AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Employment Agreement (the
“Agreement”) is entered into effective as of October 7, 2008 (“Effective Date”),
between THE CENTER FOR WOUND HEALING, INC., a Nevada corporation (the “Company”)
with its principal place of business at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxx, Xxx
Xxxx 00000, and Xxxxx Xxxx (“Executive”), 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 an executive officer of the Company, upon the terms and
conditions set forth below. This Agreement replaces and supersedes the
Employment Agreement between Executive and the Company dated April 1, 2005, as
amended (the “2005 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 the Effective
Date 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 January 1, 2011 (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.
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2.
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Position
and Responsibilities.
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(a)
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Executive
shall report directly to the CEO and shall have the lawful executive
duties assigned to Executive by the CEO or the Company’s Board of
Directors (“Board”). 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 de minimis
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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(b)
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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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3.
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Compensation
and Expense Reimbursement.
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Executive
shall receive the following compensation and/or reimbursement for
expenses:
(a) Base
Salary. Executive’s annual base salary for each fiscal year
during the Term shall be $285,000, 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. Executive’s Base Salary (as
increased from time to time) shall not be reduced without his written
consent.
(b) Signing
Bonus. Executive shall be eligible for a one-time bonus in the
gross amount of $10,000 upon the full and complete execution of this Agreement.
Such bonus shall be paid as soon as is practicable after such execution, but in
no event later than March 15 of Executive’s taxable year following the taxable
year in which the bonus is earned.
(c) 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 Gross Margin for the applicable fiscal year:
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FY
2009:
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48.5%
(Plan is 47.5% - 100 basis points above
Plan)
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FY
2010:
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49.4%
(Plan is 48.9% - 50 basis points above
Plan)
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FY
2011:
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52.0%
(Plan is 52.0% - Flat to Plan)
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Subject
to the provisions of Paragraph 4 hereof, the Annual Bonus shall be paid as soon
as possible after the close of the applicable fiscal year, but in no event later
than March 15 of Executive’s taxable year following the taxable year in which
the bonus is earned. 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 Gross Margin
targets described above. The parties acknowledge and agree that
Executive has already earned an Annual Performance bonus for fiscal year 2008 in
the gross amount of $50,000, which shall be paid in no event later than March
15, 2009.
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Gross
Margin shall be calculated by the Company and the Company’s determination of
Gross Margin shall be final and not subject to challenge by
Executive. Generally, however, “Gross Margin” means the result of net
sales less direct wound care center (the “Centers”) costs (the “cost of sales”
or “COS”) including direct and hospital contract labor payroll costs, heath
insurance and employee benefit costs associated with this direct labor, medical
director fees and other labor costs that may be paid on a 1099 basis; rental,
finance charges and depreciation costs of leasehold improvements and furniture,
fixtures and equipment used in the Centers; advertising, marketing, promotion
and Center grand opening costs that are directly assigned to Centers; automobile
expense incurred by Center employees; patient transportation costs; equipment
maintenance; software expense, including current expense and amortization costs;
property and casualty and other liability insurance costs allocated to the
Centers; non-cash compensation to Center employees (both “HMA” and “NYHWC”
payroll personnel); oxygen and medical supplies costs; amortization costs of
contract and other intangible assets directly associated with a Center; and
other costs that may be appropriately allocated to the Cost of Sales as
determined by the company’s Chief Executive Officer.
(d) 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.
(e) Car
Allowance. Executive shall be entitled to reimbursement for
automobile expenses (including insurance, maintenance, lease payments, etc.) up
to, but not exceeding, $15,000 per calendar year (but no more than $3,000 per
calendar month), plus additional reimbursement for any mileage, tolls or parking
for documented business use (with such documentation to be provided in
accordance with the Company’s normal expense reimbursement practices and
procedures). 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.
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(f) Stock
Options. Pursuant to the 2005 Employment Agreement, Executive
was granted options to purchase 210,000 shares of common stock of the Company
and pursuant to this Agreement, executive shall be granted the option to
purchase an additional 525,000 shares of the Company’s common stock pursuant to
the Company’s “Center for Wound Healing 2006 Stock Option Plan, as amended and
restated” (the “Option Plan”), as described below. 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:
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(i)
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Prior Time Vesting
Options. The 210,000 time vesting options granted to
Executive pursuant to Paragraph 3(e) of the 2005 Employment Agreement
(“Time Vesting Options”) shall survive this Agreement and remain in full
force and effect in accordance with their terms, except that (x) 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 October 8, 2008; and (y) the life of such options shall be
extended to 5 years from the original date of grant, which was April 1,
2006. The parties acknowledge and agree that pursuant to the
terms of the 2005 Employment Agreement, the Time Vesting Options are fully
vested.
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(ii)
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New Time Vesting
Options. Subject to the provisions of Paragraph 4
below, Executive is hereby granted, effective October 8, 2008
(the “Grant Date”), the option to purchase an additional 300,000 shares of
Company stock at the price of $1.05 per share (the “New Time Vesting
Options”). The New Time Vesting Options shall vest according to
the following schedule:
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(A)
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75,000
of the New Time Vesting Options will vest on the Grant Date;
and
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(B)
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75,000
of the New Time Vesting Options will vest on the first anniversary of the
Grant Date, provided that Executive is employed by the Company through
such date; and
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(C)
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75,000
of the New Time Vesting Options will vest on the second anniversary of the
Grant Date, provided that Executive is employed by the Company through
such date; and
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(D)
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75,000
of the New Time Vesting Options will vest on June 30, 2011, provided that
Executive is employed by the Company through such
date.
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(iii)
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New Performance Vesting
Options. Subject to the provisions of Paragraph 4 below, Executive
is hereby granted, effective October 8, 2008, the option to purchase an
additional 225,000 shares of Company stock at the price of $1.05 per share
(the “New Performance Vesting Options”). The New
Performance Vesting 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 New Performance
Vesting Option to purchase 75,000 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 New Performance
Vesting Option to purchase 75,000 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 New Performance
Vesting Option to purchase 75,000 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
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.
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(E)
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The
maximum number of New Performance Vesting Options that may vest pursuant
to this paragraph 3(f)(iii) for any fiscal year is 75,000 shares of the
Company’s common stock. Any New Performance Vesting Options
which do not vest within the applicable periods set forth in paragraphs
3(f) (iii) (A), (B), or (C) above shall be
forfeited.
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(iv)
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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)
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Term of
Option. The New Time Vesting Options and the New
Performance Vesting Options shall remain outstanding for 5 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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(g) 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.
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4.
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Termination
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(a)
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Termination of
Employment.
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(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.
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(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.
(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 1-4 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; (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; or (4) the Company’s
relocation of its corporate offices to an address more than 50 miles from its
current headquarters in Tarrytown, New York. 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:
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(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.
(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.
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(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.
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(b)
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Consequences of Termination of
Employment.
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(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 (and in either case such termination of employment constitutes a
“separation from service” within the meaning of section 409A of the Code),
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. 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 calendar year in which such termination occurred.
3. 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, payable not later than two and one-half (2 ½)
months after the close of the calendar year in which such termination occurred.
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; and 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; provided, however, if
Executive’s employment terminates as a result of the Company’s failure to renew
this Agreement as provided in Paragraph 1, Executive’s right to benefit
continuation and/or reimbursement for COBRA expenses as provided
herein shall expire after twelve (12) 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.
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4. Vesting of Stock
Options. Any unvested Stock Options pursuant to
Paragraph 3(f)(i) and 3(f)(ii) 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(f)(iii)(A-C), 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 Annual Bonus
earned for any prior year(s) but not yet paid; and (C) 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.
(iii)
Death or
Disability. If Executive’s employment with the Company is
terminated as a result of Executive’s death or Disability (and such termination
of employment constitutes a “separation from service” within the meaning of
section 409A of the Code), 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
Annual Bonus earned for any prior year(s) but not yet paid; and (C) 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.
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(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.
(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 (within the meaning of section 409A of the Code), 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).
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5.
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Restrictive
Covenants.
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(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.
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(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.
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(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.
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.
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(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. 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.
14. 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.
15. 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.
16. 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.
17. 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.
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18. 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,
including, without limitation, the 2005 Employment Agreement, which is cancelled
and of no further effect. 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.
19. 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.
20. 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.
21. 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.
| THE CENTER FOR WOUND HEALING, INC.: | ||
|
By
|
||
| Xxxxxx X. Xxxxxxx | ||
|
Its:
|
Chief
Executive Officer
|
|
| Date |
|
|
| EXECUTIVE: | ||
|
|
||
| Xxxxx Xxxx | ||
| Date |
|
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