Exhibit 10.1

 

MODIFICATION OF EMPLOYMENT AGREEMENT

 

Modification of Employment Agreement (this “Modification”), dated as of December
16, 2019, between Catasys, Inc. (“Employer”), a Delaware corporation, and
Christopher Shirley (“Employee,” together with Employer, the “Parties” and,
each, a “Party”), an individual.

 

WHEREAS, Employee is employed by Employer pursuant to a certain Employment
Agreement entered into as of May 16, 2017 (the “Employment Agreement”);

 

WHEREAS, Employer and Employee desire to modify the terms of the Employment
Agreement pursuant to the terms of this Modification;

 

NOW, THEREFORE, on the basis of the foregoing premises and in consideration of
their mutual covenants and agreements contained herein, the Parties agree as
follows:

 

1.         Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the same meaning ascribed to them in the Employment Agreement.

 

2.       Increase of Base Salary. Section 3.2 of the Employment Agreement shall
remain in effect pursuant to its terms, except that, as of December 16, 2019,
Employee’s base salary shall be increased to the annual rate of three hundred
forty-five thousand dollars ($345,000).

 

3.         Stock Option Grant. The following provision shall be added as a new
Section 3.4(c) of the Employment Agreement:

 

(c)     Employee shall receive a qualified incentive stock option to purchase
65,000 shares of Employer’s common stock (the “Option”), par value $.0001 per
share, with a per share exercise price equal to the Fair Market Value (as
defined by the Plan) thereof on the date the Option is granted, under and
subject to all of the provisions of Employer’s 2017 Stock Incentive Plan (the
“Plan”) and applicable award agreement, upon and subject to approval by the
Compensation Committee of Employer’s Board of Directors.  The Option will vest
in 25 equal monthly installments (corresponding to 2,600 shares each) beginning
on December 19, 2019 and ending on December 19, 2021, all according to the terms
of the Plan and applicable award agreement.  Except as otherwise set forth
herein or in the Plan and applicable award agreement, vesting of the Option will
cease upon the termination of Employee’s employment with Employer for any
reason.

 

4.         Dispute Resolution. Sections 10.7 and 10.8 of the Employment
Agreement are hereby amended and restated in their entirety to read as follows:

 

10.7     Venue. Any dispute regarding this Agreement or Employee’s employment
with Employer or the termination thereof shall be exclusively resolved by
binding arbitration pursuant to the arbitration agreement between the Parties,
if any. In the absence of any such arbitration agreement, any such dispute shall
be exclusively resolved in a federal or state court in Los Angeles, California.

 

 

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10.8     [Intentionally deleted.]

 

5.         Section 409A. The following shall be added as a new Section 10.16 of
the Employment Agreement:

 

10.16     Section 409A Compliance.

 

(a)     This Agreement is intended to comply with the provisions of Section 409A
of the Internal Revenue Code (“Section 409A”), and, to the extent practicable,
this Agreement shall be interpreted and administered in a manner so that any
amount or benefit payable hereunder shall be paid or provided in a manner that
is either exempt from or compliant with the requirements of Section 409A and
applicable Internal Revenue Service guidance and Treasury Regulations issued
thereunder. Terms used in this Agreement shall have the meanings given such
terms under Section 409A if, and to the extent required, in order to comply with
Section 409A.

 

(b)     For purposes of amounts payable under this Agreement, the termination of
employment shall be deemed to be effective upon “separation from service” with
Employer, as defined under Section 409A and the guidance issued thereunder. Any
payments subject to Section 409A that are subject to execution of a waiver and
release which may be executed and/or revoked in a calendar year following the
calendar year in which the payment event (such as termination of employment)
occurs shall commence payment only in such following calendar year as necessary
to comply with Section 409A.

 

(c)     Notwithstanding anything to the contrary in this Agreement, to the
extent required to avoid additional taxes and interest charged under Section
409A, if any of Employer’s stock is publicly traded and Employee is deemed to be
a “specified employee” as determined by Employer for purposes of Section 409A,
Employee agrees that any non-qualified deferred compensation payments due to him
under this agreement in connection with a termination of employment that would
otherwise have been payable at any time during the six (6)-month period
immediately following such termination of employment shall not be paid prior to,
and shall instead be payable in a lump sum on the first day of the seventh (7th)
month following Employee’s separation from service (or, if Employee dies during
such period, within 30 days after Employee’s death).

 

(d)     Neither Employer nor Employee shall have the right to accelerate or
defer the delivery of, offset or assign any payment under this Agreement that
constitutes “nonqualified deferred compensation” subject to Section 409A of the
Code, except to the extent specifically permitted or required by Section 409A of
the Code.

 

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(e)     If Employee is entitled to be paid or reimbursed for any taxable
expenses under this Agreement, and such payments or reimbursements are
includible in Employee’s federal gross taxable income, the amount of such
expenses reimbursable in any one calendar year shall not affect the amount
reimbursable in any other calendar year, and the reimbursement of an eligible
expense must be made no later than December 31 of the year after the year in
which the expense was incurred. No right of Employee to reimbursement of
expenses under this Agreement shall be subject to liquidation or exchange for
another benefit.

 

(f)     Notwithstanding the foregoing, the tax treatment of the payments and
benefits provided under this Agreement is not warranted or guaranteed. To the
extent that this Agreement or any payment or benefit hereunder shall be deemed
not to comply with Section 409A, neither Employer, nor the Board, nor any member
of its Compensation Committee, nor any of their successors shall be liable to
Employee or to any other person for any taxes, interest, penalties or other
monetary amounts owed by Employee as a result of the application of Section 409A
or for reporting in good faith any amounts as subject thereto.

 

6.         No Other Modifications. Other than as set forth in Sections 2 through
, there are no further modifications of the Employment Agreement. As so
modified, the Employment Agreement shall remain in full force and effect
pursuant to its terms.

 

7.       Counterparts. This Modification may be executed in counterparts, and
each counterpart, when executed, shall have the efficacy of a signed original.
Photographic copies, electronically scanned copies and other facsimiles of this
Modification (including such signed counterparts) may be used in lieu of the
originals for any purpose.

 

IN WITNESS WHEREOF, the Parties have executed and delivered this Modification as
of the date first above written.

 

CATASYS, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Terren Peizer

 

 

/s/ Christopher Shirley

 

 

Name:   Terren Peizer

 

 

Christopher Shirley

 

 

Title:     Chief Executive Officer 

 

 

Chief Financial Officer

 

 

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