1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into as of the __
day of January, 2001, is by and among QK HEALTHCARE, INC., a Delaware
corporation (the "Company"), and XXXXXXX XXXXXXXX (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive as President of
the Company under the terms and conditions specified herein, and the Executive
desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, the parties do hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) Effective as of the effective date of the Company's initial public
offering and through the four year period ending on the fourth annual
anniversary of such effective date, the Company hereby agrees to employ the
Executive as President of the Company. The Executive shall be a member of the
Board of Directors of the Company upon the effective date of the Company's
initial public offering and shall be a Director for at least three fiscal years
including the fiscal year that the Company's initial public offering becomes
effective even if it is not a full year. The Executive shall have the
responsibilities, duties and authority reasonably accorded to and expected of
such position. All employees of the Company, except the Chief Executive Officer,
shall report to the Executive directly or indirectly (i.e., through other
employees who report to the Executive directly) (collectively, the "Employees").
The Executive or the Employees shall be responsible for personnel decisions
regarding employees who are not officers of the Company, including hiring,
firing and disciplinary decisions. The Executive or the Employees shall also be
responsible for the purchase and sales operations of the Company. The Executive
will report directly to the Board of Directors of the Company and carry out its
lawful directives.
(b) The Executive hereby agrees to accept the employment,
responsibilities and duties described in subparagraph (a) above upon the terms
and conditions herein contained. The Executive agrees to devote substantially
all of his business and productive time, skill, attention and efforts to promote
and further the business of the Company. In all aspects of his employment, the
Executive shall faithfully adhere to, execute and fulfill all directives,
policies and standards established by the Company. The Executive shall not,
during the term of the Executive's employment hereunder, be engaged in any other
business activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with the Executive's duties and responsibilities hereunder.
2. COMPENSATION AND BENEFITS. For all services rendered by the
Executive, the Company shall compensate the Executive as follows:
2
(a) BASE SALARY. The Company shall pay to the Executive base salary at
the rate of not less than $750,000 per annum. Base salary shall be paid in
accordance with the Company's standard payroll procedures for senior executives.
Base salary may be increased (but not reduced) by the Compensation Committee of
the Board of Directors from time to time.
(b) ANNUAL BONUSES. The Executive shall be eligible to participate in
the Management Compensation Incentive Plan. His participation shall be governed
by the terms and conditions of the Management Compensation Incentive Plan.
(c) RETENTION BONUSES. Within ten (10) days of the second annual
anniversary of the effective date of the Company's initial public offering, the
Executive shall receive a lump sum payment of $750,000, provided that as of the
second anniversary of the effective date of the Company's initial public
offering his employment has not been terminated by him without Good Reason, by
the Company for Cause or due to his death or Disability (as defined below).
Within ten (10) days of the fourth annual anniversary of the effective date of
the Company's initial public offering, the Executive shall receive a lump sum
payment of $750,000, provided that as of the second anniversary of the effective
date of the Company's initial public offering his employment has not been
terminated by him without Good Reason, by the Company for Cause or due to his
death or Disability (as defined below).
(d) STOCK OPTIONS. Upon execution of this Agreement by the Executive
and the Company, the Executive shall receive an instrument, mutually agreed to
by the Company and the Executive, (the "Instrument") that, upon the effective
date of the Company's initial public offering, shall immediately convert to the
following stock option awards by the Company to the Executive a non-qualified
stock option to purchase 1,300,000 shares of the common stock of the Company,
$.001 par value (the "Common Stock") at an exercise price equal to the initial
offering price of the Company's Common Stock being offered in the initial public
offering (the "IPO Price") less $5.00 per share. Executive's interest in the
Instrument shall vest upon execution of this Agreement by the Executive and the
Company. The Executive shall also be awarded non-qualified stock options to
purchase 100,000 shares of Common Stock annually commencing on the first
anniversary of the effective date of the Company's initial public offering
during the Term of this Agreement (as defined below), at an exercise price equal
to the then fair market price of the Common Stock. The options shall have a term
of 10 years except as otherwise provided in the stock option agreements and will
be immediately exercisable. The shares issued upon exercise will be subject to
restrictions on resale. The options shall be embodied in written option
agreements between the Company and the Executive in the forms attached hereto as
Exhibit A, the terms of which shall be conclusive and binding.
(e) WELFARE AND RETIREMENT BENEFITS. During the term of the Executive's
employment with the Company, the Executive shall participate in such employee
benefit plans, including but not limited to 401(k), and health insurance plans,
as the Company makes available generally to the most senior executives of the
Company. In addition to participation in such plans, the Executive will be
entitled to participate in a group long term disability plan, at the Company's
expense.
(f) BUSINESS EXPENSES. During the term of this Agreement, the Company
will reimburse the Executive in a manner consistent with Company practice for
its most senior
-2-
3
executives for any reasonable travel and out-of-pocket expenses actually
incurred by the Executive in connection with his employment hereunder. The
Company's agreement under this subparagraph (e) is subject to the Executive's
substantiation and reporting of such expenses in accordance with Company policy
and federal and state income tax laws.
(g) OTHER EXPENSES. During the term of this Agreement, the Company will
reimburse the Executive in a manner consistent with Company practice for any
reasonable expenses incurred for personal financial planning and income tax
preparation services, provided that such services are provided by the public
accounting firm retained by the Company.
(h) VACATION. The Executive shall be entitled to six (6) weeks vacation
per annum.
3. NON-COMPETITION AGREEMENT.
(a) The Executive shall not, during the period of the Executive's
employment by or with the Company, and for a period of one (1) year immediately
following the termination of the Executive's employment under this Agreement (i)
by the Company with Cause (as hereinafter defined) or (ii) by the Executive
without Good Reason (as hereinafter defined), directly or indirectly, for the
Executive or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, stockholder,
owner, partner, joint venturer, or in a managerial, consulting
or advisory capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales
representative, in any business which offers any services or
products in direct competition with the Company within the
United States of America ("USA");
(ii) call upon any person who is, at that time,
within the USA, an employee of the Company in a managerial
capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Company;
(iii) call upon any person or entity which is, at
this time, or which has been, within one (1) year prior to
that time, a client of the Company within the USA for the
purpose of soliciting or selling products or services in
direct competition with the Company within the USA;
(iv) call upon any prospective acquisition candidate,
on the Executive's own behalf or on behalf of any competitor,
which candidate was, to the Executive's actual knowledge after
due inquiry, either called upon by the Company or for which
the Company made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) induce or attempt to induce any person known by
the Executive to be a customer, supplier, or business relation
of the Company to cease doing business with the Company or in
any way interfere with the relationship between the Company
and any person known by the Executive to be a customer,
supplier, licensee or business relation of the Company.
-3-
4
Notwithstanding the above, the foregoing covenants shall not be deemed
to prohibit the Executive from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business, whose stock is traded
on a national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to the Company for which
the Company would have no other adequate remedy, the Executive agrees that the
foregoing covenants may be enforced by the Company in the event of breach by the
Executive, by injunctions and restraining orders.
(c) The covenants in this Paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
(d) The Executive acknowledges that the covenants in this Paragraph 3:
(i) are agreed to by the Executive as an inducement for and in consideration of
the Company's entering into this Agreement; and (ii) contain limitations as to
time, geographic area and scope of activity to be restrained that are reasonable
and do not impose a greater restraint than is necessary to protect the goodwill
or other business interests of Company.
(e) The Executive agrees that all of the covenants in this Paragraph 3
shall be construed as an agreement independent of any other provision in this
Agreement, that the Company shall be the beneficiary of and have the right to
enforce such covenants, and that the existence of any claim or cause of action
of the Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. It is specifically agreed that the period of one year (1) year
following termination of the Executive's employment stated at beginning of this
paragraph 3, during which the agreements and covenants of the Executive made in
this Paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which the Executive is in violation of any provision
of this Paragraph 3.
4. TERM AND TERMINATION.
(a) TERM. The Executive's employment pursuant to this Agreement shall
begin on the effective date of the Company's initial public offering, and shall
terminate on the fourth anniversary of such effective date. This Agreement may
be extended only by a further written agreement between the parties.
Notwithstanding the foregoing; either party may terminate this Agreement as
described below.
(b) TERMINATION BY THE EXECUTIVE. The Executive may terminate this
Agreement at any time during the Term, with or without Good Reason. For purposes
of this Agreement, "Good Reason" means (i) the Executive is required to relocate
his principal office from its current location in Ronkonkoma, New York, to an
office a driving distance of 100 or more miles
-4-
5
away from the Executive's present home; (ii) the Company removes the Executive
from his position as President of the Company without Cause (as defined in
paragraph 4(c) below); (iii) the Executive ceases without Cause (as defined in
paragraph 4(c) below) to be a member of the Board of Directors of the Company
for the first three fiscal years after the Company's initial public offering
becomes effective, including the fiscal year during which the Company's initial
public offering becomes effective, even if that year is not a full year, except
if the Executive removes himself from the Board of Directors; (iv) the Executive
is required to perform duties materially inconsistent with the duties normally
performed by a president of a company of similar size or the duties or
responsibilities of the Executive as set forth herein are materially reduced by
the Company, except that if the Executive's duties or responsibilities are
materially reduced because the Executive has substantially failed to perform
such duties or responsibilities and the non-employee members of the Board of
Directors of the Company who are not members of the Nussdorf family determine
unanimously that the Executive has substantially failed to perform such duties
or responsibilities; (v) the Company fails to adhere in a substantial manner to
any of its covenants herein provided that such failure has a materially adverse
effect on the Executive; or (vi) the Company fails to provide the Executive with
compensation and/or benefits at the levels required herein. A termination by the
Executive for Good Reason shall not be effective unless and until the Executive
provides the Company with thirty (30) days advance written notice of his intent
to terminate his employment for Good Reason and the reason therefore and such
reason remains uncured for thirty (30) days after notice is given to the
Company, unless such reason is not capable of cure.
(c) TERMINATION BY THE COMPANY. The Company may terminate this
Agreement with or without Cause (as defined below) by providing the Executive at
least five (5) business days advance written notice. For purposes of this
Agreement, "Cause" means (1) the Executive's material breach of this Agreement
that has a material adverse effect on the Company, (2) the Executive's willful
malfeasance in the performance of any of his duties and responsibilities
hereunder if such malfeasance does or would in the future materially adversely
effect the Company; (3) the Executive's fraud with respect to the business
affairs of the Company or willful dishonesty, provided that such dishonesty
materially adversely effects the Company, (4) the Executive's conviction of a
felony crime; or (5) chronic alcohol abuse or illegal drug abuse by the
Executive, provided that such abuse renders the Executive incapable of
performing the essential duties of his position, with or without reasonable
accommodation. A termination by the by the Company for Cause shall not be
effective unless and until the Company provides the Executive with thirty (30)
days advance written notice of its intent to terminate the Executive's
employment for Cause and the cause therefore and such cause remains uncured for
thirty (30) days after notice is given to the Company, unless such cause is not
capable of cure.
5. SEVERANCE PAYMENT
(a) WITHOUT CAUSE AND GOOD REASON TERMINATION. If during the Term, the
Company terminates this Agreement without Cause or the Executive terminates this
Agreement with Good Reason, the Executive shall be entitled to receive all
compensation and benefits he would have received had such termination not
occurred. The annual bonus payable to the Executive upon his termination by the
Company without Cause or by the Executive with Good Reason, shall be the greater
of (i) the amount of the Executive's bonus in the year prior to the
-5-
6
termination and (ii) the bonus that would have been payable to him had he
remained in the employ of the Company. In addition, any unvested stock options
held by the Executive at the time of his termination by the Company without
Cause or by him with Good Reason, shall immediately vest.
(b) FOR CAUSE TERMINATION OR TERMINATION BY THE EXECUTIVE WITHOUT GOOD
REASON. If during the Term, the Company terminates this Agreement with Cause or
the Executive terminates this Agreement without Good Reason, the Executive shall
be entitled to receive base salary accrued through the date of termination.
(c) DEATH OR DISABILITY. If during the Term, this Agreement is
terminated due to the Executive's death or Disability (as defined below), the
Executive, or his designated beneficiary(ies), shall be entitled to receive (i)
base salary through the end of the calendar year in which such termination
occurs, (ii) a pro rata share of his bonus for the year of termination, and
(iii) immediate vesting of all unvested stock options. A "Disability" is a
mental or physical condition that renders the Executive unable to perform the
essential duties of his position with or without reasonable accommodation for
more than six (6) consecutive months.
(d) TIMING OF PAYMENTS. Any payments made to the Executive pursuant to
paragraphs 5(a), (b) or (c) above shall be made when they would otherwise have
been due, unless the parties hereto agree that such payments, or any portion
thereof, shall be made at an earlier time or at earlier times.
(e) NON-RENEWAL. If at the end of the Term, the Company does not offer
to renew this Agreement on terms at least as favorable as those in the final
year of the Executive's employment, the Executive shall be entitled to receive a
lump sum payment in the amount of one year's base salary.
(f) POST-EMPLOYMENT DISPUTES. If upon the termination of the
Executive's employment, a dispute arises between the Executive and the Company
concerning whether the Executive's employment was terminated by the Company for
Cause or whether the Executive terminated his employment for Good Reason, the
Company shall continue to pay the Executive his Base Salary until such dispute
is fully and finally resolved ("Salary Continuation Payments"). If such dispute
is resolved in an arbitration proceeding against the Executive, the Executive
shall promptly return the payments made pursuant to this paragraph 5(e) to the
Company. The Company may, in its discretion, place the Salary Continuation
Payments in an interest bearing escrow account to be distributed to the
Executive, if he prevails in the arbitration proceeding, or to the Company, if
it prevails in the arbitration proceeding, or as subsequently agreed by the
parties hereto, upon resolution of the dispute if the dispute is resolved prior
to the issuance of an arbitration award.
(g) NO MITIGATION. The Executive shall have no duty to mitigate any
amounts payable or benefits provided under this Agreement.
6. RETURN OF COMPANY PROPERTY. All records, files, business plans,
financial statements, manuals, memoranda, lists, designs, patents, and other
property delivered to or compiled by the Executive by or on behalf of the
Company or any of its representatives, vendors
-6-
7
or clients which pertain to the business of the Company shall be and remain the
property of the Company and be subject at all times to its discretion and
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company which is collected by the Executive shall be
delivered promptly to the Company without request by it upon termination of the
Executive's employment.
7. INVENTIONS AND WORKS. The Executive shall disclose promptly to the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, and any and
all works of authorship (including computer software), whether copyrightable or
not, which are conceived or made by the Executive, solely or jointly with
another, during the period of employment or within six (6) months thereafter and
which are directly related to the business or activities of Company and which
the Executive conceives as a result of the Executive's employment by the
Company. The Executive hereby assigns and agrees to assign all the Executive's
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, the Executive shall execute any and all applications, assignments
or other instruments that the Company shall deem necessary to apply for and
obtain copyright registration or Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRET, PROPRIETARY AND CONFIDENTIAL INFORMATION. The
Executive acknowledges and agrees that during the course of the Executive's
employment with the Company, the Executive may learn about, develop or be
entrusted with Trade Secret, Proprietary and Confidential Information. The
Company has in the past and will in the future use reasonable efforts to keep
secret the Trade Secret, Proprietary and Confidential Information. The Executive
expressly acknowledges and agrees that unless the Trade Secret, Proprietary and
Confidential Information becomes publicly known through legitimate means not
involving an act or omission by the Executive: (i) the Trade Secret, Proprietary
and Confidential Information is, and at all times shall remain, the sole and
exclusive property of the Company; (ii) the Executive shall use the utmost
diligence to guard and protect the Trade Secret, Proprietary and Confidential
Information from disclosure to any other person or entity except in the scope of
the discharge of his duties to the Company; (iii) the Executive shall not use
for his own benefit, or for the benefit of any other person or entity other than
the Company, and shall not disclose, directly or indirectly, to any other person
or entity, any of the Trade Secret, Proprietary and Confidential Information
except in the scope of the discharge of his duties to the Company; and (iv)
except in the scope of the discharge of his duties to the Company, the Executive
shall not seek or accept any of the Trade Secret, Proprietary and Confidential
Information from any former, present, or future employee of the Company.
For purposes of this Agreement, "Trade Secret, Proprietary or
Confidential Information" means any and all confidential, trade secret and/or
proprietary information of the Company or its clients, including without
limitation financial information, projected budgets, marketing strategies, past
performances, client lists, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, flowcharts,
software programs, data, systems, techniques, business acquisition plans,
inventions and research projects and other business affairs or any other
documents or materials, whether or not reduced to tangible form, pertaining to
the business of Company.
-7-
8
9. CHANGE OF CONTROL.
(a) If during the Term, a "Change of Control" occurs as
defined in Section 9(b), and the Executive's employment is terminated (by the
Company or by him) in connection therewith, the Executive shall be entitled to
receive such compensation as would be due to him as a result of a termination of
the Agreement by him with Good Reason.
(b) For purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred if: (1) any Person or Group becomes the
Beneficial Owner, directly or indirectly, of securities representing a majority
of the combined voting power of the Company's then outstanding securities
generally entitled to vote for the election of directors (capitalized terms not
otherwise defined herein are used as defined under the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder); or
(2) as a result of a cash tender offer, merger or other business combination,
sales of assets or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who were directors of the Company
immediately before the Transaction shall cease to constitute a majority of the
Board of the Company or of any successor to the Company. Notwithstanding the
above, no "Change of Control" shall be deemed to have occurred if the change
results from a transfer of securities to a member or members of the Nussdorf
family.
10. INDEMNIFICATION. During and after the Executive's employment by the
Company, the Company shall indemnify, defend and hold harmless the Executive
from and against any claims, losses, liabilities, damages, fines, penalties,
costs and expenses (including, without limitation, interest that may be imposed
in connection therewith, expenses of investigation, and reasonable fees and
disbursements of counsel and other professionals) arising out of or in
connection with the business and affairs of the Company for acts and/or
omissions during the Executive's employment to the fullest extent permitted by
law. This indemnification provision shall not be construed to apply to any
claims against the Executive arising from this Agreement.
11. COMPLETE AGREEMENT. This written Agreement is the final, complete
and exclusive statement and expression of the agreement between the Company and
the Executive and of all the terms of this Agreement, and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written Agreement may not be later modified or extended
except by a further writing signed by a duly authorized officer of the Company
and the Executive, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
12. NOTICE. Whenever notice is required hereunder, it shall be given in
writing and addressed to the Company at the main business office, and to the
Executive at the address reflected in the payroll records of the Company.
13. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of New York.
-8-
9
14. ARBITRATION. Except where equitable relief is sought, any dispute,
controversy or claim arising out of or relating to this Agreement, or breach
thereof, shall be settled by arbitration in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association by a single arbitrator in New York, New York. The arbitrator's award
shall be final and binding upon both parties, and judgment upon the award may be
entered in any court of competent jurisdiction in any state of the United States
or country or application may be made to such court for a judicial acceptance of
the award and an enforcement as the law of such jurisdiction may require or
allow. Each party shall pay its own costs of arbitration, including attorney's
fees.
15. TAX GROSS-UP. In the event that any payment made to the Executive
pursuant to this Agreement becomes subject to excise taxes under Section 4999 of
the Internal Revenue Code of 1986, as amended, (the "Code"), the Company will
pay to the Executive the amount of such excise taxes plus all federal, state and
local taxes applicable to the Company's payment of such excise taxes including
any additional excise taxes due under Section 4999 of the Code with respect to
payments made pursuant to this Agreement.
The determination of amounts required to be paid under this Agreement
shall be made by an independent auditor selected and paid by the Company. Such
independent auditor shall be a nationally recognized United States public
accounting firm, which may be the independent accounting firm used by the
Company to audit its financial statements.
16. ATTORNEYS' FEES. Upon demand by the Executive, the Company shall
pay to the Executive reasonable attorneys' fees incurred by the Executive in
connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
QK HEALTHCARE, INC.
By:
----------------------------
Title:
-------------------------
XXXXXXX XXXXXXXX
-------------------------------
Xxxxxxx Xxxxxxxx
-9-
