Document:

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

THIS AGREEMENT (the “Agreement”) is made and entered into effective as of the ____ day of December, 2007, by and among Artificial Life, Inc., a Delaware corporation (the “Company”), and the purchasers identified on the signature pages hereto (each, a “Purchaser” and collectively, the “Purchasers”).

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows.

	
            1.
 	
            Definitions.
 

As used in this Agreement, the following terms, not previously defined, will have the meanings as set forth herein:

1.1       “Commission” means the United States Securities and Exchange Commission, and any successor thereto.  

1.2       “Common Stock” means the Company’s common stock, $0.01 par value.

1.3       “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time to time thereunder.  

1.4       “Person” means an individual, partnership, limited partnership, corporation, business trust, limited liability company, an association, joint stock company, a trust, unincorporated organization, joint venture or other entity of whatever nature.  

1.5       “Registrable Common” means any shares of Common Stock issued to a Purchaser purchased pursuant to the Subscription Agreement (“Purchased Shares”), and shares of Common Stock issuable upon the exercise of the warrants (“Warrant Shares”) purchased pursuant to the Subscription Agreement, including any shares of Common Stock or other securities issued as a dividend, stock split, reclassification, recapitalization, other distribution or otherwise with respect to or in exchange for replacement of the preceding; provided, however, that Registrable Common will not include any shares, the
sale of which has been registered pursuant to the Securities Act or which have been or could be sold to the public without restriction.

1.6       “Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement.

1.7       “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

1.8       “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

1.9       “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder.

1.10      “Subscription Agreement” means the Subscription Agreement dated as of December 28, 2007 by and among the Company and such Purchasers, for the purchase of shares of Common Stock and warrants to purchase Common Stock. 

 

	
            2.
 	
            Registration Rights.
 

2.1.      Subject to the limitations and requirements set forth in this Section 2, the Company will prepare and file (i) within thirty (30) days after the receipt of a written request from the Purchaser of the largest number of shares of Common Stock under the Subscription Agreement, a registration statement under the Securities Act, on the appropriate form covering resale of the Registrable Common other than the Warrant Shares, and (ii) within thirty (30) days after the date that is six months from the date of the closing of the transactions contemplated by the Subscription Agreement, a registration statement under the Securities Act, on the appropriate form covering resale of the Registrable Common other than the Purchased Shares (each of the registration statements described in (i) and (ii) is referred to as a “Registration
Statement”, and the 30-day time periods described therein are each a “Filing Date”).  However, if 100% of the Registrable Common not previously registered hereunder shall equal or exceed 30% of the issued and outstanding shares of Common Stock on the applicable Filing Date (such amount, the “Registration Cap”), and all such shares of Registrable Common are required to be registered under the provisions of this Section 2.1(i) and/or (ii), such Registration Statement(s) shall register a number of shares of Registrable Common which is equal to the Registration Cap, and the remaining unregistered Registrable Common shall be subject to Section 2.3 until all shares of Registrable Common required to be registered hereunder are registered.  In the event that less than 100% of the Purchased Shares or Warrant Shares, as applicable,is included on a
Registration Statement, the number of such shares to be registered for each Purchaser shall be reduced pro-rata among all Purchasers and each Purchaser shall have the right to designate which such registrable shares shall be omitted from the applicable Registration Statement.  The Company will use its reasonable best efforts to cause the applicable Registration Statement to become effective within ninety (90) days after the applicable Filing Date (the “Effective Date”),which shall be extended for an additional thirty (30) days in the event the Commission provides comments on issues related to Rule 415.  Notwithstanding the foregoing, (i) the Purchasers may not request the Company to file a Registration Statement covering the Purchased Shares until at least six (6) months from the closing of the transaction contemplated by the Subscription Agreement, (ii) the Company shall not be required to file a Registration Statement covering the Warrant Shares if the Purchaser of the
largest number of shares of Common Stock under the Subscription Agreement waives such requirement in writing on or before June 30, 2008, and (iii) the Company shall not be required to file any Registration Statement if the Purchasers are permitted to make unlimited resales of the subject Registrable Commmon without the benefit of any Registration Statement and without being required to file a Form 144.  

2.2.      Subject to the limitations and requirements set forth in this Section 2, if, for reasons that are within the Company’s control, (i) the Company fails to file the Registration Statement(s) by the applicable Filing Date(s), if required to do so, or (ii) such Registration Statement(s) are not declared effective by the applicable Effective Date(s) (each of (i) and (ii), an “Event”), then the Company shall pay to each Purchaser in cash (or an equivalent number of shares of Common Stock, at each such Purchaser’s option), as liquidated damages and not as a penalty, (x) on the first business day following the date of the Event, an amount equal to one percent (1.0%) of the total Purchase Price paid by such Purchaser, as set forth in the Subscription Agreement, and (y) on each monthly
anniversary of the date of each Event, if the applicable condition remains unsatisfied, an amount equal to one percent (1.0%) of the total Purchase Price paid by such Purchaser, as set forth in the Subscription Agreement.

 

 

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2.3       Additional Registration Statements.        In the event that the Company is unable to register 100% of the Purchased Shares or Warrant Shares, as applicable, on a Registration Statement, as contemplated in Section 2.1 above, the Company shall file, if then required under Section 2.1, as soon as reasonably practicable, an additional Registration Statement covering the resale by the Purchasers of an amount or Purchased Shares or Warrant Shares, as applicable, equal to the Registration Cap.  If, following such subsequent Registration Statement, there are additional unregistered Purchased Shares or Warrant Shares  and the Company is required to register such shares pursuant to Section 2.1, the Company shall file subsequent Registration Statements pursuant to
the terms of this Section 2.3 until all such shares are registered.

3.         Registration Obligations.  At such time as the Company is obligated to file a Registration Statement with the Commission pursuant to this Agreement the Company will use its reasonable best efforts to effect the registration of the Registrable Common in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

a.         The Company shall submit to the Commission, within two (2) Business Days after the Company learns that no review of any Registration Statement will be made by the staff of the Commission or that the staff has no further comments on such Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than forty-eight (48) hours after the submission of such request.  The Company shall use its reasonable best efforts to keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Purchasers may sell all of the Registrable Common covered by such Registration Statement without restriction, and (ii) the date as of which all Registrable Common covered by the Registration Statement have been
publicly sold by the Purchasers included therein (the “Registration Period”).  The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.

 

b.         The Company shall prepare and file with the Commission such amendments (including post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Common of the Company covered by such Registration Statement until such time as all of such Registrable Common shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.  In the case of
amendments and supplements to any Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous report or other report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

 

c.         The Company shall (A) permit legal counsel to the Purchasers (“Legal Counsel”) to review and comment upon (i) a Registration Statement at least five (5) Business Days prior to its filing with the Commission and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and any similar or successor reports) within a reasonable number of days prior to their filing with the Commission, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which such legal counsel reasonably objects.  Legal Counsel shall promptly review all documents submitted to them by the 

 

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Company pursuant to this Section; provided that if the Company has not received a response from Legal Counsel within forty-eight (48) hours of providing such documents, the Company may assume that Legal Counsel has no comments.  

 

d.         Upon an Purchaser’s reasonable request, the Company shall furnish to each Purchaser whose Registrable Common are included in any Registration Statement in PDF format via electronic mail, without charge, (i) promptly after the same is prepared and filed with the Commission, at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, one (1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto and (iii) such other documents, including copies of any preliminary or final prospectus relating to any Registration Statement; provided, however, that separate delivery shall not be required if such documents are available via the EDGAR system on the Commission’s website.  First Wilshire Securities Management, Inc. (“FW”) shall be deemed to have made a permanent request so the Company shall deliver to FW the documents described in this Section 3(d) without further action on the part of FW.

 

e.         The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Purchasers of the Registrable Common covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as are specifically requested in writing by the Purchasers no later than 20 days after the applicable Filing Date(s), (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof; provided that such effectiveness of the Registration Statement shall only be required to be maintained during the Registration Period
and the effectiveness of any other Registration Statement hereunder shall only be required to be maintained during the intended distribution period thereof, (iii) take such other actions with respect to the Registration Statement as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Common for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction. The Company shall promptly notify Legal Counsel and each Purchaser who holds Registrable Common of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Common for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

f.         The Company shall notify Legal Counsel and each Purchaser in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(q), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and, upon request, deliver one copy of such supplement or amendment
to Legal Counsel and each Purchaser in PDF format via electronic mail; provided, however, that FW shall be deemed to have made a permanent request so the Company shall deliver to FW the documents described in this Section 3(f) without further action on the part of FW.  The Company shall also promptly notify Legal Counsel and each Purchaser in writing (i) when a prospectus or any prospectus supplement or post-effective amendment to a Registration Statement has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall 

 

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be delivered to Legal Counsel and each Purchaser by facsimile within one Business Day of such effectiveness), (ii) of any request by the Commission for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

 

g.         The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Common for sale in any jurisdiction and, if such an order or suspension is issued, to use reasonable efforts to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and each Purchaser who holds Registrable Common being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

h.         The Company shall hold in confidence and not make any disclosure of information concerning an Purchaser provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement.  The Company agrees that it shall, upon learning that disclosure of such information concerning an Purchaser is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to such Purchaser and allow such Purchaser, at the Purchaser’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

i.          The Company shall use its reasonable best efforts to cause all of the Registrable Common covered by a Registration Statement to be listed on the securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Common is then permitted under the rules of such exchange. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(i).

 

j.          The Company shall cooperate with the Purchasers who hold Registrable Common being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Common to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Purchasers may reasonably request and registered in such names as the Purchasers may request, provided that Purchasers provide all information necessary for the Registration Statement(s) if the name(s) on such certificate(s) differ from that of the applicable Purchaser. 

 

k.         If reasonably requested by a Purchaser in writing, the Company shall as soon as reasonably practicable, supplement or make amendments to any Registration Statement if reasonably requested by a Purchaser holding any Registrable Common covered by such Registration Statement.

 

l.          The Company shall use its reasonable best efforts to cause the Registrable Common covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Common.

 

m.        The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of a Registration Statement.

 

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n.         The Company shall otherwise comply with all applicable rules and regulations of the Commission in connection with any registration hereunder in all material respects.

 

o.         Within two (2) trading days after a Registration Statement is ordered effective by the Commission, the Company shall deliver to the transfer agent for such Registrable Common confirmation that such Registration Statement has been declared effective by the Commission in such form, and together with such other documents or legal opinions, as such transfer agent may require.

 

p.         Notwithstanding anything to the contrary herein, the Company may delay, including by delaying the filing or effectiveness of the Registration Statement, the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interest of the Company (a “Grace Period”) and, as applicable, suspend sales of Registrable Common under an effective Registration Statement; provided, that the Company shall promptly (i) notify the Purchasers in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material,
non-public information to the Purchasers) and the date on which the Grace Period will begin, and (ii) notify the Purchasers in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed thirty (30) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of sixty (60) days (each, an “Allowable Grace Period”).  For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Purchasers receive the notice referred to in clause (i) and shall end on and include the later of the date the Purchasers receive the notice referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 3(g) hereof
shall not be applicable during the period of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.

 

q.         The Company shall make available at reasonable times for inspection by one or more representatives of the underwriter(s) in connection with a Registration Statement, all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act and cause the Company’s officers, directors, managers and employees to supply all information reasonably requested by any representatives in connection with the Registration Statement.

 

r.         In the case of an underwritten offering which includes Registrable Common, the Company shall set forth in full in the underwriting agreement, indemnification provisions and procedures which provide rights no less protective than those set forth in Section 5 hereof with respect to all parties to be indemnified.

4.         Expenses.  With respect to the registration requested pursuant to Section 2 hereof (except as otherwise provided in such Section) and with respect to each inclusion of Registrable Common in a Registration Statement pursuant to Section 2 hereof (except as otherwise provided in such Section), the Company will bear the following fees, costs and expenses: all registration filing fees, printing expenses, fees and disbursements of counsel and accountants for the Company, all internal Company expenses, all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified, and the premiums and other costs of policies of insurance against liability (if any) arising out of such public
offering.  Fees and disbursements of counsel and accountants for the Purchasers, underwriting discounts and commissions and transfer taxes relating to the shares included in the offering by the Purchasers, and any other expenses incurred by the Purchasers not expressly included above, will be borne by the Purchasers.

 

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            5.
 	
            Indemnification.
 

5.1.      Indemnification by Company.  To the fullest extent permitted by law, the Company will indemnify and hold harmless each Purchaser that has Registrable Common included in a Registration Statement pursuant to the provisions hereof, its directors and officers, and any underwriter (as defined in the Securities Act) for such Purchaser and each Person, if any, who controls such Purchaser or such underwriter within the meaning of the Securities Act, from and against, and will reimburse such Purchaser and each such underwriter and controlling Person with respect to, any and all loss, damage and liability (collectively, “Losses”) to which such Purchaser or any such underwriter or controlling Person may become subject under the Securities Act, state securities laws or otherwise, and the Company will
pay to each such Purchaser, underwriter or controlling person any legal or other costs or expenses reasonably incurred by such person in connection with investigating or defending any such Loss, insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Purchaser in writing specifically for use in
the preparation thereof; provided, however, that the indemnity agreement in this Section 5.1 will not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of the Company, which consent will not be unreasonably withheld.

5.2.      Indemnification by Purchasers.  Each Purchaser that has Registrable Common included in a Registration Statement pursuant to the provisions hereof will severally, but not jointly, indemnify and hold harmless the Company, its directors and officers, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Purchaser selling securities pursuant to such Registration Statement, any controlling Person of any such selling Purchaser, any underwriter and any controlling Person of any such underwriter (each, an “Indemnitee”) from and against, and will reimburse any Indemnitee with respect to, any and all Losses to which such Indemnitee may become subject under the Securities Act, state securities laws or otherwise, and such Purchaser will pay to each Indemnitee,
any legal or other costs or expenses reasonably incurred by such person in connection with investigating or defending any such Loss, insofar as such Losses are caused by any untrue or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in conformity with written information furnished by such Purchaser specifically for use in the preparation thereof; provided, however, that the obligations of each Purchaser under this Section 5.2 will be limited to an amount equal
to the net proceeds to such Purchaser from the sale of Registrable Common as contemplated herein, unless such claim, loss, damage, liability or action resulted from such Purchaser’s fraudulent misconduct.

5.3.      Indemnification Procedures.  Promptly after receipt by a party entitled to indemnification pursuant to this Section (each, an “Indemnified Party”) of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions such Indemnified Party will, if a claim is to be made against the party obligated to provide indemnification pursuant to this section (each, an “Indemnifying Party”), promptly notify the Indemnifying Party of the commencement thereof; but the omission to provide such notice will not relieve the Indemnifying Party from any liability hereunder, except to the extent that the delay in giving, or failing to give, such notice has a material adverse effect upon the ability of the
Indemnifying Party to defend against the claim.  In case such action is brought 

 

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against an Indemnified Party, the Indemnifying Party will have the right to participate in and, at the Indemnifying Party’s option, to assume the defense thereof, singly or jointly with any other Indemnifying Party similarly notified, with counsel or reasonably satisfactory to the Indemnified Party; provided, however, that if the defendants in any action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party reasonably concludes that there may be legal defenses available to any Indemnified Parties that are different from or additional to those available to the Indemnifying Party, or if there is a conflict of interest which would prevent counsel for the Indemnifying Party from also representing the Indemnified Party, the Indemnified Party will have the right to select counsel to participate in the defense of such action on behalf of such Indemnified Party at the expense
of the Indemnifying Party; provided further, however, that the Indemnifying Party will be responsible for the expenses of only one such special counsel (and one local counsel if necessary for jurisdictional purposes) selected jointly by the Indemnified Parties if there is more than one Indemnified Party.  After notice from an Indemnifying Party to any Indemnified Party of such Indemnifying Party’s election to assume the defense or the action, the Indemnifying Party will not be liable to such Indemnified Party pursuant to this Section 5 for any legal or other expense subsequently incurred by such Indemnified Party in connection with the defense thereof, unless (i) the Indemnified Party has employed counsel in accordance with the proviso of the preceding sentence, or (ii) the Indemnifying Party has not employed counsel satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after the notice of the commencement of the action, or (iii) the
Indemnifying Party has authorized the employment of counsel for the Indemnified Party at the expense of the Indemnifying Party.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution for which it is responsible with respect to any amounts for which it would otherwise be liable under Section 5 to the fullest extent permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Common which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Common who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Common shall be limited in
amount to the net amount of proceeds received by such seller from the sale of such Registrable Common pursuant to such Registration Statement.

6.         Cooperation.  Any Purchaser whose shares of Registrable Common are to be included in a Registration Statement filed pursuant to the provisions of Section 2.1 agrees to cooperate with all reasonable requests by the Company necessary to effectuate the purposes of this Agreement, including by timely providing the Company with all information necessary to prepare and file such Registration Statement.

	
            7.
 	
            Miscellaneous.
 

7.1.      Waivers, Amendments and Approvals.  In each case in which the approval of the Purchasers is required by the terms of this Agreement, such requirement will be satisfied by a vote or the written action of Purchasers of at least a majority of the Registrable Common held by all the Purchasers, unless a higher percentage is specifically required by the terms of this Agreement.  Any term or provision of this Agreement requiring performance by or binding upon the Company or the Purchasers may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a writing signed by the Company and the Purchasers of at least a majority of the Registrable Common held by all the Purchasers.  Any amendment or
waiver effected in accordance with this Section will be binding upon all of the Purchasers.  The waiver by a party of any breach hereof or default in payment of any amount due hereunder or default in the performance hereof will not be deemed to constitute a waiver of any other default or succeeding breach or default.  Written notice of any such waiver, consent or agreement of amendment, modification or supplement will be given to the record Purchaser of Registrable Common who did not give written consent thereto.

 

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7.2.      Notices.  All notices, requests, consents and other communications required or permitted hereunder will be in writing and will be delivered either by (i) personal delivery, (ii) registered or certified airmail, postage prepaid or (iii) facsimile, as follows:

7.2.1.   to a Purchaser, addressed to such Purchaser as set forth on such Purchaser’s signature page attached hereto.

	
             
 	
            7.2.2.
 	
            to the Company, to:
 

Artificial Life, Inc.

	
             
 	
            26/F, 88 Hing Fat Street
 

	
             
 	
            Causeway Bay
 

	
             
 	
            Hong Kong
 

	
             
 	
            Attn: Eberhard Schoneburg, Chief Executive Officer
 

	
             
 	
            Facsimile:  (852) 3102-0690
 

	
             
 	
            With a copy to:
 

K&L Gates

	
             
 	
            1900 Main Street, Suite 600
 

	
             
 	
            Irvine, CA 92614
 

	
             
 	
            Attn: Raymond L. Veldman, Esq.
 

	
             
 	
            Facsimile:  (949) 253-0900
 

and such notices and other communications will for all purposes of this Agreement be treated as being effective or having been given if delivered personally, or, if sent by mail, when received.  Any party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section.

7.3.      Entire Agreement.  This Agreement, included all amendments, attachments and addenda hereto, and the documents referenced herein and the exhibits thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede and replace all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto and thereto.  The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

7.4.      Other Remedies.  Any and all remedies herein expressly conferred upon a party will be deemed cumulative with, and not exclusive of, any other remedy conferred hereby or by law on such party, and the exercise of any one remedy will not preclude the exercise of any other.

7.5.      Delays or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party under this Agreement will impair any such right, power or remedy of such party nor will it be construed to be a waiver of any such breach or default, or an acquiescence thereto, or of a similar breach of default thereafter occurring; nor will any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach or default under the Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement must be in writing and will be effective only to the extent
specifically set forth in such writing.

7.6.      Assignment.  The rights of the Purchasers under this Agreement may not be assigned to any subsequent transferee of the Registrable Common without the express written consent of the Company.  

 

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7.7.      Governing Law.  This Agreement will be governed by and construed under the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

7.8.      Counterparts. This Agreement may be executed concurrently (including facsimile signatures) in two or more counterparts, each of which will be accepted as an original, but all of which together will constitute one and the same instrument.

7.9.      Severability.  Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, will be given effect separately from the provision or provisions determined to be illegal or unenforceable and will not be affected thereby.

	
            8.
 	
            Reports Under the 1934 Act.
 

 

With a view to making available to the Purchasers the benefits of Rule 144, the Company agrees to:

 

a.         make and keep public information available, as those terms are understood and defined in Rule 144; and

 

b.         furnish to each Purchaser so long as such Purchaser owns Registrable Common, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

 

 [Signature pages follow]

 

10

IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first written above.

 

“Company”

 

ARTIFICIAL LIFE, INC.,

a Delaware corporation

 

	
             
 	
            By: 
 	
                 /s/ Eberhard Schoneburg
 

Eberhard Schoneburg

Chief Executive Officer

 

11

 

	
            [PURCHASER NAME]

 

 

By:        _________________________

Name:  _________________________

Title:    _________________________

 

Number of Common Shares: ________

Number of Warrant Shares: _________

 
 
	
            Address for Notice:

 

Purchaser: ____________________________
 Address: __________________________
 City, State, ZIP: ____________________

Facsimile No.:___________________

Telephone No.:___________________

Attn: ______________________

 
 
	
            With a copy to:

 

Name: ____________________

Address: __________________________
 City, State, ZIP: ____________________

Facsimile No.:___________________

Telephone No.:___________________

Attn: ______________________

 
 

 

 

 

12Exhibit 10.1

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

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                                 KEITH G. MYERS

                                       AND

                                 LHC GROUP, INC.

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

<PAGE>

                              EMPLOYMENT AGREEMENT

     1. Effective Date.........................................................1
        --------------

     2. Employment.............................................................1
        ----------

     3. Employment Period......................................................1
        -----------------

     4. Extent of Service......................................................1
        -----------------

     5. Compensation and Benefits..............................................2
        -------------------------

           (a)   Base Salary...................................................2

           (b)   Incentive, Savings and Retirement Plans.......................2

           (c)   Welfare Benefit Plans.........................................2

           (d)   Expenses......................................................2

           (e)   Fringe Benefits...............................................2

           (g)   Vacation......................................................3

           (h)   Office and Support Staff......................................3

     6. Change of Control......................................................3
        -----------------

     7. Termination of Employment..............................................4
        -------------------------

           (a)   Death or Retirement...........................................4

           (b)   Disability....................................................4

           (c)   Termination by the Company....................................4

           (d)   Termination by Executive......................................5

           (e)   Notice of Termination.........................................6

           (f)   Date of Termination...........................................6

     8. Obligations of the Company upon Termination............................6
        -------------------------------------------

           (a)   Termination by Executive for Good Reason;
                 Termination by the Company Other Than for Cause or
                 Disability....................................................6

           (b)   Death, Disability or Retirement...............................8

           (c)   Cause or Voluntary Termination without Good Reason............8

           (d)   Expiration of Employment Period...............................8

           (e)   Resignations..................................................8

     9. Non-exclusivity of Rights..............................................9
        -------------------------

     10. Full Settlement; No Obligation to Mitigate............................9
         ------------------------------------------

     11. Certain Additional Payments by the Company............................9
         ------------------------------------------

     12. Costs of Enforcement.................................................11
         --------------------

     14. Restrictions on Conduct of Executive.................................12
         ------------------------------------

           (a)   General......................................................12

<PAGE>

           (b)   Definitions..................................................12

           (c)   Restrictive Covenants........................................14

           (d)   Enforcement of Restrictive Covenants.........................16

     15. Consent to Jurisdiction..............................................16
         -----------------------

     16. Assignment and Successors............................................17
         -------------------------

     17. Miscellaneous........................................................17
         -------------

                                       ii
<PAGE>

                              EMPLOYMENT AGREEMENT

       THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into by and
between LHC Group, Inc., a Delaware corporation (the "Company"), and Keith G.
Myers ("Executive"), to be effective as of the Effective Date, as defined in
Section 1.

                                   BACKGROUND
                                   ----------

       The Company desires to engage Executive as Chairman and Chief Executive
Officer from and after the Effective Date, in accordance with the terms of this
Agreement. Executive is willing to serve as such in accordance with the terms
and conditions of this Agreement. All prior employment agreements between
Executive and the Company shall be terminated upon the Effective Date of this
Agreement and neither party shall have any further obligations under any such
terminated employment agreements.

       NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

       1.  Effective Date. The effective date of this Agreement (the "Effective
Date") shall be January 1, 2008.

       2.  Employment. Executive is hereby employed on the Effective Date as
Chairman and Chief Executive Officer. In his capacity as Chairman and Chief
Executive Officer, Executive shall have the duties, responsibilities and
authority commensurate with such position as shall be assigned to him by the
Board of Directors of the Company. In his capacity as Chairman and Chief
Executive Officer of the Company, Executive will report directly to the Board of
Directors of the Company.

       3.  Employment Period. Unless earlier terminated herein in accordance
with Section 7 hereof, Executive's employment shall be for a three year term,
beginning on the Effective Date and ending on the third anniversary of the
Effective Date (the "Employment Period"). Beginning on the third anniversary of
the Effective Date and on each subsequent anniversary of the Effective Date, the
Employment Period shall, without further action by Executive or the Company, be
extended by an additional one-year period; provided, however, that either the
Company or the Executive may, by notice to the other given at least sixty (60)
days prior to the scheduled expiration of the Employment Period, cause the
Employment Period to cease to extend automatically. Upon such notice, the
Employment Period shall terminate upon the expiration of the then-current term,
including any prior extensions.

       4.  Extent of Service. During the Employment Period, and excluding any
periods of vacation, holiday, sick leave and Company-approved leave of absence
to which Executive is entitled in accordance with Company policies, Executive
agrees to devote substantially all of his business time, attention, skill and
efforts exclusively to the faithful performance of his duties hereunder. It
shall not be a violation of this Agreement for Executive to (i) devote
reasonable time to charitable or community activities, (ii) serve on corporate,
civic, educational or charitable boards or committees, subject to the Company's
standards of business conduct or other code of ethics, (iii) deliver lectures or
fulfill speaking engagements from time to time on an infrequent basis, and/or
(iv) manage personal business interests and investments, subject to the
Company's standards of business conduct or other code of ethics, and so long as
such activities do not interfere in a material manner or on a routine basis with
the performance of Executive's responsibilities under this Agreement.

                                       1
<PAGE>

       5.  Compensation and Benefits.

           (a) Base Salary. During the Employment Period, the Company will pay
to Executive base salary at the rate of U.S. $339,900 per year ("Base Salary"),
less normal withholdings, payable in approximately equal bi-weekly or other
installments as are or become customary under the Company's payroll practices
for its employees from time to time. The compensation committee of the Board of
Directors of the Company (or the full Board, if there is no compensation
committee) shall review Executive's Base Salary annually and may increase (but
not decrease) Executive's Base Salary from year to year. Such adjusted salary
then shall become Executive's Base Salary for purposes of this Agreement. The
annual review of Executive's salary by the Board will consider, among other
things, Executive's own performance, and the Company's performance.

           (b) Incentive, Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs available to senior executive
officers of the Company ("Peer Executives"). Without limiting the foregoing, the
following shall apply:

               (i) during the Employment Period, Executive will be entitled to
participate in the Company's executive bonus plan, pursuant to which he will
have an opportunity to receive an annual cash bonus based upon the achievement
of performance goals established from year to year by the compensation committee
of the Board of Directors of the Company (such bonus earned at the stated "goal"
level of achievement being referred to herein as the "Target Bonus"); and

               (ii) during the Employment Period, Executive will be eligible for
grants, under the Company's long-term incentive plan or plans, of stock options
and/or restricted stock awards (or such other stock-based awards as the Company
makes to Peer Executives). Nothing herein requires the Board of Directors to
make grants of options or other awards in any year.

           (c) Welfare Benefit Plans. During the Employment Period, Executive
and Executive's eligible dependents shall be eligible for participation in, and
shall receive all benefits under, the welfare benefit plans, practices, policies
and programs provided by the Company (including, without limitation, medical,
prescription drug, dental, disability, employee life, dependent life, accidental
death and travel accident insurance plans and programs) ("Welfare Plans") to the
extent available to other Peer Executives.

           (d) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in the course of performing his duties and responsibilities under this
Agreement, in accordance with the policies, practices and procedures of the
Company to the extent available to other Peer Executives with respect to travel,
entertainment and other business expenses.

           (e) Fringe Benefits. During the Employment Period, Executive shall be
entitled to fringe benefits in accordance with the plans, practices, programs
and policies of the Company available to other Peer Executives.

                                       2
<PAGE>

           (f) Vacation. During the Employment Period, Executive will be
entitled to such paid vacation time as may be provided from time to time under
any plans, practices, programs and policies of the Company available to other
Peer Executives.

           (g) Office and Support Staff. During the Employment Period, Executive
will be entitled to office, furnishings and equipment of similar type and
quality made available to other Peer Executives. During the Employment Period,
Executive will be entitled to secretarial and other assistance reasonably
necessary for the performance of his duties and responsibilities.

       6.  Change of Control. For the purposes of this Agreement, a "Change of
Control" shall mean the occurrence of any of the following events:

           (a) individuals who, on the Effective Date, constitute the Board of
           Directors of the Company (the "Incumbent Directors") cease for any
           reason to constitute at least a majority of such Board, provided that
           any person becoming a director after the Effective Date and whose
           election or nomination for election was approved by a vote of at
           least a majority of the Incumbent Directors then on the Board shall
           be an Incumbent Director; provided, however, that no individual
           initially elected or nominated as a director of the Company as a
           result of an actual or threatened election contest with respect to
           the election or removal of directors ("Election Contest") or other
           actual or threatened solicitation of proxies or consents by or on
           behalf of any "person" (such term for purposes of this Section 6
           being as defined in Section 3(a)(9) of the Securities Exchange Act of
           1934 (the "Exchange Act") and as used in Section 13(d)(3) and
           14(d)(2) of the Exchange Act) other than the Board ("Proxy Contest"),
           including by reason of any agreement intended to avoid or settle any
           Election Contest or Proxy Contest, shall be deemed an Incumbent
           Director; or

           (b) any person is or becomes a "beneficial owner" (as defined in Rule
           13d-3 under the Exchange Act), directly or indirectly, of either (i)
           35% or more of the then-outstanding shares of common stock of the
           Company ("Company Common Stock") or (ii) securities of the Company
           representing 35% or more of the combined voting power of the
           Company's then outstanding securities eligible to vote for the
           election of directors (the "Company Voting Securities"); provided,
           however, that for purposes of this paragraph (b), the following
           acquisitions of Company Common Stock or Company Voting Securities
           shall not constitute a Change of Control: (A) an acquisition directly
           from the Company, (B) an acquisition by the Company or a subsidiary
           of the Company, (C) an acquisition by any employee benefit plan (or
           related trust) sponsored or maintained by the Company or any
           subsidiary of the Company, or (D) an acquisition pursuant to a
           Non-Qualifying Transaction (as defined in paragraph (c) below); or

           (c) the consummation of a recapitalization, reorganization, merger,
           consolidation, statutory share exchange or similar form of
           transaction involving the Company or a subsidiary of the Company (a
           "Reorganization"), or the sale or other disposition of all or
           substantially all of the Company's assets (a "Sale") or the
           acquisition of assets or stock of another entity (an "Acquisition"),
           unless immediately following such Reorganization, Sale or
           Acquisition: (A) all or substantially all of the individuals and
           entities who were the beneficial owners, respectively, of the
           outstanding Company Common Stock and outstanding Company Voting
           Securities immediately prior to such Reorganization, Sale or
           Acquisition beneficially own, directly or indirectly, more than 50%
           of, respectively, the then outstanding shares of common stock and the

                                       3
<PAGE>

           combined voting power of the then outstanding voting securities
           entitled to vote generally in the election of directors, as the case
           may be, of the entity resulting from or surviving such
           Reorganization, Sale or Acquisition (including, without limitation,
           an entity which as a result of such transaction owns the Company or
           all or substantially all of the Company's assets or stock either
           directly or through one or more subsidiary entities, the "Surviving
           Entity") in substantially the same proportions as their ownership,
           immediately prior to such Reorganization, Sale or Acquisition, of the
           outstanding Company Common Stock and the outstanding Company Voting
           Securities, as the case may be, and (B) no person (other than (x) the
           Company or any subsidiary of the Company, (y) the Surviving Entity or
           its ultimate parent entity, or (z) any employee benefit plan (or
           related trust) sponsored or maintained by any of the foregoing) is
           the beneficial owner, directly or indirectly, of 35% or more of the
           total common stock or 35% or more of the total voting power of the
           outstanding voting securities eligible to elect directors of the
           Surviving Entity, and (C) at least a majority of the members of the
           board of directors of the Surviving Entity were Incumbent Directors
           at the time of the Board's approval of the execution of the initial
           agreement providing for such Reorganization, Sale or Acquisition (any
           Reorganization, Sale or Acquisition which satisfies all of the
           criteria specified in (A), (B) and (C) above shall be deemed to be a
           "Non-Qualifying Transaction"); or

           (d) approval by the members or stockholders of the Company, as the
           case may be, of a complete liquidation or dissolution of the Company.

       7.  Termination of Employment.

           (a) Death or Retirement. Executive's employment shall terminate
automatically upon Executive's death or Retirement during the Employment Period.
For purposes of this Agreement, "Retirement" shall mean normal retirement as
defined in the Company's then-current retirement plan, or if there is no such
retirement plan, "Retirement" shall mean voluntary termination after age 65 with
at least ten years of service.

           (b) Disability. If the Company determines in good faith that the
Disability (as defined below) of Executive has occurred during the Employment
Period, it may give to Executive written notice of its intention to terminate
Executive's employment. In such event, Executive's employment with the Company
shall terminate effective on the 30th day after receipt of such written notice
by Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, Executive shall not have returned to full-time
performance of Executive's duties. For purposes of this Agreement, "Disability"
shall have the same meaning as provided in the long-term disability plan or
policy maintained by the Company and covering Executive. If no such long-term
disability plan or policy is maintained, "Disability" shall mean the inability
of Executive, as determined by the Board, to perform the essential functions of
his regular duties and responsibilities, with or without reasonable
accommodation, due to a medically determinable physical or mental illness which
has lasted (or can reasonably be expected to last) for a period of six
consecutive months.

           (c) Termination by the Company. The Company may terminate Executive's
employment during the Employment Period with or without Cause. For purposes of
this Agreement, "Cause" shall mean:

               (i) any conduct by Executive involving moral turpitude;

                                       4
<PAGE>

               (ii) Executive's commission or conviction of, or pleading guilty
or nolo contendere (or any similar plea or admission) to, a felony or a criminal
act involving dishonesty or other moral turpitude;

               (iii) any misconduct on the part of Executive in complying with
the terms of this Agreement, in connection with his employment or in connection
with or affecting the business of Company or any parent or subsidiary of
Company;

               (iv) any failure to abide by laws applicable to him in his
capacity as an employee or executive of Company or applicable to Company or any
of its parents or subsidiaries;

               (v) any failure or refusal on the part of Executive to perform
his duties under this Agreement or to obey lawful directives from the Board of
Directors of Company, or either of their designees, if not remedied within ten
(10) business days after Company's providing notice thereof;

               (vi) any violation of any policy of Company relating to equal
employment opportunity, harassment, business conduct or conflict of interest;

               (vii) knowing neglect of reasonably assigned duties, use of
illegal drugs, abuse of other controlled substances or working under the
influence of alcohol or other controlled substances;

               (viii) any breach by Executive of any obligation under this
Agreement if not remedied within ten (10) business days after Company's
providing notice thereof; and

               (ix) Executive's failure to meet performance expectations which
are reasonable and consistent with Executive's position, as determined by the
Company's Board of Directors, provided, however, that in the event of this
subsection (ix) being the sole reason for termination for Cause, Executive shall
have the following cure provisions and rights: in the event of a determination
by the Company's Board of Directors that Executive has failed to meet
performance expectations, the Company shall furnish to Executive in writing a
notice of proposed termination setting forth a specific statement of the
deficiencies in his performance. Executive shall then have a period of thirty
(30) days after the giving of such written notice of proposed termination by the
Company in which to attempt to effect a cure of the specified deficiencies. If
at the end of such thirty (30) day period no such cure has been effected to the
reasonable satisfaction of the Board of Directors of the Company, then
Executive's employment shall be terminated as of the end of such thirty (30) day
period. The Company shall be obligated to provide to Executive only one such
notice of proposed termination, and if subsequent to effecting a cure of
specified deficiencies Executive is determined by the Chief Executive Officer to
have again failed to meet performance expectations, then his employment may be
terminated immediately upon the Company's giving of notice of termination to
Executive which specifies his deficiencies in performance.

           (d) Termination by Executive. Executive's employment may be
terminated by Executive for Good Reason or no reason. For purposes of this
Agreement, unless written consent of Executive is obtained, "Good Reason" shall
mean:

               (i) a material reduction by the Company in Executive's Base
Salary as in effect on the Effective Date (which reduction in base salary is not
permitted by Section 5(a) hereof) or as the same may be increased from time to
time;

                                       5
<PAGE>

               (ii) any failure by the Company to comply with and satisfy 16(c)
of this Agreement; or

               (iii) the material breach by the Company of any of the financial
obligations of Company set forth in this Agreement.

       Any claim of "Good Reason" under this Agreement shall be communicated by
Executive to the Company in writing, which writing shall specifically identify
the factual details concerning the event(s) giving rise to Executive's claim of
Good Reason under this Section 7(d). The Company shall have an opportunity to
cure any claimed event of Good Reason within 30 days of such notice from
Executive. Good Reason shall cease to exist for an event or condition described
in clauses (i), (ii) and (iii) above on the 90th day following its occurrence,
unless Executive has given the Company written notice thereof prior to such
date.

           (e) Notice of Termination. Any termination by the Company for Cause,
or by Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 17(f) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated, and (iii) specifies the
termination date. The failure by Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of Executive or the Company,
respectively, hereunder or preclude Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing Executive's or the Company's
rights hereunder.

           (f) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by the Company for Cause, or by Executive
for Good Reason, the date of receipt of the Notice of Termination or a date
within 30 days after receipt of the Notice of Termination, as specified in such
notice, (ii) if Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date of receipt of
the Notice of Termination or a date within 90 days after receipt of the Notice
of Termination, as specified in such notice, (iii) if Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of Executive or the Disability Effective Date, as the case may
be, and (iv) if Executive's employment is terminated by Executive without Good
Reason, the Date of Termination shall be 60 days following the Company's receipt
of the Notice of Termination, unless the Company specifies an earlier Date of
Termination.

       8.  Obligations of the Company upon Termination.

           (a) Termination by Executive for Good Reason; Termination by the
Company Other Than for Cause or Disability. If, during the Employment Period,
the Company shall terminate Executive's employment other than for Cause or
Disability, or Executive shall terminate employment for Good Reason within a
period of 180 days after the occurrence of the event giving rise to Good Reason,
then and, with respect to the payments and benefits described below, only if
Executive executes a Release in substantially the form of Exhibit A hereto (the
"Release"):

                                       6
<PAGE>

               (i) the Company shall provide to Executive in a single lump sum
cash payment within 30 days after the Date of Termination, or if later, within
five days after the Release becomes effective and nonrevocable (but in no event
shall such amount be payable later than March 15 of the year following the year
in with the Executive's employment was terminated), the aggregate of the
following amounts:

                   A. the sum of the following amounts, to the extent not
       previously paid to Executive (the "Accrued Obligations"): (1) Executive's
       Base Salary through the Date of Termination, (2) a pro-rata bonus for the
       year in which the Date of Termination occurs, computed as the product of
       (x) Executive's Target Bonus for such year and (y) a fraction, the
       numerator of which is the number of days in the current fiscal year
       through the Date of Termination, and the denominator of which is 365, (3)
       any accrued pay in lieu of unused vacation (in accordance with the
       Company's vacation policy), and (4) unless Executive has a later payout
       date that is required in connection with the terms of a deferral plan or
       agreement, any vested compensation previously deferred by Executive
       (together with any amount equivalent to accrued interest or earnings
       thereon); and

                   B. a severance payment as determined pursuant to clause (x)
       or (y) below, as applicable:

                       (x) if the Date of Termination occurs before, or more
       than two years after, the occurrence of a Change of Control, the
       severance payment shall be the product one times Executive's Base Salary
       in effect as of the Date of Termination (ignoring any decrease in
       Executive's Base Salary unless consented to by Executive); or

                       (y) if the Date of Termination occurs within two years
       after the occurrence of a Change of Control, the severance payment shall
       be the product of 2.5 times the sum of (1) Executive's Base Salary in
       effect as of the Date of Termination, and (2) the greater of the average
       of the annual bonuses earned by Executive for the two fiscal years in
       which annual bonuses were paid immediately preceding the year in which
       the Date of Termination occurs, or Executive's Target Bonus for the year
       in which the Date of Termination occurs; and

               (ii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to Executive any other amounts or benefits required
to be paid or provided or which Executive is eligible to receive under any plan,
program, policy or practice of the Company to the extent provided to Peer
Executives prior to the Date of Termination (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").

               (iii) If the Date of Termination occurs within two years after
the occurrence of a Change of Control, then in addition to the payments and
benefits described in clauses (i) and (ii) above, the Executive shall be
entitled to the following additional benefits:

                   A. all grants of stock options and other equity awards
       granted by the Company and held by Executive as of the Date of
       Termination will become immediately vested and exercisable as of the Date
       of Termination and, to the extent necessary, this Agreement is hereby
       deemed an amendment of any such outstanding stock option or other equity
       award; and

                                       7
<PAGE>

                   B. If Executive elects to continue participation in any group
       medical, dental, vision and/or prescription drug plan benefits to which
       Executive and/or Executive's eligible dependents would be entitled under
       Section 4980B of the Code (COBRA), then during the period that Executive
       is entitled to such coverage under COBRA (the "Coverage Period"), the
       Company shall pay the excess of (i) the COBRA cost of such coverage, over
       (ii) the amount that Executive would have had to pay for such coverage if
       he had remained employed during the Coverage Period and paid the active
       employee rate for such coverage, provided, however, that the cost so paid
       on behalf of Executive by the Company will be deemed taxable income to
       Executive to the extent required by law, and provided, further, that if
       Executive becomes eligible to receive group health benefits under a
       program of a subsequent employer or otherwise (including coverage
       available to Executive's spouse), the Company's obligation to pay the
       cost of health coverage as described herein shall cease, except as
       otherwise provided by law

           If Executive's employment is terminated by the Company without Cause
prior to the occurrence of a Change in Control and if it can reasonably be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect a Change in Control
after such termination, or (ii) otherwise occurred in anticipation of a Change
in Control, and in either case a Change in Control as defined hereunder does, in
fact, occur, then Executive shall have the rights described in this Section 8(a)
as if the Change in Control had occurred on the date immediately preceding the
Date of Termination.

           Executive acknowledges and agrees that the receipt of severance
benefits provided in this Section 8(a) constitutes consideration for the
restrictions on the conduct of Executive contained in Section 14 of this
Agreement.

           (b) Death, Disability or Retirement. If Executive's employment is
terminated by reason of his death, Disability or Retirement during the
Employment Period, this Agreement shall terminate without further obligations to
Executive or his estate, beneficiaries or legal representatives, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to Executive or his estate,
beneficiary or legal representative, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as used in this Section 8(b) shall include,
without limitation, and Executive or his estate, beneficiaries or legal
representatives, as applicable, shall be entitled to receive, benefits under
such plans, programs, practices and policies relating to death, disability or
retirement benefits, if any, as are applicable to Executive or his family on the
Date of Termination.

           (c) Cause or Voluntary Termination without Good Reason. If
Executive's employment shall be terminated for Cause during the Employment
Period, or if Executive voluntarily terminates employment during the Employment
Period without Good Reason, this Agreement shall terminate without further
obligations to Executive, other than for payment of Accrued Obligations
(excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and
the timely payment or provision of Other Benefits.

           (d) Expiration of Employment Period. If Executive's employment shall
be terminated due to the normal expiration of the Employment Period, this
Agreement shall terminate without further obligations to Executive, other than
for payment of Accrued Obligations and the timely payment or provision of Other
Benefits.

           (e) Resignations. Termination of Executive's employment for any
reason whatsoever shall constitute Executive's resignation from the Board of
Directors of the Company and resignation as an officer of the Company, its
subsidiaries and affiliates.

                                       8
<PAGE>

       9.  Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any employee benefit
plan, program, policy or practice provided by the Company and for which
Executive may qualify, except as specifically provided herein. Amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
employee benefit plan, policy, practice or program of the Company, its
subsidiaries or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.

       10. Full Settlement; No Obligation to Mitigate. The Company's obligation
to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive or others. In no event shall Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as explicitly provided herein, such amounts shall not be reduced whether or not
Executive obtains other employment.

       11. Certain Additional Payments by the Company.

           (a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 11) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 11(a), if it shall be
determined that Executive is entitled to a Gross-Up Payment, but that Executive,
after taking into account the Payments and the Gross-Up Payment, would not
receive a net after-tax benefit of at least $50,000 (taking into account both
income taxes and any Excise Tax) as compared to the net after-tax proceeds to
Executive resulting from an elimination of the Gross-Up Payment and a reduction
of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that
the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to Executive and the Payments, in the aggregate, shall be
reduced to the Reduced Amount. Executive may select the Payments to be limited
or reduced.

           (b) Subject to the provisions of Section 11(c), all determinations
required to be made under this Section 11, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be used in arriving at such determination, shall be made by a certified
public accounting firm selected by Executive (other than the Company's regular
accounting firm) and reasonably acceptable to the Company (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and Executive within 15 business days of the receipt of notice from Executive
that there has been a Payment, or such earlier time as is reasonably requested
by the Company. All fees and expenses of the Accounting Firm shall be borne

                                       9
<PAGE>

solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 11, shall be paid by the Company to Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 11(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive, but no later than December 31 of the
year after the year in which Executive remits the Excise Tax.

           (c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment (or an additional Gross-Up Payment). Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:

               (i) give the Company any information reasonably requested by the
Company relating to such claim,

               (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

               (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 11(c), the Company shall control all proceedings taken in
connection with such contest (to the extent applicable to the Excise Tax and the
Gross-Up Payment) and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such

                                       10
<PAGE>

claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

           (d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 11(c), Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 11(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 11(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

       12. Costs of Enforcement.

           (a) In any action taken in good faith relating to the enforcement of
this Agreement or any provision herein, Executive shall be entitled to
reimbursement for any and all costs and expenses incurred by him in enforcing or
establishing his rights thereunder, including, without limitation, reasonable
attorneys' fees, whether suit be brought or not, and whether or not incurred in
arbitration, trial, bankruptcy or appellate proceedings, but only if and to the
extent Executive is successful in asserting such rights. If Executive becomes
entitled to recover fees and expenses under this Section 12(a), the
reimbursement of an eligible expense shall be made within 10 business days after
delivery of Executive's respective written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company reasonably may
require, but in no event later than March 15 of the year after the year in which
such rights are established.

           (b) Executive shall also be entitled to be paid all reasonable legal
fees and expenses, if any, incurred in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Internal Revenue Code to any payment or benefit hereunder. Such reimbursement of
expenses shall be made on a current basis, as incurred, and in no event later
than December 31 of the year following the calendar year in which the taxes that
are the subject of the audit or proceeding are remitted to the taxing authority,
or where as a result of such audit or proceeding no taxes are remitted, December
31 of the year following the calendar year in which the audit is completed or
there is a final and nonappealable settlement or other resolution of the
proceeding.

       13. [Intentionally Omitted]

                                       11
<PAGE>

       14. Restrictions on Conduct of Executive.

           (a) General. Executive and the Company understand and agree that the
purpose of the provisions of this Section 14 is to protect legitimate business
interests of the Company, as more fully described below, and is not intended to
impair or infringe upon Executive's right to work, earn a living, or acquire and
possess property from the fruits of his labor. Executive hereby acknowledges
that Executive has received good and valuable consideration for the
post-employment restrictions set forth in this Section 14 in the form of the
compensation and benefits provided for herein. Executive hereby further
acknowledges that the post-employment restrictions set forth in this Section 14
are reasonable and that they do not, and will not, unduly impair his ability to
earn a living after the termination of this Agreement.

           In addition, the parties acknowledge: (A) that Executive's services
under this Agreement require unique expertise and talent in the provision of
Competitive Services and that Executive will have substantial contacts with
customers, suppliers, advertisers and vendors of the Company; (B) that pursuant
to this Agreement, Executive will be placed in a position of trust and
responsibility and he will have access to a substantial amount of Confidential
Information and Trade Secrets and that the Company is placing him in such
position and giving him access to such information in reliance upon his
agreement to abide by the covenants set forth in this Section 14; (C) that due
to Executive's unique experience and talent, the loss of Executive's services to
the Company under this Agreement cannot reasonably or adequately be compensated
solely by damages in an action at law; (D) that Executive is capable of
competing with the Company; and (E) that Executive is capable of obtaining
gainful, lucrative and desirable employment that does not violate the
restrictions contained in this Agreement.

           Therefore, Executive shall be subject to the restrictions set forth
in this Section 14.

           (b) Definitions. The following capitalized terms used in this Section
14 shall have the meanings assigned to them below, which definitions shall apply
to both the singular and the plural forms of such terms:

               "Competitive Services" means the business of providing post-acute
healthcare services, including home-based services through home nursing agencies
and facility-based services through long-term acute care hospitals.

               "Confidential Information" means all information regarding the
Company, its activities, business or clients that is the subject of reasonable
efforts by the Company to maintain its confidentiality and that is not generally
disclosed by practice or authority to persons not employed by the Company, but
that does not rise to the level of a Trade Secret. "Confidential Information"
shall include, but is not limited to, financial plans and data concerning the
Company; management planning information; business plans; operational methods;
market studies; marketing plans or strategies; product development techniques or
plans; customer lists; customer files, data and financial information, details
of customer contracts; current and anticipated customer requirements;
identifying and other information pertaining to business referral sources; past,
current and planned research and development; business acquisition plans; and
new personnel acquisition plans. "Confidential Information" shall not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right or
privilege of the Company. This definition shall not limit any definition of
"confidential information" or any equivalent term under state or federal law.

                                       12
<PAGE>

               "Determination Date" means the date of termination of Executive's
employment with the Company for any reason whatsoever or any earlier date
(during the Employment Period) of an alleged breach of the Restrictive Covenants
by Executive.

               "Person" means any individual or any corporation, partnership,
joint venture, limited liability company, association or other entity or
enterprise.

               "Principal or Representative" means a principal, owner, partner,
stockholder, joint venturer, investor, member, trustee, director, officer,
manager, employee, agent, representative or consultant.

               "Protected Customers" means any Person to whom the Company has
sold its products or services or solicited to sell its products or services,
other than through general advertising targeted at consumers, during the 12
months prior to the Determination Date.

               "Protected Employees" means employees of the Company who were
employed by the Company or its affiliates at any time within six months prior to
the Determination Date, other than those who were discharged by the Company or
such affiliated employer without cause.

               "Restricted Period" means the Employment Period plus 24 months
(or the Employment Period plus 6 months if Executive's termination occurs within
two years after the occurrence of a Change in Control); provided, however, that
the Restricted Period shall end with respect to the covenants in clauses (ii),
(iii) and (iv) of Section 14(c) on the 60th day after the Date of Termination in
the event the Company breaches its obligation, if any, to make any payment
required under Section 8(a)(i).

               "Restricted Territory" means the geographical territories
described on Exhibit B hereto. The Company and Executive agree that Exhibit B
shall be periodically reviewed and updated as necessary to maintain a current
and complete description of the geographic territories in which the Company does
business.

               "Restrictive Covenants" means the restrictive covenants contained
in Section 14(c) hereof.

               "Third Party Information" means confidential or proprietary
information subject to a duty on the Company's and its affiliates' part to
maintain the confidentiality of such information and to use it only for certain
limited purposes.

               "Trade Secret" means all information, without regard to form,
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, distribution lists or a
list of actual or potential customers, advertisers or suppliers which is not
commonly known by or available to the public and which information: (A) derives
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (B) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy. Without
limiting the foregoing, Trade Secret means any item of confidential information
that constitutes a "trade secret(s)" under the common law or statutory law of
the State of Louisiana.

                                       13
<PAGE>

               "Work Product" means all inventions, innovations, improvements,
developments, methods, processes, programs, designs, analyses, drawings,
reports, and all similar or related information (whether or not patentable) that
relate to the Company's or its affiliates' actual or anticipated business,
research and development, or existing or future products or services and that
are conceived, developed, contributed to, made, or reduced to practice by
Executive (either solely or jointly with others) while employed by the Company
or its affiliates.

           (c) Restrictive Covenants.

               (i) Restriction on Disclosure and Use of Confidential Information
and Trade Secrets. Executive understands and agrees that the Confidential
Information and Trade Secrets constitute valuable assets of the Company and its
affiliated entities, and may not be converted to Executive's own use.
Accordingly, Executive hereby agrees that Executive shall not, directly or
indirectly, at any time during the Restricted Period reveal, divulge, or
disclose to any Person not expressly authorized by the Company any Confidential
Information, and Executive shall not, directly or indirectly, at any time during
the Restricted Period use or make use of any Confidential Information in
connection with any business activity other than that of the Company. Throughout
the term of this Agreement and at all times after the date that this Agreement
terminates for any reason, Executive shall not directly or indirectly transmit
or disclose any Trade Secret of the Company to any Person, and shall not make
use of any such Trade Secret, directly or indirectly, for himself or for others,
without the prior written consent of the Company. The parties acknowledge and
agree that this Agreement is not intended to, and does not, alter either the
Company's rights or Executive's obligations under any state or federal statutory
or common law regarding trade secrets and unfair trade practices.

               Anything herein to the contrary notwithstanding, Executive shall
not be restricted from disclosing or using Confidential Information or any Trade
Secret that is required to be disclosed by law, court order or other legal
process; provided, however, that in the event disclosure is required by law,
Executive shall provide the Company with prompt notice of such requirement so
that the Company may seek an appropriate protective order prior to any such
required disclosure by Executive.

               Executive acknowledges that any and all Confidential Information
is the exclusive property of the Company and agrees to deliver to the Company on
the Date of Termination, or at any other time the Company may request in
writing, any and all Confidential Information which he may then possess or have
under his control in whatever form same may exist, including, but not by way of
limitation, hard copy files, soft copy files, computer disks, and all copies
thereof.

               (ii) Nonsolicitation of Protected Employees. Executive
understands and agrees that the relationship between the Company and each of its
Protected Employees constitutes a valuable asset of the Company and may not be
converted to Executive's own use. Accordingly, Executive hereby agrees that
during the Restricted Period, Executive shall not directly or indirectly on
Executive's own behalf or as a Principal or Representative of any Person or
otherwise solicit or induce any Protected Employee to terminate his employment
relationship with the Company or to enter into employment with any other Person.

               (iii) Restriction on Relationships with Protected Customers.
Executive understands and agrees that the relationship between the Company and
each of its Protected Customers constitutes a valuable asset of the Company and
may not be converted to Executive's own use. Accordingly, Executive hereby
agrees that, during the Restricted Period and in the Restricted Territory,

                                       14
<PAGE>

Executive shall not, without the prior written consent of the Company, directly
or indirectly, on Executive's own behalf or as a Principal or Representative of
any Person, solicit, divert, take away or attempt to solicit, divert or take
away a Protected Customer for the purpose of providing or selling Competitive
Services; provided, however, that the prohibition of this covenant shall apply
only to Protected Customers with whom Executive had Material Contact on the
Company's behalf during the 12 months immediately preceding the Date of
Termination; and, provided further, that the prohibition of this covenant shall
not apply to the conduct of general advertising activities. For purposes of this
Agreement, Executive had "Material Contact" with a Protected Customer if (a) he
had business dealings with the Protected Customer on the Company's behalf; (b)
he was responsible for supervising or coordinating the dealings between the
Company and the Protected Customer; or (c) he obtained Trade Secrets or
Confidential Information about the customer as a result of his association with
the Company.

               (iv) Noncompetition with the Company In consideration of the
compensation and benefits being paid and to be paid by the Company to Executive
hereunder, Executive understands and agrees that, during the Restricted Period
and within the Restricted Territory, he shall not, directly or indirectly, carry
on or engage in Competitive Services on his own or on behalf of any Person, or
any Principal or Representative of any Person; provided, however, that the
provisions of this Agreement shall not be deemed to prohibit the ownership by
Executive of any securities of the Company or its affiliated entities or not
more than five percent (5%) of any class of securities of any corporation having
a class of securities registered pursuant to the Exchange Act. Executive
acknowledges that the Restricted Territory is reasonable because the Company
carries on and engages in Competitive Services throughout the Restricted
Territory and that in the performance of his duties for the Company he is
charged with operating on the Company's behalf throughout the Restricted
Territory.

               (v) Ownership of Work Product. Executive acknowledges that the
Work Product belongs to the Company or its affiliates and Executive hereby
assigns, and agrees to assign, all of the Work Product to the Company or its
affiliates. Any copyrightable work prepared in whole or in part by Executive in
the course of his work for any of the foregoing entities shall be deemed a "work
made for hire" under the copyright laws, and the Company or such affiliate shall
own all rights therein. To the extent that any such copyrightable work is not a
"work made for hire," Executive hereby assigns and agrees to assign to the
Company or such affiliate all right, title, and interest, including without
limitation, copyright in and to such copyrightable work. Executive shall
promptly disclose such Work Product and copyrightable work to the Board and
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm the Company's or such
affiliate's ownership (including, without limitation, assignments, consents,
powers of attorney, and other instruments).

               (vi) Third Party Information. Executive understands that the
Company and its affiliates will receive Third Party Information. During the
Employment Period and thereafter, and without in any way limiting the provisions
of Section 14(c)(i) above, Executive will hold Third Party Information in the
strictest confidence and will not disclose to anyone (other than personnel of
the Company or its affiliates who need to know such information in connection
with their work for the Company or its affiliates) or use, except in connection
with his work for the Company or its affiliates, Third Party Information unless
expressly authorized by a member of the Board (other than Executive) in writing.

                                       15
<PAGE>

               (vii) Use of Information of Prior Employers. During the
Employment Period, Executive will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employers or
any other person to whom Executive has an obligation of confidentiality, and
will not bring onto the premises of the Company or any of its affiliates any
unpublished documents or any property belonging to any former employer or any
other person to whom Executive has an obligation of confidentiality unless
consented to by in writing the former employer or person. Executive will use in
the performance of his duties only information which is (i) generally known and
used by persons with training and experience comparable to Executive's and which
is (x) common knowledge in the industry or (y) is otherwise legally in the
public domain, (ii) is otherwise provided or developed by the Company or its
affiliates or (iii) in the case of materials, property or information belonging
to any former employer or other person to whom Executive has an obligation of
confidentiality, approved for such use in writing by such former employer or
person.

           (d) Enforcement of Restrictive Covenants.

               (i) Rights and Remedies Upon Breach. In the event Executive
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the right and remedy to enjoin,
preliminarily and permanently, Executive from violating or threatening to
violate the Restrictive Covenants and to have the Restrictive Covenants
specifically enforced by any court or tribunal of competent jurisdiction, it
being agreed that any breach or threatened breach of the Restrictive Covenants
would cause irreparable injury to the Company and that money damages would not
provide an adequate remedy to the Company. Such right and remedy shall be
independent of any others and severally enforceable, and shall be in addition
to, and not in lieu of, any other rights and remedies available to the Company
at law or in equity.

               (ii) Severability of Covenants. Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in time and scope and in
all other respects. The covenants set forth in this Agreement shall be
considered and construed as separate and independent covenants. Should any part
or provision of any covenant be held invalid, void or unenforceable, such
invalidity, voidness or unenforceability shall not render invalid, void or
unenforceable any other part or provision of this Agreement. If any portion of
the foregoing provisions is found to be invalid or unenforceable because its
duration, the territory, the definition of activities or the definition of
information covered is considered to be invalid or unreasonable in scope, the
invalid or unreasonable term shall be redefined, or a new enforceable term
provided, such that the intent of the Company and Executive in agreeing to the
provisions of this Agreement will not be impaired and the provision in question
shall be enforceable to the fullest extent of the applicable laws.

               (iii) Reformation. The parties hereunder agree that it is their
intention that the Restrictive Covenants be enforced in accordance with their
terms to the maximum extent possible under applicable law. The parties further
agree that, in the event any tribunal of competent jurisdiction shall find that
any provision hereof is not enforceable in accordance with its terms, the
tribunal shall reform the Restrictive Covenants such that they shall be
enforceable to the maximum extent permissible at law.

       15. Consent to Jurisdiction. The Company and Executive irrevocably
consent to the exclusive jurisdiction and venue of the 15th Judicial District
Court in Lafayette, Louisiana, in any judicial proceeding brought to enforce
this Agreement. The parties agree that any forum is an inconvenient forum and
that a lawsuit (or non-compulsory counterclaim) brought by one party against
another party, in a court of any jurisdiction other than the 15th Judicial
District Court in Lafayette, Louisiana should be forthwith dismissed or
transferred to 15th Judicial District Court in Lafayette, Louisiana.

                                       16
<PAGE>

       16. Assignment and Successors.

           (a) This Agreement is personal to Executive and without the prior
written consent of the Company shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive's legal representatives.

           (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

           (c) The Company will require any Surviving Entity resulting from a
Reorganization, Sale or Acquisition (if other than the Company) to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no Reorganization,
Sale or Acquisition had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

       17. Miscellaneous.

           (a) Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.

           (b) Severability. If any provision or covenant, or any part thereof,
of this Agreement should be held by any tribunal of competent jurisdiction to be
invalid, illegal or unenforceable, either in whole or in part, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of the remaining provisions or covenants, or any part thereof, of
this Agreement, all of which shall remain in full force and effect.

           (c) Other Agents. Nothing in this Agreement is to be interpreted as
limiting the Company from employing other personnel on such terms and conditions
as may be satisfactory to it, except that this Section 17(c) shall not override
the provision of Section 7(d)(i).

           (d) Entire Agreement. Except as provided herein, this Agreement
contains the entire agreement between the Company and Executive with respect to
the subject matter hereof and, from and after the Effective Date, this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof, including without limitation, the Prior Agreement.

           (e) Governing Law. Except to the extent preempted by federal law, and
without regard to conflict of laws principles, the laws of the State of
Louisiana shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.

                                       17
<PAGE>

           (f) Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or three days after mailing if mailed, first class,
certified mail, postage prepaid:

           To the Company:   LHC Group, Inc.
                             Suite A
                             420 W. Pinhook Road
                             Lafayette, LA 70503
                             Attention: General Counsel

                             To Executive:

Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.

           (g) Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by both parties hereto, which makes specific
reference to this Agreement.

           (h) Construction. Each party and his or its counsel have reviewed
this Agreement and have been provided the opportunity to revise this Agreement
and accordingly, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement. Instead, the language of all parts of
this Agreement shall be construed as a whole, and according to its fair meaning,
and not strictly for or against either party.

           (i) Code Section 409A. Notwithstanding anything in this Agreement to
the contrary, if any amount or benefit that would constitute non-exempt
"deferred compensation" for purposes of Section 409A of the Code would otherwise
be payable or distributable under this Agreement by reason of Executive's
separation from service during a period in which he is a Specified Employee (as
defined below), then, subject to any permissible acceleration of payment by the
Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order),
(j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment
taxes):

               (i) if the payment or distribution is payable in a lump sum,
Executive's right to receive payment or distribution of such non-exempt deferred
compensation will be delayed until the earlier of Executive's death or the first
day of the seventh month following Executive's separation from service; and

               (ii) if the payment or distribution is payable over time, the
amount of such non-exempt deferred compensation that would otherwise be payable
during the six-month period immediately following Executive's separation from
service will be accumulated and Executive's right to receive payment or
distribution of such accumulated amount will be delayed until the earlier of
Executive's death or the first day of the seventh month following Executive's
separation from service, whereupon the accumulated amount will be paid or
distributed to Executive and the normal payment or distribution schedule for any
remaining payments or distributions will resume.

                                       18
<PAGE>

       For purposes of this Agreement, the term "Specified Employee" has the
meaning given such term in Code Section 409A and the final regulations
thereunder ("Final 409A Regulations"), provided, however, that, as permitted in
the Final 409A Regulations, the Company's Specified Employees and its
application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall
be determined in accordance with rules adopted by the Board of Directors or a
committee thereof, which shall be applied consistently with respect to all
nonqualified deferred compensation arrangements of the Company, including this
Agreement.

           (j) Withholding. The Company or its subsidiaries, if applicable,
shall be entitled to deduct or withhold from any amounts owing from the Company
or any such affiliate to Executive any federal, state, local or foreign
withholding taxes, excise taxes, or employment taxes ("Taxes") imposed with
respect to Executive's compensation or other payments from the Company or any of
its affiliates. In the event the Company or its affiliates do not make such
deductions or withholdings, Executive shall indemnify the Company and its
affiliates for any amounts paid with respect to any such Taxes.

       IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment Agreement as of the date first above written.

                                           LHC GROUP, INC.

                                           By:
                                              ---------------------------
                                           Title:
                                                 ------------------------

                                           EXECUTIVE:

                                           ------------------------------
                                           Keith G. Myers

                                       19
<PAGE>

                                    EXHIBIT A
                                Form of Release
                                ---------------

       THIS RELEASE ("Release") is granted effective as of the ____ day of
_________, 20__, by ________ ("Executive") in favor of LHC Group, Inc. (the
"Company"). This is the Release referred to that certain Employment Agreement
effective as of _________, 200_ by and between the Company and Executive (the
"Employment Agreement"), with respect to which this Release is an integral part.

       FOR AND IN CONSIDERATION of the payments and benefits provided by Section
8 of the Employment Agreement and the Company's other promises and covenants as
recited in the Employment Agreement, the receipt and sufficiency of which are
hereby acknowledged, Executive, for himself, his successors and assigns, now and
forever hereby releases and discharges the Company and all its past and present
officers, directors, stockholders, employees, agents, parent corporations,
predecessors, subsidiaries, affiliates, estates, successors, assigns, benefit
plans, consultants, administrators, and attorneys (hereinafter collectively
referred to as "Releasees") from any and all claims, charges, actions, causes of
action, sums of money due, suits, debts, covenants, contracts, agreements,
promises, demands or liabilities (hereinafter collectively referred to as
"Claims") whatsoever, in law or in equity, whether known or unknown, which
Executive ever had or now has from the beginning of time up to the date this
Release ("Release") is executed, including, but not limited to, claims under the
Age Discrimination in Employment Act, as amended by the Older Workers Benefit
Protection Act, Title VII of the Civil Rights Act of 1964 (and all of its
amendments), the Americans with Disabilities Act, as amended, or any other
federal or state statutes, all tort claims, all claims for wrongful employment
termination or breach of contract, and any other claims which Executive has,
had, or may have against the Releasees on account of or arising out of
Executive's employment with or termination from the Company; provided, however,
that nothing contained in this Release shall in any way diminish or impair (i)
any rights of Executive to the benefits conferred or referenced in the
Employment Agreement or Executive's Retention Bonus Agreement with the Company,
(ii) any rights to indemnification that may exist from time to time under the
Company's bylaws, certificate of incorporation, Louisiana law or otherwise, or
(iii) Executive's ability to raise an affirmative defense in connection with any
lawsuit or other legal claim or charge instituted or asserted by the Company
against Executive.

       Without limiting the generality of the foregoing, Executive hereby
acknowledges and covenants that in consideration for the sums being paid to him
he has knowingly waived any right or opportunity to assert any claim that is in
any way connected with any employment relationship or the termination of any
employment relationship which existed between the Company and Executive.
Executive further understands and agrees that he has knowingly relinquished,
waived and forever released any and all remedies arising out of the aforesaid
employment relationship or the termination thereof, including, without
limitation, claims for backpay, front pay, liquidated damages, compensatory
damages, general damages, special damages, punitive damages, exemplary damages,
costs, expenses and attorneys' fees.

       Executive specifically acknowledges and agrees that he has knowingly and
voluntarily released the Company and all other Releasees from any and all claims
arising under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. ss.
621, et seq., which Executive ever had or now has from the beginning of time up
to the date this Release is executed, including but not limited to those claims
which are in any way connected with any employment relationship or the

                                       1
<PAGE>

termination of any employment relationship which existed between the Company and
Executive. Executive further acknowledges and agrees that he has been advised to
consult with an attorney prior to executing this Release and that he has been
given twenty-one (21) days to consider this Release prior to its execution.
Executive also understands that he may revoke this Release at any time within
seven (7) days following its execution. Executive understands, however, that
this Release shall not become effective and that none of the consideration
described above shall be paid to him until the expiration of the seven-day
revocation period.

       Executive agrees never to seek reemployment or future employment with the
Company or any of the other Releasees.

       Executive acknowledges that the terms of this Release must be kept
confidential. Accordingly, Executive agrees not to disclose or publish to any
person or entity, except as required by law or as necessary to prepare tax
returns, the terms and conditions or sums being paid in connection with this
Release.

       It is understood and agreed by Executive that the payment made to him is
not to be construed as an admission of any liability whatsoever on the part of
the Company or any of the other Releasees, by whom liability is expressly
denied.

       This Release is executed by Executive voluntarily and is not based upon
any representations or statements of any kind made by the Company or any of the
other Releasees as to the merits, legal liabilities or value of his claims.
Executive further acknowledges that he has had a full and reasonable opportunity
to consider this Release and that he has not been pressured or in any way
coerced into executing this Release.

       Executive acknowledges and agrees that this Release may not be revoked at
any time after the expiration of the seven-day revocation period and that he
will not institute any suit, action, or proceeding, whether at law or equity,
challenging the enforceability of this Release. Executive further acknowledges
and agrees that, with the exception of an action to challenge his waiver of
claims under the ADEA, he shall not ever attempt to challenge the terms of this
Release, attempt to obtain an order declaring this Release to be null and void,
or institute litigation against the Company or any other Releasee based upon a
claim which is covered by the terms of the release contained herein, without
first repaying all monies paid to him under Section 8 of the Employment
Agreement. Furthermore, with the exception of an action to challenge his waiver
of claims under the ADEA, if Executive does not prevail in an action to
challenge this Release, to obtain an order declaring this Release to be null and
void, or in any action against the Company or any other Releasee based upon a
claim which is covered by the release set forth herein, Executive shall pay to
the Company and/or the appropriate Releasee all their costs and attorneys' fees
incurred in their defense of Executive's action.

       This Release and the rights and obligations of the parties hereto shall
be governed and construed in accordance with the laws of the State of Louisiana.
If any provision hereof is unenforceable or is held to be unenforceable, such
provision shall be fully severable, and this document and its terms shall be
construed and enforced as if such unenforceable provision had never comprised a
part hereof, the remaining provisions hereof shall remain in full force and
effect, and the court construing the provisions shall add as a part hereof a
provision as similar in terms and effect to such unenforceable provision as may
be enforceable, in lieu of the unenforceable provision.

                                        2
<PAGE>

       This document contains all terms of the Release and supersedes and
invalidates any previous agreements or contracts. No representations,
inducements, promises or agreements, oral or otherwise, which are not embodied
herein shall be of any force or effect.

       IN WITNESS WHEREOF, the undersigned acknowledges that he has read these
three pages and he sets his hand and seal this ____ day of ____________, 20___.

Sworn to and subscribed before me this
_____ day of ______________, 20___.

---------------------
Notary Public

My Commission Expires:

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

                                       3
<PAGE>

                                    EXHIBIT B

                              Restricted Territory
                              --------------------

The Restricted Territory shall include the following counties and parishes in
the states where the Company and its subsidiaries and affiliates conduct
business:

ALABAMA
-------
Crenshaw, Coffee, Geneva, Butler, Baldwin, Mobile, Washington, Clarke, Monroe,
Escambia, Escambia, Baldwin, Monroe, Conecuh, Covington

ARKANSAS
--------
Carroll, Benton, Madison, Boone, Washington, Crawford, Franklin, Johnson,
Newton, Marion, St. Francis, Lee, Woodruff, Monroe, Cross, Crittenden,
Mississippi, Poinsett, Jackson, White, Prairie, Arkansas, Phillips, Polk, Scott,
Montgomery, Yell, Logan, Franklin, Sebastian, Hot Spring, Clark, Hempstead,
Pike, Howard, Sevier, Garland, Garland, Hot Spring, Clark, Saline, Montgomery,
Perry, Pike, Hempstead, Nevada, Dallas, Grant, Pulaski, Faulkner, Conway, Pope,
Yell, Scott, Dallas, Cleveland, Calhoun, Bradley, Ouachita, Grant, Saline, Hot
Springs, Clark, Nevada, Columbia, Union, Ashley, Drew, Lincoln, Jefferson,
Fulton, Izard, Baxter, Sharp, Marion, Searcy, Stone, Cleburne, Independence,
Lawrence, Randolph, Jackson

FLORIDA
-------
Alachua, Bradford, Charlotte, Citrus, Collier, Columbia, DeSoto, Dixie,
Gilchrist, Glades, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough,
Lafayette, Lake, Lee, Levy, Manatee, Marion, Monroe, Polk, Putnam, Sarasota,
Sumter, Suwannee, Union

GEORGIA
-------
Bartow, Chattooga, Floyd, Gordon, Haralson, Harris, Muscogee, Paulding, Pickens,
Polk, Troup

KENTUCKY
--------
Allen, Anderson, Butler, Caldwell, Casey, Christian, Clinton, Crittenden,
Cumberland, Daviess, Edmonson, Fayette, Fulton, Green, Hart, Hickman, Jessamine,
Lincoln, Livingston, Logan, Lyon, McCreary, Pulaski, Russell, Simpson, Taylor,
Todd, Trigg, Warren, Wayne, Woodford

LOUISIANA
---------
Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier,
Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto,
East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant,
Iberia, Iberville, Jackson, Jefferson Davis, Jefferson, La Salle, Lafayette,
Lafourche, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans,
Ouachita, Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, St.
Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry,
St. Martin, St. Mary, St. Tammany, Tangipahoa, Tensas, Terrebonne, Union,
Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West
Feliciana, Winn

MISSISSIPPI
-----------
Attala, Calhoun, Carroll, Chickasaw, Choctaw, Claiborne, Clarke, Clay, Copiah,
Covington, Forrest, George, Greene, Grenada, Hancock, Harrison, Hinds,
Issaquena, Jasper, Jefferson, Jones, Kemper, Lamar, Leake, Lowndes, Madison,
Marion, Montgomery, Neshoba, Noxubee, Oktibbeha, Pearl River, Perry, Rankin,
Scott, Sharkey, Simpson, Smith, Stone, Walthall, Warren, Wayne, Webster,
Winston, Yazoo

                                        1
<PAGE>

OHIO
----
Athens, Belmont, Coshocton, Franklin, Gallia, Guernsey, Harrison, Hocking,
Jackson, Lawrence, Licking, Meigs, Monroe, Morgan, Muskingum, Noble, Perry,
Pickaway, Pike, Ross, Scioto, Tuscarawas, Vinton, Washington

TENNESSEE
---------
Anderson, Benton, Blount, Campbell, Carroll, Cheatham, Chester, Claiborne,
Cocke, Crockett, Davidson, Decatur, Dyer, Fayette, Gibson, Grainger, Hamblen,
Hardeman, Hardin, Haywood, Henderson, Henry, Jefferson, Knox, Lake, Lauderdale,
Loudon, Madison, McNairy, Monroe, Montgomery, Morgan, Obion, Roane, Robertson,
Scott, Sevier, Shelby, Sumner, Tipton, Union, Weakley

TEXAS
-----
Anderson, Angelina, Bowie, Camp, Cass, Cherokee, Collin, Delta, Fannin,
Franklin, Grayson, Gregg, Hardin, Harrison, Henderson, Hopkins, Hunt, Jefferson,
Kaufman, Lamar, Liberty, Marion, Morris, Nacogdoches, Orange, Panola, Polk,
Rains, Red River, Rusk, San Jacinto, Shelby, Smith, Titus, Tyler, Upshur, Van
Zandt, Wood

WEST VIRGINIA
-------------
Boone, Calhoun, Doddridge, Fayette, Gilmer, Greenbrier, Jackson, Lincoln, Logan,
Marshall, McDowell, Mercer, Mingo, Monroe, Nicholas, Pleasants, Pocahontas,
Raleigh, Ritchie, Roane, Summers, Tyler, Wetzel, Wirt, Wood, Wyoming

                                       2

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