This EMPLOYMENT
AGREEMENT is dated as of June 17, 2005 by and between
HealthCare Services, Inc., a Delaware corporation (the
“Company”), and John Staton (the
“Executive”).
WHEREAS ,
the Company desires to employ the Executive and the Executive
desires to be employed by the Company on the terms and conditions
contained herein.
NOW ,
THEREFORE , for and in consideration of the premises hereof
and the mutual covenants contained herein, the parties hereto
hereby covenant and agree as follows:
1.
Employment . The Company hereby employs the Executive, and
the Executive hereby accepts such employment with the Company
commencing on such date as the parties may mutually agree based
upon the Executive’s availability., subject to the terms and
conditions provided for herein (the “Commencement
Date”). The period beginning on Executive’s start date
and continuing until the date upon which the Executive is no longer
employed by the Company, in accordance with the terms of this
Agreement, shall be referred to herein as the
“Term”.
2.
At-Will Employment . Unless otherwise expressly agreed to by
the Executive and the Company in writing, the Executive’s
employment by the Company shall, notwithstanding anything to the
contrary expressed or implied herein, be terminable by either party
“at will”, for any reason or for no reason, but shall
in all other respects be subject to the terms and conditions of
this Agreement.
3.
Duties . The Executive shall be employed as the Chief
Financial Officer of the Company subject to the supervision and
direction of the Chief Executive Officer of the Company. Executive
shall be responsible for the financial operations of the
Company’s business and shall perform such duties and shall
also perform and discharge such other executive employment duties
and responsibilities consistent with this position as the Chief
Executive Officer may from time to time reasonably prescribe.
Except as may otherwise be approved in advance by the Board of
Directors of the Company and except for reasonable vacations, sick
days, personal days and similar time off and a reasonable amount of
time for the performance of civic, educational and charitable
functions and service on a board of directors (or other governing
body) of one entity which is not engaged in a business competitive
with the Company, the Executive shall devote his full time during
normal business hours throughout the Term to the services required
of him hereunder. Except as provided in the previous sentence, the
Executive shall render his business services exclusively to the
Company during the Term and shall use his commercially reasonable
efforts, judgment and energy to improve and advance the business
and interests of the Company in a manner consistent with the duties
of this position.
4. Base
Salary, Bonus, Withholding and Restricted Stock .
(a) Base
Salary . As compensation for the performance by the Executive
of the services to be performed by the Executive hereunder during
the Term, the Company shall pay the Executive a base salary at the
annual rate of three hundred thousand dollars ($300,000) (said
annual amount, together with any increases thereto as may be
determined from time to time by the Board of Directors of the
Company and the Chief Executive Officer of the Company, in their
sole discretion, being hereinafter referred to as “Base
Salary”). Any Base Salary payable hereunder shall be paid in
regular intervals (but in no event less frequently than monthly) in
accordance with the Company’s payroll practices from time to
time in effect.
(b)
Performance Bonus . In addition to his Base Salary the
Executive shall be eligible for an annual performance bonus of up
to one hundred thousand dollars ($100,000) per year. The
performance bonus plan and the award of the performance bonus shall
be consistent with such performance bonus plans as may be adopted
by the Company from time to time for senior officers of the
Company. Payment of $100,000 per year as a performance bonus is
guaranteed for the first two years of Executive’s employment
and shall be paid to the Executive in a lump sum no later than 60
days after the end of each calendar year. The guaranteed bonus
shall be prorated for a partial year. For example, with respect to
the guaranteed bonus: if the Commencement Date was July 1,
2005, then a bonus payment of $50,000 would be paid to the
Executive on or before March 1, 2006; a bonus payment of
$100,000 would be paid to the Executive on or before March 1,
2007; and a bonus payment of $50,000 would be paid to the Executive
on or before March 1, 2008.
(c)
Withholding, Etc. The payment of any Base Salary,
performance bonus or any other cash bonus hereunder shall be
subject to applicable withholding and payroll taxes, and such other
deductions as may be required under the Company’s Executive
benefit plans.
(d) Grant of
Stock Options . The Company hereby grants to the Executive
options to acquire 299,295 shares of the Company’s
Class C Common Stock, $.01 par value per share (the
“Stock Options”), at an exercise price to be
established by the Company’s compensation committee, in good
faith, based on the valuation range for the Company of
$40 million to $75 millions which is based upon
commercially reasonable valuation methodologies utilized in the
marketplace to value comparable companies, and, pursuant to the
terms and conditions of such Stock Option Plan (the “Option
Plan”) as may be adopted by the Company and such Stock Option
Agreement as may be entered into between the Executive and the
Company (the “Award Agreement”). The exercise price
will be established by no later than July 15, 2005. The Award
Agreement shall provide: (i) the Executive with
“Tag-Along Rights” which are not materially different
from those set forth in Exhibit A hereto, (ii) with
respect to vested options, the Executive shall be permitted to
exercise such options at any time after such options become vested,
(iii) the Company shall not have any repurchase right with
respect to vested options or the shares of capital stock issued
upon exercise of such options. The Award Agreement shall contain
such other provisions as may be mutually agreed upon between the
Company and the Executive. To the extent of any inconsistency
between the terms of the Option Plan and the Award Agreement, the
terms of the Award Agreement shall control. The Stock Options shall
vest in equal installments of 1/48 on a monthly basis beginning as
of the Commencement Date, provided, however, that all Stock Options
shall vest if, after a Change of Control occurs,
(i) the
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Executive’ employment is terminated by the
Company other than for Cause (as hereinafter defined) or
(ii) the Executive terminates his employment hereunder for
Good Reason (as hereinafter defined). The Company represents and
warrants to the Executive that as of the date hereof the
Class C Common Stock for which the Stock Options are
exercisable constitute 1.5% of the fully-diluted common equity of
the Company. Notwithstanding the foregoing agreement to grant the
Stock Options, it is expressly understood and agreed that the
Company does not now, nor hereafter shall have, any obligation to
continue the Executive in its employ whether or not on a full-time
basis, after the end of the Term.
A
“Change of Control” shall be deemed to have occurred if
at any time after the date hereof : the Company sells or otherwise disposes of all
or substantially all of its assets; the Company participates in a
merger or consolidation and, immediately following the consummation
of such merger or consolidation, the Company’s stockholders
prior to such merger or consolidation do not own 50% or more of the
voting shares of stock of the surviving or successor corporate; or
any person or entity, including a “person” as such term
is used in Section 13(d) (3) of the Securities Exchange Act of
1934, as amended, who is not a stockholder of the Company as of the
date hereof, becomes the beneficial owner (directly or indirectly)
of 30% or more of the combined voting power of the Company’s
voting securities.
5.
Director’s and Officer’s Insurance . In the
event that the Company obtains Director’s and Officer’s
liability insurance coverage or provides other indemnification
agreements or arrangements to or with its directors or officers,
Executive shall be one of the officers of the Company covered by
such insurance and such indemnification agreements or
arrangements.
6.
Benefits . During the Term, the Executive shall:
(a) be
eligible to participate in fringe benefits and pension and/or
profit sharing plans and/or other benefit plans or arrangements
that may be provided by the Company for, or made available to, its
senior executives in accordance with the provisions of any such
plan or arrangement, as the same may be in effect from time to
time;
(b) be
eligible to participate in any medical and health plans or other
welfare benefit plans that may be provided by the Company for its
senior executives in accordance with the provisions of any such
plan, as the same may be in effect from time to time;
and
(c) be
entitled to disability and/or life insurance benefits in accordance
with the Company policy that may be applicable to senior executive
from time to time.
7. Travel
and Expenses . The Executive shall be entitled to receive
prompt reimbursement for all reasonable employment-related travel
and other expenses incurred by the Executive during the Term upon
the receipt by the Company of reasonably detailed statements and
documentation of such expenses in accordance with the reasonable
accounting requirements of the Company and consistent with the
practices, policies and procedures applicable to other senior
executives of the Company.
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8.
Unauthorized Disclosure . The Executive hereby covenants,
agrees and acknowledge as follows:
(a) The
Executive has and will have access to and will participate in the
development of or be acquainted with confidential or proprietary
information and trade secrets related to the business of the
Company and its subsidiaries (collectively, the
“Companies”), including but not limited to
(i) business plans, operating plans, marketing plans,
financial reports, operating data, budgets, wage and salary rates,
pricing strategies and information, terms of agreements with
suppliers or customers and others, customer lists, patents,
devices, software programs, reports, correspondence, tangible
property and specifications owned by or used in the businesses of
one or more of the Companies, (ii) information pertaining to
future developments such as, but not limited to, research and
development, future marketing, distribution, delivery or
merchandising plans or ideas, and potential new business locations,
and (iii) other tangible and intangible property, which are
used in the business and operations of the Companies but not made
publicly available. The information and trade secrets relating to
the business of the Companies described hereinabove in this
paragraph (a) are hereinafter referred to collectively as the
“Confidential Information”; provided that the term
Confidential Information shall not include any information
(x) that is or becomes generally publicly available (other
than as a result of violation of this Agreement by the Executive)
or (y) that the Executive receives on a nonconfidential basis from
a source (other than the Company, its affiliates or
representatives) that is not known by him to be bound by an
obligation of secrecy or confidentiality to the Companies or any of
them.
(b) The
Executive hereby assigns to the Company, in consideration of his
employment, all Confidential Information developed by or otherwise
in the possession of the Executive at any time during the Term,
whether or not made or conceived during working hours, alone or
with others, which relates, directly or indirectly, to businesses
or proposed businesses of any of the Companies, and the Executive
agrees that all such Confidential Information shall be the
exclusive property of the Companies. Upon request of the Board of
Directors of the Company, the Executive shall execute and deliver
to the Companies any specific assignments or other documents
reasonably required to vest title in such Confidential Information
in the Companies or to obtain for the Companies legal protection
for such Confidential Information.
(c) The
Executive shall not disclose, use or make known for his or
another’s benefit any Confidential Information or use such
Confidential Information in any way except in the best interests of
the Companies in the performance of the Executive’s duties
under this Agreement. The Executive may disclose Confidential
Information when required by applicable law or judicial process,
but only after notice to the Company of the Executive’s
intention to do so and opportunity for the Company (at the
Company’s expense) to challenge or limit the scope of the
disclosure.
(d) The
Executive acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this
Section 6 would be inadequate and, therefore, agrees that the
Companies shall be entitled to injunctive relief in addition to any
other available rights and remedies in case of any such breach or
threatened breach; provided , however , that nothing
contained herein shall be construed as prohibiting the Companies
from pursuing any other rights and remedies available for any such
breach or threatened breach.
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(e) The
Executive agrees that upon termination of his employment by the
Company for any reason, the Executive shall forthwith return to the
Company all Confidential Information, documents, correspondence,
notebooks, reports, computer programs and all other materials and
copies thereof (including computer discs and other electronic
media) relating in any way to the business of the Companies in any
way developed or obtained by the Executive during the period of his
employment with the Company.
(f) Executive
agrees, while Executive is employed by the Company, to offer or
otherwise make known or available to it, as directed by the Board
of Directors of the Company and without additional compensation or
consideration, any business prospects, contracts or other business
opportunities that Executive may discover, find, develop or
otherwise have available to him in any field in which the Company
is engaged or, to the knowledge of the Executive, proposes to be
engaged, and further agrees that any such prospects, contacts or
other business opportunities shall be the property of the
Company.
(g) The
obligations of the Executive under this Section 8 shall
survive the termination of the Term and the termination of this
Agreement and shall terminate eighteen months after the termination
of the Term.
(h) Without
limiting the generality of Section 10 hereof, the Executive
hereby expressly agrees that the foregoing provisions of this
Section 8 shall be binding upon the Executive’s heirs,
successors and legal representatives.
(a) The
Executive’s employment hereunder may be terminated without
any breach of this Agreement under the following
circumstances:
(i)
Termination For Cause . Termination of the Executive’s
employment hereunder by the Company at any time “for
cause” (as defined below), such termination to take effect
immediately upon written notice from the Company to the
Executive;
The following
actions, failures and events by or affecting the Executive shall,
in the reasonable opinion of the Board of Directors, constitute
“cause” for termination within the meaning of clause
(iii) above: (1) material breach by Executive of any
material provision of this Agreement which has not been cured by
the Executive within thirty (30) days after receipt by the
Executive of written notice from the Company of such breach;
(2) gross negligence or willful misconduct of the Executive in
connection with the performance of his duties under this Agreement
which causes material harm to the Company, (3) the
Executive’s willful refusal to perform any of his material
duties or responsibilities required pursuant to this Employment
Agreement, or directed by the Chief Executive Officer in accordance
with this Agreement, which has not been cured by the Executive
within fifteen (15) days after receipt by the Executive of
written notice from the Company of such conduct and/or refusal;
(4) the Executive’s misappropriation for personal use of
material assets or business opportunities of the Company;
(5) the Executive’s embezzlement of the Company’s
funds or property, or fraud on the part of the Executive;
(6) Executive’s conviction of, or plea of no contest to,
a felony or any other crime which in the Board of Directors’
good faith reasonable opinion renders the Executive unfit
to
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serve the
Company as contemplated herein; or (7) a knowing
misrepresentation of a material fact made by the Executive to the
Company’s Board of Directors or Chief Executive Officer, with
the intention of misleading the Board or the Chief Executive
Officer.
(ii)
Termination Without Cause . Termination of the
Executive’s employment hereunder by the Company at any time,
other than termination by the Company “for cause” as
contemplated by clause (i) above; and
(iii)
Termination by Executive . At any time during the Term, the
Executive may terminate his employment hereunder (A) for Good
Reason (as defined below), (B) for any other reason,
(C) by the death of the Executive or (D) the Disability
(as defined below) of the Executive. For purposes of this
Agreement, “Good Reason” shall mean that the Executive
has complied with the “Good Reason Process”
(hereinafter defined), if applicable, following the occurrence of
any of the following events: (1) a material diminution or
other substantive adverse change, not consented to in writing by
the Executive, in the nature or scope of the Executive’s
responsibilities, authorities, powers, functions or duties;
(2) any removal, during the Term, from Executive of his title
of Chief Financial Officer; (3) the requirement that the
Executive report to any officer, consultant or committee, other
than the Chief Executive Officer of the Company or the Audit
Committee of the Board of Directors of the Company or as may be
required by the Company’s auditors in order to comply with
applicable regulatory standards or to otherwise comply with
applicable regulatory standards, it being the intent of the parties
that the Executive shall never be required to report to anyone
other than the Chief Executive Officer of the Company except in the
limited situations noted herein; (4) an involuntary reduction
in the Executive’s Base Salary except for across-the-board
reductions similarly affecting all of the Company’s senior
executives; (5) a breach by the Company of any of its other
material obligations under this Agreement and the failure of the
Company to cure such breach within fifteen (15) days after
written notice thereof by the Executive; or (6) the
involuntary relocation of the Company’s offices at which the
Executive is principally employed or the involuntary relocation of
the offices of the Executive’s primary workgroup to a
location outside the Chicago metropolitan area, or a requirement by
the Company that the Executive relocate anywhere other than the
Chicago metropolitan area, except for required travel on the
Company’s business to an extent substantially consistent with
the Executive’s reasonable business travel obligations.
“Good Reason Process” shall mean that (i) the
Executive reasonably determines in good faith that a “Good
Reason” event has occurred; (ii) the Executive notifies
the Company in writing of the occurrence of the Good Reason event;
(iii) the Executive cooperates in good faith with the
Company’s efforts, for a period not less than thirty
(30) days following such notice, to modify the
Executive’s employment situation in a manner acceptable to
the Executive and Company; and (iv) notwithstanding such
efforts, one or more of the Good Reason events continues to exist
and has not been modified in a manner reasonably acceptable to the
Executive. If the Company cures the Good Reason event in a manner
reasonably acceptable to the Executive during the thirty
(30) day period, Good Reason shall be deemed not to have
occurred. The Good Reason Process need not be utilized by the
Executive if the event giving rise to the Good Reason cannot be
cured. “Disability” means a determination, made at the
request of the Executive or upon the reasonable request of the
Company set forth in a notice to the Executive, by a physician
selected by the Company and the Executive, that the Executive is
unable to perform his duties as specified in this Agreement (after
reasonable accommodation) and in all reasonable medical
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likelihood such
inability will continue for a period in excess of 180 days, or
for shorter periods aggregating to more than 180 days in any
consecutive nine-month period.
(b)
Salary Continuation . In the event that the
Executive’s employment is terminated pursuant to clause
(ii) or (iii)(A) of Section 9(a) above, the Company shall pay
to the Executive, as severance pay or liquidated damages or both,
the sum of $33,333 per month for a period of eighteen months
immediately following such termination (the
“Severance”). The Company shall pay the Severance in
accordance with its payroll practices from time to time in effect.
Notwithstanding anything to the contrary herein, any pa
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