THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and entered
into as of July 26, 2006, by and between Hythiam, Inc., a
Delaware corporation (“Employer”), and Christopher
Hassan, an individual (“Employee”).
A.
WHEREAS, Employee has commercial sales and marketing experience and
expertise applicable to employment with Employer to perform as the
Senior Executive Vice President of Marketing and Business
Development (“SEVP”) of Employer, Employer has agreed
to employ Employee and Employee has agreed to enter into such
employment, on the terms set forth in this Agreement.
B.
WHEREAS, Employee acknowledges that this Agreement is necessary for
the protection of Employer’s investment in its business, good
will, products, methods of operation, information, and
relationships with its customers and other employees.
C.
WHEREAS, Employer acknowledges that Employee desires definition of
his compensation and benefits, and other terms of his
employment.
NOW,
THEREFORE, in consideration thereof and of the covenants and
conditions contained herein, the parties agree as
follows:
1.1
Initial Term . The initial term of this Agreement shall
begin on the date first set forth above, or as soon thereafter as
Employee commences services hereunder (“Commencement
Date”) and shall continue until the earlier of: (a) the
date on which it is terminated pursuant to Section 5 ;
or (b) four (4) years following the Commencement Date
(“Initial Term”). At the conclusion of the Initial
Term, Employee shall be employed on an at-will basis, with either
party able to terminate the employment, with or without cause and
with or without notice.
2.1
Employment of Employee . Employer agrees to employ Employee
to render services on the terms set forth herein. Employee hereby
accepts such employment on the terms and conditions of this
Agreement.
2.2
Position and Duties . Employee shall serve as
Employer’s SEVP, reporting directly to Employer’s Chief
Executive Officer (“CEO”), and shall have the general
powers, duties and responsibilities of management usually vested in
that office in a corporation, including without limitation
responsibility for commercial sales and marketing, and such other
powers and
duties as may be prescribed from time to time by the CEO or
Employer’s Board of Directors
(“Board”).
2.3
Standard of Performance . Employee agrees that he will at
all times faithfully and industriously and to the best of
Employee’s ability, experience and talents perform all of the
duties that may be required of and from him pursuant to the terms
of this Agreement. Such duties shall be performed at such place or
places as the interests, needs, business and opportunities of
Employer shall require or render advisable.
2.4
Exclusive Service . Employee shall devote all of his
business energies and abilities and all of his productive time to
the performance of his duties under this Agreement (reasonable
absences during holidays and vacations excepted), and shall not,
without the prior written consent of Employer, render to others any
service of any kind (whether or not for compensation) that, in the
opinion of Employer, would materially interfere with the
performance of his duties under this Agreement, and
(b) Employee shall not, without the prior written consent of
Employer, maintain any affiliation with, whether as an agent,
consultant, employee, officer, director, trustee or otherwise, nor
shall he directly or indirectly render any services of an advisory
nature or otherwise to, or participate or engage in, any other
business activity. Employer acknowledges that Employee may do
charity work and conduct personal business as long as such
activities do not materially interfere with the Employee’s
duties hereunder.
2.5
Relocation . Employer shall not, without Employee’s
consent, require Employee to permanently relocate outside of Los
Angeles, California. If Employer relocates more than thirty
(30) miles outside of Los Angeles, and Employee elects not to
relocate, such action shall be considered a resignation with Good
Reason under Section 5.4 . If Employer requests and
Employee agrees to relocate, Employer will pay for reasonable and
standard relocation costs of Employee and Employee’s family,
from Los Angeles, California to another location in the same manner
as the relocation to Los Angeles, California covered by
Paragraph 3.4 without regard to the final sentence of such
paragraph.
3.1
Compensation . During the term of this Agreement, Employer
shall pay the amounts and provide the benefits described in this
Section 3 , and Employee agrees to accept such amounts
and benefits in full payment for Employee’s services under
this Agreement.
3.2
Base Salary . Employer shall pay to Employee a base annual
salary of two hundred seventy-eight thousand eight hundred dollars
($278,800.00) annually, payable in accordance with Employer’s
standard payroll practices, less applicable withholding. At
Employer’s sole discretion, Employee’s base salary may
be increased, but not decreased. Notwithstanding the foregoing,
beginning on the first anniversary of the Commencement Date and
annually thereafter, the Employee’s annual salary then in
effect shall be increased by at least the Consumer Price Index for
Los Angeles, CA (or a reasonable proxy thereof).
3.3
Discretionary Bonus . Except as described in
Section 5.1 below, Employee is eligible to receive an
annual bonus in the sole discretion of Employer. This discretionary
bonus will be targeted at fifty percent (50.0%) of Employee’s
base salary, based on achieving
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designated individual goals and milestones and the overall
performance and profitability of Employer. The goals and milestones
will be established and reevaluated on an annual basis by mutual
agreement of Employee and the CEO, subject to review and approval
by the Board or its Compensation Committee. In the first year of
this Agreement, the goals and objectives related to the 2006 target
bonus shall be established within 45 days of the Commencement
Date. The bonus will be based on a calendar year and shall be paid
no later than April 30
th
of the following year. The annual bonus for 2006, which shall be
prorated for the portion of the year from Commencement Date, is
guaranteed.
3.4
Relocation Expenses . The Employee is eligible to receive
reimbursement of his reasonable and customary expenses incurred
pertaining to his relocation to Los Angeles which shall include
transportation of household contents and vehicles, commissions and
fees associated with the sale of his current home, normal fees
associated with the purchase of a new home, up to 2 points on a new
home loan (of which up to one point shall be loan origination and
the total points shall not exceed $35,000 without mutual
agreement), a house hunting trip and up to 2 months of
temporary living expenses. Employer shall reimburse the relocation
expenses to Employee in accordance with all applicable federal and
state reporting requirements. Qualified relocation expenses, which
are not taxable to Employee, shall be reimbursed to Employee
without any deduction for applicable tax. Non-qualified relocation
expenses which are taxable to Employee, shall be reimbursed to
Employee with an additional amount reimbursed so that the net
reimbursement after the deduction for all applicable taxes shall
equal the amount of the non-qualified, taxable relocation expense.
HR professionals commonly refer to this process as “grossing
up” the reimbursement. It is the intention of this
reimbursement provision that 1) Employer will reimburse Employee
for all reasonable relocation expenses incurred by Employee
including the imposition of applicable taxes; and 2) Employee shall
not personally incur any reasonable relocation expense. Failure to
remain at the Employer, other than termination by the Employer, for
a period of one (1) year from receipt of a relocation or
temporary housing reimbursement shall result in the Employee
refunding the amount paid to the Employer within thirty
(30) days.
3.5
Equity Incentive Plan . Employee shall be granted options to
purchase four hundred thousand (400,000) shares of Employer’s
common stock under the provisions of Employer’s 2003 Stock
Incentive Plan (“Plan”), upon approval by the Board or
its Compensation Committee. To the extent permissible such options
shall be incentive stock options. The options will vest as follows:
twenty percent (20.0%) on the first, second, third, fourth and
fifth anniversaries of the Commencement Date.
3.6
Fringe Benefits . Upon satisfaction of the applicable
eligibility requirements, Employee shall be provided with group
medical and dental insurance through Employer’s plans, as
well as any fringe benefit plan(s) as Employer may offer from time
to time to its personnel. Employee’s spouse and any dependent
children of Employee shall be covered under the Employer’s
health care and dental plans at Employer’s cost. Employer
will pay for four hundred thousand dollars ($400,000.00) of term
life insurance for the benefit of Employee, subject to the standard
physical examination that is required by the issuing insurance
company. In addition, Employee will be provided with accidental
death and disability and long-term disability insurance. Employee
will also be eligible to participate in Employer’s 401K
plan.
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3.7
Paid Time Off . Employee shall accrue, on a daily basis, a
total of four (4) workweeks of paid time off (“PTO”)
per year following the date of this Agreement; provided, however,
that Employee’s total accrued PTO may not exceed a total of
seven (7) workweeks. This PTO shall not lapse at the end of
any calendar year and shall continue to accrue from year to year.
This PTO shall be in addition to normal Employer holidays, which
shall be determined at the discretion of the Employer from time to
time. Any accrued but unused PTO will be paid to Employee, on a pro
rata basis, at the time that his employment is
terminated.
3.8
Deduction from Compensation . Employer shall deduct and
withhold from all compensation payable to Employee all amounts
required to be deducted or withheld pursuant to any present or
future law, ordinance, regulation, order, writ, judgment, or decree
requiring such deduction and withholding.
4. REIMBURSEMENT OF
EXPENSES
4.1
Travel and Other Expenses . Employer shall pay to or
reimburse Employee for business, travel, promotional, professional
continuing education and licensing costs (to the extent required),
professional society membership fees, seminars and similar
expenditures incurred by Employee which Employer determines are
reasonably necessary for the proper discharge of Employee’s
duties under this Agreement and for which Employee submits
appropriate receipts and indicates the amount, date, location and
business character in a timely manner.
4.2
Liability Insurance . Employer shall provide Employee with
officers and directors’ insurance or other liability
insurance, consistent with usual and reasonable business practices
to cover Employee against all insurable events related to his
employment with Employer.
4.3
Indemnification . Promptly upon written request from
Employee, Employer shall indemnify, defend and hold harmless
Employee, to the fullest extent under applicable law, for all
defense costs, judgments, fines, settlements, losses, costs or
expenses (including attorney’s fees, including fees
representing Employee), arising out of Employee’s activities
as an agent, employee, officer or director of Employer, or in any
other capacity on behalf of or at the request of Employer. Such
agreement by Employer shall not be deemed to impair any other
obligation of Employer respecting indemnification of Employee
otherwise arising out of this or any other agreement or promise of
Employer or under any statute.
5.1
Termination With Good Cause; Resignation Without Good Reason
. Employer may terminate Employee’s employment at any time,
with or without notice or Good Cause (as defined below). If
Employer terminates Employee’s employment with Good Cause, or
if Employee resigns without Good Reason (as defined below),
Employer shall pay Employee his salary prorated through the date of
termination, at the rate in effect at the time notice of
termination is given, together with any benefits accrued through
the date of termination. Employer shall have no further obligations
to Employee under this Agreement or any other agreement, and all
unvested options will terminate.
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5.2
Termination Without Good Cause; Resignation with Good Reason
. Employer shall have the right to terminate Employee’s
employment under this Agreement without Good Cause at any time.
Employee shall have the right to terminate his employment with
notice and Good Reason. If Employer terminates Employee’s
employment without Good Cause, or Emplo
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