Exhibit 99.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into the 13th day of October,
2004, by and between U. S. Physical Therapy, Inc. a Nevada corporation
("Employer") and Xxxxxxxxxxx X. Reading ("Employee") effective as of November 1,
2004, and supersedes that certain Employment Agreement between the parties
effective September 18, 2003. Employer and Employee may be referred to herein
collectively as the "Parties" and individually as a "Party." For the purposes of
this Agreement, "Employer" includes U.S.P.T. Management, Inc.; for the purposes
of Sections 11, 12, and 13 "Employer" shall include all subsidiaries and
affiliates (as defined under the Securities Exchange Act of 1934, as amended and
regulations promulgated thereunder)
Term. Employer hereby continues the employment of Employee and Employee
hereby accepts continued employment with Employer for a term (the "Term") of
three (3) years beginning on the effective date hereof ("Commencement Date") and
continuing until November 1, 2007; provided, however, that effective on the
first and second anniversary of the effective date of this Agreement, the Term
shall automatically be extended for an additional year (up to a maximum Term,
with such extensions, of five (5) years) unless either party notifies the other
on or before such anniversary dates that such party has elected not to extend
the Term.
Duties of Employee. Employee is engaged to serve as President and Chief
Executive Officer of Employer and to perform such duties and responsibilities as
are customarily performed by persons acting in such capacity or such other
duties as may be assigned by Employer from time to time. Employee shall assume
the title of President and Chief Executive Officer of Employer on the date that
the Employer publicly announces its financial results for the third quarter of
2004. Employee shall report to the Employer's Board of Directors and shall
perform his duties in accordance with the policies and objectives established by
such Board of Directors or its Chairman.
Full-Time Employment. Employee shall devote substantially all of his
working time and talent to the business of Employer during the term hereof and
shall diligently and to the best of his ability perform all duties incident to
his employment hereunder, using his best efforts to promote the interests of
Employer. Employee agrees that he shall not serve as an officer, director,
consultant, or employee of any other person or entity, whether or not for
compensation, without the prior consent of the Employer's Board of Directors.
Position on the Board of Directors. Employer agrees to use its best efforts
to cause Employee to be elected to the Board of Directors of Employer.
Base Compensation. Subject to the terms and conditions of this Agreement,
as compensation for services rendered and Employee's covenants and agreements
under this Agreement, Employer shall pay to Employee a base salary of THREE
HUNDRED TWENTY-FIVE THOUSAND AND NO/100THS DOLLARS ($325,000.00) per year ("Base
Compensation"), payable in accordance with Employer's then-prevailing pay
practices. From time to time (but at least once a year) Employer and Employee
shall review Employee's performance, and at that time
Employer, in its sole discretion, shall determine whether Employee's Base
Compensation should be increased. At no time during the Term hereof will
Employee's Base Compensation be decreased.
Additional Compensation. Subject to the terms and conditions of this
Agreement, in addition to the Base Compensation, Employer may provide incentive
compensation in the form of cash bonuses and stock options. Contemporaneously
with the execution hereof, the Employer has issued to the Employee non-qualified
stock options to purchase 150,000 shares of the Employer's common stock pursuant
to the Company's current shareholder-approved Stock Option Plan, which such
options shall vest at the rate of twenty percent (20%) per year beginning on the
first anniversary date of this Agreement, as will be more particularly set forth
in the Grant Agreement to Employee. The amount of any cash bonus and the award
of any additional stock options is completely discretionary and will be
determined solely by the Board of Directors of Employer or a compensation
committee thereof, taking into consideration any factor the Board of Directors
or compensation committee deems relevant.
Business Expenses. Employer shall reimburse Employee for business expenses
directly and reasonably incurred in the performance of his duties.
Benefits and Plans. Employee shall be entitled to such fringe benefits,
including 20 vacation days, 7 sick and personal days, company holidays,
insurance (health, disability and life) generally available to the executive
officers of Employer, and Employee shall be entitled to participate, subject to
all conditions of eligibility, in any employee benefit plans which may be
adopted by Employer, including without limitation, qualified retirement plan(s),
deferred compensation plans, and salary continuation, disability insurance,
hospitalization insurance, major medical insurance, medical reimbursement and
life insurance benefit plans. Also, Employer shall continue Employee's monthly
salary for a period of up to ninety (90) continuous days during any period of
Employee's sickness or disability.
Termination. This Agreement shall terminate prior to the expiration of the
Term hereof upon the occurrence of any one of the following events:
(1) Disability. In the event that Employee is unable fully to perform his
duties and responsibilities hereunder to the full extent required by
Employer by reason of illness, injury or incapacity for ninety (90)
consecutive days, this Agreement may be terminated by Employer, and
Employer shall have no further liability or obligation to Employee for
compensation or otherwise hereunder; provided, however, that Employee shall
continue to be compensated as provided in this Agreement during such
ninety- (90) day period and until termination under this section, and
provided further, that Employee will be entitled to receive the benefits,
rights and/or payments prescribed under any employee welfare or benefit
plan in which Employee was participating at the time of such disability in
accordance with the terms and conditions of such plans. In the event of any
dispute under this Section 9, Employee shall submit to a physical
examination by a licensed physician selected by Employer and reasonably
acceptable to Employee.
(2) Death. In the event that Employee dies during the term hereof, Employer
shall pay to his executors, legal representatives or administrators an
amount equal to one (1) year's base compensation set forth in Section 5
hereof, and thereafter Employer shall have no further liability or
obligation hereunder to Employee's executors, legal representatives,
administrators, heirs or assigns or any other person claiming under or
through Employee;
provided, however, that Employee's heirs, legal representatives or
administrators will be entitled to receive the benefits, rights and/or
payments prescribed under any employee welfare or benefit plans in which
Employee was participating at the time of his death in accordance with the
terms and conditions of such plans.
(3) Cause. Nothing in this Agreement shall be construed to prevent its
termination by Employer at any time for "cause". For purposes of this
Agreement, "cause" shall mean (i) the willful and material failure of
Employee to perform or observe (other than by reason of disability as
contemplated in paragraph 9(a)) any of the terms or provisions of this
Agreement, including the failure of Employee to follow the reasonable
written directions of Employer's Board of Directors, (ii) dishonesty or
misconduct on the part of Employee that is or is reasonably likely to be
damaging or detrimental to the business of Employer, (iii) conviction of a
crime involving moral turpitude, (iv) habitual insobriety or failure to
perform duties due to abuse of alcohol or drugs, or (v) misappropriation of
funds. Prior to terminating this Agreement on account of Employee's failure
to perform or observe any of the terms and conditions of this Agreement
(but not for any of the other enumerated "causes" stated in (ii) through
(v) above), Employer shall give Employee thirty (30) days written notice
and an opportunity to cure such failure to the satisfaction of Employer.
Upon termination for cause, Employer shall pay to Employee all sums due to
Employee through the date of such termination. Following such a
termination, Employer shall have no further duty or obligation to Employee;
provided, however, that Employee shall continue to be bound by Sections 11
through 17.
Special Benefits.
Special Benefit in the Event of a Change in Control. Employee shall be
entitled to a Change of Control benefit of $500,000 in the event of a "Change in
Control", defined as:
1. The transfer or sale by Employer of all or substantially all of the
assets of Employer whether or not this Agreement is assigned or transferred
as a part of such sale;
2. The transfer or sale of more than fifty percent (50%) of the outstanding
shares of Common Stock of Employer;
3. A merger or consolidation involving Employer in a transaction in which
the shareholders of Employer immediately prior to the merger or
consolidation own less than fifty percent (50%) of the company surviving
the merger or consolidation; or
4. A merger or consolidation involving Employer in a transaction in which
the board members of Employer after the merger or consolidation constitute
less than fifty percent (50%) of the board of the company surviving the
merger or consolidation; or
5. The voluntary or involuntary dissolution of Employer.
However, if a Change in Control occurs, the Term shall be modified to end one
(1) year from the date the Change in Control occurs, regardless of the remaining
Term immediately prior to the Change of Control.
Special Benefit in the Event of Termination Without Cause or Resignation
for Good Cause. Employee shall be also be entitled to the special benefit
described below in the event of the occurrence of either of the following events
(individually or collectively, a "Termination Event"):
(4) The termination of employment of Employee by Employer without "cause"
as cause is defined in Section 9(c) hereof; or
(5) Employee resigns "for good reason" as defined in Section 10 F. hereof.
The special benefit payable upon the occurrence of a Termination Event shall be
the sum of the following components:
Employee's Base Compensation then in effect for the remainder of the Term;
and
6. The greater of (i) the bonus paid or payable to Employee with respect to
last fiscal year of Employer completed prior to the occurrence of the
Termination Event or (ii) the average of the bonuses paid to Employee over
the three (3) fiscal years of Employer ending with last fiscal year of
Employer completed prior to the occurrence of the Termination Event; and
7. Employee's accrued but unused vacation days.
If a Change in Control has occurred prior to a Termination Event, Employee shall
also be entitled to a benefit under this Section 10 B. with the reduced Term
described above.
B. Employee's accrued but unused vacation days shall be paid to Employee
within thirty (30) days of the actual date of the termination of Employee's
employment. The other benefits described in Sections 10 A. and 10 B. shall be
paid in equal amounts over the remaining Term as if the Employee remained as an
Employee after the occurrence of the Change in Control or the Termination Event,
as the case may be.
In the event Employee's employment is terminated (whether by Employer or
Employee) as a result of a Termination Event, Employee shall be entitled to such
medical insurance benefits as he enjoyed prior to his termination for the
remainder of the Term and at the same cost to Employee of such benefits as in
effect prior to such termination.
If Employee's employment is terminated (whether by Employer or Employee) as
the result of a Termination Event within 12 months of a Change in Control, the
period after termination during which the obligations imposed by Sections 11 and
12 remain in effect shall be reduced from two (2) years to one (1) year. If
Employee continues to be employed by Employer for more than one (1) year after a
Change in Control occurs, the obligations imposed by Sections 11 and 12 shall
remain in effect for the period after termination stated therein. Employee shall
be entitled to the Change in Control benefit specified in Section 10 A. only if
he remains an employee of Employer to the date of consummation of the Change in
Control, unless Employee is terminated prior to such date pursuant to a
Termination Event or as the result of disability or death as provided in
Sections 9(a) and 9(b). Should any special benefits provided in this Section 10
become payable, the covenants contained in Sections 11 through 17 hereof shall
continue to apply except as otherwise provided in this Section 10, and should
Employee violate the terms of such covenants Employer
may cease payment of the benefits and terminate any and all future payments
otherwise called for under this Section 10.
For purposes of this Agreement, "for good reason" means the occurrence of
any one or more of the following: (i) removal or other termination of Employee
as the President and/or Chief Executive of Employer, without Employee's express
written consent; (ii) a reduction of Employee's duties, authority or
responsibilities or the assignment to Employee of such reduced duties, authority
or responsibilities, in either case without Employee's express written consent,
(iii) a reduction by Employer in Employee's Base Compensation; (iv) Employer
delivers a notice pursuant to Section 1 that it has elected not to extend the
Term for an additional year at the time stated therein; or (v) the relocation of
Employee to a facility or a location more than 30 miles from Employee's then
present location without Employee's express written consent.
Non-Competition. At all times that Employee remains employed by the
Employer and after the termination of employment, for a period which is the
lesser of a two- (2) year period following the termination of his employment
under this Agreement for any reason or the remaining Term as of the date of his
termination of employment (unless extended pursuant to the second paragraph of
this Section 11), Employee shall not, directly or indirectly, for himself or on
behalf of any other person or entity as an employee, employer, consultant,
agent, lender, principal, partner, stockholder, corporate officer, director, or
in any other individual or representative capacity, (i) invest, engage in, or
permit his name to be used in connection with any business that is in
competition with Employer, (ii) accept employment with or render services to a
competitor of Employer, as a director, officer, agent partner, employee or
consultant, or (iii) solicit or accept from any of the customers of Employer or
from any person or entity whose business Employer is soliciting, any business of
the type which Employer is engaged in or actively is preparing to engage in.
Employee shall be prohibited from engaging in the activities described above
within fifty (50) miles of any of Employer's rehabilitation clinic locations.
Notwithstanding the foregoing: (a) Employee may own the voting common stock of
any publicly held corporation so long as it does not exceed more than five
percent (5%) of the outstanding stock thereof; (b) In the event that Employee is
terminated for Cause or if Employee terminates other than for Good Reason, as
defined in this Agreement, Employee agrees not compete with the Employer under
the terms of the preceding paragraph for two (2) years after his employment
terminates; (c) Employer and Employee agree that regardless of the terms of the
first paragraph of this Section 11, if Employee is terminated other than for
Cause or if Employee terminates for Good Reason, Employer shall have the right
and option to require that Employee not compete with the Employer under the
terms of the preceding paragraph for up to two (2) years after his employment
terminates notwithstanding the period stated in the preceding paragraph so long
as Employer continues to pay Employee his Base Compensation after the
termination of his employment in accordance with Employer's standard pay
practices whether such payments are made pursuant to the provisions of section
10 or this section 11. Employer, however, may terminate such extended payments
of Base Compensation at any time pursuant to this Section 11 , and the
restrictions of Employee under this Section 11 shall thereupon cease.
Non-Solicitation. For a two- (2) year period following the termination of
the employment of the Employee under this Agreement for any reason, Employee
agrees not to, directly or indirectly, for himself or on behalf of any other
person or entity (a) solicit or induce, or attempt to solicit or induce, any
person employed by, or any agent of, Employer, to terminate employee's or
agent's relationship with Employer, nor (b) call on, solicit or divert, or
attempt to call on, solicit or divert any person, firm, corporation or other
entity who was or had been a customer or a patient referral source (including,
without limitation, any physician) of Employer who referred ten or more
customers or patients to Employer, who is a customer or a patient referral
source of Employer who has referred ten or more customers or patients to
Employer, or who is a prospective customer or a patient referral source of
Employer with whom Employee had contact as an employee of Employer and who,
within six months of such solicitation, Employer was or is actively recruiting
as a customer or patient referral source.
Confidential Information. Employee will not, during or after the
termination of this Agreement, disclose any trade secrets, financial and
accounting information, customer lists, customer mailing lists, prospective
customer lists, lists of referral sources or prospective referral sources, or
pricing, marketing or advertising plans or methods used by Employer (the
"Confidential Information") to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever, nor shall Employee make use
of the Confidential Information for his own purposes or for the benefit of any
person, firm, corporation or other entity (except Employer) under any
circumstances during or after the termination of this Agreement. On demand of
Employer, at any time, Employee shall immediately deliver all printed or written
Confidential Information to Employer. To the extent that Employee's property
does not contain Confidential Information, Employee may remove all of Employee's
property (such as computer software and tapes) upon termination of this
Agreement. Confidential Information does not include information that (i)
currently is generally available to or known by the public or hereafter becomes
generally available to or known by the public through no fault of Employee, (ii)
was already in the possession of Employee on the date of inception of Employee's
employment by Employer, or (iii) is obtained by Employee from a third party who
is under no obligation of confidence to Employer.
Reasonableness of Restrictions. Employee agrees that (a) the covenants
contained in Sections 11, 12 and 13 hereof are necessary for the protection of
Employer's business goodwill and trade secrets, (b) a portion of the
compensation paid to Employee under this Agreement is paid in consideration of
the covenants herein contained, the sufficiency of which consideration is hereby
acknowledged, and if the scope of any restriction contained in Sections 11, 12
and 13 is too broad to permit enforcement of such restriction to its full
extent, then such restriction shall be enforced to the maximum permitted by law,
and the parties hereby consent that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
Enforcement. Employee acknowledges Employee's employment with Employer is
special and unique in character and that Employee will acquire special skill and
training and gain special knowledge during Employee's employment with Employer,
that the restrictions contained in Sections 11, 12 and 13 hereof are reasonable
and necessary to protect the legitimate interests of Employer and its
affiliates, that Employer would not have entered into this Agreement in the
absence of such restrictions, and that any violation of any provision of those
sections will result in irreparable injury to Employer. Employee also
acknowledges that Employer shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages as well as an
equitable accounting of all earnings, profits and other benefits arising from
any such violation, which rights shall be cumulative and in addition to any
other rights or remedies to which Employer may be entitled. The existence of any
claim or cause of action of Employee against Employer, whether predicated on
this Agreement or otherwise, except for nonpayment of amounts
payable after the termination of Employee's employment under the terms of this
Agreement shall not constitute a defense to the enforcement by Employer of these
covenants.
Copy of Covenants. Until the expiration of the applicable restrictions,
Employee will provide, and Employer similarly may provide, a copy of the
covenants contained in Sections 11, 12 and 13 of this Agreement to any business
or enterprise which Employee may (i) directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management
operation, financing, or control of, (ii) serve as an officer, director,
employee, partner, principal, agent, representative, consultant, lender or
otherwise, or (iii) with which he may use or permit his name to be used.
Special Definition of Employer. For the purposes of Sections 11 through 16
above, the definition of Employer shall include any subsidiary or affiliate of
Employer, including all affiliated physical therapy partnerships of Employer.
Notices. Any notices to be given hereunder by either Party to the other may
be effected in writing either by personal delivery, via facsimile or by mail,
registered or certified, postage prepaid with return receipt requested:
If to Employer: U.S. Physical Therapy, Inc.
0000 Xxxx Xxx Xxxxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chairman of the Board
with a copy to: Xxxx X. Xxxxxx, Xx., Esq.
Xxxxxxx Xxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
If to Employee: Xxxxxxxxxxx X. Reading
Houston, Texas 770__
Mailed notices shall be addressed to the Parties at the addresses set forth
above, but each Party may change the address by written notice in accordance
with this Section 18. Notices delivered personally or by facsimile shall be
deemed communicated upon actual receipt. Mailed notices shall be deemed
communicated three (3) days after mailing.
Entire Agreement. This Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Employee by Employer, and contains all of the covenants and
agreements between the parties with respect to such employment in any manner
whatsoever.
Headings. The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the heading or title of any section.
Amendment or Modification; Waiver. No provision of this Agreement may be
amended, modified or waived unless such amendment, modification or waiver is
authorized by Employer and
is agreed to in writing, signed by Employee and by an officer of Employer (other
than Employee) thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by any Party hereto of any breach by any
other Party hereto of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent time
nor shall the receipt or acceptance of Employee's employment be deemed a waiver
of any condition or provision hereof.
Assignability. Employee shall not assign, pledge or encumber any interest
in this Agreement or any part thereof without the express written consent of
Employer, this Agreement being personal to Employee. This Agreement shall,
however, inure to the benefit of Employee's estate, dependents, beneficiaries
and legal representatives. This Agreement shall not be assignable by Employer
without the written consent of Employee which will not be unreasonably withheld.
Subject to the terms of this Agreement, Employer may merge or consolidate with
or into, or transfer substantially all of its assets to, another corporation or
other form of business organization without Employee's consent, and as a result
of such merger, consolidation or transfer, this Agreement shall bind the
successor of Employer resulting from such merger, consolidation or transfer. No
such merger, consolidation or transfer, however, shall relieve the Parties from
liability and responsibility for the performance of their respective duties and
obligations hereunder.
Governing Law. This Agreement shall be interpreted, construed and governed
by and in accordance with the internal substantive law of the State of Texas.
Severability. Each provision of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. In the event that any
provision of this Agreement shall finally be determined to be unlawful, such
provision shall be deemed severed from this Agreement, but every other provision
of this Agreement shall remain in full force and effect, and in substitution for
any such provision held unlawful, there shall be substituted a provision of
similar import reflecting the original intent of the Parties hereto to the
extent permissible under law.
EMPLOYER:
U.S. PHYSICAL THERAPY, INC.
By:
Name:
Position:
EMPLOYEE:
/s/ XXXXXXXXXXX X. READING
Xxxxxxxxxxx X. Reading
