Exhibit 10.81
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of August 21, 1998, by and between PDK
Labs Inc., a New York corporation, with offices at 000 Xxxxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx 00000 (the "Company" or "PDK"), and Xxxxxxx X. Xxxxxxxx, an
individual residing at 0 Xxxxxx Xxxx Xxxxx, Xxx, Xxx Xxxx 00000 (the
"Consultant" or "Xxxxxxxx").
W I T N E S S E T H :
WHEREAS, the Consultant was employed by the Company as President, Chief
Executive Officer and Chief Financial Officer of the Company pursuant to the
terms of that certain Employment Agreement dated as of October 6, 1995 (the
"Employment Agreement");
WHEREAS, pursuant to Section 3.7 of the Employment Agreement, in the
event of a "Change of Control" (as defined therein) the Consultant is entitled
to payment of a sum equal to two times the entire compensation that the
Consultant would have been entitled to through December 31, 2005 (the "Change of
Control Payment");
WHEREAS, the definition of "Change of Control" includes, inter alia,
the acquisition of more than ten percent (10%) of the outstanding voting
securities of the Company by any entity(ies) or person(s), exclusive of the
Consultant or any holder of the Company's securities on the date of the
Employment Agreement who then owned more than 10%, either acting alone or as a
"group," as that term is defined for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended;
WHEREAS, on December 10, 1997 and as amended on February 6, 1998,
Heartland Advisors, Inc. filed a Schedule 13G reporting that Heartland Limited
Partnership I, a private limited partnership for which Heartland Advisors, Inc.
serves a managing general partner with voting and dispositive power,
beneficially owns more than ten percent (10%) of the Company's Common Stock (the
"Change of Control Events");
WHEREAS, the Consultant wishes to terminate his Employment Agreement
with the Company;
WHEREAS, Section 8.11 of the Credit Agreement by and between the
Company and European American Bank, a New York banking corporation ("EAB") dated
as of August 20, 1997 (the "Credit Agreement") requires that Xxxxxxxx be
employed in a reasonably full time capacity as the President of the Company,
responsible for the day-to-day operation of the Company;
WHEREAS, EAB has agreed with the Company to waive and amend certain
provisions of the Company's loan agreements subject to certain terms and
conditions (the "Amendment");
WHEREAS, among the terms and conditions of the Amendment is a
requirement that the Company maintain the Consultant (i) in a reasonably active
full time capacity as the
President of the Company responsible for the day to day operations of the
Company, or (ii) as a Consultant to the Company pursuant to the terms of a
consulting agreement;
WHEREAS, the Company and the Consultant desire to terminate the
Employment Agreement and secure the services of the Consultant and the
Consultant desires to render services to the Company, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties mutually agree as follows:
Section 1. Consulting Services. The Company hereby engages Consultant
and the Consultant hereby accepts such engagement, as a consultant to the
Company, subject to the terms and conditions set forth in this Agreement. The
Consultant shall:
1. assist the Company with developing and implementing its
marketing objectives;
2. assist the Company in identifying, selecting and
developing relationships with banking and financial
institutions;
3. assist the Company in negotiating and finalizing
agreements with potential customers and suppliers;
4. assist the Company in developing new sales and
distribution channels and new product lines; and.
5. advise the Company in the areas of finance,
administration and mergers and acquisitions.
The Consultant shall work not less than an average of sixteen (16) days
per month and shall undertake such duties as are requested of him by the Chief
Executive Officer and as set forth above.
Section 2. Term of Agreement.
The term of this Agreement shall be for a period of three (3)
years commencing on the date hereof and ending on August 21, 2001 (the "Term"),
subject to earlier termination by the parties pursuant to Section 4.
Section 3. Payments to Consultant.
(a) In full consideration for the services to be provided by Consultant
to the Company hereunder and in consideration for the Consultant's agreement to
terminate the Employment Agreement, the Company shall (i) pay to the Consultant
the sum of Two Thousand Five Hundred Dollars ($2,500.00) for each full day
during which the Consultant renders services pursuant to
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this Agreement (the "Cash Payments") and (ii) issue upon the execution hereof to
the Consultant, 150,000 shares of the Company's Common Stock, par value $.01 per
share. During the Term, the Company shall make the Cash Payments in quarterly
payments to the Consultant in advance on the first day of each quarter
commencing on September 1, 1998.
(b) Notwithstanding anything contained in this Agreement, Xxxxxxxx (a)
shall remain vested in all pension benefits, if any, to which he was vested
prior to the date of his execution of this Agreement, (b) shall remain entitled
to health insurance benefits until the earlier of (i) August __, 2001, or (ii)
the end of the month in which Xxxxxxxx becomes eligible for health insurance
coverage under another employer's plan and (c) Xxxxxxxx shall remain entitled to
the automobile allowance described in Section 3.4 of the Employment Agreement
for the term hereof, such allowance not to exceed $2,000/mo.
Section 4. Termination of Employment Agreement; Settlement and Release.
(a) The parties agree that (i) the Employment Agreement is hereby
terminated effective immediately prior to the execution of this Agreement, (ii)
the Consultant shall relinquish all rights as a "Executive" under the Employment
Agreement and (iii) performance by the Company of its obligations hereunder
shall be deemed to be full satisfaction of the Company's obligations to the
Consultant pursuant to the Employment Agreement and with respect to payment of
the Change of Control Payment.
(b) Except for the Company's obligation to indemnify Xxxxxxxx pursuant
to the Company's Certificate of Incorporation, as amended, the Company's By-Laws
and to the fullest extent permitted by the Business Corporation Law of the State
of New York, Xxxxxxxx waives and hereby releases and discharges PDK from all
liability to him arising out of or relating to the Employment Agreement with
PDK, and from any and all liability of whatever kind or nature arising from any
acts or omissions of PDK, known or unknown, asserted or unasserted, which
occurred up to the date of this Agreement, including but not limited to all
liability for any acts that may have violated his rights under any contract,
tort, or other common law, any federal, state, or local fair employment
practices or civil rights law, regulation, or ordinance, any employee relations
state, executive order, law, regulation, or ordinance, any unemployment or
workers compensation law, or any other duty or obligation of any kind, including
but not limited to rights created by Title VII of the Civil Rights Act of 1964,
as amended, and all other laws prohibiting discrimination of whatever kind or
nature; (b) all liability, asserted or unasserted, known or unknown, suspected
or unsuspected, which was or may have been alleged against or imputed to PDK by
Xxxxxxxx or anyone acting on his behalf up to the date of this Agreement; (c)
all asserted and unasserted rights to and claims for wages, commissions,
monetary and equitable relief, employment or re-employment with PDK in any
position, and compensatory, punitive, or liquidated damages; and (d) all
asserted and unasserted rights to and claims for attorneys' fees and costs
pursuant to any statute, regulation, or judicial precedent that shifts to the
employer responsibility for payment of attorneys' fees, costs and disbursements
in litigation of any kind or nature arising from the employment relationship.
(c) PDK waives and hereby releases and discharges Xxxxxxxx from all
liability to it arising out of or relating to Xxxxxxxx'x continuing obligations
under the Employment Agreement and hereby terminates the Employment Agreement
effective immediately.
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(d) Xxxxxxxx and PDK shall not in the future initiate or cause to be
initiated any judicial or administrative charge, complaint, action, or
proceeding relating to claims released under paragraphs 4(a) and 4(b) of this
Agreement. In the event that any such judicial or administrative charge,
complaint, action, or proceeding is presently pending, or if in the future any
such proceeding is commenced it is agreed that the party bringing the action
will withdraw it, with prejudice, to the extent they have the power to do so,
and except to the extent required or compelled by law, legal process, or
subpoena, shall refrain from participating, testifying or producing documents or
information therein and shall refrain from obtaining or accepting any relief or
recovery therefrom, and if either party receives such relief or recovery they
shall promptly pay it over to the other party.
(e) Xxxxxxxx acknowledges that he has been paid all salary and
attendant benefits due him from PDK in consideration for the services he
rendered while employed by PDK, including but not limited to, vacation pay,
severance pay, holiday pay, expense reimbursement, reimbursement of relocation
expenses, bonuses, payments pursuant to any and all contracts to which he is or
was a party, and any and all monetary of other benefits that are or were due him
pursuant to policies of PDK in effect during his employment.
Section 5. Termination.
The Company may terminate the engagement of the Consultant and all of
the Company's obligations under this Agreement at any time for Cause (as
hereinafter defined) by giving the Consultant notice of such termination, with
reasonable specificity of the details thereof. "Cause" shall mean after the date
hereof (i) the Consultant's misconduct which could reasonably be expected to
have a material adverse effect on the business and affairs of the Company, (ii)
the Consultant's disregard of lawful instructions of the Company's President or
Chief Operating Officer relating to Consultant's neglect of duties or failure to
act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of the Company, (iii) the commission
by the Consultant of an act constituting common law fraud, or a felony, or
criminal act against the Company or any affiliate thereof or any of the assets
of any of them, (iv) the Consultant's abuse of alcohol or other drugs or
controlled substances, or conviction of a crime involving moral turpitude, (v)
the Consultant's material breach of any of the agreements contained herein or
(vi) the Consultant's death or Disability (as hereinafter defined); provided
however, that if the Consultant terminates this Agreement as a result of a
material breach by the Company of this Agreement, such termination shall not be
considered "Cause" hereunder. "Disability" shall mean the Consultant is
incapable of performing the services required hereunder as a result of a mental
or physical disability for a period of one-hundred eighty (180) consecutive days
or for a period of two hundred seventy (270) days during any three hundred sixty
(360) day period.
A termination pursuant to this Section 5(i), (ii), (iii), (iv) (other
than as a result of a conviction of a crime involving moral turpitude) or (v)
shall take effect 60 days after the giving of the notice contemplated hereby
unless the Consultant shall, during such 60-day period, remedy to the reasonable
satisfaction of the Board of Directors of the Company the misconduct, disregard,
abuse or material breach specified in such notice. A termination pursuant to
Section 5(iv) (as a result of a conviction of a crime involving moral turpitude)
or (vi) shall take effect
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immediately upon the giving of the notice contemplated hereby. The effective
date of termination shall hereinafter be referred to as the "Termination Date".
Section 6. Effect of Termination of Agreement.
Upon the termination of Consultant for Cause, neither the Consultant
nor the Consultant's beneficiaries or estate shall have any further rights to
compensation under this Agreement or any claims against the Company arising out
of this Agreement, except the right to receive (i) the unpaid portion of the
Consulting Fee provided for in Section 3, earned through the Termination Date
(the "Unpaid Fee Amount"), and (ii) reimbursement for any expenses for which the
Consultant shall not have theretofore been reimbursed (the "Expense
Reimbursement Amount"); provided however, that in the event that Consultant is
terminated pursuant to Section 5(vi), then in addition to the foregoing, the
Consultant shall be entitled to the Consulting Fee for the three (3) years
following the Termination Date.
Section 7. Disclosure of Confidential Information.
Consultant recognizes that he has had and will continue to have access
to secret and confidential information regarding the Company, including but not
limited to its customer list, products, know-how, and business plans. Consultant
acknowledges that such information is of great value to the Company, is the sole
property of the Company, and has been and will be acquired by him in confidence.
In consideration of the obligations undertaken by the Company herein, Consultant
will not, at any time, during or after his engagement hereunder, reveal, divulge
or make known to any person, any information acquired by Consultant during the
Term, which is treated as confidential by the Company, including but not limited
to its customer list, and marketing and strategic plans, not otherwise in the
public domain, except as may be required in performance of Consultant's duties.
The provisions of this Section 7 shall survive Consultant's engagement
hereunder.
Section 8. Covenant Not To Compete.
(a) Consultant recognizes that the services to be performed by him
hereunder are special and unique. The parties confirm that it is reasonably
necessary for the protection of Company that Consultant agrees, and,
accordingly, Consultant does hereby agree, that he shall not, directly or
indirectly, at any time during the Term:
(i) except as provided in Subsection (c) below, be engaged in the
sale, licensing, distribution or marketing of pharmaceutical
products, nutritional supplements or vitamins (the "Products")
or provide technical assistance, advice or counseling
regarding the Products worldwide either on his own behalf or
as an officer, director, stockholder, partner, consultant,
associate, employee, owner, agent, creditor, independent
contractor, or co-venturer of any third party; or
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(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf of
himself or any third party, any employee or agent of Company
or any affiliate thereof.
(b) If any of the restrictions contained in this Section 8 shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form this Section shall then be
enforceable in the manner contemplated hereby.
(c) This Section 8 shall not be construed to prevent Consultant from
(i) owning, directly or indirectly, in the aggregate, an amount not exceeding
two percent (2%) of the issued and outstanding voting securities of any class of
any company whose voting capital stock is traded on a national securities
exchange or on the over-the-counter market other than securities of the Company
or (ii) from owning shares of Common Stock of the Company or exercising options
to acquire Common Stock of the Company owned by Consultant on the date of this
Agreement or granted to Consultant pursuant to the terms hereof.
Section 9. Miscellaneous.
9.1 Injunctive Relief. Consultant acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Consultant agrees that any breach or threatened
breach by him of Sections 7 or 8 of this Agreement shall entitle Company, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by Consultant
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and that one or
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which Company
seeks enforcement thereof, such restriction shall be limited to the extent
permitted by law.
9.2 Assignments. Neither Consultant nor the Company may assign or
delegate any of their rights or duties under this Agreement without the express
written consent of the other party.
9.3 Entire Agreement. This Agreement constitutes and embodies the full
and complete understanding and agreement of the parties with respect to
Consultant's engagement by the Company, supersedes all prior understandings and
agreements, including, without limitation the Employment Agreement, whether oral
or written, between the Consultant and the Company, and shall not be amended,
modified or changed except by an instrument in writing executed by the party to
be charged. The invalidity or partial invalidity of one or more provisions of
this Agreement shall not invalidate any other provision of this Agreement. No
waiver by either party of any provision or condition to be performed shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
time or any prior or subsequent time.
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9.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
9.5 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by registered or
certified mail, return receipt requested, postage prepaid, or by private
overnight mail service (e.g. Federal Express) to the party at the address set
forth on the books and records of the Company or to such other address as either
party may hereafter give notice of in accordance with the provisions hereof.
Notices shall be deemed given on the sooner of the date actually received or the
third business day after sending.
9.7 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws provisions and the parties irrevocably
agree to submit any controversy or claim arising out of or relating to this
Agreement to a court of competent jurisdiction located in the State of New York.
The parties agree that any proceedings arising out of, relating to, or brought
for the purpose of enforcing this Agreement, or remedying any breach thereof
shall be instituted in the courts of the State of New York, and in no other
jurisdiction.
9.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one of the same instrument.
9.9 Independent Contractor. Consultant's engagement pursuant to this
Agreement shall be as independent consultant and not as an employee, officer or
other agent of the Company. Neither party to this Agreement shall represent or
hold itself out to be the employer or employee of the other. Consultant further
acknowledges that the compensation provided herein is a gross amount of
compensation and that the Company will not withhold from such compensation any
amounts respective income taxes, social security payments or any other payroll
taxes. All such income taxes and payments shall be made or provided for by
Consultant and the Company shall have no responsibility or duties regarding such
matters.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
PDK LABS INC.
By: __________________________________
Name: Xxxxxxxx Xxxxxxxx
Title: Chief Executive President
By: __________________________________
XXXXXXX X. XXXXXXXX
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