Document:

ex10-61

 

Exhibit 10.61

SELECT MEDICAL CORPORATION

4716 Old Gettysburg Road P.O. Box 2034

Mechanicsburg, Pennsylvania 17055

November 21, 2001

Mr. David W. Cross

Select Medical Corporation

7733 Forsyth Boulevard

Suite 800

St. Louis, MO 63105

         Re: Agreement in the Event of a Change of Control of SMC

Dear Mr. Cross:

                  The following will confirm the agreement of Select Medical Corporation, a
Delaware corporation (the “Company”), with you concerning the consequences upon
certain terminations of your employment in connection with a change in control
of the Company.

                  In consideration of your past and continued service to the Company and in
consideration of the mutual covenants and agreements contained in this letter
(this “Letter Agreement”), the Company and you hereby agree, intending to be
legally bound hereby, as follows:

                  1.         Covered Termination. A “Covered Termination” shall be deemed to occur
if (i) within the five-year period immediately following a Change of Control
(as defined below), (a) your employment with the Company is terminated by the
Company without Cause (as defined below), (b) there is a reduction by the
Company in your compensation from that in effect prior to such Change of
Control, or (c) you are required to be based anywhere other than the Company’s
executive offices in (or within 25 miles of) St. Louis, Missouri (except for
required travel on the Company’s business to an extent substantially consistent
with your business travel obligations prior to the Change of Control), (ii)
within the six-month period immediately following a Change of Control, you
terminate your employment with the Company for Good Reason (as defined below),
or (iii) within the six-month period preceding a Change of Control, your
employment is terminated by the Company other than for Cause, and you
reasonably demonstrate that such termination of employment was at the request
of a third party who has taken steps reasonably calculated to effect the Change
of Control.

                  2.          Payments Upon a Covered Termination. If a Covered Termination occurs,
then (i) the Company agrees that such termination is not a voluntary
termination or a termination “for cause” as contemplated by any of the
Company’s stock option or other incentive plans and any stock option or other
award agreements entered into between you and the Company (including agreements
that may be entered into in the future in connection with additional awards
granted pursuant to any

 

 

Company plan, the “Award Agreements”) and the Company agrees that all
unvested, unexercised stock options held by you which were granted to you by
the Company shall become fully vested and exercisable as of the date of the
Covered Termination and you will have the right to exercise, at any time prior
to the earlier of three months after the date of termination or the expiration
date of such option, all such options to purchase the Company’s stock
notwithstanding any contrary vesting schedule that may be contained in the
applicable plan or Award Agreement, and (ii) the Company will, on or before
your last day as an employee of the Company, pay to you, in lieu of any other
rights to cash compensation other than the payment of your salary for services
performed before the date of termination and as a severance benefit, a lump sum
cash payment equal to your total base salary plus bonus compensation from the
Company for the preceding three years (or, if you shall have been employed for
less than three years, an amount equal to three times your average total annual
cash compensation for base salary and bonus for your years of service to the
Company).

                  3.          Definitions.

                  (a)         Change of Control.

                           (i)         A “Change of Control” shall be deemed to have occurred if, subject to
Section 3(a)(ii) below, (i) any person including a group, but excluding any
stockholder of the Company who immediately prior to the Public Offering (as
defined below) beneficially owned 12% or more of the Company’s outstanding
shares, becomes the beneficial owner of shares of the Company having more than
50% of the total number of votes that may be cast for the election of directors
of the Company, (ii) any person including a group, other than you or any group
of which you are a party, increases its beneficial ownership of shares of the
Company beyond such person’s ownership immediately after the Public Offering by
a number of shares equal to or greater than 33% of the total number of votes
that may be cast for the election of directors; (iii) the individuals who serve
on the Board of Directors of the Company as of the effective date hereof (the
“Incumbent Directors”) cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, any person who
becomes a director subsequent to the effective date hereof, whose election or
nomination for election was approved by a vote of at least a majority of the
directors then constituting the Incumbent Directors, shall for purposes of this
clause (iii) be considered an Incumbent Director; (iv) the consummation of a
merger or consolidation of the Company in which the stockholders of the Company
immediately prior to such merger or consolidation, would not, immediately after
the merger or consolidation, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of the combined voting power of the
voting securities of the corporation issuing cash or securities in the merger
or consolidation (or of its ultimate parent corporation, if any); or (v) there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets (on a consolidated basis), other
than a sale or disposition by the Company of all or substantially all of the
Company’s assets to an entity, at least 50% of the combined voting power of the
voting securities of which are owned by persons in substantially the same
proportion as their ownership of the Company immediately prior to such sale.

                           (ii)         Notwithstanding the foregoing, in no event shall a “Change of
Control” be deemed to occur for purposes of this Letter Agreement unless the
total consideration for the transaction or transactions which would, absent
this clause (iii), constitute a Change of Control, has a value that is equal to
or greater than $6.51 per share of common stock of the Company (the “Minimum
Value”); provided that such Minimum Value shall be adjusted to reflect changes
to such common

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stock in the event of a stock dividend, stock split, reverse stock split,
stock combination, reclassification, recapitalization, or other similar change
in the structure or capitalization of the Company, or any other event which in
the discretion of the Board of Directors of the Company necessitates such an
adjustment.

                           (iii)         For purposes of this Section 3(a), (A) the terms “person,” “group,”
“beneficial owner,” and “beneficially own” have the same meanings as such terms
under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, (B) the term “Public Offering”
shall mean the consummation of the first public offering of shares of common
stock of the Company in a firm commitment underwritten offering registered
under the Securities Act of 1933, as amended, on Form S-1 or its successor
forms, and (C) the term “voting securities” shall mean securities, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect the
corporate directors (or persons performing similar functions).

                  (b)         Cause. For purposes of this Letter Agreement, “Cause” shall mean (i)
your willful and continued failure to substantially perform your duties
hereunder (other than any such failure resulting from incapacity due to
physical or mental illness); (ii) your engaging in willful or reckless
misconduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise; or (iii) your conviction of a felony involving moral
turpitude; provided that an act, or failure to act, on your part shall be
considered “willful” or “reckless” only if done, or omitted to be done, by you
not in good faith and without a reasonable belief that his action or omission
was in the best interest of the Company. Your employment shall not be deemed
to have been terminated for Cause unless the Company shall have given or
delivered to you (i) reasonable notice setting forth the reasons for the
Company’s intention to terminate your employment for Cause; (ii) an opportunity
to cure any such breach during the 30-day period after your receipt of such
notice; (iii) a reasonable opportunity, at any time during the 30-day period
after your receipt of such notice, together with your counsel, to be heard
before the Board of Directors; and (iv) a notice of termination stating that,
in the good faith opinion of not less than a majority of the entire membership
of the Board of Directors of the Company, you are guilty of the conduct set
forth in any of clauses (i), (ii) or (iii) of the definition of Cause above.

                  (c)         Good Reason. For purposes of this Letter Agreement, you shall have
“Good Reason” to terminate your employment after a Change of Control if you
make good faith determination that, as a result of such Change of Control, you
are unable to perform your services effectively or there is any significant
adverse change in your authority or responsibilities, as performed immediately
prior to such Change of Control.

                  4.         Additional Payments.

                  (a)         If all, or any portion, of the payments or other benefits provided
under any section of this Agreement, either alone or together with other
payments and benefits that you receive or are entitled to receive from the
Company or its affiliates, (whether or not under an existing plan, arrangement
or other agreement) (collectively the “Payments”) would constitute an excess
“parachute payment” within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”) and would result in the imposition on you
of an excise tax under Section 4999 of the Code, (such excise tax, together
with any interest and penalties related thereto, are hereinafter collectively
referred to as the “Excise Tax”) then, in addition to any other benefits to
which you are entitled under this Agreement, you will be entitled to receive an
additional payment (a “Gross-Up Payment”) in cash,

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in an amount such that after you pay all taxes including, without
limitation, (i) any income taxes (and any interest and penalties imposed with
respect thereto) and (ii) any Excise Tax, imposed upon the Gross-Up Payment,
you will retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Unless you and the Company otherwise agree in
writing, any determination required under this Section 4, including without
limitation, the amount of payments under this Article 6 (the “Parachute
Gross-up”) shall be computed and made in writing by the Employer’s then
independent public accountants (the “Accountants”), whose determination shall
be, subject to the Employee’s reasonable approval of the calculations required
under this Article 6, conclusive and binding upon the Employee and the Employer
for all purposes. For purposes of making the calculations required by this
Section 4, the Accountants may rely on reasonable, good faith interpretations
concerning the application of Section 280G and 4999 of the Code. You and the
Company shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section 4. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 4.

                  (b)         As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accountants hereunder,
it is possible that (i) Gross-Up Payments which will not have been made by the
Company should have been made (an “Underpayment”), consistent with the
calculations required to be made hereunder or that (ii) Gross-Up Payments that
have been made will be determined to have been in excess of the Gross-Up
Payments actually required (an “Overpayment”). In the event that you are
required to make a payment of any Excise Tax, the Accountants shall determine
the amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for your benefit. In the event
that it is finally determined that an Overpayment has occurred, you will
promptly, and in any event within 30 days of such determination, refund the
amount of the Overpayment, plus any interest actually paid to you with respect
to the Overpayment, to the Company. The Company shall have the right with
respect to the determination of either an Underpayment or an Overpayment to you
to appeal the assertion of any Underpayment or to claim, and sue for, a refund
of any Excise Tax paid by you upon any Payment or Gross-Up Payment, provided
that the Company shall promptly reimburse you for all expenses, including
counsel and accounting fees, incurred in connection with any such proceeding.
Alternatively, the Company may undertake any such proceeding, and you shall
cooperate with the Company in any such proceeding.

                  5.          Miscellaneous.

                  (a)         The Company will require any purchaser of all or substantially all of
the assets of the Company, by agreement in form and substance reasonably
satisfactory to you, to expressly assume and agree to perform this Letter
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase 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 Letter Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if a Covered Termination had occurred. As used in
this Letter Agreement, “Company” shall mean the Company as hereinbefore defined
and any purchaser of its assets as aforesaid which executed and delivers the
agreement provided for herein.

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                  (b)         This Letter Agreement shall remain in effect for so long as you are
employed by the Company. This Letter Agreement may not be modified or waived
except in writing and agreed to by the Company and you. This Letter Agreement
shall be governed by the laws of the Commonwealth of Pennsylvania and shall
inure to the benefit of your heirs.

                  (c)         The Company represents that this Letter Agreement has been duly
authorized and is binding on and enforceable against the Company. The
invalidity or unenforceability of any provision of this Letter Agreement shall
not affect the validity or enforceability of any other provision, which shall
remain in full force and effect.

                  (d)         Upon payment of the amount required under paragraph 1 hereof, you
shall deliver to the Company a general release of liability of the Company and
its officers and directors in a form reasonably satisfactory to the Company.

                  (e)         All payments made pursuant to this Letter Agreement shall be subject
to withholding of applicable deductions and income and employment taxes.

                  (f)         Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, sent by facsimile
transmission or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally or sent by
facsimile transmission or, if mailed, five days after the date of deposit in
the United States mails to the following addresses:

                  If to Employee:

                  David W. Cross

                  10 Lindworth Drive

                  St. Louis, MO 63124

                  If to the Company:

                  Select Medical Corporation

                  4716 Old Gettysburg Road

                  Mechanicsburg, PA 17055

                  Attention: General Counsel

                  6.          Claims Procedure. Any claim for benefits under this Letter Agreement by
you shall be made in writing and sent to the Company at its principal offices
in Mechanicsburg, Pennsylvania, or such other place as the Company shall
hereafter designate in writing. If you, or any beneficiary following your
death (collectively, the “Claimant”), believes he or she has been denied any
benefits or payments under this Letter Agreement, either in total or in an
amount less than the full benefit or payment to which the Claimant would
normally be entitled, the Company shall advise the Claimant in writing of the
amount of the benefit, or payment, if any, and the specific reasons for the
denial within thirty (30) days of the receipt of the Claimant’s claim. The
Company shall also furnish the Claimant at that time with a written notice
containing:

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                  (a)         A specific reference to pertinent provisions of this Letter
Agreement;

                  (b)         A description of any additional material or information
necessary for the Claimant to perfect the claim if possible, and

                  an explanation of why such material or information is needed; and

                  (c)         An explanation of the claim review procedure set forth in this
Section 6.

Within sixty (60) days of receipt of the information described above, the
Claimant shall, if further review is desired, file a written request of
reconsideration of the Company’s decision with the Appeal Committee. The
Appeal Committee shall consist of those individuals who were serving as the
Compensation Committee of the Board of Directors of the Company immediately
prior to the Change of Control. The Appeal Committee shall select from its
membership a chairperson and a secretary and may adopt such rules and
procedures as it deems necessary to carry out its functions. In the event any
individual is unable to serve on the Appeal Committee, then the chairperson of
the Appeal Committee shall appoint a successor provided such successor must
have been a member of the Board of Directors of the Company prior to the Change
of Control (“Prior Board Member”). So long as the Claimant’s request for
review is pending with the Appeal Committee (including such 60-day period), the
Claimant, or his duly authorized representative, may review pertinent documents
and may submit issues and comments in writing to the Appeal Committee. A final
and binding decision shall be made by the Appeal Committee within thirty (30)
days of the filing by the Claimant of the request for reconsideration. The
Appeal Committee’s decision shall be conveyed to the Claimant in writing and
shall include specific reasons for the decision and specific references to the
pertinent provisions of this Letter Agreement on which the decision is based.
The Appeal Committee shall discharge its duties under this claims procedure in
accordance with the fiduciary standards of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), and in doing so, to the extent
permitted by law, shall be indemnified and held harmless by the Company (to the
extent not indemnified or saved harmless under any liability insurance or other
indemnification arrangement with the Company) for or against all liability to
which the Appeal Committee may be subjected by reason of any act done in good
faith with respect to the adjudication of any claim under this Letter
Agreement, including reasonable expenses. Notwithstanding anything to the
contrary herein contained, the Claimant shall be entitled to submit his or her
claim for determination to any court having competent jurisdiction regardless
of whether he or she has first exercised his or her right to have the Company’s
decision reconsidered by the Appeal Committee.

                  7.          Entire Agreement. This writing represents the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may not be altered or amended except by an agreement in writing.

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                  Please indicate your acceptance of the above agreement by signing below in
the space indicated.

	 	 	 	 	 
	 	 	Very truly yours,
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	SELECT MEDICAL CORPORATION, a Delaware

corporation
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	By:
	 	/s/ Robert
A. Ortenzio
	 	 	 
	 	

      Robert A. Ortenzio,

      President

	
	
	
	

	 	 	 	 	 
	
	
	
	

	Agreed to and accepted:	 	 	 	 
	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	/s/ David W. Cross	 	 	 	 
	
	
	
	

	
	 	 	 	 
	David W. Cross	 	 	 	 

-7-Pursuant to Rule 12b-32 under the Act, the Credit Agreement, dated as of
December 21, 2001 between Televisa, the Banks set forth therein and JPMorgan
Chase Bank, as administrative agent for the Banks is incorporated herein by
reference to Exhibit 10.5 of Amendment No. 1 to the Form F-4, which amendment
was filed by Televisa on January 30, 2002.

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