Chief Operating Officer Employment Agreement

Exhibit 10.4


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT, dated as of June 5th, 1997, by and among HORIZON HEALTH SYSTEMS, INC. (the "Company"), and KYLE CALLAHAN (the "Executive").


W I T N E S S E T H:


WHEREBY, the Company desires to employ the Executive for the period provided in this Agreement, and the Executive is willing to accept such employment with the Company on a full-time basis, all in accordance with the terms and conditions set forth below;


NOW, THEREFORE, for and in consideration of the premises hereof and the mutual covenants contained herein, the parties hereto hereby covenant and agree as follows:


1. Employment.


(a) The Company hereby employs the Executive, and the Executive hereby accepts such employment with the Company, for the period set forth in Section 2 hereof, all upon the terms and conditions hereinafter set forth.


(b) The Executive affirms and represents that he is under no obligation to any former employer or other party which is in any way inconsistent with, or which imposes any restriction upon, the Executive's acceptance of employment hereunder with the Company, the employment of the Executive by the Company, or the Executive's undertakings under this Agreement.


2. Term of Employment. Unless earlier terminated as hereinafter provided, the term of the Executive's employment under this Agreement shall initially be for a period beginning on the date hereof and ending on June 1, 2000. The period commencing on the date hereof and ending on the earlier of (i) the termination of Executive's employment hereunder, and (ii) June 1, 2000, is referred to herein as the Employment Term.


If the Executive continues in the full-time employ of the Company after the end of the Employment Term (it being expressly understood and agreed that the Company does not now, nor hereinafter shall have, any obligation to continue the Executive in its employ whether or not on a full-time basis, after said Employment Term ends), then, unless otherwise expressly agreed to by the Executive and the Company in writing, the Executive's continued employment by the Company after the Employment Term shall, notwithstanding anything to the contrary expressed or implied herein, be terminable by the Company at will, with or without cause and with or without notice, but shall in all other respects be subject to the terms and conditions of this Agreement.


3. Duties. The Executive shall be employed as President and Chief Operating Officer of the Company, and shall, subject to the direction of the Board of Directors of the Company (the "Board") and the Chief Executive Officer of Nova Holdings, Inc., faithfully and competently perform such duties as inhere in such position and shall also perform and discharge such other executive employment duties and responsibilities consistent with his position as President and Chief Operating Officer as the Board of Directors of the Company and/or Chief Executive Officer of Nova Holdings, Inc. may from time to time reasonably prescribe, including serving as an officer of one or more of the Company's subsidiaries or affiliates. The Executive's primary workplace will be located in Nashville, Tennessee. Except as may otherwise be approved in advance by the Board, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, personal affairs or non-profit public service activities, the Executive shall devote his full time during normal business hours throughout the Employment Term to the services required of him hereunder. The Executive shall render his business services exclusively to the Companies (as defined in Section 6(a)) during the Employment Term and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Companies in a manner consistent with the duties of his position.


4. Salary and Bonus.


(a) Salary. As compensation for the performance by the Executive of the services to be performed by the Executive hereunder during the Employment Term, the Company shall pay the Executive a base salary at the annual rate of One Hundred Fifty Thousand ($150,000.00) Dollars (said amount being hereinafter referred to as "Salary"). Any Salary payable hereunder shall be paid in regular intervals (but in no event less frequently than monthly) in accordance with the Company's payroll practices from time to time in effect. The Salary payable to the Executive pursuant to this Section 4(a) shall be subject to being increased annually based on merit, as of September 1, 1997 and each September 1 thereafter for the twelve-month period then commencing, by an amount up to (i) the annual percentage increase in the Consumer Price Index for Urban Consumers, All Items, Nashville, Tennessee Area, for the most recent twelve-month period for which such figures are then available as reported in the Monthly Labor Review published by the Bureau of Labor Statistics of the U.S. Department of Labor, or (ii) such other amount as may be determined from time to time by the Board in its sole discretion. As of September 1, 1997 Executive's salary shall increase to One Hundred Sixty-Three Thousand Five Hundred ($163,500.00) Dollars.


(b) Bonus. The Executive will be entitled to receive bonus compensation from the Company in respect of each fiscal year (or portion thereof) occurring during the Employment Term beginning with the year which starts on July 1, 1997 provided that Executive


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is employed by Company on the last day of said fiscal year. The amount of such bonus compensation to be based on the extent to which the Company's planned EBT established by the Board for the corresponding period (the "Plan EBT") has been achieved, as follows:


Percent of Plan EBT Achieved Bonus
---------------------------- -----
80% or less None


Between 80% and 100% 1.5% of Salary for each 1%
of Plan EBT achieved in
excess of 80%


100% and above up to 125% 30% of Salary, plus 0.8% of
Salary for each 1% of Plan
EBT achieved in excess of
100%


125% or more 50% of Salary


"EBT" shall mean, with respect to any fiscal year (i) the net income (determined in accordance with generally accepted accounting principles applied consistently with the Company's audited financial statements, but excluding the effect of any extraordinary or other material non-recurring gain (but not loss) outside the ordinary course of business) of the Company ("Net Income"), plus (ii) to the extent deducted in determining Net Income for such period, the amount of the provision for income taxes for such period. Plan EBT for each fiscal year shall be as determined by the Board. Any bonus to which the Executive is entitled shall be paid as promptly as practicable after the audited financial statements for the fiscal year in question have been approved by the Board and shall be calculated on a linear basis to the nearest $100.


Executive shall be entitled to a pro-rated bonus for the period January 1, 1997 through June 30, 1997 based upon the Company's bonus plan which was in place prior to the date of this Agreement. This prorated bonus and the bonuses described hereinabove shall be in lieu of all other bonuses or bonus plans previously adopted by the Company and applicable to Executive.


(c) Withholding, Etc. The payment of any Salary and bonus hereunder shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required by law or the Company's employee benefit plans.


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5. Other Benefits. During the Employment Term, the Executive shall:


(i) be eligible to participate in employee fringe benefits and pension
and/or profit sharing plans that may be provided by the Company for its
senior executive employees in accordance with the provisions of any
such plans, as the same may be in effect from time to time;


(ii) be eligible to participate in any medical and health plans or
other employee welfare benefit plans that may be provided by the
Company for its senior executive employees in accordance with the
provisions of any such plans, as the same may be in effect from time to
time;


(iii) be entitled to 160 hours paid vacation in each calendar year,
accrued on a per pay period basis, as well as all paid holidays given
by the Company to its senior executive officers;


(iv) be entitled to non-vested sick leave, (initially 240 hours with
bi-weekly accruals of 8 hours per month, up to a maximum of 960 hours),
sick pay and disability benefits in accordance with any Company policy
that may be applicable to senior executive employees from time to time;
and


(v) be entitled to reimbursement for all reasonable and necessary
out-of-pocket business expenses incurred by the Executive in the
performance of his duties hereunder in accordance with the Company's
policies applicable thereto.


For purposes of determining eligibility, vesting and benefit accrual under each of the benefit plans and arrangements referred to in this Section 5, the Executive shall be credited with service for all years and partial years of service with Company prior to the date hereof.


6. Confidential Information. The Executive hereby covenants, agrees and acknowledges as follows:


(a) The Executive has and will have access to and will participate in
the development of or be acquainted with confidential or proprietary
information and trade secrets related to the business of the Company,
Nova Holdings, Inc, Nova Factor, Inc., Southern Health Systems, Inc.,
and any other present or future subsidiaries or affiliates of the
Company (collectively, with the Company, the "Companies"), including
but not limited to (i) customer and physician lists; patient ...