CONSULTING AGREEMENT
(XXXX X. XXXXXXXXX)
This Consulting Agreement (this "Agreement") is entered into effective as
of March 1, 2006 (the "Effective Date"), by and between Performance Health
Technologies, Inc., a Delaware corporation ("Company"), and Xxxx X. Xxxxxxxxx
("Consultant").
WHEREAS, Company is engaged in the business of designing, developing,
manufacturing, and marketing health care rehabilitation products;
WHEREAS, Company has heretofore engaged Consultant as an employee pursuant
to the terms of that certain Employment Agreement effective January 1, 2005,
between Consultant and Employee (the "Employment Agreement"), and Company is
authorized to tender this Consulting Agreement and upon such tender the
Employment Agreement is terminated subject to certain continuing obligations as
provided therein; and
WHEREAS, Company desires to retain the services of Consultant in a
consulting capacity appropriate to his knowledge and experience as provided in
this Agreement and Consultant desires to provide his services in a consulting
capacity as provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Services. Company agrees to engage Consultant and Consultant agrees to
accept engagement by Company to perform consulting services and duties (the
"Services and Duties") commensurate to Consultant's compensation under this
Agreement and otherwise as the Board of Directors of Company from time to time
requires and requests as necessary and useful to Company. The Services will
generally be in the technology and product innovation and design areas but
otherwise as Consultant and Company mutually agree.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until the earlier of (i) two years after the Effective Date,
or (ii) termination in accordance with Section 7. The term of this Agreement is
referred to herein as the "Consulting Term."
3. Relationship.
(a) Independent Contractor. Consultant shall be and at all times
remain an independent contractor for Company, with control over the
accomplishment of the Services. Consultant will, at all times, conduct his
business in his own name and as an independent contractor and not as an
employee, partner, or joint venturer of or with Company. Consultant shall
have no authority to bind Company in any way. Consultant will not at any
time make any representation, either orally or in writing, that he is an
employee, partner, or joint venturer of or with Company or that he has
authority to bind Company. Consultant understands that he has no
proprietary rights to the name "Performance Health Technologies" or the
names of any of its products, nor to any combination of such names.
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(b) Benefits; Taxes. Consultant shall not be an employee or agent of
Company; and, except as specifically set forth in this Agreement, shall
not be entitled to participate in or receive benefits under any Company
programs maintained for Company's employees (including, without
limitation, life, medical, and disability benefits, pension, profit
sharing, or other retirement plans or other fringe benefits); and shall
not be entitled to any direct or indirect compensation or remuneration of
any kind from Company. Consultant assumes full responsibility for the
payment of all income taxes, social security, and other payroll taxes for
his compensation under this Agreement.
4. Schedule; Manner and Means. Unless otherwise agreed in writing executed
by Consultant and Company, for the first six months of the Consulting Term,
Consultant will devote 100% of his time, attention, energies and business
efforts as are reasonably necessary to perform the Services; during the next six
months of the Consulting Term, Consultant will devote 75% of his time,
attention, energies and business efforts as are reasonably necessary to perform
the Services; and during the final 12 months of the Consulting Term, Consultant
will devote 50% of his time, attention, energies and business efforts as are
reasonably necessary to perform the Services. Consultant's obligation under this
Agreement is to complete the Services. Consultant has no obligation to work any
particular hours or days or any particular number of hours or days and Company
agrees that it will have no right to control or direct the details, manner, or
means by which Consultant accomplishes the results of the Services.
5. Compensation.
(a). Services As Consultant. In full compensation ("Compensation")
for the services as a Consultant under this Agreement, Consultant will be
paid 50% of his Base Salary for the first six months of the Consulting
Term, 37.5% of his Base Salary for the next six months of the Consulting
Term, and 50% of his Base Salary during the final 12 months of the
Consulting Term. As used in this Agreement, "Base Salary" shall mean the
annual Base Salary as provided in the Employment Agreement on the last day
Consultant performed services for the Company as an Executive under his
Employment Agreement. For purposes of illustration, if immediately prior
to the date of the Conversion Option the Base Salary is $162,000,
Consultant would be paid $81,000 for first six months of the Consulting
Term, $60,750 during the next six months of the Consulting Term, and
$81,000 during the final 12 months of the Consulting Term, for an
aggregate compensation of $222,750 over the Consulting Term. The
Compensation shall be paid monthly in arrears. If Company wishes to defer
any portion of Consultant's compensation under this Consulting Agreement,
Consultant's deferrals will be pegged to the rate of the CEO's deferrals
(i.e., if the CEO agrees to defer Fifty percent (50%) of his compensation,
Consultant will agree to defer fifty percent (50%) of his compensation
under this Section 5(a)).
(b). Compensation Previously Deferred. The compensation Consultant
deferred while an Executive under the Employment Agreement will be paid to
Consultant in accordance with the schedule attached hereto as Exhibit 1,
which is made a part of this Agreement.
6. Options. Upon execution of the Consulting Agreement by Consultant all
nonexpired Options issued to Consultant while he was an Executive and under the
Company's 1999 Stock Incentive Plan, as such Plan has heretofore or may
hereafter be amended (the "Plan") shall be deemed vested automatically without
action of Company or Consultant. Additionally, as soon as reasonably practicable
after the tender of the Consulting Agreement, Consultant shall surrender to the
Company all such non-expired Qualified Options and Company shall issue in
exchange therefore Nonqualified Options on the same terms and conditions as the
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surrendered Qualified Options. For purposes of illustration, if Consultant
surrenders Qualified Options that expire in May 2007 with an option price of
$.50 and Qualified Options that expire in October 2012 with an option price of
$.75, the Nonqualified Options to be issued by Company in exchange would expire
on May 2007 with an option price of $.50 and October 2012 with an option price
of $.75, respectively, and all other terms of the Nonqualified Options would be
the same as the Qualified Options.
7. Termination of Agreement.
(a) For Due Cause. Nothing herein shall prevent Company from
terminating Consultant, without prior notice, for Due Cause, in which
event Consultant shall be entitled to receive his Compensation until the
date of termination and thereafter Compensation shall cease. The term "Due
Cause" shall mean:
(i) Consultant has committed a material breach of this
Agreement, a misappropriation of funds, or other willful serious act
against Company or any of its Affiliates (as hereinafter defined)
intending to enrich himself at the expense of Company or any of its
Affiliates or has been convicted of a felony,
(ii) Consultant has engaged in conduct that has caused
demonstrable and serious injury, monetary or otherwise, to Company
or any of its Affiliates as evidenced by a binding and final
judgment, order, or decree of a court or administrative agency of
competent jurisdiction in effect after exhaustion of all rights of
appeal of the action, suit, or proceeding, whether civil, criminal,
administrative, or investigative,
(iii) Consultant, in performing the Services, has been guilty
of willful gross neglect or willful gross misconduct, resulting in
either case in material harm to Company or any of its Affiliates, or
(iv) Consultant has refused to perform the Services or any
other obligation under this Agreement, and after receiving notice to
such effect from the Board of Directors Consultant fails to cure the
existing problem within 30 days.
For purposes of this Agreement, "Affiliate" shall mean any individual or any
corporation, partnership, association, limited liability company, or other
entity that directly or indirectly through one or more intermediary's controls,
or is controlled by, or is under common control with Company.
(b) Upon Death. In the event of the death of Consultant, this
Agreement shall terminate on the date of death and the estate of
Consultant shall be entitled to receive the compensation to the date of
death and thereafter Compensation shall cease.
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(c) Upon Disability. In the event Consultant suffers a "Disability"
(as hereinafter defined), this Agreement shall terminate on "the date on
which the Disability occurs" (as hereinafter defined) and Consultant shall
be entitled to Compensation until the date on which the Disability occurs
and thereafter Compensation shall cease. For purposes of this Agreement,
"Disability" shall mean the inability or incapacity of Consultant for
three months to perform the Services under this Agreement and "the date on
which the Disability occurs" shall mean the first day following such
three-month period. Such inability or incapacity shall be documented to
the reasonable satisfaction of the Board of Directors by appropriate
correspondence from registered physicians reasonably satisfactory to the
Board of Directors.
(d) Voluntary Termination. Consultant may voluntarily terminate his
engagement under this Agreement at any time by providing at least ninety
(90) days' prior written notice to Company. In such event, Consultant
shall be entitled to Compensation until the date of termination and
thereafter Compensation shall cease.
(e) Without Due Cause. Anything in this Agreement to the contrary
notwithstanding, this Agreement and Consultant's engagement hereunder may
be terminated by Company without Due Cause by providing Consultant with
written notice of such termination. In such event, Consultant shall be
entitled to receive Compensation until the date of termination and
thereafter until the end of the Consulting Term in effect immediately
before the termination under this Section 7(e).
8. Acknowledgements by Consultant. Consultant acknowledges that: (a) the
Services to be performed by him under this Agreement are of a special, unique,
and intellectual character; (b) Company's business is national in scope and its
services are marketed throughout the United States; and (c) Company competes
with other businesses that are or could be located in any part of the United
States. Consultant further acknowledges and agrees the terms of Sections 9, 10,
and 11 are fair and reasonable and shall survive and continue according to their
terms notwithstanding the expiration, termination, or cancellation of this
Agreement.
9. Non-Compete and Non-Solicitation Covenants of Consultant.
(a) Covenants. During the Consulting Term and during the
Post-Consulting Period (defined below), Consultant covenants that he will
not, directly or indirectly:
(i) engage or invest in, own, manage, operate, finance,
control, or participate in the ownership, management, operation,
financing, or control of, be employed by, associated with, or in any
manner connected with, lend Consultant's name or any similar name
to, lend Consultant's credit to, or render services or advice to,
any business whose products, services, or activities compete in
whole or in part with the products, services, or activities of
Company anywhere within the Applicable Geographic Area (as
hereinafter defined); provided, however, that Consultant may
purchase or otherwise acquire less than five percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on
any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934;
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(ii) whether for Consultant's own account or for the account
of any other person, solicit business of the same or similar type
being carried on by Company, from any person known by Consultant to
be a customer of Company, whether or not Consultant had personal
contact with such person during and by reason of Consultant's
employment or engagement with Company; or
(iii) whether for Consultant's own account or the account of
any other person, (A) solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is an
employee of Company at any time during the Consulting Term or in any
manner induce or attempt to induce any employee of Company to
terminate his or her employment with Company; or (B) interfere with
Company's relationship with any person, including any person who at
any time during the Consulting Term was an employee, contractor,
supplier, or customer of Company.
(b) Post-Consulting Period. For purposes of this Section 9, the term
"Post-Consulting Period" means the period that ends one year after the
last to occur of (i) the end of the Employment Term under the Employment
Agreement; or (ii) the end of the Consulting Term.
(c) Applicable Geographic Area. For purposes of this Section 9, the
term "Applicable Geographic Area" means the United States.
(d) Reformation. If any covenant in this Section 9 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic
area, and such lesser scope, time, or geographic area, or all of them, as
a court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, binding, and
enforceable against Consultant.
(e) Future Employment. Consultant will, while the covenant under
this Section 9 is in effect, give notice to Company, within ten days after
accepting any other employment or engagement (as an employee, consultant,
independent contractor, or otherwise), of the identity of Consultant's
employer. Company may notify such employer that Consultant is bound by
this Agreement and, at Company's election, furnish such employer with a
copy of this Agreement or relevant portions thereof.
10. Property Rights. Consultant agrees promptly to disclose to Company any
and all ideas, concepts, discoveries, inventions, developments, original works
of authorship, software programs, software and systems documentation, trade
secrets, technical data, and know-how that are conceived, devised, invented,
developed, or reduced to practice or tangible medium by Consultant, under
Consultant's direction, or jointly with others during any period that Consultant
is employed or engaged by Company (whether or not during normal working hours or
on the premises of Company) which relate, directly or indirectly, to the
business of Company and arise out of Consultant's engagement by Company
(hereinafter "Property and Rights"). Consultant hereby assigns (and agrees to
assign in the future) to Company all of his right, title, and interest to the
Property and Rights and any and all related patent rights, copyrights, and
applications and registrations therefor. During and after his engagement,
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Consultant shall cooperate with Company, at Company's expense, in obtaining
proprietary protection for the Property and Rights and Consultant shall execute
all documents which Company shall reasonably request in order to perfect
Company's rights in the Property and Rights. Consultant hereby appoints Company
his attorney to execute and deliver any such documents on his behalf in the
event Consultant should fail or refuse to do so within a reasonable period
following Company's request, such appointment to be deemed coupled with an
interest. Consultant understands that, to the extent this Agreement shall be
construed in accordance with the laws of any state which limits the
assignability to Company of certain employee or consulting inventions, this
Agreement shall be interpreted not to apply to any such invention which a court
rules or Company agrees is subject to such state limitation.
11. Confidentiality. Consultant understands that Company continually
obtains and develops valuable proprietary and confidential information
concerning its business, business relationships, and financial affairs (the
"Confidential Information") which may become known to Consultant in connection
with his engagement under this Agreement. Consultant acknowledges that all
Confidential Information, whether or not in writing and whether or not labeled
or identified as confidential or proprietary, is and shall remain the exclusive
property of Company or the third party providing such information to Company. By
way of illustration, but not limitation, Confidential Information may include
Property and Rights, trade secrets, technical information, know-how, research
and development activities of Company, product and marketing plans, customer and
supplier information, and information disclosed to Company or Consultant by
third parties of a proprietary or confidential nature or under an obligation of
confidence. Confidential Information is contained in various media, including
without limitation, patent applications, documentation, manuals, plans,
drawings, designs, technical specifications, laboratory notebooks, supplier and
customer lists, internal financial data, and other documents and records of
Company. Consultant agrees that Consultant shall not, during the Consulting Term
and thereafter, publish, disclose, or otherwise make available to any third
party, other than employees of Company with a need to know, any Confidential
Information except as expressly authorized in writing by Company. Consultant
agrees that Consultant shall use such Confidential Information only in the
performance of his duties for Company and in accordance with any Company
policies with respect to the protection of Confidential Information. Consultant
agrees not to use such Confidential Information for his own benefit or for the
benefit of any other person or business entity. Consultant agrees to exercise
all reasonable precautions to protect the integrity and confidentiality of
Confidential Information in his possession and not to remove any materials
containing Confidential Information from Company's premises except to the extent
necessary to his engagement. Upon the termination of his engagement, or at any
time upon Company's request, Consultant shall return immediately to Company any
and all materials containing any Confidential Information then in his possession
or under his control. Confidential Information shall not include information
which (a) is or becomes generally known within Company's industry through no
fault of Consultant; (b) is lawfully and in good faith made available to
Consultant by a third party who did not derive it from Company and who imposes
no obligation of confidence on Consultant; or (c) is required to be disclosed by
a governmental authority or by order of a court of competent jurisdiction,
provided that such disclosure is subject to all applicable governmental or
judicial protection available for like material and reasonable advance notice is
given to Company.
12. Injunctive Relief and Additional Remedy. Consultant acknowledges that
the injury that would be suffered by Company as a result of a breach of the
provisions of this Agreement (including any provisions of Sections 9, 10, and
11) would be irreparable and that an award of monetary damages to Company for
such a breach would be an inadequate remedy. Consequently, Company will have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement. and Company will not be obligated to post bond
or other security in seeking such relief. Without limiting Company's rights
under this Section 12 or any other remedies of Company and notwithstanding any
other provisions of this Agreement, if Consultant breaches any of the provisions
of Sections 9, 10, or 11, Company will have the right to cease making any
payments otherwise due to Consultant under this Agreement.
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13. Other Obligations of Consultant.
(a) Protection of Company. Consultant shall not commit any act, or
in any way assist others to commit any act, that would injure Company or
its Affiliates.
(b) Periodic Reports. From time to time, and as often as requested
by Company, Consultant shall prepare and deliver to Company statements and
schedules identifying and describing the Services and such other reports
in connection with the Services as Company may reasonably request, all in
form and substance satisfactory to Company.
(c) Compliance. Consultant shall comply with all applicable laws,
rules, and regulations in respect of the conduct of his business.
14. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications
given under or by reason of this Agreement shall be in writing and shall
be deemed given when delivered in person or when mailed, by certified mail
(return receipt requested), postage prepaid, addressed as follows (notice
to Company will only be deemed given when both the original notice to the
Vice President Finance/Human Resources and the copy have been delivered):
TO COMPANY: TO EXECUTIVE:
Performance Health Technologies, Inc. Xxxx X. Xxxxxxxxx
Attn: Vice President Finance/Human Resources 000 Xxxx Xxxxxx Xxxx
Xxxxxx Xxxxx Xxxxxxx, XX 00000
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
WITH A COPY TO:
Xxxxxxx X. Xxxxx
Doerner, Saunders, Xxxxxx & Xxxxxxxx, L.L.P.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
(b) Governing Law. The execution, validity, interpretation, and
performance of this Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
(c) Headings. The headings of this Agreement are not part of the
provisions hereof and shall have no force or effect.
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(d) Entire Agreement and Amendments. This Agreement contains the
entire agreement of Consultant and Company relating to the matters
contained herein and supersedes all prior agreements and understandings,
oral or written, between Consultant and Company with respect to the
subject matter hereof. Without limiting the foregoing sentence, this
Agreement supersedes the Employment Agreement. This Agreement may be
changed only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
(e) Severability. If any provision of this Agreement is rendered or
declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any court of
competent jurisdiction, Consultant and Company shall either meet and
negotiate substitute provisions or promptly request the court to
substitute provisions for those rendered or declared illegal or
unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
(f) Effect and Assignment of Agreement. This Agreement shall be
binding upon Consultant and his heirs, executors, administrators, legal
representatives, and assigns and upon Company and its respective
successors and assigns. No assignment of this Agreement or of any of the
rights or obligations hereunder by any party hereto shall be valid without
the written consent of the other party. Provided, however, Company may
assign this Agreement without the consent of Consultant as part of the
sale, lease, license, or similar transaction of, or involving, all or
substantially all of Company's assets, products, or technology.
IN WITNESS WHEREOF, Consultant and Company have executed this Agreement on
the date first above written.
"Company" "Consultant"
Performance Health Technologies, Inc.
By: /s/ Xxxxx Xxxxxxxx /s/ Xxxx X. Xxxxxxxxx
--------------------- ---------------------
Title: Board Chairman Xxxx X. Xxxxxxxxx
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Repayment schedule for Xxxx Xxxxxxxxx
Payment begins upon receipt (in aggregate) of first $500,000 and continues with
each additional $500,000 raised per the following schedule:
% Paid Total %
1st $500k 15% 15%
2nd $500k 20% 35%
3rd $500k 20% 55%
4th $500k 20% 75%
5th $500k 25% 100%
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