AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is entered into March 31, 2008
(“Effective Date”), between CENTER FOR WOUND HEALING, INC., a Nevada corporation
(the “Company”) with its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (“Executive”) who resides at
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, to provide the terms
and
conditions for Executive’s employment with the Company and its affiliates from
time to time (together, the “Group”).
The
Company and Executive have agreed that Executive will be employed by the Company
and will serve as the Company’s Chief Executive Officer and Chief Financial
Officer, upon the terms and conditions set forth below. This Agreement replaces
and supersedes the Employment Agreement between Executive and the Company dated
January 3, 2007 (the “2007 Employment Agreement”), except as expressly provided
herein.
Accordingly,
and in consideration of the mutual obligations set forth in this Agreement,
which Executive and the Company agree are sufficient, Executive and the Company
agree as follows:
1. Term
of Employment. Subject
to the provisions of Paragraph 4 below, the initial term of this Agreement
(the
“Initial Term”) begins on March 31, 2008 and ends on June 30, 2011. Executive’s
employment by the Company pursuant to this Agreement shall be automatically
renewed for an additional twelve (12) months following the end of the Initial
Term unless either Executive or the Company has provided written notice of
its
or his intent not to renew on or before June 30, 2010 (a “Renewal Term”).
Following the first Renewal Term, Executive’s employment by the Company pursuant
to this Agreement shall be automatically renewed for successive twelve (12)
month periods (each, also a “Renewal Term”) following the end of the prior
Renewal Term unless either Executive or the Company has provided written notice
of its or his intent not to renew no less than 180 days prior to the expiration
of the prior Renewal Term. Executive’s term of employment under this Agreement
(the “Term”) consists of the Initial Term and any Renewal Term(s). For avoidance
of doubt, “Term” as used in this Agreement shall not include any Renewal Term(s)
unless this Agreement is extended in accordance with this Paragraph 1.
2. Position
and Responsibilities.
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(a)
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During
the Term, Executive shall be employed as the Company’s Chief Executive
Officer and Chief Financial Officer, with the general powers, authority
and responsibilities that accompany those positions.
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1
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(b)
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As
Chief Executive Officer and Chief Financial Officer, Executive shall
report directly to the Board and shall have the duties and
responsibilities that are typically performed by a chief executive
officer
and chief financial officer, as well as any other lawful executive
duties
and executive offices assigned to Executive by the Board consistent
with
Executive’s position, the size of the Company and the qualified personnel
employed by the Company. Executive agrees to comply with such lawful
policies of the Company as may be adopted from time to time as are
applicable to him. Executive shall devote his full business time
and best
efforts to the Company’s business and affairs; Notwithstanding the
foregoing, nothing herein shall preclude Executive from (i) serving
on the
board of one or more charitable organizations (subject to the approval
of
the Board, such approval not to be unreasonably withheld), (ii) engaging
in charitable activities and community affairs, and (iii) managing
his
personal investments and affairs, provided that any such activities
listed
in (i), (ii) and (iii) above do not interfere in more than a deminimis
manner with the proper performance of his duties and responsibilities
hereunder and comply with the limitations set forth in Paragraph
5(a)
below.
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(c)
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Executive’s
principal place of employment shall be the Company’s corporate
headquarters, currently located in Tarrytown, New York, but Executive
shall be required to engage in reasonable and customary business
travel on
behalf of the Company including visiting existing facilities owned
or
operated by the Company and recruiting prospective hospitals and
physicians.
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(d)
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The
Company agrees to use its commercial best efforts to have Executive
elected to a position on the Company’s Board of Directors by May 31, 2008,
and shall have a continuing obligation to use its commercial best
efforts
to persuade the Company’s shareholders to elect Executive to the Board if
such deadline is not met. If Executive is not elected to the Board
by May
31, 2008, or if following May 31, 2008 Executive remains employed
by the
Company, has been elected to the Board, but is subsequently voted
off the
Board, he shall have the option to either (i) terminate his employment
with the Company for Good Reason (as defined in Paragraph 4(a)(iv),
below;
or (ii) Executive’s Base Salary (as defined in Paragraph 3(a), below),
shall be increased to no less than $450,000 annually during any such
period during which he is not a member of the Board (provided that
upon
any subsequent election to the Board, Executive’s Base Salary shall be
reduced to Base Salary which he would have been paid under Paragraph
3(a)
without regard to this Paragraph 2(d)). Executive hereby agrees to
tender
his resignation from his position as a Director of the Company upon
the
termination of his employment for any reason. Nothing contained herein
shall guarantee Executive a position or continuing position on the
Board
nor affect the rights of the Company’s shareholders to elect Board
members.
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(e)
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As
part of Executive’s normal duties, Executive shall have the authority and
the discretion to award performance bonuses to the Company’s employees
(other than himself), based upon an annual bonus pool established
by the
Board; provided,
however,
that Executive shall not have the authority to award a performance
bonus
to an employee that exceeds 100% of the employee’s base salary The Board,
in its sole and absolute discretion, shall determine the amount of
the
bonus pool to be administered by Executive, provided, however, that
the
minimum bonus pool for each fiscal year during the Term shall not
be less
than 5% of corporate payroll for the fiscal year.
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2
3. Compensation
and Expense Reimbursement.
Executive
shall receive the following compensation and/or reimbursement for
expenses:
(a) Base
Salary.
Subject
to Paragraph 2(d), above, Executive’s annual base salary for each fiscal year
during the Term shall be $375,000, payable in equal monthly or more frequent
installments as are customary under the Company's payroll practices from time
to
time, and subject to annual cost-of-living increases (calculated by reference
to
U.S. Department of Labor’s Consumer Price Index for Urban Consumers, New York,
Northern New Jersey and Long Island (NY, NJ, CT, PA) for each applicable year)
to take effect on January 1 during each calendar year of the Term (the “Base
Salary”) not to exceed 4% per annum. The Board (or a committee thereof) will
review the Base Salary at least annually and may (or may not) increase it beyond
Executive’s annual cost-of-living increases at any time for any reason, in its
sole discretion. Subject to Section 2(d), above, Executive’s Base Salary (as
increased from time to time) shall not be reduced without his written consent.
(b) Bonus
for Implementation of Accounting System.
The
parties acknowledge and agree that during 2008 Executive has earned a one-time
cash bonus of $75,000 (the “Accounting Bonus”) as a result of the Company’s
implementation of the Great Plains accounting system. The Accounting Bonus
shall
be paid to Executive on December 31, 2008, or within ten (10) days of the
Company’s filing of its June 30, 2007 Form 10K and September 30, 2007 and
December 31, 2007 Form 10Q reports, whichever is sooner, but in no event later
than March 15, 2009.
(c) Closing
Bonus. The
parties acknowledge and agree that Executive has earned a one-time cash bonus
of
$50,000, payable on or before September 15, 2008, as a result of that certain
transaction evidenced by the Securities Purchase Agreement (the “Securities
Purchase Agreement”) between the Company and Bison Capital Equity Partners II-B,
L.P. (“Bison”) dated March 31, 2008 (the “Closing Bonus”).
(d) Annual
Performance Bonus.
In
addition to the foregoing, Executive shall be eligible to receive an annual
cash
performance bonus (the “Annual Bonus”) for each fiscal year ending during the
Term if Executive remains employed by the Company on the last day of such fiscal
year and the Company achieves the following Adjusted EBIDTA targets for the
applicable fiscal year:
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·
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FY
2008 (ending June 30, 2008):
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$ |
5,600,000
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·
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FY
2009 (ending June 30, 2009):
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$ |
5,850,000
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·
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FY
2010 (ending June 30, 2010):
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$ |
7,300,000
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·
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FY
2011 (ending June 30, 2011):
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$ |
8,280,000
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·
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FY
2012 (ending June 30, 2012):
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$ |
8,640,000
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·
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FY
2013 (ending June 30, 2013) and thereafter:
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$ |
9,000,000
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3
Subject
to the provisions of Paragraph 4 hereof, Payment of the Annual Bonus shall
be
made no later than October 31 after the close of the applicable fiscal year.
The
amount of Executive’s Annual Bonus shall be established by the Board in its sole
discretion following the close of the applicable fiscal year, provided,
however,
that the
minimum Annual Bonus for any fiscal year shall be no less than $50,000 and
the
maximum Annual Bonus shall be no more than 50% of Executive’s then-existing Base
Salary, provided that the Company achieves the Adjusted EBIDTA targets described
above.
(e) Benefits.
Executive shall be eligible to participate in all Company benefit plans and
programs as are generally available to the Company’s senior executives, and
Executive’s benefits shall be based on the terms of the applicable plans as
established by the Company from time to time. Executive shall be entitled to
6
weeks paid vacation per calendar year, which vacation shall be exercised with
due regard to the then current requirements of the Company’s business. Executive
shall be entitled to carry over up to two (2) weeks unused vacation from one
year to the next (for a maximum of 8 weeks vacation in any calendar year).
Executive’s vacation entitlement may be reviewed by the Board and increased at
the Board’s discretion. The Company agrees that no later than September 30,
2008, it will establish a Long Term Incentive Plan (“LTIP”), the provisions of
which shall be established at the Company’s discretion, but in which Executive
shall be entitled to participate at the highest level of participation permitted
by the LTIP.
(f) Car
Allowance.
Executive shall be entitled to reimbursement for automobile expenses (including
gasoline, insurance, maintenance, lease payments, etc.) up to, but not
exceeding, $15,000 per calendar year (but no more than $3,000 per calendar
month). Any unused car allowance existing as of December 31 of each calendar
year shall be forfeited. If any automobile expense reimbursed hereunder is
considered taxable income to Executive, Executive shall be entitled to a
“gross-up” payment from the Company so that his net, after-tax, automobile
expenses are fully reimbursed by the Company. All approved reimbursements and
any “gross-up” payment shall be paid within a reasonable time (not later than
March 15 of Employee’s taxable year following the taxable year in which an
expense was incurred) following the presentation by Employee of appropriate
documentation to the Company. The amount of expenses eligible for reimbursement
during any taxable year of Employee under this Agreement will not affect the
expenses eligible for reimbursement in any other taxable year of Employee,
and
Employee’s right to reimbursement of expenses is not subject to liquidation or
exchange for another benefit.
(g) Stock
Options.
Pursuant to the 2007 Employment Agreement, Executive was granted options to
purchase one million (1,000,000) shares of common stock of the Company under
the
Company’s “Center For Wound Healing 2006 Stock Option Plan” (the “Option Plan”),
and pursuant to this Agreement, executive shall be granted the option to
purchase an additional 750,000 shares of the Company’s common stock pursuant to
the Option Plan. The Company represents that such shares are not currently
registered, but agrees to provide Executive with “piggyback” registration rights
should the Company register the shares of any shareholder or warrant holder
of
the Company’s stock, and shall enter into a Registration Rights Agreement
reasonably acceptable to Executive providing for such “piggyback” registration
rights. The terms of such option grant shall be as follows:
4
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(i)
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Time
Vesting.
The 600,000 time vesting options granted to Executive pursuant to
Paragraph 3(g)(i) of the 2007 Employment Agreement (“Time Vesting
Options”) shall survive this Agreement and remain in full force and effect
in accordance with their terms, except that the exercise price for
all
vested and unvested Time Vesting Options shall be adjusted to $1.05
per
share, the “fair market value” determined by the Board as of its July 21,
2008 Board meeting. The parties acknowledge and agree that pursuant
to the
terms of the 2007 Employment Agreement 400,000 of the Time Vesting
Options
are fully vested and the remaining 200,000 Time Vesting Options will
vest
as follows:
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(A)
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100,000
of the Time Vesting Options will vest on the second anniversary of
the
original grant date (January 3, 2009), provided that Executive is
employed
by the Company through such date;
and
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(B)
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100,000
of the Time Vesting Options will vest on the third anniversary of
the
original grant date (January 3, 2010), provided that Executive is
employed
by the Company through such date.
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| (ii) |
Performance
Vesting.
The 400,000 performance vesting options granted to Executive pursuant
to
Paragraph 3(g)(ii) of the 2007 Employment Agreement (“Performance Vesting
Options”) shall survive this Agreement and remain in full force and effect
in accordance with their terms, except that the exercise price for
all
vested and unvested Performance Vesting Options shall be adjusted
to $1.05
per share, the “fair market value” determined by the Board as of its July
21, 2008 Board meeting. The parties acknowledge and agree that pursuant
to
the terms of the 2007 Employment Agreement, 100,000 of the Performance
Vesting Options are fully vested and the remaining 300,000 Performance
Vesting Options will vest as follows:
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(A)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for
fiscal year ending June 30, 2009, as set forth in Section 9.18(a)
of the
Securities Purchase Agreement during the fiscal year ending June
30, 2009,
then Executive’s option to purchase 100,000 shares of the Company’s common
stock shall vest as of the last day of the applicable Quarter.
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(B)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for
fiscal year ending June 30, 2010, as set forth in Section 9.18(a)
of the
Securities Purchase Agreement during the fiscal year ending June
30, 2010,
then Executive’s option to purchase 100,000 shares of the Company’s common
stock shall vest as of the last day of the applicable
Quarter.
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5
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(C)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for
fiscal year ending June 30, 2011, as set forth in Section 9.18(a)
of the
Securities Purchase Agreement during the fiscal year ending June
30, 2011,
then Executive’s option to purchase 100,000 shares of the Company’s common
stock shall vest as of the last day of the applicable
Quarter.
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(D)
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The
maximum number of options that may vest pursuant to this Paragraph
3(g)(ii) for any fiscal year is for 100,000 shares of the Company’s common
stock. Any options which do not vest within the applicable periods
set
forth in Paragraphs 3(g)(ii)(A-D) above shall be
forfeited.
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(F)
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The
Company’s EBITDA for any applicable Quarter shall be calculated by
reference to the Company’s Form 10Q for that Quarter, following the review
of such Form 10Q by the Company’s outside accountants. In the absence of
fraud by Executive, the EBITDA calculated in the manner set forth
in this
subparagraph shall be conclusive with respect to the whether any
of the
vesting thresholds provided in Paragraph 3(g)(ii)(A-D) have been
met.
[]
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| (iii) |
New
Performance Vesting Options. Subject
to the provisions of Paragraph 4 below, Executive is hereby granted,
effective July 10, 2008, the option to purchase an additional 750,000
shares of Company stock at the price of $1.05 per share (the “New
Options”). The New Options shall vest according to the following
schedule:
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(A)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for 2009
set forth in Section 9.18(a) of the Securities Purchase Agreement
during
the fiscal year ending June 30, 2009, then Executive’s option to purchase
250,000 shares of the Company’s common stock shall vest as of the last day
of the applicable Quarter.
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(B)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for 2010
set forth in Section 9.18(a) of the Securities Purchase Agreement
during
the fiscal year ending June 30, 2010, then Executive’s option to purchase
250,000 shares of the Company’s common stock shall vest as of the last day
of the applicable Quarter.
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(C)
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If
the Company achieves any of the quarterly Adjusted EBITDA targets
for 2011
set forth in Section 9.18(a) of the Securities Purchase Agreement
during
the fiscal year ending June 30, 2011, then Executive’s option to purchase
250,000 shares of the Company’s common stock shall vest as of the last day
of the applicable Quarter.
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6
| (iv) |
Change
in Control.
All of Executive’s options shall become fully vested and exercisable
immediately before the effective time of a Change in Control as defined
in
Paragraph 4(a)(v) below.
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| (v) |
Term
of Option.
Executive’s options shall remain outstanding for 10 years following its
date of grant. To the extent Executive’s options has vested at the time of
his termination of employment, his option shall remain outstanding
until
the earlier of the end of the term or the date on which Executive
exercises his option.
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(h) Expense
Reimbursement.
Executive shall be entitled to receive prompt reimbursement from the Company
of
all travel, tolls, parking, entertainment and out-of-pocket expenses which
are
reasonably and necessarily incurred by Executive in the performance of his
duties hereunder; provided,
however,
that
Executive properly accounts for such expenses in accordance with Company’s
policies as in effect from time to time, and receives pre-approval from the
Board prior to incurring any single expense for which reimbursement will be
sought in excess of $5,000.00. All approved reimbursements shall be paid within
a reasonable time (not later than March 15 of Employee’s taxable year following
the taxable year in which an expense was incurred) following the presentation
by
Employee of appropriate documentation to the Company. The
amount of expenses eligible for reimbursement during any taxable year of
Employee under this Agreement will not affect the expenses eligible for
reimbursement in any other taxable year of Employee, and Employee’s right to
reimbursement of expenses is not subject to liquidation or exchange for another
benefit.
(i) Relocation
Reimbursement.
Subject
to Section 4 hereof, in the event the Company relocates its corporate offices
to
an address more than 100 miles from Executive’s current residence in New Canaan,
Connecticut and Executive does not terminate his employment for Good Reason
(as
defined in paragraph 4(a)(iv) below), the Company shall reimburse Executive
for
all reasonable transaction costs and expenses (including any real estate
brokerage fees, commissions and closing costs) and moving expenses incurred
by
Executive, in each case while an employee of the Company, in connection with
relocating Executive’s spouse, dependents and personal property and goods from
Executive’s current residence to the area in which the Company’s headquarters is
located, provided that Executive provides appropriate documentation (the
“Relocation Reimbursement”). Reimbursements under this paragraph shall be paid
promptly and in all events not later than March 15 of Employee’s taxable year
following the taxable year in in which the applicable expenses were incurred.
The amount of expenses eligible for reimbursement during any taxable year of
Employee under this Agreement will not affect the expenses eligible for
reimbursement in any other taxable year of Employee, and Employee’s right to
reimbursement of expenses is not subject to liquidation or exchange for another
benefit. In connection with such payment, during the calendar year after the
calendar year in which the applicable expenses are incurred, the Company shall
pay Executive an additional payment in an amount such that after the actual
payment by Executive of taxes, if any, imposed in connection with the Relocation
Reimbursement, Executive retains an amount equal to the Relocation
Reimbursement.
7
(j) Gross
Up Payment.
(i) Entitlement
to Gross Up Payment.
If
Executive is subject to excise tax imposed under § 4999 of the Code or such
an excise tax is assessed against Executive, Executive shall be entitled to
receive from the Company a Gross Up Payment as defined below.
(ii) Definition
of Gross Up Payment.
The
term "Gross Up Payment" as used in this Agreement shall mean a payment to or
on
behalf of Executive which shall be sufficient to pay (1) 100% of any excise
tax
imposed under § 4999 of the Code, (2) 100% of any federal, state and
local income tax and social security and other employment tax on the payment
made to pay such excise tax, as well as any additional taxes on such payment
and
(3) 100% of any interest or penalties assessed by the Internal Revenue Service
on Executive which are related to the timely payment of such excise tax (unless
such interest or penalties are attributable to Executive’s willful misconduct or
gross negligence with respect to such timely payment).
(iii) Timing
of Gross Up Payment.
A Gross
Up Payment shall be made by the Company promptly after either the Company or
the
Company’s independent accountants determine that any payments and benefits
called for under this Agreement together with any other payments and benefits
made available to Executive by the Company and any other person will result
in
Executive’s being subject to an excise tax under § 4999 of the Code or such
an excise tax is assessed against Executive as a result of any such payments
and
other benefits. Payment of any Gross Up Payment hereunder shall be delayed
to
the minimum extent necessary to comply with §409A of the Code and any applicable
related regulations, Internal Revenue Service rulings and case law, provided
that in no event shall payment be made later than the end of the calendar year
immediately following the calendar year in which the Executive (or the Company
on behalf of the Executive) pays the excise tax under § 4999 of the Code.
(iv) Provision
of Advice to Executive.
Any
determinations under this § 3(j) shall be made in accordance with
§ 280G of the Code and any applicable related regulations, Internal Revenue
Service rulings and case law and, if the Company reasonably requests that
Executive take action to mitigate or challenge any such tax or assessment and
Executive complies with such request, the Company shall provide Executive with
such information and such expert advice and assistance from the Company’s
independent accountants, lawyers and other advisors as Executive may reasonably
request and shall pay for all expenses incurred in effecting such compliance
and
any related fines, penalties, interest and other assessments.
8
4. Termination
(a) Termination
of Employment.
(i) Termination
by the Company for Cause.
The
Board may terminate Executive’s employment for Cause at any time upon written
notice. “Cause” means any of the following: (1) Executive’s material breach of
this Agreement, breach of fiduciary duty having a material adverse impact on
the
Company, material breach of the Company’s employment policies applicable to him,
or refusal to follow the lawful directives of the Board consistent with this
Agreement that is not corrected (to the extent correctable) within ten (10)
days
after delivery of written notice to Executive with respect to such breach;
(2)
Executive’s breach of a fiduciary duty to the Company, material breach of the
Company’s employment policies applicable to him, refusal to follow the lawful
directives of the Board consistent with this Agreement, or repeated breach
of
the same provision of this Agreement, each on more than two (2) occasions,
regardless of whether such breach has been or may be corrected; (3) Executive’s
indictment for or conviction of a felony or any crime involving fraud; (4)
Executive’s misappropriation of funds or material property of the Company or any
member of the Group; or (5) Executive’s material dishonesty, disloyalty, or
willful misconduct. Notwithstanding the foregoing, any act, or failure to act,
based upon the advice of counsel to the Company shall be presumed to be done,
or
omitted to be done, by the Executive in good faith and in the best interests
of
the Company, and shall not constitute Cause as defined herein.
(ii) Termination
by the Company without Cause.
The
Company may terminate Executive’s employment under this Agreement without Cause
upon at least thirty (30) days’ prior written notice to Executive. Furthermore,
for purposes of this Agreement, a failure by the Company to renew this Agreement
pursuant to Paragraph 1 hereof shall constitute a termination by the Company
without Cause.
(iii)
Death or Disability.
Executive’s employment by the Company will immediately terminate upon
Executive’s death and at the option of either Executive or the Company,
exercisable upon written notice to the other party, may terminate upon the
Executive’s Disability. For purposes of this Agreement, “Disability” will occur
if (1) Executive becomes eligible for benefits under a long-term disability
policy provided by the Company, or (2) Executive has become unable, due to
physical or mental illness or incapacity, to substantially perform the essential
duties of Executive’s employment, with or without reasonable accommodation, for
a period of (A) 90 consecutive days or any consecutive waiting period during
which Executive is not eligible for long-term disability income benefits
pursuant to disability income policies provided by the Company, whichever is
less; or (B) or an aggregate of 120 days during any consecutive 12 month period,
as determined by an independent physician approved by the Company and Executive.
Executive agrees to be examined at the request of the Company by such
independent physician upon reasonable notice.
9
(iv)
Termination by Executive for Good Reason.
Executive may terminate his employment for Good Reason at any time upon written
notice to the Company. “Good Reason” shall mean the occurrence, during the Term,
of any of the following actions or failures to act, but in each case only if
(1)
Executive objects in writing within ten (10) days of Executive having actual
knowledge of such event, and (2) with respect to subsections 1-5 below, such
occurrence is not corrected (if correctable) by the Company within ten (10)
days
after delivery of written notice to the Board with respect to such occurrence:
(1) a material change in Executive’s duties, reporting responsibilities, titles
or elected or appointed offices as in effect immediately prior to the effective
date of such change, provided,
however,
that
Executive’s ceasing to be the Company’s Chief Financial Officer shall not
constitute Good Reason ; (2) any reduction in or failure to pay when due any
compensation or expense reimbursement to which Executive is entitled pursuant
to
this Agreement; (3) the Company’s breach of any material term of this Agreement;
(4) the Company’s relocation of its corporate offices to an address more than
100 miles from Executive’s current residence in New Canaan, Connecticut; (5) the
Company hires, retains, or promotes an employee or consultant whose Base Salary
is or becomes greater than Executive’s, and Executive’s Base Salary is not
concurrently amended by the Board to equal or exceed that of such employee
or
consultant; or (6) the Company fails to elect Executive a member of the Board,
as provided in Paragraph 2(d) hereof. For avoidance of doubt Base Salary shall
mean that remuneration which is not based upon performance, e.g., commissions.
(v) Termination
as a result of a Change in Control.
Executive may terminate Executive’s employment under this Agreement within 60
days of the occurrence of a Change in Control, as defined herein. The term
“Change in Control” means: a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act as in effect at the time
of
such "change in control", provided that such a change in control shall be deemed
to have occurred at such time as:
(A)
any
"person" (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly, of securities representing 45% or more
of
the combined voting power for election of directors of the then outstanding
securities of the Company or any successor to the Company, provided,
however,
that
for purposes of this definition, the following transactions shall not constitute
a Change in Control: (1) any acquisition directly from the Company through
a
public offering or private placement of shares of common stock (2) any
acquisition by the Company or an Affiliate,
(3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliate,
or (4)
any acquisition by any corporation pursuant to a transaction which complies
with
clauses (1), (2) and (3) of subsection (D) of this definition.
10
(B)
during
any period of two consecutive years or less, individuals who at the beginning
of
such period constitute the Board cease, for any reason, to constitute at least
a
majority of the Board, unless the election or nomination for election of each
new director was approved by a vote of at least two-thirds of the directors
then
still in office who were directors at the beginning of the period;
(C)
the
consummation of a sale or disposition (through one or more transactions) of
50%
or more of the assets or business of the Company; or
(D)
the
consummation of any reorganization, merger, consolidation or share exchange
unless (1) the persons who were the beneficial owners of the outstanding Shares
of the common stock of the Company immediately before the consummation of such
transaction beneficially own more than 60% of the outstanding Shares of the
common stock of the successor or survivor corporation in such transaction
immediately following the consummation of such transaction and (2) the number
of
Shares of the common stock of such successor or survivor corporation
beneficially owned by the persons described in Paragraph 4(a)(v)(D)(1)
immediately following the consummation of such transaction is beneficially
owned
by each such person in substantially the same proportion that each such person
had beneficially owned Shares of the Company’s common stock immediately before
the consummation of such transaction, provided (3) the percentage described
in
Paragraph 4(a)(v)(D)(1) of the beneficially owned shares of the successor or
survivor corporation and the number described in Paragraph 4(a)(v)(D)(2) of
the
beneficially owned shares of the successor or survivor corporation shall be
determined exclusively by reference to the shares of the successor or survivor
corporation which result from the beneficial ownership of Shares of common
stock
of the Company by the persons described in Paragraph 4(a)(v)(D)(1) immediately
before the consummation of such transaction.
(vi)
Termination by Executive without Good Reason.
Executive may terminate his employment under this Agreement without Good Reason
upon at least forty-five (45) days’ prior written notice to the
Company.
11
(b) Consequences
of Termination of Employment.
(i) Termination
by the Company without Cause or by Executive for Good Reason.
If the
Company terminates Executive’s employment without Cause or if Executive
terminates his employment at any time for Good Reason at any time during the
Term, Executive shall receive the benefits described in this Paragraph 4(b)(i),
provided Executive executes a release (in a form acceptable to the Company)
of
all claims he has or may have against the Company. If Executive receives the
benefits set forth in this Paragraph 4(b)(i), Executive shall not be eligible
for severance benefits from any other plan, program or policy of the Company
then in effect.
1. Continuation
of Base Salary.
Executive shall be entitled to continuation of Executive’s then-existing Base
Salary through the end of the Term or for 24 months, whichever is longer;
provided,
however,
that if
Executive’s employment terminates as a result of the Company’s failure to renew
this Agreement as provided in Paragraph 1, Executive shall be entitled to
continuation of Executive’s then-existing Base Salary for a period of twelve
(12) months. Subject to Paragraph 4(c), the Base Salary continuation payments
shall be paid in equal installments in accordance with the Company’s standard
payroll practice.
2. Payment
of Accounting and Closing Bonus. To
the
extent the Accounting Bonus (under Paragraph 3(b)) or Closing Bonus (under
Paragraph 3(c)) have not been paid as of the date of Executive’s termination,
the Company shall pay such unpaid amounts not later than the date specified
in
Paragraph 3(a) or 3(b) as applicable.
3. Pro-Rata
Payment of Annual Bonus. Executive
shall be entitled to a pro-rata amount of his Annual Bonus for the fiscal year
in which his employment terminates equal to his Target Annual Bonus times the
number of days elapsed in the applicable fiscal year divided by 365, payable
not
later than two and one-half (2 ½) months after the close of the applicable
fiscal year.
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4. Payment
of Employment Benefits. Executive
shall be entitled to payment of any accrued employment benefits to which he
might be entitled pursuant to this Agreement, including, without limitation,
payment for any vacation not yet used during the calendar year in which the
termination of employment takes place, pro-rated to the termination date. In
addition, for a period of twenty-four (24) months following Executive’s
termination of employment, the Company shall continue Executive’s (including
Executive’s family) participation in any health or medical benefit plan(s) in
which he was participating prior to his termination of employment, at the
Company’s expense, if permitted by the terms and conditions of such plans;
provided,
however, that
should Executive’s employment terminate as a result of the Company’s failure to
renew this Agreement as provided in Paragraph 1, Executive’s right to benefits
continuation and/or reimbursement for COBRA expenses as provided herein shall
expire after twelve (12) months. If such plans do not permit Executive’s
continued participation, then the Company shall reimburse Executive for amounts
actually incurred by him for continuation coverage under such plans pursuant
to
COBRA for a period of 18 months, and following the expiration of COBRA coverage,
shall reimburse Executive for amounts actually incurred by him to obtain
substantially comparable coverage for an additional six (6) months.
Reimbursements under this paragraph shall be paid promptly and in all events
not
later than March 15 of Employee’s taxable year following the taxable year in
which the applicable expenses were incurred. The amount of expenses eligible
for
reimbursement during any taxable year of Employee under this Agreement will
not
affect the expenses eligible for reimbursement in any other taxable year of
Employee, and Employee’s right to reimbursement of expenses is not subject to
liquidation or exchange for another benefit.
5. Vesting
of Stock Options.
Any
unvested Stock Options pursuant to Paragraph 3(g)(i) hereof shall immediately
vest and become exercisable pursuant to the applicable Stock Option Agreement(s)
for such options. In addition to the foregoing, should the Company’s Adjusted
EBITDA for the Quarter during which such termination takes place meet the
applicable Adjusted EBITDA vesting thresholds required by Paragraphs
3(g)(ii)(A-D) or 3(g)(iii)(A-D), then any unvested options that would have
vested as a result of the Company’s achieving such Adjusted EBITDA threshold
shall vest and become exercisable pursuant to the Stock Option Agreement(s)
for
such options.
(ii) Termination
for Cause, Voluntary Termination.
If
Executive’s employment with the Company is terminated (i) by the Company for
Cause, or (ii) by Executive’s resignation without Good Reason, Executive shall
receive (A) any accrued but unpaid Base Salary earned only through Executive’s
termination date; (B) any Accounting Bonus or Closing Bonus earned but not
yet
paid; (C) any Annual Bonus earned for any prior year(s) but not yet paid; or
(D)
payment of any accrued employment benefits to which he might be entitled
pursuant to this Agreement, excepting any accrued but unused vacation benefits.
Nothing contained in this sub-paragraph shall limit any right of the Company
in
law or equity. In addition to the foregoing, should a termination under this
sub-paragraph occur within 12 consecutive months following the relocation of
the
Company’s offices for which a Relocation Reimbursement has been paid to
Executive pursuant to Paragraph 3(i) hereof, Executive shall be required to
repay the Company within thirty (30) days of such termination any Relocation
Reimbursement payments (including any applicable Gross Up Payment made pursuant
to Paragraph 3(i) related to such Relocation Reimbursement).
13
(iii)
Death
or Disability.
If
Executive’s employment with the Company is terminated as a result of Executive’s
death or Disability, Executive shall receive (A) any accrued but unpaid Base
Salary earned only through Executive’s termination date, provided that if
Executive terminates employment as a result of Disability, Executive’s Base
Salary shall continue to be paid for any period that Executive is not eligible
to receive disability income benefits pursuant to the Company’s disability
insurance policies, or for six (6) months, whichever is less, and further
provided that such payments shall, subject to Paragraph 4(c), be paid in equal
installments in accordance with the Company’s standard payroll practice; (B) any
Accounting Bonus or Closing Bonus earned but not yet paid; (C) any Annual Bonus
earned for any prior year(s) but not yet paid; or (D) payment of any accrued
employment benefits to which he might be entitled pursuant to this Agreement,
excepting any accrued but unused vacation benefits. Nothing contained in this
sub-paragraph shall limit any right of the Company in law or
equity.
(iv) Termination
as a result of a Change in Control. If
Executive terminates his employment due to a Change in Control under Paragraph
4(a)(v), Executive shall be entitled to receive the payments and benefits set
forth in Paragraph 4(b)(i) above. In addition, if the average per-share sale
price resulting in the Change in Control is less than $7.50 per share, Executive
shall be entitled to a cash payment of $800,000, payable within thirty (30)
days
of Executive’s separation from service (within the meaning of section 409A of
the Code), subject to Paragraph 4(c).
(c)
Required Delay for Payment to Specified Employees.
To the
extent necessary to comply with the restriction in Section 409A of the Code
concerning payments to specified employees, the first payment to Executive
pursuant to this Paragraph 4(b) shall be made at least six months and one day
after Executive’s “separation from service” (within the meaning of section 409A
of the Code). The first payment shall include any installments that would have
been paid previously under Paragraph 4(b) were it not for this special timing
rule, plus interest on the delayed installments at an annual rate (compounded
monthly) equal to the federal short-term rate (as in effect under Section
l274(d) of the Code on Executive’s separation from service).
5. Restrictive
Covenants.
(a) Non-Competition.
During
the Term and for any time period during which Executive is receiving Base Salary
continuation payments from the Company pursuant to Paragraphs 4(b)(i)(1),
4(b)(ii), or 4(b)(iv) herein (the “Non-Competition Period”), Executive shall not
directly or indirectly manage, operate, participate in, be employed by, or
perform consulting services for Diversified Clinical Services, Curative Health
Services, National Healing Inc, National Baromedical Services Inc., Oxyheal
Health Group, National City, CA, and Comprehensive Healthcare
Solutions, (each
a
“Competitive Enterprise”) in the United States of America. During the
Non-Competition Period, Executive may invest in any Competitive Enterprise,
provided that Executive and Executive’s immediate family members (as defined in
Section 1361(c)(B) of the Code) do not own collectively more than one percent
of
the voting securities of any such entity at any time.
14
(b) Non-Solicitation
of Customers. During
the Non-Competition Period, Executive shall not solicit, call upon, divert
or
actively take away, or attempt to solicit, call upon, divert or take away,
for
the purpose of competing with the Company, any individual, partnership,
corporation, association, or entity who, within the thirty-six (36) month period
prior to Executive’s termination of employment, obtained or contracted to obtain
goods or services from the Company (a “Customer”) or was solicited by the
Company for business (whether or not he, she, or it became an actual customer)
(a “Potential Customer”).
(c) Non-Solicitation
of Employees.
During
the Non-Competition Period, Executive will not directly or indirectly solicit
or
attempt to solicit or encourage anyone who, at the time of the termination
of
Executive’s employment, is then an officer, manager or salesperson of the
Company (or who was an officer, manager or salesperson of the Company within
the
three (3) months prior to the termination of Executive’s Employment) to resign
from the Company or to apply for or accept employment with any company or other
enterprise.
(d) Other
Employment During the Term. During
the Term, Executive shall not receive compensation from any other company or
business unless the arrangement giving rise to such compensation has been (i)
disclosed to and approved by the Board in advance or (ii) is otherwise permitted
by the terms of this Agreement.
(e) Use
and Disclosure of Proprietary Information.
(i) Definition
of Proprietary Information.
“Proprietary Information” means information, knowledge or data not otherwise
known to the general public concerning (A) the Group’s businesses, strategies,
operations, prospects, financial affairs, organizational matters, operational
results, operational strengths and weaknesses, personnel matters, compensation
policies and procedures, budgets, business plans, marketing plans, studies,
policies, procedures, products, ideas, processes, software systems, trade
secrets and technical know-how, specifications, or research and development
operations or plans, (B) any matter relating to clients of the Group or other
third parties having relationships with the Group and (C) any confidential
information from which the Group derives business advantage or economic value.
Proprietary Information includes (1) the names, addresses, phone numbers and
buying habits and preferences and other information concerning clients and
prospective clients of the Group, and (2) information and materials concerning
the personal affairs of employees of the Group. In addition, Proprietary
Information may include information furnished to Executive orally or in writing
(whatever the form or storage medium) or gathered by inspection, in each case
before or after the date of this Agreement. Proprietary Information does not
include information (X) that was or becomes generally available to Executive
on
a non-confidential basis, if the source of this information was not reasonably
known to Executive to be bound by a duty of confidentiality, (Y) that was or
becomes generally available to the public, other than as a result of an
unauthorized disclosure by Executive, directly or indirectly, or (Z) that
Executive can establish was independently developed by Executive under
circumstances not covered by the provisions of Paragraph 5(f) hereof.
15
(ii) Acknowledgements.
Executive acknowledges that he will obtain or create Proprietary Information
in
the course of Executive’s involvement in the Group’s activities and may already
have Proprietary Information. Executive agrees that the Proprietary Information
is the exclusive property of the Group. In addition, nothing in this Agreement
will operate to weaken or waive any rights the Group may have under statutory
or
common law, or any other agreement, to the prohibition of unfair competition
or
the protection of trade secrets, confidential business information and other
confidential information.
(iii) During
Employment.
Executive will use and disclose Proprietary Information only for the Group’s
benefit and in accordance with any restrictions placed on its use or disclosure
by the Group.
(iv) Post-Employment.
After
the termination of Executive’s employment, Executive will not use or disclose
any Proprietary Information for any purpose; provided,
however,
that
the restriction on Proprietary Information not constituting a trade secret
under
applicable law shall expire after five (5) years.
(f) Ownership
of Work Product.
All work
product, property, data, documentation, information or materials conceived,
discovered, developed or created by Executive during or in connection with
Executive’s employment with the Company or any of its parents, subsidiaries, or
affiliates (collectively, the “Work Product”) shall be owned exclusively by the
Company. To the greatest extent possible, any Work Product shall be deemed
to be
a “work made for hire” (as defined in the United States Copyright Act, 17
U.S.C.A. §101 et seq.,
as
amended) and owned exclusively by the Company. Executive hereby unconditionally
and irrevocably transfers and assigns to the Company all right, title and
interest in or to any Work Product. Executive agrees that any trade secret,
invention, improvement, patent applications, copyrighted material, program,
system or novel technique or the like conceived, devised, developed or otherwise
obtained by Executive or other Company employees during or in connection with
Executive’s employment with the Company shall be and become the sole property of
the Company, and that Executive will execute any and all documents reasonably
necessary to evidence or secure the Company’s ownership.
(g) Non-Disparagement.
During
and after Executive’s employment with the Company, the parties mutually covenant
and agree that neither will directly or indirectly disparage the other, or
make
or solicit any comments, statements, or the like to any clients, competitors,
suppliers, employees or former employees of the Company, the press, other media,
or others that may be considered derogatory or detrimental to the good name
or
business reputation of the other party. Nothing herein shall be deemed to
constrain either party’s cooperation in any Board authorized investigation or
governmental action. In the event of Executive’s termination of employment or
the non-renewal of this Agreement, Executive and Company shall agree on any
press release relating to such termination or nonrenewal and the Company and
Executive shall not publicly discuss or comment on Executive’s termination or
non-renewal in any manner other than as mutually agreed in the press release.
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6. Employment
Taxes.
All
payments and other compensation under this Agreement shall be subject to
withholding of applicable taxes and other amounts required by law to be
withheld.
7. Indemnification.
To
the
fullest extent permitted by applicable law, the Company shall provide
indemnification for Executive under its Articles of Incorporation and Bylaws.
Executive shall be covered by the Company’s standard indemnification agreement
and by any director’s and officer’s liability insurance policy maintained by the
Company, subject to the terms of such agreement and/or policy(ies). The Company
shall maintain directors and officer’s liability insurance in amounts
appropriate for the Company’s size and business throughout the Term and for a
period of three (3) years thereafter.
8. Successors.
The
Company shall use commercially reasonable efforts to require (through
contractual arrangements or otherwise) any successor to the Company to all
or
substantially all of the Company’s business and/or assets (whether a direct or
indirect successor, and whether by purchase, lease, merger, consolidation,
liquidation, or otherwise) to assume the obligations under this Agreement.
In
case of any succession, the term “Company” shall refer to the successor. The
terms of this Agreement and all of Executive’s rights hereunder shall inure to
the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. Notwithstanding the foregoing, nothing contained herein
shall be construed as authorizing any assignment or other delegation by
Executive of his duties hereunder.
9. No
Third-Party Beneficiaries.
Except
as to any successor of the Company as provided in Paragraph 8 above, nothing
in
this Agreement may confer upon any person or entity not a party to this
Agreement any rights or remedies of any nature or kind whatsoever under or
by
reason of this Agreement.
10. No
Duty to Mitigate.
Executive shall not be required to seek new employment or otherwise to mitigate
the payments contemplated by this Agreement; provided,
however,
that the
payments contemplated by Paragraph 4(b)(i)(1) this Agreement (and to the extent
such provision is incorporated by reference by any other provision of this
Agreement) shall be offset by any earnings that Executive may receive from
any
other source (other than investment activities) during the period in which
payments pursuant to Paragraph 4(b)(i)(1) are being made by the Company.
Moreover, any benefits or reimbursement to which Executive is entitled pursuant
to Paragraph 4(b)(i)(4) shall cease if Executive obtains comparable heath or
medical insurance coverage with another employer. Nothing contained in this
Paragraph 10 shall be construed to obligate Executive to pay any amounts to
the
Company, or to repay any amounts already paid to him by the Company, under
any
circumstances.
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11. Notice.
Notices
and other communications between the parties to this Agreement shall be
delivered in writing and shall be deemed to have been given when personally
delivered or on the third business day after mailing by U.S. registered or
certified mail, return receipt requested and postage prepaid, or by a recognized
national courier service.
(a) Notices
and other communications not personally delivered to Executive shall be
addressed to Executive, at the most recent home address that he provided in
writing to the Company.
(b) Notices
and other communications to the Company shall be addressed to the Company’s
corporate headquarters, to the attention of the Company’s
Secretary.
12. Waiver
and Amendments.
No
provision of this Agreement may be modified, waived, or discharged, unless
the
modification, waiver, or discharge is agreed to in writing signed by Executive
and by an authorized representative of the Company (other than Executive).
Unless specifically characterized as a continuing waiver, no waiver of a
condition or provision at any one time may be considered a waiver of the same
provision or condition (or any different provision or condition) at any other
time.
13. Payment
of Legal Expenses.
The
Company agrees to reimburse Executive for his costs and expenses actually
incurred related to the drafting, negotiation, and signing of this Agreement
up
the maximum amount of $20,000.00, provided that such costs and expenses are
incurred during 2008 and no unused portion of such $20,000 may be carried over
to a subsequent year. Reimbursement
shall be paid within a reasonable time (not later than March 15 of Employee’s
taxable year following the taxable year in which an expense was incurred)
following the presentation by Employee of appropriate documentation to the
Company.
14. Ability
to Enter this Agreement.
Executive represents and warrants that neither the execution and delivery of
this Agreement nor the performance of Executive’s services hereunder will
conflict with, or result in a breach of any employment or other agreement to
which Executive is a party or by which Executive might be bound or affected.
Executive further represents and warrants that Executive has full right, power,
and authority to enter into and carry out the provisions of this
Agreement.
15. American
Jobs Creation Act of 2004.
This
Agreement shall be construed, administered and interpreted in accordance with
a
good-faith interpretation of Section 409A of the Code and Section 885 of the
American Jobs Creation Act of 2004. If the Company or Executive determines
that
any provision of this Agreement is or might be inconsistent with such provisions
(including any administrative guidance issued thereunder), the parties shall
make their best efforts to act in good faith compliance with the requirements
of
Section 409A of the Code and to agree to such amendments to this Agreement
as
may be necessary or appropriate to comply with such requirements.
18
16. Choice
of Law and Exclusive Jurisdiction.
This
Agreement (including its validity, interpretation, construction, and
performance) shall be governed by the laws of the State of New York, without
regard to any concerning conflicts or choice of law that might otherwise refer
construction or interpretation to the substantive law of another jurisdiction.
Any dispute related to or arising from this Agreement, or its construction,
formation, or termination, shall be brought exclusively in the state or federal
courts for Westchester County, New York, and both the Company and Executive
waive any defense of lack of personal jurisdiction in such courts for any action
arising from or related to this Agreement.
17. Section
Headings.
All
headings in this Agreement are inserted for convenience only. Headings do not
constitute a part of the Agreement and may not affect the meaning or
interpretation of any term or other provision of this Agreement.
18. Severability
and Reformation.
Each
substantive provision of this Agreement is a separate agreement, independently
supported by good and adequate consideration, and is severable from the other
provisions of the Agreement. If a court of competent jurisdiction determines
that any term or provision of this Agreement is unenforceable, then the other
terms and provisions of this Agreement shall remain in full force and effect,
and the unenforceable terms or provisions shall be equitably modified to the
extent necessary to achieve the underlying purpose in an enforceable
way.
19. Whole
Agreement.
This
Agreement reflects the entire understanding and agreement between the Company
and Executive regarding Executive’s employment. This Agreement supersedes all
prior negotiations, discussions, correspondence, communications, understandings,
and agreements, whether oral or written, relating to Executive’s employment with
the Company. The respective rights and obligations of the parties to this
Agreement shall survive the termination of Executive’s employment to the extent
necessary to give such rights and obligations their intended
effect.
20. No
Presumption.
Each
party hereto has participated in the negotiation and drafting of this Agreement
and each has been represented throughout to his or its satisfaction by legal
counsel of their respective choice. In the event any ambiguity or question
of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
21. Fiscal
Year.
Should
the Company’s fiscal year be modified during the Term, the provisions of this
Agreement shall be deemed modified and amended to provide Executive with
equivalent rights and benefits to which he would otherwise have been eligible
but for such modification.
22. Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute a single
instrument.
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