except as expressly set forth in this Agreement, no
waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by
the other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at any time.
          (f) Equitable and Other Relief. Employee acknowledges that money
damages would be both incalculable and an insufficient remedy for a breach of
Sections 8, 9 or 10 by Employee and that any such breach would cause the Company
irreparable harm. Accordingly, the Company, in addition to any other remedies at
law or in equity it may have, shall be entitled, without the requirement of
posting of bond or other security, to equitable relief, including injunctive
relief and specific performance, in connection with a breach of Sections 8, 9 or
10 by

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Employee. The parties agree that the only circumstances in which disputes
between them will not be subject exclusively to arbitration pursuant to the
provisions in Section 13(h) are in connection with a breach of Sections 8, 9 or
10 by Employee. If the Company files a pleading with a court seeking immediate
injunctive relief and this pleading is challenged by Employee and injunctive
relief sought is not awarded, the Company shall pay all of Employee’s costs and
attorneys’ fees. The parties consent to venue in Dallas County, Texas and to the
exclusive jurisdiction of competent state courts or federal courts in the state
or district in Dallas County, Texas for all litigation which may be brought,
subject to the requirement for arbitration in Section 13(h), with respect to the
terms of, and the transactions and relationships contemplated by, this
Agreement. The parties further consent to the non-exclusive jurisdiction of any
state court located within a district which encompasses assets of a party
against which a judgment has been rendered for the enforcement of such judgment
or award against the assets of such party.
          (g) Entire Agreement. The provisions of this Agreement constitute the
entire and complete understanding and agreement between the parties with respect
to the subject matter hereof, and supersede all prior and contemporaneous oral
and written agreements, representations and understandings of the parties, which
are hereby terminated. Employee and the Company acknowledge and represent that
there are no other promises, terms, conditions or representations (or written)
regarding any matter relevant hereto.
          (h) Arbitration. Except as otherwise provided in Section 13(f), in the
event any claim, demand, cause of action, dispute, controversy or other matter
in question (“Claim”) arises out of this Agreement (or its termination) or
Employee’s employment (or termination of employment) by the Company or its
Subsidiaries, then, upon the written request of Employee or the Company, such
dispute or controversy will be submitted to binding arbitration. Any arbitration
will be conducted in accordance with the Federal Arbitration Act (“FAA”) and, to
the extent an issue is not addressed by the FAA or the FAA does not apply, with
the then-current National Rules for the Resolution of Employment Disputes of the
American Arbitration Association (“AAA”) or other rules of the AAA as applicable
to the claims asserted. The results of arbitration will be binding and
conclusive on the parties hereto. All parties agree that venue for arbitration
will be in Dallas County, Texas. If Employee is the prevailing party, then
Employee will be entitled to reimbursement by the Company for reasonable
attorneys fees, reasonable costs and other reasonable expenses pertaining to the
arbitration. All proceedings conducted pursuant to this Section 13(h) will be
kept confidential by all parties. THE ARBITRATORS SHALL HAVE NO AUTHORITY TO
AWARD PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES (WHETHER IT BE EXEMPLARY DAMAGES,
TREBLE DAMAGES, OR ANY OTHER PENALTY OR PUNITIVE TYPE OF DAMAGES). REGARDLESS OF
WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER TEXAS LAW, EMPLOYEE AND THE COMPANY
EACH HEREBY WAIVE THE RIGHT, IF ANY, TO RECOVER PUNITIVE DAMAGES IN CONNECTION
WITH ANY CLAIMS. EMPLOYEE AND THE COMPANY ACKNOWLEDGE THAT BY SIGNING THIS
AGREEMENT EMPLOYEE AND THE COMPANY ARE WAIVING ANY RIGHT THAT EMPLOYEE OR THE
COMPANY MAY HAVE TO A JURY TRIAL OR, OTHER THAN AS EXPRESSLY PROVIDED BY SECTION
13(f), A TRIAL BEFORE A JUDGE IN CONNECTION WITH, OR RELATING TO, A CLAIM.

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          (i) Attorney Fees. The prevailing party in any dispute or controversy
under or in connection with this Agreement shall be entitled to reimbursement
from the non-prevailing party for all costs and reasonable legal fees incurred
by such prevailing party.
          (j) Survival. Sections 1 and 4 through 13 of this Agreement shall
survive the termination of this Agreement.
          (k) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICT OF LAWS OF TEXAS OR ANY OTHER JURISDICTION, AND, WHERE
APPLICABLE, THE LAWS OF THE UNITED STATES.
          (l) Amendments. This Agreement may not be amended or modified at any
time except by a written instrument approved by the Board and executed by the
Company and Employee.
          (m) Employee Acknowledgement. Employee acknowledges that Employee has
read and understands this Agreement, is fully aware of its legal effect, has not
acted in reliance upon any representatives or promises made by the Company other
than those contained in writing herein, and has entered into this Agreement
freely based on Employee’s own judgment.
          (n) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart of this Agreement
that has attached to it separate signature pages which together contain the
signature of all parties hereto shall for all purposes be deemed a fully
executed original. Facsimile signatures shall constitute original signatures.
[SIGNATURE PAGE FOLLOWS]

 

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     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first above written.

            COMPANY:

ODYSSEY HEALTHCARE, INC.
a Delaware corporation
      By:   /s/ Richard R. Burnham         Richard R. Burnham, Chairman of the
Board                EMPLOYEE:
      /s/ Robert A. Lefton       Robert A. Lefton   

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]