Document:

EX-10.21

 

 Exhibit
10.21

CONSULTING AGREEMENT

     THIS AGREEMENT is made and entered into on the 5th day of March, 2007 (the “Effective Date”),
by, between and among AdCare Health Systems, an Ohio corporation (referred to as the “Company”) and
The McKnight Group (the “Consultant”).

     WHEREAS, the Company is engaged in the business of developing and managing long term care
facilities for its own account as well as for the account of third parties; and

     WHEREAS, the Consultant is engaged in the business of developing, designing and constructing
churches; and

     WHERAS, the Company desires to enter into a relationship with the Consultant wherein the
Consultant will help the Company to establish and evaluate business opportunities and proposals and
perform other services for churches as set forth herein.

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein
contained, and intending to be legally bound hereby, it is agreed between the parties hereto as
follows:

	 	1.	 	Consulting Services
	 
	 	 	 	The Company is engaged in developing and managing assisted living facilities in
Ohio. The Company is at present developing a 42-unit assisted living facility for
The Grove City Church of the Nazarene, which the Company will manage upon
completion. The Company was introduced to the Grove City Church of the Nazarene by
the Consultant and the Consultant is the architect and the builder of the said
assisted living project. The Consultant is the largest builder of churches in the
Midwest, having built over 500 churches to date. In addition, the Consultant has
provided architectural and construction services to the Company in the past,
namely, being the architect and contractor on seven assisted living projects and
one retirement facility. The Company is interested in expanding its development
activities by providing development and management services to churches. The
Consultant is interested in expanding its architectural and construction business
by implementing a plan that will effectuate future assisted living buildings to be
included in the master plans for its church clients who are in the process of
expanding or building new churches. Accordingly, the Company hereby retains the
Consultant and the Consultant hereby accepts such engagement to market to its
church clients, new and old, the concept that an assisted living facility can fit
in with the future needs and ministries of its church clients and such plans are
consistent with the mission statements of the churches. The Consultant further
agrees to incorporate into the plans for its church clients a “footprint” or
“layout” of an assisted living property for future development by the Company and

 

 

	 	 	 	agrees to arrange meetings with church members and committees to engage in
discussions for the eventual development and building of assisted living facilities
on the church grounds. It is agreed that the Company will provide the development
services and the management services that are listed on Schedule 1 and the
Consultant will provide the architectural, engineering and construction services
listed on Schedule 2. The Consultant will not be an agent of the Company and will
have no ability to bind the Company.
	 
	 	 	 	Subject to the standards generally set forth in the Agreement, the Consultant will,
as an independent contractor, exercise sole right to determine the time, place and
manner in which the objectives of this Agreement are carried out. The Consultant
will use its best efforts to maintain and enhance the good will and reputation of
the Company and the Company will use its best efforts to maintain and enhance the
good will and reputation of the Consultant. Each party pledges to promote the
highest standards of service, confidence and ethics; and practice with the
professions. Each party will adhere to the highest standards of professional
conduct and will abide by all the laws of the State of Ohio and applicable federal
laws.
	 
	 	2.	 	Compensation
	 
	 	 	 	In consideration for the services rendered and to be rendered, the Company agrees
to issue to the Consultant on the date this agreement is executed, 100,000 five
year warrants to purchase 100,000 common shares of the Company at a strike price
equal to the closing price of the common shares on the American Stock Exchange plus
25%, to vest as follows: 50,000 Warrants on the day this
Agreement is executed; 25,000 Warrants one year from the date this Agreement is
executed; 25,000 Warrants two years from the date this Agreement is executed.
	 
	 	3.	 	Term
	 
	 	 	 	Unless sooner terminated pursuant to Paragraph 4 below, this Agreement shall be
effective for a term commencing as of the date hereof (the “Effective Date”) and
terminating five (5) years from the Effective Date and will thereafter be renewed
for one (1) year periods on each anniversary of the Effective Date unless either
party provides the other with not less than sixty (60) days prior written notice
prior to such anniversary.
	 
	 	4.	 	Termination.

 

 

     With Cause. The Company shall have the right to immediately terminate the Consultant’s
service hereunder for cause. For purposes of this Agreement, the term “Cause” includes, but is not
limited to fraud, dishonesty, willful misconduct, gross negligence in performance of his duties, or
breach of any other provision of this Agreement.

     Voluntary Termination. The Company and the Consultant shall each have the right to terminate
his services at any time after 90 days prior written notice.

     Payments through Termination Date. In the event that the Consultant is terminated two years
prior to the Expiration of the Term of this Agreement for Cause or the Consultant voluntarily
terminates this Agreement less than one (1) prior to the execution of this Agreement, the
Consultant shall return any warrants that have not been exercised.

	 	5	 	Prohibition of Assignment
	 
	 	 	 	This is an Agreement for the personal services of Consultant and is not
transferable.
	 
	 	6	 	Covenants of the Consultant

	 	6.1	 	Ownership and Return of Documents. The Consultant agrees
that all agreements, contracts, leases, certifications, forms,
memoranda, notes, records, papers or other documents and all
copies thereof relating to the operations or business of the
Company, some of which may be prepared by the Consultant shall
be the Company’s property. The Consultant agrees that the
Consultant will deliver all of the aforementioned documents that
may be in its possession to the Company upon termination of the
Consultant’s engagement, together with the Consultant’s written
Certification of compliance with the provision of this Section 6.1.
	 
	 	6.2	 	Exclusive Engagement During the term of this Agreement and for a period of twelve (12)
months thereafter, the Consultant
agrees that he will not engage in a business competitive with that
of the Company in the state of Ohio other than his present business
interests and affiliations and such activities as are reasonably related
to them.

	 	7	 	Governing Law
	 
	 	 	 	This Agreement shall be subject to and governed by the laws of the State of Ohio.
The parties agree that the exclusive jurisdiction for any disputes relating to this
contract will be Common Pleas Court in Franklin County,

 

 

	 	 	 	Ohio and Consultant expressly consents to service of process for such purposes.
	 
	 	8	 	Entire Agreement
	 
	 	 	 	This Agreement constitutes the entire Agreement between the parties and contains
all of the agreements between the parties with respect to the subject matter
hereof. No change or modification of this Agreement shall be valid unless the same
is in writing and signed by both parties hereto. No waiver of any provisions of
this Agreement shall be valid unless in writing and signed by the person or party
to be charged.
	 
	 	9	 	Severability
	 
	 	 	 	If any portion of this Agreement shall be for any reason, invalid or unenforceable,
the remaining portion or portions shall nevertheless be valid, enforceable and
carried into effect, unless to do so would clearly violate the present legal and
valid intention of the parties hereto.
	 
	 	10	 	Notices
	 
	 	 	 	All notices, demands, requests, consents, approvals or other communications
required or permitted hereunder shall be in writing and shall be delivered by hand,
registered or certified mail with return receipt requested or by a nationally
recognized overnight delivery service, in each case with all postage or other
delivery charges prepaid, and to the last known address of the party to whom it is
directed, or to such other address as such party may specify be giving notice to
the other in accordance with the terms hereof. Any such notice shall be deemed to
be received when delivered, if by hand, on the next business day following timely
deposit with a nationally recognized overnight delivery service, or on the date
shown on the return receipt as received or refused or on the date the postal
authorities state that delivery cannot be accomplished, if send by registered or
certified mail, return receipt requested.
	 
	 	11	 	Attorney’s Fees
	 
	 	 	 	In the event of litigation concerning this Agreement, the prevailing party shall be
entitled to collect from the losing party reasonable attorney’s fees and costs,
including those on appeal

     IN WITNESS WEREOF, the Company has caused this Agreement to be signed by its duly authorized
officer, and the Consultant has hereunto set Consultant’s hand on the day and year first above
written.

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	COMPANY	 	 	 	CONSULTANT	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	AdCare Health Systems, Inc	 	 	 	The McKnight Group	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/David A. Tenwick
	 	 	 	By:
	 	/s/Homer McKnight	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Its:

	 	Chairman
	 	 	 	Its:
	 	CEOEX-10.4

 

Exhibit 10.4

AMENDED AND RE-STATED EMPLOYMENT AGREEMENT

BY AND BETWEEN

HARTVILLE GROUP, INC.

AND

DENNIS C. RUSHOVICH

EFFECTIVE: March 29, 2007

 

 

EMPLOYMENT AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	PAGES	 
	 
	 	 	 	 	 	 	 	 
	1.	 	EMPLOYMENT	 	 	1	 
	 
	 	1.1	 	General Duties and Title	 	 	1	 
	 
	 	1.2	 	Other Positions of Executive	 	 	2	 
	2.	 	TERM	 	 	2	 
	3.	 	REMUNERATION	 	 	2	 
	4.	 	WITHHOLDING	 	 	3	 
	5.	 	INSURANCE AND OTHER BENEFIT PLANS	 	 	3	 
	6.	 	VACATIONS, ILLNESS AND HOLIDAYS	 	 	4	 
	7.	 	BUSINESS EXPENSES	 	 	4 	 
	8.	 	INDEMNIFICATION	 	 	4	 
	9.	 	TERMINATION OF EMPLOYMENT	 	 	5	 
	 
	 	9.1	 	Termination by the Company for Cause	 	 	5	 
	 
	 	9.2	 	Definition of Cause	 	 	5	 
	 
	 	9.3	 	Determination of For Cause Termination	 	 	5	 
	 
	 	9.4	 	Termination by the Company Without Cause	 	 	6	 
	 
	 	9.5	 	Voluntary Termination by the
Executive	 	 	6	 
	 
	 	9.6	 	Disability Termination	 	 	7	 
	 
	 	9.7	 	Termination Due to Executive’s Death	 	 	7	 
	10.	 	RESTRICTIVE COVENANTS; CONFIDENTIALITY; OWNERSHIP OF PROCEEDS OF EMPLOYMENT	 	 	7	 
	 
	 	10.1	 	Solicitation of Employees;
Customers; Agents or Representatives etc	 	 	7	 
	 
	 	10.2	 	Confidential Records	 	 	8	 
	 
	 	10.3	 	Ownership of Proceeds of Employment	 	 	9	 
	 
	 	10.4	 	Survival	 	 	9	 
	 
	 	10.5	 	Enforceability; Remedies	 	 	9	 
	11.	 	MISCELLANEOUS PROVISIONS	 	 	9	 
	 
	 	11.1	 	Severability	 	 	9	 
	 
	 	11.2	 	Execution in Counterparts	 	 	9	 
	 
	 	11.3	 	Notices	 	 	10	 
	 
	 	11.4	 	Entire Agreement and Subsequent Amendments	 	 	11	 
	 
	 	11.5	 	Applicable Law	 	 	11	 
	 
	 	11.6	 	Headings	 	 	11	 
	 
	 	11.7	 	Binding Effect; Successors and Assigns	 	 	11	 
	 
	 	11.8	 	Waiver	 	 	11	 
	 
	 	11.9	 	Warranty and Capacity to Contract	 	 	12	 
	 
	 	11.10	 	Arbitration	 	 	12	 
	 
	 	11.12	 	Survival	 	 	12	 
	 
	 	11.13	 	Costs of Preparation and Negotiation of Agreement	 	 	13	 

 

 

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) originally entered into May 1, 2005 (the
“Effective Date”) and amended and re-stated, effective March 29, 2007 by and among HARTVILLE
GROUP, INC. (the “Company”) a Nevada corporation, and DENNIS C. RUSHOVICH an individual
currently residing at 56 Greens Circle, Stamford, CT 06903 (“Executive”).

WITNESSETH THAT

WHEREAS, the Company desires to employ Executive in accordance with the terms of this Agreement
and Executive desires to be so employed by the Company; and

WHEREAS, the parties desire to set forth the employment understanding and terms and conditions
of employment in a written agreement; and Executive wishes to accept such employment upon the
terms and subject to the conditions hereinafter set forth;

NOW THEREFORE, in consideration of the mutual promises contained herein, the parties hereto
hereby agree as follows:

	1.	 	EMPLOYMENT
	 
	1.1	 	General Duties and Title
	 
	 	 	On the Effective Date, the Company hereby employs Executive with the
title/s designated in Exhibit A (the “Position Description”) attached
hereto and forming a part of this Agreement.

	 
	 	 	Executive’s primary responsibilities and duties are as described in
Exhibit A. The primary responsibilities and duties of the Executive
may be altered or amended by either (i) the mutual agreement of the
Company and the Executive; or (ii) the establishment of new or
modified duties, as determined by the Company after consultation with
the Board of Directors of the Company (the “Board”). Any modifications
or alterations to the duties assigned to the Executive will be
consistent with the customary duties of a Chief Executive Officer and
the education, background and experience of the Executive. Executive
shall faithfully and substantially perform for the Company all such
duties. Executive shall report to and take direction primarily from
the Board. Executive agrees to act in the capacity of a member or
officer of such boards as he may be appointed without remuneration
other than the remuneration to which Executive Is otherwise entitled
under this Agreement.
	 
	 	 	Services rendered by Executive shall be rendered in accordance with
recognized insurance and financial industry standards and recognized
codes of conduct or ethics. Executive shall further promote and
enhance the business purposes of the Company by
entertainment and other means, including participation in professional
organizations and activities, attendance at insurance, financial, or
industry conventions and seminars, and membership in insurance or
financial industry societies.

1

 

	1.2	 	Other Positions of Executive
	 
	 	 	Notwithstanding the foregoing, the Company acknowledges that the
Executive has other business interests and ownerships as well as
serving on the Boards of Directors of other companies including
companies in which the Employee is a stockholder or owner. Subject to
the provisions of Section 10 hereof, the Company acknowledges and
consents to the continuation of these ownerships and relationships,
provided they do not materially impair performance of the Executive’s
duties under this Agreement.
	 
	2.	 	TERM
	 
	 	 	The employment of Executive hereunder shall commence on the Effective Date and shall,
unless this Agreement is sooner terminated as provided in Section 9 hereof, continue until
April 30, 2006 and thereafter for additional one (1) year terms until each successive
April 30 (each an “Anniversary Date”) provided, however, that if written notice of
termination of this Agreement is given by party hereto to the other party hereto at feast
ninety (90) days prior to an Anniversary Date, then this Agreement shall terminate no
later than the Anniversary Date next following the date of such notice.
	 
	3.	 	REMUNERATION
	 
	 	 	The Company (and/or an affiliate acting on behalf of the Company) will pay, or provide, to
Executive as compensation for services to be rendered under Section 1 hereof, the
following amounts:

	 	(a)	 	Monthly Base Salary
	 
	 	 	 	A base salary (“Base Salary”) at the monthly equivalent rate of Two Hundred Thousand
Dollars ($200,000) per annum.
	 
	 	(b)	 	Stock Rights under the Company’s 2004 Nonstatutory Stock Option Plan,
as, Amended (“Option Plan”)
	 
	 	 	 	Options under the Option Plan to purchase up to 500,000 shares of the common stock
of the Company on the terms and conditions set forth in the Stock Option Agreement
being adopted by the parties simultaneously herewith.

With regard to the above referenced Stock Option Agreement and any previous or
subsequent Stock Option Agreements executed by the Company and the Executive, in
the event that a “Change of Control”, as defined herein, occurs, notwithstanding
the vesting schedule contained in any such Stock Option Agreement all options
shall immediately vest upon a ‘Change of Control’ of the Company.

The period of time within which any Options granted under any Stock Option
Agreement may be exercised in the event of termination after a ‘Change in
Control,’ shall be extended by not less than twelve (12) months after the
Termination Date, but in any event, no later than the expiration date of all
Options.

2

 

For the purposes of this Agreement, “Change of Control” means:

	 	(i)	 	if any “person”, as defined in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (“Act”) (other than a current 10%
beneficial owner (as defined in Rule 13d-3 under the Act) of the Company’s
Securities) becomes the beneficial owner, directly or indirectly, of more
than fifty percent (50%) of the combined voting power of the then issued
and outstanding securities of the Company; or
	 
	 	(ii)	 	the sale, transfer, or other disposition of all or
substantially all of the assets of the Company, whether by sale of
assets, merger, or otherwise.

	 	(c)	 	Living Expenses
	 
	 	 	 	The Company shall provide the Executive with appropriate living quarters in or
proximate to Canton, Ohio, and use of an automobile for the term hereof. Weekly
round trip air travel on a regularly scheduled passenger airline carrier between
Canton, Ohio and the Executive’s residence in Stamford, Connecticut will be paid for
by the Company.
	 
	 	(d)	 	Discretionary Cash Bonus
	 
	 	 	 	A cash bonus payable to the Executive at such times and in such amounts as the
Company may, in its sole discretion, determine.

	4.	 	WITHHOLDING
	 
	 	 	Executive agrees that the Company shall withhold from any and all payments required to be
made to Executive pursuant to this Agreement all actual or potential Federal, State, local
and/or other taxes the Company determines are required or potentially will be required, to
be withheld in accordance with applicable statutes and/or regulations from time to time in
effect.
	 
	5.	 	INSURANCE AND OTHER BENEFIT PLANS
	 
	 	 	Executive shall be entitled, during the period of employment with the Company, to
participate in (i) the life insurance and disability insurance plans available to
executives of the Company, including such accidental death or other benefits as may be
provided under such plans, and (ii) the health and dental and vision plans available to
officers (and their immediate families) of the Company, and (iii) such other employee
benefit plans, including all employee welfare benefit plans and employee pension benefit
plans, that currently are or will be made generally available to executives and salaried
employees of the Company. Participation by or inclusion of the Executive in any benefit
plan maintained by the Company shall be provided only to the extent that the Executive Is
eligible under the terms and conditions of the applicable plan and, if required pursuant
to the plan, the employee meets any insurance underwriting or other conditions validly
required by the provider or carrier of the plan or the contracts, policies, or other terms
of eligibility or participation issued in connection with the plan.

3

 

	6.	 	VACATIONS, ILLNESS AND HOLIDAYS
	 
	 	 	Without any loss or reduction of remuneration, Executive shall be entitled to be absent
from Executive’s duties with the Company by reason of vacation for four (4) weeks for each
year or illness for (4) four weeks for each year during the term of this Agreement. In
addition, the Executive shall be entitled to such national and religious holidays as
generally approved by the Company. The Executive shall be entitled to carry forward any
unused sickness, vacation or holiday time accrued during a year to successive years of
this Agreement until used.
	 
	7.	 	BUSINESS EXPENSES
	 
	 	 	The Company recognizes that, in connection with Executive’s performance of his duties,
functions and responsibilities hereunder, Executive will incur certain reasonable and
necessary expenses. The Company agrees to pay or promptly reimburse Executive for all such
reasonable business expenses, which are incurred in connection with the Company’s
business, upon the presentation of statements setting forth the nature and amount of such
expenses in reasonable detail, in accordance with the Company’s generally applicable
guidelines and procedures from time to time.
	 
	8.	 	INDEMNIFICATION
	 
	 	 	The Company shall indemnify, defend and hold harmless Executive, and shall cause each
applicable entity controlled by the Company (defined for purposes of this Section 8 as a
“Subsidiary”) to indemnify, defend and hold harmless Executive for general directors
and/or officers liability in the normal course of Executive’s services on Company business
or Subsidiary business, to the fullest extent allowed by law.
	 
	 	 	To secure its indemnification obligations the Company has and shall maintain in full force
and effect through the term of this Agreement directors and officers insurance coverage
the provisions of which are summarized at Exhibit B. The use of the Company’s insurance
coverage or policy to secure its or any Subsidiary’s indemnification on litigation shall
not, however, limit the obligation of the Company or any Subsidiary to indemnify the
Executive for claims or expenses either below the annual or periodic deductible limit in
the policy or in excess of the policy limits or for items or events not covered by the
policy.
	 
	 	 	The Company shall be obligated, and shall cause each applicable Subsidiary, to pay the
claims or expenses of the Executive required under this Section 8, including defense cost,
directly to the third party to whom payment is due and owing, without the necessity of the
Executive making such payment and seeking reimbursement from the Company or the
Subsidiary.
	 
	 	 	To the extent that the Executive is successful on the merits or otherwise in defense of
any action, suit, or proceeding, or in defense of any claim, issue or matter brought
against the Executive, the Executive shall be indemnified by the Company, and the Company
shall cause each applicable Subsidiary to indemnify the Company, against all expenses,
including defense and legal fees, incurred by the Executive.
	 
	 	 	The provisions of this Section 8 shall survive the termination or expiration of
Executive’s employment under this Agreement irrespective of the reason for such
termination, provided that nothing herein shall be construed to provide Executive with

4

 

	 	 	any greater coverage or coverage for any period longer than Executive would have been
entitled to receive under the terms of such insurance policy referred to herein (other
than deductible and policy dollar limits).
	 
	9.	 	TERMINATION OF EMPLOYMENT
	 
	9.1	 	Termination by the Company for Cause
	 
	 	 	In the event that Executive is removed from office by the Company for cause (as hereinafter defined), the employment of
Executive under this Agreement shall terminate and Executive shall be entitled to receive all remuneration and benefits
accrued hereunder to the date of such termination except for unvested Options under the Option Plan and Insurance which
would by its terms lapse.
	 
	 	 	No other or further payment of benefits under this Agreement will be due upon Termination for Cause, except as required by
law, or under the Company’s insurance and other employee benefit plans and the procedures referred to in Sections 5 and 7.
	 
	9.2	 	Definition of Cause
	 
	 	 	For purposes of this Agreement, the term “cause” shall mean (1) any willful material neglect by Executive, or material
failure by Executive to substantially perform the duties and responsibilities of the Executive’s office or offices (other
than any such failures resulting from Executive’s incapacity due to illness or injury), or (ii) any malfeasance or gross
misconduct by Executive in connection with the performance of any of the duties or responsibilities or otherwise which
would, in the view of a reasonable person, be materially prejudicial to the interests of the Company or any of its
affiliates if Executive were retained in the respective office or offices, including without limitation, conviction of a
felony, or (iii) actual indictment for, or formal admission to a felony or crime of moral turpitude, dishonesty, breach of
trust or unethical business conduct or any crime involving the Company, or (iv) repeated material failure to adhere to the
policies and directions of the Board of Directors, or failure of the Executive to devote sufficient time and efforts to the
business of the Company and the duties and responsibilities hereunder so as to result In material impairment of the
Executive’s performance hereunder, and with respect to 9.2.(i) or 9.2.(ii) or 9.2.(iv) herein, there has been a failure to
cure such breach or a failure to modify Executive’s conduct within 30 days of receiving written notice of such breach
specifying the factual reasons supporting the proposed dismissal for cause.
	 
	9.3	 	Determination of For Cause Termination
	 
	 	 	A determination of a for cause termination shall be made by the Company as follows:

	 	(a)	 	The Chairman of Board shall first make a preliminary determination that the
Executive should be reviewed for discharge for cause, The Company will not be
required to provide any preliminary notice to the Executive of its intention to
investigate the possible discharge of the Executive for cause.
	 
	 	(b)	 	After investigating the circumstances surrounding the possible for cause
termination of the Executive, the Company, through the Chairman, may

5

 

	 	 	 	 	immediately relieve or suspend the Executive from the Executive’s position by
providing notice to the Executive. Upon notice of the suspension, the Executive
shall immediately vacate the premises and remove all personal property from the
premises of the Company. The Company shall have the absolute right to review any and
all material in the possession of the Executive on the Company premises to determine
those items, which are proprietary to the Company. After sorting the appropriate
items, all personal items shall be delivered to the Executive at the location
designation reasonably selected by the Executive.
	 
	 	 	(c)	 	After concluding its investigation, the Company, through the Chairman of the
Board, shall make a determination whether the Executive should be discharged for
cause. The determination for discharge for cause shall be timely communicated in
writing to the Executive.
	 
	 	 	(d)	 	Until terminated, notwithstanding that any of the foregoing procedures are
taking place, or have taken place, the Executive shall be entitled to and shall
continue to accrue all remuneration and benefits provided for under this Agreement.
	 
	9.4	 	Termination by the Company Without Cause
	 
	 	 	The Company expressly reserves the right to terminate the employment,
or materially reduce the responsibilities, of Executive at any time
for no reason or for any reason.
	 
	 	 	In the event that Executive’s employment is so terminated or altered
under this Section, Executive shall be entitled to receive:
	 
	 	 	Six (6) monthly payments of the current monthly Base Salary, paid
pursuant to the Company’s normal payroll practices
	 
	 	 	In addition to the above payments if permitted under the appropriate
plan documentation and if allowed by law, all health, dental and life
insurance coverage provided to Executive under the employee benefit
plans will be extended for such period as the Company is obligated to
make monthly Base Salary payments to Executive in terms of this
Section, unless Executive becomes covered by other employer plans. if
coverage extensions are not permitted by law or under the plans, the
Company shall pay to the Executive periodic bonuses equal to the
insurance premium cost which would have been required as if the
Executive were covered under the plan.
	 
	 	 	Any unvested employer contributions attributable to Executive under
any pension plan, shall be accelerated and deemed vested as of the
date of termination of employment without cause. If the acceleration
of vesting is not permitted by law or under the terms of the plan, the
Company shall, in lieu of accelerated vesting, pay a bonus to the
Executive in the amount of the account forfeiture under the plan.
	 
	9.5	 	Voluntary Termination by the Executive
	 
	 	 	Executive shall be entitled, with not less than ninety (90) days
written notice, to voluntarily terminate employment with the Company.
If Executive elects such termination, Executive shall be entitled to
receive the Executive’s monthly Base Salary

6

 

	 	 	defined under Section 3 and benefits defined under Section 5 until the end of
such notice period. Executive shall also be entitled to exercise any vested
rights under Sections 5 and 6.
	 
	 	 	Even though the Executive is required to give not
less than ninety (90) days advance written notice,
the Company shall have the option to require that the
Executive discontinue service on behalf of the
Company at any time upon receipt of advance written
notice of the Executive’s election to terminate;
provided, however, that in such event the Company
shall be required to continue the Base Salary and
benefit payments through the ninety (90) day notice
period.
	 
	9.6	 	Disability; Termination
	 
	 	 	The Executive’s employment shall terminate if the
Executive becomes so disabled as to be unable to
substantially perform the services of the character
contemplated by this Agreement, and such disability
continues for a period of ninety (90) consecutive
days. The Executive’s employment shall terminate at
the conclusion of the 90-consecutive day disability.
In such event, the Executive shall be entitled to
receive the Executive’s monthly Base Salary defined
under Section 3 and benefits defined under Section 5
until the end of the 90-consecutive day disability
period. Executive shall also be entitled to exercise
any vested rights under Sections 5 and 6.
	 
	 	 	For purposes of this Agreement the term “disability”
or “disabled” shall mean a physical or mental
condition resulting from a bodily injury or disease
or mental disorder which renders the Executive
incapable of engaging in substantial gainful activity
of the character contemplated by this Agreement and
which can be expected to be of a long and continued
duration. The disability of the Executive shall be
determined by the Board based upon competent medical
authority. The determination of a disability may be
made by the Board independent of such determination
being made under any other disability insurance plan
sponsored or funded by the Company.
	 
	9.7	 	Termination Due to Executive’s Death
	 
	 	 	This Agreement shall terminate if the Executive shall
die, in which event the Executive’s estate or
personal representative shall not be entitled to
continue to receive Base Salary payments permitted
under Section 3 or other benefits permitted under
this Agreement, other than the monthly Base Salary
for the period until death and those benefit
continuation requirements imposed as a matter of law.
With respect to other benefit entitlement under the
bonus plan or other similar plans, the Executive’s
estate shall only be permitted to such rights or
benefits as otherwise provided in those plan
documents.
	 
	10.	 	RESTRICTIVE COVENANTS; CONFIDENTIALITY; OWNERSHIP OF PROCEEDS OF EMPLOYMENT
	 
	10.1	 	Solicitation of Employees; Customers; Agents or Representatives etc.
	 
	 	 	Executive agrees that, during the term of employment hereunder, and for a period of one
(1) year after the Company no longer employs Executive, Executive shall not, directly or
indirectly:

7

 

	 	 	(a)	 	solicit, entice, persuade or induce any individual who is then or has been
within the preceding six-month period, an employee of the Company or any of its
subsidiaries or affiliates, to terminate his or her employment with the Company or
any company controlled by or under common control with the Company. (defined for
purposes of this Section 10 as an “Affiliate”), or to become employed by or enter
into contractual relations with any other individual or entity, and the Executive
shall not approach any such employee for any such purpose or authorize or knowingly
approve the taking of any such actions by, any other individual or entity; or,
	 
	 	 	(b)	 	except in accordance with Executive’s duties hereunder, solicit, entice,
persuade or induce any individual or entity which is then, or has within the
preceding twelve month period been, a customer, distributor or supplier, or policy
owner, agent or representative of the Company or any of its Affiliates to terminate
or materially reduce his, her or its contractual or other relationship with the
Company or any of its subsidiaries or affiliates, and the Executive shall not
approach any such customer, distributor, supplier, policy owner, agent or
representative for such purpose or authorize or knowingly approve the taking of any
such actions by any other individual or entity.
	 
	 	 	(c)	 	For purposes of this Agreement, where the Executive has been Terminated without
Cause under Section 9.4, such restrictive period of one (1) year shall commence at
the time provided under 9.4 for the Executive’s receipt of the final monthly payment
under Section 9.4.
	 
	10.2	 	Confidential Records
	 
	 	 	In the course of employment, Executive will have access to
confidential information, records, data, specifications, and other
knowledge owned by the Company or its subsidiaries or affiliates,
Executive agrees that at no time during or after the term of
employment shall the Executive remove or cause to be removed from the
premises of the Company or its subsidiaries or affiliates, any
record, file, memorandum, document, equipment or like item relating
to the business of the Company or its subsidiaries or affiliates
except in furtherance of Executive’s duties hereunder, and
immediately following the termination of Executive’s employment
hereunder or at any other time at the request of the Board of
Directors, all such records, files, memoranda, documents, equipment
and like items then in Executive’s possession will promptly be
returned to the Company. Executive further agrees that, during and
after the term of employment, Executive shall not without the written
consent of the Company or a person authorized thereby, disclose to
any person, other than an employee of the Company its subsidiaries or
affiliates or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by Executive of duties
as an executive of the Company, any confidential information obtained
by Executive while in the employ of the Company with respect to any
business methods, plans, policies, products and/or personnel of the
Company or its subsidiaries or affiliates, the disclosure, including
speaking with the press, of which would, in the view of a reasonable
person, be injurious or damaging to the business of the Company or
its subsidiaries, or affiliates, provided, however, that confidential
information shall not include any information known generally to the
public (other than as a result of unauthorized disclosure by
Executive), or any information of a type not otherwise

8

 

	 	 	considered confidential by persons engaged in the same business or a business
similar to that conducted by the Company.
	 
	10.3	 	Ownership of Proceeds of Employment
	 
	 	 	Executive acknowledges that the Company shall be the
sole owner of all the fruits and proceeds of the
Executive’s services hereunder, including without
limitation all ideas, concepts, formats, suggestions,
developments, arrangements, designs, packages,
programs, promotions and other properties relating to
the businesses of the Company, which Executive may
create in connection with and during the term of
employment hereunder, free and clear of any claims by
the Executive of any kind or character whatsoever
(other than Executive’s right to compensation and
benefits hereunder).
	 
	10.4	 	Survival
	 
	 	 	The provisions of this Section 10 shall survive any
termination or expiration of Executive’s employment
under this Agreement, irrespective of the reason
therefore.
	 
	10.5	 	Enforceability; Remedies
	 
	 	 	The parties hereto agree that a breach by Executive
of any of the provisions of Section 10. hereof will
cause the Company great and irreparable injury and
damage. By reason of this, Executive acknowledges
that, in the event of a breach by Executive of any of
the provisions of Section 10 hereof, the Company
shall be entitled, in addition and as a supplement to
any other rights or remedies it may have at law, to
the remedies of injunction, specific performance and
other equitable relief. This section 10 shall not,
however, be construed as a waiver of any of the
rights which the Company may have for damages or
otherwise.
	 
	11.	 	MISCELLANEOUS PROVISIONS
	 
	11.1	 	Severability
	 
	 	 	Executive acknowledges and agrees that (i) Executive has had an
opportunity to seek advice of counsel in connection with this
agreement and (ii) the Restrictive Covenants contained in Section
10.1 hereof are reasonable in temporal and geographic scope and In
all other respects. If in any jurisdiction any term or provision
hereof is determined to be invalid or unenforceable, (a) the
remaining terms and provisions hereof shall be unimpaired, (b) any
such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction, and the remaining provisions hereof shall be given full
force and effect without regard to the invalid portions. The Employer
and the Executive intend to and hereby confer jurisdiction to endorse
the Restrictive Covenants upon the Courts of any jurisdiction within
the geographical scope of the covenants.
	 
	11.2	 	Execution In Counterparts
	 
	 	 	This Agreement may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which
shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement (and all signatures need
not appear on any one counterpart), and this Agreement shall

9

 

	 	 	become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other
parties hereto.
	 
	11.3	 	Notices
	 
	 	 	Any notice or other communication in connection with this Agreement shall be deemed to be delivered if in
writing (or in the form of a fax) addressed as provided below and if either (a) actually delivered at said
address, or (b) in the case of a letter, three business days shall have elapsed after the same shall have
been deposited in the US mail, postage prepaid and registered or certified, and (c) in the case of fax,
one business day shall have elapsed after dispatch.

If to the Company, to it at the following address:

Hartville Group, Inc.

3840 Greentree Avenue SW

Canton, Ohio 44706

FAX 330-484-8081

Attention: Chairman of the Board

with a copy to:

Baker & Hostetler

Capitol Square, Suite 2100

Columbus, Ohio 43215-4260

Attn: Jack Bjerke

or at such other address as the Company shall have specified by written notice actually received by the
addresser.

If to Executive, to Executive at the address provided in the preamble or to :

FAX 772-679-5814

with a copy to:

McCarthy Fingar, LLP

11 Martine Avenue

White Plains, New York 10606

FAX (914) 946-0134

Attn: Robert J. Kiggins, Esq.

or at such other address as Executive shall have specified by written notice actually received by the
addresser.

10

 

	11.4	 	 Entire Agreement and Subsequent Amendments
	 
	 	 	This Agreement constitutes the entire agreement between the Company and Executive relating to Executive’s
employment and supersedes all prior agreements and understandings of the parties hereto, whether oral or
written with respect to the subject matter herein.
This Agreement may be amended or altered only by the written agreement of the Company and Executive.
	 
	11.5	 	Applicable Law
	 
	 	 	This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without
regard to principles of conflict of law.
	 
	11.6	 	Headings
	 
	 	 	The descriptive headings of the several sections of this Agreement are inserted for the sole purpose of
convenience of reference, and do not constitute part of this Agreement or in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
	 
	11.7	 	Binding Effect; Successors and Assigns
	 
	 	 	This Agreement shall be binding upon and shall inure to the benefit of:
	 
	 	 	(a)	 	the Company and its successors and assigns; and
	 
	 	 	(b)	 	Executive and to the benefit of Executive’s heirs, executors, administrators
and legal representatives. Executive’s duties and obligations hereunder are personal
and shall not be assignable or delegable in any manner whatsoever.
	 
	 	 	The Company may assign the obligations under this Agreement (subject to a right of recourse by Executive to the Company in
the event of any default under the obligations to Executive hereunder), to an affiliate or to any intermediate parent of
the Company.

	11.8	 	 Waiver
	 
	 	 	The failure of either of the parties hereto at any time, to enforce any of the provisions of this agreement shall not be
deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this agreement or any
provision hereof or the right of either of the parties hereto, to thereafter enforce each and every provision of this
Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any
such breach shall be construed or deemed to be a waiver of any other or subsequent breach.

11

 

	11.9	 	Warranty and Capacity to Contract

	 
	 	 	The Company and Executive hereby represent and warrant to the other that:
	 
	 	 	(a)	 	they have full power and authority to execute this Agreement, and to perform
their respective obligations hereunder;
	 
	 	 	(b)	 	such execution, delivery and performance will not (and with the giving of
notice or !apse of time or both would not) result in any breach of any agreements or
other obligations to which Executive or the Company is otherwise bound; and
	 
	 	 	(c)	 	this Agreement is a valid binding obligation on Executive and the Company.
	 
	11.10	 	Arbitration
	 
	 	 	Except to the extent necessary for Executive or the Company to enforce rights under
Section 11.9 above, or for the Company to enforce its rights under Section 10 above, or
for the Executive to enforce his rights under Section 8, above, any case or controversy
arising among the parties hereto under this Agreement, or the subject matter hereof, shall
be settled by binding arbitration in Canton, Ohio under the then prevailing rules of the
American Arbitration Association. The decision of the arbitrators shall be final and
binding and the party against whom the award is rendered (“the non-prevailing party”)
shall be specifically instructed in any such award to pay all reasonable attorney’s fees,
disbursements of the prevailing party’s legal counsel, arbitration costs, expenses and
filing fees incurred by the prevailing party in the arbitration proceeding. The American
Arbitration Association shall appoint three (3) arbitrators to preside at the said
arbitration proceeding and the arbitrators will determine in their decision and award,
which is the prevailing party, which is the non-prevailing party, the amount of the fees
and expenses of the prevailing party and the amount of the arbitration expenses. The
arbitrators will render their award, upon the concurrence of at least two (2) of their
number, no later than thirty (30) days after the conclusion of the arbitration
proceedings. Judgment may be entered on the award of the arbitrators and may be enforced
in any court of competent Jurisdiction.
	 
	11.11	 	Remedies
	 
	 	 	All remedies hereunder are cumulative, are in addition to any other
remedies provided by law and may be exercised concurrently or separately, and
the exercise of any one remedy shall not be deemed to be an election of such
remedy exclusively or to preclude the exercise of any other remedy. No failure
or delay in exercising any right or remedy shall operate as a waiver thereof or
modify the terms of this Agreement.
	 
	11.12	 	Survival
	 
	 	 	Anything contained in this Agreement to the contrary notwithstanding, the
provisions of Section 8; and Section 9; and Section 10; and Section 11.1; and
the other provisions of this Section 11 (to the extent necessary to effectuate
the survival of Section 11) shall survive termination of this Agreement and any
termination of Executive’s contract hereunder.

12

 

	11.13	 	Costs of Preparation and Negotiation of Agreement
	 
	 	 	The Company shall be responsible for payment or reimbursement to Executive
for all of Executive’s costs and expenses, Including but not limited to all
attorneys fees of legal counsel to the Executive, incurred in the preparation
and negotiation of this Agreement and all documents related thereto.
	 
	 	 	The Company shall be fully responsible for payment of its own costs and
expenses incurred in the preparation and negotiation of this Agreement and all
documents related thereto.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of
the date first written above.

13

 

BY DENNIS C. RUSHOVICH (“Executive”)

Executed at Canton, Ohio on March 29, 2007

	 	 	 
	/s/ Dennis C. Rushovich
 

	 	 
	Dennis C. Rushovich
	 	 
	 
	 	 
	BY HARTVILLE GROUP, INC.
	 	 

Executed at Canton, Ohio on March 29, 2007

	 	 	 
	/s/ Nicholas J. Leighton
 

	 	 
	Director and Audit Committee Chairman
	 	 

14

 

Exhibit A — Position Description,

	 	 	 
	Titles:

	 	President and C.E.O of Hartville Group, Inc
	 
	 	 
	Reporting Lines:

	 	Board of Directors of Hartville Group, Inc

Responsibilities and Duties with regard to Companies Manacled by Executive

As provided in Bylaws of Hartville Group Inc.

15

 

Exhibit B — Summary of D & O Coverage

Carrier — Chubb Group of Insurance Companies

Policy Number — 6800-2391

Insured Persons — All directors and officers of Hartville Group, Inc. and its Subsidiaries
acting in such capacities

Type of Coverage — Executive Liability for Wrongful Acts and Executive indemnification for
Wrongful Acts

Amount of Coverage — $1,000,000 per loss and up to $1,000,000 aggregate for each Policy
Period

Premium — $23,357 for Policy Period

Deductibles —  (a) Executive Liability — $5,000 per insured — $20,000 all insureds

                           (b) Executive Indemnification — $100,000

Mode of Coverage — Claims Made

Policy Period — January 1, 2005 to December 31, 2005

Right of Extension (Tail Coverage) — One year for 100% of annual premium

Duty of Company to Defend — None

Exclusions — Prior Acts before January 1, 2004; fiduciary liability under retirement and
employee welfare plans; short swing profits under Exchange Act 16(b), most claims inter se;
deliberate torts; fraudulent or criminal acts or omissions; willful violations; acts or
omissions involving personal profit to Insured Person; and as otherwise stated in the Policy

Majority Shareholder Exclusion — No coverage for claim by Petsmarketing, Inc. or any 10% or
greater voting shareholder of Hartville Group, Inc.

Outside Directorship Extension — Certain Policy coverages are extended to Insured Persons
acting in certain capacities for non-profit type organizations at the request of Hartville
Group Inc or any of its Subsidiaries

16

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