Document:

exv10w7

 

Exhibit 10.7

HYTHIAM, INC.

Consulting Services Agreement

          Agreement dated as of as of September 15, 2005, between Hythiam, Inc., a Delaware corporation
(“Hythiam”), and David E. Smith & Associates, a [California professional corporation]
(“Consultant”).

          Consultant’s [president and sole shareholder], David E. Smith, M.D. (“Smith”), and Hythiam are
the parties to an Employment Agreement dated as of January 1, 2004 (the “Employment Agreement”),
pursuant to which Smith was engaged and continues to serve, on a part-time basis, as Hythiam’s
Senior Vice President, Medical Affairs.

          Hythiam desires to procure services from Consultant, on an independent contractor basis, that
are outside the scope of the services that Smith is obligated to perform under the terms of the
Employment Agreement, and Consultant is willing to provide such services, in each case, subject to
the terms and conditions of this Agreement.

          Accordingly, Hythiam and Consultant hereby agree as follows:

          1. Description of Services. Beginning on the date hereof, Consultant will consult with
Hythiam as reasonably required from time to time by Hythiam in regard to:

          (a) making Smith (or, with Hythiam’s prior approval, another qualified professional
employed by or under contract to Consultant) available as a speaker, lecturer or discussion
leader at meetings of or presentations to Hythiam’s licensees and referring physicians;

          (b) procuring the attendance of Smith (or, with Hythiam’s prior approval, another
qualified professional employed by or under contract to Consultant) as Hythiam’s
representative at meetings of professional societies; and

          (c) assisting Hythiam in the recruitment of members of Hythiam’s Scientific Advisory
Board and, in case Hythiam should sponsor or co-sponsor any clinical trials, of principal
investigators;

along with such other matters as may be reasonably assigned to Consultant by Hythiam’s Chief
Executive Officer or Chief Operating Officer (collectively, the “Services”). In addition,
Consultant has executed and agrees to comply with:

          (d) Hythiam’s standard Confidentiality and Non-Disclosure Agreement (the “NDA”); and

          (e) Hythiam’s standard Intellectual Property, Confidentiality, Restrictive Covenant and
Invention Assignment Agreement (the “Confidentiality Agreement”);

 

 

the terms of which are hereby incorporated by reference into this Agreement.

          2. Performance Standard. Consultant understands that health care is a highly regulated
industry, and Consultant represents that it is familiar with the laws and regulations governing the
health care industry and will perform Services diligently, competently, professionally, in a timely
manner, and in full compliance with all applicable laws, regulations and industry ethical standards
(collectively “Laws”) and the terms of this Agreement. Consultant also will follow Hythiam’s
ethical marketing practices and any other specific Hythiam policies provided to Consultant, though
Consultant acknowledges that Hythiam is under no obligation to provide any policy with respect to
Laws inasmuch as Consultant is expected to be aware of and comply with Laws independently. Without
limiting the generality of the foregoing, Consultant will not, directly or indirectly, (a)
unlawfully influence or attempt to influence any referrals by physicians of substance abuse
patients to any Hythiam customer or (b) imply or represent that Hythiam provides medical advice,
diagnosis or treatment.

          3. Compensation. During the Term (as defined in Section 5 hereof), Hythiam will compensate
Consultant by paying Consultant a fixed monthly fee of $3,800, payable on or about the
15th of each month in arrears in respect of the monthly period just ended. Consultant
acknowledges that such fee will constitute payment in full for all Services rendered and the
performance by Consultant of all of its other obligations hereunder.

          4. Expense Reimbursement. Consultant will be entitled to reimbursement from Hythiam for
reasonable out-of-pocket expenses for travel and necessary third party services incurred in
performance of Services but only if, in each case such expenses are approved in advance by Hythiam
and based on valid receipts and other documentation sufficient to satisfy IRS standards.
Reasonable travel expenses will consist of coach class airfare, business class lodging, and
reasonable meals and ground transportation expenses.

          5. Term/Termination. This Agreement will commence on the date hereof, will terminate at close
of business on the date immediately preceding the first anniversary of the date hereof and (unless
either party shall elect otherwise, effective with at least 30-days’ prior notice to such effect to
the other party) will automatically and immediately renew for successive one-year periods
thereafter, subject to earlier termination, without penalty:

          (a) by Hythiam, in case Smith should die or become disabled in any material respect,
effective upon notice to such effect to Consultant: and

          (b) by either party, in case the other party should materially breach any of the terms
or conditions of this Agreement and while such breach continues, effective upon 30 days’
notice to the breaching party (such notice to specify such breach with reasonable
particularity), and, following the initial one-year term, effective upon 30 days’ prior
notice to the other party.

In case of termination, Consultant will be entitled to any fees accrued (on the basis of a 30-day
month) and expense reimbursements incurred in accordance with Sections 3 and 4, respectively,
hereof prior to receipt of the notice of termination. Upon termination, Consultant will perform

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no more Services and will not imply or represent that it has a relationship with Hythiam in any way
whatsoever.

          6. Relationship of Parties. It is understood and agreed that during the Term Consultant and
Hythiam are and will remain independent contractors with respect to performance of this Agreement.
Nothing in this Agreement will be construed to constitute Hythiam and Consultant as employer and
employee, partners, joint venturers, agents or anything other than independent contractors.
Hythiam will not pay or withhold, and Consultant is not entitled to, any wages, fees, payroll
taxes, or employee benefits, including health insurance benefits, paid vacation, or any other
employee benefit, for the benefit of Consultant or its employees.

          7. Consultant’s Employees. Consultant will require and ensure that its employees or
contractors who perform Services on behalf of Consultant will be subject to the terms of this
Agreement and will, prior to performance of any Services, if they have not already done so, execute
a copy of the NDA and the Confidentiality Agreement. Consultant also will provide a copy of the
Confidentiality Agreement executed by each such employee or contractor to Hythiam prior to
performance of any Services by such employee or contractor. At the request of Hythiam, Consultant
will provide adequate evidence of such employee’s or contractor’s qualifications to perform the
Project Services. Notwithstanding the foregoing, Consultant will not subcontract any of the
project services without Hythiam’s advance written consent in each case.

          8. Intentionally deleted.

          9. Notices. All notices required or permitted under this Agreement will be in writing and
will be deemed delivered when delivered in person or sent by a nationally-recognized overnight
courier service or three days after being deposited in the United States mail, postage prepaid, ,
addressed as follows:

	 	 	 	 	 
	 

	 	if to Hythiam:
	 	Hythiam, Inc.
	 

	 	 	 	11150 Santa Monica Blvd., 15th Floor
	 

	 	 	 	Los Angeles, CA 90025
	 

	 	 	 	Attention: Chief Operating Officer
	 
	 	 	 	 
	 

	 	if to Consultant:
	 	 David E. Smith & Associates
	 

	 	 	 	856 Stanyan Street
	 

	 	 	 	San Francisco, CA 94117
	 

	 	 	 	Attention: President

or as otherwise specified by notice from one party to the other.

          10. Entire Agreement. The parties acknowledge that this Agreement contains the entire
agreement of the parties with respect to the Services and that there are no other promises or
conditions in any other agreement, whether oral or written, with respect to the

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Services. As regards such subject matter, this Agreement supersedes any other prior written
or oral agreements between the parties.

          11. Amendment/Assignment. This Agreement may be modified or amended if, and only if, the
amendment is made in writing and is signed by both parties. Neither this Agreement nor any right
under this Agreement may be transferred or assigned in whole or in part by either party without the
prior written consent of the other party, and any attempted assignment without such consent will be
null and void. Notwithstanding the foregoing, Hythiam may assign this Agreement in whole or in
part to an affiliate or successor entity without Consultant’s consent.

          12. Severability. If any provision of this Agreement should be held to be invalid or
unenforceable for any reason, the remaining provisions will continue to be valid and enforceable.
If a court or judicial authority finds that any provision of this Agreement is invalid or
unenforceable, but that by limiting such provision it would become valid and enforceable, then such
provision will be deemed to be written, construed, and enforced as so limited but only to the
minimal extent required to make the provision valid and enforceable.

          13. Waiver of Contractual Right. The failure of either party to enforce any provision of this
Agreement will not be construed as a waiver or limitation of that party’s right subsequently to
enforce and compel strict compliance with every provision of this Agreement.

          14. Applicable Law. This Agreement will be governed by the laws of the State of California
(without regard to that body of law known as “Conflicts of Law”).

          15. Benefits, Binding Effect. This Agreement will be binding upon and inure to the benefit of
the respective parties and their permitted assigns and successors in interest.

          16. Survivability. Notwithstanding anything to the contrary set forth in this Agreement,
Sections 2, 5, 9, 12, 13, 14, and 15 and this Section will survive termination of this Agreement
for any reason.

          IN WITNESS WHEREOF, to these terms, each party has caused this Agreement to be executed below
in its name and on its behalf, all as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	HYTHIAM, INC.	 	 	 	DAVID E. SMITH & ASSOCIATES	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	 	 	By	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Anthony M. LaMacchia
	 	 	 	 	 	David E. Smith, M.D.	 	 
	 

	 	Chief Operating Officer
	 	 	 	 	 	President	 	 

4exv10w12

 

Exhibit 10.12

Sterling Chemicals, Inc.

Bonus Plan

     Our Bonus Plan is comprised of two programs that provide eligible employees with
opportunities to receive cash compensation in addition to their salaries. One of these programs
pays bonuses based, in part, on our attainment of specified levels of EBITDA (the “Corporate
Performance Bonus Program”), while the second program pays bonuses based on individual
performance, irrespective of the amount of EBITDA we earn during the year (the “Individual
Performance Bonus Program”).

Eligibility.

     All of our salaried personnel, both exempt and non-exempt, may be paid bonuses under our
Corporate Performance Bonus Program and our Individual Performance Bonus Program. In order to be
paid a bonus, an employee must be employed by us at the time bonuses are paid, unless the employee
has retired, died or become disabled, in which event a pro rata bonus payment will be made based on
full months of service for the relevant year.

Corporate Performance Bonus Program.

     Our Compensation Committee has set three separate corporate EBITDA hurdles under the Corporate
Performance Bonus Program; a Threshold Amount ($35 million), a Target Amount ($70 million) and a
Maximum Payment Amount ($140 million). In order for any bonus to be paid under our Corporate
Performance Bonus Program, we must attain at least the Threshold Amount of EBITDA. If we earn at
least the Threshold Amount of EBITDA for any year, the maximum bonus that can be earned by an
employee for that year under our Corporate Performance Bonus Program is determined by the actual
amount of EBITDA earned, the employee’s base salary for that year and the employee’s “Bonus Target”
(which is assigned in March of each year and is expressed as a percentage of the employee’s base
salary), on the following basis:

	 	 	 
	EBITDA Earned	 	Maximum Bonus Payment
	$35 million (Threshold)

	 	Base Salary X Bonus Target X 50%
	 
	 	 
	$70 million (Target)

	 	Base Salary X Bonus Target X 100%
	 
	 	 
	$140 million (Maximum)

	 	Base Salary X Bonus Target X 200%

 

 

If our EBITDA is between the Threshold Amount and the Target Amount, or between the Target Amount
and the Maximum Payment Amount, the maximum bonus that can be paid to an employee for that year is
pro-rated between the two levels on a straight-line basis.

     Once the maximum amount of bonus for an employee is set, the actual bonus earned by that
employee is determined based on his or her performance. The actual amount of bonus paid to our
Chief Executive Officer and each of our Senior Vice Presidents is determined by our Compensation
Committee. For each of our other eligible employees, if the employee’s rating for the year for
which the bonus is being paid is SE, OE or FS, that employee will receive a bonus of between 51%
and 100% of the maximum bonus that could have been paid to that employee for that year under our
Corporate Performance Bonus Program, with the exact percentage to be determined by the employee’s
ranking within his or her employee group. Any employee whose rating for the year for which the
bonus is being paid is GM will be paid a bonus equal to 50% of the maximum bonus that could have
been paid to that employee for that year under our Corporate Performance Bonus Program. However,
if the amount of bonus to be paid to any employee whose rating is SE, OE, FS or GM is less than the
amount paid to each hourly employee under our Gainsharing Program, then the amount of that
employee’s bonus will be increased to match the amount paid under our Gainsharing Program. Any
employee whose rating for the year for which the bonus is being paid is DM will not be paid a bonus
for that year, irrespective of the amount of EBITDA we earned for the year.

Individual Performance Bonus Program.

     In any year when we do not attain the Threshold Amount of EBITDA, each of our salaried
employees has the ability to earn a bonus under our Individual Performance Bonus Program of up to
50% of his or base salary for that year times his or her Bonus Target. In any year when do earn at
least the Threshold Amount of EBITDA under our Corporate Performance Bonus Program, no bonus is
paid under our Individual Performance Bonus Program. The actual bonus earned by each employee
under our Individual Performance Bonus Program is based on his or her performance. Any employee
whose rating for the year for which the bonus is being paid is SE, OE or FS will receive a bonus of
between 40% and 100% of the maximum bonus that could have been paid to that employee for that year
under our Individual Performance Bonus Program, the exact percentage to be determined by the
employee’s ranking within his or her employee group. Any employee whose rating for the year for
which the bonus is being paid is GM or DM will not be paid a bonus for that year under our
Individual Performance Bonus Program. Our Chief Executive Officer and each of our Senior Vice
Presidents are not eligible for bonuses under the Individual Performance Bonus Program. Whether a
bonus will be paid to our Chief Executive Officer or any of our Senior Vice Presidents for any year
when we do not attain the Threshold Amount of EBITDA, and if so, the amount to be paid, will be
determined on an annual basis by our Compensation Committee.

Payment.

     At the end of each year, our financial statements are audited and presented to our Audit
Committee for approval. The results of the audit will determine whether we have earned

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the Threshold Amount of EBITDA and, consequently, whether bonuses will be paid under our Corporate
Performance Bonus Program or our Individual Performance Bonus Program. Once our Audit Committee
has approved the audit for the year, bonus amounts for each employee for that year will be
determined, and the bonus payments will be made in any event on or before March 14. Bonuses are
paid in a single lump sum after all taxes have been withheld. The payment of a bonus does not,
however, affect the employee’s base pay in any manner and has no impact on the amount or level of
benefits under any of our other benefit plans.

Payment Reductions.

     The amount of bonus paid to an employee under our Corporate Performance Bonus Program or our
Individual Performance Bonus Program assumes continued employment with us in active status
throughout the year. For purposes of our Bonus Plan, active status is made up of regular hours
worked, vacation time, jury duty, service as a witness under court subpoena, funeral leave and
military leave. Non-active status includes all other absences from work for any reason, including
illness, injury, personal business, doctor’s appointment, excused absence, family illness, leave of
absences and personal leave, etc. Once the amount of bonus to be paid to each employee is
determined, an employee’s bonus may be reduced if the employee has accumulated absences totaling at
least 44 working days (352 hours for shift workers) during the year for which the bonus is being
paid. The amount of reduction will be 16.67% for the first 44 working days (352 hours for shift
workers) of non-active status plus an additional 8.33% reduction for each additional 22 working
days (176 hours for shift workers) of non-active status during the year for which the bonus is
being paid.

     The amount of bonus paid to any employee who was hired after July 1 of the year for which the
bonus is being paid will be pro rated based on the number of full months of service during that
year. The amount of bonus paid to any employee who became eligible under our Bonus Plan in the
middle of a year due to a promotion or change in job classification will not be pro rated due to
such promotion or job classification (i.e., all months of service with us during that year will be
treated as if they were performed in the employee’s most recent position).

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