EXHIBIT 10.14
EXECUTIVE AGREEMENT
This is an Agreement between Certified Diabetic Services, Inc., a
Delaware corporation, with its principal office at 0000 Xxxxxxxxx Xxxxx Xxxxx,
Xxxxxx, Xxxxxxx 00000 ("the Corporation"), and ________________________________
("Executive"), effective as of December __, 1997.
Recitals
A. Executive is an executive officer of the Corporation or one or more
of its affiliated companies with significant policy-making and operational
responsibilities in the conduct of its business.
B. The Corporation recognizes that Executive is a valuable resource for
the Corporation and desires to be assured of the continued dedication and
services of Executive.
C. The Corporation acknowledges that upon a threatened change in
control Executive may have concerns about the continuation of his employment
status and responsibilities and may be approached by others with employment
opportunities, and the Corporation desires to provide Executive some assurance
as to the continuation of his employment status and responsibilities in the
event of a change in control.
D. The Corporation desires to assure that if it should receive an
offer involving a possible change of control and Executive would be involved
in deliberations or negotiations in connection therewith, Executive would be
in a secure position to consider such offer and negotiate on behalf of the
Corporation and its shareholders as objectively as possible, and to this end
the Corporation desires to protect Executive from any direct or implied threat
to his financial well-being under such circumstances.
E. Executive is willing to continue to serve as an executive of the
Corporation but desires assurance that in the event of a change in control he
will not be exposed to unreasonable financial hardship or loss of status.
Agreement
The parties do hereby agree as follows:
1. Definitions. As used herein:
"Change in Control" - A change in control shall be deemed to have
occurred if and when, after the date hereof any of the following events have
occurred:
(i) (a) the Corporation (or in one or more transactions 50% or more
of its assets or earning power) is acquired by or combined with another Person
and (b) the owners of the voting shares of the Corporation outstanding
immediately prior to such acquisition or combination own less than a majority
of the outstanding voting shares of the Person surviving such transaction (or
the ultimate parent of the surviving Person) immediately after such
acquisition or combination;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (including any "person" as defined in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 10%
or more of the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors ("Voting Stock") of
the Corporation;
(iii) the Corporation files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Corporation has
occurred or will occur in the future pursuant to any then-existing contract or
transaction; or
(iv) if, during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Board of Directors of the
Corporation ("Board") cease for any reason to constitute at least a majority
thereof; provided, however, that for purposes of this clause (iv) each
Director who is first appointed, or first nominated for election by the
Corporation's stockholders, by a vote of at least two-thirds of the Directors
of the Corporation (or a committee thereof) then still in office who were
Directors of the Corporation at the beginning of any such period will be
deemed to have been a Director of the Corporation at the beginning of such
period; or
(v) The occurrence of any other event or circumstance which is not
covered by (i) through (iv) above which the Board determines affects control
of the Corporation and, in order to implement the purposes of this Agreement
as set forth above, adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.
Notwithstanding the foregoing provisions of paragraphs 1 (ii) or
(iii), unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for purposes
of paragraphs (ii) or (iii) solely because (1) the Corporation, (2) an entity
in which the Corporation directly or indirectly beneficially owns 50% or more
of the entity's outstanding voting stock (a "Subsidiary"), or (3) any employee
stock ownership plan or any other employee benefit plan of the Corporation or
any Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of voting
stock of the Corporation, whether in excess of 10% or otherwise, or because
the Corporation reports that a change in control of the Corporation has
occurred or will occur in the future by reason of such beneficial ownership.
In defining "Control," all voting securities of the Corporation shall be
considered to be a single class.
"Minimum Base Compensation" means the Executive's current base annual
salary, plus such increases to the base annual compensation as the Board may
authorize in their discretion from time to time, but in no event less than the
annual base salary in effect at the time of making this Agreement.
"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.
2. Termination Following Change in Control. Executive shall be
entitled to the benefits described below if a Change in Control shall have
occurred and within three years of such Change in Control either (i) Executive
terminates his employment upon making a determination (which determination
will be conclusive and binding upon the parties to this Agreement provided it
has been made in good faith) that Executive's employment status or employment
responsibilities have been materially and adversely affected thereby, or (ii)
his employment is terminated by the Corporation:
(a) Executive shall be entitled to receive an amount equal to three
times his Minimum Base Compensation in effect for the year in which
his termination of employment occurs. Executive shall also be
entitled to receive three times the average bonus or incentive
compensation paid to him in respect of the three fiscal years (or
such lesser number of years as Executive has been employed by the
Corporation) preceding his termination of employment. At Executive's
option the amount payable under this paragraph 2(a) shall be paid to
him in one lump sum within thirty days after termination of
employment or in twenty-four equal consecutive monthly payments
commencing on the first day of the month following termination of
employment.
(b) The Corporation shall maintain for Executive's benefit until the
earlier of (i) thirty-six months after termination of employment, or
(ii) Executive's commencement of full-time employment with a new
employer (the "Continuation Period"), all costs and expenses
associated with providing a corporate automobile, all professional
memberships, dues in all clubs in which Executive maintains
membership, all life insurance, medical, health and accident,
disability plans or programs and such other substantially similar
benefits which Executive shall have been entitled to prior to
termination, provided Executive's continued participation is
permitted under the general terms of such plans and programs after
the termination of employment. In the event Executive's
participation in any such plan or program is not permitted, the
Corporation will provide at no cost to Executive directly the
benefits to which Executive would be entitled under such plans and
programs.
(c) Executive also shall be paid the aggregate of the increases in
the single sum actuarial equivalents of Executive's vested accrued
benefits under the Corporation's retirement plan or any successor
plan (the "Pension Plan") and each nonqualified defined benefit
pension plan sponsored by the Corporation, including any
supplemental executive retirement plan that would result if
Executive were credited with three additional years of service and
benefit service and three additional years of age under such plans.
(d) Executive shall be entitled to all shares of stock and stock
options of the Corporation owned by Executive or promised by the
Corporation to Executive, including without limitation all stock
pledged, held in escrow, stock options, warrants or other rights to
own or purchase stock in the Corporation, released of any escrow,
forfeiture, or vesting provisions.
(e) Without limiting the rights of Executive at law or in equity, if
the Corporation fails to make any payment or provide any benefit
required to be made or provided under this Agreement on a timely
basis, the Corporation will pay interest on the amount or value
thereof at an annualized rate of interest equal to the greater of
(i) 12% or (ii) the prime commercial rate in effect of the
Corporation primary lender from time to time. Such interest will be
payable as it accrues on demand. Any change in such prime rate will
be effective on and as of the date of such change.
3. Consideration for Payments. The Corporation hereby acknowledges that
it will be difficult (a) for Executive to find reasonably comparable employment,
and (b) to measure the amount of damages which Executive may suffer as a result
of termination of employment. Accordingly, the payment of the severance
compensation by the Corporation to Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Corporation to be reasonable and
will be liquidated damages, and Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of Executive under this Agreement or otherwise. The
Corporation shall not be entitled to set off or counterclaim against amounts
payable hereunder any claim, debt or obligation of Executive.
4. Excise Tax Payments. In the event that Executive becomes entitled
to the benefits described in this Agreement ("Severance Payments"), if any of
the Severance Payments will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any similar federal or state excise tax, the Corporation shall pay to
Executive at the time specified in Section 2(a) above, an additional amount
(the "Gross-Up Payment") such that the net amount retained by Executive after
payment of any Excise Tax, and any federal, state and local income tax on the
Gross-Up Payment itself shall be equal to the amount of the Severance Payments
stated in this Agreement.
For purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise Tax:
(a) any other payments or benefits received or to be received by
Executive in connection with a Change of Control of the Corporation
or the termination of employment (whether pursuant to the terms of
this Agreement or of any other plan, arrangement or agreement with
the Corporation, or with any Person whose actions result in a Change
in Control or with any other Person affiliated with the Corporation
or such Person) shall be treated as "parachute payments" with the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Corporation's independent auditors and acceptable to
Executive, other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the
Code;
(b) the amount of the Severance Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the
total amount of the Severance Payments or (ii) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) and (4)
(after applying clause (a), above); and
(c) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of Executive's residence on the
date of termination of employment, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
If the Excise Tax is subsequently determined to be less than the
amount taken into account under this Section 4 at the time of termination of
employment, Executive shall repay to the Corporation, at the time the
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction. If the Excise Tax is determined to
exceed the amount taken into account under this Section 4 at the time of
termination of employment, the Corporation shall make an additional Gross-Up
Payment to Executive in respect of such excess at the time the amount of such
excess is finally determined.
5. Arrangements Not Exclusive. The specific benefit arrangements
referred to in this Agreement are not intended to exclude Executive from
participation in or from other benefits available to executive personnel
generally or to preclude Executive's right to other compensation or benefits
as may be authorized by the Board of the Corporation at any time. The
provisions of this Agreement and any payments provided for hereunder shall not
reduce any amounts otherwise payable, or in any way diminish Executive's
existing rights, or rights which would accrue solely as the result of the
passage of time under any benefit plan, incentive plan, stock option plan,
employment agreement or other contract, plan or arrangement except as may be
specified in such contract, plan or arrangement.
6. The Corporation's Right to Terminate Employment. This Agreement
sets forth the severance benefits payable to Executive in the event his
employment with the Corporation is terminated under certain conditions
subsequent to a Change in Control (as defined in Section 1 hereof). This
Agreement is not an employment contract nor is it intended to confer upon the
Executive any right to continued employment. Notwithstanding the foregoing,
any termination of employment of Executive or the removal of the Executive
from the current office or position of Executive at the Corporation following
the commencement of any discussion with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of
Executive after a Change in Control for purposes of this Agreement.
7. Enforcement Costs; Interest. The Corporation is aware that, upon
the occurrence of a Change in Control, the Board or a stockholder of the
Corporation may then cause or attempt to cause the Corporation to refuse to
comply with its obligations under this Agreement, or may cause or attempt to
cause the Corporation to institute, or may institute, litigation seeking to
have this Agreement declared unenforceable, or may take, or attempt to take,
other action to deny Executive the benefits intended under this Agreement. In
these circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the Corporation that Executive not be required to
incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action nor be bound to negotiate any
settlement of his rights hereunder under threat of incurring such expenses
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Executive hereunder. Accordingly, if
following a Change in Control it should appear to Executive that the
Corporation has failed to comply with any of its obligations under this
Agreement or in the event that the Corporation or any other person takes any
action to declare this Agreement void or unenforceable, or institute any
litigation or other legal action designed to deny, diminish or to recover from
Executive, the benefits intended to be provided to Executive under this
Agreement, the Corporation irrevocably authorizes Executive from time to time
to retain counsel of his choice at the expense of the Corporation as provided
in this Section 7 to represent Executive in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Corporation or any director, officer, stockholder or other person affiliated
with the Corporation.
Notwithstanding any existing or prior attorney-client relationship
between the Corporation and such counsel, the Corporation irrevocably consents
to Executive entering into an attorney-client relationship with such counsel,
and in that connection the Corporation and Executive agree that a confidential
relationship shall exist between Executive and such counsel. The reasonable
fees and expenses of counsel selected from time to time by Executive as
provided above shall be paid or reimbursed to Executive by the Corporation on
a regular, periodic basis upon presentation by Executive of a statement or
statements prepared by such counsel in accordance with its customary
practices. In any action involving this Agreement, Executive shall be entitled
to prejudgment interest on any amounts found to be due him from the date such
amounts would have been payable to Executive pursuant to this Agreement at an
annual rate of interest equal to the greater of (a) 12%, or (b) the prime
commercial rate in effect at the Corporation's primary lender from time to
time during the prejudgment period.
8. Termination. This Agreement shall terminate if the employment of
Executive with the Corporation shall terminate prior to a Change in Control.
9. Successors and Assigns. In the event that the Corporation shall
merge or consolidate with any other corporation or all or substantially all
the Corporation's business or assets shall be transferred in any manner to any
other Person, such Person shall thereupon succeed to, and be subject to, all
rights, interests, duties and obligations of, and shall thereafter be deemed
for all purposes hereof to be, the Corporation under this Agreement. This
Agreement shall be binding upon and inure to the benefit of any such successor
and the personal and legal representatives of Executive. If Executive should
die while any amounts are still payable to him under this Agreement, all such
amounts shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary indicated on the Beneficiary Designation, attached
hereto as Exhibit A.
10. Severability. In the event that any section, paragraph, clause or
other provision of this Agreement shall be determined to be invalid or
unenforceable in any jurisdiction for any reason, such section, paragraph,
clause or other provision shall be enforceable in any other jurisdiction in
which valid and enforceable and, in any event, the remaining sections,
paragraphs, clauses and other provisions of this Agreement shall be unaffected
and shall remain in full force and effect to the fullest extent permitted by
law.
11. Indemnification. For a period of five years after any termination
of Executive's employment, the Corporation shall provide Executive (including
his heirs, executors and administrators) with coverage under a standard
directors' and officers' liability insurance policy at its expense, and shall
indemnify, hold harmless and defend Executive (and his heirs, executors and
administrators) to the fullest extent permitted under the laws of the
Corporation's state of organization against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action,
suit or proceeding in which he may be involved by reason of his having been a
director or officer of the Corporation or any subsidiary (whether or not he
continues to be a director or officer at the time of incurring such expenses
or liabilities), such expenses and liabilities to include, but not be limited
to, judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
IN WITNESS WHEREOF, this Agreement has been executed on December __,
1997.
EXECUTIVE: CERTIFIED DIABETIC SERVICES, INC.
____________________________ By: _________________________
Xxxxx X. Xxxxxxx, Chairman
Print Name: ________________
Exhibit A
Beneficiary Designation
In the event of my death, I hereby direct that any amounts due me
under the agreement to which this Beneficiary Designation is attached shall be
distributed to the person designated below. If no beneficiary shall be living
to receive such assets they shall be paid to the administrator or executor of
my estate.
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Date
Executive's Name _______________________
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Beneficiary's Name
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Relationship to Executive
