Exhibit 10.14

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (“Agreement”) effective as of February 1, 2004,
between SARAH C. GARVIN, of Seabrook, Harris County, Texas (“Garvin”), DYNACQ
HEALTHCARE, INC., a Delaware corporation (“Dynacq”) (formerly, Dynacq
International, Inc., a Nevada corporation (“Dynacq–Nevada”)), and DOCTORS
PRACTICE MANAGEMENT, INC., a Texas corporation and a wholly-owned subsidiary of
Dynacq (“DPM”).

 

RECITALS:

 

WHEREAS, Garvin entered into that Employment Agreement (the “Original Employment
Agreement”), effective December 6, 2000, between Garvin, as an employee, and
Dynacq–Nevada, as the employer, and in connection with the Original Employment
Agreement Dynacq–Nevada made an incentive stock option grant to Garvin of
options (the “Stock Options”) to purchase 100,000 shares (subsequently, 200,000
shares after a 2-for-1 stock split) of Dynacq’s common stock, $.001 par value
(“Stock”) pursuant to that Incentive Stock Option Agreement (Pursuant to Dynacq
International, Inc. Year-2000 Stock Incentive Plan) (the “Stock Option
Agreement”); and

 

WHEREAS, under the terms of the Stock Option Agreement all Stock Options have
vested and have been exercised by Garvin, with the exception of Stock Options
covering the remaining 80,000 shares of Stock which vested and became
exercisable on December 5, 2003 but have not yet been exercised; and

 

WHEREAS, Dynacq–Nevada changed its name to Dynacq Healthcare, Inc. and became
reincorporated in the State of Delaware; and

 

WHEREAS, after the expiration of the 3-year term of the Original Employment
Agreement, Garvin entered into a new employment arrangement pursuant to that
Employment Agreement, dated December 19, 2003 (the “Second Employment
Agreement”), between Garvin, as employee, and DPM, as employer; and

 

WHEREAS, Garvin, DPM and Dynacq are agreeable to changing Garvin’s status as an
employee under the Second Employment Agreement to that of consultant under the
terms and provisions of this Agreement, to terminating the Second Employment
Agreement, all to be effective as of February 1, 2004.

 

NOW THEREFORE, in consideration of Five Dollars ($5.00) cash in hand paid by
each party hereto to the other, the premises, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Garvin, DPM and Dynacq hereby agree as follows:

 

1. Consulting Services; Location; Other Activities or Employment.

 

A. Effective February 1, 2004, Garvin shall hold herself available to provide
consulting services to DPM, as may be requested by DPM from time to time during
the term of this Agreement, involving the field of Garvin’s expertise in the
acquisition, leasing and operation

 

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of surgical hospitals, including but not limited to the referral, as Garvin may
determine in her sole discretion, of any acquisition and leasing leads to DPM
and Dynacq for their consideration, and assistance with feasibility studies
related to such leads as may be requested by DPM and/or Dynacq, and holding
herself available for providing information or assistance regarding current
hospital operations and strategic models for DPM. Garvin shall provide the
consulting services provided hereunder at such times and upon such schedules as
shall be determined by her in her sole discretion, except as may be otherwise
mutually agreed upon in connection with a particular consulting assignment.

 

B. Garvin may render the consulting services pursuant to this Agreement from an
office situated in any location of her own choosing, within or outside of the
State of Texas, including but not limited to the State of Georgia; and the
reasonable expenses of any travel away from such office incurred by Garvin in
connection with consulting services rendered hereunder shall be reimbursed by
DPM in accordance with the usual and customary practices of DPM, provided that
such expenses are reimbursable only to the extent that they are incurred due to
a specific request by Dynacq and/or DPM and the amounts thereof are approved in
advance by Dynacq and/or DPM.

 

C. Garvin shall not be expressly or impliedly restricted or prohibited by virtue
of this Agreement or the relationship created hereby from engaging in other
activities or business ventures of any kind or character whatsoever. Garvin
shall have the right to be employed by, to conduct, or to possess a direct or
indirect ownership interest in, activities and business ventures of every type
and description, including activities and business ventures in direct
competition with DPM or Dynacq, provided, however, that, except as otherwise
provided in this Agreement, Garvin shall not compete, directly or indirectly,
with Dynacq, DPM, and/or any of its subsidiaries or affiliates in the ownership
or operation of, or consulting for, ambulatory surgery centers and/or hospitals
of any type (individually, a “Project”) within a twenty-five (25) mile radius of
any location where the Company or any of its affiliates currently operates or
currently intends to operate, namely, Vista Community Medical Center, LLP, Vista
Surgical Center West, LLC, Vista Hospital of Dallas, L.P., Vista Hospital of
Baton Rouge, LLC, Georgia Baptist Meriwether Hospital and Nursing Home, and/or
Riverstone Hospital Partners, L.L.P., for the period of duration of the
consulting relationship under this Agreement, but no longer (this proviso
concerning non-competition is sometimes hereinafter referred to as the
“Noncompetition Clause”). In the event that within the period of twelve (12)
months after the effective date of this Agreement, the Company or any of its
affiliates should give written notice to Garvin that it does not intend to
further pursue development of any one of the Projects named in the preceding
Noncompetition Clause which it does not presently operate but currently intends
to operate, each such Project shall thereafter be deleted from and shall not be
included in the list of Projects in the Noncompetition Clause Garvin shall not
be obligated by virtue of this Agreement to present any particular business
opportunity to DPM or Dynacq even if such opportunity is of a character that, if
presented to DPM or Dynacq, could be taken, pursued or developed by either of
DPM or Dynacq. Garvin shall have the right to take, pursue and develop any such
opportunity for her own account (individually or as a partner, member,
shareholder, fiduciary or otherwise) or to present or recommend it to any third
party, except as otherwise prohibited by this paragraph. Should Garvin violate
the terms of this Noncompetition Clause, as determined pursuant to the terms and
provisions of Paragraph 11 of this Agreement, the consulting relationship of
Garvin hereunder shall be terminated effective as of such determination, and
Dynacq shall be entitled to

 

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exercise all appropriate legal remedies. In such event, DPM and/or Dynacq shall
have no further obligation to make any further payments to Garvin; and Garvin’s
obligations under the Noncompetition Clause shall terminate.

 

2. Term. The term of Garvin’s engagement as a consultant under this Agreement
shall be for a period of thirty (30) months commencing February 1, 2004 and
ending August 31, 2006, unless such engagement is sooner terminated as provided
in this Agreement.

 

3. Compensation; Expenses; Termination of Consulting Relationship.

 

A. As compensation for her consulting services and for holding herself available
to render her consulting services hereunder, Garvin shall receive a fee (the
“Consulting Fee”) in the aggregate sum of (i) One Hundred Eighty-Nine Thousand
and No/100 ($189,000.00) for the first eighteen (18) months of the term of this
Agreement, payable in the amount of Ten Thousand Five Hundred and No/100 Dollars
($10,500.00) per month, plus (ii) One Hundred Twenty Thousand and No/100
($120,000.00) for the remaining twelve (12) months of the term of this
Agreement, payable in the amount of Ten Thousand and No/100 Dollars ($10,000.00)
per month. The monthly payments of the Consulting Fee shall be payable on the
fifteenth day of each month, commencing on February 15, 2004. Additionally,
Garvin shall be reimbursed for all travel, entertainment and other business
expenses incurred in connection with her consulting services hereunder, provided
that such expenses are reimbursable only to the extent that they are incurred
due to a specific request by Dynacq and/or DPM and the amounts thereof are
approved in advance by Dynacq and/or DPM.

 

B. DPM shall have the right at any time during the term of this Agreement to
terminate the consulting relationship with Garvin hereunder; provided, however,
that in such event DPM and Dynacq shall jointly and severally have the
obligation to pay to Garvin the amount of the remaining unpaid balance of the
Consulting Fee in full within thirty (30) days after such termination unless
such termination results from Garvin’s violation of the Noncompetition Clause
contained in sub-Paragraph 1.C. DPM and Dynacq, jointly and severally, shall
have the obligation to pay to Garvin the full amount of the Consulting Fee
provided in the foregoing sub-Paragraph 3.A. under any and all circumstances,
regardless of her incapacity or other inability during the term of this
Agreement to perform her obligations hereunder, unless the termination is due to
the death of Garvin or results from Garvin’s violation of the Noncompetition
Clause contained in sub-Paragraph 1.C.

 

C. Excluding termination resulting from a violation of the Noncompetition Clause
contained in sub-Paragraph 1.C, in the event that any installment of the
Consulting Fee should not be received by Garvin thirty (30) days after it is due
and payable, then DPM shall be deemed to have terminated the consulting
relationship with Garvin hereunder effective as of the date such installment was
due and payable, and DPM and Dynacq shall jointly and severally be obligated to
pay to Garvin the amount of the remaining unpaid balance of the Consulting Fee
in full within an additional thirty (30) days. If the termination does result
from a violation of the Noncompetition Clause contained in sub-Paragraph 1.C,
DPM and/or Dynacq shall have no further obligation to pay any sum to Garvin.

 

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D. Excluding termination resulting from a violation of the Noncompetition Clause
contained in sub Paragraph 1.C, under which circumstances DPM and/or Dynacq
would have no further obligation to pay any sum to Garvin, in the event that the
remaining unpaid balance of the Consulting Fee should not be received by Garvin
thirty (30) days after termination of the consulting relationship with Garvin
pursuant to sub-Paragraphs 3.B, or 3.C hereunder, (i.e., in the case of
sub-Paragraph 3.C, sixty (60) days after the delinquent installment was due),
then both (i) the Noncompetition Clause contained in the second sentence of
sub-Paragraph 1.C herein, and (ii) the provisions of the General Release by
Garvin provided in sub-Paragraph 8.B herein, shall each terminate in their
entirety and cease to be of any further force or effect. Also, in such an event,
the provisions of the General Release by Dynacq and DPM provided in
sub-Paragraph 8.A herein, shall also terminate in their entirety and cease to be
of any further force or effect.

 

4. Termination of Second Employment Agreement.

 

A. Effective February 1, 2004, the Second Employment Agreement, and all terms
and provisions and the employment relationship thereunder, will terminate and
cease to be of any further force or effect, with the exception of Paragraph 5
styled “Confidential, Proprietary & Trade Secret Information”, Paragraph 6
styled “Release From Covenant Not To Compete Contained in the Original
Employment Agreement”, and Paragraph 7 styled “Continuation of Indemnity
Agreement”. From and after February 1, 2004, neither Garvin, Dynacq nor DPM
shall have any further obligations or duties to the other pursuant the Second
Employment Agreement, except as may be otherwise provided in this Agreement.

 

B. Effective February 1, 2004, Garvin shall cease to hold or occupy all
positions as an officer of, or to hold any other positions or relationships with
respect to Dynacq and of DPM, which might cause Garvin to be deemed an
“affiliate” or an “officer” of Dynacq respectively under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, or any
rules or regulations promulgated with respect to such laws, and shall hereafter
be strictly a consultant under this Agreement and not an employee of either
Dynacq or DPM.

 

C. For purposes of Garvin’s Stock Option Agreement, the change in Garvin’s
status as an employee under the Second Employment Agreement to that of
consultant under the terms and provisions of this Agreement shall be deemed a
termination of Garvin’s employment “without cause”, and therefore Garvin shall
have three (3) months from the effective date hereof to exercise her vested
options thereunder.

 

5. Confidential, Proprietary, and Trade Secret Information. Garvin and DPM
hereby agree that Garvin shall have a continuing duty to not disclose any
confidential, proprietary, or trade secret information regarding Dynacq
Healthcare, Inc. f/k/a Dynacq International, Inc., or any of its affiliates or
subsidiaries obtained during the term of her employment under the Original
Employment Agreement, under the Second Employment Agreement dated December 19,
2003, and/or during the term of this Consulting Agreement. Such information
includes, but is not limited to, the operating results of individual healthcare
facilities, employees’ compensation or other information, regulatory or legal
issues, accounting and reporting matters and other information related to such
companies’ operations and development plans.

 

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Information shall be excluded from the term “confidential, proprietary, or trade
secret information” that (i) has been published or is otherwise in the public
domain at the time of the disclosure; (ii) becomes public through no fault of
Garvin or of the party receiving such information; (iii) was already in the
possession of Garvin prior to employment or engagement as a consultant hereunder
or the party receiving such information is rightfully in possession thereof
without knowledge of, or a breach of, any applicable confidentiality
requirements or other restrictions; (iv) is obtained from a third party who is
lawfully in possession of said information and is not subject to a contractual
or fiduciary relationship to the party receiving or providing such information
or any other person; or (v) is disclosed pursuant to a mandatory requirement of
a governmental agency or by operation of law.

 

6. Release from Covenant Not To Compete Provisions Contained in the Original
Employment Agreement. Except as otherwise provided herein, Dynacq and DPM agree
that Garvin is hereby, and shall be, released from the terms and provisions of
Section 15, styled “Covenant Not to Compete”, contained in the Original
Employment Agreement, and all duties and obligations thereunder.

 

7. Continuation of Indemnity Agreement. From and after December 6, 2003, that
Indemnification Agreement dated as of January 24, 2002, between Dynacq — Nevada
and Garvin is hereby ratified and confirmed by Dynacq and DPM and shall continue
to be in full force and effect and applicable to any and all matters arising
prior to February 1, 2004.

 

8. General Releases.

 

A. Except as may be otherwise provided in sub-Paragraph 3.D hereunder, in
consideration for Five and No/100 Dollars ($5.00) cash in hand, and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Dynacq and DPM, each on behalf of itself and its respective
predecessors, employees, agents, officers, directors, shareholders,
representatives, attorneys, successors, insurers and assigns, and on behalf of
any other persons claiming by, through or under Dynacq’s or DPM’s name, do each
hereby waive, release, and relinquish their rights to and discharge, release and
acquit Garvin, her agents, attorneys, successors, insurers and assigns, from any
and all causes of action, claims, demands, debts, liabilities, expenses or costs
of any kind and every character and nature whatsoever arising and accruing prior
to February 1, 2004, including but not limited to any claims or rights, for
known past events or acts, contingent or fixed, either in or arising out of the
law of contracts, torts or property rights, whether arising under statutory law
or common law, at law or in equity, with respect to her Original Employment
Agreement and/or her Second Employment Agreement dated December 19, 2003, and
Garvin’s employment relationship thereunder, and Garvin’s positions as an
officer of Dynacq and/or DPM. Furthermore, except as may be otherwise provided
in sub-Paragraph 3.D hereunder,_ Dynacq and DPM each jointly and severally agree
to Indemnify and hold harmless Garvin, and all other persons or entities
released by Dynacq and DPM above against the full amount of any liability, loss,
claim, damage, or expense (including attorneys’ fees and any judgment required
to be paid) in connection with any of the matters it has released in the event
any person should assert against such released person or entity a claim under
assignment or title derivative from Dynacq or DPM.

 

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B. Except as may be otherwise provided in sub-Paragraph 3.D hereunder, in
consideration for Five and No/100 Dollars ($5.00) cash in hand, and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Garvin, on behalf of herself and her agents, attorneys,
successors, insurers and assigns, and on behalf of any other persons claiming
by, through or under Garvin’s name, do each hereby waive, release, and
relinquish its rights to and discharge, release and acquit Dynacq Healthcare,
Inc., f/k/a Dynacq International, Inc. (“Dynacq”), its subsidiaries, affiliates
and parents and their independent contractors, agents, officers, directors,
shareholders, representatives, attorneys, successors, insurers and assigns, from
any and all causes of action, claims, demands, debts, liabilities, expenses or
costs of any kind and every character and nature whatsoever arising and accruing
prior to February 1, 2004, including but not limited to any claims or rights,
whether known or unknown, contingent or fixed, either in or arising out of the
law of contracts, torts or property rights, whether arising under statutory law
or common law, at law or in equity. Furthermore, except as may be otherwise
provided in sub-Paragraph 3.D hereunder, Garvin agrees to Indemnify and hold
harmless Dynacq and its subsidiaries, affiliates and parents and all other
persons or entities released by Garvin above against the full amount of any
liability, loss, claim, damage, or expense (including attorneys’ fees and any
judgment required to be paid) in connection with any of the matters Garvin has
released in the event any person should assert against such released person or
entity a claim under assignment or title derivative from Garvin.

 

9. Survivability of Certain Provisions. The terms and provisions of Sections 3,
5, 6, 7, 8, and 9 of this Agreement shall survive, for an indefinite period, the
termination of Garvin’s consulting engagement hereunder and the term of this
Agreement.

 

10. Notice. Any notice provided or permitted to be given under this Agreement
shall be in writing, and may be served by personal delivery or by depositing
same in the mail, addressed to the party to be notified, postage prepaid, and
registered or certified, with a return receipt requested. Notice deposited in
the mail in the manner hereinabove described shall be deemed to have been given
and received five (5) days after deposit in the mail as provided in the
preceding sentence. Notice served in any other manner shall be deemed to have
been given and received only if and when actually received by the addressee. For
purposes of notice the addresses of the parties shall be as follows:

 

If to DPM or Dynacq:

  

Doctors Practice Management, Inc.

c/o Dynacq Healthcare, Inc.

10304 Interstate 10 East, Suite 369

Houston, Texas 77029

 

Attention: Philip Chan, President

If to Garvin:

  

Sarah C. Garvin

4010 Beechwood Drive

Atlanta, Georgia 30327

 

Each party shall have the right, upon giving ten (10) days prior notice to the
other in the manner hereinabove provided, to change its address for purposes of
notice. Failure of or delay in

 

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delivery of any copy of a notice shall not impair the effectiveness of any
notice given to either DPM/Dynacq or Garvin.

 

11. Violation of Noncompetition Clause. The parties hereto agree that, in the
event of a claim by DPM that Garvin has violated the Noncompetition Clause
hereunder, and as a prerequisite to exercising its rights under this Agreement
with respect to such violation, DPM must (i) immediately notify Garvin in
writing, stating the specific factual allegations giving rise to the claim of
such violation (for purposes of this Paragraph, the “Claim”), AND (ii) permit
Garvin forty-five (45) days to either cure or disprove the breach. If Garvin
shall not have cured or disproved the breach to the satisfaction of DPM and
Dynacq within forty-five (45) days, DPM may terminate this Agreement. If Garvin
does cure or disprove the breach within forty-five (45) days, this Agreement
shall remain in force. All parties are required to exercise good faith in the
performance, interpretation, and enforcement of the Noncompetition Agreement.

 

12. Miscellaneous.

 

(a) This Agreement sets forth the entire agreement of the parties hereto with
respect to the consulting services and the other matters addressed herein and
supersedes all previous agreements, understandings or negotiations with respect
to the consulting services and the other matters addressed herein.

 

(b) The rights and obligations set forth in this Agreement may be amended,
modified or supplemented only by a writing signed by each party hereto.

 

(c) A party hereto may waive a right under this Agreement only by a written
waiver signed by the party. No failure to exercise or delay in exercising a
right under this Agreement will constitute a waiver of that right.

 

(d) If any provision of this Agreement is found invalid, illegal or
unenforceable, and the basis of the bargain between the parties is not thereby
destroyed, the provision will be ineffective only to the extent of the
invalidity, illegality or unenforceability, and the other provisions of this
Agreement will remain in full force and effect.

 

(e) A party hereto may not assign its rights, and a party hereto may not
delegate its obligations, under this Agreement unless it first obtains the
written consent of the other parties. Any party, in its discretion, may withhold
consent to any such assignment or delegation.

 

(f) Except as permitted under the foregoing Subsection (e), this Agreement will
not inure to the benefit of any person other than the parties hereto.

 

(g) This Agreement will be governed by and construed and enforced in accordance
with the internal laws of the State of Texas without reference to the principles
of conflicts of laws thereof; and exclusive jurisdiction and venue of any
dispute arising hereunder shall lie in Harris County, Texas.

 

(h) This Agreement may be executed in multiple counterparts, each copy of which
shall constitute an original document.

 

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(i) Time is of the essence under this Agreement.

 

(Signature page follows)

 

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EXECUTED this 6th day of February 2004, but effective as of the effective date
first mentioned above.

 

DYNACQ:

DYNACQ HEALTHCARE, INC.

By:   /s/    Philip Chan            

Philip Chan,

Vice President & Chief Financial Officer

DPM:

DOCTORS PRACTICE MANAGEMENT, INC.

By:   /s/    Philip Chan            

Philip Chan,

President

 

GARVIN: /s/    Sarah C. Garvin         Sarah C. Garvin

 

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