EMPLOYMENT AGREEMENT
--------------------
Agreement made the 2nd day of November, 1995, by and between a
Corporation: Certified Diabetic Supplies, Inc.
(a Florida Corporation) 0000 X & X Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
and
Executive: Xxxxx X. Xxxxxxx
00000 Xxxxx Xxxx Xxxxx X-000
Xxxxxx, Xxxxxxx 00000
Effective Date: November 2, 1995
BACKGROUND
It is in the best interest of the Corporation and its Shareholders
to secure Executive's services for the Corporation with an employment agreement.
The Corporation, as an incentive to Executive to become employed and to continue
employment with the Corporation grants compensation, present and future stock
interest and other incentives as more fully set forth in this Agreement and the
attached Schedules. Executive and the Corporation desire to enter into an
Employment Agreement under the terms and conditions set forth below.
NOW THEREFORE, in consideration of the promises and mutual
agreements set forth in this Agreement and for other good and valuable
consideration, the parties agree as follows:
1. EMPLOYMENT
The Executive shall be employed by the Corporation in the
capacity of President and Chief Operating Officer of the Company
2. DUTIES
Executive shall serve the Corporation faithfully and to best of
his ability, under the direction of the Board of Directors. He shall devote his
entire time, energy and skill during the regular business hours and such other
hours as are reasonably necessary and shall perform from time to time such
services and act in such office or capacity as the Board of Directors may
direct. Company acknowledges, however, that Employee has other business
interests and is a director of other businesses and that such activity shall not
constitute a breach of this Agreement as long as it does not normally interfere
with the performance by Employee of his duties hereunder.
3. COMPENSATION
The Corporation shall pay or cause to pay the Executive during
the term of his employment salary and bonuses as more particularly set forth in
Schedule "A" which is attached to this Agreement and made part hereof.
4. STOCK
Executive shall be entitled to certain capital stock in the
Corporation as set forth in Schedule "B" which is attached to this Agreement and
made a part hereof.
5. ADDITIONAL BENEFITS
Executive shall also be entitled to any fringe benefits which
may from time to time be made available to officers, directors and other
Executives of the Corporation and as set forth in the personal policies of the
Corporation, or as determined by the Board including but not limited to any
employee benefit plan which is qualified and exempt under Section 401(a) and
501(a) of the Internal Revenue Code. Executive shall also be entitled to any
group medical, dental, hospitalization insurance, long-term disability insurance
equal to ($4,000/month) Four Thousand Dollars per month and a life insurance
policy of not less than ($1,000,000) One Million dollars payable in the event of
death of the Executive and the Executive shall select the beneficiary. It is
understood that, with the exception of the life insurance policy, employment is
not a requirement for the Corporation to be responsible for continued coverage
for the executive and his wife for group medical, dental and hospitalization
insurance. This insurance will be a continuing cost to the Corporation until
death of the Executive and his wife, Xxxxxxxxx X. Xxxxxxx.
6. EXPENSES
The Corporation shall reimburse Executive for out-of-pocket
expenditures for transportation, fuel, entertainment, travel, meals, hotel
accommodations and the like incurred by him in the interest of the Corporation
("out-of-pocket expenses"). Executive shall each month submit vouchers, receipts
or other documentation together with appropriate written explanation required by
Corporation to verify out-of-pocket expenses and shall be reimbursed for the
actual expenses incurred. Corporation shall provide Executive a reasonable
monthly allowance for automobile expense, including cost of the vehicle, gas,
maintenance, repairs and insurance or, in the alternative, may provide a
suitable motor vehicle for use by the Executive for conduct of business on
behalf of the Corporation.
7. WORKING FACILITIES
The Corporation shall furnish Executive with such office space
and such other facilities and services as in the discretion of the Board of
Directors is appropriate for such an executive position and necessary for
performance of his duties.
8. AUTHORITY TO BIND THE CORPORATION
Executive shall have authority to enter into contracts binding
upon the Corporation and to create any obligations on the part of the
Corporation in the normal course of business and as would be expected of an
Executive of a similar Corporation. Notwithstanding the foregoing, Executive
shall not have the authority to enter into contracts binding the Corporation,
without prior approval with the Board of Directors, for purchases of
transactions equal to or exceeding ($500,000) Five Hundred Thousand Dollars.
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9. VACATIONS
Executive shall be entitled each year to six (6) weeks vacation
in accord with company policy for officers, directors senior management
personnel.
Vacations shall be coordinated with other employees of the
Corporation, shall be consistent with Executive's duties (as more fully set
forth in Section 2 of this Agreement) and the needs of the Corporation and shall
be scheduled at such times so as not to interfere with the effective operation
of the Corporation.
10. TERM AND TERMINATION OF EMPLOYMENT
10.a. Term
The term of employment shall be for a period of five (5) years
commencing on the Effective Date of this Agreement November 2, 1995 until
October 31, 2000. At the end of the initial five (5) year term, Corporation and
Executive agree to negotiate in good faith a new contract or extension of the
current contract. In the event the Corporation and Executive fail to reach an
Agreement due solely to the failure of the Corporation to negotiate in good
faith, Executive shall be entitled upon his termination to his highest annual
compensation (to include all bonus compensation) payable for one (1) year from
the date of termination in the same manner his salary was paid while employed
("Severance Pay"). Executive shall have no duty to mitigate damages and should
he accept other employment, severance pay shall not be reduced or deducted from
any other of his earned income.
Further, in the event the Corporation terminates Executive
other than pursuant to the provisions set forth in Section 10b below, the
Executive shall be entitled to (i) the balance of his compensation due under
this Employment Agreement, but in no event Executive shall be paid no less than
an amount equal to two year's compensation as provided in Sections 3, 4, 5, 6,
and 7 (ii) Severance pay for the year following termination and (iii) release of
all stock from any escrow and forfeited provisions set forth in Schedule B.
10.b. Termination
10.b.1 Termination by Death. If Executive dies, then this
Agreement shall terminate immediately, except that Executive's heirs, personal
representatives or estate shall be entitled to receive (a) his salary for a
period of one (1) year after his death payable as his salary was paid during
Executive's lifetime; (b) any accrued benefits up to the date of termination;
(c) bonuses that have accrued but not paid; (d) shares of stock pledged, held in
escrow, stock options, warrants or other rights to own or purchase stock in the
Corporation; and
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(e) any benefits which are to be continued or paid after the date of termination
in accordance with the terms of the corresponding benefit plans. Specifically,
medical insurance is to continue for the lifetime of the Executive and his wife,
Xxxxxxxxx X. Xxxxxxx.
10.b.2 Termination by Disability. If Executive becomes
disabled, and such disability continues for more than three (3) consecutive
months after the onset of Disability (as defined below) or for periods
aggregating more than four(4) months during any sixth month period, then
Corporation shall have the right to terminate this Agreement immediately, except
that Executive shall be entitled to receive (a) the difference in his Base
Salary above any disability insurance proceeds received from the disability
policy or plan paid for or provided by Corporation for a period of one (1)
calendar year beginning on the date of the Onset of the disability; (b) any
accrued benefits up to the date of the termination; (c) bonuses that have
accrued but not paid; (d) all shares of stock in the Corporation including
without limitation all stock pledge, held in escrow, stock options, warrants or
other rights to own or purchase stock in the Corporation; and (e) any benefits
which are to be continued or paid after the date of termination in accordance
with the terms of the corresponding benefit plans. "Onset of Disability" means
the first day on which Executive shall be unable to perform any of his duties
under this Agreement a full time basis by reason of physical or mental
incapacity, sickness or infirmity.
In the event of a partial disability, Executive shall be
entitled to work for such time and in such capacity as his disability permits
and his salary shall be adjusted accordingly.
10.b.3 For Cause. This Agreement may be terminated for cause
as defined below, upon five (5) days prior written notice from the Corporation
to the Executive upon the occurrence or act by the Executive of any one of more
of the following events:
(a) fraud,
(b) dishonesty, or
(c) other material and willful misconduct by the Executive
If the Executive's employment is terminated for cause pursuant to
this Section, Executive shall be entitled to receive (a) his accrued Base Salary
through the date of termination, (b) any accrued benefits up to the date of
termination, (c) all shares of stock released from any forfeiture provision set
forth in Schedule B and (d) any benefits which are to be continued or paid after
the date of termination in accordance with the terms of corresponding benefit
plans.
10.b.4 Mutual Agreement. This Agreement may be terminated at
any time upon mutual agreement of the parties.
11. PROCEDURE UPON TERMINATION
Upon termination of his employment, Executive shall promptly
return to Corporation all documents (including copies) and other materials and
property of Corporation, pertaining to its business, including without
limitation customer and prospect lists, contracts, files, manuals, letters,
reports and records in his possession or control, no matter from whom or in what
manner required.
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12. DISCOVERIES
Except as set forth in this Section, Executive shall
communicate to Corporation, in writing when requested, and preserve as
confidential information of Corporation, all customer lists, trade secrets,
estimating techniques, bidding practices, non-public client information, client
contacts, vendors, business concepts and other ideas, relating to the business
for the Corporation which are conceived, developed or made by Executive, whether
alone or jointly with others, at any time (during or after business hours)
during the term of Executive's employment with Corporation (such concepts,
practices, ideas and lists are referred to "Executive Discoveries") or have been
made heretofore by the Executive in relation to business of the Corporation. All
of Executive's Discoveries shall be Corporation's exclusive property, and
Executive shall, at Corporation's expenses, sign all documents and take such
other actions as they may reasonably request to confirm their ownership of
Executive's Discoveries.
13. NONDISCLOSURE
At all times after the date of this Agreement, except with
Corporation's express prior written consent or in connection with the proper
performance of services under this Agreement, Executive shall not, directly or
indirectly, communicate, disclose or divulge to any Person (as defined in
Section 22 below) or use for the benefit of any Person, any confidential or
proprietary knowledge or information, no matter when or how acquired, concerning
the business of Corporation including, but not limited to, (a) names of
customers, locations, prospects and suppliers, (b) details of contracts,
proposals or other business arrangements with clients, prospects and suppliers,
(c) marketing methods, trade secrets, financial condition, and (d) software,
source code, technical documentation and other information. For purposes of this
Section 13, confidential information shall not include any information which is
known by the general public, or which becomes known by the general public other
than as a result of any improper act or omission of Executive.
14. RESTRICTIVE COVENANT
a. Covenant Not to Compete or Solicit
The Corporation was founded for the purpose of being a
Registered Provider under Medicare to sell durable medical equipment, primarily
diabetic supplies throughout the United States. As a material inducement to
entering this Agreement, Executive agrees and covenants that while he is an
employee of the Corporation and for a period of two (2) years thereafter, he:
(1) shall be restricted from competing with the
Corporation, directly or indirectly on his own behalf or through third parties,
in any manner whatsoever as a shareholder, director, officer, joint venturer,
partner, sole proprietor, investor or, in any other ownership capacity
whatsoever, or as an employee, consultant, agent, or representative of or for a
competing business within the fifty (50) states of the United States all
territories of the United States and Canada;
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(2) shall not either directly or indirectly on his own
behalf or through third parties solicit or attempt to solicit advertisers,
agencies, developers, operators, owners, clients or customers (collectively
"Customers") of the Corporation who are or were customers of the Corporation at
any time during the preceding two (2) years prior to his termination of
employment with respect to any of the Corporation's business or businesses of
its subsidiaries or affiliates for a competing business; and
(3) shall not communicate with or solicit any person or
entity, who is, or during a six (6) month period prior to his termination of
employment an employee, salesman, contractor, agent or representative
(hereinafter collectively "Employee or Contractor"), or Contractor's
relationship with the Corporation or in an effort to obtain such Person as an
employee, salesman, contractor, agent or representative of an entity or business
which competes with the Corporation's business.
b. Convenient Not to Violate Corporate Confidences
The parties agree and acknowledge that the Executive will
have access to and will become aware of confidential information and trade
secrets including Customer data, files, and business techniques, (collectively,
"Confidential Information") and that this confidential information (1) is not
generally available to the public, (2) has been compiled at the Corporation's
expense and over a substantial amount of time, (3) is critical to the
Corporation's ability to compete in the industry in which it does business, and
(4) if disclosed or released will be greatly and irreparably damage the
Corporation's business. Therefore, as a material inducement to entering into
this Agreement, Executive agrees and covenants that he will not, while he is an
Executive or during a two (2) year period beginning on the date of the
termination of his employment, either disclose or divulge this confidential
information to anyone or use this confidential information in any manner to
compete with the Corporation.
c. Enforcement
The Corporation may enforce the provisions of this Section
by suit for damages, injunction, or both, as provided below:
(1) The parties agree and acknowledge that the Corporation
will be irreparably injured by the breach of any provision of this Section, and
that money damages alone will not be an appropriate measure of the harm the
Corporation will suffer from such continuing breach. Therefore, the parties
agree that the equitable relief, including specific performance of these
provisions by injunction, is an appropriate remedy for breach of these
provisions.
(2) The parties also agree and acknowledge, however, that
money damages will be appropriate with respect to any past breach of any
provision of this Section. Therefore, in case of any breach of this Section, the
breaching party shall render a full
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and complete accounting of the gross receipts, expenses, and net profits which
have resulted from such breach and shall be liable for money equal to the
greater of (1) the actual profits recognized by such breaching party from all
transactions in breach of this Section, or (2) profits that the Corporation
could realize from the transactions in breach of this Section.
(3) Notwithstanding anything to the contrary contained in
this Agreement neither the Corporation nor other Shareholders shall be obligated
to make any payments to the Executive under this or any other Agreement between
the parties if the Executive is deemed to have violated any provision of this
Section of this Agreement. Further, breach of this Section shall be a complete
defense to the non-payment by the Corporation of any payments due Executive
under the terms of this Agreement.
(4) The Corporation shall, in addition to the damages
described in this Section be entitled to be reimbursed for all reasonable legal
fees and costs necessary to prosecute any claim or action under this Section as
part of any award by a Court Arbitrator. The term "costs" shall include all the
filing and court costs, investigation, witness and expert witness fees,
deposition costs, travel, long-distance telephone, photocopying and printing and
any and all other costs necessary to prosecute the claim.
(5) If any portion of the provisions of this Section or its
application is construed to be invalid, illegal, or unenforceable, then the
other portions and their application shall not be affected thereby and shall be
enforceable without regard thereto. If any of the Covenants are determined to be
unenforceable because of their scope, duration, geographic area or similar
factor, then the Court or arbitrator making such determination shall have the
power to reduce or limit such scope, duration, area or other factor, and such
Covenant shall then be enforceable in its reduced or limited form.
15. RELATIONSHIP OF PARTIES
The relationship between the partners is that of employer
and employee. The employee shall be eligible to participate in any plans or
arrangements or distributions by the Corporation pertaining to any person,
profit-sharing bonus or similar benefits provided for regular employees and
officers, directors and senior executives except to the extent that such plans,
arrangements, or distributions are superseded by more liberal provisions in the
Agreement.
16. MANAGEMENT RESPONSIBILITY
The parties recognize that the business affairs of the
Corporation shall be managed by the Board of Directors of the Corporation in
accordance with the laws of the State of Florida governing the organization and
administration of business corporations.
17. WAIVER OF BREACH
The waiver by either party hereto of a breach of any
provisions of this Agreement shall not operate to be construed as a waiver of
subsequent breach of the same or any other provision of this Agreement.
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18. NOTICES
All notices, consents or other communication required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three (3)
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid, or (c) one (1) business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective address stated on the first page of this
Agreement. Notices may also be given by prepaid telegram or facsimile and be
effective on the date transmitted if confirmed within twenty-four (24) hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Notice to Corporation, addressed to the attention of the Chairman of
the Board, shall suffice as notice to the Corporation, provided that a copy
thereof is simultaneously sent to the Corporate Attorney of record. Notice to
Executive addressed to the address set forth at the beginning of this Agreement
and shall suffice. Any party may change its address for notice and the address
to which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 18, except that any such change of
address notice shall not be effective unless and until received.
19. PRIOR AGREEMENTS
Executive represents to Corporation (a) that there are no
restrictions, agreements or undertakings whatsoever to which Executive is a part
which would prevent to make unlawful his execution of this Agreement or his
employment hereunder, (b) that his execution of this Agreement or his employment
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written to which he is a party of which he is bound and
(c) that he is free and able to execute this Agreement and to enter into
employment by Executive.
20. ASSIGNMENT
Corporation may assign its rights and duties under this
Agreement to any party without the consent of Executive. This Agreement, being
for the personal services of Executive, shall not be assignable by him.
21. OTHER PROVISIONS
This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous, oral or written, express or implied, agreements and
understandings. This Agreement shall not be modified or terminated except in
writing. No action taken by Corporation under this Agreement, including without
limitation any waiver, consent or approval, shall be effective unless approved
by Corporation's Board of Directors. This Agreement shall inure to the benefit
of and bind each of the parties hereto and the successors and assigns of
Corporation and the personal representatives, estate and heirs of Executive.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same of any other right,
remedy, power or privilege with
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respect to any occurrence or be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver. Any headings preceding the text of any of the Sections or
Subsections of this Agreement are inserted for convenience of reference only,
and shall neither constitute a part of this Agreement nor affect its
construction, meaning, or effect.
22. DEFINITION
22.1 Person. "Person" means any individual,
corporation, partnership, sole proprietorship, joint venture, association,
cooperative, trust, estate, governmental body, administrative agency, regulatory
authority or other entity of an nature.
WITNESS the due execution and delivery hereof on the date
first above written.
CORPORATION: EXECUTIVE:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ XXXXX X. XXXXXXXXXX /s/ XXXXX X. XXXXXXX
-------------------------- -----------------------
Name: Xxxxx X. Xxxxxxxxxx Name: Xxxxx X. Xxxxxxx
Title: Treasurer
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SCHEDULE A
COMPENSATION
1. MINIMUM BASE COMPENSATION
Subject to the termination provisions of the Agreement, Executive
shall be paid an annual minimum base salary of $150,000 per year for all
services rendered to the Corporation for the term of this Agreement ("Minimum
Base Compensation") in equal weekly or bi-weekly installments with a deduction
of all taxes and other amounts required to be withheld or deducted by law.
2. INCENTIVE BONUS COMPENSATION
In addition to his Base Compensation, Executive shall be entitled to
Incentive Bonus Compensation ("Incentive Bonus Compensation") as determined as
follows:
Starting from a base of $2,500,000 in sales and an EBITDA of
$750,000 and not taking into consideration the adjustment for (1) accounts
receivable and (2) officer's salaries. See Schedule Below.
Annual Sales EBITDA Compensation
------------ --------- ------------
$2,500,000 $750,000 $150,000
4,000,000 1,200,000 250,000
6,000,000 1,800,000 300,000
8,000,000 2,400,000 400,000
10,000,000 3,000,000 500,000
Each Incentive Bonus shall be paid not more than thirty (30) days
after a determination that the applicable performance goal has been met. EBITDA
means, for any period, the Company's consolidated earnings from continuing
operations before interest, taxes, depreciation and amortization for such
period.
The Executive shall be entitled to such other cash bonuses as
determined from time to time at the discretion of the Board of Directors based
upon the growth and success of the Corporation.
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SCHEDULE B
STOCK
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NONE
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