EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made and entered into as of this
date by and between Perennial Health Systems, Inc.., a Colorado corporation
("Corporation"), and Xxxxx X. Xxxxxx ("Employee").
WHEREAS, Corporation and Employee desire that the term of this Agreement begin
on _____________ ("Effective Date").
WHEREAS, Corporation desires to employ Employee as Chief Financial Officer,
and Employee is willing to accept such employment by Corporation, on the terms
and subject to the conditions set forth in this Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Duties. During the term of this Agreement, Employee agrees to
be employed by and to serve Corporation as Chief Financial Officer, and
Corporation agrees to employ and retain Employee in such capacity. Employee
shall devote a substantial portion of his business time, energy, and skill to
the affairs of the Corporation as Employee shall report to the Corporation's
President and CEO, and at all times during the term of this Agreement shall
have powers and duties at least commensurate with his position as Chief
Financial Officer, as such duties are outlined in Appendix A hereto.
Section 2. Term of Employment.
2.1 Definitions. For the purposes of this Agreement the following terms
shall have the following meanings:
2.1.1 "Termination For Cause" shall mean termination by Corporation of
Employee's employment by Corporation by reason of Employee's willful
dishonesty towards, fraud upon, or deliberate injury or attempted injury to,
Corporation or by reason of Employee's willful material breach of this
Agreement which has resulted in material injury to Corporation, or continuance
of failure by the Employee to perform his duties in compliance with this
Agreement after written notice to the Employee by the Board of Directors
specifying such failure, provided that such cause shall have been found by a
majority vote of the members of the Board of Directors of the Corporation
other than Employee.
2.1.2 "Termination Other Than For Cause" shall mean termination by
Corporation of Employee's employment by Corporation (other than in a
Termination for Cause) and shall include constructive termination of
Employee's employment by reason of material breach of this Agreement by
Corporation, such constructive termination to be effective upon notice from
Employee to Corporation of such constructive termination.
2.1.3 Voluntary Termination" shall mean termination by Employee of
Employee's employment by Corporation other than (i) constructive termination
as described in subsection 2.1.2, (ii) "Termination Upon a Change in Control,"
and (iii) termination by reason of Employee's death or disability as described
in Sections 2.5 and 2.6.
2.1.4 "Termination Upon a Change in Control" shall mean a termination of
Employee's employment with Corporation following a "Change in Control."
2.1.5 "Change in Control" shall mean (i) the time that Corporation first
determines that any person and all other persons who constitute a group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
("Exchange Act")) have acquired direct or indirect beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of forty percent
(40%) or more of Corporation's outstanding securities.
2.2 Initial Term. The term of employment of Employee by Corporation shall
be for a period of one (1) year beginning with Effective Date, unless
terminated earlier pursuant to this Section.. At any time, Corporation and
Employee may by mutual written agreement extend or modify the term of
Employee's employment under the terms of this Agreement.
2.3 Termination For Cause. Termination For Cause may be effected by
Corporation at any time during the term of this Agreement and shall be
effected by written notification to Employee. Upon Termination For Cause,
Employee shall promptly be paid all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination, but
Employee shall not be paid any other compensation or reimbursement of any
kind, including without limitation, severance compensation.
2.4 Termination Other Than For Cause. Notwithstanding anything else in
this Agreement, Corporation may effect a Termination Other Than For Cause at
any time upon giving written notice to Employee of such termination. Upon any
Termination Other Than For Cause, Employee shall promptly be paid all accrued
salary, bonus compensation to the extent earned, vested deferred compensation
(other than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Corporation in which Employee is a participant to the full extent of
Employee's rights under such plans (including accelerated vesting, if any, of
awards granted to Employee under the Corporation's stock option plan), accrued
vacation pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination, and all
severance compensation provided in Section 4.2, but no other compensation or
reimbursement of any kind.
2.5 Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of
Corporation, has failed to perform his duties under this Agreement on account
of illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than twelve (12) consecutive months,
Corporation shall have the right to terminate Employee's employment hereunder
by written notification to Employee and payment to Employee of all accrued
salary, bonus compensation to the extent earned, vested deferred compensation
(other than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Corporation in which Employee is a participant to the full extent of
Employee's rights under such plans, accrued vacation pay and any appropriate
business expenses incurred by Employee in connection with his duties
hereunder, all to the date of termination, with the exception of medical and
dental benefits which shall continue through the expiration of this Agreement,
but Employee shall not be paid any other compensation or reimbursement of any
kind, including without limitation, severance compensation.
2.6 Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and Corporation shall
promptly pay to his estate or such beneficiaries as Employee may from time to
time designate all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of the Corporation in which Employee is a participant
to the full extent of Employee's rights under such plans, accrued vacation pay
and any appropriate business expenses incurred by Employee in connection with
his duties hereunder, all to the date of termination. The Employee's estate
shall not be paid any other compensation, including without limitation,
severance compensation.
2.7 Voluntary Termination. In the event of a Voluntary Termination,
Corporation shall promptly pay all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination, but no
other compensation or reimbursement of any kind, including without limitation,
severance compensation.
2.8 Termination Upon a Change in Control. In the event of a Termination
Upon a Change in Control within one year of the Effective Date, Employee shall
immediately be paid all accrued salary, bonus compensation to the extent
earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans
(including accelerated vesting, if any, of any awards granted to Employee
under Corporation's Stock Option Plan), accrued vacation pay and any
appropriate business expenses incurred by Employee in connection with his
duties hereunder, all to the date of termination, and all severance
compensation provided in Section 4.1, but no other compensation or
reimbursement of any kind.
2.9 Notice of Termination. Corporation may effect a termination of this
Agreement pursuant to the provisions of this Section upon giving thirty (30)
days' written notice to Employee of such termination. Employee may effect a
termination of this Agreement pursuant to the provisions of this Section upon
giving thirty (30) days' written notice to Corporation of such termination.
Section 3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be rendered by Employee
as provided in Section 1 and subject to the terms and conditions of Section 2,
Corporation agrees to pay to Employee a "Base Salary" for the ______ calendar
months beginning the Effective Date at the rate of $175,000.00 per annum
payable in equal, bi-weekly installments of $6730.78. Employee's Base Salary
shall be reviewed annually by the Compensation Committee of the Board of
Directors ("Compensation Committee"), and the Base Salary for each year (or
portion thereof) beginning February 1, 2000 shall be determined by the
Compensation Committee which shall authorize an increase in Employee's Base
Salary for such year in an amount which, at a minimum, shall be equal to the
cumulative cost-of-living increment on the Base Salary as report in the
"Consumer Price Index, All Items," published by the U.S. Department of Labor
(using February 1, 1999 as the base date for computation).
3.2 Bonuses. Employee shall be eligible to receive a bonus of up to 25% of
the Base Salary, with said bonus to be contingent upon criteria that is to be
agreed upon and reduced to writing, and a copy thereof shall be attached to
this Agreement. All such bonuses shall be reviewed annually by the
Compensation Committee.
3.3 Additional Benefits. During the term of this Agreement, Employee
shall be entitled to the following fringe benefits:
3.3.1 Employee Benefits. Employee shall be eligible to participate in
such of Corporation's benefits and deferred compensation plans as are now
generally available or later made generally available to executive officers of
the Corporation, including, without limitation, Corporation's Stock Option
Plan, profit sharing plans, annual physical examinations, dental and medical
plans, personal catastrophe and disability insurance, financial planning,
retirement plans and supplementary executive retirement plans, if any. For
purposes of establishing the length of service under any benefit plans or
programs of Corporation, Employee's employment with the Corporation will be
deemed to have commenced on the Effective Date.
3.3.2 Vacation. Employee shall be entitled to three weeks vacation
during each year during the term of this Agreement and any extensions thereof,
prorated for partial years.
3.3.3 Life Insurance. For the term of this Agreement and any
extensions thereof, Corporation shall at its expense procure and keep in
effect term life insurance on the life of Employee payable to the Estate of
the Employee the minimum aggregate amount of two hundred and fifty thousand
dollars ($250,000.00) dollars.
3.3.4 Automobile Allowance. For the term of this agreement and any
extensions thereof the corporation shall provide officer with an automobile
allowance equal to $650 per month, and provide for insurance on said vehicle.
3.3.5 Reimbursement for Expenses. During the term of this Agreement,
Corporation shall reimburse Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by Employee in
connection with his duties under this Agreement.
3.3.6 Stock Options. As part of the consideration for the Employee's
entering into this Agreement, the Corporation shall issue non-qualified, non-
plan options for the Employee to purchase 250,000 shares of the Corporation's
common stock at a price equal to the median between the bid and the ask for
the Corporation's stock as of the Effective Date. One Hundred Thousand
(100,000) of the aforementioned options to purchase the Corporation's stock
shall vest on the Effective Date, and Fifty Thousand (50,000) options shall
vest each successive six month period of employment.
Section 4. Severance Compensation.
4.1 Severance Compensation in the Event of a Termination Upon a Change in
Control. In the event Employee's employment is terminated in a Termination
Upon a Change in Control, within one year of the Effective Date Employee shall
be paid as severance compensation his Base Salary (at the rate payable at the
time of such termination), for a period of one hundred and eighty (180) days.
4.2 Severance Compensation in the Event of a Termination Other Than for
Cause. In the event Employee's employment is terminated within one year from
the date of this Agreement in a Termination Other Than for Cause, Employee
shall be paid as severance compensation his Base Salary (at the rate payable
at the time of such termination), for a period equal to one hundred and eighty
(180) days. Employee may, in Employees sole discretion, by delivery of a
notice to the Corporation within thirty (30) days following a Termination
Other Than for Cause, elect to receive from Corporation a lump sum severance
payment by cashiers check equal to the present value of the flow of cash
payments that would otherwise be paid to Employee pursuant to this Section.
Employee shall be entitled to an accelerated vesting of any awards granted to
Employee under Corporation's Stock Option Plan to the extent provided in the
stock option agreement entered into at the time of grant.
4.3 No Severance Compensation Upon Other Termination. In the event of a
Voluntary Termination, Termination For Cause, Termination by Death, or
Termination by reason of Employee's disability pursuant to Section 2.6,
Employee or his estate shall not be paid any severance compensation.
Section 5. Outside Activities of Employee. Corporation acknowledges that
Employee has commitments and business activities not related to the
Corporation. There shall be no restriction on Employee's ability to fulfill
such commitments or engage in such business activities, provided that during
the term of Employee's employment under this Agreement or for a period of one
year after the termination of such employment (other than a Termination Other
Than For Cause or a Termination Upon Change in Control) Employee shall not
divert away from the Corporation, for officers personal benefit, or for the
benefit of an organization in which officer has a material financial interest,
any opportunity, arising during such period to pursue such opportunities
personally unless the Board of Directors of the corporation have determined
not to pursue such opportunity.
Section 6. Payment Obligations. Corporation's obligation to pay Employee
the compensation and to make the arrangements provided herein shall be
unconditional, and Employee shall have no obligation whatsoever to mitigate
damages hereunder. If litigation after a Change in Control shall be brought
to enforce or interpret any provision contained herein, Corporation, to the
extent permitted by applicable law and the Corporations' Articles of
Incorporation and Bylaws, hereby indemnifies Employee for Employee's
reasonable attorneys' fees and disbursements incurred in such litigation.
Section 7. Confidentiality. Employee agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and treated as confidential both during and after the term of this Agreement,
except as may be permitted in writing by Corporation's Board of Directors or
as such information is within the public domain or comes within the public
domain without any breach of this Agreement.
Section 8. Withholdings. All compensation and benefits to Employee
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.
Section 9. Indemnification. In addition to any rights to indemnification
to which Employee is entitled to under the Corporation's Articles of
Incorporation and Bylaws, Corporation shall indemnify Employee at all times
during and after the term of this Agreement to the maximum extent permitted
under Kentucky Business Corporation Act or any successor provision thereof and
any other applicable state law, and shall pay Employee's expenses in defending
any civil or criminal action, suit, or proceeding in advance of the final
disposition of such action, suit or proceeding, to the maximum extent
permitted under such applicable state laws.
Section 10. Notices. Any notices permitted or required under this
Agreement shall be deemed given upon the date of personal delivery or forty-
eight (48) hours after deposit in the United States mail, postage fully
prepaid, return receipt requested, addressed to the Corporation at:
000 Xxxx Xxxx Xxxxxx - Xxxxx 0000 X
Xxxxxxxxxx, Xx. 40202
addressed to the Employee at:
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
or at any other address as any party may, from time to time, designate by
notice given in compliance with this Section.
Section 11. Law Governing. It is acknowledged that the Corporation's home
office is located in Kentucky, that this Agreement is entered into in
Kentucky, and that this Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
Section 12. Titles and Captions. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
Section 13. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
Section 14. Agreement Binding. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties
hereto.
Section 15. Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in
any appeal therefrom, it is agreed that the prevailing party shall be entitled
to reasonable attorneys fees to be fixed by the arbitrator, trial court,
and/or appellate court.
Section 16. Computation of Time. In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday, or legal holiday, in
which event the period shall run until the end of the next day thereafter
which is not a Saturday, Sunday, or legal holiday.
Section 17. Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or
plural as the identity of the person or persons may require.
Section 18. Arbitration. If at any time during the term of this Agreement
any dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered
by the arbiter may be entered in any court having jurisdiction thereof.
Section 19. Presumption. This Agreement or any section thereof shall not
be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.
Section 20. Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such
action as may be necessary or appropriate to achieve the purposes of the
Agreement.
Section 21. Parties in Interest. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
Section 22. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 23. Separate Counsel. The parties acknowledge that the
Corporation has been represented in this transaction by counsel, and that the
Employee has not been represented in this transaction by the Corporation's
attorneys, and the Employee has been advised that it is important for the
Employee to seek separate legal advise and representation in this matter.
Date:
Perennial Health Systems, Inc.
a Kentucky Corporation
By: /s/ Xxxxx Xxxx /s/ Xxxxx X. Xxxxxx
----------------------------- -----------------------------
Xxxxx Xxxx, President Xxxxx X. Xxxxxx, Individually
May 5, 1999
ADDENDUM
As an addendum to and a clarification of the employment contract signed May 5,
1999 between Xxxxx X. Xxxxxx and Perennial Health Systems, Inc., the parties
mutually agree to the following:
1. The "EFFECTIVE DATE" that employment will commence will be on or before
June 1, 1999.
2. The option price for the options granted in Section 3.3.6 shall be based
as of the date of signing of said agreement and not as of Effective Date.
The parties do hereby agree to the terms of this addendum as is recognized by
the signatures below:
Perennial Health Services, Inc.
By: Xxxxx X. Xxxx, President
/s/ Xxxxx X. Xxxx /s/ Xxxxx X. Xxxxxx
--------------------------- -----------------------------
Xxxxx X. Xxxx Xxxxx X. Xxxxxx
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