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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This
Employment Agreement (this "AGREEMENT") is made and entered into
as
of June 1, 2004 (the "Effective Date"), by and between U.S. Health
Services
Corporation, a Delaware corporation, (the "COMPANY"), Standard
Management
Corporation, an Indiana corporation, (the "GUARANTOR"), and Martial
R. Knieser,
M.D., an individual, (the "EXECUTIVE").
RECITALS
WHEREAS,
the Company desires to hire Executive and Executive desires to
become employed by the Company; and
WHEREAS,
the Company and Executive have determined that it is in their
respective best interest to enter into this Agreement on the terms
and
conditions as set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants
and promises contained herein, and for other good and valuable
consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereby
agree as follows:
1.
EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby
accepts employment by the Company, upon the terms and conditions
set forth in
this Agreement.
2. DUTIES.
Executive shall serve as President, and such other positions as
may be mutually agreed upon by Executive and the Board of Directors
of the
Company (the "Board"). Executive shall perform all reasonable
duties assigned by
the Chairman and the Board and agrees to be subject to the general
supervision,
orders, advice and direction of the Chairman and the Board.
3. EXTENT
OF SERVICES. During the term of Executive's employment
hereunder, Executive shall devote his full working time and efforts
to the
performance of his duties and the furtherance of the interests of
the Company
and shall not be otherwise employed. Notwithstanding the above,
Executive may
serve as a director or trustee of other organizations, may practice
medicine, or
engage in charitable, civic, and/or governmental activities
provided that such
service and activities do not prevent Executive from performing the
duties
required of Executive under this Agreement and further provided
that Executive
obtains written consent for all such activities from the Company,
which consent
will not be unreasonably withheld. Executive may engage in personal
activities,
including, without limitation, personal investments, provided that
such
activities do not interfere with Executive's performance of duties
hereunder
and/or the provisions of Executive's written agreements with the
Company.
4. TERM.
Subject to the provisions for termination in Section 8 below,
the
initial term of employment of Executive under this Agreement shall
be two (2)
years from and after the Effective Date (the "INITIAL TERM"). This
Agreement
shall automatically renew annually for successive one (1) year
periods (the
"RENEWAL TERM," and together with the Initial Term, the "EMPLOYMENT
TERM"),
unless the Company or Executive elects not to renew this Agreement
by serving
written notice of such intention not to renew on the other party at
least ninety
(90) days
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prior to the succeeding Effective Date. If such an election is
made, this
Agreement shall be in full force and effect for the remaining
portion of the
then-current one (1) year period, subject to the provisions for
termination in
Section 8 of this Agreement.
5.
COMPENSATION AND BENEFITS.
5.1 BASE SALARY. In consideration of the services rendered to
the
Company
hereunder by Executive and Executive's covenants hereunder, the
Company
shall, during the Employment Term, pay Executive a salary at
the
annual
rate of Three Hundred Fifty Thousand Dollars ($350,000) (the
"BASE
SALARY"),
less statutory deductions and withholdings, payable in
accordance
with the Company's regular payroll practices. Executive may
receive
annual salary increases based upon his performance in his
executive
and management capacity. The amount of such salary increases
shall be
determined by the Board or the Compensation Committee of the
Board (the
"COMPENSATION COMMITTEE").
5.2 BONUS. In addition to base salary, within ninety (90) days
after
the end of
each calendar year of the Company, Executive shall be entitled
to receive
a bonus equal to one percent (1%) of the Company's earnings, on
a
consolidated basis, before interest and taxes for such calendar
year of
the
Company; provided, however, that no bonus shall be paid unless
the
Company
earns a profit for the calendar year, and provided further that
Executive
must be actively employed by the Company on December 31 of the
calendar
year for which the bonus is to be paid. The bonus shall be
calculated
from the books and records of the Company and its affiliates,
which
shall be kept in accordance with generally accepted accounting
principles
applied by the Company in the preparation of its financial
statements. In addition to the bonus described above, Executive
may
receive
additional bonuses based upon his performance in his executive
and
management
capacity. Whether to award such bonus increases and the amounts
thereof
shall be determined solely by the Board or the Compensation
Committee.
5.3 BENEFITS PACKAGE. During the Employment Term, Executive shall
be
entitled
to participate in such employee benefit plans and insurance
programs
offered by the Company, from time to time for its executive,
management
or supervisory personnel generally, at such time as Executive
shall have
fulfilled the eligibility requirements for participation
therein.
5.4 VACATION.
Executive shall be entitled to four (4) weeks' paid
vacation
each year of the Employment Term.
5.5 EXPENSES. The Company shall, upon receipt from Executive of
supporting
receipts to the extent required by applicable income tax
regulations and the Company's reimbursement policies, reimburse
Executive
for all
out-of-pocket business expenses reasonably incurred by
Executive
in
connection with his employment hereunder.
5.6 LIFE INSURANCE. During the Employment Term, the Company shall
at
its
expense maintain a term life insurance policy or policies on the
life
of
Executive in the
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face
amount of Five Hundred Thousand Dollars ($500,000). Four
Hundred
Thousand
Dollars ($400,000) of the policy or policies is payable to the
Company
and One Hundred Thousand Dollars ($100,000) of the policy or
policies
is payable to such beneficiaries as Executive may designate.
Following
termination or expiration of this Agreement for any reason, for
a period
of sixty (60) days following the later of (i) termination or
expiration
of this Agreement and (ii) the date upon which the Company is
no longer
required to maintain such insurance for the benefit of
Executive,
Executive shall have the option to purchase from the Company
the policy
of insurance (other than group insurance) on the life of
Executive.
The purchase price of such policy shall be equal to the
applicable
portion of any prepaid premium thereon.
6. STOCK
OPTION. Subject to approval by the Board, Executive shall
receive
an option to purchase a total of 100,000 shares (the "OPTION
SHARES") of the
Guarantor's common stock (the "OPTION"). The Option shall vest over
two (2)
years in accordance with the following vesting schedule, and at the
closing
market price on the Effective Date: 33% on the Effective Date, 33%
after
Executive's completion of one (1) year of service and the remaining
33% upon
Executive's completion of two (2) years of service.
6.1 In the event of Executive's Involuntary Termination (as
defined
below)
following a Change in Control (as defined below), the Option
shall
automatically accelerate so that the total number of vested Option
Shares
for which
the Option shall be exercisable after taking such acceleration
into
account, shall be equal to the number of Option Shares in which
Executive
would have vested under the normal vesting/exercise schedule in
effect for
the Option had Executive completed service with the Company
through
the Severance Period (as defined below).
(i) An INVOLUNTARY TERMINATION shall mean the
termination of Executive's employment by reason of:
1. Executive is terminated by the Company for reasons
other than for Cause; or
2. Executive's voluntary resignation following (a) a
change in Executive's position with the Company (or Parent or
Subsidiary employing Executive) that materially reduces
Executive's
level of responsibility, or (b) a reduction in Executive's level
of
compensation (including base salary, bonus and fringe
benefits),
provided and only if such change or reduction is effected by
the
Company without Executive's consent, and
(ii) A CHANGE IN CONTROL shall be deemed to occur in the
event of a change in ownership or control of the Guarantor
effected
through any of the following transactions:
1. the acquisition, directly or indirectly, by any
person or related group of persons (other than the Guarantor or
a
person that directly or indirectly controls, or is controlled by,
or
is under common control with, the Guarantor) of beneficial
ownership
(within the meaning of Rule 13d-3 of the
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Securities Exchange Act of 1934, as amended) of securities
possessing more than fifteen percent (15%) of the total
combined
voting power of the Guarantor's outstanding securities pursuant to
a
tender or exchange offer made directly to the Guarantor's
stockholders; or
2. the sale, transfer or other disposition of all or
substantially all of the Guarantor's assets; or
3. a change in the composition of the Board of Directors
of the Guarantor over a period of thirty-six (36) consecutive
months
or less such that a majority of the Board members ceases, by
reason
of one or more contested elections for Board membership, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have
been
elected or nominated for election as Board members during such
period by at least a majority of the Board members described in
clause (i) who were still in office at the time such election
or
nomination was approved by the Board; or
4. the
consummation of a merger or consolidation of the
Guarantor with or into another entity or any other corporate
reorganization, if more than fifteen percent (15%) of the
combined
voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or
other
reorganization is owned by persons who were not stockholders of
the
Guarantor immediately prior to such merger, consolidation or
other
reorganization.
A transaction shall not constitute a Change
in Control if its sole purpose is to change the state of
the Guarantor's incorporation or to create a holding
company that will be owned in substantially the same
proportions by the persons who held the Guarantor's
securities immediately before such transaction.
6.2
The Option is to remain exercisable for three (3) months
following
the Involuntary Termination of Executive's employment.
7.
TERMINATION. Executive's employment and this Agreement (except
as
otherwise provided hereunder) shall terminate upon the occurrence
of any of the
following, at the time set forth therefor (the "TERMINATION
DATE"):
7.1 DEATH OR DISABILITY. Immediately upon the death of Executive
or
a
determination by the Company that Executive has ceased to be able
to
perform
the essential functions of his duties, with or without
reasonable
accommodation, for a period of not less than ninety (90) days, due
to a
mental or
physical illness or incapacity ("DISABILITY") (termination
pursuant
to this Section 7.1 being referred to herein as termination for
"DEATH OR
DISABILITY"); or
7.2 VOLUNTARY TERMINATION. Ninety (90) days following
Executive's
written
notice to the Company of termination of employment; provided,
however,
that the Company may waive all or a portion of the ninety (90)
days'
notice and accelerate the
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effective
date of such termination (and the Termination Date)
(termination
pursuant
to this Section 7.2 being referred to herein as "VOLUNTARY"
termination); or
7.3 TERMINATION FOR CAUSE. Immediately following notice of
termination for "CAUSE" (as defined below), specifying such Cause,
given
by the
Company (termination pursuant to this Section 7.3 being referred
to
herein as
termination for "CAUSE"). As used herein, "Cause" means (i)
termination based on Executive's conviction or plea of "guilty" or
"no
contest"
to any crime constituting a felony in the jurisdiction in which
committed,
any crime involving moral turpitude (whether or not a felony),
or any
other violation of criminal law involving dishonesty or willful
misconduct
that materially injures the Company (whether or not a felony);
(ii)
Executive's substance abuse that in any manner interferes with
the
performance of his duties; (iii) Executive's failure or refusal to
perform
his duties
at all or in an acceptable manner, or to follow the lawful and
proper
directives of the Chairman, the Board or Executive's
supervisor(s)
that is
not corrected within thirty (30) days after written notice from
the
Company to the Executive identifying such failure or refusal;
(iv)
Executive's breach of this Agreement; (v) misconduct by Executive
that has
or could
discredit or damage the Company; (vi) Executive's indictment
for
a felony
violation of the federal securities laws; or (vii) Executive's
chronic
absence from work for reasons other than illness.
7.4 TERMINATION WITHOUT CAUSE. Notwithstanding any other
provisions
contained
herein, including, but not limited to Section 4 above, the
Company
may terminate Executive's employment thirty (30) days following
notice of
termination without Cause given by the Company; provided,
however,
that during any such thirty (30) day notice period, the Company
may
suspend, with no reduction in pay or benefits, Executive from
his
duties as
set forth herein (including, without limitation, Executive's
position
as a representative and agent of the Company) (termination
pursuant
to this Section 7.4 being referred to herein as termination
"WITHOUT
CAUSE").
7.5 OTHER REMEDIES. Termination pursuant to Section 7.3 above
shall
be in
addition to and without prejudice to any other right or remedy
to
which the
Company may be entitled at law, in equity, or under this
Agreement.
8.
SEVERANCE
AND TERMINATION.
8.1 VOLUNTARY TERMINATION, TERMINATION FOR CAUSE, TERMINATION
FOR
DEATH OR
DISABILITY. In the case of a termination of Executive's
employment
hereunder for Death or Disability in accordance with Section
7.1 above,
or Executive's Voluntary termination of employment hereunder in
accordance
with Section 7.2 above, or a termination of Executive's
employment
hereunder for Cause in accordance with Section 7.3 above, (i)
Executive
shall not be entitled to receive payment of, and the Company
shall have
no obligation to pay, any severance or similar compensation
attributable to such termination, other than Base Salary earned
but
unpaid,
accrued but unused vacation to the extent required by the
Company's
policies, vested benefits under any employee benefit plan, and
any
unreimbursed expenses pursuant to Section 5.5 hereof incurred
by
Executive
as of the Termination Date, and (ii) the Company's obligations
under this
Agreement shall immediately cease.
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8.2 TERMINATION WITHOUT CAUSE. Subject to the provisions set
forth
in this
Agreement, in the case of a termination of Executive's
employment
hereunder
Without Cause in accordance with Section 7.4 above, the Company
shall pay
Executive twelve (12) months' salary (hereinafter the
"SEVERANCE
PAYMENT"),
payable in installments in accordance with the Company's normal
payroll
practices and subject to the tax withholding specified in
Section
5.1 above.
The Company shall also provide Executive with health benefits
equal to
and under the same terms as such benefits were provided to
Executive
immediately prior to the Termination Date, or pay the same
level
of
premiums for such benefits required of Executive under COBRA, 29
U.S.C.
Section
1161, et seq. (hereinafter "BENEFIT CONTINUATION"), throughout
any
period in
which Executive receives the Severance Paym
