Exhibit 10.1

 

209 10th Avenue South – Suite 450    Nashville, Tennessee 37203    Telephone
615-301-3100   

Facsimile 615-301-3200

http://www.healthstream.com

   LOGO [g81538g50t94.jpg]

September 22, 2015

Dear Michael:

This letter will confirm the terms of your offer of employment with
HealthStream, Inc. (the “Company”) as the Senior Vice President of the Company
with the title of President of Provider Solutions. The following describes the
general terms of your employment:

1. Position and Responsibilities. You will serve in the position of a Senior
Vice President of Company with the title of President of Provider Solutions. You
will also serve as a member of the Company’s Executive Team, though your
participation in the weekly Executive Team meeting is optional unless requested
in advance. Initially, the business unit for which you will serve as President
will include Sy.Med and HealthLine Systems. You will report to the Chief
Executive Officer and assume and discharge such responsibilities as are
commensurate with such position and as the Chief Executive Officer may direct.
During your employment with the Company, you shall devote your full-time
attention to your duties and responsibilities and shall perform them faithfully,
diligently and completely. In addition, you shall comply with and be bound by
the operating policies, procedures and practices of the Company including,
without limitation, the Employee Handbook, Code of Conduct, Code of Ethics, and
insider trading policies, in effect from time to time during your employment.
Moreover, all compensation awarded will be subject to recoupment pursuant to,
and to the extent provided by, (i) the terms of the Company’s Compensation
Recoupment Policy (as it may be amended from time to time), and (ii) applicable
SEC rules and NASDAQ listing requirements adopted pursuant to Section 954 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, at such time
that such SEC rules and NASDAQ listing requirements become effective. You
acknowledge that you will be required to travel, potentially extensively, in
connection with the performance of your duties.

2. Compensation. In consideration for your services and the performance of the
business unit over which you preside, during the term of your employment, you
will receive:

 

  A. Base Salary. Your annual base salary will be $270,400.00 (“Base Salary”),
payable in accordance with the Company’s prevailing payroll practices. All
executive base salaries are subject to Compensation Committee review and
approval.

 

1

--------------------------------------------------------------------------------

  B. Cash Bonus Plan. You will be eligible to participate in an annual cash
bonus plan that is based on the financial performance of your business unit
(“Bonus Plan”). Under the Bonus Plan you will be eligible to receive a bonus of
up to forty (40%) of your Base Salary per year. Whether and to what extent you
achieve a bonus according to the Bonus Plan will be predicated on your business
unit exceeding certain annual financial performance targets (“Annual Targets”),
which may include, among other things, operating income, EBITDA, and revenue
thresholds. Each year the Compensation Committee will set the terms of the Bonus
Plan, including the Annual Targets. Any such cash bonus (i) shall be subject to
the terms and conditions of the Bonus Plan, (ii) shall be payable at such time
as bonuses are paid generally to executive officers of the Company, and
(iii) shall be payable so long as you remain in the employ of the Company on the
payment date. For purposes of clarity, your participation in the 2015 Bonus Plan
would be for the period of January 1, 2015 through December 31, 2015, and would
be in lieu of your participation in the HealthStream cash incentive bonus plan
during such period.

 

  C. Equity Awards – Time-Based Vesting. You will be eligible to receive equity
awards on an annual basis in the same form and on the same terms and conditions
as other Senior Vice Presidents of the Company (referred to herein as “Annual
Awards”). The amount and value of your Annual Awards will be equal to the
greatest standard award granted to any direct report of the Chief Executive
Officer for the applicable year. All Annual Awards shall be subject to the terms
and conditions of the then applicable Company equity plan (the “Equity Plan”)
and the equity agreement under which such awards are granted. The issuance and
terms of all Annual Awards are subject to approval by the Compensation
Committee. Your 2015 equity award of 4,470 RSUs has already been granted.

 

  D. Equity Awards – Performance-Based Vesting.

 

  a.

You will also be eligible to receive a lump sum equity award (referred to herein
as the “Performance Award”) upon your acceptance of the position and the
Compensation Committee’s approval of such award. The total number of Performance
Award shares you will be granted is 25,000. The Performance Award will be
eligible for vesting (i) in five increments of 15%, 20%, 20%, 20%, and 25%,
respectively on March 15, 2016, 2017, 2018, 2019, and 2020 (the “Vesting Dates”)
according to whether your business unit meets or exceeds certain annual
financial performance targets, which may include, among other things, operating
income, EBITDA, and revenue thresholds as determined by the Compensation
Committee on an annual basis or (ii) upon a Change of Control as defined in the
Equity Plan occurring prior to March 15, 2015; provided that you remain in the
employ of the Company as of such Vesting Dates or the Change of Control, as
applicable. It is anticipated that one of the factors the Compensation Committee
will consider when setting annual financial performance targets relating to your
Performance Award shares is the financial performance of your business unit in
relation to your business unit’s pro-forma financials. Performance Award shares
that are eligible for vesting in a particular year, but do not vest in that year
due to failure to achieve applicable financial targets shall be

 

2

--------------------------------------------------------------------------------

  eligible to vest in any of the remaining five years, depending on whether the
financial targets for such years are exceeded by a requisite amount as
determined on an annual basis by the Compensation Committee. All Performance
Awards shall be subject to the terms and conditions of the Equity Plan and the
equity agreement under which such awards are granted.

 

  b. In addition to the Performance Shares, you will also receive an equity
award (referred to herein as the “5-Year Performance Award”) upon your
acceptance of the position and the Compensation Committee’s approval of such
award. The total number of 5-Year Performance Award shares you will be granted
is 5,000. The 5-Year Performance Award will be eligible for vesting in a single
increment (i) on March 15, 2020 according to whether your business unit exceeds
certain five-year, cumulative financial performance targets for the performance
period from January 1, 2015 through December 31, 2019, or (ii) upon a Change of
Control as defined in the Equity Plan occurring prior to March 15, 2020;
provided that you remain in the employ of the Company as of the applicable
vesting date. The financial target or targets required for vesting will be
established by the Compensation Committee upon your acceptance of this offer of
employment and may include, among other things, operating income, EBITDA, and
revenue thresholds. The 5-Year Performance Award is intended to incentivize you
to achieve exceptional financial performance for the Company’s Provider
Solutions segment that results in a rate of return over and above that required
to achieve your Performance Awards described above. The 5-Year Performance Award
shall be subject to the terms and conditions of the Equity Plan and the equity
agreement under which it is granted.

 

  c. To incentivize your role in consummating Board approved acquisitions, for
each acquisition that is closed prior to December 31, 2019 and becomes a direct
operating part of your business unit, the Compensation Committee shall meet to
consider whether to award you an additional equity award that would vest
according to the financial performance of such acquired business over time. Such
awards, if granted, would not be in excess of the amount of shares awarded
pursuant to your then current Annual Award.

3. Other Benefits. You will be entitled to receive the standard employee
benefits made available by the Company to its employees to the full extent of
your eligibility. During your employment, you shall be permitted, to the extent
eligible, to participate in any group medical, dental, life insurance and
disability insurance plans, or similar benefit plan of the Company that is
available to employees generally. You shall also be eligible to participate in
the Company’s 401(k) plan. Participation in any such plans shall be consistent
with your rate of compensation to the extent that compensation is a
determinative factor with respect to coverage under any such plans. The Company
shall reimburse you for all reasonable expenses actually incurred or paid by you
in the performance of your services on behalf of the Company subject to the
terms of and in accordance with the Company’s expense reimbursement policy as
from time to time in effect (and to the extent applicable,
Section 1.409A-3(i)(1)(iv) of the Treasury Regulations).

 

3

--------------------------------------------------------------------------------

4. Restrictive Covenants. You agree that your employment as President of
Provider Solutions is contingent upon your execution of, and delivery to the
Company of a Trade Secret & Proprietary Information Agreement in the form
attached hereto as Annex A (the “TSPI”).

5. Conflicting Employment. You agree that, during your employment with the
Company, in addition to the restrictions set forth in the TSPI, you will not
engage in any other employment, occupation, consulting or other business
activity directly related to the business in which the Company is now involved
or becomes involved during your employment, nor will you engage in any other
activities that conflict with your obligations to the Company.

6. At-Will Employment. You acknowledge that your employment with the Company is
for an unspecified duration that constitutes at-will employment, and that either
you or the Company can terminate this relationship at any time, with or without
cause and with or without notice.

7. General Provisions.

 

  (a) This offer letter and the terms of your employment will be governed by the
laws of Tennessee, applicable to agreements made and to be performed entirely
within such state.

 

  (b) This offer letter sets forth the entire agreement and understanding
between the Company and you relating to your employment and supersedes all prior
verbal discussions between us.

 

  (c) This agreement will be binding upon your heirs, executors, administrators
and other legal representatives and will be for the benefit of the Company and
its respective successors and assigns.

 

  (d) All payments pursuant to this letter will be subject to applicable
withholding taxes.

 

  (e) While your employment will be at-will, the Company’s willingness to offer
you the employment terms outlined herein is predicated on the understanding that
you intend to commit to a minimum of five years of ongoing employment with the
Company as President of Provider Solutions.

{signature page follows}

 

4

--------------------------------------------------------------------------------

Please acknowledge and confirm your acceptance of this letter by, signing and
returning one copy of this offer letter in its entirety to me.

 

Sincerely, LOGO [g81538g39x16.jpg] Robert A. Frist, Jr. Chief Executive Officer

OFFER ACCEPTANCE:

I accept the terms of my employment with HealthStream, Inc. as set forth herein
and in any attached Annexes. I understand that this offer letter does not
constitute a contract of employment for any specified period of time, and that
either party, with or without cause and with or without notice, may terminate my
employment relationship. I received this offer letter with notice of my pay rate
and designated payday in English because I have represented to my employer that
this is my primary language.

 

/s/ Michael Sousa

  Date: 9/24/2015    Michael Sousa   

 

5

--------------------------------------------------------------------------------

Annex A

Trade Secret and Proprietary Information Agreement

 

6

--------------------------------------------------------------------------------

TRADE SECRET AND PROPRIETARY INFORMATION AGREEMENT

In consideration of my being hired as Senior Vice President of the Company with
the title of President of Provider Solution and employment by HealthStream, Inc.
and/or any of its corporate parents, subsidiaries, divisions, or affiliates, or
the successors or assigns of any of the foregoing (hereinafter referred to as
the “Company”) on the terms set forth in the offer of employment to which this
document is an Annex, I hereby agree as follows:

1. Confidentiality.

(a) Trade Secret and Proprietary Information. I understand and acknowledge that,
during the course of my employment arrangement with the Company and as a result
of my having executed this Trade Secret and Proprietary Information Agreement, I
will be granted access to valuable information relating to the Company’s
business that provides the Company with a competitive advantage, which is not
generally known by, nor easily learned or determined by, persons outside the
Company (collectively “Trade Secret and Proprietary Information”). The term
Trade Secret and Proprietary Information shall include, but shall not be limited
to: (a) specifications, manuals, software in various stages of development;
(b) customer and prospect lists, and details of agreements and communications
with customers and prospects; (c) sales plans and projections, product pricing
information, acquisition, expansion, marketing, financial and other business
information and existing and future products and business plans of the Company;
(d) sales proposals, demonstrations systems, sales material; (e) research and
development; (f) computer programs; (g) sources of supply; (h) identity of
specialized consultants and contractors and Trade Secret and Proprietary
Information developed by them for the Company; (i) purchasing, operating and
other cost data; (j) special customer needs, cost and pricing data; (k) patient
information, including without limitation Protected Health Information as
defined in 45 C.F.R. 164.501 and (l) employee information (including, but not
limited to, personnel, payroll, compensation and benefit data and plans),
including all such information recorded in manuals, memoranda, projections,
reports, minutes, plans, drawings, sketches, designs, formula books, data,
specifications, software programs and records, whether or not legended or
otherwise identified by the Company as Trade Secret and Proprietary Information,
as well as such information that is the subject of meetings and discussions and
not recorded. Trade Secret and Proprietary Information shall not include such
information that I can demonstrate (i) is generally available to the public
(other than as a result of a disclosure by me), (ii) was disclosed to me by a
third party under no obligation to keep such information confidential or
(iii) was known by me prior to, and not as a result of, my employment or
anticipated employment with the Company; provided, however, that,
notwithstanding the preceding sentence, all information set forth in subsections
(k) and (l) above shall always be treated as Trade Secret and Proprietary
Information, and shall not be deemed in the public domain or nonconfidential
under any circumstances.

(b) Duty of Confidentiality. I agree at all times, both during and after my
employment with the Company, to hold all of the Company’s Trade Secret and
Proprietary Information in a fiduciary capacity for the benefit of the Company
and to safeguard all such Trade Secret and Proprietary Information. I also agree
that I will not directly or indirectly disclose or use any such Trade Secret and
Proprietary Information to any third person or entity

--------------------------------------------------------------------------------

outside the Company, except as may be necessary in the good faith performance of
my duties for the Company. I further agree that, in addition to enforcing this
restriction, the Company may have other rights and remedies under the common law
or applicable statutory laws relating to the protection of trade secrets.
Notwithstanding anything in this Agreement to the contrary, I understand that I
may disclose the Company’s Trade Secret and Proprietary Information to the
extent required by applicable laws or governmental regulations or judicial or
regulatory process, provided that I give the Company prompt notice of any and
all such requests for disclosure so that it has ample opportunity to take all
necessary or desired action, to avoid disclosure.

(c) Unfair Competition. I acknowledge that the Company has a compelling business
interest in preventing unfair competition stemming from the intentional or
inadvertent use or disclosure of the Company’s Trade Secret and Proprietary
Information and Company Property.

(d) Intellectual Property and Inventions. I acknowledge that all developments
and other intellectual property, including, without limitation, the creation of
new products, conferences, training/seminars, publications, programs, methods of
organizing information, inventions, discoveries, concepts, ideas, improvements,
patents, trademarks, trade names, copyrights, trade secrets, designs, works,
reports, computer software, flow charts, diagrams, procedures, data,
documentation, and writings and any other intellectual property (collectively
referred to as “Developments”) that I, alone or jointly with others, may
discover, conceive, create, make, develop, reduce to practice, or acquire at any
time during or in connection with my employment with the Company are the sole
and exclusive property of the Company. I hereby assign to the Company all
rights, titles, and interests in and to all such Developments, and all
intellectual property related thereto. I agree to disclose to the Company
promptly and fully all future Developments and, at any time upon request and at
the expense of the Company, to execute, acknowledge, and deliver to the Company
all instruments that the Company shall prepare, to give evidence, and to take
any and all other actions that are necessary or desirable in the reasonable
opinion of the Company to enable the Company to file and prosecute applications
for, and to acquire, maintain, and enforce, all letters patent, trademark
registrations, or copyrights covering the Developments in all countries in which
the same are deemed necessary by the Company. All data, memoranda, notes, lists,
drawings, records, files, investor and client/customer lists, supplier lists,
and other documentation (and all copies thereof) made or compiled by me or made
available to me concerning the Developments or otherwise concerning the past,
present, or planned business of the Company are the property of the Company, and
will be delivered to the Company immediately upon the termination of my
employment with the Company.

(e) Competitive Business. I acknowledge that a business engaged in the same or
similar business as the Company shall be a Competitive Business. Thus,
“Competitive Business” shall mean: (i) one that offers learning, workforce
development, talent management, survey research, simulation, courseware,
benchmarking, patient experience or improvement coaching or consulting, or
related services or solutions to the healthcare industry; (ii) one that provides
software and services in connection with credentialing, privileging, provider
management, quality management, CVO services, provider verification of
credentials or licenses, provider database or directory solutions, medical staff
management, provider enrollment or onboarding, provider recruiting or staffing,
and contact center software for healthcare, as well as optometric software, and
(iii) any enterprise engaged in any other type of business in which the Company
or one of its affiliates is also engaged, or plans to be engaged, so long as I
am directly involved in such business or planned business on behalf of the
Company or one of its affiliates.

 

--------------------------------------------------------------------------------

2. Non-Solicitation of Employees, Customers. In order to protect the Company’s
Trade Secret and Proprietary Information;

(a) during my employment with the Company and for a period of two (2) years
after the termination of such employment for any reason (the “Restricted
Period”), I will not, without the express written permission of HealthStream,
directly or indirectly solicit, induce, hire, engage, or attempt to hire or
engage any employee or independent contractor of the Company, or in any other
way interfere with the Company’s employment or contractual relations with any of
its employees or independent contractors, nor will I solicit, induce, hire,
engage or attempt to hire or engage any individual who was an employee of the
Company at any time during the one year period immediately prior to the
termination of my employment with the Company;

(b) during the Restricted Period, I will not, without the express written
permission of HealthStream, directly or indirectly contact, call upon or
solicit, on behalf of a Competitive Business, any existing or prospective
client, or customer of the Company, including without limitation those who I
serviced, or otherwise developed a relationship with, as a result of my
employment with the Company, nor will I attempt to divert or take away from the
Company the business of any such client or customer.

3. Restrictions on Competitive Employment. In order to protect the Company’s
Trade Secret and Proprietary Information and the good will of the Company,
during the Restricted Period, I will not (as principal, agent, employee,
consultant, director or otherwise), anywhere in the United States and Canada,
including but not limited to the states and locations in which I have been
engaged in the business of the Company, directly or indirectly, without the
prior written approval of the Company, engage in, or perform any services for, a
Competitive Business. Notwithstanding the foregoing, if there is a Change in
Control as defined in the Company’s 2010 Stock Incentive Plan, then the
Restricted Period for purposes of this Section 3 shall be reduced from a period
of 2 years to a period of 1 year after termination of my employment with the
Company. I understand that I may have an interest consisting of publicly traded
securities constituting less than 1 percent of any class of publicly traded
securities in any public company engaged in a Competitive Business so long as I
am not employed by and do not consult with, or become a director of or otherwise
engage in any activities for, such company. The Restricted Period shall be
extended by the length of any period during which I am in breach of the terms of
this paragraph.

4. Injunctive Remedies. I acknowledge and agree that the restrictions contained
in this Agreement are reasonably necessary to protect the legitimate business
interests of the Company, and that any violation of any of the restrictions will
result in immediate and irreparable injury to the Company for which monetary
damages will not be an adequate remedy. I further acknowledge and agree that if
any such restriction is violated, the Company will be entitled to immediate
relief enjoining such violation (including, without limitation, temporary and
permanent injunctions, a decree for specific performance, and an equitable
accounting of earnings, profits, and other benefits arising from such violation)
in any court having jurisdiction over such claim, without the necessity of
showing any actual damage or posting any bond or

--------------------------------------------------------------------------------

furnishing any other security, and that the specific enforcement of the
provisions of this Agreement will not diminish my ability to earn a livelihood
or create or impose upon me any undue hardship. I also agree that any request
for such relief by the Company shall be in addition to, and without prejudice
to, any claim for monetary damages that the Company may elect to assert.

5. Severability Provision. I acknowledge and agree that the restrictions imposed
upon me by the terms, conditions, and provisions of this Agreement are fair,
reasonable, and reasonably required for the protection of the Company. In the
event that any part of this Agreement is deemed invalid, illegal, or
unenforceable, all other terms, conditions, and provisions of this Agreement
shall nevertheless remain in full force and effect. In the event that the
provisions of any of Sections 1, 2, 3 or 4 of this Agreement relating to the
geographic area of restriction, the length of restriction or the scope of
restriction shall be deemed to exceed the maximum area, length or scope that a
court of competent jurisdiction would deem enforceable, said area, length or
scope shall, for purposes of this Agreement, be deemed to be the maximum area,
length of time or scope that such court would deem valid and enforceable, and
that such court has the authority under this Agreement to rewrite (or
“blue-pencil”) the restriction(s) at-issue to achieve this intent.

6. Non-Waiver. Any waiver by the Company of my breach of any term, condition, or
provision of this Agreement shall not operate or be construed as a waiver of the
Company’s rights upon any subsequent breach.

7. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, I HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
CONNECTION WITH ANY LITIGATION ARISING OUT OF, UNDER, IN CONNECTION WITH, OR IN
ANY WAY RELATED TO THIS AGREEMENT. THIS INCLUDES, WITHOUT LIMITATION, ANY
LITIGATION CONCERNING ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER VERBAL OR WRITTEN), OR ACTION OF THE COMPANY OR ME, OR ANY EXERCISE BY
THE COMPANY OR ME OF OUR RESPECTIVE RIGHTS UNDER THIS AGREEMENT OR IN ANY WAY
RELATING TO THIS AGREEMENT. I FURTHER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR THE COMPANY TO ISSUE AND ACCEPT THIS AGREEMENT.

8. Continuation of Employment. This Agreement does not constitute a contract of
employment or an implied promise to continue my employment or status with the
Company; nor does this Agreement affect my rights or the rights of the Company
to terminate my employment status at any time with or without cause.

9. Governing Law. This Agreement shall be construed in accordance with and
governed for all purposes by the laws and public policy of Tennessee, without
regard to principles of conflict of laws.

--------------------------------------------------------------------------------

As indicated by my signature below, I agree to abide and be bound by the terms
and conditions of this Trade Secret and Proprietary Information Agreement:

 

 

  Date:    /    /                Michael Sousa   

 

HealthStream, Inc:

 

By:  

 

Name:  

 

Title:  

 

Date: