1
Exhibit 10.16
EMPLOYMENT SECURITY AGREEMENT
This Employment Security Agreement is made as of the _____ day of
________________________, 1998, by and between DRUG EMPORIUM, INC., a Delaware
Corporation having its principal executive offices at 000 Xxxxxx Xxxxxxx Xxxxx,
Xxxxxx, Xxxx 00000 (the "Company"), and _______________________________________,
an individual employed by the Company (the "Executive"). This Agreement replaces
the Employment Security Agreement with the above named Executive dated September
25, 1997.
WHEREAS, Executive is employed by the Company in a key executive
capacity and possesses intimate knowledge of the business and affairs of the
Company and is a valuable asset to the operations of the Company; and
WHEREAS, the Company is approached from time to time by outside
individuals and others who have an interest in acquiring all or a portion of the
Company's stock, some of whom have a background indicating the capability of
operating the Company, and some of whom do not; and
WHEREAS, the Company desires to evaluate such individuals, companies
and potential offers in the best interests of its shareholders, without the
distraction of the effect of change in control on Executives; and
WHEREAS, the Company also wants to assure managerial continuity and
stability during any takeover attempt.
NOW, THEREFORE, in consideration of the foregoing, and of the
agreements and covenants herein contained, Company and Executive agree as
follows:
1. This Agreement shall be effective and binding immediately upon its
execution, but it shall not become operative unless and until a "change in
control" of the Company, as defined hereinbelow, shall occur. The date of such
change in control is referred to herein as the "operative date" of this
Agreement.
2. As used herein, the term "change in control" shall mean either:
a. The ownership (whether direct or indirect) of shares in
excess of 50% of the outstanding shares of common stock of
the Company by a person or group of persons not directors of
the Company as of the date of this agreement; or
b. The occurrence of both of the following:
(1) The ownership (whether direct or indirect) of shares
in excess of 20% of the outstanding shares of common
stock of the Company by
2
a person or group of persons not directors of the
Company as of the date of this Agreement; and
(2) Any change in the composition of the Board of
Directors of the Company resulting in a majority of
the directors of the Company as of the date of this
Agreement no longer constituting a majority;
provided, however, that in making such
determination, directors who were elected by, and on
the recommendation of, such present majority shall
be treated as present directors.
3. The term of this Agreement shall commence with the operative date
and shall continue for a term of two calendar years thereafter. During the term
of this Agreement, the Company agrees to continue the Executive in the employ
of the Company, and the Executive agrees to remain in the employ of the
Company, in the Executive's then-present capacity with no diminution of
responsibility, and to exercise such authority and perform such duties as are
commensurate with the authority exercised and duties performed by the Executive
during the six months immediately prior to the operative date of this
Agreement. Such services shall be performed in the same metropolitan area where
the Executive was employed immediately prior to the operative date, or at such
other location as the Company may reasonably require or to which Company and
Executive may agree.
4. During the term of this Agreement, Executive shall be compensated
at a base salary, bonus, stock option and employee benefit level commensurate
with the salary, bonus, stock option and benefits to which the Executive was
entitled in the twelve months prior to the operative date, or such greater
amount provided by the Company for Executives of comparable duties.
5. The employment of Executive under this Agreement may be terminated,
and the Executive not be entitled to the benefits set forth herein, only upon
the occurrence of one or more of the following events:
a. Termination by the Company for cause, as defined
below; or
b. Voluntary resignation by the Executive, as defined
below.
6. "Cause" shall mean:
(i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (Other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to the Executive
2
3
by the Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies,
(ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, or
(iii) the Executive's conviction of, or pleading of no contest to, a
felony.
For the purposes of clauses (i) and (ii) of this definition, no act, or failure
to act, on the Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive in bad faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest of the
Company or its subsidiaries. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board (or committee thereof), the Company's chief
executive officer or other duly authorized senior officer of the Company (as
appropriate) or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company and its subsidiaries. The
cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three quarters
(3/4) of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice of any such meeting is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board) finding that, in the good faith
opinion of the Board, the Executive has acted in a manner described in clause
(i) or (ii) above and specifying the particulars thereof in detail.
No termination for cause under the preceding paragraph shall be deemed to have
occurred without prior service of a written notice of termination to the
Executive specifying the factual basis for the allegation of cause, and the
failure of the Executive to cure such basis within 30 days after the notice.
7. The Executive's resignation shall not be "voluntary" and shall not
be a reason for termination of the Agreement in the event that:
a. Without the express written consent of the Executive, the
Executive reasonably determines that he is assigned any
duties inconsistent with his position, duties, responsibility
and status with the Company at the operative date, or his
authority, position or title in effect immediately prior to
the operative date is materially changed;
b. The base salary and bonus opportunity benefits or perquisites
of the Executive in effect at the operative date of this
Agreement are materially reduced;
3
4
c. The Company fails to continue in effect any benefit or
compensation plan providing the Executive with substantially
similar benefits to those which the Executive enjoyed as of
the operative date;
d. In the event that relocation of more than 25 miles or
excessive travel demands in comparison to those in effect as
of the operative date are made upon the Executive; or
e. The Executive terminates his employment for any reason during
the 30 day period immediately following the one year
anniversary of the change of control.
8. In the event of a breach of this Agreement by the Company or the
termination of the Executive's employment during the term of this Agreement
(including without limitation due to the death or permanent disability of the
Executive) other than for cause as defined above, then:
a. Executive shall receive, in a lump sum, a cash payment in the
amount of the total of the salary and bonus received by
Executive from the Company in the last two full fiscal years
prior to the operative date;
b. Executive shall continue to receive all employment benefits,
including medical benefits, health insurance and other, to
which he may be entitled as a member of senior management of
the Company for a period of 24 months after the termination
date; and
c. Executive shall receive an additional benefit, over and above
that to which he would normally be entitled under the
Company's retirement plans, equal to the actuarial equivalent
of the additional amount Executive would have earned under
such retirement plans or programs had he accumulated two
additional continuous years of service. Such amount shall be
paid to Executive in a cash lump sum payment at his normal
retirement age, or, at Executive's option, at his early
retirement age as provided for in such retirement net plan.
The Company will reimburse the Executive for all legal fees and
expenses incurred in good faith by the Executive as a result of any dispute
with any party (including, but not limited to, the Company and/or any
affiliate of the Company) regarding the payment of any benefit provided for in
this Agreement (including, but not limited to, all fees and expenses incurred
in disputing any termination or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement), or in each case interest on
any delayed payment at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code. Such payments will be made within five business days
after delivery of the Executive's written requests for payment accompanied by
any evidence of fees and expenses incurred as the Company may reasonably
require.
4
5
9. The amounts paid to Executive hereunder shall be considered
severance pay in consideration of the past services Executive has rendered to
the Company, and in consideration of continued service from the date hereof to
Executive's entitlement to those payments. Executive shall have no duty to
mitigate damages by seeking other employment. Should Executive actually receive
payments from any other employment, the payments called for hereunder shall not
be reduced or offset by any such payments.
10. In the event Executive's employment is terminated after the
operative date:
a. For twenty-four (24) months after the termination of
Executive's employment hereunder, Executive shall
not, unless acting with the prior written consent of
Company:
(1) Directly or indirectly, for himself, or on
behalf of or in conjunction with any
entity, solicit or endeavor to recruit or
hire, as an employee, consultant, agent or
representative, any person who was an
employee of the Company within six months
of the date that the Executive first
solicited or endeavored to recruit or hire
such person.
(2) Discourage or otherwise attempt to prevent
any person from doing business with the
Company.
b. In the event that the provisions of this Section
should ever be deemed to exceed the time limitations
permitted by applicable law, then such provisions
shall be deemed reformed to the maximum time
limitations permitted by applicable law.
c. Executive specifically acknowledges and agrees that
the remedy at law for any breach of the provision of
this section will be inadequate and that the
Company, in addition to any other relief available
to it, shall be entitled to temporary and permanent
injunctive relief without the necessity of providing
actual damage. The provision of this Section 10
shall remain applicable to Executive until a final
decision of a court of competent jurisdiction is
entered finding that Executive was discharged by the
Company in violation of Section 5 hereof.
11. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor to
5
6
the Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes
of this Agreement), but shall not otherwise be assignable, transferable or
delegable by the Company. The failure of the Company to obtain such an
assignment shall be a breach of this Agreement, in which event the date of
succession or transfer shall be deemed to be the date of the breach.
12. This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, estates, executors, administrators, heirs and beneficiaries.
All amounts payable to the Executive shall be paid, in the event of the
Executive's death, to the Executive's estate, heirs and representatives. This
Agreement shall inure to the benefit of, be binding upon and be enforceable by,
any successor, surviving or resulting corporation or other entity to which all
or substantially all of the Company's business and assets shall be transferred.
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
13. Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by his will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section, the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
14. This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of Ohio,
without giving effect to the principles of conflict of laws of such State. Any
dispute arising out of this Agreement shall be determined by arbitration in
Columbus, Ohio under the rules of the American Arbitration Association then in
effect and judgment upon any award pursuant to such arbitration may be enforced
in any court having jurisdiction thereof.
15. MISCELLANEOUS
a. ENFORCEMENT: The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any
part hereof are declared invalid or unenforceable by a
court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected
thereby.
b. WITHHOLDING: The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal,
state or local withholding or other taxes or charges which
it is from time to time required to withhold.
6
7
c. EXPENSES AND INTEREST: If, after a change in control of the
Company any claim or legal or arbitration proceeding shall
be made or brought to recover damages for breach hereof,
the Executive shall recover from the Company prejudgment
interest on any money judgment or arbitration award
obtained by the Executive, calculated at the rate of
interest announced by Bank One Columbus, Ohio from time to
time at its prime rate, calculated from the date that
payments to him should have been made under this Agreement.
d. PAYMENT OBLIGATIONS ABSOLUTE: The Company's obligation
during and after the term of this Agreement to pay the
Executive the compensation and to make the arrangements
provided herein shall be absolute and unconditional and
shall not be affected by any circumstances, including,
without limitation, any set off, counterclaim, recoupment,
defense or other right which the Company may have against
him or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and
every payment made hereunder by the Company will not seek
to recover all or any part of such payment from the
Executive or from whosoever may be entitled thereto, for
any reason whatsoever.
e. WAIVER AND ENTIRE AGREEMENT: No provisions of this
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing
signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other
party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
NO agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter
hereof have been made by either party which are not set
forth expressly in this Agreement.
f. NOTICES: For all purposes of this Agreement, all
communications including without limitation notices,
consents, requests or approvals, provided for herein shall
be in writing and shall be deemed to have been duly given
when delivered or five business days after having been
mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to the
Company (to the attention of the Secretary of the Company)
at its principal executive office and to the Executive at
his principal residence, or to such other address as any
party may have furnished to the other in writing and in
accordance herewith, except that notices of change of
address shall be effective only upon receipt.
g. SEVERABILITY: The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the
other provisions hereof, and this
7
8
Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first written above.
DRUG EMPORIUM, INC.
By order of the Board of Directors
By:___________________________________
Its: _________________________________
EXECUTIVE:
__________________________
8
