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EXHIBIT 10.5
July 25, 2001
Xx. Xxxxx X. Xxxxxxxxx
Universal Hospital Services, Inc.
0000 Xxxxxxxxx Xxxxx
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Dear Xx. Xxxxxxxxx:
You currently serve as President and Chief Executive Officer of
Universal Hospital Services, Inc. (the "Company") pursuant to that certain
employment agreement dated as of November 25, 1997 (the "1997 Employment
Agreement"). This Employment Agreement replaces the 1997 Employment Agreement
and sets forth the agreed terms of your new employment agreement with the
Company. For good and valuable consideration, the parties hereto agree as
follows:
1. Position; Duties. The Company agrees to employ you, and you agree to
serve and accept employment, for the Term (as defined below) as President and
Chief Executive Officer of the Company, subject to the direction and control of
the Board of Directors of the Company (the "Board"), and, in connection
therewith, to reside in the United States, to oversee and direct the operations
of the Company and to perform such other duties as the Board may from time to
time reasonably direct. Your place of employment will be in the Minneapolis,
Minnesota area. During the Term, you agree to devote all of your time, energy,
experience and talents during regular business hours, and as otherwise
reasonably necessary, to such employment, to devote your best efforts to advance
the interests of the Company and not to engage in any other business activities
of a material nature, as an employee, director (except as a director of each of
Xxxx International Holdings, Inc. and the Hennepin County Unit of the American
Cancer Society), consultant or in any other capacity, whether or not you receive
any compensation therefor, without the prior written consent of the Board. You
will not be given duties inconsistent with your executive position.
2. Term of Employment Agreement. The term of your employment hereunder
will begin as of July 25, 2001 and end as of the close of business on July 25,
2004, subject to earlier termination pursuant to the terms hereof (including the
Renewal Term, as defined in the next sentence, the "Term"). Following the
initial Term, this Agreement will automatically be renewed for successive
one-year terms (each a "Renewal Term") unless notice of termination is given by
either party upon not less than 30 days' written notice prior to the date on
which such renewal would otherwise occur. In the event that your employment is
not renewed following the expiration of the Term or following the expiration of
the first Renewal Term immediately succeeding the Term, the Company shall pay to
you your base salary and provide you with the benefits provided hereunder for
eighteen months following such non-renewal.
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3. Compensation and Benefits.
(a) Base Salary. Your base salary will be at annual rate of
$218,000, payable in equal bi-weekly installments, provided that upon
completion of the currently proposed initial public offering of the
Company's common stock, your base salary will be increased to $243,000.
Such base salary will be adjusted annually based on changes in the
consumer price index (all urban consumers, U.S. city average). The
Board will annually review your base salary beginning in 2002 and make
annual adjustments as it deems appropriate. Necessary withholding
taxes, FICA contributions and the like will be deducted from your base
salary.
(b) Bonus; Options. In addition to your base salary, beginning
in 2002 you shall be entitled to receive a bonus of up to 200% of your
base salary, based on the achievement of the annual EBITDA targets
contained in Exhibit A (such targets to be subject to adjustment by the
Board of Directors of the Company, in good faith, to reflect any
acquisitions, dispositions and material changes to capital spending).
The amount of such bonus would rise linearly from 0% of base salary to
200% of base salary based on achievement of EBITDA of 90% to 110% of
target EBITDA. No bonus shall be payable if EBITDA is 90% or less of
target EBITDA. You will also be entitled to receive certain stock
options pursuant to one or more executive or employee stock option
plans at the discretion of the Board, consistent with past practices.
(c) Other. You will be entitled to such health, life,
disability, vacation, pension, sick leave and other benefits as are
generally made available by the Company to its executive employees.
Your benefits will also consist of five weeks paid vacation time, club
membership, an annual physical exam and reimbursement of up to $5,000
annually for tax preparation and financial planning costs.
4. Termination.
(a) Death. This Employment Agreement will automatically
terminate upon your death. In the event of such termination, the
Company will pay to your legal representatives your base salary in
monthly installments and continue to provide the benefits provided
hereunder, in each case for eighteen months following such termination.
(b) Disability. If during the Term you become physically or
mentally disabled, whether totally or partially, either permanently or
so that you are unable substantially and competently to perform your
duties hereunder for a period of 90 consecutive days or for 90 days
during any six-month period during the Term (a "Disability"), the
Company may terminate your employment hereunder by written notice to
you. In the event of such termination, the Company will pay to you your
base salary in monthly installments and continue to provide the
benefits provided hereunder, in each case for eighteen months following
such termination.
(c) Cause. Your employment hereunder may be terminated at any
time by the Company for Cause (as defined herein) by written notice to
you. In the event of such termination, all of your rights to payments
(other than payment for services already
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rendered) and any other benefits otherwise due hereunder will cease
immediately. The Company will have "Cause" for termination of your
employment hereunder if any of the following has occurred.
(i) your continued failure, whether willful,
intentional or grossly negligent, after written notice, to
perform substantially your duties hereunder (other than as a
result of a Disability);
(ii) dishonesty in the performance of your duties
hereunder:
(iii) conviction or confession of an act or acts on
your part constituting a felony under the laws of the United
States or any state thereof;
(iv) any other willful act or omission on your part
which is materially injurious to the financial condition or
business reputation of the Company or any of its subsidiaries;
(v) you have breached any provision of this
Employment Agreement contained in Paragraphs 6, 7 and 8
hereof; or
(vi) you have breached any provision of this
Employment Agreement (other than paragraphs 6, 7 or 8 hereof)
and such breach will not have been cured within sixty days
after notice thereof from the Company to you.
(d) Without Cause. Your employment hereunder may be terminated
at any time by the Company without Cause by written notice to you. In
the event of such termination, the Company shall continue to pay you
your base salary through the date which is eighteen months from the
Date of Termination (as defined herein). It is acknowledged and agreed
that termination of your employment upon expiration of the Term, or any
Renewal Term, shall not be deemed to constitute a termination without
Cause for purposes of this Employment Agreement or for any other
purpose.
(e) Resignation Without Good Reason. You may terminate your
employment hereunder upon sixty days' prior written notice to the
Company, without Good Reason (as defined herein). In the event of such
termination, all of your rights to payment (other than payment for
services already rendered) and any other benefits otherwise due
hereunder will cease upon the date of such termination. It is
acknowledged and agreed that termination of your employment upon
expiration of the Term will not be deemed to constitute resignation
without Good Reason for purposes of this Employment Agreement or any
other purpose.
(f) Resignation For Good Reason. You may terminate your
employment hereunder at any time upon thirty days' written notice to
the Company, for Good Reason. In the event of such termination, the
Company will continue to pay you your base salary though the date which
is eighteen months from the Date of Termination.
You will have "Good Reason" for termination of your employment
hereunder if, other than for Cause, any of the following has occurred:
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(i) your base salary has been reduced other than in
connection with an across-the-board reduction (of
approximately the same percentage) in executive compensation
to Executive Employees imposed by the Board in response to
negative financial results or other adverse circumstances
affecting the Company;
(ii) the Company has reduced or reassigned a
material portion of your duties hereunder or has required you
to relocate outside the greater Minneapolis, Minnesota area;
(iii) your illness, that in the good faith
determination of the Board of Directors of the Company is
likely to result in you becoming disabled and unable to
continue your employment with the Company; or
(iv) the Company has breached this Employment
Agreement in any material respect.
(g) Date and Effect of Termination. The date of termination of
your employment hereunder, pursuant to this Paragraph 4, will be, (i)
in the case of Paragraph 4(a), the date of your death, (ii) in the case
of Paragraphs 4(b), (c) or (d), the date specified as your last date of
employment in the Company's notice to you of such termination or (iii)
in the case of Paragraph 4(e) or 4(f), the date specified in your
notice to the Company of such termination (in each case, the "Date of
Termination"). Upon any termination of your employment hereunder
pursuant to this Paragraph 4, you will not be entitled to any further
payments or benefits of any nature pursuant to this Employment
Agreement, or as a result of such termination, except as specifically
provided for in this Employment Agreement, the Stockholders' Agreement
between the Company and the equity security holders of the Company, in
any stock option plans adopted by the Company in accordance with
Paragraph 3(b) hereof, or as may be required by law.
(h) Other Employment. Notwithstanding anything in this
Employment Agreement to the contrary, if your employment hereunder is
terminated pursuant to Paragraph 4(d) or if you terminate your
employment pursuant to Paragraph 4(d) or (f), and if prior to the date
which is eighteen months after the Date of Termination you find other
employment, the amount of payments or benefits payable to you after
such termination in accordance with the terms of this Employment
Agreement will be reduced by the value of your compensation in your new
employment through the date which is eighteen months after the Date of
Termination.
5. Acknowledgment. You agree and acknowledge that in the course of
rendering services to the Company and its clients and customers, you will have
access to and become acquainted with confidential information about the
professional, business and financial affairs of the Company and its affiliates.
You acknowledge that the Company is engaged and will be engaged in a highly
competitive business, and the success of the Company in the marketplace depends
upon its good will and reputation for quality and dependability. You agree and
acknowledge that reasonable limits on your ability to engage in activities
competitive with the Company are warranted to protect its substantial investment
in developing and maintaining its status in the marketplace, reputation and good
will. You recognize that in order to guard the legitimate interests of the
Company and its affiliates, it is necessary for the Company to protect
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all confidential information. The existence of any claim or cause of action by
you against the Company shall not constitute and shall not be asserted as a
defense to the enforcement by the Company of this Employment Agreement. You
further agree that your obligations under Paragraphs 6, 7 and 8 hereof shall be
absolute and unconditional.
6. Confidentiality. You agree that during and at all times after the
Term, you will keep secret all confidential matters and materials of the Company
(including its subsidiaries and affiliates), including, without limitation,
know-how, trade secrets, real estate plans and practices, individual office
results, customer lists, pricing policies, operational methods, any information
relating to the Company (including any of its subsidiaries and affiliates)
products, processes, customers and services and other business and financial
affairs of the Company (collectively, the "Confidential Information"), to which
you had or may have access and will not disclose such Confidential Information
to any person other than the Company, their respective authorized employees and
such other person to whom you have been instructed to make disclosure by the
Board, in each case only to the extent required in the course of your service to
the Company hereunder or as otherwise expressly required in connection with
court process. "Confidential Information" will not include any information which
is in the public domain during or after the term, provided such information is
not in the public domain as a consequence of disclosure by you in violation of
this Employment Agreement.
7. Non-competition. During the Prohibition Period (as hereinafter
defined), you will not, in any capacity, whether for your own account or for any
other person or organization, directly or indirectly, within the United States
and Canada (a) own, operate, manage or control, (b) serve as an officer,
director, partner, employee, agent, consultant, advisor or developer or in any
similar capacity to, or (c) have any financial interest in, or aid or assist
anyone else in the conduct of, any person or enterprise which is engaged in a
business competitive with the activities of the business actually conducted by
the Company. As used herein, "Prohibition Period" means the period from and
after the date hereof to and including the later of (i) the date which is
eighteen months from the Date of Termination, if your employment hereunder is
terminated by the Company without Cause or by you for Good Reason or (ii) the
date which is twelve months from the Date of Termination, if your employment
hereunder is terminated other than as set forth in the preceding clause (i).
8. Non-solicitation. During the Prohibition Period, you will not,
directly or indirectly, hire, recruit, solicit, call upon, divert, take away,
entice or in any other manner persuade or attempt to do any of the foregoing
with respect to, any employee, independent contractor, dealer, supplier, client,
customer or business contact of the Company or any of its subsidiaries to
discontinue his or her position or relationship, or violate any agreement, with
the Company or any of its subsidiaries as employee, independent contractor,
dealer, supplier, client, customer or business contact, except with the prior
written consent of the Board, which consent will be given at the sole discretion
of the Board.
9. Modification. You agree and acknowledge that the duration, scope and
geographic area of the covenants described in Paragraphs 6, 7 and 8 are fair,
reasonable and necessary in order to protect the good will and other legitimate
interest of the Company and its subsidiaries, that adequate consideration has
been received by you for such obligations, and that these obligations do not
prevent you from earning a livelihood. If, however, for any reason any court of
competent jurisdiction determines that any restriction contained in Paragraphs
6, 7 or 8
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are not reasonable, that consideration is inadequate or that you have been
prevented unlawfully from earning a livelihood, such restriction will be
interpreted, modified or rewritten to include as much of the duration, scope and
geographic area identified in such Paragraphs 6, 7 or 8 as will render such
restrictions valid and enforceable.
10. Equitable Relief. You acknowledge that the Company will suffer
irreparable harm as a result of a breach of this Employment Agreement by you for
which an adequate monetary remedy does not exist and a remedy at law may prove
to be inadequate. Accordingly, in the event of any actual or threatened breach
by you of any provision of this Employment Agreement, the Company will, in
addition to any other remedies permitted by law, be entitled to obtain remedies
in equity, including without limitation specific performance, injunctive relief,
a temporary restraining order and/or a permanent injunction in any court of
competent jurisdiction, to prevent or otherwise restrain any such breach without
the necessity of proving damages, posting a bond or other security, and to
recover any and all costs and expenses, including reasonable counsel fees,
incurred in enforcing this Employment Agreement against you, and you hereby
consent to the entry of such relief against you and agree not to contest such
entry. Such relief will be in addition to and not in substitution of any other
remedies available to the Company. The existence of any claim or cause of action
by you against the Company or any of its subsidiaries, whether predicated on
this Employment Agreement or otherwise, will not constitute a defense to the
enforcement by the Company of this Employment Agreement. You agree not to defend
on the basis that there is an adequate remedy at law.
11. Life Insurance. The Company may, at its discretion and at any time
after the execution of this Employment Agreement, apply for and procure, as
owner and for its own benefit, and at its own expense, insurance on your life,
in such amount and in such form or forms as the Company may determine. You will
have no right or interest whatsoever in such policy or policies, but you agree
that you will, at the request of the Company, submit yourself to such medical
examinations, supply such information and execute and deliver such documents as
may be required by the insurance company or companies to which the Company or
any such subsidiary has applied for such insurance.
12. Successors; Assigns; Amendment; Notice. This Employment Agreement
will be binding upon and will inure to the benefit of the Company and will not
be assigned by the Company without your prior written consent. This Employment
Agreement will be binding upon you and will inure to the benefit of your heirs,
executors, administrators and legal representatives, but will not be assignable
by you. This Employment Agreement may be amended or altered only by the written
agreement of the Company and you. All notices or other communications permitted
or required under this Employment Agreement will be in writing and will be
deemed to have been duly given if delivered by hand, by facsimile transmission
to the Company (if confirmed) or mailed (certified or registered mail, postage
prepaid, return receipt requested) to you or the Company at the respective
addresses on the first page of this Employment Agreement, or such other address
as will be furnished in writing by like notice by you or the Company to the
other.
13. Entire Agreement. This Employment Agreement embodies the entire
agreement and understanding between you and the Company with respect to the
subject matter hereof and supersedes all such prior agreements and
understandings.
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14. Severability. If any term, provision, covenant or restriction of
this Employment Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Employment Agreement will remain in full
force and effect and will in no way be affected, impaired or invalidated.
15. Governing Law. This Employment Agreement will be governed by and
construed and enforced in accordance with the laws of state of Minnesota
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws thereof.
16. Counterparts. This Employment Agreement may be executed in two or
more counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument, and all signatures need
not appear on any one counterpart.
17. Headings. All headings in this Employment Agreement are for
purposes of reference only and will not be construed to limit or affect the
substance of this Employment Agreement.
If you accept and agree to the foregoing, please sign and return a
counterpart of this letter to the Company at the above address, whereupon this
letter will become a binding Employment Agreement between you and the Company as
of the date hereof.
Very truly yours,
UNIVERSAL HOSPITAL SERVICES, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Accepted and agreed to:
----------------------------
Xxxxx X. Xxxxxxxxx
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EXHIBIT A
[Annual EBITDA Targets]
