EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on the 18th
day of April, 1997 by and between STERLING HOUSE CORPORATION, a Kansas
corporation ("SHC" or "the Company"), and XXXX X. XXXXXXXXX, a resident of
the State of Florida ("Xxxxxxxxx"). The term of this Agreement shall be
deemed to have commenced as of the 18th day of April, 1997 ("Employment
Commencement Date").
1. Appointment, Title and Duties. SHC hereby employs Xxxxxxxxx to serve as its
Chief Financial Officer. In such capacity, Xxxxxxxxx shall report to the
Board of Directors, President and Chief Executive Officer of SHC and shall
have such powers, duties and responsibilities as are customarily assigned to
the Chief Financial Officer of a publicly-held corporation. In addition,
Xxxxxxxxx shall have such other duties and responsibilities as may reasonably
be assigned to him by the Board of Directors, President or Chief Executive
Officer, including serving with the consent or at the request of SHC on the
board of directors of affiliated corporations.
2. Term of Agreement. This Agreement shall commence on the Employment
Commencement Date and shall terminate upon the earlier of: (i) the date of the
voluntary resignation of Xxxxxxxxx, (ii) the date of Xxxxxxxxx'x death or
determination of Xxxxxxxxx'x disability (as defined in Paragraph 6 below), or
(iii) the date of notice by SHC to Xxxxxxxxx that this Agreement is being
terminated by SHC.
3. Acceptance of Position. Xxxxxxxxx hereby accepts the position of Chief
Financial Officer of SHC and agrees that during the term of this Agreement
he will faithfully perform his duties and will devote substantially all of
his business time to the business and affairs of SHC and will not engage, for
his own account or for the account of any other person or entity, in any
other business or enterprise, including, without limitation, serving on the
board of directors of any other business or enterprise, except with the
express written approval of the Board of Directors of SHC, which consent
shall not be unreasonably withheld; provided, however, that SHC's Board
of Directors shall not be deemed to have unreasonably withheld its consent if
the business or enterprise in which Xxxxxxxxx proposes to engage would
materially detract from the time available to Xxxxxxxxx for the performance
of Xxxxxxxxx'x duties for the Company; provided, further, Xxxxxxxxx may, at
his sole discretion, make personal, passive investments. Xxxxxxxxx agrees to
perform his duties faithfully, diligently and to the best of his ability, to
use his best efforts to advance the best interests of the Company at all
times, and to abide by all moral, ethical and lawful policies,
guidelines, procedures, instructions and orders given to him by the Company
from time to time. Notwithstanding the foregoing, Xxxxxxxxx may provide
consulting services to his previous employer, Vitas Healthcare Corporation
("Vitas"), (i) in person for a period of one (1) week during May 1997, (ii)
in person for a period of up to four (4) days upon Vitas having recruited a
replacement for Xxxxxxxxx, and (iii) by telephone for up to ten (10) hours
per month for a period of one hundred fifty (150) days following the
Employment Commencement Date; provided, however, Vitas and/or Xxxxxxxxx shall
bear all expenses in connection with such consulting services.
4. Salary and Benefits. During the term of this Agreement:
A) SHC shall pay to Xxxxxxxxx a base salary at an annual rate of not less than
One Hundred Seventy-Five Thousand Dollars ($175,000) per annum, paid in
approximately equal installments in accordance with the regular payroll
practices of SHC in effect from time to time with respect to its executive
officers. SHC agrees from time to time to consider periodic changes to such
base salary in the sole discretion of the Board of Directors. The Company
shall deduct from Xxxxxxxxx'x compensation and bonus, if any, all applicable
local, state, Federal or foreign taxes, including, but not limited to,
income tax, withholding tax, social security tax and pension contributions,
if any.
B) Xxxxxxxxx shall participate in all health, retirement, Company-paid
insurance, sick leave, disability, expense reimbursement and other benefit
programs, if any, which SHC makes available, in its sole discretion, to its
senior executives;
provided, however, nothing herein shall be construed to obligate the Company to
establish or maintain any employee benefit program. Until Xxxxxxxxx and his
family relocate to the Wichita, Kansas area, SHC shall pay or reimburse Vitas
for the cost of COBRA continuation coverage under Xxxxxxxxx'x existing health
insurance; provided, however, SHC shall not be required to pay or reimburse
Vitas for amounts in excess of Five Hundred Dollars ($500) per month.
Reimbursement of Xxxxxxxxx'x reasonable and necessary business expenses
incurred in the pursuit of the business of the Company or any of its
affiliates shall be made to Xxxxxxxxx upon his presentation to the Company
of itemized bills, vouchers or accountings prepared in conformance with
applicable regulations of the Internal Revenue Service and the policies and
guidelines of the Company.
C) While there is no guaranty that any bonus will be paid in any year,
Xxxxxxxxx shall be eligible for bonuses in the sole discretion of the Board
of Directors in an amount not to exceed thirty percent (30%) of his base
salary, with such bonus, if any, being based upon the performance standards
applicable to the other senior executive officers of SHC.
D) Xxxxxxxxx shall be entitled to reasonable vacation time in an amount of not
less than five (5) weeks per year, provided that not more than two (2) weeks
of such vacation time may be taken consecutively without prior notice to, and
the consent of, the Chief Executive Officer of SHC.
5. Stock Options Pursuant to the terms of SHC's 1995 Stock Option Plan,
Xxxxxxxxx shall be entitled to receive options to purchase fifty-nine
thousand two hundred fifty (59,250) shares of the common stock of the
Company, of which options to purchase thirty thousand (30,000) shares shall
vest on the first anniversary of the Employment Commencement Date and twenty-
nine thousand two hundred fifty (29,250) shares on the second anniversary of
the Employment Commencement Date, except in the event of a Change of Control
of SHC, as defined in the 1995 Stock Option Plan ("Change of Control"), in
which event the options shall immediately vest. The date of grant of such
options shall be the Employment Commencement Date and the exercise price of
such options shall be the last sale price reported for SHC common stock on
the American Stock Exchange on the Employment Commencement Date. Xxxxxxxxx
shall also be entitled to receive options to purchase an additional thirty
thousand seven hundred fifty (30,750) shares of the common stock of the
Company, subject to the approval by the stockholders of SHC of an increase
in the number of available options under the 1995 Stock Option
Plan, which options shall vest on the third anniversary of the Employment
Commencement Date. All such options shall be subject to all of the terms and
conditions of the 1995 Stock Option Plan, and the specific terms thereof
shall be set forth more specifically in separate stock option agreements.
6. Certain Terms Defined. For purposes of this Agreement:
A) Xxxxxxxxx shall be deemed to be disabled if a physical or mental condition
shall occur and persist which, in the written opinion of two (2) licensed
physicians, has rendered Xxxxxxxxx unable to perform the duties of Chief
Financial Officer of SHC for a period of ninety (90) calendar days or more,
and which condition, in the opinion of such physicians, is likely to continue
for an indefinite period of time, rendering Xxxxxxxxx unable to return to his
duties for SHC. One (1) of the two (2) physicians shall be selected in good
faith by the Board of Directors of SHC, and the other of the two (2)
physicians shall be selected in good faith by Xxxxxxxxx. In the event that
the two (2) physicians selected do not agree as to whether Xxxxxxxxx is
disabled, as described above, then said two (2) physicians shall mutually
agree upon a third (3rd) physician whose written opinion as to Xxxxxxxxx'x
condition shall be conclusive upon SHC and Xxxxxxxxx for purposes of this
Agreement.
B) A termination of Xxxxxxxxx'x employment by SHC shall be deemed to be "for
cause" if it is based upon (i) Xxxxxxxxx having been convicted of a felony, (ii)
material disloyalty by Xxxxxxxxx to the Company, including but not limited to
embezzlement, or (iii) Xxxxxxxxx'x material failure or refusal to perform his
duties in accordance with this Agreement.
C) A resignation by Xxxxxxxxx shall not be deemed to be voluntary, and shall be
deemed to be a resignation for "good reason" if it is based upon (i) a
material breach by SHC of the Company's obligations to Xxxxxxxxx under this
Agreement or under the Company's Stock Option Plan, (ii) a diminution in
Xxxxxxxxx'x title, duties, base salary or benefits which is not part of an
overall diminution for all executive offices of the Company, or (iii)
Xxxxxxxxx being forced to relocate from the Wichita, Kansas area
following a Change of Control of the Company.
7. Certain Benefits and Obligations Upon Termination. In the event that
Xxxxxxxxx'x employment terminates because (i) SHC has terminated Xxxxxxxxx
other than "for cause," as described above, (ii) Xxxxxxxxx has voluntarily
resigned for "good reason," as described above, or (iii) SHC has terminated
Xxxxxxxxx for any reason within a period of one (1) year following a Change
of Control, but not in the event that Xxxxxxxxx'x employment terminates
because Xxxxxxxxx dies or becomes disabled, then,
A) SHC shall pay Xxxxxxxxx
his then base salary for a one (1) year period commencing on the date of the
notice giving rise to the termination of employment, which amount shall be
paid in equal monthly installments over a twelve (12) month period;
B) Xxxxxxxxx shall retain all grants and awards, whether or not vested, issued
under the Company's 1995 Stock Option Plan; and
C) All accrued but unpaid or unused vacation, sick pay and expense
reimbursement shall be calculated and paid within thirty (30) days following the
termination of Xxxxxxxxx'x employment.
8. Confidentiality. Xxxxxxxxx hereby acknowledges his understanding that as a
result of his employment by SHC, he will have access to, and possession of,
valuable and important confidential or proprietary data, documents and
information concerning SHC, its operations and its future plans. Xxxxxxxxx
hereby agrees that he will not, either during the term of his employment with
SHC, or at any time before or after the term of his employment with SHC,
divulge or communicate to any person or entity, or direct any employee or
agent of SHC or of his to divulge or communicate to any person or entity,
or use to the detriment of SHC or for the benefit of any other person or
entity, or make or remove any copies of, such confidential information or
proprietary data or information, whether or not marked or otherwise
identified as confidential or secret. Upon any termination of this Agreement
for any reason whatsoever, Xxxxxxxxx shall surrender to SHC any and all
materials, including but not limited to drawings, manuals,
reports, documents, lists, photographs, maps, surveys, plans, specifications,
accountings and any and all other materials relating to the Company or any of
its business, including all copies thereof, that Xxxxxxxxx has in his
possession, whether or not such material was created or compiled by
Xxxxxxxxx, but excluding, however, personal memorabilia belonging to
Xxxxxxxxx, notes taken by him as an officer, and any other materials, etc.,
which Xxxxxxxxx deems to be of value to him in the event the same
may be needed by Xxxxxxxxx in connection with the defense of any lawsuit,
action or proceeding brought against him for any reason whatsoever. With the
exception of such excluded items, materials, etc., Xxxxxxxxx acknowledges
that all such material is solely the property of SHC and that Xxxxxxxxx has
no right, title or interest in or to such materials. Notwithstanding
anything to the contrary set forth above in this Paragraph 8, the provisions
of this Paragraph 8 shall not apply to information which: (i) is or
becomes generally available to the public other than as a result of
disclosure by Xxxxxxxxx, (ii) is already known to Xxxxxxxxx as of the date of
this Agreement from sources other than SHC, or (iii) is required to be
disclosed by law or by regulatory or judicial process.
9. Non-Competition. Xxxxxxxxx hereby agrees that, during the term of this
Agreement and for a period of three (3) years after any termination for any
reason whatsoever of this Agreement, he will not, directly or indirectly,
commence doing business, in any manner whatsoever, for or with any business
which (i) is engaged in the same business as SHC, (ii) has revenues from
assisted living operations in excess of fifty percent (50%) of SHC's total
revenues, with such calculations being annualized based upon the latest
available quarterly financial data for each of such entities, and (iii) has
assisted living facilities in any state in which SHC then operates or is in
the process of developing more than three (3) assisted living residences.
Xxxxxxxxx further agrees that he will not, directly or indirectly, during the
term of this Agreement and for a period of one (1) year after termination for
any reason whatsoever of this Agreement, become employed by or commence doing
business with or for any assisted living provider that has or proposes to
have assisted living facilities in more than one (1) state. Xxxxxxxxx will
not directly employ, solicit for employment or advise or recommend to any
other person that they employ or solicit for employment any employee of the
Company during the period of Xxxxxxxxx'x employment by the Company and
for a period of three (3) years following the termination of Xxxxxxxxx'x
employment. The provisions of this Paragraph 9 shall be null and void in the
event that Xxxxxxxxx resigns for "good reason." SHC hereby acknowledges and
agrees that Xxxxxxxxx'x ownership of a class of securities listed on a stock
exchange or traded on the over-the-counter market that represents five
percent (5%) or less of the number of shares of such class of securities then
issued and outstanding shall not constitute a violation of this Paragraph 9.
10. Moving and Relocation Expenses. In addition to the salary and benefits set
forth in Paragraph 4 herein, SHC shall provide to Xxxxxxxxx the following
benefits in connection with his moving and relocation to Wichita, KS:
A) SHC shall pay or reimburse Xxxxxxxxx for (i) all sales commissions due and
owing to real estate agents, which amount shall be the lesser of a six
percent (6%) sales commission or Thirty-Nine Thousand Dollars ($39,000) and
(ii) up to Six Thousand Dollars ($6,000) for other miscellaneous direct costs
related to the closing of the sale.
B) SHC shall provide Xxxxxxxxx a one (1) bedroom furnished apartment during the
actual period when Xxxxxxxxx is in the process of relocating his residence to
Wichita, KS; provided, however, SHC shall not be required to pay for such
temporary housing for a period exceeding six (6) months.
C) SHC shall pay or reimburse Xxxxxxxxx for the actual costs paid to third
parties of transporting his furniture to Wichita, KS; provided, however, SHC
shall not be required to pay or reimburse Xxxxxxxxx for an amount in excess
of Nineteen Thousand Dollars ($19,000) for such moving expenses.
11. Attorneys' Fees. In the event that any action or proceeding is brought to
enforce the terms and provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and costs.
12. Notices. All notices and other communications provided to either party
hereto under this Agreement shall be in writing and delivered by hand delivery,
overnight courier service or certified mail, return receipt requested to the
party being notified at said party's address set forth adjacent to said
party's signature on this Agreement, or at such other address as may be
designated by a party in a notice to the other party given in accordance with
this Agreement. Notices given by hand delivery or overnight courier service
shall be deemed received on the date of delivery shown on the
courier's delivery receipt or log. Notices given by certified mail shall be
deemed received three (3) days after deposit in the U.S. Mail.
13. Construction. In construing this Agreement, if any portion of this
Agreement
shall be found to be invalid or unenforceable, the remaining terms and
provisions of this Agreement shall be given effect to the maximum extent
permitted without considering the void, invalid or unenforceable provision.
Without limiting the generality of the foregoing, to the extent that any
provision contained in Section 9 hereof is deemed unenforceable by virtue of
its scope in terms of area, business activity prohibited and/or length of
time, but could be enforceable by reducing any or all thereof, Xxxxxxxxx and
SHC agree that the same shall be enforced to the fullest extent permissible
under the laws and public policies applied in the jurisdictions in which
enforcement is sought. In construing this Agreement, the singular shall
include the plural, the masculine shall include the feminine and neuter
genders, as appropriate, and no meaning or effect shall be given to the
captions of the paragraphs in this Agreement, which are inserted for
convenience of reference only.
14. Choice of Law. This Agreement shall be governed and construed in
accordance with the internal laws of the State of Kansas without resort to
choice of law principles.
15. Integration; Amendments. This is an integrated Agreement. Except as
contemplated herein with respect to stock options, this Agreement constitutes
and is intended as a final expression and a complete and exclusive statement
of the understanding and agreement of the parties hereto with respect to the
subject matter of this Agreement. All negotiations, discussions and writings
between the parties hereto relating to the subject matter of this Agreement
are merged into this Agreement, and there are no rights conferred, nor
promises, agreements, conditions, undertakings, warranties or representations
, oral or written, expressed or implied, between the undersigned parties as
to such matters other than as specifically set forth herein or directly
related thereto. No amendment or modification of, or addendum to, this
Agreement shall be valid unless the same shall be in writing and signed by
the parties hereto. No waiver of any of the provisions of this Agreement
shall be valid unless in writing and signed by the party against whom it is
sought to be enforced.
16. Binding Effect. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that Xxxxxxxxx
shall not be entitled to assign his interest in this Agreement (except for an
assignment by operation of law to his estate), or any portion hereof, or any
rights hereunder, to any party. Any attempted assignment by Xxxxxxxxx in
violation of this Paragraph 16 shall be null, void ab initio and of no effect
of any kind or nature whatsoever.
17. Survival. The provisions contained in Paragraphs 7, 8 and 9 shall survive
the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth above to be effective as of the date specified in the preamble of this
Agreement.
STERLING HOUSE CORPORATION
Address: a Kansas corporation
000 Xxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000 By
Xxxxxx X. Xxxx, President
"SHC" or the "Company"
Address:
00000 Xxxxxxxx Xxxx
Xx. Xxxxxxxxxx, XX 00000
XXXX X. XXXXXXXXX
"Xxxxxxxxx"
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