EMPLOYMENT AND NON-COMPETITION AGREEMENT
Xxxxx Xxxxxxx
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated
as of January 30, 1995, is between Newrxco, Inc., a Delaware corporation (the
"Employer"), and Xxxxx Xxxxxxx (the "Employee").
WHEREAS, the Employer intends to purchase all of the stock (the
"Stock") of Community Distributors, Inc., a Delaware corporation (the
"Company"), pursuant to a Stock Purchase Agreement, dated as of August 26, 1994
(the "Stock Purchase Agreement"), among the Employer, Xxxxx Xxxxxx, Xxxxxx
Xxxxxx and Xxxxxx Xxxxxxx;
WHEREAS, the Employee is currently employed as an executive officer of
the Company and the Employer desires that the Employee continue to work as an
executive officer of the Company;
WHEREAS, immediately after the purchase of the Stock, the Employer will
merge with and into the Company with the Company as the surviving corporation,
and after such merger the term "Employer" shall be deemed to mean and refer to
the Company; and
WHEREAS, in connection with the foregoing, the Employer wishes to
employ the Employee as an executive officer of the Employer, and the Employee
wishes to work as an executive officer of the Employer, on the terms set forth
below.
NOW, THEREFORE, it is hereby agreed as follows:
ss.1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
ss.2. DUTIES. The Employee shall be employed as the President and Chief
Executive Officer of the Employer. In such capacity, the Employee shall have
such executive responsibilities and duties as are assigned by the Employer's
Board of Directors (the "Board") and are consistent with the position of
President and Chief Executive Officer of the Employer. The Employee agrees to
devote his full time and best efforts to the performance of his duties to the
Employer.
-2-
ss.3. TERM. The initial term of employment of the Employee hereunder
shall commence on the closing date of the acquisition under the Stock Purchase
Agreement (the "Commencement Date") and shall continue until the fifth
anniversary of the Commencement Date (the "Initial Term"), unless earlier
terminated pursuant to ss.6, and shall be renewed automatically for additional
one (1) year terms thereafter unless terminated by either party by written
notice to the other given at least ninety (90) days prior to the expiration of
the then current term.
ss.4. COMPENSATION AND BENEFITS. Until the termination of the
Employee's employment hereunder, in consideration for the services of the
Employee hereunder, the Employer shall compensate the Employee as follows:
(a) Base Salary. The Employer shall pay the Employee, in accordance
with the Employer's then current payroll practices, a base salary (the "Base
Salary"). The Base Salary will be paid at an annual rate of $400,000, and shall
be increased annually during the term of the Employee's employment hereunder by
the percentage increase in the consumer price index for urban wage earners for
the New York and Northeastern New Jersey area for the preceding four (4)
calendar quarters for which information has been published by the U.S.
Department of Labor over the consumer price index for the comparable prior four
(4) calendar quarters.
(b) Minimum Bonus. The Employee shall be eligible to receive from the
Employer, for each of the fiscal years of the Employer ended after the date
hereof, a minimum bonus (the "Minimum Bonus") equal to $50,000; provided, that
the Minimum Bonus payable for the fiscal year of the Employer ended July 31,
1995 shall be prorated based on the number of days elapsed from the Commencement
Date until the end of such fiscal year. The Minimum Bonus for each fiscal year
shall be paid within 30 days after the completion of the Employer's audited
financial statements for such fiscal year; provided, that the Minimum Bonus
shall not be payable for any fiscal year of the Employer ending after July 31,
1996 if Actual EBITA (as defined in Section 4(c)) for each of the previous two
consecutive fiscal years of the Employer was less than 90% of Budgeted EBITA (as
defined in Section 4(c)) for such fiscal year (it being understood that if the
Minimum Bonus is not paid for any such fiscal year as a result thereof, and
subsequent thereto Actual EBITA of the Employer exceeds 90% of Budgeted EBITA
for such fiscal year, the Minimum Bonus shall be payable for such succeeding
fiscal year).
(c) Management Incentive Bonus. The Employee shall also be eligible to
receive from the Employer, for each of the fiscal years of the
-3-
Employer ended after the date hereof, a management incentive bonus (the
"Incentive Bonus") equal to the amount, if any, by which the Annual Bonus
Calculation (as defined below) for such fiscal year exceeds the Minimum Bonus
for such fiscal year; provided, that the Incentive Bonus payable for the fiscal
year of the Employer ended July 31, 1995 shall be prorated based on the number
of days elapsed from the Commencement Date until the end of such fiscal year.
The Incentive Bonus for each fiscal year shall be paid within thirty (30) days
after the completion of the Employer's audited financial statements for such
fiscal year. As used in this Agreement, (a) "Actual EBITA" means, with respect
to any fiscal year of the Employer, EBITA for such fiscal year calculated on the
basis of the Employer's audited financial statements for such fiscal year; (b)
"Actual EBITA Percentage" means the percentage obtained by multiplying (i) the
quotient of Actual EBITA divided by Budgeted EBITA by (ii) 100; (c) "Annual
Bonus Calculation" means, (i) with respect to each fiscal year of the Employer
in which the Actual EBITA Percentage for such fiscal year exceeds 90% but does
not exceed 100%, an amount equal to the product of (A) 50% of the Employee's
Base Salary for such fiscal year multiplied by (B) a fraction, the numerator of
which is the amount by which the Actual EBITA Percentage for such fiscal year
exceeds 90% and the denominator of which is 10%, and (ii) with respect to each
fiscal of the Employer in which the Actual EBITA Percentage for such fiscal year
exceeds 100%, an amount equal to the sum of (A) 50% of the Employee's Base
Salary for such fiscal year plus (B) 2% of the amount by which Actual EBITA for
such fiscal year exceeds Budgeted EBITA for such fiscal year; (d) "Budgeted
EBITA" means, with respect to any fiscal year of the Employer, the EBITA
projected in the Employer's business plan for such fiscal year as approved by
the Board; and (e) "EBITA" means, with respect to any fiscal year, the sum of
the consolidated net income (or loss) of the Employer for such fiscal year,
calculated in accordance with generally accepted accounting principles
consistently applied but excluding therefrom any extraordinary items of income
or loss, plus all amounts deducted in the computation thereof on account of (i)
income taxes, (ii) interest expense, (iii) amortization, (iv) the amount of the
Minimum Bonus and any Incentive Bonus paid to the Employee hereunder and (v)
management fees paid to any shareholder of CDI Group, Inc. or any affiliates of
such shareholders during such year.
(d) Vacation. The Employee shall be entitled to three (3) weeks
vacation each calendar year. Any vacation shall be taken at the reasonable and
mutual convenience of the Employer and the Employee. Accrued vacation not taken
in any calendar year will not be carried forward or used in any subsequent
calendar year.
(e) Insurance; Other Benefits. Accident, disability, life and health
insurance for the Employee shall be provided by the Employer under
-4-
group accident, life and health insurance plans maintained by the Employer for
its full-time, salaried employees as such employment benefits may be modified
from time to time by the Board for all full-time, salaried employees. In
addition, the Employer shall either continue the Employee's current individual
disability policy or arrange for coverage under an alternative disability
insurance policy which is no less favorable. The amount and extent of such
coverage shall be subject to the discretion of the Board, provided, that the
amount and extent of such coverage shall be no less favorable than such coverage
provided by the Employer to the Employee immediately prior to the date hereof.
(f) Car Allowance. In connection with the Employee's employment, the
Employee shall from time to time be required to travel by automobile on the
Employer's business. Accordingly, the Employer will lease for the Employee every
three years a new Lexus 400S or other suitable automobile which is substantially
equivalent in value thereto and will pay all maintenance and insurance costs
with respect thereto until the termination of the Employee's employment with the
Employer.
(g) Stock Options. The Employee shall be entitled to purchase
additional shares of the common stock of the Employer's parent subject to the
terms and conditions set forth in the Incentive Stock Option Agreement attached
hereto as Exhibit A and the Disposition Event Stock Option Agreement attached
hereto as Exhibit B.
ss.5. EXPENSES. The Employee shall be entitled to incur, and receive
reimbursement from the Employer of, discretionary expenses in an amount up to
$20,000 per annum in connection with the performance by the Employee of his
duties hereunder. The Employee shall comply with such reporting requirements
with respect to expenses as the Employer may establish from time to time. In
addition to the foregoing, the Employer shall pay or reimburse the Employee for
all other reasonable out-of-pocket expenses incurred by the Employee in the
performance of his duties hereunder, including without limitation, the
attendance by the Employee and his spouse of one trade conference each year
which is related to the industry of the Employer.
ss.6. TERMINATION. The Employee's employment hereunder shall commence
on the Commencement Date and continue until the expiration of the Initial Term,
and any extension of such term pursuant to ss.3, except that the employment of
the Employee hereunder shall earlier terminate:
(a) Death or Disability. Upon the death of the Employee during the term
of his employment hereunder or, at the option of the Employer, in the event of
the Employee's disability, upon thirty (30) days' written notice
-5-
from the Employer. The Employee shall be deemed disabled if he meets the
criteria for disability under the Employer's disability insurance policy for 180
days, consecutive or non-consecutive, in any twelve (12) month period. Any
refusal by the Employee to submit to a medical examination for the purpose of
certifying disability under this ss.6(a) shall be deemed to constitute
conclusive evidence of the Employee's disability.
(b) For Cause. For "Cause" immediately upon written notice by the
Employer to the Employee; provided, that the Employer may not terminate the
Employee for Cause unless (i) such termination has been approved by the
affirmative vote or consent of a majority of the directors on the Board
(excluding the Employee) at the time of such termination and (ii) not later than
30 days following the date of such termination, the Employee shall be given the
opportunity to appear before the Board, represented by counsel, to address the
grounds for such termination. For purposes of this Agreement, a termination
shall be for Cause if the Board shall determine that any one or more of the
following has occurred:
(i) the Employee shall have committed an act of fraud,
embezzlement, misappropriation or breach of fiduciary duty against the
Employer, including, but not limited to, the offer, payment,
solicitation or acceptance of any unlawful bribe or kickback with
respect to the Employer's business; or
(ii) the Employee shall have been convicted by a court of
competent jurisdiction of, or pleaded guilty or nolo contendere to, any
felony which the Board determines in its discretion would detrimentally
affect or impair in any way (A) the Employee's ability to perform his
duties hereunder or (B) the reputation or operation of the Employer's
business or (C) the relationship between the Employer and its
suppliers, customers or employees; or
(iii) the Employee shall have committed a breach of any of the
covenants, terms and provisions of ss.9 hereof or material breach of
any of the covenants, terms and provisions of ss.8 hereof; or
(iv) the Employee shall have breached any one or more of the
provisions of this Agreement (excluding ss.ss.8 and 9 hereof) or any
one or more of the provisions of the Stockholder Agreement of even date
herewith among CDI Group, Inc. and its stockholders, and such breach
shall have continued for a period of twenty (20) days after written
notice to the Employee specifying such breach in reasonable detail; or
-6-
(v) the Employee shall have refused, after explicit written
notice, to obey any lawful resolution of or direction by the Board
which is consistent with his duties hereunder.
(c) Resignation or Termination Without Cause. Upon ninety (90) days'
written notice by either the Employee or the Employer to the other party hereto.
For purposes of this Agreement, the Employee shall be deemed to have been
terminated without Cause if the Employee terminates his employment hereunder for
Good Reason upon ninety (90) days' written notice to the Employer. The Employee
shall be entitled to terminate his employment for Good Reason if any of the
following occur:
(i) the Employee is assigned duties which are materially
inconsistent with the position or responsibilities associated with his
position as President and Chief Executive Officer of the Employer; or
(ii) the Employer requires the Employee to perform his duties
hereunder principally at any location outside the State of New Jersey
and he notifies the Employer within 30 days after such relocation that
he is unwilling to continue his employment hereunder at such location.
(d) Rights and Remedies on Termination. (i) If the Employer shall
terminate the Employee's employment hereunder pursuant to ss.6(c) hereof, then
(A) the Employee shall be entitled to receive, as severance pay, payment, in
accordance with the Employer's then current payroll practices, of his Base
Salary in effect at the time of his termination for (1) the remainder of the
Initial Term or (2) if such termination occurs subsequent to the Initial Term,
the remainder of the then current one-year extension thereof; provided, however
that the Employee shall be required to mitigate his damages during such period
by using his best efforts to search for alternative employment of similar status
with an employer of comparable or better financial resources to the Employer and
to accept such employment if offered and the Employer shall be entitled to
reduce the amount payable by the Employer under this ss.6(d)(i) by an amount
equal to the income received by the Employee pursuant to such new employment,
and (B) the Employee shall be entitled to receive, within 30 days following the
completion of the Employer's audited financial statements for the fiscal year
during which such termination occurs, a prorated portion of the Minimum Bonus
and the Incentive Bonus (if any) for the fiscal year in which his termination
occurs
-7-
determined by multiplying (1) the full amount of the Minimum Bonus and the
Incentive Bonus (if any) that would have been payable to the Employee pursuant
to ss.4(c) hereof if his employment hereunder had not been terminated by (2) a
fraction, the numerator of which is the number of days elapsed during such
fiscal year prior to the Employee's termination and the denominator of which is
365.
(ii) If the Employee's employment hereunder is terminated pursuant to
ss.6(a) hereof, then the Employee (or his estate, as applicable) shall be
entitled to receive (A) payment, in accordance with the Employer's then current
payroll practices, of the Employee's Base Salary in effect at the time of such
termination for one year following such termination and (B) within 30 days
following the completion of the Employer's audited financial statements for the
fiscal year during which such termination occurs, a prorated portion of the
Minimum Bonus and the Incentive Bonus (if any) for the fiscal year in which his
termination occurs determined by multiplying (1) the full amount of the Minimum
Bonus and the Incentive Bonus (if any) that would have been payable to the
Employee pursuant to ss.4(c) hereof if his employment hereunder had not been
terminated by (2) a fraction, the numerator of which is the number of days
elapsed during such fiscal year prior to the Employee's termination and the
denominator of which is 365.
(iii) If the Employee's employment hereunder is terminated by the
Company pursuant to Section 3 without Cause at the end of the Initial Term or at
the end of any one-year term thereafter, the Employee shall be entitled to
receive, within 30 days following the completion of the Employer's audited
financial statements for the fiscal year during which such termination occurs, a
prorated portion of the Minimum Bonus and the Incentive Bonus (if any) for the
fiscal year in which his termination occurs determined by multiplying (1) the
full amount of the Minimum Bonus and the Incentive Bonus (if any) that would
have been payable to the Employee pursuant to ss.4(c) hereof if his employment
hereunder had not been terminated by (2) a fraction, the numerator of which is
the number of days elapsed during such fiscal year prior to the Employee's
termination and the denominator of which is 365.
(iv) Except as otherwise set forth in this ss.6(d), the Employee shall
not be entitled to any severance or other compensation after termination other
than payment of any portion of his Base Salary through the date of his
termination and any expense reimbursements under ss.5 hereof for expenses
incurred in the performance of his duties prior to termination.
ss.7. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
improvements and innovations (including all data and records pertaining thereto)
related to the Employer's business, whether or not patentable, copyrightable,
registrable as a trademark, or reduced to writing,
-8-
that the Employee may discover, invent or originate during the term of his
employment hereunder, and for a period of twelve (12) months thereafter, either
alone or with others and whether or not during working hours or by the use of
the facilities of the Employer ("Inventions"), shall be the exclusive property
of the Employer. The Employee shall promptly disclose all Inventions to the
Employer, shall execute at the request of the Employer any assignments or other
documents the Employer may deem necessary to protect or perfect its rights
therein, and shall assist the Employer, at the Employer's expense, in obtaining,
defending and enforcing the Employer's rights therein. The Employee hereby
appoints the Employer as his attorney-in-fact to execute on his behalf any
assignments or other documents deemed necessary by the Employer to protect or
perfect its rights to any Inventions.
ss.8. CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that certain assets of the Employer, including without limitation
information regarding customers, pricing policies, methods of operation,
proprietary computer programs, sales, products, profits, costs, markets, key
personnel, formulae, product applications, technical processes, and trade
secrets (hereinafter called "Confidential Information") are valuable, special,
and unique assets of the Employer and its affiliates. The Employee shall not,
during or after his term of employment, disclose any or any part of the
Confidential Information to any person, firm, corporation, association, or any
other entity for any reason or purpose whatsoever, directly or indirectly,
except as may be required pursuant to his employment hereunder, provided, that
Confidential Information shall in no event include (a) Confidential Information
which was generally available to the public at the time of disclosure by the
Employer or (b) Confidential Information which becomes publicly available other
than as a consequence of the breach by the Employee of his confidentiality
obligations hereunder. In the event of the termination of his employment,
whether voluntary or involuntary and whether by the Employer or the Employee,
the Employee shall deliver to the Employer all documents and data pertaining to
the Confidential Information and shall not take with him any documents or data
of any kind or any reproductions (in whole or in part) or extracts of any items
relating to the Confidential Information.
ss.9. NON-COMPETITION. During the term of the Employee's employment
hereunder and until two (2) years after termination of the Employee's employment
hereunder, the Employee will not (a) anywhere within New Jersey, New York or
Pennsylvania or anywhere within 100 miles of any store operated by the Employer
at the time of the Employee's termination, engage, directly or indirectly, alone
or as a shareholder (other than as a holder of less than five percent (5%) of
the common stock of any
-9-
publicly traded corporation), partner, officer, director, employee or consultant
of any other business organization that is engaged or becomes engaged in the
operation of retail drug stores or in any other business activity that the
Employer is conducting at the time of the Employee's termination or has notified
the Employee that it proposes to conduct and for which the Employer has, prior
to the time of such termination, expended substantial resources (the "Designated
Industry"), (b) divert to any competitor of the Employer any customer of the
Employer, or (c) solicit or encourage any officer, key employee or consultant of
the Employer to leave its employ for alternative employment or hire or offer
employment to, any person to whom the Employer has offered employment. The
Employee will continue to be bound by the provisions of this ss.9 until their
expiration and shall not be entitled to any compensation from the Employer with
respect thereto except as provided in ss.6(d) hereof. If at any time the
provisions of this ss.9 shall be determined to be invalid or unenforceable, by
reason of being vague or unreasonable as to area, duration or scope of activity,
this ss.9 shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter; and the Employee agrees that this ss.9 as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
ss.10. GENERAL.
(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the recipient
of such notice or communication shall have specified to the other party hereto
in accordance with this ss.10(a):
If to the Employer, to:
Community Distributors, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
-10-
With a copy to:
Xxxxxx X. Xxxx, Esq.
Xxxxxxx, Xxxx & Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
If to the Employee, to:
Xx. Xxxxx Xxxxxxx
XxXxx Xxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
(b) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by the Employee of his obligations under ss.ss.7, 8
and 9 hereof, the Employer will have no adequate remedy at law, and accordingly
will be entitled to specific performance and other appropriate injunctive and
equitable relief.
(c) Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) Waivers. No delay or omission by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
(e) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Assigns. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties hereto, including any
entity which acquires substantially all of the assets or stock of the Employer.
(g) Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to
the subject matter hereof and shall not be amended except by a written
instrument hereafter signed by each of the parties hereto.
-11-
(h) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of New Jersey.
-12-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed as of the date and
year first above written.
NEWRXCO, INC.
By: /s/ Xxxx X. XxXxxxx
-----------------------------
Title: President
/s/ Xxxxx Xxxxxxx
---------------------------------
Xxxxx Xxxxxxx
